Apple Dividend

                                             

Apple’s recent decision to declare a first time dividend later this year is not a windfall for shareholders. Company management must have its reasons for departing from the longtime no-dividend policy of Steve Jobs, but shareholder wealth augmentation is not one of them.

Theoretically, when a company pays out a dividend to shareholders, it reduces the value of each share of stock by the amount of the dividend. All other things being equal, a company with a share value of $100 would see its share price drop to $95 the day after a $5 dividend.

So, what is the benefit to shareholders? Let’s assume an individual shareholder is going to get a $600 dividend from Apple. Receipt of the dividend constitutes a taxable event, and 15% or $90 must go to the IRS. If the shareholder really needed $600, he could have sold about one share of Apple stock. In that case instead of paying tax on the whole dividend, the shareholder would only pay a 15% tax on his gain. If the stock had cost $300, then he would have only paid 15% of the  $300 gain.

 

While dividend paying stocks like utilities have lately been attractive to investors, nothing prevents a shareholder from selling stock to generate income. Many years ago a client told me that she needed income but never considered selling a few shares each year of a very large stock holding that had appreciated in value.

Perhaps taxes were one of the reasons that led the legendary Steve Jobs to resist the temptation to pay dividends during his long career at Apple. I’m sure it wasn’t the biggest reason since growing the business and keeping it on a firm foundation seemed to have been his top priorities. Warren Buffett has also resisted the temptation to declare dividends at Berkshire Hathaway.

It seems to me that Steve Jobs did more in his tenure at Apple to create wealth not only for himself, for his thousands of employees, and for millions of shareholders than all the community organizers and protestors who complain of the disparities of wealth in this country. Isn’t it ironic that the “Occupy” protestors all use iPhones, iPads, and iPods? ###

Rising Gasoline Prices

What is the reason for high gasoline prices today? Liberals like to put the blame on big oil companies. They argue that these companies are profiteering at the expense of all of us. Conservatives like to blame the Obama administration for dragging its feet on drilling in the USA. They reason that if we had more supply, prices would drop.

However, it might be better to look in another direction for the reason for the high prices at the pump. Every time we fill up we exchange some money for a few gallons of gas. Instead of looking at the price of gas, maybe we should examine the value of the money we use to pay.

Let’s take an average driver who puts 12000 miles a year on his car. If the car averaged 20 miles per gallon, he would use 600 gallons in a year. At today’s price of about $4.00 per gallon, his total cost for the year would be $2400. Just imagine that instead of using cash or a credit card to pay, you used gold. At today’s price of $1640 per ounce, he would only need about an ounce and a half of gold to pay for a full year’s supply of gas.

Two years ago when gas prices were about $2.80 per gallon, the driver would have needed $1680 to pay for his 2400 gallons that year. However, in 2010 the price of gold was only $1125 per ounce. It would still have taken about an ounce and a half of gold to buy the full years supply.

In other words, the price of gold in relation to oil has hardly changed in the past two years. What has changed is the value of the paper we call money that we present at the pump. In the old days they would have this debasing the coinage.

Massive government borrowing has cheapened the value of our dollars. You’d have to be a real sucker to accept cheaper dollars for gasoline. The oil and gas we buy is the same product as always. It still probably costs about the same to drill and refine it into the finished product we use in our cars.

It is true that other factors are involved in gasoline production. Catastrophes and speculation can cause short-term swings in prices but in the long run no driller or producer is going to accept Monopoly money for their product.

We all knew this when we were children. Why don’t we understand it now? Which one of us would have traded a Mickey Mantle card for the whole Washington senator team? For that matter who today would trade Exxon or Chevron for the whole US Senate? ### 

Glaucoma and Medical Marijuana

A recent front page article in the Connecticut Post highlighted the attempts of a 90 year old woman to treat her glaucoma with marijuana. The story was front page because the Connecticut legislature is currently considering the legalization of “medical” marijuana for the treatment of many ailments.

