The Contrarian's View,
Vol. I, #3 October 13, 1986
- TAX "REFORM" -
You will note that I have put the word "reform" in quotes, and I have a
good reason: I feel that the 1986 tax bill, under the guise of "reforming"
the tax structure, has actually created two potentially very damaging
problems which most everyone has so far ignored:
1. It's now easier for Congress to pick our pockets clean in future years;
2. "Shifting gears" from the current to the new tax structure will most
likely trigger a late-1987 recession.
And why have I reached this conclusion? (1) It is the nature of politicians,
when they overspend, to raise taxes rather than cut spending; and (2) I
believe the negatives in the '86 tax bill outweigh the positives.
What are these positives and negatives? Let's take a look.
TAX BILL POSITIVES:
* Many of the poor and near-poor drop off the tax rolls altogether.
* Taxes on individuals overall are lowered about 6%. This is 6% more money
that the public can spend or save as it sees fit, and is therefore a gain
in economic freedom of choice (rather than having the government decide
for you how to spend that 6%).
* The maximum marginal tax rate declines from 50% (on earned income) to
33%, which is terrific for the 11% of U.S. taxpayers who were formerly
in the very high brackets. (For the rest of us, no big deal.) This
provides a strong incentive to work hard to become richer, because the
rich will get to keep more of what they make.
* The government seems to have declared that the income tax system exists
primarily to raise revenue to run the government, and it will pursue its
social engineering schemes through other means. This represents less
direct interference in our lives, and is therefore an increase in
individual freedom.
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TAX BILL NEGATIVES:
* The new tax structure makes it very, very difficult to shelter wages
and salaries from income tax. If you are very successful in your job,
you WILL pay tax at the 28% (or 33%) rate on virtually ALL of your
additional income.
* The near-rich have a higher marginal tax bracket (33%) than the very
rich (28%). If you can see any valid reason for this, let me know; I
can't find any, other than Congress sees fat purses available for
plundering. (And this new tax scheme is supposed to be "fairer"?)
* The "marriage penalty" has returned for couples where both work.
* The lower tax rate on long-term capital gains is abolished; and other
provisions encouraging investment have been either repealed (invest-
ment tax credit) or severely limited (IRAs, Keoghs).
* Even though the top marginal tax rate on interest and dividend income
has been cut, the new tax laws offer fewer incentives for most people
to save. I'll say more about this in a minute.
* Corporate taxes overall will rise about 9%, to compensate for the 6%
tax cut for individuals. Since businesses WILL maintain their profit
margins, almost all of this tax increase will be passed on to consumers
in higher prices.
* It's now more expensive to borrow to buy consumer goods.
* In its drive toward "fairness", Congress thoroughly steamrollered over
many, many people who had, in completely good faith, settled comfortably
into the nooks and crannies of the current tax system. Contrary to what
you might think, these are not just the rich hiding in tax shelters; they
include retirees living on capital gains, small businesspeople, parents
saving for children's college educations, working teenagers, rental prop-
erty owners, high-rollers who borrow to live, and nearly everybody who is
trying to set something aside for retirement.
* "Simplification" is not one of the descriptions I would attach to this
tax change. Some of the added paperwork burdens now imposed include:
Assigning Social Security numbers to young children; segregating tax-
shelter income from other kinds of income; forcing partnerships and small
businesses to switch from fiscal to calendar tax years; proving that the
amount of money you borrow against your home doesn't exceed its total
cost; estimating the tax deduction (if any) for your IRA contribution;
determining the elegibility for tax exemption of municipal bonds; and
classifying the tax status of gifts to children and grandchildren.
* Perhaps most important for the contrarian is the way this tax bill was
passed. It seemed to rise up from nowhere in the Senate last spring,
mostly in response to frustration caused by the failures of prior efforts
to "reform" the tax structure. Pressed by their constituents to "do some-
thing", and out of the sheer relief of escaping from the clutches of
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Vol. I, #3 The Contrarian's View, October 13, 1986 Page 3
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lobbyists, our Congressional representatives piled onto the bandwagon,
until nearly all fervently believed that this tax restructuring was truly
A Great Thing For America. The truth is, except for the lowering of mar-
ginal tax rates.... which has already proved its effectiveness.... this
tax bill simply is not very well thought out. When the herd all rushes in
the same direction with great enthusiasm, you just know, in your contrar-
ian heart, that there will be multitudinous problems, even if you can't
yet see all of them. (After all, when was the last time Congress did
something intelligent and useful?)
