This means companies don't have to set aside additional funds to shore up their pension programs. So a magical increase in earnings.
The biggest beneficiaries? The Industrials - whose obligations decreased from $22.1billion to $0.6 billion!!
Source Aug 28 wsj
That is why when you see a sudden increase in net income find out reason for sudden increase. And go to balance sheet and look in other liabilities. Pension obligations would be included there. Add that to total debt to see how much does company really owe. I believe sometimes pension obligations included inlong term debt.
Chartered accountants and other financial types - if what I have opined in above para is not accurate del free to jump in.
Kind of. I have window dressing used in the context of mutual fund companies selling the losers and “dressing” up portfolio with winners before end of each quarter. This makes their investors think their fund managers are so smart - only holding winners. Of course a price is paid. Buy high sell low.
After a brief hiatus, the Nuggets section is open for business. As our savvy readers are aware ETFs are a cost-effective way of investing in the markets. Those that follow big markets indexes charge fees as low as 0.07 to 0.1%.
After the 2008-2009 rout, lots of financial advisers have been using managed ETF portfolios for clients designed by ETF strategists. These strategists use their "wisdom" to design a set of ETFs and move money across this set as and when their crystal ball ( read macro economic indicators) guides them to do so. Result? Increase in transaction cost, underperformance in addition to the 1% fees that these " strategists" charge to underperform.
So what is the total hit to the investor, you ask. Patience!
It is a favorite question - are markets overvalued fairly valued or undervalued? Yesterday WSJ had an article on this.
Normally P/E is based on last 12 mo or estimated earnings for next 12 months. Robert Schiller Yale Prof. Coined a metric called Schiller's P/E where earnings are averaged over last 10 years.
Logoc - this removes year to year volatility. The average P/E was 17 for last 50 plus years. I. The 1995-2000 time frame this ratio skyrocketed peaking in 2000 at around 40. There were times this ratio was as low as 10!
Sonlofic dictates the P/E could fall to 17. That represents a 25% drop.
My addition - Of course falling to 10 represents a drop of 53%.
So in theory market could go down 25 to 53% from these levels.
IMO it is not that simple. Market could stay flat for say 3 yrs and let earnings catch up. Also IMO earnings in 2002 2003 2008 2009 were extremely low. Having 4 low earnings years in a 10 yr span is rare. So once 2002 and 2003 are replaced the 10 yr Aglverage earnings should increase.
Readers have been complaining about the inconsistent updating of financial news of the unique bent. This has been a rough few months. We had to trim our staff in deference to the tough economic outlook. Today we may have turned a corner. We may soon have a Senior Contributor in the frontlines.
Since the 2007-2008 financial crisis, Tactical investing has become the strategy in fashion. These funds seek to keep you out of stocks when they fall and move you back in when they rise.
Of course readers of this column would scoff at this strategy. The WSJ finally figured out in today's paper that this strategy ain't all that.
These funds are up only 6% this year while stock indexes are up 12%. Over last 3 years they lag stock indexes by 6% points per year. And a balanced fund with 60/40 stocks/bonds is up 11% per year last 3 years, trouncing these tacticians.
To add insult to injury the tactical funds charge 1.5% expense ratio - 15 times higher than index fund.
There is a sucker born every minute. But not among our readers.
Our readers have been concerned about the fiscal cliff and the anticipated dividend hike. One alert reader passed along the following from this weeks WSJ.
Companies have been borrowing money to pay a 1- time dividend. COSTCO is the biggest name doing this. The incentive is two - fold. Distribute dividends ahead of the tax bite. Take advantage of the ultra low interest rates. Private equity firms are also loading up the companies they bought with debt and paying themselves a handsome dividend.
Result? Share prices for these companies spiked. Is this a good thing? Mr. Monk certainly won't approve.
Cash is king - so the mantra goes. Not if you are one of the Big US Banks. Deposits have been flooding in. While the banks are finding it difficult to find credit worthy folks to lend to.
Ideally, the Loan to deposit ratio should be 100 for banks to rake in money. In 2007 this ratio was 95%. Now? 72%! Deposits at end of 2012 were a record high $10.6 trillion while loans to borrowers only $7.6 trillion.
Result? The difference between the interest collected from borrowers and interest paid to depositors has " fallen sharply". ( the tech term is net interest margin).
Contents from Jan 11 wsj.
IMO at some point down the road this should resolve itself.
