Investing 102

[WSSix]

Originally Posted by GregWeld

On a personal note --- what people don't see is how many people make a living off the "rich" guy. The building of my home here in Sun Valley will keep some people employed for over two years. If I was taxed at ordinary rates - I'd have built a smaller project - or not built at all! I could have bought some other place (only the real estate agents would have gotten any income). That would have affected an awful lot of people here in the valley. The excavator - the cement guys - the framers - the plumbers - the electricians - the HVAC guys - the roofers - the sheet rockers - the painters... NONE of those guys would have made a dime off this project - and therefore neither would they pay ordinary income taxes on their earnings. So they can tax ONE guy (me) or they can collect taxes on a 100 people. I go out and have a meal regardless of the taxes I pay. But think about the 100 people. Do they go out or stay home? Do they buy some new equipment or not? Do they buy a new snow machine or have to sell the old one to pay the rent?

For any one that may be wondering, that is what trickle down economics means.

I remember the luxury tax of 91 even though I was only 11 and far from luxury. I remember it because twice a day I would cross the bridge into and out of Thunderbolt, Georgia and get to see the yachts and sailboats that were being worked on in the town. Seemed like in one day they disappeared and the company folded. It took a very long time for another business to open shop and be successful in that area. There was another shop in Savannah that I didn't get to see that also lost a lot of business due to that tax.
I too can see something similar happening should dividends become ordinary income tax. Only the harm will be much more broad. Let's hope no one gets any dumb ideas about changing the tax code and punishing retirement savings.

[Stuart Adams]

Originally Posted by GregWeld

Oh boy.... a loaded question that really is a tough one. For me personally -- it would change what I do to a certain degree as that would take a lot of disposable income away.

But, I need to make money on my money. How am I going to do that? Stocks? Bonds? Real estate?

The tax rate comes into play when BOND Yields have normalized returns (not the ultra low FED induced rates we have seen lately). That's when you look to tax free bonds - because you can calculate the tax free rate of return vs the taxable rate of some other investment. The problem with Bonds is you don't have the capital growth... so there is actual "risk" there that people fail to calculate.

Stocks have survived - and paid dividends - thru all manor of tax "schemes" by the government. Ditto real estate. Ditto bonds. So it's not a zero sum game regardless of what the tax scheme is. People still need to invest their money "somewhere".

Here's the way I look at it..... If I make 100,000 and I have to pay 35% - I still kept 65,000 for me. Obviously I like keeping 80,000 of the 100... and one can discuss the benefits (or not) of that free cash flowing back to the economy vs flowing back to Uncle Sam.

But the short response is -- I think it depends on how many other things are going in the economy. A big change would be a definite shock to the economy. Ala interest rates rising too quickly. It would really depend on how the change would roll in. If they gradually raised rates - people would have time to make the proper adjustments.

I remember when (1991) the Gov decided they were going to tax "luxury". So they put a 10% penalty tax on Boats and Furs and high dollar cars etc. It cost 60,000 jobs in the boat building industry in the US and put the fur industry virtually out of business (when was the last time you saw a woman wearing a fur or saw a fur store). But we know the "government" is not the best and brightest... That tax was repealed two years later because of the damage it did. Personally, I think raising the tax rate to ordinary income tax rates would do similar damage to the economy.

As usual -- it's a thorny issue. Many people believe the "rich" should be taxed - but what happens is that the man in the street pays a far heavier price when they loose their jobs.

On a personal note --- what people don't see is how many people make a living off the "rich" guy. The building of my home here in Sun Valley will keep some people employed for over two years. If I was taxed at ordinary rates - I'd have built a smaller project - or not built at all! I could have bought some other place (only the real estate agents would have gotten any income). That would have affected an awful lot of people here in the valley. The excavator - the cement guys - the framers - the plumbers - the electricians - the HVAC guys - the roofers - the sheet rockers - the painters... NONE of those guys would have made a dime off this project - and therefore neither would they pay ordinary income taxes on their earnings. So they can tax ONE guy (me) or they can collect taxes on a 100 people. I go out and have a meal regardless of the taxes I pay. But think about the 100 people. Do they go out or stay home? Do they buy some new equipment or not? Do they buy a new snow machine or have to sell the old one to pay the rent?