For me, the most alarming aspect of the new tax law is the strong disin-
centive toward saving that it contains. How can this be, you might ask,
when the top marginal tax rate on income has dropped? (Besides, Americans
already save a very low percentage of their discretionary incomes.)
Ah, but you must understand how we've been conditioned to save! Under the
present tax structure, the best way to save is to borrow for capital pur-
chases and consumer goods, while investing in tax-deferred or tax-sheltered
vehicles for future income. We may not be saving CASH; instead we "save"
homes, vacation cottages, boats, rental real estate, collectibles, stocks -
in short, any tangibles that can be financed (with tax-deductible interest)
and later sold for a capital gain.... while what spare cash we have goes
into IRAs, corporate pension and savings plans, tax-deferred annuities,
U.S. Savings Bonds, gifts in trust to children, or anywhere else that tax-
free compounding is available. This "save by borrowing" technique also
offers protection against rampant inflation, because the debt can be repaid
with cheaper dollars.... an excellent refuge against the tidal waves of
printing-press money that our leaders in Washington unleash on us from time
to time.
Even the average wage-earner presently has many of these options available.
He/she can (and often does) take on a large home mortgage and car loan,
while saving in a company savings plan, IRA, mutual fund or U.S. savings
bonds. The more affluent have been able to use various tax shelters, stock
hedges or commodity straddles, trusts, professional corporations, annuities
and other devices to defer current income into future years and/or convert
that income into capital gains.
In effect, under the present system, the more of your income you decide to
save, the more freedom you have to determine the amount of income tax you
will actually pay.... depending, of course, on the degree of risk you're
willing to take with your investments.
Under the new system, you will lose this freedom. The only controllable
deductions most of us will be able to apply against wages and salaries are
mortgage interest and property taxes, charitable contributions, and up to
$3000 of capital losses. (The cutoff points for medical, casualty and misc-
ellaneous deductions are too high, and for IRAs too low, to benefit fami-
lies who can afford to save any meaningful part of their incomes.)
The middle-class saver takes the worst beating. Consider:
* DIVIDENDS DEDUCTION: Repealed. Currently, the first $200 of dividends
is not taxed.... equivalent to the payout on $5000 worth of stock
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yielding 4%.
* IRAs: No deduction for couples with incomes over $50,000, even if ONLY
ONE partner is covered by a pension plan at work.
* CAPITAL GAINS: A 40% tax increase for top-bracket taxpayers, but a
DOUBLING (14% to 28%) or more of the tax on long-term capital gains for
the average schmuck.
* MUTUAL FUNDS: I've never been crazy about mutual funds because, taken
all together, they do slightly less well than the market. In fact, it is
impossible for mutual funds collectively to outperform the market, because
they ARE the market. (Of course, there are always a few value-oriented
funds which DO perform better than the overall market.) In addition,
the mutual fund owner pays the funds' management expenses and, because
fund managers insist on constantly turning over their portfolios, the
owner also pays taxes on the resulting capital gains distributions. Now
the tax "reformers" have delivered a double blow to the poor slob who owns
mutual funds: (1) Long term capital gains distributions will be taxed
at the same rate as dividends, and (2) the tax will be based on the
funds' GROSS income, NOT on the net income the funds pay to their share-
holders after deducting management and operating expenses. (Is it "fair"
for you to pay tax on income you never receive? Ask your congressman.)
* INVESTMENT EXPENSES: Under current tax law all of your investment expen-
ses are fully deductible; under "reform", only borrowing expense (up to
the amount of income received) and miscellaneous expenses that exceed 2%
of your gross income are deductible. That 2% limit cuts out most of us,
so say goodbye to your annual deductions for The Wall Street Journal,
investment newsletters, magazines and books, safe deposit box rental,
dividend reinvestment plan fees, postage for investment transactions,
seminar expenses and dividends paid on stock sold short.
* RENTAL REAL ESTATE: Here the "reformers" have a really great deal for
you! Even if you ACTIVELY MANAGE your real estate holdings, tax "reform"
still considers your income from real estate to be passive.... so you
can't use depreciation expenses to offset your "non-passive" income.
Fortunately the tax writers provided a middle-class loophole, so an
ordinary wage earner who lives, say, in half of a duplex and rents out
the other half, can still get the pass-through tax benefits. But don't
get TOO SUCCESSFUL and make too much money, or the tax benefits will
wither away.
