clifp
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Oct 27, 2006
- Messages
- 7,733
The rumors of Apple starting to pay a dividend continue to circulate.
I find it interesting that at $2/qtr the yield on Apple stock will be 1.5% almost exactly twice the yield on 30 year TIPs bonds. Now Apple is no Coke and it is entirely possible that Apple will no longer be a major firm in 30 years. On the other hand Apple unlike Uncle Sam has no debt, and doesn't need Congressional action to pay its bills. More importantly Apple is accumulating cash at an astounding rate $75 billion this year vs 1.3 trillion in debt for Uncle Sam.
Now this isn't an Apple (sorry) to Oranges comparison. But one of the implication of 1.5% yield for Apple vs .78% for 30 years TIPs is that investors think the risk of Apple distributions not keeping up with inflation is twice that of Uncle Sam over the next 30 years. Now I don't expect either Apple to turn into the next Gateway Computer nor do I expect the US to turn into Greece, but either scenario is possible and both would very bad for investors. The big difference between this two investments is a retiree buying Apple stock has an excellent chance of seeing his income grow at rate far exceeding inflation. Where as the retiree buying a TIP bond know best case that he will be getting a whopping .78% interest payment that grows with inflation.
No wonder Buffett calls investing in government bonds return free risk.
Speaking of Buffett, this week has been Warren Buffett week for me. He released his annual shareholder letter, and I watched his lengthy CNBC interview, and read the Motley Fool Berkshire board and the various pundits.
My main comment are that it wasn't a very interesting read for non Berkshire shareholder. There were not many pithy observation other than his comments that single family houses in distressed areas are probably one of the best investment opportunities out there. Which I think is good news for real estate investors in FL, NV, AZ, and much of CA.
What was interesting to me a shareholders as well anybody else looking for undervalued stocks is his rather extensive comments valuing the stock.
Although the book value of Berkshire was up by 4.6% comfortable out performing the S&P 500 by 2.5%, the stock price has languished. (I add especially this year.) Book value increase has exceeded the SP500 for every rolling 5 year period starting in 1965 and of course over that period of time the value of Berkshire has increased by an astounding 19.8%. Buffett doesn't often comment about the price of Berkshire stock, but for the last 6 months he has all but shouting from the rooftops that is a screaming buy.
Whitney Tilson is a long time Berkshire stockholder and has an interesting analysis here. He thinks Berkshire is just $179K for the A shares or just under $120 for the B share compare to current $79 price.
Much like Steve Jobs replacing Warren Buffett is pretty much impossible, but much like Apple stock had already mostly priced in Job's death the same thing is mostly true for Buffett IMO. I'd also expect to see Berkshire start paying a dividend after he steps down (probably feet first).
I find it interesting that at $2/qtr the yield on Apple stock will be 1.5% almost exactly twice the yield on 30 year TIPs bonds. Now Apple is no Coke and it is entirely possible that Apple will no longer be a major firm in 30 years. On the other hand Apple unlike Uncle Sam has no debt, and doesn't need Congressional action to pay its bills. More importantly Apple is accumulating cash at an astounding rate $75 billion this year vs 1.3 trillion in debt for Uncle Sam.
Now this isn't an Apple (sorry) to Oranges comparison. But one of the implication of 1.5% yield for Apple vs .78% for 30 years TIPs is that investors think the risk of Apple distributions not keeping up with inflation is twice that of Uncle Sam over the next 30 years. Now I don't expect either Apple to turn into the next Gateway Computer nor do I expect the US to turn into Greece, but either scenario is possible and both would very bad for investors. The big difference between this two investments is a retiree buying Apple stock has an excellent chance of seeing his income grow at rate far exceeding inflation. Where as the retiree buying a TIP bond know best case that he will be getting a whopping .78% interest payment that grows with inflation.
No wonder Buffett calls investing in government bonds return free risk.
Speaking of Buffett, this week has been Warren Buffett week for me. He released his annual shareholder letter, and I watched his lengthy CNBC interview, and read the Motley Fool Berkshire board and the various pundits.
My main comment are that it wasn't a very interesting read for non Berkshire shareholder. There were not many pithy observation other than his comments that single family houses in distressed areas are probably one of the best investment opportunities out there. Which I think is good news for real estate investors in FL, NV, AZ, and much of CA.
What was interesting to me a shareholders as well anybody else looking for undervalued stocks is his rather extensive comments valuing the stock.
Although the book value of Berkshire was up by 4.6% comfortable out performing the S&P 500 by 2.5%, the stock price has languished. (I add especially this year.) Book value increase has exceeded the SP500 for every rolling 5 year period starting in 1965 and of course over that period of time the value of Berkshire has increased by an astounding 19.8%. Buffett doesn't often comment about the price of Berkshire stock, but for the last 6 months he has all but shouting from the rooftops that is a screaming buy.
Whitney Tilson is a long time Berkshire stockholder and has an interesting analysis here. He thinks Berkshire is just $179K for the A shares or just under $120 for the B share compare to current $79 price.
Much like Steve Jobs replacing Warren Buffett is pretty much impossible, but much like Apple stock had already mostly priced in Job's death the same thing is mostly true for Buffett IMO. I'd also expect to see Berkshire start paying a dividend after he steps down (probably feet first).
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