Big News for Square

I have a square. It was convenient in college if I sold a book to someone else and they did not have cash. Easily accepts every card and then deposits the next day into your bank account of choice. It has done wonders for small merchants that go to trade shows or sell at antique malls. They do not need a full service terminal and can use their smartphone. A much smaller investment. It takes a percentage like any merchant service but it is not exorbitant. It is probably much less than some services. This accessibility and ease of use have made Square grow large and fast. They are competing with the large banks and doing a good job. They just announced that their merchants did $100 million in sales in one day you can read more about that here. This makes it a force to be reckoned with in the field. If only they went public I would invest. They shake up the banks and regular merchants. The only downside to Square and one that I tell the clients at the bank is that Square is not as secure as a regular merchant. With the new EMV chips in cards it will make Square even more vulnerable. They might be able to still compete and maybe even one day able to use the EMV chip.

Square has challenges ahead but they will reinvent and overcome. They will still be very popular for small merchants that do not have the volume for a larger merchant.

Lending Club: Changing the Loan Game

I have been interested in Lending Club since 2010. I heard about it and at first dismissed it as just a blimp because the banks will come back and start lending again. It has stayed and has grown more than 100% in outstanding loans in the past year. That is huge for any lender to double the amount of loans on the books. It has done this with the appeal to investors looking for healthy returns and a good supply of worthy debtors. It requires both to succeed and it has them in droves. It makes it easy to get a loan and pay a reasonable rate. They will change the way people look to take out loans. I also see this as a way for millennial to invest more and expect healthier returns. Younger investors are hesitant to invest in the stock market but helping out a neighbor while earning a good return appeals immensely to my generation.

This is why I am going to say that The Lending Club is something that is worthy of investment. It has lots of room to grow and it will change the market for loans. As more hear about it more people will want to take advantage of these loans and the terms. They can feel better about the loans because most of the interest paid goes to an individual investor instead of a bank. People will be less likely to default knowing the disappointment that will come from default. There will always be defaulters but I  think fewer will default using this model and others might start using it too.

I am going to invest in Lending Club too. If the price is good tomorrow I will be there.

Cyber Monday Sales

Online shopping is continuing to be the new medium for people  to purchase Christmas gifts. It is a good deal. Shoppers can purchase items in the comfort of their home, sometimes cheaper than ion store and have it shipped to the doorstep. There are no crowds and the purchasing process is easy and secure. No wonder cyber Monday was even bigger. Black Friday sales in-store were not as good as last year but online sales were certainly made up for anything else. I see plenty of people still shopping and buying items this year. Get in the market before it goes up even more. Retail sales are going to be strong and the consumer is back.

Oil's Collapse and Bad Calls

The recent 10% drop in oil prices now trading about $65 a barrel it means that all the big oil companies took a hit in stock price. Exxon itself took a 4% hit on Friday. This would be bad in the short-term for anyone who followed my advice to buy Exxon a few weeks back. I still think Exxon will recover and might even make more money on cheaper oil. It just hurts to look and see that drop in stock price in a day. This is why we as investors need a well-diversified portfolio. The drop would be bad but it would not hurt the entire portfolio. Just a small drop on a small percentage. Bad but not catastrophic. We try to avoid those when handling money. Also, another reason to diversify in industry and across the globe.

Exxon could still easily recover and I think they will buy back more shares at this cheaper price. They might make more too because consumers are used to high gas prices so there would be less downward pressure to lower gas prices as much as the drop in oil prices. Exxon will also make plenty of money from its large holding of natural gas. Those prices are up and it looks to be a cold winter which will be good for Exxon. It might be several years or it could be in a few months when it recovers. Still la great long term-play.

OPEC is trying to hurt the United States Oil production that is competing with it. I think some of the OPEC members though will not be able to handle this squeeze and will lower production to raise prices. They depend on that money and have gotten used to the high price. It must be maintained in the long run.

Housing Next Year

Home sales in October were so great. It looks to be that the economy has done really well and is still recovering nicely. Home sales of 5.26 million the most since last year in September and October is not normally a great time for home sales. It shows the huge strength in the consumer and that people feel more comfortable in moving and making large purchases. Next year I think it will continue to improve and that rental property will have its bubble burst. People will want to own homes again and they will have more money and more secure jobs allowing them to buy houses.

Not sure if they will want to buy new houses though or will want to buy the glutted amount of existing homes for sale. We will see and I am going to invest accordingly that the home sales will continue to increase.

A Break from Business: Talking About Darren Wilson's Grand Jury Case

A Grand Jury has the responsibility to discuss the prosecutors evidence in a possible case and decide if the evidence presented is enough to proceed to a formal trial. It's an integral part in some states legal systems to screen cases to make sure there is enough there and there is probable cause. I'm going to say that there was not enough evidence in the case against Darren Wilson. It is so easy to indict from a Grand Jury. The jury does not have to be in total agreement. Normally just 3/4 quarters have to agree to indict. They also only have to have probable cause not the beyond the reasonable doubt standard in a normal trial. As fivethirtyeight blog says here it is extremely rare for a grand jury not to indict because the prosecutor can decide which cases to bring. I think we must be convinced that there was not evidence to convince the jurors that police misconduct occurred.

They still examine all the evidence  and can bring in any person to testify before them. It is a tough job to decide the fate of a person. We must be convinced that they did the best of their ability to try and shift through everything to get the just outcome. The jurors have a real person's life in their hands let's believe that they took the case seriously.

The best thing we can do is work to change the system if we think it is faulty. We should also respect the decision of our fellow citizens on the jury and believe that Darren Wilson had no police misconduct in his handling of Michael Brown. What is bad is looting businesses because a grand jury decision should not be an excuse to rob people of their livelihood.

Apple is a Huge Company

I saw a tweet earlier today that said that said you could add Exxon and Wal-Mart's market cap together and you would get to the size of Apple's market cap. That is crazy big! Apple got to be worth 700 billion dollars today and I can see with just a few more years and a few good products could be worth 1 trillion. There is also just a huge gap between the largest and the second largest company. I think it means that other companies will grow in size too.

I think it will also mean that Apple will be put into the DOW there is just no way they can ignore such a large company. And the reservations in previous years about the stock price has been fixed. Since the DOW is averaged from price last year when Apple would get put in at $600 it would add several hundred points to the DOW. It was too much of a shift. Now taking away a smaller company and adding Apple would probably increase the DOW's price but not in such a huge way.

If the DOW does not add Apple they are ignoring the goal which is to include the largest companies in the country. Apple will get added and then the price will go up again because more people will need to hold Apple to follow the DOW. Maybe Cisco or Coca-Cola will get bumped. Those are possibilities. We will know soon though.

We Got Two Central Bank Movements Today

China and the euro zone both announced things that should increase inflation and help out economies supposedly. The euro zone will work hard to raise inflation and china cut interest rates. Both of these policy changes were cheered by media and the actual traders today. Sending stocks around the world higher. Who doesn't like free money. Well in the long term we won't like it and we need to get people away from depending on inflation and easy money. It will be unsustainable in the long run and will hurt our economy. The euro went down today on the news which will probably bring in more tourists but savers in the country will be hurt. There are always unseen consequences good and bad. The bad will show one day. But today and probably for the next few years the good consequences will show.

New Book I Started

I just started "Millennial Money" by O'Shaughnessy and am really liking the first two chapters. It's a good description so far of why young people need to invest early and often. It almost feels like an update and reimagining of "The Richest Man in Babylon." He has several of the same themes like pay yourself first but less stories and more hard facts on why it is critical for the future. 

Can't wait to read the next chapters and learn even more. I think this would be a great book for recent high school and college graduates. Our generation needs to get over the holding cash in savings accounts and buy actual investments that will grow and return over time. 

Immigration and the Lawmakers

The President has announced a new executive order for the nation tonight involving immigration policy. The President claims that he has waited too long for the House of Representatives to act. It has been a long time to have reform on immigration but we have had problems with it before. Legislation is slow on purpose because we do not want hasty decisions and bad policy made. It is a long process. We should respect that it is long and we do not want tyrannical actions.

I do want immigration reform and let more people in the country. I believe we should really increase the HB 1 Visas for smart people who want to come. They can help solve our problems. What we do not need though is executive action that ignores the system that works. It will take long but waiting letting the elected people decide is better.

The House also delayed action because the Administration will veto or let it flounder in the Senate unless it was exactly what he wanted. Let the house have discussion and amendments. Even though they do not agree with the President they are still elected and should have their voice heard.

Busy Christmas Ahead Still

I was out shopping early this week and I have seen traffic and the stores busier than I can remember. Certainly busier than the previous six years or so. The stores do not have the big sales out yet but they certainly have people shopping. I think this is from several things. Cheaper gas prices have Americans in better spirits. They see more money in their bank accounts from slightly higher wages and more work hours. They also have lower credit balances which mean lower payments and they see that they can spend more. Americans still are not good in investing and thinking about saving. So more money earned means more money spent especially around Christmas.

