James Altucher: Why The Stock Market Is A Sucker's Game Right Now (And What Stocks I Own) [View article]
About halfway through your article you're talking about the supply/demand of stock and say "supply will stop going down" and earlier "there's only so much stock that people can buy". I assume you are talking about share buybacks there and I don't know what you're basing the comment on. Companies are increasing their buybacks quarter by quarter for the last three years and can continue buying in large amounts as long as profits are strong, especially if they are afraid to invest in their businesses. If the cash is ever allowed to be repatriated from overseas without (a very large) penalty the buybacks could really shoot up.
Market Notes: Time To Run For Cover? -- April 25 [View instapost]
Dr. Kris: Congrats on the Barron's article. Just read it at our local library here in the mountains of western NC. Was surprised by the article since I have been a very regular reader of SA over the last two years and had never read one of your articles. Was not familiar with the instablog category so will have to start reading those. How did Barron's select you as the focus of an article, I wondered to myself.
ITW has been applauded over the last 20 years for all the hundreds of small acquisitions it has made. Now it is unloading all the rubbish and you are applauding them for that. Management finds a way to line their own pockets with the to and fro. You might want to read the SA article today about the opinions of Bruce Berkowitz and the games companies play with income statements.
The Buyback Kings, Part 1: Buy Companies That Buy Themselves [View article]
If I'm not mistaken, Berkshire Hathaway had the first buyback in it's 50 year history in 2013. Buybacks had nothing to do with their success. There are times they probably should have bought back their stock but didn't. They wisely reinvested their earnings. Acquisitions mostly.
I think the problem with your article and many other articles about WFM is the misconception that they are primarily a purveyor of organic products or health foods. Maybe you haven't shopped there much but I make it to their Greenville SC store every few months (round trip of 90 miles). I see them as a gourmet grocery store/restaurant (that of course has a selection of organic products for those wanting them). Go at lunch and see the people lined up for their excellent pizza slices coming out of their oven--if that is organic pizza it's not obvious. Go through their wine, meat or fish departments and you won't see much mention of organic (free range or wild maybe). Many of their prices are high, but in some areas (charcoal and spring water are good examples) they have some of the lowest prices. They have maybe the only generic brands (365) that I will buy. Organic isn't important to me but Whole Foods is the grocery store I prefer to shop at. But you are right of course, the stock is overpriced just like Panera Bread and Chipotle and many other cult locations. I think WFM will be a thriving business when Panera and Chipotle are in their graves.
I'm not sure how you use leverage to increase your return on 10 years yielding 1.70%. Wouldn't you have to borrow below that level? Where are you going to borrow below 1.7% if you are the typical SA reader? If the bull market for bonds is still in place I guess that means you think the rate will drop from 1.7%? If not, how is that a bull market?
Is Dividend Growth Investing Crippling Your Dividend-Based Retirement? [View article]
Curreyr: Think you miss the main benefit of a conventional IRA/401k. It is not to hope that your marginal tax rate might be lower in 30-40 years when you start taking money out. Most people hope their rate is higher (which means your income and wealth have grown over time). There are plenty of people now (in their 20s and 30s) in the 10 to 15%marginal tax rates that will be in the 25%+ when they retire in 40 years, even if the tax system doesn't change. The main benefit of these vehicles is that you defer the taxes for decades--that is the same as an interest free loan from the Federal and State governments. I started my IRA in the first year it was available (1982) and started my 401K in 1984. If those funds had been in a taxable account I would have easily paid $100K in federal and state taxes over the last 30 years on the earnings of those funds. I have retained that $100k and it has compounded tax free. That is the main benefit of an IRA. And by putting higher taxed items, like corporate bonds, in your IRA you defer even more taxes.
Is Dividend Growth Investing Crippling Your Dividend-Based Retirement? [View article]
Of course, if you're in the 10 or 15% marginal tax brackets you don't have to pay any Federal tax on qualified dividends or long term capital gains in a taxable brokerage account. If you're in a higher bracket all you need to do is buy non dividend stocks (there are many) and taxes will be deferred until you sell. Kinda like an IRA without contribution limits or withdrawal requirements.
Picking Stocks And Printing Profits [View article]
Just a few observations. I think it is very easy to draw erroneous conclusions from statistical analysis unless the reader understands the assumptions made. Your analysis is, by necessity, a "before tax" return which favors those investments that don't pay corporate taxes. So REITs and MLPs will shine in this analysis. Those stocks that do pay corporate tax (qualified dividends) have already had their returns reduced by that corporate tax. The highest return segment of your analysis, the 7.5% group, is probably a result of most MLPs being included in this group. They not only had a good year but those returns have not been reduced by taxes. The lowest return segment, the no dividend group, includes many stocks that are on the way to bankruptcy. They might have had dividends for much of their existence but as disaster nears they eliminate their dividends. The DGI crowd will look at the no dividend group and say "aha--I knew dividends were the best option". I think the number that jumps out at me is the segment you title "0-1%". I assume it doesn't include the zeros so might be mislabled. It probably excludes any MLP or REIT so only includes qualified dividends that have been reduced by corporate taxes and yet still has the second highest total return of all the groups you show. Those are the stocks favored by many "total return" investors.
