TIPS (and Other Tips) A Selective Recap March 31, 2003January 22, 2017 Paul Langley: ‘You are plagiarizing yourself!! The tip you published last week about not having to enter the http://www and .com was originally published in your column on March 8, 2001. I use this tip all the time and I remember I got it from your column so when I saw it again, I checked the archives and sure enough there is was. I hope you aren’t turning into Dear Abby (or was it Ann Landers? I can’t remember, but one of them reran columns without noting they were reruns and caused quite a stir).’ ☞ You mean people actually read these columns? And remember them? I hereby extend your subscription by a full week. Another tip you’ve found here beginning with May 12, 2000, and repeated several times since, was to buy Treasury Inflation-Protected Securities – TIPS. At the time I first suggested them, they yielded 4.25%-above- inflation. Since then, TIPS have more than held their own while the NASDAQ index has fallen more than 60% and the Dow, 23%. Indeed, last March this column suggested the 30-year TIPS yielding 3.375%-above-inflation and selling at 99 cents on the dollar. Today they sell at $1.15, so you are 16% ahead on the price plus a little more than 3% in interest. (Those of you who chose to buy I-Bonds instead, as first discussed May 15, 2000, have also done OK.) So the question naturally arises – what about TIPS now? And my answer is: you could do worse. The risk is a bit greater (the 30-year bonds that have risen to 115 could drop back to 99 or even lower … though I doubt they will, and they would eventually be redeemed for full inflation-adjusted value). And the return is somewhat less (instead of 4.25% or even 3.375% above inflation, the premium they command means that you will get more like 2.5% above inflation). And there is still the nuisance that the inflation adjustment is reported as taxable income each year even though you don’t actually receive it until you sell. Still, TIPS remain a very conservative place – some would say a too conservative place – for, say, a bedrock portion of your retirement plan. (To get a rough idea of what these bonds are selling for on any given day, click here – and scroll down to the very end of the page. Note that where you see something like “115-20” as the price of the bond maturing April 15, 2032, that does not mean the bonds are trading “around 115 to 120.” It means they are trading at around 115 and twenty thirty-seconds. Treasuries have traditionally been quoted in “thirty-seconds” of a dollar. For those of us with fewer than 32 fingers and toes, this has always come unnaturally; but the thing I like about it is that I get to call them “two-nies.” Sixteenths are “teenies.” I can’t imagine this will last much longer, so enjoy it while you can. Let’s face it . . . I’ve been a bit glum in my financial/economic outlook for quite some time now. (Personally, I inherited the happy gene; but that’s a different story.) Some of you may think my bearishness is simply borne of Al Gore’s loss, and I’ll admit that’s part of it. I think the borrow-and-spend, regulators-be-damned Republican stewardship of the economy has been just dazzlingly, breathtakingly bad. (And this is something they were supposed to be good at?) But really long-time readers will recall my urging Dorothy to sell her Amazon.com shares at 400 and at 300 and at 200 and at 100 and at . . . well, you get the picture. Yes, Amazon is a wonderful company – I am still one of its best customers. But stock prices in the late ‘90s became a once-in-a-lifetime bubble and that’s made me a sourpuss in this space for a long time now, happy gene or no. It’s been hard to know where to put our hard-earned dollars (not that it’s ever been easy) – especially if we need some investment income to, say, pay the rent. This past November 25, I again suggested TIPS, but also four stocks: Real estate investment trust BF Saul, BFS, first mentioned here at $16.75 on May 3, 2000. It pays $1.56 dividend and was $23.25 or so November 25, up 38% – which is about where it was again this past Friday. I worry about the real estate market, but it still yields 6.6% and I have held much of mine. Enterprise Production Partners, EPD, then $17.75, now $20.80, up 16% plus a few months of its hefty dividend. Ferrell Gas Partners, FGP, then $20.50, just a few cents higher today, which yields better than 9%. The Templeton Russia Fund TRF, then $19.60, about a dollar higher today. With the Dow down 6% or so since November 25, these have done OK – so far. But there are some serious caveats to stress. First, I’m no expert in any of these securities. Second, I find that when I begin to gloat this way, it is a sign that a well-deserved comeuppance will shortly follow. Third, free advice is generally worth what you pay for it (although that’s a better value than you generally get for paid advice). Fourth, it makes little sense for most people to choose individual stocks – far better, for that portion of your funds which you wish to commit to the stock market at any given time, to go the no-load, low-expense index mutual fund route, at least for most of your