Tempting Tuesday – Stop Buying That Dip and Get Out!
GET OUT!!!
In this year’s horror hit, “Get Out“, the main character gets his warning just one time, early in the film. I don’t know if it’s early or late in the Stock Market Film but I did, very clearly, tell people to GET OUT!!! in yesterday morning’s PSW Report and I repeated that warning live at the Nasdaq at 10:30, causing the index to drop 50 points (sorry). There may have been other factors in play – but I’ll take the credit/blame for this one.
You can see a quick video review on my logic for why the market is 20% overbought here:
#TradeTalks: Commodities Review and Preview w/ @philstockworld & @JillMalandrino https://t.co/ecs4wXWlts — Nasdaq (@Nasdaq) December 4, 2017
Yesterday we discussed the Global macro reasons why the current market prices are unrealisitic and, from talking to people, I thought it could be made a bit clearer if we focus on something more obvious and simple so we’re going to look at just the 30 Dow components and think about how lower taxes would effect them.
Since we don’t have 2017 figures in yet, I’m using last year but, in general, there’s not too much change in earnings. The 30 Dow components have a market cap of $6.7 TRILLION, which is about 10% of the US markets and 6.7% of the World Market Cap so a good, representative sample.
Symbol
|
Name
|
Price
|
Market Cap Billiions
|
2016 Pre-Tax EBITA
|
2016 Taxes | Percent Paid | |
---|---|---|---|---|---|---|---|
AXP | American Express Co | 98.59 |
|
86 | 9.2 | 2.7 | 29.3% |
AAPL | Apple Inc | 169.80 |
|
871 | 64.1 | 15.7 | 24.4% |
BA | Boeing Co | 277.97 |
|
166 | 5.9 | 0.67 | 8.8% |
CAT | Caterpillar Inc | 141.50 |
|
84 | 0.64 | 0.14 | 21.9% |
CSCO | Cisco Systems Inc | 37.72 |
|
186 | 13.1 | 2.7 | 20.6% |
CVX | Chevron Corp | 120.84 |
|
230 | -1.9 | -1.7 | -89.5% |
XOM | Exxon Mobil Corp | 83.57 |
|
354 | 8.4 | -0.4 | 0.0% |
GE | General Electric Co | 17.95 |
|
156 | 14.1 | -0.5 | 0.0% |
GS | Goldman Sachs Group Inc | 250.65 |
|
95 | 10.3 | 2.9 | 28.2% |
HD | Home Depot Inc | 184.90 |
|
216 | 13.5 | 4.5 | 33.3 |
IBM | International Business Machines Corp | 156.46 |
|
145 | 12.9 | 0.45 | 3.4% |
INTC | Intel Corp | 44.49 |
|
208 | 12.9 | 2.6 | 20.2% |
JNJ | Johnson & Johnson | 139.01 |
|
373 | 20.5 | 3.3 | 16.1% |
KO | Coca-Cola Co | 46.23 |
|
197 | 8.9 | 1.6 | 18% |
JPM | JPMorgan Chase & Co | 106.95 |
|
371 | 44.4 | 9.8 | 22.1% |
MCD | McDonald’s Corp | 170.65 |
|
136 | 6.9 | 2.2 | 31.9% |
MMM | 3M Co | 239.26 |
|
143 | 7.3 | 2.0 | 27.4% |
MRK | Merck & Co Inc | 56.22 |
|
153 | 4.7 | 0.7 | 14.9% |
MSFT | Microsoft Corp | 81.08 |
|
625 | 23.2 | 2.0 | 8.6% |
NKE | Nike Inc | 60.10 |
|
98 | 4.9 | 0.65 | 13.2% |
PFE | Pfizer Inc | 36.06 |
|
214 | 8.4 | 1.1 | 13.1% |
PG | Procter & Gamble Co | 91.41 |
|
231 | 13.7 | 3.1 | 22.6% |
TRV | Travelers Companies Inc | 136.36 |
|
37 | 4.4 | 1.0 | 22.7% |
UNH | UnitedHealth Group Inc | 221.42 |
|
214 | 12.9 | 4.8 | 37.2% |
UTX | United Technologies Corp | 120.04 |
|
95 | 8.2 | 1.7 | 13.9% |
VZ | Verizon Communications Inc | 51.72 |
|
210 | 25.4 | 7.4 | 29.1% |
V | Visa Inc | 107.43 |
|
244 | 12.3 | 5.0 | 40.7% |
WMT | Wal-Mart | 97.01 |
|
290 | 22.9 | 6.2 | 27.1% |
DIS | Walt Disney Co | 110.22 |
|
164 | 14.2 | 4.4 | 31.0% |
DWDP | DowDuPont Inc | 72.13 |
—
|
168 | XX.X | X.X | X.X% |
As you can see, we don’t have figures for DWDP due to the recent merger but the other 29 components earned $406.3Bn and paid $86.25Bn in taxes, which is an effective rate of 21.2%. So how will cutting the corporate tax rate to 20% make enough of a difference to justify the Dow’s 35% rise, which added over $100Bn in market cap to the Dow in 12 months?
The earnings growth certainly don’t justify it though with a p/e of 16.5, the Dow is a huge bargain compared to the S&P 500s p/e ratio of 27.3 but that’s mainly because Apple (AAPL) is such a weighty component. This is my problem with this market rally – we’re up in anticipation of tax cuts being a huge benefit to these companies but only 8 of 30 companeis pay more than 25% in the first place and clearly Visa (V) and United Health (UNH) need to fire their accountants!
You’ll notice that, the bigger a company is, the less they seem to pay – that’s because they generally have more opportunities to mess around with offshore shells and such to move the momey around. In any case, whether it’s from the reading of the bill or the huge disappointment that will be suffered when companies calculate their Q1 tax liabilities and they turn out NOT to be very different than Q4 (assuming a bill is passed by then) – I think we’re going to see a huge let-down when the reality of the tax changes hit the expectations of investors.
So, while there are still buyers we are GETTING OUT of all of our positions in all of our portfolios and we will start again, from scratch, in 2018, with all new portfolios on January 2nd.
Until then – it’s time to go shopping!
Provided courtesy of Phil’s Stock World.
Would you like to read up-to-date articles on the day they are posted? Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE – Not the Gambler!
Source: http://www.philstockworld.com/2017/12/05/tempting-tuesday-stop-buying-that-dip-and-get-out/?utm_source=beforeitsnews&utm_medium=feed&utm_campaign=psw-feeds&utm_content=article-link
Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.
"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.
Please Help Support BeforeitsNews by trying our Natural Health Products below!
Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST
Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST
Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!
HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.
Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.
MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)
Oxy Powder - Natural Colon Cleanser! Cleans out toxic buildup with oxygen!
Nascent Iodine - Promotes detoxification, mental focus and thyroid health.
Smart Meter Cover - Reduces Smart Meter radiation by 96%! (See Video).