Ideas Pobres

Want a job? Move to Nebraska.

noreply@blogger.com (Juan Pobre) — Sat, 21 Nov 2009 04:03:00 +0000

This SITE has a graphic view of the unemployment picture in the Unites States from 2004 - 2009. Right now, Florida, Michigan, California and Arizona are bleeding red. But Nebraska is job heaven!

Right click on the graphic at the SITE to zoom and pan.

Greenblatt Magic Formula Returns

noreply@blogger.com (Juan Pobre) — Thu, 19 Nov 2009 05:44:00 +0000

On October 19, Joel Greenblatt presented at the Value Investing Congress. Greenblatt is an acclaimed value investor and philanthropist.

His presentation explained the Magic Formula which was first presented in his best selling book titled The Little Book That Beats the Market which was published about 4 years ago.

The video can be watched HERE. Be sure to first download his slide presentation which goes with the video. The slides can be obtained HERE.

If you had followed his methodology, then over the last 10 years your return would have been 288% versus -1.5% for the S&P 500. Even over the last three years, which to say the least have been difficult, the Magic Formula total return would be +15% versus -15% for the S&P 500.

His Magic Formula website is HERE.

India goes for the gold!

noreply@blogger.com (Juan Pobre) — Wed, 04 Nov 2009 02:42:00 +0000

India's central bank bought 200 tons of gold from the IMF reserves. It is equivalent to 8% of annual world production of gold.

India's finance minister said: "We have money to buy gold. We have enough foreign exchange reserves."

What? They don't want paper dollars!

Gold closed at $1084 today - up almost 3%.

Er, or is it the case that the dollar fell in value 3%?

What yard stick should I use? I am so confused.

Full article HERE.

Democrats, the guardian of the little man against greedy Wall Street...

noreply@blogger.com (Juan Pobre) — Wed, 21 Oct 2009 02:24:00 +0000

The conventional wisdom is that the Republicans are anti-regulation and that they allowed the free reign of Wall Street to line their pockets. And no doubt there is a lot of truth to this.

The other conventional wisdom as that the sainted Democrats are in the trenches doing battle against Wall Street greed and their Republican allies for the betterment and protection of the little man on main street.

If you believe that about the Democrats, then watch the PBS Frontline report, "The Warning" which aired tonight. You can view it on the Frontline website.

One example... Brooksley Born was the Director of the U.S. Commodities Futures Trading Commission (CFTC) in the Clinton administration. Among other things, she was responsible for the regulation of financial instruments such as derivatives.

In 1998, Ex-Goldman Sach's executive and then Clinton's Secretary of the Treasury, Robert Rubin, calls her to a meeting in his office to tell her to back off on her efforts to regulate the derivatives industry...

Robert Rubin said to her, "I am told that you do not have the jurisdiction to do this." And Brooksley said: "Well, that's interesting. That's the first time I've ever heard that. All my lawyers at the CFTC have assured me that we have the exclusive jurisdiction to do this." And Rubin said: "Oh, you're listening to government lawyers. You shouldn't be listening to government lawyers; you should be listening to private lawyers. All the private lawyers representing the banks say you don't have the jurisdiction."

This is the same Robert Rubin who pushed Congress and Clinton to repeal the Glass-Steagall legislation of the 1930s that prevented banks from also offering financial and investment services. Two months after Glass-Steagall was repealed, Rubin left Treasury to take an executive position with Citibank. And we all know what happened to Citi during his tenure as they jumped into all manner of financial products.

And all the current furor over egregious Wall Street executive pay? None other than Democratic wheeler-dealer, Robert Rubin received $127 million for his services while driving Citibank into the toilet.

Oh, and it's the very same Rubin, who after he left Treasury, sparked controversy in 2001 when he contacted an acquaintance at the Treasury Department and asked if the department could convince bond-rating agencies not to downgrade the corporate debt of Enron, a debtor of Citigroup.

In January 2009, Rubin was named by Marketwatch as one of the "10 most unethical people in business".

Who else eventually forced Brooksely Born out of the CFTC? None other than Deputy Secretary of the Treasury under Rubin, Larry Summers.

And what else has Summers done? During Summers' presidency at Harvard, the University entered into $3.52 billion of interest rate swaps, financial derivatives that can be used for either hedging or speculation. By late 2008, those positions had lost approximately $1 billion in value. This forced Harvard to borrow significant sums in distressed market conditions to meet margin calls on the swaps. The decision to enter into the swap positions has been attributed to Summers and has been termed a "massive interest-rate gamble" that ended badly.

Still more... During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation. Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets.

