Free 7 Paid Sick Days Mandatory Says Gov’t
There's a move afoot by US lawmakers to make it mandatory that employers provide employees with at least 7 paid sick days per year. The legislation called the Healthy Families Act, which would enable certain workers to earn one hour of paid sick time for every 30 hours worked, for up to seven days a year. Workers could use this time to care for themselves or family members. With a catchy and fuzzy name like that, who could debate it, right? I understand the rationale for the push and I realize there are lousy employers out there who don't take care of employees who are in a time of need, but I thought that was what FMLA was for. The examples of justification for the proposal I've seen in the media reports reflect the hardships that employees have been enduring when their budgets don't allow for the time off unpaid. Not that they're being fired for being sick, but that they don't have it in their budget. If what equates to say, a 3% pay cut (7 days unpaid) in a given year pushes your family over the edge, perhaps Congress should be focusing more on a family budgeting and personal responsibility act over this "Healthy Families" Act which actually does nothing for keep families healthier, yet saps business further in the middle of an economic downturn.
I don't understand why an employer now has to be responsible for an employee's lack of ability to budget. Look, if someone has a serious illness and they need some time off, I get that. I'd hope my employer would give me some support if I or one of my family members had a debilitating disease that required some time off to recover. I just wouldn't anticipate that on an annual basis, I now essentially get an extra 7 vacation days each year. Let's face it, that's what this is going to turn into.
I've seen the FMLA abuses first hand by people who take advantage of the system (i.e. the same people tend to require extended FMLA absences once per year, [often around summer time!]) and the doctors that write some of the bogus justifications are no better. What's in it for them? Just the continued visits and reputation for other would-be FMLA abusers to visit for some easy documentation. If Dr. X doesn't write up that note for my "asthma condition" that allows me to take off whenever I want, I'll go to a doctor who will. Now, this sick day allowance - it's essentially a government-mandated additional 7 vacation days.
Sick Days = Free Vacation Days. Yaaah!
The reality from the people I know that get "sick days" that accrue each year, is they don't actually use them when they're sick. They use them for vacation, for running errands or they are compensated for not using them at the end of the year. I don't begrudge them per se, because everyone else in their company (or government job) is doing the same thing and it's the norm rather than the exception. I don't know, maybe if I were a government worker now, I'd do the same thing and I'm just cranky. In my company, we have unlimited sick days, but I've never used a sick day in my career. Nor have I ever missed a day since I was working as a teenager. I guess I've been lucky, or I stay healthy or whatever and I realize it's not the same for everyone. However, what will really end up happening here is that people will take these 7 days, use them for different purposes as I stated above and when they actually ARE sick - they come to work anyway!!! Why? Because they feel like they're wasting a vacation day or money they could bundle up later. This ill concieved law will not actually help people, but rather, just continue the abuses by a sizeable portion of employees that continually look to get one over on their employers any chance they get.
This is another one of the laws of unintended consequences in my opinion - not to mention government meddling. You're going to increase employer costs, which in turn doesn't help profitability or job creation, while you reward the abusers and punish the people who play by the rules - all while not even addressing the underlying issue - which is the fact that some people can't keep a 7 day emergency fund on hand for unintended expenses.
Your Thoughts?
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Free 7 Paid Sick Days Mandatory Says Gov't
Apple Volatility at Earnings Play – Just Right
As similarly outlined in my Lesson in Volatility prior to Google Earnings article last week where a quick $810 could have been made overnight with no cash outlay (unmitigated risk on either side was assumed though!), the same play would have worked out nicely for Apple this week. Following Apple's earnings, the pundits and investors alike seemed pleased, but so much so that a sold put and sold call combination would have been unprofitable. To recap the rationale on the Google example which aptly applied here to Apple this week as well...
By Selling a Put option and a Call option simultaneously ~$10 from the current share price, investors netted an $175 gain in a single day, even though shares moved up following the earnings announcement!...
The options on both the call (long side) and the put (short side) dropped in value the next day, even though shares rose 3.2% ($3.89) in trading.
How could the call option DROP in value as shares are rising??? Simply put, leading into the earnings announcement, implied volatility on AAPL options was somewhat high, and then following the announcement, it dropped off because the news was out. Put another way, just prior to earnings, investors figured there’s a chance that shares would skyrocket, hence they were willing to pay more money for an “out of the money” call option at the $130 strike thinking that perhaps shares would zoom right past and they could pocket the difference. When the earnings announcement was met with a yawn though, the likelihood of that scenario deteriorated quickly, hence, the much lower price.
