Question of the Week

Should US Olympians have to pay taxes on their medals?

Yes
No

Okay, earnings season is coming to an end –it is clear that results needed a little more oomph.  I am not talking about the bottom line; I am talking about the top line and guidance for the current quarter. The quarter hasn’t done a lot to dissuade naysayers. Stocks are extended, and indeed valuations are higher than historical norms.  The last time the trailing price-to-earnings ratio (PE) was this high was back in 2010.

Price-to-Earnings Ratio

• Forward 17.1
• Trailing 19.5

The numbers tell us and what to look for in the current quarter, and how to determine where the market should be trading.

With 91% of S&P 500 companies reporting, here are the numbers (source Fact Set):

Financial Reporting Trends 2Q16	Revenue	Earnings
Beat	54%	70%

 

Financial Reporting Trends 3Q16	Negative	Positive
Guidance	62%	28%

 

• Earnings -3.5%
• 5 consecutive quarters of year-over-year revenue declines (first time since 3Q08 to 3Q09)

The market has traded at much higher valuation levels, which is something to keep in mind as you contemplate picking a top.

Today’s Session

Stocks have been lackluster all morning long and even continued evidence of a strong housing market is not helping the urge to trade lower at the start of the session.

Home Depot posted sales of $26.5 billion, up 6.6% as overall same store sales climbed 4.7%, and in the United States, it increased 5.4%.  It was the highest quarterly sales and net earnings in the company’s history.

• Transactions +2.3%
• Average Ticket Sales $60.87 +2.4%
• Sales per Square Foot $438.6 +4.3%

Management also increased its full year guidance.

Home Sweet Condo

Housing starts climbed 2.1% to annualize pace of 1,211,000 beating out consensus of 1,180,000.   It’s all about condos, as multifamily continues to march back from that swoon earlier in the year that landed the March permit number at 318,000.

• Single 770,000 from 766,000
• Multifamily 433,000 from 400,000

Permits came in at annual rate of 1,152,000 missing the 1,160,000 consensus, but multifamily soared.

• Single 738,000 from 711,000
• Multifamily 411,000 from 386,000

Comments

The winning athletes will be heavily taxed on all of their endorsement deals. There should be no tax on winning an award in an amateur sporting event. If anyone says yes to this, I hope they are not USA citizens and don't vote in the USA. Daria Schooler (DoctorObvious) on 8/16/2016 10:01:56 AM

They have ALREADY "PAID IT FORWARD" through years of hard work and expenses for training, travel, and personal effort and time away from family / friends . . . John McCauley Plewes II on 8/16/2016 10:18:17 AM

I am sure Olympic athletes receive significant support from the US Government as well as private donors. Gold medals are like anything else one 'earns' and taxes should be paid on the medals. I have changed my stance on this issue over time. By the way, I am ultra conservative! Rob on 8/16/2016 10:26:13 AM

Since most gold medal winners will be in the "top 1%", they should pay taxes on the medal at the highest rate. Remember its all about taxing the rich right? leonard weiss on 8/16/2016 10:29:19 AM

I consider your earnings commentary incomplete. At least 85% of these reports are "Adj" earnings and/or Non-GAAP. Lets remember what GAAP represents..probably 80% of these Non-GAAP numbers are for optics and supporting stock prices...fantasy math...VERY misleading!! RLB on 8/16/2016 10:36:29 AM

I believe valuations would signal a market top if anything were normal... such as a normal recovery, normal monetary policy and interest rates, etc. This recovery has been so weak that although we are nowhere near our potwentioal, we could continue muddling forward for some time unless and until someone gets the bright idea to fix fiscal and regulatory policy to actually stimulate growth. Otherwise average is spectacular and all the participants get medals! Ray Weldon on 8/16/2016 10:41:54 AM

They train for an event that happens every four years, then, depending on the event, they perform for maybe a few seconds or minutes, then, in case they're at the top of their game at that moment, they win gold, their country takes a share out in taxes. I think their country should give them a bonus. Patricia Flynn on 8/16/2016 11:20:01 AM

These days there is only 1/3 ounce of gold in a gold metal. I say don't tax them on that, but if they sell it, tax them. robot40 on 8/16/2016 11:26:42 AM

tAXES SHOULD BE PAID ONLY IF THEY CAN DEDUCT THE EXPENSES ASSOCIATED WITH THEIR OLYMPIC PARTIOCIPATIO. Harold Sader on 8/16/2016 11:48:42 AM

Most of the top performers are all pro athletes and all of their costs of training and what not are tax deductible. Also if they earn medals at the the games they get a bonus, $25,000 for a gold medal. So don't think they are losing out. I know, the lesser event athletes don't make money outside of winning medals but do it for the pleasure of participating in the games. That's just the way it is, not much in the way of crowds wanting to see archery or kayak racing except those who are involved in the sport. Fred on 8/16/2016 11:59:25 AM

Take the taxes for their Medals out of the Clinton Foundation Global Initiative. At least there would be something good these bandits would have done for some great young people. Harold Wells on 8/16/2016 12:55:24 PM

Four years ago this tax item was put forth and behold its still a problem our good prez again have a meeting to solve it JIm on 8/16/2016 3:21:13 PM

Charles, do you mean to tell me that you have 13% of your clients that think an athlete that receives a medal, not cash, should pay taxes on the medal. How did hey ever find heir way o your investment service? Bet they also agree with HRC that all taxes should be raised. Shame on them!!!! Gene on 8/16/2016 4:02:23 PM

Hey Charles, do you mean to tell me that 13% of you subscribers believe that and athlete who wins a medal, not cash, in the Olympics should pay taxes on the medal. How did they ever decide to seek your investment advice. I'll bet they also think that HRC's plan to raise their taxes is also a good idea. Shameful!!!!! Gene Ulrich on 8/16/2016 4:12:20 PM

Seeing that American winners in sports competitions around the world each year has to pay taxes on their winnings (some of which Olympians), I see no reason why they should not pay now..If they are not to pay, then they should not pay taxes on their other winnings as they are too representing USA. Patrick Johnson on 8/22/2016 12:45:49 PM

It is ridiculous to think that they would pay taxes on the medals when they get them. On the other hand, if they choose to sell them, an income tax is reasonable at that time. Bob G on 8/24/2016 11:15:47 AM

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