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GaltMachine

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  • Weighing The Week Ahead: Can You Separate The Signal From The Noise? [View article]
    Mitch,

    The qualifier is "Federal Income" taxes. According to the NYTimes 46% of people did not pay these taxes in 2011 and a certain percentage actually got refunds on taxes they did not pay which means they received a subsidy.

    http://nyti.ms/TaWDjW

    In contrast, the top 1% of taxpayers paid over 37% of the total Federal Income taxes collected. The top 10% paid over 70% of taxes collected.
    http://bit.ly/UqnOH3
    Nov 25, 2012. 12:52 PM | 2 Likes Like |Link to Comment
  • Billionaire Ken Fisher's Top 5 Dividend Stocks [View article]
    I remember back in Dec 2003, a stock guru was asked for his "one pick for the decade stock to hold" idea on one of those CNBC year end shows and he chose PFE as his conviction purchase. I was interested and decided to follow it.

    Amazingly it was trading in the $34 range at that time.

    With a PSR at 2.88, I wonder what Fisher sees in their pipeline that justifies his conviction in the stock. Still seems somewhat expensive at this price.
    Nov 25, 2012. 12:43 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Can You Separate The Signal From The Noise? [View article]
    Jeff,

    From the Doug Short article referenced above:

    "At this point in time, I think it is possible that the NBER could eventually date a new recession from some point in the third or fourth quarter of 2012. But I remain of the view that ECRI's 2011 recession call was painfully premature."

    This seems like a significant change in tone from Doug's previous stance on the data.

    Is there a connection between the economy and your stance in Felix?

    "We are now 67% short in trading accounts via three inverse ETFs."

    Does that mean your model is signalling a greater probability of a market decline ahead?

    Thank you.
    Nov 25, 2012. 12:11 PM | Likes Like |Link to Comment
  • H-P (HPQ) "is a conglomerate in which all the cylinders have stopped firing at once," writes the FT. The company's PC division, IT services operation, and servers and hardware business are all struggling, while its lucrative printing division is facing decline. And that's not to mention the firings of three CEOs, a boardroom spying scandal, and multiple megabillion-dollar deals that have gone wrong, the latest of which is Autonomy. [View news story]
    On a Price to Sales Ratio (PSR) you can really see the long term decline of this company from a shareholder's point of view.

    Current PSR is around 0.2 vs a 10yr average in the 0.75 range and peaked at 1.28 in October 2007.

    http://bit.ly/TXgRN0

    If it ever reverts to trend this would be a really good time to enter on a long-term basis. If you are a holder now and bought in the higher range, well, I wish you good luck!
    Nov 25, 2012. 11:57 AM | 2 Likes Like |Link to Comment
  • 7.8T reasons dividend tax increases won’t crush stocks: That's the estimated value of all equity assets held by retirement investors that are not tax sensitive. Though it seems counterintuitive, Lucas Kawa thinks an increase on dividend tax rates might actually benefit the millions who hold high-yield dividend stocks in their IRAs and are able to buy into a potential sell without being impacted by the rising tax rate. [View news story]
    bob,

    According to research done by Christina Romer, President Obama's former Chair of Economic Policy, tax increases have a negative GDP multiplier of between 2 to 3 times:

    http://bit.ly/TVN7mJ
    "Tax Increases Reduce GDP
    "Tax changes have very large effects: an exogenous tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent."

    How do changes in the level of taxation affect the level of economic activity? The simple correlation between taxation and economic activity shows that, on average, when economic activity rises more rapidly, tax revenues also are rising more rapidly. But this correlation almost surely does not reflect a positive effect of tax increases on output. Rather, under our tax system, any positive shock to output raises tax revenues by increasing income."

    So if taxes go up by $100 billion, GDP is expected to go down by between $200-$300 billion as a result in that particular year. Given how low our current rate of growth is it is not clear whether we could withstand the hit to growth especially if we get all the proposed increases being discussed.
    Nov 24, 2012. 01:45 PM | 2 Likes Like |Link to Comment
  • A Powerful Leading Indicator Points To A 2013 Market Rally [View article]
    djohnson,

    "the only time we expanded our factories and added more capacity and headcount was due to our inability to keep up with increasing demand."

    The connection between demand and taxes is after tax/disposable income. When taxes are increased, after tax income declines immediately. The consumer can either scale back their spending or reduce their savings to compensate for the reduction in income. When consumers are fearful they save a little more which in the short-run will reduce demand. The total value of all income for the country is called GDI (Gross Domestic Income).

    If consumers scale back spending this will lower demand which is what businesses fear. So businesses are being perfectly logical when it comes to the fear of higher taxes and the cost of regulations.

    The Obamacare tax will be a direct hit to corporate and consumer bottom lines and despite the years that have elapsed since its passing we still don't know what's in it when it comes to cost, regulation, and how it will be enforced.

    So the "uncertainty fears" expressed by corporate America are entirely justified in my opinion. You may not share them but on a macro level it is obvious that this concern is impacting the economy. Hopefully it is a temporary phenomenon.
    Nov 24, 2012. 01:35 PM | 1 Like Like |Link to Comment
  • 7.8T reasons dividend tax increases won’t crush stocks: That's the estimated value of all equity assets held by retirement investors that are not tax sensitive. Though it seems counterintuitive, Lucas Kawa thinks an increase on dividend tax rates might actually benefit the millions who hold high-yield dividend stocks in their IRAs and are able to buy into a potential sell without being impacted by the rising tax rate. [View news story]
    Brendan,

    "I would just expect that higher tax rates wouldn't hurt because you have to pay the tax man period end of story."

