CapitalistMarks

Dow up 500+ points in one week! Don’t get too excited.

Posted on 17. Jul, 2009 by scott.

The Dow, Nasdaq and S&P had a great week.  In five days they made up the losses of the previous five weeks.  Sounds great and looks great on paper too.  But don’t get overconfident.

Much of this is smoke and mirrrors.  At least until we (the politicians) generate a bunch more confidence and get a handle on unemployment.

So, what gives?

The market this week was driven by three main stocks.  Goldman Sachs, Intel and IBM.  And you know what all of these have in common, and why you shouldn’t be raiding your mattress for $$ to throw at the market?  They have huge international components to their earnings.

If you take the time you can read all the press releases and you will soon discover that the gains are not a result of a change in perspective by the ‘all important’ American consumer.  These good earnings are a result of positive GDP (Gross Domestic Product — the value of all goods and services) in three of the so called BRIC countries.  Brasil, India and of course China.

These countries have a combined GDP of about $4.5 trillion.  The United States has a GDP of about $13 trillion.  But the U.S. is going to lose ground this year (negative GDP growth) and the BIC (BRIC less Russia) are going to have an average GDP growth of around 6-8%.  Their consumers are spending.  Their governments are NOT running up huge deficits (China even has a huge net SURPLUS — several $trillion).  Their governments are not trying to do too much with too little.

These countries have a population of around 2.6 billion people (the U.S. has 305 million) or about twelve times ours.  So they don’t ALL have to be buying computers, TVs and Toyotas.  But a bunch of them are.  Buying computers with Intel chips and IBM software or consulting.  Plus, because they are growing, the innovators in these countries are growing or starting companies and where do they get the money and financial savvy to do that?   Goldman Sachs and the boys.

DELL, the once dominant American PC company reported disappointing earnings and projections.  Starting to see the picture?

The bottom line:  The U.S. is not even close to being out of this recession.  Obama and his team of ghurus and knuckleheads have got to get a handle on unemployment and rising taxes.  Don’t expect this runup to continue.  If you have some good profits then consider taking some of them off the table in the next few weeks . . . you just might be able to get back in cheaper if and when the next wave of bad news hits (for the traders our there, and not the long-term investors . . . wait are there any of those left?).

By the way, historically the month of October seems to be when markets can take some awful hits–especially if things aren’t going well– and they aren’t and probably won’t be by then.

Too bad we are pumping out bad news all the time (i.e. full speed ahead with universal health care and damn the costs) and the BIC’s are pumping out real infrastructure projects, sensible energy policy (well at least Brasil), and actual economic growth.

Stay tuned.

This ain’t over yet baby!

thanks to epak at Flickr for the photo

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MRI, as in MMM, R I worried about health care!

Posted on 15. Jul, 2009 by scott.

I had an MRI today, took a couple of hours but only 35 minutes in the actual machine.  The rest was waiting. Fortunately the MRI was one of the new ones that are called ‘open’ which means translates to only terrifyingly claustrophobic.

When I got home there was breaking news on CNBC, the Senate had passed a health care bill.  After listening for only a minute I knew there was trouble.  An MRI is nothing to worry about compared to what our government can do when they pump a bill through a veto-proof Congress.  Yikes and it only took the Dems a week or so after getting Al Franken in the Senate!

Its like magic for Obama and his obedient servants.  Mr President, you may get your wish for a bill to sign by August but if you do it WILL NOT BE A GOOD ONE.

I tell you what gentlemen and ladies, America has been trying to get a universal health care bill passed for 60 years (ever since FDR’s days).  And now we are to believe that the Dems in Congress can flush out a workable solution in just a matter of weeks?

Don’t you believe it.

Of course we still have hope for reasonable dialogue on the tough issues (how to pay for it, how to lower costs, how to ‘force’ people to signup, and so on).  But I will tell you the thing I really fear after my one minute lesson during the breaking news: 8%!!

Seems the Dems in the Senate want to force employers to pay 8% of payroll to help finance this thing (a $trillion + over the next decade . . . and that’s low).  If they are starting at 8% what are they going to end up with.

Let me give you the historical example . . . and it is a good one that is entirely relevant.

Social Security.

Hang on because this is a lesson in government, politics, economics and social theory.  One you are NOT going to like.

