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Paul Leibowitz

Paul Leibowitz
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  • Gilead Proves Golden: The Importance Of Its Beat-And-Raise Quarter [View article]
    "You suggested that the "public outcry" would not allow treatment denials but denials are in fact occurring on a regular basis. Care to elaborate the reasons you believe rationing will end?"


    I never wrote that insurance companies won't vigorously try to ration medical treatment to control costs. Vigorous attempts to ration by some (not all) insurers will end once there are FDA-approved treatment/cure options covering all classifications of patients.

    We are living through a period of increased competition and new clinical trials. It's a matter of short time before FDA-approved cure options (not treatment, but cure options) are available to all HCV-infected persons. GILD isn't stupid. It will be conducting such trials side-by-side with its competition.

    Not one doctor should ration medical care. Not one patient should stand for rationed care. Those fighting with their insurer will switch insurers. Sooner or later, there will be no reason to switch.

    HCV is infectious. HCV-related hepatic fibrosis is a dynamic scarring process. It leads to increasingly severe illness, and death. Patients won't stand for waiting to receive treatment. The medical community won't stand for it.

    The new media will have a field day.

    As an aside, I use the word "cure" loosely. As a scientist, the farthest I am willing to take the definition of cure is the farthest treated populations have been monitored. So far, it's looking pretty good.
    May 4, 2015. 08:16 AM | Likes Like |Link to Comment
  • Straight Talk On The 4% Rule [View article]
    "From there it increases again erratically, reaching 14.29% at age 114."


    The percent depends on which table one uses.

    It can get as high as 47.6% at age 114 ... well above 14.29%.

    For that reason, I already have Plan B.
    May 2, 2015. 12:15 PM | 2 Likes Like |Link to Comment
  • Straight Talk On The 4% Rule [View article]
    Dave, BNH, Dave Crosetti, and others gracious enough to comment ...

    I just realized that we agree.

    My point pertained to the growing impossibility of adhering to the 4% rule when making *withdrawals* from a Traditional IRA.

    Your comments were about adhering to the 4% rule with one's spending, after any withdrawal whether above or below rates of 4%.

    The problem arose from writing comments rather than speaking face-to-face.

    May 2, 2015. 12:06 PM | 3 Likes Like |Link to Comment
  • Straight Talk On The 4% Rule [View article]
    Dave, BHN

    Yes, the issue I raised really goes to "enough" and, of course, there is no requirement to spend withdrawals. The only requirement is to pay taxes on funds in an IRA at increasing rates of withdrawal.

    The point remains that there is no way to adhere to the 4% rule once the percent of the portfolio that is required to be withdrawn is more than the current yield of the portfolio. This point is unrelated to whether one spends the amount withdrawn or not, or does an in-kind transfer.

    I understand the benefits of emptying an IRA ahead what the law requires if one has worked out a plan to make better use of the funds after taxes are paid, such as the conversion of a Traditional IRA to a Roth IRA (not everyone benefits from such a conversion.)

    Everyone's situation is different. As you wrote, Dave, it is impossible to generalize.

    Aside from Social Security, some people have Traditional IRAs as their only other source of retirement funds, and a portion of such persons are just able to make ends meet with Social Security and the RMD. Some need to withdraw more than the RMD, others can save a portion of the RMD.

    For those of us who have other sources of income than a Traditional IRA, and especially those who make no to little use of those other sources of income, adhering to the 4% rule in a Traditional IRA is of very little concern. Once the RMD reaches 15%, 20%, or more (should one live long enough to have that problem) those other sources can be used.

    In-kind transfer is an unrelated topic because it doesn't absolve the tax liability. Personally, I avoid in-kind transfers because it's impossible to know the actual dollar amount transferred until after the transfer when a new basis price is established. After, a small amount of cash also needs to be transferred unless one transferred more than the RMD. In-kind transfers are treated as sales in the IRA and repurchases in the account to which shares are transferred, commissions typically waived.

    May 2, 2015. 10:20 AM | 5 Likes Like |Link to Comment
  • Recent Trade: Sold 2 Oil Majors And Bought W.P. Carey [View article]

    Good question. Unfortunately, I don't know the answer. But, that never stopped me from speculating : - )

    (1) The Investment Program Association, an industry trade group, wants the SEC and Finra to slow any changes to how REIT valuations appear on client account statements and give more time to nontraded REIT sponsors and the broker-dealers that sell the products to adjust. Uncertainty around the proposed rule has already slowed REIT sales.

