The Oracle of Omaha says the U.S. economy has plenty of runway left before the next recession. “Right now, there’s no question: It’s feeling strong. I mean, if we’re in the sixth inning, we have our sluggers coming to bat right now,” Buffett said in an interview with Becky Quick on CNBC’s “Squawk Box” Thursday morning.
Buffett added: “Business is good. There’s no question about it.”
— Read on money.com/money/5304816/warren-buffett-just-made-a-surprising-prediction-about-the-economy/
Florida U.S. Senator Marco Rubio was recently on CNBC warning American investors and public pension funds who invest in stocks of Peoples Republic of China businesses listed on U.S. stock exchanges to beware. Like Enron and Worldcom, the companies could potentially be fraudulent enterprises, or like they say in Texas, “big hat, no cattle” entities. Essentially, these Chinese “public” companies are not regulated by the Securities and Exchange Commission (SEC) like their American counterparts. And, these listed companies are not currently required to abide by U.S. or Western generally accepted accounting practices (GAAP) standards.
The SEC exists to protect U.S. investors from the shenanigans of public companies. Yet, trillions of dollars of U.S. capital from American investors and pension funds are invested and continue to flow into these highly risky non transparent companies that are not regulated by the SEC.
If there was ever a time for investors or buyers of stocks to beware, it would relate to investments in Chinese stocks. Even the large cap highly own stocks of Chinese companies such as Alibaba (BABA), Tencent (TCEHY), Nio (NIO) and Baidau (BIDU), pose major potential risks to U.S. investors since no independent accounting firm has audited their financial reports or filings to assess their veracity.
Just like the quarterly and annual numbers of gross domestic economic product provided by the Chinese Communist government are viewed as works of fiction by most Western economist, Chinese companies’ financials should be reviewed with similar, if not , more scrutiny and skepticism.
CNBC Mad Money host Jim Cramer has commented on many occasions to viewers that he personally avoids and would not recommend his viewers to invest in Chinese companies stocks. He cites their lack of financial transparency and unknown corporate governance as reasons to avoid all but the largest of these stocks.
Finally, Senator Marco Rubio and Hayman Capital Management founder Kyle Bass, have been sounding the alarm for years about the threat potentially posed to the U.S. financial markets and to the retirement pension plans of millions of Americans by these listed foreign companies. Senator Rubio, along with a bi-partisan group of Senators, have been both sounding the alarm and proposing that all companies listed on major U.S. security exchanges be required to follow the same reporting standards and independent audit requirements followed by U.S. public companies. And, those foreign companies found not in compliance with SEC regulations for public companies should be de-listed from American security exchanges.
Official Apology from Trey Parker and Matt Stone
“Like the NBA, we welcome the Chinese censors into our homes and our hearts. We too love money more than freedom and democracy. Xi doesn’t look like Winnie the Pooh at all. Long live the Great Communist Party of China! May this autumn’s sorghum harvest be bountiful! We good now China?”
For the past twenty to thirty years, thousands of American and Western European international corporations have had to compromise abiding by Western democratic values and rights, those same values and rights that made them successful, to conduct business inside China and access the enormous Chinese domestic market.
From all appearances, these corporations have sought bottom line profit and top line revenue growth by doing business in China above basic human values of freedom of speech and the rule of law.
For decades, corporations have literally bent over backwards and several have performed ‘unnatural acts’ to appease the Chinese autocratic government officials. These corporations have overlooked draconian censorship, brutal repression, forced labor and re-education of minority ethnicities, and outright fraud to chase monetary gain in China.
No American or Western European corporation appears immune to seeking profit over values to conduct business in China. Google, one of America’s largest technology companies, appeared to ignore its own corporate values and offered a version of its search engine and services that conformed to the Communist autocratic government’s oppressive censorship policies. Only after Google employees threatened to strike and the American media shined light on the deal did Google abandon the effort.
Now, thanks to the NBA desire to expand in China and a team’s general manager’s tweet supporting the Hong Kong protestors, Chinese harsh censorship and irrational response by global norms to core American values and rights, freedom of speech and rule of law, are finally getting the media and public attention it deserves. With billions of dollars and international market growth at stake, NBA Commissioner, Adam Silver, is attempting to tightly walk a fine line between living by Western core values of freedom of speech while simultaneously preserving access to the lucrative Chinese domestic markets.
