A couple more notes on Thompson Creek:
1. They have to build the infrastructure at Mt Milligan and another site, which will cost $350M in 2011, likely will run cash to a bit less than $0 in 2011-2012, (currently net positive cash balance after the acquisition of Mt Milligan is about $300M). As long as copper and gold prices stay where they are, this is ok -- I would say copper prices are more vulnerable than gold prices out to 2013.
The expected of revenue from Mt Milligan from copper is $243M per annum at $3,50 lb copper (81M lbs) and from gold is $230M at $1200 gold (relatively even split copper gold). So the expected revenue from Mt Milligan will be about the same as current total sales (2010 sales of $594.8M).
2. Along with note 1, TC just bought Mt Milligan in Oct 2010 for $700M. They financed this with a stock issuance and also a gold forward sales agreement with a company called Rand Gold (I looked at this, and it looks ok). But now as mentioned in point 1, they have to build the mine infrastructure.
3. Molybdenum production will decline at their main Moly mine, Thompson Creek in Idaho in 2012, overall Moly production is expected to be down to 26-28 M lbs in 2012 from 31-33M lbs in 2011. They have to also spend $181M to expand their other Moly mine, Endako, in 2011. Further, cash costs are going up to the $9 range per lb for the thompson creek mine from $7 range in 2011. Endako is not as high quality an asset (grade of 0.,04% Moly verses 0.08% at Thompson Creek). It appears Moly production at Thompson will stablize after 2012, but I am not sure -- mine life currently is 11-14 years at Thompson Creek. Mine life at Endako is also 15 years.
4. Moly prices may come under pressure in 2014, when the largest Moly project in the Western Hemisphere, owned by Moly Corp (ticker: GMO) comes online This project will approximately double US production of Moly, producing 50M lbs per annum of Moly current US production is 56M lbs according to the USGS: http://minerals.usgs.gov/minerals/pubs/commodity/molybdenum/mcs-2011-molyb.pdf World production of Moly is 234M lbs so General Moly will add about 12.8% to world supply. General Moly has Chinese financing for its project so it is most likely going through.
5. Lastly, TC has 22M warrants outstanding with an exercise price of $9, which is actually a lot. These expire on Oct 11, 2011, so the stock could be under pressure from these -- my understanding is that TC will have to pay out cash for the exercise of these warrants. At a stock price of $12.50, this is $3.50*22M or $77M, which is actually going to drain the cash balance of TC further.
So in summary, TC is interesting however will likely be under pressure through 2011 until visibility on the Mt Milligan project is more clear, which will be sometime in 2013. Further, currently copper and some other industrial metals are weakening in anticipation of perhaps less stimulus from the major economies and therefore lower economic growth. So TC (I think) won't see a breakout until 2012 (but can watch the co, see if it gets close to $10 where the warrant exercise won't be such an issue).
Showing posts with label Online Stock Trading. Show all posts
Showing posts with label Online Stock Trading. Show all posts
Friday, 28 October 2011
High Reserves but Some Operating Problems
I did some more research on Polyus and they had some mixed operating performance in 2010 -- their biggest mine, currently Olimpiada showed a decrease in production of almost 30%, from 839,000 ounces in 2008 to 584,000 ounces in 2009 -- apparently the problem is that two other mines are close by, and Polyus is allowing ore from the other two mines to be processed at the processing center at Olimpiada, which caused problems with the exaction of ore. The solution appears to build a separate processing center (which can crush the ore, and exact the gold by a bath of high-grade acids and chemical solutions) but it doesn´t appear that the firm has this in the works.
Another concern was that the production was up 10% y/y to 1.39M ou (approx) but the profit didn´t increase, mainly due to higher costs -- I´m not sure I did note that the mines are spread around the country in mainly three locations, which are extremely far away from each other (well over 1000 miles), so the co isn´t getting any syngeries from the operations.
Polyus is having serious problems with its acquisition of KazahkGold, and is going to divest this -- about 2 years after acquiring it -- the owners of Polyus and the ruling family (Nazerbyev) of Kazakhstan really got into an argument. On the negative side, KazahkGold was the one asset so far that is significantly increasing production
Current forecast is for 1.5M ou, which one analyst takes to mean that the problems at Olimpiada will continue. The capital expenditures appear to be (according to UBS) well under maintance levels -- strangley, the CEO (who is also the owner to the New York Nets) wants to sell the firm, not develop it.
The basic idea is to find Gold miners which are the most undervalued on reserves. Below is a useful chart by UBS that shows potential undervaluation by reserves, since Gold is not really concentrated in one geographical area, there are many firms and it does appear that Polyus is undervalued, although perhaps not by a whole lot (in the chart below, Anglo Gold, Harmony and Gold Fields appear to be the cheapest on an EV/Reserves and Resources). I´ll look into these -- (although I´m not sure how these miners stack up against individual gold mines, I did like the fact that Polyus had one very large mine in the works -- will research).
Another concern was that the production was up 10% y/y to 1.39M ou (approx) but the profit didn´t increase, mainly due to higher costs -- I´m not sure I did note that the mines are spread around the country in mainly three locations, which are extremely far away from each other (well over 1000 miles), so the co isn´t getting any syngeries from the operations.
Polyus is having serious problems with its acquisition of KazahkGold, and is going to divest this -- about 2 years after acquiring it -- the owners of Polyus and the ruling family (Nazerbyev) of Kazakhstan really got into an argument. On the negative side, KazahkGold was the one asset so far that is significantly increasing production
Current forecast is for 1.5M ou, which one analyst takes to mean that the problems at Olimpiada will continue. The capital expenditures appear to be (according to UBS) well under maintance levels -- strangley, the CEO (who is also the owner to the New York Nets) wants to sell the firm, not develop it.
The basic idea is to find Gold miners which are the most undervalued on reserves. Below is a useful chart by UBS that shows potential undervaluation by reserves, since Gold is not really concentrated in one geographical area, there are many firms and it does appear that Polyus is undervalued, although perhaps not by a whole lot (in the chart below, Anglo Gold, Harmony and Gold Fields appear to be the cheapest on an EV/Reserves and Resources). I´ll look into these -- (although I´m not sure how these miners stack up against individual gold mines, I did like the fact that Polyus had one very large mine in the works -- will research).
Is the Andewa Deposit Legit?
Frontier Resources (FNT.AX) has move from sub-..10 to mid .30's in a week -- the main reason is the announcement of exploratory drilling information at the Andewa prospect on the island of New Britain in Papua New Guinea.
