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Marion Contrarian

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  • How to Enjoy MLP Distributions Without the Tax Hassles [View article]
    Your K1s should show your adjusted basis (which generally declines each year) in the units you own. If you hold them long enough, your basis could eventually reach zero, at which time your distributions become 100% taxable as received. And when you sell your units with zero basis, 100% of the sale would be taxable (at your marginal rate, I believe). If you sell before the basis reaches zero, the tax is based on whatever adjusted basis you have at the time. While you hold the shares, you'd continue to enjoy a generous yiled on a tax (deferred).
    Mar 26, 2011. 09:58 AM | 2 Likes Like |Link to Comment
  • How to Enjoy MLP Distributions Without the Tax Hassles [View article]
    Semi short answer:
    KMP: Hold units in taxable account to reap high after tax distribution yields and avoid UBTI (for large positions).
    KMR: Hold shares in either/both taxable and/or tax-favored accounts to enjoy share (and capital) growth via distribution of incremental shares in lieu of cash, as well as the prospect for potential additional gains via a shrinking spread between the value of KMR shares and KMP units.

    As the author states, KMR does not pay dividends, and is structured to handle distributions (and adjusted cost basis) through issuance of additional shares. Conversely, KMP issues distributions to unit holders, a good portion of which is (tax deferred) return of capital, and your basis is reduced over time. For very long term holders, your cost basis will eventually be zero at which time distributions will become fully taxable. In the mean time, enjoy very high after tax returns.

    For a discussion of the differences between KMI, KMP, and KMR, check out this Motley Fool article:
    Mar 25, 2011. 09:59 AM | Likes Like |Link to Comment
  • The Fed Made This Rust Belt Bank a Great Buy [View article]
    Being long EYG and short SKF reflects a bullish position in the Dow Jones U.S. Financials IndexSM.
    - Is the combined long/short an attempt to mitigate the (longer term) losses due to daily "reset" of the benchmarkwhile maintaining a bullish view?
    - Do you intend to reverse the position (short UYG / long SKF) when the banks "tumble"?
    Feb 23, 2011. 08:56 AM | Likes Like |Link to Comment
  • Sweet Dividend Yields Found in the Beverage Industry [View article]
    RE: Foreign Taxes

    Yep - you can either take a credit (100% of tax paid) OR a deduction (tax paid X your marginal tax bracket). The first $300 ($600 for couples) is completely exempt. Otherwise, you'll need to fill out IRS Form 1116, and the "tax gymnastics" can be a bit convoluted (i.e., instructions on forms will refer to other forms, which will refer to still other forms, which will finally refer you to a CPA who is also an Enrolled Agent -- which I'm not).

    For a comprehensive discussion of the Foreign Tax Credit (FTC), with consideration of both U.S. and Canadian treatment, see

    For the "short form" version, courtesy of IRS, see

    As a side note, you probably wouldn't be able to tell if your tax software was accurately accounting for the FTC if you're above the $300/$600 threshold. Anyone for a Flat Tax?
    Jan 26, 2011. 04:55 PM | 1 Like Like |Link to Comment
  • 7 Stocks Going Ex Dividend the Fifth Week of December [View article]
    The price drop in the stock approximates the amount of the dividend because the cash paid out affects the company's balance sheet, regardless of whether or no that cash is reinvested in additional shares (e.g., DRIP). As the author implies, share price also "tends" to recover (in bull markets) after ex-div date, although recovery time may vary from one stock to another. You can look at price history of candidate stocks to characterize share recovery from prior dividend payments, but note that some data sources adjust historical data for dividends while others do not.
    Jan 13, 2011. 02:53 PM | 1 Like Like |Link to Comment
  • Cramer's Stop Trading! Out of Bonds (12/9/10) [View article]
    Think about the dynamics of the bond and equity markets, when interest rates decline, the bond holder has potential capital gains (through bond price appreciation) in addition to whatever interest rate (s)he has locked in when the bonds were purchased. Stocks achieve gains as well, as the cost of capital declines.

    When rates flatten out after declining, the prospect for further capital appreciation is gone, and the bond holder is left with static (unrealized) capital gains and his locked-in interest rate. Stocks continue to do well in this static low-rate environment as long as capital remains available for investment.

    As rates begin to rise, the bond holder's capital gains begin to deteriorate, and (s)he may consider selling to capture that gain and go to cash, or perhaps (dividend-paying) stocks. Stocks will continue to perform in this relatively-low (but rising) interest rate environment as cheap money stimulates the economy and company earnings improve. If rising rates are due to (or accompanied by) inflation, consumers may be inclined to refinance (assuming they qualify) or buy real estate and durable goods in advance of higher rates.

    At some point, interest rates become sufficiently elevated that a number of factors come into play:

    1. The carry costs for business loans don't "pencil out" for business expansion.
    2. Borrowing costs for consumers (and perhaps inflation) reduces demand for non-essential goods and services.
    3. The coupon rate for bonds begins to compete with the returns for equities, and some investors may move from equities to bonds to secure a more predictable cash flow from interest payments (despite some potential capital loss as rates continue to rise, perhaps mitigated by choosing shorter-term bonds).

