Sunday, December 1, 2013

The Magic of Compounding



This over-the-top video focuses on compounding wealth through the superior returns achieved by investor Mohnish Pabrai. Be warned the video is on the slightly obnoxious side, but as dividend investors we have placed both our faith and our wealth in compounding returns over time until we reach that magical place of financial independence.




UCD Value Investing MBA Seminar featuring Mohnish Pabrai & Guy Spier

Thursday, November 28, 2013

Monday, November 25, 2013

Dividend Stocks hitting 52 Week Lows on a Day When the Market Inched to New All-time Highs

The Dow Jones Industrial average inched up to hit all-time highs today. Most components of the Dow are beyond fully valued. The neighborhood I live to live in are where quality stocks are within 10% of their yearly lows. I'm an anti-momentum investor who is always looking for a bargain where the market has irrationally and temporarily driven prices down. Looking at today's 52-week low list, I see some possible opportunities for the dividend investor:

Exelon - is an electric utility in the eastern and mid-western US. It is a low quality utility that has a poor history of enhancing shareholder value. The goal of management seems to be enrich themselves first, then worry about the shareholders later. Not the kind of stock a dividend investor wants to own.

CenturyLink is the third largest phone company in the US, trailing only Verizon and AT&T. CenturyLink was built from the mergers of a number of smaller telephone companies, such as Qwest and Embarq. Unless you're one of the big two, the telephone business can be challenging. CenturyLink cut it's dividend earlier in the year to use the money to pay down its hefty debt load. It is not outside the realm of possibilities that another dividend cut lies in the future. This is a marginal holding in my book that might be worth an investment were it to dip to the high $20s.

HCP Inc. is one of the premier health care REITS. This is the sweet spot of the REIT world with typically long leases and a stable tenant, hence the premium valuations of many of these companies. HCP has paid increasing dividends for 28 straight years, and is rated BBB+ by S&P. HCP has $22B in assets under management in the areas of senior housing, post-acute skilled nursing, life sciences, medical offices, and hospitals. This is a quality REIT that I'd love to pick up at even cheaper prices.

Health Care REIT is another solid health care REIT that owns 1183 properties consisting of senior housing, post-acute skilled nursing, hospitals, medical offices and life science buildings in 43 states, the UK and Canada. HCN pays out about 78% of FFO as dividends. Investors can expect modest dividend growth over the years along with modest FFO appreciation. Again, this is a REIT that is beginning to dip into the upper range of what I would consider an attractive price.

Ventas is also one of the premier health care REITS in the country. The company owns over 1470 separate properties in the areas of senior housing, skilled nursing facilities, hospitals and medical office buildings. With a market cap of around $18B, Ventas' high growth days may be behind it, but there is plenty of room for dividend growth, and share price appreciation at a more modest pace in line with a company of this size. I'd love to pick up a high quality name list Ventas at a few bucks cheaper than today and if the downdrafts in the REIT world continue I may get that opportunity.

AvalonBay Communities is an apartment REIT catering to upper end clientele. It seems to be reasonably well-run and has a premium portfolio of apartment building. But as an apartment REIT, it tends to have primarily short term leases with a lot of tenant turnover, leading to choppy, uneven earnings. For these reasons, and being a long-term shareholder, I would rarely consider investing in an apartment REIT, and will pass on this opportunity.

NameTickerCurrent PriceYieldBuy Price
ExelonEXC$27.235.34%Pass
CenturyLinkCTL$30.707.04%$29.90
HCP Inc.HCP$37.705.57%$36.50
Health Care REITHCN$57.335.34%$55.00
VentasVTR$58.154.52%$56.00
AvalonBay CommunitiesAVB$116.863.58%Pass

Sunday, November 24, 2013

Going Where Most Investors Fear to Tread: O and ARCP.

This past week I stepped to buy more shares of two monthly dividend paying stocks that were already in the portfolio-- Realty Income and American Realty Capital Properties, two of the largest triple-net REITS in the country. I bought 20 shares of O at an average price of $38.75 and 40 shares of ARCP for $12.95.

In a market that is definitely frothy, with the normal dividend stocks that most dividend investors like being more than fully valued, REITS have been getting pounded, with many in negative territory for the year. Only time will tell if these are bargain prices, or if the stocks will go lower, but to the long term dividend investor it doesn't really matter. And as a dividend investor, you've got to love the accelerated compounding of monthly dividends.

Realty Income is considered a blue chip REIT with a BBB+ credit rating that has a consistent history of slowly raising it's dividend year after year. Don't expect any large moves from O, but do expect a slow, steady increase in dividends and share price over the years. O currently yields approximately 5.6%, and after its mega-acquisition of ARCT has 3,866 properties in 49 states and Puerto Rico. it's top 5 tenants are Fed-Ex, Walgreens, Family Dollar Stores, LA Fitness, and AMC Theaters, with no single tenant accounting for more than 5.1% of total rent. It's occupancy rates have never fallen below 96%. 2014 FFO is forecast to be between $2.53 to $2.58.

ARCP does not have a long history of consistency like Realty Income. ARCP went public two years ago with a portfolio of 63 properties and just two tenants. ARCP has been on an acquisition binge since going public, with it's most recent merger with Cap-lease (LSE) just consummated. The proposed merger with Cole Real Estate Investments (COLE) will create the largest net-lease REIT in the US with an enterprise value of $21.5B. Post-merger, ARCP is forecasting a dividend of $1 per share. FFO earnings guidance for 2014 is in the $1.13 to $1.19 range. Nick Schorsch's aggressive acquisition strategy may pay off for investors in the long run.

If lower prices present themselves on either of these stocks, I'll use the opportunity to nibble away.

Tuesday, November 12, 2013

Is Old Tech Right for Dividend Investors

To me, technology stocks tend to be the ultimate for fad, momentum and market timer investors of all types, and not the usual shopping ground for value or dividend investors. However, old technology may be an exception to the rule. These companies have moved from their glamor growth days of adolescence to become solid middle-aged citizens making slow and steady progress. As a result, their PEs have shrunk back into value territory and their hoards of cash are now being deployed on dividends and share buybacks, something that would never even have been contemplated by these companies 10 or 15 years ago. The amount of foolish and expensive acquisitions has also slowed down now that they can no longer use an inflated stock price to pay eye-popping numbers for companies with little to no sales. Growth has slowed as well, and deflated PEs, but these companies still generate massive amounts of free cash flow.
Before I launch into my discussion and in the spirit of full disclosure, I work in the IT field and have numerous personal experiences with these companies. I’ll try not to let these experiences influence my opinions unduly, but it is hard not to form an opinion about a given company’s employees.

