Sunday, November 30, 2008
Taking Action in 2009...How to Make This Nation Great Again (cause we have DEFINITELY fallen off our perch.)
"The only thing we have to fear is fear itself." Some speeches live forever, and Franklin D. Roosevelt's 1933 inaugural address, carried to tens of millions of Americans by radio at the lowest depths of the Great Depression, remains among them. Eight days later, FDR delivered his first "fireside chat." When a special session of Congress adjourned after exactly 100 days, major programs for economic regulation, relief, reform and recovery were in place. Hope and optimism had been restored.
Take Action in 2009
The Now Famous Words of Barack Obama "Yes We Can"
The Authors of Every Monday Matters at Google's Headquarters
Saturday, November 29, 2008
Were you a Republican, Democrat or Independent voter?
Did the person you voted for end up winning the presidential race?
Does that even matter?
These are a few questions I pose because I've thought about them quite a bit both BEFORE and AFTER the election.
At the end of the day, the person that won the nomination has to bring the country back together and then get the country to take ACTION to try and improve the country and our future.
Here are a few great books/videos that I've come across that I'll be reflecting upon, and acting on, in 2009.
FDR and Obama's first 100 days
Friday, November 28, 2008
Now they are trying to stimulate their local economy by encouraging more lending. People will be paid less to save so they will need to invest their $$$ (both banks and individuals). As I have pointed out, China's economy is 50% export based so their economy gets beaten up pretty good when Americans stop buying stuff due to the credit crunch and concerns about their economy. Will it spark increased spending amongst the Chinese consumers? Time will tell....I am not holding my breath though :)
Thursday, November 27, 2008
Wednesday, November 26, 2008
Last week the MBS market for commercial real estate took a beating and really took a toll on a few funds.
From the WSJ:
Last week's record plunge of the commercial real-estate securities market has claimed its first major casualty: a $1.5 billion fund with investors including Texas billionaire H. Ross Perot and members of his family, said people familiar with the matter.
Other hedge funds and money-management firms that invested in real-estate debt face the potential for more margin calls. These include a $2 billion fund managed by Petra Capital Management LLC, a firm founded by Andy Stone, one of the founders of the commercial-mortgage securities business. Guggenheim Partners LLC is someone being watched closely as well.
Of interest to Dallas residents, "Parkcentral Global Hub Ltd., the fund overseen by Parkcentral Capital Management LP, a Plano, Texas, firm controlled by the Perot family, peaked this year at $2.5 billion in assets. It used borrowed money to amplify its bets, said people familiar with the matter, and began dumping assets last week.
"That leverage helped hasten the fund's meltdown as the commercial mortgage-backed securities, or CMBS, market cratered last week, and the borrowings also could leave lenders with tens of millions of dollars in losses, the people said."
"A Parkcentral spokesman Tuesday confirmed that the fund has been forced to liquidate to pay off creditors, but he declined to elaborate. He blamed the "unprecedented upheaval of the capital markets in general and the freezing of credit markets in particular."
Tuesday, November 25, 2008
NEW YORK – The Federal Deposit Insurance Corp. says its list of problem banks, those considered to be in trouble, shot up to 171 during the third quarter. That's up nearly 50 percent from 117 in the second quarter, and the highest number since late 1995.
The FDIC also says commercial banks and savings institutions suffered a 94 percent drop in third-quarter profits to $1.7 billion from $27 billion in the same period last year. Except for the fourth quarter of 2007, it was the lowest quarterly profit since the fourth quarter of 1990.
The report is yet another sign of growing troubles in the U.S. banking industry. Late Sunday, Citigroup Inc. got a government backstop for $306 billion worth of mortgages and other assets. On Tuesday, the Federal Reserve agreed to buy up to $600 billion in mortgage-backed assets.
I propose the governement tell companies getting financial assistance to STOP stupid spending as in.....
STOP AIG spending $25 million a year for their name on Manchester United's shirts.
STOP Citigroup spending $20 million for naming rights to the Mets new stadium.
