It certainly seems like Yahoo is trading cheap. As for getting to $71, that depends on them doing some type of transaction to spin-off their BABA shares without incurring taxes. That will take some time, although they mentioned that they are currently looking at different options. There's timing and uncertainty so Yahoo will trade at a discount to this end value, probably at least 10% and closer to 20%, so that would make a best short term target of the mid $50's. Then you have the BABA valuation. It probably spikes from the IPO price, but most of these famous IPO's tend to come back in price after peaking once the euphoria wears off, until they start to report earnings. Who really knows if BABA turns out to be the next google
len, you really should look at the Congressional Budget Office website to review the stats on the budget. Here's a summary.
First, the deficits started in 1975 and ran until 98. The surplus years were 98,99,2000 and 01. The deficit returned in 02. the change in defense spending from 01 to 02 was 306b to 349b.
Let's look at spending and revenue from 2001 to 09.
Spending went from 1862 to 3517. Revenue 1991 to 2105. Defense went from 306 to 656.
Before you conclude that the increase in spending was all due to defense, note the following on entitlements (01 to 09):
Social sec: 429 to 677
Medicare: 129 to 500
Medicaid: 129 to 250
Income sec: 143 to 350
Other retirement: 92 to 137. All told, that's 870b more in spending on entitlements which is more than the 350 increase in defense.
There's a Barrons article with the math of the sum of the parts on Yahoo. Regular business plus their cash and Yahoo Japan is worth $16 plus $6 for the BABA shares net of taxes that they are selling in the IPO =$22. They will still own BABA shares worth between $27-30b (at $70-80 per Baba share) = $27 per yahoo share before taxes which could be as much as 35%. So that's $49 total. The article is about tax-efficient waysfor yahoo to spin off the BABA shares like Liberty Media has done for some of their interests.
So the regular business (minus the cash, BABA and Japan) is valued at $8 and has EBITDA at 772mm, meaning it is selling at about 10 times EBITDA. Competitor AOL trades at over 7 times.
Even if BABA shares go to $100, that would only be another $7+ in yahoo value (before taxes). Based on that, Gambler, your hopes are a little high. But enjoy the ride. Just remember "pigs get fed, and hogs get slaughtered."
When considering govt statistics, it is always helpful to remember those great words from Mark Twain: "there are statistics, damn statistics and lies."
On the CPI, it's not so much the products and services that are captured, but the "adjustments" in the name of "product quality improvement" that are factored in keep the reported prices down.
Finally, there is a difference between disinflation and deflation. As long as the stock market stays up, there is no way the Fed reconsiders the taper decision.
Sarge, I got tired of listening to Gambler pump Yahoo so I decided to play along. I bought a call with a $43 strike for $2+ and sold a $48 call for 1+. I can make a maximum of $5 per option if Yahoo goes above 48 or lose the $1+ if it doesn't go above $43. It sounded like a good bet with Yahoo trading at $42 when I put the play on. It's only play money.
I wouldn't worry about the yhoo trade. Better for it to rise after the Baba IPO then to rise before and then sell off on disappointment Based on a recommendation, I have a spread play where I bought Nov 43's and sold Nov 48 calls. I've never done spreads before so I hope it works out.
Just read 2 stories that are turning the markets green. First, WSJ Fed reporter Jon Hilsenrath is saying that the Fed is leaving put their language that it will be a "considerable time" before they raise rates, although in the press confernence that follows they will qualify that somewhat. It's pretty sad that trading decisions are based on two words in a Fed statement, but it is what it is. Second, China started a QE program.
SC4, while the yields are on the low side, they are treated as return of capital for several years. Second, the article said they had 10-15% distribution growth rates for several years. As we have seen with the MLPs and particularly the GPs, it's the growth rate that matters the most. As for the power producers not honoring their contracts, these power producers are very large, investment grade entities.
Anyway, it's just a thought for more due diligence. We always have to keep looking for new opportunities.
Gambler, who really knows what is driving the market on any one day. The Fed will speak on Wednesday and I don't believe they will raise the Fed funds target, at least based on the stats that they keep pointing to. But, some of the hawks don't see the need to continue these extraordinary measures (QE, ZIRP) after 6 years. A return to a normal Fed funds would be about 2% if it is supposed to track inflation. Perhaps this is a little temper tantrum that the big boys are having to warn the Fed not to raise rates. Nonetheless, as long as some of the economic numbers keep showing strength (and they have been mixed) the drumbeat for higher rates will continue at least until we get a stinker number. The 10 year rose recently (which accounts for weakness in mREITs) and is running into resistance. Pension funds are probably taking profits in stocks and buying bonds.
The other wild card is the Scottish vote on Thursday.
I would keep YHOO until the Baba offering comes. You've come this far, why not see it through. Stops just tend to get taken out from under you.
I'm waiting for some buying opportunities and may even nibble at Keebon's SDLP if it gets oversold with RSI under 30.
The 50 dma on the S&P is 1972 and the 100 dma is 1945. If we break the first, the second is support.
