In Defense of ARR

A recent article in Motley Fool questioned whether ARR is a good investment.

“Though ARMOUR Residential presently exhibits a dividend yield of nearly 14%, investors should be carefully watching ARMOUR Residential's book value in the coming quarters. This should yield a clue as to whether further dividend cuts are looming down the road."

There are two points I would make about this article: first ARR has declared their dividend through the end of 2014 so the dividend won't change either way until then, second the real estate market is at its lowest point so the price is not going to get any lower.

Some would say that ARR went down 43% last year but I would contend that that's the time to buy.  “Buy low, sell high” is the basic law of investing.  If you buy high then you won't make any money.

Here's the thing about ARR:  it's a numbers game.  In my humble opinion it's the best stock out there to make the most monthly income off dividend payments.  Because of its low price and consistent high yield you can buy more of it and make more each month.  Most dividend stocks cost too much to buy in bulk and make a decent monthly income.  I did a lot of research to find this stock and that's the reason why I've been in it so long.

If you were to put $100,000 in ARR since the dividend is declared till the end of the year, you would make $7000 by the end of the year just off dividends. That's 7 percent for 6 months not including the possible equity gain. If there is an equity loss it most likely won't be any larger than 7 percent.

For the general investor I would agree that a more conservative strategy is better.  It also depends on how old you are and how long you have to invest.  Investing in ARR is definitely an aggressive strategy and if you are risk averse, it would be prudent to balance things out with other stocks and maybe some ETFs.

Indeed, not one of us knows what's going to happen tomorrow.  If an investor says they do they're lying. We're all just making the best educated guesses we can.

We all have our strategies so you got to trust your gut. I could come up with a ton of articles to support buying ARR and just as many not to support buying ARR.  At the end of the day you got to call a play and hope your team wins.

Musk Opens Patents

When Tesla opened up its patents last week, that was a game changer for the electric car industry.  Some may question the move but as I said before, it’s not a good bet to bet against Elon Musk.  Aside from having a fighter’s spirit he has the ability to look long term and the resources to support it.

According to Musk, his reasons for opening up his patents were based on the situation we are in regarding climate change.  He wants the conversion to electric cars to happen faster than it is already so we can reduce carbon emissions before things get any worse.

Musk stands to gain immensely from the increased output of electric cars through the ancillary sales of his batteries and components and through his charging stations. Sometimes the stars align for certain individuals and it looks like this is a great set up.   

Here’s the company’s full statement:

Tesla Motors Statement on Patents

 

Is It Time To Buy Gold?

Given the rise in the equity markets gold has gone down.  Gold is typically a hedge against market downturns.  It would seem to be counter-intuitive to buy gold now that stocks are giving a bigger return.  Plus no one knows how high the market will go.  However, now is probably the best time to start building a gold portfolio.  As the price of gold goes down due to higher equity returns you can buy more of it.  As the adage goes: "buy when people are selling and sell when people are buying."

Tesla Benefits From Space-X

Tesla has the potential to become like a Google or Facebook because of its investment in battery technology.  What many of the bears aren't realizing is that the company is run by Elon Musk who has two other groundbreaking companies and one hasn't gone public yet.  Basically if you want to invest in his activities Tesla (TSLA) and Solar City (SCTY) are the only options for small investors.

If and when Musk takes Space-X public, that will be a boon for his other ventures.  If you hear interviews with Musk and watch his past behavior he does what it takes to keep his companies afloat.  He even risked his personal fortune to keep Space-X running when it was about to go under.  Now with his unveiling of his new capsule and after he has some successes under his belt it is a perfect opportunity to take Space-X public.

Here’s an article on Space X’s unveiling of their new capsule:

Space-X New Capsule

Here’s a CNN article asking that questions and giving some context on Musk’s IPO opportunity:

Space-X IPO