Discounted cash Value vs dividends: Keys to risk Management

[bimetalaupt]

Bet on black: this is a high risk system that uses time arbitration to "medicate" risk. Call it my ASA for the Head ache of volatility.  It is all about risk: Monte Carlo risk of the known unknown.
so if your correlation of M3 to DJIA is 64% you investment at 50% Intrinsic Value should produce a superior return then on dividends alone. That does not mean buying zero income only dividends add little to the value.

Look at IBM, HD and JNJ: All have future value 200% over valuation and pay a dividend.  Look about the stock and efficient use of capital.

Just a thought,
BiMetalAuPt

[Aman A.K.A. Ahamburger]

Good point . Taking on massive amounts of debt to fund buybacks and dividends with no innovation in the pipeline is a low growth strategy for sure.

Question; what kind of risk metric does a global conflict have in your math models? Higher oil and gas prices=less money going into the general economy.

Hope you're having a good weekend.

[bimetalaupt]

Current 10 year projection of the intrinsic Value of these equities.just a fast check of these three with 2.5% interest 10 year T notes and 3.5% 30 year t-bond
firm............ISV@10 years..........WACC
HD............. $166.62 ... ............ WACC  ....5.05%
IBM ............$569.79 ............,...WACC......4.91%
JNJ..............$204.29................WACC........4.47%

WACC= WEIGHTED AVERAGE COST of CAPITAL

[Aman A.K.A. Ahamburger]

I'm guessing the first number is price projections? What maturity are the numbers based against? This week will probably be a good one to tuck 50% of dividends that need to be reinvested away. Especially because it's getting close to payout time again.

[bimetalaupt]

Jun 15, 2014 22:33:10 GMT -5 Aman A.K.A. Ahamburger said:

I'm guessing the first number is price projections? What maturity are the numbers based against? This week will probably be a good one to tuck 50% of dividends that need to be reinvested away. Especially because it's getting close to payout time again.

A++++,
No, Intrinsic Stock Value or current value of future cash flows.  I lost it  trying to make a copy and have to retype the post..later
God Bless you and yours,
BiMetalAuPt

MMXV-BETA:The last bull upper projection for DJIA Sept 30,2015 is $20,039.2288106 with a Correlation to M3 of 64.043990972482163%. We will present more numbers for Long term Calls or puts later. 
We are expecting a summer war between bonds and stock.  KASH is KING

[Aman A.K.A. Ahamburger]

,

Wow, talk about growth potential then. I'm expecting some more war to break out over summer as well. I always wait a bit after I decide I might buy. Should be an interesting couple of weeks.

God bless you and yours as well,

[bimetalaupt]

The school of value system is all about understanding risk: system we will talk about is call " Value At Risk". From Hull's book.  What I talked ABOUT IN THE PAST WAS THE MATH MODEL THAT PROJECTED MY RISK WAS 228% OF MY EXPECTED RETURN. 

Our test system with real cash was set for the true Bar-Bell test of 80% T-Bonds and up to 20% futures and Options. In the real world 85% of all Calls and Puts reach the expiration date worthless. The trick we were working with was to write uncovered puts until the asset was put to the system then writing calls. T-Bonds are 90% Cash equivalents. Now if the stock market declines then you will see the lack of correlation with the bond market. This is known as the Efficient Frontier: best return for the risk.

Now I will say that I am 95% sure that I will not lose more the 20%. Problem is It cost me profit to buy insurance. I tested the numbers against Citigroup that had36% ROE at the time( 2006-2007). There risk was 64% of return.

An Example of this system might be
CALLS on IYZ 10%
PUTS on QQQ 10%
KASH IS KING 1%
T-Bonds 79%
Est Alpha 4.00
EST Beta -0.5

Problem has been that a market natural total system portfolio has in the past produced a long term return of 7% with the S.D. 8%. Assume more risk over time and high beta portfolio produced 12% with SD of 25% ( beta 2.00+). Can you live with both?

