1/28/13…inflated stock market optimism and Mickelson’s pessism

TB’s Song of the Day…dedicated to Phil Mickelson:

Cause you had a bad day
You’re taking one down
You sing a sad song just to turn it around
You say you don’t know
You tell me don’t lie
You work at a smile and you go for a ride
You had a bad day
The camera don’t lie
You’re coming back down and you really don’t mind
You had a bad day
Memo to Phil: perhaps you need to listen to and think about ‘Don’t Worry, Be Happy’

From the Friars Club Encyclopedia of Jokes: “Did you hear about the Scotsman who quit golf, then took it up again twelve years later? He found his ball!”

Bloomberg Quote of the Day: “AI failed over and over and that is why I succeed.”

 –Michael Jordan

Bloomberg Top Stories:

*U.S Durable Goods Orders Rose 4.6% in December; Ex-Trans +1.3% – that’s why they are referred to as ‘doubtful goods orders’!  Estimate was for +2%. ‘Nuf said.

*Europe Crisis Seen Reaping Social Toll of Record Unemployment in December – !!!

*Yen Rallies as Pound Slips While European Stocks, U.S> Futures Fluctuate

*Default Swaps Upgrade Sovereign Ratings From Brink of Junk as World Heals – ???

*Pound Mimics Yen as Losses Mount in Britain’s Triple-Dip Recession peril

*Spanish Bond Rates Shield Rajoy Party From Corruption Fallout – going lower?

*Ford Beating GM in Race to Europe Turnaround as Profit in U.S. Jumps

*Nokia Bondholders Risks Endure After Dividend Skipped – 1st time in 143 years!

*Bank Bonds Poised to Recapture Pre-Crisis Yield Eminence – spreads narrowing

*Boeing Risks $5 Billion of Revenue on Result of Dreamliner Grounding Probe – !!!

*Facebook Bullish Bets Climb to Record on Mobile, Search Expansioni

*Nazi Goebbel’s Step-Grandchildren Hidden Billionaires Owning Daimler-Benz L

*Davos Money Men See World Emerging From Doldrums With Tendency to Relapse – ?

*Egypt Protests Flare for Fifth Day as Mursi Institutes State of Emergency

*Obama Recess Pick Defeat an Anomaly as Three Appeals Courts Support Power- fools! Three Supreme Court justices have been appointed this way and scores of other judges. This will cause convicted felons to appeal…where did we get these biased fools?

*Snow, Freezing Rain in Eastern Half of U.S. Is Expected to Disrupt Travel – do tell!

Due to the giddiness of CNBC and others on the S&P 500 close above 1500 for the first time since 2007, TB is going to cut the normal market summary except for overnight markets and commodities…never believe what a realtor or stockbroker tells you…they are always bullish as that is how they get paid, not by being bearish. For a different perspective here is Gary Schilling from Bloomberg today: Gary Schilling/Deleveraging and Markets


How strong are the markets? Year to date despite extremely weak volume, the Dow is up 6%; Dow Transports +10.6%; S&P 500 +5.4%, Nasdaq 100 +2.9% (due to impact of Apple which is off 17.3% so far this year). All indices were up 0.5%


But how is your portfolio doing? Let’s look at the long-term performance of the S&P 500, due to the preference for the Spyder S&P 500 Index ETF (SPY), the largest and most actively traded ETF. Long-term as in since the high on 9/1/00 (1530) and the slightly higher record high on 10/11/07 of 1576. Kind of makes you wonder what kind of fool gloats over 1503 doesn’t it? Of course it could be the start of something big…or not!

9/1/00- 12/31/12: -0.6%…or +1.9% annualized with dividends reinvested in the index!

10/11/07-12-31-12: -1.3% +0.9%

(Caveat: the index is not the same as it was in 2000 or 2007 as they swap out losers and replace with winners…like Apple. It is doubtful you adjust your portfolio that much.)

The two biggest components of your retirement, your home and IRA, have failed you, but stocks may be about to make another breathtaking record run, right? Not if you read the above headlines or Schilling. Passive management won’t get you anywhere and growth is now being replaced by value and dividends. Note article on buying corporate bonds!


Next the Nasdaq 100, most impacted by Apple. First, it should be noted that Apple was a dull stock until 2005. From March 31, 1981 it ranged from 1-38 (the high on 3/31/00!). To emphasize the rapidity of its recent rise, the average price from 3/31/81-1/25/13 is just $69…a strong case for buy and hold…at least until recently (by the way if you had sold at the peak on 9/28/12 at $705, the capital gains rate would have been 15%, not 20%!

Return from 12/31/04-12/31/07: 515% or 83% annualized; 3/31/09-9/28/12: 537%, 70% annualized; 9/28/12-1/25/13 (low $439.88) -34%! Timing is everything, right?


Note that Apple, despite being affected when the Fed made all NASDAQ stocks marginable effective 1/1/99 – even IPO’s from the first day’s close (although the only brokers who would do that were the discount brokers who made their money on margin borrowing) – this lead to a huge increase in margin debt and contributed to the stock market bubble which imploded in 2000 in two waves…dotcom’s first, then tech. Nice job, Greenie…again!


So how did Apple affect the S&P 500 and NDQ 100 over those last two periods?  Let’s see, gross return/annualized:             3/31/09-9/28/12           9/28/12-1/25/13

S&P 500                                  +94%(+20.9%)                    +5.1%

NDQ 100                                +133%(+27%)                     -1.5%

Apple                                       +537%(+70%)                      -34%


Due to a higher weighting the Nasdaq impact of Apple was far greater and shows that this was not a broadbased tech rally. S&P actually reduced the weighting of Apple, but since the index is market capitalization weighted it has come back strong. Lastly see how the S&P 500 is showing broad strength since Apple peaked while the Nasdaq is showing less. Recently only about half the stocks in the NDQ 100 are up on a given day.


