In response to the President of OPEC:
I believe that the most important number in your life right now should be 2.7. I think that it is very important for you to stick this number to the inside of your skull because it is real proof that you are selling a product that is not inelastic.
You have underestimated the economic alternatives that we will resort to in the United State. We will walk, carpool and eventually leave your drug.
remember 2.7% because that is how much demand droped in the United States. We have made you into billionaires and we are soon to leave you, especially as prices pb go to $170.
Sound the alarm: you may want to do something to keep us hooked on your drug....
Thursday, June 26, 2008
Saturday, April 12, 2008
JOEZ earnings call
JOEZ is set to have an earnings call April 14.
I had the pleasure to listen in on the last conference call. Outside of the hour it took to connect everything was positive. Most notably JOEZ management team has a very aggressive outlook on the retail sector. With the second outlet store set into place in Orlando and the first one in New York already out of the ground, they should prove to have a good quarter as far as organic growth goes.
Many denim companies, like True Religion, have market confidence. And, at face value, I think that Joe's Jeans is undervalued by about a dollar. One analyst put their true value at $2.75 a share. So as far as I am concerned, they are ON SALE.
Look for a good report on consumer spending. Even with the credit crisis looming in the background, I think that consumer spending, especially in high end sectors, will remain strong. The only truely effected companies are those connected to large purchases and not those connected to discretionary spending. Moreover the companies that produce luxury items as the buyer is usually not effected by a blip on the economy.
Monday, April 7, 2008
One day of solar energy could fuel your portfolio for a life time
Solar energy seems to be a hot TRADE right now. A stock that I have been following has been First Solar or FSLR. I must admit that I have had a position in FSLR in the past but with new energy being harvested at an alarming pace and the prices of traditional fuels, i.e. coal or petrol, on the rise solar power and products are sectors to be in.
"Solar stocks had another blowout week led by LDK Solar’s (LDK) 25% gain." Himanshu Pandya of Seeking Alpha said in a recent report. "First Solar (FSLR), Sunpower (SPWR) and Suntech Power (STP), what I consider the first-tier solar companies, all had a gain close to or above 20% for the week."
I believe that solar power could be the next bubble. Along with agriculture, solar energy is heavily subsidized and is poised to begin to make profits without the governments help, unlike agriculture.
One reason that FSLR has had the biggest positive gains over the last year is partly because of their supply to a market that is in such huge demand. The market of solar power is gaining traction because of the reduction in cost to supply the panels and products that go into the market place. With this reduction in costs we may see solar field popping up all over the country.
With the introduction of solar to our power grids we may also see a deep price reduction in traditional industry. Since the municipalities are not jumping on solar and venture capital is, there may be new competition to a service that has traditionally been state run.
Maybe gold and oil is not the place to be. Like bottled water, the money may be in something that is very abundant.
"Solar stocks had another blowout week led by LDK Solar’s (LDK) 25% gain." Himanshu Pandya of Seeking Alpha said in a recent report. "First Solar (FSLR), Sunpower (SPWR) and Suntech Power (STP), what I consider the first-tier solar companies, all had a gain close to or above 20% for the week."
I believe that solar power could be the next bubble. Along with agriculture, solar energy is heavily subsidized and is poised to begin to make profits without the governments help, unlike agriculture.
One reason that FSLR has had the biggest positive gains over the last year is partly because of their supply to a market that is in such huge demand. The market of solar power is gaining traction because of the reduction in cost to supply the panels and products that go into the market place. With this reduction in costs we may see solar field popping up all over the country.
With the introduction of solar to our power grids we may also see a deep price reduction in traditional industry. Since the municipalities are not jumping on solar and venture capital is, there may be new competition to a service that has traditionally been state run.
Maybe gold and oil is not the place to be. Like bottled water, the money may be in something that is very abundant.
Friday, April 4, 2008
Fair tax = healthy economy.
Many people would have you think that the fair tax, a national tax replacing the income tax and payroll tax, would really hurt your life because all of the sudden you would not have the same spending power.
This could not be further from the truth for two reasons.
The first overwhelming fact about converting our system to a fair tax is the vast amount of wealth and jobs that would come back to the United States. It is estimated that 17 trillion dollars now live in off shore banks to avoid our "success punishing" system. Our progressive tax, as it stands now kills the incentive for success by taxing the wealthy that create business. ( an economic side note, this was proved by the Laffer curve which is in just about every economic text book.)