What lessons Americans should learns from the current controversy is that the Chinese Communist autocratic government ruthlessly censors speech, curbs individual freedom, runs roughshod over the Western standard rule of law and represses any entity, individual or corporate, that challenges or threatens its legitimacy or core principles.
Houston Rockets general manager Daryl Morey’s now-deleted tweet in support of the Hong Kong protests and the response to it have already earned more attention than dozens of other stories in recent years documenting questionable relationships between U.S. companies and Beijing, writes Jake Novak.
— Read on www.cnbc.com/2019/10/08/chinas-reaction-to-the-nba-is-the-wake-up-call-the-world-needed.html
The Dow dropped more than 3% on Tuesday and Wednesday on fears of a recession, making it the worst start to a quarter since 2008. A more optimistic view prevailed by the end of the week.
— Read on www.barrons.com/articles/dow-jones-industrial-average-battles-back-as-recession-fears-recede-51570238255
Effective investors often share these 6 traits. These traits are useful for those who prefer to control their investing with a hands-on approach.
1. They start investing early. It’s math: The more years investors begin to invest, the more money they may be able to earn through the power of compounding. Starting early means a longer investment time horizon. And, a longer time horizon allows you to invest in assets that have more growth potential over time.
2. They prioritize their goals. With clear goals and a clear time frame, investors can prioritize. That helps develop asset allocation because an investor has time horizons around those goals.
3. They save consistently.. Consistently save a portion of their income generally reach their goals faster. Those who make contributions to their retirement savings every year, as opposed to those who skip some years, can accumulate more and are more likely to reach their goals.
4. They’re comfortable taking risk. Successful investors know that for the potential to grow their assets faster than inflation, they’ll have to invest in assets with a higher than expected return, such as stocks, which carry higher levels of risk.
5. They diversify. Investors spread their money among different asset classes — stocks, bonds, real estate, commodities, and others — and also diversify within those asset classes. That might mean, for example, owning stock of U.S. companies, as well as companies in other countries.
6. They’re tax-wise. Taxes should never be the sole driver of an investment decision, but making tax-wise investment decisions can help maximize after-tax returns. For example, investors might choose to move money from taxable accounts into assets with lower or no tax obligation, such as municipal bonds.
Covered-call writing and cash-secured put selling can be used in conjunction with dividend growth investing to generate even more income in a portfolio.
By lowering our long-term cost basis, the rate of success will increase substantially compared to buying stock outright at market.
Conservative option selling strategies, known as covered-call writing and selling cash-secured puts on a monthly basis.
Dividend growth investing is by far the best opportunities which can help investors live off their dividends.
By selling options on stocks we’d like to own, we target annualized returns exceeding the 10% level in order to get sufficient premium while receiving a substantial discount if the shares are put to us by expiration. This helps not only reduce our cost basis, but we can benefit from a high IV rank which measures historical volatility against current volatility.
Selling covered calls combines upside potential, premium and corporate dividends we may receive along the way.
Some basics about options. Calls grant the owner the right to buy a stock at a preset price, called the strike price, up to a certain date. The cost of the option is called the premium, and it generally moves up and down with the price of the underlying stock. Options can last anywhere from minutes to months before they expire. One option contract controls 100 shares of stock.
A call is “in the money” if the market price of the stock is above the strike price. If the stock trades below the strike price, the option is said to be “out of the money.” If you sell calls against stocks or ETFs you own, you’ll immediately collect the premium, which you keep no matter what happens to the stock. Sell calls consistently and you’ll generate a steady income stream.
The main drawback of this strategy is that it caps your potential gains in a stock. If your shares get called away, you could miss out on profits in a fastrising market. Nothing would stop you from buying the stock again at the market price and selling another call. But you may owe capital gains taxes on the shares you sold. Option premiums are taxable as ordinary income.
That could be costly if you’re in the top federal tax bracket of 43.4%. And, of course, the premium you earn from selling a call may offer little consolation if the stock tanks.
The most challenging issue may be figuring out which calls to sell. One simple way to use the strategy:
The individual premiums may not amount to much—maybe one to two percent per share for a $50 stock. But selling calls like this every few weeks could lift your annual income by five to eight percentage points a year. The more volatile the stock, the greater the premium you’ll pick up with each sale (though you’ll face more risk that the stock will be called).
