Gyroscopic Investing

@ $17.85.

We'll see how that goes.

It has a nice dividend if the market continues to hate it.

Not bad considering the 52-week low is 17.20 and you've had a pretty solid rally since then.  I still think the long-term picture has ARMH cleaning INTC's clock because more computing devices are becoming mobile, and low power chips from ARM are becoming powerful enough to handle most computing loads at a lower price/performance ratio.

I was thinking this in 2009 though but I didn't have the guts to buy ARMH at $6. 

With a P/E of 11 (even after the 8.23% gain since I bought it) and a 3.3% dividend, there are several different ways for this story to have a happy ending.

Although I am happy with my gains, Intel didn't do a whole lot better than the whole stock market in September, so I may have just timed the wave properly.

I think that Intel will probably hit $22.50 to $24.00 a share at some point in the next 12 months and then perhaps re-test the $17.00 range if the whole market starts feeling bad again.

You know, with the sole exception of WMT, which I bought at the time because I could participate in the DRIP with some fees waived and I was getting a discount on the stock, I've never bought a single stock directly.

I've always thought it might be fun to pick some dividend stocks and set up some DRIPs, but that would require money.

It looks like Intel is going to get some love today.

I still have my holdings described in the OP (plus a couple of reinvested dividends).

At current valuations I love this company.  P/E under 10, doube digit revenue and earnings growth, nice dividend, little debt, lots of cash.  I like it.

Clive wrote: Looks like the INTC up-trend after you bought has subsequently turned back down into a down-trend though. Weren't you tempted to take some off the table, or do you use some other profit target MT?

Nah.

The dividend helps me not to think about it much.

I think it deserves a P/E of at least 15 or so.  I might sell it when it trades at that P/E. 

My zen investment meditation course is also helping me:

"Visualize the gyroscope, balanced in the midst of chaos, centered as myriad events unfold...now, BE the gyroscope, balanced and impartial, curiously watching as myriad events unfold, experiencing it all as one, childlike, with a spirit of detachment."

I see Google is selling bonds now.
Not very common for a tech company.

Anyone want to talk me out of buying them?
The comments on the page linked above are interesting.

dualstow wrote: I see Google is selling bonds now.
Not very common for a tech company.

Anyone want to talk me out of buying them?
The comments on the page linked above are interesting.

What are the terms?

Here's the part that is causing a ruckus:

Google issued one-year, three-year, and 10-year bonds, all within a very tight range of the benchmark U.S. Treasurys against which corporate bonds are priced.
Google is taking advantage of low borrowing costs.

The 10-year bond, for instance, will yield 3.734%, compared to 10-year Treasurys, which yield 3.15%.

Are the 10 years callable?

MediumTex wrote: Are the 10 years callable?

I'm not sure. And, I haven't found the actual bond yet at a brokerage bond desk.

dualstow wrote:Anyone want to talk me out of buying them?

Facebook directs more users than Google: http://articles.sfgate.com/2010-02-15/b ... gine-gigya

Anybody remember Lycos? AltaVista? NCSA home page?  All of these were the main way to find web pages, then less than three years later were in single digits.  To me, a 10 year investment in a search engine company seems really risky.

MT,

You made a VP play that wasn't LTT's?  I'm shocked.

dualstow wrote: I see Google is selling bonds now.
Not very common for a tech company.

Anyone want to talk me out of buying them?

Google doesn't pay a dividend, so I don't know how to evaluate the situation other than to compare the investment opportunity with non-Google alternatives (which brings enterprise risk into the picture).

But if this had been last summer and the question was about JNJ bonds, I do have an enterprise-neutral way of analyzing the situation (http://seekingalpha.com/article/220336- ... ond-bubble).  The dividend yield on JNJ stock was higher than the yield on its 10-year bonds (3.6% yield for the dividends versus 2.95% yield for the 10-year bonds).  Bond interest is fixed for the life of the bond, while dividends payed by JNJ historically have grown each year by 10 percent or more (no guarantee that JNJ will continue to grow its dividends in the future, but if it does, it means the JNJ dividend will double every 7 years or sooner).

The point is that for people willing to risk money on JNJ, its dividends were a better deal than its bonds.  While it's true that bondholders get paid before stockholders in the event a company goes bankrupt, JNJ has a AAA credit rating (the best available), suggesting that it is far from going bankrupt anytime soon.

LifestyleFreedom wrote: JNJ has a AAA credit rating (the best available), suggesting that it is far from going bankrupt anytime soon.

You don't really mean that do you? 

LifestyleFreedom wrote: Google doesn't pay a dividend
...
The point is that for people willing to risk money on JNJ, its dividends were a better deal than its bonds.

For a long time, I liked individual stocks with rising dividends, too. But, I already have too many of those (including Intel, btw). I've been trying to lessen them ever since I discovered the Bogleheads, and even more so now that I'm into the pp. But, many of them still sit in my VP, and of course that's where these Google bonds would go if I bought any.

I usually don't buy any corporate bonds at all outside of a few index funds that I still hold.

Why not just buy some 10 year treasuries?

In a panic the treasuries would give you nice capital gains, while in a panic I doubt if Google bonds would be perceived as a safe haven.