This new wealth effect that would be hastily returned to us banks would cause a lending "promise land", but instead of milk and honey, dollar bills would flow. It has been proven that the wealth effect would lead people to spend and save more. This savings and spending would both bolster the dollar and lead to the same tax base that is found now.
I urge you to check out their website at www.fairtax.org. Oh yeah, fyi close to 80 Congressmen and 2 Senators are behind this already!
This could not be further from the truth for two reasons.
The first overwhelming fact about converting our system to a fair tax is the vast amount of wealth and jobs that would come back to the United States. It is estimated that 17 trillion dollars now live in off shore banks to avoid our "success punishing" system. Our progressive tax, as it stands now kills the incentive for success by taxing the wealthy that create business. ( an economic side note, this was proved by the Laffer curve which is in just about every economic text book.)
This new wealth effect that would be hastily returned to us banks would cause a lending "promise land", but instead of milk and honey, dollar bills would flow. It has been proven that the wealth effect would lead people to spend and save more. This savings and spending would both bolster the dollar and lead to the same tax base that is found now.
I urge you to check out their website at www.fairtax.org. Oh yeah, fyi close to 80 Congressmen and 2 Senators are behind this already!
Thursday, March 27, 2008
technical analysis, read quick!
The real importance of the study of financial behavior is found in an approach to investing called technical analysis. The two basic approaches are found in two camps fundamental analysis that focuses on the study of the stock value and technical analysis that follows the market behavior.
The basis of technical analysis is the efficient market hypothesis. The EMH assumes that, at some level, the market processes available information and acts accordingly. As such, one can assume that if a stock is trading at a higher volume or if people are shorting the stock, then that is an indicator of some information that has come out about the security that is being process by the efficient market.
Technical analysis looks at a few primary indicators, at least for your purposes, when analyzing the market. The primary factor that one needs to watch is volume. Where are people trading for a day or a historical period of time. A high trading volume of the TTM could indicate that the stock has large price movement.
The other primary factor in technical analysis is watching the statistics. Based on behavior, statistics are often a good indicator of price change and what is likely to happen next. Many technical analyst, or chartists, use a moving average to forecast potential outcomes.
The primary factor to success in technical analysis is timing. So you better sift through the financial bull crap quick and watch those candlestick charts!
The basis of technical analysis is the efficient market hypothesis. The EMH assumes that, at some level, the market processes available information and acts accordingly. As such, one can assume that if a stock is trading at a higher volume or if people are shorting the stock, then that is an indicator of some information that has come out about the security that is being process by the efficient market.
Technical analysis looks at a few primary indicators, at least for your purposes, when analyzing the market. The primary factor that one needs to watch is volume. Where are people trading for a day or a historical period of time. A high trading volume of the TTM could indicate that the stock has large price movement.
The other primary factor in technical analysis is watching the statistics. Based on behavior, statistics are often a good indicator of price change and what is likely to happen next. Many technical analyst, or chartists, use a moving average to forecast potential outcomes.
The primary factor to success in technical analysis is timing. So you better sift through the financial bull crap quick and watch those candlestick charts!
Monday, March 24, 2008
Visa, it is everywhere you want to be....
After the IPO of Visa (NYSE:V) on March 18th there has been an incredible increase in stock price at the potential gain of an already profitable company of nearly 10 dollars.
China seems to believe in Visa, buying nearly $300 million dollars worth of the debit & credit card company, the Country's largest life insurance company is betting on the long term stability of America's power to spend. The large life insurance company, based in China, decided to buy the IPO in a recent surge of foreign investment that Chinese companies are undertaking.
It seems that the wise investment bankers injected the IPO, Visa, at just the right time. With the precedent of 350% change over time of the MasterCard brand in a bull market the Visa sale, which netted $18 Billion dollars for the leading card service, could do even better being inserted in a possible upswing in our GOLDILOCKS economy.
Potential pitfalls for the economy can only be fully realized in a huge downturn in consumer spending and credit. The credit component seems to be a null point because the credit crisis we are in seems to be only affecting the big purchases like housing and car buying but will not hugely bleed into buying a shirt from Abercrombie or jewelry from Tiffany & Co., who posted great earnings and is up as much as $5.00 today.
The debit side of the business also seems to be strong as a growing number of people are rejecting the green that they used to carry and going with Visa and banking backed plastic for transactions.
Look for Visa to continue to rise and be everywhere you want it to be!
