Tuesday, January 25, 2011

Facebook Public?

JANUARY HAS STARTED WELL, THOUGH with a bit of volatility. By the numbers, for the three weeks ended Friday, January 21, 2011, the Dow Jones Industrial Average closed at 11,871, up 294 points, or 2.5%. The Standard & Poor’s 500 closed at 1283, up 26 points, or 2%, and the NASDAQ Composite closed at 2689, up 37 points, or 1.4%.
Apple is out of Jobs. At least they need to prepare for a future without him. Whatever his medical conditions, those conditions appear to be absorbing his attention, which will continue to make it challenging for him create popular new bites.

Goldman Sachs reported quarterly profits of $2.39 billion, off 53% from the fourth quarter of 2009. Apparently, this is the third consecutive quarterly decline in revenue and profits for the firm. You can find the company’s address on their website, if you want to send CEO Lloyd Blankfein a sympathy card.

Speaking of Goldman, Facebook just picked up $1.5 billion from them. It appears that Facebook has operating margins of almost 50%, and year over year revenue growth of more than 100%. According to those who say they know, these are better numbers than Google posted at the same point in its business cycle.

Wal-Mart and Michelle Obama have announced plans to re-arrange the ingredients in a variety of foods sold at Wal-Mart, in order to offer more healthy fare. We wish them well, and encourage everyone to be aware of what it takes to be healthy. My parents always kept a garden, which also seemed a good way to keep healthy foods available.

GE profits were up 51% for the fourth quarter, with robust growth coming from its technology and infrastructure businesses. GE stock, at $20, is right at its 12 month high.

On the economic front, the Conference Board’s leading indicator index was up 1% in December, the sixth consecutive monthly increase. New home construction dropped 4%, to an annualized 529,000 units. Existing home sales were up 12% in December, which is 3% below the year ago level. Initial jobless claims dropped to 404,000, with the official unemployment rate still north of 9%, and the real unemployment rate a guess, but probably in the high teens.

With ongoing concern over the economy, employment, housing and mortgages, and the state of our republic, the stock market should be in the black this year. You may want to save this commentary until year end to see if I have a clue what I’m talking about. One interesting tidbit – Travelers, Quest Diagnostics, and Coach, among others, have increased their share repurchase programs.

According to a recent report, U.S. job growth has been stagnant over the last ten years. Nonfarm payrolls, which include both government and private sector positions, were 132 million at the beginning of 2001. Nonfarm payroll grew to 138 million in 2007, and finished 2010 at 131 million.

We live in a global economy. Capital of all kinds, including financial and human capital, finds its way to environments where it is rewarded and appreciated. The U.S. doesn’t compete well in some of these areas. On the financial side, we may want to focus on rewarding capital by reducing the tax and regulatory burdens of putting capital to work. On the human side, we may want to focus a tad more on results and persistence, and a bit less on self esteem. The latter is a by-product of the former.

Quote of the week:

“A man does what he must – in spite of personal consequences, in spite of obstacles and dangers and pressures – and that is the basis of all human morality.”
                                                                                                   Winston Churchill

Tuesday, January 4, 2011

Intermarine 55

DOMESTIC EQUITIES FINISHED 2010 strong, with solid holiday shopping reports, and at least some tax resolution in Congress. By the numbers, for the two weeks ended Friday, December 31, 2010, the Dow Jones Industrial Average closed at 11,577, up 86 points, or 0.8%. The Standard & Poor’s 500 closed at 1257, up 14 points, or 1.1%, and the NASDAQ Composite closed at 2652, up 9 points, or 0.3%.
Health care legislation, interesting election results, wars, floods, blizzards, Russian spies posing as financial advisors – all this and more made the headlines in 2010. Around the world, sovereign bankruptcies in Greece and Ireland were averted, whiners in France and other plantation states rioted because they are actually expected to work to get paid, and the European Union began to show its cracks.

A variety of asset classes responded to this worry and concern by having a very solid year. In 2010, the Dow was up 11%, the S&P 500 was up 13%, the NASDAQ was up 17%, European stocks were up 9%, Netflix was up 228%, and H-P was off 18%. Responding to either demand from growing economies, or the suffocating sovereign debt levels around the world, hard assets had a good year. Gold was up 29%, silver was up 82%, copper was up 32%, oil was up 15%, and palladium was up 94%. Bombay’s Sensex finished the year up 15.4%, closing at 20,509. Hong Kong, Shang Hai, and other Asian markets also finished well.

The president has signed into law a repeal of “Don’t Ask, Don’t Tell”, allowing gays to serve openly in the military. It will be interesting to see what impact this has on our military and even more, to track unintended consequences.

According to a recent survey, Washington D.C garnered the spot as the best city for business, beating Omaha, Boston, and Des Moines, among others. Never hurts to have a seemingly endless supply of other people’s money to help fund your growth. This strategy consistently falls into the best practices category of the finest Ponzi con artists.

Toronto-Dominion Bank, owner of TD Ameritrade and other financial enterprises, has announced the purchase of Chrysler Financial from Cerberus. This is a plus for Chrysler Financial, in our opinion, as Canadian bankers don’t seem to be nearly as afflicted with the virus that seems to live and feed on Wall Street.

On the economic front, jobless claims dropped to 388,000 last week. Consumer confidence declined in December, according to the Conference Board, from 54.3 to 52.5. Oil prices are likely to continue to head north. Saudia Arabia has said it is prepared to support $100 per barrel oil, as they find greater demand in emerging markets. Prepared to support? No kidding.

So, what happens next in the world economy? Are we in for Happy Days again, or is this simply the euphoria before some type of worldwide meltdown? Well, my crystal ball is in for repairs, and the shop won’t return my calls.

There is always opportunity, and sovereign debt and its causes must be addressed. How will that shake out? There are too many scenarios to comment on, and everyone has an opinion. Those companies that appear to be best positioned for the future, regardless of economic circumstances, seem to be those that are multi-national, meaning they have revenue and operations around the world, have a low debt load, and offer products deemed to meet basic needs. Often, these companies are mature in the developed markets, and are growing rapidly in the developing economies of the world. They also have paid a consistent dividend.

Intermarine of Brazil, and BMW Group’s DesignworksUSA have teamed up to create Intermarine 55, a 57 foot yacht that will go on sale in July. It will sleep six comfortably, features windows all around, a sink, barbeque area, and cooler on the stern, another sink, barbeque area, and refrigerator on the flybridge, and plenty of meal prep space in the galley. Fridge, stove, and microwave come standard. You can customize fabrics and woods. Base price is $2.2 million.

Quote of the week:

“Don’t ask what the world needs. Ask what makes you come alive, and go do that, because what the world needs is people who have come alive.”
                                                                                             Howard Thurman