Medical Fascism in America

Marketwatch ran this article yesterday.  There are more like it on the internet today.  Medical fascism is alive and well in America.  My comments are in red below.

March 27, 2012, 1:39 p.m. EDT

Justices show split over health-insurance mandate

High court adopts ideological stances on purchase requirement

By Russ Britt, MarketWatch

LOS ANGELES (MarketWatch) — Supreme Court justices appeared to be split along ideological lines after hearing arguments over whether U.S. citizens should be made to buy insurance — the central issue in the health-care-reform debate — in a second day of hearings Tuesday.

Obamacare is medical fascism.  Fascism occurs when government regulates corporations to such an extent that they are just arms of the government with the illusion of private property rights.  Government is telling medical corporations and insurance companies how to run their business and it is forcing the individuals of society to buy it.  This is sickening and tyrannical.

Blog reports from The Wall Street Journal and other sources, however, indicated that there may be two swing votes in Chief Justice John Roberts and the court’s perennial ideological straddler, Justice Anthony Kennedy.

President George W. Bush nominated Chief Justice John Roberts in 2005.  He filled the vacancy left by the death of William Rehnquist.  President Ronald Reagan appointed Justice Anthony Kennedy in 1988.

Reports showed that the court’s liberal bloc, Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan, were arguing in favor of the 2010 Affordable Care Act and its so-called individual mandate during the two-hour debate.

I wonder what portions of the US Constitution the liberal judges were using to support their arguments for the 2010 Medical Fascism Bill?

Meanwhile, conservative appointees to the high court were strongly challenging those who were supporting the requirement that all U.S. citizens be insured. Solicitor General Donald Verilli faced rapid-fire questioning from Justices Antonin Scalia and Samuel Alito in the latter half of the two-hour argument devoted to the question.

What were the Solicitor General’s arguments for forcing U.S. citizens to buy health insurance?  What part of the US Constitution

Throughout the debate, the Journal’s blog indicated that Ginsburg, Kagan and Breyer came to Verrilli’s defense several times as the law faced skeptical questioning from the more conservative justices.

Ginsburg argued at one point that the decision by an individual not to buy insurance affects others. But Scalia and Alito questioned that. Alito contended that the law forces young, healthy people “to subsidize services that will be received by somebody else.”

Individuals make billions of decisions everyday not to buy millions of products or services marketed to them worldwide.  Their decision not to buy affects others, but so what?  Producers of goods and services must persuade individuals to buy their goods voluntarily.  They must make them a better deal.  They must serve customers desires or they will go bankrupt.  Is everyone obligated by government force to buy goods and services that they don’t want just because the seller of the good or service might be affected?  This is lunacy.  Justice Ginsburg absolutely abhors a free market.  Hasn’t she affected red robe makers by not buying their red judge robes and wearing a black robe instead.  Should the government force her to buy red robes instead of black robes be she is affecting them.  If they do, then now the black robe clothiers are affected.  She is a Marxist in supreme court justice’s clothing.

If there is no individual mandate, Ginsburg also said, it would force the price of insurance higher. Scalia countered that’s no different than buying a car; if fewer people buy cars, that could force up prices.

Supreme court justices have no concept of economics.  Politicians enact laws prohibiting free and open competition amongst producers.  The existing producers lobby the politicians to enact barriers to entry for new competition.  This reduces the supply of healthcare while increasing the price of healthcare.  Cartels are bad for consumers of healthcare.  Consumers get high prices and crappy healthcare.  What is needed is the elimination of government involvement in healthcare.  Large profit margins will attract entrepreneurs to invade the existing healthcare market to provide better healthcare than is currently available from the healthcare cartel.

Roberts wondered whether the requirement to buy health insurance is the same as forcing individuals to prepare for other types of emergencies, according to Journal posts. Later, he said the requirement to buy insurance could open the doors for Congress to require the purchase of other types of goods in the future.

 “All bets are off,” Roberts remarked.

It is immoral to force an individual to allocate his life, liberty, or property to the purchase of goods that he has already voluntarily decided not to purchase.  How would the justices like being forced to cross train for a triathlon three hours per day so they can stay fit and not affect the healthcare systems’ costs which “affects others” who pay the taxes that pay for the healthcare system?

Verrilli has responded in most instances by framing the issue around market regulation, which is something that Congress can oversee under the Constitution’s interstate-commerce clause. The clause gives Congress the power to regulate markets. Virtually all individuals are or will become part of the health-care market, he has argued.

The interstate-commerce clause does not give the congress the power to regulate markets.  It was supposed to prevent states from enacting tariffs that would keep commerce from being “regular”.  See Judge Andrew Napolitano’s more eloquent explanations here: http://tinyurl.com/bp47ny3 .  Statists of both parties had use this clause to justify regulation of everything and anything.

Kennedy said Verrilli needed to answer a “very heavy burden of justification” to show how the Constitution authorizes Congress to require that individuals buy insurance or pay a penalty. At one point, Kennedy commented that the mandate changes the relationship between citizens and the government “in a fundamental way.”