Microsoft is the tech company everyone loves to hate. It seems that Microsoft can do nothing right if you read the trade rags. I have a very different opinion. Microsoft has clearly been very slow in anticipating technology trends, and has been playing catch-up to its more nimble peers. You can’t argue that, whether it is search, online email, game consoles, operating systems….. they have been slow on the draw. They have also grossly overpaid for acquisitions and been forced to write down some of these investments. But unlike much of the tech press, I’d argue that Steve Balmer has actually positioned the company pretty well for the future. Windows 8.1 is actually a good operating system that is configurable enough to hide some of its most annoying features. The Surface 2 is a wonderful small form multi-purpose PC that corrects many of the short-comings of the 1st generation Surface. Office is under threat from Google Docs and LibreOffice for basic functionality, but continues to be a cash cow for the company. The Windows phone is a low cost alternative to the iPhone that, in my opinion, provides a better user interface than Android and will continue to chip away market share. Azure hosting services and SharePoint are both doing extremely well, while Bing and Xbox are lagging. Their pending acquisition of Nokia continues their metamorphosis into an Apple-like company that produces both hardware and software. I’ll add one last comment that their sales people are very easy to work with and knowledgeable about the company’s products. At $37 Microsoft is a little rich for my blood, and would prefer to pick it up under $34. I view Microsoft as a steady-eddy kind of stock in the tech sector.

Hewlett-Packard is a company that is in deep trouble and deservedly sells at a bargain price. They are on the wrong end of just about every technology trend and in their desperation have made foolish acquisition after foolish acquisition looking for a quick fix to their problems. Printers are the crown jewel or their operation, and selling printer ink refills is a very profitable business, but even their printer business is declining. In their recent quarterly report, the only sector in their business portfolio that didn’t decline was software with a 1% increase in revenue. Whether Meg Whitman can turn this company around remains to be seen, but she has at least but a stop to their streak of ridiculously overpriced acquisitions and directed access cash to stock buybacks instead. I don’t view HP as a long-term hold kind of stock, because I think their decline is almost inevitable, but they could make an interesting turnaround play for short-term money. Their sales force in my experience was inept and uninformed about their own products, and their service was spotty at best. There is not enough of a margin of safety for me to buy this low-quality stock at these prices, and I certain would not consider HP to be type of stock a dividend investor would want to hold for decades. It was a turnaround play when it hit the mid to low teens. HP isn't going out of business tomorrow, but I would think of buying unless it drifts back into the low twenties, and only then as a short-term speculation.

Oracle provides database products and services as well as a number of customizable packaged business solutions built on top of their database engine. They also sell Unix/Linux hardware through their Sun subsidiary. As a customer, the oracle database engine is a first rate offering, but Oracle as a company is truly a pain-in-the-ass to work with. Most other customers I’ve talked feel the same way, and regret their decisions to buy Oracle’s packaged business solutions. The typical customer spends a small fortune getting their business solution implemented (much more than their ever would have guessed), but are unable to switch to a different product because the costs to switch are almost as high as the costs to implement. Oracle attempts to nickel and dime their customers at every turn. I refuse to do business with them and won’t buy their stock.

Apple is still a tech darling though their stock price has come back down to earth. Apple is known for producing high-quality, but expensive products from the iPod to the iPad to the iPhone and PCs. I won’t buy their products because I can find cheaper alternatives that satisfy my needs, but that doesn’t mean I don’t admire the company. The concerns with Apple are the dependency on a few key products that if they fall out of fashion or get leapfrogged by another company could have a devastating impact. The other problem is what to do with the hoard of cash that is not benefiting the shareholders in any way sitting in the bank (oh, to have those kind of problems). Carl Icahn is trying to force Apple’s management to use this cash in a shareholder friendly way. Apple is a tech company to buy at the right price, but investors need to keep a close eye on the company. Things could turn bad for them very quickly if they are out-innovated by another company.

Cisco still owns the network. They also now own IP-phones and are entering the blade server market. Gone are the days where they paid billions of dollars for companies with no sales. Like the IBM of old, no one ever gets fired for buying Cisco. Cisco has a reputation for nickel and diming their customers, but to a lesser degree than Oracle. Cisco has become much more shareholder friendly and is a buy with a yield above 3%.

Intel was the dominant chip maker of the PC-era. They missed the boat on mobile and notepads, and are now trying to catch up and gain market share in those growing markets. Investing in Intel is a bet that their scientists can close the gap with competitors like Qualcomm. In the meantime, they have the free cash flow to support the necessary R&D investment and capital spending require to refocus their operations to devices other than the PC.

NameTickerCurrent PriceYieldBuy Price
MicrosoftMSFT$37.622.98%$34.00
Hewlett-PackardHPQ$26.392.20%$21.00
OracleORCL$34.341.40%Pass
AppleAAPL$519.922.35%$475.00
CiscoCSCO$23.452.90%$22.50
IntelINTC$24.213.72%$22.50

A word of caution on investing with technology companies. It is rare that any of them can stand the test of time and the rapid pace of technology change. Investors need to closely monitor these companies and technology trends and be ready to pull the plug when it is obvious that a company has lost its technological edge, least they get stuck slowly dying company like Blackberry.

Monday, November 11, 2013

The Warren Buffett Way



Some commentary on CNBC by Robert Hagstrom, author of "The Warren Buffett Way," on Buffett's recent investments and whether the investment style is evolving over time. The investment thesis for IBM, in my opinion, is modest growth coupled with a heavy share repurchase program = an ever increasing ownership interest in a company with a shrinking share base and increasing dividends = above average returns for the investor.

Friday, November 8, 2013

REITS: An Unloved Sector for Dividend Investors

On Friday, a day when the markets were up strongly, most REITS suffered 2 – 3% losses. This is a sector that has gone from market darling to dog in less than 6 months, with many stocks down 20% or more from their highs for the year. But as value and dividend investors know: where there's heavy selling, there's potential opportunity.

With low interest rates, and a recovering real estate market, many REITS have been on a buying binge this past year that initially excited the markets and pushed up prices, but now the hangover is setting in, leaving some possible bargains to nibble away at.

The sectors I currently like in REIT-dom are health care and triple-net. With the aging of America, I expect hospitals, doctor offices, and senior care facilities to do well, and this area tends to be recession resistant and hasn't suffered from overbuilding that has hurt other areas. Triple-net REITS have historically more consistent performers than say office buildings and provided greater diversity and less tenant risk. Most triple-net REITS maintained their dividends through the most recent financial while retail and office REITS were forced to cut their dividends.

Some REITS on my watch list include:

NameTickerCurrent PriceP/FFOYieldBuy Price
Omega HealthcareOHI$31.4512.56.10%$30.00
Healthcare Trust of AmericaHTA$10.7917.95.33%$10.50
Realty IncomeO$40.0617.05.45%$39.00
American Realty Capital PropertiesARCP$12.5814.97.24%$12.50
W. P. CareyWPC$64.1415.65.36%$62.00
VentasVTR$61.5714.84.35%$60.00
Medical Properties TrustMPW$12.8112.86.25%$12.50

Investors should be aware that REITS are highly leveraged investment vehicles and because they are required by law to payout a large percentage of their earnings as dividend, they usually raise money for investments through borrowing and by issuing new common or preferred shares. Quality of management is key to whether REITS will be able to grow their dividends and share price over time.

Monday, November 4, 2013

The Ten Commandments of Government

I Generally speaking, government always grows -- it never shrinks -- whether times are good or bad.


II In each area it purports to "assist", government attempts to replace individual decision-making with central planning.


III In order to implement its grand central plans and solidify its power, government must take from one citizen to give to another; this is, in effect, lawful theft.


IV No matter how many times central planning fails, the self-appointed masterminds in government assert that "this time is different" and that with only a few tweaks and more money, their delusional plans will succeed.


V Because it uses funds confiscated from taxpayers, self-restraint is no obstacle to government's ambitions.


