|
Thursday, 26 May 2011
Dog Blown Away By Tornado Makes It Back Home
Posted on 21:30 by Unknown
Monday, 23 May 2011
Clever Examples of Long Term Strategy To Doing Business With China and Asia
Posted on 20:07 by Unknown
I read a recent article in Forbes about Peabody Energy. In 2003, when he became COO, Greg Boyce foresaw that China, with it's incredible growth rate, would switch from being a net exporter to a net importer of coal.
When he became CEO in 2005, he spun off the company's Appalachian mines and invested in Australian coal mines so he could sell to China. Since he has been CEO, the shares are up 10 fold and non-U.S. operations now provide 50% of Peabody's earnings (up from 2%).
The Forbes article mentioned 2 of Boyce's actions that really impressed me as clever, and long term strategic:
1. Before China became a net importer of coal, he laid the groundwork by opening a Beijing office and a trading desk, so he could build trust and relations.
Also, as I previously mentioned, he invested in Australian mines because Australia has more coal than they need domestically, and are close to Asia. He purposely invested in Australian mines that had access to ports, so he could keep logistic costs down.
2. The next big thing is Mongolia. In the Gobi Desert, they have the world's largest untapped deposits of metallurgical coal (better quality then the subbituminous coal found in the U.S.), and are starting to shop around development rights. Besides Peabody, lots of American, Chinese, European, and Russian companies are vying to develop these fields.
To position themselves for this opportunity, Peabody wants to have a local staff of experienced managers. So, today, they are investing in Mongolia by hiring Mongolian engineers to work in their Wyoming coal mines, and are sending Mongolian students to U.S. engineering schools.
When he became CEO in 2005, he spun off the company's Appalachian mines and invested in Australian coal mines so he could sell to China. Since he has been CEO, the shares are up 10 fold and non-U.S. operations now provide 50% of Peabody's earnings (up from 2%).
The Forbes article mentioned 2 of Boyce's actions that really impressed me as clever, and long term strategic:
1. Before China became a net importer of coal, he laid the groundwork by opening a Beijing office and a trading desk, so he could build trust and relations.
Also, as I previously mentioned, he invested in Australian mines because Australia has more coal than they need domestically, and are close to Asia. He purposely invested in Australian mines that had access to ports, so he could keep logistic costs down.
2. The next big thing is Mongolia. In the Gobi Desert, they have the world's largest untapped deposits of metallurgical coal (better quality then the subbituminous coal found in the U.S.), and are starting to shop around development rights. Besides Peabody, lots of American, Chinese, European, and Russian companies are vying to develop these fields.
To position themselves for this opportunity, Peabody wants to have a local staff of experienced managers. So, today, they are investing in Mongolia by hiring Mongolian engineers to work in their Wyoming coal mines, and are sending Mongolian students to U.S. engineering schools.
Sunday, 22 May 2011
Leave Ronald McDonald Alone!
Posted on 22:35 by Unknown
A lot of healthy eating activists are taking aim at McDonalds and asking them to retire Ronald McDonald. They think he unfairly advertises to children.
The truth is that these activists will always go after McDonalds about something. If Ronald goes away, they will target happy meals next. They just don't like McDonalds.
But McDonalds is a successful business that makes lots of money for its shareholders by giving people what they want. Who are a few activists to tell millions of Americans that you can't be trusted to pick your own restaurant, so we'll go after McDonalds to protect you?
When San Francisco banned Happy Meal toys, my wife thought that's a good thing, because my son always wants Happy Meals, and sometimes I give in. But I told her that is completely wrong. I am the parent - it is my issue if I give in to my son. Parents should not be hiding behind the government because they can't say no to their children.
Having a few "experts" deciding which business are worthy sounds like Communism and central planning. It's doomed to fail (while capitalism is very robust and adaptable) because millions of "average" minds are collectively better at determining markets than a "smart" few.
The truth is that these activists will always go after McDonalds about something. If Ronald goes away, they will target happy meals next. They just don't like McDonalds.
But McDonalds is a successful business that makes lots of money for its shareholders by giving people what they want. Who are a few activists to tell millions of Americans that you can't be trusted to pick your own restaurant, so we'll go after McDonalds to protect you?
When San Francisco banned Happy Meal toys, my wife thought that's a good thing, because my son always wants Happy Meals, and sometimes I give in. But I told her that is completely wrong. I am the parent - it is my issue if I give in to my son. Parents should not be hiding behind the government because they can't say no to their children.
Having a few "experts" deciding which business are worthy sounds like Communism and central planning. It's doomed to fail (while capitalism is very robust and adaptable) because millions of "average" minds are collectively better at determining markets than a "smart" few.
