Tuesday, March 3, 2015

Good vs. Evil...Great Column from Dennis Prager

Why Obama So Dislikes Netanyahu

Tuesday, Mar 3, 2015
There is no question about whether President Obama — along with Secretary of State John Kerry and the editorial pages of many newspapers — has a particular dislike of Israeli Prime Minister Benjamin Netanyahu.
But there is another question: Why?
And the answer is due to an important rule of life that too few people are aware of:
Those who do not confront evil resent those who do.
Take the case at hand. The prime minister of Israel is at the forefront of the greatest battle against evil in our time — the battle against violent Muslims. No country other than Israel is threatened with extinction, and it is Iran and the many Islamic terror organizations that pose that threat.
It only makes sense, then, that no other country feels the need to warn the world about Iran and Islamic terror as much as Israel. That’s why when Benjamin Netanyahu speaks to the United Nations about the threat Iran poses to his country’s survival and about the metastasizing cancer of Islamist violence, he, unfortunately, stands alone.
Virtually everyone listening knows he is telling the truth. And most dislike him for it.
Appeasers hate those who confront evil.
Given that this president is the least likely of any president in American history to confront evil — or even identify it — while Benjamin Netanyahu is particularly vocal and eloquent about both identifying and confronting evil, it is inevitable that the former will resent the latter.
The negotiations with Iran over its nuclear weapons program are today’s quintessential example. Those who will not confront a tyranny engaged in terror from Argentina to the Middle East, and which is committed to annihilating another country, will deeply resent Israel and its leader.
For those who doubt the truth of this rule of life, there are plenty of other examples.
Take the Cold War.
Those who lived through it well recall that those who refused to confront communism vilified those who did. Indeed, they vilified anyone who merely labeled communism evil. When President Ronald Reagan declared the Soviet Union an “evil empire,” he was excoriated by those who refused to do so. Yet, if the words “evil” and “empire” have any meaning, they perfectly applied to the Soviet Union.
But to those who opposed Reagan, these words could not be applied to the Soviet Union.
New York Times columnists lambasted the president for using such language. The newspaper’s most prestigious columnist at the time, James Reston, condemned Reagan for his “violent criticism of Russians as an evil society.”
Anthony Lewis accused Reagan of using “simplistic theology.” Reagan was using “a black and white standard to something that is much more complex.”
Tom Wicker wrote that “the greater danger” than the spread of communism “lies in Mr. Reagan’s vision of the superpower relationship as Good versus Evil.”
Columnist Russell Baker added his contempt for Reagan’s characterization of the Soviet Union. And, in a long Times article under the headline, “Reagan’s Gaffe,” an unnamed “strategist” for former Vice-President Walter Mondale told the newspaper that “Mr. Reagan had undercut diplomatic efforts of recent months” — exactly as the Times and the Obama administration now describe Benjamin Netanyahu doing to the negotiations with Iran.
(For a detailed description of the reactions to Ronald Reagan’s anti-communism, see Ann Coulter’s book, “Treason.”)
Some 20 years later, when President George W. Bush characterized the regimes of North Korea, Iraq and Iran as an “Axis of Evil,” he was likewise lampooned — as if those mass murderous tyrannies were not evil.
In short, those who refused to characterize the Soviet Union as evil loathed Ronald Reagan and other anti-communists for doing so; and those who objected to the “Axis of Evil” label placed on North Korea, Iran, and Iraq loathed George W. Bush and his supporters. The loathing of Benjamin Netanyahu is simply the latest example of the rule that those who will not confront evil will instead confront those who do. (It’s much safer, after all.)
Since the end of World War II, there has been a name for the people who refuse to confront evil and who resent those who do: leftists.

Tuesday, February 24, 2015

Chump IRA Historical Dividend Growth Graphic...Very Pretty

I've been messin' with excel's graphing features again... here is the result:

This is a nice visual of the yearly dividend growth.  Each quarter and full year are shown.  The total annual dividend has grown at a rate of over 17% annually since 2011.  I love to see the growth in each quarter, as well as each year, I find this very motivational ;-)

My recent sale of Walmart, and addition of better growers will only enhance this growth in 2015.



More on My GE Purchase Yesterday

Interesting insider activity at GE, from today's SA:



  • It’s always a good idea to keep track of the insider buying activity.
  • General Electric’s director purchased 800,000 shares of the company for nearly $20 million.
  • General Electric’s shares haven’t moved yet.
  • Could this be an opportunity for investors?
Peter Lynch, the iconic hedge fund manager at Fidelity Investments and the author of two of the most widely recognized investment books "One Up On Wall Street" and "Beating The Street", wrote:
Insiders might sell their shares for a number of reasons, but they buy them for only one: they think the price will rise.