Frontier has 7 deposits in Papua New Guinea - the main source of value is Andewa in the Island of New Britain- the firm is implying that there is gold deposits between 14 to 66 g/ton in this region which stretches for about 7 km, at a good seam -- in comparison Barrick Gold, the world's largest gold producer averages about 2 g/ton, so this would be 7-33x more concentrated.
Actually Frontier also has 2 projects in Tasmania, but again the best potential is the Andewa project in PNG. (actually the Bulago deposit is also promising, see below)
I sort of don't believe the numbers. I was searching through the world's richest gold mines and all have gold per ton numbers below 3 g/ton see:http://www.minefund.com/mineral-deposits/richest-deposits.php
This would be by far the most rich gold find in the database --well so far I've searched Barrick's deposits (in their annual report, and the Polyrus Gold (Russia) deposit which is #2 on the list and this averages 1.5 g./ton.
The newest release has some geological data but not nearly enough to establish reserve numbers - so far this is all in the beginning stages.
The firm is really small, having to raise capital even for exploratory drilling. (they had to raise $A1.1M to survey the region -- Frontier will certainly have to raise capital to develop the project. Actually the deposit looks like it is close to the coast, so could be served by water transport, see a map of the projects in the 2010 Annual Report, p. 3: http://www.frontierresources.com.au/
Previously in 3/10 Frontier announced another 67 g/ton deposit, this time on the main island of PNG, in the Bulago deposit, but this didn't generate much excitement -- I don't know why all of a sudden the latest report has really made the stock go off, but the previous ones did not. (more word of mouth, or a better geological survey, actually I don't know).
Anyway I'll be researching more and will try to find out if the find in legit.
Frontier has 7 deposits in Papua New Guinea - the main source of value is Andewa in the Island of New Britain- the firm is implying that there is gold deposits between 14 to 66 g/ton in this region which stretches for about 7 km, at a good seam -- in comparison Barrick Gold, the world's largest gold producer averages about 2 g/ton, so this would be 7-33x more concentrated.
Actually Frontier also has 2 projects in Tasmania, but again the best potential is the Andewa project in PNG. (actually the Bulago deposit is also promising, see below)
I sort of don't believe the numbers. I was searching through the world's richest gold mines and all have gold per ton numbers below 3 g/ton see:http://www.minefund.com/mineral-deposits/richest-deposits.php
This would be by far the most rich gold find in the database --well so far I've searched Barrick's deposits (in their annual report, and the Polyrus Gold (Russia) deposit which is #2 on the list and this averages 1.5 g./ton.
The newest release has some geological data but not nearly enough to establish reserve numbers - so far this is all in the beginning stages.
The firm is really small, having to raise capital even for exploratory drilling. (they had to raise $A1.1M to survey the region -- Frontier will certainly have to raise capital to develop the project. Actually the deposit looks like it is close to the coast, so could be served by water transport, see a map of the projects in the 2010 Annual Report, p. 3: http://www.frontierresources.com.au/
Previously in 3/10 Frontier announced another 67 g/ton deposit, this time on the main island of PNG, in the Bulago deposit, but this didn't generate much excitement -- I don't know why all of a sudden the latest report has really made the stock go off, but the previous ones did not. (more word of mouth, or a better geological survey, actually I don't know).
Anyway I'll be researching more and will try to find out if the find in legit.
Wednesday, 19 October 2011
Valuing Corning in an Extended Period of Lower Revenue Growth
Corning (NYSE: GLW), founded in 1851, has historically been at the forefront of glass production technology. Corning invented the glass process to produce light bulbs in the late 19th century, fiber optic cable in the 1970's, and liquid crystal displays (LCD's) in the 1990's to early 2000's.
Glass, which is produced from silicon (which in turn is made from sand) will likely be utilized in society far into the future, in so far that glass has certain suprior optic characteristics vis-a-vis plastics, a chief competitor material. Further, plastics are produced from more expensive hydrocarbons.
Corning, along with many downtrodden stocks in the current environment, is currently selling at a multi-year lows, at approximately $13, down from $22 in July and only moderately above the depths of the near $8 valuation at the bottom of the financial crisis. Corning's valuation represents 1x book value and approximately 6x historical earnings, with a net cash position of over $4.1Bn on Corning's balance sheet.
The question most relevant for investors is: at this current valuation is Corning significantly undervalued?
The answer to this question mainly lies with the direction of the High Definition television market. Corning's current profitability is highly dependent on its patented Fusion Process for liquid crystal display (LCD), which are used for high definition televisions and displays for computers and hand held devices. Corning, along with its 50% owned equity company Samsung Corning, has an estimated 83% market share in the manufacture of LCDs.
In the last quarter ended 6/30/11, Corning's LCD segment, along with equity earnings from Samsung Corning, comprised 90+% of operating income.
Corning's Profitability is Likely Significantly Higher in LCD's Produced for HD Televisions Verses for Computers and Hand Held Devices:
Corning in its 2010 Investor's Day estimated that approximately 60% of the volume (square feet) of this LCD glass was produced for HD televisions, and 40% by sq footage was produced for computers and hand held devices. Corning does not split out the relative profitability for computer and hand held display glass, however it is likely that Corning derives a higher percentage of its display earnings from HD Television glass, in so far that this glass is significantly thicker and represents a higher valued added product, in which screen resolution is significant competitive differentiator.
The Fusion Process Invention for LCD Marked an Incredible Turnaround for Corning in 2004:
Corning in the 1990's derived the majority of its income from the production of Fiber Optic fiber, where GLW had a market leading market share. In 1998, Corning derived 65% of its operating income from its telecommunications division, which mainly sold fiber optics. Interestingly, in 1998, Corning derived only 11.5% of its operating income from its information display segment, which at that time produced glass mainly for cathode ray tube televisions and computer monitors (this segment would by 2005 comprise the vast majority of Corning's profits through LCD technology).
Optic fiber sales collapsed in 2000 following the popping of the Internet bubble. Corning reported losses of $5.2Bn, $1.2Bn and a slight gain of approximately $200M in 2002, 2001 and 2000 respectively. In retrospect, it could be said that fiber optics worked TOO well, in so far that, according the publication The City of Light: The History of Fiber Optics by a medium sized, single fiber optic cable had enough capacity to carry ALL the phone calls in the United States simultaneously. One could say, Fiber Optics would be built once, then would not need to be rebuilt for 10 years or more -- a difficult market to build a sustainable business.
