Diamonds and Dogs
March 1, 2010
I AM SO SORRY
First it was Tiger Woods, "I am so sorry" as he looked into the camera, apologizing for previous transgressions to a hand-picked crowd of friends. It seems to me that Tiger needs to deal with his demons privately and the circus that was his public appearance was obviously aimed at soothing temperamental sponsors who are itching to pull the plug on Tiger Inc. In fact, I believe Gatorade dumped Tiger within days of his made-for-TV guilt session. Then came Akio Toyoda, the heir and leader of the famed Toyota brand, who declared that "he was so sorry" for the tarnished image and fortunes of the car company that bears his family name (sort of) Toyota (TM). Toyoda said that a key reason for the quality issues at Toyota was the focus on profits at the company. A focus on profits at a car company? That is definitely not a US car company. I believe that Toyota the stock (TM) is beginning to look interesting. The headline news couldn't be worse. The stock is trading for about ½ of what it was three years ago. The stock is also trading at about its book value. They have gotten their "I am so sorry" presentation done in front of Congress and the American media and they may be able to get back to business. And business means being the largest car manufacturer in the world. GM is talking about doing a new IPO of shares, but sage investors may take a look at TM instead.
February 8, 2010
Pointing to his timeless wisdom, our founding father Ben Franklin remarked in his autobiography that "&when you run in debt: you give to another power over your liberty." As the national leaders push us to borrow and borrow more and more, we risk the loss of our financial freedom. I would argue that you cannot spend and borrow your way out of a financial crisis and that true economic growth comes alternatively from savings and innovation. Recently, the union spokesman disguised as a Senator, Chuck Schumer, publically pressured Citigroup to make a bad loan to an untimely commercial real estate project known as the Carousel Mall in Syracuse. Forcing capitalist to make bad loans for political reasons is the primary cause of the recent recession and financial crisis. The politicians that convinced people that home ownership was a right and who funded the homes through quasi-governmental agencies like Fannie Mae and Freddie Mac, have not only ruined many lives and weakened our country, they have sold out America for some votes. Leverage, or borrowing, should only be used when both sides have a realistic chance for success. Otherwise, the liberties of everyone, including the US taxpayer, are lost.
January 28, 2010
Four More Years
"Helicopter" Ben Bernanke was confirmed as the Fed Chief for a second term today in the closest, albeit political, vote ever for the post. I don't believe market players ever doubted that Ben would not be chosen for a second four years, believing that the "No" votes were used by politicos to show the voters back home how concerned they were. After a less than thrilling marathon of a state of the union address last night and today's vote, you can really get a sense that Washington is broken and the slightly dull inmates are running the asylum. Interest rates were kept at zero on Wednesday, as the Fed continues its plan of letting the big banks profit their way out of a financial crisis. Stock traders pulled in their horns the past several days as good earnings have not been rewarded kindly.
January 25, 2010
Henry David Thoreau once remarked "That government is best which governs least." Once again, the US government took an active role in the markets this week, with very disappointing results. On the heels of a democratic defeat in Massachusetts, which basically defeated the president's hope for business unfriendly healthcare reform, the president chided Wall Street big shots. In surprising fashion, Obama took a shot at the big banks and offered dramatic changes to how Wall Street works. I am not here to defend the giant banking firms, their processes, or their huge compensation. But the surprise pronouncements by the White House shook the financial markets and created a down-draft which we hadn't seen since March of last year. In three days, stocks lost close to 5% as the old saying goes, Wall Street fears the unknown and right now, we have no idea what will come out of the leader of the free world's mouth next. For traders, we broke
through the 50 day moving average and are trading around the 200 day, so there may be a bounce in the offering this coming week.
December 31, 2009
Happy New Year, Happy New Decade!
Today we close out 2009, one of the wildest and unpredictable years in history. With amazing strength, the markets closed the year just off the 52 week highs, even with a nice sell-off today. It was the best year since 2003 as the Dow climbed about 19% and the Nasdaq surged over 43%. Nice numbers, but they still leave us negative for the past two years and 2009 will close out the worst stock market decade in history. Stocks have gone nowhere for the past 10 years, except down on average, as the decade is a barbell that began with the tech wreck of 2000-2002, and ended with the financial crisis and recession that is with us today. Of note is the fact that about 200 billion dollars moved into bond funds this year as stock funds witnessed a net outflow of about 5 billion. This will be the crucial story of 2010 I believe, as a tremendous bubble may be forming in what are thought of as conservative bonds. For now, let's enjoy the end of a fine year and toast the upcoming. Good health and happiness to all for 2010!
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