Birchtree's Account Talk

[ocean]

Re: Birchtree's account talk

Birch,

I got 200 shares CSX @ 61.45 on Friday. I considered that it was a good bargain because it dropped couple more points since Thursday close. I don’t intend to hold it long. Hope it goes up in the next few weeks as you said that the Dow Utilities will go up. If it doesn’t, that is ok too. Thanks for the tip.

Ocean

 

[Birchtree]

Re: Birchtree's account talk

From TWSJ 7/22 by Mark Whitehouse

Strong earnings reports this past week from such companies as J.P. Morgan Chase, Pfizer Inc. and Allstate Corp. led analyst to increase their estimate of second quarter profit growth for S&P 500 companies to 13.6%, from 12.4% at the beginning of the week. For all of 2006, analysts expect profits to grow 14%, up slightly from 13.7% last year.

Corporate profits can't outpace the economy forever: In the long term, the ceiling is the nominal rate of economic growth, which economists put at about 6%. Profits are already at a record high as a percentage of the economy, and they're facing pressures on all sides. Slower economic growth should damp sales, while rising interest rates, energy prices and wages should take a bigger bite out of the proceeds from sales, leaving less for the bottom line.

In this environment, U.S. companies have only two ways to keep profits growing: Get more efficient by using their capital and workers more wisely, or boost their sales to places such as Asia, where economies are growing faster. That's why bulls and bears alike will be paying close attention to the profit margins and international sales of companies. And as global players, they're a good barometer of how much of a difference foreign sales can make. If these companies can keep profit margins high and find customers abroad, that's a good sign.

I'm glad I'm a C man.

 

[Birchtree]

Re: Birchtree's account talk

Don't tell the others, but this rally is setting up internally to last for many months. Even if you do tell the others - none of them will believe you. Snort.

 

[Birchtree]

Germany sees job gains.

From TWSJ 6/24 by Marcus Walker

The euro region is poised to post its strongest economic growth since the technology boom of 2000. The 2.2% expansion projected for this year would be the largest improvement in the growth rate among the world's big, developed economies. Amid signs that U.S. growth is losing steam, it is a timely revival that could help prevent a global slowdown.

Rising employment in Germany is expected to drive stronger domestic demand, adding momentum to an export driven recovery that was draining, not adding, jobs. Germany is Europe's largest economy and in recent years has been one of its most stagnant. But the nation has led in developing a robust export industry and in the corporate restructuring that has finally begun to create jobs.

Europe's economic slump has given companies new muscle in their negotiations with workers. Governments in Europe have been slow to overhaul worker friendly labor laws for fear of incurring voters' wrath. That slowed job growth as companies transferred operations overseas where labor costs were lower. High unemployment in Europe depressed consumer spending, helping limit economic growth in the past five years to a meager 1.4% average in the 12 countries that use the euro.

At the same time. a robust global economic expansion created new opportunities for European companies to export goods. That boosted profits, but also made companies keener to hone operations and trim costs to compete better in the global marketplace. Companies in France, Italy, and other parts of Europe haven't gone as far as Germany in cutting costs and changing labor practices. But they, too, are seeing corporate profits rise from growing exports and are pressing for greater worker productivity. The improvement is feeding a renewal of business investment that is gradually easing high unemployment rates.

 

[Birchtree]

Re: Birchtree's account talk

From TWSJ 8/1 by Robert Pozen

In the coming days, Congress is expected to pass a pension bill that will effectively put the nail in the coffin of defined benefit plans for corporate America. To close a $313 billion funding shortfall in plans insured by the Pension Benefit Guaranty Corporation, the bill will raise PBGC insurance premiums, require increased pension contributions by most employers and change the interest rates in acturial calculations for defined benefit plans.

Concurrently, the accounting rule makers are forcing employers to reflect their pension deficits (or surpluses ) on their balance sheets - thereby reducing the net worth of many companies and jeopardizing the lending agreements of some. The consequence of this double header? No public company in the U.S. will create a new defined benefit plan, and the existing ones will be gradually phased out, frozen or converted into cash balance plans.

