I think I may have a solution for the American Autos. Put simply, it is time to for them to have another mini-van moment. That is, create something that is a total game changer. All this bail out talk is a joke. They vote, it doesn't pass, they vote again, it doesn't pass. The bills are littered with crap, so just stop all the hand out wishing, and go build a product that people want to buy.
Naturally, that's easier said than done. But it's definitely easier that finding some car czar that has a magic wand to waive and fix all the problems of the auto industry. But on a side note, the thought of some government appointed person to oversee the Autos has got to be the dumbest thing I've ever heard. That person doesn't exist. And you can't have some outsider telling you how to spend your bail out dollars.
But I digress. Here's my suggestion: Disappear for one year.
Support current warranties, repairs, and yadda yadda yadda. But for now, and at the least; stop making stuff that isn't competitive. Bolt the doors. Go into deep R and D. For one, the media will go nuts because they won't know what you're up to. Spend a year thinking, researching, prototyping, and stop making all the same old same old.
For years, we have watched the American Autos go BACKWARDS. They have been sitting around the boardroom thinking, "Hey, what worked in the 70s?... Lets make that again. And what was that one car that was popular in the 80s? Let's do that again." It's regression at its finest.
Now, you might be saying, what about all the union workers, and all those jobs? Well, if the autos stay on the track their on, then they will all be unemployed anyway. Wage cuts are a way better option. Massive unemployment is already the probable case scenario. It's time stop making crap just so you can employ people and start looking long term towards, "What can we do to get a competitive edge?" Now, I'm not literally calling the product crap, it's not; but it's seems like they have 15 brands of cars that are the same ol same ol, producing ridiculous volumes of brands and cars and nothing is sticking. That's a lot of crap. So stop. Spend some time thinking, and come up with something (like the mini-van) that will be a game changer. Tweaking one curve of the fender to come out with next year's model has got to stop.
Americans don't need a cooler looking car, and we don't need to relive the muscle car days. We don't need a 3rd cigarette lighter under the rear passenger seats, and more gadgets and options that will break in 2 years anyway. We need fuel economy, safety, performance and reliability. Is that so hard?
Now, you want the easy road to profitability? Just kill off every model except the overgrown black SUV's. We all know those things have sold like hot cakes, and still are.
On a side note, I watched a discovery channel special on aircraft carriers the other days. An American aircraft carrier only has to fill up once every 24 years. So if I'm supposed to believe that an American made 97-thousand TON boat can run on fuel so that it only has to fill up once every 24 years, but the best GM can do is make their Hybrid Tahoe achieve 2 more miles per gallon than it's gas guzzling non hybrid counterpart, you've got to be kidding me.
If you want revenue, you have to make something that people want to buy. I don't know how any company can go on employing tens of thousands of people spinning all their wheels making a product that isn't competitive, while executives fly around on private jets begging for money.
I'll keep this one short. The potential Auto Bail Out is the biggest bunch of bunch of crap I've heard in a long time.
Point 1
The bail out is not the American thing to do, it is the stupid thing to do. As an American (company, businessman, entrepreneur, or otherwise), you can not go on year after year making a product that your American consumers are buying less and less of. That's not American, it's foolish. America is an innovation powerhouse; (businesses) get on that train or get left behind.
Point 2
Honda, Toyota, and BMW (at the least) have manufacturing plants here in the USA, with Americans building those cars. I do not see them lining up for a government hand out, and I would bet the farm that sales are down.Point 3
The economy is down, and it's hit my business too. People are spending less, paying invoices slower, and everything in between. Should I line up and ask the government for money? No! You, me and anyone else with a business has to adapt, not whine off crying to mommy government saying give me money, or jobs will be lost.
Economy or not, if you aren't making product people want to buy, your business will decline; it is as simple as that. All this lining up for the bail out buffet is absurd.
What ever it is, 70 billion, or 700 billion... the bail out of the financial industry will have positive and negative impacts. Positive, because they've basically put a giant band aid on a giant whale.... But the root of what caused the injury still exists. So regardless of how much money the government decides to appropriate to the bail out... it's just a temporary fix. So for positive's sake, it's a quick fix, and might avoid the panicking recession that is at hand.
The negative side for me is the lesson of responsibility. If I tank my company from personal greed and/or stupid decision making, no one is coming to my rescue. I believe at the heart of the credit crisis, mortgage write downs, and other financial collapses is personal greed. And I'm not really hypothesizing here either. There are several cases of a new CEO coming into leadership with a company and in just a year or two they wreck the company having created such a golden parachute in year 1, that the fines and firing that will take place in year two are simply a quick way out, where they can wash their hands of it all. And after all of it, they still have gobs of compensation they created and approved for themselves in year 1. So in those circumstances, there is no accountability.