SS is big now, but it wasn’t to start.  Today, Social Security is the largest government program in the world, the single greatest expenditure in the federal budget (21%) and represents 37 of ALL government spending and upwards of 8% of our entire GDP!!Can you imagine if we duplicate that with the Dems universal health care bill?

Originally in 1937 (the first year the 1935  ‘Old age, survivors, and disability insurance’ Act went into affect) only 1% if wages up to $3,000 were paid by the employer and employee.  That’s $60 total.   The figures for today are 6.2% and $106,800!  That’s $13,243 total.  Now, we all understand the longterm impact of inflation but the % increase is 620%!

In the midst of the greatest recession since FDR’s time (when Social Security started) we can’t afford to ‘TAX’ our employers another 8% of their payrolls.  This is particularly true of the engine of our economic miracle . . . the small businessman(woman).

And if they want 8% not what is it going to be when they really figure our how much this is going to cost?  Are they going to tack on another 8% withholding from the employees wages?  Will it end up a 16% tax?  20%?   30%?  In a year?  Two?  Five?

These are the biggest knuckleheads in our country that we are talking about here.  Guys that do everything possible to keep getting elected again and again (like our 30+ year veterans such as Hatch, Utah, and 40+ year Kennedy, Massachusetts). They don’t know what is going on in mainstreet and they really don’t care!  They have been living ‘cushy’ loves in DC far too long.

Note:  Don’t forget that my single greatest desire for our country is to see term limits for ALL elected officials.  Do I need to keep harping on this?

Point:  we need universal health care.  We can’t be a great country without caring for ALL our people.  But . . . there are other ways and they need to be explored in more than the first few weeks and months of Obama’s 1st year in office.  Let’s do it, but let’s do it right the first time.  In a sensible economic and social way.

Our ‘leaders’ need to be creative, innovative, thoughtful and concerned. Good Universal health care just can’t be this easy.  They need to consider most, if not all, alternatives and not start with an 8% tax right off the bat.  Not in this economic environment.  Such irresponsible thinking will lead to higher unemployment and even greater social costs in the future.

We need good, well-paid doctors and health care providers, but can’t we give them tax incentives, or writeoffs of student loans for service to God and Country?

There aren’t millions of people NOT getting medical care in this country (the double negative is intentional for affect . . . did it work?).  Those that need care get it and providers as well as taxpayers are paying for it already.  Can’t we figure out how to take those costs and build them into the system?

American’s tend to treat injuries and diseases.  Can’t we be more proactive and preventative in our care to reduce costs?  What about expensive tests?  Like my $1400 MRI today.  Do we really need all these or are Doctors just protecting themselves from the costly lawsuits filed by greedy lawyers?  Can’t we limit medical malpractice suits?  Like the loser being forced to pay all costs?

We have to find a better way.

Come to think of it, I might see if my doctor will order up a CatScan so I can have another couple hours to think on this.  Why not?  Our current system has no controls, no reasonable bounds, and it sure doesn’t make sense to the millions of people waiting tens of millions of hours in doctors offices every year (my personal record is a three hour wait for a 4 minute visit with a doctor).

How does any of this make sense?

Doesn’t unless you care.

So contact your congressmen and let them know you won’t stand for a ‘quickie’ bill pushed through by the Democratic majority. Not that the Republicans have offered any real alternatives.

Get a committe together of the top minds in all the related fields, put them in a room with nothing to eat but buttered popcorn and diet Pepsi.  For a week.  Bet they will come up with some great ideas.  Fast!

Let’s take the time to craft something really good, really innovative, really effective, really American!!

Thanks for your time and I hope you don’t have to get an MRI anytime soon!

Thanks to muffet of Flickr for the photo of an older ‘enclosed’ MRI

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Power to the people! Shareholders that is.

Posted on 18. Jun, 2009 by scott.

I think it was Yoda who said “Power, with the people, is.”? If not he should have.

Today I want to further embelish my proposed new capitalism.? The issue now is public companies and the salaries and benefits they pay as well as the way the conduct business.

Adam Smith, John Meynard Keynes and John Kenneth Galbraith were all supportive of public companies.? I am too.? But not so much in the way they are run today.They aren’t for the shareholder that’s for dang sure.