As smart investors we should see this busy Christmas season and make moves into big retailers. They will have great earnings in January and February. Let's choose the good ones and take advantage before the price goes up in the future.

Japan's Depression and its meaning

Japan announced early this week that they were in a recession again. Their policies supposedly did not work and the economy shrunk. Sometimes though policy takes many years to take its full effect and to see all the consequences that arise out of it. Many media outlets proclaimed that since Japan was doing poorly that the rest of the economy will soon follow. I doubt it. Japan is a big economy but their shrinking is not really a surprise. They have not grown significantly for thirty years and they have a older population. The unemployment rate is really low and maybe with the economic factors currently in Japan they are stuck until another great development.

Here is a good discussion of Japan's announcement from Tyler Cowen. I think his analysis is spot on and really shows we have nothing to really fear from this announcement and can keep living our lives. It does not mean we will have a contraction. But then again it is hard to tell and maybe we are in a time now where growth can not always occur.

BB&T and Banks Getting Bigger

BB&T has been on a tear in buying more banks and expanding their reach. It looks like they are moving from a large regional bank like Regions into a national bank with branches in almost every state. It will take time to expand that far but it looks like it could be sooner rather than later. They just purchased branches in Texas, Northern Kentucky, and now today banks in Pennsylvania, Maryland, West Virginia, and New Jersey. Will other banks also try to expand into new areas is a good question. Does this mean that more banks are ready to grow. BB&T's Kelly King is always talking about changing and growing is the one thing that will make BB&T better. He has certainly promoted this idea and shown how well it works with expanding into new regions. It's the largest acquisition in the banking sector since the financial crisis. Buying other banks and branches is the best way for banks to expand into new areas.

I'm going to bet that other banks will also try to expand. Could be a good sign for banks and financial institutions if more M&A occurs. Might be a time to get in and they are undervalued and underperforming because of government regulation and suits against them.

Disclosure: I work for BB&T

Jobs, Jobs, Jobs

The American Economy again created plenty of jobs last month and decreased the unemployment rate. The wages of workers were slightly up. Everything was good news and the market meet it with a whimper. It seems that the market wants more and expects more. The growth while strong and healthy is not spectacular. The market always demurs when expectations are met. Only beats and misses matter. Otherwise it just shows that it is pretty fairly priced and followed. Maybe we should just set lower sights for the growth of our economy.

It is better though to stick with high expectations. We would nit want to revert to the mean and take mediocre results as strong gains. Our economy can do better, should do better, and we should push for policies that allow wider growth and less hassle for businesses. Open up trade, remove barriers, and free movement would be a great start. Let's help everyone in the world with higher expectations and then let us beat those expectations.

Links Worthy of Attention

With the recent switch in governmental power the ever weighty words of Hayek. Always good to remember.

Urban Onshoring: The idea of bringing back tech jobs. This focuses on one company in the South Bronx and one aspect of a possibly bigger movement.

My babysitter extraordinaire when I was younger has a wonderful blog and this post about remembering the real part of people's lives is more important than the online parts. 

The Economist reviewed The Cambridge History of Capitalism is a comprehensive study of the thought of Capitalism. Probably going to buy this soon. I can't stop myself from getting a good book.

A look at WeWork. It's fast rise and its take on coworking.

And finally Netflix is adding new programing. Consistently and regularly. Still think it is a bubble though.

Election Consequences and Investing

As with any election as people and power shifts consequences occur and change the shape of the economy and the country as a whole. It might take years to fully realize the shift or just a matter of days after the formal change occurs. Tonight was a big shift in power in the Senate and it could still be bigger as a runoff is left and not all votes are counted. The electorate wanted change tonight and they will get it. As investors though we might like the change or hate the change we have to see what companies could win or lose from the change. Will corporate taxes be lowered, its a strong possibility and so that will mean higher earnings for all companies boosting stock prices and values. What other things will get the go ahead from the government or receive government subsidies. I'm not sure yet and it is hard to tell until the law comes into effect but we can make guesses of what will occur.

I'm excited to see the new changes will be and it is sure to open up new investment potential.

The Best Day of the Year

Today is so important. We go and get rid of that scoundrel in office and replace him with someone way more palatable. It's the day we support the people who have done a great job in office and reward them with another term. It's also the day we show our support and make our voices heard. It shows that we support our government and system we have and want it to continue as we actively participate in a meaningful way.

Even if the person you support has no chance of winning you should still vote because you might embolden him to run again. There is always the next election to have your candidate win. It shows a smooth transition between those in power. 

No excuses just vote.

Need to Make Money

The CEO of BlackBerry said "We need to make money" today in an interview. Well of course the company needs to make money. If not it will not exist as a company anymore but will go to the corporate graveyard. I understand he was saying that his company needed to find new ways to make money and cut costs but it was still an obvious statement. He should have phrased it better. It's almost like when the commentators in a sports competition say that the team to win will need to score more points. Duh, that's how one normally wins games. Obvious statements should be avoided from management. It makes it seem like they don't know the finer points and are just into saying the basic statements which do not put trust into the company. Instead it distracts and in my opinion shows that they are peddling nothing new and have nothing to contribute.

Management steer clear of silly responses it will lead no where. To really instill confidence come up with new things. It will show you are truly doing analysis and understand the business.

Fed is Ending the Dreaded QE

YEAH!!!! I'm very happy the Fed is ending QE. It's great news for the long-term economy. It might hurt some in the short-term with decreased stock prices but I feel that in the long-run it will be so much better. We will no longer have fake growth in the stock market and it will now be more realistic growth. The stock market is currently lower but in the long run it will go right back up. Might be a time to buy as stock prices take a little downside. The Fed was very happy with the overall economy and this is also good news.

Now if only they raise interest rates to a more reasonable level. Go out there and make wise investment choices. If I get time I will post more about this change in policy.

Everyone can be Dr. Hudson with Crowdfunding

I read "Magnificent Obsession" by Lloyd C. Douglas in High School it can be read here and I must say it stuck with me over the years. The idea behind the plot was the protagonist, Robert Merrick,  decoding a secret journal from a well known physician, Dr. Hudson, in town. The journal contained information that Dr. Hudson can money and time to people who needed it to carryout their dreams or get over a rough patch in life. Hudson recorded every deed he did in his journal but literally swore every single person he helped to secrecy that it was him. He received nothing back form the people expect he was able to perform better in his work because of his good deeds. He also had the people promise to pass on the gift he gave them, to others in need when the time came. Merrick as he decodes and talks to the people in the journal discover a huge chain of people helping others out when no one else would. An example was him giving a sum of money to a struggling restauranteur and then that person gave money to another person that needed it to pay rent. And so on. really its an early version of Pay It Forward.

The same thing happens when we donate to startups and people who are trying to start their dream. We take no position in their company but really only help out. Although normally we tell people we do these things but there is a way to do it without telling anyone or even receiving anything from it. It is nice though to get the little funding gifts the company gives people though. Overall, it does embody the idea of "Magnificent Obsession" and Pay It Forward. We give to others so that one day if we are in need or struggling others will come help us. Helping others out is the best thing humans can do for one another and when we expect nothing back it makes it sincere and worthwhile to give to others. We also get back something we want when we back the project if it is a new book, movie, or the next gadget that will make our lives easier.

I'm not the best at giving to others but I do try and truly expect nothing back when I help others. I can about my fellow humans and their struggle. Not trying to fix every problem or know that i can do something for everyone but I can try to make the lives of those I know better. I think crowdfunding is a great thing that has helped many people and enriched the lives of many people. So let's continue and give to others freely and without getting anything back directly. We will get back so much more and maybe there is a power in giving to others and seeing them succeed that makes us happier and wealthier. There is real Pay It Forward to do in our lives so let's get out there and make a real difference rather than the small Pay It Forward that others promote. We want real change.

The President and His Czars

A break form my normal coverage of business we go into the world of politics. Appropriately before the election. President Obama has appointed several people throughout his six years to be in charge of certain aspects of policy and carryout his goals. The appointees are not elected or confirmed through Congress but just simple administrative appointments. I personally think the world choice is terrible. We should not have any czars in America appointed or elected. Czars conjure up the image of an evil tyrant in Russia whipping the peasants into shape and forcing an iron will upon the people. Of course this is far from the image I want to see rom my government. Why can't they be named head administrator or chief policy director. These sound nicer.

Not only am I not a fan of the name that they have chosen, I also do not like the idea that an appointment without any oversight can make policy that has far reaching effects for the country. We live in a republic I hope and that republic needs representation and a balance of oversight and powers. The President should not have the authority to appoint someone to have this power because no one person should have the power to make policy and law. Otherwise we lose the Republic and revert back to a dictatorship.

As SNL pointed out in last week's episode that the appointment of the new Ebola Czar had no medical experience. Why are we allowing people to be in charge of policy that have no background in that field. President Obama's other czars have not had a good understanding of the fields that were their charges. We do not always get the best choices in people to do anything but with a system of checks and balances at least it is not one person's fault but a group. Groups make better decisions than an individual. I'm still all about the individual but groups collect wisdom and knowledge together to make a better decision.

