We are issuing a buy recommendation for AMD at 2.85 on October 10, 2014.
When you see the markets drop, what do you do? Stop watching? Sell for a loss? Everyone has a different reaction. Here is what the markets look like today October 7, 2014 at 1:11 pm EDT.
When many look at the above they often run away. We suggest you look hard at your portfolio, possibly take some losses, and buy the stocks you see as opportunities in a down market. Often the baby is thrown out with the bath water and the good goes down with the bad.
As you may already know, Carl Icahn wanted the split to happen a while ago according to the NY Times. Now eBay and the board have decided it is indeed the right thing to do. It is suppose to happen sometime next year in 2015. It is official and on the eBay corporate site with the recent press release entitled eBay & PayPal to Become Independent Companies in 2015
Here is what Yahoo finance has to say about the split:
Is eBay Taking the Easy Way Out?
eBay had no problem enjoying the market dominance of PayPal after they bought them. Now that the industry is more competitive they are spinning PayPal off and asking someone else to do the hard work.
Of course that is only one opinion.
As of the writing of this post Apple is worth $599 Billion. That makes Apple (AAPL) the largest company in the world by market capitalization. PWC ranks the top companies throughout the world in their Global top 100 companies report linked from that article.
It could be considered no surprise as they sold over 10 million new iPhones in one weekend. However what is the current thinking on their ability to continue to grow.
The above chart shows Apple’s stock price from the 1980’s to 2014. The meteoric rise is impressive. But when, if ever, would it be time to short? What do you think?
Let’s start with my favorite quote from a NY Times article:
“For some companies considering deals, today’s actions will mean that inversions no longer make economic sense,” Mr. Lew said. “These transactions may be legal, but they’re wrong.”
– U.S. Acts to Curb Firms’ Moves Overseas to Avoid Taxes, NY Times Online
Mr. Lew and others seem to want to skirt the law because, according to them, they know best. It is legal and they are attempting to make it illegal. But what about addressing the reason it is being done. Foreign tax rates are lower than U.S. tax rates. This puts U.S. companies at a disadvantage.
Foreign Companies have an Advantage
Foreign companies can have the same gross sales as U.S. companies yet pay less in taxes and therefore have more money left over to invest and grow. They, foreign companies, also have more money to acquire additional companies. It is not uncommon for a U.S. company to be up for sale and a foreign company purchases it because they have more capital. Why do they have more capital if their gross sales are the same as a U.S. company? Because they pay less in corporate taxes.
Law Dictates Behavior
Let us not forget that law dictates behavior. We know for a fact that those states with pro-corporate laws, more litigated laws, better tax rates, and corporate friendly states have more corporate filings. Delaware is a case in point. So is it going to be a surprise that less and less companies in the future will be started in the U.S. and more and more companies will be started overseas?
Entrepreneurs Need to Look at Countries, Not Just States
Now the issue will not be which state to incorporate but which country. Here is a chart from the TaxFoundation.org showing the corporate tax rates by country.
Based on this chart, where should a new company incorporate. Every country as a lower corporate income tax rate than the U.S.