If you really want to see the legitimacy of the US Constitution or any constitution destroyed, then read Lysander Spooner’s “No Treason: The Constitution of No Authority” essay from the 19th century.  Spooner was an abolitionist in the late 19th century.  http://en.wikipedia.org/wiki/No_Treason

But both Kennedy and Roberts grilled Paul Clement, the attorney arguing to strike the mandate on behalf of 26 states.

The law is patently unconstitutional since providing healthcare is not an enumerated power of congress in Article I Section 8.  Don’t these justices see the tyranny that is involved here?

Roberts noted that the government is simply trying to regulate the financing of health care, while Kennedy said all citizens are part of the health-care risk pool, according to the Journal’s blog.

During that portion of the session, Scalia and Alito reportedly did not challenge Clement, indicating they’re planning to support overturning the mandate.

Without the individual mandate, other provisions of the law could be struck down. The mandate places healthy people into the risk pool so that their costs can be shared with those of unhealthy persons.

But it is possible that the court will strike down only the individual mandate, leaving the requirement that insurance companies must offer coverage to any individual, regardless of his or her health history.

If you believe in voluntary exchange, free markets, and property rights; then you should see the immorality of forcing insurance companies to offer coverage to individuals that they would voluntarily choose not to insure.  People that don’t think that is right or who would want it any different way are free to pool their capital to start their own insurance company that makes its unique service proposition to their customers “We insure anyone regardless of their health history!”.  That company will be bankrupt in a short amount of time.

Insurers including UnitedHealth Group Inc. (NYSE:UNH)  and WellPoint Inc. (NYSE:WLP)  struggled on the day, down as much as 2%.

UnitedHealth Group (UNH) pays a paltry 1.17% dividend and WellPoint (WLP) pays a measly 1.64% dividend.

The court hearings took place as protesters from both sides of the health-care debate gathered outside the building. Among those calling for the overturning of the mandate was tea party-favorite Rep. Michele Bachmann, the conservative Republican from Minnesota who dropped out of this year’s presidential race.

Government pits people who would ordinary not interact or have conflict with one another against each other.  This is the lesson in the book/movie The Hunger Games.  Go see it or read it.

Separately, the nonpartisan Urban Institute issued a study Tuesday saying that 7% of all those under age 65 would be subject to the rule requiring the purchase of insurance.

The study says 87.4 million nonelderly Americans would be exempt from the individual mandate because of their low-income or undocumented status. Of the remaining 181 million Americans under age 65, an estimated 86% have insurance, the study says.

Develop a relationship with doctors and nurses in your local area who will be willing to work in the grey market of healing before the full force of medical fascism takes effect.

Published in: on March 28, 2012 at 2:20 pm  Leave a Comment  

First Look at 9% High Dividend Stock Vector Group LTD (VGR). Stop Smoking and Stop Buying VGR.

Preferred stock: None.

Bonds: $1.7 billion outstanding.  Nothing is due soon, but Vector has other debt troubles (see balance sheet below).

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What does the company do?  Vector Group manufactures cigarettes through subsidiaries. Its Liggett Group subsidiary produces cigarettes under discount brands and private labels. The company also produces cigarettes in Russia. Recently, Vector Group has launched QUEST, which it claims is a genetically engineered nicotine-free cigarette.

DIVIDEND RECORD: Vector Group is a steady dividend payer and grower, but the money company is paying out more than it earns.

Dividend: $0.40

Dividend yield: 9%  ($1.20 annual dividend / $17.72 share price)

Dividend payout: 129%  ($1.20 / $0.93 recent EPS) –OR- 164% ($1.20 / $0.73 average adjusted earning power)

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EARNING POWER: $0.73 per share @ 79.57 million shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income

Shares

Adjusted EPS

12/2007

$0.93

$74 M

74 M

$0.93

12/2008

$0.69

$61 M

82 M

$0.77

12/2009

$0.31

$25 M

77 M

$0.31

12/2010

$0.68

$54 M

78 M

$0.68

12/2011

$0.93

$75 M

79 M

$0.94

Five year average adjusted earnings per share is $0.73

Consider contrarian buying below $5.84 (8 times average adjusted EPS)

Consider value buying below $8.76 (12 times average adjusted EPS)

Consider speculative selling above $14.60 (20 times average adjusted EPS)

Vector Group LTD (VGR) is currently trading at 24 times average adjusted EPS.  This is stock is speculatively priced.

BALANCE SHEET – Hideous!!  Negative equity!

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Most of the damage to the balance sheet has been due to an increase of short-term debts and other long-term liabilities.

Fiscal year ends in December. $USD in millions except per share data.

2007-12

2008-12

2009-12

2010-12

2011-12

Current liabilities

Short-term debt

21

97

22

52

135

Accounts payable

7

6

4

9

10

Deferred income taxes

24

93

17

37

36

Taxes payable

12

44

30

25

Accrued liabilities

34

69

46

40

42

Other current liabilities

24

19

15

59

68

Total current liabilities

109

296

149

227

315

Non-current liabilities

Long-term debt

277

Deferred taxes liabilities

142

49

45

52

61

Accrued liabilities

2

Pensions and other benefits

35

34

39

46

Other long-term liabilities

156

304

512

678

593

Total non-current liabilities

575

388

591

769

702

Total liabilities

684

684

740

996

1017

Book value per share: ($1.12)  Vector Group has a negative book value per share.  This means stay away at any price.  There are much better stocks to buy.

