Showing posts with label 2015 Great Stocks. Show all posts
Showing posts with label 2015 Great Stocks. Show all posts

Gingrich: U.S. should reconsider gold standard

NEW YORK (CNNMoney) -- Republican presidential candidate Newt Gingrich is calling for the United States to think about returning to the gold standard.
Speaking at a foreign policy forum in South Carolina on Tuesday, Gingrich advocated a "commission on gold to look at the whole concept of how do we get back to hard money."
Gingrich, a former Speaker of the House, has spoken in favor of a "hard money" policy in the past, but these were his strongest comments to support reinstating the gold standard.
Gingrich would model his "gold commission" after one put in place after Ronald Reagan was elected, when the nation was battling double-digit inflation. But even then, the commission overwhelmingly rejected the idea of a return to the gold standard.
One of only two members of the 17-member commission to endorse a return to the gold standard was Ron Paul, one of Gingrich's rivals for the GOP nomination.
The United States first moved away from the gold standard, under which the dollar was backed by the nation's gold reserves, in 1933, and dropped it altogether in 1971. Despite support for its return by some on the political right, few mainstream economists support its reinstatement.

Local currencies: 'In the U.S. we don't trust'

Chief among the problems is that with a dollar pegged to gold, U.S. goods could become uncompetitive on the global markets compared to goods priced in euros or yen.
The return to a gold standard is a central point in the campaign of Paul, a Congressman from Texas who also advocates abolishing the Federal Reserve.
In his comments Tuesday, Gingrich also spoke sharply against the Fed, saying it should focus on keeping prices in check, dropping the dual mandate of job growth and fighting inflation.
"We need to say to the Federal Reserve: Your only job is to maintain the stability of the dollar because we want a dollar to be worth thirty years from now what it is worth now," he said. &q! uot;Hard money is a discipline. It means you can't inflate away your difficulties."
The Fed has become a major target of Republicans in the last year. Republican congressional leaders wrote to the Fed in September asking it to not take any additional steps to help spur the economy.
Other leading Republicans have echoed Gingrich's call to end the Fed's dual mandate. Texas Gov. Rick Perry, another presidential candidate, even suggested Fed Chairman Ben Bernanke might be guilty of treason if the Fed moved to buy more Treasuries in an attempt to spur greater growth. 

Best Wall St. Stocks Today: GM

The wooden but plucky CEO of GM (GM), Rick Wagoner, told the press that if his company is allowed to go into Chapter 11, it will end up being a simple liquidation. GM will be torn into pieces and sold off as scrap. He made one good point to support his point of view. If a bankruptcy of the No. 1 US car company drags on for several months, potential auto buyers will purchase vehicles from competitors that they view as being �safe�.” No one wants to buy a car that won�t be serviced. Wagoner has made this point before, but it is more compelling now that the deadline for the government to approve or disapprove GM�s restructuring plan is only two weeks away.
GM has effectively taken a page out of the AIG playbook for gaming the Administration and Congress. Henry Paulson and his associates were led to believe, perhaps rightly, that if AIG failed it would cost other financial companies so significantly that the government would have to bailout almost every large financial firm in the country. GM�s argument is even simpler. A liquidation of the car firm would probably cost tens of thousands of jobs at the company, and many times that at suppliers. That argument is also old, but with the chance of liquidation in the next few months becoming more likely, it refreshes the strength of the logic.
GM has been in the middle of quietly challenging the government�s plan to close it down for three months now. The Administration has now sent its car experts to Detroit, and they have said that a bankruptcy of either GM or Chrysler is undesirable. They did not elaborate much on this analysis, but, from the standpoint of the car companies, they do not need to. It is enough that the blue chip analysts sent by the President to evaluate the car companies have a belief system that matches the one in The Motor City.
The financial and car industries have effectively ganged up on the government. They would seem to be weak because of their remarkable failures and reliance on out! side hel p to keep them alive. The opposite is true. By being terribly crippled, they are sucking all of the money out of the US Treasury because the Administration knows that if these parts of American business fail, replacing the jobs and capital will be insurmountable tasks. The recession would get much, much worse. Staying ahead of the job losses would become impossible.
AIG has led the way for GM. It has taken government money and made it clear that a great deal of the cash has been wasted. Even with the evidence of that completely uncovered, the Administration has so little power that it cannot let AIG go under, as a punishment for taking taxpayer money and using it for multimillion dollar bonuses.
No one at GM is going to get a raise because the government will give it another $20 billion or $30 billion. The car industry embezzlement is more artful. With more than one million jobs at risk and unemployment rising at a pace rarely seen in American history, letting GM fail would completely compromise any chance of keeping the unemployment rate below 10%. If this figure rises above that number, it will make every American shudder.