[Aman A.K.A. Ahamburger]

Jun 19, 2014 22:49:07 GMT -5 bimetalaupt said:

The school of value system is all about understanding risk: system we will talk about is call " Value At Risk". From Hull's book.  What I talked ABOUT IN THE PAST WAS THE MATH MODEL THAT PROJECTED MY RISK WAS 228% OF MY EXPECTED RETURN. 

Our test system with real cash was set for the true Bar-Bell test of 80% T-Bonds and up to 20% futures and Options. In the real world 85% of all Calls and Puts reach the expiration date worthless. The trick we were working with was to write uncovered puts until the asset was put to the system then writing calls. T-Bonds are 90% Cash equivalents. Now if the stock market declines then you will see the lack of correlation with the bond market. This is known as the Efficient Frontier: best return for the risk.

Now I will say that I am 95% sure that I will not lose more the 20%. Problem is It cost me profit to buy insurance. I tested the numbers against Citigroup that had36% ROE at the time( 2006-2007). There risk was 64% of return.

An Example of this system might be
CALLS on IYZ 10%
PUTS on QQQ 10%
KASH IS KING 1%
T-Bonds 79%
Est Alpha 4.00
EST Beta -0.5

Problem has been that a market natural total system portfolio has in the past produced a long term return of 7% with the S.D. 8%. Assume more risk over time and high beta portfolio produced 12% with SD of 25% ( beta 2.00+). Can you live with both?

,

I had to read this a few times... Seems like you are saying that this system could produce a guaranteed loss because of options and your returns are diminished because of insurance? As opposed to owning shares in companies that have been around for decades to over a century that pay you to hold them/income generating fixed income assets??

God bless,

[bimetalaupt]

A++++,

This study was done 2006-2007. You are correct and the point I was trying to make is Option trading is like going to Lost Wages, NV: odds favor the house.  Assumption of risk increase return .  Covered puts were my best trades'  It is looking like March 2009 again per

Have  a great week end

Bruce.

[Aman A.K.A. Ahamburger]

,

I kind of figured as much. Lost wages for sure, especially when you have to buy insurance just to assume that extra risk..

March 2009? Margin debt all time high, China's overbuilding has doubled since then and the buyers have dried up. Inflation starting to creep up, the Mid East is twice as bad as it was. Putin has shown his true colors. IDK, but I did call the US manufacturing Renaissance, the US oil and gas boom, the US housing bottom, the private US slow and steady recovery(per velocity of money). I brought the China ghost cities problem up well in advance(including the proper timing), the New EU, the fact that China will have to fight the war in the Mid East.... You sure that wasn't march '08?

Having a good week so far, God bless,

[bimetalaupt]

JNJ at BETA 0.54 and 25 years =410.32
How much of this is due to share buy back?++

with out share buy back JNJ Beta was 0.89 ISV = 305.09 so 105 could be related to buyback/ price defence!! not dividends

[tyfighter3]

That's why I like growth stocks. Who cares about a 4 or 5% dividend when they are growing 50, 100 % or more a year. And then there are stocks like EPD that's doing both.

[Aman A.K.A. Ahamburger]

I'm with ya Ty. Growth + dividends is where it's at!

Jul 28, 2014 14:01:43 GMT -5 bimetalaupt said:

JNJ at BETA 0.54 and 25 years =410.32
How much of this is due to share buy back?++

with out share buy back JNJ Beta was 0.89 ISV = 305.09 so 105 could be related to buyback/ price defence!! not dividends

I think you're right on the money , no surprise there. Lots of appreciation in the market has been due to buybacks.

Also, as you have stated numerous times .. GREAT CALL!!!

