Table On-Topic Summary - 08-Oct-2002
A compilation of this board's financial/economic posts From 43320 to 43360

Post  43320  by  uponroof       Reply
Richard Russell on the Markets....
and one reason why bank stocks are going south

"...Barron's Confidence Index is the ratio of the yield of best-grade bonds to the yield on medium grade bonds. When the bond crowd gets worried, they move to the best-grade bonds and the CI declines. The latest CI is a shocking 68.0 down from 70..4 last week and down from 85 back in May.

You won't read this anywhere else but that 68.0 on the CI is the lowest CI since the terrible 1940s! Something is scaring hell out of the usually prescient bond crowd. What could it be?

Ah, here's a hint. An NYU export states that as of Sept. 15, 20% of all high-yield debt was in default and another 25% was in distress. That has led to a 9% overall loss for junk bond investments this year. The market for distressed debt totals $490 billion in face value and $279 billion in market value.

Let me put is this way -- the credit situation in the US is moving toward a state of "shambles." Do you wonder why many bank stocks are falling apart..."

Post  43321  by  uponroof       Reply
More on distressed debt..

Post  43322  by  jeffbas       Reply
Boy are you going to miss the boat. Tax policy in this country (double taxation of dividends) makes it stupid management strategy to pay more than token dividends. 6-8% earnings yields makes more sense - what they could afford to pay in dividends in a no growth environment if it were not against shareholders' best interests.

Post  43323  by  uponroof       Reply
CSFB next target (for good reason)...
couldn't come at a worse time for the financial sector


btw-Ted Turner's nightmare year just got a little worse.
Giants win in 5. Say goodbye to that team of multi millionaires. The Braves will not look the same next year.

Post  43324  by  clo       Reply
SquawkBack Poll: Losing sight of the economy?

Has the U.S. economy been pushed to the back burner as Washington focuses on Iraq? Take part in Tuesday's SquawkBack Poll.
As President Bush focuses on Iraq during his speech Monday night, most Americans may actually have their minds on another issue: the economy.

Recent polls indicate that voters fret over the nation's economic future, as stock prices and 401(k)s slide and unemployment rises.
According to a CBS/New York Times poll released Sunday night, a solid majority of Americans believe President Bush should give U.N. weapons inspectors time to act and should wait for support from allies before invading Iraq.

The poll also found that seven in 10 would prefer to hear political candidates talk about the economy over war with Iraq. In addition, more than one-third think the economy will get worse if the United States attacks Iraq. More than half, 57%, said they would base their vote for a candidate on economic policy before foreign policy. As for how respondents rated President Bush's handling of the economy, 41% said they approve, while 46% disapproved. His overall job approval rating was at 63%.

So do you think the government is paying enough attention to the economy?
Tell Squawk Box what you think. Register your vote on the left, and e-mail Squawk Box to explain your thoughts. We’ll share the results of the SquawkBack Poll at 9:45 a.m. ET Tuesday.

Post  43325  by  pmcw       Reply
CY Update:

CY announced today that actual results for the third quarter were a loss of 3 cents a share and revenue of $205 million. I still feel they will write off a bunch of non-cash stuff, show a B:B around 1:1 and guide very slightly up with a very slight pro forma profit forecasted for Q4.

Regards, pmcw

Post  43326  by  srudek       Reply
jeffbas: I have high standards! If I miss the stock "boat" because I can't get the desired 6-8% dividends then, based on experience, it will be a boat well-missed. I apply a much higher standard to real estate purchases and, as a policy, stop buying when the market heats up. I just need to be equally disciplined if I buy stocks. I'll certainly try to apply a much higher standard when I buy privately held business interests.

With regard to stocks, I believe history shows that it should be relatively easy to buy super-solid companies, with long histories of unbroken dividend payments, paying 6%+ dividends "soon". Be patient. I've read that stocks historically have higher payouts than bonds; and that seems reasonable given the obviously much higher risks. We just need patience. Stop trying to "invest" when there aren't any investments to be found -- only speculations.

