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  • An Intelligent Investor Should Consider REITs [View article]
    Brad: Let me guess what the "cheerleader" comment was based on. I came to the same conclusion a few years back. Almost every one of your articles is "all in" as in Texas Hold Em. You are either 100% for a REIT or 100% against it (mostly 100% for). Very seldom will one of your recommendations provide both the pros and cons of the REIT being discussed. Every investment has pros and cons--if it didn't have any cons everyone would buy it and the price would soon be so high that the price would be the con. If it didn't have any pros than no one would buy it and it would disappear.

    You have all the skills to be a great REIT writer. You have the REIT knowledge, computer skills, writing skills, contacts in the industry but for whatever reason you have decided to be a cheerleader. Try writing one balanced article--maybe pick O since that is the REIT you love the most. Give us all the positives on one side and all the negatives on the other (force yourself to provide those negatives regardless of what the REIT management might think)--kinda like a balance sheet and see what happens.
    Jul 18, 2014. 08:24 AM | 19 Likes Like |Link to Comment
  • Big Obstacles Face Retail MLP Investors [View article]
    Factoid: You lost me in the first sentence. How do you take a current dividend of 2% on the S&P with a 8% dividend growth and get a 10% total return expectation? I assume you meant 10% annual return? The two percentages aren't additive. You start with a 2% yield and grow the dividend by 8% and the next year you have a yield of 2.16% and the year after 2.33%, etc. And that assumes no growth in the stock price which won't happen since most of the 8% dividend growth is inflation . But of course your example excludes stock appreciation caused by earnings growth so maybe that is what you meant to say instead of dividend growth? But where do you get 8% annual earnings growth in an economy that is growing 2% a year.
    Jun 23, 2013. 08:23 AM | 16 Likes Like |Link to Comment
  • Exxon Mobil Needs A Big Dividend Hike This Year [View article]
    Michael: I know this dead horse won't come to life with a little beating but (1) not all shareholders want dividends (2) the money used for an increased dividend will reduce share buybacks at a time that Exxon is cheap--the exact time that buybacks should be increased (3) reducing share buybacks will cause the share price to drop (4) the total return of Exxon stock won't go up because the dividend goes up (5) share buybacks are tax efficient for most shareholders (6) the board designed the option plan--if share buybacks are beneficial to manager compensation do you really think they won't redesign it so that dividends are equally beneficial to the option plan?(7) if you want more dividends why not just sell your Exxon and increase your holdings in one of the higher dividend payers you mention in the article?
    Mar 7, 2014. 11:46 AM | 15 Likes Like |Link to Comment
  • The Bubble In Blue Chips - Part 1 [View article]
    Here's the problem with your analysis. Annual average returns of various indexes for last 10 years:

    S&P 500 7.57%
    REITs 9.56%
    Mid Cap 10.62%
    Small Cap 10.86%

    If you want to make the case that the whole US market is overpriced, go for it. And you can always pick a few stocks, like Home Depot, in any index that look overpriced. Looking at these 10 year numbers it doesn't look like you have a case.
    Oct 18, 2013. 05:06 PM | 15 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, 2014. 08:49 AM | 14 Likes Like |Link to Comment
  • The Dumbest Portfolio For The Smartest People [View article]
    Alex: Am surprised that SA would print your article. If everyone adopted your philosophy there would be no need for SA (or for that matter, WSJ, Barrons, Value Line, Morningstar, etc). Investment knowledge, already low, would disappear as we become investment robots.

    I see two big problems with your approach. Taxes--where do you put your global ETFs? If you place them in an IRA or 401K you will be assessed foreign tax on the dividends and have no way to recover those taxes on your 1040. In effect you will get double taxed on those dividends (once by the foreign government and again when you withdraw the funds from your IRA). Qualified dividends and long term capital gains--instead of paying the 15% rate you will pay your marginal tax rate which might be 28-31%. Your foreign bond interest will also get double taxed in an IRA. Main purpose of an IRA is to defer taxes but using your proposal you increase taxes which pretty much offsets the benefits of deferral. I guess you could put all of these investments in a taxable account if you have the resources but then what do you put in your IRA?

