Counterparties

By Nick Rizzo
December 20, 2011

To survive, Italy must drastically reduce wages — VoxEU

Warren Buffett’s already down $1.5 billion on his BofA investment — WSJ Deal Journal

Romer on on Reinhart and Rogoff: not all recessions are created equal — NYT

The WSJ says there’s a dividend bubble — WSJ (paywall)

Romney is fully expecting to discuss “that picture” in the general election — Bloomberg

Romney still collections millions from Bain — NYT

And here’s an interesting look at how North Korea makes money: drugs, counterfeiting, and smuggling — NPR

4 comments

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Dividend stocks are up because bond yields are down. Hard to justify accepting a 3% bond yield when you can take a 3.5% dividend (representing just half the earnings yield) from a company with growing revenues. Bond yields obviously influence dividend stocks more than those that don’t return income to their shareholders.

From the tag, however, I was expecting to read commentary on the sustainability of dividend yields. Instead it blithely ignored the rationale for owning dividend stocks and instead argued that growth stocks might outperform in an economic recovery. This is true, but having growth stocks perform BETTER is very different from having dividend stocks perform POORLY.

Moreover, if you own a stock for the dividend then you are more focused on the earnings (with which the dividend will be paid) than on the share price (which is only relevant when you buy or sell). An economic recovery will tend to increase earnings for everybody — and thus benefit dividend stocks as well.

Posted by TFF | Report as abusive

3rd paragraph of the Buffett article:

“Don’t worry about Buffett, though. He is guaranteed a profit on his BofA investment. The banking giant must repay Buffett’s $5 billion, plus a 5% premium, at any time. Plus, the world’s third-richest man will rake in dividends of $300 million a year from BofA, and he won’t give up those payouts no matter what sub-basement BofA shares tumble into.”

Posted by djiddish98 | Report as abusive

Nice to be Buffett…

But is there a chance that BoA will fold? Wouldn’t his investment be wiped out in a bankruptcy?

Posted by TFF | Report as abusive

The market seems to think there is, or reasonable enough to trade into the $5′s again.

I think muddling through is the existence for BoA in the near future. Can’t be an exciting time to be there, either.

Posted by McGriffen | Report as abusive