Government by Lies

         We’ve encountered his type before.  Silver-tongued commie reprobate doing whatever the dogma dictates without regard to reality, screwing up, as always, and wriggling out of the mess we’re left with through glib and bizarrely inappropriate lip service.  It’s flat-out obvious that his sweet talk doesn’t mean a thing - hollow words never do - but in his own mind, and in those of his belligerent followers, this hardline bully has freed himself to go on ruining the lives of his targeted victims, and will.

         Tragically, a complicit media never holds its golden boys accountable for the awful destruction they routinely leave behind.

         Fast-talking boneheads are the bane of our existence, and yesterday it was made very clear that one of them lives in the White House right now.  He’s the sitting President, for goodness sakes.

         Insurance is a hard-nosed, demanding field, complex as all get out and run by extraordinarily knowledgeable titans of detail possessing the kind of expertise that comes from decades of hands-on experience in a business forcing its participants to do the right thing or perish utterly at the jowls of a deadly pack of bloodthirsty lawyers in the aftermath of the next Cat 5 hurricane/nuclear meltdown/act of war/what have you.

         Nothing a nincompoop community activist and his blissfully thoughtless hangers-on couldn’t master, in the birdbrained opinion of a nincompoop community activist anyway.  Hell-bent on destroying what hard-work has given us, instead of assimilating their lazy, worthless, drugged-out kind into this bountiful capitalist nation, the Umama infestation is stuffing Soviet-style central planning down our throats.  That's right, subscribers, we're getting manhandled into his loser socio-demographic stratum.  The entire population of us in one fell swoop.

         Health provision is the real target here.  The insurance industry only stands in the way.  Clearly, Blatant Umama sees no need to even try to deal with it as anything other than an inconvenience.

         In a few years private medical coverage won’t even be around anymore. Washington will be running the show.

         When the Screw-up in Chief decided it was time to add health care in with all the free stuff that halfwit sycophants of his ilk buy votes with these days, you knew a catastrophe was in the making.  Well, Obamacare caused millions of Americans to lose their health insurance, and yesterday Mr. Unction tried to cover his a$$ by proclaiming that anyone who got cancelled could apply to be renewed for a year.

         A year.  Like that isn’t kicking the can down the road while he tightens his Commie stranglehold on free enterprise.

         Apparently, the profligate dunderhead thinks we’re moving on now.  Somehow we at your MacDougal Post can’t see that happening, and we’re waiting on future developments to reveal what will really be going on with this misbegotten debacle of debacles soon to befall us all. 

Market Manipulation 101

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World without Jobs

         Secure in the belief that one’s offspring could always find a place in the vibrant American workforce, my generation simply went out and had kids.  Plenty of kids.  All the little ones we wanted, and then some in a few cases that your Post staff won't get into here.  And so did our immediate parentage and progeny.  For the most part, the entire capitalist bloodline serving the great American Greenback was able to depend on the healthiest job market in history to give everyone in the clan a living wage, if he/she wanted one.

         Mournfully, this is no longer so.

         At this moment in time, personal success/failure is so closely tied to capital/nepotism that it’s become scary to think of bringing a child/victim into this career-killing new world of egregious financial racketeering, pervasive automation, corporate treason (see the outsourced American Dream, for starters), and sweeping political corruption.  CEO’s and them, otherwise known as the 1%, are acting on an ever-dwindling need for the rest of humanity, and AI (artificial intelligence) appears on the verge of displacing most of the 99% from any participation at all in the economic lives of the rich and factious.  Unless you’ve got a family-owned enterprise of some kind, are wired into others who do, or have stashed away enough wherewithal to financially empower the heirs as they reach adulthood, for you and yours the American landscape looms ignominiously bleak, likely to ensnare the overwhelming proportion of its peoples into a wretched tragedy of Dickensian proportions.

         We predict that the 1% will retain what will someday be called the 20% as hand servants and courtesans, leaving no need for the remaining 79%, who will be left to rot and perish in an inner city ruled by drug lords freed from incarceration by this lawless President and stockpiled with the only civilian handguns in the whole hope and change country.  Meanwhile, all the little robots will be producing so many goods and services for the 1% and the robots, and so efficiently too, the stock market will shoot up higher and higher, handsomely rewarding the stock option crowd with unimaginable wealth from your fleeced company shares. 

