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.