My Prediction For 2013 - All Other Predictions Will Be Wrong [View article]
Larry: Seems just a little strange that readers and writers on this site are ridiculing those making stock market predictions--and basically saying they are worthless. I assume we are all trying to beat the market (risk adjusted) and isn't that what seeking alpha is all about? Aren't we all making predictions every time we buy, hold or avoid a stock? Isn't almost every article written on this site a prediction of some kind? There are bad predictions and good ones--my guess is with a little work you could have come up with many good predictions made by the pros last year. I think I recently read on this site, for example, that the Barron's Roundtable stock predictions over the last 10 years have easily beaten the market, as a group and by most of the members of that group. Of course there is an art to making a prediction-keep it fuzzy enough so that you can claim to be correct in almost all cases--yours that Exxon will still be here in 10 years (duh) still thriving (how do you measure that?) and still the leader in their field (how is that measured--market cap? market return? revenues?). I will predict that none of your five picks will be the best performing stock (market return) in their field over the next year or 10 years.
Danger Zone: Schwab U.S. REIT (SCHH) [View article]
Might make your article(s) more valuable if you add a few words on why these ETFs own these stocks you consider so poor. I assume most of these ETFs are not active--they are selecting stocks because they are part of an index or some other simple way to select stocks--that is why they are cheap--no research. Seems to me your readers must know that if they buy an ETF they are not getting stock selection in most cases. They must believe the market is fairly efficient so stock selection is not all that important to them. If you don't agree, not sure why you spend your efforts in the ETF world and not the actively management world? If you have an efficient way to identify good stocks prove it.
Bullish On The Economy For 2013-2015 [View article]
Maybe I missed it in your article but there seems to be nothing about tax increases that will surely happen in 2013--it's just the amount that is unclear--it will be a large increase or a larger increase. So you say that the fiscal cliff will be a dud (little impact) because it (only) impacts government spending which has to come from taxes or borrowing anyhow (so you then infer that it isn't that important--wonder why we always have those government spending stimulus programs every time there is a recession?). The social security tax reduction of the last two years (2% for most workers) is almost surely gone Jan. 1--that quickly reduces consumer income and spending. Government spending reductions will reduce income and won't be offset by reduced taxes--that will reduce income and consumer spending. Increasing taxes on small business can only result in a reduction in hiring and therefore a reduction in income and consumer spending. When tax withholdings go up in January that will have an immediate and substantial impact on consumer spending.
My take is that your theory only works if two things happen: the Fed continues to pump money into the economy in ever increasing amounts; and the fiscal cliff is totally avoided or postponed--my guess is the chance of that is less than 1 in 3.
Markel: Not As Well Known, But Better Than Berkshire? [View article]
Steven: I think you are giving investors far too much credit, when you say they are "much more talented" then they were in the early Buffett years. Think internet bubble, housing bubble, and what many see as a bond bubble--and that just over the last 13 years. As investors in the internet age we might have more information than we did in 1975 but are we using that information wisely? As to Buffett having more investment opportunities in 1975, his world then was very narrow--I don't think he ever looked outside the U.S., never at technology or other things he didn't understand. MKL has the whole world and all industries to consider. MKL has the same non-dividend philosophy as Buffett, but do they have the same quality of management and the same shareholder friendly values? That seems to be all important and the article doesn't really address those issues.
Since you're not an accountant, I will toss one nit on your article. If you sell a stock at a loss on January 1, 2013 you don't have to wait until the refund in 2014 to benefit from the cash flow. If the amount is substantial (worth the small effort) you can adjust your withholding at any time (e.g., January 2013). I adjust my withholding two or three times a year--very easy to do with either a revised W-4, or for many people just to adjust their pension or Social Security withholding--many are online. My adjustment takes about 30 seconds. Some folks love to get a big tax refund--which means an interest free loan from you to the IRS--I try to maximize what I owe the IRS, just short of the amount that generates a penalty.
