Left Wing Echo Chamber POLITICS THREAD ftw!

by **Werthless** » Tue Oct 28, 2008 17:29:29

FTN wrote:
pacino wrote:I don't see why it shouldn't...just because you have a lot of stock? I have stock too. The long-term gains is 15% no matter what you make.

Long term capital gains = more than 1 year.

My theories on investing often indicate that its not smart to "buy and hold" stocks. The S&P 500 has lost 10% of its value since October 1998. If you bought stocks and held them and didn't sell them before last month's collapse, or before the bear market in 2002-2003, you lost money.

You're oversimplifying it, to the point of being wrong. There are 2 shortcuts that you used, in which you fail to account for a possible source of return.

1) Dividends, particularly if you reinvest them. In the last 100 years, 40% of total stock returns have been due to dividends. It's not simply the capital gains that bring you a return. Stocks with a high yield are essentially a coupon, paying you quarterly to hold the stock.
2) Dollar cost averaging (or buying stocks/indices as you go) can help you come out ahead, even when the overall investment does not go up in value. Here's an example. It's not a panacea, but in an up-and-down market, it can help average investors who follow a consistent investment to get ahead.

by **FTN** » Tue Oct 28, 2008 17:36:07

Well, I oversimplified, but I wasn't wrong. Not every stock pays a dividend, especially growth stocks.

by **Werthless** » Tue Oct 28, 2008 17:40:02

FTN wrote:Well, I oversimplified, but I wasn't wrong. Not every stock pays a dividend, especially growth stocks.

Well, I assumed you were talking about investing in indices, since you mentioned the returns of the S&P 500 (a stock index with dividend paying stocks). There are dividends there, and if you bought stock over the last 10 years (and didnt plump it down 100% in Pets.com), then you haven't lost money. I don't have the total return at my fingertips.

by **FTN** » Tue Oct 28, 2008 17:45:16

Werthless wrote:
FTN wrote:Well, I oversimplified, but I wasn't wrong. Not every stock pays a dividend, especially growth stocks.

Well, I assumed you were talking about investing in indices, since you mentioned the returns of the S&P 500 (a stock index with dividend paying stocks). There are dividends there, and if you bought stock over the last 10 years (and didnt plump it down 100% in Pets.com), then you haven't lost money. I don't have the total return at my fingertips.

I meant investment in individual stocks. Google and Apple, for example, obviously do not pay dividends.

Side note, do we believe the expected rate cut was priced into this rally today?

by **TenuredVulture** » Tue Oct 28, 2008 17:50:49

FTN wrote:
Werthless wrote:
FTN wrote:Well, I oversimplified, but I wasn't wrong. Not every stock pays a dividend, especially growth stocks.

Well, I assumed you were talking about investing in indices, since you mentioned the returns of the S&P 500 (a stock index with dividend paying stocks). There are dividends there, and if you bought stock over the last 10 years (and didnt plump it down 100% in Pets.com), then you haven't lost money. I don't have the total return at my fingertips.

I meant investment in individual stocks. Google and Apple, for example, obviously do not pay dividends.

Side note, do we believe the expected rate cut was priced into this rally today?

Yes--I think that's pretty clear.

By the way, in this kind of market, it might make sense to invest in stocks with reliable revenue streams and a good yield, and not worry so much about price volatility. On the other hand, I think google might be attractively priced right now.

by **FTN** » Tue Oct 28, 2008 17:55:28

Yeah big dividend staple stocks are obviously the safest plays at this point.

by **dajafi** » Tue Oct 28, 2008 17:55:49

Thought this was interesting--how much "bang for the buck" government could get from various stimulus measures. I took it from a PDF so it isn't formatted right here, but you should get the idea. Here's the policy brief it came from, if anyone is interested.

First year impact on real GDP for each $1 spent

Tax cuts
Non-refundable lump-sum tax rebate $1.02
Refundable lump-sum tax rebate $1.26

Temporary tax cuts
Payroll tax holiday $1.29
Across the board tax cut $1.03
Accelerated depreciation $0.27

Permanent tax cuts
Extend Alternative Minimum Tax patch $0.48
Make Bush income tax cuts permanent $0.29
Make dividend and capital gains tax cuts permanent $0.37
Cut in corporate tax rate $0.30

Spending increases
Extend UI benefits $1.64
Temporary increase in food stamps $1.73
General aid to state governments $1.36
Increase infrastructure spending $1.59

The Democrats seem most interested in the last bucket, with Republicans indicating they'll probably go along to some degree--and indeed, that's where the most value is in terms of short-term boost. The Republicans' preference evidently is to pick from the first three buckets, particularly the third; I'm sure that some tax cuts will be in the offing. Everybody loves to play Santa Claus... except maybe McCain, who's still talking about a spending freeze even in the face of a perfect storm for Keynesian interventions. This would not be wise, though even if he won I'm sure something would pass.

by **TenuredVulture** » Tue Oct 28, 2008 17:59:58

FTN wrote:Yeah big dividend staple stocks are obviously the safest plays at this point.

