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charliezap

charliezap
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  • John Paulson Says to Buy Dividend Stocks and Houses, Sell Bonds [View article]
    1) Most likely taxes on qualified dividends will go up to just 20%. This will not have much impact on the stock market, IMO.

    2) Also, many stocks are held by non-taxable entities, such as pension funds and IRA"s. This is another item that will diminish the impact. There is a lot of disinformation being spread (particularly on CNBC and Fox Business) about taxes on dividends going to 39.6%. Tax fears provide a buying opportunity, IMO.

    3) Of course, the most sensible thing to do with dividends would be to give corporations a deduction for dividends paid, just as there is a deduction for interest paid. This would eliminate the bias toward debt, eliminate the double taxation problem, and simplify our tax returns. It would also encourage corporations to pay dividends and to stop hoarding cash or reinvesting in low return projects. (Dividends received by individuals would be taxed at the same rate as earned income, just as they were pre-GWB tax cuts.)
    Again, of course, it would happen. It makes too much sense, and is regarded as "politically impossible", just like the carbon tax.
    Oct 1 12:13 PM | 11 Likes Like |Link to Comment
  • Second Quarter Portfolio Review: Building Dividend Growth And Quality [View article]
    DesertRat, the issue with REITs in a rising interest rate environment, is not, IMO, that higher interest costs will reduce the capacity to pay dividends, leading to rate cuts; at least, not with respect to eREITs.

    I counted 8 REITs on the list out of 48 stocks, all equity REITS. In the current rate environment, most eREITs have reduced short term borrowings and taken on longer term debt at favorable rates. If rates do rise, it will be because of improved business conditions, enabling REITs to raise the rents on lease renewals, thus offsetting any increases in interest costs.

    Mortgage REITs (mREITs) are a different kettle of fish. mREITs are much more heavily levered than eREITs, plus, the borrowings are heavily short term. Higher rates would squeeze earnings, unless the REITs' main assets are adjustable rate loans, or unless appropriately hedged. But this portfolio does not hold any mREITs.

    So the risk in eREITs (of which I hold about half a dozen) is not so much higher interest expenses, but interest rate risk. The eREITs that are most vulnerable to interest rate risk are the low yielders, those paying less than less than 3%. When rates on T-bonds rise above 3%, it is my opinion that many former fixed income investors who switched to dividend paying stocks will switch back to fixed income. Higher yielding REITs (those paying 5, 6, or 7%) will be less vulnerable to this pressure than the low yielders.
    Jul 19 03:22 PM | 10 Likes Like |Link to Comment
  • Court revives BP retirement plan lawsuit filed after oil spill [View news story]
    """ . . participants in BP employee retirement savings plans alleged they were deceived into buying and holding BP stock before and after the 2010 Gulf of Mexico oil spill."""

    What nonsense! Lawyers attempting to take another chunk out of BP! I hope they fall on their aasssseess!
    Jul 15 07:14 PM | 10 Likes Like |Link to Comment
  • Citigroup Mired In Mexico - Sell This Megabank [View article]
    Silly article. All of this news is factored into the price of the stock. Citi sells at the lowest P/E and lowest Price/TBV of the big banks, which leaves plenty of room for the stock to move up.

    According to Marketwatch, 20 analysts say Strong Buy or Buy. 9 are at Hold, and 2 say Sell. The median target price is $58. I'll go with the expert consensus, which says Citi will earn $5.50 next year. P/E on $5.50 is 8.5, which is very low!
    May 19 09:04 AM | 10 Likes Like |Link to Comment
  • Is This the End for BP? [View article]
    What a misleading headline!

    At a price of $44.55 (30% below the high), and a market cap of $140 billion, it is obvious that the market does not think it is anywhere near the end for BP. Besides which, there is nothing really new in the article, though I don't know where the $100 billion clean-up estimate comes from -- I would stick with $30-40 billion. There is some uncertainty in the outcome of lawsuits, of course. However, I think that BP will in the end not take all of the responsibility -- some will fall to Halliburton, Transocean, Cameron, Anardarko and Mitsubishi.

    Also, most of the assets that BP is selling are marginal, peripheral, or fully mature assets. It is obvious that BP intends to stay in the high risk exploration sector of the industry, in order to exploit their exploration know how. BP may or may not be a fully integrated company in the end, but E&P is the most profitable sector of the business, while R&M (refining and marketing), has always been somewhat marginal. As far as the stock price is concerned, there is more upside than downside from here.
    Dec 15 12:15 PM | 10 Likes Like |Link to Comment
  • Share Buybacks That Precede Disaster [View article]
    """BP halted its dividend payout, saving $10 billion a year. And BP, on July 20, agreed to sell some assets to Apache Corp (APA) for $7 billion and said it hopes to sell another $23 billion of properties. As YCharts reported, it appears BP will weather the storm.
    . . . .
    What’s more, regardless of who’s to blame for the Deepwater platform’s sinking, BP is responsible for its own balance sheet. And, as Bloomberg BusinessWeek noted, BP’s liquidity crunch was made even worse by the $37 billion it spent buying back its own shares in recent years, at what now seem highly inflated prices."""