Just STOP STUPID behavior. Look, I am NOT saying stop spending altogether or get "all up in their business."
Lets make sure this is 100% absolutely, positively clear. I think myself, like most Americans and people throughout the world, would simply like our government and business LEADERS to act RESPONSIBLY and don't ACT LIKE LEADERS. BE LEADERS.
In my opinion, that is what ticks off the average American working family. When they work hard each day to get educated, get a good job, send their kids to college, etc. and watch DUMB decisions made by guys making a BOATLOAD of $$$ (who get paid MILLIONS when they screw up and get golden parachutes) it really disenfranches people. It KILLS momentum and the American Spirit.
Then, to top it off, the U.S. citizen watches our elected politicians going to jail left and right for corruption, giving pardons to RICH THIEVES like Mark Richt, probably Koslowski (Bush in 50 days?), etc.
EVERY decision.....and I mean EVERY decision, needs to be done INTELLIGENTLY and rationally and be in our citizens bests interests. If we (government, U.S citizens and business) could spend 10% of our $$$ towards MORE INTELLIGENT actions that would give the economy a bigger boost over the LONG-TERM then lets do it. BE SMART. BE CALCULATED. BE LEADERS..
History shows us, time and time again, that high debt loads and a troubled economy can lead to potentially RAMPANT forms of inflation. We've seen that happen in TONS of places in the last 20 years. If the U.S. dollar collapses it will begin to erode the standard of living in the U.S. like nothing that we have seen since the late 1970s. I believe inflation WILL happen but, in the interim, we have deflation occurring like never before seen (except in the 1930s). Even Nouriel Roubini's comments on http://rgemonitor.com/ support that view.
The real question is the TIMING of the dollar collapse. When will it happen? How soon? Will we be at 10% unemployment when ANOTHER "shoe drops?"
If and when it does collapse, where will oil prices go and will hybrid auto production be enough to come to the rescue for U.S. citizens? Unfortunately we don't eat oil because the price of groceries will also go up AGAIN, thereby pinching the American lifestyle. The standard of living for the average American citizen is at risk here folks and we need to start fixing problems INTELLIGENTLY quickly.
The final point I want to make, before everyone clicks on the video below, is that today's bailout of Citigroup, in my opinion, is VERY dangerous. We need to STOP THE STUPID behaviors that are getting us in trouble.
1) Did you know that the Beatles played at Strip Clubs for 8 hour sets (yes, 8 hours) for months before they came to America? By the time they came to America they were EXPERTs on stage. These guys knew EXACTLY how to play together. They were willing to throw their heart into it......
2) Did you know Bill Gates snuck out of bed and the HOUSE to go program at University of Washington from 2 a.m. to 6 a.m. in 11th grade?
Hope you enjoyed this clip I discovered!
Update: Here is another interview of Gladwell I found on http://www.thestreet.com/
Monday, November 24, 2008
Sunday, November 23, 2008
Everyone knew Citigroup was in trouble. Now it looks like the government is stepping in to do something.
What is VERY unique about Citigroup (NYSE: C) is that they are 60%-70% international revenue vs. JPM at roughly 30% or so and Bank of America at 5%-10% max. This basically means that there is more COUNTERPARTY risk associated with Citigroup going under than other institutions since they play a much larger role in foreign capital markets. If Citigroup goes under than the global financial markets could really unravel quickly....That is the concern that the government is trying to address before the markets open tomorrow.
But, focusing on this weeks movement I think the following:
1) S&P 660-700 was a price range I was starting to hear a few weeks ago but I was hearing too much "fair value" when the S&P 500 price levels hit 800, which told me that we had ALOT of downside risk remaining. Given that S&P500 EPS estimates are 15%-20% too high, in my opinion, shaving 15%-20% off of S&P500 price levels gets us to 640-680 on the S&P 500. That is my target range for when the market MIGHT get near a bottom. Frankly, at this point it is a guesstimate but one I'd put ALOT more credence in then most Wall Street Pundits these days.