VI Its fundamental misunderstanding of human nature notwithstanding, government must claim to grant "rights", which require it steal the labors of one citizen to give to another (such as food, shelter, employment, and health care).


VII No matter how widespread the harm it causes, government will never provide an honest and historical accounting -- a report card -- of its failures.


VIII As more individuals and families are harmed by the failures of central planning, government must find suitable scapegoats, must lie to do so, and therefore must also repress dissent.


IX In order to build its network of redistribution and grow a culture of dependency on its services, government must inevitably undermine the family unit, religion, and the notion of God-given rights in order to cow, bribe, or intimidate its citizens.


X As government grows ever more powerful, it must also become increasingly oppressive through compulsion and force. To do otherwise would mean government must shrink, and this it cannot do.


Via Zerohedge

Sunday, November 3, 2013

Two Unloved Stocks for Dividend Investors-- BP and DLR

The hardest and most profitable thing to do in investing is go against investor sentiment and buy those companies that are solid but hated by most investors. In a market that many argue is getting frothy, two opportunities stand out-- BP and Digital Realty.

BP was one of the most hated and shunned stocks after the Gulf Oil spill. This was perhaps the ideal time to buy for those with really strong stomachs, but the average investor rarely has the nerve. Now that several years have passed since the disaster, BP is beginning to regain its footing and return to normal exploration activities with a previously missing emphasis on safety. Compares to its peers, such as Exxon Mobile at 2.8%, BP yields approximately 4.9% and is selling for 8-9 times the estimate of 2014 earnings. Investors have not fared well with BP over the past decade, which saw the stock reach a high of $80 in 2007 and a low of $25 after the Deep Sea Horizon spill. However the risk/reward ration seems to be turning in favor of BP shareholders, who will be paid a handsome dividend as the marketplace slowly regains confidence in BP. As an added kicker, BP has already repurchased $3.3 billion worth of shares over the past quarter as part of its $8 billion share repurchase program. As such BP retired 2.3% of its shares outstanding over the quarter. This pace cannot continue, but shareholder friendly uses of cash through dividends and buybacks are always a well alternative to management wasting cash overpaying for merger and acquisitions.

Digital Realty is a real estate investment trust that specializes in acquiring and leasing data center space to companies who don't think it is economical to build and run data centers themselves. DLR reported earnings last week and disappointed with marketplace with a miss and downward earning guidance that saw its stock punished by a 20% drop in price. Funds From Operations (or FFO) came in at $147.4 million ($1.10 per share), down slightly from $148.9 million ($1.13 per share) in the year-ago quarter. The company said the third-quarter results included a non-cash, straight-line rent expense adjustment of 7 cents per share related to the company's leasehold interest at 111 Eighth Ave. in New York City. Analysts expectations were $1.20 a share for the quarter. DLR guided down future FFO to $4.60-$4.62 for 2013, down from previous estimates of $4.73-$4.82. A 20% drop in market seems like overkill for the miss and downward guidance. Though confidence has been shaken in DLR management, the stock still represents a bargain compared to other REITS at a yield of 6.5% and a P/FFO at around 10. I'll ride the 6.5% dividend as I wait for the stock to recovery and FFO growth to resume. The annual dividend of $3.12 leaves some room growth on a projected FFO of $4.60. At some point in the future, the market will correct its overreaction.

Quote of the Day: Milton and Rose Friedman

As the DC city council considers raising the minimum wage to help raise the standard of living of the working class people in DC to punish the low skill workers in DC and reward the unions, it is helpful to revisit the impact of wages raised by legislative fiat on those who need jobs the most to develop marketable skills.

Another set of government measures enforcing wage rates are minimum wage laws. These laws are defended as a way to help low-income people. In fact, they hurt low-income people. The source of pressure for them is demonstrated by the people who testify before Congress in favor of a higher minimum wage. They are not representatives of the poor people. They are mostly representatives of organized labor, of the AFL-CIO and other labor organizations. No member of their unions works for a wage anywhere close to the legal minimum. Despite all the rhetoric about helping the poor, they favor an ever higher minimum wage as a way to protect the members of their unions from competition.

The minimum wage law requires employers to discriminate against persons with low skills. No one describes it that way, but that is in fact what it is. Take a poorly educated teenager with little skill whose services are worth, say, only $2.00 an hour. He or she might be eager to work for that wage in order to acquire greater skills that would permit a better job. The law says that such a person may be hired only if the employer is willing to pay him or her (in 1979) $2.90 an hour. Unless an employer is willing to add 90 cents in charity to the $2.00 that the person’s services are worth, the teenager will not be employed. It has always been a mystery to us why a young person is better off unemployed from a job that would pay $2.90 an hour than employed at a job that does pay $2.00 an hour.

The high rate of unemployment among teenagers, and especially black teenagers, is both a scandal and a serious source of social unrest. Yet it is largely a result of minimum wage laws.

~ Milton and Rose Friedman, Free to Choose

Picture of the Day: Secretary Whatever

 
No commentary required.

The Washington Redskins Name Controversy-- Where Does it End?

Much noise has been made recently from the politically correct media over the name of the Washington Redskins. Many people consider the term Redskins to be an offensive racial slur in spite on the teams long history using the name, and George Preston Marshal's intention to honor the team's first coach in Washington, Lone Star Dietz who claimed to be part Sioux. My intention here is not to argue over the merits of the Redskin name, though many younger Native Americans refer to themselves as 'Skins, but to explore the question of where does the political correctness end for the NFL. Here's a list of teams who other groups would find offensive:

  1. Kansas City Chiefs - same issues as the Redskins.  Chiefs is a derogatory term for Native Americans.
  2. New Orleans Saints - the atheists of American who have fought hard to remove God from the classrooms, courthouses and coinage should be fighting equally hard over this name.   Besides, anyone who has been to New Orleans knows it is less than a Saintly city.
  3. New York Giants - offensive to all the vertically challenged people in the world.
  4. Green Bay Packers - anyone with an urban dictionary knows why this is offensive.
  5. Minnesota Vikings - any cultures historically victimized by Viking raids will be offended by this name.
  6. Dallas Cowboys - Native Americans, cowgirls and other non-cowboys should take exception to this.
  7. Tampa Buccaneers - any cultures victimized by pirates should take offense.
  8. Cleveland Browns - another racially offensive term.
  9. New England Patriots - too similar to the term Tea Party Patriots, which every thinking person should find offensive.
  10. Tennessee Titans - same problem as the NY Giants.
  11. Buffalo Bills - another name that should be offensive to Native Americans.
  12. San Diego Chargers -  offensive to all people who can't manage money, from shopaholics to DC politicians.
  13. Oakland Raiders - offensive to all cultures who have been victimized by raiders, including Native Americans.
I call on Roger Goodell, NFL commissioner, to yield to the political pressure and rename all of these teams in addition to the Redskins to something less offensive.

Friday, November 1, 2013

The Healthcare Mash

The Healthcare Mash


A Ghoulish and Greedy Uncle Sam

Thursday, October 31, 2013

Tuesday, October 29, 2013

Quote of the Day: George Orwell

"Political language is designed to make lies sound truthful and murder respectable, and to give the appearance of solidarity to pure wind."