    Second problem with indexing in general--what happens when management realizes (some already have) that investors are stuck with their stock regardless of how poorly they perform or how the managers abuse their power with oversized compensation and benefits? And the more overpriced the stock, the more of that stock will be held in the index fund. Think of Cisco in 2000, selling for a PE of approximately 1 million. The higher the percent of stock held in index type funds the less management review will occur. Maybe you don't think that is your problem.
    Feb 28, 2013. 09:05 AM | 13 Likes Like |Link to Comment
  • Strategy In The Face Of Volatility [View article]
    Mr. Brown Alumnus: In mid March of 2012 the S&P 500 was at 1,400. Twenty percent below the all time high is about 1,517. So your "good things come to those who wait" philosophy is confusing to this public college grad. When you start buying you will be paying some 8% more than the 2012 price, you would have given up two years of dividends and you will be two years closer to the next recession. We all make bad guesses about the future but most of us don't brag about them.
    Apr 11, 2014. 09:38 AM | 9 Likes 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, 2014. 08:33 AM | 9 Likes Like |Link to Comment
  • Dumb Investment Of The Week: Floating Rate Note Funds [View article]
    This is what Morningstar has to say about EVBLX "this fund may not lead the pack in risk led markets but it is still a strong choice". Expenses--"below average". Average annual return for last 5 years, 11.03%--Barclays US agg, 4.88%. Morningstar (and they don't have any conflict of interest) rates it "Gold" and 3 stars. If I was the customer you mentioned, I would be getting a very queasy feeling about now. Dumb article of the week.
    Feb 24, 2014. 07:25 PM | 9 Likes Like |Link to Comment
  • Buffett's Dangerous Advice About Bonds [View article]
    Bogle, Gross and Gundlach appear on CNBC on a regular basis. Is it OK to listen to them? Your protest seems to me to have a false ring to it--I see a lot of CNBC bashing on this site but the bashers seem to spend a lot of time watching the network. I would think the advice on CNBC is at least as good as what is written here by shills trying to sell us something. In both cases there is excellent, mediocre and terrible advice and it is our job to sift through it.
    May 27, 2013. 10:47 AM | 9 Likes Like |Link to Comment
  • The Facts Are In - MLPs Work Great In IRAs [View article]
    Picture yourself driving down the interstate at 72mph, with a speed limit of 65, and you pass a cop. Is the cop going to pull you over and give you a ticket? Probably not--cops don't make the traffic laws and the IRS doesn't make tax law. They are both in the position of trying to enforce laws passed by legislatures. Cops and the IRS have to consider limited manpower (peoplepower?) and focus their efforts where they think it makes the most sense. It must seem obvious to the IRS that the issue of MLPs and IRAs is confusing and they could easily make it clear with a very specific publication but they can't tell the public to ignore the legislature any more than the cops can tell you it's OK to speed. I have no doubt (or little doubt anyhow) that "Reel Ken" is correct in his analysis of this issue but for now the IRS is ignoring it so I think we investors can also ignore it as long as we understand that the IRS can change their tune any time they want.
    Mar 27, 2013. 11:12 AM | 9 Likes Like |Link to Comment
  • Just How Risky Are REITs? [View article]
    Adam: You make the point that "unlike a dividend stock which can utilize a portion of cash flow" REITS don't have that luxury. I think you are wrong by a wide margin. All that REITs need to distribute in dividends is taxable income. In most cases they have plenty of cash flow beyond that (primarily related to depreciation that reduces taxable income). This excess cash they can either distribute as a dividend or retain to expand (buy more real estate). Some REITs play the game of distributing far more than they need to. Long term this reduces earnings. If buyers of REITs understand this game that's fine and they can calculate that into their purchase.
    Mar 13, 2013. 05:08 PM | 9 Likes Like |Link to Comment
  • The Only 20 Companies That Matter [View article]
    The data can't be debated? That seems a little arrogant. All data can be debated. For example, do the corporate profits include foreign operations, or have they been somehow excluded. If they haven't been excluded then how can you compare global profits (of US based corporations) with what I assume is US GDP? If they have been excluded, how accurate is the distribution of earnings between US operations and foreign, knowing that US corporate tax rates are higher, there would be an incentive to migrate earnings to the lowest tax countries. Globalization has changed many things and maybe your graphs haven't been updated. Lots of things to debate.
    Nov 10, 2012. 07:55 AM | 9 Likes Like |Link to Comment
  • Buffett's Brilliant Duracell Deal: A Reprise Of Past Deals, A Comment On The Present Market, A Whisper About The Future [View article]
    T&M: Of course there are some major differences between the athlete who gets taxed his $10 million in salary and a tax on a long term gain. The biggest is the impact of inflation. The gains on Berkshire investments discussed, KO, Washington Post, PG, are largely the result of inflation over the long period those investments have been held. Should Berkshire, or you, pay a capital gain tax on inflation? If you bought a stock for $10,000 in 1980 and sold it today for $20,000 you would pay a capital gain tax on the $10,000 gain. In reality you have a loss on the stock in inflation adjusted terms. If capital gains were adjusted for inflation (as is most of the rest of our tax system) there would be less justification for the tax rate differential. Our tax system is far from perfect but generally there is logic for what you see as inconsistency.
    Nov 15, 2014. 08:35 AM | 8 Likes Like |Link to Comment
  • Learning To Dislike MLPs [View article]
    I wonder how important correlation with the S&P 500 is to the average MLP investor (I place zero importance on it)? I wonder how important accuracy of analyst quarterly DCF estimates are to the MLP investor? I can imagine that a trader of MLPs might be interested but as a buy and hold investor of MLPs they mean close to nothing--and because of the tax advantages of holding forever I am guessing most MLP investors fit into that category. Maybe I am missing something important but I am looking at current DCF growth and longer term project pipeline, along with analyst overall ratings
    Sep 14, 2014. 06:46 PM | 8 Likes Like |Link to Comment