Price to book value ratio: Not applicable because of the negative book value (under 1.0 is good)

Current ratio: 1.61 latest quarter (over 2.0 is good)

Quick ratio: 1.00 latest quarter (over 1.0 is good)

Debt to equity ratio: Not applicable because they have no equity. (lower is better)

Percentage of total assets in plant, property, and equipment: 6.1% (the higher the better)  Other assets include: Current assets 54.94%, Intangibles 11.59%, and Long Term Assets 27.32%

CONCLUSION – Vector Group LTD is a 9% high dividend stock, but I don’t trust their ability to payout the dividend in the future.  They are going to have to issue more shares or debt to finance the dividend.  The stock is speculatively priced at 24 time average adjusted earning power.  The balance sheet is horrifying.  They have negative equity and no plan to fix the situation.  I wouldn’t buy this stock until its balance sheet is repaired.  Stay away from Vector Group LTD.  It is headed for a cliff when the worldwide recession reappears.  This appears to be a poorly run company.

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DISCLOSURE – I don’t own Vector Group LTD (VGR)

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Published in: on March 26, 2012 at 5:04 pm  Leave a Comment  

Don’t Overpay for Apple (AAPL) Despite the New Dividend.

Preferred stock: none

Bonds: none

DIVIDEND RECORD:  Apple has never paid a dividend in 17 years, but they recently announced that they would begin paying a quarterly dividend of $2.65 per share (http://www.bloomberg.com/news/2012-03-19/apple-to-pay-dividend-buy-back-stock-to-return-some-of-its-cash.html) beginning in the period starting July 1st, 2012.  Will they become a dividend grower?  Who knows; they have no track record.  However, the dividend will not be threatened by any debt, preferred stock, or bonds.

Dividend: $2.65 quarterly starting in 2Q 2012

Dividend yield: 1.7% ($10.60 annual dividend / $608.60 share price)

Dividend payout: 30% ($10.60 dividend / $35.11 recent EPS) -0R- 85% ($10.60 dividend / $12.39 average adjusted earning power)

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EARNING POWER: $12.39 per share @ 932.37 million shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income

Shares

Adjusted EPS

9/2007

$3.93

$3,496 M

889 M

$3.75

9/2008

$6.78

$6,119 M

902 M

$6.56

9/2009

$9.08

$8,235 M

907 M

$8.83

9/2010

$15.15

$14,013 M

925 M

$15.03

9/2011

$27.68

$25,922 M

937 M

$27.80

Five year average adjusted earnings per share is $12.39

Consider contrarian buying below $99.12 (8 times average adjusted EPS)

Consider value buying below $148.68 (12 times average adjusted EPS)

Consider speculative selling above $247.80 (20 times average adjusted EPS)

Apple (AAPL) is currently trading at 49 times average adjusted EPS.  This is stock’s price is highly speculative.

BALANCE SHEET – The chart of the balance sheet is beautiful, but the price to book value ratio shows you how overvalued Apple is at the present time.  Investors have forgotten that Apple traded at $82 – $85 a share between November 2008 and March 2009.  You can buy Apple near its book value if you are patient.  Their current ratio is not impressive despite all the pundit talk of Apple having so much cash.

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Book value per share: $81.80 as of September 2011

Price to book value ratio: 7.44 (under 1.0 is good)  You are paying a massive premium to book value for every Apple share at today’s prices.  Remember that is only as good as its last product.  Not every product is going to be a homerun.  When it eventually disappoints the share price is going to crash as the hedge funds retreat.

Current ratio: 1.58 latest quarter (over 2.0 is good)  I thought with all that talk of Apple being loaded with cash that they would have blow the current ratio away.   That simply isn’t the case.  They have $54.771 billion in current assets and $34.607 billion in current liabilities.

Quick ratio: 1.35 latest quarter (over 1.0 is good)  There is the cash showing through.

Debt to equity ratio: 0 (lower is better)  They are long term debt free.  Outstanding.

Percentage of total assets in plant, property, and equipment: 5.64% (the higher the better)  Not a lot of plant and equipment.  Here are where their assets are relative to total assets: Other long term investments 51.72%, current assets 39.49%, and intangibles 3.15%.

CONCLUSION – Apple will be a small dividend payer yielding about 1.7% at today’s stock price.  It will be interesting to see if they become a strong dividend grower over time.  The dividend will be safe at the onset.  Payout ratios are not a problem.  In my opinion the stock price is highly speculative at 49 times average adjusted earning power of $12.39 per share.  Apple’s share price has taken a beating in the past.  In late 2007 the share price peaked at $199.  By March 2009 the stock price had fallen to $85.  Don’t make the mistake to believe that Apple is crashproof.  There is a worldwide recession coming and Apple will take another beating.  I think the dividend it to entice hedge funds from pulling out of the stock with the recession hits.  Apple’s balance sheet is not as strong as I thought.  The price to book value is ridiculous right now and their current ratio is unimpressive.  However, they are in much better shape than most companies.  I recommend you sell it  if you own it now.  I think Apple is a safe buy below $148; otherwise, you’re playing a speculative game of the greater fool theory.  Don’t get trampled by the hedge funds when they exit their positions in Apple.  The dividend yield will be much higher below $148, you won’t be paying through the nose for earnings, and you’ll pay a much smaller premium to book value.