There is one positive I see with the ridiculous rescue plan. Individual investors like myself can take heart of a certain stability of the markets. I can now throw my money into 10 baskets of good companies, and feel assured that if I picked industry leaders, my money is safe with a higher probability of positive return. With the example of the bail out, if things get bad enough, the government will step in and inject cash to fix the potential recession times. So my fear of my investments tanking, is much less. Sure it's now more of a fixed game, but we are forced to play the game with the rules at hand. It's not just supply and demand anymore. The market won't simply correct itself anymore. The market will correct its speed bumps, but if there's a road crater, it's government to the rescue. The big picture is kind of crappy, but we the individual investors can play this game with the new rules.
And here's a side note on the mortgage crisis. Everyone has been playing a ruthless game of blame for sometime now, and that's really a rope that has no end. There are so many people at fault, you can't just say it's the crooked CEO's, or the predatory lenders, or the dumb people who didn't read their contract and signed mortgages that are way over their pay grade. You can't say it's the real estate investors that spiked up a market so full of hot air that it was bound to deflate. Again, greed is at the forefront of the fault.
Greedy home buyers wanted to get in huge houses with little down, and then bet the farm that their over sized house would appreciate and make them gobs of money. How many millions of people want(ed) to make their millions off real estate? When board games are sold in stores about the industry, that's a sign of a bubble I would say. Lesson learned, the housing market doesn't always go up. But then again, no market does.
Then you have the mortgage industry. In this industry there are zillions and zillions of bees swarming around fishing out the next origination fee. They place a loan, and at minimum they get a point. We'll call it a point, because it sounds a lot better than saying you're going to finance an extra $1000 over the next 30 years so I can put that $1000 (1% of the loan) in my pocket right now, for placing your loan. And that's only on a $100,000 home. The national average is around 200K per home, which makes that one point yield a quick bee bonus of $2,000. Do you think any of these bees might present a not so good situation as great if they are a signature away from a quick $2,000? Many of these bees cared not about honest, ethical, situation appropriate loans. They would just push and fix and sell (which is the industry word) things until they could get their "point" on your loan. And because of this behavior, most of these people aren't working anymore. The days of those points getting passed out like bubble gum are over.
The end result, definitely not laissez-faire. I don't even know if there is a French economic term to describe our current economic state. Some are saying it's the United States of France; not from an ownership point of view, just from an economic governance point of view. That phrase certainly sounds strange, so even if it is accurate, I can't really buy into it. Never the less... and for now... long live the mostly free markets.
I have to look at the bright side here. I know some might call me crazy here, but I almost welcome high gas prices. Katie is a stay at home mom, and my commute is between 12-15 minutes. So from a selfish perspective, the pain at the pump that most people are feeling right now just isn't that painful for us. At the same time, lets just pretend that a whole dollar fell off the gas prices, and took the national average to just over 3 dollars a gallon. Well, that's still expensive gas, which means we're at the point now where it's worse than horrible. So prices getting a lot better, barely puts a dent in reality.
But back to welcoming high gas prices. High gas prices are pretty much the only thing that will kick energy innovation into high gear, because frankly most of the solutions being pitched right now just aren't going to cut it. I would even say it's an embarrassment to U.S. innovation that the 145 million cars on our highways are virtually running on the same fuel that the first cars ran on exactly 100 years ago. In 1908 the Model T ran on gasoline and ethanol. Now in 2008, our cars (vast, vast majority) are running on gasoline and ethanol. The Model T also ran at about 18 mpg (miles per gallon). I think the only reason we're not still driving the Model T is probably because it wouldn't pass today's safety inspections.
Ethanol is a great buzz word; I sure fell for it a couple years ago. And FYI, ethanol is not going to cut it. It's caused the price of certain crops to skyrocket, so many countries can't even afford basic foods now. And it takes a boat load of corn and 80 gallons of water to make a gallon of ethanol fuel. That's immeasurably ridiculous.
So how about Hybrids? That word is about as grey as "broadband internet service". What does it really mean? You could buy a 2 wheel drive hybrid Tahoe and get 22 mpg (Hwy). But wait there's more. What if you opted to save $15,000 and get the non-hybrid version, and just take the 19 mpg (Hwy). Pretty simply math here; for 15 grand you get 3 more miles per gallon. NOT GOOD ENOUGH.