2) Anyone see the way the financials performed this week? I commented about it but, after that, it just got WORSE and WORSE and WORSE....
Here is a two week chart of the 2 largest banks in the U.S. and Citigroup. You can see how we had some major declines in major financial stocks this past week. Given that the financials have LED this decline they gets me a bit spooked re: the near-term future.
3) I had to book a trip to Vegas for January of 2009 (bachelor party so, twist my arm, I had to go :) ). I'll update everyone re: what I see when I get back but this is what I noticed from afar.
- Airfares are TOO EXPENSIVE. Gas has come down NOTABLY but airlines continue to charge LUDICROUS fares and their times STINK. I am going American one way and Southwest another to drop the cost to $300 from Dallas. Oh, and my free miles couldn't find a flight worth a crap to use them on
- I got a room for $70 a night vs. $150 published on major websites. This is Thurs/Fri/Sat. The longer I waited the more the rooms in Vegas kept coming down.....
4) Any financial review/post not commenting on the auto companies would be crazy. Without MAJOR re-structuring the U.S. auto industry doesn't deserve any $$$. It would be throwing good $$$ after bad $$$.
A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing prices and a sharp decline in market liquidity. Anyone thinking subprime mortgages/CDOs/ABS as well? (collateral debt obligations and asset backed securities = CDO & ABS). The Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.
A Minsky moment is a phenomenon named after economist Hyman Minsky, which describes what happens when an economy simply can't afford its debt anymore.
To put this into current, economic terms:
Lower home and stock prices leads to less consumer spending.
Less consumer spending leads to smaller trade deficits.
Smaller trade deficits lead to less foreign capital inflows.
Less foreign capital inflows lead to higher interest rates. Japan didn't need foreign capital in the 1990s.
Higher interest rates cause property and stock values to plunge.
Plunging values leads to less consumer spending.
Less consumer spending ... haven't we been here before?
Repeat cycle until broke.
Friday, November 21, 2008
From yahoo Tech Ticker
Heading into Friday's session, in which an early rally effort quickly faded, the S&P was down 49% year-to-date and on track for its worst year ever. Down 43% year to date, the Dow is heading for its second worst year in history, the WSJ reports, trailing only the 53% decline in 1931.
Heading into Friday's session:
- 115 S&P stocks were trading under $10
- 41 were trading under $5
- 204 were trading with a market cap of less than $4 billion
These are not the only criteria in the index, but S&P 500 companies typically have market caps above $4 billion and stock prices above $5. Furthermore, many institutional fund managers are prohibited from owning stocks that trade below $10 or $5, depending on the firm.
Thursday, November 20, 2008
Wednesday, November 19, 2008
So my question here is "Why is JPM outperforming BAC so much, ESPECIALLY in the last few weeks. Their stock is only off 15% but BAC is off nearly 25%. Is the market saying something?" Why does the analyst at Institutional Risk Analytics think JPM and Citigroup need to go back to the Feds and not BAC? The charts/market seem to indicate a different scenario.
So I have posted earlier on my blog re: Citigroup and my thoughts that they were in dire straights. The reason that The government gave four banks $25 billion was so that no one would shoot Citigroup after they were the only ones getting $$$. They would stand out from everyone else.
Now this guy from Institutional Risk Analytics is saying JPM will need more $$$?
Both $$$ mentioned are very scary. Guess I'll keep on building cash for awhile! My Jan-09 target for cash building is now moving to March-09.
Apparently they indicated in their meeting on Monday with employees that losses will be $4.9 billion in Q3 with losses going up $1 to $2 billion each quarter. That means next June the company could lose up to $10 billion.
Anyone else need a stiff drink after reading that?
Wow. Where was the board during all of this? I mean, these guys lost an INSANE amount of money and no one seems to be losing their shirt except the U.S. taxpayers (for the time being). I sure as heck feel now that Robert Reubin shouldn't be the Treasury Secretary in Barack Obama's Cabinet as the guy has been paid $15 million per year as a board member and investment banker at Citigroup since leaving the Clinton presidency. What was his role in this?