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DISCLOSURE – I don’t own Apple (AAPL).

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Published in: on March 21, 2012 at 1:47 pm  Leave a Comment  

Apple dividend

There is news that Apple will begin paying a $2.65 per share quarterly
dividend (http://news.investors.com/article/604927/201203201524/apple-shares-retreat-fr….
That is great news, but I like high dividend stocks. Apple would
become a 6% high dividend stock if it pays its proposed dividend and
its stock price drops to $176.66. Unfortunately for current Apple
investors that would be nearly a 71% price decline from today’s
closing price of $605.88 per share. Right now you are laughing at me.
How preposterous!! Ahhh, but you forget that Apple was selling for
$176 in mid-September of 2009. Apple is not market-proof. I will
write a “First Look” article on Apple soon where we can discover their
average earning power together.

There is another way for Apple to become a high dividend stock. They
could pay out 80% of the recent earnings of $35.11 per share in the
form of a dividend. A $7.02 quarterly dividend payment would bring
the yield up to 6%. I’m very confident that Apple will not do this.

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Published in: on March 20, 2012 at 11:43 pm  Leave a Comment  

A First Look at Ship Finance International (SFL). Floating or Sinking?

What do they do – Ship Finance International leases a fleet of 57 crude oil tankers exclusively to a company called Frontline Shipping Limited. Ship Finance purchased the oil tankers from Frontline Ltd., the parent company of Frontline Shipping. Ship Finance also provides administrative and maintenance services for the vessels through a partnership with Frontline Management Ltd., another subsidiary of Frontline Ltd.

Preferred stock: none.

Bonds: $1.7 billion outstanding

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DIVIDEND RECORD: Spotty.  They have a pattern of growth and cuts.  In 2007 the dividend was $0.55 quarterly.  In 4Q2008 it grew to $0.60.  Then they cut it in half in 2009.  It grew from $0.30 to $0.39 in 2009 to 2011.  This quarter it was cut to $0.30 again.

Dividend: $0.30 quarterly

Dividend yield: 8.8% ($1.20 annual dividend / $13.74 share price)

Dividend payout: 57% ($1.20 / $2.09 recent EPS) –OR- 55% using average adjusted earning power ($1.20 / $2.16)

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EARNING POWER: $2.16 @ $79.12 million shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income

Shares

Adjusted EPS

2006

$2.48

$181 M

73 M

$2.29

2007

$2.30

$168 M

73 M

$2.12

2008

$2.50

$182 M

73 M

$2.30

2009

$2.59

$193 M

74 M

$2.44

2010

$2.09

$166 M

79 M

$2.10

2011 (est)

$1.56

$133.45 M

79.12 M

$1.68

2011 earnings quarter by quarter

EPS

Net income

Shares

Adjusted EPS

2011 Q1

$0.40

$32.1 M

79.12 M

$0.405

2011 Q2

$0.40

$41.47 M

79.12 M

$0.524

2011 Q3

$0.35

$27.45 M

79.12 M

$0.346

2011 Q4 (est)

$0.41

$32.43 M

79.12 M

$0.409

2011 Total (est)

$1.56

$133.45 M

79.12 M

$1.68

Six year average adjusted earnings per share is $2.16

Ship Finance International (SFL) is currently trading at 6.36 times average adjusted EPS.  This is stock is in contrarian territory.

Consider contrarian buying below $17.28 (8 times average adjusted EPS)

Consider value buying below $25.92 (12 times average adjusted EPS)

Consider speculative selling above $43.20 (20 times average adjusted EPS)

BALANCE SHEET – You would be paying a 30% premium to book value at today’s share price.  The company is strapped for cash and current assets.  Too much debt for my liking.

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Book value per share: $10.61

Price to book value ratio: 1.3 (under 1.0 is good)

Current ratio: 1.0 latest quarter (over 2.0 is good)

Quick ratio: 0.49 latest quarter (over 1.0 is good)

Debt to equity ratio: 2.2 (lower is better)

Percentage of total assets in plant, property, and equipment: 4% (the higher the better)

CONCLUSION – Ship Finance International is a high dividend stock yielding 8.8% despite the recent dividend cut.  The amount of the dividend has been irregular, but it has paid 31 quarters of consecutive dividends.  The company’s share price has been pummeled into contrarian territory at only 6.36 times average adjusted earnings.  I like this company below book value of $10.61.  It has traded below book value as recently as December 2011.  The rest of the balance sheet is weak.  It has very little current assets relative to current liabilities (current ratio).  I’d like to see them pay down their long term debts with their free cash flow.  The return of the worldwide recession will drive SFL’s stock price down again.  You’ll have your chance to buy it below $10.61.

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DISCLOSURE – I don’t own Ship Finance International (SFL).