Like I said -- taxes are a thorny issue, and need careful consideration of the cause and effects. What sounds good on paper and in theory - can have debilitating effects down the chain.

Thanks. A patient mentioned that Obama was talking about that, it got my attention, and not in a good way. You da man!

[GregWeld]

Originally Posted by Stuart Adams

Thanks. A patient mentioned that Obama was talking about that, it got my attention, and not in a good way. You da man!

Obama would mostly likely love to issue an "executive order" to mandate taking 75% of my income so he can "redistribute" it to someone that hasn't held a job in their lifetime.... That would most certainly be very helpful to the economy.... for a day... until the recipient was broke again the next day and back on the free food wagon.

[toy71camaro]

Wow. MSFT and AMZN on the move today! Sheesh.

[GregWeld]

Originally Posted by toy71camaro

Wow. MSFT and AMZN on the move today! Sheesh.

You'd have had to have a lot of "conviction" to have held AMZN or MSFT for a long enough period to get to this point. Both of these stocks have had lousy performance for quite awhile.

If you chart them for comparison sake - only the move yesterday pulled them into "decent" performance category. I charted both against Snap-On (SNA) just for fun and SNA beats MSFT handily -- over a 5 year chart (212% vs 55%) and even beats AMZN (212% vs 209%). I'm laughing here because who'd have thought Snap-On could pound those two.... The performance would be even worse if you backed up a week (before the latest move).

Now --- punch FaceBook (FB) into the equation... it's only up 113% over the same period. HAHAHAHAHAHAHAHA

[GregWeld]

Here's an interesting little tidbit.... I'd have never guessed in a million years. Apple raised it's dividend 11% which is nice... but it still doesn't pay much "percentage wise"... at 1.42%


But here's what shocked me.....


Apple is now the largest payer of dividends writing checks for $12.1 billion a year, topping Exxon Mobil at $11.6 billion.

[WSSix]

Isn't Apple still at the top of the list for companies with the most cash on hand?

[glassman]

Originally Posted by WSSix

Isn't Apple still at the top of the list for companies with the most cash on hand?

Yes, (well from the "news") and "supposedly" paying off investors (partly). I read here a few pages back from one of us that Apple doesn't reward its investors nearly enough....

[GregWeld]

Originally Posted by WSSix

Isn't Apple still at the top of the list for companies with the most cash on hand?

According to this quarters report -- cash on hand - which included short and long term investments (bonds etc) is a whopping 192 BILLION. That's more than Microsoft and Google COMBINED.

Astounding...

In full disclosure I own 2000 shares.

Gwen and I discussed them (AAPL) the other day (she was a Microsoft exec for 19 years beginning in 1984 before they were a public company) - where MSFT seems to just come out with an "upgrade" which many times seems to us to be more complicated to use, or add ons that we don't need or use.... Apple manages to come up with truly useful products and software upgrades that enhance, or makes our lives, more fun or more productive. As a company for investing in -- being able to charge a premium price is directly linked to that companies ability to create desirable products. I think Apple (AAPL) has done this time and again. I only wish they shared that cash hoard with their shareholders. But it's hard to argue with their TOTAL RETURN. Remember we have to balance the dividend payout with growth... but the goal is fantastic total return.

[GregWeld]

Originally Posted by glassman

Yes, (well from the "news") and "supposedly" paying off investors (partly). I read here a few pages back from one of us that Apple doesn't reward its investors nearly enough....

You missed the part about TOTAL RETURN for investors being the key. That is made up of any combination of growth and dividend.

Apple (AAPL) has a 1 year total return of 56% - a 3 year T/R of 60% - and a 5 year T/R of 270%


I'll take a triple of my money in 5 years as a successful investment any day. :>)