~ George Orwell

Friday, October 25, 2013

Random Acts of Journalism: The Darkside of D.C. Politics

In the CNBC interview above author and Peter Schweizer discusses his new book “Extortion: How Politicians Extract Your Money, Buy Votes and Line Their Own Pockets.” Schweizer's book is drawing some criticism from the political status quo, here’s an excerpt from a National Journal article:
A new book that argues politicians in Washington manufacture crises and manipulate vote scheduling and other legislative activity as part of a Mafia-like “protection racket” to extort campaign donations. But the new book “Extortion: How Politicians Extract Your Money, Buy Votes and Line Their Own Pockets,” is predictably not drawing rave reviews from House Speaker John Boehner, whose office is lashing out at author Peter Schweizer, a fellow at the conservative Hoover Institution and an editor-at-large at Breitbart.

Schweizer advances a novel argument: Rather than special-interest money in Washington being funneled to politicians in order to gain access and favor, politicians run government in ways designed to extract special-interest money from various constituencies. He also says that the notion that Washington dysfunction is a product of partisanship and ideological entrenchment can be looked at in a different light: that gridlock, legislative threats, and fear of uncertainty help prime the donation pump.

“It’s one of the oldest and most effective forms of extortion: the protection racket,” he writes in one chapter. “Pay me money and I will promise not to make your life miserable. Fail to pay and bad things will happen to you.”

Schweizer writes that that has been the “bread and butter” of organized crime for centuries, but that “the Permanent Political Class in Washington plays the protection racket, too. Failure to pay will not get you killed—but it could kill your business.”

To make his case, Schweizer describes various maneuvers in which he argues politicians engage in a form of legal extortion to extract campaign contributions from business or other special interests. His book throws out colorful terms for these maneuvers, such as “toll-booth” requirements, “milker bills,” “double-milker bill,” and “juicer bills.” In one case, Schweizer points to what he calls the “tollbooth” maneuver. In the interview, he said he first head of that phrase from a member of the “business community,” who used it to describe contributions he had to pay before getting floor action on a tax-extender. Schweizer said that led him to explore further. Schweizer depicts Boehner as the master of the tollbooth, and focuses in part on the events surrounding a 2011 vote on the Wireless Tax Fairness Act, a bill with widespread support that sailed through committee in July of that year on a voice vote. Yet, Schweizer notes that the scheduling of a floor vote on the bill lingered until the fall.

Boehner eventually announced a vote would be held on Nov. 1. Schweizer notes that the day before the vote, 37 checks from wireless-industry executives totaling nearly $40,000 rolled in to his campaign, including 28 from executives at AT&T. The day of the vote, he writes, employees at Verizon, another company with a lot at stake in the bill, sent 28 checks to members of Congress.

“Checks don’t just magically appear, and they don’t arrive by chance,” he writes, adding, “When corporate executives make donations on the same day at the same time, especially when a large group of them do... it is likely there has been an organized solicitation.”

The book also identifies other bills for which Schweizer says votes appear to be delayed, only to see eventual floor action accompanied in by a flurry of contributions by individuals or businesses with interests in the legislation.




This segment from 60 Minutes barely skims the surface of the corruption that is Washington, D.C. But it is a start, and we need more of this.




Few politicians leave office poorer than when they enter, and most leave as multi-millionaires. The only way to clean-up the corruption in Washington is take taxpayer dollars out of the hands of politicians and leave it in the hands of the people who earned it in the first place.

Wednesday, October 23, 2013

Quote of the Day: The Grouch

Politicians never accuse themselves of 'greed' for wanting other people's money to give to their constituents and cronies, but they have no problem accusing you of 'greed' for wanting to keep what you've earned through the fruits of your labor.

~ The Grouch

Sunday, October 20, 2013

Quotes of the Day: Eugene Fama

My attitude is this: if you are getting attacked by Krugman, you must be doing something right.

~ Eugene Fama, from Interview with Eugene Fama

Cartoon of the Day: The New Jim Crow

Obamacare: It's the Math, Stupid




As much as politicians like to demagogue and deny it, the math for Obamacare will never work and can never work, and is a major threat to the continued economic prosperity of the country. The failures of the websites are immaterial compared to the failures of the premise behind Obamacare.




The Great Global Warming Swindle



Global warming is almost exclusively about politics and increases taxes and control over people, rather than science. We have advanced beyond the military industrial complex to the welfare industrial complex and environmental industrial complex.

Wednesday, October 16, 2013

Investment Facts: Nobel Prize Edition

  1. The fees charged last year for actively managed mutual funds averaged 0.92%, which was seven times higher than the average fees of 0.13% for passively managed index mutual funds in 2012. 
  2. Empirical evidence shows that passively managed index funds outperform almost all actively managed funds over long holding periods, adjusted for risk, taxes and expenses.
  3. And yet there was almost nine times more money invested in actively managed mutual funds at the end of 2012 ($11.74 trillion) than in passively managed index funds ($1.31 trillion).
 
Source: The Investment Company Institute’s 2013 Investment Company Fact Book (53rd edition).


Cartoon of the Day: The Great Debt Debate



Final Score: Washington Establishment 1, Hardworking Taxpayers 0

Revisiting King George III

Sunday, October 13, 2013

Who Owns the $16.8 Trillion in US Debt?


Contrary to popular opinion, the US is not bought and paid for by China. In fact, most of US debt is owned by entities and people inside the the US. We owe about $5 trillion to other countries. The largest single owner of US debt is the US government itself through the QE program of the Federal Reserve, the investment restrictions of the Social Security Administration, and military and federal retirement programs. It is a boatload of debt, to be sure, and slightly exceeds the 2012 estimate of $16.62 trillion in US GDP. One thing the government shutdown has demonstrated (even though approximately 80% of the government is still working) is that there is plenty of bloat and waste in the bureaucracy to be cut, but few politicians with the fortitude to do what is best for the country in either party. Entitlement programs are a time bomb waiting to make the debt problem much worse without significant reform.

Saturday, October 12, 2013

30 Popular Life Hacks Put to the Test



Using Doritos as kindling to start a fire is my favorite.

Friday, October 11, 2013

Thursday, October 10, 2013

How Not to Advertise a Product

Why I No Longer Buy Personal Finance Books

At one time I was buying personal finance books at quite a brisk pace looking for the best advice to secure my future and look out for my family. It became clear after a close reading of these books that most of them were saying the same things over and over again, just with a slightly different spin. The common principals from these books could be easily distilled and written on a single sheet of paper, and why spend money helping to make the authors and publishers rich when I could be investing it for myself instead. So here are my principals:
  1. Save 20% of your income.
  2. Max out your 401K plan and take full advantage of your employer match.
  3. Only borrow money for houses and cars.
  4. Pay off your credit card bills in full each month and limit the number of credit cards that you carry.
  5. Unless you are Warren Buffett, Peter Lynch or Michael Price, don’t buy individual securities and stick with well diversified mutual funds or ETFs.
  6. Investment costs are the single most reliable indicator of future investment performance. What you don’t pay to the broker or fund manager is what you get to keep. Investment costs compound negatively. Index funds are a low-cost choice that guarantee diversify and market-performance minus their low fees without the need for star managers.
  7. Use your asset mix between bonds and stocks to manage your overall portfolio risk. There is always risk in every choice and black swan events will occur periodically.
  8. Rebalance your portfolio periodically between stocks and bonds. This is a mechanical way to ensure you are selling high and buying low.
  9. The greatest investment opportunities arise when the markets are in full panic mode (think 2008, 2009). If you can control your emotions, do the opposite of what the herd is doing, though it may be very painful for a while because no one know where the bottom is in the market.
  10. Maximize investments in tax-saving vehicles like Roth-IRAs.
  11. Insurance is necessary and is meant to protect you from catastrophes. It is not an investment vehicle.
  12. If you need a financial adviser (you can do this yourself), pick only fee-based advisers. For many, setting up an account online can take less than an hour.
  13. For most investors who will earn their lifetime income from a stream of payroll checks over the next 30 - 40 years, dollar cost averaging into index funds or well-diversified mutual funds is the most effective strategy for wealth accumulation.

