For Those Who Love Irony: How Rising Taxes Drove Income Higher

What the . . .???   I thought tax rates had no impact on income or behavior or investing!!

But here we see the impact of scaring investors and companies with higher tax rates: they take their money out of the market.  In this instance, companies rushed to get their dividends to investors before the end of December, in order to avoid the higher dividend rate which was being ushered in along with Baby New Year.  Imagine that!



John Carney By: Senior Editor,

One day after the Federal Open Market Committee announced that economic growth paused in December 2012, the Commerce Department released data showing that personal income rose by the most since 2004.

The 2.6 percent increase in incomes blew away the official expectations number, which was 0.8 percent.

The biggest clue to how incomes rose while the economy stalled is contained in the Commerce Department’s data about the sources of rising income. Of the $353 billion income rise, $268 billion came from dividends. That is, dividends accounted for around 75 percent of the total increase.

That is a breath-taking rise. As Steve Liesman pointed out this morning, monthly dividends have only increased by more than that only once in the past 50 years — in 2004, thanks to a record-breaking dividend from Microsoft.

Much of the hike in dividends seems likely to be due to companies paying shareholders before the expiration of Bush-era tax cuts on dividends. And so, ironically, the looming hike on dividend income actually resulted in a dramatic rise in that income. Taxes drove income up.

Even some of the non-dividend income increase might have been driven by higher taxes, as some firms paid bonuses out early to avoid having them taxed at a higher rate in the new year.

. . . .

You can read the remainder of this interesting article by clicking here.


Thursday, January 31st, 2013 Education, News No Comments

Thinking about trading Facebook? Might want to hold off a bit longer . . .

Facebook (ticker: FB) was perhaps the most highly anticipated (read: “over-hyped”) IPOs in years.  Probably the most talked about this century.  And, as everyone knows, it tanked horribly after a quick spike, which didn’t last through its first day of trading. 

But with the fervor behind it, and currently trading around 1/2 the price it debuted at, some traders and investors are starting to look at picking it up. 

I don’t generally muck about with fundamentals, so won’t jump into the argument over how they intend to increase their cash flow and whether that makes FB a good investment or trade, but one thing certainly gives me the shakes when I think about jumping on a stock trading site to buuy some shares: lockup periods ending. 

There are a ton of shares which are out of the game, right now, locked up for regulatory reasons.  Once they are released to the wild, we don’t know how many will immediately be for sale, but very recent history (see article below) suggests an answer: a lot. 

That could present an enormous head wind for any bullish position.   I’m not saying FB is a buy or a sell, but the prudent trader/investor should bear in mind that the next few months are likely to be difficult ones for the shares (and anyone holding them). 


Here’s When Other Facebook Insiders Can Sell Stock

Published: Tuesday, 21 Aug 2012 | 3:58 PM ET
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By: Reuters

Last week, Facebook’s early investors and some directors became eligible to sell stock they own in the social networking company. Others will have similar rights in the coming months.

Up to 1.91 billion more shares could flood the stock market — more than four times the 421 million shares that had been trading since Facebook’s [FB  19.22    0.061  (+0.32%)   ] initial public offering in May.

Facebook’s stock has fallen since last Thursday’s expiration of the first lock-up period. On Monday, it’s disclosed that Peter Thiel, one of Facebook’s earliest investors and a member of its board, was among the insiders selling stock after the lock-up period expired. He sold about 20 million shares through affiliates for $19.27 to $20.69 each.

(Read More: Investor Thiel Unloads Most of His Facebook Shares)

Here’s the schedule, as reported by Facebook in a regulatory filing:

  • Aug. 16: 271 million shares held by early investors and directors who had participated in the IPO, though CEO Mark Zuckerberg is excluded for unspecified reasons.
  • Unspecified date between Oct. 15 and Nov. 13: 243 million shares and stock options held by directors and former or current employees, excluding Zuckerberg.
  • Nov. 14: 1.22 billion shares and stock options, about a third of which is controlled by Zuckerberg.
  • Dec. 14: 149 million shares held by early investors and others who participated in IPO, except Zuckerberg.

(read entire article here)

Wednesday, August 22nd, 2012 Education, News, Stock Trading No Comments

Concerns Over Stock Trading Volume

Trading volume traditionally shrinks over the summer months.  Market participants – whether the retail trader or the hedge fund manager – find more entertaining things to do than sit around fine tuning their positions.  You know, things like going to the beach, going to picnics, going to the zoo, etc.  A lot of ‘going to’ that doesn’t involve sitting in front of a trading screen. 

Now, on top of the normal seasonal dynamic, securities insecurities has a number of traders and investors sitting on their hands, too.  Could be a problem for those of us sitting on any kind of profit resulting from the recent market gains . . .

