When the dark wood fell before me
And all the paths were overgrown
When the priests of pride say there is no other way
I tilled the sorrows of stone
I did not believe because I could not see
Though you came to me in the night
When the dawn seemed forever lost
You showed me your love in the light of the stars
Cast your eyes on the ocean
Cast your soul to the sea
When the dark night seems endless
Please remember me
Then the mountain rose before me
By the deep well of desire
From the fountain of forgiveness
Beyond the ice and the fire
Cast your eyes on the ocean
Cast your soul to the sea
When the dark night seems endless
Please remember me
Though we share this humble path, alone
How fragile is the heart
Oh give these clay feet wings to fly
To touch the face of the stars
Breathe life into this feeble heart
Lift this mortal veil of fear
Take these crumbled hopes, etched with tears
We'll rise above these earthly cares
Cast your eyes on the ocean
Cast your soul to the sea
When the dark night seems endless
Please remember me...
Thursday, February 28, 2008
Monday, February 25, 2008
Genius Dad Award
As many of you may know, I find much amusement in the financial markets. I generally share this enthusiasm with a few close friends and family. I'd like to give a shout-out to my father-in-law for two fantastic stock picks: DVN and CHK. These two have been on absolute fire since he mentioned them to me almost 3 years ago - up 70% and up 50% respectively, not counting any dividends during this time. You might think that he has mentioned many other companies that I have disregarded. But, in fact, no - these are the only ones. So, a 100% accuracy with an average return in excess of 60% in just under 3 years. Nice, very nice. My only regret: I never acted on his recommendations. But, the good news is that I'm waiting for the next one.
Thursday, February 21, 2008
Are you an, er, investor?
"We believe that according the name ‘investors’ to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a ‘romantic.’" --Warren Buffett
Sunday, February 17, 2008
Mount Tabor vs Mount Calvary
As you can see, I didn't give up blogging for Lent. Today, our priest - Father Bill - preached a most excellent homily, drawing a parallel in Jesus' life that struck me as incredible.
Three disciples - Peter, James, and John - join Jesus on Mount Tabor where they experience the Transfiguration of Christ. Here, Jesus is clothed in an all-glowing and majestic white garment that reveals His true identity (God); He is surrounded by two of the most regarded Jewish 'fathers' - Moses and Elijah; and, God conspicuously tells the disciples "This is my beloved Son".
Let's contrast this to what happens soon after they descend and Jesus' suffering begins. His life ends on Mount Calvary. Here, His clothes are stripped away from Him; on the cross, Jesus is now surrounded by two criminals; and, His executioner says "Indeed this man was the Son of God."
Isn't that parallel amazing?! Clearly, I think so!
(Ironically, Peter denies knowing Jesus three times, even though he had been with Jesus during the Transfiguration.)
Three disciples - Peter, James, and John - join Jesus on Mount Tabor where they experience the Transfiguration of Christ. Here, Jesus is clothed in an all-glowing and majestic white garment that reveals His true identity (God); He is surrounded by two of the most regarded Jewish 'fathers' - Moses and Elijah; and, God conspicuously tells the disciples "This is my beloved Son".
Let's contrast this to what happens soon after they descend and Jesus' suffering begins. His life ends on Mount Calvary. Here, His clothes are stripped away from Him; on the cross, Jesus is now surrounded by two criminals; and, His executioner says "Indeed this man was the Son of God."
Isn't that parallel amazing?! Clearly, I think so!
(Ironically, Peter denies knowing Jesus three times, even though he had been with Jesus during the Transfiguration.)
Thursday, February 07, 2008
A tale of two rates
Just an expansion to my response earlier. Most so-called frivolous spending that seems to be the topic of discussion within many circles is arguably the result of of easy credit and hence credit cards. Whether the Fed funds rate is 3%, 3.5%, or 5%, it will not affect how the American consumer spends on his/her credit card. Credit card rates have astronomical rates - 18%, 25%, 29% amongst other incredible numbers - and *that* in itself should be a deterrent to bad spending habits and debt.
The Fed funds rate is more of a response to stimulate business capital spending which in turn creates employment. I think it's fairly clear at this point that we have a weakening labor market.