    "For example, as of Jan. 1, 2014, there were approximately $65.6 billion of unlisted REIT securities in registration .... Of this amount, only $3.4 billion was placed into registration in the fourth quarter of 2013, approximately 38% below the 'replacement rate' of new offerings required to preserve the amount of potential equity fundraising of the unlisted REIT industry.”

    (2) WPC may still be licking its wounds (and cautious about the sale of non-traded REITs until the regulations mentioned above are clear).

    The SEC recently settled a non-traded REIT kickback scheme with W.P. Carey. According to the settlement, W.P. Carey paid nearly $10 million in undisclosed compensation – using the assets of the REIT – to a broker-dealer that sold shares of W.P. Carey’s non-traded REITs to the public. Carey executives then used fake invoices and misrepresented the payments in securities filings to keep it all secret. The arrangement benefited not only the broker-dealer, but also W.P. Carey, because the broker-dealer’s sales of REIT shares increased the management fees paid to W.P. Carey. In the settlement, W.P. Carey and 2 senior executives agreed to pay $30.3 million in disgorgement, interest and penalties.

    (3) Whereas WPC is in the net-lease REIT sector, many of the questions directed at WPC's CEO (Trevor Bond) at the March 2015 Citi conference focused on the WPC non-traded REIT advisory business segment (10 percent revenues), rather than the WPC on balance sheet net-lease business (90 percent revenues).

    In view of what I wrote in (2), above, it's fair to ask if there an "ARCP overhang."

    Other key points made in the above Bezinga article are:

    - WPC has a solid reputation for letting investment portfolios "season" for 8 to 10 years. This philosophy gives the WPC managed funds time for values to catch up from "the dilution [from fees] when you first sell the shares."

    - No New CPA Net-Lease Funds: After CPA 18 is fully invested in 2016, there will not be another managed fund in this vertical market.

    - Moving forward, WPC intends to "pivot away from managed REIT net-lease revenue."

    - WPC plans to continue hotel and self-storage managed funds, as well as new vertical markets for its non-traded REITs.

    (5) WPC is changing its strategy, as discussed in the June 2014 article:

    In my view, one of the reasons is likely due to the egg WPC got on its face from the settlement with the SEC which lead to ongoing questions about its non-traded REIT business.

    Another reason is likely due to the need to exercise investment discipline in view of the threat of rising interest rates. “A lot more capital is looking for net-lease assets. This has created what some investors see as somewhat of a bubble in the net-lease market."

    Brad, how about another article on WPC?

    May 2, 2015. 10:18 AM | 3 Likes Like |Link to Comment
  • Recent Trade: Sold 2 Oil Majors And Bought W.P. Carey [View article]
    "The much more interesting metric is the AFFO. WPC managed to increase this very quickly since it became a REIT. It was $3.76 in 2012, $4.22 in 2013 and $4.81 in 2014. That is a CAGR of 13%, which is very impressive, especially for a REIT. The disadvantage is that the outlook for 2015 isn't as positive. The 2015 AFFO guidance is varying between a slight decline and very modest growth."


    Thank you for mentioning AFFO. It's far more useful (and important) than FFO. Most ignore it because it's extra work.

    In 2014, AFFO was $4.81 per diluted share and dividends declared during 2014 were $3.685 per share.

    On 24 Feb 2015, WPC affirmed its 2015 AFFO guidance range of $4.76 to $5.02 per diluted share.

    So, even if AFFO comes in at the low end of $4.76 for 2015, WPC can likely easily afford another increase of the dividend in 2015 (all else equal).

    Long WPC


    Reference is here:
    May 1, 2015. 07:53 PM | Likes Like |Link to Comment
  • Straight Talk On The 4% Rule [View article]
    "... if your portfolio's yield is 4% or more, you can follow what amounts to the 4% rule without selling any assets."


    As you certainly know, that works well in after tax accounts and in Roths, but begins to fail in traditional IRA's when the percent of the portfolio that is required to be withdrawn is more than the current yield of the portfolio.

    Investors who can't maintain a high enough yield for one of several reasons will have to dig into principal in their IRAs whatever the size of the portfolio may be.

    The required minimum distribution at age 71 is 3.77%. It jumps to 5.35% at age 80, a portfolio yield that will be a struggle for many to achieve.

    Scroll to the attached Table III at the bottom of this page (Uniform Lifetime):

    I know you know this.

    I am mentioning it because many younger investors may not.

    May 1, 2015. 07:30 PM | 16 Likes Like |Link to Comment
  • Straight Talk On The 4% Rule [View article]

    In a word, "Perfect."
    May 1, 2015. 02:44 PM | 4 Likes Like |Link to Comment
  • Gilead Proves Golden: The Importance Of Its Beat-And-Raise Quarter [View article]
    "What about the other seeking alpha article on Gilead that claims they will start exhausting the patient pool as early as next year. Not that I believe that but would be interested in people's opinions if they had one!

    ckarabin, thanks for reading. Could you please provide a link to the article you are referring to?"