Here’s where the forceful demand for bonds comes from

Surging Demand

U.S. commercial banks have become large buyers of U.S. Treasury and agency debt since the beginning of the year, marking their largest holdings since the financial crisis. The shift is in part an effort to boost balance sheets to conform to regulatory requirements, according to a report last week by Bank of America Merrill Lynch strategists, led by Priya Misra.

Global central banks are increasing their foreign-exchange reserves , partially as a buffer against the impact of capital that flows in and out markets due to central bank bond-buying programs in the U.S., Japan, and elsewhere. As part of that process, they load up on high-quality debt. (Read more about how China’s reserves flow through the economy.)

Central banks have bought up a substantial portion of the government bond market as part of their stimulus programs . Since the Fed’s Operation Twist program began in 2011, the Fed has been a large purchaser of long-term bonds, notes Kathy Jones, fixed-income strategist at Charles Schwab. The Federal Reserve is slowing its bond purchases, but continues to add to its holdings. At the same time, Japan’s program is going strong, and the European Central Bank may consider more easing measures.

When executing a trade that requires collateral to be posted, banks and central banks that serve as counterparties worry more about the quality of debt more than they did before the financial crisis. That’s added demand for top-grade bonds like Treasurys, agency debt, and high-grade corporate bonds to use in trades, according to Marrinan, of RBS.

Institutional buyers like pension funds and insurance companies have been rotating into highly rated bonds as they cash out in the equity market. Pensions in particular buy high-quality bonds to match their long-term assets with liabilities, though the industry’s movement into fixed-income has been slow . There was evidence of “moderate” pension fund buying in the bond market, according to a June report by strategists at UBS, led by Boris Rjavinski.

Sovereign wealth funds , which are government-held investment funds, have been large buyers of high-quality debt as well, Weisman notes.

Waning Supply

Issuance of U.S. government debt is trending downward . Strategists at J.P. Morgan, led by Nikolaos Panigirtzoglou, said in a June report: “After peaking in 2010, government bond supply is on a declining trend due to declining government budget deficits.”

Corporate credit markets , including securitized markets, have seen the amount of total outstanding debt drop, despite continued record issuance of corporate bonds. Because companies that sell bonds are increasingly using them to refinance older, higher-yielding debt, the total amount of bonds in the marketplace isn’t rising, Marrinan notes.

Municipal-bond issuance has dropped off as local government officials choose to emphasize fiscally responsible policies, particularly as they try to appeal to voters ahead of elections this fall, according to Burt Mulford, municipal bond portfolio manager at Eagle Asset Management.

On top of that, fewer types of bonds qualify as high-quality debt, according to Jim Sarni, managing principal at Payden & Rygel. Two that no longer do are Spanish and Italian debt in the wake of European banking crises.

[bimetalaupt]

Don’t be fooled, all is not well for stocks
For those who only watch the headlines, the stock market looks as if it’s doing a pretty decent job digesting 6 years of gains. The Dow (DJI) is hanging out near record highs in the 17,000 area, the S&P 500 (^GSPC) is within 2% of the once unthinkable 2,000 mark and the Nasdaq (^ICIX) is higher than anytime in the last decade.

Or maybe this is just the lull before the storm. As Josh Brown of the Reformed Broker CEO of Ritholtz Wealth Management notes in the attached clip, under the surface things are worse than they seem. Small caps are underperforming, the Nasdaq is being led by a tiny fraction of major stocks and it’s all but impossible to find ideas that are particularly fresh by any reasonable standard.