Let's get rid of the czars and start by renaming them to something far away from tyrannical meanings.

Reverting to the Average

The wheel of fortune is always spinning on Wall Street and some days it is in your favor and others it is not. With good research and strong companies hopefully you come out ahead and the wheel is in your favor more times than against it. I don't think you should be constantly trading stocks based on news and sentiment on the street. Many times it is based off fear and causes money in the hands of brokers and you losing money. However a way to play with stocks is the idea that all stocks will revert to the average gain at some point. In this case it would be the S&P 500. 

A stock that has shot up recently will probably come down some in the next few months off it lows. Not always the case and this is why it is a bad idea to gamble here. But it probably will go down, once it misses its earnings or just because people have moved on to the next hottest stock.

The beaten up stocks unless they are truly fundamentally flawed (where good research will help you out) will probably go up in the next couple of months and maybe even outperform the market. This is the same theory as the Dogs of the DOW but slightly updated and now can be used al the time. 

Those that are depressed will go up quickly and make a quick buck for the investor and others will quickly fall which if shorted would make money. Again though it does not always work and every investment is a risk because of uncertainty. Anything can happen but probably in the end everything will revert to the mean. 

Xerox: A Pioneer of Corporate Giving

I'm in the middle of reading John Brooks' Business Adventures. It is a great book and once I get done with it I'll have a more in-depth review of the entire book. Today though I felt I had to talk about one of the stories. Xerox has an entire chapter devoted to it and rightly so. It is fascinating story of discovering the printing method we all use each and every day. But more fascinating is that they were one of the first schools to give large sums of money to a university with no direct benefit back to them. They of course benefited from a more prestigious school offering better classes in their hometown to find better talent in their company. Yet the school did no research for them directly.

Xerox donated several millions of dollars to the University of Rochester which was the largest gift from a company to a college at that time. Many people in the business world and in charge of other companies said that Xerox was wrong and should not be giving money in such large sums to a school. Some shareholders also cried foul and stated that Xerox was taking away their profits from the company. The founders did not care a lick about the detractors statements. To them the most important thing was to do the right thing and they saw that as donating to the local university.

We should remember this because sometimes we too get distracted with short-term goals and do not see the bug picture. Xerox is still around today and thriving and it might just be because of this early investments and good management. I'm sure the small donations in the end had a fairly good ROI.

When companies today start talking about giving back and make it seem like a  new idea just remember that there is nothing new under the sun and that Xerox was one of the first pioneers of giving back.

The Ever-Chnging Price of Hot Wheels

I work at a bank inside a Kroger and Kroger has conveniently placed a bin of Hot Wheel cars in front of the branch. They have changed the price repeatedly throughout the past three weeks, it ranges from a measly 79 cents to ten for ten dollars. I have noticed that the price is 79 cents when there is an abundance and ten for ten when the supply is limited in scope. I noticed though that there were more people attracted to the ten for ten than the .79 or .89 cent prices. 

Since it wasn't a randomized trial or a scientific study I have no idea why more people passed up on the better deal to wait for a higher price. More people could have walked by or there were more children in the store that day. It could be the best marketing around too. What I do know is that the price of the hot wheels seemed to have no other variable but the amount of cars in the bin. When more stock was added today the price decreased to .89 from one dollar. 

This is a classic case of supply and demand. Even in the tiniest toy there are still wide price swings when supply goes up or down. Maybe if the supply gets really low they will sell for 1.29. Paying attention to prices can signal to the consumer if they have a lot of toys or a limited supply at the moment. 

I Love Earnings Season

It happens four times a year and it is the most exciting for us normal investors. Investors get to see the performance of the companies they picked and might find some deals after an earnings miss. Hopefully each stock you invest in beat or at least met the guidance and expectations. It solidifies the choices and justifies the risks taken, hopefully with profits in the portfolio.

Sometimes though it can create massive losses as it did this earnings season with those invested in Coke, McDonald's, and IBM. This is why due diligence must be performed for every stock and even then sometimes you can loss big. Warren Buffett is the king of researching a company and normally does not loss money on investments but he lost supposedly at least two billion in a matter of days. Unless he sells though he could recover his losses and even make more money. Still very bad though to have stocks you own go down. It will happen but do not be too hasty and sell from one days down movement. It can always go back up and if the company is strong and solid it might not matter.

Use these few weeks in earnings season to learn about the companies you are invested in and pay close attention. Read the entire report they give to investors. This is the time to make decisions for next year and maybe drop a few underperformers or those that lowered guidance. Enjoy this choppy time in the market and happy investing.

IBM and Apple Reported Today

And the two reports were vastly different in reactions and profitability. IBM lost about seven percent today and never recovered from their tumble this morning. Apple had a strong day and after their earnings report had a strong after hours movement up in price.

Investors did not like the report that IBM had an earnings miss and selling its chip business. It was probably good that IBM sold the chip business and can use those resources more efficiently. Any investor of IBM is hurting today. Although, I still think IBM is an okay investment, it will be steady and maybe they can reinvent themselves to be leaner. They are more attractive now at the lower price.

Apple had a very good earnings report with high margins as expected, huge numbers of iPhone sales, and less than stellar iPad sales. Apple has mountains of cash and will use the cash horde to buy other companies to increase revenue streams and continue to make great new products. Not everyone will work but some will become household staples.

Apple is more revolutionary than IBM and that is partly from the fact that Apple is a newer company and has created a culture of trying new things and pushing the boundaries. Now they make different products and only operate as competitors in a few places. It really depends if you as the investor think that Apple can continue to reinvent the wheel or if IBM can turnaround to become more nimble.

I would look at other tech firms than these two. Both are consistent and large. I'm searching for the next Apple.

I Predict a Strong Christmas Season

I can feel in my bones that this Christmas Season will be very string for retailers. And maybe a little bit of research and noticing on my part along with the gut feeling. It will be bad for some retailers that have not been able to continue to appeal to the average American Consumer and really good for a select few that have the must-have gifts. That might be a new iPhone or it could be a TV. Probably technology related for sure. On the whole though I think it will be at least as strong or stronger than last year.

We as consumers are feeling a little more money in our pockets and more secure in our jobs. There will be deals to have this Christmas. Americans and really any human cannot pass up a good deal. I think retailers will be eager to have consumers in the store and buying and will offer them deals. Especially after a tough mid-year with fewer sales and higher costs.

Companies will look to be thin with employees and costs to increase revenue. They will succeed and take advantage of the deal-hunting consumer and the fatter wallets that they are carrying. I can't be for sure that Christmas will be strong but I see it as a good Christmas for investors.

Finally to Number Ten: Lockheed Martin

Lockheed Martin is the tenth stock in the WML. It has high earnings potential, can do well with government contracts for defense especially with ISIS and Russian threats still applicable. It is trading at a reasonable 18 times earnings, pays a sizable dividend, and a good profit margin for its industry at 6.6%. All really good signs for the future of the company.

It also has a great management team that knows the industry and can negotiate to get the important contracts. It has forward thinking executives with ideas on energy and expanding into new territory. The supposed advancement in fusion reactors is enough to get my interest piqued. It is a large company and it is trying something new to keep ahead of its competitors. If we all get better energy cheaper and more of it, I'm all for investing my money in that company.

I think it could be a great long term investment and if the fusion reactor is true might be a stock you can retire on in twenty years. We will see and you should of course not put al your eggs in one basket but make space to put some money in this stock. It has good prospects and will likely give investors an above average return.

Why I Do Not Own Netflix

Netflix is a bubble as bad as any other bubble. Yes, it went up wildly and yes it produces some really good TV shows now like Orange is the New Black and House of Cards (I really like House of Cards, masterfully done and in the same realm as Breaking Bad). With all that great stuff even then I would not put my money in the stock. It is trading at 91 times earnings way too high for my tastes. There is no way they could continue to sign up subscribers at a rate that justifies that valuation unless they quadrupled the revenue from each subscriber along with gaining subscribers at a fast clip.

It took just one earnings announcement (the one last evening) to send the stock tumbling 20%. A good sign of a bubble and to some investors maybe a signal to jump in because it will keep going up. Wrong it will not be a long term play that will be worthwhile. It has too much competition. HBO wants to move into Netflix's category when they offer subscriptions to non-cable customers.

Netflix is very lax with their subscribtion and allow lots of people to be on one account which hurts their bottom line. I have really never liked Netflix as a stock to own. It has always been overvalued and I am not into wild speculation of that sort. It does not offer a product that can be patented or hard to copy. It has a really good viewing platform but not one that will make lots of money for its investors.

The Market Will Fluctuate

That is the most important thing we should remember in this volatile time. Markets will always go up and down and sometimes it is nothing to panic about. Other times it is truly a bubble. This time is probably not a bubble or the start of another recession. Stocks are not crazy with valuation except a few which is always unavoidable. Earnings are expected to be less per share than forecast in the beginning of the year but that might be because of not buying back stock, commodity price differences, or the consumer is not spending as much but saving. The jobs numbers look okay, the Federal Reserve is still buying fewer bonds.