Friday, November 14, 2008
1) Roubin was an advisor/banker at Citigroup and Board Member. He is an an economic advisor to Barack Obama and possible Treasury Secretary. He had that role with Bill Clinton. Should a guy that clearly was asleep at the wheel re: risk management and enriched himself the entire time get such a role? I don't think so.....
2) Citigroup is really the reason that the banks got $25 billion each (Citigroup, Wells, JPM, Bank of America) in loans from Paulson via their "closed door" meeting that was highlighted in a 60 minutes video link I posted about a month ago. Ken Lewis of Bank of America is interviewed.
Citigroup is 60%-70% international. If they go under the "counter party" risks (ie. exposure of other worldwide banks/nations) would go THROUGH the roof and take down the entire global financial system.
If you look at their losses they have some of the highest amongst all banks in writedowns associated with mortgages - I am sure they will eventually be passed by Wachovia.
Additionally, look at their exposure to consumer credit. Henry Blodget estimated it at $500 billion in exposure. A 10% writeoff is $50 billion!
Just something to keep an eye on.
If you are a growing economy you need more power. You get it from coal, nuclear, wind, solar, etc. Coal drives something like 70% of U.S. power. The Chinese have done this as well but their pollution controls haven't been as strong as ours. They have been focused TOO MUCH on low cost stuff up until now. With the growth of their manufacturing sector, their environment is in SHAMBLES.
So they are increasingly turning to solar power and wind power, which they hope to export to the rest of the world later one. One way to play the "green revolution" with a strong China focus is APWR (A-Power Energy). Something to look into....Due your DD.
The weekly trends still appear downward for now but the short-term charts are pretty flat. You can see from the MACD curves that there is potential for a HUGE breakout at some point. The 10 week moving average is still coming down but it is at $9.00. An 80% bounce could happen and then get SLAMMED by the market quickly. I think I'll keep on building my cash balances and put some $$$ to work with APWR early in 2009. Same goes for Gulf Resources, which is now consolidating but the weekly trends are still coming down. That stock appears further along in its consolidation pattern and next week should indicate a crash of the stock or a potential run as the stock is now trading RIGHT AT the 10 week moving average. It is Overbought on the daily charts but NOT on the weekly charts :) We'll see which trend is more powerful....
I am not an economic forecaster but here is why, despite NO comparable datapoints since 1929, this will NOT be another great depression.
* The level of government intervention in the current financial crisis is completely unprecedented. Last time this happened the government INCREASED taxes, the Federal Reserve did nothing and banks were ALREADY belly up. Oversight of the stock market was NON-EXISTENT.
* There is a coordinated multinational approach to this economic history like none in modern or prior history that I can find. At least not on this scale, in value terms or percentage terms. Please let me know if you find anything comparable.
So, there you have it folks. I don't have solutions but I do have some observations. I'll post some interesting, "pick me upper" quotes for everyone this weekend. How about that? Hopefully by then everyone hasn't put a shotgun to their head due to depression about reading this blog ;)
2) Her synopsis for Brian Williams (she is a CNBC correspondent) is SPOT on. We are now over $1 TRILLION in government committments now. Staggering!
3) Nearly 20,000 job reductions were announced today from major corporations. This is getting ugly. I am shaking my head in disbelief. The unfortunate thing is that most people are just now getting scared. I've been that way for 4-6 weeks now!
Thursday, November 13, 2008
So here are a few articles I have come across in recent days as well as observations
1) Nortel, JCPenney & Pizza Hut all had layoffs here in Dallas.
2) American Express became a bank. They now get access to the gov'ts coffers via discount window and can sell their securitized credit card balances to the government. They get liquidity. WOW!