For want of a better term the market is choppy and choppy is bad. “Tops are a process. A choppy market can sometimes be indicative of a change in trend.” When you’re six years into a bull market and long stocks there’s a good chance you’d prefer to have the upward drift in the market continue

finance.yahoo.com/news/don-t-be-fooled--all-is-not-well-for-stocks-173341410.html

RIDK DJIA 5QS $2776.59678505399
15 MONTH RIDK % 16.267603054171833%

1 sd + djia $20,443.0357719

wild ride!!!  RISK and return all in the next 15 months: WALL of worth and wealth with a bit of "volitionality".. (In linguistics, volition is a concept that distinguishes whether the subject, or agent of a particular sentence intended an action or not. Simply, it is the intentional or unintentional nature of an action.[1] Volition concerns the idea of control and for the purposes outside of psychology and cognitive science, is considered the same as intention in linguistics. Volition can then be expressed in a given language using a variety of possible methods. These sentence forms usually indicate that a given action has been done intentionally, or willingly. There are various ways of marking volition cross-linguistically. When using verbs of volition in English, like want or prefer, these verbs are not expressly marked.[2] Other languages handle this with affixes,[1][2] while others have complex structural consequences of volitional or non-volitional encoding.[1][3)( THINK HFT AND WHAT THEY DO: ACT ON WORDS IN THE NEWS)
VOLATILITY S&P 500 (^VIX)
-Chicago Options
13.66 Up 0.38(2.86%) 11:27AM EDT

Just a thought,
BiMetalAuPt
Just read the words from the last paragraph of the FOMC..July 30,2014..

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Richard W. Fisher; Narayana Kocherlakota; Loretta J. Mester; Jerome H. Powell; and Daniel K. Tarullo. Voting against was Charles I. Plosser who objected to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for "a considerable time after the asset purchase program ends," because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee's goals.

Statement Regarding Purchases of Treasury Securities and Agency Mortgage-Backed Securities Leaving the Board

[Aman A.K.A. Ahamburger]

Bio,

You mean like if they would have said they need to grease the wheels on the day Argentina defaulted it would have been... interesting. How about the DJT? Great call!

God Bless,

[tyfighter3]

Well, I've been in CASH since April. Just doing some short term stuff to keep me sharp. I think the underlieing RISK in this market is getting to big for this Market to go much higher without a correction to happen. IMO it would be Healthy for the Market. At my age, I'm keeping my cash close to me. lol

[tyfighter3]

And as I speak look at WLL bucking the trend today. Energy is where it's at.

[Aman A.K.A. Ahamburger]

Jul 31, 2014 12:11:05 GMT -5 tyfighter3 said:

Well, I've been in CASH since April. Just doing some short term stuff to keep me sharp. I think the underlieing RISK in this market is getting to big for this Market to go much higher without a correction to happen. IMO it would be Healthy for the Market. At my age, I'm keeping my cash close to me. lol

Might as well be tight at this point. The times, they are a changing.

[Aman A.K.A. Ahamburger]

Jul 28, 2014 14:01:43 GMT -5 bimetalaupt said:

JNJ at BETA 0.54 and 25 years =410.32
How much of this is due to share buy back?++

with out share buy back JNJ Beta was 0.89 ISV = 305.09 so 105 could be related to buyback/ price defence!! not dividends

Did you see the video Charles Biderman, Jeremy Siegel video I posted from July, 2007? Buybacks were also a big topic of discussion at that point as well.

Look at who else is sitting on their stocks and letting their cash pike grow! Love it when I'm on the same page as this guy..

Buffett Waits on Fat Pitch as Cash Hoard Tops $50 Billion

[jarrett1]

As the USA's CEO's respond to Obama's "you don't get it" video...we will now have the debate we should have had in 2007-2008!!!

[bimetalaupt]

Aug 4, 2014 15:40:52 GMT -5 jarrett1 said:

As the USA's CEO's respond to Obama's "you don't get it" video...we will now have the debate we should have had in 2007-2008!!!

With Apple Inc.'s repurchases staking a claim as the most profitable on record, buybacks remain one of America's most popular antidotes to bears.