I think this has to do with some uneasiness about ISIS and ebola. It is also expected to happen when the Fed slows down bond buying and might get near to raising interest rates. All of these combined to create a high volume selloff but will probably just end up as smoke.

As long-term investors we cannot be skittish when the market goes down 10% just like we cannot be over jubilant when it goes up 10%. We know it goes up and down and we are riding the wave. We make big moves when the research says that is a good idea. Don't go out and sell everything today because it might go down some but I can almost guarantee that it will go back up. Not sure when but it will in the end. Stay the course and Happy Investing!

Book Review: So Good They Can't Ignore You

So Good They Can't Ignore You by Cal Newport was in the same list that Johnny Bunko came from and its review can be found here. This book was really good and had lots of good tips on how to make the reader an expert. Focusing on spending hours on your field learning as much as possible so you can push the boundaries of your work and find the next best thing or discovery. How one learned was also important and it was more than just reading but an intense focus on the subject and writing down what one learned. It had cutting out wasteful activities most notably spending hours on email instead of doing real work.

The material was presented through the eyes of several different people, one that succeeded at the goal and the other failed. It brought about why that person failed and showed the exact place in his mind where it collapsed. This made it easy to understand his ideas and to not fall into the same trap. Case studies are great teaching tools in business and career books.

The biggest thing he did though was to downplay passion in the workplace and as a determining factor in what one decides to do in their career. He uses several high name people like Steve Jobs and Bill gates to show that passion for computers did not go into making the business. It appeared later on after time in the business and was slowly built up. Also, that many people who are successful with passions as a focus in business have ten plus years in that field and know most things in that area which allows them to push at the edge making a new discovery.

Newport makes several other observations about gaining more control in a career and how that could damage the goal and the career if the person is not careful in making sure he is ready to move up and gain control. They have to build up career capital and skills in the job. Then they can move forward.

This book along with Johnny Bunko would be perfect gifts for the college student that might think they can move into a field and just have passion without skills to back it up. Go and get the book, read it, and distill it. I have started to spend an hour or so each week learning about other banks which would be considered competition in my job to see how they perform and what they offer. It has very practical skills and can show that careers can take a long time to develop but can be very rewarding. it just might take ten years to be really good at a job.

Take Advantage of Declines

Many investors have sold shares these past two weeks, either taking profits from highs or believing there is a bull market coming soon. The taking profits is understandable risking money you want some return and taking a little from the high point is very good. You can set it aside to have Christmas or renovate the house. Or take some profits and reinvest when the market has a pullback. It's almost what the people who sold because of a negative view of the market are doing. They are selling now and hopefully will buy shares back later for a lower price to make even more money. Those investors could also just have a short position out on stocks and will make money on the short. 

We as savvy investors know to take a little money when stocks reach the high point to either incest in something that can go up or sit on the sidelines to reinvest when stocks go back down. I don't believe in timing the market and this is not the same. This is being wise and making a real profit on a gain and then reinvesting it at a later date. As an investor I do not feel bad if I sell some of a stock to take some profits and it goes up because I should still have some money in said stock unless the company has changed policies or management that will negatively affect returns. 

So with this recent pullback, I am reinvesting money into the stock market I took out and putting more money in companies that have long term futures. Not every single one will last forever and some might even still have further room to go down but since research was a major factor in deciding which stocks to invest in, I am confidant that the choices will give healthy returns in the years to come. Do not be scared of a little pullback, take advantage of it. 

Perfect Practice Makes Perfect

The entirety of the time I was in coached sports I heard "practice makes perfect" and "you have to practice every single day." While I agree that practice daily is true and will lead to rewards there was a key component missing. It was the idea of practicing in the correct way and in a perfect manner. Also always pushing current skills to the next level. 

Let's say I was practicing my ball throwing for baseball. I consistently each day go out and perform the same rote task of throwing the ball from shortstop to first base. This is a common task to do. I get really good at it and really nothing else. Good I think, I've mastered a skill. But I am wrong. I mastered a skill but not a more difficult skill that is highly prized or needed. Also, let's say I have a slight flaw in my throw, the ball still gets there but it makes the ball move wildly once every ten throws. Well that's a big flaw that over time really hurts my chances of playing in the big leagues. No one ever really tried to correct my technique and now it is a habit for life. I could have really pushed myself to fix the technique and learned great skills. 

This happened because I didn't follow the right advice about practice. I also just blindly thought that I was practicing and that in a certain period after prancing and passion for the game I should be the next great baseball player pulling in millions. 

I was never into baseball that much to put in effort or time so this is all hypothetical but any sport I was playing, like tennis,  never put in enough nor did I participate the way I should have to become a master. I should have followed the real advice that I must practice in a way to excel which is through pushing boundaries and fixing all mistakes. 

And this can work in more than just sports. It can work everywhere. To become great you have to spend time in something and spend the right kind of time. One that will advance and not make you skillful in a low skill but introduce you to master a hard learned skill.

Thoughts on Internships

I had a few thoughts based off of this article in The Economist this week. It says that internships are becoming more popular for the millennial generation. I do see this occurring with people graduating and still picking up internships not yet full-time work. I do not see a problem with internships at all, they do provide the average person a look into a field they might be interested in and get experience dealing with problems in business or any line of work. It allows them to meet higher level employees and ask them questions with less friction than an outsider would have.

Yes, it does not pay them very much if at all and sometimes people pay to go to the internship with time, housing costs, or if they use a broker to find an internship. These downsides are not the best and can certainly turn some possible workers off the internship. They will work you and it will be the things that no one else wants to do.

Internships though are great because even though you are the bottom, this position is only temporary and you will learn much from any internship. They are giving you a glance at the workings of their business in exchange for you doing the work no one else wants to do. And no it is very fun to pay to work but with the access and learning that can be accomplished it's a small price to pay for a better position later where you have the upper hand in knowledge about the field. Also, in earlier times people did pay to learn a trade and it was much longer. Apprenticeships are not the same as internships but a close modern day equivalent.

If you have ann internship use it to make friends with people in the office especially those with technical knowledge and ask them questions. You are there to learn and you can learn everything about a company in a few short weeks working there. The biggest thing you might find out is that the company is not the right fit for you.

Disappointing Job Numbers

August had extremely slow job growth from the previous expectations coming in at 142,000 new jobs rather than the expected 215,000 new jobs. At the lowest level of new jobs created in the United States this year. There was some brighter spots in the report, the unemployment rate went down and wages rose faster than inflation. All good things for people with jobs. The unemployment rate though went down because less people are participating in the labor force not because of new jobs.

The effects of this report on the market will probably be negative at first. Although I could see the market rise later because the Fed might be unwilling to raise rates or slow bond-buying after such a weak report.

We will just have to see but I would be cautious trading today and the next week until more information comes out. Trade Wisely.

Book Review: The Adventures of Johnny Bunko

I liked the nontraditional presentation of these career guide. It was produced as a manga comic book and its short and to the point. I read it in under 20 minutes and it shouldn't take any person too long to read. It is not full of technical jargon or grand ideas to get you started on the perfect career path. It does not tell the reader that the path to happiness is to make large amounts of money or even how to get to where you want to go.

The thing that Bunko teaches people really well is six simple rules to think about in your career path. Each no more than a few words. I thought the simplistic rules were really good for those with short attention spans and would be a great graduation gift. It at times seems silly but the book does teach really good things to think about in the career path.

I would have liked more discussion of these ideas and rules but understand that with the chosen format it is difficult to have an in-depth conversation with a short book. The rules are good and well-thought of but I don't know if they are good for more directional looking people. I know there is not a plan that works for everyone and each person must find their own path but some people want and need more concrete steps for their career.

Overall a great book and one that should sit on the shelf. Even if you get other books for more discussion, this is a perfect introduction to a new way to think about careers. Get it for that recent grad you know or someone who might be unhappy in their current job/career path.

Number Nine: Wal-Mart, The Unstoppable Beast

Wal-Mart is down from its high this year on concerns about the entire retail industry. It has met expectations with earnings last quarter and will have strong earnings the rest of the year if in line with forecasts. I think Wal-Mart will beat those expectations this year though.

Wal-Mart will have very competitive pricing this Christmas and the American consumer will want to spend this Christmas season as incomes go up slightly and more people are employed. They can created themselves as a destination for the hottest tech gadget and with the lowest prices.

I'm also really interested in Wal-Mart's money services it offers customers. It has become a good bank for the customers banks normally overlook. Good prices on money orders and prepaid debit cards will put them ahead as people eschew traditional banks. They are also growing their organic produce which they are able to sell for a higher price and perhaps even attract more conscious consumers.

The company is also doing well in competing with Amazon on shipping goods to a consumer's house. I know a few people who just order it online from Wal-Mart and have it delivered to their door and these people do not always live in a big city.