    @DoctoRx and @ckarabin

    The article was written by Small Pharma Analyst:

    One key point is that, since the sickest HCV Patients in the US will be treated sooner, the remainder of infected patients will be rationed over a smaller annual patient population. The logic is that, because nearly half of HCV carriers are undiagnosed and most patients have mild disease, it will take time for these patients to enter treatment and they will enter at a reduced rate and they will be severely rationed on an as-needed basis to control costs.

    SPA quotes WHO estimates, that only 25% of patients are symptomatic and as many as 50 % of those infected do not even know they have disease, and says "these patients will likely be treated, but it will be a slow process. This, along with rationing of the mild cases, will reduce the number of HCV patients treated starting in 2016."

    GILD (and all the analysts) know this.

    I don't buy it.

    Instead, let's look at those patients who know they are infected. Does anyone really think that people who know they are infected will allow themselves to be severely rationed on an as-needed basis to control costs?


    To do so is a conscious decision to get very sick before being treated.

    If anyone makes that decision, they should be on anti-psychotics.

    I believe the public outcry would be deafeningly loud.

    It makes more sense to treat these people so they don't infect others. (Whether the treatment is with GILD's product or a competitors should depend on clinical results, with consideration of cost if they are roughly equivalent in efficacy.)

    I am unaware of any study done to project a useful steady state patient population of newly diagnosed patients emerging from those who are currently clinically asymptomatic. Such projections are needed to forecast the available market over the next decade, or so.

    The time may come when the market dwindles or dries up, but that won't happen as long as there is a meaningful sustainable population of infected, undiagnosed carriers.


    I enjoy your articles.

    I particularly liked this one because it's clear that you're on a nondrug-induced high : - )
    May 1, 2015. 10:23 AM | 2 Likes Like |Link to Comment
  • Mr. Market Has Ignored This Healthcare REIT, Maybe You Shouldn't [View article]

    You inadvertently used the Adjusted (Operating) Earnings settings for FAST Graphs in all your graphs, rather than Funds From Operations (basic) (FFO,CFL).

    In particular, in the last graph where you show price, the current P/FFO is 16.1, not the PE ratio of 20.5 as shown. Also, the graph with P/FFO displays differently.

    Apr 27, 2015. 11:00 AM | 2 Likes Like |Link to Comment
  • Attractively Valued Ameriprise Financial: A Long-Term Total Return Opportunity Raises Dividend 16% [View article]

    Many big thanks for covering AMP. It's been on my list for some time. In the past (and even today), I've been queasy about buying any financial services company so subject to market conditions as AMP owing to its asset management business. Oddly enough, I am less concerned about the insurance side because I do not expect interest rates to remain so low for more than another year.

    When rates rise, there will be less pressure on the earnings side of the insurance business and less pressure to maintain or increase reserves.

    However, AMP's business is roughly as sensitive to the capital markets as its peers. Market volatility and larger than normal market corrections (which happen around once every 6 years) often result in declines in asset values and outflows from the asset management business. When assets decline, investments are marked to market which stresses the balance sheet. In addition, the sales of annuities and insurance products would be expected to decline.

    At the time of the Great Recession, AMP's EPS dropped from $4.03 for 2007 to $3.15 for 2009. The steepest drop in price was in Feb of 2009 most likely because of good guidance given by AMP for the remainder of the year.

    Over the past 12 years, AMP appears to have never traded above a PE of 16.9 and, even then, just briefly.

    The Great Recession hit it as hard as many other stocks. It took 2 years for it to recover from its low when it traded for a PE of 13.9 before dropping to another low of 8.1 about 6 months later (around Sept 30, 2011).

    From there on out, it's been uphill.

    M* expects "Ameriprise to continue to trade at a discount to pure play asset managers, as the firm's insurance business still accounts for nearly half its earnings, and the insurance business tends to trade at a lower multiple than the asset managers." Their "new fair value estimate [of $135] implies a 14 times PE multiple of 2015 projected earnings and a 13 times PE multiple of 2016 projected earnings." M* recommends a buy at $81 mainly because they assign a high uncertainty to their forecast, and assign AMP a narrow moat.

    (Note that the word "nearly" implies to me more than the 36% Chuck used which he took out of AMP's filing. To my mind, 36% is about one-third, not nearly 50%. Thus, I assume M* copied old text.)