The Big Mac And Your Financial Health: Rising Burger Prices Show A Worrying Trend [View article]
Here's my guess--us totally obese Americans have demanded bigger Big Macs. With a little research the author could determine that the Big Mac is actually 28% larger than it was in 1981, which might be exactly the increase in the average weight of the customers of McDonalds. Inflation, but not the kind you are talking about.
Barron's Roundtable Vs. Mr. Market's Asset Allocation [View article]
This would have been an excellent article if you had put some names to the Roundtable results (maybe there is copyright protection issues?). I always thought Barron's could have made the Roundtable contest into a much more valuable exercise (selling more copies of their magazine at the same time) by making it a year long contest, allowing a certain number of changes during the year for each analyst, and then providing much better result information (even a small weekly section of the magazine). Making the contest multi year might even be better.
I will quibble with your last paragraph of winners versus losers and zero sum game. If you have a base line that you are competing against (e.g., S&P 500 results) yes there have to be winners and losers, but from ground zero all investors can theoretically have postitve returns (of course they won't). And the winners and losers could change dramatically if you factor in the after tax returns. In any case, most investors in stocks can do better than what so many non investors do--put the money in savings accounts and CDs that often have a negative real return.
Outperforming The S&P 500 Is Not Easy. Don't Be Fooled Otherwise [View article]
Risk is one of those things that is impossible (for me anyhow) to quantify--seems like the pros like to use volatility but I was never convinced that was a good measure of risk. Berkshire Hathaway is a very low volatility stock but if Buffett dies tomorrow it could turn out to be a risky investment. Or if tax laws are changed next week, low volatility investments could easily get whacked. I read the article you are referring to--seems to me the problem is with the title--"beating the market". I think if the title was "beating the S&P 500" and then the author used some, or all, of his steps 2-9, a case could be made that the extra diversification would not increase risk (and might decrease it) and the higher growth potential of the small cap and foreign components would likely beat the S&P 500 over time. Just don't ask me to prove it.
Elliott: I am guessing the individual country numbers came from IMF but the subtotals were calculated by someone else. I am not questioning the country numbers. Look at the Sunni population of 220 million and the Sunni GDP of $2.587 trillion and you get an average of $11,759, not $30,620. That is obvious without doing the math, just by looking at the GDP per person for the big population countries of Egypt and Turkey. I think someone (hopefully not you) added up the country numbers and divided by the number of countries--giving no weighting to the bigger population countries. The IMF wouldn't make that basic clerical error. Same problem with the Shite numbers.
Searching For A Dividend Growth Utility Stock [View article]
Billinsd: I hear what you're saying. Some 40 years ago, after my two years in the army, I was on unemployment for three-four months, praying for a job and that's not a good feeling. My only point, and it's a small one, is that capital appreciation of a non dividend paying stock can provide the same cash flow as a dividend, so don't overlook that option if a non-dividend stock looks like it might return more. On the other hand, in your position you are probably in a marginal tax bracket where qualified dividends are tax free at the Federal level (at least in 2012) so maybe they are the way to go.
Searching For A Dividend Growth Utility Stock [View article]
Bruce M: I understand the attraction of dividends--on the surface. I used to be attracted to them myself until I started reading SA and thinking through the pros and cons of dividends. Now I just can't see the benefit--at least for the typical "qualified dividend" stock. Let's look at what you call benefits. Bear with me by accepting a hypothetical--two companies that are exactly the same in terms of quality of management, moat, PE and whatever else you think is important in valuing a company. Assume each has a total return of 8% a year. One has no dividend and the other has a 50% payout, so a 4% dividend. Now look at the benefits you list. PRESERVATION OF CAPITAL--by giving you a 4% dividend the company is reducing your capital, exactly the same amount you would if you sell the equivalent amount of the stock (the non dividend stock would go up 8% in value and by selling 4% you are in the same position as the dividend stock that would only go up 4% in value--in either case the stock, for that year is worth 4% less than it would have been without the dividend/sale of stock. NOT SEEING SAVINGS DRAWN DOWN--exactly the same issue--your savings are being drawn down by a dividend by exactly the same amount as selling an equivalent amount of stock--it's just not as obvious because the share count drops for the non dividend stock but it's market value goes up. COOPERATIVE MARKET--in a recession the dividend is issued (in most cases) even when the company might be badly in need of funds--but they are afraid to not give a dividend--it will ruin their dividend track record and they would no longer qualify as "dividend aristocrats". The dividend has greatly reduced the companies ability to manage it's finances in the recession. Selling some of the stock would be just as bad but at least you have some control over when and if you sell.