Wal-Mart hasn't had to change but I believe that they are capable of change and quickly at times. They are attuned to what the American consumer wants and can provide it at the cheapest price. For these reasons they are included in the WML. Happy Trading.

The Great Number Eight: General Electric

I really like the products the General Electric produces, it has wide interests and a large industrial player. This is just one reason why I'm including it in the index. The management team is superb. Jeffery Immelt leads from the front and can change GE to a leaner machine than what it already is. The stock is still fairly valued and revenues will grow along with stable dividends.

Immelt has been with GE since the early 80's and knows the company intimately. He instills courage and awe among the employees, convincing them that his path is the right path to make GE stronger. He has created with other executives a strong C-suite that can keep pushing the monolith of GE forward. GE is not afraid of change and is willing to subtract parts of the business that do not fit in with the image.

Overall a great company and one that will be a great pick for any portfolio.

CEO's Should Be Owners

According to this article in the Journal of Finance, CEOs and other top managers should be owners in the company that they manage. This makes perfect sense if the company does well and stock prices go up they make even more money besides the basic paycheck. We just now have actual proof and data to support this claim. This is great news. Companies should pay attention and if they want to increase shareholder value and reduce costs they should switch payment to stock grants or options. They could also look to require the top managers have to own a part of the company.

This would be pretty much impossible to force managers to own shares but would be an interesting idea. At least with that managers could never turn their back on the company without hurting their own wealth.

Also with this knowledge, we savvy investors should look to see if management owns shares in the company and if they have sold recently. If the managers are selling the company it might reduce trust from managers no longer believing in the company. If they have bought the company and are continuing to buy shares it will probably portend that the company will be doing really well and the managers are going to perform better. Now sometimes it does not work out as cut and dry but overall a good rule to follow. Managers buying shares is a good omen and selling shares probably means you should get out of the stock.

Burger King and Tim Horton's

This merger announcement was a surprise to me because I would not have guessed that Burger King wanted to move out of the US and join with a maker of doughnuts and coffee. It does make sense after looking over the deal. Burger King wants to expand and they can now get good coffee in the store and Tim Horton's can have an easier time expanding to the USA where they have failed before. It also shows that the tax rate in the USA is way too high for corporations. Why stay here when the country next door is offering a lower tax rate and still allows you to trade in the USA. I do not know why we are surprised this movement to leave the country is happening. With the good open borders we have now and quick movement of information and goods its like each country there is no reason to pay more to do the same business when you can save shareholders millions moving.

It is no different from a company moving from New York to Florida or Texas because of the tax benefits. The states try to attract new business and they do that with lower taxes and other benefits. For the USA to keep current business headquarters and attract new ones we will have to have a competitive tax rate of 20% or less and give legal protection to our corporations. Corporations have incentives and act on those incentives. Our government should recognize what incentives businesses have and convince them with better incentives to stay. They should be carrot incentives and not punishments because extra taxes or punishments will only create hatred and resentment. Nice benefit incentives is the way to go.

If we don't see a change soon, I think we could lose even more major companies.

Long-Term Investing Choice: Real Estate

For real estate to pay off your time horizon needs to be in the decades. You could get really lucky and invest in a plot of land that quickly increases in value. Most though are long term plays and will return well if you are willing to wait. A plot of land to develop would be good especially if you can collect some rent on the land while waiting to develop to something bigger.

With increases in population and less land available per person, buying land in the right place will be great for your portfolio. If you have the cash to invest in property and land you should do it. If you do not have the cash to buy your own land it would not be a bad idea to invest in a REIT or form a group of investors among people you know to buy land and property.

With the choice of getting into real estate you also have to think about the side of real estate you want. Do you want apartment complexes or do you want to rent to business owners. Each can be profitable but come with their own challenges. Apartment renting has high turnover and will require costs to upkeep the places and work on each apartment. The positives are the chances that every building is empty is very low and you can change the price of rents quickly because of the high turnover.

Commercial real estate positives are high rents and low turnover. The business will be a constant source of income. Until it leaves then it would be harder to attract a new business and could sit empty for years until a new business is persuaded to move to your property.

Each type must be weighed with what you want property you want to handle. It is a smart idea for young investors with a long time horizon. Not just for older investors looking to diversify.

Up, Up, and Away

The S&P 500 is up again to record intraday highs today and even crossed 2000. It has since come down but looks to go over it again if information doesn't change the direction. This helps to confirm my thinking that the market was going to end higher this year and continue to go up maybe not much but still go up. I encourage all young people wanting to get in the market that they should get in now before it becomes even more expensive to join in.

Get in their find value and invest. These highs should not be too worrisome for everyone. Next year it might be different but some traders are even calling for 15-20 year long bull market and we are just in the first five years. Although world news and government policies change all the time which will distort  the market and change outcomes and directions. We as smart investors have to keep on top of all news so that we do not lose money. Passive management of money is not good.

Happy investing and happy making record highs today

Cutting Expenses at the Grocery Store

Being the smart saver and investor I am, I decided to do a little experiment to save money at the grocery store. I will hopefully be changing and continuing the experiment to get the best bang for the buck. And since I've saved so much at the grocery store I will then invest those savings.

I use to just go through the grocery and buy anything that caught my eye, spend on the fancy stuff just because I wanted it and it was something I needed, duh. Oh, wait most of the things I bought were not the best for the value and I did not use everything so wasteful as well.

So from now on, I will be buying more generic items unless the generic item is not up to par. You cannot sacrifice everything in life. Real Coke cannot be beat and KIng Arthur Flour blows away everyone else. But I think things like paper products, canned goods, and other choice items might be just as good and maybe the same people make both brands. Then it would be silly to not buy the cheaper brand. So far my experience contains only toilet paper and paper towels. Neither of which have done poorly but I will say the paper towels are little thiner but not terribly. They still get he job done with no change in amount of paper.

I want to hear your experience with generics and trying to save money at the grocery. Maybe your tip can save me money now and earn me money later. Happy investing.

America Needs More Hawks

Fed policy has remained very dovish even though several qualifiers have been met that would signal a raise in stricter monetary policy. We are not getting the higher interest rates we need. They have reduced the amount of money they are printing. Hawkish policy is the only way to go now and if they do not change policy I doubt they ever will. It's just too easy to maintain the easy rates we have now. It hurts people in the long run but in the short term is great. Stocks have risen,  jobs are created, and people take out loans which are all good things. Without a more normal level of rates and a change though we could be stuck in a trap that will never allow rates to go up without fear of economic collapse even if that is extremely unlikely.

It has been too long with soft rates and I'm personally tired of the low rates. I want better returns on my money that I'm saving.

I also think that the Fed has decided to wait because they are scared that the market might react poorly or the economy as a whole might not like the shock. But if the Fed tells people they are going to do this at this time, it will not be a shock and economic actors can plan accordingly. I've heard for years that the Fed will raise interest rates and stop printing money. Hopefully it will happen sooner rather than the middle of next year. Fed also please be more open with your plans and less volatility will be present.

In Praise of the Spender

The consumer is all powerful in our economy and is lifted up as an aspiration for everyone. No one is supposed to have the old car, last season's clothes, or save money in any significant quantity. Yet I hear few reasons of why the spender should be praised except it circulates money and that's what we need. The downsides of course are that the spender does not multiple money but instead the miser hoards the spenders money.

My argument for why the spender should be praised is not rested upon the circulation of money. Money always circulates and goes where it is most dear. The spender is good because he forces companies to provide new things and always invent the next best thing. This gave us the latest computer model with the faster speeds and more storage. The spender demanding new things gave everyone the newest model of any appliance or new type of clothing we enjoy today. This is because the spender is not happy buying the same thing over and over while the miser still uses the 1950s fridge because it works. If everyone was a miser the world would have much less difference and made less progress. The miser sees those things as frivolous while the spender requires them and then everyone gets the blessings.

Just like in the previous post, everyone in the economy has an important role to play and each one performs a different but required function. If one of the actors were to disappear we would be worse off. No one should be belittled for what they do in the economy. The miser might not understand the spender but without the two competing ideas the economy would not function as well. So do not belittle the spender or the miser but lift both onto a pedestal and sway thanks.

In Praise of the Miser

The miser in our society gets a bad name. He is seen as hoarder of money and uncaring/selfish person. All the worst connotations imaginable about money, the miser gets thrown upon him for no real proof except he might have money and isn't spending it to help the economy/help others/provide jobs. YEt the miser does something else for the economy that is a good thing and also the claims against most misers might be untrue about hoarding wealth.