That’s about it. If you can think of anything I left out, please feel free to add a comment.

Wednesday, October 9, 2013

Rick Warren on the Purpose Driven Life



A Blast from the Past



My how times have changed. The hypocrisy of politicians from both sides never ceases to amaze, nor does the silence of the lap-dog press.

Quote of the Day: Jim Treacher

Washington DC is a tiny island in a vast sea of other people's money. The natives enjoy its bounty and think it'll last forever.

~ Jim Treacher

Wednesday, October 2, 2013

Flying 3-D Printers



Not quite the replicator on the Starship Enterprise, but a step in that direction.

Quote of the Day: Don Boudreaux

The first error occurs when Mr. Krugman writes that “thanks to surging inequality, these petty people [the "plutocrats"] have a lot of money.” Contrary to Mr. Krugman’s implication, however, crony capitalists “have a lot of money” not because of rising inequality but, rather, because government gives them special privileges. At root, inequality here is the result of actions by the agency so trusted by Mr. Krugman – the state – rather than the source of itself.

Mr. Krugman’s second, related error is his claim that “money brings power.” In fact, only government brings power. While it’s true that people with lots of money are disproportionately able to use whatever government power exists, a government of few and strictly limited powers would be unable to grant special privileges even to the wealthiest of people. The core problem, therefore, isn’t “money” or “the rich”; it is, instead, the existence of the expansive and vigorous government power that Mr. Krugman famously, if illogically, believes is key to freedom, prosperity, and greater equality.

~ Don Boudreaux

Grouch: Boudreaux pretty much nails the fallacy underlying all of Krugman's op-ed pieces.

Sunday, September 29, 2013

LIve from New York, It's Obamacare



If the lefties on SNL are making fun of it, you know it has to be blatantly obvious just how bad the law is.

Saturday, September 28, 2013

The Obamacare Online Video Contest

My pick for the winner:



Lyrics:

What’s hated by unions
has businesses wary
and dropping coverage
like the ‘Skins secondary?

Causing thousands of layoffs
taking it’s toll?
What’s so good for people
that they’re forced to enroll?

What’s a law that’s so good
folks who passed and defended it
see it and got waivers
to be exempted? It’s

like Olestra, at first
it sounded hip
but we quickly found ourselves
dealing with a whole lot of sh…

Obamacare, Obamacare
Unions and businesses both in despair

So to recap, young people,
your hours get cut
and your income goes down
and your premium’s up

"The Sea of Happiness" that is the post-Hugo Chavez Economy in Venezuela

Click here or here for an expose on the consequences of extreme government interference in markets........ the socialist workers paradise.

Friday, September 27, 2013

Dissent From Just Outside the Washington Beltway



Believe it or not, taken just north of Washington Beltway in the People's Republic of Maryland on my drive home from work today. Thanks to #1 son for snapping the photo.

Wednesday, September 18, 2013

The Latest Screenshot





This config is elementary OS Linux with Wingpanel Slim, elFaenza icons, a stock background that comes with the system, and a custom conky config that displays weather and basic system information.  Who needs windows when the average can create custom look and feels like this?

Quote of the Day: John Adams

Suppose a nation, rich and poor, high and low, ten millions in number, all assembled together; not more than one or two millions will have lands, houses, or any personal property; if we take into the account the women and children, or even if we leave them out of the question, a great majority of every nation is wholly destitute of property, except a small quantity of clothes, and a few trifles of other movables. Would Mr. Nedham be responsible that, if all were to be decided by a vote of the majority, the eight or nine millions who have no property, would not think of usurping over the rights of the one or two millions who have? Property is surely a right of mankind as really as liberty. Perhaps, at first, prejudice, habit, shame or fear, principle or religion, would restrain the poor from attacking the rich, and the idle from usurping on the industrious; but the time would not be long before courage and enterprise would come, and pretexts be invented by degrees, to countenance the majority in dividing all the property among them, or at least, in sharing it equally with its present possessors. Debts would be abolished first; taxes laid heavy on the rich, and not at all on the others; and at last a downright equal division of every thing be demanded, and voted. What would be the consequence of this? The idle, the vicious, the intemperate, would rush into the utmost extravagance of debauchery, sell and spend all their share, and then demand a new division of those who purchased from them. The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If "Thou shalt not covet," and "Thou shalt not steal," were not commandments of Heaven, they must be made inviolable precepts in every society, before it can be civilized or made free.

~John Adams, 1787

Thursday, August 29, 2013

Quote of the Day: Martin Luther King, Jr.

Even if it falls your lot to be a street sweeper, go on out and sweep streets like Michelangelo painted pictures; sweep streets like Handel and Beethoven composed music; sweep streets like Shakespeare wrote poetry; sweep streets so well that all the host of heaven and earth will have to pause and say, “Here lived a great street sweeper who swept his job well.”

~ Martin Luther King, Jr.

Wednesday, August 28, 2013

A Real World Solar Energy Example


In the video above, the homeowner explains how he spent $42,000 in 2009 installing 20 solar panels on his Rochester, NY home. He used $12,000 of his own money, and the other $30,000 was paid for by state and federal taxpayer subsidies and tax credits. Over the life of the panels, Mr. Punton says he’ll be lucky to even get $8,000 to $10,000 back in reduced utility bills, which won’t even cover his own investment, much less cover any of the $30,000 in taxpayer subsidies and tax credits.

Sunday, August 18, 2013

Another Blind Squirrel Gets Lucky



“I believe that opportunity looks a lot like hard work.... Build a life. Don’t live one, build one.”

Thursday, August 15, 2013

Blind Squirrel Finds Acorn



A shocking admission from Bono: “Aid is just a stopgap. Commerce [and] entrepreneurial capitalism take more people out of poverty than aid. We need Africa to become an economic powerhouse.”

Wednesday, August 7, 2013

Quote of the Day: Dietrich Bonhoeffer

"Silence in the face of evil is itself evil: God will not hold us guiltless. Not to speak is to speak. Not to act is to act."

~ Dietrich Bonhoeffer

Friday, July 26, 2013

Quotes of the Day: Seth Klarman

"One day a physicist, a biologist, and an economist were sitting at a café across from an apparently empty building. They watch two people enter and then, later, three leave. The physicist says, "Apparently there was some error with our measurements," while the biologist says, "Obviously, they reproduced while in the building." Then the economist observes, "If another person were to enter the building, it would once again be empty."

