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charliezap

charliezap
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  • The False Link Between Higher Stocks And A Stronger Economy [View article]
    """I have been skeptical about the economy and the markets since September of 2009."""

    Since 9/2009, new housing starts (SAAR) are up by 57%. The number of jobs gained (SAAR) is 5.6 million, less than desired, but far more than the 1.8 million achieved during the entire 8 years of the GW Bush administration. (See census and BLS data.)

    Since 9/2009, the S&P 500 index is up by almost 40%.

    You have obviously been wrong on both the economy and the markets. Why should we give you any credibility now?
    Mar 27 01:39 PM | Likes Like |Link to Comment
  • An increasingly vocal campaign is arguing for a go-slow approach in allowing U.S. exports of liquefied natural gas. Industrial firms such as DOW, HUN and AA fear that exporting LNG could hurt the U.S. by driving up gas prices. But an XOM exec asks, "Why should the U.S. government discriminate between a... project to liquefy natural gas and a chemical plant to solidify it into plastic pellets? Both create investment, both create thousands of jobs." [View news story]
    I clicked on 'Like' accidentally. Would like to retract.

    Not sure if you are being sarcastic or serious. If you are serious, please list the tax subsidies for oil companies for me. Or do you mean the investment tax credits that other large manufacturing companies, like GE, get?

    For the record, I think all or tax credits for corporations should be abolished and impact should be offset by lowering the corporate tax rate.

    I also think it would be good for America if corporations got a tax deduction for dividends paid. This would eliminate the double taxation of dividends problem. It would also level the playing field as between debt and equity -- there would be less incentive to lever up the capital structure, making companies more financially stable. To offset the reduction in corporate taxes from a deduction for dividends, dividend income to individuals would be taxed at ordinary income rates, the same as the wage and salary earnings of workers.

    Oh, yes. For heaven's sake, its finally time to tax the incentive fees paid to hedge funds and private equity funds at ordinary income rates, just like commissioned salespersons.
    Mar 26 12:58 PM | 2 Likes Like |Link to Comment
  • Why Price/Sales Is A Dangerous Valuation Metric [View article]
    The service I use and like is the AAII's Stock Investor Pro. Their database covers 9,000 companies and a very large number of stock variables including EV and ratios such as EV / EBITDA. The service includes 50 stock screens. Variables include income statement and balance sheet data, earnings estimates, stock prices, and company descriptions. Reports include an excellent company summary. The latest data can be downloaded weekly. Building one's own screens, reports, custom variables, notebooks, etc can be time consuming at first, but the service is extremely useful once one is familiarized. The service costs $198 per year. Membership in the AAII may also be required -- $30 per year.
    Mar 24 03:35 PM | 1 Like Like |Link to Comment
  • A Word Of Caution About Bank Of America's Share Buyback [View article]
    David, a minor quibble. Retiring the bought back shares would not necessarily affect the calculation of book value or per share earnings. These items are based on SHARES OUTSTANDING, which automatically excludes shares held in treasury. So it does not matter if the bought back shares shares are held in treasury or are retired -- the shares outstanding will be the same in either case.

    As far as stock awards to management are concerned, that also may have little to do with shares held in treasury. As long as the shares authorized exceed the shares outstanding, the board is free is make stock awards, either from treasury shares or by issuing new shares. [Shares authorized usually exceed shares outstanding, often by a wide margin.]

    Then there is the definition of accretive. I think that bank stock valuation is based more on EPS (and prospects fro growth) than on book value. To me an accretive buyback is one that increases EPS. Also, one has to consider the cost of the funds used for the buyback, and whether they are borrowed or withdrawn from earning assets.