The simple truth is that the laws, regulations and even traditions associated with publicly held companies in America are outdated.? “In the beginning” shares were sold by reputable owners to neighbors and friends (perhaps a few friends of friends).? The point then was that very little regulation was needed because? morality and personal obligation most often over-rode any potential greed or misconduct.? Owners and management were intended to benefit according to their contribution (i.e. capital, time, skill, technical know-how, patents and so on).? If things went bad, shareholders could walk right in to the presidents office (of the company they invested in) and complain or argue to effect change.? These conditions didn’t vary much for a long time and I will admit there will abuses.

The rules and regulations that have survived reflect this.

Now, we have huge multi-national corporations with millions of shareholders (individually or through mutual funds, retirement funds and such).? Most Americans today own shares in public companies directly or indirectly.? Even though we (shareholders) are entitled to attend the annual meetings and vote for selected issues and directors, the fact is that few, if any, of us do.? There are several reasons for this and among them are:? the meetings are in far off places and hard to get to (intentionally??), the shares (relatively) most shareholders have are insignificant to the whole, management drafts and controls the issues to be voted on or discussed at the annual meeting, etc. etc. etc.

Yet one very important thing has not changed in the 500 or so years of history associated with you and I owning shares in corporations — WE ARE STILL THE OWNERS!!? Yes, we put up the money and we should be getting the attention we deserve for doing so.

Few people really focus on that.? Management doesn’t.? The board of directors don’t.? The government regulators don’t.? And, conseqeuntly you and I don’t — and we should.

This has to change in the new capitalism ( see Capitalism Redux) that I have written about before and would like to see evolve during BHO’s first term.

What I am now going to propose may not be perfect but it is a good beginning point for the administration to restore shareholder interests.? And, by the way, this would have a tremendously positive impact on the stock markets — if for no other reason than we, the people, we feel like we have some real ’say.’

These changes would be required by the SEC (Securities and Exchange Commission) and every public company would have to follow them.? They would not have been possible twenty years ago but technology makes them easy today.

Here they are.

1:? Each public company would keep a current and accurate list of ALL individual shareholders (now the majority are invisible to management because their shares are only reported as consolidated in the funds that own them).

2: Each public company would be required to make the list readily available to every shareholder including contact information (most importantly email addresses, but the other stuff too).? Every shareholder would be able to contact and influence every other shareholder directly.

3: Each public company would provide immediate alerts of news to EVERY shareholder BEFORE it goes out to anyone else (or at least at the same time).

4: Each public company would maintain a fully functional website for shareholders and interested parties.? This site would facilitate communications, discussions and even debate through blogs, questions to management (the PR department anyway), and other such means.

5: Since every shareholder would have access to all the above, any single activist shareholder could conduct thier own campaign for change by communicating directly with his other ‘partners’ as well as management.

6: Every public company would be required to have a vote on any issue that a reasonable % of shareholders agree on –? and majority rules.? I understand that this might make annual meetings a bit more uncomfortable for management but if things aren’t going swimmingly for the shareholders then management shouldn’t be sleeping very good at night either.

The whole point of all this is to return control of the company to the owners — the shareholders.? Not day to day management, but real control of important issues like who is running the company and how much they are getting paid to do so.

Shareholders will have a say on compensation, on the board of directors . . . heck on just about anything that is really important.? AND THEY SHOULD!!!

This would stop the current trend of management ignoring shareholders to line their own pockets, to produce dangerous products, to take advantage of labor, to go offshore and avoid taxes . . . . . .

If we make such sweeping, consequential changes would we only be returning to the basics of true capitalism — the Adam Smith type that worked so well for so long.? People will chose the products, the strategies and the companies that they believe with their $$$.? Management will be responsible to the people (owners) and will get their butts kicked if they step out of line.? Hey, won’t it be great to get rid of all those obscene ‘golden parachutes’ interlocking boards vote for themselves!

I don’t want management, directors, huge hedge funds, mutual funds or large retirement funds (managed by their own ’select’ people) making decisions for me.? I WANT TO VOTE ON EVERY IMPORTANT ISSUE OF ALL THE COMPANIES I OWN SHARES IN AND I WANT TO HELP DECIDE WHAT ISSUES ARE IMPORTANT.? You don’t have to vote or get involved if you don’t want to, but the point is that under these new regulations you can if you want to.? Ain’t happening today that is for sure.