* SMALL BUSINESSES: One of the time-honored ways to succeed in America has
been to form your own small business. If you worked hard and were success-
ful, you could "cash out" and retire on the sale of your business in your
golden years.... a wonderful way to convert your years of labor into a
minimally-taxed capital gain. Under tax "reform" most of the tax breaks
for operating your business remain, and the corporate maximum tax is
lower, so you can keep more of your profits to reinvest in the business.
But watch out when you retire! Under the current system, your accumulated
years of increase in the value of your business would be taxed at a max-
imum 20% rate, and income averaging would allow you to further reduce the
tax bite. Under tax "reform" the government takes a flat 28%.
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I have two friends, one of whom is selling the radio station he owns to
the other, who was looking for a radio station to buy. You get just one
guess why this sale is taking place this year. Also, WCUW's landlord was
absolutely insistent that our purchase of his building (which houses the
WCUW broadcast studios) take place in 1986.... and it's not too hard to
figure out why!
Now that we've seen how tax "reform" is another variation of Congress'
usual theme.... soak the upper middle class, because that's where the money
is.... the question remains, What do we do about it? Here are some of my
ideas on how you should rearrange your finances to minimize the damage
that tax "reform" might otherwise cause:
1. PAY OFF WHAT YOU OWE. Why pay taxes on your accumulated savings, when
the interest on your car loan is no longer deductible? Pay off all
your consumer loans. If you need money for an emergency, see item #2.
2. ARRANGE A LINE OF CREDIT ON THE EQUITY IN YOUR HOME. Your mortgage inter-
est is deductible for any mortgage amount which doesn't exceed the cost
of your home (with its improvements). Arrange a line of credit on which
you can draw in an emergency, or use for paying off your consumer debt.
And make sure you keep good records of the home improvements you make....
even the shrubbery you plant counts!
3. OPEN A MARGIN ACCOUNT. This is another way to pay off your consumer
debt. With your securities in an "active assets" or similar account at
your broker's, you can borrow just enough money so that your interest
expense offsets your dividend income..... and use the borrowed funds to
retire your consumer loans. But don't overdo it, or you may get a margin
call in the 1987 bear market.
4. STOP FUNDING YOUR IRA. If you're not eligible for the IRA tax deduction,
there's no point in tying up any more money in your IRA with all its
restrictions and penalties. (The money already in your IRA you should
leave to compound tax free.) If you are eligible for a 401(k) or 403(b)1
or similar plan at work, by all means save using these plans.... they
still allow you to take a tax deduction for the amount of your salary
that you contribute to the plan. If you don't have the opportunity to
save in one of these plans, consider U.S. savings bonds (before they
eliminate the 7.5% minimum yield feature), single-premium annuities
with a mutual-fund-switching feature, zero-coupon municipals, or my
suggestions #5 and #6 which follow, for tax-free compounding on your
savings.
5. DON'T PANIC OVER YOUR TAX SHELTERS. You do not totally lose the tax-
shelter deductions; they are merely postponed until the partnership is
dissolved, wherepon you can use the accumulated deductions to offset
your capital gain (if any).... so all you've really lost is the time
value of the money you can't recapture until liquidation. In fact,
because tax "reform" has depressed the prices of shelters generally,
they now are one of the best ways to compound your savings tax-free....
although I would stick with the publicly-traded limited partnerships,
because they are completely liquid (can be sold on a moment's notice).
If you have already bought into one of those ten-year private deals
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which offers a 2:1 writeoff and then goes bust in the third year, you
have my sympathy.... but a good contrarian should never have gone into
a deal that wasn't economically viable in the first place.
6. IMPROVE YOUR HOME. This is perhaps the best way to compound your savings
tax-free, becaues it offers protection against inflation, and also gives
you immediate enjoyment of the money you save. When you eventually need
the money (for a car, or child's education, or whatever) you can borrow
against your home's equity. Under tax "reform" this is the only real tax
shelter left for the middle class, thus demand for housing is likely to
increase and drive up prices.... so any improvements you make in the
next year will quickly increase in value. If your home is already im-
proved as much as you can tolerate, then buy or improve a vacation home.
7. ACCELERATE DEDUCTIONS INTO 1986; DEFER INCOME TO 1988. If you have any
control over when you receive income and spend for tax-deductible items,
this is an obvious maneuver. (If you also think this is a recipe for a
1987 recession, you're right.) Obvious things you can do: Prepay taxes;
extend your investment publication subscriptions; and don't forget to
fund your IRA for 1986 (it's still deductible). If you have both long-
term capital gains and losses outstanding, take your gains this year
(when they're taxed less) and defer your losses to next year (when
they're worth more as a deduction.... up to $3,000 worth).
