Both written by Jeremy Seigel.  These are probably the 2 most useful books I have read on investing.  The books discuss the long term results of investing in stocks since 1800.   Much work has been done on graphs, stats, and research.  Since 1800, 1900, or 1950 stock returns have beaten bonds or gold by a wide margin.  However, I do think he misses a lot of stocks that end up broke.  Also two stocks listed as S&P 10 are now bust, General Motors and Washington Mutual.  There are a lot of hidden gems in these books, so I am going to stop my review here.  Go to the library read them, then after you will buy them on amazon because they are that good.

He also writes about the coming crisis due to the fact the country is living longer.  He even recognizes that it requires far fewer man-hours to make steel than 20 years ago - 4 m-hrs compared to 10 m-hrs.  But, he fails to realize if you added the productivity gains of machines, farming, and minerals, humans would have to live to 200 years old for one to work as hard as someone in the 1950s.    Increased life expectancy is actually good for the economy, in the sense that it adds new industries like health care and nursing homes.  Industries that don't need to be artificial created with taxes like banking and NASA.

Although I admire Peter Schiff and hope he wins his senate seat.  Hopefully he realizes income taxes are good.  The growth of the 1950s was the result of 80% income tax rates.  But what I am here today is to challenge his notion the the DOW will someday equal the price of gold.  His notion is the DOW is based on U.S. stocks and that as Americans get poorer due to dollar losses, the DOW will go down. 

First lets look at gold.  The first column is the year.  The 2nd column is metrics tons of gold in the world.  The 3rd column is the increase in new gold supply due to mining.  The 4th is the loss in gold due to manufacturing and dental.  None of the numbers are referenced and not too accurate.

Gold Tonnes  Gain Loss
1970 93500   2000 -500
2000 140000 2600 ¬500
2001 143000 2601 ¬500
2002 146000 2600 ¬500
2003 149000 2600 ¬500
2004 152000 2600 ¬500
2005 155000 2600 ¬500
2006 157000 2500 ¬500
2007 159000 2500 ¬500
2008 161000 2356 ¬500
2009 163000 2400 ¬500

The world population is currently 6.8 billion people.  In 2000 is was 6.1 billion.  During this time change the supply of gold increased 16%, the population increased 8.1%.  It is estimate the supply of gold will increase another 100,000 tons before reserves become depleted and the cost of extraction will exceed the price of $1500.  The value of gold is purely based on what people give it.  For that reason you often hear advertisements on radio and t.v. to keep the demand up.  Gold has not inflated in supply (2% per year) compared to any currency.  As inflating currencies via increasing the national debt are the easy way to steal or tax savers.

Now lets look at a DOW stock.  I chose Exxon-Mobil because it is the largest in market cap.  The first column is year, the 2nd column is shares outstanding, the 3rd column is annual dividend, and the 4th column is yahoo finance adjusted price at end of August.

XOM   
2000 6900 0.88 34
2001 6800 0.90 33
2002 6700 0.92 30
2003 6600 1.00 33
2004 6400 1.08 42
2005 6100 1.16 55
2006 5700 1.28 64
2007 5400 1.38 82
2008 5000 1.60 78
2009 4800 1.68 69

During this time shares outstanding were reduced 30.4% compared to the population increase of 8.1%.  Assuming XOM puts out the same amount of oil as in 2000.  It is easy to see the change price of a share XOM, should exceed that of the change in the price of an ounce gold on an inflation basis. 

It should be noted.  If the electric car gains foothold in the U.S., which everyone should hope due to the lower air pollution, it is entirely possible XOM will go the way of Circuit City - bankrupt.  But, before that happens the DOW will replace the stock.

The rise in the price of gold is purely the result of hype and advertisement of the last decade.  The fleeing of corrupt currencies as result of cutting income taxes.  Yes, gold supply change is better than any fiat currency.  But stocks can control their shares outstanding, thus if they are able to increase market share too, they should outperform gold. As long as the hype continues for gold, demand will rise and prices too.  Governments can control their national debt too, thus supply of currency.  They can increase taxes, cut spending, and pass balanced budget amendments to stabilize currency.

