Alchanati Campbell & Associates
November 01st, 2019
Happiness. The world is so angry, it’s getting harder to enjoy the little pleasures in life. Satisfaction is a rarity because we always want more. Happiness is like privacy: hard to have. What makes you happy? Life begins and ends with happiness, but with the happiness of two kinds. The first joyful and excitable, and the second calm and resigned. We are always in a rush and most strive for perfection. Little disturbances, troubles, delays, occurrences, change our mood to a negative one. When we don’t get what we want, when we compare ourselves to others, when we have high expectations... it all puts pressure on our happiness. Our subjective well-being depends not on our absolute material well-being, not even where we stand relative to others, but on where we think we stand. One secret to happiness is to ignore comparisons with people who are more successful than you are: always compare downwards, not upwards. Happy people don’t put other people down. People are happier when they do generous things and live among generous people. Expect less and appreciate more. I give everything except for what I can lose forever. Enjoy every day as it comes. Who is rich? One who is satisfied with what they have. If you can concentrate always on the present, you’ll be a happy person. Know that no one is ever satisfied with where they are.
Why are companies paying fewer dividends or no dividends? A dividend is a distribution of a portion of a company’s earnings to holders of its stock. Dividends = meaningful portion of stock returns. When a company makes money, they have the option of distributing their retained earnings in the form of a dividend, retaining the earnings and using it to pay off debt or pay for R&D, or use it to buy back their stock. When a company pays dividends, its board of directors decides what percentage of its earnings to distribute to shareholders. Investors love dividends; over the last 100 years, half of the total stock returns came from dividends. Companies pay dividends to make their shareholders happy (making the company more appealing) and sometimes companies retain so much net profit that they’re able to pay dividends and still have money left over. But why do companies not pay dividends? Some companies use their retained earnings to fuel its growth, they choose to use the money and put that money to better use (Research and Development, Acquisitions, etc.), shareholders are taxed on the dividends they receive and some investors don’t want to pay extra taxes so companies choose not to distribute dividends, and companies that start to pay dividends, it can be difficult to stop so they are stuck paying dividend (investors see a drop in dividend payout yield as financial instability). Berkshire Hathaway, the company founded by Warren Buffett, is a well-known company that does not pay a dividend. The company prefers to reinvest profits in things that allow the company to improve its efficiency, expand its reach, create new products and services, and further separate themselves from the competition.
Shareholder Yield by Meb Faber. This is a short research piece on capital allocation and investing. “Returns for shareholders will be determined largely by the decisions a CEO makes in choosing which tools to use in deploying capital and raising capital. Dividends and their reinvestment represent a major portion of a stock investor’s total return over time. Reinvested dividends represent over half of an investor’s annualized returns (over the period of 1871-2011). By reinvesting dividends and compounding the portfolio returns, the final value of the total return portfolio turns out to be 99.8% higher than the non-dividend portfolio. Dividends contribute virtually all of the final portfolio value versus a price only return. A study done by Elroy Dimson, Paul Marsh, and Mike Staunton showed that higher dividends yielding stocks outperformed low dividend-yielding stocks in 20 countries from 1975-2010. One of the most important qualities of a successful investment analyst is the ability to adapt to change. Companies have been lowering their dividend payout ratios for the past 70 years. One of the reasons for this is beginning in the late 1990s, share buybacks have outpaced dividend payments. The purpose of a company is the maximize long-term value.”
Why dividends are important. Over the long term, the return from dividends has been a significant contributor to the total returns produced by equity securities. Portfolios consisting of higher dividend-yielding securities produce returns that are attractive relative to lower-yielding portfolios and to overall stock market returns over long measurement periods. Stocks with high and apparent sustainable dividend yields that are competitive with high-quality bond yields may be more resistant to a decline in price than lower-yielding securities because the stock is in effect “yield supported”. The ability to pay cash dividends is a positive factor in assessing the underlying health of a company and the quality of its earnings. The payment of dividends has been declining and the repurchase of shares has been increasing.
The US Healthcare System. The United States spent $3.65 trillion on healthcare in 2018, more than any other country and more than the entire GDP of Brazil, the U.K, Spain, or Canada. At current rates, healthcare spending will increase to 20% of US GDP by 2027. This spending equals an average of $11,212 per person. Despite having some of the most advanced healthcare technologies in the world and spending these vast amounts of money, the U.S healthcare system is ranked 27th in the world. In the U.S, people are/were (healthcare and tax law has changed sporadically under the current administration) required to have health insurance to help offset the high costs of healthcare. Health insurance can be provided by the federal government, state government, or by private providers. Private providers generally offer either a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO). HMO plans have lower monthly premiums, low or no annual deductible, require a primary care physician referral before seeing a specialist, and provide a list of network providers, but if you chose a provider outside of their network you will have to pay 100% of the cost. PPO plans offer more flexibility, allow you to see more out of network doctors, and are usually offered by employers to their employees. The federal and some state governments also offer health insurance to provide for lower-income individuals and families. Despite these options, healthcare costs are still devastating for the average family which is why in a recent poll 87% of voters in a recent poll say it is very important for a candidate to discuss healthcare. This overwhelming voter interest in the topic has led many of the presidential candidates to release healthcare plans. These plans all aim to lower the cost of healthcare and ensure all Americans are covered, but use different tactics, some candidates want to simply improve our capitalistic model, some want to socialize the entire healthcare system, and others think a mix between the two may offer the best solution. Whichever the strategy might be, these healthcare plans are going to cost a lot. This week Elizabeth Warren released her strategy to pay for the massive $20.5 trillion needed to pay for her proposed since-payer health care plan. This plan does not increase the cost of healthcare on the average taxpayer and will likely save the average family tens of thousands of dollars in the long run, but it boldly targets wealthy individuals and corporations to pay for the cost. Some argue that this tax burden will stunt economic growth, while others believe that in the long run strategies like this will improve the efficiency of the healthcare system allowing the economy to grow due to the potentially billions of dollars that consumers would save on healthcare and could use to increase their spending or investments. Whatever the outcome may be healthcare will continue to be a heavily debated topic of the upcoming election year.
Americans’ Levels of Concern about Personal Finance. 1. Not having enough money for retirement. 2. Not being able to pay medical costs in the event of a serious illness or accident. 3. Not being able to pay medical costs for normal healthcare. 4. Not being able to maintain the standard of living you enjoy. 5. Not having enough money to pay for children’s college. 6. Not having enough to pay for normal monthly bills. 7. Not being able to pay your rent, mortgage or other housing costs. 8. Not being able to make the minimum payments on your credit cards.
Online Installment Loans. Online installment loans are personal loans that borrowers can apply for online. The average borrower balance is $16,259, the interest rates are often extremely high starting in the double digits but can range from 34% to 200% and have much larger maturities. In recent years online installment loans have grown as subprime lenders shift from payday loans to offering online installment loans (lenders are targeting the middle working class). The volume of the number of installment loans approved has grown 8x since 2014.
The Alchanati Campbell and Associates Team
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