The iPhone maker is up 25 percent since it spent $18 billion on its own shares between January and March and rallied 32 percent after a $16 billion buyback in 2013. Those are the highest four-month returns among the 20 biggest quarterly repurchases by any company since 1998, according to data compiled by Bloomberg and Standard & Poor's. S&P 500 constituents have spent $211 billion on their own stock this year amid concern the five-year bull market is prone to selloffs such as last week's 2.7 percent retreat
finance.yahoo.com/news/apple-buybacks-pay-most-ever-040001811.html

As I said: buy backs are defensive action  against short selling by HFT!!!  They improves Intrinsic Stock Value by lowering the BETA: RISK and this effect Valuation ,ore then it cost.  Also improves Return or equity and reduces WACC ( weighted Average Cost of Capital).

Just a thought,
BiMetalAuPt

[bimetalaupt]

Story of the buy-back the broke the shorts!

Many years ago Telidyn (sp) sold several money losing of its many firms to raise cash.  The 'Shorts' assumed they were about to buy XXXX for a lot of $$$$$. The stock crashed.  They did a buy back and demanded the stock certificates be returned.


The stock started up like 10% in one day.  By law the shorts had 3 days to re-buy the stock and return the borrowed shares.  They never did buy XXXXXX and made a very nice improvement in the stock price in part to the new lower beta and improved growth due to the fact they sold some money losing firms.  Remixes of the assets to focused on profits makes me think  of JNJ!!

Just a thought,
BiMetalAuPt
Jim Cramer also talked about this in April 2014.

[bimetalaupt]

The last major buy signal Expert 50/50 through we had a Equity Risk Premium of greater then 6.00% for 10 years cycle.  

beta = 0.05  (DUK)
ERP 10Y LD EST. 5.260367964444000%
ERP 30Y 4.453367964%

TOTAL MARKET AT 1.05 BETA


total sm yield 1.71%
M3 growth 7.86%
combination 9.57%
erp 6.320000000000%

IF AND ONLY IF THE DJIA REACHES 14816.3535700851 ( major black swan event= 2 standard deviation crash or super correction) 
 THEN!!!  IT IS A BET ON RED..OK MOST OF THE SYSTEM HAS BEEN BET ON BLACK

HIGH RISK AT BETA = 1.35
SMALL CAPS 11.4528000000%
Max margins at 1.05 beta with 67% return upside / downside ( Possibility X Probability)
MAR 11.16840000000%
WACC = 8.45%

Just a thought,
BiMetalAuPt RIDK 4619.964375
19436.3179450851
UPSIDE 3102.53794508509
DJIA UPSIDE/RISK 67.1550188108%

Highest risk DJIA 14816.3535700851

[jarrett1]

All bets are off until/when the traders in their $300,000 summer rentals decide to trade the market...market side ways til after labor day!!!

[bimetalaupt]

Well: yes spending was down for July so SAVINGS was up to 5.7%. That is a 0.3% increase from MAY AND JUNE.  SAVING DRIVES INDUSTRIAL DEVELOPMENT AND AFTER A 9 MONTH DELAY M2 WILL INCREASE GEP AND after a 15 month delay we will have increased long term capital SPENDING EFFECTING THE GDP!.

ALSO DEBT IS UNDER BETTER CONTROL!
This Week In Credit Card News: Late Payments At 7-Year Low; The Top-Rated ...
Forbes - 52 minutes ago
The rate of U.S. credit card payments at least 90 days overdue fell to 1.16% in the second quarter–the lowest level in at least seven years, credit reporting agency TransUnion said.
Just a thought,

BiMetalAuPt

 research.stlouisfed.org/fred2/series/PSAVERT
2014-07: 5.7
2014-06: 5.4
2014-05: 5.4
2014-04: 5.2
2014-03: 4.8

[Aman A.K.A. Ahamburger]

Those are some great points !

I'll take decreased spending, decreased debt, and increased savings any day of the week and twice on Sunday!!! Shows the strength of the US economy, shows how much better of a place the US consumers has got to over the last 5 years, and like you said; shows the strength of long term industrial production that is in store for the NA economy. Think about durable goods for the global conflict...

