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Thursday, August 20, 2009
Thursday, January 22, 2009
Daily Reading: January 22, 2009
I am really growing tired of posting the latest economic data points, quarterly earnings updates, and other useless information. All of that is simply noise; if you are in the game for the long-term, all that matters is you pick good investments and pay an appropriate price.
So today I am posting a couple of articles with more substance:
A great blog post about framing investment decisions in terms of probabilities. gurufocus.
Another great post about 'Warren Buffett's Secret Formula'. investorwalk. SSSHHHH, it's a secret. Actually the secret is simplicity; read the post it is well worth your time.
So today I am posting a couple of articles with more substance:
A great blog post about framing investment decisions in terms of probabilities. gurufocus.
Another great post about 'Warren Buffett's Secret Formula'. investorwalk. SSSHHHH, it's a secret. Actually the secret is simplicity; read the post it is well worth your time.
Wednesday, January 21, 2009
Daily Reading: January 21, 2009
Most of the news today concerns the market rally, Obama's first full day in office, and Tim Geithner's confirmation hearing.
Let me pose a question:
In 4 years, at the end of Obama's term, will his supporters be disappointed to find that the country is largely identical to what it was in 2009? The poor are not going to become rich because of Obama. The rich are not going to become poor because of Obama. We are still going to have energy problems. Iran is still going to hate Israel and by extension the U.S. Etc. Etc....
Don't get me wrong, I'm sure that the country will progress to a certain degree under Obama's watch. He is smart, thoughtful, ambitious, and is armed with a lot of political capital and goodwill. But his supporters seem to view his election to the presidency as equivalent to the second coming of the Messiah. I am curious to see their reaction when it becomes obvious that he is merely a mortal.
Let me pose a question:
In 4 years, at the end of Obama's term, will his supporters be disappointed to find that the country is largely identical to what it was in 2009? The poor are not going to become rich because of Obama. The rich are not going to become poor because of Obama. We are still going to have energy problems. Iran is still going to hate Israel and by extension the U.S. Etc. Etc....
Don't get me wrong, I'm sure that the country will progress to a certain degree under Obama's watch. He is smart, thoughtful, ambitious, and is armed with a lot of political capital and goodwill. But his supporters seem to view his election to the presidency as equivalent to the second coming of the Messiah. I am curious to see their reaction when it becomes obvious that he is merely a mortal.
Tuesday, January 20, 2009
Daily Reading: January 20, 2009
The Federal Reserve Bank is now a leveraged hedge fund. WSJ.
It is inauguration day and mood in Washington appears festive. WSJ.
Warren Buffett has publically expressed his opinion about the future prospects of stock investing four times in his career. Whitney Tilson posted all four articles in one pdf on his website. If you read nothing else this week, please read these.
Dr. Doom thinks we are far from the end of the banking crisis. Bloomberg.
Gloom and Doom for the S&P 500. Bloomberg. When reading this type of material, it is important to think about where we will be 5 years from now; not where we will be 5 months from now. Base your investment decisions on long-term corporate performance, not on the latest 6 month economic forecast.
What vocations will be most affected by Obama's 3 million jobs goal? Forbes tries to answer that question.
It is inauguration day and mood in Washington appears festive. WSJ.
Warren Buffett has publically expressed his opinion about the future prospects of stock investing four times in his career. Whitney Tilson posted all four articles in one pdf on his website. If you read nothing else this week, please read these.
Dr. Doom thinks we are far from the end of the banking crisis. Bloomberg.
Gloom and Doom for the S&P 500. Bloomberg. When reading this type of material, it is important to think about where we will be 5 years from now; not where we will be 5 months from now. Base your investment decisions on long-term corporate performance, not on the latest 6 month economic forecast.
What vocations will be most affected by Obama's 3 million jobs goal? Forbes tries to answer that question.
Friday, January 16, 2009
Daily Reading: January 16, 2009
Bank of America loses in the 4th quarter. Reuters.
More bailouts; this time it's Chrysler Financial. AP. I get the feeling that the financial system isn't as stable as Bernanke et. al. would have us believe.
Disinflation continues. WSJ. It seems likely that we will be hearing the word 'deflation' a lot more in the near future.
There were several layoff anouncements today: Pfizer, AMD, Hertz, and Wellpoint. Plus Circuit City will be liquidating, which will put an estimated 30,000 people out of work. WSJ. I don't think the employment picture will be improving anytime soon.
The Feds are considering creating an "aggregator bank" to remove bad assets from bank's balance sheets. Bloomberg. Isn't that the original intend of the TARP program?
The federal government seems to be obsessed with the idea of lending. The theory goes: The economy has stalled because banks are not lending. So if the Feds can force banks to lend the economy will recover.