The first thing a miser does is not consume extra resources, he does not need. The miser lives in a smaller house than the money could buy, eats out less, buys fewer clothes, and wastes nothing. This might go against the grain of what we have been taught about the economy. Under the current assumption that we need to spend money to boost the economy the miser is hurting everyone. Yet the miser is doing the opposite. The miser makes every good cheaper for everyone else because he takes himself out of competing for the same resources. He lives humbly, so that others that want a lavish lifestyle get it cheaper and more of it. All resources on earth are finite and each person who leaves it for others helps rather than hurts the economy

The miser collects huge amounts of wealth from his non spending. This is terrible why isn't he sharing his wealth with others. Oh but he is sharing his wealth in just a different way. He puts the money in place that are safe and secure investments. Providing even more of his money to boost the economy through investments. Yes he might get a small percentage for the privilege of using his money but he cannot use the money in a more productive way. He allows others who can create the next Apple and Exxon to get a start and provide even more to our lives.

The miser does even more and yes he is probably not the best citizen in the country but most misers provide a service to the economy like everyone else and should not be vilified because their contribution is different than other economic actors. Each person has a role to play and they do it best when we encourage their actions as reasonable and helpful to everyone. Just remember because someone did not want that shirt in J.Crew you can now buy it.

Thoughts on Trading Exxon

Personally I think Exxon is a fantastic stock to invest in, solid earnings, revenue, and dividends. It is very attractive just from these simple measures of a company. It is also way undervalued in my opinion.  It trades at a measly 12.68 P/E ratio very low for its sector and for any stock. I would still buy it at 15 P/E ratio. Lots of room for upside and should go up as people realize that it is undervalued. It has a 19.67% return on equity compared to 13.98% for the S&P 500. It has a market capitalization of 424 billion but its revenue each year are 422 billion.

It provides a good that almost every human on the planet uses every single day in some way. And it is the top provider of that good. It might have some competition from alternative energy sources but I have faith in that management that they will move into other energy sectors and stay on top of their game. If not then the company deserves to be thrown under the bus and go the way of other companies unwilling to change.

I see Exxon trading at 125-130 very soon and it might even be this year. It should at least trade at that level if trends continue. And it would probably still be a great buy at 130. At 150 it is too expensive. So get out there and find an undervalued stock like Exxon and invest. Happy trading.

Disclosure: I have family members who own Exxon, I do not owen Exxon nor do I plan to open a position in Exxon.

Links worthy of attention

Global hazelnut shortage. Buy Nutella now and sell it later. Also I didn't realize that Nutella took up 1/4 of the global hazelnut supply.

More M&A activity with the dollar stores. It's going to get feisty and I think M&A will continue to pick up as companies want to boost balance sheets and have lots of spare cash.

Deirdre McCloskey on wealth and poverty and how the poor have been helped even though the rich got richer. Not everything I agree with but interesting ideas.

McDonalds is going to provide their great coffee products in grocery stores soon. Will this hurt their drive-through business and selling a biscuit with a coffee? I doubt it but it could have unintended consequences.

Americans need more vacations! I think this might have to do with more part-time workers and temp workers. And the idea that you should always be able to work. Thankfully I work at a company that demands an employee take at least a week off vacation each year.

Ron Shevlin on a possible way that new generations will rate banks. Consumers will rate banks on the services they offer to improve customers financial lives and how well they do this.

Possible new Australian media laws could change the landscape and will have an impact on investors in these companies.

Downsides to Day Trading

It is silly and irresponsible to day trade, there I said it. Now let me show you why it might have appeal and then I'll show you why it is stupid.

It has the glamour of being on Wall Street from the comfort of your home. The day trader can watch market news all day, read the latest rumors, and then decide to put money toward what he thinks the market will do on that information. It also has the potential to make a trader very wealthy in a very short time. And with little capital a bet could return 100s of percents in a few months. No other way to invest has that probability in actuality.

The above reasons almost make me want to gamble my own savings and investments to retire even earlier with large piles of cash made quickly and easily. It seems easy, people on tv and the internet talk about how the strategies work and are sure-fire ways to increase returns from small investments. The problems of course are many. One is the problem that lots of the returns are consumed from extra taxes and commission fees. The income is taxed at the ordinary income rate rather than capital gains. Let's say you trade 400 times a year at a cost of $8 a trade that is $3200 a year given to the brokerage house for the privilege to trade. 400 is a small number too because if you are day trading then you need to trade probably more than twice a day. Each trade decreases your actual return while making other people richer from your trades. Unless you have a large amount to big with to trade it is not worth it to day trade and give up such a large percentage in trading fees. Although the brokerage houses will want you to trade more and therefore will try and convince you otherwise. Do not fall into their trap, stay strong and stick with a buy-and-hold strategy. It will pay off in the long term with fewer fees and taxes.

With day trading, the trader has to know direction and timing of the stock. Its already hard to decide if a stock will go up or down based on all the factors that can move a stock and so it is extremely risky to day trade because you are taking on all the unknown factors. It can make you wealthy but I would not do it with any sizable portion of your money and I wouldn't bank on it for retirement. Way too dangerous for the long term and a trader shouldn't want to take on more risk than necessary to get a reasonable return.

Just stay away from day trading. Chose some good companies invest monthly in those and wait for the rewards to come. it might be a few years but they will be there.

Slow and Steady is a Must

Smart investors realize that you first have to pick a good company and I have several choices on how to pick bargains and stocks that will be lasting investments. Secondly and just as important you have to wait and hold on to the stocks you picked. Investing is rarely a win for investors with day trading, those people do that for a living and many lose lots of money but make the brokerage houses very wealthy. As the savvy investor you want to become take note that the huge returns from investing might not appear for 20-30 years. After that period of slow and steady investing all of a sudden you will say I made great investments, they have huge returns and I am making money for my retirement over what i could expect. Third it is also a good strategy for us investors to put in a set amount each month to the investments. This way it increases the pot that will grow and earn money. 

If you start with $10,000 in the nest egg and add $1500 each month for 30 years you will put in a total of $550,000 which is a great start to retirement. It gets better though, with interest earned at a reasonable 6% rate compounded monthly you would have $1 million in interest earned. That doubled the money the saver put in and the saver still has the original investment. That is a great way to have a nest egg. It might have taken a long time to build that up but its well worth it in the end and it's not unreasonable to save $1500 a month for someone making $50000-60000. Each dollar added increases the amount earned and it would be even better to save $2000-3000 a month.

Many of the great investors see the stock market as it is a generator of wealth but it can only do that function if it is allowed the time to work and transform the lowly investment into a fortune. As the young generation right now we can start saving and putting our money in wise places to build the wealth we will need and want for our future. Money just sitting idly because of being afraid for it will not return to what we need, it will lose money and won't be able to cover expenses or the things we would like to purchase. Let's be smart savers and place money in the proper place to work for us and not us working for the money. 

Loss of American Wealth

There is much talk recently from a Federal Reserve report that details the significant loss in assets of American families wealth. This comes from the housing bust, lower wages, stock market crash, and having to dip into retirement and savings to make ends meet. Now this is a tragedy of the highest order for the long term health of our economy. The economy needs savings and investments that will help companies form new products and perform research to make lives better. With less capital and the country being poorer it does not help investment and long term growth.

Instead of thinking the government though should step in because they would only tax us more in hidden ways or openly to "recover" the wealth. We need to instead look to become long-term investors and really focus on saving money again to put toward our future, awesome retirement. Setting aside 10% of income a year to savings could put the American family back toward the road of prosperity and recover the lost wealth. We might have a minor setback on our hands but in the end we will rise above as long as we get back into the habit of smart spending and smart saving.

The Current Market Picture

The DOW and S&P 500 are near record highs which to lots of people get them nervous that a correction is coming or worse another recession. It was the same story though a few months ago before it hit these new record highs. I'm unconvinced that the market is about to take a large fall. I think the bears could make the market go down 5-6% until the end of the year but that is a small risk. In large part I think the bull still has room to move upwards. I think earnings might not be great this quarter but with more M&A activity and IPOs that the market will set new highs in the coming months. There is also an election during the mid-terms that will make politicians want the economy to grow. We could also stay at this level trading closely within a few hundred points in the DOW for the most part. For each outcome I would say 50% chance of going up, 35% chance of staying about even, and 15% chance of going down 5-6%. Geopolitical problems could increase or decrease the chances of the outcomes along with certain good/bad numbers coming out from the government at the end of the week. If employment continues going down the market I could only see going up in value.

So with these chances and possible outcomes, you the savvy investor should make plays and investment choices that reflect this outcome. You should have a few defensive stocks that will hold value in a small correction. Also it would be wise to hold a bond fund and some cash on hand to put into the market when some if the stocks become more attractive. Mostly with the chances though if you are in a bull market position I would not change much except too take a little profit now and if on the off chance it does go down you can reinvest and maybe even you got back your initial investment.

Managing a Paycheck

A key to creating wealth and to have a steady income is to manage your paycheck well. A graph, an Excel spreadsheet, or jotting it down on paper all make the same end goals. Putting your money in the correct place and not losing track of where the money goes. I'm afraid that too many people get a paycheck and see that as the amount they have to spend, then spend it all quickly and only have a little to get by until the next paycheck. Some have bills that eat up costs but others are simply buying unnecessary things. Then after the weekend they wonder where all the money has gone. It is as if they are afraid that money will disappear if they do not spend it in the next 24 hours. Well if they do spend it will be gone and they struggle making ends until the next paycheck.

