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Albert Meyer

Albert Meyer
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  • 5 Reasons Not To Have Bank Of America In Your Portfolio [View article]
    Thanks for a interesting take on a stock I own.

    "Consumers Still Dislike Bank Of America... (another wrote) I especially find argument #4 to be spot on. They are miserable when it comes to customer service."

    Kind of funny because as for myself and all my business associates and family members (whom I polled more than a year ago) who are customers of Bank of America, had nothing but good things to say about the bank. I must admit, for the most part, they were smart enough not to over commit themselves and buy homes they couldn't handily afford. So, I guess, their thrift and sound financial practices mean that the bank needs them more than they need the bank, hence, their satisfaction with the bank's customer service.

    This is statement is absolutely correct, but notable if I'm allowed to go off on a tangent: "The government's role was to provide cash incentives to banks, while participating banks would be required to accept and process the applications of those who were eager to modify their onerous mortgages... " Actually, the government is bankrupt. The taxpayers funded about 60% of the government's largesse and the Chinese provided the other 40%. I feel sorry for the folk who over-committed themselves and now have to live with "onerous mortgages." However, I feel more sorry for the next generation when all this debt that funded Washington's benevolence falls due. In the interim, I feel sorry for all of us, when interest rates return to normal and Washington's interest burden starts to rival its bloated military spending.

    Back on track: I'm not overly concerned about the dividend. If the goal is to build a rock solid balance sheet and plenty of liquidity to meet all the regulators' flight of fantasy, then I can wait on my dividend. However, I agree, five years ago, JPM and WFC were the better pick, but the roles might well be reversed over the next five years. Who can tell? Still, I appreciate the author's observations.
    Feb 26 09:39 AM | 2 Likes Like |Link to Comment
  • The Truth About Cisco's Buybacks [View article]
    LOL! Sometimes a little humor trumps detailed analysis.
    Feb 22 08:05 AM | Likes Like |Link to Comment
  • The Truth About Cisco's Buybacks [View article]
    If you run a fraud, albeit legitimized by Congress, the SEC and FASB, make sure it lacks transparency. There are many ways to calculate these numbers, because there is such a lack of transparency. One has to make certain assumptions that others might not make. Regardless, Cisco's CEO banked on average $50 million-plus during the period 1998 to 2007. His fellow travelers did not quite match that extravagance, but they are still richer than the Royal House of Windsor.

    I wrote the SEC and asked that companies disclose (in the proxies, so need to get auditors involved) the amounts that they deduct on their tax returns for stock-based compensation, that is, the employee gains on option exercises (number of options times (market price minus exercise price)).

    The SEC replied that the proxy already has enough disclosure about compensation and, secondly, investors don't need that information. About a month later, Senator Levin had a hearing in which he used those exact numbers to make the point that the amounts companies report as stock-based compensation in the income statement bear no relationship to the tax deductions that they take in their tax returns. I sent my SEC correspondence file to Senator Levin's office. They did not bother to acknowledge receipt, let alone respond. The hearing, like all hearings on the Hill, served only one purpose, a photo shoot to mesmerize the electorate, i.e., the dummies who haven't figured out that this is a one-party state.
    Feb 21 09:07 AM | Likes Like |Link to Comment
  • The Truth About Cisco's Buybacks [View article]
    Seems so obvious, doesn't it?

    The only people who made out like bandits as Cisco are the CEO and his buddies. Shareholders got screwed. The billions of dollars employees, mainly executives, took out in compensation, as they exercised their 2 billion options, caused shareholder dilution that are now slowly being mopped up by stock buybacks, in effect exposing the lie that stock-based compensation is a non-cash expense. It is a smoke and mirror show.

