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Larry Sohl

Larry Sohl
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  • Is This The Big Correction? [View article]
    Call me old fashioned, but I believe the market is primarily driven by fear, greed, and pure emotion more then anything else. I do love the chart analysts, though. It's cheap entertainment to believe you can read the tea leaves and predict what Joe Trader is going to do on any given day based on a chart.

    People know there's been a big run-up. People keep hearing analysts and bloggers talk about the impending crash. If they're selling, it's their fear of getting crushed by another drop.

    You could also argue that the we're way above the S&P 500 long-term P/E ratio of 14 and we're due for a sell-off. I saw that argument recently, again based on a chart and some numbers. What the author failed to point out is that the P/E ratio of the market hasn't been at that level since the late 1980's. Crunching all the market's numbers for 100+ years, calculating an average, and pretending that's a predictor of the market... also entertaining.
    Jan 26, 2010. 09:05 AM | 14 Likes Like |Link to Comment
  • MLPs - A Reality Check ? [View article]
    For those complaining about the taxes, recognize that you're only paying taxes because the MLP just made you a boat-load of money. There is no free lunch. You pay taxes on ANY investment gain. However, with the MLP's you get the great advantage of delaying that payment for an extended period.

    Does it hurt to pay taxes when selling a long held MLP? Yes. But only because you've been raking in the ROC distributions for years and haven't had to pay a dime. Compare the tax hit and timing of the payments on MLP's to any other investment, and it is not a disadvantage, it is a strength. IMO.

    I've held MLP's for a long time. EPD, for example, has a 3, 5, and 10-yr return of 26%, 20%, and 14.4%/year. Compare that to the S&P at 12%, 5%, and 8%. I'm quite satisfied with the MLP's, even with perceived paperwork or tax quirks.
    Mar 26, 2013. 11:42 AM | 13 Likes Like |Link to Comment
  • Long / Short Is Better for Long-Term Investors Than Long Only [View article]
    Why do most people not use shorts / derivatives / hedges?

    1) They are more complex, and most investors don't have the time or knowledge to understand them...
    2) They are not present or available in typical 401k or investment accounts...
    3) Hedge funds are often available only to the wealthier investor...
    4) Most investors do not use a professional money manager who can handle it for them.

    And for me... most importantly, I wouldn't do it because statistics show that over a 10 year period 90% of money managers fail to beat the market. Over a longer term, even fewer consistently beat the market. Hedge fund managers are great at talking up their latest returns (if they've been good), but most can't maintain stellar performance for extended period of time. (Unless their name is Madoff...but we know how that worked out) Plus, the fees charged by hedge funds can be exorbitant. Over a long period of time, the hedge fund manager is often the only one who wins. The odds of finding that one hedge fund / strategy that beats the market year after year are extremely low.

    I don't know about most investors, but I'm not out to score the one "greatest trade". Using Jesse Livermore as an example, yes... he scored some major gains shorting the market in 1929. And later lost everything. I wouldn't like to follow in those footsteps.

    So.... I'll stick with my not so glamorous, unsophisticated steady approach. I'll continue to make regular investments, recognizing that I'll never pick the top and bottom of the market. I'll continue to reallocate regularly, recognizing that this is the most reliable way to capture gains and buy into undervalued sectors. I'll continue to
    re-evaluate my allocation plan, recognizing that a static plan may not make sense as the economic environment changes. It may not be glamorous. I may not experience the thrill of making (and completely losing!!) several fortunes like Livermore, but if in 20 years I can say that I've averaged a simple 8-10% annual return, I think I can live with that.
    Jun 29, 2010. 09:26 AM | 13 Likes Like |Link to Comment
  • The Myth of Diversification or How to Really Diversify [View article]
    For many years I've tried to diversify and seek out the asset classes that didn't correlate with the S&P500. Your statistics back up my belief that in recent years it's become more difficult to find this diversity. What about some other asset classes? Are emerging markets so strongly tied to the S&P? The last number I saw for this correlation was 0.52, which gives you another decent option.

    I've also diverted more of my portfolio towards MLP's. Although the MLP's have done very well for me, it's not as easy to find correlation information. The last numbers I saw were in the 0.5 - 0.65 range, which again gives you another decent alternative.

