Stephen Rosenman's  Instablog

  Is the disaster movie 2012 right?  Will 2012 be the year of cataclysmic catastrophe.  No way.  The end of the financial world doesn't start in 2012 but, rather could, in January 1, 2011 if Congress doesn't extend favorable treatments of capital gains and dividends.  That's when the dividend and capital gains taxes are set to revert back to their pre-2003 rates.  For capital gains, that's an ouchy 20%, not fun but survivable.  For dividends, it is the end of the world.  Uncle Sam goes back to taxing them at ordinary income rates, up to 39%.  Unless Congress does something fast, good bye to the quaint notion of dividend paying stocks.  2011, hello, buy backs, growth at any cost, anything but dividends.
     The only thing I see can good about this is the likely rush to special dividends this year.  Before January 1, companies should hand out as much excess cash as they can to their shareholders.  Which ones will give the largesse?  Look for companies with huge insider holdings and excess cash generation to announce massive special dividends.  Management with large stock holdings will recognize that one time only payments make good tax sense.  After all, why not hand it out this year and pay 15% rather than wait and get gouged at 39%? 

Disclosure: no positions needed

January 4 of last year, I made several predictions about Apple. (seekingalpha.com/article/113078-five-app...)
1. Apple's cash would continue to follow a steep curve up.  That trend has continued.  In fact, its cash position has uncannily continued the steep plot line I drew last year.
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If Apple continues its current path, cash will reach $50 billion in 2011 and $70 billion in 2012, an extraordinary feat.  Last year, when the stock was trading in the 80s, I wondered when the market would realize how undervalued Apple was.  It still is. The cash thrown off each year is incredible.  Six billion dollars alone over the last quarter.  Eleven billion over the last year.  The story is not so much the cash position as the ability to generate cash.
2. I postulated that non-GAAP earnings would be the big story.  Indeed, Apple succeeded in getting the FASB to change the rules of accounting for smart phones. Now non-GAAP earnings have become the only story.  The change gives investors transparency in evaluating Apple's earnings.  The previous high PE of 33 is torn down.  In its place, we get a PE of 18 that actually reflects Apple's iPhone sales.
3. I predicted Steve Jobs would host January's investor meeting.  Unfortunately, the conference I forecast he would attend was January 2009.  Jobs missed that event of course, taking a leave of absence. He did lead the iPad launch January 2010.  (After all, what's a year? At least I got the month right.)
4. And, finally, I argued the stock would have a major move up.

As for more predictions: 
1. Apple heaps on more cash.
2. Earnings soar.
3. Steve continues leading product rollouts (Januarys).
4. Cash generation and climbing earnings convince investors to buy the stock.



Disclosure: long AAPL

    Back in May, (seekingalpha.com/article/139271-the-balt...), I speculated that the Baltic Dirty Tanker Index (BDTI) would outperform the Baltic Dry Index (BDI), something that would have major ramifications for the denizens of that index: FRO, NAT.  I based that simply on the fact that we are one world.  The extraordinary run we'd had in the BDI just couldn't coexist with the bludgeoned BDTI. After all, you can't have the globe going ga ga over the transport of solids (iron, coal, fertilizer) and blow off the transport of liquids (oil) forever. The BDTI should play catch-up. Below are the November thru May charts, capturing the unusual divergence in the two indexes. <a:>

Since the article, the BDTI is up from 485 to 1077 (122%), the BDI up from 2707 to 2848 (5%).  The BDTI has bested the BDI over the last 8 months.
Individual companies in the BDTI outperformed the BDI.  Look at FRO's action versus GNK's dump.  
The play is over.  The BDTI has had a powerful run.   The oil tanker companies, whose rates are reflected in the index, no longer appear to offer the exceptional value of 8 months ago.



Disclosure: no position