    Finally, on the issue of buyback versus an increased dividend, my initial reaction was disappointment that the dividend was not raised to some normal level. On the other hand, considering the amount of dilution that took place through the TARP program and the Buffett deal, I can accept that a first step toward getting back to a normal capitalization is reducing that dilution through a buyback.
    Mar 19 03:21 PM | 2 Likes Like |Link to Comment
  • A Word Of Caution About Bank Of America's Share Buyback [View article]
    willfly, according to this link, Ken Lewis went into Countrywide with his eyes wide open -- there is no mention of any fed or admin involvement:

    http://n.pr/UzAFMW
    Mar 18 10:34 PM | 1 Like Like |Link to Comment
  • A Word Of Caution About Bank Of America's Share Buyback [View article]
    The Buffett deal was a heck of a good deal for BRK and a heck of a bad deal for BAC. I very much doubt that "good management" had much to do with the decision. In fact, in 2010 BRK sold all of the shares of BAC that it then held, well before the Buffett deal, which took place in 2011.

    It was Buffett and not BAC that set the terms. But BAC lacked liquidity and appears to have had little choice in the matter. Buffett got a preferred stock position, putting himself in a preferential position in case BAC went bust. He also got a 6% dividend on a $5 billion investment, plus warrants to buy 700 million shares of common stock at just over $7.14 per share, with an unusually long 10-year exercise period. BAC was closed at $6.99 per share the day before the deal was announced.

    Before the financial crisis and the Ken Lewis misadventures (Merrill Lynch was another very bad deal), BAC set an historic high of $55 per share toward the end of 2006. It was downhill from there to the closing low of $3.14 on 3/9/2009. At the current price around $12.50, BAC is at only 23% of the price at its historic high. In large part, dilution is to blame, including that brought about by the Buffett transaction.

    In the buyback, BAC effectively be paying $12.50 or more for shares that Buffett will buy at $7.14. Buffett gets a 6% dividend and the common shareholders get penny. Some "vote of confidence" as some called the Buffett deal when it was announced!
    Mar 18 07:53 PM | 14 Likes Like |Link to Comment
  • Just How Risky Are REITs? [View article]
    Solution. Close the public schools. Save on taxes. Isn't that what we want? Then nobody will know nothing and we can sit at home in our ignorance, in rocking chairs on our porches, with our guns at the ready.

    What a great future!
    Mar 17 06:46 PM | Likes Like |Link to Comment
  • Just How Risky Are REITs? [View article]
    Good article. Of course, everything got hit in 2008-09 -- there was no place to hide. I agree with you that liquidity became the main issue. People forget that special IRS rules in 2009 permitted REIT's to cut or eliminate dividends, by temporarily suspending the 90% payout rule. Many REIT's took advantage of the suspension to retain funds and build liquidity, a smart move in my opinion. But the market penalized the REIT's that cut dividends, and the memory has persisted. But the crash did indeed create opportunities that in hindsight are quite remarkable -- like SPG (largest mall owner) going from 29 to 159, virtually in a straight line. The yield is now under 3%, however, and one has to wonder whether prospective future returns justify the risk.

    Remember, the peak price in 2007 was about 124, so there was a scary downhill ride prior to the current uptrend.
    Mar 13 05:09 PM | 1 Like Like |Link to Comment
  • National Retail Properties: Dividend Stock Analysis [View article]
    Agreed. There is a bubble in some REIT sectors, including shopping centers. Tanger Outlet Centers (SKT) is an example. I once bought SKT when it had an 11% yield. Sold it later. Now the yield is 2.4%.

    True, the payout ratio is low. The annual dividend rate is currently $0.84 vs 2013 est FFO of $1.80. But . . .
    Mar 12 02:15 PM | 2 Likes Like |Link to Comment
  • Monmouth: A REIT Insiders Believe In [View article]
    I have taken the following from another posted comment of mine:
    ----------------------...
    Why use FFO instead of EPS? GAAP accounting rules require the accountants to deduct depreciation when producing a company financial statements. But for a property REIT, the major assets are land, buildings, and other improvements. In the aggregate, the values for these assets are much more likely to appreciate over time then to depreciate. This fact causes conventional measures such as Net Income, PE, and Book Value to be grossly misleading as valuation determinants.
    Mar 12 01:37 PM | 1 Like Like |Link to Comment
  • Monmouth: A REIT Insiders Believe In [View article]
    Yes, Jeff, we own rentals too. But I bet your the expenses in your formula do not include depreciation.

