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  • Tax Inversions Are Immoral, Signal Need For Reform [View article]
    User 395629:

    Since the author of this article is unwilling to defend his article you might do the rest of us making comments a favor and take on that role. I'm not sure if the difference of opinion is a knowledge issue or just a philosophical difference. How about I raise some questions and you share your opinion.

    (1) Do you realize that the tax savings of inversion are almost totally related to U.S. tax on foreign earnings?
    (2) Do you realize in a globalized world that the US is about the only country that taxes foreign earnings?
    (3) Do you realize that US multinationals can accomplish much the same thing by just leaving the cash overseas (awaiting a tax holiday similar to what happened in the past)? I believe there is $2 trillion in this limbo.
    (4) Do you realize that C Corp conversion to REIT status eliminates all Federal and State tax (think Weyerhauser and Iron Mountain)? Would seem to be a far greater issue than inversions.
    (5) Do you realize that C Corp conversion to MLP status not only eliminates all Fed and State tax but defers taxes to the holders of the units until sale (think Devon and Phillips 66). And if held to death often result in zero tax? Would seem to be a far greater tax avoidance than inversions.
    (6) I have never heard any complaint about use of REITs and MLPs to avoid taxes (probably since the media doesn't understand the tax impacts)--do you have the same issue with them and are you going to boycott those businesses (most of the rental property in the country and all the pipelines until Kinder does their changeover).

    Seems like the main benefit of SA is exchange of views to help us all learn about investing so hopefully you will answer these questions.
    Aug 27, 2014. 09:58 AM | Likes Like |Link to Comment
  • Tax Inversions Are Immoral, Signal Need For Reform [View article]
    User: That is how it works now.
    Aug 26, 2014. 11:11 AM | Likes Like |Link to Comment
  • Tax Inversions Are Immoral, Signal Need For Reform [View article]
    Orange Peel: Not clear from your article if you understand the issues or not. I see tax inversions as little different from companies converting to REIT status or MLP status (check the growth of those in the last 20 years). In all three cases corporations are working within tax law to reduce tax liabilities. How do you determine that only the inversion is immoral? C-corporations are the only form of business in this country to pay business taxes--and at the outrageous (nominal) rate of 35% Fed plus about 4% state. Compare those rates with what the rest of the world charges . Then to top if off we want to double tax the overseas earnings of our C-corps if they want to bring the funds home. Just about every other country uses a territorial system of taxing only the income derived in that country--but no, that isn't good enough for us so we will also tax the earnings of US companies derived from other countries (for any amount taxed under the 35%--which is all of it). So to avoid that double tax companies have been leaving that cash overseas--another form of tax avoidance--is that immoral also? Now the overseas cash has grown so large these companies are forced to either bring it home and pay the double tax or change HQ to avoid the double taxation--they will continue to pay US taxes on US derived income just like every ADR listed on our exchanges or any other foreign company earning money in the US. What is immoral is our business tax code so take the time to understand it before writing pointless articles. Make a list of all the REITs, MLPs, and C-corps with overseas cash and you have a list that is almost every large U.S. based stock listed on our exchanges. Are they all immoral?
    Aug 25, 2014. 12:15 PM | 7 Likes Like |Link to Comment
  • The Religion Of Doom And Gloom [View article]
    My guess is that of the articles on SA that discuss specific stocks, some 70% are totally positive and 20% totally negative and maybe 10% balanced. Balanced doesn't sell. Macro articles are more balanced but less read (and as Wall St. Debunker says above should mostly be ignored). So maybe we shouldn't blame "Wall Street". Small investors (most of them anyhow) get what they want (confirmation bias at its most obvious).
    Aug 16, 2014. 12:32 PM | Likes Like |Link to Comment
  • Why Gilead Is The Most Exciting Growth Opportunity In 2014 [View article]
    Earnings yield? Isn't that just the inverse of the PE ratio? I want real yield. I want a cash dividend. I won't buy a stock without a dividend of at least 3%. And growing. This turkey has ZERO real yield! I have bills to pay. And the fools are buying back shares. Management only buys back shares to fatten their option income--everyone knows that. What happened to the Chuck we used to know?
    Aug 15, 2014. 08:03 PM | 1 Like Like |Link to Comment
  • Gilead: Rising Short Interest Provides Yet Another Reason To Own The Stock [View article]
    DoctoRx: I saw mention that Gilead is going to allow an Indian company to develop a generic version of Sovaldi for sale in India. On the surface this seemed very risky--how to keep control of the output to make sure it doesn't end up in the black market in the developed markets (maybe at 10% the cost). Is allowing generic production in the developing market standard procedure for an expensive drug like this? Is the formula for a drug like this public information or is it more similar to the secret formula for Coke?
    Aug 15, 2014. 03:42 PM | Likes Like |Link to Comment
  • Taxes Don't Lie [View article]
    Taxes do lie. Changes in tax law occur and taxpayers avoidance occur. Payroll taxes have increased over the last year in part because of the end of the social security temporary tax reduction. Corporate taxes have been impacted by a growing conversion of C-Corps to REIT status (think Iron Mountain and Weyerhauser) much greater use of MLP status, and tax inversions that have been in the news lately. Individual tax collections have been greatly impacted by the FED keeping interest rates low--pushing investors into MLPs and dividend stocks--which reduce tax compared to interest income.
    Aug 13, 2014. 07:37 AM | 7 Likes Like |Link to Comment
  • What Is The Proper Way To Measure Your Portfolio's Performance? [View article]
    Seems to me the paragraph that you quoted from Sharpe is so generic as to be meaningless. What does it really say? I think there is no perfect benchmark since the typical portfolio has a constantly changing makeup. A mutual fund like those of FPA might have 40 or 50 % cash at times in the cycle--surely that cash reduces the risk of the portfolio and comparing such a fund to a 100% stock portfolio makes no sense, at least in the short term. Many mutual funds have large, small and mid cap stocks, might even have a few REITs and MLPs (which aren't included in most indexes) as well as foreign stocks and cash. I have finally decided on something simple--I use the Vanguard Target Term 2020. It has a blend of bonds, large and small cap US and international stocks that changes as I get older and it even might be similar in makeup to my own portfolio at least once a year. It's not perfect, especially since it doesn't consider tax efficiency, but is close enough for me--if I can't beat it on a regular basis I should (but won't) concede defeat and just buy the benchmark.
    Aug 11, 2014. 04:15 PM | 1 Like Like |Link to Comment
  • Will The High Premiums For The PIMCO High Income Fund Continue To Erode? [View article]
    18: Over the last ten years PHK has a NAV annual return of 12.02%. Seems to me the only way that the long term distribution can exceed long term returns is by using return of capital and that can only last so long. They have already chewed up 44% of their IPO NAV in excess returns--before long there will have to cut the distribution or do a reverse split unless their performance starts exceeding their distribution (which it did over the last year). What surprises me is how many investors have no problem with return of capital, include it in their yield calculations and will actually pay a premium for the privilege. Would love to hear Bill Gross give his honest opinion of the owners of PHK.
    Aug 11, 2014. 01:03 PM | 3 Likes Like |Link to Comment
  • Main Street Is Too Expensive [View article]
    You raise a good question. Is MAIN overvalued? Is 147% of book too expensive? Most of those with comments won't even consider the possibility since the stock (which I own) has a good history, management and dividend. The same could be said no matter what the current price. Buffett won't buy back Berkshire unless the book goes below 120%--it never seems to. I know you can't compare MAIN with any other stock because...So is book unimportant with BDCs? Or is it unimportant just with MAIN? Is there any level where MAIN is overpriced?
    Aug 8, 2014. 09:44 PM | Likes Like |Link to Comment
  • Will The High Premiums For The PIMCO High Income Fund Continue To Erode? [View article]
    Lefty: A few observations on PHK versus PDI.