Does Frontier Communications Pass Buffett's Test

We'd all like to invest like the legendary Warren Buffett, turning thousands into millions or more. Buffett analyzes companies by calculating return on invested capital, or ROIC, in order to help determine whether a company has an economic moat -- the ability to earn returns on its money above that money's cost.
In this series, we examine several companies in a single industry to determine their ROIC. Let's take a look at Frontier Communications (NYSE: FTR  ) and three of its industry peers, to see how efficiently they use cash.
Of course, it's not the only metric in value investing, but ROIC may be the most important one. By determining a company's ROIC, you can see how well it's using the cash you entrust to it and whether it's creating value for you. Simply put, it divides a company's operating profit by how much investment it took to get that profit. The formula is:
ROIC = net operating profit after taxes / Invested capital
(You can get further details on the nuances of the formula.)
This one-size-fits-all calculation cuts out many of the legal accounting tricks (such as excessive debt) that managers use to boost earnings numbers, and it provides you with an apples-to-apples way to evaluate businesses, even across industries. The higher the ROIC, the more efficiently the company uses capital.
Ultimately, we're looking for companies that can invest their money at rates that are higher than the cost of capital, which for most businesses is between 8% and 12%. Ideally, we want to see ROIC above 12%, at a minimum, and a history of increasing returns, or at least steady returns, which indicate some durability to the company's economic moat.
Here are the ROIC figures for Frontier and three industry peers over a few periods.
Company
TTM< /p>
1 Year Ago
3 Years Ago
5 Years Ago
Frontier Communications 4% 2.8% 6.9% 8.2%
Windstream (Nasdaq: WIN  ) 6.9% 7.2% 12.4% 7.9%
CenturyLink (NYSE: CTL  ) 2.9% 7.5% 6.7% 6%
AT&T (NYSE: T  ) 5.6% 5.9%* 6% 6.5%
Source: S&P Capital IQ. TTM=trailing 12 months.
*Because T did not report an effective tax rate for one year ago, we used its 35% effective tax rate from three years ago.
Frontier's returns on invested capital are less than half of what they were five years ago. The other companies have also seen declines in their ROIC from five years ago, suggesting that the telecom space is particularly difficult.
One thing that makes Frontier so attractive to investors is its high dividend yield. Unfortunately, its low returns, which are shrinking over time, suggest that Frontier may not be able to grow its dividend in the future. In fact, Frontier already had to decrease its dividend by 25% last year, and its shrinking ROIC suggests that it may have to reduce those yields even more.
On the upside, Frontier's acquisition of Verizon assets last year gives it the potential to take advantage of economies of scale, which could help it improve its returns on invested capital in the future. Its increase in returns! from la st year offers some hope in Frontier's ability to improve its ROIC to a more attractive level.
Businesses with consistently high ROIC show that they're efficiently using capital. They also have the ability to treat shareholders well, because they can then use their extra cash to pay out dividends to us, buy back shares, or further invest in their franchise. And healthy and growing dividends are something that Warren Buffett has long loved.
So for more successful investments, dig a little deeper than the earnings headlines to find the company's ROIC. Feel free to add these companies to your Watchlist:
  • Add Windstream to My Watchlist.
  • Add AT&T to My Watchlist.
  • Add Frontier�Communications to My Watchlist.
  • Add CenturyLink to My Watchlist.

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