Pfizer, the makers of Viagra have agreed to buy Allergan, the makers of Botox for $155 billion. It sounds like destiny. Pfizer isn’t buying Allergan only for the drugs though. A big motivation for the deal is the tax savings. Post-acquisition, Pfizer will shift its tax base from the U.S. to Ireland. Ireland has one of the lowest corporate tax rates in the world at 12.5%. The U.S. has one of the highest. The pols will of course demagogue Pfizer for abandoning America, but our tax code is a national disgrace. How are American companies supposed to compete with their foreign counterparts when … [Read more...]
What We’re Reading 11-23-2015
Elizabeth Warren's Tax Warning - WSJ Argentina Shifts Right - The Guardian Why Housing Hasn't Lifted the Economy Much - WSJ Reining in a Sprawling Federal Reserve - WSJ The Downside of Stock Buybacks - Reuters The Best Year-end Tax Moves - Fortune … [Read more...]
Smart Money Bailing on Stocks
What’s the smart money been doing with their money this year? Other than losing a lot of it (see hedge fund hotels Sun Edison and Valeant Pharmaceuticals for example), they are net sellers of U.S. stocks. According to the latest from Bank of America Merrill Lynch, BofA’s institutional and hedge fund clients, the so-called smart money, have yanked a net $24 billion out of U.S. stocks YTD. Who is buying what they are selling? Retail investors are net buyers of U.S. stocks for the first time in seven years, but if you exclude ETFs, they too are net sellers (I’ll come back to this in a minute). … [Read more...]
What is Amazon Stock Really Worth?
CNBC: Amazon is now the most expensive stock in the S&P. Discussing a fair price on Amazon stock, with Aswath Damodaran, Professor at NYU Stern School. … [Read more...]
The 1% Recovery
If you thought 2% growth during this “economic recovery” was bad, I have even more discouraging news for you. On a per person basis, economic growth has been even worse than 2%. Since the recovery began, growth in GDP per capita has averaged only 1.35%. That is an embarrassingly low number coming off of the deepest recession since the great depression. At some point, don’t we have to stop blaming the great recession for the slow recovery and instead examine the economic policies that might be holding back growth? … [Read more...]
Danger: 2 Stocks You’ll Be Glad You Missed
The Wall Street Journal has been chock-full of teachable moments lately. Last week we pointed readers to two pieces that highlighted the risk of investing in low-barrier to entry businesses. This week the journal brings us two pieces that should make it crystal clear why diversification is so vital to your long-term investment success. The subject of both WSJ articles is activist investors. Activist investors often take out-sized positions in stocks and then agitate the board for change to increase shareholder value. Casablanca is an activist hedge fund that took a 5.2% stake in Cliffs … [Read more...]
How Higher Interest Rates Can Stimulate Growth
The chorus of economists and investors demanding an interest rate hike from the Fed to stimulate economic growth is getting louder. An interest rate hike to stimulate growth? Yup, it sounds counter-intuitive, but isn’t the proof in the pudding? Seven years of zero rates and a $4 trillion balance sheet and the economy is struggling to even surpass 2% growth. That’s some stimulus. You’ve read on this site before that the Fed’s prolonged period of zero rates and its big balance sheet may now be a larger drag on growth than a stimulus to it. It would follow then that removing zero percent … [Read more...]
The Prudent Strategy for Building Wealth
We’ve written often on this site and in our monthly strategy report about the speculative nature of the stock market rally in recent years and most especially in recent months. The leading lights of the stock market year-to-date are companies trading at levels that leave no margin of safety for the serious long-term investor. Here, I am talking about the Netflix, Amazon, Facebook, and Googles of the world. These four companies plus Apple are responsible for over 75% of the return on the S&P 500 year-to-date. Fund managers who eschew these stocks are taking serious career risk, but it is … [Read more...]
Stock Market Update: Has the Window of Opportunity Closed?
Many investors and strategists have been arguing that the Fed lost its window of opportunity to hike rates when the good professors panicked during the stock market correction in August. The decision backfired as the Fed told the public that global financial conditions were bad enough not to hike in September, but not so bad that the Fed wouldn’t hike sometime in 2015. The market took the Fed’s panic as a sign of weakness. If the Fed didn’t hike in September what would encourage them to hike later in the year? Investors pushed interest rates down sharply over ensuing weeks and the … [Read more...]
This Company can Turn $1 into $460
As the late great Yogi Berra might say of this market, “It’s like De Ja vu all over again.” More stimulus from the global central banking cabal (ECB yesterday, Bank of China today, BOJ next week) and the fab five (Facebook, Amazon, Google, Apple, Netflix) are again driving the market to ever higher levels on the back of quarterly earnings reports. Sounds like a replay of, well, anytime over the last three years. The gains these stocks are making on what are regular earnings surprises (h/t analyst enablers) is confounding to the serious long-term investor. Amazon is poised to add $55 per … [Read more...]
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