    Higher taxes lower after tax returns for everyone so I don't understand what you are trying to say here with this comment. After tax returns are what matter which means you will be poorer after a tax increase than you were before it. The proposed upcoming taxes on dividends would particularly hammer after tax dividend yields so this is no small issue since there is still a lot of money sitting in taxable accounts (including my own).

    Part of discounting the future returns from stocks takes into account the tax rates applied to those income streams and since taxes reduce income streams this implies that valuations will go down. That's the simple analysis.

    The unknown factor is whether investors will be willing to pay more for the same income stream which would be a form of multiple expansion. I don't know the answer to that question but I suspect we will find out in the near future.

    Selling for tax reasons alone is never a wise strategy so anyone doing it to avoid short-term taxes should think hard and fast about paying taxes now to avoid higher taxes later. The loss of compounding on the untaxed portion could be significantly better than the tax savings now.
    Nov 24, 2012. 12:06 PM | 1 Like Like |Link to Comment
  • The latest fiscal cliff idea: a higher federal gas tax. State highway officials and industries that stand to benefit from increased highway spending such as road builders and heavy equipment makers are among those pressing lawmakers to raise the 18.4-cent-a-gallon federal gasoline tax as part of a broad agreement. It's just one of a grab bag of proposals various groups are trying to tuck into a deal. [View news story]
    So part of the solution is to make the "fiscal cliff" even higher?

    Only govt could twist logic like this and turn higher gas prices into a positive.
    Nov 23, 2012. 11:34 AM | 4 Likes Like |Link to Comment
  • California’s CO2 now has a price, but it's a low one. For each metric ton of carbon dioxide emitted, businesses, utilities and industries that bought allowances will pay just $10.09. The results of California's first CO2 auction came as a relief to state officials that all of the 23.1M allowances covering emissions up for auction were sold, but some analysts had expected a higher price. [View news story]
    Who were the dummies that paid this protection money?

    They are definite short candidates.
    Nov 21, 2012. 11:06 AM | 2 Likes Like |Link to Comment
  • More on Jobless Claims: Last week's 78K jump in initial claims was revised higher to 90K. The biggest increase in claims this week came from New York and New Jersey, up 43.9K and 31.K, respectively. Big Sandy victim California was next, up 24.7K. S&P 500 futures remain flat. [View news story]
    Angel,

    I wonder if that was considered humor?

    Who's going to take the under on claims revised downward next week?
    Nov 21, 2012. 08:46 AM | Likes Like |Link to Comment
  • More on H-P: The company is taking an $8.8B charge related to Autonomy just a year after buying it for $10.2B. Some thought a write-down was possible, but few expected one this large. FQ1 guidance is for EPS of $0.68-$0.71, below an $0.85 consensus. Prior FY13 EPS guidance of $3.40-$3.60 is maintained, but there's probably a lot of skepticism. PC sales -14% Y/Y (-10% in FQ3), printing -5% (-3% prior), services -6% (-3% prior), enterprise hardware -9% (-4% prior), software +14% (boosted by Autonomy), financial services +1%. HPQ -10%. CC at 8AM ET (webcast). (PR[View news story]
    Funny though I hate cliches sometimes they are appropriate: "Don't catch a falling knife!"

    At some point you have to think this will be attractive as a turnaround play (I hope).
    Nov 20, 2012. 09:50 AM | Likes Like |Link to Comment
  • Oct Housing Starts:+3.6% to 894K vs. 836K expected and 863K (revised) in Sep. Permits 866K vs. 865K expected and 890K (revised) in Sep. [View news story]
    bbro,

    Thanks. That's a good enough guess for me.

    Multi-family has seemed to be the driving number now. I wonder if we are shifting to more of a rental culture now?

    I assumed all housing had the same multiplier so I learned something new.
    Nov 20, 2012. 09:47 AM | Likes Like |Link to Comment
  • Oct Housing Starts:+3.6% to 894K vs. 836K expected and 863K (revised) in Sep. Permits 866K vs. 865K expected and 890K (revised) in Sep. [View news story]
    bbro,

    Given where housing is now as a %age of GDP vs 2006, how much incremental GDP growth does a number like this drive?

    The y/y numbers are good even with the depressed base so it looks like housing was a big part of why we had positive GDP y/y.

    Thank you.
    Nov 20, 2012. 08:46 AM | Likes Like |Link to Comment
  • Groupon (GRPN -27%) had its defenders on this dark day. Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript[View news story]
    PDT,

    On August 14th, the stock closed at $5.51 and today it has rebounded from recent lows, $2.60 intraday, to just about $3.15. Amazingly on a price to sales basis it is starting to look interesting http://bit.ly/NyY1hB

    http://bit.ly/HrozJW
    "Graham wrote that the owner of equity stocks should regard them first and foremost as conferring part ownership of a business. With that perspective in mind, the stock owner should not be too concerned with erratic fluctuations in stock prices, since in the short term, the stock market behaves like a voting machine, but in the long term it acts like a weighing machine (i.e. its true value will in the long run be reflected in its stock price)."
    Nov 19, 2012. 12:03 PM | Likes Like |Link to Comment
  • NAHB Housing Market Index: 46, up from 41 in Oct, vs. 42 expected. Index marks seventh consecutive monthly gain in the confidence gauge and its highest point since May of 2006. Components reflecting current sales conditions posted the biggest eight points increase to 49. (PR[View news story]
    bbro,

    Interesting given the divergence in IP and housing. Hopefully housing helps drive improvements in the IP numbers in the month's ahead. What do you think?

    Last week's number looked pretty ugly. Supposedly the NFP could be close to negative this month so I wonder whether that is a recessionary signal or just noise from Sandy.
    Nov 19, 2012. 10:27 AM | Likes Like |Link to Comment
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