Here are comments from an article = I authored:

President Bush has stirred up a maelstrom of debate. No, = not whether or not the double taxation of dividends is fair, or which societal class = will benefit most, but how much money will be sucked out of the bond market = and reallocated into dividend paying stocks. If your financial advisor suggests to = liquidate your bond portfolio to purchase dividend paying stocks to take advantage = of tax-free income, gather all your assets and run for the exit. =

The difference between a bond and a stock is much more than an = interest rate or dividend yield. Interest is not a dividend and dividends = are not interest. The IRS in their wisdom even categorizes these payments differently. = While they both are reported on Schedule B in tax returns, bond investors generally = receive a 1099-INT for interest payments where common stock holders receive a = 1099-DIV for dividend payments.

A bond is a loan made by investors to a corporation, the U.S. Government, or a municipality in which that entity is obligated to pay = interest at a stated rate and pay back principle at a stated time. = Conversely, common stock provides ownership of a corporation. Dividends are a promise = made by a corporate Board of Directors to pay shareholders a specific amount of = money for each share of stock held.

For example, a 10-year Treasury bond may pay a current yield of = 3.85%. A $100,000 purchase of the 10-year bond will create $3,850 of interest = payment every year for 10 years. At the end of the 10-year period, the = investor will receive back $100,000 of principle payment.

A common stock whose price is $40 and pays a dividend of $1.54 = has a dividend yield of 3.85%. The dividend yield is calculated by = dividing the dividend by the stock price. A $100,000 purchase would involve 2,500 = shares and create $3,850 of dividends per year. At the end of a 10-year = period, no one can know where the stock price will be.

This wherein lies the problem with the debate on just how much = money will shift from bonds to dividend paying stocks. Bonds and stocks = represent a completely different risk-reward scenario. While today many wish this were = true, common stocks do not pay back principle at a stated time in the future. =

The reallocation debate requires one to disregard an important = risk; Market Risk. The one lesson most investors hopefully learned is = that market risk is not to be ignored. Three consecutive years of declines, a = dubious performance not seen in over 60 years, may provide an enticing argument to invest in dividend paying equities. Besides how much worse can the stock market = get? With interest rates so low, why not take advantage of yield and possible = growth. Popular pundits will discuss how the risk reward scenario should be in = favor of equities. Don’t be fooled.

One item I am confident of. Wall Street investment firms = are very imaginative and resourceful. Should President Bush’s = proposed tax cut on dividends become law, look for these firms to create investment vehicles = to generate badly needed underwriting fees. For the near future, don’t be = seduced to sell your bonds in anticipation of buying dividend paying stocks. = Make sure recommended transactions will benefit you and not your broker’s pocketbook or = wallet.

Ed Gjertsen II

ed@macktracks.com

Confidentiality Notice: This = e-mail message, including any attachments, is for the sole use of the intended recipient(s) and may contain confidential and privileged = information. Any unauthorized review, use, disclosure or distribution is = prohibited. If you are not the intended recipient, please contact the sender by reply = e-mail and destroy all copies of the original message.

-----Original = Message-----
From: owner-canslim@lists.xmission.com = [mailto:owner-canslim@lists.xmission.com] On Behalf Of Ted Kozek
Sent: Thursday, April 10, = 2003 9:40 PM
To: = canslim@lists.xmission.com
Subject: [CANSLIM] Tax = Free Dividends

Would someone like to comment on the effect = tax free dividends will have on corporate, treasury any municipal bond = rates

Here are comments from an article = I=20 authored:

President Bush has stirred up a maelstrom of=20 debate. No, not whether or not the double taxation of dividends is = fair,=20 or which societal class will benefit most, but how much money will be = sucked out=20 of the bond market and reallocated into dividend paying stocks. If = your=20 financial advisor suggests to liquidate your bond portfolio to purchase = dividend=20 paying stocks to take advantage of tax-free income, gather all your = assets and=20 run for the exit.

The difference between a bond and a stock is = much more=20 than an interest rate or dividend yield. Interest is not a = dividend and=20 dividends are not interest. The IRS in their wisdom even = categorizes these=20 payments differently. While they both are reported on Schedule B in tax = returns,=20 bond investors generally receive a 1099-INT for interest payments where = common=20 stock holders receive a 1099-DIV for dividend = payments.

A bond is a loan made by investors to a = corporation, the=20 U.S. Government, or a municipality in which that entity is obligated to = pay=20 interest at a stated rate and pay back principle at a stated time. = Conversely, common stock provides ownership of a corporation. = Dividends=20 are a promise made by a corporate Board of Directors to pay shareholders = a=20 specific amount of money for each share of stock held. =

For example, a 10-year Treasury bond may pay a = current=20 yield of 3.85%. A $100,000 purchase of the 10-year bond will = create $3,850=20 of interest payment every year for 10 years. At the end of the = 10-year=20 period, the investor will receive back $100,000 of principle=20 payment.

A common stock whose price is $40 and pays a = dividend of=20 $1.54 has a dividend yield of 3.85%. The dividend yield is = calculated by=20 dividing the dividend by the stock price. A $100,000 purchase would = involve=20 2,500 shares and create $3,850 of dividends per year. At the end = of a=20 10-year period, no one can know where the stock price will = be.

This wherein lies the problem with the debate = on just=20 how much money will shift from bonds to dividend paying stocks. = Bonds and=20 stocks represent a completely different risk-reward scenario. = While today=20 many wish this were true, common stocks do not pay back principle at a = stated=20 time in the future.

The reallocation debate requires one to = disregard an=20 important risk; Market Risk. The one lesson most investors = hopefully=20 learned is that market risk is not to be ignored. Three = consecutive years=20 of declines, a dubious performance not seen in over 60 years, may = provide an=20 enticing argument to invest in dividend paying equities. Besides how = much worse=20 can the stock market get? With interest rates so low, why not take = advantage of yield and possible growth. Popular pundits will = discuss how=20 the risk reward scenario should be in favor of equities. Don=92t = be=20 fooled.

One item I am confident of. Wall Street = investment=20 firms are very imaginative and resourceful. Should President = Bush=92s=20 proposed tax cut on dividends become law, look for these firms to create = investment vehicles to generate badly needed underwriting fees. For the = near=20 future, don=92t be seduced to sell your bonds in anticipation of buying = dividend=20 paying stocks. Make sure recommended transactions will benefit you = and not=20 your broker=92s pocketbook or wallet.

Ed Gjertsen II

ed@macktracks.com

Confidentiality Notice: This = e-mail=20 message, including any attachments, is for the sole use of the intended=20 recipient(s) and may contain confidential and privileged = information. Any=20 unauthorized review, use, disclosure or distribution is = prohibited. If you=20 are not the intended recipient, please contact the sender by reply = e-mail and=20 destroy all copies of the original = message.

-----Original=20 Message-----
From:=20 owner-canslim@lists.xmission.com = [mailto:owner-canslim@lists.xmission.com]=20 On Behalf Of Ted = Kozek
Sent: Thursday, April 10, 2003 = 9:40=20 PM
To:=20 canslim@lists.xmission.com
Subject: [CANSLIM] Tax Free=20 Dividends

Would someone like to comment = on the effect=20 tax free dividends will have on corporate, treasury any municipal bond=20 rates