(disclaimer: author has a long position or positions of Visa traded under class a NYSE:V)
China seems to believe in Visa, buying nearly $300 million dollars worth of the debit & credit card company, the Country's largest life insurance company is betting on the long term stability of America's power to spend. The large life insurance company, based in China, decided to buy the IPO in a recent surge of foreign investment that Chinese companies are undertaking.
It seems that the wise investment bankers injected the IPO, Visa, at just the right time. With the precedent of 350% change over time of the MasterCard brand in a bull market the Visa sale, which netted $18 Billion dollars for the leading card service, could do even better being inserted in a possible upswing in our GOLDILOCKS economy.
Potential pitfalls for the economy can only be fully realized in a huge downturn in consumer spending and credit. The credit component seems to be a null point because the credit crisis we are in seems to be only affecting the big purchases like housing and car buying but will not hugely bleed into buying a shirt from Abercrombie or jewelry from Tiffany & Co., who posted great earnings and is up as much as $5.00 today.
The debit side of the business also seems to be strong as a growing number of people are rejecting the green that they used to carry and going with Visa and banking backed plastic for transactions.
Look for Visa to continue to rise and be everywhere you want it to be!
(disclaimer: author has a long position or positions of Visa traded under class a NYSE:V)
Thursday, March 6, 2008
Mass Hysteria over what again?
Can you taste pessimism seeping out of the mouths of every financial “journo” about the market? Every financial tabloid and dramatized show have two important tools on their Swiss Army knife lexicon; recession and housing crisis.
I was watching CNBC and realized that this is a bunch of hype for a myriad of reasons. While I could go on for some time about the fear tactics that many journalists use to keep the viewer glued to the ticker, I think there are a few things that need to be pointed out about our current condition.
First of all, recession is apart of a healthy economy. Much in the same way that a forest needs to be burned down, sometimes a recession or a “blip on the radar screen” can be a good thing. Not only does it allow the investor to rethink a trading strategy and reemploy a new one, but it keeps the economy in check and often times slaps the hand of those doing risky or unethical behavior, i.e. the sub prime swindlers. What we are really looking for here is a Goldilocks economy.
The bump in our road is not as bad as it could be. While indicators of recession have moved a few percentage points, there have been no wild swings. For the most part, consumer spending continues to be steady and people seem to be secure in mortgages that were thought to be in technical default.
What is really bothersome is the reoccurring thought of why? Why do they keep reporting something that cannot be changed by anyone until the next set of number, those that will establish a trend happen? The markets enter a new realm in this situation and that is the mastery of the technical analyst. The reason that the real moneymakers do not care about a down turn is the financial tools that are available. The hedge fund managers and the venture capital guys have their money hedged in a much more sophisticated way.
While Jim Cramer is telling all of you to be diversified by having stocks in several different industries, the Wall Street guys are doing that and buying stocks short and long. They are diversified by, essentially, making beta one. These professionals are the people that are outsmarting you. They are the professionals that do not care if there is mass hysteria, they will make money either way the market goes.
I was watching CNBC and realized that this is a bunch of hype for a myriad of reasons. While I could go on for some time about the fear tactics that many journalists use to keep the viewer glued to the ticker, I think there are a few things that need to be pointed out about our current condition.
First of all, recession is apart of a healthy economy. Much in the same way that a forest needs to be burned down, sometimes a recession or a “blip on the radar screen” can be a good thing. Not only does it allow the investor to rethink a trading strategy and reemploy a new one, but it keeps the economy in check and often times slaps the hand of those doing risky or unethical behavior, i.e. the sub prime swindlers. What we are really looking for here is a Goldilocks economy.
The bump in our road is not as bad as it could be. While indicators of recession have moved a few percentage points, there have been no wild swings. For the most part, consumer spending continues to be steady and people seem to be secure in mortgages that were thought to be in technical default.
What is really bothersome is the reoccurring thought of why? Why do they keep reporting something that cannot be changed by anyone until the next set of number, those that will establish a trend happen? The markets enter a new realm in this situation and that is the mastery of the technical analyst. The reason that the real moneymakers do not care about a down turn is the financial tools that are available. The hedge fund managers and the venture capital guys have their money hedged in a much more sophisticated way.
While Jim Cramer is telling all of you to be diversified by having stocks in several different industries, the Wall Street guys are doing that and buying stocks short and long. They are diversified by, essentially, making beta one. These professionals are the people that are outsmarting you. They are the professionals that do not care if there is mass hysteria, they will make money either way the market goes.