Since AAPL was trading at $121 at the close, a trader could have sold the $130 call for 3.00 and sold the $120 put for 2.36 Wednesday toward the end of trading. On Thursday, the same call was worth .16 less and the put was worth 1.59 less for a quick $175. Of course with trading costs and taxes, nothing to write home about, but this play is scalable and the Google play with a similar strategy was much more lucrative at $810 in a single day for 10% on either side.
Disclosure: Currently long GOOG shares with a credit spread and long AAPL with a covered call (currently in the money; will have to reconcile before too long). I did not partake in either play, but this morning, following AT&T's earnings announcement where they cited strong iPhone revenue, my Premium Twitpub subscribers got an alert to consider a long position (or this play) in APPL which had earnings due out later in the day.
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Apple Volatility at Earnings Play - Just Right
Refi Rates Low, but Banks Aren’t Lending?
There's been an emerging news story in the past few weeks highlighting how even seemingly low risk borrowers are being turned away for refinancing and new mortgage deals by banks and small mortgage outfits alike. This is surprising on one hand since they're passing up lucrative fees, especially in light of Obama's recent reward programs. On the other hand, this must say something about the perception of the risk in the borrower pool. Today, CBSMarketwatch ran this story asking banks to just fess up and say they're not lending instead of trying to appease politicians and angry Americans.
Yesterday, I heard a piece on CNBC they had guests on saying that with regard to FICO scores, 760 is the new 720 (read about why knowing your FICO score is critical and how to improve yours) and get this - if you've EVER had a negative amortization (also referred to as pick-a-pay or option ARM), you can't get a refinancing deal at most outfits. This is actually pretty alarming. If you made every payment on time and have plenty of cash in the bank and verifiable income, apparently, the thinking is that because you took on that kind of loan in the past, you're now viewed as a higher credit risk. I hate when groups of people are punished for bad behavior in a subset.
What are you seeing out there? Can you get a loan?
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Refi Rates Low, but Banks Aren't Lending?
Hottest Double Digit ETFs from Last Week
I like to publish the prior week's hottest ETFs to share some new trends and niche ETFs out there. As it turns out, since we don't see the same sector dominating the runup each week (aside from 3X Financials most weeks of late), each week, I introduce at least one obscure ETF that may provide some strong returns and lower correlation with the ever popular S&P500, Nasdaq and Financial ETFs. For instance, consider the newly launched Colombia ETF which portends to grow rapidly if history is any indicator from its sole US ADS previously, this closed end fund looking to focus on warming ties to CUBA, and the Carbon Trading ETF and Solar Energy ETF in these similar best-prior week ETF articles. For the prior week:
BHH - Up 17% B2B Internet Holders - This internet ETF is actually up over 40% vs a small loss for the S&P500 YTD. In prior downturns, we saw tech get hammered, but surprisingly, this time around, tech had no direct role in the market euphoria and these companies seemed to have learned a thing or two about living without excessive costs and holding cash. Tech may very well continue to outperform if we're looking at a slow recovery in financials and housing.
JJN - Up 16% Barclays iPath Nickel - Note, this is an ETN which has slightly different properties than an ETF. But for a pure play on nickel which is a barometer for both industrial activity and currency generation, this ETN seeks to replicate the Dow Jones-AIG Nickel Total Return Sub-Index index which is composed of the Primary Nickel futures contract traded on the London Metal Exchange.
PSR - Up 16% Powershares Active US Real Estate - This is an "actively managed ETF" which may sound like a bit of a misnomer. The fund will invest at least 80% of assets in securities of companies that are principally engaged in the U.S. real estate industry and included within the FTSE NAREIT Equity REITs Index. It is free to utilize the balance of the assets for additional exposure to other real estate or alter the weighting of its holdings. With a higher expense ratio of .8% than its passively managed brother VNQ at .1%, it will be interesting to see if the ability to add some actively managed positions to the ETF outweigh the .7% difference in expense ratios.
IDX - Up 15% Market Vectors Indonesia ETF - I hadn't even heard of this newly launched ETF: Indonesia has been on fire, as have many of the emerging market ETFs, which also fell much harder than the US. In the past month alone, this ETF is up over 40% compared to about 12% for the S&P500. As highlighted earlier, there are some other lesser-known emerging market ETFs, like the newly launched Colombia investment focused ETF and one then there's the CUBA investment closed end fund that returned 40% in a single day recently (but note, it doesn't have any direct holdings in Cuba!)
SEA - Up 14% Claymore/Delta Global Shipping - This ETF seeks to replicate the performance of the Delta Global Shipping index, which is really a play on the return to global trade and recovery. In February, the ETF fell much more rapidly than the S&P500, but then rocketed back more quickly from March onward, up over 25% in the past month vs. 12% for the S&P500.