Are there Parallels Between Fiber Optics and LCD Technology in terms of the technology "working too well?" LCD's interestingly do not wear out at any sort of moderate pace -- most technological publications estimate that LCD screens will last decades -- 30,000 to 60,000 hours for the LCD screen to lose 50% of its display brightness, which, at a rate of 8 hours of use a day means a minimum of 10.6 years before the LCD needs to be replaced.
One could envision a scenario in which consumers buy one LCD television and do not replace this television for 15 or more years. Corning, in its 2010 annual investor meeting, estimated that 50% consumers would replaced their HD televisions every 6 years on average, but this data is speculative in so far that HD televisions have been introduced only since 2006 and therefore not many consumers have replaced their televisions for functional deterioration or any other reason.
HD televisions were introduced in 2006, and experienced rapid growth as consumers replaced their traditional cathode ray tube (CRT) sets with LCD and plasma televisions. In North America, Europe and Australia and New Zealand, initially the sales of HD televisions was likely buoyed by a strong housing market -- as one buys a new house, part of the improvements process likely involved buying a HD television for the living room (which could be viewed as an "investment" along with new floors, landscaping, furniture etc). All in all, HD televisions increased at an annual rate of over 30% from 2006 to 2008, driving HD televisions to a respectable 44% of all televisions in the United States (or slightly more than 1 HD television set per household in the US) by 2010. HD televisions represent 37% of all televisions in the EU-27 and 45% of all televisions in Japan. Even China reports HD television market share of total television units of 21% across all approximately 400 million households, even as according to the China's People Daily, the Chinese middle class (defined as households with income of at least 60,000 rmb or approximately $10,000 per annum) comprises 23% of the total population -- in other words nearly all of China's middle class as of the end of 2010 already owns an HD television set.
Will HD Televisions Units Sales Grow Significantly Going Forward?
At first glace, this question would be ridiculed by Corning and industry consultancies, which would reply of course! Corning has estimated that the total sq footage of HD televisions will increase at an annual rate of 21% in China and other emerging markets, with a total increase in HD television sales to 2014 across all areas of 12% (with only 4% growth in North America and Europe on an annual basis).
It is argued here that 1) HD television penetration in China likely will only grow at the rate of the overall Chinese middle class growth and 2) economic weakness in the US and Europe will mean flat to declining HD television unit sales in the near term.
The Chinese publication estimated at in July 2010 that the middle class would reach 48% of the total population from the current 23% by 2020, or a near doubling in 10 years. However, this implies that HD television sales will increase at only an approximate 7.2% per year -- and this under more optimistic economic growth forecasts for China of last year (in which growth rates of 8-10% were considered attainable for the next 10 years, currently China is more likely to achieve lower economic growth).
HD televisions do not appear to be any cheaper within China than in the US or Europe, with starting costs at around $US300 -- a newly minted middle class member of China with approximately $10,000 of annual income can afford this purchase but those with lower incomes likely will keep their old CRT televisions (currently China already has on average 1.1 televisions per household).
In the 4th quarter of 2008 and the first quarter of 2009, Corning's display segment reported significantly lower sales, total year on year sales declines of 50-58%, as North American and European consumers cut back on discretionary purchases. As Goldman Sachs has recently updated the forecast for a recession in the US to a 40% probability in 2012, and likely the odds of a recession in Europe are significantly higher (given the banking crises there) unit sales growth of HD televisions appears to be on a declining trend in the US and Europe for 2012 and the intermediate term.
Overall, Corning's 2010 investor day forecasts of 12% industry growth in HD television sales growth should be averaged to a rate that is significantly slower, and potentially (probably) slightly negative (mid single digit sales growth in China, declining sales growth in North America and Europe). The question is, can Corning remain profitable in these conditions?
Estimating Cornings' Display Segment Profitability with Mid-Single Digit HD Television Sales Declines:
In the 1st quarter of 2009, Corning's display segment actually reported a small profit (excluding Samsung Corning) of $38M despite 57% lower sales year on year -- however $37 of this profit was due to favorable exchange rates. Some of this moderate result was due to Corning idling LCD plants. Impressively, Samsung Corning only reported 13% lower year on year profit declines to $180M in the 1Q 09 -- mainly (appears, as Samsung Corning does not publish separate financial figures) due to continued growth in HD sales in China during 2008 and 2009 as the Chinese middle class bought new HD televisions.
With lower than expected growth over the near to intermediate term, it can be inferred (very roughly, based on Corning's historical ability to idle plant capacity) that Corning will eek out approximately low profits, in the $100M range per quarter. It does not appear that Samsung Corning will get the same boost from Chinese demand going forward into 2012 as it did in 2008 and 2009, but on the flip side, other region's declines of 50-58% in revenues is quite severe and not likely to be repeated. Total yearly profits therefore appear around $400M to $800M in the LCD division for intermediate term.
What Annual Earnings in a Slow Growth Environment would Corning's Other Division's Yield?
Corning's fiber optics group has reported relatively break even profits (with growth mainly dependent on infrastructure spending in China) and three interesting, but smaller groups -- specialty materials which includes Corning's Gorilla Glass and Biologic Glass, which includes high-tech glass for biotech laboratories (cells, test tubes, etc -- glass is non-reactive so has an advantage in these applications verses plastic). Corning's environmental technol0gies group produces glass for catalytic converters, and reported profits of $42 in 2010. Earnings were $60M for life sciences in 2010, and Gorilla Glass reported impressive sales growth but no profits in 2010. All in all, in appears Corning's other divisions can be counted on for around $100M in annual earnings in a slow economic growth environment in 2012.
Dow Corning Earnings:
Corning owns 50% of Dow Corning, which is a major producer of silicon and silicon based materials. Dow Corning is a large company in a period of world economic growth, with earnings approaching $800M for 2010. In a recessionary environment, Dow Corning broke even in 2008. With recessions more likely than not in 2012, Dow Corning appears to be set for low profits in 2012, barring significant governmental action.
Likely Earnings for Corning in a low Growth Environment:
Corning appears to be set for $600M in annual earnings without significant new product introductions ($400M approximately in their Display Segment and $100M per year in their other segments combined, and $100M for the 50% stake in Owens Corning). With a 14x multiple, $600M would command a market cap of $8400M (plus $4.1Bn of net cash) would be valued at $12.5Bn -- current entreprise value is $15.71Bn.