I've got an interesting line of thought to post later on your swan thread.

[bimetalaupt]

Systematic risk reduction: Efficient Frontier system understated VALUE: Austrian style used to develop the next generation Math Model :MMXVII Total risk limiting or 60-30-10 Max risk development

Value-at-Risk in Portfolio Optimization: Properties and
Computational Approach
§
Alexei A. Gaivoronski
§
and Georg P∞ug
§§
§
Department of Industrial Economics and Technology Management
NTNU - Norwegian University of Science and Technology
Alfred Getz vei 1, N-7049 Trondheim, Norway
[e-mail]
§§
Department of Statistics, University of Vienna
Universitaetsstrasse 5, A-1010 Vienna, Austria
Georg.P∞[e-mail]
Abstract
The Value-at-Risk (V@R) is an important and widely used measure of the extent to
which a given portfolio is subject to risk inherent in Ønancial markets. In this paper, we
present a method of calculating the portfolio which gives the smallest V@R among those,
which yield at least some speciØed expected return. Using this approach, the complete
mean-V@R e±cient frontier may be calculated. The method is based on approximating the
historic V@R by a smoothed V@R (SV@R) which Ølters out local irregularities. Moreover,
we compare V@R as a risk measure to other well known measures of risk such as the
Conditional Value-at-Risk (CV@R) and the standard deviation.
It is shown that the resulting e±cient frontiers are quite diÆerent. An investor, who
wants to control his V@R should not look at portfolios lying on other than the V@R e±-
cient frontier, although the calculation of this frontier is algorithmically more complex. We
support these Øndings by presenting results of a large scale experiment with a representative
selection of stock and bond indices from developed and emerging markets which involved
the computation of many thousands of V@R-optimal portfolios.
1 Introduction
The Value-at-Risk (V@R) is an important measure of the exposure of a given portfolio of se-
curities to diÆerent kinds of risk inherent in Ønancial markets. By now, it became a tool for
risk management in Ønancial industry (
RiskMetricsTM
1995) and part of industrial regulatory
mechanisms (
Amendment to the Capital Accord to Incorporate Market Risks
1996). Considerable
§
Journal of Risk, Vol. 7, No. 2, pp. 1-31, Winter 2004-2005
1
amount of research was dedicated recently to development of methods of risk management based
on Value-at-Risk
1
.
In this paper we focus on applications of the Value-at-Risk (V@R) concept in the context
of optimal portfolio selection. This is a relatively novel application of V@R as opposed to
utilization of V@R for risk measurement purposes. One of the reasons is that V@R optimization
is inherently more di±cult than { for example { variance optimization and e±cient solution
algorithms for this problem are lacking. The V@R optimization problem is nonconvex, may
exhibit many local minima and is of combinatorial character, i.e. exhibits exponential growth
in computational complexity. The objective of this paper is to demonstrate how to solve V@R
optimization problems and to put V@R on equal footing with the variance as portfolio selection
criterion. We present a smoothing algorithm, which allows to calculate optimal portfolios in the
V@R sense accurately and in reasonable time.
Recently, the possibilities to utilize V@R and related measures like the Conditional Value-
at-Risk (CV@R, see Uryasev & Rockafellar (1999)) as criteria for optimal portfolio selection
started to attract some attention. The relevant literature includes Basak & Shapiro (2001),
Gaivoronski & P∞ug (1999), Krokhmal, Uryasev & Palmquist (2001), Medova (1998), Uryasev
& Rockafellar (1999) and sheds an interesting light on the properties of V@R-optimal portfolios
while acknowledging considerable computational di±culties which we address in this paper.
2
Another aim of this paper is to make computational comparisons of the properties of V@R,
CV@R and standard deviation as risk measures in context of portfolio selection. In the center
of our approach is the comparison of e±cient frontiers for diÆerent data sets, some of them of
considerable interest for institutional investors. This study can be seen as complementary to
comparison of theoretical properties as in Artzner, Delbaen, Eber & Heath (1999) or evaluation
of risk measures from the utility theory standpoint as in Grootveld & Hallerbach (2000) and
Kaplanski & Kroll (2002). We argue that for an investor whose risk preferences are expressed
in terms of Value-at-Risk it is important to consider this measure directly because other risk
measures like standard deviation, or even the seemingly related CV@R may represent a poor
substitute. Empirical comparisons of V@R and other risk measures from diÆerent angles can be
found in Wu & Xiao (2002) and PØngsten, Wagner & Wolferink (2004).
The rest of the paper is organized as follows. In section 2 we introduce the three risk-return
optimization problems for standard deviation (or equivalently variance), V@R and CV@R and
discuss their properties illustrating our points by numerical examples. We concentrate here
on empirical risk measures derived directly from historic data. In other words, our approach
is based on historic simulation. The main Ønding is that historical V@R can be represented
by a superposition of two components: one is relatively well behaved and the other is highly
irregular. This observation is exploited in section 3 where we introduce the smoothed Value-
at-Risk (SV@R) which is an approximation of V@R, which extracts the global component of
1
See e.g. Jorion (2001) and Du±e & Pan (1997) for surveys
2
V@R optimization can be considered as a stochastic programming (SP) problem of special type. It is related
to SP problems with probability constraints (Prekopa 1995). General references for stochastic programming mod-
els and solution techniques are Birge & Louveaux (1997), Ermoliev & Wets (1988), Kall & Wallace (1994), Wets
(1982) among others. DiÆerent applications of SP to optimal asset allocation were considered in Cari~no & Ziemba
(1998), Consigli & Dempster (1998), Dembo & Rosen (1999), Dupacova, Bertocchi & Moriggia (1998), Gaivo-
ronski & de Lange (2000), Gaivoronski & Stella (2000), Mulvey & Vladimirou (1992), Ogryczak & Ruszczynski
(1999), Zenios (1993), fast computation of several mean-risk e±cient portfolios was considered in Duarte (1999).
2