3) There is more push to get these auto manufacturers part of the bailout package. Did you know that GM, less than a decade ago, paid out dividends & bought back stock worth $20 BILLION? If you knew that, how would you feel about bailing out the auto manufacturers, investors and unions? If they didn't pay out the cash the unions would have taken it via DEMANDING higher wages for an "honest day" of work.
Which then brings me to this CNBC/LinkedIn.com poll. Looks like most American's, by state or career path, don't agree with the auto manufacturers getting one penny....
Cosmetic sales were up 25% during the great depression. One of the few categories to experience sales growth during that time frame.
Sales of lipstick were up 100% after September 11, 2001. Apparently lipstick sales are up 40%
in recent months.
Now think about the impact on a MUCH bigger scale. All of a sudden tons of Fortune 500 companies will have underfunded pensions as well. This will drag down earnings growth, hinder job growth or exacerbate the downturn/need for cost savings.
Wednesday, November 12, 2008
1) Don't mess with the toilet paper
2) Double digit growth in store brands vs. name brands
3) Store brands are an average of 46% cheaper
4) Many people are beginning to feel that name brands are "overpriced or overrated." In a declining economy and one where there is abundance of options vs. before have brand margins gotten out of whack with reality?
The authors of recently published book "Brand Bubble" seem to think that tough times are ahead for major brand labels. These folks work for Young & Rubicam, part of the largest ad agency holding company in the world, WPP Group.
Will we go back to gas guzzlers?
Will innovation stop in green technologies?
Will we STOP implementing them due to economics that don't appear favorable, especially during these tough economic times?
If you are looking for a "green" revolution than today's economy is like the "perfect storm" for that segment of the economy. Lithium Ion battery powered vehicles will get pushed out, etc. I hate to say it but there is a direct correlation with gas prices.
Now, in a few years I think we'll be back at $100 oil but, until then, it makes me sick......
FYI, look for the Chinese to lead in the "green revolution." They have TONS of engineers, a HUGE national focus on this (they have polluted their environment big time) and they still have another 700 million people to bring out of poverty in the next century :) This part of the economy will be a HUGE export for them, in my opinion. Solar already is.....but wind and cheap CLEAN COAL solutions will be coming soon! APWR is the stock ticker symbol of a chinese wind turbine company for anyone looking into that sector of the company. Keep your eyes on it!
Tuesday, November 11, 2008
The Fed refusing to reveal who received almost $2 trillion in non-TARP loans, or what collateral it has accepted from "emergency" loans made to struggling firms, as Bloomberg reports.
The Treasury Department providing a tax break to banks involved in acquisitions that could amount to $140 billion. <--I, for one, don't have that much of an issue with this one. The reality is it will re-build balance sheets for banks and hopefully keep interest rates low as they won't have to charge crazy rates to generate decent EPS. There are two sides to every story here....
Bottom of message
"Apple, he says, is going to start selling iPhones via Costco at $149 starting in January. "
Dell & Starbucks are two notable examples I can come up with that are utilizing social media to re-connect with their customers and look for ways to improve their operations. When it doubt ASK THE CUSTOMER!
It wouldn't surprise me to see Chinese stocks down notably tomorrow. After the bell, an industry stalwart (Focus Media) and big chinese holding of many mutual funds/hedge funds announced they are missing guidance slightly this quarter but guiding down EPS estimates SIGNIFICANTLY for next quarter.
Which begs the question.....How much is the Chinese economy slowing down? Will even 5% growth happen next year? Is their stimulus package enough? How much will Google's stock price fall since their EPS is based on advertising as well. Yes, this is China vs. the U.S. but people have been hearing rumors about a slowdown in online advertising spending and an "informal, unofficial" hiring policy per the video below.
Do what you know
No surprise here. Cash is king, ESPECIALLY in today's environment
Management Strategies & Overhead <--key for today's environment.
Differentiate Your Product (key for branding/marketing). Don't be a "me too" company
Monday, November 10, 2008
This is no suprise to us, right? I've posted about Circuit City and their woes going back to April 15th, when Blockbuster said they would buy them. At the time of the anouncement I believed it was one of the dumbest acquisition announcements I have EVER seen in my life (or read about from older times). Blockbuster, a struggling retailer in their own right and one without a spectacular balance sheet thought they would buy Circuit City on April 15th (tax day as well).