It is getting to the point that the world economy may be completely different in 50 years from cars, to energy, to telephones, to television.

It is entirely possible the entire car fleet switches to electric.  The engines last long simpler, no pollution.  Batteries can be completely recycled.  A car might be so reliable that it lasts a 3 lifetimes with little repair.  Automotive companies, gas companies, repair business would see a large drop in revenues.

Photovoltaics on the roof of your house can supply enough energy for both electrical use and heating.  No more fuel oil, no more natural gas.  In fact the wire to your house may not be needed with new batteries and super-capacitors.  This might lead to increased global warming a pv panels are black and might add to the albedo of the earth.  But either way to prevent an ice age is more important than global warming.

It is pretty apparent the world is going wireless.  He who owns the spectrum is a good long-term play.  The question is how far they can take broadband on the wireless spectrum.  The wired phone service is not necessary.  The only real use is broadband.  Which leads to tv.  You can get pretty much a simple internet service like vunow where you can watch hulu, blip tv, and youtube, and hundreds of other channels over the internet.  Some in 1080p quality.  Thus phone, internet, radio, movies, and tv will become broadband services.

The biggest reason stocks have lost money over the last 100 years when compared to inflation is mainly the result of stock options.  If a CEO is paid via options they are more inclined to backdate them, hope for inflation, and hope there is a bump in share price allowing them to cash out $100 million in options.

A better scenario would be to pay executives actual stocks and allow them to increase the true value in relation to inflation.   Thus a CEO might get 5000 shares a year in stocks to be paid in 10 years.   If they do a bad job, their 5000 shares will be worth less next year.  The CEO will pay dividends to get some of that money in the present.  The CEO should not get any pension, but be responsible to elect the new CEO. Even if the CEO works for the company 30 years, he would still get only 5000 shares a year to be paid in 10 years.  The new CEO might get the job in 14 years.  However the new CEO would not get 5000 shares a year.  The new CEO might only get 2000 shares a year, due to price appreciation.

When the CEO retires, he will do his best to find a new CEO that will do his job.  The CEO must still wait for the stocks to become vested (10 years), and to pick a bad replacement will hurt his stocks.

If the CEOs of company like GM, KMart, or CC decide to screw the investors and make a backdoor deal with the creditors.  They will lose all their non-vested stocks and dividends.  Thus, the CEO will do all they can to save the stock.

The general public believes the management currently is only responsible to the stock holders.  The last 10 years proved this to be a white lie.  Although they are suppose to be responsible to the shareholders, they are really more interested in themselves and their employees.

I found this blog on dividend investing,

http://www.dividendgrowthinvestor.com/

Generally I consider these guys two heroes, however there are a couple of points where I disagree with them.  I do agree with them on the inflation that is coming as it is always is with unbalanced books.  We are in a temporary deflationary period due to forced selling.

Jim Rogers claims to sell the dollar and own basic commodities such as lead, agriculture, steel, oil, and gold.  According to him, no new lead mine has been constructed thus there is going to be great demand for lead.  However, he fails to mention lead is being phased out to non-toxic  better lithium based batteries.  It is also being replaced in paints, gas additives, and plumbing due to health concerns.  Cars which run on oil, could easily run on natural gas and electricity. Thus the oil is a ying yang fight with the electric car, if oil gets too high the electric car will replace it.  The dollar may be dead, but everything is a commodity.  Homes are a commodity.  Kitchen sinks are a commodity.  Computer chips are a commodity.  Lawyers are a commodity.   The dollar may be dead, but there are other commodities such as McDonalds and Heinz Ketchup.   