    Companies like Cisco would have done much better paying employees a bonus of 5% to 15% of revenues in lieu of stock options (calculate employee option gains over a ten-year period as a percentage of revenues and exclude the one or two years that totally distort the long term average) and then used the free cash flow to actually shrink the share count. I've done this calculation for many companies. I have still to find one where it does not show a compelling case for cash over stock, not to mention the transparency aspect of cash over FASB's legerdemain. Shareholders are much better off and employees are not doing any worse except for the odd anomaly where a stock price might have soared in one year only the crater the next.
    Feb 20 04:28 PM | 2 Likes Like |Link to Comment
  • Moynihan gets raise of 17% in 2013 [View news story]
    "No CEO is worth more than $1,000,000.00 in salary! A real CEO would want his or her comp in stock! Board members $100,00.00 per year."

    True, but the going rate for CEO's in the US who run large cap companies runs from about $8 million to $28 million a year. Those who bought BAC stock two years ago, when the CEO's comp was about $3 million (pretty generous of Moynihan seeing his predecessor raked in more than $20 million a year), are now looking at returns of anywhere from 40% to 100%. It was very important for Moynihan to manage the bank's many litigation and regulatory issues properly, I think he did a good job. He seems the real deal to me. I don't begrudge him his salary, still about half of what the CEOs at Wells Fargo and JP Morgan earn. That said, shareholders would be much better off if US corporations adopt Norwegian style corporate government practices and compensation packages.

    In England, a barely literate and impetuous soccer player earns 300,000 pounds a week ($498,000), that its, $25.9 million a year. On odd occasions he scores a goal or two, with the help of nine other players (goalie excluded). Don't blame him. He is just taking what the market gives him.

    It is somehow easier and more palatable to give a CEO $14 million in stock awards (options and restricted stock) than to actual pay cash of $14 million. As as shareholder I prefer cash, but the tax code disallows as a tax deduction cash compensation in excess of one million dollars. Hence, stock awards are tax efficient, but dilutive to shareholders.
    Feb 20 03:21 PM | Likes Like |Link to Comment
  • Paul Krugman's Fallacies [View article]
    If the money just sits in a bond investment, it creates no jobs...

    Capital formation creates jobs. This capital formation comes in many different forms... equities, preferred, bonds, debentures, etc. If the recipient of the interest does not spend it, it leads to more capital formation, more wealth accumulation.... more conducive to a healthy economic environment. Government intervention just prolongs the recession. What caused the recession in the first place? Government intervention in housing market? Wars? We can differ on this... no problem. I prefer limited government, as the Founding Fathers intended it. The private sector operates in an environment of rigor and accountability. Should anyone in government be held responsible for running up $17 trillion in national debt and $100 trillion in unfunded obligation? Will anybody? Of course not. The worst that can happen to anyone among the ruling class is to lose his or her seat, after which a firm of lobbyists will welcome him or her with open wallets.
    Dec 26 08:55 AM | 1 Like Like |Link to Comment
  • Paul Krugman's Fallacies [View article]
    Why should the government save GM for the benefit of the trade unions and at the detriment of bondholders? Go talk to a former impoverished GM bondholder. Why should the government pick Tesla over Jet Blue (bankrupt) or Pilgrims Pride (bankrupt)? Why should taxpayer bail out private capital? (Only because the folk who get the bailout, own our elected officials.) Why should the government be in the business of gambling with our capital, as they did in the case of S.... (can't mention the name)? You write: "It is just the cost of doing business in a capitalist world. Not the government's business to dabble in the capitalist world with our taxes. Besides, the folk at Solydra were the buddies of VP Biden, hence the Administration's charity towards them. It was not a rational allocation of capital. Repaying political favors and buying more for the future.

    Yah, you are correct, the government (the poor taxpayer) saved Goldman Sachs' posterior - GS partners/directors are among the richest 0.5% of the world's population. Former Goldman partners in government took our money to bail out their buddies at Goldman. That's the problem. What ever platitudes you have about government, government is made up of people just as greedy and self-seeking as the folk who bankroll their campaigns. If only Enron was hugely indebted to Goldman Sachs. Jeff Skilling would still be walking the streets of Houston and Ken Lay would not be living somewhere, who knows where, under an assumed name. He died? Got any proof, other than what the media tells us? Maybe he is dead. Just like to believe that he, with the help of his friends in high places, managed to do a disappearing trick.