Corning would likely significantly disagree with this analysis, but such an analysis assumes significantly lower HD television sales growth and significantly lower replacement rates for HD televisions, based on a more challenged global economic enviornment. To the extent that Corning is accurate in forecasting close to double digit HD television sales growth going forward, Corning's long term value would be significantly higher
Glass, which is produced from silicon (which in turn is made from sand) will likely be utilized in society far into the future, in so far that glass has certain suprior optic characteristics vis-a-vis plastics, a chief competitor material. Further, plastics are produced from more expensive hydrocarbons.
Corning, along with many downtrodden stocks in the current environment, is currently selling at a multi-year lows, at approximately $13, down from $22 in July and only moderately above the depths of the near $8 valuation at the bottom of the financial crisis. Corning's valuation represents 1x book value and approximately 6x historical earnings, with a net cash position of over $4.1Bn on Corning's balance sheet.
The question most relevant for investors is: at this current valuation is Corning significantly undervalued?
The answer to this question mainly lies with the direction of the High Definition television market. Corning's current profitability is highly dependent on its patented Fusion Process for liquid crystal display (LCD), which are used for high definition televisions and displays for computers and hand held devices. Corning, along with its 50% owned equity company Samsung Corning, has an estimated 83% market share in the manufacture of LCDs.
In the last quarter ended 6/30/11, Corning's LCD segment, along with equity earnings from Samsung Corning, comprised 90+% of operating income.
Corning's Profitability is Likely Significantly Higher in LCD's Produced for HD Televisions Verses for Computers and Hand Held Devices:
Corning in its 2010 Investor's Day estimated that approximately 60% of the volume (square feet) of this LCD glass was produced for HD televisions, and 40% by sq footage was produced for computers and hand held devices. Corning does not split out the relative profitability for computer and hand held display glass, however it is likely that Corning derives a higher percentage of its display earnings from HD Television glass, in so far that this glass is significantly thicker and represents a higher valued added product, in which screen resolution is significant competitive differentiator.
The Fusion Process Invention for LCD Marked an Incredible Turnaround for Corning in 2004:
Corning in the 1990's derived the majority of its income from the production of Fiber Optic fiber, where GLW had a market leading market share. In 1998, Corning derived 65% of its operating income from its telecommunications division, which mainly sold fiber optics. Interestingly, in 1998, Corning derived only 11.5% of its operating income from its information display segment, which at that time produced glass mainly for cathode ray tube televisions and computer monitors (this segment would by 2005 comprise the vast majority of Corning's profits through LCD technology).
Optic fiber sales collapsed in 2000 following the popping of the Internet bubble. Corning reported losses of $5.2Bn, $1.2Bn and a slight gain of approximately $200M in 2002, 2001 and 2000 respectively. In retrospect, it could be said that fiber optics worked TOO well, in so far that, according the publication The City of Light: The History of Fiber Optics by a medium sized, single fiber optic cable had enough capacity to carry ALL the phone calls in the United States simultaneously. One could say, Fiber Optics would be built once, then would not need to be rebuilt for 10 years or more -- a difficult market to build a sustainable business.
Are there Parallels Between Fiber Optics and LCD Technology in terms of the technology "working too well?" LCD's interestingly do not wear out at any sort of moderate pace -- most technological publications estimate that LCD screens will last decades -- 30,000 to 60,000 hours for the LCD screen to lose 50% of its display brightness, which, at a rate of 8 hours of use a day means a minimum of 10.6 years before the LCD needs to be replaced.
One could envision a scenario in which consumers buy one LCD television and do not replace this television for 15 or more years. Corning, in its 2010 annual investor meeting, estimated that 50% consumers would replaced their HD televisions every 6 years on average, but this data is speculative in so far that HD televisions have been introduced only since 2006 and therefore not many consumers have replaced their televisions for functional deterioration or any other reason.
HD televisions were introduced in 2006, and experienced rapid growth as consumers replaced their traditional cathode ray tube (CRT) sets with LCD and plasma televisions. In North America, Europe and Australia and New Zealand, initially the sales of HD televisions was likely buoyed by a strong housing market -- as one buys a new house, part of the improvements process likely involved buying a HD television for the living room (which could be viewed as an "investment" along with new floors, landscaping, furniture etc). All in all, HD televisions increased at an annual rate of over 30% from 2006 to 2008, driving HD televisions to a respectable 44% of all televisions in the United States (or slightly more than 1 HD television set per household in the US) by 2010. HD televisions represent 37% of all televisions in the EU-27 and 45% of all televisions in Japan. Even China reports HD television market share of total television units of 21% across all approximately 400 million households, even as according to the China's People Daily, the Chinese middle class (defined as households with income of at least 60,000 rmb or approximately $10,000 per annum) comprises 23% of the total population -- in other words nearly all of China's middle class as of the end of 2010 already owns an HD television set.
Will HD Televisions Units Sales Grow Significantly Going Forward?
At first glace, this question would be ridiculed by Corning and industry consultancies, which would reply of course! Corning has estimated that the total sq footage of HD televisions will increase at an annual rate of 21% in China and other emerging markets, with a total increase in HD television sales to 2014 across all areas of 12% (with only 4% growth in North America and Europe on an annual basis).
It is argued here that 1) HD television penetration in China likely will only grow at the rate of the overall Chinese middle class growth and 2) economic weakness in the US and Europe will mean flat to declining HD television unit sales in the near term.
The Chinese publication estimated at in July 2010 that the middle class would reach 48% of the total population from the current 23% by 2020, or a near doubling in 10 years. However, this implies that HD television sales will increase at only an approximate 7.2% per year -- and this under more optimistic economic growth forecasts for China of last year (in which growth rates of 8-10% were considered attainable for the next 10 years, currently China is more likely to achieve lower economic growth).
HD televisions do not appear to be any cheaper within China than in the US or Europe, with starting costs at around $US300 -- a newly minted middle class member of China with approximately $10,000 of annual income can afford this purchase but those with lower incomes likely will keep their old CRT televisions (currently China already has on average 1.1 televisions per household).
In the 4th quarter of 2008 and the first quarter of 2009, Corning's display segment reported significantly lower sales, total year on year sales declines of 50-58%, as North American and European consumers cut back on discretionary purchases. As Goldman Sachs has recently updated the forecast for a recession in the US to a 40% probability in 2012, and likely the odds of a recession in Europe are significantly higher (given the banking crises there) unit sales growth of HD televisions appears to be on a declining trend in the US and Europe for 2012 and the intermediate term.