homepage.univie.ac.at/georg.pflug/science/technicalreports/GaivoronskiPflugNew.pdf

The efficient frontier is a concept in modern portfolio theory introduced by Harry Markowitz[1] and others. A combination of assets, i.e. a portfolio, is referred to as "efficient" if it has the best possible expected level of return for its level of risk (usually proxied by the standard deviation of the portfolio's return).[2] Here, every possible combination of risky assets, without including any holdings of the risk-free asset, can be plotted in risk-expected return space, and the collection of all such possible portfolios defines a region in this space. The upward-sloped (positively-sloped) part of the left boundary of this region, a hyperbola, is then called the "efficient frontier". The efficient frontier is then the portion of the opportunity set that offers the highest expected return for a given level of risk, and lies at the top of the opportunity set (the feasible set). For further detail see modern portfolio theory.

IT IS ALL ABOUT IMPROVING YOUR ALPHA WITH LITTLE INCREASE IN RISK( BETA).

Just a thought,
BiMetalAuPt

[bimetalaupt]

The Discounted Cash flow model aka RETIRE has posted a buy on DUK!!   In a world of an expected total return for retirement of 7%  the expected return of 9% is looking better then the average retirement  funding system. Equity risk Premium of 6%+ is classed by our Math model as BUY: just like March 2009.  Yes it takes BALLS OF GOLD to buy when the world is selling in FEAR... BUY!! DUK.

dividend................. est. growth.......................... total return............................ ERP
4.488356%............ 4.520000%.......................... 9.008356%.......................... 6.68%

Just a thought,

BiMetalAuPt

About Gold:  buy is off in time...BUY at 930.547845115032

[bimetalaupt]

FROM DEUTSCHE:

With looming interest rate increases, all the bond proxies have been hit hard. Utilities, real estate investment trusts (REITs) and energy master limited partnerships (MLPs) all had a very tough first half of 2015. A new research note from Deutsche Bank says that utilities are cheap, and all the quality companies yielding 4% or more make very good sense for the last half of 2015. Other top Wall Street firms are starting to join in the chorus for the utility stocks.
Duke Energy Corp. (NYSE: DUK) is the largest market weighted stock in the S&P 500 utilities at 8.62%. The stock is one of the leading U.S. utility companies, given its stable earnings base, as a significant portion of the company’s earnings are derived from regulated operations. Also, the company has delivered a healthy financial performance in the past and remains an attractive option for income-seeking investors.

Duke shareholders are paid an outstanding 4.38% dividend. The Thomson/First Call consensus price target is $81.12. Shares of Duke Energy closed most recently at $72.53.


Read more: Deutsche Bank's High-Yielding Utilities to Buy Now - 24/7 Wall St. 247wallst.com/infrastructure/2015/07/06/deutsche-bank-loves-high-yielding-utilities-4-to-buy-now/#ixzz3f90cFy7Y
Follow us: @247wallst on Twitter | 247wallst on Facebook

Read more: Deutsche Bank's High-Yielding Utilities to Buy Now - 24/7 Wall St. 247wallst.com/infrastructure/2015/07/06/deutsche-bank-loves-high-yielding-utilities-4-to-buy-now/#ixzz3f905FY8h
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THANK-YOU SIR: MMXVI-ALPHA AGREES!!!!

AT These number it DUK is a buy per MMXVI-Alpha: ERP > 6%

dividend........................est. growth............... total return................... ERP
4.384393%................. 4.520000%................ 8.904393%................... 6.63%

[bimetalaupt]

DUK CLOSED AT 75.27 UP 2.42 OR 3.32%... LEAVING IT JUST IN BUY DUE TO THE MAJOR DROP IN INTEREST RATE ON T-BONDS ( 30 YEARS)..

dividend................... est. growth............ total return.................... ERP

4.384217%.............. 4.520000%............ 8.904217%................... 6.67%

QUESTION OF THE DAY? WHY DOES GREEK DEBT HAVE ANYTHIN K TO DOW WITH THE VALUE OF FREE ENERGY IN WEST TEXAS?  NOW FOR NG: IS NG A REAL BUY SO WE ARE DONE WITH OLD COAL POWER obsolete plants ?

Intrinsic Stock Value ( Value Pro) 110.07 

Just a thought,

BiMetalAuPt

Utilities have been a staple piece of portfolios for many years. In some ways, these power-generation companies and electric utilities have replaced traditional certificates of deposit and other income-generating investments. Duke Energy Corp. (NYSE: DUK) comes in as a powerhouse among the utilities, and Tuesday morning this
The company announced that it will increase its dividend. The new dividend will be $0.825 quarterly, which is a yield of roughly 4.5%, or $3.30 on an annualized basis. This is an increase of 3.8% from the previous level. The dividend previously had a yield of about 4.4%, paying out $3.18 annually, or $0.795 quarterly.

Currently the long-term target dividend payout ratio continues to be in the range of 65% to $70%.

This is an interesting time for Duke to hike its dividend. The stock has suffered over the course of the first half of 2015, and so far this year the stock is down 11%. On the horizon there is also the potential for a rate hike by the Federal Reserve.

Deutsche Bank expects the Fed to start hiking rates in September and continue through 2016. The firm also thinks the climb in long-term yields will be limited, the yield curve actually flattens and fed funds will be at 2% and the 10-year Treasury yield at 3% by the end of 2017. If so, then utilities are a great place for yield investors to stay put or initiate positions in.


Read more: Duke Energy Dividend Hike (NYSE: DUK) - 24/7 Wall St. 247wallst.com/energy-business/2015/07/07/why-the-duke-dividend-hike-matters-so-much/#ixzz3fF4ZeHNd
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