Even after readjusting your finances along these lines, you will still be
limited in deductions you can take against your income. Sorry, you simply
have lost the freedom you previously had, and there really is no solution
other than to work for less money and compensate for it with a less ex-
pensive and more relaxed lifestyle.... or work harder, make more money,
and pay the tax.
Finally, let's not forget that, wherever possible, we should recognize
investment opportunities arising out of tax "reform", and profit from
them. Certainly the most obvious beneficiaries will be financial insti-
tutions which offer second-mortgage lines of credit against home equity.
One of the drawbacks against such loans, though, is the high "closing"
cost banks charge for making the loans. Eventually competition will re-
duce these charges; those who are first to figure out how to reduce the
consumer's cost of obtaining these loans will get the lion's share of
the business. Also, financial services companies (such as Integrated
Resources, a major "Hedger's Delight" portfolio holding) will likely do
quite well by selling passive-income-producing shelters, once the tax-
shelter panic quiets down. But remember, all companies which lend money
or sell financial products are very sensitive to interest rates; as the
cost of money goes up, their profits go down.
- SIGN OF THE TIMES? -
The other day I was in a local savings bank (in conjunction with arranging
WCUW's building mortgage) and I glanced through the literature the bank
had placed in its freebie racks. There were brochures for savings bank life
insurance, mortgage loans, college education loans, home improvement loans,
consolidation loans.... I looked again. There were no brochures on the
various kinds of savings accounts available, or the rates of interest paid!
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From this I conclude that the bank really has no need for our money.... the
government is presently manufacturing enough to fulfill all its current
requirements.
- STOCK MARKET OUTLOOK -
First, to review my past projections: In July I said, "I am looking for
lower prices throughout the summer". The Dow Jones Industrials average was
over 1900 when I wrote that; on the first day of fall it was under 1800.
The word "throughout" was misleading, though, as the DJI hit a new high
in early September, before its two-day, 120-point drop.
In September I said I expected a two-tier market to develop, with interest-
rate-sensitive and natural-resource issues mostly remaining stable, while
"the rest of the market.... gently sags as a prelude to the 1987 bear mar-
ket." Well, "gently" may have been an inappropriate word to use, as the
Dow Jones Industrials dove 86 points while I was writing those very words!
However, the two-tier nature of the market is becoming more apparent:
Stocks which are included in one or more of the popular market averages
have now become mere commodities for the arbitrageurs, and as a result are
"locked in" to the level of interest rates; the remaining stocks, mostly of
small companies and mostly traded over the counter, have taken a much worse
beating, as the outlook for improved business conditions continues to dim.
(The November issue of "The Contrarian's View" will look in detail at the
impact of arbitrage on stock prices.) As for the 1987 bear, time will tell.
I am not expecting any major trend in the market (as reflected in the popu-
lar averages) for the next two or three months. Prices will fluctuate be-
tween DJI 1600 and 2100, sometimes violently, with the odds favoring the
lower end of this range UNLESS the Federal Reserve aggressively loosens
again. (A decline in short-term interest rates would quickly drive the DJI
toward 2100.) Smaller companies' stock prices will continue to deteriorate,
although there will be some sympathetic movement with the upward thrust of
the market averages if the Fed should loosen again.
- WORTH INVESTIGATING -
SOUTHERN UNION COMPANY (SUG, $14, NYSE) reported a substantial loss for
its second quarter (ending June 30), from having to foreclose on commer-
cial real estate whose owner defaulted on his mortgage from Southern Union.
This has depressed the price of the stock; but the main businesses....
the gas utility and oil and gas production, remain profitable. Book value
of the stock is about $13; current yield is 12%. Although the dividend may
be cut, the current stock price discounts a lot of trouble which may never
appear.
