Wednesday, May 21, 2014

Renouncing Citizenship, Corporate America-Style!

Monday, May 19, 2014
Money and Markets

Renouncing Citizenship, Corporate America-Style!
by Mike Larson
Almost 3,000 Americans renounced their U.S. citizenship in 2013 — the highest on record. Now, many of Corporate America's biggest names are joining the exodus!
Here's a quick recap of the important news of the day ...
 Utilities ... down? The Nasdaq and financials ... up? Could it be?
 Today, yes. The Dow Jones Utility Index slumped 8 points, or 1.5 percent, while the Nasdaq rose 0.9 percent and the KBW Bank Index climbed 1 percent. That's a noticeable change in trend, though only a nascent one.
 Some of the most active, news-driven names today were AstraZeneca (AZN, Weiss Rating: C) and DirecTV (DTV, Weiss Rating: A-). You'll find more on both below.
 Meanwhile, LifeLock (LOCK, Weiss Rating: B) may be relentlessly protecting your personal information. But it sure isn't protecting shareholder wealth! The stock plunged another 17.6 percent today, bringing its total loss since its February high to 53.2 percent! A key reason: Concern over the security standards of its LifeLock Wallet mobile application.
Pfizer (PFE, Weiss Rating: A) has made no secret about a key motive behind its offer to buy AstraZeneca of the U.K., recently hiked to $117 billion. It wants to adopt AZN's British address as its own, a move designed to save a cool $1 billion or more in taxes per year!
“The pressure is intensifying now that a major icon, Pfizer, has done the formerly unthinkable.”
But it's not just Pfizer. American icon Walgreen Co. (WAG, Weiss Rating: A-) bought 45 percent of Alliance Boots, the British pharmacy and convenience store chain, back in 2012. Now, many of its investors want WAG to buy the rest, pack its bags, and ship its headquarters from the northern Chicago suburb of Deerfield to the U.K. — or even Switzerland, where Boots has a holding company address in Bern.
No, Walgreen isn't considering the move because it wants to line its aisles with fine Swiss chocolate or bottles of HP Sauce. It wants to save money by stiffing Uncle Sam!
The U.S. has a much higher corporate tax rate — 37.5 percent — than the 20 percent rate that Boots faces in the U.K. At least one analyst firm estimates that an overseas relocation — or "tax inversion" in Wall Street jargon — could boost Walgreen's earnings per share by 75 percent.
Is it un-American? Is the political cost worth the financial gain? Those are the questions some of the biggest names in the S&P 500 are wrestling with. But the pressure is intensifying now that a major icon, Pfizer, has done the formerly unthinkable.
Pfizer's move could save it $1 BILLION or more in taxes per year.
Naturally, Washington is up in arms. Democratic Senator Carl Levin of Michigan is leading the charge in Congress to ban the practice, while other members have spoken out against it.
Republicans, including Senator Orrin Hatch of Utah, are generally against targeting inversions only. They prefer comprehensive tax reform that lowers tax rates, while eliminating other tax breaks.
Yet will anything of substance actually get done? It doesn't look like it to me. I mean, legislators have been debating everything from our unsustainable government debt burden to immigration policy for years, but accomplishing nothing on the legislative front. Why should we believe tax inversions will break the D.C. logjam?
So what do you think about all of this? Do you think it's "right" for largely American companies to decamp for foreign shores? Is it going to cost U.S. jobs, like the offshoring of customer service facilities has? Or is it just a case of moving the mailbox? Let me know on the blog!
Speaking of the blog, it's turning out to be a great money-saving tool, folks. I say that because many of you are sharing tips for shaving your monthly food costs, TV costs, and more!
Reader Mike B. said he called his satellite company and threatened to cancel — and they responded by knocking his bill down by $20 a month for 10 months. He also broke his cable "bundle" at his vacation home, which along with adding Roku devices on his televisions, saved $140 per month. His advice: "You can definitely fight them if you're flexible and motivated."
And when it comes to inflation, Reader Barbara H. is downright steamed at the lack of any move in Washington to combat it. She said:
"Our President's solution of the week is rebuilding infrastructure. Uh huh ... . that'll put maybe, what, 20,000 construction workers on the job? Whatever happened to bringing manufacturing back to the U.S.? NEITHER PARTY has the answer these days."
What about you? Do you think D.C. "gets it" when it comes to our cost of living? Sound off here!
 The U.S. accused five members of China's armed forces of espionage. They allegedly hacked into computer networks of companies as diverse as United States Steel Corp. (X, Weiss Rating: C-) and Westinghouse Electric to steal economic secrets.
 The rumored AT&T (T, Weiss Rating: B) -DirecTV (DTV, Weiss Rating: A-) deal became reality over the weekend. The transaction foots to $67.1 billion including debt, cash, and stock.
 Is it just me, or is this whole "Bring back dead artists and let 'em sing and dance!" trend kind of creepy? First, Tupac Shakur. Now, Michael Jackson. Fortunately, I can't sing to save my life so I know my digital image will be safe once I've passed on!
Reminder: If you have any thoughts to share on these market events, all you have to do is hop on over to the blog and leave your comments. Until next time,
Mike Larson
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
The investment strategy and opinions expressed in this article are those of the author's and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.

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