Arnold Landy

THE DUMBNESS OF DIVIDENDS

That is an interesting question. I am not aware of studies that have compared dividend-paying stocks with those do not pay dividends. Even if a difference were found, the two groups are so diverse that knowing if one group outperformed the other would not be very useful. After all, among dividend payers there are many fine companies, but many clunkers, too. Companies in decline often keep paying a dividend even as their financial situation worsens. AIG even raised its dividend a few short months before its demise in order to reassure investors. GM paid a dividend thoughout most of its many years of decline. Likewise, among non-dividend payers, there are stocks heading for oblivion, but many young, fast growing companies on their way to becoming tomorrow's dividend-paying blue chips. And don't forget success stories like Warren Buffett's Berkshire-Hathaway, which has never paid a dividend. Just knowing whether or not a company pays a dividend is, by itself, not very useful. Thanks for your comment.


On Nov 21 09:13 AM TradingHelpDesk wrote:

> But haven't dividend paying stocks outperformed non-dividend paying
> stocks over the long term?
>
> Maybe better run companies can consistently make profits and share
> those profits with shareholders annually?

There's No Lying in Government Statistics: The Labor Market Is Still Down

While your third indicator, rate of change in total hours worked, was down, the one indicator in that report that is an input into the Leading Economic Indicators: average weekly hours in manufacturing, was up during the month. That, together with the steady decline since April of initial claims for unemployment insurance provides signs of an impending upturn in the economy. (see my articles and Instablog). Have you found that total hours worked is superior to average weekly hours in manufacturing as a leading indicator? Thank you.

Unemployment Claims Point to a Better Economy

Initial Claims data indicates that the recession will end soon, but the economy is still deteriorating. Employment is still falling and the unemployment rate still rising. Even after the recession ends, the unemployment rate is likely to continue rising for several months. That is because as the recession ends more people are encouraged and enter the labor force (that is the denominator of the unemployment rate) by seeking jobs and employment growth proceeds slowly as many employers still have surplus labor at the beginning of an economic recovery. Thank you for your comment.


On May 03 03:09 PM UbuTranscendent wrote:

> Arnold,
>
> What is your viewpoint on this item from Bloomberg this morning?
>
>
> Thanks, Ubu.
>
> ----------------------
> Joblessness Probably Rose to 25-Year High
>
> May 3 (Bloomberg) -- Unemployment in the U.S. probably climbed in
> April to a 25-year high, showing the labor market will be one of
> the last areas to emerge from the worst recession in at least 50
> years, economists said before reports this week.
>
> The jobless rate jumped to 8.9 percent last month from 8.5 percent
> in March and employers cut at least 600,000 workers from payrolls
> for a fifth straight time, according to the median estimate in a
> Bloomberg News survey ahead of a May 8 Labor Department report. Other
> figures may show service industries shrank at a slower pace.
> ....
> ----------------------
>

Economic Signs of Optimism

True enough. You correctly point out that confidence surveys are beauty contests, comprised of perceptions rather than reality. No doubt you had in mind Keynes' beauty contest analogy. He said that a sophisticated observer trying to guess the winner of a beauty contest, rather than selecting his own preference, would try to guess whom he thought the judges would pick, based on his knowledge of the average public perceptions of beauty. Keynes likened this process to sophisticated stock market investing: anticipate what the mass of other investors will do, then do it first. We are surprised by the upturn in Consumer Confidence, especially in its Expectations component. Observers are even more surprised by the spike in stock prices over the past seven weeks. The stock market and Consumer Confidence are BOTH beauty contests, often indicating emerging trends in the economy. Right now, they are both doing their job. I do thank you for your thoughtful comment.

Warren Buffett Agrees: Tangible Common Equity Ratio Is Way Overhyped

I believe that he has made an error; see my instablog: seekingalpha.com/insta...

Warren Buffett Agrees: Tangible Common Equity Ratio Is Way Overhyped

I believe that he has made an error (see seekingalpha.com/insta...


On Apr 24 03:56 PM thrifty86 wrote:

> Question: Where does Buffett get his "KO has zero tangible common
> equity" figure?

I Liked GE in March; I Don't Like It Now

Great analogy ! Humor is always welcome. Of course, GE can rely on several government programs if it needs funds in order to avoid insolvency. The fact that they are utilizing these programs underlines the point that you are making. Thanks for your comment.


On Apr 20 10:10 AM helplessobserver wrote:

> Let me see, a fellow comes to you and wants to borrow money for his
> business. He has $348,000 borrowed already and lent out questionable
> borrowers and in his wallet he has 26 crisp $100 dollar bills which
> he has to repay you and all his other lenders in case his borrowers
> default and he sustains losses. Well I do not think any man on the
> street would loan him any money, would you?

I Liked GE in March; I Don't Like It Now

I am negative short-term, due the GE's negligible tangible common equity, which continues to shrink. The U.S. government will keep GE going until the current financial panic is over and the recession ends. As the economy recovers, GE's earnings will improve and they will strengthen their balance sheet. That will enable the stock price to rebound.


On Apr 20 12:21 PM Bronson Young wrote:

> Yeah I agree. His article is confusing. He is so negative about GE
> in the article but then he says that the price will higher in five
> years. I am long GE anyways. I can wait five years.

I Liked GE in March; I Don't Like It Now

The U.S. government will continue to prop up GE and keep the company financially liquid because it is too big to fail. After the financial panic ends and the economy recovers, GE's loan quality will improve, the value of its commercial real estate will rise and its earnings will start to grow again. The stock price will respond positively as this process plays out. But, until economic conditions improve, the spreading awareness of the negligible tangible common equity on its balance sheet will be a headwind for the stock price.


On Apr 20 11:33 AM Titus Andronicus wrote:

> "...and the share price five years from now will be higher than what
> it is today, perhaps substantially so."
> I agree with this statement, but it doesnt seem to fit in your article.
> Why did you make this statement? Everything in your article is negative
> on GE. What would lead you to believe GE will be substantially higher
> in five years? It will, but you can't make a statement like that
> without some support.

I Liked GE in March; I Don't Like It Now

The U.S. government will continue to prop up GE and keep the company financially liquid because it is too big to fail. After the financial panic ends and the economy recovers, GE's loan quality will improve, the value of its commercial real estate will rise and its earnings will start to grow again. The stock price will respond positively as this process plays out. But, until economic conditions improve, the spreading awareness of the negligible tangible common equity on its balance sheet will be a headwind for the stock price.


On Apr 20 11:33 AM Titus Andronicus wrote:

> "...and the share price five years from now will be higher than what
> it is today, perhaps substantially so."
> I agree with this statement, but it doesnt seem to fit in your article.
> Why did you make this statement? Everything in your article is negative
> on GE. What would lead you to believe GE will be substantially higher
> in five years? It will, but you can't make a statement like that
> without some support.