I've written many times before that double taxing dividends -- especially while singly taxing stock options to "employees" -- is a recipe for a Bubble. I have faith that before this Bubble is through our wise legislators will find Jesus. I'm sure the guys who got preferential tax treatment for stock options (really only "dividends" restricted to employees; and many suckers thought dividends had been discontinued!) can arrange a change in tax law when it suits their best interests.

Coming off this Bubble, I expect people to utterly spurn any company which does not pay a healthy dividend and/or persists in using stock options. History says that will be the case. Companies which cannot/will not pay proper dividends to owners will be relegated to where they belong: penny stock status or worse. The person who "owns" a company is the person who controls the net income stream of the company; if only the employees get paid by the company than only the employees own the company. The idea that common stockholders "own" the company, for most of today's companies, is laughable. I'm sure Larry Ellison and Bill Gates have had more than a few laughs over this one. I'd be rolling on the floor with laughter if I were them right now.

The stuff about it being smarter for companies to retain earnings to "grow" the company than to pay dividends is, for the vast majority of companies, a myth which begets stupidity and excess. I may make an exception for those few companies which truely have stellar ROEs without excessive leverage or misleading accounting, but very few companies fit that bill.

Buy and hold only makes sense when large dividend pays are available. At all other times, the only buyers are stupid-money buyers. It's important to recognize the distinction and, when proper returns aren't available, decline to play rather than lower your standards. There are plenty of investment alternatives to lousy stocks.

Post  43327  by  pdowd       Reply

Yes there are plenty of oppurtunities away from stocks. Art and collectibles have been very kind to me. Limited edition silk screen art prints such as New Orleans Jazz Fest prints and Blue Dog by George Rodrigue have appreciated greatly in the last decade. While they are not as liquid as other investments if you are resourcefull they can be sold. I mentioned in a previous post how I purchased a limited edition silk screen Blue Dog print from the Blue Dog Gallery on royal Street in New Orleans on July 1995 for $950.00 . The series was limited to 70 prints and I bought an artist proof. The series has completely sold out. A friend recently sold a similar print for over $8,000.00 at a private auction. My print appraised for $9200.00 last November. Of course we are probably in an art and collectible bubble too, but who knows.
Regards PD.

Post  43328  by  Decomposed       OT: Table ON TOPIC SUMMARY Oct 07, 2002

Post  43329  by  jeffbas       Reply
"history shows"

SR, please tell me the times in the last 100 years when good quality stocks had a dividend yield of double the 10 year Treasury. If you have to go back 50 or 100 years, or can't even find history ever showing that, Then I suggest your bias has the better of your brains. ANY investment has to be a "buy-and-hold" more often that every 50 years.

In fact, I believe that you are totally misreading history. As I have commented before, I believe that in the last 100 years you see roughly a generation of stock market outperformance followed by one of underperformance, as the excesses are corrected. Dividends have nothing to do with it. During the generation of outperformance "buy-and-hold" is exactly the correct strategy - which is about half the time. During the underperforming generations, it is not, no matter what the dividend yield.

The last generation of poor performance was the mid-1960's through July 1982. Despite the fact that the DJII hit its low in 1974, stocks were mostly trading vehicles (DESPITE BETTER DIVIDEND YIELDS) until a sustained bull market began again in August 1982. However, there were huge opportunities for "buy-and-hold" investors in selected sectors during that period - such as the during the phenomenal move in mostly non-dividend paying Oil & Gas stocks around the 1979-1981 period.

Your comment, "The stuff about it being smarter for companies to retain earnings to "grow" the company than to pay dividends is, for the vast majority of companies, a myth which begets stupidity and excess", defies logic. A company should manage its dividend policy against its average ROI over long periods (pay out more if it does not have attractive opportunities than if it does). Most companies can do a LOT better on average than what an individual can get on a cash dividend after he pays income taxes on it. (It is just another application of the merit of tax-sheltered retirement plans and life insurance - the tax free build up of value.)

Post  43330  by  nvrgivup       Reply
srudek: Excellent post. I am an occasional participant here so I have missed many of your posts but I agree with your sound fundamental way of thinking. I would love to see and end to the policy of "double taxation" of dividends. If dividends became tax exempt, or at least some portion of them, then it would be good for the stock market. The bears have pointed out that retirees have become so dependent on stock investments in their IRA's and 401s, that heavy selling will be necessary for the next few decades to provide retirement income. And that is because the idea of "investing" for the last several years is price appreciation rather than dividends. If a retiree could draw dividends of 5-8% per year from a solid stock, it would not be necessary to sell their stocks. Then the market would be much more stable, earnings would become more of a priority, and we would all benefit, IMO.