    At least in the case of BP, this is nothing but a remarkable case of 20/20 hindsight. The Macondo incident was not a normally predictable event. Before the oil spill that sheared a third off BP's market cap and a large chunk off its shareholder's equity, BP was a relatively under-leveraged company. A share buyback was not outside of the bounds of prudent financial management. To the contrary, it was probably a wise course of action, if the alternative was to invest in lower return investments.

    Citibank is a different case. Definitely over-leveraged, especially considering the risky "investments" it had, both on and off the balance sheet. But Citi was competing with the likes of Goldman, Lehman, Bear, M Stanley, and M Lynch, all of which had persuaded the SEC that a capital ratio of 33 to 1 was OK.
    Sep 8 05:11 PM | 10 Likes Like |Link to Comment
  • Oil Price Economics the 60 Minutes Way [View article]
    This is a brilliant debunking of a silly piece by 60 Minutes. Anyone who buys commodities in the futures market has to eventually sell that contract or take delivery. Yes, Goldman may own a few tanks in Cushing, OK. They may even own a refinery or two. But the US government tracks inventories on a weekly basis and there is no evidence of excessive hoarding. Yes, Morgan Stanley may have a few large tankers slow-steaming out there on the high seas, but the volumes involved in tanker storage are simply not enough to account for $140 per barrel of oil. Besides, now they are playing a different game, trying to take advantage of the contango situation, delivering in the future at higher prices, now that spot prices are below $40 per barrel. This will be to the advantage of the consumer, as it will bring down future prices. Seems to me the market place is working just fine.

    So why did oil go over $140. The obvious answer is supply and demand. No one can deny that China and India, growing at over 10% annually, added greatly to world demand. No on can deny that it takes years for the supply side to react to high prices, due to the enormous capital expenditures required to develop oil producing properties.

    And why did oil go back to $40. Again, simple. 1) That new supply came to market, 2) high prices caused substitution and economization and reduced demand, and, 3) RECESSION!

    In the short term, oil is a highly price inelastic commodity, which makes oil prices potentially highly volatile. Too bad Steve Kroft, and others, never did any Economics 101 before they ventured onto the networks to demonstrate their public ignorance.
    Jan 12 10:45 AM | 10 Likes Like |Link to Comment
  • 4 Beaten-Down Dividend Stocks For 2014 [View article]
    Getting a K-1 may be a bit of a tax filing hassle, but selling a MLP brings on additional levels of complexity.

    In 2012, my wife decided we should move to a larger apartment. To raise the funds, we liquidated one of our taxable accounts, which included the sale of EV Energy Partners, EVEP, at a significant long term gain. I have always done our taxes myself, using TurboTax. As the tax filing deadline approached, I realized that there were issues that I did not fully understand, but I filed (electronically) anyway, reporting the gain on Schedule D. More tax "fun".

    I delved deeper, and found that when you sell an MLP, you are not simply selling stock. You are selling a portion of an operating business and the gain has to be reported on Form 4797. A portion of the gain was deemed ordinary income, due to the depreciation recapture provision. I filed an amendment, and paid more tax.

    I reviewed my filing once more, and found that the gain was still showing up on Schedule D, as well as on Form 4797. The gain had been doubly reported in the original filing, once when I down loaded the 1099B from the brokerage firm, and once when I entered it manually on Sch D. I filed a second amended return, removing the Sch D entry. We now await a refund of several thousand $ from the feds and from NY State.

    I learned something new about filing taxes, and my wife is very happy about our new apartment. Now I just have to report the sale of our old apartment on our 2013 tax return.
    Jan 1 08:39 AM | 9 Likes Like |Link to Comment
  • At A Decade-Long Low, Annaly Capital Management May Be A Buy [View article]
    Where do you get your notions from? Actually, the president has proposed the opposite, and would favor winding down or privatizing Fannie and Freddy. Only our elected congress is in the way.

    http://cbsn.ws/18Ux8P1
    Dec 17 04:31 PM | 9 Likes Like |Link to Comment
  • Exxon Mobil Goes Head-To-Head With This Energy Play [View article]
    This article makes an idiotic comparison (see above), and uses indicators (price/book, price/sales) that make no sense when applied to oil and gas companies (integrated or otherwise). There is little said about new projects and growth drivers -- and everything about mindless ratio analysis. The article is an abuse of Seeking Alpha users' time. SA should be more discriminating in what gets published!
    Jul 15 12:57 PM | 8 Likes Like |Link to Comment
  • Is BP The Best Petroleum Firm To Invest In? [View article]
    A sophomoric analysis that shows little understanding of the integrated oil business model and comes to a lot of unsupported conclusions.