By July, Blockbuster woke up (management probably was tired of being told they were the biggest idiots in the room) and backed out of the deal. I know this is bold language but it seemed like a complete "NO BRAINER" type of deal NOT TO DO.
So lets take a look at some interesting facts about Circuit City and their industry.
1) Their stores are DEAD when it comes to foot traffic vs. Best Buy.
2) I find it interesting that Ultimate Electronics, Tweeter and Circuit City have all died a painful death in the last few years.
3) Linens N Things went into Chapter 11 earlier this year. Recently they went Chapter 7 and began liquidating assets (ie. completely shutting down.) Circuit City announced a 20% store closure last week, big cuts in management LATE last week, Chapter 11 this week and likely, in my opinion, Chapter 7 eventually.
Seriously, these guys have been HEMORHAGING cash for some time, they have NO differentiation vs. Best Buy (me too concept) and people have STOPPED shopping there altogether (at least people I know.) Who will buy a $2000 TV from a bankrupt retailer? We'll see how it plays out in the stores but I am NOT optimistic re: their future.
Here are some time management tips for budding entrepreneurs and corporate workers as well.
I have been getting VERY serious about this due a few reasons:
1) I want to read more - I find my mind really gets "WIRED" differently when I am reading. My creative juices get going and I find myself thinking more "outside the box" while at work.
2) I want to lose weight - therefore I need to get cardio in.
3) I want to keep this Blog full of new, fresh content. It takes time to write articles / thoughts, cruise the net, create posts, etc
4) I am getting back into investing in a big way right now. I am actively, as everyone can tell, researching a TON of chinese small to mid cap stocks, energy plays, etc. I hope to make some nice $$$$ in 2009 by making some purchases in the first quarter. Until then I am waiting for the market to consolidate.
As my market update yesterday indicated, I think the market is heading lower so I am not in a rush to buy stocks right now.
Sunday, November 9, 2008
1) This dwarfs the $150 billion amount the U.S. spent in February to stimulate the economy.
2) Where will the Chinese get the $$$$? That question alone will cause a ripple effect as people will anticipate that they will be buying fewer U.S. treasury bonds and take more of their currency reserves back home with them to spend on their local economy. This might hurt U.S. stocks/bonds further and cause the U.S. stock market to pull back.
3) This should boost Chinese-based companies that do the bulk of their business in China and sell primarily into their economy/market. Remember 50% of their economy is export related.
So, as the week comes to an end, what did we see and, more importantly, what SHOULD we be forecasting?
1) Unemployment levels on two reports wednesday (challenger gray and some other private report), then one more on friday (gov't data) confirmed that unemployment is at 6.5% and 10 million people. I thought we were due for a record unemployment rate (in my generation) but this number is climbing quicker than I thought. What concerns me is the number of people who are REMAINING on unemployment (continued claims) within the data. I believe that number is at its highest levels in nearly 25years. WOW! Below is a 14 year graph I found in an AP press release. I could have pulled the data myself but I am a bit pressed for time today. I have got tons of stuff to get done in the next 1-2 weeks before family comes into town as I am sure everyone reading this does too :)
2) Obama won the election on Tuesday and the stock market slid 10% on Wed/Thurs. as the market was reacting to his tax policies and their impact? No, the lousy unemployment data came out on Wednesday, which shocked the hell out of everyone. On top of that, U.S. auto companies began pandering for $$$ on Wednesday looking for a handout from Uncle Sam. Lets remember that just about every U.S. poll had Obama winning this for weeks, maybe even months now.
Here is a picture of the situation Obama is going to be walking into.