Overall, Corning's 2010 investor day forecasts of 12% industry growth in HD television sales growth should be averaged to a rate that is significantly slower, and potentially (probably) slightly negative (mid single digit sales growth in China, declining sales growth in North America and Europe). The question is, can Corning remain profitable in these conditions?
Estimating Cornings' Display Segment Profitability with Mid-Single Digit HD Television Sales Declines:
In the 1st quarter of 2009, Corning's display segment actually reported a small profit (excluding Samsung Corning) of $38M despite 57% lower sales year on year -- however $37 of this profit was due to favorable exchange rates. Some of this moderate result was due to Corning idling LCD plants. Impressively, Samsung Corning only reported 13% lower year on year profit declines to $180M in the 1Q 09 -- mainly (appears, as Samsung Corning does not publish separate financial figures) due to continued growth in HD sales in China during 2008 and 2009 as the Chinese middle class bought new HD televisions.
With lower than expected growth over the near to intermediate term, it can be inferred (very roughly, based on Corning's historical ability to idle plant capacity) that Corning will eek out approximately low profits, in the $100M range per quarter. It does not appear that Samsung Corning will get the same boost from Chinese demand going forward into 2012 as it did in 2008 and 2009, but on the flip side, other region's declines of 50-58% in revenues is quite severe and not likely to be repeated. Total yearly profits therefore appear around $400M to $800M in the LCD division for intermediate term.
What Annual Earnings in a Slow Growth Environment would Corning's Other Division's Yield?
Corning's fiber optics group has reported relatively break even profits (with growth mainly dependent on infrastructure spending in China) and three interesting, but smaller groups -- specialty materials which includes Corning's Gorilla Glass and Biologic Glass, which includes high-tech glass for biotech laboratories (cells, test tubes, etc -- glass is non-reactive so has an advantage in these applications verses plastic). Corning's environmental technol0gies group produces glass for catalytic converters, and reported profits of $42 in 2010. Earnings were $60M for life sciences in 2010, and Gorilla Glass reported impressive sales growth but no profits in 2010. All in all, in appears Corning's other divisions can be counted on for around $100M in annual earnings in a slow economic growth environment in 2012.
Dow Corning Earnings:
Corning owns 50% of Dow Corning, which is a major producer of silicon and silicon based materials. Dow Corning is a large company in a period of world economic growth, with earnings approaching $800M for 2010. In a recessionary environment, Dow Corning broke even in 2008. With recessions more likely than not in 2012, Dow Corning appears to be set for low profits in 2012, barring significant governmental action.
Likely Earnings for Corning in a low Growth Environment:
Corning appears to be set for $600M in annual earnings without significant new product introductions ($400M approximately in their Display Segment and $100M per year in their other segments combined, and $100M for the 50% stake in Owens Corning). With a 14x multiple, $600M would command a market cap of $8400M (plus $4.1Bn of net cash) would be valued at $12.5Bn -- current entreprise value is $15.71Bn.
Corning would likely significantly disagree with this analysis, but such an analysis assumes significantly lower HD television sales growth and significantly lower replacement rates for HD televisions, based on a more challenged global economic enviornment. To the extent that Corning is accurate in forecasting close to double digit HD television sales growth going forward, Corning's long term value would be significantly higher
Monday, 10 October 2011
Differences Between Roth IRA & Traditional IRA
Interestingly, there are 11 different types of IRAs ranging from Individual Retirement Accounts, Employer and Employee Association Trust Account, Spousal IRAs, Rollover Conduit IRA, etc. The most common are the traditional IRAs and the Roth IRA. In this article, we will explain the differences & similarities between the two.
Traditional IRA
In Traditional IRA, the contributions you make towards the account are not taxed. Whatever capital gains & earnings you make on your IRA are also not taxed up until retirement, when you withdraw money from your account. For example, imagine you made $50,000 this year and contributed $5000 to a traditional IRA. You will be taxed on $50,000 – $5000 = $45,000. Furthermore, your $5000 contribution will grow tax-deferred for many years, until you retire and decide to withdraw it. The setback with this is that your $5000 (which would have probably grown to $50,000 upon retirement) will then be taxed at your ordinary income tax rate.
Note: You can only withdraw this money after you turn 59 and 1/2 years or older. Any withdrawals made before this age will be subject to income taxes as well as a 10% early withdrawal penalty. However if you use the withdrawn funds to finance higher education expenses or for the below list of 8 exceptions, you will not have to pay the 10% early withdrawal penalty.
8 Exceptions that Eliminate the 10% Early Withdrawal Penalty
There are 8 exceptions to the 10% early withdrawal penalty (i.e. withdrawals that are taken before the age of 59 and 1/2). They are for distributions that:
i) Are taken because of the IRA owner’s disability
ii) Are taken because of the IRA owner’s death
iii) Are a series of loan repayments made over the life expectancy of the IRA investor
iv) Are used to pay for unreimbursed medical expenses that exceed 7.5% of the adjusted gross income of the IRA owner
v) Are used to pay for medical insurance premiums if the IRA investor has been unemployed for more than 12 weeks
vi) Are used to pay for the purchase of a principal residence (maximum of $10,000 can be withdrawn). Also, the IRA investor must not have previously owned a home within the last 24 months.
vii) Are used to pay for higher education expenses of the IRA owner or eligible dependants/family
viii) Are used to pay back taxes of an IRS levy placed against the IRA
Traditional IRAs are commonly associated with the old way of investing: certificates of deposits. This stereotype is because most banks sell CDs and they are the ones that offer Traditional IRA accounts for investors. But remember, you are not limited to investing Certificates of Deposit or bonds only, you can make higher risk investments such as cyclical stocks, commodities, futures, ETFs, etc.
Traditional IRAs are commonly associated with the old way of investing: certificates of deposits. This stereotype is because most banks sell CDs and they are the ones that offer Traditional IRA accounts for investors. But remember, you are not limited to investing Certificates of Deposit or bonds only, you can make higher risk investments such as cyclical stocks, commodities, futures, ETFs, etc.
The Roth IRA
Pioneered by the late Senator William V. Roth, Jr., the Roth IRA came into existence on January 1, 1998 thanks to the Taxpayer Relief Act of 2007. The Roth IRA is unique from all the other retirement accounts because all the earnings you accumulate on your savings will grow tax-free when you withdraw them upon retirement. The only catch to this is that when you make the initial Roth IRA contributions, you will receive no deductions on your income tax return. Other benefits of the Roth IRA include the elimination of the minimum required distributions rule when you turn 70 and 1/2 years old (more on this below).