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Published in: on March 15, 2012 at 1:21 pm  Leave a Comment  

First Look at 12% Dividend Yielder Capital Product Partners (CPLP)

What they do – Based in Piraeus, Greece, Capital Product Partners owns and leases small to medium-sized ships for the transportation of refined oil products. These rental contracts are typically long-term and range from three to 10 years. The company outsources vessel management to parent company Capital Maritime. Spun out from Capital Maritime in 2007, ownership in Capital Product Partners represents a limited-partnership stake.

Capital Product Partners LP. is an international tanker company. The Company is engaged the seaborne transportation services of crude oil and refined petroleum products, edible oils and soft chemicals, by chartering its vessels under medium to long-term time and bareboat charters. Its fleet consisted of 27 modern high specification vessels with an average age of approximately 4.0 years as of January 31, 2012, including two very large crude carrier tankers, four Suezmax crude oil tankers, 18 modern MR tankers. As of December 31, 2011, it charter 24 of our 27 vessels under medium to long-term time and bareboat charters to charterers, such as BP Shipping Limited, Petroleo Brasileiro S.A., Cosco Bulk Carrier Co. Ltd., Capital Maritime and subsidiaries of Overseas Shipholding Group Inc. On June 9, 2011, the Company acquired Patroklos Marine Corp.

Preferred stock: This company has a small amount of preferred stock.  In 2010, they paid $359K out of $17,936K (about 2%) in preferred dividends.  In 2011, they paid $1,742K out of $87,120K (about 1.9%) in preferred dividends.  The preferred does not threaten the common stock dividend at this time.

Bonds: no bonds.

DIVIDEND RECORD: CPLPs grew its dividend from $0.36 quarterly in 2007 to $0.41 in 2010 Q1.  Boom! Then they cut the dividend in almost half and it been there ever since.

Dividend: $0.23 quarterly

Dividend yield: 12.12%  ($0.92 annual dividend / $7.59 share price)

Dividend payout: 51.6% using 2011 reported unadjusted earnings of $1.78 –OR- 153% using average adjusted earning power of $0.60 per share

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EARNING POWER: $0.60 per share @ 70.79 million shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income

Shares

Adjusted EPS

2007

$0.95

$27.8 M

22.3 M

$0.39

2008

$1.54

$50.7 M

24.2 M

$0.72

2009

$1.15

$29.2 M

24.8 M

$0.41

2010

$0.54

$17.5 M

32.4 M

$0.25

2011

$1.78

$85.4 M

47.1 M

$1.21

Six year average adjusted earnings per share is $0.60

Consider contrarian buying below $4.80 (8 times average adjusted EPS)

Consider value buying below $7.20 (12 times average adjusted EPS)

Capital Product Partners (CPLP) is currently trading at 12.65 times average adjusted EPS.  This is stock is priced for investment.

Consider speculative selling above $12.00 (20 times average adjusted EPS)

BALANCE SHEET – Nice equity growth.  The company doesn’t have much in the way of current assets to cover current liabilities.  Great price to book value ratio.

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Book value per share: $7.30

Price to book value ratio: 1.03 (under 1.0 is good)

Current ratio: 1.05 latest quarter (over 2.0 is good)

Quick ratio: 0.94 latest quarter (over 1.0 is good)

Debt to equity ratio: 1.18 (lower is better)

Percentage of total assets in plant, property, and equipment: 89.78% (the higher the better)

CONCLUSION – Capital Product Partners (CPLP) is a high dividend stock yielding over 12%.  However, I’m a little troubled by the high dividend payout ratio using the average adjusted earning power.  You need to really dig into the annual reports and quarterly reports to determine if its earning power will grow enough to protect the current dividend.  Remember that CPLP cut its dividend almost in half in 2010.  I’m always leery of dividend cutters.   It is priced for investment at barely over 12 times average adjusted earning power and the stock was contrarian cheap as recently as August 2010.  The only ding on the balance sheet is the low current ratio.  The return of the worldwide recession will drop CPLPs price.  You will have another opportunity to buy this stock between $7.20 to $4.80.  Wait for it.  Read the annuals and quarterly reports while you are waiting.  I haven’t read them yet, but I will: http://www.capitalpplp.com/sec.cfm

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http://stockcharts.com/c-sc/sc?s=CPLP&p=W&b=5&g=0&i=p59203526393&r=2148

DISCLOSURE – I don’t own Capital Product Partners (CPLP).

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Published in: on March 13, 2012 at 11:28 am  Leave a Comment  

Test Post.

My last article failed to post.  This is a test.  Be seeing you!

Published in: on March 13, 2012 at 10:07 am  Leave a Comment  

First Look at Plains All American Pipelines (PAA).

  Today I take a look at Plains All American Pipeline (PAA).  This is the last of fifteen articles examining some of the dividend stock recommendations of Seeking Alpha contributor Insider Monkey.  Most of these stocks have dividend yields of 4% – 5%, so I think that they need to be looked at because they could become high dividend stocks when the stock market pulls back from another worldwide recession.  I want to see which of his 15 are potential high dividend stocks with earning power and strong balance sheets.  Plains has a high dividend payout ratio, it is speculatively priced, and its balance sheet is blah.  To see how I arrived at those conclusions and what a good value price to buy at read on.