Now, there certainly are some hybrids that are just killing it out there. They're not all marketing scams. The Prius boasts more than 45 mpg. That's pretty impressive. For me, I'm not really drinking the hybrid Kool-Aid yet. My well performing sports sedan gets close to 30 mpg on the hwy, and I'm fine with that for now. Premium gas and all.
And as many are pitching, the future is not in driving less for me. It's not in ethanol, hybrids, carpooling, windfall profits taxing, or any of the other insufficient ideas out there. It's not in better fuel economy as far as I'm concerned. It's in DIFFERENT fuel economy. We're a hundred years past the Model T right now. I'm actually shocked that my car isn't running on tap water, nuclear energy, batteries, stored solar power, or frankly anything other than the energy that OPEC gouges for.
Quick reminder, it's takes between 2 and 4 dollars to get a barrel of oil out of the ground in the Middle East. The current market value for that barrel is close to $140. And crying about it doesn't do much, because it's a great case and point for Economics 101: Supply and Demand. Very few people control the supply, and about a billion people feed the demand.
So I look forward to high gas prices. Real pain at the pump is simply a line we will all have to cross. There is no doubt it will have to get worse before it gets better, and I am really looking forward to better.
So I wrote this back in January, and I have been wondering why Apple is up the last several days here. It turns out some analyst that follows AAPL like a shadow noticed that the iPhone was fairly sold out across the Nation. History tells us that Apple tends to eliminate supply of a product when the new version is around the corner (sounds easy enough). So the rumor is that the 3G iPhone is on the (near) way and Apple doesn't want to get stuck sitting on a bunch of version 1 iPhones. Very interesting.
I suppose it is time to revisit this post from May-07. Many months in the making, MSFT is finally taking over YHOO. (Press)
So this morning I walked into the office and just laughed when I saw the DOW down 260 points. I have no problem with the correction going on, because A. our downside protection has kicked into overdrive (90+ days out IWM puts). So at this point the more absurd tanking goes on, the better off I am. But somewhere around 1PM (cst), I just happened to glance at Apple trading in the 120s. Totally ridiculous. The stock has had an unjust amount of downside surprise, regardless of how you interpret their soft outlook. So I looked at AAPL trading at 127, and thought enough is enough, the ridiculousness has gone too far. I jumped in @ 127, thinking I’m willing to ride out any further downside. They have product, they have cash, they have growth, innovation… what’s not to like? Turns out my spontaneous buy time happens to be the luckiest timing I have executed in a long time. And even though it’s rebounded an Earth shocking 9% since 1PM, I’m not even thinking of dropping out now. Personally I think 127 is a great avg cost for the longer term.
GM is set to raise prices for their New Year's Resolution. Now, is that really a good idea? Home foreclosures are still at all time high rates, and GM's stock has fallen almost 40 percent since the 52 week high in October. Banks have less money to lend from their self-caused credit crunch. Nine out of ten car notes are upside down. Is now the time to raise prices on the cars people aren't buying? You be the judge. I just find it interesting.
Google dipping below 650 the other day was one of those blessings of second chances. Since GOOG will be heading back to 750 (it's only a matter of time), the market was nice enough to let people back in at 650 (or lower) again. Consider that a blessing, which on the heals of Thanksgiving you should be thankful for.
Google will be monetizing phone service soon. Since cell phone providers know where your phone is (via GPS), it's safe to assume that Google will know where you are too. Maybe Google will be able to automatically know that you've been in motion for more than 300 miles. I would speculate that they might send you a little blurb about the nearest gas station, or closest restaurant? What if it's Saturday morning and you're just around the corner from a donut shop? That donut shop might be paying Google to tell people near their shop to stop in for some donuts. It's certainly not far fetched. Imagine the possibilities. Then imagine what that will do to the value of the company.
Man, who let the dogs out? Remember this post? When I recommended MasterCard (MA) at 160/share? They blew the roof off their quarterly earnings this week and MA is up over 20% today (intraday), over 100% year to date. Wow. Seriously, I almost can't believe my eyes. Ding ding ding, ring the bell on this party, pigs get slaughtered.
Whewww, keep your seat belts on, the market is smokin' hot. That is smokin' hot from going down in flames! If you have never bought protective puts on your stock, I'd look into that.
I read a daily market commentary by a guy who teaches for Investools, his favorite ticker right now is CASH. Get it? Cash? Ha ha ha ha ha. Cash. I love it.
