Click to enlarge.
The next chart shows the data as standard deviations from the relatively stable 1952:Q2 to 1999:Q4 period.
Click to enlarge.
And lastly, let's zoom in and add some commentary.
Click to enlarge.
The two largest deviations over the past 60 years were in the past two quarters. Both of them! That's a positive 15-sigma event followed by a negative 8-sigma event. Nice. Nothing builds long-term confidence like predictable dividends, lol. Sigh.
Corporate America sure likes swinging for the fences these days! What could possibly go wrong?
Also sometimes used in completely unrelated attempts at doing difficult or near-impossible things.
So we got that goin' for us, which is nice.
Source Data:
St. Louis Fed: Custom Chart
Ah, the smell of late-stage capitalism!
ReplyDeleteGaming the tax system:
ReplyDeletehttp://www.businessinsider.com/goldman-dividend-long-term-capital-gains-taxes-2012-11
The dividend spike was very noticeable in S&P 500 index funds last Dec.
Volatility for the win!
TJandTheBear,
ReplyDeleteAnd napalm, but only in the morning. Apocalypse Now for the win!
mab,
ReplyDeleteThat helps explains the smaller spike and downdraft in 2012:Q4 and 2013:Q1.
Now we just need to explain the biblical spike in 2013:Q2 and the massive downdraft in 2013:Q3.
10-Year Treasury Yield: 2012:Q1 to 2013:Q3
Someone alert Jeremy Siegel! The economy can't actually tolerate higher interest rates!
Big shocker. ;)
Part of the biblical spike in 2013:Q2 was just a rebound from 2013:Q1's low. Not sure where the rest of it came from.
ReplyDeleteI think a reasonable explanation for the massive downdraft in 2013:Q3 is what the interest rate spike did though.
In any event, with this kind of volatilty some unicorn is likely to lose a kidney!
Sure hope he's got a fully fuctional healthcare.gov!
Anybody remember all those years ago when I called what was going to happen a "tank slapper?' This is it.
ReplyDeleteI think tax dodging pulled more than just one quarter forward. It's not evident in large cap companies.
ReplyDeletehttp://finance.yahoo.com/q/hp?s=VFIAX&a=10&b=13&c=2000&d=10&e=29&f=2013&g=v
But I could easily see smaller non-public entities taking several quarters of divies early to save on taxes.
The gap between "buy and hold" and "trading" is growing. The former thrives on consistent behavior in general accordance with economic conditions. The latter on wild variance with no rational pattern. Look at the long term chart. No doubt who is winning.
ReplyDeleteRob Dawg,
ReplyDeleteYour tank slapper analogy continues to "resonate" with me. ;)
mab,
ReplyDeleteI have this uneasy feeling that the wild variance is partly tax dodging and partly excessive risk taking brought on by the supposedly "sure thing" common knowledge theory that free money is now abundant.
If a company uses debt to buy its own shares then earnings get amplified and in theory this can become a positive feed back loop.
On the other hand, it also amplifies the pain should profits begin to fall apart. Further, the extra debt still remains in the aftermath.
Just the thought of a crazy permabear!
I meant to say that "earnings per share" would get amplified.
ReplyDelete"earnings per share" would get amplified.
ReplyDeleteShare buy backs are often a sham. The alleged shareholder benefit is typically offset by new share issuance via stock options.
In many companies, management is given more in compensation over a period of years than the company actually earns.......this becomes painfully evident once the "trees grow to the sky" story fails to materialize.
Also, it looks as if the dividend behavior of small companies was more volatile following the tax changes:
http://finance.yahoo.com/q/hp?a=05&b=15&c=2001&d=11&e=1&f=2013&g=v&s=iwm&ql=1
I'm thinking that all money losing companies should dilute their losses per share by massive new share issuance. Imagine how much more attractive a share of Sears stock would look if it only lost a penny per share!
mab,
ReplyDeleteI'm thinking that all money losing companies should dilute their losses per share by massive new share issuance. Imagine how much more attractive a share of Sears stock would look if it only lost a penny per share!
Nice, lol.
Perhaps Sears could simply offer plenty of stock dividends instead of cash dividends?
Or better still... coupon dividends! Get a "10% off anything in the store" coupon for every share owned!
Limit one coupon per transaction of course. ;)
Perhaps Sears could simply offer plenty of stock dividends instead of cash dividends?
ReplyDeleteYeah, I'm imagining how this could be hyped on CNBC:
"Sears did it again! Another monster beat! We've come to expect huge share dilution from Eddie Lampert, but nothing like this.
So far this quarter, every money losing company has beat share dilution expectations. The market loves this type of financial engineering. It's all about adding value."
mab,
ReplyDeleteWe expected them to offer 10 shares for each one you owned but then they pulled a Spinal Tap!
Put it up to eleven.