Risk/Reward Vol. 156
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
"When our old age pension check comes to our door
We won't have to dread the poorhouse any more."---lyrics from "Old Age Pension" by Roy Acuff
"You've got me turning up/I'm turning down
I'm turning in/I'm turning 'round
I'm turning Japanese."---lyrics from "Turning Japanese" by The Vapors
"Shawty had them Apple Bottom Jeans
Boots with fur/The whole club
Was watching her."---lyrics from "Apple Bottom Jeans" by T-Pain
This week the Dow Jones Industrial Average (DJIA) showed increased volatility which is to be expected in light of recent gains. It closed down a modest 17 points for the week, but is up 6.8% year to date and up 9% since its post election swoon.
According to the actuarial firm Towers Watson, as late as 1998, 90 of the Fortune 100 companies offered salaried employees a defined benefit pension plan. Today that number is 30. Indeed, the odds today that any employer will offer such a benefit (which guarantees a set income in retirement for life) are about the same as Roy Acuff recording a new hit---and he died in 1992. Today employees must rely upon defined contribution plans (e.g. 401k's and IRA's) for retirement. These plans place the responsiblity ON THE EMPLOYEE to invest wisely year in and year out. Thus, I was shocked to read that only 2% of individual retirement account participants and only 4% of 401k participants take advantage of self direction options. Leaving the management of one's portfolio to an employer-controlled investment adviser (who has little if any liability for bad investment advice) seems imprudent to me. So if you "dread the poorhouse" like always have, I recommend that you investigate self direction and that you take advantage of it.
As discussed in Vol. 152 (www.riskrewardblog.blogspot.com ), in an attempt to "turn 'round" its sluggish economy, Japan is overtly "turning down" the value of the yen thus making its products and services more attractive globally. It is axiomatic that a devalued currency facilitates exporting. This week, in response to his countries' falling exports, French President Hollande recommended that the European Central Bank (ECB) target a Euro exchange rate tied to the world's other major currencies and inflate (devalue) the Euro accordingly. In what can only be characterized as a disingenuous rebuff, ECB President Draghi rejected the idea, reaffirming the charade that central bankers should not "turn in" to politicians and that central banks should avoid currency wars. Come, come now Mr. Draghi. For the past four years, Ben Bernanke and you have employed bond buying and other forms of quantitative easing to debase your respective currencies to the disadvantage of a host of other countries. In this regard, we are all "turning Japanese."
On Thursday, noted hedge fund manager (Milwaukees' own) David Einhorn raised some "fur", claiming that Apple (AAPL) has breached its duty to shareholders by sitting on $140billion in cash. You will recall (see Vol. 116 ) that this has been my complaint against AAPL for a long time. Since Apple doesn't need the money to grow organically and since (apparently) no acquisition candidate meets AAPL's standards, AAPL should return capital to its shareholders in the form of increased dividends (currently 2.3%), a preferred stock dividend (as recommended by Einhorn) or an aggressive share buy back, each of which is proven means of increasing share value. To this point, compare the stock performance of AAPL (known for giving the "boot" to shareholder concerns) and Tupperware (TUP), a company wholly dedicated to shareholder value. Since September 19, 2012 when AAPL reached its all time high of $702, AAPL has done nothing but build cash. TUP on the other hand announced a 70% increase in its dividend and a very aggressive share buy back program. AAPL is down 30% since then hovering near its recent " Apple bottom", and TUP is up 35%. Shockingly, with "the whole club watching", AAPL responded to Einhorn's comments by acknowledging that it has more cash than it needs and by stating that the board is investigating ways to enhance shareholder value. Instead of "shawtin'" the stock, I bought a small position.
I reiterate. If your plan permits, take control of your retirement account through self direction. By doing so, you improve the odds that upon retirement, you can rap (like T-Pain and Yung Joc) that
"I got money in the bank
Shawty, what you think 'bout that!
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