    One year total return, through Aug. 7, on a NAV basis-- PDI wins 23% to 21% (both outstanding returns).

    One year total return on a price basis--PDI in a landslide 28% to 17% (difference caused mostly by premium contraction of PHK).

    Expense ratio--PHK wins in a landslide 1.14% to 3.15% (including leverage). Why does PIMCO have such a wide variance in expense ratios?

    Cost of Leverage--PHK .09% and PDI .98% (included in expenses above). Why the big difference when leverage is similar for both funds?. How can PHK pay less than a tenth of a percent for 41% leverage? Is PIMCO directing the lowest cost borrowings to PHK? Or does PHK use preferreds which don't show as an expense?

    Return of Capital--PDI's NAV has grown 32% since IPO ($25 to $33). PHK (over a longer period) has had NAV contraction of 44% ($15 to $8.46). That NAV contraction is a return of capital and artificially inflates the distribution (Lefty--distribution is not the same as yield). PDI has a large unrealized capital gain that will have to convert to distribution (real yield this time) at some point. If you use distribution as a basis for valuation than PDI's distribution is greatly understated and PHK's is overstated.

    All numbers from Morningstar and represent my understanding of the numbers on their site.
    Aug 8, 2014. 09:03 AM | 1 Like Like |Link to Comment
  • Short Sellers Are Not The Bad Guys [View article]
    Raven: I think the anti shorts are just a subset of those with a serious case of what academia calls "confirmation bias". Many investors want to read articles that confirm their investment philosophy/selections. How many thousands of articles have appeared on SA telling us that Realty Income (NYSE:O) is a great investment? But they keep getting printed and people keep reading and commenting. If you read a negative article about Kinder Morgan or Linn, scores will show up and start attacking the author. Me, I prefer articles that point out the negatives about an investment--the positives are easy to come by.
    Aug 4, 2014. 05:15 PM | 4 Likes Like |Link to Comment
  • To ETF Or To Not ETF [View article]
    Scott: You make it sound like the etf companies are picking the stocks. Generally not true--there are very few actively managed etfs. Most of them are based on some sort of index and most of them are market cap weighted. The reason both of your defense etfs had the same top stocks is that they are the largest market cap defense stocks. If you want to use your system I suggest you look at actively managed open end mutual funds that cover that industry and then you will really get manager selected stocks.
    Jul 29, 2014. 02:04 PM | 3 Likes Like |Link to Comment
  • How Can This Market Capitalization Be Justified? [View article]
    xpan: You're right but ADRs are not included in the Wilshire 5,000 or the S&P 500 so that makes the comparison of market cap and GDP even more flawed.
    Jul 29, 2014. 09:40 AM | Likes Like |Link to Comment
  • How Can This Market Capitalization Be Justified? [View article]
    The market cap comparison to GDP seems pointless in a time of growing globalization. The GDP is U.S. only but the market cap includes the value of foreign operations of U.S. companies. For example, McDonald's hamburger sales in Europe are largely included in European GDP and only the income from those operations added to our GDP. So unless the Federal Reserve has adjusted either market cap or GDP it's not clear why they would rely on this graph.
    Jul 29, 2014. 09:08 AM | 7 Likes Like |Link to Comment