To OTC Journal Members:
 

President George Bush's Tax Cut on Dividends- Crazy Like a Fox

The financial news is filled with opinions on George Bush's proposal to eliminate taxes on corporate dividends. Opponents argue this is a tax cut for the rich, and may give companies an excuse to cut dividends without reducing the rate of return to taxable accounts.

However, no one is talking about the most substantive benefit of this proposal. This proposal, if implemented, will be a major factor in restoring investor confidence in the market, as it will stimulate investor participation in companies that can pay dividends, thereby helping us avoid future potential fraudulent accounting practices.

Had the investment community been more focused on dividend paying companies in the latter half of the 90's, instead of the obsession with top line growth and artificially inflated earnings, there would have been far less investor money lost on Enron, WorldCom, Global Crossing, and Tyco.

Companies cannot afford to write checks for dividends unless the have excess cash, which comes from positive cash flow. Earnings are merely an accounting opinion, affected by many interpretations and variables. These interpretations have become more complex as companies and accounting standards have become more complex.

This new proposal will help investors focus on the basics. A company generates revenues, has gross profits, pays its overhead, and has cash left over to pay a dividend. Regardless of some accounting firm's interpretation of earnings, if there is excess cash from operations, there is fiscal good health.

Had dividends been in vogue on Wall Street there would have been far less money invested in Enron and WorldCom. Stock valuations may have been more reasonable. Arthur Andersen may have been less aggressive with their fraudulent "earnings opinions". Dividends could only have been paid out of cash flow, and cash flow was not subject Arthur Anderson's interpretation, which Enron paid them $50 million annually to render.

In the latter half of the 90's when business was booming for many technology companies, stock buy backs were the preferred use of cash to enhance share price. Technology companies took their excess cash and bought back shares in the open market. The shares were then retired, thereby reducing the number of shares issued and outstanding. This caused earnings per share to go up as there were less shares issued and outstanding.

If dividends are back in vogue, companies will take their excess cash flow and pass it straight through to shareholders, rather than buying back shares in the open market. Companies will do this if investors bid up their shares, and the tax benefits will go a long ways towards making dividend paying stocks more attractive to investors.

A little known bond analyst at a Wall Street boutique firm is credited by many for having been the catalyst which burst the technology bubble in March of 2000. This bond analyst was trying to determine if Amazon.com could afford to pay the coupon on their bonds. Rather than analyzing earnings per share or eyeballs per share, this analyst was simply looking at cash flow. Could Amazon afford to pay the coupon on their bonds? His opinion came out negative, and many believe this sparked the beginning of the end for technology stocks.

George Bush's proposal to eliminate the taxation of dividends will help push investors, both rich and not so rich, in the right direction. After all, you cannot pay a dividend out of phony earnings.

Your thoughts are welcome. Email info@otcjournal.com.
 

StockGroup Information Systems (OTC BB: SWEB) In the News

StockGroup closed at $.25 today, up 31% from our initial entry level this past September. Formally a dot-com with an advertising revenue model, this company has completed the successful transformation to an electronic financial information provider, and in the process is finally becoming cash flow positive. Based on current trends and their many high profile customers, we anticipate StockGroup will be able to announce positive earnings in the 1st quarter of this year which will continue building over successive quarters. Current clients include Citigroup, American Express, NY Life, Dupont, and many others.

This past Monday StockGroup announced it had landed another major client. Stockgroup announced it will provide the clients of Global Securities Information, Inc. with financial information powered by Stockgroup's proprietary Financial Content Management System. Global Securities Information Inc. is an award winning specialty provider of public record business transaction information to law and accounting firms, investment banks, corporations, and the business press.

GSI's customers include every one of the top 100 law firms, over 30 investment banks, each of the "big four" accounting firms, and the financial and legal media.

Look for this stock to try for the next level throughout the remainder of January. Our short term price target remains $.30, which would equate to a $4.5 million market capitalization. Investrend analyst Michael Whitney still maintains a "Speculative Buy" on Stockgroup, with a target of $0.55 to $0.65.
 

Calypte Biomed (OTC BB: CALY) Out With News Before the Open Again- Excess Supply Could Be Running Short

Today, just prior to the open of the markets, Calypte Biomed issued another press release stating the company had received an exemption from FDA required lot testing. This will speed up the time it takes to fill their orders and reduce their costs. Click here to read the entire text of the press release.

Despite trading 31.3 million shares this week alone, the stock has only appreciated about 27% from the opening price on Monday morning. Over our last several editions we have been cautioning investors about excess supplies of this stock from both financing activities and payment of consultants through free trading equity.

The stock could be getting close to a break out. As the company continues to announce positive fundamental developments, investors seem willing to accumulate the excess supply.

This enormous volume could be bringing us close to a breakout in the stock. The company cannot issue any more shares, as it has reached the maximum number it can issue.

Therefore, the stock could be close to finally trading higher. Keep your eyes out for news, and watch for the stock to behave somewhat better in the coming weeks.

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MarketByte LLC has been paid a fee of 250,000 free trading shares of Calypte common stock by First Stage Capital for coverage of Calypte Biomed. On August 12, 2002, MarketByte LLC entered into an agreement directly with Calypte Biomed to continue coverage of the company through October 31, 2002. Calypte Biomed paid $25,000 cash as compensation, and an additional 300,000 shares of free trading stock were paid by a third party on behalf of the company. On November 1, 2002, MarketByte LLC and Calypte Biomed to agreed to renew the agreement to extend through January 31, 2003 in return for a pledge by Calypte Biomed to pay $25,000 in cash, and an additional 300,000 shares of free trading stock were pledged by a third party. Please review our policy on selling shares found in the Mission Statement on our home page. MarketByte LLC has received no compensation in the form or cash or securities for coverage of StockGroup Information Systems. Currently, there is no formal relationship between the two parties. Both parties are contemplating an informal relationship wherein MarketByte may receive benefits in the form of advertising and/or technology services. This should be construed as a potential conflict of interest. 

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