Regards, nvr

Post  43331  by  jeffbas       Reply
nvr, I think that you are missing the other side of the coin. Companies with reasonable ROI opportunities that pay out their cash in dividends will either become more dependent on debt (balance sheet leverage) to finance these growth opportunities, or will abandon such opportunities - leading to a slower economic growth, slower employment growth and slower standard of living growth in the country. I do not particularly care for those alternatives, as a dynamic economy offers better opportunity for those who are not ahead to get ahead.

I believe that Europe is a good example of an analogous consequence. They have a social policy that makes it difficult to get rid of unneeded workers. This amounts to a hidden tax on the efficient operation of companies and has led to the predictable results than have been seen for years/decades (poorer economic performance). In other words, instead of paying dividends to shareholders, with the results discussed above, they pay "dividends" to unneeded workers, with similar results.

Post  43332  by  pacemakernj       OT: NJ Senate Race update...

Post  43333  by  pacemakernj       Reply
Roof, I just heard Europe WILL NOT lower rates. They see no reason for a rate cut at this time! Huh? Well that will help everyone out. Ok, so here's the big question how bad do things have to get before they will lower rates? It's now a race to see whose pride will get in the way first. AG's or the European's. I am now starting to think these guys will ONLY lower rates when a JPM goes bust. They now need a major excuse to cut. This is foolish monetary policy. As such they are sowing the seeds of something very big, imo and it will not be good. Pace.

Post  43334  by  Warstud       Reply
XICO tanking bigtime $2.25 eom.

Post  43335  by  pacemakernj       OT: Clo, you liberals really crack me up. Back in

Post  43336  by  tinljhtkh       Reply

Thanks for your nice contributions to Table! They make us all think and that’s both a good and a bad thing, depending on your thoughts!

"Dividends from blue chips with a long history of payouts will have to be at least 6-8% above the inflation rate."

They told us back in the late 90's that "it would be different this time." I suppose that we were supposed to invest in the future and the things that would make it different--no profits, no dividends, and a constant reliance on borrowed money as we were supposed to ignore the fundamentals that had kept "it" from being different for so many years. Now here we sit, three years later, and they were right! It is different this time!

We have no inflation and are begging for some! We have a very low dividend rate and the resulting outcome that results from that event--people like you are investing in things that show at least some appreciation of some kind, even art, if they have to hang on to them for a very long time! I suppose that the art work on all of those stock certificates that most people never see anyway, sold in seemingly unlimited editions, just hasn't held its value! Maybe they should have hired better artists, particularly for those editions whose "art" value is the only thing currently of any worth as bankruptcy has depreciated their economic value down to nothing! You had best watch your art investments if all of these beauties flood the market, creating a competitive bubble in the stock certificate collection scene! Half of all American households already own some of these "collectibles" and you know what mass ownership does to value! It would probably make good art go up even that much more!

Perhaps if more people had gotten a look at their stock certificates, and been able to judge what the ultimate worth of them might have been in the worst possible circumstance--Enron, Worldcom, Global Crossing, and the like--we might have had an entirely different investment climate right now! Let's face it! :0) The artwork on so many of those stock certificates wasn't very good at best, and was pretty pretentious at it's worst! There might have even been some nudity on some of them if you looked closely enough, and that might not have set very well with the religious right! John Ashcroft might have been shocked at what he saw!

We just didn't do our due diligence like we should have done it in the first place or we wouldn't have found ourselves here! Or maybe it would have happened the same way after all! I was at an auction recently and comic books weren't going for much more than most baseball cards! And the collapse in the Beanie Baby market has been horrible to behold. Even the Cabbage Patch dolls have taken on a financial frown! Maybe they were just collecting and overpaying for the art value of the stock certificates after all and just didn't realize it!