Saturday, 21 May 2011
Are We Headed For Runaway Inflation? Myths vs. Realities
Posted on 22:18 by Unknown
It's fashionable today to talk about the high prices of gold and oil, and how the Fed is printing so much money that we are going to have hyperinflation.
I'm skeptical, and columnist Steve Chapman, a member of the Tribune's editorial board, agrees with me. He laid out a compelling argument in a recent Chicago Tribune article - which I have paraphrased in the form of Myth vs. Reality:
Myth: The price of gold has doubled since Obama was elected, because investors want to hedge against an increasingly worthless dollar.
Reality: Gold has been in a long-term bull market - during the 8 years of the Bush Administration, the price of gold tripled while the consumer price index rose less than 3% per year.
Myth: The rise in oil and other commodities are caused by the Fed's actions.
Reality: Commodity prices are also affected by events outside the United States - in this case, strong demand from developing countries such as China.
Myth: The government understates inflation because the "core" inflation rate excludes food and energy.
Reality: Food and energy are excluded because they give a distorted picture due to volatility. The core rate is accurate. During the last decade, the core rate was up 21%, vs. 27% for the full inflation rate. General inflation can't exist without the core rate increasing. In the 1970's everything went up - not just food and energy.
The bottom line is that there is no evidence of near-term inflation. The market knows this, as indicated by the popularity of three year treasuries yielding 1%. They would not be in demand if people thought inflation would ravage it.
Finally, high inflation like the 1970's needed a wage-spiral. Higher prices resulted in higher wages, which resulted in higher costs. Today, there is no wage-spiral. Unemployment is high, and wages / salaries are stagnant.
I'm skeptical, and columnist Steve Chapman, a member of the Tribune's editorial board, agrees with me. He laid out a compelling argument in a recent Chicago Tribune article - which I have paraphrased in the form of Myth vs. Reality:
Myth: The price of gold has doubled since Obama was elected, because investors want to hedge against an increasingly worthless dollar.
Reality: Gold has been in a long-term bull market - during the 8 years of the Bush Administration, the price of gold tripled while the consumer price index rose less than 3% per year.
Myth: The rise in oil and other commodities are caused by the Fed's actions.
Reality: Commodity prices are also affected by events outside the United States - in this case, strong demand from developing countries such as China.
Myth: The government understates inflation because the "core" inflation rate excludes food and energy.
Reality: Food and energy are excluded because they give a distorted picture due to volatility. The core rate is accurate. During the last decade, the core rate was up 21%, vs. 27% for the full inflation rate. General inflation can't exist without the core rate increasing. In the 1970's everything went up - not just food and energy.
The bottom line is that there is no evidence of near-term inflation. The market knows this, as indicated by the popularity of three year treasuries yielding 1%. They would not be in demand if people thought inflation would ravage it.
Finally, high inflation like the 1970's needed a wage-spiral. Higher prices resulted in higher wages, which resulted in higher costs. Today, there is no wage-spiral. Unemployment is high, and wages / salaries are stagnant.
Wednesday, 18 May 2011
I Bought Two REITS Today - AAT and CPT
Posted on 11:24 by Unknown
Today, I bought two REITs (Real Estate Investment Trusts).
REITs trade like stocks, and can be thought of as real estate mutual funds. In other words, instead of owning companies, they own real estate. They get special tax breaks, providing that they pass most of their earnings to shareholders. Because of this, REITs provide a lot of income.
I have always wanted to buy some REITs to diversify my portfolio, and I decided now might be a good time after reading an article in the recent edition of Forbes entitled "REIT Merger Boom is Brewing".
I bought two REITS: American Assets Trust (AAT) at $21.88 and Camden Property Trust (CPT) at $62.51.
AAT went public in January at $20.50 per share. It is a 45 year old company based in San Diego that owns a high-quality portfolio of office, residential, and retail properties on the West Coast - including California, Hawaii, and Portland OR. While the national vacancy rate is in double digits, AAT's properties in California and Hawaii are just 5% vacant.
Camden Property Trust specializes in apartment communities, is considered a buy because its stock price hasn't gained as much as bigger apartment REITs, such as Equity Residential. In fact, CPT makes an attractive takeover target for bigger REITS (like Equity) because of its large holdings in the Southwest and Southeast.
As all my positions, I plan to manage them with my Stock Trading Riches system.
REITs trade like stocks, and can be thought of as real estate mutual funds. In other words, instead of owning companies, they own real estate. They get special tax breaks, providing that they pass most of their earnings to shareholders. Because of this, REITs provide a lot of income.
I have always wanted to buy some REITs to diversify my portfolio, and I decided now might be a good time after reading an article in the recent edition of Forbes entitled "REIT Merger Boom is Brewing".
I bought two REITS: American Assets Trust (AAT) at $21.88 and Camden Property Trust (CPT) at $62.51.