By making after-tax contributions to your Roth IRA, you will not owe a single dime of tax to Uncle Sam when you retire and withdraw your money. This adds the advantage of being able to grow your earnings tax-free not for the government, but for yourself! Which retirement plan is therefore the right choice for you? Well it depends on your personal situation. If you expect to be in a higher tax bracket when you retire, it is better off to pay the taxes right now and grow your savings tax-free in a Roth IRA. Because a Roth IRA holds after-tax dollars, you can maximize your contributions by adding greater tax leverage to your retirement savings.
After-Tax Contributions
Consider Jackson who earns a $65,000 annual salary. Jackson is currently in the 25% tax bracket and contributes $3500 a month to his Roth IRA. Jackson would therefore pay income taxes of $3500 x 25% = $875 and would contribute $3500 – $875 = $2625 to his Roth IRA. If Jackson expects to be in a 33% tax bracket upon retirement, he will have to pay $3500 x 33% = $1155 upon his retirement. Therefore by making after-tax Roth IRA contributions now and getting taxed at the lower 25%, Jackson avoids having to pay taxes @ 33% when he hits retirement.
Traditional IRA
In Traditional IRA, the contributions you make towards the account are not taxed. Whatever capital gains & earnings you make on your IRA are also not taxed up until retirement, when you withdraw money from your account. For example, imagine you made $50,000 this year and contributed $5000 to a traditional IRA. You will be taxed on $50,000 – $5000 = $45,000. Furthermore, your $5000 contribution will grow tax-deferred for many years, until you retire and decide to withdraw it. The setback with this is that your $5000 (which would have probably grown to $50,000 upon retirement) will then be taxed at your ordinary income tax rate.
Note: You can only withdraw this money after you turn 59 and 1/2 years or older. Any withdrawals made before this age will be subject to income taxes as well as a 10% early withdrawal penalty. However if you use the withdrawn funds to finance higher education expenses or for the below list of 8 exceptions, you will not have to pay the 10% early withdrawal penalty.
8 Exceptions that Eliminate the 10% Early Withdrawal Penalty
There are 8 exceptions to the 10% early withdrawal penalty (i.e. withdrawals that are taken before the age of 59 and 1/2). They are for distributions that:
i) Are taken because of the IRA owner’s disability
ii) Are taken because of the IRA owner’s death
iii) Are a series of loan repayments made over the life expectancy of the IRA investor
iv) Are used to pay for unreimbursed medical expenses that exceed 7.5% of the adjusted gross income of the IRA owner
v) Are used to pay for medical insurance premiums if the IRA investor has been unemployed for more than 12 weeks
vi) Are used to pay for the purchase of a principal residence (maximum of $10,000 can be withdrawn). Also, the IRA investor must not have previously owned a home within the last 24 months.
vii) Are used to pay for higher education expenses of the IRA owner or eligible dependants/family
viii) Are used to pay back taxes of an IRS levy placed against the IRA
Traditional IRAs are commonly associated with the old way of investing: certificates of deposits. This stereotype is because most banks sell CDs and they are the ones that offer Traditional IRA accounts for investors. But remember, you are not limited to investing Certificates of Deposit or bonds only, you can make higher risk investments such as cyclical stocks, commodities, futures, ETFs, etc.
Traditional IRAs are commonly associated with the old way of investing: certificates of deposits. This stereotype is because most banks sell CDs and they are the ones that offer Traditional IRA accounts for investors. But remember, you are not limited to investing Certificates of Deposit or bonds only, you can make higher risk investments such as cyclical stocks, commodities, futures, ETFs, etc.
The Roth IRA
Pioneered by the late Senator William V. Roth, Jr., the Roth IRA came into existence on January 1, 1998 thanks to the Taxpayer Relief Act of 2007. The Roth IRA is unique from all the other retirement accounts because all the earnings you accumulate on your savings will grow tax-free when you withdraw them upon retirement. The only catch to this is that when you make the initial Roth IRA contributions, you will receive no deductions on your income tax return. Other benefits of the Roth IRA include the elimination of the minimum required distributions rule when you turn 70 and 1/2 years old (more on this below).
By making after-tax contributions to your Roth IRA, you will not owe a single dime of tax to Uncle Sam when you retire and withdraw your money. This adds the advantage of being able to grow your earnings tax-free not for the government, but for yourself! Which retirement plan is therefore the right choice for you? Well it depends on your personal situation. If you expect to be in a higher tax bracket when you retire, it is better off to pay the taxes right now and grow your savings tax-free in a Roth IRA. Because a Roth IRA holds after-tax dollars, you can maximize your contributions by adding greater tax leverage to your retirement savings.
After-Tax Contributions
Consider Jackson who earns a $65,000 annual salary. Jackson is currently in the 25% tax bracket and contributes $3500 a month to his Roth IRA. Jackson would therefore pay income taxes of $3500 x 25% = $875 and would contribute $3500 – $875 = $2625 to his Roth IRA. If Jackson expects to be in a 33% tax bracket upon retirement, he will have to pay $3500 x 33% = $1155 upon his retirement. Therefore by making after-tax Roth IRA contributions now and getting taxed at the lower 25%, Jackson avoids having to pay taxes @ 33% when he hits retirement.
Understanding Your IRA
Similar to an employer sponsored 401k, an IRA is a tax deductible defined contribution retirement account. It does not require an employer to be a sponsor and one can be opened at a variety of financial institutions.
As a retirement investment, an Individual Retirement Account (IRA) has multiple advantages and disadvantages:
Pros:
Tax deferred until withdrawal.
Individual, customized control of investments.
Cons:
Very low yearly contribution allowance of $5,000.
10% withdrawal penalty.
Lack of liquidity if the contributor needs the money for another purpose.
Benefits of an Individual Retirement Account (IRA)
The most significant advantage of an IRA is that it’s a tax deferred plan similar to a 401k. For example, if you are making $50,000 a year and opt to put the maximum of $5,000 a year into your IRA, your income rate for taxes will be considered $45,000. This tax deferment also means that when you withdraw the funds upon retirement, the withdrawn amount is taxed as income.
Owners of the account have a variety of investments that can be funded with their IRA account. These generally include a variety of stocks, bonds and mutual funds. Investments such as real estate have further limits set in place by the individual retirement account (IRA) administrator. Collectibles and life insurance are not permitted to be held in individual retirement accounts (IRA).
The tax deferment feature of an individual retirement account (IRA) is generally popular because individuals expect to have lower yearly income in their retirement years than in their working years. In this case, being taxed at their lower income rate during retirement can save money over being taxed at the higher income rate received during their working years.
