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David Silver
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David was an equity research analyst, with a concentration on the transportation and beverage industries. He is a graduate of Tulane University’s A.B. Freeman School of Business where he received his Bachelor of Science in Management with a dual degree in Finance and Accounting. David actively... More
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  • Gas Tax: A Lot Of Hot Air

    We all know that the deficit and lack of taxes is a problem, but do we really think that raising the gas tax is the best way to go about fixing the problem? Making the rounds on Capitol Hill and through state governments is the possibility of increasing the gas tax. Right now, the average American pays approximately 48.9 cents per gallon in gasoline taxes. For comparison, Hong Kong residents pay $6.06 per liter (about $1.60 per gallon), India pays $0.61 per gallon, Germany adds approximately $8.10 per gallon, and Great Britain residents pay approximately $3.54 per gallon.

    (click to enlarge)

    As Americans, we already pay much fewer taxes on the fuel we use; however, as vehicles become more fuel efficient and hybrids and electric vehicles become more widespread, the usage of fuel is going to continue to decline. As a result, the amount collected via taxes will decrease. Is the fix to this more gasoline taxes? My response would be no. Take away the subsidies - or some of the subsidies - for purchasing a hybrid or electric vehicle. If these cars are that cost efficient, smart consumers will purchase these vehicles anyway.

    This talk has come from both sides of the aisle in Washington D.C., and it's even more of a bipartisan rumor on the state level. A portion of the money that was generated through the gas tax goes to help maintain and or rebuild roads, bridges, tunnels, etc. However, more of the money that could be used to fund "shovel ready" projects rather than being spent through subsidies to help hybrid and electric vehicle sales. I don't have a car in New York City, but I was driving around with my parents this past weekend and was "lucky" enough to be in the car when each of their cars needed to venture into a gas station. It was painful! Gasoline prices have increased dramatically over the past year, as the cost per gallon of gasoline has increased by (on average) $0.277. Since the beginning of August, prices at the pump have increased 6%.

    There are talks about a "usage tax." People that are driving more already pay a usage tax. They pull into a gas station more than once a week, that is taxing their wallet. That is taxing how much disposable income they have. So nix the usage tax, and nix the increase to the gas tax in general. Get rid of the subsidies and fix up our roads and bridges with the money that we already have in the coffers. Those jobs will yield benefits too, even if they are temporary.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: commodities
    Sep 20 3:45 PM | Link | Comment!
  • Large Sweet Drink Ban Standing On Dissolving Legs

    Reading through New York City's Mayor Michael Bloomberg's proposal to ban the sale of sugary drinks larger than 16 ounces, I find myself asking if the Mayor really thinks New Yorkers are that stupid? Is obesity and diabetes an epidemic, absolutely, but is it the government's responsibility to limit our options, I do not believe so. Many people that are in favor of the ban cite the city's smoking ban as a successful government control, and it was. The difference here is that I am not personally at risk from someone grabbing a 20-ounce bottle from the bodega around the corner from his or her apartment. Smokers' secondhand smoke would stay inside a bar for a few hours until it was filtered out or breathed in by other patrons.

    Mayor Michael Bloomberg has made sugary drinks his crusade of sorts. After failing to get the state legislature to enact a sugary drink tax, the Obama administration denied Mr. Bloomberg's request to prevent food stamps to be used to purchase sugary drinks. The Department of Health of New York City is not under the state's control, but is appointed by Mayor Bloomberg, so one would think that this would pass easily. The ban could go into effect as early as March 2013 (Bloomberg leaves office December 2013).

    The ban will have more of an effect on consumers in New York City than the soda companies. The Coca-Cola Company (NYSE:KO), PepsiCo (NYSE:PEP), Dr Pepper Snapple (NYSE:DPS), and even energy drink maker Monster (NASDAQ:MNST) are under the microscope as the 20-ounce bottle is the most popular item on the shelves. If the ban is successful it could spread to different markets, but that is a long shot. If 20-ounce bottles are out, do consumers migrate back to aluminum cans, or will the companies introduce a smaller bottle? Regardless, consumers can expect that new hypothetical 16 ounce bottle to cost roughly the same as the 20-ounce bottle, so Mr. Bloomberg's plan for a soda tax has reared its head, but in another form.

    New York City is a huge market, and the ban would affect many different types of retailers from stadiums to restaurants to convenience stores and bodegas and even to food trucks. I know I normally buy one 20-ounce soda with lunch and it is the perfect size. If the ban works, and the government alters consumers' choices, then it is going to be the city that sees financial trouble. This is an extreme example, but if people purchased a 12-ounce can instead and drank water on top of that, how much revenue would be lost for those stores, and how much revenue would be lost for the city and the state in the form of taxes? So now, the Mayor isn't only going after the sugary drinks, he is going after the businesses that sell them.

    It is not only the soda's that would be subject to the ban; it would impose a 16-ounce limit on any sugary bottled or fountain drinks that contain more than 25 calories per 8 ounces. Arizona iced tea would be banned, but Snapple would be allowed. Lipton iced tea, which was thought to be a "safe" alternative would see its 20-ounce bottles pulled from the shelves. In a sign that this is a stupid idea, an 8.3 fluid ounce can of Red Bull has more sugar in 8.3 ounces that a 20-ounce bottle of Coca-Cola does. A grande café latte with nonfat milk from Starbucks would still be sold, and so would a tall iced caramel macchiato flavored coffee drink, but a Gatorade would be pulled from the shelves.

    The more I research which drinks would be pulled and which ones would stay, the more I see how stupid this ban is in its current form. Beer has more sugar than the 25 calories per 8 ounces, but a pint has 16 ounces, so that is apparently still allowed. Again, it is making big news lately, but I do not expect this ban (even if it goes through) to have a significant effect on beverage makers.

    Disclosure: I am long KO.

    Tags: KO, PEP, DPS, MNST
    Jun 01 4:33 PM | Link | Comment!
  • Ford's (F) Mulally Gets Paid

    With all the talk over the past five years about CEO compensation, I truly hope that Ford's (NYSE:F) CEO Alan Mulally is not among those executives that get the vitriol from the Street. Over the weekend, Ford announced that 4.8 million shares vested for Mr. Mulally yielding $58.3 million ($34.5 million after taxes) as a result of various incentives being accomplished.

    Let's paint a picture for you. It is 2009, the auto industry (and economy in general) is on the verge of collapse. Talk is that General Motors (NYSE:GM) and Chrysler will be forced into bankruptcy and the rumors are starting to circulate about a government bailout for everyone in the auto industry. Enter the 4.8 million stock options for Mr. Mulally when the stock was trading at $1.86 per share (the stock today is trading above $12). Since that time, Ford has avoided bankruptcy and rebounded to see 2010 and 2011 be two of the most profitable years ever for the Dearborn, MI based company.

    Ford also disclosed that it issued 1.2 million options to purchase stock to Mr. Mulally at $12.46 a share. He can't exercise any of the options for at least one year. He can't exercise the full value of the options unless he stays in his post for three more years. The company says Mr. Mulally can keep the options if he retires. Mr. Mulally continues to be questioned if he will retire soon, but has consistently downplayed the possibility.

    Is it an unjustified anger that the public feels for such high CEO pay? Or is it just the belief that many of these executives do not earn their pay? I will say, I hope it is the latter, and that Mr. Mulally is not included in this group because, in my opinion, and many of the people that I speak to, Mr. Mulally earned every penny.

    Disclosure: I am long F.

    Tags: F, long-ideas
    Mar 08 8:26 AM | Link | Comment!
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