    "This "problem" can be "solved" by reallocating the tax burden in such a way that it would be more rational for a company to remain on-shore."

    This is what they are doing in Canada through lowering the tax rate, but you don't seem to like that either. US Corporations are moving their manufacturing to Singapore, Malaysia and Taiwan because of the huge discrepancy in tax rates. Corporations are global animals. They create jobs with no regard to patriotism. Capital goes to where the best returns are earned.

    "The more prisoners, the more profit for the prison companies, so what do we have? Three Strike laws and the War on Drugs filling prisons beyond bursting, so more prisons get built (privately) and more contracts are given out."

    Again, the War on Drugs has nothing to do with the proper role of government. Rather, it exists to expand the size of government (justice system, police, prison, etc.) and benefits the prison-industrial complex. As you and I care about the middle class, the drug war has decimated the middle class, particularly poorer communities (once middle-class or at least the potential to become middle-class) of color. Another example of how government takes care of special interests, but under the guise that they are protecting us and our children - social consequences be damned. The war on drugs is one of government's biggest failures. They try and keep drugs off our street and yet in prisons, the one place where they have total control, drugs are readily available. They can't keep prisons drug free, but they want to keep our streets drug free. Pathetic.

    "... Good Government is both good and possible, at least in theory..." And in practice, but not in Washington. Decades of graft have turned them all into slaves of special interest groups represented by an army of lobbyists.

    (I'm not a Conservative by any stretch of the imagination. George Bush is conservative, of the neo-con kind. I am light years removed from Conservatives. Conservatives are not socially tolerant. It is true that Conservatives don't like government intervention in the economy, but they crave social intervention and particularly warfare intervention.)

    Anyway, thanks for the debate. Our motives are right. We want a better world, but we have different ideas of how to achieve it.
    Dec 20 02:16 PM | 2 Likes Like |Link to Comment
  • My 2014 Growth Stock Picks [View article]
    Strong words... but I'll add my penny's worth. I have noticed that stock buybacks made a huge contribution to EPS, which would be fine if funded wholly by free cash flow. However, check the numbers yourself, but, depending on your choice of time frame, the numbers are along the following lines: $9 billion spent to repurchase 70 million shares (32 million over the past five years) the past decade of which free cash flow contributed $6.3 billion, with debt funding the balance. Purchases in the early part of the decade were done at much lower valuation multiples. I could be wrong, but I don't think they can replicate the historic rate of stock repurchases without adding a lot more debt.
    Dec 20 10:51 AM | 1 Like Like |Link to Comment
  • Paul Krugman's Fallacies [View article]
    You are setting up straw men to support your argument.

    The private sector consists of private and public corporations. The public corporations you rightfully vilify are in bed with Congress. The greed virus runs through the boardrooms, the lobbyists and into the halls of Congress.

    One example: Sarbanes-Oxley (deeply flawed and compromised due to pressure from special interests) included a provision that mandated the expensing of stock options. (Stock options are insiders favorite tool to raid the corporate treasury) Government, in the form of George Bush (would have been no different, regardless of which party occupied the leadership position in any branch of government at the time), threatened to veto the legislation unless the mandate was removed; which was duly done. (Stock option compensation was not considered an expense, but nonetheless allowed as a tax deduction by the Tax Code as mandated by a corrupt Congress - you can't make it up.)

    SEC chairman, Harvey Pitt, (part of our honorable government, ostensibly there to protect investors at a cost of $50 billion a year), argued that stock option compensation would make US corporations uncompetitive! If insiders are siphoning off profits, they have government to thank for making it easier for them. Astute investors shun companies with insiders that steal their money.

    Offshore accounts are encouraged by the tax system. Put that on the government's side of the ledger. Corporations are acting rationally.