Here is my take on the U.S. auto companies and their situation: I don't see how Uncle Sam can hand out BILLIONS to many banks that irresponsibly lent out $$$ and had senior executives that directly profited from those risky lending behaviors. The impact reaches globally. While we worry about job loss here in the U.S. as well as in industrialized nations developing nations worry that a financial crisis will turn into a HUMANITARIAN crisis where the world's poor are forgotten and die of starvation. That point should NOT be lost on everyone. I am NOT liberal but I do like to think of myself as socially responsible.
Getting back to the point, to bail out Wall Street, who are apparently going to get FAT bonuses this year, and turn a blind eye to blue collar workers is LUDICROUS.
Now, having said that, lets realize a few things about the auto industry.
1) They have been uncompetitive for 25 years and have been saying the same rhetoric for as many years. The graph below highlights this.
2) There is more health care costs in a car than steel. Some cost containment/restructuring has to happen BIG TIME.
3) Letting one of them go into bankruptcy would have a MAJOR ripple through on the economy (suppliers, cities, etc.)
Where I take exception to giving them $$$ is this:
1) What will be different? What will fundamentally change that will enable them to make money or gain marketshare back? I just don't see why we should toss good $$$ after bad $$$.
2) No company should be allowed to pay dividends. These loans shouldn't be flowing to the shareholders as these guys are LOSING $$$.
3) While giving $$$ to bankers is bad, at least we know they are doing things differently today, right? I mean the percentage of people geting approved for loans has dropped NOTABLY in this credit crisis and those that can get a loan are oftentimes having to pay a higher interest rate to get financing. RISK is now being priced into the banking system whereas it was NOT before.
K, that's about it for now......This issue just gets me IRRATE.
3) Thursday (and throughout the week) was the first REAL numbers of retail sales for October. We also had Cisco comment about October sales. They were the first technology comment to really comment on a full month of October sales and are regarded as an industry "bellweather" company.
* Auto sales were off 25% + for the auto industry.
* Wal-mart was up 2.8% month-over-month. Quite impressive
* Most department store chains were down 10%-20% based on comparison store sales (comps.) This Christmas sale season is really starting to look bleak quickly
* I also noticed that Walmart was running some SERIOUS sales on Saturday a.m. such as a Compaq Computer for $299 and a 46" LCD for $799.
So we found out that consumers continued to take on debt in September but they must have REALLY cut back in October. More comments after the graph below
Americans are clearly becoming more pessimistic as a result of the loss of jobs. The Reuters/University of Michigan preliminary index of consumer sentiment fell to 56.3 in November, the lowest level since 1980, from 57.6 the prior month, according to the Bloomberg survey median.
4) Finally, and it would be RIDICULOUS of me to neglect this. Oil is in the low 60s and many people here in the loan star state are finding regular unleaded as low as $1.90 a gallon now. I've seen $2 - $2.05 being quite common but a few are lower. Why is gas 40 cents more now for premium vs. 20 cents before? I have noticed a widening of that gap in the last few years.
Good luck to all in the next week. I hope everyone has a wonderful holiday season ahead.
Guy was the marketing guy behind the first McIntosh and now runs his own VC company. He was an Apple Fellow and helps entrepreneurs now. He has written over 8 books in his years and this is basically an "entrepreneurs manual". At 500 pages it might take some time to read! Probably full of tons of useful info. though.
Saturday, November 8, 2008
The average American would say "would these guys get the bonuses if not for the U.S. taxpayer? HELL NO!"
I get that these guys work crazy hours, are brilliant people, etc. But part of bonuses is to RETAIN people and to help them walk across the street to the competitor offering even STUPIDER bonuses. Guess what? There are a TON fewer people even around this year, let alone paying bonuses at all!
The taxpayer is going to get VERY pissed VERY quickly if big bonuses come out. I'll even be bold enough to say that some may ask the LEFT LEANING congress, soon to be under Obama's watch, to seriously look at revoking Goldman Sach and Morgan Stanley's bank charter status. Are they really banks? How long can they survive without being able to borrow billions from the federal government for nothing and use it to gamble each day with the taxpayer's money? Now, I would ask Wall Street. Do you really want to piss off the general public and a left leaning congress right now? Your thoughts? Please comment.
