December 2008
December 31, 2008 –
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RELATED TICKERS: GM
While many tonight are saying 'out with the old and in with the new' I would like to change that phrase a bit. In a capitalist system 'out with the losing businesses and in with the profitable businesses' (well at least in the long-term as it may takes a few years for some businesses to fail completely...GM?) works just as well. This year has certainly seen some exits as decided by shareholders, customers, or fed up corporate partners. In a sense this is the greatest strength of capitalism in that we leave behind what we really don't need; inefficient businesses, poor managers, their bad products and give back to those institutions that really add to our society with their needed goods and valuable services. [more]
December 16, 2008 –
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RELATED TICKERS: KO
By now we've all had many opportunities to buy our favorite companies at great prices. What then will be the true measure of our investment success? It is clear that the earnings of those companies will truly determine their returns but in an unclear environment like this many questions arise. In this environment therefore being diversified is very valuable because who emerges strongest could be a wide host of choices. The job of the asset-allocator though is to place companies through industry specific litmus tests. Retailers need to rein in inventories and reduce accounts receivables. Railroads need to focus on their debt/equity positions and Banks need to cut costs and build strong returns on equity. The traditional measures though like strong cash flow growth, revenue growth and very little debt always remain. [more]
December 05, 2008 –
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RELATED TICKERS: GPS
, SBUX
While I often try to not give much weight to large movements in the stock market (and instead pay attention more to the actions of businesses), I have persistently been hearing about how retiring Baby-Boomers will have a large effect on the stock market over the next few years. Many would like to draw the connection that this aging is also exacebated by traditional trends in consumption throughout life that are almost unavoidable. This phenomenon, coined by Harry Dent and termed as Age Wave Theory, states that spending and earning are highest in the mid-late 20s to the 50s and then decline later in life. These two factors then represent a significant effect on the market where large scales of earnings, to the tune of 3 Trillion according to AARP are slowly leaving equities. For the United States, a country that has 67 million baby-boomers, (those born between 1946-1964) this represents a problem not just as far as public programs like social security, but as far as our overall consumption-based economy is concerned. [more]
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