I am not convinced that a lack of current lending is the problem. It seems to me that an abundance of lending throughout the last decade is the real problem. America is over-leveraged. We have borrowed money to buy stocks, real estate we can't afford, cars, furniture to put in the house we can't afford, vacations, clothes, Versace handbags, and anything else our little hearts desired. And now we have run out of borrowing capacity; we realize that we can't afford all of this stuff. The next logical step is to begin reducing our burdensome debt, i.e. deleverage. So now, rather than eating out 4 times a week and going to the mall every weekend, we are spending within our means (using cash instead of card) and selling assets to prepay debt. America is finally acting prudent with its financial resources. We don't want Uncle Sam to force-feed us with borrowed money!
The process of deleveraging is likely to be long and quite painful for some. But it is a necessary step to put us on the path towards long-term economic prosperity.
More bailouts; this time it's Chrysler Financial. AP. I get the feeling that the financial system isn't as stable as Bernanke et. al. would have us believe.
Disinflation continues. WSJ. It seems likely that we will be hearing the word 'deflation' a lot more in the near future.
There were several layoff anouncements today: Pfizer, AMD, Hertz, and Wellpoint. Plus Circuit City will be liquidating, which will put an estimated 30,000 people out of work. WSJ. I don't think the employment picture will be improving anytime soon.
The Feds are considering creating an "aggregator bank" to remove bad assets from bank's balance sheets. Bloomberg. Isn't that the original intend of the TARP program?
The federal government seems to be obsessed with the idea of lending. The theory goes: The economy has stalled because banks are not lending. So if the Feds can force banks to lend the economy will recover.
I am not convinced that a lack of current lending is the problem. It seems to me that an abundance of lending throughout the last decade is the real problem. America is over-leveraged. We have borrowed money to buy stocks, real estate we can't afford, cars, furniture to put in the house we can't afford, vacations, clothes, Versace handbags, and anything else our little hearts desired. And now we have run out of borrowing capacity; we realize that we can't afford all of this stuff. The next logical step is to begin reducing our burdensome debt, i.e. deleverage. So now, rather than eating out 4 times a week and going to the mall every weekend, we are spending within our means (using cash instead of card) and selling assets to prepay debt. America is finally acting prudent with its financial resources. We don't want Uncle Sam to force-feed us with borrowed money!
The process of deleveraging is likely to be long and quite painful for some. But it is a necessary step to put us on the path towards long-term economic prosperity.
Thursday, January 15, 2009
Feel Good Story of the Day
To add balance to all the crappy news I post everyday, I am going to try to post at least one good news story everyday (assuming, of course, that I can find one good news story everday).
Here is today's:
Army mom gets a special Christmas present. HappyNews.com
Here is today's:
Army mom gets a special Christmas present. HappyNews.com
Daily Reading: January 15, 2009
Treasury will get the second half of TARP. CNBC. Big surprise.
Oil prices continue to fall. CNBC. This is really scary stuff. The long-run risks associated with our energy problems are much more dire than the current financial crisis.
Bank of America needs more capital. Bloomberg. How is it possible that U.S. banks were so poorly managed that even after a $350 billion bailout they still need more capital?
Nortel Networks files bankruptcy. Bloomberg. This is just one of many bankruptcies that will take place in 2009.
Does anyone know if any Berkshire Hathaway companies are laying off employees? I doubt it; cost control is as natural to Warren Buffett as breathing. It is unlikely there is much fat to cut at BRK.
Oil prices continue to fall. CNBC. This is really scary stuff. The long-run risks associated with our energy problems are much more dire than the current financial crisis.
Bank of America needs more capital. Bloomberg. How is it possible that U.S. banks were so poorly managed that even after a $350 billion bailout they still need more capital?
Nortel Networks files bankruptcy. Bloomberg. This is just one of many bankruptcies that will take place in 2009.
Does anyone know if any Berkshire Hathaway companies are laying off employees? I doubt it; cost control is as natural to Warren Buffett as breathing. It is unlikely there is much fat to cut at BRK.
Wednesday, January 14, 2009
Wednesday, January 7, 2009
Daily Reading: January 7, 2008
ADP report says the job market got much worse in December. Reuters.
A female Austrian banker who sold Russian investors on Bernie Madoff might be in hiding. She is rumored to be afraid for her life. NY Times. John Grisham couldn't make this stuff up.
Environmentalists want to stop or reduce production of oil from the Canadian sands. NY Times. Great idea. The global economic downturn is already setting us up for severe oil supply problems. And now these idiots want to voluntarily make the supply picture even worse. Hey, I have an idea, let's stop driving cars altogether; we could just go back to riding horses!! U.S. alfalfa producers would certainly be on board.