Not All Stock Buybacks Are Created Equal [View article]
There are a lot of cliches in the investment world and you seemed to have grabbed ahold of a few of them. Corporations love that one about "returning cash" to the shareholders using buyouts. The cash isn't going to the shareholders, it's going to ex shareholders, who had no idea his stock was being bought by the company. It didn't benefit him at all since he would have sold the stock in the open market in any case. I guess you can make the very small case that the price he gets might be a tad higher because of the simple supply/demand issue. As you pointed out, the benefit of buybacks is to the remaining shareholders who now own a larger share of the company--but it's not cash to them. The next cliche is that share buybacks don't count if the share count didn't drop. The issuing of stock options is totally separate from share buybacks--stock options will be issued whether there are buybacks or not--it will just involve the issuance of additonal shares if there aren't any buybacks. If there are no buybacks the share count will grow by the number of stock options--if there are buybacks then the impact of the stock options on share count will be reduced--regardless of whether the actual share count goes up or down. You do make a good case that share buybacks often occur more often at market tops just like investors tend to invest more at market tops (think of the current case of DGIs buying up dividend stocks) --other companies like Exxon continually buy back shares in good and bad markets--kind of like reverse dollar cost averaging. Of course if you believe in the efficient market theory there are no bad times to buy back stock--the market price always reflects the value of the stock (I don't believe in the theory but a lot of folks do). In any case, company managements do a lot of stupid things--just one of the things that need to be considered when purchasing a stock. Buying back shares at the wrong time is easy to spot and maybe a good reason to unload the stock.
5 5% Dividend Stocks That Meet My 'Too Good To Be True' Metrics [View article]
The reason CXW dramatically increased it's dividend was the conversion, on January 1, to REIT status. That requires them to distribute 90% (really 100%) of their taxable income. Good reason to increase the dividend since it eliminates corporate taxes.
Bruce M: Your suggestion related to capital gains on the 1099 got me thinking about the sale of property and also the large unrealized capital gain that must be built into most REITs that don't routinely sell property. This info wouldn't be built into the FFO and I never see any book value or similar measure to account for it in REIT articles on SA. I do see that Value Line has something called "loans and real estate per share"--not sure what the loans part is unless it is a reduction of the real estate value for mortgages outstanding, and they have a line called "premium over book". Any thoughts on that issue?
Minutemen: Not trying to give you a hard time and maybe comparing O against only two other REITs is not a fair test (would love to see these same 3 excellent tables done for a multitude of other REITs so a much more valuable comparison could be made). But based on these seven years I'm not sure how you think their management is stellar and not sure, based on the last 7 years, how you think dividend growth has been consistent? The fact that they have had some dividend growth (no matter how small) for 62 quarters would be true no matter how bad the author's analysis looked for O. Looking at these numbers I would not only not sleep well at night-- I would unload the stock today. I think the best part of SA is when us readers analyze and question the columns-and each other. I would still appreciate your reaction to the three tables--if you didn't own O would you even consider buying it based on that data? What positive info can you find in those three tables for O? Why do you think things will be better in the next 7 years?
One of the other comments suggested that if I don't like the stock I didn't have to buy it. Of course that is true and I won't buy it but what that said to me is--"don't question my stocks or my investment system". For those with that attitude I question their purpose in reading SA.
Minutemen: I guess that is why investing is so much fun. I look at 7 years of data and see a terrible stock and you see 62 consecutive quarters of dividend increases and see a no brainer. I look at the dividend increase from 2009 to 2011 and see 3 cents increase for 8 quarters and call those artificial and pointless increases (1/4 to 1/2 cent a quarter increase for those two years) used to maintain it's so called " aristocrat" record even if it has to do it by eating it's seed corn (increasing it's payout ratio). Maybe it's just a bad 7 year run and maybe it will reverse starting in 2013. Maybe it already has since I am only reacting to the prior 7 years used in the article. But to me there are no "no brainers" in the stock market--if there were all the smart money would run up the price until they were no longer "no brainers". I'm not sure what the point of reading an article like this and ignoring the numbers presented. Disagree with them if you think they are wrong or disagree with my interpretation but otherwise what's the point.
James Altucher: Why The Stock Market Is A Sucker's Game Right Now (And What Stocks I Own) [View article]
I've Never Owned A Rolex, But Maybe It's Time To Invest In Taubman [View article]
Market Notes: Time To Run For Cover? -- April 25 [View instapost]
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The Buyback Kings, Part 1: Buy Companies That Buy Themselves [View article]
Whole Foods: The Short Thesis [View article]
Invest In U.S. Treasuries [View article]
Is Dividend Growth Investing Crippling Your Dividend-Based Retirement? [View article]
Is Dividend Growth Investing Crippling Your Dividend-Based Retirement? [View article]
Picking Stocks And Printing Profits [View article]
Not All Stock Buybacks Are Created Equal [View article]
The next cliche is that share buybacks don't count if the share count didn't drop. The issuing of stock options is totally separate from share buybacks--stock options will be issued whether there are buybacks or not--it will just involve the issuance of additonal shares if there aren't any buybacks. If there are no buybacks the share count will grow by the number of stock options--if there are buybacks then the impact of the stock options on share count will be reduced--regardless of whether the actual share count goes up or down.
You do make a good case that share buybacks often occur more often at market tops just like investors tend to invest more at market tops (think of the current case of DGIs buying up dividend stocks) --other companies like Exxon continually buy back shares in good and bad markets--kind of like reverse dollar cost averaging. Of course if you believe in the efficient market theory there are no bad times to buy back stock--the market price always reflects the value of the stock (I don't believe in the theory but a lot of folks do). In any case, company managements do a lot of stupid things--just one of the things that need to be considered when purchasing a stock. Buying back shares at the wrong time is easy to spot and maybe a good reason to unload the stock.
5 5% Dividend Stocks That Meet My 'Too Good To Be True' Metrics [View article]
5 Key Factors I Look For In A REIT [View article]
Also what is D/A expense?
5 Key Factors I Look For In A REIT [View article]
One of the other comments suggested that if I don't like the stock I didn't have to buy it. Of course that is true and I won't buy it but what that said to me is--"don't question my stocks or my investment system". For those with that attitude I question their purpose in reading SA.
5 Key Factors I Look For In A REIT [View article]