Deposit Limits of an Individual Retirement Account (IRA)
The yearly deposit limit for an IRA is $5,000 in 2008 and 2009. There is an additional “catch-up” allowance of $1,000 a year for individuals 50 or older. There is a restriction on this catch-up contribution in that the owner must have already made the maximum contribution to their Individual Retirement Account (IRA) and an employer sponsored 401k. These deposit limits are also in place for a Roth IRA and the total deposit between two separate accounts can’t exceed the limits listed above.
Withdrawing funds from an Individual Retirement Account (IRA)
As with a 401k, there is an early withdrawal limit on individual retirement accounts (IRA) if the money is distributed outside of the allowable exceptions. The IRA is open to withdrawal once the owner reaches the ages of 59 ½. At the age of 70 ½ the owner is required to withdraw the minimum amount which is calculated as a combination of life expectancy of the owner, their spouse, and any beneficiaries.
Other exceptions to the penalty include:
Medical expenses that exceed 7.5% of the owners adjusted gross income.
Withdrawal in order to buy a first home.
Inability to work any longer (disability).
Costs of medical insurance while unemployed.
Distributions to a beneficiary if the owner dies.
Higher education expenses of the owner, their children or their grandchildren.
Types of Individual Retirement Accounts (IRA) Available
The above information is all in reference to a traditional individual retirement account (IRA). The following is a list of non-tradition IRAs available and how they differ from the traditional plan.
Roth IRA
The primary difference is that a Roth IRA is not tax deductible and the owner pays taxes on the money before it is deposited into the account. On the other hand, the money is not taxable once the owner begins to withdraw funds. Additionally, any capital gains, dividends, and interest earned in the account are not taxable. The Roth IRA also does not have a requirement to begin withdrawals by age 70 ½. There is a maximum yearly income allowed to be eligible to contribute to a Roth individual retirement account (Roth IRA). For full contributions this limit is $105,000 for single filers and $166,000 for those filing jointly.
SEP IRA
The Simplified Employee Pension Individual Retirement Account (SEP IRA) is an IRA account specifically meant for self-employed individuals and their employees. The account is shared among all members involved and uses a profit-sharing model. The contribution limits for an SEP IRA are the lesser of 25% of income or $49,000 in 2009. All members of the SEP IRA are required to make the same contribution.
Individual Retirement Accounts (IRAs) are popular among individuals who are looking to plan out their retirement. It is important when planning for retirement to understand the different options available and how to fit them into your personal preferences. You can read more about how an individual retirement account (IRA) fits into saving for retirement and retirement investing here.
As a retirement investment, an Individual Retirement Account (IRA) has multiple advantages and disadvantages:
Pros:
Tax deferred until withdrawal.
Individual, customized control of investments.
Cons:
Very low yearly contribution allowance of $5,000.
10% withdrawal penalty.
Lack of liquidity if the contributor needs the money for another purpose.
Benefits of an Individual Retirement Account (IRA)
The most significant advantage of an IRA is that it’s a tax deferred plan similar to a 401k. For example, if you are making $50,000 a year and opt to put the maximum of $5,000 a year into your IRA, your income rate for taxes will be considered $45,000. This tax deferment also means that when you withdraw the funds upon retirement, the withdrawn amount is taxed as income.
Owners of the account have a variety of investments that can be funded with their IRA account. These generally include a variety of stocks, bonds and mutual funds. Investments such as real estate have further limits set in place by the individual retirement account (IRA) administrator. Collectibles and life insurance are not permitted to be held in individual retirement accounts (IRA).
The tax deferment feature of an individual retirement account (IRA) is generally popular because individuals expect to have lower yearly income in their retirement years than in their working years. In this case, being taxed at their lower income rate during retirement can save money over being taxed at the higher income rate received during their working years.
Deposit Limits of an Individual Retirement Account (IRA)
The yearly deposit limit for an IRA is $5,000 in 2008 and 2009. There is an additional “catch-up” allowance of $1,000 a year for individuals 50 or older. There is a restriction on this catch-up contribution in that the owner must have already made the maximum contribution to their Individual Retirement Account (IRA) and an employer sponsored 401k. These deposit limits are also in place for a Roth IRA and the total deposit between two separate accounts can’t exceed the limits listed above.
Withdrawing funds from an Individual Retirement Account (IRA)
As with a 401k, there is an early withdrawal limit on individual retirement accounts (IRA) if the money is distributed outside of the allowable exceptions. The IRA is open to withdrawal once the owner reaches the ages of 59 ½. At the age of 70 ½ the owner is required to withdraw the minimum amount which is calculated as a combination of life expectancy of the owner, their spouse, and any beneficiaries.
Other exceptions to the penalty include:
Medical expenses that exceed 7.5% of the owners adjusted gross income.
Withdrawal in order to buy a first home.
Inability to work any longer (disability).
Costs of medical insurance while unemployed.
Distributions to a beneficiary if the owner dies.
Higher education expenses of the owner, their children or their grandchildren.
Types of Individual Retirement Accounts (IRA) Available
The above information is all in reference to a traditional individual retirement account (IRA). The following is a list of non-tradition IRAs available and how they differ from the traditional plan.
Roth IRA
The primary difference is that a Roth IRA is not tax deductible and the owner pays taxes on the money before it is deposited into the account. On the other hand, the money is not taxable once the owner begins to withdraw funds. Additionally, any capital gains, dividends, and interest earned in the account are not taxable. The Roth IRA also does not have a requirement to begin withdrawals by age 70 ½. There is a maximum yearly income allowed to be eligible to contribute to a Roth individual retirement account (Roth IRA). For full contributions this limit is $105,000 for single filers and $166,000 for those filing jointly.
SEP IRA
The Simplified Employee Pension Individual Retirement Account (SEP IRA) is an IRA account specifically meant for self-employed individuals and their employees. The account is shared among all members involved and uses a profit-sharing model. The contribution limits for an SEP IRA are the lesser of 25% of income or $49,000 in 2009. All members of the SEP IRA are required to make the same contribution.
Individual Retirement Accounts (IRAs) are popular among individuals who are looking to plan out their retirement. It is important when planning for retirement to understand the different options available and how to fit them into your personal preferences. You can read more about how an individual retirement account (IRA) fits into saving for retirement and retirement investing here.
