DIVIDEND INVESTING ALERT FOR THE WEEK ENDING
Posted on May 17, 2013 | Dividend Investing
Lotteries offer lots of insight into financial behavior. One of the most interesting insights is how loss aversion drives people who rarely play to buy lottery tickets.
STOCK SUPERSTARS ALERT FOR THE WEEK ENDING 5/17/2013
Posted on May 17, 2013 | Stock Superstars Report
Stock Superstars alert for the week ending 5/17/2013 updated.
Why You May Not Want to Go Away
Posted on May 16, 2013 | Investor Update
Take the money and run or keep your allocation to stocks?
I’m sure this is a question many of you have. The market has had a good run so far this year, with the S&P 500 gaining 17.3% on a total-return basis through yesterday’s close, despite a long list of worries. Then there is the old adage of “sell in May and go away.” But, Mr. Market remains in a chipper mood as is evident by the new record closes continually being set by the Dow Jones industrial average and the S&P 500.
Master Limited Partnership Tax Rules
Posted on May 16, 2013 | AAII Journal
The unique structure of MLPs gives them tax advantages, but also makes them more complex. Find out how distributions and gains are taxed.
For those who are new to them, the first thing to understand is that an MLP is simply a publicly traded partnership (PTP). (Not all PTPs are MLPs, however; a number of PTPs are simply commodity pools.) By buying shares, technically referred to as “units,” in an MLP, you become a partner (or a “unitholder”) in this very large partnership. As a partner rather than a corporate shareholder, you enter a whole new world of taxation. Partnership taxation is what makes MLPs a tax-advantaged investment, but it also makes them more complex than many other investments.
As a partnership, an MLP is not considered to be a separate entity for tax purposes the way a corporation is, but rather is a pass-through entity—sort of an agglomeration of all its partners. An MLP does not pay corporate tax; instead, all the things that go into calculating tax—income, deductions, gain, losses and credits—are divided up among the unitholders as if they had earned the income themselves. Part III of the K-1 tells you your total share of each of these items.
You pay tax on your share of the partnership’s taxable income, as determined by all the items on the K-1. It is important to remember that you will owe tax on this income whether or not you receive a cash distribution.
What about the distributions? Do you pay tax on them as well? You might think so, since the quarterly cash distributions look a lot like dividends; however, MLP distributions are not dividends, but quite a different creature. When you fill out your tax return, the only thing you have to worry about paying tax on is your share of net partnership income. The portion of the distribution that is equal to net income is covered by that tax payment.
AAII Sentiment Survey: Slightly Less Optimism and Slightly More Pessimism
Posted on May 16, 2013 | AAII Survey
Individual investors are slightly less optimistic and slightly more pessimistic than they were a week ago, according to the latest AAII Sentiment Survey. Even with the changes, the sentiment readings are close to their historical averages.
Bullish sentiment, expectations that stock prices will rise over the next six months, fell 2.3 percentage points to 38.5%. The decline puts optimism below its historical average of 39.0% for the 10th time in 12 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.4 percentage points to 32.2%. This is the fourth consecutive week that neutral sentiment is above its historical average of 30.5%.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.9 percentage points to 29.3%. This is the first time pessimism has risen in five weeks. The historical average is 30.5%.
All three measures of sentiment are near their historical averages. The bullish sentiment readings reflect the ongoing record highs being set by the Dow Jones industrial average and the S&P 500 index, better-than-forecast earnings, signs of continued economic growth and a lack of new bad news. Keeping some investors cautious or pessimistic are current valuations, the actual pace of economic growth and a lack of progress on key issues by the White House and Congress.
This month’s special question asked AAII members if they are holding onto stocks they think are overvalued or overbought. Close to 40% of respondents said no, they are not. Nearly a third of respondents, however, said they were. Dividends were the primary reason given as to why respondents were holding to stocks they thought are overvalued or overbought, followed by an adherence to a long-term investment strategy. A couple of respondents opined that there are not any good alternatives to stocks right now.
Here is a sampling of the responses:
- “No. I sell stocks that I think are overvalued and I buy on dips.”
- “I’m holding onto a couple that are probably priced over fair value because of their dividend yield.”
- “Yes, since I may well be wrong about the valuation. I am a long-term investor, so I don’t play my short-term guesses.”
- “Where else would I put the sale proceeds?”
This week’s AAII Sentiment Survey results:
- Bullish: 38.5%, down 2.3 percentage points
- Neutral: 32.2%, up 0.4 percentage points
- Bearish: 29.3%, up 1.9 percentage points
- Bullish: 39.0%
- Neutral: 30.6%
- Bearish: 30.6%
The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.) The survey and its results are available online at: http://www.aaii.com/sentimentsurvey
Posted on May 16, 2013 | Computerized Investing
Freakonomics.com is a financial and economics blog that reveals “the hidden side of everything,” using statistical and behavioral economic models.
Sell of the week 5/15/2013
Posted on May 15, 2013 | Podcast
AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why PerkinElmer (PKI) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.
Audio url: Sell of the week
May 2013 AAII Model Portfolios Updated
Posted on May 15, 2013 | Model Portfolios
1-Year Returns as of 4/30/13: AAII Fund Portfolio 17.6% — AAII Shadow Stock Portfolio 38.6%
BUY OF THE WEEK 5/14/2013
Posted on May 14, 2013 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why PulteGroup (PHM) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.
Audio url: Buy of the Week
DIVIDEND INVESTING ALERT FOR THE WEEK ENDING
Posted on May 10, 2013 | Dividend Investing
The first is margin debt, which is money borrowed against asset holdings such as stocks.