Rogers claims Smoot-Hawley Tariff Act was responsible for the great depression.  There is no universal agreement about the effect of the tariff (wikipedia). Tariff rates and peaked in 1830 at 57.3% with only 8% of all imports being duty-free, dwarfing the Smoot-Hawley rate of 19.9% with 63% of all imports being duty free.  IMHO, tariff levels have very little to do with anything.  The native Indians got along fine without the other continents.  With labor in these countries so low $0.25 an hour, it only seems fair to the U.S.  to charge a tariff.  Either that or change our labor laws.

Peter Schiff practices get out of the dollar and get into gold.   50% of the stocks he owns are foreign gold mining stocks.  Seems the diversification is rather low to me.  Gold is a yellow metal, with new supply coming online with new mining techniques.  Over 2/3 of all gold has been discovered since 1960.  Leveling of mountains and trashing of rivers have all been done to get gold.  Gold has historically been viewed as money, but there is nothing that makes this mandatory.  It is heavily advertised by gold owners.  A dollar backed in steel would probably be better than backed by gold.  If it was backed by steel you could turn your dollars in and get steel and build a house, boat, or car.  It would create very stable home prices.

Schiff claims basically Americans have blown their wealth by borrowing everything and consuming.  We make a lot of stuff and the only reason we make stuff overseas is because companies can get away from US labor laws by doing so.  Many of the plants are designed here and built there.  For example SunpowerCorp recently built a 1 Gigawatt annual photovoltaic plant in the Philippines due to lower labor costs.   If you increased tariffs more plants would be built here, giving Americans a higher likelihood of being able to buy the panels since they now have jobs to purchase them.  Furthermore the tariffs could replace income taxes.  Everybody lives on credit worldwide.

Schiff  claims Social Security is a ponzi scheme.  If you look at all the paper and steel mills and farms the number of people to make a ton of anything is about 1/10th of what is was in 1900.  Based on this productivity if the average person lived to 40 in 1900, they could live to 400 in 2010 using the same percentage of personnel devoted to industry.  Social security need not go broke, the only reason SS is in trouble is the same reason why we had problems with Katrina, Banks, and the SEC - poor government and public company leadership.

Both claim low income taxes will improve the economy. Historically taxes were dropped from 73% in in the early 1920s to 24% at the time of the crash in 1929.  Also the highest tax bracket was 94% in 1944 and net income it became effective was lowered from $5,000,000 to $200,000 in 1941.   If you look at history, higher the tax rate, higher the growth! The best way improve the economy would be to raise the top tax rate to 90% for all income above $200,000 a year.  History shows it leads to strong economy.  All this money could pay for virtually everything including SS, public health care, and bullet trains.  The IOUSA movie on Schiff's site, puts the blame of our fiscal problems mainly on Laffer, Bush, and Reaganomics.  Schiff generally supports Reagan's tax plans and smaller government.

Schiff claims the present situation we are in is proof the New Deal and Keynesian economics does not work.  The present situation was caused by not balancing the budget.   In the IOUSA movie on Schiff's site,  the Bush administration was for deficits.   The present situation was caused by cutting taxes and spending more money than revenues collected.  However there is some truth to what the Austrians Economists claim, that what starts as temporary governmental fix usually become permanent expanding government programs, which stifle the private sector and civil society.  But, it does not need to be that way the government could collect monies and spend wisely with some thought to aide the economy and respect taxpayers.  So Schiffs claim that this is somehow a result of taxing is misguided.  It may be aided as result of poor spending and poor corrupt leadership.  But, there is no proof that it is a result of wise spending.

I have never shorted a stock but scrambling around the net I came across this site, wallstreetcourier.com,  that listed the highest shorted stocks in mid-July 2008 on the NYSE.   There are probably a lot worse stocks on NASDAQ or AMEX.  I think it is safe to say if you invested short in everyone of those stocks you would have made a killing.  Without permission I am going to list the top 10 shorted stocks from this site in July 2008.

