Joez, the rocket ship... watch out True Religion

In the market for high end denim, Joes Jeans is becoming a major force to be reckoned with. The turnaround has come and the women's business, has done exceedingly well. The selling is great and the product is now in a bigger bond with placement next to Seven For All Mankind and Citizen Jeans in most retail locations.

NYSE: JOEZ - EPS: $0.02, Market price $1.29 per share

The best note of future growth is organic financing. Internal retained earnings are the fuel to opening new store accounts and retail stores. Joez has fully penetrated the luxury denim sales. There is a full line and full look. There will be several full price stores in the next year, they are looking at several places now to lease. The president called this growth "aggressive".

"Our goal is to have 50 stores if all goes well." The president of Joes Jeans said.

The denim line is successful, but there is more to their mix.

"The most successful piece of non-denim business is the Knitt Top," The president said.

The inventory for the last year was $20 million in closing inventory with about half that being fabric for this quarter. The company has a very only about 100,000 yards on order. The company, Joes, has their designs set out to 10/30/2008. They plan to use those. Eighty percent of their production is coming out of Mexico and Morocco (80% to 98% production over the next year overseas).

Excess and overruns will be offered to the two outlets. One slated for New York and the other outlet unknown location will receive about 15,000 pieces a year and will not start creating products for these store specifically for some time.

JOEZ - this is a good pick for 2008. This is a company, that even in a bear market, has had a positive earnings growth and a great outlook for future growth!

Visa, here comes magic....

The only thing that really stands in the way of Visa's IPO (initial public offering) is the shopping that it now has to do for an investment bank to make this deal happen sometime early next year. The SEC (securities exchange commission; www.sec.gov) gave Visa the "go ahead" on an IPO in September of 2007. The only bad variable could be a bearish (bad outlook) market of early 2008.

MasterCard (NYSE:MA) went public about 2 years ago. The original offering was about $44.20. They are now, two years later, trading at right under $200 per share. Besides the obvious return that an investor could have possibly netted from this short term hold, MasterCard has held double digit dividends every quarter.

There are several things that could make Visa an even more appealing buy when it is introduced.

- Visa is the number one card in people's wallets. Visa is held by 60 percent of the card holding market.

- Outside of the obvious credit business that Visa holds, Visa is also the primary go between on debit cards. So we may even see an upside for banks like Bank of America (BAC), Wells Fargo (WFC) and JPMorgan (JPM).

No matter what your stance is on consumer credit, Visa is poised for great success in this coming year. The debit vs. credit exposure that Visa has plays on the growing trend to go totally plastic totally leaving out cash. While people may be bearish on consumer spending, I hope that you can sort through the financial tabloids and financial crap and see the future for Visa.

Long term value.

Ultimately we must look at the reason that people are really to look for in an investment. Last time I talked about the nature of a business. The life cycle, that I outlined, really corresponds with the FCF, or future cash flows, of the business. That is, the future of the company's ability to make money.

When I think about how this would correspond with investing, Joe's Jeans, traded under the ticker JOEZ. The stock traded for $1.06 just about all day (http://finance.yahoo.com/q?s=joez) and I think that even that is a low ball estimate at what the future holds for JOEZ.

I was watching an MTV program named "Life of Ryan". To me it was not too exciting, but it was on. They younger boy on the show started going through a list of brand names for jeans. Joe's was apart of this small list of designer jeans. While this is nothing to huge, I want to go through the behavioral logic of the issue.

The business model for luxury branding is all about name recognition and perceived value. Joe's has done a great job of leveraging their name into the ranks of Seven for All of mankind and True Religion. It should be interesting to see what direction Joe's goes in the next weeks with all of the financial bull crap out there.

Buy and Hold?

Buy and Hold is a common strategy for most smaller investor. In fact, for a good bit of time I subscribed to this notion and used it as the overlying strategy that I have held. I have recently rethought this idea and I have began to take the stance on Buy and Homework.

Jim Cramer, the host of Mad Money CNBC first brought this elementary strategy to me. No, I cannot claim it as my own, but I believe it has alot of merit in the undertones of investing. Many times people believe that they will beat  the markets (make money in the markets) by buying a stocks and giving them time to just accrue money like a debt insturment. This does not work in a single security due to the nature of a business.

Businesses are like people. They grow up, they live and in many cases they die or slow down to little value. The nature of the strategy of buying and blindly holding the security does not recognize this concept.