To begin we, the people, need to take control back.? Send this to everyone you know.? Let’s start a real grass roots effort to make the change we need.

Capitalism Redux!!

Power to the people!!

Oh, no picture today, I want you to focus on the words!!

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Don’t hang your hopes on the market . . . yet!

Posted on 12. May, 2009 by scott.

Frankly, there has been far too much enthusiasm for the stock market lately.? The markets are up (at least the Nasdaq) for 9 straight weeks.? Time for a pull-back.

I stick with my prediction of DOW 10,000 but I am moving the date back to July (maybe August).? The old saying is ’sell in May and go away’ but don’t look for that to be true this year.

Sell now, but be prepared to get back in within a few weeks.? I expect a pull-back of 15-20% and possibly a little more.? When the wheels start rolling again the bull will take off for real.

Why?? The stimulus hasn’t really had a chance to take affect yet (and it will), confidence is building (and will only get better), earnings are beating estimates (but from very low expectations) and most of the bad news is in.? Yet the thing that will bring markets down for a few weeks is the financial sector . . . not triggered by real estate again but by consumer debt.? Sadly we haven’t heard the beginning, let alone the last, of this looming problem.

So, my saying for this year is:? “sell in May and wait for only for payday”.? Payday is the aforementioned 15%+ decline.? Pile on after that.

Dow 10,000 this summer.? Dow 13,000 by the end of the year.

After that all bets are off.? Obama doesn’t walk on water and though he is batting about .500 right now that pace is not possible to maintain in our politically charged environment that has just been exacerbated with the news that Medicare will be unfundable very soon.?

That deficit is just a precursor to the Social Security disaster coming down the road . . . a real battle of the titans on that. ? “Conservatives vs. liberals” will seem like the good old days when the baby boomers get hold of that!

Thanks to flickr’s kevinzengli for the photo

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How long to recovery? How about NOW!

Posted on 13. Apr, 2009 by scott.

I have heard (and read) a lot lately about how long a?recovery from the currrent economic crisis (recession) will take.? The ‘pan-dits’ (pundits with perpetually negative views–about 90% of those on TV and radio) have given us the discouraging estimates of anywhere from 2-3 years to 20 years or more.

Don’t believe it.

It is happening NOW!? In earlier posts I stuck out my neck and predicted an early?recovery of the markets (as in stock).? That seemed pretty aggressive a month or two ago.? No longer.? Markets are leading indicators.? A five week run on the positive side seemed unthinkable six weeks ago.? A 25% gain in that period was dream-stuff.? Now it is real and building.? A further 25% will put the Dow Industrials at the 10,000 level I wrote about as the target for June.?

Not so unthinkable is it?

Why is this all happening?? Is it the incredible stimulus and bailouts invested by our government?? Not really.? Only a tiny (and I mean a miniscule tiny here) of those have had time to take affect.? Capitalism works, without all the outside intervention, and we are watching it go on its merry way.

The markets are like a pendulum, and a wild one at that.? Almost always we can expect the market pendulum to swing (way) too far one way or the other.? This is caused by the herd mentality of our populace, enhance by far-out predicitions from the media.? This pendulum effect is far worse today than fifty years ago.? Blame that on the media, the internet, the Congress, the Fed (Reserve), the Treasury (Department), your local newspapers (if you have any left).

I remember once in college, I got to a class a little early and a couple of students were waiting outside the door.? I joined them, not even thinking about it.? After ten minutes the entire class was waiting.? Pretty soon the Professor arrived and started waiting too.? After ten more minutes someone thought to open the door and look inside.? The room was empty.? What a bunch of morons! And sheep.? These are the same people we are ‘following’ today.

Jeez Louise, how I wish we all thunk (plural of think in my odd universe) for ourselves.?That would be?cool, fool.

Yet, economically the tide is turning, the pendulum has started the move back, and it will pick up speed.? The new administration has stopped ‘nay saying’ and started to be more encouraging . . . on all fronts.? Confidence in building.? Spending will pick up and the economy will get back on track.? A whole bunch of American sheep will be piling on soon (most of them too late to enjoy the full benefits of the current upward?move).?

Follow the ‘crowd thoery’ and watch with wonder.? I won’t trouble you with analysis of all the leading indicators but they are swinging the right way too.? This I will reconfirm: Dow 10,000 by June.? Positive GDP growth in the third quarter for sure (I actually think we can see positive GDP in this, the second, qaurter).