Now Lets look at Berkshire Hathaway, like Apple a late bloomer but unlike Apple it is not included in any major indices (except the ‘B’ stock which is in OEX and SPX):

BRK/A was up from 12/31/87-12-31/12 by 4,444% or 16.5% annualized! It was not a big winner in the buildup to 2000 and actually strengthen after the crash…it also briefly was hit in the financial crisis but bounced back quickly. Still from 12/31/07-12/31/12 it was down by 5.3%, -1.1% annualized. From 12/31/12-1/25/13 however it is up 9.9%. Just an interesting comparison. Ponder it along with Schilling’s view on deleveraging and the impact on stocks.


Global stocks mixed and little changed except Japan -0.9% India +0.9%, Korea -0.4% vs -0.9% vs -0.8% vs -0.8%, Hang Seng +0.4%. U.S. stock futures slightly higher at session highs: DOW +30; SPX +3; NDQ +4.50%.


Bonds are weak overnight with the 10 yr Treasury at 2% and the 30 yr at 3.17%. The long Tip is now at 0.51%. Foreign bond yields are higher across the board by 5-9 basis points except Greece which is 10.02-5% -5.


Gold was pulverized again on Friday falling $13.30 to $1658.80 ($34 in three sessions!), slicing right through the 200 day ($1670). This is the lowest close since January 9 and negates the attempted rally. The $1636 low on 12/21 – lowest since 8/21 is now critical support!  It is off again overnight to $1653.10 -$5.10 Crude slipped by 7 cents to $95.88, its second straight inside session after putting in an intraday high of $96.92 (highest since 9/17) last Wednesday. Overnight it is $96.31 +.43. How about an up or down vote?

…don’t miss the section on stock performance above. Now for Mr. Mickleson: first, TB is a fan of him and admires him as a golfer. He didn’t appreciate however his griping because he ‘had a bad day’ in a golf tournament, finishing 37th. Ah, but he apologized! Not exactly, it was an ‘I’m sorry but…’ Like Lance Armstrong (don’t mean to compare them only their apologies), he said he was sorry for using his platform as a professional golfer to talk about his personal tax situation (which he admitted he didn’t fully understand). To those of you who missed it, he said he is paying 62% of his income in taxes…horse manure! If he is, he had better fire his accountants and his investment advisors. The poor man is thinking of moving out of California due to the onerous tax rate. Phil, here are some facts:

First, your net worth of $150 million (second only to Tiger Woods at $500 million plus), was achieved with the benefit of the Bush tax cuts (prior top rate 39%). Thanks to our beloved Congress, most of those are still intact on the first million, although the capital gains rate rose to 20% from 15% while your top marginal rate rose to 36% (on income above $500,000). This means the effective tax rate on your first million –after deductions and exemptions – is just 20%! So TB analyzed the ‘second’ and subsequent million dollars, since they would be devoid of deductions (but you still have generation skipping and other perks that have contributed to…been the cause of?…the widening wealth gap).

Here is what happened. Specifically your complaint was about the increase from a 10% top rate in California to 13.3%. But again, that is gross so let’s look at 2012 and 2013 pro forma based on that second million:        2012         2013

Income                                                 $1,000,000      1,000,000

Federal Tax (adj. for state tax)     $291,000      $342,733

State Tax                                                 $100,000      $133,000

Adjusted Total Tax                                  $391,000      $475,733

Effective Tax Rate                                       39.1%            47.6%

Sure that is a lot…but Phil you are forgetting this:

  1. Taxes paid to other states on winnings outside California are a state tax credit
  2. This is just EARNED income and if your advisors can’t come up with some nice returns that minimize your taxes, call TB, he can help.

Is TB whining? No, because Barry Ritholtz also took Mickelson to task for the stupidity of his comments. Hopefully, Phil won’t be one of those like Sheldon Adelman who spend millions on ads to preserve their tax rate (he and other conservatives are putting up money through their SuperPacs etc. to kill the appointment of Sen. Hagel as Secretary of Defense). Millions for defense but not one cent for the less fortunate? Hmmm.

The PGA like all professional sports likes to tout how much its members do for charity. There is a Phil and Amy Mickelson Foundation…but TB has no idea of how much of his $150 million has gone into it. Today, we learned that Michael Bloomberg donated $1 billion to Johns Hopkins University, his alma mater. This in addition to what he has given in the past. He has also done service as New York City Mayor and his beloved Bloomberg LLP is in his charitable trust. That is philanthropy.

You grew up the son of an airline pilot when that was a well-paying profession. Like so many others your age you have never done service for your country…yet you are in effect not having sympathy for those who have suffered from the economic collapse.

As a professional golfer just how much do you think you would be earning from those tournaments if corporations weren’t using them to offset paying taxes and how much real value do they get from them…other than CEO’s rubbing shoulders with golf professionals? Those same corporations, most likely pay an effective tax rate of less than 10% and some zero while they complain about the lack of competitiveness due to the 35% corporate tax rate. It is time for you and the rest of America to wake up to reality.

Best of luck in the 2013 season Phil…just don’t shoot of your mouth again when you don’t know the facts. Also, if that minimal increase in state tax – less than 2% after deducting Federal tax benefits – is enough to make you leave California, TB pities you.



. . .  – – –  . . . (SOS!)  . . .   – – –  . . .  (SOS!) . . .   – – –  . . .  (SOS!)


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