    Of course, M*'s recommended buy price is a 5 star value which maximizes returns. I posit that AMP would only trade at $81 if people believed in Chicken Little and were willing to wait for the next Great Recession or huge sink hole. Some value between $81 and $135 makes more sense.

    When I think about it, the longer one holds AMP at today's price the less important Chicken Little's prediction becomes even if true.

    Should I make a purchase, I first need to decide if I want to be an owner of AMP's business.

    If so, my preference would be to buy at around 5-10% less than today's price so it aligns better with its historic PE ratio. Then, it's a matter of being patient and letting time pass.

    There is no question in my mind that you picked an interesting and worthy company to review (as usual).

    Thanks for causing me to delve into AMP more deeply. I kept putting it off.


    Long WFC and USB (banks)
    Long TRV and MMC (insurance)
    Apr 24, 2015. 01:24 PM | 5 Likes Like |Link to Comment
  • 2 Reasons AT&T Is The Better Dividend Investment Than Verizon [View article]
    " topped off my T last week at 32.44. It is now an overweight position for me, but that's OK"


    I topped it off yesterday at around 32.60. T is also an overweight position for me relative to VZ.

    Even though I also own a full position in VZ, I agree with what's been written about in this article, and believe that T's attempts at diversification will pay off.


    As appears in this thread, I suggest caution for those comparing these two companies using PE ratios, or anything to do with GAAP earnings. When evaluating any company with high levels of debt and large capital investments, GAAP earnings can be misleading. It helps to understand how non-GAAP earnings were calculated.

    But, more often, FCF is a more reliable financial metric for such companies (one should look to see if FCF is likely to be sustained at a healthy level going forward, all else being equal).
    Apr 23, 2015. 11:11 AM | 1 Like Like |Link to Comment
  • Why I Purchased Schwab's U.S Dividend Equity ETF As A Dividend Growth Investment [View article]

    Thanks for posting your method. It took a lot of work but it's worth it if helps you decide to whether to swap some of your positions for SCHD. It always helps to look at data different ways, even if you know that SCHD was not invested in those stocks at those weights for the entire time period.

    Not to confuse, but in the event you missed some comments, you may find these two of interest:
    (1) aymo0003 is not expecting a DGR of 13% from SCHD moving forward
    (2) as10675 comments on SCHD's likely future performance after considering the weightings:

    Just a bit of point/counter-point (which is where the fun is in all of this).

    Apr 22, 2015. 06:15 PM | Likes Like |Link to Comment
  • Why I Purchased Schwab's U.S Dividend Equity ETF As A Dividend Growth Investment [View article]
    "I think the SA 60-month Beta is probably calculated based on the portion of the 60 months that actually existed"


    Really good guess.

    Makes sense.
    Apr 22, 2015. 11:48 AM | 1 Like Like |Link to Comment
  • Why I Purchased Schwab's U.S Dividend Equity ETF As A Dividend Growth Investment [View article]
    Dave (and everyone),

    I'd like to revisit the comment that I posted above.

    It seems I missed noticing that Seeking Alpha's portfolio calculated a 60 month beta (five years) for an ETF that has been in existence less than 4 years.

    SCHD's inception date was 10/20/2011. It's only been 42 months since October 20, 2011.

    Can anyone explain why Seeking Alpha may be correct in reporting 60 months? I think it's an error and again shows why we should not rely on everything we read unless it comes from an SEC filing or off a company's site.

    The error popped into my head when I read Be Here Now's comment (further below in this thread) and didn't understand how he could do calculations on a portfolio of stocks that simulated SCHD during a period when it didn't exist.

    In that comment, he posted his results of calculations of the historical dividend growth rates of a portfolio of stocks mimicking SCHD, and using SCHD weightings, and gave results going back for 5 years.

    Keep in mind that the composition of SCHD changes annually (it's rebalanced every March).

    I wondered how he could do calculations going back 5 years and it was then that I recalled Seeking Alpha's beta calcs for 60 months.


    I did it differently, using SCHD's distribution data on M*.

    The M* data is under "Distributions", here:

    Here's the data:

    Year----Total distribution

    2015YTD-0.2699 (Estimate, not used)
    2011----0.1217 (Partial year. Not used. The distribution date is Oct 20, 2011)

    Using the income/distribution data on M*, I get the following CAGR:

    From 2013 to 2014, the DGR was 16.67%

    From 2012 t0 2014, the DGR was 13.86%

    The CAGR calculator I used is here:

    Close, but different.

    Can you please explain a bit more about what you did?
    Apr 22, 2015. 08:47 AM | Likes Like |Link to Comment