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Hottest Double Digit ETFs from Last Week
24 Dividend Increases in a Row from a Company You’ve Never Heard of
Through a rather obscure screening, I came across a relatively small company that has increased its dividends for 24 consecutive quarters, including another announcement this week. Now that spreads are shrinking on the high yield muni bond mania and with high yield corporate bond ETFs priced for Depression era defaults, this stock offers a nice mix of both low risk, sustained performance and a yield higher than what you can get in Treasuries or CDs.
Healthcare Services Group (HCSG) provides services like housekeeping and food services to nursing home and other healthcare institutions. While this may not sound like a sexy line of work, its performance, dividend history and outlook is surely attractive.
With a market capitalization of under $1Billion and virtually no press and only 2 analysts covering the stock, the yield stands at 4.3%. What's going to continue to power this stock though, is sustained dividend increases in the face of a very harsh environment. They're on a streak here and the management intends on keeping these dividend increases going. While the proverbial "recession-proof"/"defensive" healthcare sector proved to be anything but in the recent downturn, this particular niche actually appears to hold true to the stereotype. In fact, Healthcare Services Group is doing so well, not only is it increasing its dividend every quarter, but it also just announced an acquisition: Contract Environmental Services, one of their competitors. With the well-known graying of America and cost pressures on healthcare providers, the business outlook is quite strong for HCSG.
As evidenced below, HCSG as delivered outsized returns of over 150% over the past 5 years versus a loss for the S&P500. And this wasn't hand-selected. During the most recent 1 year period, where the S&P500 lost close to 40%, HCSG gained close to 20% (plus dividends!).
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24 Dividend Increases in a Row from a Company You've Never Heard of
Blogger Takes on Goldman Sachs
Here's an interesting battle between Mike Morgan, a blogger I follow, and Goldman. He's taken a pretty harsh stance toward their tactics and leadership and now he's getting legal threats from them - according to this article, they've hired a firm to try and shut him down. Unlike my battle with ShopToEarn via cease and desist letters, where I backed off a bit for varying reasons (but note my 2009 Shop To Earn Update is generating plenty of controversy), this guy's not backing down. Check out what he has to say at GoldmanSachs666.
What do you think, is he on to something?
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Blogger Takes on Goldman Sachs
High Yield Bond ETF – 12% Yield + Share Gains Looking Attractive
The iShares iBoxx High Yield Corporate Bond ETF (HYG) has been showing impressive performance on many fronts and may very well continue to reward investors that are early to the party quite handsomely. Not only has it outperformed the S&P500, but its dividend yield is significantly higher, at 12% vs 3.3% for the S&P500. Many economists have been touting how corporate and municipal bonds are trading at Depression scenario prices and anyone believing that we're not headed for a repeated disaster should be snatching up shares now.
A look at the top 10 holdings - it's refreshing to see the the ETF isn't comprised primarily of Financials, which is what dealt a death blow to many high yield stock ETFs.
Chs / Cmnty Health Sys 8.875%
CROWN AMERS
CSC HLDGS INC
Davita 7.25%
DIRECTV HLDGS LLC / DIRECTV
Dollar Gen 10.625%
Intelsat 11.25%
L-3 Comms 6.375%
Peabody Engy 7.375%
Windstream 8.625%
Monthly Dividends - As evidenced below, the ETF pays dividends monthly and for the most part, the trend has been continually higher, even in the face of a decline in share value and the global market tumult.
| 1-Apr-09 | $ 0.806 Dividend | |||||
| 2-Mar-09 | $ 0.719 Dividend | |||||
| 2-Feb-09 | $ 0.753 Dividend | |||||
| 29-Dec-08 | $ 0.524 Dividend | |||||
| 1-Dec-08 | $ 0.698 Dividend | |||||
| 3-Nov-08 | $ 0.69 Dividend | |||||
| 1-Oct-08 | $ 0.69 Dividend | |||||
| 2-Sep-08 | $ 0.62 Dividend | |||||
| 1-Aug-08 | $ 0.663 Dividend | |||||
| 1-Jul-08 | $ 0.651 Dividend | |||||
| 2-Jun-08 | $ 0.634 Dividend | |||||
So, investors faced with the prospect of trying to get an 8-11% yield on Advanta's high yield investment notes (albeit with their own set of risks) vs. what's remaining from the 37 High Yield MegaCaps List vs. this high yield corporate bond ETF such as HYG with the aforementioned accoutrement's demonstrate that this market is offering various means of achieving double digit returns over long periods of time if they have the risk tolerance.
Disclosure: No current position in HYG, but considering for high yield IRA account in the future.
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High Yield Bond ETF - 12% Yield + Share Gains Looking Attractive