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  • ridinycurve ridinycurve Jan 10, 2003 12:16 PM Flag

    you were asking E-ball ?

    <<It will make the tax code more fair at the Corporate level (to the detriment of REITs I am afraid). And I believe that it might NOT add to the deficit that you are so afraid of.>>

    You going to swap out high yielding REITS for low yielding stocks just to get a tax break. Show me what tax bracket that works in.

    You are living in the past. Running deficits means running deficits. Deficit spending is a necessary part of fighting deflation. Nobody is focused on balancing the budget, and shouldn�t be, unless he/she is an economic nincompoop.

    <<Since it is (by admission) not a stimulus bill, there will be no recovery anytime soon.>>

    It is a stimulus bill that focuses on long-term recovery and strength in the economy. The structural problems edging us, and the rest of the world, toward deflation will not go away on a quick fix.

    <<That should mean that (absent the deficit) my 2% 10 year prediction (and your 5% FNMA) has a good shot at happening, right?>>

    Since there WILL be deficit spending, your 2% 10-year is a total fantasy.

    ridin

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    • These high yields on MBS REITs are a temporary phenemoneon, a function of where we are in the cycle. The average dividend on NLY (per share at constatnt leverage) is 42 cents. At 19$ that is a 9% pre-tax. Hardly overwhelming--especially when retained earnings at tech companies are included in the tax break. Growth and stibility of earnings will matter more than ever, and the MREITs have seen the top.

      As for deficits, I am just repeating the supply-side mantra. If you reduce taxes on capital, Gov revenues will rise. There is some evidence of this.

      Japan has defecit spending levels that dwarf what our would be in a worse case (as a % of GDP) and they have a sub 2% 10 year.

      • 3 Replies to entropy_98_98
      • "Hardly overwhelming--especially when retained earnings at tech companies are included in the tax break."

        Except that Price to BV multiples on the tech stocks that are doing well tend to be extremely high. Retained earnings are a small portion of the valuation. Let's take a look at few:

        ORCL
        Retained Earnings = $853,000,000
        Market Cap = $68,920,000,000
        Retained Earnings %age of market Cap = 1.22%

        MSFT
        Retained Earnings = $19,920,000,000
        Market Cap = $298,000,000,000
        Retained Earnings %age of market Cap = 6.67%

        CSCO
        Retained Earnings = $7,520,000,000
        Market Cap = $109,800,000,000
        Retained Earnings %age of market Cap = 6.84%

        DELL
        Retained Earnings = $2,322,000,000
        Market Cap = $70,206,000,000
        Retained Earnings %age of market Cap = 3.31%

        SUNW
        Retained Earnings = $6,298,000,000
        Market Cap = $11,714,000,000
        Retained Earnings %age of market Cap = 53.76%

        I contrasted SUNW with CSCO,DELL,ORCL, and MSFT to show that the relatively healthy companies generating decent earnings are priced way up there, several multiples to BV. While SUNW trades at less than 2 times BV and isn't making any money. Now I would say that SUNW is a very risky investment even at these prices. For your statement to be meaningful for tech stocks one is going to have to take highly risky positions.


        "Growth and stibility of earnings will matter more than ever, and the MREITs have seen the top."

        First of all I don't think even you would try to sell us on the stability of earnings in tech stocks. Tech stock earnings are cyclical. Consummer non durables may be attractive but try finding some cheap stocks in this group with lots of retained earnings.

      • <<These high yields on MBS REITs are a temporary phenemoneon, a function of where we are in the cycle. The average dividend on NLY (per share at constatnt leverage) is 42 cents. At 19$ that is a 9% pre-tax.>>

        And a steep yield curve will persist for some time to come (IMO)�.and when the yield does drop to 9%, I�ll gladly take it (and don�t forget the ability to leverage up). Name me high yielding stocks that come anywhere close to competing�.and when everyone piles into those few stocks, what will be the yield then? Oh, and why do you suppose those non REIT stocks are yielding so much�.could they have some extreme systemic risk?

        <<Hardly overwhelming--especially when retained earnings at tech companies are included in the tax break.>>

        And the composite earnings on the NASDAQ 100 are NEGATIVE by how much?

        <<Growth and stibility of earnings will matter more than ever, and the MREITs have seen the top.>>

        Maybe near the top, but might stay there for a good long while, and they can grow their earnings through increased use of leverage and indexing up of floaters and ARMs�.and growth in earnings of non REIT companies may be very slow for years. Remember that 3% growth in GDP does not translate into earnings growth of 3% for public companies. Much of GDP growth takes place in privately held companies, some quite large.

        <<As for deficits, I am just repeating the supply-side mantra. If you reduce taxes on capital, Gov revenues will rise. There is some evidence of this.>>

        And they probably will rise sometime in the future, but that is certainly not the focus currently. How many people you know that still have large unrealized capital gains? Cap gains must be rebuilt.

        <<Japan has defecit spending levels that dwarf what our would be in a worse case (as a % of GDP) and they have a sub 2% 10 year.>>

        Much of the Japanese deficit spending has been squandered on unproductive projects that have their basis in political cronyism, graft, greed, and corruption. They do not add to future GDP. Once completed, the economic value of these projects goes to zero or near zero.

        ridin

      • << These high yields on MBS REITs are a temporary phenemoneon, a function of where we are in the cycle. The average dividend on NLY (per share at constatnt leverage) is 42 cents>>

        over what time period E-ball ?..... the share price did not average $19 over the same period and nobody denies that rising short rates will be bad for NLY ........but last i checked , you were still sticking to your 'death to NLY by CPR's and 2% 10yr' ....... has that changed ?

        << . At 19$ that is a 9% pre-tax. Hardly overwhelming-- >>

        just more than 99% of all public stocks that trade in the USA but hey , lets make liberal exaggerations and see if the peanut gallery notices ..........

        seems to me you only make the case for income oriented investors given at 9% pretax and max tax bracket , you're still MILES ahead of S&P average ........and NLY dividend would have to plunge almost 40% to get there .......

 
NLY
10.23+0.02(+0.20%)May 21 4:05 PMEDT