Keep in mind, you may have to give up the stock if the market bounces higher before your call contract expires. But aside from taxes you may owe on the sale, tha
Chinese companies do not deserve to be listed on U.S. stock exchanges if they don’t adhere to the same standards as every American company, said hedge fund manager and Hayman Capital Management founder Kyle Bass.
With about $1 trillion of American capital moving into China by 2021 and around $2 trillion worth of Chinese entities listed in the U.S., Bass said the U.S. needs to crack down on the “insane” nature of U.S.-China business standards.
“Imagine what kind of fraud is behind these companies,” Bass told CNBC’s “Squawk on the Street” on Monday. “All of the U.S. money that goes into Chinese companies, it goes into companies that don’t operate under a rule of law.”
Social Security benefit may be subject to 1 of 3 potential tax treatments depending on your income at the time you collect:
It won’t be subject to federal income tax.
Up to 50% of it will be subject to federal income tax.
Up to 85% of it will be subject to federal income tax.
Let’s say you retire at age 62 and cover your living expenses by taking withdrawals from a tax-deferred retirement account—a traditional IRA. The amount you withdraw from your traditional IRA will lower your account balance. This may reduce your future required minimum distributions (RMDs), which are calculated by dividing your retirement account balance (as of December 31 of the previous year) by the IRS’s life expectancy factor.
Since your RMD is considered ordinary income, smaller distributions can help you control your income when you begin collecting Social Security at age 70.
if you defer your benefit until you’re age 70 and live until age 90, you’ll collect $652,560 in Social Security over the course of your lifetime. If you don’t defer your benefit and begin collecting at your full retirement age (66), you’ll collect almost $80,000 less over the course of your lifetime.
Note: Example excludes inflation.
A timeless debate perseveres because it’s a fair fight—both sides of the argument hold water. Folding your pizza makes it easier to eat; not folding it makes it last longer. Cats are independent; dogs are loyal. No matter what you call it, a sandwich is delicious—so just enjoy it. Taking Social Security at full retirement age means you may be able to preserve other financial resources; deferring until age 70 means you’ll get more money when you do collect.
Several personal factors will likely influence when you decide to collect Social Security. At the risk of sounding morbid, you won’t know whether you’ve truly made the “right” decision until it’s too late. So the best advice I have to offer is to choose your Social Security start date based on the facts you know right now. If you get a good night’s sleep after you’ve made your decision, you’re on the right track.
*Source: longevityillustrator.org, supported by the Society of Actuaries.
— Read on vanguardblog.com/2018/05/30/the-social-security-timing-debate/
Shareholders’ equity is all earnings retained by the company, plus any capital paid in by shareholders. You can calculate shareholders’ equity by subtracting the company’s total liabilities from its total assets.
What Does Return On Equity Signify?
ROE looks at the amount a company earns relative to the money it has kept within the business. The ‘return’ is the profit over the last twelve months. That means that the higher the ROE, the more profitable the company is. So, all else being equal, a high ROE is better than a low one. That means it can be interesting to compare the ROE of different companies.
What’s A Good ROE?
By comparing a company’s ROE with its industry average, we can get a quick measure of how good it is. However, this method is only useful as a rough check, because companies do differ quite a bit within the same industry classification.
How Does Debt Impact ROE?
Most companies need money — from somewhere — to grow their profits. The cash for investment can come from prior year profits (retained earnings), issuing new shares, or borrowing. In the first two cases, the ROE will capture this use of capital to grow. In the latter case, the debt required for growth will boost returns, but will not impact the shareholders’ equity. That will make the ROE look better than if no debt was used.
Careful use of debt to boost returns is often very good for shareholders. However, it could reduce the company’s ability to take advantage of future opportunities.
The Key Takeaway
Return on equity is one way we can compare the business quality of different companies. A company that can achieve a high return on equity without debt could be considered a high quality business. If two companies have the same ROE, then I would generally prefer the one with less debt.
But when a business is high quality, the market often bids it up to a price that reflects this. The rate at which profits are likely to grow, relative to the expectations of profit growth reflected in the current price, must be considered, too.