Word: dividend
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...David Broder, in his Washington Post column on Wednesday, and Harvard economist Richard Freeman and think-tanker Eileen Appelbaum in the New York Times on Thursday, all raise the admittedly intriguing idea of the "prosperity dividend." The gist: Wait until the surplus is a surplus before you send it back. At the end of the fiscal year, if there's money left over in the federal budget, simply cut every taxpayer in America a check...
...expect from Paul O'Neill. But expecting congressional Democrats and Republicans to scrimp and save every year in order to send Americans an annual surplus dividend for which they'd share the credit? That's a very long shot indeed...
Here's some basic math. The NASDAQ has lost half its value. To get even, it must double. At 10% a year, money doubles in about seven years. That gets you the drawn-out recovery. Yet no-dividend growth stocks should compound at 12% to 15%, implying a recovery in about five years. And I believe the market has muscle memory; having been there once, it's easier to get back. My prediction? Three years. Odds are I'm wrong. What's important, though, is that I'm mentally set for a grind. Go ahead, Mr. Market, surprise me, pleeeeze...
...cases in which a subsidiary is only partly divested. Known as equity carve-outs, these divestitures tend to be IPOs of less than 20% of a business. The parent retains the bulk of the stock--and control--but often later gives that stake to shareholders as a tax-free dividend. Early this year 3Com sold 17% of its white-hot Palm unit in an IPO, then gave the rest to shareholders in July. The average carve-out does well. Palm has doubled since July, although it remains below March's mania levels. But parent companies tend to lag in this...
...talk about big-spending liberals, and the futility of going to Congress with your dukes up, and how states, towns and ordinary people can spend their money better than Washington can. And he'll be offering them their money back. Gore talks about surplus reinvestment, Bush about a surplus dividend. Gore is running as a book-devouring pugilist; Bush as a backslapping manager who'll get all the thinkers on the same page...