~ Seth Klarman


"Leverage is always a double-edged sword, and in 2007 excessive leverage at all levels of the economy had eroded our nation's margin of safety. When things went wrong in 2008, we' had nothing to fall back on. There was no room for error, little cushion to give us time to refocus and rebuild. Today, with massive deficits and even higher government debt, we have less margin for error than we did four years ago. What might we do instead of today's unsuccessful, misguided, and dangerous programs? Jim Grant, in a CNBC interview several months ago, had one suggestion: perhaps we should try capitalism. Let's allow markets to operate freely; let's allow the invisible hand to work its magic; let's once again permit failure."

~ Seth Klarman

Friday, May 31, 2013

What A Deal for US Taxpayers!



Maritha Nelson's $240 in food stamps has run out, leaving her $9 in cash and seven people to feed. The 50-year-old single mother, who entered the U.S. by swimming across the Rio Grande, has government funded housing, medication, and $700 a month in Social Security. She's been on assistance for 20 years, and wants others to know that help is available. Florida is teeming with food stamp recruiters...who have a goal: increase federal aid to Florida by $1 billion a year.

Tuesday, May 28, 2013

Quote of the Day: Ben Graham

I blamed myself not so much for my failure to protect myself against the disaster I had been predicting, as for having slipped into an extravagant way of life which I hadn't the temperament or capacity to enjoy. I quickly convinced myself that the true key to material happiness lay in a modest standard of living which could be achieved with little difficulty under almost all economic conditions.

~ Ben Graham

Saturday, May 25, 2013

A Simple Fix for Getting Amazon Instant Video to Play on Linux Mint

I've been a happy Amazon Prime customer for several years, and an unhappy Windows 8 customer since I mistakenly purchased a license for that product. I've made the decision to cut my losses with Windows 8 and move exclusively to Linux Mint. One snag I hit with this plan was in playing amazon instant video. Instead of the video starting as expected, I get a dialog box stuck on the "Updating Player."

To fix this problem, I installed the hardware abstraction layers packages hal and libhal1 for my distro using the command:

sudo apt-get install libhal1 hal

And now magically, I have Amazon Prime videos streaming on Linux Mint 14.

The Anti-gravity 3-D Printer

Friday, May 17, 2013

A Brief Lesson on the "Separation of Church and State"



Here's the full text of the Jefferson letter:

To messers. Nehemiah Dodge, Ephraim Robbins, & Stephen S. Nelson, a committee of the Danbury Baptist association in the state of Connecticut.

Gentlemen

The affectionate sentiments of esteem and approbation which you are so good as to express towards me, on behalf of the Danbury Baptist association, give me the highest satisfaction. my duties dictate a faithful and zealous pursuit of the interests of my constituents, & in proportion as they are persuaded of my fidelity to those duties, the discharge of them becomes more and more pleasing.

Believing with you that religion is a matter which lies solely between Man & his God, that he owes account to none other for his faith or his worship, that the legitimate powers of government reach actions only, & not opinions, I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should "make no law respecting an establishment of religion, or prohibiting the free exercise thereof," thus building a wall of separation between Church & State. Adhering to this expression of the supreme will of the nation in behalf of the rights of conscience, I shall see with sincere satisfaction the progress of those sentiments which tend to restore to man all his natural rights, convinced he has no natural right in opposition to his social duties.

I reciprocate your kind prayers for the protection & blessing of the common father and creator of man, and tender you for yourselves & your religious association, assurances of my high respect & esteem.

Th Jefferson
Jan. 1. 1802.




Grouch: It is certainly my opinion that the Supreme Court clearly misinterpreted the Jefferson to suite their own political ends, as with all those who piggy back on that decision.

Most people would be surprised to know----- "It is no exaggeration to say that on Sundays in Washington during the administrations of Thomas Jefferson (1801-1809) and of James Madison (1809-1817) the state became the church. Within a year of his inauguration, Jefferson began attending church services in the House of Representatives. Madison followed Jefferson's example, although unlike Jefferson, who rode on horseback to church in the Capitol, Madison came in a coach and four. Worship services in the House--a practice that continued until after the Civil War--were acceptable to Jefferson because they were nondiscriminatory and voluntary. Preachers of every Protestant denomination appeared. (Catholic priests began officiating in 1826.) As early as January 1806 a female evangelist, Dorothy Ripley, delivered a camp meeting-style exhortation in the House to Jefferson, Vice President Aaron Burr, and a "crowded audience." Throughout his administration Jefferson permitted church services in executive branch buildings. The Gospel was also preached in the Supreme Court chambers.

"Jefferson's actions may seem surprising because his attitude toward the relation between religion and government is usually thought to have been embodied in his recommendation that there exist "a wall of separation between church and state." In that statement, Jefferson was apparently declaring his opposition, as Madison had done in introducing the Bill of Rights, to a "national" religion. In attending church services on public property, Jefferson and Madison consciously and deliberately were offering symbolic support to religion as a prop for republican government." source(http://www.loc.gov/exhibits/religion/rel06-2.html)

Monday, May 13, 2013

The Highest Paid Public Employees in Each State



The highest paid public employee in every one of the 50 states is either a college coach at a public university: football (27), basketball (13), hockey (1), or a college administrator at a public university: president (4), medical school dean (4), law school dean (1).

Could this be one of reasons College tuition has far outpaced inflation?

What Would You Do for a Free Tank of Gas?



Update: What's too good to be true, often isn't. This video was staged with professionals.

Friday, May 10, 2013

Spock vs Spock

Quote of the Day: Russ Nelson

"If prices are information, then subsidies are censorship."

- Russ Nelson

Sunday, April 28, 2013

What the Tech Industry Has Learned from Linus Torvalds



The Grouch is a big Linux fan and runs various flavors of Linux on all his computers.

Linux Foundation Executive Director Jim Zemlin's advice:

1. Don't Dream Big

Zemlin quotes poet David Frost in his first point about not dreaming big: "Don't aim for success if that's what you want. Do what you love and believe in and it will follow."

2. Give It All Away

Zemlin also makes an important point about how companies make money from software that is given away. By giving Linux away, Linus Torvalds and the entire Linux community have created more value than anyone could have imagined. Linux today is estimated to be worth more than $10B.

3. Don't Have a Plan

He goes on to explain that the plan for Linux is there is no plan and shares with the TEDx audience how self-forming communities result in faster, better collaboration. Seven changes are made to Linux every hour, 24 hours a day, because people are self-motivated and care about what they're working on.

4. Don't Be Nice

Zemlin talks here about the value of flame wars, defending ideas and ridiculing code. The result? Better software. He cites a UC Berkeley study that found groups that are encouraged to debate rigorously and defend their ideas, opposed to traditional brainstorming where every idea is a good idea, come up with better ideas.

A 2013 Creed

I choose to be equal.

It is my right to be equal—if I want.

I seek security—not opportunity.

I wish to be a kept citizen,

humbled and dulled by having the state look after me.

I don't want to take the calculated risk,

to dream and to build,   

to fail and to succeed.

I refuse to barter my government handout for the risk of great rewards;

I prefer the guaranteed existence to the challenges of life;

the stale calm of Utopia to thrill of fulfillment.

I will trade my freedom for beneficence

and my dignity for a handout in a heartbeat.

