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  • Why McDonald's Still Has Some Pep In Its Step: Part 1 [View article]
    So sales went down 1.4% in 2012 and down another 1.7% in 2013 but your projections are they go up in the outyears, starting at 3% for 2014. Not sure how that qualifies as "extremely conservative". What if the sales continue to go down or stagnate? All the fine analysis means nothing if your revenue numbers are flawed.
    Mar 25 03:19 PM | 1 Like Like |Link to Comment
  • The Sum Of All Fears: Public Service Announcement - The Russell 2000 Is Wildly Overvalued! [View article]
    Looking at your list of 10 fears, it seems like almost every one of them applies equally to the entire market not just the Russell 2000. What makes the Russell 2000 look grossly overvalued is the PE of 83 but according to WSJ Market Data Center the forward 12 months PE for the Russell 2000 is "only" 19.55. Expensive for sure but not comparable to 83 so it seems like there is a big anomaly in that 83 PE number--there must be a big write off, maybe from a large company that has moved into the index from above. Might be worth your time to find out what caused the PE to temporarily explode.
    Mar 24 08:33 AM | 9 Likes Like |Link to Comment
  • Yellen Channels Groucho In First Press Conference [View article]
    You're right. You are overreacting. Did the Fed learn nothing last summer?. I think they did--that short term blips in the stock market are meaningless so they don't have to parse every sentence in every Fed communication; that the market overreacts and undrereacts constantly and those reactions have no impact on the economy--and after three days no reaction on the market. They do provide buying opportunity and maybe that is why the shakers encourage overreaction.
    Mar 21 11:36 AM | Likes Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Part time: The answer should be obvious. When the special dividend was announced all the DGIs who populate this site hit the buy button for Costco. How could you lose on a big increase in the dividend--book value or any other value be damned? My guess is this special dividend moved Costco into Dividend Aristocrat wannabee status.
    Mar 18 07:15 PM | 1 Like Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Geekette: Assuming your reply was to me, I used the phrase "until you choose to sell". That's the key--you decide when you want to pay the tax --or even if you want to pay tax . Just like many (most?) people don't touch their IRAs until forced to at age 70 1/2 and some leave the remainder to their beneficiaries. With a taxable account full of non dividend paying stocks you have a huge amount of flexibility. If you need the cash you sell some and pay the capital gains tax and have had the benefit of tax deferral in the years you held. If you don't need the funds they continue to grow and compound with no tax liability.
    Mar 18 03:41 PM | Likes Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Conkjc: Non dividend stocks come in all flavors. There are many non dividend paying companies with strong earnings, predictable earnings and strong economic moats. That's the point Larry is trying to make (at least that is my reading). Of the 60% of stocks that don't have dividends many will meet your requirements for those things. If you count the low dividend stocks the number grows. I think what Larry is also saying is that if you can't sleep at night without that stream of dividends at least understand the price you are paying. If I "didn't want to rely on a good market" I would just keep more cash, or have more laddered bonds so the cash would be available as needed. I would also include a chunk of REITs and MLPs that put off cash without the tax inefficiency of
    c corps.
    Mar 18 02:31 PM | 1 Like Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Muskie: It might help us total returners better understand the topic if you could expand on your statement about selling stocks being "a little trickier and a little scarier". I think many DGIs share that feeling but seldom discuss it.
    Mar 18 12:42 PM | Likes Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Cf: I was comparing non dividend stocks held in a taxable account to a conventional IRA. My point was that you can hold non dividend paying stocks in a taxable account, with no limit to how much you contribute to that account, and pay no tax on your return until you choose to sell holdings--which you are never forced to do. I think I am right in saying that at time of death the unrealized capital gains in that taxable account pass to heirs without estate tax or income tax for all but the wealthiest and the basis of those holdings goes to the market price at time of death (if I am wrong tax accountants please respond). I think we all love the tax deferral aspects of a conventional IRA (which is about their only benefit) but we have the ability to do the same thing in a taxable account by holding non dividend stocks (and eliminate all the negatives of the conventional IRA). You're right of course, the Roth has all those benefits also but many of us have most of our portfolios outside the Roth.
    Mar 18 12:33 PM | 1 Like Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Katcher: You are right about Berkshire's dividend paying stocks--Berkshire does have to pay a tax on those dividends but it is less than what most of us pay (c-corps get a reduced rate below the 15% level). Berkshire also has many non dividend stocks (e.g., Direct TV, DaVita) and more importantly they buy whole companies when they can (e.g., GEICO) and there is no dividend involved. In any case, if Berkshire paid a dividend there would be an additional tax that we would have to pay, regardless of the tax Berkshire has already paid on the dividends they receive. That would mean a triple tax on the income generated by dividend paying stocks owned by Berkshire and reduce our after tax total return on the investment. What a deal!