Where I deviate from Cramer's view is in the research of the company. I believe that the investor that is taking the risk to only have a few stocks must research the companies 10K's and their financials daily for at least 30 minutes. Due to the living nature of a stock, an investor must keep a steady ear to the life beat of the company. 

One place that people can find the 10K's for a company is SECfilings.com. This free service, that you must sign up for, has a compilation of 10ks for almost every market and many over the counter stocks. 

To me key statistics are also vital. I look for ROE, EPS, P/E, volume traded and the bid and ask margin. You can find these statistics on yahoofinance.com.

I have recently taken a second look and implimented this to AAPL, Apple. Take a look at it and let me know what you would do. 

My Picks for the week...

This has been an interesting week for the markets with the majority of stocks having a zero sum gain or loss. It has been stagnant. However, there are still two great money making opportunities this week.

For this up coming quarter I like E*Trade (ETFC). The past few months have been promising with new advertisements during the Super Bowl and an insider buyback of great proportion. While many see the buyback as a possible PR stunt, I think it shows great promise because the insider has no huge reason to buy into their company if there is no relative gain to be had. With a price floating around $5.11 all week there is a possibility for rally to be had this week. No matter what it is better than the $2 price E*Trade was flirting with a few weeks ago.

Additionally I think there is a great opportunity with ASEN. This company has a great business model with growth opportunities in the entertainment and retail business. There basic model is cigar coffee houses. They were trading at $0.12 earlier this week and they are moving up for sure, well not for sure, but it is promising!

Best of luck this week and remember stocks are something that you should plan on loosing money on; that way you are never disappointed when you have a bad day. Real diversification comes with ETFs and Mutual funds, not 4 stocks in four different fields. Best of luck as you sort through all of the financial bull crap out there this week!

The truth of unions: looking a gift horse in the mouth

Many people see this factory. You know, the facility that used to be where we all picked up our checks. Some people put together transmissions and some people have hand painted pin stripes on the cars that drove the American economy. On the backs of workers the companies have become wealthier than most small republics that litter the coast of Africa.

In a country that has been built by the blue-collar worker it is sad that companies have not adequately taken care of their workers. But wait. Have the big three really forgotten the American workers that have formed labor unions against them. When we look at the economics of the labor union models they make no sense for several reasons.

The economics of the issue come to where the real profit belongs, in the pockets of the equity owners or in the pockets of the workers. The labor unions have seen the large profits in the past and have negotiated, using predatory tactics, raises and benefits that far outweigh the real market value of what they do.

In the last months we have seen a renegotiation of union labor contracts. It was in these negotiations that the Big 3 will be turned into the Big 1. Chryslers’ private equity management group was not as successful as GMs’ management group that was able to put off about $1000 per car expense to labor unions.

What Labor unions do not realize is that as jobs leave the U.S. there maybe less of an opportunity to find an alternative job in the U.S. if the Big 3 go under. While it is hard to think of that scenario, it is possible if labor unions continue to keep looking a gift horse in the mouth.

How importants is American Business? An open letter...

First off, I want to start by saying that this debate originated in the
fact that not one candidate or another cared about poor farmers. I
wanted to point out that American farming is no longer the same.
Farmers, whether your friend at the TN Agriculture department wants to
admit it or not, are highly subsidized and can only compete in our
market because of tariffs on incoming (imported) goods are so highly
levied that many foreign firms cannot compete.



Furthermore, the American farmer does not have the same face as he once
did, so there is a problem in your definition of "poor farmer". Now
farming is largely corporate. In fact, most farmers are only on contract
with larger producers of food that buy the raw product from the farmer
and sell it at places like the Chicago Merc. Exchange. These economies
of scale and corporations that control them are American farming. While
it is true, as referenced in my included chart, that small farms make up
91.2% of the numerical value of farms the 7.1% of corporate farms do
59.1% of production. These "large family farms" can best be categorized
as contract farms with very little "small town farmer" involvement past
production and meager pay.







Now I realize there was some confusion of my point of view. I am not
saying farming is not vital because of course we need farming to survive
because of the ultimate product; food. However, American farming is not
important; food products can be grown anywhere. Those jobs in farming
would be filled in efficiently by any country surrounding our own. In
fact, if farming left, I believe it would take one season (per crop) to
recapture the market and bring in the equalizing price that we have now.
That is based on the market theory that the American economy would be
such a great need for food in the US that outside producers would be
stupid not to bring food to our market.



