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The Stock Market Roller Coaster
For your edification, I yanked this off of a website where I sometimes contribute. The author is my friend Charles Pennington, and he posted an interesting chart. Ticker / cash per share / price / 2012 earnings from ValueLine / (price-cash)/earnings msft $7 $26 $2.80 7 csco $8 $18 $1.45 7 goog $129 $630 $40 12.5 orcl $6 $29 $2.42 9.5 jnj $11 $64 $5.25 10 pfe $5 $21 $1.60 10 aapl $87 $395 $32.50 9.5 cvx $10 $103 $13.10 7 wlp $53 $65(!) $7.70 1.3 amgn $19 $61 $5.50 7.5 His contention that some stocks are ridiculously cheap with the cash on hand per share. Whether they are or not is a matter of opinion which is way above my pay grade. However, I don't like sitting on a lot of cash, or cash equivalents right now with negative interest rates. I suspect that those companies aren't thrilled on some level with all that cash. Frankly, I don't think that risk has left the room and I think right now is very risky with many hidden dangers bubbling up from right under the surface. But then again I get real paranoid about freaky events that can dislocate markets.— December 23, 2011 1:10 p.m.
The Stock Market Roller Coaster
Don, that is a decent strategy that should work until the cycles change (as described by Bacon.) I tend to only buy stocks when there is a huge bear market and I like to fade the final climactic selling when irrationality takes over. I tend to hold stocks like these for years and only pitch them when the position is no longer right. I generally write covered calls against my stocks to generate a little extra income and have had a measure of success doing this. I don't recommend this strategy for everyone, as the strike price can get hit and stocks can get called away from you if you're not watching the market. @Mr.Bios, markets are pretty much 24 hours these days and everyone all over the world is trading the pre-markets and the Globex. The overnight markets are not as thin as they were a few years ago, and show surprising liquidity at times. Still, I would not want to do a market order for 1000 ES, as it would probably move the market a few full points. Also, during the overnight/pre-market, the spreads are just a little wider(~30%+-) than during regular market hours and this is indicative of the premium one has to pay for getting their action down outside regular market hours.— December 23, 2011 6:34 a.m.
How Sempra used cash-balance plans
Fred, I'd buy good senior bonds right before I felt that a bankruptcy was imminent and sell them on the usual pop that comes after the bankruptcy. There are ways to tell if the county/city is going bankrupt...one way is to ask their largest vendors if they are becoming a slow pay. There are other ways that my sagacious friends in that market employ but they are proprietary and I haven't a clue. You need to watch out what bonds you buy and what you pay for them. I suspect (and history bears this out in other cases) that if Detroit or Wayne County files for bankruptcy, many of the bonds will rally sharply.— December 13, 2011 7:53 a.m.
How Sempra used cash-balance plans
It's a rather complex and expensive proposition to short a specific bond in the muni market as finding a counterparty to the trade is very expensive. What happens in that market is that the bids just dry up(or the spreads get really, really wide) causing the price to go to a lower level where it will trade. But when one mentions munis, one must remember that not all munis are created equal. There's a big difference between General Obligation Bonds, Assessment Bonds, and Revenue bonds, etc. especially in the workout phase after a default. There's also senior debt, junior debt, subordinated debt, insured, collateralized, etc. all of which affects the price, the risk of the bond, and the return after workout. Also, one must look at the average price of defaulted bonds and what the recovery will bring, keeping in note the conditions of the general bond market. For the group as a whole, the average recovery of a defaulted muni in the US after workout is around 67 cents on the dollar although there is a very wide range of values in this treacherous market. Still, it helps to remember that during the Orange County bankruptcy, a plurality of the bond holders were repaid at par within 3 years. That's a great rate of return as some of the senior debt with a huge coupon traded as low as 32 if memory serves me correctly. But the thing about the Wayne County(detroit) Muni market's broad decline is that even the senior revenue notes are trading at a fear discount despite the fact that many are safe, and many are insured. I'd have no problem buying a 2028 Wayne County Airport Revenue bond with a 4.75 coupon at 91, especially when similar revenue bonds at Atlanta (ATL) are priced at in the ballpark of 105. Even looking at the Jefferson County Alabama bankruptcy, lots of their debt is fully secure,collateralized, insured, and even with bonds like their Jefferson County General Obligation bond that matures in 2016 with a 5.25% coupon. That bond was trading at 80 the day after the bankruptcy and that price shows that the market expects at least an 80 cent on the dollar recovery rate. It is interesting to note that the price of those bonds went up significantly after the bankruptcy. To eliminate some confusion here, my little instruction for people looking at bonds is that price and yield are in an inverse relationship...lower price, higher yield....higher price, lower yield.— December 13, 2011 7:34 a.m.
How Sempra used cash-balance plans
Detroit might be a tangled mess, but there are some good bargains in their different muni issues right now.— December 4, 2011 2:23 p.m.
How Sempra used cash-balance plans
Should Apple Computer be broken up? It is an excessively large enterprise, at least according to its market cap.— December 4, 2011 2:19 p.m.
How Sempra used cash-balance plans
Falstaff, I suspect that the only thing you own that's big is your mouth and that your wealth is significantly less than your ability to do simple statistics problems....Perhaps your big mouth is overcompensating for other areas of your anatomy where you were shortchanged by God.— December 4, 2011 2:17 p.m.
How Sempra used cash-balance plans
Better yet, lower taxes and cut 43% from the government immediately. The government doesn't need more income, they need to spend less.— November 29, 2011 11:26 a.m.
How Sempra used cash-balance plans
Really, Luxury taxes don't dent luxury consumption? Tell that to the boat manufacturing industry in Florida that in 1992 was 90% wiped out. In 1992 when the government imposed a lot of luxury taxes, the taxes took in 97 million than projected. Why, because people stopped buying luxury items, or they went offshore and bought those items and used various means to dodge the taxes.— November 29, 2011 11:23 a.m.
How Sempra used cash-balance plans
Hey Falstaff, since you think taxes are so low, put your money where your mouth is. Pay more taxes and show you have the courage to practice what you preach. Gifts to the United States U.S. Department of the Treasury Credit Accounting Branch 3700 East-West Highway, Room 622D Hyattsville, MD 20782— November 29, 2011 11:18 a.m.