    On your other point--I believe you will find that Berkshire has bought back shares exactly once in it's 50 year history (Buffett era). So, to me, the value of Berkshire to the small investor is (1) managers who wisely reinvest the earnings more efficiently than we can (at least for most of that 50 years); (2) Shareholder friendly managers (such as no stock options) and (3) no dividend which is tax efficient for most of us.
    Mar 18 11:22 AM | 1 Like Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    PJ: Not sure if internet stock buyers were any greedier than the rest of us. Greed is what makes the stock market tick and what I saw in the late 90s was a faith that technology had changed the investing world. Sure, there were momentum investors and bandwagon investors (as there always are) but the SA type investor of that time was buying based on a belief that the fundamentals had changed or were no longer important. I think Larry is saying your "assessing key fundamentals" is badly flawed. Or maybe that you are ignoring some of the fundamentals by focusing on dividend stocks. Unless you want to make the case that the fundamentals of dividend paying stocks are superior to those of non dividend stocks?
    Mar 18 09:32 AM | 4 Likes Like |Link to Comment
  • Dividends And 'The Magic Pants' [View article]
    Larry: I have been reading SA for some three years and one thing I learned early on--logic doesn't work when discussing dividends with DGIs. You have logically refuted all the DGI arguments and my guess is you won't convert anyone (you will get a lot of nasty comments). Just like with those invested in the internet stocks in the late 1990s, dividend investing has taken on many of the characteristics of true religion. Faith is not based on logic.

    I will expand a little on your tax inefficiency comment. I agree that selling stock to generate income versus dividends has some small tax benefits but the real benefit of stocks not paying a dividends is to hold them as long as possible. They then become the equivalent of a conventional IRA without the negatives. Just like with an IRA the income earned is deferred until you choose to take it--if you have held Berkshire since 1980 and never sold, you have paid zero tax--just like an IRA--think of the compounding that has occurred in those 34 years of the taxes that would have been paid on dividends). But zero dividend stocks are better than an IRA since there is no mandatory withdrawals at age 70 1/2 and no maximum annual contribution (not to mention that at death, for most under current estate tax laws, all the earnings pass to heirs without taxation--a free lunch).
    Mar 18 08:49 AM | 14 Likes Like |Link to Comment
  • The Myth Of Improving Corporate Balance Sheets [View article]
    Boom: I think they might be admitting that their shares are cheap and that no acquisition makes as much sense as buying back their shares but I'm not sure how important the dividend relationship is. Look at Direct TV--since 2003 they have brought their share count down from 1.4 billion to just over 500 million and they don't have a dividend. During that time their share price has gone from $8 to $73 and the owners have not had to pay a cent in taxes on that gain (unless they choose to sell).
    Mar 15 03:49 PM | Likes Like |Link to Comment
  • What We've Sold So Far In 2014 [View article]
    KO had a PE of 51 back in 1998 so not sure how important the comparison of performance is to that time. It was grossly overvalued for quite a few years (and probably still is at a PE of 18). But the earnings are up from 71 cents a share in 1998 to about $2.25 currently--that would make for a good stock performance if it wasn't for the starting PE. Think how Buffett must feel, stuck with his zillion shares of KO that he will have a huge problem unwinding without crashing the stock. Wonder how much of Berkshire's under performance over the past five years can be attributed to KO? The DGIs call it a "Dividend Aristocrat" so who wouldn't want to own it?
    Mar 15 08:58 AM | 1 Like Like |Link to Comment
  • The Myth Of Improving Corporate Balance Sheets [View article]
    Chad: You make some good points but am not sure about your opinion that "acquisitions offer better valuations". If the PE of the market is high than acquisitions will be equally expensive. Seems like the worst time to make them, which is why Buffett is sitting on so much cash. It would also seem very strange if corporations didn't take advantage of historically low interest rates to borrow. If their earnings yield is some 6% and they are paying 3% interest on their debt (tax deductible) on the surface it seems like a good deal. It's always easy to look in that rear view mirror and say they should have guessed the bottom and bought back shares in 2009 (they started big time buybacks in 2011). I am also thinking that much of the borrowing is from MLPs and oil/gas shale companies and might make all the sense in the world. It might be valuable to take the debt numbers and break it down by sector. But your point about balance sheet quality is a good one.
    Mar 14 04:38 PM | 4 Likes Like |Link to Comment
  • Clean Energy: Heading Towards Flop Of The Year [View article]
    I have no horse in this race. I have followed natural gas as transportation fuel for the last few years and have nibbled on CMI as a trade but haven't taken the plunge on the distribution system. But it seems like it is getting very difficult to post a negative article on this site. They bring the automatic response that the author is only writing the article because he is shorting the stock. Not sure how that is different than the positive articles written by authors long a position. I guess some folks just love conspiracy theories. Just for the record, Zacks analyst ratings for CLNE are a very poor 3.55 with 5 strong sells. Value Line gives it a very poor rating of 4/4 (timeliness and safety). The stock is 58% off its all time high and 35% off its 12 month high.

    I appreciate negative articles--would like at least 1/3rd of the articles on this site being negative--even if the author is shorting.
    Mar 9 09:38 AM | 2 Likes Like |Link to Comment