stock market money. As for other stocks that I’ve gingerly brought to your attention from time to time, there is the natural tendency for me to forget the ones that did terribly . . . so I ask you to remind me and I will own up to them later this week if you do. One of you, I know, paid $11 a share for BOREF, a stock that I have been telling you from the very beginning is surely going to zero (not least because I own a ton of it). It was trading at around $3 when I first wrote about it and is trading at around $3 today – a virtual blue chip when compared with the Standard & Poor’s 500, down 38% in the same time period. Indeed, it has been trading not far from $3 more or less the full four years except for that one day one of you put in a “market order” – meaning you would pay any price – for 500 shares (or some number like that), this with a stock that sometimes trades no shares at all for a day or two, but which had just then gotten noticed by a potential customer no less august than Boeing. So your elephantine 500-share order, combined with what could easily have been four or five others, drove the stock up to a momentary, glorious, wind-rushing-through-its-hair $11. It was grand. (In future, always use limit orders for thinly traded stocks.) If BOREF some day gets back to $11, I will not sell. As I’ve said all along, this is a wild speculation. I will either sell much, much higher or, far more likely, watch the stock fall to zero. Still – here comes the fate-tempting hubris again – I would like to point out to all you securities analysts and portfolio managers who were earning millions of dollars a year recommending Cisco to your clients at $42 the same day I was being paid nothing to write up BOREF at $3, that BOREF is still $3, while CSCO is $13, down 75%. Now watch me fall down a flight of stairs or something.
Other Voices March 28, 2003February 22, 2017 But first . . . IT’S ALMOST TIME TO FILE YOUR INCOME TAX EXTENSION Oh, sure – lord it over me. You’ve already done your taxes. You’ve already got your refund! Well, that just means you’re too organized. For many of us, April 15 means only one thing: Form 4868, the automatic four-month extension to file. (I can proudly say I have never had to mess with Form 2868, which is the application for yet a second extension, to October 15th, but which the IRS is not so quick to grant.) Of course, the extension to file is not an extension to pay. If you don’t send in enough dough with your extension to cover your tax bill, there will be penalties and interest when you finally do file (so the safe thing to do is overestimate a bit and then just accept a refund of the difference). But for those who need an extension to August 15 – maybe your printer died so you can’t print your tax return, maybe the dog ate your ink cartridge – you can now do it by phone, toll free – 888-796-1074 – provided only that you filed a return for 2001 or 2000. You even get a confirmation number to prove that you made the call. And if you need to send in $$$, that can be done by authorizing the IRS to suck it out of your bank account. (There are ways to pay your tax by credit card, too, but don’t – you’ll typically pay 2.5% extra to do it, not to mention any interest you incur on your balance. The frequent-flier miles are not worth that much.) And now . . . WHY GEORGE SOROS WORRIES ABOUT GEORGE BUSH [‘Removing Mr. Hussein is a good thing, yet the way Mr. Bush is going about it must be condemned. America must play a more constructive role if humanity is to make any progress.’] Click here. WHY A MARINE, OF ALL PEOPLE, AGREES WITH MICHAEL MOORE [‘To be blunt, my personal feeling on the invasion of Iraq is that George W. Bush and his colleagues have instigated an environment of violence and as a result my children will have to grow up in a nation where random acts of terrorism are common place.’] Click here. WHY DENNIS MILLER THINKS IT’S NOT SO COMPLICATED Quoting him, in part (except that it turns out this is NOT Dennis Miller, after all – oops! – but could have been – A.T.): 1) Between President Bush and Saddam Hussein . . . Hussein is the bad guy. 2) If you have faith in the United Nations to do the right thing, keep this in mind: they have Libya heading the committee on human rights and Iraq heading the global disarmament committee. Do your own math here. 3) Saddam and bin Laden will not seek United Nations approval before they try to kill us. 4) Even if you are anti-war, you are still an ‘infidel’ and bin Laden wants you dead, too. If you believe in a ‘vast right-wing conspiracy,’ but not in the danger that Hussein poses, quit hanging out with the Dell Computer dude. 5) We are trying to liberate them. He is trying to kill us. 6) Whether you are for military action or against it, our young men and women overseas are fighting for us to defend our right to speak out. We all need to support them without reservation. Yes, we do. I don’t think anyone is arguing that point. Still, when you contemplate the reservations expressed by George Soros and that ex-Marine, above . . . or when you read stories about young marines like this one . . . you wish there had been another way.