Here's a perfect example of increasing credit card interest rates while the Fed funds rate is decreasing. So, this should give you some hope that Fed rate cuts fear do not automatically mean there will be an increase in frivolous spending!
The Fed funds rate is more of a response to stimulate business capital spending which in turn creates employment. I think it's fairly clear at this point that we have a weakening labor market.
Here's a perfect example of increasing credit card interest rates while the Fed funds rate is decreasing. So, this should give you some hope that Fed rate cuts fear do not automatically mean there will be an increase in frivolous spending!
Tuesday, February 05, 2008
The second Fed cut
Pat asks: "I'm curious what the Jayhawk thinks about the Fed's further 50 basis point reduction in the rate. Are we nearing the point of overcompensating? Will cheap cash encourage more irresponsible spending on the part of the American consumer? My vote for the Jayhawk presidency may depend on his answer!"
Given your last statement, I probably shouldn't say anything!
To answer your question directly, I do not believe the Fed's actions will necessarily "encourage more irresponsible spending on the part of the American consumer."
You can't choke the economy, allow high levels of unemployment, and kill economic growth in an effort to teach people how to save. That's like severing a kid's finger every time he or she makes a mistake!
Instead, we need to promote growth and simultaneously educate people on personal finance. Bernanke has blatantly spoken about the latter.
Looking at the ISM Services data point that came in today, we're in deep trouble already. The Fed's job now is to worry about economic growth before inflation. As far as the American consumer and spending goes, it can't be fixed overnight. Over time, though, I believe there are awareness efforts currently in place that will encourage more saving, including the housing correction.
Pat, I think you should hand out flyers at Farragut West that encourage people to save!
Given your last statement, I probably shouldn't say anything!
To answer your question directly, I do not believe the Fed's actions will necessarily "encourage more irresponsible spending on the part of the American consumer."
You can't choke the economy, allow high levels of unemployment, and kill economic growth in an effort to teach people how to save. That's like severing a kid's finger every time he or she makes a mistake!
Instead, we need to promote growth and simultaneously educate people on personal finance. Bernanke has blatantly spoken about the latter.
Looking at the ISM Services data point that came in today, we're in deep trouble already. The Fed's job now is to worry about economic growth before inflation. As far as the American consumer and spending goes, it can't be fixed overnight. Over time, though, I believe there are awareness efforts currently in place that will encourage more saving, including the housing correction.
Pat, I think you should hand out flyers at Farragut West that encourage people to save!
Money and Happiness: A response
A frequent and enthusiastic reader of Jayhawk's Nest, Pat, responds to a post earlier, so aptly titled "$$$ = :) ?":
"How many times must we be told that money does not equal happiness? I am thinking about an economic model in which households seek to maximize gratitude (as opposed to profit), because the link between a sense of gratitude and happiness is MUCH more robust than that between money and happiness.
Practical consequence of an economy that seeks to maximize gratitude as opposed to profit?: buying locally, especially from people you know. I am not anti-trade... I'm anti-anonymity. I am not pro-protectionism... I'm pro-personal transactions."
Pat - Great thoughts, as usual, and thanks for checking in.
Just a few minor points - it's firms that maximize profits, not households. Households, which are made up of individuals, are "utility" maximizers. Supposedly, utility would include money. And, if so, households would save money. Strangely, they generally have not.
However, I don't think the reason we have a negative savings rate is that people don't want to save. In fact, they believe they are saving when they invest in their homes and their 401(K)'s etc. Elaborate investment vehicles were not easily available 30 - 40 years ago, e.g. IRAs. The stock market was way too expensive for the average Joe, i.e. commissions were high and minimum requirements to stocks (or better put partnerships in companies) were astronomical. Competition and technology has changed that over the past decade or so, and for the better. The only problem is that education has lagged. People do not realize that their investments are not a ticket to purchase the world.
I think the issue is that we went too far with credit and have hit extremes. The availability of credit anonymously had never been experienced before and it's likely that we - as a society - simply went too far using it, and profit-maximizing firms went too far issuing it. The intent was not criminal, but the consequences seem to be that way. It's simply a process or learning a new way of thinking, i.e. how to effectively use credit. I believe we're now in the process of correcting back to equilibrium.