- PORTFOLIO REVIEW -
A. "Hedger's Delight" - model portfolio, includes commissions:
8Oct86
Shrs Description Bought Sold On Sold At Cost Is Value
---- ------------------------------ ------- ------- ------- ------- -------
100 Bally Manuf wt$40/4Jan88 SHORT 30Oct85 281.23 -212.50
1 Bally Manuf 15Sep98cvbd 60.00 2Oct85 795.00 840.00
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Page 8 The Contrarian's View, October 13, 1986 Vol. I, #3
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A. "Hedger's Delight" continued.... 8Oct86
Shrs Description Bought Sold On Sold At Cost Is Value
---- ------------------------------ ------- ------- ------- ------- -------
20 Computer Consoles SHORT 12Jun86 186.74 -152.05
1 Computer Con 15Feb98cvbd 77.50 24Sep85 685.00 710.00
1 Eastern Air L 1Oct93cvbd 47.50 11Sep85 625.00 590.00
100 Golden Nugget SHORT 28Feb86 1390.67 -1037.50
100 Golden Nugget wt$18/1Jul88 28Feb86 357.50 175.00
50 Integrated Resources SHORT 16May85 913.10 -1175.00
15 Integrated Resources SHORT 11Jun85 296.50 -352.50
45 Integrated Resources cvpf 4.25 17Apr85 1560.51 1712.00
25 Integrated Resources cvpf 4.25 15May85 847.50 956.25
30 Integrated Resources cvpf 4.25 11Jun85 1031.13 1147.50
200 Keystone Camera Products SHORT 12Jun86 1023.86 -1150.00
300 Keystone Camra wt$8.25/20Mar90 11Jun86 330.00 393.75
200 McLean Industries SHORT 5Dec85 1777.90 -800.00
200 McLean Industrs wt9.45/15Jul90 5Dec85 510.00 175.00
165 Pier 1 Inc. SHORT 12Nov85 1663.24 -2598.75
82 Pier 1 Inc. SHORT 23Jan86 931.95 -1291.50
100 Pier 1 wt$22/15Jul88 12Nov85 585.00 2000.00
12 Ridgewood Properties (A) SHORT 12Nov85 252.00 -285.00
100 Safeguard Scientifics SHORT 22Nov85 1010.47 -1450.00
20 Safeguard Scientifics SHORT 6Dec85 222.74 -290.00
100 Safeguard Scient wt$12/30Jun87 18Sep85 220.00 437.50
100 Spendthrift Farms SHORT 9Dec85 341.83 -150.00
100 Spendthrift Farms SHORT 10Dec85 341.83 -150.00
500 Spendthrift Farms wt$9/15Mar89 6Dec85 240.63 93.75
200 Wickes wt$4.43/26Jan92 SHORT 28Aug85 427.48 -450.00
50 Wickes wt$4.43/26Jan92 SHORT 6Feb86 104.06 -112.50
280 Wickes Companies (B) 28Aug85 1226.13 1155.00
CASH .00 .00
(A) Pier 1 distribution; (B) 7:1 conversion ------- ------- --------
of $2.50 preferred. 11159.92 9013.40 -1171.75
SUMMARY - "Hedger's Delight":
Original cost: $ 9,398.02
Present value: $ 9,988.17
Increase (decrease): $ 590.15 (6.28%)
COMMENT on "Hedger's Delight": There were no purchases or sales this month
for this portfolio, which is designed to counterbalance excessively high
or low stock prices. Our counterbalancing is proving somewhat successful,
though, as the market retreats from its highs. The latest stock to "tank"
is Spendthrift Farms, which could not make the September interest payment
on its long-term debt, and also suffered a $9.4 million loss for its fiscal
year ending June 30. Spendthrift may merge with Kentucky Horse Center; the
wife of the president and CEO of Spendthrift owns Kentucky Horse Center.
B. "Future Income" - includes commissions:
8Oct86
Shrs Description Bought Sold On Sold At Cost Is Value
---- ------------------------------ ------- ------- ------- ------- -------
50 Apache Petroleum wt$18/30Sep86 21Dec84 15Jul86 .00 41.25 -41.25
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Vol. I, #3 The Contrarian's View, October 13, 1986 Page 9
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B. "Future Income" continued.... 8Oct86
Shrs Description Bought Sold On Sold At Cost Is Value
---- ------------------------------ ------- ------- ------- ------- -------
1 Apache Pet 15Jul2001cvbd 90.00 26Sep86 914.06 930.00
20 McDermott Inter'l wt$25/1Apr90 31Mar86 41.25 65.00
100 Mesa Petroleum 6Feb86 275.00 337.50
50 MSA Realty wt$9/1Apr89 7Feb85 89.38 118.27
50 Public Service NH wt$5/15Oct91 22Jan85 96.25 225.00
50 Varity wt$3.60/31May91 31Mar86 24.07 25.00
------- ------- --------
1440.01 1701.25
SUMMARY - "Future Income":
Original cost: $ 1467.20
Present value: $ 1701.25
Increase (decrease): $ 234.05 (15.95%)
Yield: $ 90.00 (6.13%)
COMMENT on "Future Income": The Apache Petroleum 9% convertible bond due
July 15, 2001 has been added to the portfolio, as a result of "exercising"
the 50 Apache Petroleum warrants. This transaction has been accounted for
according to IRS rules: A capital loss of $41.25 and ordinary income of
$14.06 on July 15, 1986, the date the warrants were extended; and the cost
of the bond is therefore $900 + $14.06 = $914.06. Interest on this bond is
payable semiannually on January and July 15. The bond is convertible any-
time into 76 Apache Petroleum units (@$13 per unit), and cannot be called
for redemption before July 15, 1988 unless the units trade at more than
$16.25 for 20 days within a 30-consecutive-day trading period.