Summers hailed the Gramm-Leach-Bliley Act in 1999, which lifted more than six decades of restrictions against banks offering commercial banking, insurance, and investment services (by repealing key provisions in the 1933 Glass-Steagall Act): "Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Summers said. Many critics, including President Barack Obama, have suggested the 2007 subprime mortgage financial crisis was caused by the partial repeal of the 1933 Glass-Steagall Act.

And what does Summers do now? He is the Director of the National Economic Council in President Obama's administration.

So are the Democrats the "Good Hands People" or the Dirty Hands People? Or just one and the same as the Republicans?

Just an illusion?

noreply@blogger.com (Juan Pobre) — Fri, 09 Oct 2009 14:34:00 +0000

Like Alice in Wonderland, when one peers through the looking glass, one can see different views of reality.

If one considers the performance of the S&P since the March lows in a strictly dollar based measurement, the return has been spectacular.

But if one looks at the S&P performance using the prism of a trade weighted index of the dollar's value versus other currencies, the performance of the S&P has been in good measure an illusion. See HERE.

This is just another example of how the debasement of a currency can create the illusion of wealth when in reality it acts as a wealth destroyer.

Gasoline refiners in for hard times ahead

noreply@blogger.com (Juan Pobre) — Sun, 30 Aug 2009 15:54:00 +0000

This week's Barrons discusses falling U.S. oil consumption and the rocky road the refiners such as Valero, Tesoro, Frontier and others face going forward. More efficient cars on the road, an aging population that drives less and a slowing economy have all forced consumption down and thinned refining margins.

The chart included in the article is quite interesting. Note that for all the pain and complaining last year when prices hit a record $4 per gallon, gasoline expenditures as percent of disposable income was lower in 2008 than it was in the 1980. And in 2009 it is only half of what it was in 1980.

Barrons usually does a good job of putting numbers into perspective. Inflation is an insidious villain destroying savings and a way for governments to impose a stealth tax. Inflation also turns the dollar into a rubber yardstick - next to useless when comparing prices over time. So using inflation adjusted dollars, or in this case, expenditures as a percentage of disposable income gives a better perspective. Compare this article to how politicians and others with an agenda use unadjusted prices to whip up the public on various issues.

The full article can be found HERE [$].

Anyway, the memory of us old timers that things were harder back then is correct! We truly did have to "walk 10 miles to school, barefoot, in the snow, uphill both ways".

Inflation is your friend!...

noreply@blogger.com (Juan Pobre) — Sat, 01 Aug 2009 22:30:00 +0000

Below is a news reel from 1933 making the case that inflation is a wonderful way to grow the economy, increase wages, and sell more beer...

Next time I thirst for my favorite beer and have to pay a bit more, I'll think of this film, smile and start whistling, "Happy days are here again!"

The new "Sunshine State"

noreply@blogger.com (Juan Pobre) — Fri, 31 Jul 2009 21:51:00 +0000

Today's WSJ has an article HERE[$] on New Jersey's solar electricity initiative. Some excerpts...

"New Jersey's biggest utility is outfitting 200,000 utility poles with solar panels, part of the state's embrace of a try-anything strategy that has made it the nation's second-biggest producer of solar energy behind California...

FedEx Corp., for example, said Thursday it will begin installing solar panels atop its distribution hub in Woodbridge, N.J., next month. Covering about three acres and capable of generating 2.42 megawatts of electricity, it is expected to be the largest rooftop solar facility in the U.S. when completed in November. The solar array will satisfy about 30% of the facility's electricity needs...

California also is on a solar tear. It wants "a million solar roofs" a decade from now, and is spending $3.3 billion on subsidies, hoping to get 3,000 megawatts installed. More than 158 megawatts of grid-tied solar power were installed in California last year, double the amount installed in 2007. Since the 1980s, California has installed nearly 500 megawatts of grid-tied solar power, equivalent to one large power plant, but still a tiny fraction of the 40,000 megawatts the state needs on a summer day..."

Petra Solar has the contract to provide the solar panels for the utility pole project.

Pathetic

noreply@blogger.com (Juan Pobre) — Mon, 20 Jul 2009 00:05:00 +0000

One of MSNBC's lead stories today...

Geithner travels globe, pitching U.S. debt
Treasury secretary must convince foreign governments investment is safe

...Publicly traded U.S. debt — which excludes deficits the government owes to itself in Social Security and other trust funds — stood at 41 percent of the total economy in 2008. It is projected to climb to 82 percent of the entire economy by 2019...

"If these trends are not reversed, the world will stop buying our debt and the economy will break," said Mark Zandi, chief economist at Moody's Economy.com.

Full article HERE.