    All the experts out there... what is the best one-stop source for correlation information? Is there a single site that covers all the asset classes, and is updated regularly?
    Apr 6, 2011. 08:08 AM | 10 Likes Like |Link to Comment
  • If You Own Dividend Stocks And Are Worried About Taxes, Then Read This... [View article]
    Find me a politician with the guts to truly modify the tax code, and he's got my vote. The system has become so complicated, so convoluted, and full of so many tax breaks for special interest groups that no one can argue that's it's completely fair. It makes tax and retirement planning a crapshoot. How can you plan for retirement when you have no clue what the flavor of the day might be for taxes?

    I've got money going into a taxable brokerage account, 401k, Roth IRA, and a whole life plan. I don't have a clue what the tax environment may be 20 years from now, but at least I'll have some options to choose from when planning withdrawals.
    Mar 13, 2012. 03:00 PM | 9 Likes Like |Link to Comment
  • MLPs - A Reality Check ? [View article]
    No matter how I slice it, I still must disagree with you assessment that there is double taxation.

    Using your example: You bought something for $100,000. You sold it for $200,000. And in the meantime, you collected $175,000 in payments. If this was a regular stock with non-qualified dividends, you'd be paying capital gains rates on $100,000, and ordinary income rates on $175,000. And by your numbers, this is exactly what you are doing with this MLP! The only funny thing is the timing of those payments.

    After your cost basis goes to zero, you pay capital gains rates on the last $75,000 in distributions. I agree 100%, that the $75,000 is 'earnings disguised as ROC'. At the time of sale, you show paying $25,000 at cap gains rates, and $175,000 at ordinary income rates. This 'recapture' isn't double taxation. It's simply correcting an earlier error. The $75,000 in initial distributions should have been taxed at ordinary rates and wasn't, and to make up for this at the time of sale $75,000 that should have been taxed at cap. gains rates is taxed at ordinary rates.

    Bottom line, when all transactions are complete, you had a total of $100k in cap. gains, and were taxed on $100k in cap. gains. You had $175k in ROC's/distributions, and you were taxed at regular rates on $175k in income. I still call this an advantage, and definitely not double taxation. Your tax bill was delayed.

    ...unless you can show me that you are paying more than cap. gains on 100k of income, and ordinary rates on 175k of income. In which case I will gladly eat crow.
    Mar 26, 2013. 12:47 PM | 8 Likes Like |Link to Comment
  • If You Own Dividend Stocks And Are Worried About Taxes, Then Read This... [View article]
    I'll start by saying that proposed tax changes will hit me severely. But....

    Painting everyone in the lower tax brackets with one brush is unfair. They've ALL made a 'host of mistakes' and have no interest in elevating themselves? And are in your mind evidently not even worthy of having voting rights? No doubt, some people don't have the drive or ambition to succeed in everything they do. For every slacker, there are 100 hard working Americans trying to improve their lot in life. At least I like to think that's true.

    The tax proposals as of late are obviously targeted at the wealthy, but the tax rules for the prior 30 years have swung heavily in favor of the wealthy. Capital gains and dividend tax rates are nowhere near where they used to be. The game is increasingly rigged, as lobbyists and now Super-Pac's drive Washington's agenda. The uber-wealthy can pat themselves on the back and pretend that they have simply worked harder than everyone else, but 300,000,000 other Americans may not agree.
    Mar 13, 2012. 01:48 PM | 8 Likes Like |Link to Comment
  • MLPs - A Reality Check ? [View article]
    Yes, we are in agreement on the numbers. I just think calling it double taxation is not only misleading, it's skews the impact. You make it sound like it's a disadvantage, but it's actually an advantage. You get to delay having to pay ordinary income tax rates on that $75,000. And since it's impossible to avoid paying the piper at some point, isn't the next best thing getting to delay that payment as long as possible?

    The theme of keeping a close eye on long-held MLP's and the tax implications is valid and important to understand. It's easy to get lulled by all those easy ROC's, and forget about the tax hit down the road. Thanks for the article, and the forum for discussion.
    Mar 26, 2013. 02:27 PM | 7 Likes Like |Link to Comment
  • How to Invest in Dividend Stocks [View article]
    Maybe I'm an optimist (as a CVX holder), but I'd be surprised if Chevron ends up paying a dime in Ecuador. I'm guessing most investors are agreeing with that assessment, based on the lack of movement in the share price after the lawsuit's decision was announced.
    Feb 17, 2011. 09:51 AM | 7 Likes Like |Link to Comment
  • High Yield Blue Chips Set to Rally? [View article]
    I'd argue that this article may have been great a month ago. Is it too late now? I think it's very dependant upon the company. BP for example, still sports a hefty dividend. But it's price has already come up nearly 40% from it's low in early March (up from ~$33 to ~$47). That being said, I still think BP is a great buy even at $47, and I added heavily to my position when it was at $38. Far too many companies have slashed their dividend, so do your research. Who would have thought, for example, that Dow Chemical, after nearly 100 years of holding or increasing their dividend, would have to cut it by nearly 2/3 in 2009? It appears BP will be able to maintain their dividend, unless the price of oil unexpectently craters.