Tuesday, March 4, 2008
Apple buyback?
Apple could present a plan in the next few months to buyback a large portion of their common stock outstanding according to apple insiders.
Investors in AAPL are looking to leadership to make the same move that Microsoft (MSFT) made and plans to follow through with by August 17th of this year.
Apple may follow in the wise path of Microsoft because of their cash rich balance sheet. With virtually no debt and large cash reserves, the company is in a good position to stimulate the stock value for the investors.
Last summer Apple's common stock was trading for around $200. Now, the once great has almost decreased in value by $100 at a trading price of $124.64 today.
Not a largely consumer elastic with the change in consumer spending, Apple still has strong sales but weak valuation. I attribute this, in large part, to the future view of free cash flow in the future. As I have discussed before, the market's view of future sales has been bearish for the last few quarters.
A buyback will decrease the market liquidity of Apple and, for a short time, stimulate stock price. What apple really needs to do is increase investor confidence and come out with another revolutionary product like the i-Phone!
Thursday, February 28, 2008
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!
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!
Tuesday, February 26, 2008
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.
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.
Thursday, February 21, 2008
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.
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.
Wednesday, February 20, 2008
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.
Saturday, February 16, 2008
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!
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.
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.
Saturday, February 9, 2008
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.
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.
Monday, February 4, 2008
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.
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.
Thursday, January 24, 2008
Valuation for all of the rest of us!
To value someting, in financial terms, is going to be quite a task for most of us. Sure you can go on the web and get forecasting models and divde the firms value by share outstanding but that takes so much effort. The best way for the individual investor to decide which securities they are willing to buy outside of the ETF or mutal fund they already own is to look at the vitality of the company. Listed below is a simple value model found online.
http://www.moneychimp.com/articles/finworks/fmvaluation.htm
You may wonder what else could help you make a decision for picking a stock. There are several things that can indicate what you may expect from a security.
- The P/E ratio often times will indicate what kind of price movements you may expect from the stock you like. The P/E is often an indicator of how wild of a price change you may expect because it is linked to the the price earnings expectations of investors. Thus, if announced earnings are a disappointment on, say, Apple (NasDaq:AAPL) then one may see a stock value plummet by a few percentage points because investor confidence has decreased.
- A high P/E is considered a growth stock. A low P/E is considered a value stock. Historically value stocks out perform growth stocks.
While this is only a small piece of you valuation pie, this is the start to a long series of valuation tips that can help you, the normal investor, sort through all of the financial crap!
http://www.moneychimp.com/articles/finworks/fmvaluation.htm
You may wonder what else could help you make a decision for picking a stock. There are several things that can indicate what you may expect from a security.
- The P/E ratio often times will indicate what kind of price movements you may expect from the stock you like. The P/E is often an indicator of how wild of a price change you may expect because it is linked to the the price earnings expectations of investors. Thus, if announced earnings are a disappointment on, say, Apple (NasDaq:AAPL) then one may see a stock value plummet by a few percentage points because investor confidence has decreased.
- A high P/E is considered a growth stock. A low P/E is considered a value stock. Historically value stocks out perform growth stocks.
While this is only a small piece of you valuation pie, this is the start to a long series of valuation tips that can help you, the normal investor, sort through all of the financial crap!
Tuesday, January 22, 2008
Bears and Bull
After a great holiday weekend I found myself depressed at the market outlook for the week. In a perverted way I am at a ghastly realization in my life: like many other in the world, my happiness is sometimes derived of a series of letters and numbers that stream across my brain daily. I watch as AAPL scrolls across Bloomberg TV and I check my Blackberry regularly to see what USU is doing. Did I mention that I wake up before the sun rises over my little apartment in the city of Nashville to see if JOEZ has moved a few cents in the previous day's "after hours trading"?
Perhaps there is evidence of addiction there. But every time I inhale more information I feel like I am the king of my financial future, and now I realize that this addiction to information is a simple LIE! I, like many of you out there, must come to terms with an addiction that I have a major problem with and the lie that I have bought into that I can beat the markets.
Since when did my diploma read Princeton Business School? I am a CFA level I candidate. I have had a grand total of four classes on stocks and the same amount on debt and derivative instruments. And with that hardly amazing amount of experience, I have lulled myself into the belief that I can beat the masters of the game: the hedge fund managers, the technical analysts with 5 PhDs and the institutional wizards of financial tools.