Monday, February 23, 2015

Selling Walmart, and a Few Additions

After a long weekend of consideration, I've decided to sell my position in WMT today.  I closed the position with a gain of around 13.5%, over 2.5 years...pretty anemic.  The final straw was their measly $0.01 dividend raise announced last week, coupled with the announcement they are going to pay their employees more money.  I don't mind the increase in wage, but they said it would cost $1B!!  Ouch.   For Costco, who sells higher end products with high margins, they can pay their employees better, but at the worlds's low cost seller, they can't.  Low yield, slow to no growth, no growth in the dividend...I'm better off owning other names, including utilities....

More on the adds soon, started a 1/3 position in GE (3.6%Y), added to DOV(2.1%Y) and SO(4.6%Y).  And I still have some cash left over.

Here are the FASTGraphs:

First GE:

A few comments on GE:
  • I've owned it in my taxable account for over a year...its pulled back some recently, and presents a good value at current prices
  • GE has a yield of 3.7%, and has been on the rise every year since the financial crisis
  • GE is rated AA+ by S&P, and has sold off their financial business making them less risky
  • GE is huge, global, and into so many markets and countries....a great conglomerate for the long haul.
Next is current holding DOV:

A few Dover comments:
  • Dividend Aristocrat, with raises in the dividend for 59 consecutive years!
  • Price has pulled back some recently due to a rare sales and eps reduction in 2014
  • Slightly underweight position in the portfolio, decided to add a small amount here
Next is utility SO:

A few SO comments:
  • I've held Southern in the chump IRA for 2 years or so, very low Beta of 0.16
  • Yield is 4.6%, and on a Price/Cash Flow basis, the stock is a bit under valued
  • Nice safe utility, with good yield and steady slow growth
  • Added a small additional amount to increase the the portfolio income


Thursday, February 12, 2015

Cisco (CSCO) Crushes Expectations

Cisco is hitting on all cylinders...up over 9% today based on solid earnings and revenue.  CSCO is around 3.8% of the Chump portfolio... From Morningstar:

Cisco Systems Inc


Cisco remains a dominant force in data networking.

Analyst Note 02/12/2015
Cisco struck an overwhelmingly positive tone in releasing fiscal second-quarter results, with CEO John Chambers making numerous comments to the effect that the firm has never been better positioned to capitalize on the opportunities ahead of it. Cisco's performance during the quarter was at the high end of management's forecast, with revenue up 7% year over year. The firm expects to continue growing in the third quarter, forecasting revenue up 3%-5% year over year. We don't expect to materially change our fair value estimate, and we continue to believe Cisco is executing well and its competitive position remains strong.
Cisco saw strength across several key markets during the second quarter, including switching (revenue up 11% year over year) and the data center segment (up 40%). Within switching, the Application Centric Infrastructure platform, Cisco's response to software-defined networking, continues to gain adoption, with ACI/Nexus 9000 customers reaching 1,700, roughly tripling over the past two quarters. The service provider market remains the biggest source of weakness, with service provider video sales down 19% year over year and routing sales up only 1%. However, service provider orders were down only 1% versus a year ago, the best result in six quarters. Emerging markets continue to show signs of stability, with orders up 1% year over year. Sales in China and Russia, as should be expected, are still very weak.
Efforts to streamline the company produced solid profitability during the quarter. The gross margin expanded slightly versus a year ago to 61.7%, while the operating margin expanded nearly a percentage point to 28.4%. Head count declined 3% during the quarter, bringing the total reduction to 5% since the end of fiscal 2014. Free cash flow was stable versus a year ago at $2.6 billion during the quarter despite a $1 billion unfavorable swing in working capital resulting primarily from the return to revenue growth.

Below is a 20Year FastGraph for CSCO:

Even at today's price of $29.40, I estimate fair value for CSCO to be around $35, so the stock is still a great value.  I'll continue to hold.


Wednesday, February 4, 2015

AFLAC Results (AFL) - Solid Company, Undervalued

Aflac had a nice Q4 earnings report yesterday, here is a summary:

Aflac is a dividend champion, with a 32 year streak of dividend increases.  I consider it a core position in the Chump portfolio, and plan to hold the position.

Below is a recent FastGraph for AFL which shows where I bought the stock and when:

As the graphic shows, AFL is trading at a significant discount to fair value.  As I write this, the stock is at $60.88.  Fair value per the above is in the range of $95 - $100 per share.

AFL presents a nice buying opportunity today.



Friday, January 23, 2015

Why Am I the Target of Every New Tax? Because I'm "Rich!"