  • August 16, 2012, 8:19 a.m. ET

Stock Trading-Volume Drop Can’t Be Blamed Only on Summer

 By Sue Chang and Laura Mandaro

Trading in the stock market has slowed to a somnolent pace, even after accounting for all the traders and hedge-fund managers escaping to their vacation homes in the Hamptons.

Get used to it. Volumes could bump along at below-average levels for another three weeks, as investors hang on to recent gains and avoid making big moves before what is seen as the next catalysts–upcoming Federal Reserve and European Central Bank events.

On Wednesday, the volume of shares listed on NYSE Euronext’s (NYX) New York Stock Exchange totaled a paltry 2.64 billion, the fourth straight day with less than 3 billion shares changing hands and roughly 29% below this year’s average volume. The month’s average of 3.3 billion has dropped more than 40% from last August’s daily average.

It is no surprise August volumes look iron-deficient compared to a year ago. In August 2011, investor anxiety about Congress’ bitter fight over raising the debt ceiling and the U.S. losing a triple-A rating led to intense swings on the indexes and a surge in trading volumes.

But even compared to prior Augusts, volume has been slight. NYSE composite volume is on track for its lowest month since December 2007 and its lowest August since 2006, according to the Wall Street Journal’s data group.

For stocks listed on Nasdaq OMX Group’s (NDAQ) Nasdaq Stock Market, 1.52 billion shares traded on Wednesday, which is about 12% lower than the average for this year.

Aside from the usual summer doldrums, a lack of fresh incentives, consolidation in the wake of robust gains over the past couple of months and uncertainties over what, if any, action policy makers in the U.S. and Europe will take to jump-start their economies, are keeping investors mostly in the wings. . . . .   Read rest of article.

Friday, August 17th, 2012 News, Stock Trading, Uncategorized No Comments

3 Semiconductors for Traders

By The Hot List | | February 06, 2012 05:47 PM

Being a semiconductor stock is like being from the “technology wing of the technology party.” Whether it is in PCs or mobile devices, due to the advent of smart cars and smart appliances or the rise of The Cloud, few things seem to drive the tech sector like the capacity of semiconductor companies to make our machines move faster, work harder and make our lives that much better.

This is why the group is considered the leader of the overall technology sector. This is why some traders look to such phenomena as divergences between the behavior of semiconductor stocks compared to technology as a whole for potential clues as to whether the larger sector, or even the larger economy, is due for a surprising move.

Here our take on semiconductor stocks is in many ways more pedestrian. Many of these stocks have had great runs. And many traders who have benefitted from those runs appear to be at least starting the process of taking profits. And if that profit-taking continues, many of these semiconductor stocks could be available at their lowest, most oversold levels in weeks if not months.

The semiconductor stock that is most interesting in this regard right now is Novellus Systems (NASDAQ: NVLS). Shares of NVLS rallied to new, 52-week highs late last week, and have pulled back over the past two days as traders have locked in gains and taken profits. Down more than 2% and trading midway between recent, short-term highs and recent, short-term lows, NVLS has a positive edge of more than three-quarters of a percent and neutral ratings of 6 out of 10.

Other semiconductor stocks that have begun to sell off significantly as the week gets underway are Kla-Tencor Corporation (NASDAQ: KLAC), whch pulled back by more than 2% to finish at its lowest level in a week. KLAC has a positive edge of half a percent in the short-term, and has earned a two-point ratings upgrade based on Monday’s selling alone. Additional weakness in the stock could help KLAC earn another two-point upgrade which would put Kla-Tencor in our “consider buying” category in the near-term.

Sellers have already appeared to take control of Triquint Semiconductor (NASDAQ: TQNT). Unlike KLAC and NVLS, shares of TQNT are trading below their 200-day moving average – and have been since the summer of 2011. The stock had rallied into overbought territory on Friday, after climbing for four consecutive sessions. Shares of TQNT sold off by more than 2%, and still have “consider avoiding” ratings of 2 out of 10.

Want more stocks? Read our latest from 7 Stocks You Need to Know: “The Intel Pullback as Pitstop: Three Down, Six Up”

David Penn is Editor in Chief of

Tuesday, February 7th, 2012 News, Stock Trading No Comments

What to expect from US GDP?

Friday, January 27th, 2012 Education, News, Stock Trading No Comments

What Up, Dawgs? GE Now Part of the Dow Dog Pound

Published: Wednesday, 25 Jan 2012 | 12:04 PM ET
By: Jeff Cox Senior Writer


Sebastien Bozon | AFP | Getty Images

The Dogs of the Dow – those high-yielding stocks that are supposed to represent the bottom of the blue-chip barrel – have some unlikely company.

General Electric once stood as the bellwether of American industry but now sits among the 10 Dow stocks that produce the highest yield and, theoretically at least, represent the most risk for investors.