The recovery has started.? The stimulus helped, primarily because it gave people hope and then confidence.? Did we need it?? Probably (but not for the reasons you think).? Do we need all the ‘rest’ of it now?? Probably not (let the free markets take over).?

It will take two years or so for all the stimulus and bailouts to take affect.? We will be far into the next expansion by then and frankly all that extra spending (investing) will be wasted.

I wish we could pull a bunch of the spending off the table.? Possible, and not likely.??When has Congress ever made a timely AND?right decision?? I read about one on December 8, 1941 . . . haven’t heard of one since.? Need I remind you that we need TERM LIMITS!? That would be the best change of all.

Stimulus?? Bailouts?? Tax cuts?? Deficit spending?? Fiscal and monetary action?? That’s the old news.? The new news is refininancing at much lower?rates, buying homes at 75% of their value from two years ago (and at rates as low as 4.5% for 30 years),?people saving for rainy days (and hopefully putting some of that savings into good equities?that will help protect against the coming inflation (yikes!).?On top of all that we stood up to the pirates and pulled a John Wayne on them!? Way to go BHO.? So!

Doctor, the patient is alive and well, just give him a few months to start running again.?

I’m fully invested and I don’t care about the ups and downs the market will experience in the next year or so.? But, I am sure it will be a good 50% or more higher in a year than it is right now.? I’ll hang on for that gain and count myself lucky to have had the opportunity.? By the way I bought some oil trackers and so as oil goes up (as it will) my profits will more than pay for the extra cost of gas.

This next year is going to be fun, exciting and provide a myriad of opportunities to the confident and brave.?

Cautionary note:? by 2010 inflation could be a bugaboo, by 2011 it will be awful (double digits is possible).? Then watch out for a whole new set of problems.

Ain’t life fun?

Thanks for the flick photo to army.mil

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Oil prices rising, a forecast.

Posted on 25. Mar, 2009 by scott.

Lately the prices of oil have been going up.? I thought they would, since OPEC and Russia have been actually cutting back on production.? This is something they often threaten, but rarely achieve.? Are they shooting themselves in the foot?

I think so, and that is a good thing.

BHO is serious about achieving energy independence, at least he talks like he is.? Further, though some 55% higher than just a month or so ago, oil prices are only about 1/3 of what they were late last summer.? The threat of $150/barrel oil is still real, but all of the world is aware of that and beginning to recognize the need for consumption restraint.

The biggest thing is that America is noticing and ‘we the people’ are doing something about it.? A large part of this next series of statistics is due to the ugly recession of 2007-2009 (see I am putting a time frame on it…and it doesn’t go into 2010!) but a bunch of it is just due to recognition that high oil prices are bad for everyone.

towit.

According to the Department of Transportation ( March 19 press release) Americans are driving a LOT less than they were a year ago, or specifically 14 months ago.? In the period of Dec 2007 thru Jan 2009 Americans have driven 122 billion less miles than in the period of Dec 2006 thru Jan 2008.? This is 122,000,000,000 miles!? And, we drove 7 billion less miles in January than we did in the same month a year ago.

Go figure.? Are we getting smart?? Driving less? Taking public transportation more?? Carpooling?? Yes, yes, yes, and yes.

That is a lot of miles.? Figure 15 mpg average (and that is probably very conservative) then we have saved about 8 billion gallons of gasoline in the last 14 months.? That is about 150 million barrels of oil!? What with lower prices and less oil consumed, it can be argued that Americans just sent $22 Billion less to Chavez, Putin and Ahmadinejad. Take that one on the chin, dudes.

So, are OPEC’s cutbacks helping them??? I think not.? Not only are we using less oil, but so are the Chinese, the Indians, the Japanese, the Europeans and a whole bunch of others (not the Iranians nor the Venezuelans who pay only a subsidized 25 cents or so per gallon).

We are all smarter now.? OPEC is NOT going to dominate world economics like they have at times in the past.? Cutting back is going to hurt their economy not ours.? They will sell less oil for less $$ and their economies (dependent on that oil) will suffer.

Hey Putin, Chavez, Ahmadinejad…how do these ’shoes’ fit?