Symbol	Stock Description	Current Short Position	Prev. Short Position	Avg. Daily Volume	Short Interest Ratio (Days)
F	Ford Motor Company Common Stoc	330749822	317066331	69375474	4,77
IWM	iShares Trust (Barclays Global	301105075	355087303	128108383	2,35
WM	Washington Mutual, Inc. Common	274005590	276393184	87479278	3,13
WB	Wachovia Corporation Cmn Stk C	260591480	235147056	96490621	2,70
WFC	Wells Fargo & Company Common S	162555448	152153754	61488282	2,64
GM	General Motors Corporation Com	161906104	152943729	37587765	4,31
C	Citigroup, Inc. Common Stock	158475677	152024744	115581160	1,37
NCC	National City Corporation Comm	156351306	159189902	30781665	5,08
FNM	Federal National Mortgage Asso	154428562	138687675	123814199	1,25
BAC	Bank of America Corporation Co	133823812	101494912	106441375	1,26

Wow, what a list of dogs.  At least for the last 6 months.  I think back to what Jim Rogers once said,  "The winning investors who invest in shorts are probably the smartest investors."  They have to fight the wind of the long-term rising stock market.

The only question is it too late.  Another interesting site shortsqueeze.com .  Has anyone invested short?

As I am the buybackking I am going to tell you all I know about buybacks.  I have been getting crushed and to top it off one of my buyback stocks filed chapter 11 - Circuit City (CC).  I am still a little upset because I do not believe CC needed to go broke, if management decided to make changes before bankruptcy rather than after it.  Once your company hits chapter 11 it usually is not good for stockholders.  In the end, after they emerge they usually cancel the stock and give stockholders the chance to buy warrants way out of the money.

From 2000 to 2008 the stock never changed much.  Long-term debt was low and current asset to current liabilities was a ratio of 2:1.  Even today that ratio is like 1.5:1 (CC SEC filing).  Even in their latest quarterly, their balance sheet looks no different or better than 100s of other companies.  Revenues are down but only like 10% and they have been closing stores and terminating higher cost employees.  So I thought they could pull through.  They still have $1 billion in equity.

The reason I am the buybackking, is they have been buying back shares since 2003 lowering shares outstanding from 210 to 170 million shares in 2007.  Thus I was attracted to it with its buybacks and little long-term debt.  From what I learned it is not long-term debt that is too important it is short-term liabilities - rent, debt, etc. that determines whether a company can pay its bills.  The best ratio to look at is the current ratio.  A current ratio above 3 as generally considered safe.

As result of this and observing 100s of buyback stocks.  I think there are two reason for buybacks.  1. is to increase shareholder value, and 2. the sinister to unload stocks when insiders know the stocks is troubled and they want to get money out in privately negotiated buybacks.  The problem with #2 is the same problem you find in horse racing the owners and trainers know what is really going on with the stock or horse.  The public is left guessing.

The reason I like buybacks is imho they are better than dividends.  Suppose you have 2 companies p/e of 10, price of 20, and 10% growth rate.   The company wants to distribute 50% of earnings to the stock holders permanently.  If the company issues a 5% dividend, the stock price will probably jump to 30 or more and thus offer a 3.3% yield.  However, if the stock chooses to distribute 50% as dividends and 50% as buybacks.  The stock probably won't rise and have a 2.5% yield.  Dividend hunters will probably consider the $30 a better buy.  However, as the $20 stock buys back its shares, not only can it increase its dividend 10% a year, it can increase it 15%.  Furthermore the stocks fundamentals are based on old shares outstanding creating more hidden value.  If the stock becomes to attractive it might be a buyout candidate and I suggest many CEOs to increase their dividend if the price becomes too attractive.

Most companies do not buy back shares correctly.  They start a plan and buyback too aggressively.  I think they would be wise to keep it in short-term investments and buy from the pool at a more steady rate.  Furthermore if they really need the money they can use money from this pool.  If many companies like CC did this they might still exist and could be buying back at the low prices of today.   Today many companies might slow their buyback plans and focus on survival.