GE’s [GE  19.121    0.281  (+1.49%)   ] yield is clocking in at a robust 3.6 percent, more than double the 1.7 percent that Dow stalwart Caterpillar [CAT  107.43    1.14  (+1.07%)   ] produces. (GE is minority owner of NBC Universal.)

Joining GE as newcomers to the 2012 Dog pound is Procter & Gamble, with a 3.2 percent yield.

The two companies replace Chevron [CVX  107.071    0.351  (+0.33%)   ] (3 percent) and McDonald’s [MCD  99.22    0.47  (+0.48%)   ] (2.8 percent), both of which boosted the Dogs to the status as one of the top trades of 2011.

As the Dow 30 gained about 5 percent and the Standard & Poor’s 500 finished flat for the year, the Dogs posted an average total return of 16.7 percent, according to calculations from Bank of America Merrill Lynch.


But the strategy has been a loser so far in 2012.

The Dogs, as tracked through their ETF proxy, the Deutsche Bank ELEMENTS Dogs [DOD  9.77    0.03  (+0.31%)   ] has gained just 1.2 percent even though the Dow had gained 3.7 percent and the S&P 500 4.5 percent heading into Wednesday trading.

That’s been the story of trading this year: What worked in 2011 has faltered in 2012. High-yield boomed last year but has faltered this year; high short interest worked as a contrary indicator then but not so much now, and non-domestic stocks are crushing their U.S.-based counterparts, again reversing a 2011 trend.

Still, the Dog collar hasn’t chased away those who believe the hunt for yield will resume.

“Yield is expected to remain scarce as the 76 million baby boomers head into their retirement years,” said Mary Ann Bartels, technical research analyst at BofA. “The equity market is supplying an abundance of yield and investors can get paid to wait for price appreciation.”

The rest of the current Dog pack: AT&T [ATT  25.388    0.006  (+0.02%)   ] , DuPont [DD  50.16    0.75  (+1.52%)   ] , Intel [INTC  26.9001    0.0051  (+0.02%)   ] , Johnson & Johnson [JNJ  65.16    0.16  (+0.25%)   ] , Kraft Foods [KFT  38.31    0.01  (+0.03%)   ] , Merck [MRK  38.71    -0.07  (-0.18%)   ] , Pfizer [PFE  21.661    0.001  (+0.01%)   ] and Verizon [VZ  37.5999    -0.1901  (-0.5%)   ] .


Want to read original post? Click here.

Wednesday, January 25th, 2012 Education, News, Stock Trading No Comments

Jon Najarian Spots Unusual Activity In Specialty Retail

Mr. Najarian has a knack for using options activity to spot impending stock moves.  Check this one out for American Eagle.

Published: Monday, 24 Oct 2011 | 1:15 PM ET
By: Lee Brodie Producer

Halftime Report

Trader Jon Najarian has spotted unusual activity in a major specialty retailer.

He tells us his proprietary OptionMonster heat seeker has identified an unusually high number of November 15 calls that recently traded in American Eagle[AEO  13.383    0.383  (+2.95%)   ].

”It’s not my number 1 pick in the space but there’s not doubt big investors have their eye on this stock, It’s a lot of upside buying.”

It suggests at least some institutional investors expect the stock to make a sharp move higher.

Elsewhere in the space trader Zach Karabell is watching VF Corp [VFC  136.93    4.24  (+3.2%)   ], Bed Bath & Beyond[BBBY  62.3802    0.5702  (+0.92%)   ], Nike[NKE  94.98    0.63  (+0.67%)   ]Limited [LTD  43.90    1.19  (+2.79%)   ]and Ralph Lauren[RL  157.85    7.11  (+4.72%)   ]which all hit record highs.

”High end retail is keyed into the discretionary spend. If people have money they continue to spend it.”

JJ Kinahan agrees. “For the high end this could be a much better holiday than many investors expect.”

Monday, October 24th, 2011 News, Options, Stock Trading No Comments

US Rating Likely to Be Downgraded Again: Merrill

 While not completely unexpected, this is not a fun prospect.  Seems likely that many traders will be looking to gold for some capital appreciation in the coming months.
Published: Monday, 24 Oct 2011 | 3:11 AM ET
By: Reuters

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.

A second downgrade — either from Moody’s[MCO  32.00    0.62  (+1.98%)   ]or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden.

A second loss of the country’s top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.

“The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the report.

“Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,” he added.

The bipartisan congressional committee formed to address the deficit — known as the “super committee” — needs to break an impasse between Republicans and Democrats in order to reach a deal to reduce the U.S. deficit by at least $1.2 trillion by November 23.

If a majority of the 12-member committee fails to agree on a plan, $1.2 trillion in automatic spending cuts will be triggered, beginning in 2013.