C. "Crapshooter's Folly" - includes commissions:
8Oct86
Shrs Description Bought Sold On Sold At Cost Is Value
---- ------------------------------ ------- ------- ------- ------- -------
10 BancTexas cvpf 1.46 (div susp) 21Apr86 44.00 37.50
50 Campbell Resrc wt$4.40/31Dec88 11Sep85 6.00 6.00
50 Damson Energy Partners Class A 8Jul86 116.88 75.00
100 Damson Energy Partners Class B 17Jul86 206.25 162.50
100 Energy Developmt wt$20/31Mar87 31Mar86 13.75 4.69
100 Entex Energy Development 1.00 25Jul86 477.50 400.00
100 Entex Energy Development 1.00 30Jul86 371.25 400.00
100 USX wt$42/15Sep88 6Oct86 68.75 43.75
------- ------- --------
1304.38 1129.44
SUMMARY - "Crapshooter's Folly":
Original cost: $ 1304.38
Present value: $ 1129.44
Increase (decrease): $ -174.94 (-13.41%)
COMMENT on "Crapshooter's Folly" - I've added the USX warrants this month
at what I think is a most favorable price. The takeover speculation which
culminated in Carl Icahn's $31-per-share offer has caused the common to
nearly double in price from its July low, and has also depressed the price
of the warrants. (After all, if common shareowners are bought out at $31,
the right to buy stock at $42 is worthless.) My guess is that USX manage-
ment will beat back the takeover, and restructure the company. In two years
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Page 10 The Contrarian's View, October 13, 1986 Vol. I, #3
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USX common could be worth (and trading at) more than $50 per share. Remem-
ber Union Carbide! I debated whether these warrants should go into the
"Crapshooter's Folly" or "Future Income" portfolio.... but I decided that
as long as USX is attracting greenmailers, the Crapshooter category was
more appropriate.
D. IRA 1 - real portfolio: Twentieth Century
8Oct86
Shares Description Bought Sold On Sold At Cost Is Value
-------- ------------------------- ------- ------- ------- ------- -------
2.7410 VISTA 8Mar84 11.32 17.71
5.8240 VISTA 21Mar84 25.10 37.62
1.3680 VISTA 31Aug84 6.50 8.84
.0670 VISTA 12Jan85 .29D .43
1.6630 Cash Reserves 12Jun86 166.28 166.28
.0050 Cash Reserves 30Jun86 .50I .50
.0080 Cash Reserves 31Jul86 .80I .80
.0080 Cash Reserves 31Aug86 .80I .80
.0070 Cash Reserves 30Sep86 .70I .70
E: IRA 2 - real portfolio: Bull & Bear
905.8000 Dollar Reserves 16Jun86 900.80 900.80
.9000 Dollar Reserves 30Jun86 .90I .90
2.4000 Dollar Reserves 15Jul86 2.40 2.40
4.5600 Dollar Reserves 31Jul86 4.56I 4.56
4.0800 Dollar Reserves 29Aug86 4.08I 4.08
--------- --------
$ 1127.03 1146.42
SUMMARY - IRA 1 and 2:
Original cost: $ 952.62
Present value: $ 1146.42
Increase (decrease): $ 193.80 (20.34%)
COMMENT on IRAs: The mostly-cash position looks better and better as the
months go by..... "Timer's Trend" signalled a sell on September 10, and
was shown in the September issue, although the publishing deadline did
not allow me time to comment. The IRAs were mostly in cash, anyway, so
no action was required. We are still on a SELL as of October 8, 1986.
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NEXT ISSUE - will appear about November 17.
/Nick Chase