The problem is that money does matter when it comes to making people happy. (See this study by Firebaugh and Tach.) However, the correlation between money and happiness is not linear, but rather it has diminishing marginal returns. After so much dough, you have enough. The question is: what's the threshold? And that is the problem. At some point, one has to say enough is enough. For most people, though, it's a hard thing to do since we're naturally inclined towards greed.
So, where does that leave us? I believe that the current system is fine. It's impossible to measure gratitude or utility. As a society, we need to educate people, especially the youth, about credit. It is *not* free money. Instead, it's simply a means of convenience. I see personal credit as a substitute for cash. I'd rather carry one credit card than cash. In this way, I can track expenses, not worry about emergency funds on the road, etc, etc.
I'm not convinced about buying local, etc. I'll refer you to Ricardo's competitive advantage argument. I'll buy from the moon if it's cheaper and my goal is to maximize savings. I don't see any reason to buy from the local dude if Wal-Mart has the same item for half the price (which it generally does).
In relation to the article I initially posted, I think my take-away is this: forget the past (after seeking forgiveness of course!), don't worry too much about the future, and make the most of the present for it is a gift!
Suzi Orman says it best: people first, then money, then things.
"How many times must we be told that money does not equal happiness? I am thinking about an economic model in which households seek to maximize gratitude (as opposed to profit), because the link between a sense of gratitude and happiness is MUCH more robust than that between money and happiness.
Practical consequence of an economy that seeks to maximize gratitude as opposed to profit?: buying locally, especially from people you know. I am not anti-trade... I'm anti-anonymity. I am not pro-protectionism... I'm pro-personal transactions."
Pat - Great thoughts, as usual, and thanks for checking in.
Just a few minor points - it's firms that maximize profits, not households. Households, which are made up of individuals, are "utility" maximizers. Supposedly, utility would include money. And, if so, households would save money. Strangely, they generally have not.
However, I don't think the reason we have a negative savings rate is that people don't want to save. In fact, they believe they are saving when they invest in their homes and their 401(K)'s etc. Elaborate investment vehicles were not easily available 30 - 40 years ago, e.g. IRAs. The stock market was way too expensive for the average Joe, i.e. commissions were high and minimum requirements to stocks (or better put partnerships in companies) were astronomical. Competition and technology has changed that over the past decade or so, and for the better. The only problem is that education has lagged. People do not realize that their investments are not a ticket to purchase the world.
I think the issue is that we went too far with credit and have hit extremes. The availability of credit anonymously had never been experienced before and it's likely that we - as a society - simply went too far using it, and profit-maximizing firms went too far issuing it. The intent was not criminal, but the consequences seem to be that way. It's simply a process or learning a new way of thinking, i.e. how to effectively use credit. I believe we're now in the process of correcting back to equilibrium.
The problem is that money does matter when it comes to making people happy. (See this study by Firebaugh and Tach.) However, the correlation between money and happiness is not linear, but rather it has diminishing marginal returns. After so much dough, you have enough. The question is: what's the threshold? And that is the problem. At some point, one has to say enough is enough. For most people, though, it's a hard thing to do since we're naturally inclined towards greed.
So, where does that leave us? I believe that the current system is fine. It's impossible to measure gratitude or utility. As a society, we need to educate people, especially the youth, about credit. It is *not* free money. Instead, it's simply a means of convenience. I see personal credit as a substitute for cash. I'd rather carry one credit card than cash. In this way, I can track expenses, not worry about emergency funds on the road, etc, etc.
I'm not convinced about buying local, etc. I'll refer you to Ricardo's competitive advantage argument. I'll buy from the moon if it's cheaper and my goal is to maximize savings. I don't see any reason to buy from the local dude if Wal-Mart has the same item for half the price (which it generally does).
In relation to the article I initially posted, I think my take-away is this: forget the past (after seeking forgiveness of course!), don't worry too much about the future, and make the most of the present for it is a gift!
Suzi Orman says it best: people first, then money, then things.
Sunday, February 03, 2008
Dollar slide over?
There are some out there who think Bernanke's rate cuts were a dumb decision because it hurts the dollar. So to my cassandras of dollar doom and gloom, I present the following article. You may want drum rolls.
From Bloomberg.com: "Ben S. Bernanke's decision to lower interest rates 1.25 percentage points last month will end the dollar's two-year slide, according to the world's biggest currency traders."
Read more here.
