| Mish Buys a Basket of Miners Posted: 13 Jun 2013 09:00 PM PDT Most of my investment funds are under management at Sitka Pacific. I also have investments with GoldMoney and some other assets from my late wife Joanne. I believe precious metal miners represent true value, but I cannot state when the market will come to the same conclusion. Last week I bought a basket of miners with a significant amount of money. Many of these stocks are also held in various Sitka Pacific strategies. Mish Miner Basket | Symbol | Average Price | Initial Weight | PE | Dividend | Yield |
|---|
| NEM | $34.08 | 30% | 10.06 | $1.40 | 4.10% | | GG | $29.18 | 15% | 15.70 | $0.60 | 2.10% | | ABX | $20.64 | 15% | NA | $0.80 | 4.00% | | GDX | $29.60 | 10% | 11.00 | NA | 1.20% | | GLDX | $16.73 | 5% | NA | NA | 6.52% | | HMY | $4.08 | 5% | 11.73 | $0.10 | 2.30% | | SBGL | $3.38 | 2% | NA | NA | NA | | SLW | $23.72 | 9% | 14.22 | $0.48 | 2.00% | | PAAS | $12.65 | 9% | 42.38 | $0.50 | 4.10% | General Comments As you can see, most of the investment is with major mining companies that pay substantial dividends. PEs are trailing, not optimistic or unrealistic forward estimates. Price per book value is low in most cases. Each symbol is a clickable link to Yahoo!Finance statistics. Gold Stock Comments - NEM - Newmont Mining: My best value play and weighted accordingly. Price/book is a mere 1.19 and I have no reason to believe book value is overstated. Trailing PE is 10.04 and the dividend yield is 4.10%. What's not to like?
- GG - Goldcorp: A major Canadian gold miner with a respectable PE and dividend. Goldcorp trades right at book value (.99 to be precise).
- ABX - Barrick Gold Corporation: Another major Canadian gold miner with a respectable dividend. Earnings were negative last quarter due to writedowns. Dividend appears solid. Price/per book is a mere .88 (less than book value).
- GDX - Market Vectors Gold Miners ETF. Rather than pick too many additional stocks and following them all, I put 10% of my basket into a gold miners ETF basket.
- GLDX - Global X Gold Explorers ETF. This is a speculative play on gold explorers. Some of the companies in the ETF are likely to go bust. Hopefully some will strike it big. I weighted this according to risk, with only 5% of my basket.
- HMY: Harmony Gold Mining Company Limited: This is a South African mining company that stands to appreciate from its gold mining operations and also from a falling Rand.
- SBGL - Sibanye Gold Limited: This is another South African miner and arguably my most speculative play. It is weighted accordingly at 2% of the basket.
Silver Stock Comments - SLW - Silver Wheaton Corp: SLW has a respectable PE and pays a reasonable dividend. It is a play on the price of silver which I expect to recover at some point.
- PAAS - Pan American Silver Corp: PAAS is a major silver producer with a nice dividend yield of 4.10%. Pan American is trading at 68% of book value.
As you can see I weighted the basket 82% gold to 18% silver which reflects my belief that gold is a far safer play. None of these picks constitutes a recommendation in any way. Please do your own due diligence. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| IRS Refunds $4 Billion Child Tax Credits Per Year to Illegal Immigrants Whose Kids Do Not Live in US (and May Not Exist at All); Earned Income Fraud Another $13 Billion Posted: 13 Jun 2013 09:39 AM PDT Here's an interesting video that came my way yesterday from a close friend. The video highlights a news investigation by Channel 13, WTHR in Indianapolis, regarding fraudulent refunds of taxpayer money to illegal immigrants living in the US. The refunds are based on child tax credits, when the kids live in Mexico or elsewhere. Link if video does not play: Another Massive Tax Loophole! Typically videos like this are not remotely true, but this one is according to FactCheck. Q: Does the IRS pay billions in tax refunds to workers who are in the U.S. illegally?
A: Yes. The Treasury Department's Inspector General determined that $4.2 billion was paid in 2010, up from less than $1 billion in 2005. Leading Democrats are resisting a bill that would stop future payments.
FULL ANSWER
This is a rare case of an Internet rumor with some substance to it. In fact, it's shaping up as a major dogfight in Congress. At issue here are the federal child tax credits that can be claimed by persons with dependent children under age 17. Some Democrats are already defending these child tax credit payments that have gone to those without a valid Social Security number, accusing Republicans who want to end them of a heartless attack on children.
Several different versions of this viral email all cite a recent investigative story by an Indianapolis television station, but WTHR-TV is far from the first to notice. The Washington Post and others reported on this last year when the Treasury Department's inspector general for tax administration issued a report on July 7, 2011.