A new tip on TIPS...

noreply@blogger.com (Juan Pobre) — Thu, 18 Jun 2009 01:51:00 +0000

Maybe they are not such a great idea after all.

Kiplingers looks at the down side of TIPS.

See HERE.

U.S. Unemployment

noreply@blogger.com (Juan Pobre) — Sun, 31 May 2009 18:31:00 +0000

For the first time since 1993, U.S. unemployment has caught up to Europe. As of March it was 8.5%.

See HERE for a chart.

Obama orders cabinet to cut $100 million from budget. Really!

noreply@blogger.com (Juan Pobre) — Fri, 01 May 2009 02:44:00 +0000

More than 40 years ago, one of Obama's predecessors to his Illinois senate seat, Everett Dirksen, famously said "A billion here, a billion there, pretty soon, you're talking real money".

A few days ago I was watching TV while doing other things and I thought I had heard the president say that he was ordering his cabinet heads to cut $100 million dollars from the budget. Surely I had mis-heard. He must have said "cut $100 billion". Even then I thought $100 billion was trivial given the current budget. It passed from my mind.

Then I saw today that he actually did say $100 million. See HERE.

The President must be living in a time warp. Perhaps in Lincoln's time, $100 million was real money.

View this video to see how trivial $100 million is in the context of the government budget...

Glaxo-Smith-Kline and Swine Flu

noreply@blogger.com (Juan Pobre) — Tue, 28 Apr 2009 00:06:00 +0000

With swine flu in the news, my brother suggested purchasing either Glaxo-Smith-Kline or Roche. Each have antiviral medications to shorten the illness and perhaps protect people against contracting the influenza. GSK has Relenza and Roche has Tamiflu. Relenza is reputed to be the more efficacious against this strain.

As expected the growing concern caused both stocks to pop today. GSK was up 7.6% and Roche was up 4.3%. In truth, their anti-viral medications are only a small part of their businesses so surely emotions played a big part in the action.

I did take a look at GSK in particular and took a position. At the open, GSK had gapped up more than 5% before I could place a buy. For the day my position was up 2.3%.

Independent of the swine flu factor, GSK seemed attractive on a valuation basis. It is trading at PE of 12.2% (ttm) and sports a 5.6% dividend. But its revenue growth has been stagnant/down. It had been recently beaten down over concerns of patent expiration of some of its key products as well as concerns over its pipeline. And I suppose that there is the general over hang of concerns with Obama's yet to be revealed health initiative.

As insurance, I'll put a stop loss on it and let it play out for a while.

If one had been more prescient a smarter move would have been to buy some of the smaller players in this field as soon as the flu started to appear. Today's pops for Novavax, Biocryst and Biota were in the range of 80-125%. See HERE.

I suppose one could argue that this is like buying gold. That is, playing off of fears and bad news. The reality is I hope that the need for these medications does not come to pass. In which case I will instead rely on the valuation and overall strength of the company.

How long will key minerals last?

noreply@blogger.com (Juan Pobre) — Mon, 27 Apr 2009 02:46:00 +0000

The NEW SCIENTIST has a very interesting chart on the longevity of (that is, when we will run out of) key commodities based on various scenarios of consumption rates, population growth and recycling percentages.

For example they estimate that there is enough platinum to last about 15 years, silver 15-20 years, zinc 20-30 years. So either we will have to use less, find even more than is projected to be available or see prices rise.

The chart can be seen HERE.

Worst recession in the last 50 years?

noreply@blogger.com (Juan Pobre) — Sat, 25 Apr 2009 15:20:00 +0000

The New York Times has an interesting chart on how the current recession compares with other recessions over the last 50 years.

"The current recession has become the second-worst in the last half-century and is close to surpassing the severe 1973-75 downturn, according to the Index of Coincident Indicators, based on government data and compiled each month by the Conference Board, a private organization.

Unlike the more widely followed Index of Leading Indicators, which is supposed to help forecast changes in the economy, the coincident index is aimed at simply recording how the economy is doing now.

The accompanying chart shows how far that index has declined from prerecession peaks during each downturn since 1960."

Click on the chart to view it full size. Full article is HERE.

China Going for the Gold... again

noreply@blogger.com (Juan Pobre) — Sat, 25 Apr 2009 01:03:00 +0000

Bloomberg reports HERE that over the last 6 years China's GOLD holdings have increased by 76% to over 1,000 tons. China now has the 5th largest holding of the yellow stuff.

The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons.

China has been looking for ways to diversify away from dollar holdings by buying under valued commodities.

As previously reported, the IMF is about to sell 400 tons of gold. China is viewed as a likely buyer which would support prices.