    I didn't see any of these articles being written when the Dow was at 6500. Everyone's just going with the flavor of the day, which lately is extremely bullish. I'm still a big fan of the Buffett mantra of being greedy when everyone else is fearful. A big buy-in at 6500 would have paid off handsomely.
    May 12, 2009. 09:32 AM | 7 Likes Like |Link to Comment
  • MLPs: Profits in the Pipelines? [View article]
    I was leery of the MLP's, primarily due to the tax consequences. However the complications are not as daunting as some may think, and the rewards are high. I hold MLP's in a taxable Fidelity account, and although the tax data and information from the K-1 forms can be confusing, it imports easily into TurboTax. You don't have to be a tax expert to handle this, although it helps to understand the implications on your tax bill.

    As far as holding MLP's in investment accounts, there are options. Instead of buying KMP, you can buy KMR. KMR essentially trades in lockstep with KMP, but is set up to deliver distributions as additional shares, versus cash. This makes the use of KMR in a tax-deferred account easy, with out the worries of UBTI or other tax complications. If you want to understand this better, try this link.


    The Kayne Anderson funds are another great option that help you diversify your MLP holdings. The author mentions KYN. I personnaly hold shares of KYE. Again, these are structured to issue 1099's versus K-1 forms, taking most of the tax complexities out of the picture.
    Mar 11, 2009. 09:03 AM | 7 Likes Like |Link to Comment
  • The Only Reason For Automatic Dividend Reinvestment [View article]
    I have to say, the transaction tracking may have been tedious 20 years ago, but no one is doing this in an accounting journal anymore. With Fidelity, Quicken, Turbotax and the like, the only pain is hitting 'download' and having the broker dump everything into the forms for you. DRIPS have the advantage of taking emotion out of the mix. You're going to reinvest no matter the price. If you're trying to save up those dividends and buy at just the right time, good luck. Believing you can consistently time the market and pick out all the highs and lows is a fool's errand. But that's just my humble opinion.
    Jan 29, 2014. 10:06 AM | 6 Likes Like |Link to Comment
  • Why You Should Avoid Chevron At These Prices [View article]
    Perhaps I'm more a glass half full type of guy, but your comment minimizing the potential 17% one year upside for pricing seems odd. If it comes to fruition, I'll take an annual 17% capital appreciation with a 3% dividend on top of it any time, and be very, very happy.
    Feb 21, 2012. 08:59 AM | 6 Likes Like |Link to Comment
  • The Myth of Diversification or How to Really Diversify [View article]
    Totally off subject, but as a manufacturing manager "just in time" is a concept that sounds great and does cut costs. Costs of carrying inventory are reduced. However... it can get to the point of lunacy. If a company stocks no inventory and is expecting perfect delivery performance from their supplier, there can be some harsh surprises. Ask the auto companies in the Toyota food chain. A zero inventory / just in time philosophy is resulting in plant shut downs, post earthquake/tsunami. Are slightly reduced inventory costs greater then the cost to shutdown the entire business for a week or more? I think not. Companies lose millions with each day of a shutdown. My two cents.
    Apr 6, 2011. 09:10 AM | 6 Likes Like |Link to Comment
  • Ten Reasons This Rally Is Ultimately Toast [View article]
    I'll admit.... I have strong anti-chartist sentiments, since I tend to believe that daily market swings have more to do with fear, greed, and emotion then some chart interpretation.

    That being said, let's pretend I'm from Missouri... Show-Me. Show me some data backtesting the theories regarding Bollinger Bands, Fibonacci retracements and the like. I would love to see some hard data demonstrating how successful (or un-successful) these strategies are. I would love to see some data demonstrating the relative success of a frequent trading system based on these charts/methods, versus the performance of a simple buy and hold portfolio. I'm an admitted skeptic, but will keep an open mind if it can be shown that chartist systems have some merit.

    Is there a website for this anyone knows of?
    Sep 16, 2010. 08:24 AM | 6 Likes Like |Link to Comment