Economists disagree on how to best use the fiscal stimulus plan to end the recession. NY Times. Although, as a card-carrying conservative I would never argue against a tax cut, I doubt very seriously that tax cuts will provide the desired economic benefit. Here's why:
We have experienced a dramatic erosion of consumer spending. And there is a strong arguement to be made that the shift from frivolous consumer to frugal consumer is not going to reverse anytime soon. Further, the purpose of using federal discretionary spending as an economic policy tool is to fill the 'spending void' left by consumers. So, if consumers aren't willing to spend, it does no good to give them money. It will merely go to pay off debt and increasing savings.
Now, to be sure, increasing savings and reducing debt is a good thing for the long-term economic health of our country. But paying off credit cards and saving for little Johnny's college tuition isn't the purpose of the stimulus plan. As previously stated, the purpose of fiscal stimulus is to increase SPENDING. The only way for the Feds to ensure that every penny appropriated to the plan is spent is to spend it themselves.
A female Austrian banker who sold Russian investors on Bernie Madoff might be in hiding. She is rumored to be afraid for her life. NY Times. John Grisham couldn't make this stuff up.
Environmentalists want to stop or reduce production of oil from the Canadian sands. NY Times. Great idea. The global economic downturn is already setting us up for severe oil supply problems. And now these idiots want to voluntarily make the supply picture even worse. Hey, I have an idea, let's stop driving cars altogether; we could just go back to riding horses!! U.S. alfalfa producers would certainly be on board.
Economists disagree on how to best use the fiscal stimulus plan to end the recession. NY Times. Although, as a card-carrying conservative I would never argue against a tax cut, I doubt very seriously that tax cuts will provide the desired economic benefit. Here's why:
We have experienced a dramatic erosion of consumer spending. And there is a strong arguement to be made that the shift from frivolous consumer to frugal consumer is not going to reverse anytime soon. Further, the purpose of using federal discretionary spending as an economic policy tool is to fill the 'spending void' left by consumers. So, if consumers aren't willing to spend, it does no good to give them money. It will merely go to pay off debt and increasing savings.
Now, to be sure, increasing savings and reducing debt is a good thing for the long-term economic health of our country. But paying off credit cards and saving for little Johnny's college tuition isn't the purpose of the stimulus plan. As previously stated, the purpose of fiscal stimulus is to increase SPENDING. The only way for the Feds to ensure that every penny appropriated to the plan is spent is to spend it themselves.
Tuesday, January 6, 2009
Daily Reading: January 6, 2008
I, with the council of a friend, have been saying that oil prices are unsustainably low. Here is an AP article that agrees.
Jeff Skilling is going to receive a new sentence. AP. In my opinion, the new sentence should be an abrupt removal of his male anatomy! If you haven't read "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron" it is well worth the effort. Here is a link to purchase it on Amazon.com.
Another book that I highly recommend, and just finished re-reading over the holiday, is "Liar's Poker: Rising Through the Wreckage on Wall Street" by Michael Lewis. It is excellent. You can buy it here.
A German billionaire, overcome by the financial crisis, killed himself today. Foxnews.com
While I'm on the topic of good books, each of the books in the 'Must Read' section of this blog should be in every investor's library. Follow the links to purchase them.
The Fed thinks we are in the midst of a long recession and inflation could remain "uncomfortably low" for a long time. WSJ. As if it's not obvious.
Bank of America's CEO, Ken Lewis, thinks that top management shouldn't receive bonuses for 2008. WSJ. This is old news to me. Management teams at large American corporations have been over paid for a couple of decades. The marginal cost of retaining a high-profile CEO is much, much, much, much greater than the marginal benefit received. Obviously, the implosion of Wall Street highlights my point.
Jeff Skilling is going to receive a new sentence. AP. In my opinion, the new sentence should be an abrupt removal of his male anatomy! If you haven't read "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron" it is well worth the effort. Here is a link to purchase it on Amazon.com.
Another book that I highly recommend, and just finished re-reading over the holiday, is "Liar's Poker: Rising Through the Wreckage on Wall Street" by Michael Lewis. It is excellent. You can buy it here.
A German billionaire, overcome by the financial crisis, killed himself today. Foxnews.com
While I'm on the topic of good books, each of the books in the 'Must Read' section of this blog should be in every investor's library. Follow the links to purchase them.
The Fed thinks we are in the midst of a long recession and inflation could remain "uncomfortably low" for a long time. WSJ. As if it's not obvious.
Bank of America's CEO, Ken Lewis, thinks that top management shouldn't receive bonuses for 2008. WSJ. This is old news to me. Management teams at large American corporations have been over paid for a couple of decades. The marginal cost of retaining a high-profile CEO is much, much, much, much greater than the marginal benefit received. Obviously, the implosion of Wall Street highlights my point.
Monday, January 5, 2009
Daily Reading: January 5, 2008
An excellent essay by a UConn psycology professor about gullibility in the investment decision-making process; especially as it relates to Bernie Madoff investors. WSJ. After reading the essay, I will almost certainly be purchasing his book, "Annals of Gullibility."
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