As you've no doubt heard, the President wants to raise taxes....among those mentioned, taxes on your assets and taxes on 529 educational savings plans.  Ay Carumba!  (529 article posted below)

What is really frustrating to me, is the notion, which goes largely unchallenged, that families earning $250k per year are the "rich."  I'm fortunate (perhaps even lucky);  my family income is greater than $250k per year...therefore, I'm rich!  Further, our president is fond of saying that those of us earning over $250k are the "fortunate" and the "lucky."  It's our responsibility to forego tax breaks, pay higher taxes and fees, so that we can transfer our hard earned money to those "less fortunate."  What is it that differentiates the fortunate from the less fortunate?

Is it just our current family income?  Why is income the only measure of the fortunate?  How about someone who comes from a wealthy family, inherits millions, but doesn't choose to work, so has a lower income.  Is that person less fortunate?  How about the many kids I grew up with, all of whom had the same opportunities as me, but chose different paths, perhaps easier paths, and now earn much less than I do?  Are they really less fortunate?  How about an athlete receiving a full ride to college, but who didn't bother to study or get a useful degree, and is now making low wages.  Is that person less fortunate?

I am a non-union professional, and always have been.  I come from a modest background; my father was a middle school counselor, and my mother couldn't work due to chronic illness.  I paid for 100% of my college education.  My first job after college paid me $28.5k per year.  I've worked hard to get to this level of income, and its taken 25 years of long hours and strong job performance. I've never been fired from a job, but I've always been an "at will" employee, with the threat of job loss ever present.  Is that "luck?"  Perhaps.

I don't have a pension awaiting my retirement, I have to build my own pension with a 401k, rollover IRA (the Chump portfolio), and regular savings. I may or may not have social security when I retire in 15 years or so.  The Social Security website places an asterisk next to my benefits, which states that by 2030 (my retirement year), there will only be enough money to fund 77% of projected benefits.  Hmmmm

As someone who enjoys more than $250k in annual income, I also DO NOT qualify for many useful tax benefits and programs including:

  • Can't deduct IRA contributions
  • Don't qualify for a Roth IRA
  • Pay a higher federal tax rate on earnings
  • Don't qualify for any college financial aid
  • Can't deduct 529 contributions from state tax
  • and many, many more
Is $250k really indicative of a "rich" person?  In my family, after federal and California state taxes, $250k becomes $162k.  A mortgage in CA, or a rental for that matter, is around $3k/month, or $36,000.  And when you add in property taxes and outrageous prices for gas, electricity and water, mello roos and hoa fees, etc...housing consumes around $50k per year.  That leaves $112k.

Food, gas, home insurance, life insurance, car insurance, autos, clothing, healthcare, cell phones, cable, and other expenses for a family of five eat up around $50k per year, taking me down to $62k for non-essentials.  Among the non-essentials are things like vacations ($10k), the kids sports and hobbies ($12k).  Another frustrating non-essential cost is education.  The public schools in California are among the worst in the country, thus, we pay for supplemental tutoring for our 2 younger kids ($5k), and are likely to try and send them to a private high school ($13k/year).  My oldest is a freshmen in a California public university...at a cost of $34,000/year.  Ignoring private high school for the moment (I have a year before it hits, whew!), I'm left with....drumroll....$1,000.  That's right, after all of the above, I would have $1,000 left!

Oh, and let's not forget about retirement.  I need to send money to my 401k for retirement, into a 529 account for three kids college, where I'll need to pay 100% of their education, and I have to find some savings for our regular (taxable!) savings & investment account for emergencies and rainy day!

Could I spend less?  Of course, and we do.  We can take fewer and cheaper vacations, we can drive older cars (we do) that are 100% paid for.  We can eat out less, buy new clothing less frequently, and cut back on sports and hobbies.  We could even sell our modest 2,600 square foot home and find a smaller one.

But I ask you, is this what "rich" families do?  

Thank goodness I've been socking away a few bucks from every paycheck into my 529 account.  I now have enough saved to pay for my son's four years of public university, and I'm on track to have enough for my two daughters when they hit college ages.

I definitely consider myself rich, but its because I have an incredible family, some great friends, and we're blessed with good health, not because of my income.