As I watch oil approach $55 a barrel I smile.? Not because I bought some oil tracking shares a month ago (oil at $36) and so even if prices increase more at the pump, my gains will pay for my extra costs.? No, I am confident that we will NOT see oil at $150 a barrel anytime soon, We will continue to use less and we will get much further into the? renewable energy cycle of investment as Obama moves us along (of course the Chinese need to help here too, but they have reasons of their own to do so).

Yeah, I am mentally sitting on the beach and watching the calm sea as those dufusus’ in Iran, Russia and Venezuela watch their hoards of? my our dollars decline.

AHHH!? It is beautiful out there!? Care to join me?

Thanks for the photo from flickr to eindzel

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AIG’s management — are they nuts?

Posted on 16. Mar, 2009 by scott.

I just don’t get the audacity, ego and insanity of a good bunch of America’s top industrial/financial leaders.? Key exhibit?? AIG.

First, AIG takes more than $160 BILLION from us taxpayers in lieu of a bankruptcy that would have wiped out any and all further compensation for their management . . . this is not, by the way all, at once but in at least FOUR seperate bailouts over the last 6-7 months.

Hold on here, there is probably something before the above first.? It is the fact that management of AIG found the capacity and intellect to turn one of the biggest (and profitable) corporations in the world into a joke and house of cards with their stupid and reckless investments in derivative financial transactions.? With a company this big (over 100,000 employees) there must be at least 1,000 executives that are grossly overpaid and thus there are 1,000 job openings for the unemployed.

Back on track now. Second, AIG manages to loose more than any company in history last quarter.? The total is an incredible $161,000,000,000!? IN ONE THREE MONTH PERIOD!

Third, with our taxpayer investment to bail out AIG and their incompetent management we (the taxpayers) now own about 80% of the stock of this failed company.

Fourth, the management of AIG has been responsible for ‘pushing’ the stock too hard.? Yeh, pushing it all the way from $74/share to a low of $0.34/share? on March 2, 2009.? Don’t get out your calculators, I’ll do the work for you.? That is a decline in stock value of 99%!!

Fifth, our leaders (from Bush and Paulson to Obama and Giethner) believe that AIG is TOO big to let fail.? Well, the market cap of that entire company was only $1 Billion just a week ago (it is about $2.2 Billion today).? To give you some perspective some other ’struggling’ ?companies today have a market cap (multiply shares outstanding by the price of a singe share) of: GM — $1.5B, CITI bank?– $13.6 B, Ford — $5.5 B, and DELL — $18 B.

Sixth, we (and I guess here I have to mean the Treasury Department by default) ought to be making the key decisions about this company going forward.? Certainly NOT the management who got the company into this mess.? (As a further aside here, if the mafia had any money invested in AIG?then maybe we won’t have to worry about current managment much longer — unless they can manage from the bottom of the Hudson while wearing stylish cement boots)

And lastly, there is an argument out there that we have to keep the idiots who are managing this company in place to complete the workout.? Holy Cow!? Hey, Batman, isn’t it true that hundreds of thousands of the best financial minds in the business (oxymoron) are UNEMPLOYED right now.? NOBODY NEEDS BONUSES IN THIS MARKET TO KEEP A JOB.? There are?at least?10,000 capable people who would do anything right now to get any job let alone one like helping turn around AIG.? Count me in that list.

AIG is a mess.? The picture above, represents the executive kitchen at AIG.? It is indicative of how management there operates.? Make a mess … go on to the next thing … make another mess … go on to the next.? They just don’t bother to clean up first.? My mother would send me to my room if I went out to play before cleaning up!

Clean this mess up President Obama, they are NOT to lare to fail.? Stop any bonuses from being paid Mr. Giethner, this company does not need the kind of management they have now.? Send the knuckleheads responsible for the bonuses to their rooms (and I hope they are 12′x8′ rooms with bars).

Stop the bonuses.? Don’t permit the American taxpayer to be a part of such incredible ‘hutzpah’ and insensitivity.? These guys managing AIG don’t deserve a second chance.? Can ‘em.? I have enough experience to step in right now and there are thousands of?unemployed out there who are a whole lot smarter than me and would jump twice as hard to get any of those?jobs.

AIG’s management — are they nuts?? Heck, yes!

thanks to flickrs photo from eschipul

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