I will cower before the government, my master,

begging for more in exchange for my vote.

I've abandoned my heritage to stand stooped, ashamed, and afraid;

unable to think and act for myself;

or create anything but what I'm told;

or to face the world boldly

and say "This, with God's help, I have done."

Because everyone knows nothing happens

without government paving the way first.

Friday, April 26, 2013

A 1950's Creed

I do not choose to be a common person.

It is my right to be uncommon—if I can.

I seek opportunity—not security.

I do not wish to be a kept citizen,

humbled and dulled by having the state look after me.

I want to take the calculated risk,

to dream and to build,   

to fail and to succeed.

I refuse to barter incentive for a dole;

I prefer the challenges of life to the guaranteed existence;

the thrill of fulfillment to the stale calm of Utopia.

I will not trade my freedom for beneficence

nor my dignity for a handout.

I will never cower before any master

nor bend to any threat.

It is my heritage to stand erect, proud, and unafraid;

to think and act for myself;

to enjoy the benefit of my creations;

and to face the world boldly

and say "This, with God's help, I have done."

Wednesday, April 24, 2013

Sunday, April 7, 2013

Straight talk for women about the wage gap

The War on Prosperity Continues

The #1 obstacle to wealth accumulation in the US is the government and its greedy pursuit of tax revenue to fund its foolish spending programs. The goal of government seems to be to grow its power and control over the economy by making as many people as possible dependent upon it for their livelihoods and well-being as possible--- whether through food stamps, social security, Medicare, Obamacare or crony capitalism. The latest in the long list of bad ideas emanating from Washington comes from the most recent Obama budget proposal. Under his plan, a taxpayer’s tax-preferred retirement account, like an IRA, could not finance more than $205,000 per year of retirement – or right around $3 million this year. What is not clear is whether this plan will apply to 401ks also. But these types of proposals reveal the mindset of the ruling class. In country that saves too little in general and for retirement in particular, let's punish those who would sacrifice today in order to take care of themselves tomorrow with penalties on excessive savings. What types of incentives do these proposals put in place? Has the American Dream now changed from individuals and couples achieving financial to favored groups and constituents achieving complete government dependence. These are the types of measures governments resort to that have no controls or discipline over their spending. Artificially low interest rates are already punishing savers and rewarding debtors like the US Government. Now the government is trying to tell us how much we can save for retirement because they need their money now to sustain current levels of spending. Think Cypress can't happen here? Think again.

Saturday, April 6, 2013

How Potato Chips are Made



Unbelievable how technology has advanced in the past 50 years, even with the low-tech potato chip.

Technological advances have reduced the price of food for the average consumer by 13% in constant dollars from 1982 to today.

Friday, April 5, 2013

Tuesday, April 2, 2013

Freedom in the 50 States





My own state of Maryland is working hard to break into the bottom 5 (thank you Governor Owe'Malley), and it shows in the flight of productive people and businesses to neighboring states.

Sunday, March 17, 2013

Matt Ridley: Burning fossil fuels is greening the planet



Matt Ridley, author of the The Rational Optimist, talks about a curious global trend that is just starting to receive attention. Over the past three decades, our planet has actually gotten greener. Reason? Matt Ridley explains that it’s because of the burning of fossil fuels! It’s an amazing, astonishing discovery, but one that’s incredibly unwelcome for the environmentalists. The optimist could even say this phenomenon is the earth regulating itself.

Remembering Silent Cal: The President Who Shrank Government



Can anyone imagine actually shrinking government these days? Just listen to the howls and the predictions of impending doom when even a minuscule cut in the rate of yearly growth in government spending is proposed.

Saturday, March 16, 2013

Quote of the Day: Peter Lynch

The basic conflict between corporate directors and shareholders over dividends is similar to the conflict between children and their parents over trust funds. The children prefer a quick distribution, and the parents prefer to control the money for the children's greater benefit.

One strong argument in favor of companies that pay dividends is that companies that don't pay dividends have a sorry history of blowing the money on a string of stupid diworseifications. I've seen this happen enouth times to begin to believe in the bladder theory of corporate finance, as propounded by Hugh Liedtke of Pennzoil; The more cash that builds up in the treasury, the greater the pressure to piss it away.

~ Peter Lynch, from One Up on Wall Street

Thursday, March 14, 2013

Monday, March 11, 2013

What's a MAV?

Quote of the Day: Jim Rogers

Throughout our history – any country’s history – the people who save their money and invest for their future are the ones that you build an economy, a society, and a nation on.

In America, many people saved their money, put it aside, and didn’t buy four or five houses with no job and no money down. They did what most people would consider the right thing, and what historically has been the right thing. But now, unfortunately, those people are being wiped out, because they are getting 0% return, or virtually no return, on their savings and their investments. We’re wiping them out at the expense of people who went deeply into debt, people who did what most people would consider the wrong thing at the expense of people who did the right thing. This, long-term, has terrible consequences for any nation, any society, any economy.

If you go back in history, you'll see what happened to the Germans when they wiped out their savings class in the 1920s. It didn’t lead to good things down the road for Germany. It didn’t lead to good things for Italy, which did the same thing. There were plenty of countries where it wiped out the people who saved and invested for their future. It’s usually a serious, political reaction, desperation in some cases, and looking for a savior and easy answers is usually what happens when you destroy the people who save and invest for the future.

~ Jim Rogers, from Peak Prosperity Interview, 3/9/2013

Grouch: Savers have been punished since the Fed's Quantitative Easing program began. Bank deposits, Certificates of Deposit, Money Market accounts and even investment grade bonds aren't even keeping up with inflation and taxes while the Fed continues its risk-on, asset inflation policy. All market-based incentives now lead rational investors to borrow at these cheap rates, instead of save and commit their capital to riskier projects in pursuit of return.

An Update on My Turnaround Stocks

First, a warning. Turnaround investing isn't for everyone. Only do it if you have a strong stomach, and can take the volatility and potential losses in pursuit of alpha. Some of these situations are dogs that will always remain dogs, but occasionally you'll hit a home run.

Around the beginning of 2012, I initiated a couple of "turnaround" positions in stocks that seemed cheap based upon their assets and earning potential-- Bank of America and Cedar Realty Trust. They performed well throughout the year. Then near the end of 2012 I purchased a couple of more turnarounds. The results are below:




Bank of America - this one was a no-brainer--- the bank everyone loves to hate.... what could be better to drive down the price to ridiculously cheap levels. The bank was essentially backstopped by the US Government so there was no chance of it going out of business, and there was no way Brian Moynihan could could be as dumb and reckless with shareholder capital as Ken Lewis. This one is going into the $20s in the next 3 years even if the yield curve steepens.

Cedar Realty Trust - this was another no-brainer that I should have picked up for $3.50 a share instead of $4.25 (shame on me) when it was clearly selling below the value of its assets. New CEO Bruce Schanzer has completed divesting the company of non-core assets accumulated by previous management, and is now working to strengthen the balance sheet, and put the company back on the path to FFO growth before increasing its dividend. Wouldn't surprise me to see this one trading trading in th $8-9 range in a couple of years, or to be merged into a larger REIT.