As a result, American workers will have to take even more personal responsibility for their retirement income through defined contribution plans and other savings vehicles. Birchy says the writing is on the wall - even Uncle employees may eventually face the same situation. The TSP system is set to receive these potential conversions. Be prepared and educated.

 

[ocean]

Re: Birchtree's account talk

From TWSJ 8/1 by Robert Pozen

As a result, American workers will have to take even more personal responsibility for their retirement income through defined contribution plans and other savings vehicles. Birchy says the writing is on the wall - even Uncle employees may eventually face the same situation. The TSP system is set to receive these potential conversions. Be prepared and educated.

Birch,

The government employees already are taking more personal responsibility of the TSP retirement system. Don't quite understand what potential conversions Congress can or will make about the TSP.

Ocean

 

[Birchtree]

Re: Birchtree's account talk

Ocean,

The TSP system is a defined contribution plan - voluntary. Often called a deferred compensation plan and is designed to be a retirement supplement. The annuity program is the defined benefit plan and is the obligation of the employer based on several factors. It is a lifetime monthly payment based on your life span - when you pass it stops depending on the beneficiary setup. My wife opted for a defined contribution via the FRS (State of Florida) and has already made over $150,000 extra. There is no set payment upon retirement, you take what you need when you need it. Great tax benefits. The program does require participants to be responsible for their own retirement benefits. And knowing how to invest is very helpful.

 

[ocean]

Re: Birchtree's account talk

Birch,

As you mentioned there are two types of plans, 1 is the defined contribution plan and the other is the defined benefit plan. The Federal retirement systems already covered both - TSP is the defined contribution plan and CSRS and FERS should be the defined benefit plan.

The government made the change back in 1984 from the more generous CSRS to the FERS. But they also created the TSP system so that both retirement system participants could contribute their own and management their own contribution. So the annuity and the contribution systems were already established back then. I would wonder if they could come up with any type of TSP conversions since we already in the game for such a long time and this system seems to be working quite perfectly. What I mean quite perfectly is that I did not hear any news from the official TSP site saying that participants would lose money over time. I only see most participants if not all would have their TSP balance growth over time with their continuing contribution and from the returns of their investment. I am quite satisfied with these CSRS/FERS and TSP systems because it works.

Ocean

 

[Dave M]

Conversion

Take the (1%) X (years of service) X (H3) and make an estimate, based on our individual series/grade/life expectancy, of the dollar-amount equal to the total payout. Transfer that $$ into our TSP accounts and abate the annuity.

It'd be a bunch of money and then we could play with it, make it grow. I like the idea.

Dave

 

[Pilgrim]

Re: Conversion

Take the (1%) X (years of service) X (H3) and make an estimate, based on our individual series/grade/life expectancy, of the dollar-amount equal to the total payout. Transfer that $$ into our TSP accounts and abate the annuity.

It'd be a bunch of money and then we could play with it, make it grow. I like the idea.

Dave

Not a bad idea, but we get 1.1% if we retire at 62 or older. Even though I'm no where near that old, I want every penny if they plan to buy me out.

 

[Birchtree]

Conversions

I mentioned the defined contribution plans because they can be very rewarding if managed correctly. They work the same way that TSP functions - and now the infrastructure is in place with the lifecycle funds to accept conversions if the opportunity is presented. The biggest benefit of defined contribution is that you own the money up front - you don't have to live forever to excercise your full benefits. And you have flexibility in your choice of beneficiary. I know one FRS participant that pulled down $800,000, think how much more he can make with active investing. DaveM is correct. The accounts continue to grow during your retirement years - just like TSP.

These voluntary conversions may never be offered by Uncle - but I wouldn't bet against the possibility. They are not for everyone, but I'd take mine in a heart beat.

 

[ocean]

Re: Birchtree's account talk

$800K is a lot of money to be converted for investing like TSP. I wish my account can reach that level in 5 years when I retire and just draw 5% - 6% out annually without touching the princpal. I will be a happy man then.

Ocean

 

[Birchtree]

Re: Birchtree's account talk

Just 19% of Americans think the economy is getting better these days, while 65% disagree and say it is getting worse - from a Rassmussen Report.

