80 Percent Chance of Market Crash Next Year, Says John Hussman (bankrupt, insurance)

[user_id]

Originally Posted by Teak

Huh? What is your source to prove that there is a preference for capital gains due to the tax structure??

The tax code has preferred capital gains for awhile, it is only recently that the tax treatment is some what similar. Regardless, there are a number of tax differences between the two still. Dividends are ordinary income, capital gains are not. You most realize dividends, you only realize capital gains when you sell the underlying asset. etc. Dividend payments are lower now than they have been in the past.

Originally Posted by Teak

Let me take a look at some of my current dividend return rates:
BHP 5.67% (on my cost basis)
CVX 5%
ENB 3.5%
ETN 3.5%
MO 7.6%
KMB 4.3%

This of course is rather silly. Looking at the rate of return on dividends in one period means rather little, so does looking at the dividends in isolation of valuations of the underlying asset. But those rates are not good given the risk, you can get similar rates with much safer investments (e.g., bonds)

Originally Posted by Teak

I will get paid again next year, and the year after that, and the year after that, and the year after that, and ......

Unless of course they cut their dividend, go bankrupt, etc. You seem to think stocks are bonds?

Originally Posted by Teak

So tell me, oh wise one, what should we buy-and-hold suckers put our money into, if not companies that are weathering the recession fairly well, and continue to pay out dividends (and raise dividends)??

Most people would probably be better off in bonds over the next 10 years or so.

Originally Posted by Teak

Not really waiting since I doubt that you have much skin in the game anyway....

I already stated I don't have "much skin in the game" in terms of equities. I would get involved with trading if I had more time, but I'm not interested in "buying and holding" shares of a company I have no control or say in.

[Traderx]

Originally Posted by user_id

Most people would probably be better off in bonds over the next 10 years or so.

What would make you think that?

Isn't it probable that rates will rise over the next 10 years? Unless they start charging you to borrow your money they can't go much lower.

[Teak]

Originally Posted by user_id

The tax code has preferred capital gains for awhile, it is only recently that the tax treatment is some what similar. Regardless, there are a number of tax differences between the two still. Dividends are ordinary income, capital gains are not. You most realize dividends, you only realize capital gains when you sell the underlying asset. etc. Dividend payments are lower now than they have been in the past.

Yes, dividends are ordinary income and for me they are untaxed since I fall under the Foreign Earned Income exclusion. I collect thousands of US$ in dividend payments each year, I file my form, but no taxes are owed. And I don't have to sell anything to achieve these returns. They are a return on my capital, without having to liquidate the capital.

This of course is rather silly. Looking at the rate of return on dividends in one period means rather little, so does looking at the dividends in isolation of valuations of the underlying asset. But those rates are not good given the risk, you can get similar rates with much safer investments (e.g., bonds)

A dividend return of 7.6% is silly?? A company like Altria does, in fact, act pretty much like a bond. Addictive activities, such as smoking are, well, addictive. Thus, I expect the addictions and dividend payments to continue for a long long time. Research at the U of Pennsylvania has shown Altria to be the highest-returning stock of any over ~100 years. A large part of that return is the return of capital in the form of dividends. I think it is silly for people to call this crap.

Unless of course they cut their dividend, go bankrupt, etc. You seem to think stocks are bonds?

Well, some stocks are like bonds, but actually better. In addition to a steady stream of dividend payments, they can and do appreciate in price much more rapidly than bond funds. But if one has no desire to sell, ever, then the dividend growth rate is more important than price appreciation.

Most people would probably be better off in bonds over the next 10 years or so.

I already stated I don't have "much skin in the game" in terms of equities. I would get involved with trading if I had more time, but I'm not interested in "buying and holding" shares of a company I have no control or say in.

So don't buy-and-hold!! But don't call those of us who do suckers.

Did you know that bonds can go bad also?? Let me think, does the name Dubai ring a bell right about now??

[user_id]

Originally Posted by Traderx

What would make you think that?

Isn't it probable that rates will rise over the next 10 years? Unless they start charging you to borrow your money they can't go much lower.

Because the equity markets in terms of "buy and hold" are likely to be worse over the next decade or so.

In terms of rates going up, sure rates are likely to go up. I'd suggest either planning on holding the bonds until maturity or buying a short or intermediate term bond fund.

[user_id]

Originally Posted by Teak

Yes, dividends are ordinary income and for me they are untaxed since I fall under the Foreign Earned Income exclusion.

So what? I'm talking about their treatment in the aggregate, that is what is important in terms of policies effecting market behavior.

Originally Posted by Teak

A dividend return of 7.6% is silly?? A company like Altria does, in fact, act pretty much like a bond.

I did not say a dividend of 7.6% is silly, rather I stated that looking at the rate of return over one period in isolation is silly. And common stock is never like a bond...

Originally Posted by Teak

Well, some stocks are like bonds, but actually better.

I guess to someone that does not know what a stock or bond is? But you seem to believe that 1.) Companies never go bankrupt, 2.) Companies never cut their dividends, 3.) Equities always appreciate. Of course, that is all ridiculous.

Originally Posted by Teak

So don't buy-and-hold!! But don't call those of us who do suckers.

Why? You're suckers. I just wish I had more time to steal your money via trading. I mean serious, have you ever wondered why one should actually make money by merely purchasing some common stock and holding it? If that actually made people reasonable returns in general everyone should be rich by now..