    Offshoring is another rational maneuver. If you were to commit capital to a business and a supplier in another country offers to provide you with components and/or services at a price that beats a domestic supplier, you would make a rational decision and accept the offer. Unlike government, businesses operate in very competitive environments. Consumers are very price sensitive. There is no room for altruism.

    "Governments (enlightened ones, in theory) are in the game to break even, not to score profits. And they get a discount on salary costs due to the returns from income taxes." I'm not sure what your point is here.

    When the government loses $500 million in a failed Solyndra investment, nobody is held accountable. When government expends blood and treasure on a misguided oil war, nobody is held accountable. When government runs up $12 trillions of debt over a period of thirteen years, nobody is held accountable. When government runs up $100 trillion dollars in unfunded mandates, nobody is held accountable.

    For the sake of brevity, I used the Soviet Union, but any country low on the economic freedom index and with big government will fit the bill.

    "Not very rigorous, as you present no method for calculating X or Y." As I said, there are no need for calculations. All you need to do is acknowledge that if you give bureaucrats $100 million dollars they will undoubtedly create jobs as they spend/invest the money. The same $100 million could also create jobs in the private sector. Jobs created in the public sector = X. Jobs created in the private sectors = Y. Anyone who believes that X>Y, i.e., government is best at created jobs, should agitate for much higher taxes. If that is your predisposition, then I grant you that right. That's the beauty of the First Amendment. We can promote our ideologies in full view of the public.

    (I have no brief with the Heritage Foundation. They are a front of the GOP, just like MoveOn.org is front of the DNC. These front organizations use a particular issue or issues to dupe donors who have strong loyalties towards the scam being run in the beltway called Congress.)
    Dec 19 09:42 AM | 3 Likes Like |Link to Comment
  • Paul Krugman's Fallacies [View article]
    "'Nuff said." You are not being intellectually honest, presenting half the story to bolster a weak argument..

    Why don't you go to the Singapore Government website for your information? Here:

    "Some international reports list Singapore as having high levels of Government debt. These include the CIA Public Debt Factbook and the World Economic Forum report. Some are puzzled why this is so, as the Government runs a balanced budget.

    "These reports only look at gross debt. Taking into account our assets, we have in fact no net debt.

    "In Singapore’s case, we do not borrow to spend. We instead invest all borrowing proceeds. All borrowings are thus backed by assets. What we earn in investment income from our assets is more than sufficient to cover the debt servicing costs. The Singapore Government in fact has a strong balance sheet with assets well in excess of our liabilities.

    "This makes us a net creditor country, not a net debtor country.

    "This is why international credit rating agencies give the Singapore Government the highest short and long-term credit ratings of AAA.

    "In fact, in an April 2012 report by BlackRock Investment Institute, Singapore ranked 2nd in the BlackRock Sovereign Risk Index in terms of creditworthiness, with Singapore’s net asset position highlighted as a key strength.

    "If the Government runs balances budgets or budget surpluses, why do we still need to borrow money?

    "The Singapore Government does not borrow to fund its Budget. It operates on a balanced budget over each term of Government.

    "The two types of domestic debt securities issued are for reasons unrelated to the Government’s fiscal needs:

    "(1) Singapore Government Securities (SGS) are issued to develop the domestic debt market. SGS are marketable debt instruments issued for purposes of developing Singapore's debt markets. They provide a risk-free benchmark against which other risky market instruments are priced off.

    "(2) Special Singapore Government Securities (SSGS) are non-tradable bonds issued specifically to meet the investment needs of the Central Provident Fund (CPF). Singaporeans’ CPF monies are invested in these special securities which are fully guaranteed by the Government. The securities earn for the CPF Board a coupon rate that is pegged to CPF interest rates that members receive.

    "Under the Constitution and the Government Securities Act, the Singapore Government cannot spend the monies raised from these two existing domestic debt securities. All borrowing proceeds from the issuance of SGS and SSGS are invested. These investment returns are more than sufficient to cover the debt servicing costs."