Here's where being a real CFA would help--you look at PEs, and you see all kinds of potential bargains--Goog right now is 22 or 23. That's dirt cheap for a company that is supposed to have a lot of upside. But I have no idea if that is based on an anticipation of reduced earnings--a possibility, since google is really reliant on advertising and may take a big hit going forward.

by **pacino** » Tue Oct 28, 2008 18:03:43

McCain ignoring the actual city of Philadelphia may be the biggest reason he will lose in Pennsylvania. If he can not lose the way Bush lost in Philly, he actually COULD take PA. However, him going to Pottsville and Hershey and only ever going as far east as Doylestown seems to me to be setting himself up for a huge disappointment in this state. They are devoting so much time to it and yet ignoring 1/10 of the population, and a lot of Rizzoites who could vote for him.

by **Barry Jive** » Tue Oct 28, 2008 18:24:51

Palin's speaking at Penn State tonight, but McCain hasn't made an appearance yet. My guess is that they don't think SC and Philly are Real Pennsylvania.

by **FTN** » Tue Oct 28, 2008 18:43:53

TenuredVulture wrote:
FTN wrote:Yeah big dividend staple stocks are obviously the safest plays at this point.

Here's where being a real CFA would help--you look at PEs, and you see all kinds of potential bargains--Goog right now is 22 or 23. That's dirt cheap for a company that is supposed to have a lot of upside. But I have no idea if that is based on an anticipation of reduced earnings--a possibility, since google is really reliant on advertising and may take a big hit going forward.

This isn't meant as an attack, but what leads you to believe I don't understand these things. For the last 6 months, I've spent endless amounts of time reading and educating myself about this stuff. I'm far from an expert. But I'm buying fundamentals textbooks, I'm teaching myself. I dove in months ago, and I had no clue what I was really looking at. I don't have all the answers right now. But I'm learning more.

And in this market, the fundamentals really aren't all that important. Really great companies are trading at absurd values, values that make no sense. When the latest employment figures are released, it will help to paint a clearer picture.

by **jeff2sf** » Tue Oct 28, 2008 19:27:20

But you just seem to recite talking points. It's NOT obvious that big dividend staple stocks are the best plays right now. If it WAS obvious, the market would reflect that. You're missing the bigger picture

by **TenuredVulture** » Tue Oct 28, 2008 19:39:26

FTN wrote:
TenuredVulture wrote:
FTN wrote:Yeah big dividend staple stocks are obviously the safest plays at this point.

Here's where being a real CFA would help--you look at PEs, and you see all kinds of potential bargains--Goog right now is 22 or 23. That's dirt cheap for a company that is supposed to have a lot of upside. But I have no idea if that is based on an anticipation of reduced earnings--a possibility, since google is really reliant on advertising and may take a big hit going forward.

This isn't meant as an attack, but what leads you to believe I don't understand these things. For the last 6 months, I've spent endless amounts of time reading and educating myself about this stuff. I'm far from an expert. But I'm buying fundamentals textbooks, I'm teaching myself. I dove in months ago, and I had no clue what I was really looking at. I don't have all the answers right now. But I'm learning more.

And in this market, the fundamentals really aren't all that important. Really great companies are trading at absurd values, values that make no sense. When the latest employment figures are released, it will help to paint a clearer picture.

Well, I wasn't addressing just you. I am intrigued by google's valuation. Anyway, fundamentals always matter, it's just that sometimes the market forgets that. When it does, it can be a time to either buy or sell, depending which way the market is going.

On google, it's not priced like a growth stock with a PE of 22, so that means the market thinks of it as a mature company, or it could mean it's underpriced.

by **FTN** » Tue Oct 28, 2008 20:04:52

jeff2sf wrote:But you just seem to recite talking points. It's NOT obvious that big dividend staple stocks are the best plays right now. If it WAS obvious, the market would reflect that. You're missing the bigger picture

Its not obvious that staple stocks with big dividends are the safest bets in a recession?