Some other info about buybacks.  Buyback announcements and buyback rates are not the same.  Consider only a company that is losing shares outstanding as a buyback stock.  Many companies have buyback plans but shares outstanding continue to rise.  This can be from stock options, to recent acquisitions,  to other sinister things.  

I am embarrassed for the taxpayers to be forced to bailout this worthless company.   Go to yahoo and look what these executives make for pushing paper. Their website shows they do nothing vital to the USA.  Companies like these need to go bankrupt.  Even if they were profitable I am embarrassed they exist in the USA.  They don't make cars, they don't build roads, and they don't clean sewers.  They do nothing and are of no importance to me.  Just because someone wears a nice suit does not make them important.  So pissed that I seem to be the only one angry at this.  Why haven't Bernake and Paulson been fired already.  Or better yet, why hasn't the federal reserve been closed so we don't have to make interest payments or sell bonds or tbills anymore?  Why work?

I am using this as a rough draft to send to my congressmen.

You are making a mistake bailing out these banks, GM, and Ford.  The best thing you can do is to encourage companies and banks to go broke.  From their ashes will come new strong growth.  You should be happy that banks fail as better run banks will take over their assets.  Even if GM fails, it will allow Zenn, Tesla, BGAuto, CAT, ACAT, PII, Deere, HOG, and all auto related companies to take over GMs assets and facilities on the cheap.  Companies go broke all the time.  It is healthy for the strength and tax base of the United States.

You can really improve their corporation balance sheets if you illegalize stock options and eliminate the pay of top executives.  You might allow top executives to get minimum wage.  It should also be illegal to increase shares outstanding.  It should also be illegal for a company to buy stock and give that stock out as bonuses.  All the income executives would receive would be from increasing dividends from share positions they bought in the open market or when the IPO was created.  All dividends should come from earnings to assure taxes.

How do you get a new CEO if they aren't paid?   The largest shareholder is the CEO.  The CEO gets paid by dividends from stock ownership.  The CEO could also sell shares. There is no board of directors.  The largest shareholder or the CEO would probably hire an acting CEO.  Smaller shareholders could combine their voting power to become the majority shareholder and be responsible for the CEO.

To increase jobs and the build the economy in the country you should be increasing taxes and earmarks.  Tax generates revenues that directly creates jobs.  Such as cleaning the trash along the roads.   Every economic powerhouse has taxed their way into prosperity.  Earmarks, where people compete on projects, is a good way to spend tax dollars.  Earmarks should be distributed based upon state population.  California might use their earmarks to build a bullet train or build their own Mount Rushmore.  The earmarks should be listed so the public can see them to decide if the money was spend wisely.

To get back to stocks here is a list of foreign ADRs an close-end funds that pay over 10% dividend: YZC, GGB, AWC, ACH, IAE, IAF, EOD, E, ANGGY.

If you read or watch Peter Schiff on youtube, he recommends investing abroad.  It seems many large safe ADRs have moved from the NYSE to the Pink Sheets.  The reason is to avoid as they say paying the costs of Sarbanes-Oxley.  There are literally 100s of ADRs there. Many pay over 5% dividend.  

 http://www.pinksheets.com/pink/companysearch/index.jsp search ADRs and pink sheets.

One thing that bothers me about Schiff is that he claims home prices will drop.  To build a house requires commodities thus, evenutally home prices should be rising to.  I heard many home builders already claim home prices are below replacement costs.  The population is growing 3 million a year in the USA, and some of those people are going to want to live in a new home.

Furthermore, presently the dollar might be overvalued.  I heard comedy by Chris Rock that if you go overseas the dollar won't buy anything.  To me that means  the dollar is presently undervalued to other currencies.  The reason why investors sold off dollars correctly in the early part of the decade.  However, they went a little too far.  The dollar will continue to erode in the U.S. however, the dollars needs to rise to catch up to the foreign currencies.  Thus if you buy a pair of shoes in Great Britain will cost the same as a pair of shoes in the USA after conversion.