The title of the report summed up the IG's [Treasury Inspector General] finding: "Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits." Problem Still Not Addressed The WTHR video appears to be from 2012. The treasury inspector general report came out in 2011. So Congress, the treasury, the IRS, and presumably president Obama have known about this for at least two years. Fraudulent Bonanza for Illegals The question I had this morning is a simple one: has anything been done yet? It does not appear to be the case. On April 16, 2013, The Washington Times featured an article by Edwin S. Rubenstein Collecting billions in a loophole, subtitled "Fraudulent tax refunds yield a bonanza for illegal immigrants". As federal services from air-traffic control to White House tours are ratcheted down thanks to the budget sequestration, millions of illegal aliens are now eagerly await billions in illegitimate Treasury payments, courtesy of the Internal Revenue Service (IRS).
Two programs, the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) provide cash payments to low-income parents who pay no income tax and fail to have a valid Social Security number.
The IRS knowingly allows illegal aliens who claim children to get Earned Income Tax Credit cash payments of up to $5,891 per household. This is one reason why these cash payments are expected to exceed $52 billion in fiscal year 2012 alone. The General Accountability Office (GAO) estimates that roughly a quarter of all Earned Income Tax Credit payments are issued improperly.
Compounding the problem is the Additional Child Tax Credit, which was added to the older Child Tax Credit program that became law in 1997. The Child Tax Credit reduces the tax low-income families pay by $1,000 for each child under 17. If the tax filer claims five children for a credit of $5,000 but owes only $2,000 in taxes, under the Additional Child Tax Credit the IRS sends the filer a check for the difference, or $3,000.
The federal tax agency makes no effort to verify the existence of children or the eligibility of the tax-credit recipients to work in the United States. Indeed, IRS managers reportedly encourage their staff to ignore questionable applications and blatant fraud for the sake of fast-tracking Individual Taxpayer Identification Number approvals.
The scandal prompted at least one congressman to act. Last year, Rep. Sam Johnson, Texas Republican, introduced the ITIN Reform Act. The legislation would require people claiming Additional Child Tax Credit refunds on tax returns filed without a Social Security number to verify their citizenship status in person at an IRS office. Currently, the IRS sends these refunds automatically, with no questions asked. Total Illegal Immigrant Fraud Over $17 Billion Annually General Accountability Office (GAO) estimates one-fourth of the annual $52 billion in earned income payments is fraudulent. The math here is pretty simple. One-fourth of $52 billion is $13 billion, so the total cost to taxpayers is $17 billion annually. Democrats do not want to do a damn thing about this, nor does the IRS. Please play the video, it's a real eye opener. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| California, Illinois on Brink of Pension Crisis; New Actuarial Rules Will Force States to Admit Problems Posted: 13 Jun 2013 01:27 AM PDT Many states, especially California and Illinois, have had severe pension underfunding problems for many years. However, new actuarial pension rules will finally force states to admit the problem. Thus, it should not be surprising that talk of "technical bankruptcy" and "service insolvency" is growing. Here are some pertinent ideas from California on the Brink: Pension Crisis About to Get Worse - Moody's new credit standards for public pensions would nearly double the unfunded liabilities for state and local pension plans in California to $328.6 billion from $128.3 billion.
- California has the second lowest credit rating at Standard & Poor's of all 50 states; Illinois now has the worst. Moody's new standards would drop the funded status of these plans to 64%, versus a previous estimate of 82%, the Center said.
- "By standard accounting methods, some state pension funds will run out of assets within as little as five years"
- New rules will lower expected rates of returns on their pension assets, instead of the often overstated returns they now use to paper over holes in their plans blown out by bad investments.
- Meredith Whitney says California is papering over budget holes with gimmicks, like raising taxes retroactively, pushing state expenses onto local towns and cities that can't afford them, and underfunding their pension funds. "It's so much worse than the rosy picture that the headlines suggest," the CEO of Meredith Whitney Advisory group says.
- The Senate Joint Economic Committee reiterates what Whitney says. "Many states and localities have regularly skipped or underfunded contributions to pension plans," the report said. "Over the past five years, state and local governments have underpaid actuarially required pension contributions by more than $50 billion. The worst culprit of all, Illinois, has underpaid its pension contributions to the tune of $28 billion over the past 15 years."
- Illinois' plan is just 44% funded, or 30% using "conventional accounting standards," the Senate committee says. Los Angeles' combined plans would fall from 77% funded to 50% funded.
- San Jose's combined plans would fall from 75% to 60% funded.
- San Francisco's combined plans would fall from 88% funded to 69% funded.
Trouble Will Escalate Many California cities are in serious trouble, and that trouble will grow by leaps and bounds as soon as there is a significant stock market correction. Pension plans typically assume 7.5% returns. That's not going to happen on a sustained basis with 10-year treasuries yielding close to 2%. Yet, any significant rise in bond yields will crush existing bondholders as well as wreak havoc in equities. Moody's wants states to assume 5.5% returns, but even that is far too high. The stock and bond markets are now so bloated thanks to Fed bubble-blowing policies that 0-2% returns for a full decade is a distinct possibility. And not a single pension plan in the US is remotely prepared for such an event. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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