I haven't checked the price of tulips lately. Maybe we can create a market over there--diversification you know! It could be a hard winter and you just never know what might be rotting on some of those ships out there in San Francisco Bay! Most of this generation of investors came from the "flower power" generation anyway and it looks like a natural market to me! There is nothing better to fight depression than the hope that flowers will emerge in the late spring and its getting pretty depressing out there right now! We could get Tiny Tim (was that his name) and Ms Vickie back together and try to “tiptoe through the tulips just one more time!” Maybe it will be different this time! Or maybe they just won't remember that there is nothing new under the sun! Tulips are a perennial aren't they? Maybe it's their time to shine again!

Maybe we can sell them some "inflation" and try to create a market there! Greenspan might even buy some of that! Nah! It would just be another bubble and I’m probably just being irrationally exuberant even thinking about the whole thing! Lord knows that the market in irrational exuberance is shot right now!

What do you think?




Post  43337  by  oldCADuser       Reply
Don't remind me. I'm down over 70% since I bought into this ###.


Post  43338  by  srudek       ot Tin: I appreciate your comments - especially th

Post  43339  by  Decomposed       Reply
The story of the day is Xicor... down 20% on bizarrely light volume.

If its price doesn't pop within 24 hours, I'll be floored. And yes, I've been buying -- for the first time in quite a while.

Post  43340  by  maniati       Reply
pace: Unlike the U.S., the central bankers of the EU have one mandate that supersedes all others: to keep inflation in check. So, don't expect them to lead the way on a rate cut. But that's not the way I would expect them to attempt to head off a possible collapse of a particular bank, anyway. I think it's more likely we see a cut in the U.S. first - IMO.

I predicted back in August that we would see no cuts in the U.S. even as late as the Nov. meeting unless there was unexpected bad news. I'm right so far, but, at the same time, some of the risk factors that I talked about are beginning to materialize. As I have mentioned, I expected retailing to take a hit, and we have now seen quite a long and impressive list of large national retailers warn on Q3, with others reporting softness in September. So, that's bad news, and its significance is that the Fed is counting on the consumer component of aggregate demand to not only keep things going, but to restore corporate earnings so as to restart capital investment. But, frankly, I fully expected the retailing hit, so I can't say it meets my definition of "unexpected bad news." I don't think we get a cut on the basis of that alone. I think it will take more. Bad news in the housing sector might do it, but, then again, I'm expecting some seasonal softness there, anyway, so that's not necessarily "unexpected," either, depending on how soft. I still say the big unknown variable (not including wars, terrorism, etc.) is what unemployment does. Bad unemployment numbers would result in a cut in Nov., IMO. But, absent that, I can still see the possibility of no cuts at the next meeting. If the meeting were tomorrow, there would be no cut, IMO. Still a month to go, though, so too early to tell.

Post  43341  by  oldCADuser       Reply
I don't know,...

"The story of the day is Xicor... down 20% on bizarrely light volume."

...todays volume is much higher then both the 10 day and 3 month averages.


Post  43342  by  Decomposed       Reply

Relative to the size of the fall, XICO's volume is a pittance. There have been days in the last 4 months when the volume topped 800,000 shares... and there was nothing like a 20% fall on those days.

I attribute this to a large but uninformed seller. (Large because it's obvious the selloff started abruptly. Uninformed because the volume tells us that a full day later, he hasn't been joined in the sale by institutional holders.)

We'll see. A drop like this for rational reasons should have had a LOT more volume. I think the only reason the price has remained in the $2.30 range is because the would-be buyers are all blown away by what's happened and are looking for the catch before stepping in.

Post  43343  by  Warstud       Reply
It's PMCW selling LOL..

And once it's reaches 75 cents, he won't be recommending it anymore.

Post  43344  by  ljpit       OT: pmcw, VSE: I had the same thing with FIBR. Ent
Post  43345  by  wilful10       OT: Big Tin and Tiny Tim -
Post  43346  by  tinljhtkh       OT: It's a
Post  43347  by  Inspector_32       OT: Iraq war taking too long to get going....

Post  43348  by  wilful10       Reply
California Dreaming... Would it were only

a song,, but this one is more of a nightmare:

California's expenditures..