From Bloomberg.com: "Ben S. Bernanke's decision to lower interest rates 1.25 percentage points last month will end the dollar's two-year slide, according to the world's biggest currency traders."
Read more here.
Incredible Giant WIN!
WHOA! AMAZING! WHAT?! DID THEY WIN? THE PATRIOTS LOST?!!
WOW!
I'm stunned. By far the best Super Bowl game I've watched, ever. Go Manning brothers!
Now, what does this mean for you and me? It means invest your money in the S&P index fund and there's a good probability you'll make the big bucks by the end of the year. And perhaps at the end of the year, we'll have another wow - a wow year. Perhaps the Super Bowl was just a glimpse of the volatility and final outcome we can expect for stock returns in 2008.
Congratulations NY Giants!
By the way, Belichick is class-less and deserves to lose. Did you see him run away when the game was not even officially over? How lame!
WOW!
I'm stunned. By far the best Super Bowl game I've watched, ever. Go Manning brothers!
Now, what does this mean for you and me? It means invest your money in the S&P index fund and there's a good probability you'll make the big bucks by the end of the year. And perhaps at the end of the year, we'll have another wow - a wow year. Perhaps the Super Bowl was just a glimpse of the volatility and final outcome we can expect for stock returns in 2008.
Congratulations NY Giants!
By the way, Belichick is class-less and deserves to lose. Did you see him run away when the game was not even officially over? How lame!
Saturday, February 02, 2008
Looking for Dividends?
Multiplying Dividends
| COMPANY | TICKER | MARKET VALUE | SECTOR | DIVIDEND YIELD | 10-YEAR DIV GRTH RATE | 2008 EPS GROWTH |
| Buckeye Partners | BPL | $2 billion | Energy | 7.10% | 5.84% | 9% |
| Enterprise Products | EPD | $13.1 billion | Energy | 6.60% | 7.16% | 39% |
| Kinder Morgan Energy | KMP | $13.5 billion | Energy | 6.60% | 7.09% | 138% |
| Pfizer | PFE | $155.4 billion | Health Care | 5.80% | 17.43% | 6% |
| Integrys Energy Group | TEG | $3.8 billion | Utilities | 5.50% | 4.11% | 50% |
| Bank of Montreal | BMO | $27.9 billion | Financials | 4.90% | 16.96% | 11%* |
| Nstar | NST | $3.5 billion | Utilities | 4.40% | 5.32% | 6% |
| UST | UST | $8.5 billion | Consumer Staples | 4.30% | 4.01% | 7% |
| Royal Bank of Canada | RY | $64 billion | Financials | 4.10% | 19.35% | 19%* |
| Bank of Nova Scotia | BNS | $47 billion | Financials | 4.30% | 17.12% | 18%* |
| Huaneng Power (ADR) | HNP | $10.2 billion | Utilities | 4.10% | 9.89% | 14% |
| Paychex | PAYX | $12 billion | Technology | 3.70% | 23.30% | 12%** |
| Genuine Parts | GPC | $6.8 billion | Consumer Discretionary | 3.60% | 4.97% | 9% |
| Taubman Centers | TCO | $2.6 billion | Financials | 3.60% | 10.17% | 8% |
| Toronto-Dominion Bank | TD | $47.9 billion | Financials | 3.60% | 14.75% | 17%* |
| General Electric | GE | $346.4 billion | Conglomerate | 3.60% | 10.89% | 13% |
| Eli Lilly | LLY | $58.9 billion | Health Care | 3.60% | 6.74% | 10% |
*Taken from Barron's.
Friday, February 01, 2008
Investment vehicles
I'm preparing a document that summarizes various investment vehicles.
Here's a good link if you're interested:
http://www.finance.cch.com/text/c20s15d010.asp
Here's a good link if you're interested:
http://www.finance.cch.com/text/c20s15d010.asp
How Wall Street Works
If you'd like to understand the current market volatility, you must watch this video. It's 8 minutes long and will be the best thing to have come out of your losses, if any. Really, it's worth it. Do it. Then tell me what you think!
Click here.
http://www.youtube.com/watch?v=SJ_qK4g6ntM
Click here.
http://www.youtube.com/watch?v=SJ_qK4g6ntM
Subscribe to:
Posts (Atom)