Today gold jumped 1% to $912.

And according to the TELEGRAPH, "Inflows into ETFs up by more than 300% Figures from the World Gold Council show that investors appetite for gold showed no sign of abating with record inflows in to gold exchange traded funds."

Just about every economist will tell you that gold has no utility. It does not generate dividends. Even Warren Buffett has said, “It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

So given that all this is true, then why does just about every government on the planet continue to hold gold?

I'm continuing to hold about 10% of my IRA in the IAU and GLD ETFs. I don't trust all the paper currency being printed. Do you?

Diamond Dollars

noreply@blogger.com (Juan Pobre) — Sun, 19 Apr 2009 14:15:00 +0000

University of Chicago graduate and former executive with Pepsico, Vince Gennaro, talks with Bloomberg's Tom Keene on this PODCAST about his book, "Diamond Dollars: The Economics of Winning in Baseball.''

If you liked Michael Lewis' Money Ball, then Diamond Dollars would make for a great follow on baseball season read.

Autos as a distressed value play?

noreply@blogger.com (Juan Pobre) — Sat, 18 Apr 2009 17:16:00 +0000

Dennis Virag, president of Automotive Consulting Group Inc., talks with Bloomberg's Ken Prewitt in this PODCAST about partnership negotiations between Chrysler LLC and Fiat SpA, a looming bankruptcy for General Motors Corp. and his assessment of Ford Motor Co. and its Chief Executive Officer, Alan Mullaly.

Virag expects the GM shareholders to be wiped out. So GM is the ultimate value trap. Chrysler is of course private, so no play here. But Virag is surprisingly positive on Ford.

Also Mandel of Autoweek can be heard HERE giving his comments to Bloomberg on the Detroit 3.

Emerson Electric (EMR) - A Value Play?

noreply@blogger.com (Juan Pobre) — Sat, 18 Apr 2009 00:13:00 +0000

I tend to think that we are in stock pickers market. That is, in this market, one can do better by selectively buying stocks rather than buying the broad indexes. If you are of that mindset, then perhaps consider Emerson Electric as a value play.

I had bought Emerson back in October (down 4% since then). As I am 6 months in to this stock, I spent some time looking at its current situation to see if I should still hold (I will). Since I did the research, I thought I would share my findings in case there is any interest.

Emerson has a PE of 11 and is paying a 4+% dividend. The dividend beats money in the bank. Its return on equity is 27%.

And while Emerson has been hit like just about everyone else, it has many businesses that I should think would do well under Washington's stimulus regime. Businesses like smart grid technology, heat pumps, process management systems and more.

I tend to think of Emerson as being somewhat like General Electric but without the GE Capital albatross around its neck.

Some links:

EMR Quote

Greenblatt Value Ranking

Bloomberg Podcast: Christopher Middleton of Atlantic Equities positive on Emerson

Bloomberg: Emerson may acquire Rockwell Automation (usually negative for the acquiring company's stock)

Barrons Stockgrader Rates it a Buy[$]

MSN StockGrader rates it a 9 (out of 10)

Street.Com Video: Emerson and China

Emerson was bearish on near term outlook in their April 7 update

Emerson Quarterly Report and Webcast is May 5

President Obama's 2008 Tax Return

noreply@blogger.com (Juan Pobre) — Thu, 16 Apr 2009 03:39:00 +0000

I just mailed my 2008 income tax return. For grins, HERE is President Obama's 2008 Form 1040 Federal Income Tax Return. His adjusted Gross Income was $2,656,902 on which he paid $855,323 in taxes.

Black blasts Bush, Paulson, Obama, Geithner and Summers

noreply@blogger.com (Juan Pobre) — Sun, 12 Apr 2009 13:14:00 +0000

After blasting Bush, Paulson, Obama, Geithner and Summers on Bill Moyer's PBS show this past week, now Bill Black is doing more of the same in this week's Barrons Magazine. What Black says is consistent with what Economist Simon Johnson said in the Atlantic Magazine HERE. Excerpts from Black's interview in Barrons is below.

"The scale of fraud is immense. This whole bank scandal makes Teapot Dome [of the 1920s] look like some kid's doll set. Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama's presidency. The Bush administration was even worse. But they are out of town. This will destroy Obama's administration, both economically and in terms of integrity.

We have failed bankers giving advice to failed regulators on how to deal with failed assets. How can it result in anything but failure? If they are going to get any truthful investigation, the Democrats picked the wrong financial team. Tim Geithner, the current Secretary of the Treasury, and Larry Summers, chairman of the National Economic Council, were important architects of the problems. Geithner especially represents a failed regulator, having presided over the bailouts of major New York banks.