    At least, the author acknowledges his inexperience in analyzing companies such as BP, XOM and CVX when he admits that the oil and gas sector isn't his favorite. He shows it further when he resorts to P/S and P/B ratios as valuation tools.

    P/S is a metric that was invented during the dot com era to value newly formed companies that had no profit, and not much hope of one. In the oil industry, P/S varies according to the relative proportion of assets in the various sectors, that is production, refining, chemicals, transportation, and marketing. Since intracompany sales are eliminated in consolidation of company accounts, P/S also depends on the degree to which a company uses its own oil in its refining operations, versus buying from other companies. In short, P/S has little bearing on relative valuation of oil companies.
    P/B: Book Value is based on the accounting cost of exploring for and producing oil and gas, after deduction of depreciation and depletion. The value of the oil and gas reserves found is not dependent on the accounting cost, but more on the size of the oil fields found, and the price of crude oil. The more successful a company is at finding oil, the higher the P/B ratio. Again, not an especially good guide to valuation.

    Plus, a lengthy article about BP without talking about the elephant in the room, namely, the still open ended nature of BP's liabilities in the Macondo spill. This alone is enough to explain why BP sells at a lower P/E and higher yield than CVX or XOM.

    Finally, the author may think that the "formerly hot emerging markets like China are starting to cool off", but, in fact, Chinese oil imports just hit a record:
    http://reut.rs/1exMozu
    Feb 14 01:18 AM | 8 Likes Like |Link to Comment
  • The U.S. Economy: How Did We Get Here? Where Are We Headed? [View article]
    """ Wrong analysis. Debt is never a problem, umless the debtors stop paying. The issue is not too much debt."""

    Wrong analysis! The problem was too much debt -- mortgages, equity loans, and credit cards -- regardless of whether the lenders were too easy in making the loans. Debt became too high relative to incomes, and the collapse was inevitable. Plus, all that capital going into new houses was a total misallocation -- empty houses are a highly unproductive investment.
    Apr 23 09:43 PM | 8 Likes Like |Link to Comment
  • If you've been on the sidelines during the market's recent run, don't worry, there's more upside to come, says Goldman's Abbie Joseph Cohen. This rally's real, and the fundamentals are there to support it Cohen says. She pegs fair value for the S&P 500 at 1,575 — a 4% premium to yesterday's close. "There are other models, including the Fed model, that show fair value as high as 1,700 or 1,750." [View news story]
    Bush's 3 tax cuts took the economy from the Clinton surplus's to a deficit. Under Bush, government spending, including the cost of an unnecessary war that was supposed to finance itself from oil revenue, caused the US debt to double from the end of 2000 to the end of 2008. The Bush economic policies brought on the recession that Obama inherited. If you had studied Econ 101, you would know that the federal budget deficit automatically increases during a recession -- tax receipts go down and spending on items such as unemployment insurance and food stamps go up. And if you did Econ 102, you would realize that drastic cuts in government spending during a recession would cause the economy to go from recession to depression.

    Also, it may surprise you to learn that the federal deficit has been decreasing since 2009, the last year of the Bush budgets.

    http://bit.ly/YInI1u
    Mar 1 11:48 PM | 8 Likes Like |Link to Comment
  • 4 Reasons to Be Long Oil - And Nothing Else [View article]
    """If XOM goes down, we are in deep trouble."""

    Since it peaked around 95 in 2008, XOM has declined by about 36%. This, despite buying back $86 billion of stock in the last 3 years. Compare this with XOM's capital expenditures of only $67 billion in the same period (2007-2009), which does not include the premium-priced XTO purchase.

    1. Some might conclude that XOM is in the process of liquidation.
    2. Looking at the chart, one must conclude that almost all shares repurchased in the past five years, were purchased at higher prices than the current.
    3. Not a very convincing performance by management, in my opinion.

    If you think oil is going higher, buy one of the smaller exploration companies. Or a company that is highly geared to the price of oil, such as Canadian Natural Resources (CNQ).
    Sep 14 12:28 AM | 8 Likes Like |Link to Comment
  • 'Static Kill' a Success; What's BP Worth Now? [View article]
    Also, some (but not all) of BP's oil spill costs will be tax deductible, and will reduce their tax liability.
    Aug 5 08:58 AM | 8 Likes Like |Link to Comment
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