Plains All American Pipeline (PAA)

Price: $79.99

Shares: 155.57 million

Market capitalization: $12.44 billion

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What does the company do to please customers – Plains All American Pipeline, L.P. (PAA) is engaged in the transportation, storage, terminalling and marketing of crude oil, refined products and liquefied petroleum gas (LPG) and other natural gas-related petroleum products. It is also engaged in the acquisition, development and operation of natural gas storage facilities. It has three segments: Transportation, Facilities, and Supply and Logistics. PAA’s operations are conducted through, and its operating assets are owned by, PAA’s subsidiaries. On December 23, 2010, PAA acquired Nexen Holdings U.S.A. Inc. On February 9, 2011, the Company, through its subsidiary PAA Natural Gas Storage, L.P., acquired 100% interest in SG Resources Mississippi, LLC. In July 2011, Gavilon, LLC acquired refined products rack marketing business from the Company. In December 2011, it acquired South Texas crude oil and condensate gathering system and a Canadian trucking operation. In December 2011, it acquired Yorktown Terminal and Jal Pipeline.

Morningstar’s Take – Plains All American Pipeline LP built itself into one of the most successful master limited partnerships by focusing on one thing: supplying the Midwest with crude oil to run its refineries. Plains is expanding its geographic and product focus to include the entire United States and extend the model that has worked so well for crude oil to refined products, natural gas liquids, liquefied petroleum gas, and natural gas.

Preferred stock: I’m not sure how many shares, but there has been preferred stocks since 2009 that receives about a quarter of net income.  For example, in 2011 Net income was $966 million dollars before a $236 million dollar preferred dividend.  That is 24.4%.  This is a threat to the common dividend.

Bonds: $250 million outstanding.  This isn’t a threat to the common dividend.

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DIVIDEND RECORD: Wow!  PAA is an amazing dividend grower.  It paid $0.19 quarterly in 1999.  Thirteen years later it is paying $1.02 quarterly.  That is a 437% increase in 13 years, or 33% straight line dividend growth per annum.

Dividend: $1.02 quarterly

Dividend yield: 5.1% ($4.08 annual dividend / $79.99 share price)

Dividend payout: 83% using recent Google Finance EPS of $4.93 –OR- 145% using average adjusted earning power of $2.82.  This company almost always paid out more than it earned in the past 10 years.  It makes up the difference by constantly offering new shares each year.

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EARNING POWER: $2.82 @ 155.57 million shares

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created.  In PAA’s case they are steadily adding shares)

EPS

Net income

Shares

Adjusted EPS

2007

$2.52

$365 M

114 M

$2.35

2008

$2.64

$325 M

121 M

$2.09

2009

$3.32

$443 M

131 M

$2.85

2010

$2.40

$330 M

138 M

$2.12

2011

$4.88

$730 M

155.57 M

$4.69

Five year average adjusted earnings per share is $2.82.

Consider contrarian buying below $22.56 (8 times average adjusted EPS)

Consider value buying below $33.84 (12 times average adjusted EPS)

Consider speculative selling above $56.40 (20 times average adjusted EPS)

Plains All American Pipeline (PAA) is currently trading at 28.4 times average adjusted EPS.  This is stock is speculatively priced.

BALANCE SHEET – Blah balance sheet.

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Book value per share: $35.03

Price to book value ratio: 2.28 (under 1.0 is good)  This is way too high for my liking.  Wait for a big price drop.

Current ratio: 0.96 latest quarter (over 2.0 is good) This company is a little short of current assets to cover this year’s liabilities.  I’m guessing they will offer more shares to make up the difference.

Quick ratio: 0.005 latest quarter (over 1.0 is good)  This company is cash starved.

Debt to equity ratio: 0.96 (lower is better)  This is not great, but not too bad either.

Percentage of total assets in plant, property, and equipment: 50.32% (the higher the better).  PAA has 21% of assets in receivables, 12% in intangibles, and 9% in long term assets.

CONCLUSION – The best time to buy PAA in recent years was in late 2008.  It was a value investment back then.  Plains All American Pipelines is an amazing dividend payer and grower, but I’m concerned that the preferred stock and capital expenditures are going to threaten the dividend growth in the future.  The company is speculatively priced at this time at over 28 times average adjusted earnings.  Wise investors should have scaled out of it when it reached $56.40 back in October 2011.  Keep selling portions and rising your stops is the key to scaling out.  The balance sheet is weak when you look at the price to book value ratio and the current ratio and quick ratios.   The company is going to have to issue more debt or stock to finance its current operations.  You can safely ignore this stock until it drops back to the $35.00 to $22.00 dollar range.

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DISCLOSURE – I don’t own Plains All American Pipelines (PAA).

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Published in: on March 8, 2012 at 3:31 pm  Leave a Comment  

First Look at Bristol-Myers Squibb (BMY).

Preferred stock: none

Bonds: none

What do they do to satisfy customers – Bristol-Myers Squibb discovers, develops, and markets pharmaceuticals for various indications, such as cardiovascular and infectious diseases, cancer, and psychiatric disorders. Unlike some of its more diversified peers, Bristol has exited several nonpharmaceutical businesses to focus on branded drugs.  Plavix is their biggest revenue product.  Plavix is a heart attack prevention drug.