It is worse than a lie. Geithner has appropriated the language of his critics and of the forthright to support dishonesty. That is what's so appalling -- numbering himself among those who convey tough medicine when he is really pandering to the interests of a select group of banks who are on a first-name basis with Washington politicians.

We are using taxpayer money via AIG to secretly bail out European banks like Société Générale, Deutsche Bank, and UBS -- and even our own Goldman Sachs. To me, the single most obscene act of this scandal has been providing billions in taxpayer money via AIG to secretly bail out UBS in Switzerland, while we were simultaneously prosecuting the bank for tax fraud. The second most obscene: Goldman receiving almost $13 billion in AIG counterparty payments after advising Geithner, president of the New York Fed, and then-Treasury Secretary Henry Paulson, former Goldman Sachs honcho, on the AIG government takeover -- and also receiving government bailout loans."

The full article is HERE[$].

A taxing time?

noreply@blogger.com (Juan Pobre) — Sat, 11 Apr 2009 15:42:00 +0000

Don't feel so bad. Forbes magazine has an interesting ARTICLE comparing US tax rates to that of other countries.

"Total taxation (federal, state and local) amounted to 28% of the GDP in the U.S. in 2006. Only four of the 30 OECD countries had a lower tax ratio. Taxes averaged 35.9% for the OECD as a whole and 38% in Europe. Citizens of Denmark and Sweden paid very close to 50% of their total income in taxes...

...Federal revenues as a prececent of GDP will be the lowest since 1950...

...Only 4 OECD countries, Japan, Korea, Turkey and Mexico, had lower tax rates than the US."

A Bear Market Rally?

noreply@blogger.com (Juan Pobre) — Fri, 10 Apr 2009 17:09:00 +0000

"The Dow Jones industrial average gained 246 points on Thursday. The Standard & Poor’s 500 index has now risen more than 25 percent since stocks bottomed out on March 9, one of its best runs since the Great Depression."

The question at hand is whether the recent spurt in stock prices is a turn around or just a bear market rally? In the New York Times, three economists give their opinions HERE.

You can't handle the truth!

noreply@blogger.com (Juan Pobre) — Tue, 07 Apr 2009 16:55:00 +0000

On April 3, Bill Moyers interviewed Bill Black, a top regulator during the S&L scandal of the 1980s and now a Professor of Law and Economics at the University of Missouri.

Bill Black supported Obama in the election. Now he has scathing comments about Obama's Treasury Secretary, Geithner, his Economic Advisor, Summers, Bush's Treasury Secretary, Paulson, and others. He argues that the fraud committed on Wall Street is now knowingly being covered up by the economic team in Washington.

BILL MOYERS: Who's covering up?

WILLIAM K. BLACK: Geithner is charging, is covering up. Just like Paulson did before him. Geithner is publicly saying that it's going to take $2 trillion — a trillion is a thousand billion — $2 trillion taxpayer dollars to deal with this problem. But they're allowing all the banks to report that they're not only solvent, but fully capitalized. Both statements can't be true. It can't be that they need $2 trillion, because they have masses losses, and that they're fine.

These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed, not because...

BILL MOYERS: What do you mean?

WILLIAM K. BLACK: Well, Geithner has, was one of our nation's top regulators, during the entire subprime scandal, that I just described. He took absolutely no effective action. He gave no warning. He did nothing in response to the FBI warning that there was an epidemic of fraud. All this pig in the poke stuff happened under him. So, in his phrase about legacy assets. Well he's a failed legacy regulator.

BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

WILLIAM K. BLACK: Absolutely.

BILL MOYERS: You are.

WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They're scared to death of a collapse. They're afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we'll run screaming to the exits. And we won't rely on deposit insurance. And, by the way, you can rely on deposit insurance. And it's foolishness. All right? Now, it may be worse than that. You can impute more cynical motives. But I think they are sincerely just panicked about, "We just can't let the big banks fail." That's wrong.

BILL MOYERS: So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?

WILLIAM K. BLACK: That's right. And it's particularly a crisis that brings this out, because then the class of the banker says, "You've got to keep the information away from the public or everything will collapse. If they understand how bad it is, they'll run for the exits."

Watch the full interview HERE.

To quote Jack Nicholson, "You can't handle the truth!"

Here's a TIP...

noreply@blogger.com (Juan Pobre) — Tue, 07 Apr 2009 01:25:00 +0000

"In March, TIPS earned 6.1 percent, the best returns since the Treasury started selling the securities in 1997, according to Merrill Lynch & Co. index data." Bloomberg reports HERE.