When You Have Nothing Nice to Say March 27, 2003March 25, 2012 I know: come sit by me. But actually, I think it’s better just to take a day off. Back tomorrow . . .
One More Reason Not to Sun-Bathe Naked on Your Roof March 26, 2003February 22, 2017 Several sites of possible interest today. First, no matter your view of the war, you might want to click here to thank the troops. It takes just seconds. Next, to see what the war might cost us, click here. It appears we may all one day own a piece of Iraq. (For this pun to work, you need to pronounce it a-ROCK and be old enough to remember decades of Prudential ads. And, yes, the only form of wit lower than the pun is the pun that needs explanation.) Of course, we won’t literally own a piece of Iraq and don’t want to; we’ll just own a piece of the extra half trillion dollar debt, inasmuch as we are ‘financing’ this war with tax cuts. (I am very sad to see that my super smart, plugged in friend who predicted a five-day cake walk was wrong.) I read the Goering quote that’s been going around the Internet with more of an ache than a feeling it’s a ‘perfect fit’ for the present situation. But thanks to Doug Jones for providing this link to the full story. And now, finally (well, I know what caught your eye – you are human, I am human), comes the bit about naked sunbathing. This is an extraordinary site, skin or no skin. If you’re into real estate investing or just want to see what your house looks like from a few thousand feet up, or what your neighbor pays in real estate tax, or how big his house is . . . or if you just want more reason to feel dazzled by this brave new world . . . or to feel anxious about its loss of privacy . . . check this out. (Thanks, Steve Sapka.)
Borrowing Massively to Cut Taxes for the Best Off March 25, 2003February 22, 2017 But first this time saver . . . Alan Silver: ‘Ever get tired of typing ‘www.’ or ‘http://’ or ‘.com’ when entering a URL in the Internet Explorer Address Bar? If so, just type the core address and press CTRL + ENTER. The http://www. and .com will appear automatically.’ And now, as Congress prepares to pass another of the President’s massive tax cuts, largely for those who need it least . . . TAX CUTS DURING WAR – OR AN ‘ADOPT A SOLDIER’ PROGRAM? By Matt Miller Let’s get this straight. Currently, 250,000 brave U.S soldiers are poised to strike Iraq; it’s likely war will have begun by the time you read this. The White House is sending an emergency spending request to Congress to fund the war and its aftermath that could come in at $80 to $100 billion. And that’s just a down payment. Meanwhile, the wealthiest 250,000 Americans – who earn, on average, more than $1 million a year – are waiting for a huge chunk of the $440 billion in tax cuts the top 1 percent of taxpayers are slated to receive in the next few years. Plus, our commander in chief says it’s essential that these wealthy Americans get the bulk of what Citizens for Tax Justice estimates to be another $2 trillion in tax cuts over the next decade, on top of the $440 billion. All this while the budget deficit is soaring to record highs, which, depending on war and reconstruction costs, could soon close in on $400 to $500 billion. Does anyone else think something is terribly wrong with this picture? How we finance this war, and the rebuilding of Iraq afterward, will speak volumes about our national morality, and the relationship between our citizens and our government. For this reason it is useful to zero in on the 250,000 troops and the 250,000 highest income taxpayers. At this historic crossroads, President Bush’s differing expectations of these Americans is shocking. I know the tax cuts are about GOP political positioning. But suddenly, with our troops moving, what was merely awful, cynical economic ‘policy’ now shines in neon as something worse. The president’s tax plans, given the challenges we face, simply can’t be squared with honorable notions of democracy. It’s simply wrong to cut taxes for the best-off while we fight a war and run up huge budget deficits. It’s even more irresponsible to do this on the eve of the baby boomers’ retirement, for which we already face $25 trillion in unfunded liabilities. It’s a measure of the detachment, or perhaps the cynicism, of Republican leaders that only John McCain seems to have the decency to say what’s fiscally and morally obvious. ‘Not now,’ McCain said on the Senate floor this week, about more tax cuts. ‘Not until Congress and the administration have a better understanding of the costs of war and peace.’ Common sense, right? Not to Bill Frist, the Senate Majority Leader, who continues to spout the standard talking points on behalf of a tax package crafted without any consideration of the costs of war and reconstruction. These tax cuts corrosively mock the president’s noble positioning of our effort in Iraq. Bush is offering a perverse fiscal twist on Churchill’s inspiring refrain. ‘We shall fight on the beaches, we shall fight on the landing grounds, we shall fight on the fields and in the streets,’ Churchill said. ‘We’ll borrow to fight them in Iraq. We’ll borrow more to rebuild Iraq. Then we’ll borrow even more to cut taxes for the rich,’ President Bush is effectively saying. I have a better idea. Say that Bush asks Congress for $80 billion for the war for now. Dividing $80 billion by 250,000 troops comes to a cost of $320,000 a head. Let’s ask the 250,000 highest-earning Americans to forego this much of the tax cut they’re supposed to receive in the coming years. Call it the Adopt-A-Soldier program. You get the idea. We’ll need to revisit broader tax policy soon enough – that’s what the 2004 election will in part be about. But for now, to fund the war without adding to the deficit, let’s do this one small thing. My guess is that the vast majority of the nation’s 250,000 highest earners would vote in favor of this idea in a heartbeat. Will the president have the decency to propose it? If we’re lucky and if we do it right, liberating and rebuilding Iraq could be among America’s finest hours. Sticking our kids with the bill for Iraq in order to cut taxes for the wealthy would guarantee that it won’t be. Columnist Matt Miller is a senior fellow at Occidental College in Los Angeles and host of ‘Left, Right & Center’ on KCRW-FM in Los Angeles. © 2003 MATTHEW MILLER
Buying Uranium from Niger March 23, 2003January 22, 2017 Alan Light: ‘Watching these war protestors in the major cities I can’t help wondering how many of them voted for Ralph Nader. Sigh.’ ☞ The assumption Alan is making, of course, is that if these folks had been thinking – at least in swing states like Florida, where Nader got 97,000 votes – Gore would have won and there would have been no war to protest. ‘Sure he would have won,’ some will say, ‘and then where would we have been?!’ This crowd assumes that if Gore had been President on 9/11 he would have surrendered to Al-Qaeda and, separately, allowed Saddam to develop a full arsenal of atomic bombs. I don’t believe that. Indeed – given the January 7, 2001 CIA briefing at Blair House, where the incoming President and VP were told that Osama Bin Laden represented a ‘tremendous’ and ‘immediate’ threat – it’s evident that the prior administration was at least paying attention and felt urgency to act. Whether Gore/Lieberman might have made enough progress by September 10 to avert September 11 is anybody’s guess. But I doubt that, post 9/11, any president would have failed to take strong action. As to Saddam . . . his potential nuclear capability was a key argument for preemptively attacking another nation without broad backing from our allies. (With broad backing, relatively few would have protested the war.) But just how real was the Iraqi nuclear threat? Needless to say: I don’t know. This is way above my pay grade, and probably yours. We just have to trust the President. But then you read stuff like this and it gives you pause . . . even as we all, unquestionably, detest Saddam, hope for the liberation of the Iraqi people, are impressed by the care and intelligence with which we are pursuing the attack, support our troops 110%, and pray for their swift success and speedy return. Tuesday: Matt Miller on the Tax Cuts
A Hopeful Prediction March 20, 2003February 22, 2017 Someone way smarter and better informed than I believes this war will be over in five days or less. Very few Iraqis, he believes, want to die for Saddam. The market is probably headed further down, but may rally strongly first if my friend is right. More to the point, the loss of life may not be as terrible as many of us have feared. That would be welcome news indeed. Until it is over, I am just going to keep my fingers crossed, which makes typing further columns impossible. Now: will you please send Colin Powell over to talk with the North Koreans?
Watch What I Do, Not What I Say March 19, 2003February 22, 2017 David Bruce: ‘Have you seen this site’ from the Democratic side of the House Appropriations Committee?