Traditional Ira a retirement benefit scheme
Each and every individual looks into future to avoid any unforeseen happenings, so he plans in such a way so that he can face the same and continue to live a good life. Those who are able to live a good life during their golden years can do so once they learn how to make their money work for them instead of the other way around. Chances are you’ve got dreams of your own about the way you’d like your life to look during your retirement years. Here comes the Planning for retirement which ensure that one can live tassel free when he is older bringing home a pay cheque biweekly/monthly .We figure out the world of finance and learn where and how to best invest our money, so why not get started by making contributions to a Traditional IRA?
Before starting to make contributions to a Traditional IRA, we should understand what is this? Traditional IRA is nothing but an ‘Individual Retirement Account and there are two types of this type of fund: a Traditional IRA, and a Roth IRA. The Traditional IRA is popular due to the tax advantages that are tied to them. In addition, eligibility requirements are easy to meet. In order to start making contributions to a Traditional IRA, you must be less than 70 years old during the year you make contributions, and you must be earning some type of legal income. So this is a simple way to begin planning for your financial future. It can also be the first step you take towards being able to live the good life. An IRA is not an investment in and of itself. Think of an IRA as a container that holds stocks, bonds, mutual funds, property or gold bars – anything that is considered an investment. The IRA “container” defines your tax benefit, with different types of IRAs having different tax benefits and different rules for contributions and disbursements. The investments in the IRA define the kind of returns you get on your contributions.
A Traditional IRA allows you to decide how much you want to invest as well as how often you want to contribute and save money for retirement. In the case of a traditional IRA, you may also be offered an immediate tax shelter for the contributions that you make to your account. In addition, it does not matter if you are already paying into another retirement plan. Currently, there is a limit of $5,000 per year that can be contributed to a Traditional IRA, making them less intimidating than some other types of accounts which require large down payments.
If you are over 50 years old, you can contribute a “catch up” amount of $1000 over the regular limit of Traditional IRA’s in order to boost your retirement savings. This is a great way to make up for those early years in your career when you hadn’t yet started planning for retirement. An individual retirement arrangement (IRA) allows a person, whether covered by an employer-sponsored pension plan or not, to save money for use in retirement while deferring taxes on the account’s earnings. Stated differently, a traditional IRA converts investment
income (interest, dividends, and capital gains) into ordinary income. Taxes are assessed at time of withdrawal
In a traditional IRA, a person’s annual contributions can be taxed if he or she is already covered by some other pension plan. There are certain restrictions related to the amount of contributions one can make to a traditional IRA. The information about other rules and regulations governing traditional IRAs is available online. There are several web sites which provide tips and help for a person who has decided to go for a traditional IRA.
On average, Traditional IRA’s have shown to have a return of approximately 8%. There is, of course, risk involved with any investment, and Traditional IRA’s are not guaranteed. However, they have proven to be trustworthy in a world of shaky investments, and this rate of return is more than fair compared to many.
In order to make a contribution to a traditional IRA, You must be under the age of 70 1/2 at the end of the calendar year. After age 70 1/2, you’re no longer eligible to contribute to a traditional IRA and you must have some form of compensation. Compensation includes wages, salaries, bonuses, and commissions. Compensation does not include deferred compensation or payments such as interest income and stock dividends you might have received during the year. In a traditional IRA, there are generally no restrictions on withdrawal of money from the account. One can withdraw it any time. But one has to pay a tax on the amount withdrawn.
Traditional IRA has much flexibility over other IRAs.Many people, therefore, prefer a Traditional IRA .Several new versions of IRA have now taken over the traditional IRA. Even then, many people still prefer it the old way.
Before starting to make contributions to a Traditional IRA, we should understand what is this? Traditional IRA is nothing but an ‘Individual Retirement Account and there are two types of this type of fund: a Traditional IRA, and a Roth IRA. The Traditional IRA is popular due to the tax advantages that are tied to them. In addition, eligibility requirements are easy to meet. In order to start making contributions to a Traditional IRA, you must be less than 70 years old during the year you make contributions, and you must be earning some type of legal income. So this is a simple way to begin planning for your financial future. It can also be the first step you take towards being able to live the good life. An IRA is not an investment in and of itself. Think of an IRA as a container that holds stocks, bonds, mutual funds, property or gold bars – anything that is considered an investment. The IRA “container” defines your tax benefit, with different types of IRAs having different tax benefits and different rules for contributions and disbursements. The investments in the IRA define the kind of returns you get on your contributions.
A Traditional IRA allows you to decide how much you want to invest as well as how often you want to contribute and save money for retirement. In the case of a traditional IRA, you may also be offered an immediate tax shelter for the contributions that you make to your account. In addition, it does not matter if you are already paying into another retirement plan. Currently, there is a limit of $5,000 per year that can be contributed to a Traditional IRA, making them less intimidating than some other types of accounts which require large down payments.
If you are over 50 years old, you can contribute a “catch up” amount of $1000 over the regular limit of Traditional IRA’s in order to boost your retirement savings. This is a great way to make up for those early years in your career when you hadn’t yet started planning for retirement. An individual retirement arrangement (IRA) allows a person, whether covered by an employer-sponsored pension plan or not, to save money for use in retirement while deferring taxes on the account’s earnings. Stated differently, a traditional IRA converts investment
income (interest, dividends, and capital gains) into ordinary income. Taxes are assessed at time of withdrawal
In a traditional IRA, a person’s annual contributions can be taxed if he or she is already covered by some other pension plan. There are certain restrictions related to the amount of contributions one can make to a traditional IRA. The information about other rules and regulations governing traditional IRAs is available online. There are several web sites which provide tips and help for a person who has decided to go for a traditional IRA.
On average, Traditional IRA’s have shown to have a return of approximately 8%. There is, of course, risk involved with any investment, and Traditional IRA’s are not guaranteed. However, they have proven to be trustworthy in a world of shaky investments, and this rate of return is more than fair compared to many.
In order to make a contribution to a traditional IRA, You must be under the age of 70 1/2 at the end of the calendar year. After age 70 1/2, you’re no longer eligible to contribute to a traditional IRA and you must have some form of compensation. Compensation includes wages, salaries, bonuses, and commissions. Compensation does not include deferred compensation or payments such as interest income and stock dividends you might have received during the year. In a traditional IRA, there are generally no restrictions on withdrawal of money from the account. One can withdraw it any time. But one has to pay a tax on the amount withdrawn.
Traditional IRA has much flexibility over other IRAs.Many people, therefore, prefer a Traditional IRA .Several new versions of IRA have now taken over the traditional IRA. Even then, many people still prefer it the old way.
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