    The government runs budget surpluses, which brings spending, net of surpluses down to the 12%-level, but can fluctuate form year-to-year. Again quoting the Singapore Government:

    "Published Date: 04 October, 2012

    "Some recent online articles highlighted the fact that the International Monetary Fund (IMF) had in April 2012 restated Singapore’s fiscal data in the IMF’s World Economic Outlook (WEO) database. The restatement increased the figure for the cumulative government surplus for the period 1990-2011 from $271bn as reported in the WEO database in September 2011 to $429bn in April 2012.

    "This was a major restatement in the WEO database. However, there was also online speculation that the restatement was due to the IMF discovering discrepancies in Singapore’s fiscal data, and that we had been under-reporting our government revenues and surpluses.

    "This is untrue. The restatement of data in the WEO database was due to technical errors in the course of an IMF data migration exercise. It had nothing to do with the data reported by Singapore. The IMF corrected the errors in August 2012 when it reported a cumulated government surplus of $267bn for the period. The IMF has explained its restatement of Singapore’s historical fiscal data in the WEO database.

    "We should highlight too that the IMF’s data on Singapore Government surpluses follows the IMF’s regular presentation format, which includes revenues that are not fully available for spending by the Singapore Government, such as land sales proceeds and investment income. The data reported in Singapore’s Government Budget only includes revenues that are available for spending, under the Singapore’s Constitution. (Further details can be found here.)"

    Bottom line, and this was the purpose of my post, Y is always > than X, hence limited government (which also goes hand in hand with economic freedom), as practiced in Singapore, Switzerland, Hong Kong and other places means greater prosperity for citizens. Government spending (clearly essential in some cases and thus unavoidable) inhibits economic growth. The US Constitution enshrines limited government, but the folk we elect pay scant regard to the Constitution. They are owned by special interests. Our elected officials pay lip services to the Constitution, fool us every two years to reelect them, and then they do the bidding of their paymasters.
    Dec 18 09:27 AM | 4 Likes Like |Link to Comment
  • Southern Copper: An Anti-Cyclical, Long-Term Bet On Emerging Markets' Copper Demand [View article]
    Insiders own 80%. CEO's compensation cash only, about $1.5 million. No stock options. Massively shareholder friendly. Check the dividend distributions over the past ten years.
    Dec 17 04:32 PM | 1 Like Like |Link to Comment
  • Paul Krugman's Fallacies [View article]
    Government spending is prosperity-negative. So, how to solve an increase in poverty levels? Get government to spend more on helping the poor. Geez, why haven’t I thought of this before?

    If you take $100 million from the private sector and give it to Washington (as done through the tax system), Washington could use this booty to create jobs. The question is: how many jobs? Nobody knows, but the exact number doesn’t matter. Just call it “X” number of jobs.

    If we keep the $100 million in the private sector, it will also lead to job creation. Again, we do not know how many, but we can call it “Y” number of jobs.

    We are now faced with a very simple mathematical equation:

    Is X > Y?

    Or is Y > X?

    The folk who lived in the old Soviet Union, where the ruling class laid claim to virtually all of the country’s production and labor, know without a shadow of doubt that Y is always bigger than X. There was a direct correlation between the decline in jobs (increase in poverty) and growth in the size of the Soviet government.

    We can’t hope to raise the water level in a swimming pool by taking water from the deep end and pouring it into the shallow end. In the same way, we can’t generate prosperity as a nation by taking hard-earned wages from the subject class and giving it to the ruling class. The ruling class can create a modicum of prosperity, especially when reinforced by talking heads on TV.