MediumTex wrote: Why not just buy some 10 year treasuries?

In a panic the treasuries would give you nice capital gains, while in a panic I doubt if Google bonds would be perceived as a safe haven.

I was about to reply that I have some pre-Boglehead VFITX, but I just checked the average duration in the semi-annual report and it's rather short for an "intermediate term treasury" index fund.

MediumTex wrote: Are the 10 years callable?

They are. I can see them in Fidelity now, and it says "Call Protection: No".

Callable bonds... what a jip.

I never really thought of my mortgage as "callable," but that's basically what it is, which is what leads me to stick to a 30 or 15 year fixed vs going 5, 7 or 10 year arm.

I can borrow, today, at a tax-deductible, callable 4.5% (3.555% after the tax-benefit (for me, fed and state, based on pretty low brackets... this would be more like 2.59% in MN if you're in the top federal bracket).  

Meanwhile, I can invest in a NON-callable 30-year treasury today in my Roth IRA or another tax-preferred account at 4.28%.  

4.28% non-callable treasury bond vs 2.6-3.6% (depending on brackets) callable mortgage debt?? That's a pretty good deal IMO.

Even if someone wanted to keep their treasury bonds in a taxable account (4.5% vs 4.28% before taxes), considering your mortgage will be state tax-deductible and your treasury bond will be state non-taxable, in MN at 7.5% state rates, one would still beat their mortgage interest cost with a treasury... not taking certain finnicky phase-outs into consideration of course.

I'm not trying to go on a tyrade about how awesome mortgage debt is, but if you can more-or-less arbitrage your way into beating its returns with something as liquid and flexible as long-term treasury bond and want to take a little more risk, maybe taking on some mortgage, and investing into long-term treasuries and some other higher-risk assets in your VP you could use the "good" volatility AND liquidity of those treasuries to not only beat your mortgage, but smooth out the volatility of whatever PM stocks, REITS or other stocks one may have in their VP.

moda0306 wrote:I'm not trying to go on a tyrade about how awesome mortgage debt is, but if you can more-or-less arbitrage your way into beating its returns with something as liquid and flexible as long-term treasury bond

Yeah.  As long as everything goes as planned.

How will your mortgage arbitrage into government bonds work if you have to pay your mortgage with 1/10th of your bonds?

Weirmar, Germany: Dec 1918 Germany starts to inflate, 8.9 marks to the dollar.  Jan 1923 it was 8000 marks to the dollar, and it was about to get real bad.  Nov 1923, things stabilize at 4.2x10^12 marks to the dollar.  Aug 1924, hyperinflation is over, things are going pretty well, they create the new Reichsmark, 1 new mark for 1,000,000,000,000 of the old Papiermark.  Then over the next year or so as part of the process of cleaning up the rest of the mess, they revalue debts into the new currency.  No, they did not convert at 1,000,000,000,000:1.  Mortgage debt was revalued to 25% of face if it was at least 5 years old.  Government bonds were revalued to no more than 2.5% of face.

Or in other words, they had to pay 1/4 of their mortgage, but had only 1/40th to pay it with.  I'm sure the story was really good for some of those years...  In 1918 "buy government bonds, help fund the war!".  In Dec 1922 I'd expect government bonds were paying a pretty good rate of interest, after prices had gone up almost 1000x in 4 years.  The war is over, you have a good job, and are making good wages that while not up 1000x, are still enough to make your fixed-rate mortgage look puny.  But wow, instead of paying off the mortgage, buy government bonds, look at that rate!  And the government is good for it, I mean sure, we lost the war but industry is booming, exports are booming, we're rebuilding the nation, really the only problem is the reparations, but those are working out.  With that rate on government bonds, look how much I can make compared to prepaying the mortgage!

dualstow wrote:

MediumTex wrote: Are the 10 years callable?

They are. I can see them in Fidelity now, and it says "Call Protection: No".

Specifically, it says "MAKE WHOLE."

I know this is more than a month late, but it's nice to see that Intel is raising the dividend yet again.

SANTA CLARA, Calif., May 11, 2011 – Intel Corporation today announced that its board of directors has approved a 16 percent increase in the quarterly cash dividend to 21 cents per share (84 cents per share on an annual basis), beginning with the dividend that will be declared in the third quarter of 2011.

Today's announcement is the second dividend increase in the past 6 months. Intel previously raised the dividend 15 percent in November 2010.

http://newsroom.intel.com/community/int ... h-dividend

dualstow wrote: I know this is more than a month late, but it's nice to see that Intel is raising the dividend yet again.

SANTA CLARA, Calif., May 11, 2011 – Intel Corporation today announced that its board of directors has approved a 16 percent increase in the quarterly cash dividend to 21 cents per share (84 cents per share on an annual basis), beginning with the dividend that will be declared in the third quarter of 2011.

Today's announcement is the second dividend increase in the past 6 months. Intel previously raised the dividend 15 percent in November 2010.

http://newsroom.intel.com/community/int ... h-dividend

I really like this company as a long term holding.  It's coming up on a year since I bought my shares and I have been happy with the purchase.

AgAu,

I appreciate the historical context... seems a little far-fetched for the U.S., but I'll definitely take that into consideration. 

Thanks.