Planning ahead with money, writing down where you spend and the amount, and then seeing how much is wasted can really help with saving money and not wasting money. Instead of spending money in trinkets put it toward a trip. There are tools out there to help manage the daily expenditures, find the one that suits you and use it. This way when you get that next raise you can better handle the extra money to save for retirement or just to spend more wisely.

Why Not Capitalism?: A Book Review

Jason Brennan's new book takes a stab at socialism's constant moral high ground stance particularly against Jerry Cohen and similar authors. His argument surrounds several logical fallacies that socialism commits. The biggest and most atrocious fallacy is the comparison of perfect socialism to imperfect capitalism that occurs in Cohen's book Why Not Socialism. Brennan mocks this claim endlessly and almost too much but gets the point across that you must compare imperfect socialism to imperfect capitalism and perfect socialism with perfect capitalism otherwise you do not get a true comparison that matters.

Under his new comparison of perfect capitalism to perfect socialism, the reader finds out that justice and tolerance excel in perfect capitalism more than in perfect socialism. Mostly because capitalism allows for people to create socialist utopias if they want or form anything else they want as long as they do not hinder another person's choices. I agree with him that capitalism in the perfect sense fairs better and more people would like if they were given the true comparison rather than the options most socialists give us today. The choice today is between all the problems of capitalism and no problems in socialism. Of course people are going to choose socialism without any problems over things with problems. Once though you put up two perfect systems most people will choose capitalism and capitalism maintains the moral high ground.

The other big argument Brennan makes is that capitalists should call out socialist who use this bad metaphor and to now stand up for the moral high ground that is Capitalism. In this way we can do our part to spread the good message that Capitalism has for every person in the world.

I would recommend this book to any person and i think I might order it for people and ship it as gifts. You, the reader should go out and get this book now and spread the news that Capitalism actually maintains the moral high ground in any argument with socialism

Starbucks: The Seventh WML Stock

Starbucks, a company that has persuaded millions to buy a simple cup of coffee at a premium price because of the atmosphere and the art of making that cup of coffee. Howard Schultz runs the company with the idea to expand the storefront and go into other drinks like tea and food with acquiring La Boulange. This drive to expand and change the way we consume certain simple goods shows foresight and will be very good for shareholders in the end. The company owning all the stores is also a better thing for shareholders because it creates even more consistency from one store to the next and makes their reward program easier to implement. The reward program is genius because it takes longer and spending money to get to the level that matters and then to get a free drink instead of nine or ten purchases you have to purchase 12 separate times. There was also good news about the China Starbucks' stores and that the are profitable and attracting more Chinese since they were first opened.

The P/E ratio isn't the lowest and should be lower but with their recent acquisitions and purchases it does put pressure on the earnings. Earnings are still growing and will be back to better levels in the next few quarters. Starbucks pays a good dividend and has increased it 32.6% in the past three years. It has really good sales growth and has become a staple of the American coffee scene. Schultz was able to turn a simple community that did not have high profit margins and turn it into a lavish, luxury good consumed by millions daily.

Disclosure: I do not own nor intend to open a long or short position in Starbucks.

Surgical Care Affiliates: WML Stock Number Six

I really like Surgical Care. It has a good strategy of operating surgical centers in a hospitals and in their own owned centers. They are also aggressive in growing the business and while still no profit from operations they should soon turn a profit. Most potential profits went into expanding which I like in a growing company. It will produce higher returns for my money later on. Also, the CEO is young and driven to increase productivity and the business. Surgical care will benefit from changing ways people have surgery and want cheaper, quicker options.

This is a stock that I would get in and see to get better in the years to come.

Here is a good article that explains more about the company and about Andrew Hayek, the CEO.

Disclosure: I opened up a long position in SCAI and will continue to hold for the long term.

Update on the WML

Sorry folks for never completing the 30 stocks in the WML index but I have been somewhat busy with a new job and just other things. Here though is an update on how well the index has done over the past 5 months.

If you invested in the five stocks I recommended and added to your portfolio you would be up around an average of 9.48% since the start if you had the same amount in each stock. While it might seem that I only had four stocks I'm going to count GoPro as one because I would have put it in the index earlier but it wasn't yet trading.

Hopefully I can add the other 25 or so stocks soon and of course share my reasoning of removing or adding stocks. I don't think I'll remove one of the five just yet.

Happy trading

BBVA buys Simple, Makes a Play into New Banking

Simple is a modern bank and tailors directly to people trying to make banking simple. It has a convenient tool to track purchases and other tools to see those purchases impact on your bank account. It focuses on online banking only rather than having branches it put the branch in your pocket and wherever you go. It makes budgeting and saving easy and gives great graphics to achieve those goals.

BBVA is a large traditional bank. It has many branches in the Southeast United States and is based in Spain. They are making a play into this new sector by buying Simple and the technology. They paid $117 million for the bank. If BBVA takes simple to more people and continue to operate it as a new company this will end up being a great investment. Customers will enjoy the simplicity and the great new tools to help them achieve goals. Although, BBVA could also make a mistake and change too much or roll out Simple to more consumers in a haphazard way. This could then backfire on BBVA. I do not think that the managers at BBVA will make these mistakes and it will truly revolutionize banking in a good way for the consumer.

Diversification into Foreign Markets

For the modern investor it is necessary to diversify risk with bonds, cash, stocks, and other forms of investments. This does not mean putting all your eggs in one area of the world. There are opportunities for expansion and great reward in other markets besides your national one. It decreases risk because one area might be struggling with higher inflation and the other country is booming. Now when investing it is still prudent and wise to go ahead and research everything you can about the foreign firm and how the market operates. Due diligence is a must. It is still your money and information is out there about these firms. Just because it is in a different local does not suddenly make it a fountain if wealth or even the exact opposite of what is happening at home.

Foreign companies can be valued differently. A company in the US has average price to earnings of maybe 18-20 while in Eastern Europe it might be closer to 4 or 5 because of the known corruption that will take place. So because it might look like a bargain with American eyes an investor has to put on the correct lenses to value and understand the company.

The investor should also not put more than 25% in foreign stocks and bonds. You want to be well diversified but the home turf is still the better place to invest. It saves transactions costs and the possibility of losing the money with a sudden change. The Ukraine recently had a revolution and those old bond investors might not have a claim to money anymore. Things can happen rapidly and too much abroad might hinder your overall return.

That being said lower risk with probability of higher profits is always a good thing. Investing in foreign markets is an easy way to diversify risk and boost return. Happy investing and start researching those new firms.

United Parcel Service: The Fourth Pick in the WML

UPS is one of the two leading private parcel companies. The other is Fedex, the other major competition comes from the United States Post Office. As the consumer purchases more and more online, these companies will provide most of the shipping of goods. Trucks are still important for the majority of businesses but a truck isn't going to stop in the front driveway but a smaller UPS truck could certainly stop and unload the daily goods you bought. The online retailers enjoy sending you the goods from a central warehouse instead of hiring employees in the store. The cost of shipping is also not that expensive to the consumer or the corporation as seen that many companies provide free shipping over a certain order price. UPS is very efficient at getting shipments from one place to another quickly getting most shipments delivered in just a few days. Their logistics formula has to be good to have such a well run machine. The company has invested heavily in getting goods from one location to another. This is justified because people will need to move items around and UPS offers good service for a reasonable price. They also provide easy shipments from business to business and that is their true bread and butter.

The stock has returned nicely to shareholders with dividends and with a nice growth in price over the past five years. They have increased revenue and able to maintain being top dog in the industry. UPS's CEO D. Scott Davis has spent a long time with UPS and has run the company through the worst of the most recent recession and made the company stronger. I think with careful research that UPS has positioned itself strongly in their sector. The company will be able to maintain the strong position making this company a good investment choice for the investor. It will be a very important business for everyone and will have more growth in revenues to come.

Disclosure: I do not own UPS or plan on purchasing a position in UPS

The Third WML Stock: The Southern Company

The Southern Company (SO) provides power to over 4.3 million customers. This makes it one of the largest electrical firms in the United States. It covers most of the deep south/gulf states. This hugeness though does not put it into the WML. It is put there because the good leadership qualities of Tom Fanning has pushed the electrical company from just providing power to a vibrant company that is looking into new energy sources. They have started a new nuclear power plant. When completed will provide so much cheap energy to the southern states. And hopefully will show that nuclear power is a viable option. They are the leading example of new energy right now. Southern Company has also strived to cut waste and pollution with technology. In al aspects they are leaders in changing the landscape of the electrical utilities.

The stock return has not been as spectacular as some returns but it makes it up with consistent growth and any declines made up with its dividend. It will also return consistent profits because every modern person uses electricity at some point. The states Southern operates in are growing and will therefore increase profits later. If the technological changes decrease costs for Southern, the returns will be enormous. The changes being implemented will work out because the leadership in the firms structure are pushing hard but not changing too slowly. They are keeping up with the new times, listening to customers to give them what they want. The government has approved the loan just a few days ago to build the new nuclear plant. Hopefully they can get it running quickly.