    Job creation and, by implication, prosperity, thrives in a country where the size of government is kept as small as possible. Singapore has grown its economy by more than +9% p.a. over the past 40-plus years. They have done so, because they have adhered strictly to the rule that kept the size of government to 12.5% of GDP. It is the fourth wealthiest country in the world, measured on a per capita basis. It has no natural resources to boost its GDP, for example, as is seen in oil rich countries. Singapore is a pure economic miracle based on the simple equation: Y is always > than X.
    Dec 16 10:38 AM | 2 Likes Like |Link to Comment
  • America's Rental Crisis [View article]
    "The problem is that the number of poor people is growing rapidly due to the lack of well paying jobs for poor people."

    Statists should be alarmed because since 2000, the State added $12 trillion (trillion with a "t") to the national debt. All this spending and we are getting poorer? Obviously. Should not come as a surprise. Washington, and their media lackeys, would us believe that they can spend us to wealth and prosperity. I can offer up 12 trillion reasons why this is a fallacy and highly detrimental to the social fabric in many different ways - see my post below.
    Dec 13 01:34 PM | 4 Likes Like |Link to Comment
  • America's Rental Crisis [View article]
    Interesting article, but...

    Government spending is prosperity-negative. So, how to solve an increase in poverty levels? Get government to spend more on helping the poor. Geez, why haven’t I thought of this before?

    If you take $100 million from the private sector and give it to Washington (as done through the tax system), Washington could use this booty to create jobs. The question is: how many jobs? Nobody knows, but the exact number doesn’t matter. Just call it “X” number of jobs.

    If we keep the $100 million in the private sector, it will also lead to job creation. Again, we do not know how many, but we can call it “Y” number of jobs.

    We are now faced with a very simple mathematical equation:

    Is X > Y?

    Or is Y > X?

    The folk who lived in the old Soviet Union, where the ruling class laid claim to virtually all of the country’s production and labor, know without a shadow of doubt that Y is always bigger than X. There was a direct correlation between the decline in jobs (increase in poverty) and growth in the size of the Soviet government.

    We can’t hope to raise the water level in a swimming pool by taking water from the deep end and pouring it into the shallow end. In the same way, we can’t generate prosperity as a nation by taking hard-earned wages from the subject class and giving it to the ruling class. The ruling class can create a modicum of prosperity, especially when reinforced by talking heads on TV.

    Job creation and, by implication, prosperity, thrives in a country where the size of government is kept as small as possible. Singapore has grown its economy by more than +9% p.a. over the past 40-plus years. They have done so, because they have adhered strictly to the rule that kept the size of government to 12.5% of GDP. It is the fourth wealthiest country in the world, measured on a per capita basis. It has no natural resources to boost its GDP, for example, as is seen in oil rich countries. Singapore is a pure economic miracle based on the simple equation: Y is always > than X.
    Dec 13 11:08 AM | 7 Likes Like |Link to Comment
  • Apple: How Big Can The Dividend Get? [View article]
    You ought to make a distinction between companies that offer employees generous stock option grants (like Cisco, Coke and P&G) and those that don't (like Apple and Microsoft).

    I argue that the cash outflows pertaining to stock buybacks that mop up the dilution caused by option exercises must be viewed as an operating expense (treat the strike price contribution as credit) to arrive at adjusted free cash flow number. Shareholders do not benefit from stock buybacks that merely mop up dilution, hence free cash flow is not free until adjusted for the impact of repurchases that relate to stock issued to employees. It is akin to settling a deferred compensation liability, an off-balance sheet liability originated by the stock grant. One could make the same argument for restricted stock grants, but the dilutive impact of RSUs is normally less pronounced and can be ignored for a quick back-of-the-envelope analysis. This suggested adjustment to free cash flow would raise the FCF payout ratios for Cisco, Coke and P&G materially. Other than that your analysis is spot on.

    Another useful analysis would be to assume a 20%-plus annual increase in Apple's dividend over the next five years. Such an assumption might show that about one-third of Apple's current cash balance would still remain intact after five years. The point is that there is plenty of room for Apple to grow dividends at more than 15% p.a. over the next five to ten years, which would appeal to many dividend-seeking investors.
    Nov 26 08:17 AM | 1 Like Like |Link to Comment
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