Those automatic cuts, mostly in discretionary spending, would weigh further on a fragile U.S. economy, Merrill said.

In the same report, the bank reduced its 2012 and 2013 growth forecasts for the United States to 1.8 percent and 1.4 percent, respectively.

If there were a downgrade, it was not clear which ratings agency would move first.

Moody’s Investors Service, which has a negative outlook on the United States’s Aaa rating, said it is looking at several other factors, including the results of presidential elections and the expiration of the Bush-era tax cuts late in 2012, to decide on the rating.

“It’s not that we’re waiting just for this committee to decide on the rating,” Steven Hess, Moody’s lead analyst for the United States, told Reuters in an interview last week.

Failure by the committee to come up with an agreement, he said, “would be negative information but it is not decisive in our view about the rating.” To be sure, Hess did not rule out the possibility of an early move on U.S. ratings if the country’s economy slips into recession.

So far, however, the economic performance “is certainly not super positive but not a disaster either,” he said.

Fitch Ratings, on the other hand, still has a stable outlook on its AAA rating on the United States, meaning it is more likely to revise that outlook to negative before actually downgrading the rating.

In its latest report on the United States, Fitch says a “negative rating action,” which could be only an outlook revision, could result from a weaker-than-expected economic recovery or by failure by the bipartisan committee to reach agreement on at least $1.2 billion in deficit-reduction measures.

See full article here

Monday, October 24th, 2011 Education, News, Stock Trading No Comments

Financial Transaction Tax—Story of Failure

This horrible idea pops up in the U.S. every few years, too.  Apparently, politicians everywhere have a difficult time with the idea that there is chunk of money somewhere they aren’t carving a piece out of. 

Published: Tuesday, 27 Sep 2011 | 4:55 PM ET
By: Bob Pisani
CNBC Reporter


A financial transaction tax? It didn’t work when it was tried in Sweden.

Another potential factor in today’s late market drop: word that the European Commission will unveil a financial transaction tax on bond and stock trading, as reported by DealBook.

This is a variation on the Tobin Tax, first suggested by Nobel Laureate James Tobin, who proposed a tax on currency transactions.

France and Germany are reportedly in favor, but the UK and Sweden are not, and with good reason: it didn’t work when it was tried in Sweden.

In 1984 Sweden instituted an 0.5 percent tax on the purchase or sale of equities…a 1 percent tax on a round trip! It was doubled in 1986, and was subsequently modified depending on how long the security was held.

The result: taxable trading volumes fell, and the taxes collected were disappointing. Also, revenues from capital gains taxes fell at the same time (duh), so any gains from the transaction tax were offset by the fall in capital gains taxes.

The tax was abolished in 1991.

Read original article here



Wednesday, September 28th, 2011 Education, News, Stock Trading No Comments

New Market-Wide Circuit Breakers Coming

Circuit breakers are more apt to make us think about our houses electrical system than trading, but Bob Pisani has an interesting post about coming changes to systemic ‘circuit breakers’ in the stock market.  Aimed at avoiding a cascading failure in equity prices, circuit breakers give everyone some time to catch their breath and let go of some panic – and with some of the gut churning drops we’ve had in recent years, it looks like the SEC wants to make these a bit more frequently invoked.


Published: Tuesday, 27 Sep 2011 | 1:30 PM ET
By: Bob Pisani
CNBC Reporter

After much delay, the SEC is filing proposals to revise the existing market-wide circuit breakers.

The changes reduce the percentage declines needed to halt trading and simplifies the structure of the circuit breakers. It also changes the reference index from the Dow Industrials to the S&P 500.

The current circuit breakers, adopted in October 1988, kick in when the Dow Industrials drop 10, 20, and 30 percent.

The only time the circuit breakers actually kicked in was Oct. 27, 1997, when traded was halted twice.

And that’s the problem: they were useless during the “Flash Crash,” because the Dow never dropped more than 10 percent.

The SEC has put out the proposed changes for a 21-day comment period.

The changes will greatly simplify the current cumbersome structure. It will:

1) Reducethe market decline percentage thresholds necessary to trigger a circuit breaker. Instead of 10, 20, and 30 percent declines, the threshold will be reduced to 7, 13, and 20 percent declines from the prior day’s closing price.

2) Shorten the duration of the trading halts to 15 minutes.

3) Simplify the time when the trading halts kick in. Now there will be only two trigger periods: those that occur before 3:25pm (when trading would be halted for 15 minutes), and those that occur on or after 3:25pm, when there would be no halt in trading.

4) Recalculate the trigger thresholds on a daily, rather than quarterly, basis.

The individual stock circuit breakers, which halt trading if the price of an individual stock moves 10 percent or more in a five-minute period, remains in effect.

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Read original article here

Tuesday, September 27th, 2011 Education, News, Stock Trading No Comments