I'm not going to lie, I'm 90 percent cash right now. Trying to bottom pick right now is like playing mud football with world champion sumo wrestlers. But when all this selling is over, there will be a junk load of companies on sale.
Leave it up to Forbes to calculate Hollywood's ROAC. No, that's not Return on Invested Capital, but Return on Actor Compensation. Forbes turned their uber-analytical eye to the movie biz to figure out the relationship between a film's net revenue and lead actor compensation. They took the box office sales, added DVD revenue, then subtracted the budget. Then for each actor they averaged the actor's last 3 movie's numbers, and that gives you what Forbes calls the "Star Payback" (and what I call the ROAC). Check this out:
Movies leading with Matt Damon average $29 of gross income for each $1 paid to Matt (and that doesn't include The Bourne Ultimatum, it's too recent).
Brad Pitt was right behind Matt Damon with his movies averaging $24 in GI to each $1 in compensation.
Other calculated averages include: Vince Vaughn: $21 to $1 Johnny Depp: $21 to $1 Jennifer Aniston: $17 to $1 Angelina Jolie: $15 to $1
It is quite shocking to me that Adam Sandler, Will Ferrell, and Jim Carry all rank "low" at under $10 to $1. Gladiator, Russell Crow, averages $5 to $1!
Learn more at: www.forbes.com/starpayback
For many years now I've had a healthy addiction to watches. Healthy, because I don't really buy them to support the addiction. I just love watches, though I can't really say why.
Watches are all the rage right now. They're getting bigger and bigger and becoming more of a focal point for personal bling it seems. Just take a walk through the mall and you're sure to see watches with faces so big, they're about the size of a steering wheel in a Mini Cooper.
So Katie and I were in a watch store the other day, and a Burberry watch caught my eye. Nice shiny silver, with all kinds of intricate details, but not too overboard like some ridiculous rap artist or something ("artist" being used lightly there). Come to find out that Burberry watches are made by Fossil but branded for Burberry. Hmmmm.... interesting. You know who else Fossil makes watches for? Just a few brands you might have heard of: Abacus, Diesel, DKNY, Disney, Emporio Armani, Kenneth Cole, Philippe Starck, MW Michelle, Michael Kors, Marc Jacobs, Relic, Wrist PDA, and Zodiac to name a few.
So at this point I'm seeing dollar signs in my eyes thinking about FOSL stock, and their near monopoly here in the middle of my watch revolution. Everything looks good right? Buy Buy Buy, right? Well, not necessarily. It's time for a little homework... say.... a few minutes worth... and that will tell me to buy, or forget about it.
Homework
FOSL has had about a 100% run in the last 12 months. In the last few months (since middle May), institutional money has been pulling out, which explains the May resistance at around $32/share. So the big money is pulling out, but is that all that matters? Not really. Let's look at some numbers (last 4 quarters): ROIC: 11.50% (return on invested capital) Book Value / Share Growth rate: 4.5% EPS growth rate: -12.34% Sales Growth rate: 8.39% Free cash flow growth rate: -136.43%
Not so hot any more. Those are last 4 quarters' numbers, but what you don't see there is that most of those numbers have been declining year over year. Those five numbers should all be +10% and not falling. Well that is if you're like me and you like to invest with minimal to little risk.
Final answer? Monopoly or not, it's NO buy time for me. It looks good on the outside... but not so hot on the inside. So I'll push FOSL aside, and perhaps invite Qaulcomm to make a portfolio debut.
Allow me to over complicate your summer vacation. Have you ever considered currency exchange rates when planning your travel excursions? If you want to get the most for your money, you might want to consider current exchange rates. A good (easy) place to see this information is here. Here are some examples:
Italy is on the Euro now (unfortunately), so right now, $1.36 US converts to $1 EU. Bottom line: you'll pay a 36% premium to enjoy Italy right now. Visiting Rome, Florence, or Venice? I highly suggest Cross Pollinate for your lodging needs. You can not beat their price/value offering!
Traveling to London, or anywhere in the UK? It takes over $2.00 US to get 1 Pound (GPB) in your pocket! That is what I call a crap attack. How terrible and embarrassing that is.
And of course, what would a travel post on my blog be without mentioning the Cayman Islands? The rates don't flex there, as the CI is pinned to the Dollar at $1.25 US = $1.00 CI. And I wouldn't hold your breathe on that one, it's not going to get any better.
And finally, any Yucatan or Cabo fans out there? Even the Peso is getting more expensive, now trading at about 9.3 cents per Peso, up from 8.3 cents a year ago.
It seams the Dollar is in a funk. It's got the blues.