Push to Tax ‘529’ Plans Stokes Debate

Obama Touts Proposal as Means to Restructure Student Aid, but Critics See Challenges for Middle Class

President Barack Obama ’s push to start taxing college-saving accounts, including the popular “529” accounts, would affect millions of Americans who are stashing money for their children’s education, stirring debate about how to structure federal student aid and how to define the middle class.
The proposal, which has sparked a public backlash but faces dim prospects in Congress, targets so-called 529 savings accounts that boomed after Congress passed the tax breaks starting in 2001. States have promoted the plans as a way for middle-class parents to combat escalating college costs.
The president’s push, unveiled as part of a broader tax overhaul last weekend, would strip the main federal tax benefit from the plans by taxing any money earned from future contributions. Currently, earnings aren’t taxed and the White House says existing funds would be shielded from the new tax.
Administration officials say the changes are part of a move to restructure a slew of education tax benefits that, according to the College Board, amounted to $17.4 billion in 2012. The net effect would be to boost aid for low- and middle-income families while removing benefits currently enjoyed by wealthier families, the White House said.
The president’s proposal, which has critics within his own party, has generated concern among middle-income families who say they prefer the current system.
Elizabeth Philips, a single mother in San Diego, opened a 529 plan last year for her two boys, ages 6 and 9. She said that without more details, she is skeptical.
“I think we should be making it easier for parents to get started with 529s and not add any more roadblocks,” said Ms. Philips, who said she earns six figures but under $150,000 as a marketing professional at a technology company. At time of rising college costs, she said, “the No. 1 thing people should be doing is setting up these accounts as early as possible to maximize the time value of money.”
To buttress its case in the context of a sharpened focus on the middle class, the White House points out that around 70% of funds in 529 accounts and lesser-known Coverdell plans—which would also be affected—belong to households earning more than $200,000 a year. Thus the benefit of the tax break skews heavily toward the highest earners.
While the president’s push to eliminate tax breaks on ‘529’ college-saving plans isn’t likely to clear Congress, it has sparked debate over how to structure student aid and how to define the middle class. Here, the University of Mississippi campus in Oxford.ENLARGE
While the president’s push to eliminate tax breaks on ‘529’ college-saving plans isn’t likely to clear Congress, it has sparked debate over how to structure student aid and how to define the middle class. Here, the University of Mississippi campus in Oxford. PHOTO: ASSOCIATED PRESS
Chye-Ching Huang, senior tax policy analyst at left-leaning Center on Budget and Policy Priorities, said the president’s plan is sound. “Overall, the plan would scale back benefits that primarily benefit students from high-income families and would attain college anyway without those tax subsidies, and redirect it more towards people who actually need help for college and more likely to react to incentives,” Ms. Huang said.
Slightly over half of all the college-saving accounts are held by Americans making under $150,000 a year, according to a 2012 Government Accountability Office report. About 30% earned under $100,000 a year. There are about 12 million 529 accounts in total, according to the College Savings Plan Network, an industry group, while the average balance in a 529 account is about $21,000—enough to cover almost two years average tuition, room and board—minus aid—at a public four-year university.
Ryan Ellis, tax policy director for the conservative think tank Americans for Tax Reform, said the proposal violates an Obama campaign pledge to not raise taxes on middle-income Americans.
“This idea that this is an account for the preserve of the Huxtables out there that make $250,000 a year is kind of ridiculous,” Mr. Ellis said. Many owners of 529 plans are young parents who take pride in saving money in advance for their children’s college education, he said. “You’ve made them look like chumps for saving whatever they’ve saved so far.”
Other critics, including Capitol Hill Republicans and conservative think tanks, said the president’s plan of “streamlining” education tax benefits was vague and that removing the 529 tax break would ultimately hurt middle-income families. The change, critics say, would dissuade parents from saving and ultimately push more families to borrow for educations at a time when student debt burdening many middle-class Americans.
“What these accounts are designed for is the middle-income families that can’t afford to pay as you go and aren’t going to get need-based aid,” said Betty Lochner, head of the College Savings Plan Network. “It doesn’t make any sense to” take away the incentive to save, she said. Ultimately, many families would have to borrow more to cover expenses without the 529 tax break, she said.
The White House said 529 plans would continue to receive “favorable” tax treatment even with the proposed change. The accounts would still grow tax-free, with funds being taxed only after being withdrawn. Also, the earnings would be taxed as income to the beneficiary—the student. Officials pointed out that in most cases students are in lower income brackets than their parents and thus pay a lower tax rate.
The 529 provision was pitched as part of a broader tax overhaul, which faces steep odds on Capitol Hill. Sen. Lamar Alexander (R., Tenn.), chairman of the committee that oversees education policy, said the 529 provision is “sure to go nowhere in Congress.”
But the larger restructuring, were it to pass Congress, would make the system fairer, the White House said.
“Under the president’s plan, every dollar saved from consolidating and curbing inefficient education tax breaks—and tens of billions more—is ploughed right back into higher-education tax benefits for students and middle-class families,” an Obama administration official said.
The vast majority of middle-income families who would lose the tax break for 529 earnings would benefit from an expansion of the American Opportunity Tax Credit under the president’s plan, the official said.
Write to Josh Mitchell at joshua.mitchell@wsj.com