Here is an Indicator of the current decline in the American agriculture
market taken from a USDA study.





When 65% of farms specialize in one or two things there is a red flag
that must go up. This economic theory of specialization indicates that
they only have the resources to compete doing one thing otherwise they
would do multiple things so poorly they could not compete. In most cases
livestock can quickly account for this 65% on single-specialization
farms. However, it is fair to say that and increasing trend in product
specialization is an indicator of a fiercely competitive market. A
competitive market indicates competitors outside large corporately
backed, Gov't subsidized farms. Where is that competition coming from?
Why of course, the people that can do it better or else we would not
have oranges from Mexico and coffee from Bolivia because we would be
able to compete with their pricing and force them out of the market. So
if they can still produce something, bring it to market (the US) and
still under price after tariffs; then I say they can do it much more
efficiently than we can.



The farming economy is largely protected by tariffs and pro-American
farming laws. Do I want that to go away? No, I think the jobs are needed
because in many cases this is all many of these people know how to do
and "you ain't no man unless you got land". However, I do believe that
it is ridiculous to say that agriculture continues to be the strong arm
of America. I may give it a leg feature or perhaps the lean side of the
buttocks, but it is by no means our back bone. Let me give you an
indicator here. When oranges have two consecutive freezes, domestically,
people buy oranges from Mexico for a relatively similar price with no
real strain on the economy or GDP. But when a few banks have a few
problems there is a downfall in markets. When the automotive industry
has a bad quarter it spreads to oil commodities and to the common stock
market. No one is hugely concerned about agriculture because we can get
products from other places and frankly, as I write this, I am getting
mad that my tax dollars go to subsidize American farming when a few
miles over the borders they can do it better and cheaper.



And to answer the terrible logic of "The world not being able to grow
our food" theory, that is purely a capital (money) problem, we do not
have magic soil or expertise, we just have American money. In fact,
there is often better growing conditions elsewhere. If there was a free
market in America that allowed foreign firms to compete then you would
see regions like Central America produce the majority of our raw food
products because they have an influx in capital that allows them to
build an infrastructure that can meet our demands.



So when you say that Hillary is better for the American farmer, yeah she
probably is but she is not better for the American economy. Just because
one interest group, farmers in this case, are dependent on the US to
subsidize them does not make them the backbone of the economy, it make
the "poor farmer" a leech. So Hillary ultimately would provide a way to
help farmers leech off the economy. Free markets create jobs, gov't
subsidies drain the market of jobs because productivity is not maximized
and efficiency is not fully realized.

Dollar vs. All

So I have this "thing" going on where I bring you market news at the first of the week and then a way you can increase your knowledge going into investing.

Today I must bring you grave news, the dollar is just underperforming. But is this really grave or could it be good? Many people believe that if the dollar is down then we have a disadvantage when competeing in the global economy. I disagree on this judgement for a few reasons.

First of all, the dollar decreasing actually increases jobs in the United States. While this has not recently been seen in the latest job lose reports because of other variables including a downturn in spending and a subprime dabackel, this is historically accurate. A weakening dollar equates to a bigger incentive to avoid changing of money to another currency, if the incentive is large enough, like the cost of a Euro at $1.48, then companies over the long run will decide to bring manufacturing home. Eventually, you will see a decrease in Net Imports for this very reason, thus increasing GDP, a measurement of a country's financial health.

Secondly, there is an arguement that foreign money being more valueable relative to the dollar could encourage foriegn families to come spend their money here on goods, services and taxes. With an increase in tourism the market is bound to grow because of items people want being sold. also the tax variable of GDP will increase.

Our CPI, consumer price index, has not changed. You do not have to worry about what you are buying here short term because most business is linked to a plac ewhere they can still get a COGS at a rate much lower than the sales price and break even is still relatively low.

Last of all, there is a competitive advantage for companies that have a hedging focus. If for instance a company in Europe puts money in an American bank, as USD, then they are buying dollars for a cheaper price relative to their future expectations. For example, Company X buys $1 it really cost $.67 from euro to dollar. Therefore if, as in history, the dollar were to rebound there would be a realized gain of some amount. This is good for the American economy because it puts more money in financial institutions that loan out money to people and businesses and are ultimately able to grow the economy.

So when people are all against a falling dollar, just look at the silver lining. Yeah, it sucks and it would be better for that trip to Euro-Disney to have a strong dollar, but it is not the end of the world. I hope this helps sift through the financial crap.