I'm not even going to bother anymore. I know where you stand. You've told me 1000 times.

by **jeff2sf** » Tue Oct 28, 2008 20:24:48

And Imma tell you 1000 more times if need be. I'll save you some money.

by **drsmooth** » Tue Oct 28, 2008 21:10:48

FTN wrote:Well, I oversimplified, but I wasn't wrong. Not every stock pays a dividend, especially growth stocks.

almost 80% of firms in the S&P do. & the avg payout is increasing, fairly briskly as stuffy old dividends go.

by **Monkeyboy** » Wed Oct 29, 2008 00:26:21

seke2 wrote:[. At the bake sale, instead of delicious chocolate cakes, we'll be forced to buy Kebab and Curry.

mmmmmm, kebab and curry...

by **Monkeyboy** » Wed Oct 29, 2008 06:27:57

New Yorker's take on the whole "Obama is a socialist" thing.

LIKE, SOCIALISM by Hendrik Hertzberg

Now that Communism has been defunct for nearly twenty years, though, the cry of socialism no longer packs its old punch. “At least in Europe, the socialist leaders who so admire my opponent are upfront about their objectives,” McCain said the other day—thereby suggesting that the dystopia he abhors is not some North Korean-style totalitarian ant heap but, rather, the gentle social democracies across the Atlantic, where, in return for higher taxes and without any diminution of civil liberty, people buy themselves excellent public education, anxiety-free health care, and decent public transportation.

The Republican argument of the moment seems to be that the difference between capitalism and socialism corresponds to the difference between a top marginal income-tax rate of 35 per cent and a top marginal income-tax rate of 39.6 per cent. The latter is what it would be under Obama’s proposal, what it was under President Clinton, and, for that matter, what it will be after 2010 if President Bush’s tax cuts expire on schedule. Obama would use some of the added revenue to give a break to pretty much everybody who nets less than a quarter of a million dollars a year. The total tax burden on the private economy would be somewhat lighter than it is now—a bit of elementary Keynesianism that renders doubly untrue the Republican claim that Obama “will raise your taxes.”

For her part, Sarah Palin, who has lately taken to calling Obama “Barack the Wealth Spreader,” seems to be something of a suspect character herself. She is, at the very least, a fellow-traveller of what might be called socialism with an Alaskan face. The state that she governs has no income or sales tax. Instead, it imposes huge levies on the oil companies that lease its oil fields. The proceeds finance the government’s activities and enable it to issue a four-figure annual check to every man, woman, and child in the state. One of the reasons Palin has been a popular governor is that she added an extra twelve hundred dollars to this year’s check, bringing the per-person total to $3,269. A few weeks before she was nominated for Vice-President, she told a visiting journalist—Philip Gourevitch, of this magazine—that “we’re set up, unlike other states in the union, where it’s collectively Alaskans own the resources. So we share in the wealth when the development of these resources occurs.” Perhaps there is some meaningful distinction between spreading the wealth and sharing it (“collectively,” no less), but finding it would require the analytic skills of Karl the Marxist. ♦

by **VoxOrion** » Wed Oct 29, 2008 06:58:19

The comparison between "spreading the wealth" of the oil owned by Alaskans and "spreading the wealth" of income I earned that is not owned by anyone but myself is a smoke screen.

by **Werthless** » Wed Oct 29, 2008 09:45:35

FTN wrote:
jeff2sf wrote:But you just seem to recite talking points. It's NOT obvious that big dividend staple stocks are the best plays right now. If it WAS obvious, the market would reflect that. You're missing the bigger picture

Its not obvious that staple stocks with big dividends are the safest bets in a recession?

I'm not even going to bother anymore. I know where you stand. You've told me 1000 times.

In this day and age (tight credit market), I expect some firms to cut dividends "temporarily." So some staple stocks with "big dividends" may not have big dividends for long. This is how yields of some individual companies can be over 10%... no one thinks they're going to keep paying this dividend in the short term, and they are priced lower accordingly.

But you're still right... If you can find the strong companies with high yields who don't cut their dividends, there is a ton of value out there. But it requires an analyst to have a very strong grasp of accounting, among other skills. Your information filter must be solid, and that's where further formal education may help.

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Left Wing Echo Chamber POLITICS THREAD ftw!