Originally Posted by Teak

Did you know that bonds can go bad also?? Let me think, does the name Dubai ring a bell right about now??

Sure, the entity issuing the bond can default. But when I said people would be better off in bonds I did not have in mind the foreign debt of nations that produce nothing of any real value. Rather low-risk bonds.

Bonds out-performed equities over the last 10 years, I expect the next 10 years to be rather similar.

[jimhcom]

Originally Posted by lumbollo

Let's see. The crash of 8-10 months ago was from the bubble popping that was created by:

• Lowering the cost of money to 1%/year
• No regulation on the finance industry
• Endless encouragement for people to consume as much as possible
• Off shoring of middle class jobs to improve corporate profits
• Two unfunded wars

What was the solution to fixing the above?

• Lowering the cost of money to 0%/year
• Handing a trillion+ dollars to the finance industry with no regulation
• Federal government borrowing money to give to people to consume as much as possible
• Off shoring of middle class jobs and huge layoffs to improve corporate profits
• War escalation, still unfunded

The definition of insanity is to repeat the same action over and over and hoping for a different result. Money in the market right now is a gamble and nothing else. I have no idea when it will fall again, but I would not bet that it will last much past the first Tuesday in November 2010. Better have a plan for that.

Excellent!! Reps to you.

[Teak]

Originally Posted by user_id

I did not say a dividend of 7.6% is silly, rather I stated that looking at the rate of return over one period in isolation is silly. And common stock is never like a bond...

If you buy a dividend-paying stock at say 5% dividend yield (for example), and you reinvest the dividends, that dividend yield on your cost basis will increase each time a dividend is reinvested. That is NOT a rate of return over one period in isolation. And when the company increases their dividend, the dividend yield on your cost basis will grow faster.

I guess to someone that does not know what a stock or bond is? But you seem to believe that 1.) Companies never go bankrupt, 2.) Companies never cut their dividends, 3.) Equities always appreciate. Of course, that is all ridiculous.

No, I did not say that companies never go bankrupt, or never cut their dividends. But, how does a bond-holder escape when companies go bankrupt?

Let's look at some examples. GM shareholders lost out, and so did their bond-holders. Yes, bondholders come higher up in the repayment scheme. They take a lower risk for a lower reward. Their return is based upon the coupon rate of the bond (if they are the original purchasers of the bond). Dividend investors take a greater risk, but have the potential for greater reward with return in the form of dividends and capital appreciation.

A bond is a cost to the company and must be paid unless the company restructures under bankruptcy law. A dividend is paid out AFTER taxes and interest (on bonds) have been paid and are arbitrary. Thus, we buy-and-hold suckers buy only companies with long track records in paying out dividends and growing those dividends.

Why? You're suckers. I just wish I had more time to steal your money via trading. I mean serious, have you ever wondered why one should actually make money by merely purchasing some common stock and holding it? If that actually made people reasonable returns in general everyone should be rich by now..

Steal my money by trading?? You confuse long-term investors with day traders. Go ahead and try to steal my money; I told you some of the companies that I have invested in; go ahead and short those stocks.

I have 13 years of personal proof that long-term investing works. But why waste the details on a skeptic? I gave you a list of some of my investments; let's see a list of yours.

Sure, the entity issuing the bond can default. But when I said people would be better off in bonds I did not have in mind the foreign debt of nations that produce nothing of any real value. Rather low-risk bonds.

Low-risk bonds, like what? Treasuries??

Bonds out-performed equities over the last 10 years, I expect the next 10 years to be rather similar.

Don't look at just the capital appreciation of the broad market. Look at a selected list of dividend payers. As a buy-and-hold sucker, I didn't run out and buy the hot stocks, like petfoodonline.com, or CrocsAreStupidShoesForIdiots.com.

I think that Procter & Gamble will be around a lot longer than you think.

[floridasandy]

Originally Posted by lumbollo

Let's see. The crash of 8-10 months ago was from the bubble popping that was created by:

• Lowering the cost of money to 1%/year
• No regulation on the finance industry
• Endless encouragement for people to consume as much as possible
• Off shoring of middle class jobs to improve corporate profits
• Two unfunded wars

What was the solution to fixing the above?

• Lowering the cost of money to 0%/year
• Handing a trillion+ dollars to the finance industry with no regulation
• Federal government borrowing money to give to people to consume as much as possible
• Off shoring of middle class jobs and huge layoffs to improve corporate profits
• War escalation, still unfunded

The definition of insanity is to repeat the same action over and over and hoping for a different result. Money in the market right now is a gamble and nothing else. I have no idea when it will fall again, but I would not bet that it will last much past the first Tuesday in November 2010. Better have a plan for that.

totally agree that was an excellent post. it seems that we haven't learned very much, with the same mistakes still being made and the same cheerleaders still cheering the mistakes.

[james011]

I don't know about you guys, but the crash after Obama's election was like godsend. Recovered all my losses in 08 and doubled my previous gains from 2000-2008. So you doom and gloom people, don't be so quick to enjoy the schadenfreude.

Don't hold during high volatility. Buy low, sell high™

[sterlinggirl]

Originally Posted by user_id

Why? You're suckers. I just wish I had more time to steal your money via trading.

If you spent less time dissecting posts to argue minutia, you'd have plenty of time to trade.

I mean serious, have you ever wondered why one should actually make money by merely purchasing some common stock and holding it?

To support the production of goods and building of infrastructure rather than being a leech on the investments of others? Of course that would require you to have some personal pride...