Between 1998 and 2001, state government expenditures increased by more than 35 percent. The state's budget deficit is now larger than the entire budgets of most states. Moreover, the state added more than 25,000 new state employees--a larger increase than the next three largest states COMBINED.

A sad state of affairs indeed.


Post  43349  by  tinljhtkh       OT: wilful10!
Post  43350  by  oldCADuser       OT: You know what they always say...

Post  43351  by  pacemakernj       Reply
Maniati, I've been in the rate cut camp since June. I thought we needed a 75bp easing then and I still feel that way today. My only conclusion is that AG feels that 1) a rate cut at this juncture would be futile, 2) He is worried about inflation. Encouraging people to continue to borrow money and spend it is imo, an act of desperation. I've said a few months ago the world is now praying the almighty American consumer will continue to spend. At the same time AG is praying corporate America picks up their cap ex spending. For without the latter, the former will collapse. That is what the markets are telling us. My guess is we will see what will happen by no later than February of '03. Just a guess but by then we'll have a good sense of what cap ex spending will look like. If it is good the market will do well if not you can fill in the blank. Right now I have yet to see any appreciable pick up but there are some early signs that things might be turning the corner. I said I'll have a better sense in November. That is what I am sticking with. But let me say that imo, we will not go back to what it was. I think it is now incumbant on companies to control their expenses and manage their bottom lines. I will tell you this 4th quarter for me is shaping up to be my worst since 1990. So I am issuing a earnings warning. I hope next year will be better. If not I'll be swabbing the decks. Pace.

Post  43352  by  pacemakernj       OT: Inspector, your ignorance is truly astounding.

Post  43353  by  clo       Reply
RESULTS SquawkBack Poll: Losing sight of the economy?

Total Votes: 3180
Do you think the government is paying enough attention to the economy?

Yes 23%

No 77%

Post  43354  by  Decomposed       ot: Thanks, clo!

Post  43355  by  srudek       Reply
pace: My 4th quarter is looking really good so far. My business wholesales cookies to healthfood store, coffee shops, etc. all over the country. A really discretionary product -- a $2 cookie (but worth every penny!). The last few weeks have been increasingly strong, although that is partly a seasonal change. Anyway, I'm giving you real-time assurance that consumer spending is doing well.

But your "4th quarter is shaping up to be [your] worst since 1990." Your business is furniture (or is that roof?) sold to Silicon Valley companies?

Just trying to fit pieces of the puzzle together. So B2B is dead (at least in your area) while B2C is okay nationally. I'd suggest that Greenspan probably feels that a lowering short term interest isn't needed by the consumer and would never get through to businesses such as yours in any case. No point in a 75bp easing; he's making the right choice, I suspect.

What would help the most and the most immediately would be a recission of double taxation on dividends (or making them tax free entirely). That would have the best chance of sparking a major, lasting rally in the stock market which would enable companies which can't borrow to maybe get more equity funds.

Fat chance something so reasonable and simple will get enacted in time to save the day. The legislators are too concerned about the taxes which would escape -- not considering that #1 relatively few dividends are currently being paid anyway; so tax losses couldn't be all that huge on a relative basis and #2 the stock market drop is costing them enormously more in lost taxes as business spending is forced to decline to fit the stock market decline. Quite a group of Brainiac's ruining the country.

Post  43356  by  oldCADuser       OT: Well, I'm about to depart on Phase II of my an

Post  43357  by  pacemakernj       Reply
Srudek, I am glad to hear you are doing well. I am in the office furniture business and things continue to trend down. If you are B2B things are not so good. Especially where cap ex is related. But I am hopeful for the first half of '03. I don't have confirmation of that yet but my clients seem to be talking positively about '03. IMO, corporate America will shut down all unnecessary spending for the remainder of the year. They say, "we'll buy it next year". In which case the first quarter could be very good like this year. People will get their hopes up but that's what happened this year. We'll see. I love the idea about rescinding the taxation of dividends though. But you are right in makes too much sense therefore they will not do it. Unless the Republicans win in November. Regards, Pace.

Post  43358  by  pacemakernj       OT: OCU, I'd be curious while your in India can yo
Post  43359  by  clo       OT: oldCAD, may you find new discoveries even thou
Post  43360  by  tinljhtkh       OT: OCU!