A couple of interesting items from the i.v. mlp board. Someone posted an article from S&P on how they rate "yieldco's." Yieldco's are somewhat analogous to MLPs in that they can be formed by a sponsor to take certain cashflowing projects. The yieldco company is not hampered by the MLP rules as far as the type of project and the geographic location so they are being used for renewables like solar and wind. The Yieldco company is an LLC and there is no k-1, and here's the kicker, the dividends are return of capital for a long period. The article mentioned two companies: NYLD and TERP. TERP just came public in July and so they haven't declared their first divy. NYLD pays about 2.6% While some may run from these because of a negative view toward renewables, the artilce said that the yieldco's usually have the right of first refusal to buy projects from their sponsor which leads to projected dividend growth of 10-15% for several years. In a correction, we might get a buying opportunity.
The second article was a comparison of the flow rates of a couple of different oil wells that were drilled in the same areas by different companies using different amounts of water and sand. The later wells used many multiple amounts more of sand and water and achieved huge increases in flow of oil.
Jack, I would love to see the stats on retired people that you use to conclude that they are not spending. Maybe those that are in the lower quintiles. But I am sure the story for the upper two-fifths is different. Even with the housing implosion and past stock market busts, many in these groups benefited from rising house prices over the prior 20 years and a rising stock market. Can these more affluent BB carry the load for the rest of their class
IRM raised their dividend to 47.5 cents (1.90 annually). This is the first "new" dividend rate as a REIT. I expect the stock to be re-priced along the same metrics of other property REITs with a yield of 4% which would equate to around $47.50. Also all the REIT mutual funds will now be buying.
bob, I posted that 6 hours ago. I'm hurt that you aren't reading all of my posts. Guess, it didn't matter in today's bloodbath. But there's still 27 minutes left for the plunge protection team to hit the buy programs.
Gambler, well said. This is the bet as the 10 yr has risen to 2.6% The Fed speaks again next week. Last time rates moved up, they ran into resistance right at the 200 dma. The 200 dma is now 2.65%.
WMC is getting hammered, part due to the market selloff and part due to the interest rate fear. They should declare their next divy in the next week. I'm expecting a slight rise. The yield is almost 20% at the current price. I have a bunch.
It's definitely getting bumpy out there. Lots of stocks that don't have fundamental problems are getting sold with the ones that do.
except for HCLP and OILT. Now that OILT was one to grab when it corrected down to the low 40's. Like many, I had it on my screen but couldn't pull the trigger.
HCLP is being added to one of the Alerian MLP indices and EQT is being added to another one. HCLP has been bouncing around like a pinball. Just as it looks like it is breaking out, it comes back under $65. Adding it to the index should get it over $65 and keep it there.
The market is kind of boring right now (unless you're watching SDRL tank, ba da bing!) so I saw a piece in Barron's about buying call spreads on Yahoo and decided to try it out. I've never played with spreads but if it makes Huff rich enough to travel around the world, then there must be something to it. If it doesn't work out, then I'm coming for Gambler.
This is another example of difficult choices in investing. We all like to think we have a long-term horizon and can ignore short-term fluctuations, but if that was true, then we would not spend so much time looking at our stocks each minute. Oftentimes, by the time we recognize that the trend has turned for our favorite stock, the damage has been done and it is too late to sell. With SDRL, I think the error was thinking that it had overcome the recent issues it was facing. Clearly it had not, but the reconfirming of the divy made some think that the worst was over (one has to always be onguard for false support by management such as announcements of stock buybacks without actually buying stock or immaterial personal buys or other pr related events, like appearances on TV shows.). The stock was overbought in June when its RSI was well over 70. That was the time to sell. Maybe easier said in retrospect, but if you have a system and stick to it, you can't blame it when the stock continues to goes crazy as there is no way to predict that kind of behavior. Sometimes you sell a stock based on good reasons like valuation and then it goes on to become even more overvalued, but you can't expect all stocks to become way overvalued and allow you to exit with a larger than normal profit.
SDRL is almost oversold now and approaching support at $31. Below that, support is at $28. The question one would have to ask is if you feel the yield compensates you for the risk at this time. There's no harm in waiting until the picture clears -- either the stock finds support or fundamentals stabilize.
bob, I read the s.a. article that you referred to in a different post. Here is my difficulty with that article. The article makes a big deal about the difference in the interest rate spread that NYMT has versus other mREITs like AGNC and NLY. But the trouble is that NYMT being a non-agency mREIT can use as much leverage. Non-agency mREITs typically only use 3-4 times leverage while agency mREITs use 6-8 times.
Second, I could be wrong but I do not think a dividend increase is in the future (although I once said that any CFO worth his metal could find a penny or two if they had to). I think the s.a. article depends too much on the GAAP analysis. I'm no accountant, but I know that GAAP accounting, particularly for mREITs that invest in more complicated mortgage backed securities and use VIE's, can skew the earnings report.
In the 2nd q, NYMT reported on its cashflow statement cash from operations of $16,497. They paid out $37,736 in common stock divies and $2,906 in preferred divies. They had a bunch of unrealized gains and other financings that contributed to their EPS. I think it would be hard for them to increase the divy based on unrealized gains.