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Marion Contrarian

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  • 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
  • Dividend Yield Worship Could Lead You Down The Wrong Path [View article]
    No argument here -- the author's warning against focusing exclusively on dividend yield is common sense. As a commentator named "Jim" sez: "Do your homework".

    That said, my take on the exhortations on dividend-yielding stocks appears to be mostly a recommendation vs. investing in gov't bonds (the other "fashionable" safety trade), as yields can be equal or better, with the prospect of capital appreciation (or at least reduced capital erosion) with respect to Treasurys.

    Capital appreciation is secondary for these dividend-paying stocks, and can make them a candidate for a portion of a diversified portfolio that also includes growth, international, etc. for less-active investors.
    Sep 8, 2011. 07:40 AM | 8 Likes Like |Link to Comment
  • The SEC May Change The Game For Mortgage REITs [View article]
    A reasonable assumption if (when) legislation is passed is that REITs will drop by 30%-40% due to loss of tax pass-through (meaning that the REIT will get taxed, and then the investor will get taxed on what's left). Take a look at the dips that REITs took the last time this "rumor" surfaced, and assume the same will occur.
    Sep 5, 2011. 10:06 PM | 3 Likes 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
  • 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
  • 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
  • ETFs On The Rise [View article]
    From the title, I was expecting a list of ETFs that were currently providing relatively higher returns -- not a subtle ad for Dorsey-Wright ETFs.

    This article provides nothing new.
    Apr 17, 2012. 08:27 AM | 1 Like Like |Link to Comment
  • Analyzing Tuesday's Noteworthy Insider Trades [View article]
    RE: Caterpillar "Insider" Buys

    Make sure you dig into the SEC filings before you jump on "insider buying".

    First of all, 405 shares isn't that earth-shaking, representing only 0.5% of Lavin's current holdings.
    Second, the purchase was by his daughter, and was offset by sales by Lavin.
    Third, Lavin SOLD 11,000 shares since then (but still owns around 80k shares directly, as well as 23k shares represented by derivative instruments.

    As a matter of fact, net INSIDER SELLING over the first quarter was around $24M
    Apr 11, 2012. 12:42 PM | 1 Like Like |Link to Comment
  • Dividend Showdown: Dividend Champions Vs. Mortgage REITs [View article]
    As discussed elsewhere in reader comments, there are differences in the tax treatment of mREIT distributions and corporate dividends. These differences lead to "best choices" for where to hold the particular investment:

    Since distributions don't qualify for reduced tax rates, mREITs are best held in a Roth IRA. Distributions compound tax free, and can be withdrawn without tax or penalty if IRS rules are followed (e.g., don't withdraw more than aggregate contributions prior to retirement age; no restrictions after retirement age reached).
    Note that capital losses within a Roth cannot be used to offset gains in taxable accounts, so no tax "benefit" on losses.

    Reduced tax rates apply to dividends (subject to expiration of the tax code) when "conventional" dividend-paying stocks are held in a taxable account . Any capital losses could be used to offset capital gains in other equities in the taxable account(s). That said, the Roth IRA could also hold these stocks, as the same tax-free treatment mentioned for mREITs applies (as does the lack of capital gain offsets, unfortunately).

    I'm including this class of investments, as they are another favorite of those looking for investment income. If MLPs are part of your income portfolio, they are generally best held in a taxable account. The after-tax yield on distributions from most MLPs (at least the popular pipeline MLPs) are very high due to depreciation, etc., so holding them in a taxable account reaps those benefits (while holding in an IRA does not). Unrelated Business Taxable Income (UBTI) is often cited as another reason to exclude this investment from IRAs, but the amount of UBTI generally will not exceed the tax threshold. As such, holding MLPs in a Roth would generally be OK, too. Like mREITs, I wouldn't hold MLPs in a conventional IRA, as depreciation benefits don't acrue within the IRA, and 100% of the distriubtions (and any capital gains) would be subject to marginal tax rates upon withdrawal.

    DISCLOSURE: Long NLY (mREIT), several MLPs, and "conventional" dividend-paying stocks.
    Sep 17, 2011. 04:40 AM | 1 Like Like |Link to Comment
  • Top Dividend Stocks With High Dividend Growth Rates [View article]
    I haven't researched AMLP, but one "benefit" you may lose (vs. direct investment in MLPs) is that the majority of MLP distributions in many cases is return of capital, providing a higher effective (after tax) yield on the MLP(s) in taxable accounts. The associated reduction in cost basis could subject you to higher taxes upon sale of the MLP. However, if the MLP is not sold, but rather passed on to your heirs, the basis would be stepped up and no tax would be due -- making MLPs an intriguing estate-planning tool.
    Jul 13, 2011. 12:17 PM | 1 Like Like |Link to Comment
  • How to Enjoy MLP Distributions Without the Tax Hassles [View article]
    Perhaps the historical discount could be attributable to the tax (deferral) benefits of KMP relative to KMR. A wider discount might reflect a belief in a potential increase in future tax rates.
    Apr 11, 2011. 05:07 AM | 1 Like 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