Hewlett Package - another no-brainer..... after 10+ years of stupid management dramatically overpaying for acquisitions on the hope and a prayer that they would reignite growth in the company, I decided to jump into this one when they announced their $8.8B dollar write down of the Automony acquisition. I chalk the writedown up to the company failing to do its due diligence. Shame on them, but an opportunity for investors. I bought this stock on the over-reaction to the writedown and in the belief that PCs and printers are still a profitable albeit under-appreciated business. I also bought on the faith that Meg Whitman would bring some much needed stability and strategic direction to the company. I expect this stock to be back in the low 30s in 2 - 3 years.

Chesapeake Energy - this is the riskiest stock of the turnarounds. It is largely dependent on the price of natural gas to help cure its debt problems. Good news is that lightning rod CEO Aubrey McClendon is retiring, and with a more independent board of directors, hopefully, they will not let the new CEO use the company as his own personal piggy bank. I expect this stock to be in the low 30s sometime in the next 3 years, but it could also fall to the single digits should the price of natural gas fall.

Two that Got Away - opportunities that I missed this past year were AIG and MBIA. Some financials are very difficult to evaluate, but it was clear AIG was another situation backstopped by the Feds so it wasn't going to fail.

Sunday, March 10, 2013

Climate Change and Desertification



“Desertification is a fancy word for land that is turning to desert,” begins Allan Savory in this quietly powerful talk. And terrifyingly, it’s happening to about two-thirds of the world’s grasslands, accelerating climate change and causing traditional grazing societies to descend into social chaos. Savory has devoted his life to stopping it. He now believes — and his work so far shows — that a surprising factor can protect grasslands and even reclaim degraded land that was once desert.

The conventional wisdom these days is usually more about political correctness than problem solving.

Summarizing My Feelings on Hugo Chavez



Few have single handed done so much to destroy the economy of nation and ultimately hurt the very people they set out to help. He will be praised endlessly by those who seek to do the same to their own country's economies, but the people of Venezuela will suffer for decades as those who follow clean up the mess he created.

A Primer on the Falkland Islands from the British Point of View

Saturday, March 9, 2013

Flying Over America

5 Sequester Facts



We all know the sky didn't fall on this past Monday, but Reason TV takes the hype out of Armageddon:

1. The Cuts Are Tiny!

The actual cuts in fiscal year 2013 are only $44 billion, according to the Congressional Budget Office (CBO). The rest don’t even take place until 2014 or later. Whether you use $44 billion or $85 billion we’re talking about 1 or 2 percent of total government spending.

2. Spending is Still Going Up!

Even with the sequester, the federal government is expected to spend more this year than it did last year. The government spent $3.5 trillion in 2012 and i expected to spend $3.6 trillion in 2013 (see Summary Table 1).

3. The Pentagon Won't Starve!

The largest chunk of cuts will come out of the defense budget, which has doubled over the past decade. The Pentagon will still have about $500 billion at its disposal, not counting war-related and emergency appropriations.

4. You Can't Cut Nonexistent Programs!

The White House’s Office of Management and Budget says the sequester will cut a whopping $2 million from the $20 million budget for the National Drug Intelligence Center. That sounds pretty bad - until you realize the Drug Intelligence Center closed its door in June 2012.

5. It Was All Obama's Idea!

The whole damn sequester was the Obama administration’s idea. As the Washington Post’s Bob Woodward has reported, despite Obama’s denials to the contrary, “the automatic spending cuts were initiated by the White House” as part of the deal to raise the debt limit back in August 2011.

Gun Control Works

Wednesday, March 6, 2013

Banned in DC



The word “FREEDOM” is among the list of banned vanity license plate slogans for Washington D.C., according a government file obtained by a Freedom of Information Request filed by the transparency website GovernmentAttic.org.

Monday, March 4, 2013

Quote of the Day: Detroit

Detroit’s downward spiral has been legendary. Once the fourth largest city in the nation, and home to its largest industry, Detroit’s population has been cut in half, from 1.5 million in 1970, to less than 700,000 in 2012. Median household income is $27,862 compared to the state median of $48,669. The poverty level is 36.2 percent compared to a statewide level of 15.7. The murder rate is 11 times that of New York City, and the unemployment rate is above 18 percent, more than double the national average. Detroit Public Schools (DPS) have been under emergency management since 2008. In late February, the state review board revealed that the city faces a short-term cash $327 million budget deficit and an estimated $14 billion in long-term debt, primarily driven by unfunded pension and retirement health care obligations.

As a result, the city can’t provide basic services. The Detroit Fire Department is so short of critical resources, rotating ”brownouts” of fire companies are required. Forty percent of the city’s street lights are broken. For the past two years, the Bing administration has slowly adopted a city “triage” system, best described by the Detroit Free Press. “Infrastructure improvements, demolition activity, outdoor maintenance and development incentives will henceforth be concentrated in a relatively small number of neighborhoods that boast the high numbers of owner-occupied homes and little evidence of residential and commercial blight,” it reports.

To accord with this plan, the city’s 139 square miles have been broken down into four categories by Detroit’s Planning and Development Department: “steady,” as in little blight and a high number of owner-occupied homes; ”transitional,” as in a neighborhood on its way up or down; “varied” as in some streets are stable and others are not; and ”distressed” as in large amounts of blight, and few amenities, such as grocery stores.

Detroit residents have responded in kind. A staggering 47 percent of the owners of Detroit’s 305,000 properties didn’t pay their property taxes in 2012. Homeowner Fred Phillips illuminated the frustration many of those residents feel. ”Why pay taxes?” he asks. “Why should I send them taxes when they aren’t supplying services? It is sickening….Every time I see the tax bill come, I think about the times we called and nobody came.”

Yet it’s even worse than that. Detroit has some of the highest big city property taxes in the nation, and property assessments remain overly inflated, amounting to as much as ten times the market price of the property, according to recent research compiled by two Michigan professors.

This has led to another phenomenon. Property owners are allowing themselves to be foreclosed upon, and then re-buying the same property at a reduced price, legally eliminating their outstanding debt in the process. Six hundred properties were repurchased in this manner in 2012, triple the number that occurred in 2010.

In short, Detroit is a city on the brink of ruination.

~ Arnold Ahlert

The Sequester Apocalypse is Upon Us







Mother of all horrors---- the sequester apocalypse is upon us and all sorts of havoc is hitting me personally.  I woke up this morning and my car won't start because all the gas had mysteriously disappeared from the gas tank.  My cupboards were bare even though I went to the grocery store on Sunday, and the dog had no food and had to scavenge the neighborhood for food.  Even my bank accounts were drained all because the politicians didn't get the money to spend that wanted even though they stamped their feet and demanded.  The sequester apocalypse has arrived and all sorts of bad things are starting to happen around the country....... oh, wait a minute, my mistake.... thecar does start, my cupboards are fully stocked, the cable TV still works, the dog is fat and happy...... what am I missing?

 Politicians, being politicians, and deriving most of the power from other people's money they've voted to confiscate to fuel their spending addiction, will only cut in ways most painful for their constituents (even though there is at least 10% waste, fraud and abuse at most agencies) so that there will be an outcry from the people to restore the funding.  This trick has been played for years at the local, state and federal levels when spending cuts (or the growth in spending is cut in this case) are implemented.  Don't fall for it.  The government is in dire need of spending cuts and some restraints on its abuse of taxpayers.  This is a good first step.


Bring on the locusts