Earlier this morning I went to the restroom and felt the need to mentally throw up. You know what came out? An iPhone. Yeah that's right. You heard me. Dallas/Ft. Worth has received as much rain in two days that we normally get in a year, there's a war going on, there's a junk load of political posturing going on with the presidential hopefuls, but there's only one thing on the news: the iPhone. iPhone this, iPhone that... bla bla bla... iLines, iCamping out... A&TT iExclusivity, network this, network that... I'm starting to think if I sat in a dark room with no windows, lights, or electronics, somehow word about the latest iPhone junk would some how seep in. It's like an unstoppable cancer, eating up society.
Our little family went out to eat tonight and guess what? There was traffic congestion and a number of parking spaces were blocked off in the town center. Why? Because the iLine that leads to the iStore that sells the iPhone was going down the iStreet and around the iCorner, and was hindering the flow of iTraffic.
Seriously.... If you haven't iPuked yet, now is as good a time as any.
Did you know that the last time the financial gap between the rich and the poor was this wide was the Great Depression? For real, I don't make this stuff up. How do the rich keep getting richer while the poor just can't catch a break? I sure don't have all the answers, but one way is interest. Rich folks have money that works for them, leaving them time to find more ways for their growing ocean of money to make more money. Poor people have their jobs, which requires their time (a very limited asset), and they have rising costs of living, healthcare, and inflation to deal with while the wages paid aren't keeping up. It is actually a very sad story, and I don't see anything promising in the future to flatten the spread. So while the rich/poor gap gets wider and wider, those of us in the middle, (somewhere between welfare and billionaires), have to take action to make sure we are headed in the right direction.
You know who makes money off of interest besides rich people? Credit card companies. If you do the math on what the CC companies make off of people carrying a monthly balance, it would blow your mind right out of your ear canal. I kid you not.
Credit card companies provide the invaluable "service" of letting someone make purchases, while giving them the opportunity to only pay some of the balance a month later. Everything after "some of the balance" is the balance you carry. They have all kinds of creative ways to charge interest (9% - $20 APR being normal) on average daily balances or previous balances or whatever. Bottom line, they get rich if you choose to pay anything other than the entire balance each month by due date.
You can turn the tables!
Slow down your spending, pay the total balance every month even if it hurts, and get yourself to a point where you can buy the stock of companies like MasterCard (MA) or American Express (AXP). That way you can make money off them making money off interest. I've been holding MA for a while now and I'm in no hurry to sell. I just might sit on it until Ava is in college. We'll see.
Point being, if you're a thousandaire, you aren't going to make much off straight interest, be it bank savings, fixed CD's or whatever. You might try investing in those who make more money off interest than you can. IE, MasterCard is up 60% year to date (after +4% today). The 0.00001% that your bank is offering you for your fee free savings account just can't compete with that.
I am working on refining (and further developing) an online budgeting tool that I use for our family that I truly believe could miraculously change the financial tides for many families. If that strikes your curiosity, then stay tuned, because I will let anyone who wants to use it for free (and completely anonymously).
Only in America can an A-list baseball player be seen exiting a strip club, and hence add over $70 million in market cap to a fashion company's stock value.
On the morning of May 30th, copies of the New York Post hit the stands showing a large photograph of A-Rod exiting a strip club with an unknown blond woman (not his wife). The photo apparently shows A-Rod wearing a pair of True Religion jeans, to which Wall Street interpreted as yet another celebrity endorsement for the product.
So A-Rod wears them, Fergie sings about them, and you pretty much need their salaries to afford a pair. Personally, I just can't stomach paying more than 30-40 bucks for a pair of jeans. Perhaps I take pride in dressing hip for half price.
The chart above shows TRLG's 18% stock response to breaking story.
So this morning, Yahoo shares are getting a little major boost from the reports of a possible buy out from Microsoft. Microsoft certainly needs this. If Google gets a chance to buy Yahoo, it would put a deep moat around Microsoft search capabilities. I think it would be good for MSFT, but I don't think they will edge out Google for the lead anytime soon. I think MSFT is fighting to stay in the search game, not to win.
But on to more important matters... what would they call the new product? Would they keep the Yahoo name because it is so well known, or would they stamp the MSFT branding and drip their Kool-Aid on it and doom it to late releases, bugs and mandatory updates? Either way, I thought it would be fun to think of what they might call it. - MicroHoo! - YaSoft! - YacroSoft! - YacSoo (very Chinese sounding, China is all the rage right now) - MicHooSoft! - YacroHoo!
... just a few ideas. : )