Morningstar’s take – Adept at partnerships, Bristol-Myers Squibb has built a strong portfolio of drugs and a robust pipeline. While the company faces major patent losses beginning in 2012, we expect Bristol’s next generation of drugs will fill the patent holes over the next decade. Further, by selling off business lines unrelated to its core pharmaceutical strategy, the company has been building a war chest of cash to make acquisitions and new partnership deals.

DIVIDEND RECORD: Steady dividend payer since at least 1987.  Strong dividend grower – the quarterly dividend was $0.09 in 1987 and it has grown to $0.34 quarterly.  That is about 11% straight-line dividend growth per year.

Dividend: $0.34

Dividend yield: 4.17% ($1.36 annual dividend / $32.59 share price)

Dividend payout: 63% using recent Google Finance reported EPS of $2.16 –OR- 58% using average adjusted earning power of $2.35 per share.

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EARNING POWER: $2.35 @ 1.69 billion shares (*Note: This amount only includes net income from continuing operations.  There was significant net income from discontinued operations in 2009 ($8 billion) and 2008 ($2.5 billion).  The earning power would be higher if I included the discontinued ops, but that would skew earning power going forward).

(earnings adjusted for changes in capitalization – typically share buybacks and/or additional shares created)

EPS

Net income*

Shares

Adjusted EPS

2007

$1.09

$1,968 M

1,980 M

$1.16

2008

2.62

$3,686 M

1,999 M

$2.18

2009

$5.34

$4,420 M

1,974 M

$2.62

2010

$1.79

$4,513 M

1,713 M

$2.67

2011

$2.16

$5,260 M

1,700 M

$3.11

Five year average adjusted earnings per share is $2.35 @ 1.69 billion shares

Consider contrarian buying below $18.80 (8 times average adjusted EPS)

Consider value buying below $28.20 (12 times average adjusted EPS)

Bristol-Myers Squibb (BMY) is currently trading at 13.86 times average adjusted EPS.  This is stock is priced for investment.

Consider speculative selling above $47.00 (20 times average adjusted EPS)

BALANCE SHEET – Bristol-Myers Squibb has a strong balance sheet.

Image004

Book value per share: $9.44

Price to book value ratio: 3.45 (under 1.0 is good)  Wait for the share price to retreat below $20.00 to drop this ratio down.

Current ratio: 1.96 latest quarter (over 2.0 is good)  BMY has plenty of current assets to cover current liabilities.

Quick ratio: 1.12 latest quarter (over 1.0 is good)  BMY has 112% of its current liabilities in cash alone.  This is good.

Debt to equity ratio: 0.33 (lower is better)  A nice low debt rate.

Percentage of total assets in plant, property, and equipment: 13.71% (the higher the better)  I like companies with a higher percentage of real assets relative to total assets.  BMY has 16% of its total assets in goodwill and another 9.5% in intangibles.  I would want to know if any of its most profitable drugs are going generic anytime soon.  That event will drop the value of their assets.

CONCLUSION – As usual, the best time to buy BMY in recent years was in March 2009 when it was below $20.00.  It was a value investment back then.  It is still a pretty good buy at 13.86 times average adjusted earning power.  Bristol-Myers Squibb has been a steady dividend payer and a strong dividend grower.  The dividend is very stable and payout ratios look good because there is still ample room to pay the dividend if some of its drugs go generic.  The only thing that bothers me is the high price to book value ratio, but that will come down as the worldwide recession returns.  The company has a lot of current assets and cash to cover upcoming.  I would read the company’s quarterly financials and annual reports to learn what product provide most of the company’s profits.  Their biggest revenue producing product, Plavix, is going generic in the USA this year.  US sales of all BMY drugs account for 65% of sales, Europe accounts for 17%, and Canada and Japan at 3% each.  Read the beginning of the 2011 annual report for an excellent overview of their products, their revenues, and when they go generic: http://quote.morningstar.com/stock-filing/Annual-Report/2011/12/31/t.aspx?t=&ft=10-K&d=82bed019190b624cc2daf43fd54c3551

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DISCLOSURE – I don’t own Bristol-Myers Squibb (BMY).

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Published in: on March 6, 2012 at 3:43 pm  Leave a Comment  

Your Rotten Monetary Policy Is Destroying This Country by Ron Paul.

Your Rotten Monetary Policy Is Destroying This Country

by Ron Paul

Before the United States House of Representatives Committee on
Financial Services, Hearing on ‘Monetary Policy and the State of the
Economy,’ 2/29/2012

Mr. Chairman, thank you for holding this hearing on monetary policy
and the state of the economy. I believe that now, more than ever, the
American people want to hold the Federal Reserve accountable for its
loose monetary policy and want full transparency of the Fed’s actions.