         Remember, CEO’s and them aren’t just picking at your family savings when they skim small sums of your shares into their pockets through “stock options” every year.  The thieving lowlife sleazebags are grabbing your entire starting capital over time - AND PLOTTING YOUR EVENTUAL DEMISE.

         Across the years, as the forces financed by CEO payoffs drive the size of our labor force down to global depression levels and beyond, way beyond, the minimum wage seems likely to transition into something more like the National wage, and the opportunity to even earn that will diminish steadily.  Parents who do not preplan their children’s financial future are throwing babies into an already harsh cruelty that can only get worse as hope and change marches on.

         And some day soon grandparents who only provided for themselves over their lifetimes will be looked upon as letting the rest of the family down.

         So enjoy your grandkids while you can, subscribers.  Blatant Umama and his ilk will have them turning on you before this is all done.

The IBM Buyback

         As reported yesterday, the International Business Machines Corp. (IBM) board has increased the company stock buyback program to a total of $20.6 billion, around 10% of market capitalization (common stock outstanding times market price) at the time of the announcement.  From the rest of the news coverage, which dubbed this "financial engineering" (as opposed to the enlightened, cutting edge, and totally appropriate financing it really is), MacDougal got to wondering if anybody in the media had any idea what the announcement meant, and figured it wouldn’t hurt to dig into that for our valued subscribers, a number of whom are at least as accomplished in arithmetic as he is.

         First of all, will IBM repurchase 10% of its shares? In that case, intrinsic value, as measured by whatever relationship to book value you want to use, would rise by 11.1%.  (After subtracting 10%, our new intrinsic value denominator is to 9 as our old denominator was to 10, and 1/9=11.1%).  If you think the market will let Big Blue pull it off, go ahead and factor that increase into what you've been figuring IBM is worth, and do so today.

         Beyond this, it’s clear that there will be more repurchases if market prices remain low enough.  What if IBM were able to retire 5% of the issue every year?  That would be $10 billion per annum, and the rate isn’t a stretch, given buybacks in recent years as well as the gloomy global economic outlook, which could put a lid on quotes for a while.  Or, what if, which is more likely, Big Blue came up with a way of mixing stock repurchases in with normal bottom line growth, as warranted?

         To get those answers, we peer into the future, focusing on what impact the new math would have on calculations discounting future earnings per share (EPS) growth.  A PE analysis, comparing such a projection with a stock’s ratio of market price to EPS, is representative of what you’d want to use there, and investors are familiar with the concept, so lets go with it for our purpose here.

         Doing the grunt work, McDougal found that reducing shares by 5% a year with no increases at all in annual net income would hike EPS slightly faster than management could by growing annual net income by 5% per annum without stock repurchases.  EPS would double in the 14^th year under such a permanent share repurchase program and increase by eightfold in the 41^st year, versus the 15^th and 43d year, respectively, resulting from 5% annual EPS growth.

         Furthermore, because you buy back fewer shares each year under this program, even with no net income growth IBM would generate enough cash to purchase 5% of its shares a year indefinitely as long as the PE ratio remained at, say, 11.5x or lower, a distinct possibility under the conditions we’re working with.  However, were market valuations to improve, Big Blue couldn’t afford to maintain a 5% per repurchase program if the PE rose too high, and it looks like that point would be reached somewhere before the PE hit 15.

         Interestingly, the PE relationships wouldn’t change a whole lot if IBM were to do both, that is, grow EPS at 5% and repurchase 5% of its shares every year, but EPS would double in the 7^th year under that assumption, reflecting a 10.5% annual growth rate.  Higher earnings growth would have to eventually increase the PE multiple, the market driving IBM’s PE through 15 at some point.  Given management’s firm commitment to "financial engineering", stock buybacks would probably continue at an appropriately reduced level in that event.

         So, subscribers, change your valuations accordingly, upping the intrinsic and adding your annual stock repurchase estimates directly in with net income growth projections - for as long as IBM’s PE multiple hangs in at current levels.  If the price shoots up, wait to hear what the Board has to say, and recalculate.  

         It's noteworthy that MacDougal made no provision for an earnings dip in his assumptions, so within the constraints of his work, stock repurchases appear to establish a floor for EPS growth of 5% a year.  If earnings were to show signs of chronic decline, that outlook would have to be cranked in anew.

Dylan Ratigan: Lone Voice of Truth in the Media

   

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