August 15, 2014
Comment on Model Portfolio activity
We took trading profits in
Walgreen, GM, and Deere and scratched on Sprint. We remain nervous traders of
event and earnings news with an eye towards a significant correction soon. Not
always right but…..
August 8, 2014
Comment on Model Portfolio activity
and Sprint were on sale this week after both dropped 25% in price on negative
news. Walgreens dropped because it decided not to do an inversion which would
have save it $4 billion in taxes over the next number of years. Of course U.S.
taxpayers would have had to make up the difference and since U.S.
taxpayers are Walgreen customers the folks at WAG decide that the inversion
wouldn’t have been such good business practice.
dropped because its merger with T Mobile was called off and the arbitrageurs had
to unwind positions. Moreover talk of Sprint not being able to compete again
surfaced. Softbank, the Japanese conglomerate owns 70% of Sprint and the
Japanese take the long view so not to worry.
have traded both stocks over the past few years having good success with WAG but not
so much with Sprint.
also repurchased AT&T and Cisco both slightly lower than our last sales and
Deere and GM both down 15% from our last sales.
with these purchase most accounts remain 70% or more cash.
markets are keying on Putin and the Ukraine. If he invades the 20% correction will occur. If
not, the correction may be put off till the fall.
August 1, 2014
Comment on Model Portfolio activity
We headed to the sidelines before the big drop on Thursday
taking scratch profits. We are holding onto the GM Warrants but that is all. We
don’t know when but we do know Mr. Market likes to frustrate everyone. July was
the first down month in a while – though the down was insignificant and we
continue to look for earnings disappointment trades. August brings retail and a
few tech earnings reports.
Two articles we found interesting for your reading
Huffington Post July 29:
'Patriotic' Big Banks Profit Helping U.S. Companies
The Huffington Post
| By Mark Gongloff
After wrecking the U.S.
economy and sucking hundreds of billions of dollars from American taxpayers for
their own survival, what can our patriotic big banks do for an encore? Why,
help American companies flee the U.S. to avoid taxes, of course. For America!
Andrew Ross Sorkin had a must-read New York Times
column on Tuesday about how
some of our biggest bailout recipients also have the biggest share of the nearly $1 billion
banks have made in the past few years helping U.S. companies do
"inversions." That's when an American company buys a company in an
foreign country that has a lower tax rate and then moves its headquarters to
that country to shave a few points from its tax bill, possibly costing the U.S.
government $19 billion over the next decade. For America.
And you'll never guess which bank has made the most
money on this patriotic activity! OK, you'll probably guess: It is Goldman
Sachs: Yes, the Vampire Squid has made more than $200 million advising
companies on 10 different inversion deals since 2011, according to the NYT's
crunching of Thomson Reuters data. The second-busiest inversion handmaiden is
Morgan Stanley, with 8 deals at nearly $98 million. JPMorgan Chase has made
more than $184 million on 6 such deals, and JPMorgan CEO Jamie Dimon has taken
the extra step of publicly defending the practice, Sorkin noted.
“We have a flawed corporate tax code that is driving U.S.
companies overseas,” Dimon recently said on a conference call. “Even if you stop and say, ‘Don’t invert,’ capital
will move away.”
And then Dimon added this hilarious kicker: "I'm
just as patriotic as anyone." Which is a little like the "some of my
best friends are black" racism defense.
I dare say that Jamie Dimon might not be exactly as
patriotic as anyone, like, say, a soldier holding it down at a forward
operating base in Afghanistan or, I don't know, maybe the CEO of a company that
decides against doing an inversion for reasons of actual patriotism.
But Jamie Dimon is not the first person in a Sorkin
column to declare their undying love of country while doing the opposite thing.
In a recent column titled "Reluctantly, Patriot Flees
Homeland for Greener Tax Pastures,"
Heather Bresch, the CEO of drug maker Mylan, called herself a patriot as she
reluctantly packed her bags to reluctantly move her company forever to the
Netherlands, in order to reluctantly cut her company's tax bill from 25 percent
to the "high teens."
Dimon and other defenders of inversions claim they keep U.S.
companies competitive and so are truly patriotic. If only the U.S.
would cut corporate tax rates, they say, then these companies would stop
running away. But most of these companies already pay far less than the
statutory tax rate of 35 percent. And one tax professor told Sorkin that the U.S.
would have to cut its corporate tax rate to less than 10 percent to have any
Unlike Dimon and Bresch, many bankers involved in
inversions apparently have normal human shame responses and thus declined to
comment to Sorkin on the record about inversions. One told Sorkin, anonymously:
“This is going to sound cynical, but as much as I may
hate these deals and the ramifications for our country, if I don’t do the deal,
my competitor across the street will be happy to do it."
Pro tip: If you ever hear an investment banker start a
sentence off with "This is going to sound cynical," you'd better
brace yourself for a blast of weapons-grade cynicism right in the face.
Obama has called for Congress to stop inversions, so of course they will
probably go on forever. But if even Andrew Ross Sorkin, who usually struggles to find reasons to criticize Wall Street, is angry
about them, then maybe the chances are a little better than we thought.
Jeff Saut wrote on July 24
"The biggest seller on the NYSE today has been NoDoz!?"
Cashin, Director of Floor Operations at UBS Securities
I have spent many a night with Art Cashin at Bobby Van's directly across from
the NYSE. Artie should actually write a book because there are not many of us
The stories he tells are unrivaled in stock market folklore, and it will be sad
if those tales are not recorded for future generations. The same experience
happened to me in a limo ride a few months ago with legendary investor Ron
Baron, eponymous captain of Baron Capital. Ron founded Baron Capital with $10
million in 1982 and his assets have grown to over $27 billion since then.
During that limo ride Ron said to me, "There are not many of us
Of course, the "us" in question is me! Indeed, in the next 25 years,
there will be very few of us who experienced the "crash" of 1987; so,
Art, write a book! I was actually in Barron's magazine in September of 1987
suggesting that there was going to be a "waterfall decline." Of interest
is that said "crash" commenced 64 months into the recovery in stock
prices. Also of interest is that the 1929 recovery rally peaked at 64 months,
the Nikkei 225 (INDEXNIKKEI:NI225) peak took
65 months, and the NASDAQ 100 (INDEXNASDAQ:NDX)
peaked at 64 months; so, the 64/65 month timing point historically seems
significant, at least to me, although I am not expecting anything like a crash
here. Yet, this month is month 64 from the "nominal bottom" of March
2009 and next month is month 65.
Yesterday, however, I received this note from one disgruntled advisor. "I
read your weekly strategy reports almost every week. I found this morning's
annoying. You said, 'a few weeks ago I turned more cautious on a near-term
basis.' Nonsense! You have been calling for a 10 to 12% pullback for at
least 7 of 8 months. Have I been misinterpreting your comments for the last 7
or 8 months?"
My response was, "I have repeatedly said that coming into the year we were
due for a 5 - 7% pullback in the first 3 months of the year based on the
historical odds. And, that those same odds suggest we are due for a 10 - 12%
drawn-down sometime this year. Whether we started it 3 weeks ago when we
traveled into the 1950 - 1975 target zone, triggered by the April 15, 2014
upside reversal session at SPX (INDEXSP:.INX)
1816, is unknowable. So it is true, I have said there should be a 10 - 12%
pullback sometime this year, but I have not been calling for it for the past 8
months and I do have the documentation to prove that."
Today is a big day for stocks given the consecutive "inside days"
trading range. With the Ukraine rebels handing over the "black box," a
breach of Monday's high or low price could foster a trading surge
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