Meanwhile, we all need to recognize that companies shouldn’t just pay their dividends mechanically, like clockwork. The dividends of better companies are our cut of the profits, and that cut will ebb and flow with the business. So when any discussions regarding variability come up--either for better or for worse--the stocks can experience a lot of trading activity.

You shouldn’t take the ups and downs in one of our long-term, solid performer’s stock pricing lightly. But neither should you interpret any down as reason to dump or discard the shares.

Most of the companies run pools of mortgage assets, much like bond portfolios. They maintain their capital from common and preferred shares as well as bonds and bank debt. And the combination of its assets (mortgages and related securities) and liabilities (bonds and other debts), along with shareholder equity (stock), works to maintain positive returns in an always-changing market.

We know that interest rates are constantly in flux. From short- to longer-term rates in the bond and mortgage markets, the market is continuously shifting directions from near-term drifts daily to longer-haul, major shifts (such as those we've been seeing for the past few years).

These rate drifts and shifts work to provide the company with the ability to build and run the underlying portfolio to generate the heavy cash flows, which the company then pays out to common stock, preferred and bond holders.

It may seem like a straightforward business, yet it’s anything but.

Running a mortgage portfolio is one of the most complex jobs in the finance world and bond market. Cash flows are in constant flux--not just with rates but also in terms of borrower pre-payments. Management must have a constant hand on how even minor changes in the markets and the economy will help or hurt the underlying assets and liabilities.

One of our Portfolio favorites inside Personal Finance has been successful in this endeavor for years, even as its peers have been mauled or sent to the scrap heap again and again.

Right now, too many folks seem to think that they’re experts on mortgages. They’re trying to explain how the subprime market lenders were destined to fail and why the market--even the economy--may be set for the big one.

But as I’ve written before, subprime isn’t the foe that everybody believes it to be. It’s not a friend or a foe; it’s just another part of the market.

And it doesn’t matter whether a mortgage company is focused on high credit (as our favored PF Portfolio lender is) or low credit. It only matters that the company knows how to run and deal with its portfolios.

One last note on subprime: Unlike regular consumer loans--which have nothing behind them other than a signature--mortgages have the collateral of the properties. Workouts may take a little time, but there are assets--not just black holes--behind the loans.

Of course, that also assumes fraud isn’t in play. But that’s another issue.

Come and Chat

If you’d like to hear firsthand about some of our investments, particularly those in some of the more-interesting markets beyond the usual Wall Street fluff, join me on one or more of my upcoming conferences or travel opportunities--see below for the various opportunities available.

Head out to the East Coast, and join me and PF Associate Editors Roger Conrad and Elliott Gue at the Washington, DC, Money Show, Sept. 6-8, 2007. The conference will take place at the Wardman Park Marriott, located in downtown Washington DC. To register for free, go to https://inet.intershow.com/regnew/info.asp?sid=DCMS07&newReg=t&scode=008611. Be sure to tell them I sent you.

Noble palaces, historic villages, stunning natural vistas and indispensable, one-on-one conversation: I’ll be cruising down the blue Danube Sept. 8-16, 2007, along with PF Associate Editors Roger Conrad and Elliott Gue. You’ll have unfettered access to talk about your portfolio or any other topic that comes up as you take in Central Europe’s rich culture and historic beauty aboard the River Cloud, a “five-star floating hotel.” Interested in exploring Europe and your portfolio? Contact Joseph H. Conlin Travel Management toll free at 877-814-6502 or via e-mail at nycimpresario@mac.com to finalize your plans.

Farewell

Finally, a lady who made one of the most complex discoveries in science history a bit easier to comprehend, with a spiral or two, died at 86 years. Would you know deoxyribonucleic acid when you saw it? It would take a bit of hardware, but thanks to Odile Crick’s sketch of a double-spiraling helix, most of us can easily recognize this basic building block of life, more commonly known as DNA.

In 1953, Odile’s husband Frank made his discovery of DNA. To try to illustrate what it was, he turned to his artistic wife, who gave the world what would become an iconic representation of Frank’s discovery.

If you’re interested in having me or one of my cohorts address any investment or professional groups, please e-mail me at bygeorge@kci-com.com with ideas or suggestions.

Neil J. George, Jr.

Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by e-mail at bygeorge@kci-com.com.