Did My Florida Tax Today And a Word About the Market March 18, 2003January 22, 2017 There are compelling reasons for us to go into Iraq and compelling reasons for us not to. The only two things I feel sure of are that (1) the timing of the debate, for Labor Day through the mid-term elections, was deeply cynical; and that (2) we could be doing this with far more international support if our general attitude these last two years hadn’t been one of near contempt for the rest of the world’s concerns and sensitivities. As more than one commentator has inquired, how did we ever lose a popularity contest with Saddam Hussein? Once it starts, one can only hope the war will wreak the least possible carnage and the best possible outcome for the Iraqi people, which will in turn lead to the best possible results for us. But until it starts, and after it is over, we should not forget our own peaceful but important struggles, such as the struggle to reduce the tax burden on those who are already best off at the expense of those who are least fortunate. I was thinking such thoughts when I mailed in my Florida Intangible Property Tax today. As long-time readers know, this is a tax that only those Floridians who are best off even know about. Shortly after he took office, Governor Bush cut it in half. (He left the sales tax and the property tax unchanged.) Instead of a very small tax (two-tenths of one percent of assets above $100,000, not including real estate or retirement plans or bank accounts or Treasury securities or Florida municipal bonds), it is now half that (one-tenth of one percent). Governor Bush saved me some money. I didn’t ask for it, I don’t need it, and it’s one more reason so many kids in this state are poorly educated in desperately overcrowded classrooms; one more reason drug treatment programs have been eliminated in 51 of Florida’s 55 prisons. This is the Bush way of helping the poor and middle class, as valid in Florida as it is on the national stage (yesterday‘s column). Is the idea to build a country of rich and poor, with machine guns guarding our gated communities? I’d rather pay the tax. Finally, a word about the market. It’s nice that it’s spiked up the last few days. It might spike up some more. But best-case scenario, with all going reasonably well, where are we at the end of this war? Won’t we be more or less where we were, but with an extra $100 billion in debt on top of all the rest? Are we that much better off, with that much brighter prospects, than we were December 5, 1996, the day of Greenspan’s ‘irrational exuberance’ remarks, when the Dow (now 8140) was 6500 and the NASDAQ (now 1392) was 1250?
How About a Lamb Chop on Your Head? March 17, 2003February 22, 2017 The estimable Alan Light: ‘It’s too bad that on the entire Worldwide Web, you can’t find a site devoted to the wearing of hats made out of meat. Oh, wait. You can.’ The equally estimable and considerably less whacked out Paul Johns (as if I am anyone to knock a bit of occasional wackiness): ‘Could you publish this link to a six-point plan to avert war?’ ☞ Sure. I can’t imagine it’s not too late, but why not? Or try this one-point plan . . . From Tom Friedman in last Wednesday’s New York Times: ‘ Despite all the noise, a majority of decent people in the world still hunger for a compromise that forces Saddam to comply, or be exposed, and does not weaken America. So, Mr. President, before you shake the dice on a legitimate but audacious war, please, shake the dice just once on some courageous diplomacy. [Emphasis added.] Pick up where Woodrow Wilson left off: fly to Paris, bring the leaders of France, Russia, China and Britain together, along with the chairman of the Arab League summit, and offer them any reasonable amount of time for more inspections – if they will agree on specific disarmament benchmarks Saddam has to meet and support an automatic U.N. authorization of force if he doesn’t. If France still snubs you, the world will see that you are the one trying to preserve collective security, while France only wants to make mischief. That will be very important to the legitimacy of any war.’ AND NOW FOR THE MONEY SIDE OF THINGS . . . From Sunday’s New York Times front page: ‘The Bush administration says it is planning major changes in the Medicare program that would make it more difficult for beneficiaries to appeal the denial of benefits . . . In the last year, Medicare beneficiaries and the providers who treated them won more than half the cases – 39,796 of the 77,388 Medicare cases decided by administrative law judges.’ ☞ That clearly won’t do. The government has to be able to deny frail old people health care. By eliminating their right to appeal, the taxpayer saves two ways: first, they don’t have to defend their actions in court; second, they don’t have to pay up in the 53% of the cases when they lose. In the real world, you have to make tough choices, and these savings are required to help reduce the tax burden on people making $1 million a year. From Sunday’s New York Times lead editorial: ‘In a sorry effort to protect President Bush’s tax-cut mania, the Republican leaders of Congress have unveiled proposals for slashing the most basic government programs for years to come … The G.O.P. leaders endorse the next chunk of detaxation despite Congressional findings that two-thirds of the deficits running through the decade will be caused by the Bush tax cuts, not simply the failing economy. [Emphasis added.] The estimated shortfall of $2.7 trillion could have been an $890 billion surplus but for the Bush proposals, according to the Congressional Budget Office. The president’s next $1.4 trillion cut, geared to the affluent, will average $90,000 a year for millionaires, according to the Tax Policy Center, a research group run by the Brookings Institution and the Urban Institute. You would think a sense of embarrassment might strike the Republicans in blessing such a boon for a fortunate minority while taking a cleaver to programs vital for most taxpayers, notably a woeful $12 billion cut in food stamps. But they seem intent on ideology trumping responsibility.” ☞ ‘Tis a grand time to be rich and powerful in America.