While the Fed has certainly released an unprecedented amount of
information on its activities, there is still much that remains
unknown. And every move towards transparency has been fought against
tooth and nail by the Fed. It took disclosure requirements enacted
within the Dodd-Frank Act to get the Fed to provide data on the its
emergency lending facilities. It took lawsuits filed by Bloomberg and
Fox News to provide data on discount window lending during the worst
parts of the financial crisis. And it will take further concerted
action on the part of Congress, the media, and the public to keep up
pressure on the Fed to remain transparent.

Transparency is not a panacea, however, as a fully transparent
organization is still capable of engaging in all sorts of mischief, as
the Federal Reserve does on a regular basis. Ironically, one of the
Fed’s more egregious recent actions, adopting an explicit inflation
target, was hailed by many as another wonderful example of
transparency. Yet if you think about what this supposed 2% inflation
target actually is, you realize that it is an explicit policy to
devalue the dollar and reduce its purchasing power. Two percent annual
price inflation means that prices rise 22% within a decade, and nearly
50% within two decades.

Indeed, if you look at the performance of the consumer price index
(CPI) under Chairman Bernanke’s tenure, prices have risen at a rate of
2.25% per year. Many, perhaps even most, economists would consider
this a modest rise, an example of sober, cautious monetary policy.
Some economists of Paul Krugman’s persuasion might even argue that
this is too tight a monetary policy. However, 2.25% is not too far off
from the Fed’s new 2% target.

Now look at the performance of the US economy since February 1, 2006,
the date Chairman Bernanke took the mantle from Alan Greenspan.
Trillions of dollars have been wasted on bailouts, stimulus packages,
and other feckless spending. Millions of Americans have lost their
jobs and have lost hope of ever regaining employment. The national
debt has risen to more than 100% of GDP, as the federal government
continues to rack up trillion-dollar deficits, aided and abetted by
the Fed’s policies of quantitative easing and zero percent interest
rates. And we are supposed to believe that a 2% inflation rate,
similar to what has prevailed during the worst economic crisis since
the Great Depression, is the cure for what ails this economy.

This explicit 2% target also fails to take into account that whatever
measure is used to determine price inflation, be it CPI, core CPI,
PCE, etc., will always be chosen with an eye towards underreporting
the true rate of inflation and price rises. Pressure will be exerted
on those calculating the price indices, so as not to alarm the public
when prices begin to accelerate. One need only look at what is taking
place in Argentina today, where the government publishes an official
CPI figure that is often less than half that reported by private
sources.

A similar situation exists in this country, where economists
calculating CPI according to the original basket of goods have
determined that price inflation has increased 9.5% per year since
2006, rather than the 2.25% reported by the government. Even the
government’s own data reports price rises of nearly 7% per year since
2006 on such consumer goods as gasoline and eggs. Bread, rice, and
ground beef have increased by nearly 6% per year, while bacon and
potatoes have increased nearly 5% per year. This means that in a
little over half a decade, prices on staple consumer goods have
increased 30-50%, all while wages have stagnated and millions of
Americans find themselves out of work and without a paycheck. Of
course, government officials claim that price increases do not affect
the average American because they can always buy hamburger instead of
steak, or have cereal instead of bacon. But the American people can
see how they are suffering because of the Federal Reserve. The
government’s claims that the official statistics show no reason to be
concerned about inflation is Marxist – as in Groucho, who famously
said: “Who are you going to believe, me or your own eyes?”

The Federal Reserve continues to keep interest rates low in the hopes
of boosting lending and consumption. But keeping interest rates at
zero discourages saving, particularly as the rate of price inflation
continues to rise. Why stick money in a savings account earning 0.05%
if it is guaranteed to lose at least 2% of its value every year? And
this is a guarantee, as the Fed has promised a 2% rate of increase in
price inflation, while also guaranteeing a zero percent federal funds
rate through 2014. Retirees living on fixed incomes, dependent on
savings, or on interest income from investments will see their savings
drawn down as they are forced to consume principal. Young people, hard
hit by the recession and struggling to find jobs, will fail to see the
virtue of thrift. Saving or investing is an exercise in futility, as
parking money in the bank or in CDs will guarantee a loss, while
investing in stocks, bonds, or mutual funds will net at best paltry
gains, and at worst massive losses in this continuing weak economy.

The longer the Federal Reserve keeps interest rates low and
discourages savings and investment, the more societal attitudes will
change from being future oriented to present oriented. The Federal
Reserve and its policies already served to stimulate and prioritize
consumption over saving, creating the largest debt bubble the world
has ever known. The extended zero interest rate policy only serves to
promote more consumption and debt now, eviscerating thrift and savings
– the true building blocks of prosperity. This present-oriented
mindset has become pervasive especially among politicians, putting the
government in dismal financial shape as Congressmen and Presidents
over the years have taken to heart Louis XV’s famous saying: “Après
moi, le déluge.” If the American people follow the same path in their
own lives, this country will be ruined. Capital will be depleted,
infrastructure will fall into disrepair, and the United States will be
a mere shadow of its former self. It is well past time to end the
failed monetary policy that encourages this mistaken preference for
cheap money now.

March 1, 2012

Dr. Ron Paul is a Republican member of Congress from Texas.

Original link at LewRockwell.com: http://lewrockwell.com/paul/paul794.html

Published in: on March 3, 2012 at 12:03 am  Leave a Comment