So what is the downside to the dividend--tax implications (double taxation) if it is in a taxable account, for an IRA,using up a place in your IRA that could be better used by a high taxed item like a corporate bond or a REIT. Second--assuming you have trust in the management of your company--they can reinvest the money better than you can--they can buy back shares when they are underpriced (Berkshire Hathaway just did it) they can make an acquisition (think Burlington Northern); they can pay down debt. They can decide where the funds can best be used--if you don't trust them to do it you shouldn't own that company. I think many investors fall into the trap of seeing dividends the same way they see interest on a bond--I no longer do.
Two or three years ago I would have agreed with everything you said. What has happened to turn me off Costco is the dramatic increase in their house brands. Most grocery stores have house brands but they generally are in addition to the name brands. Costco, all too often replaces name brands with their house brand--I guess to keep the sku number down--or to increase the margin. I don't like their house brands so find myself buying less and less, so it isn't worth the longer trip and membership fees (which just went up). I recently canceled my membership but maybe I'm the exception--time will tell.
The Insanity Of The Chase For Special Dividends [View article]
Excellent article but one small comment included in your piece doesn't work for me. You suggest that a good reason for a special dividend might be that in some cases "management will squander the cash through an ill timed investment". I read the same line many times in SA articles as a justification and benefit of dividend investing. Of course management does that and worse, but my response is always--if you think your management is likely to take such actions, why do you own that company? If management will screw up in those areas why would you trust them to run your company? No one ever responds but I am thinking you will.
My Prediction For 2013 - All Other Predictions Will Be Wrong [View article]
Danger Zone: Schwab U.S. REIT (SCHH) [View article]
Bullish On The Economy For 2013-2015 [View article]
My take is that your theory only works if two things happen: the Fed continues to pump money into the economy in ever increasing amounts; and the fiscal cliff is totally avoided or postponed--my guess is the chance of that is less than 1 in 3.
Markel: Not As Well Known, But Better Than Berkshire? [View article]
Markel: Not As Well Known, But Better Than Berkshire? [View article]
I'm Not An Accountant, Either [View article]
The Big Mac And Your Financial Health: Rising Burger Prices Show A Worrying Trend [View article]
Barron's Roundtable Vs. Mr. Market's Asset Allocation [View article]
I will quibble with your last paragraph of winners versus losers and zero sum game. If you have a base line that you are competing against (e.g., S&P 500 results) yes there have to be winners and losers, but from ground zero all investors can theoretically have postitve returns (of course they won't). And the winners and losers could change dramatically if you factor in the after tax returns. In any case, most investors in stocks can do better than what so many non investors do--put the money in savings accounts and CDs that often have a negative real return.
Outperforming The S&P 500 Is Not Easy. Don't Be Fooled Otherwise [View article]
Middle East Facts You Should Know [View article]
Middle East Facts You Should Know [View article]
Searching For A Dividend Growth Utility Stock [View article]
Searching For A Dividend Growth Utility Stock [View article]
So what is the downside to the dividend--tax implications (double taxation) if it is in a taxable account, for an IRA,using up a place in your IRA that could be better used by a high taxed item like a corporate bond or a REIT. Second--assuming you have trust in the management of your company--they can reinvest the money better than you can--they can buy back shares when they are underpriced (Berkshire Hathaway just did it) they can make an acquisition (think Burlington Northern); they can pay down debt. They can decide where the funds can best be used--if you don't trust them to do it you shouldn't own that company. I think many investors fall into the trap of seeing dividends the same way they see interest on a bond--I no longer do.
Why I Love Costco [View article]
The Insanity Of The Chase For Special Dividends [View article]