Southern Company changes with possible threats meeting them and going over the threats. They are not remaining stagnant in providing electricity but adding new technology and leading the way in new technology in utility companies. As Mr. Fanning continues his firm's direction and guidance I cannot see them failing. A good investment

Disclosure: I do not own any shares in SO. Nor do I plan on initiating a position.

The Second Stock in the WML Index: Eagle Bancorp, Inc

The second well run company is Eagle Bancorp (EGBN). It operates 16 branches in Maryland and Around Washington, D. C. The firm has performed well over the past few years going from the 8th largest bank in Maryland to the 2nd largest. It has increased revenue, earnings, and customers in the past few years. Management maintains an aggressive stance to fend off the threats of larger banks. They are beating the average operating margin and profit margin of their competitors and peers of publicly traded companies. The stock has returned 584.65% in the past five years. All point to really good management of the firm and caring about the investors. It has $2.9 billion in assets and $2.67 billion in loans. A good healthy margin for the bank and source of good income down the line. The firm remains competitive to its customers offering the latest services.

Ronald Paul the CEO has many years in regional banking and has steered the company in the right direction. Expanding the bank's reach and maintaining good margins. Their consistent growth and strong investor relations makes me put them second in the index. It is also fitting because America and the investor need banks to do business and this company will grow to support a very strong segment of America. Hopefully we see more exciting news from this company.

Disclosure: I do not own any shares of EGBN nor have I had any interaction with the bank. i do not plan on opening a position on the bank's stock

The First Stock in the WML Index: Macy's, Inc

When the average American thinks of Macy's they think of the Thanksgiving Day Parade and the enormous department store in New York City. What they need to think of is a strong management team fending off fierce online competition and a strong network of stores committed to customer service. Macy's is an aggressive company differentiating itself from other department stores. Recently it revamped its credit card accounts to better take care of the customers. It has priced products aggressively to get customers in and shopping. It has a superb management team that has many years in retail and constantly looking at the competitors. They have sales above $26 billion and are in a strong position against other department stores. The team has managed the recession well and have emerged stronger to face new challenges.

They have centralized control and are adding more fulfillment centers in stores. Cutting out districts and moving only to regions has reduced waste and will make Macy's a more competitive business against online retailers. The fulfillment centers will boost store sales while also getting the product quickly to the customer. It will open up ways to order from other stores quicker and seamlessly. Macy's making online business and retail stores stronger and more interconnected moves the company forward.

The head management are focusing on what the local customers want to buy and are delivering goods that meet local tastes. People on the Southern coastline do not have the same preferences as those in the mid west. Those customers will now get different goods and can order the other goods not found in their particular store. Also, many stores have a local shop that is connected to a local attraction. The Bowling Green, KY store has a Corvette shop with ties to the National Corvette Museum. It adds character. No other store has the same local shop and no other stores in the area have that shop.

Macy's balance sheet and numbers have looked spectacular over the past few years. The stock has returned  579.29% over the past five years. A wonderful return for any investor. The fundamentals look good with earnings growing over the past few years and revenue increasing. All signs to a well managed company.

Macy's deservedly gets the first pick as a well managed company. It is a bastion of retail and Americans love retail. With the management in place, Macy's will remain a strong pick from a managerial viewpoint. Things could change with the leadership or bad decisions could remove them from the index. Congratulations Macy's on gaining the coveted first spot.

Disclosure: I work at Macy's part-time but own no shares in the company and no one in my immediate family owns shares.

A New Stock Market Index: Wood Management Leadership Index

I want to start my own stock index to follow the 25-50 best leadership/management headed firms. It will be a huge project and probably take many weeks of intense study to finalize the companies. I will operate it with a set of rules and opinions. The rules being has to be publicly traded and a set of guidelines and factors that will separate one from another. It will be important to maintain objective standards to show that well run firms are better investment choices than poorly managed firms. This is just the beginning of the index so will take some time to formulate rules. My opinion on the company factors into the overall rankings and weight in the index. I don't think I want a price weighted average because price has nothing to do with the value of management but instead a function of earnings and shares available.

After picking a stock, I will then put some of the analysis on the blog for you to critique and you can see where I am coming form. Let's say I choose a stock a day to add to the index and analysis. Management is important to a business and can make or break the company as a whole. Let us go and find the best managed companies.

10.10 is a Terrible Idea for Business and Workers

The president and many of his supporters have raised the call to bump up the minimum wage 39% over the next few years. It has been touted as a way to release many people from the chains of poverty and boost income. Today though the CBO (congressional budget office) said that the increase could cost the economy around 500,000 jobs. Not a trivial amount and one that is definitely affecting those making minimum wage or just above it. Combined with the ObamaCare job loss and it looks pretty dire  for finding work. They also claim that it would raise 900,000 families out of poverty, good for them to get so many people out of poverty while destroying 500,000 jobs. Also, that only holds true if the poverty rate is not changed which it is changed with inflation or at anytime congress decides it is different. With more people making more money chasing the same amount of goods you can be certain that it will not lift anyone out of poverty but it sure will put 500,000 people out of work. Think about how many people were pulled out of poverty from the last wage hike. My guess is about zero, it could have been a few of course.

The administration claimed today that the CBO cannot always be trusted and they make mistakes. Sure the organization makes mistakes sometimes because after it makes recommendations the government sometimes changes policies. And not only that but the current administration held pretty tightly to those CBO numbers about the effects of ObamaCare and the deficit when they needed. This is a case of them playing politics and spinning a bad story for their plan.

Now, most economists agree that minimum wage hikes effect workers and cause some unemployment. It just has to based off of economic rules. The effect's magnitude is the thing in question among all but the most staunch liberal economists. It makes businesses hire few workers and instead buy machines that are now cheaper than labor. It makes firms decide to work and demand more from each individual worker. That's nice to now have to worker harder on those already struggling.

The last thing it will do is cause everyone else to demand a higher wage. Those making 10.10 now will not stand for soon making minimum wage. Instead they will also ask for a new higher wage line with the work they perform. Now we have just inflicted ourselves with higher inflation. The President's goal could be higher inflation to take away the debt burden but what he did was taking those who invested wisely and saved and destroyed that saved wealth so some people can win. I think strongly that the government should not interfere with who wins in the economy and who loses. Especially when it trashes the savings of one group to pay off another. It is shady and should not be done.

If the government passes the hike which it looks like it might. Companies that sell machines to perform tasks might be a good buy. Also, get ready for increased inflation and news of businesses laying off workers and small businesses perhaps closing because of the inability to pay the new higher wage. Mandates are rarely good because they do not take into account the changes in the organic economy and are blind to what might actually be happening.

Try to Stay Far Away from Malinvestment

As wise, smart investors we want to get great returns but sometimes investments promise great returns or show great returns than spectacularly collapse. Leaving you without that wealth and feeling burned from the market. So how as forward thinking investors do we avoid thew possibility of malinvestments. It is not simple because it is easy to fall in the trap and sometimes malinvestments are displaying results and activity of perfectly good investments. I will try to tell you a few ways to avoid malinvestments.

1. If someone is offering you a guaranteed rate of return is lying to you. There is no way that anyone can know the future and get the rate of return you can expect. That person selling you the investment is hiding something and probably something is very wrong. It should be a warning flag and alarm for any and all investors. Okay, that one is pretty common sense and should already be followed.
2. A broker offering you on the ground floor of an investment is probably a bad investment. The only way it got to you if you are a retail investor is if it stinks and no ones else was willing t touch it. Let some other sucker bite and lose money. There are better more stable investments around. Just remember for you to get in on the ground floor of an IPO it has to travel through all the banks, hedge funds, big time investors, and probably even more people. You are the last and the broker really needs to unload this investment onto you. If you are a wealthy trader already you might be able to ignore this message. 
3. Watch out for possible bubble assets. This are ones that very one has to buy, it's the next great thing, and you couldn't possibly lose money. You can and there is a big possibility you will lose money. This firms are ones that do not have much income, little business experience, and people are just focusing on the possibilities not on the actual results. The stock is already probably overvalued when you get in because it has no income and little prospects to make money. At least the money that would justify the value. Remember the dot com boom and subsequent bust. It happens all the time and you don't want to be on the wrong side of the trade. You as a retail investor must keep in mind that it will be arduous to beat the bubble before it pops. The information you have will less and later than the high power traders. 

I know this sounds unnerving and might think that stuffing the mattress is a better alternative to investing money. We must recall that investing is about risk and reward. Malinvestments have high risk and little reward which is why they are to be avoided. There are many good investments out there we maintain our diligence in looking for long term projects for money.  The best way to stay ahead and avoiding the terrible possibility of losing money is having a diversified portfolio that has some riskier assets and some stable assets. This way you hedge and always remain on top. Keep up the good investing and the good strategy and you will retire a wealthier person than a less attentive investor.