After watching a great episode of Jim Cramer's Mad Money, I realize that many people have bought into this. Yes, that means you Cindy, mother of 9, from San Fran. And Bob from Michigan, even I know that buying 2 stocks of Google does not make you Warren Buffet. So here are some things we can all take into consideration....
1. Most likely we will only beat the market out of dumb luck, but that does not mean success.
- Yes, you made a good call on timing last June on AAPL with the iPhone but real success comes from long term gains.
2. You cannot day trade, do not even try.
- Day trading for the average Joe is not smart because you have two things working against you; poverty of time and availability AND uncle sam's little gift- short term capital gains tax.
3. Ten stocks is not diversification.
- True diversification is creating a portfolio where beta is not too far above or below 1.0. This can be achieved by buying index funds (google "spyder funds": a group of Equity Traded Funds) or by a mutual fund that has little to no load fee. (keep in mind that load fees often represent the management of these funds.)
4. Savings accounts are not overrated.
- Ask the trader that had an unrealized lose of 30% about savings. Would I rather have an E*Trade savings account with a guaranteed return of 5% per year or a mild stroke? I think I will take the bird in hand. I am not saying that one must be fully invested in boring bank notes, just some of your investment. Many calculate you risk propensity as 120- your age. My risk propensity would be 99% because I am 21 years old. The percentage should be the amount you have in risky instruments. That probably still leaves a percent or more for a small risk investment like a high yield savings account.
5. Try not watching the daily fluctuation.
- If you just leave your group of securities and other financial instruments alone you could be pleasantly surprised in a few months. Watching daily up and downs does not help your addiction.
So this week, as everyone tells you that you are stupid to not be in the market, they could be right. There could be some reward but remember, buying stocks are like buying groceries: sometimes they spoil and sometimes you can eat it all up while they are good. Good luck this week you warriors of insanity!
Perhaps there is evidence of addiction there. But every time I inhale more information I feel like I am the king of my financial future, and now I realize that this addiction to information is a simple LIE! I, like many of you out there, must come to terms with an addiction that I have a major problem with and the lie that I have bought into that I can beat the markets.
Since when did my diploma read Princeton Business School? I am a CFA level I candidate. I have had a grand total of four classes on stocks and the same amount on debt and derivative instruments. And with that hardly amazing amount of experience, I have lulled myself into the belief that I can beat the masters of the game: the hedge fund managers, the technical analysts with 5 PhDs and the institutional wizards of financial tools.
After watching a great episode of Jim Cramer's Mad Money, I realize that many people have bought into this. Yes, that means you Cindy, mother of 9, from San Fran. And Bob from Michigan, even I know that buying 2 stocks of Google does not make you Warren Buffet. So here are some things we can all take into consideration....
1. Most likely we will only beat the market out of dumb luck, but that does not mean success.
- Yes, you made a good call on timing last June on AAPL with the iPhone but real success comes from long term gains.
2. You cannot day trade, do not even try.
- Day trading for the average Joe is not smart because you have two things working against you; poverty of time and availability AND uncle sam's little gift- short term capital gains tax.
3. Ten stocks is not diversification.
- True diversification is creating a portfolio where beta is not too far above or below 1.0. This can be achieved by buying index funds (google "spyder funds": a group of Equity Traded Funds) or by a mutual fund that has little to no load fee. (keep in mind that load fees often represent the management of these funds.)
4. Savings accounts are not overrated.
- Ask the trader that had an unrealized lose of 30% about savings. Would I rather have an E*Trade savings account with a guaranteed return of 5% per year or a mild stroke? I think I will take the bird in hand. I am not saying that one must be fully invested in boring bank notes, just some of your investment. Many calculate you risk propensity as 120- your age. My risk propensity would be 99% because I am 21 years old. The percentage should be the amount you have in risky instruments. That probably still leaves a percent or more for a small risk investment like a high yield savings account.
5. Try not watching the daily fluctuation.
- If you just leave your group of securities and other financial instruments alone you could be pleasantly surprised in a few months. Watching daily up and downs does not help your addiction.
So this week, as everyone tells you that you are stupid to not be in the market, they could be right. There could be some reward but remember, buying stocks are like buying groceries: sometimes they spoil and sometimes you can eat it all up while they are good. Good luck this week you warriors of insanity!
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