This Rassmussen survey has not been around very long, but a similar poll by Gallup has only once shown more economic pessimism by the public, immediately after 9/11 attacks with a reading of 19% for better and 70% for worse. The next closest extreme of economic pessimism was in March 2003 right before the Iraq War began when the poll showed 23% for better and 67% for worse.

This is great stuff for a contrarian like myself - the fewer believers the better. Fear the BULL and catch the wild ride to come.

 

[Birchtree]

Re: Birchtree's account talk

Fed policy makers see core inflation falling back to between 2% and 2.25% next year from 2.25% to 2.5% this year - without the economy falling below potential to achieve that. The officials see growth at a bit above 3% through the end of next year, in line with estimates of potential growth, and a labor market at full strength.
Fed officials acknowledge that firms have been able to pass on energy costs in part because the economy is now so close to full capacity. But some expect second half growth to slow enough to limit that pricing power. The economy has entered a period of slightly below trend growth that should relieve any underlying inflationary pressures emanating from tightness in labor and product markets.

They never told me investing would be easy - therefore I'll show confidence in Ben and be right and sit tight. Snort.

 

[Birchtree]

Re: Birchtree's account talk

The smaller June trade deficit reflected a healthy 2 percent jump in U.S. exports to a record $120.7 billion, with shipments of farm goods, capital goods and industrial supplies all setting records. U.S. shipments to the 25-nation European Union and countries in Central and South America climbed to all-time highs, reflecting improved economic growth in these regions. Exports to Japan, which is also enjoying an economic rebound, jumped to the highest level since March 2001. I hope my dog the Wizard is taking notes for his remedial economics class.

 

[robo]

Re: Birchtree's account talk

Birchtree,

I thought you might enjoy this article....

Robo


Soft Landing?

Many See a Goldilocks Market,
While Others See Stagflation Lite
August 18, 2006


http://online.wsj.com/public/article/SB115582251775238292-qnPslPx3Epwv3N_5egS_0SEZb8A_20060825.html

 

[Birchtree]

Re: Birchtree's account talk

The futures markets are still clinging to the view that there is a one in four chance that the Fed will tighten again before the end of the year, and they are priced for only one rate cut in 2007. That is not enough. Looking at the gap between the average interest rate in the economy and the current posted rate, there won't be any real stimulus until after the Fed has cut rates by at keast 275 basis points. The power of the bull is prescient - snort.

 

[Birchtree]

Re: Birchtree's account talk

The components of the NYSE breadth MCO are still on a buy signal and bottoms above bottoms continue to control the NYSE breadth MCO pattern. The NYSE breadth MCSUM is getting very close to the +500 level with a reading of +472. This +500 level is important because of the juncture we're at right now, it would be highly constructive if the MCSUM pattern were able to move above the +500 level. For inorder to do this several other related things will need to happen if this level is able to be violated - higher MCO levels for one, new all time highs with respect of the NYAD itself. If these internal components can actually make new highs during this sequence, so will the price pattern as breadth leads price. Come on Rochester. Snort.

 

[Birchtree]

Re: Birchtree's account talk

The Dow volume MCSUM is now 100 data points from taking out the December 2005 highs - now at a reading of +895. Today should be positive on the close.

 

[Birchtree]

Buybacks reach quarterly record

From TWSJ 8/25/06

Big companies bought back a record $116 billion worth of shares in the second quarter, up 43% from a year earlier, according to Standard & Poor's.

Over 40% of the companies in the S&P 500-stock index reduced their shares outstanding with buybacks in the quarter. The previous buyback record was $104 billion, set in the fourth quarter of 2005. It's unprecedented. We've never had this magnitude of buybacks.

In the past seven quarters, S&P 500 companies have spent $630 billion on buybacks. Since then, about half of the companies included in the survey have shrunk their share count. In the first quarter, more than 20% of S&P 500 companies reduced shares by at least 4% from year-earlier levels.

Moreover, big companies are spending as much on buybacks as they are on capital expenditures. Companies are flush with cash after posting 17 quarters of double-digit operating earnings growth. Businesses built cash reserves in part by outsourcing and improving productivity.

My friends, there is an explosion on the way. Buy now and be patient.