The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. The nation's jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It's only going to get worse.
With the three U.S. auto companies seeking financial assistance to avoid bankruptcy (at least GM & Chrysler) my thoughts of 9% + unemployment are becoming more probable. My thoughts were that this recession would be notably worse than the prior one and, if one auto company fails, it would get us to 9% unemployment very quickly as the ripple effects would go through the economy over a few months.
Banks have exposure, which they would then have to book losses
Auto suppliers would go belly up as many aren't just SOLELY GM, Chrysler or Ford dependent. They lose 35% of their production and potential receivables (uncollected bills) then they' ll have to cut their production, let people go, etc.
Oh yeah, and the communities are dependent on them. So that would ripple through the local economies where the manufacturer is located.....
It could get UGLY quickly is my point here.
FYI, I think the guy with Task is DEAD WRONG for one reason. This economic cycle and downturn is being caused by something NOT SEEN IN 80 years! This is a CREDIT CRUNCH / devaluation cycle and it will take quite a bit of time to work through the system. It can happen quickly or slowly. That is the choice of politicians and policy makers. Either way, I think it will be painful.
The real question is "when will demand destruction end?"
Thursday, November 6, 2008
What is interesting about the book is that these guys work for Young and Ribicam Group and have a HUGE vested interest in branding. In an age of overabundance to brand values decline? Do you put as much of a premium on Starbucks vs. McDonalds? I think it is one of a market decline.....
Wednesday, November 5, 2008
Interesting but I found the stat that 53% have NOT read a blog to be the most interesting factoid. The number of blog pages has been growing at a PHENOMENAL rate the last few years.
For those seeking info. on private equity Venture Capital (VC) is one of the biggest components. This is "value add" type of creation, in my opinion. They take people with an idea, give them $$$ and management tips, and then watched their garden grow.
I don't see as much "value creation" in private equity as I do in VC work. Too much private equity (LBO stuff) is financial engineering/optimization. While some companies are PHENOMENTAL at changing management structures, practices, etc. they tend to be more evolutionary vs. revolutionary.
Tuesday, November 4, 2008
Sunday, November 2, 2008
I wanted to post this last week......but couldn't get the GIF files to post correctly.
Today's left chart is interesting as the charts are now turning bullish. The MACD has crossed (below), W%R isn't overbought at -20 and the RSI has quite a bit of room to move. Short-term it looks like the market is going to rally for a bit. We could get a short-term run and then, as we approach the 10 WEEK moving average, you would expect some SERIOUS resistance and the potential for the market to roll back over. That will take time to happen though.....
The chart on the right shows weekly trends. You can see from that chart that we have BARELY moved above the 5 week moving average and we are now moving out of significantly oversold territory. Nonetheless, 1100 on the S&P is a 13% move to the upside. You can also see how we DROPPED off a cliff from 1100 as well. The previous intra-week high of around 1050 was important. Any close above that would likely spur a run to 1100. That might be where the charts meet at the 20 week moving average. I can't see a run to 1200 anytime soon based on the fundamentals but 1050 seems highly plausible and 1100 seems like a reach (a + 13% move on top of our current move up) but it is possible.
From the early 1920s through 1985, the average level of debt-to-GDP in this country was 155%. The highest peak in history (until the recent debt boom) was in the early 1930s, when debt-to-GDP soared to 260% of GDP. In the 1930s, the ratio then cratered to 130%, and it remained close to that level for another half century.
In 1985, we started to borrow, and last year, when we got finished borrowing, we had borrowed 350% of GDP. To get back to that 155%, we need to get rid of more than $25 trillion of debt.
Do we have to get back to 155% debt-to-GDP? No, we don't have to. But given what happened after the 1920s, and given what people will probably think about debt when they get through getting hammered this time around, we wouldn't be surprised if we got back there. It seems to be sort of a natural level.