    These formulas work whether you are big or small in real estate:

    Net Operating Income (NOI) = Rents - Cash Expenses

    Net Income (i.e., earnings) = NOI - Depreciation

    This is NIBT, whether for GAAP reporting or for IRS reporting purposes. Note that GAAP may differ from IRS because of differing depreciation schedules, or for other reasons. For a REIT that does not pay income tax, NIBT gives you EPS, which gives PE.

    The gross (first year return) on your rental property is NOI / Acquisition Cost

    If you borrow to make the acquisition, your NOI will be reduced by the interest expense:
    FFO (Funds from Operations) = NOI - Interest Expense.

    The "cash-on-cash" return will be given by FFO / Downpayment (which = Acquisition Cost minus Acquisition Debt). The Downpayment is also your effective Net Price. The inverse of the cash-on-cash return is the FFO Multiple.

    For the 2012 fiscal year, FFO per share for MNR was $0.68 (my calculation, based on info in the 10-K). The FFO multiple is about 16. The inverse, the "cash on cash" return, is 6%.

    16 looks more palatable than 36.

    Oddly, for property REIT's, Yahoo usually gives FFO data on the "Analyst Estimates" page, but for MNR they appear to have reverted to EPS.

    Please excuse the lengthy reply -- you are probably aware of all this. For more though on why REIT analysts look at FFO rather than EPS, see my next post.
    Mar 12 01:32 PM | 2 Likes Like |Link to Comment
  • Monmouth: A REIT Insiders Believe In [View article]
    REIT analysts don't look at the PE. They look at the FFO multiple. Read the article.
    Mar 11 11:58 AM | 3 Likes Like |Link to Comment
  • Monmouth: A REIT Insiders Believe In [View article]
    Ve . ery interesting! think I saw a recent survey where office and industrial were the least popular choices among REIT sectors. Taking a contrarian approach, this might be a good time to enter. After all, recent employment gains have been better than expected. I've always like Mack-Cali (CLI) in the office sector and it might be worth a look along with MNR. Just need to do a little more due diligence before taking a position.
    Mar 11 10:26 AM | 1 Like Like |Link to Comment
  • 5 Bullet-Proof Dividend Growers Yielding 5% [View article]
    Jon, I am not a tax accountant either. But thank you for the excerpt from DMLP. The following is my interpretation.

    The first sentence of the excerpt says: ""Tax-exempt investors may recognize unrelated business taxable income."

    UBTI is not an issue in taxable accounts. In taxable accounts, partnership net income from whatever source is taxable in one way or another. As DMLP says, UBTI is an issue that is related to tax exempt accounts -- such as IRA's. Interests in ordinary business income that are held in IRA's will generate UBTI. However, my interpretation from your excerpt is that income from "passive" activities, such as interest and royalties, do not constitute UBTI. In fact, I just received the Sch K-1 for 2012 for EVEP (EV Energy Partners). Line 1 reports ordinary business income. Line 5 reports interest income. Line 7 reports royalties. Of these 3, only line 1 would be regarded as UBTI in an IRA.

    Clearly, DMLP is set up to appeal to tax exempt accounts by avoiding UBTI. Most other MLP's whether in the pipeline business, or the oil and gas production business, or whatever, are not operating to avoid UBTI. We can agree that DMLP is highly suitable for inclusion in an IRA.
    Mar 9 01:58 PM | Likes Like |Link to Comment
  • 5 Bullet-Proof Dividend Growers Yielding 5% [View article]
    While I don't want to argue about it, it is my understanding that holding a partnership interest in an IRA is what gives rise to the concept of UBTI. I don't quite follow how an MLP can be structured so that UBTI can be separated from "income", unless it is something along the lines of the following, which is taken from the link below: "" "two MLPs (Enbridge Energy Partners and Kinder Morgan Energy Partners) have affiliates that issue special shares that pay distributions in the form of additional shares and do not trigger UBIT; an additional MLP (Linn Energy, LLC) has formed an affiliate that pays cash dividends. If you don’t want your retirement account to pay UBIT but hate to pass on the income opportunity, you may want to check out these options." ""

    http://bit.ly/sqR4tD
    Mar 9 12:18 PM | 1 Like Like |Link to Comment
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