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Is The Old "Old Normal" The New Normal When It Comes To Dividends?
The broad theme of buying stocks because they are cheap - as evidenced by the dividend yield's premium to US Treasury yields - seems to fall apart a little once one look at a long-run history of the behavior of these two apples-to-unicorns yield indications. Forget the risky vs risk-free comparisons, forget the huge mismatch in mark-to-market volatility, and forget the huge differences in max draw-downs that we have discussed in the past; prior to WWII, the average S&P 500 dividend yield was 136bps over the 10Y Treasury yield and while today's 'equity valuation' is its 'cheapest' since the 1950s relative to Bernanke's ZIRP-driven bond market; the 'old' normal suggests that this time is no different at all and merely a reversion to more conservative times - leaving stocks far from cheap.
Source: BAML
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So, back to pre-great depression times, just awesome.
So our "Change" really translates to the old "Brother can you spare a dime".
I wonder if they called it "mark to fantasy" accounting back then too?
Dick Bove has advised, "buy the banks with both hands".
With the Fed backstopping risk, shouldn't I be all in? Look at BAC. Think about the upside when it recovers.
Nothing will "recover" until there are real consequences for bad behavior. "When it recovers" - LMFAO!!
do you mean around the neck or are you suggesting by the balls, squeezing excrutiating hard until they pop like any other economic bubble they created. Of course both would suggest buy to hold.
why the fuck are dividends not taxed as ordinary income (like interest) ?
i know the answer is to pump stocks and keep the 401k money coming, but the manipulation is so transparent
Because the minute before they were dividends those $ were taxed as corporate profits.
they were taxed as ordinary income before the Bush tax cuts
and the actual paid corporate tax is rate is less than 2%, so wtf is your point?
It's not my point it's the point.
As of 2008 the div tax has been knocked down to zero for the 10% and 15% tax brackets.
If you think that's such an outrageous giveaway then go buy some dividend paying stocks.
Or mail in a tip to the IRS if you think they have it all wrong, they could use the extra $.
and the reason the bush tax cuts were enacted was to stimulate demand for dividend paying stocks......to pump stocks as an investment class
whats next a tax credit for dividends ?
I think at least part of it is because there's a double taxation effect.
The shareholders are owners of the corporation which is treated as a separate legal entity. Corporate profits are taxed, then they're taxed again when they're distributed as dividends.
This makes total sense; this is also why the majority of us are NOT in the stock market (minus the fact the majority of intelligent epople know it's rigged. As my friend Lou said, "Even if we HAD money, our generation would tell stocks to go fuck themselves, anyways".
Also, notice MSM pumping the dividend and yield propaganda. Especially our boy Jim Cramer over at CNBC. He'll says what others will parrot about this "bargain" market: "But look at the yields! They are fantastic and are such a fundamental indicator of performance!".
The propaganda reminds me of a poker tale about the late great Chip Reese, considered by some the best poker player in history (he wasn't great at No Limit Hold Em, but probably the best 7 Stud player, in all forms, in thistory of the game). When players would come to the game, he's come up to them, shake their hand, smile ,say hello and basically be the nicest guy in the world to you, "Hey buddy, welcome to Vegas! Have a seat, we got your best food, drink, and even your best games running! Have a seat!".
Hours later, players would be cleaned out, but with a smile on their face playing with such a gentleman and genuinely nice guy (I met the man before he died - he's a great dude) who was one of the biggest cutthroat sharks in Vegas.
cramer should have been a jockey....he's like 4-11
and many jockeys fix races (per their rich owners requests) ...perfect for cramer
Yields aught to outperform as stock prices decline, but also as yields remain depressed in the bond markets. If there's an earnings decline, then you'll have a search for yields, taking into account currency depreciation.
Dividends... How quaint (in a klepto-facist eCONomy)...
Or NEO-CONomy
I meant to include 'CORPORATE' in there as well... Your definition fits...
The redline "new normal" at -2 implies negative dividend yield at 1.65 on the 10YT......so not very helpful is it?
I've gone to the way-back machine and today's bad guy is Alexander Hamilton ..... he set up the entire model leading us to where we are today.
A little off topic but has anyone got the straight dope on CAFR. and any shenanigans surounding it? any good links would be much appreciated.
Interesting to see data which supports my intuitive conclusions. The argument that stocks are "cheap" has been incredible to me for some time. I started exiting my equity positions back at the 10,300 level (roughly Flash Crash time frame). And I unloaded the balance spring of 2011 at 12,300.
Kudos for proper use of incredible...
The solid MLPs are looking very good in this enviroment.... eg TCP, LINE
Hell at the rate we are going, we might get a rennaissance of true value investing along the lines of Ben Graham...
if people simply want to gamble it is 2012 and time to stop confusing gambling with "investing"
it seems to me that the macro situ does not offer much in the way of reward for putting my money at risk
now there are 3000 ways to "play" this but making bets and letting the banksters fade you while you tell them yer stops to protect yourself just does not seem like a good idea for slewie
when i was a kid the local "mobsters" would run numbers and daily double bets; they were nicely dressed and had the toothpick thing workin and they paid [in silver no less!]
now it seems the whole wealth of nations is involved
veryy nicely dressed, no toothpick, and good luck cashing out!
"good luck cashing out"
~~~
That's the point ain't it slewie?
It's like a casino ON FUCKING FIRE & you're trapped there... hittin' on "16"... with a stack of chips in front of you... (with no regards whatsoever to the people who are making their way towards the exits, nor the cashier's window, nor even the dealer in front of you)...
Odd. I have not considered stocks cheap in price OR reasonable in value since they bottomed a few years ago...
Two words: shrinking yields.
Have fun holding the MO at $36 bag.
Wow, that's the only chart I've seen that comes close to being as big a sucker play as AZO. You've got the same stock boner and evaporating book value. Let me guess ... buybacks!