    When this occurs, stocks begin to loose their luster and cash (or another market) may be more attractive until interest rates level off at their highs (assuming one is a "perfect" market timer -- let me know if you know of one). That's the time to significantly increase your bond exposure to lock in high coupon rates, with the prospect of future capital gains when rates drop again.

    Historically, the inflection point for interest rates has been around 4-6%. For a decent discussion of the correlation between interest rates and stocks, go to


    Disclosure: long equities and cash, minor* amount of intermediate bond exposure via a mutual fund in my IRA (*insufficient to benefit signficantly from capital gains). Watching TBF/TBT for possible (re)entry.
    Dec 12, 2010. 01:22 PM | 3 Likes Like |Link to Comment
  • John Hussman on the Fake Recovery [View article]
    Angel -
    Sure, the S&P beat HSGFX over the period you specify -- it also lagged during the last 3 months. However, look at performance over:
    6 month, 3 year and 10 year periods, and HSGFX beat the S&P.

    It appears that HSGFX is a (relatively) better bear market bet than the S&P, but lags during bull markets. It has also outperformed the (long-short) category averages over a variety of periods. However, long-short funds have underperformed the S&P.

    I'm not recommending the fund (nor am I invested in it), but wanted to point out that the performance period affects the results. I'd also add that, if you "knew" when to be in the fund (in a down market), you'd still be better off in cash......
    Oct 19, 2010. 09:31 PM | 2 Likes Like |Link to Comment
  • 5 Dividend Stocks Defeating Bonds [View article]
    re: LLY's CAGR trend -- an interesting metric. Thanks for the perspective.
    Sep 11, 2010. 11:03 AM | 2 Likes Like |Link to Comment
  • The White House calls a halt to new oil drilling until a review of the Gulf spill has been conducted. As costs mount, BP's (BP +0.6%) reputation is in tatters, as the worsening incident threatens to undo marketing efforts to rebrand the company as “beyond petroleum.” But some analysts say the $20B drop in BP's market cap is an overreaction.  [View news story]
    I sold some OTM Puts on the 27th, presuming that an overreaction had occurred. Seems like I was a bit premature, and may end up owning BP (the dividend will make this less painful). Yesterday, I put on a bullish ATM call spread.

    Uh-oh ... a White House press conference. Look out belooooow!!!
    Apr 30, 2010. 11:31 AM | 2 Likes Like |Link to Comment
  • The Municipal Bond Crisis Is About to Begin [View article]
    re: "Everyone needs a year and a day to capture the returns from March '09..."

    While the market may indeed decline this April, I doubt that it could be attributable to capturing gains from the '09 bottom. Not "everyone" got in at the market bottom. Volume continues for both the S&P and total market, implying investors continuing to get into (and out of) the market(s).

    Similarly, not "everyone" will get out of the market in April, although some might, if for no other reason, to raise funds to pay their tax bill ;o)
    Feb 17, 2010. 09:20 AM | 1 Like Like |Link to Comment
  • The Municipal Bond Crisis Is About to Begin [View article]
    If you predict that tomorrow's weather will be much like today's, you'll be right more often than wrong. The same can be said for stock market predictions.
    However, you're more likely to get soaked when the latter turns against you than the former.
    Feb 17, 2010. 08:47 AM | 11 Likes Like |Link to Comment
  • Actively Managed ETFs Look Poised to Explode [View article]
    A more appropriate title would be, "The Number of Actively Managed ETF Offerings are Poised to Explode". This article is about an increase in the number of choices, not projected performance. On the contrary, a proliferation of product offerings tend to signal a market top.
    Jan 18, 2010. 11:44 PM | Likes Like |Link to Comment
  • 5 High Yield Canadian Royalty Trusts [View article]
    Historical dividend info also available on Yahoo Finance -- just select historical data, and check the "dividends only" box (e.g.,

    On Dec 02 03:27 PM jg1945 wrote:

    > Thanks for the information, in the US, your companies are basically
    > pink sheets here and it's difficult to get dividend information unless
    > you have their website.
    Dec 3, 2009. 09:20 PM | Likes Like |Link to Comment
  • Comparing International Small Cap Funds [View article]
    As of today (May 29, 2009), VSS is outperforming the other ETFs mentioned (DLS,GWX,SCZ):

    It's too early to tell whether this is attributable to the greater weighting that VSS gives to emerging markets, lower costs, relative emphasis on growth vs. value, or some other factor, and whether VSS will continue to outperform in the long run. A two-month "track record" isn't long enough to hang one's hat on.
    May 29, 2009. 02:05 PM | Likes Like |Link to Comment
  • Stocks to Help You Avoid the 7 Deadly Sins of Income Investors [View article]
    Some of the recommended dividend payers (specifically MLPs) are generally best held in taxable accounts, as the income is partially sheltered (depreciation, return of capital, etc). KMP is one example of this, EPD is another (you could hold Kinder Morgan Management - KMR - inside your Roth; instead of dividends, you are issued equivalent additional shares).

    On May 01 11:21 AM andypandy wrote:

    > Cliff:
    > If I am investing with a roth IRA account is a lower dividend acceptable?
    > If so, how low?
    May 29, 2009. 02:25 AM | Likes Like |Link to Comment