I am not a medical professional but the glaucoma case caught my attention because I too suffer from the disease. Glaucoma is a disease that causes irrecoverable damage to the optic nerve. The only treatment is to reduce the fluid pressure in the eye by medication or surgery. No treatment will repair the damage to the optic nerve or improve vision. Successful treatment can only reduce the pressure in the eye in order to slow down or retard further damage to the eye.

In the article the woman claimed that the eye drops needed to treat glaucoma were not doing the job, and that she was reluctant to undergo laser surgery. However, the article never mentioned what success the lady had achieved by smoking her marijuana cigarettes. I checked with my eye surgeon and he indicated that marijuana does reduce the pressure but only for about an hour. People with glaucoma need permanent, round the clock, pressure reduction. Does anyone think it would be healthy for grandma to smoke 24 joints a day?

Glaucoma is serious business, and marijuana is not a quick fix. Anyone suffering from this disease should consult a glaucoma specialist. In my case the glaucoma had progressed so far that eye drops were no longer doing an adequate job. On investigation I discovered that laser surgery was also not the best answer but that there was another surgical procedure that could and did do the job. ###

Catholic travel: Italy and Assisi

                                                A Religious Experience

Assisi

                                 

Italy is one of the most popular travel destinations today. Besides its many attractions it has for the Catholic traveler a special significance. When my wife and I travel we like to go to Mass every day. Not only does every little Italian town have its own church, but each little district in the town will have its own church. Of course in the larger cities you can hardly cross the street without bumping into a Catholic church which is still functioning as a center of worship.

For an American Catholic the spiritual benefit of attending Mass even in Italian is immeasurable. Still, I have to admit that for a tourist there are some ancillary advantages. First, it is a pleasure to observe Italians at worship. On Sundays the churches are well attended and Italians attend with gusto. They sing out the hymns more so than we do here in America.

At a daily Mass attended by half a dozen elderly women, they sang an a cappella version of the Ave Maria that was as good as anything I've ever heard.

Secondly, even though most of the precious art works that were originally in these churches have been removed to pinacotecas and museums, there is still plenty to see although the churches are extremely dark except when services are being conducted. In some churches if you drop a coin in a box, you will get a couple of minutes of light illuminating some masterpiece. Any tourist can do that but sometimes a Mass goer can get a special perk. If you attend the 10:30 daily Mass in the Baptistry in Florence, you will be allowed inside before the mob of tourists is admitted. Before and after Mass you will be able to walk around observing the incredible ceiling and walls virtually alone.

One year my wife and I happened to be in Assisi on October 4, the feast of St. Francis. Assisi is a special town on any day but it was really something that weekend. The day before was a Sunday and we attended Mass in the magnificent lower church of the Basilica of St. Francesco. The Mass was packed with pilgrims from all over come to honor St. Francis.

Assisi is a hill town with panoramic views over the surrounding Umbrian countryside but to me the most wonderful thing about Assisi is the sounds. Monday morning we were awakened by the incredible bells of San Francesco which rang steadily for more than five minutes at 7:00. Two hours later a procession from the town's central square, the Piazza del Comune, wound its way down the via di San Francesco to the Basilica. Every year a different region of Italy is represented in the procession. That year it was Abruzzo from the South. People marched  in their native costumes behind their local banners down to the Church to attend Mass.

Loudspeakers broadcast the proceedings for the thousands who couldn't get inside while TV camera crews roamed through the crowd and helicopters floated above. After Mass some politician gave a speech, and then gaily dressed singing groups performed traditional songs from Abruzzo. Finally, the crowd began to disperse for lunch and siesta.

That night after dinner my wife and I were walking back to our hotel. By then even the area around the Basilica was deserted. Yet as we passed the doors of the lower Church, we heard a small group of Americans singing the hymn of St. Francis.

            Make me a channel of your peace…###