AAT went public in January at $20.50 per share. It is a 45 year old company based in San Diego that owns a high-quality portfolio of office, residential, and retail properties on the West Coast - including California, Hawaii, and Portland OR. While the national vacancy rate is in double digits, AAT's properties in California and Hawaii are just 5% vacant.
Camden Property Trust specializes in apartment communities, is considered a buy because its stock price hasn't gained as much as bigger apartment REITs, such as Equity Residential. In fact, CPT makes an attractive takeover target for bigger REITS (like Equity) because of its large holdings in the Southwest and Southeast.
As all my positions, I plan to manage them with my Stock Trading Riches system.
Saturday, 14 May 2011
Are Big Institutional Purchases A Bullish Sign?
Posted on 11:08 by Unknown
A friend of mine recently sent me a newsletter where the writer was bullish on gold and mentioned that the University of Texas announced that they now hold $1 billion of gold bars.
I responded that this is not necessarily a bullish sign. This is an old trick that traders use to get out profitably from large positions.
It might be the case that, having accumulated this large gold position, the university is sitting on a profit.
With a large position, they will need liquidity in the form of buyers if they want to sell some or all of the position without driving down prices.
So, now they announce the purchase to encourage people to jump in to the market, and their brokers will sell their gold to them :-)
I responded that this is not necessarily a bullish sign. This is an old trick that traders use to get out profitably from large positions.
It might be the case that, having accumulated this large gold position, the university is sitting on a profit.
With a large position, they will need liquidity in the form of buyers if they want to sell some or all of the position without driving down prices.
So, now they announce the purchase to encourage people to jump in to the market, and their brokers will sell their gold to them :-)
Skype: Great Trade for Marc Andreesen
Posted on 08:35 by Unknown
This past week, Microsoft bought the internet phone company Skype for $8.5 billion. Did they overpay? Was it a good buy?
That remains to be seen. Skype continually loses money and Ebay gave up on integrating it. But, I think they may have some success if they combine Skype with Xbox and, especially, Communicator.
Many corporations (including the bank I work for) use Microsoft Communicator internally for chats. If Microsoft embeds Skype into Communicator, they could capture a big share of the voice business.
But, one thing for sure is that a big winner is Marc Andreesen (founder of Netscape) and his investment firm, Andreesen Horowitz.
Ebay bought Skype for $3.1 billion in 2005 and sold it to a group of investment firms (headed by Silver Lake and Andreesen Horowitz) for $2.8 billion in 2009.
Now, 18 months later, they sold it to Microsoft for $8.5 billion.
That's a great trade - a 204% return in a year and a half!
That remains to be seen. Skype continually loses money and Ebay gave up on integrating it. But, I think they may have some success if they combine Skype with Xbox and, especially, Communicator.
Many corporations (including the bank I work for) use Microsoft Communicator internally for chats. If Microsoft embeds Skype into Communicator, they could capture a big share of the voice business.
But, one thing for sure is that a big winner is Marc Andreesen (founder of Netscape) and his investment firm, Andreesen Horowitz.
Ebay bought Skype for $3.1 billion in 2005 and sold it to a group of investment firms (headed by Silver Lake and Andreesen Horowitz) for $2.8 billion in 2009.
Now, 18 months later, they sold it to Microsoft for $8.5 billion.
That's a great trade - a 204% return in a year and a half!
Friday, 13 May 2011
Recession Humor
Posted on 10:00 by Unknown
The Recession has hit everybody..... I got a pre-declined credit card in the mail. |
Wednesday, 4 May 2011
Will The Dollar Collapse?
Posted on 09:50 by Unknown
A friend of mine who lives in Zurich sent me this article and asked about my opinion of this gloomy scenario:
http://www.swissinfo.ch/eng/business/Dollar_faces_collapse.html?cid=30012940
Here is my response:
I don’t think the dollar will collapse or stop becoming the reserve currency.
It isn’t unprecedented for a first world country to have such a high level of debt during time of war, or when preventing a depression / severe recession. The U.S. is doing both.
Under these conditions, there has never been a default as long as:
1. the currency is not backed by gold,
2) a lot of the debt is held outside the country.
Also, a bubble occurs when most people think there is no problem. Right now, everyone worries that the U.S. has a debt problem – including the government. That is a bullish sign. So, I think that the debt will be eased off. Eventually the dollar will strengthen.
http://www.swissinfo.ch/eng/business/Dollar_faces_collapse.html?cid=30012940
Here is my response:
I don’t think the dollar will collapse or stop becoming the reserve currency.
It isn’t unprecedented for a first world country to have such a high level of debt during time of war, or when preventing a depression / severe recession. The U.S. is doing both.
Under these conditions, there has never been a default as long as:
1. the currency is not backed by gold,
2) a lot of the debt is held outside the country.
Also, a bubble occurs when most people think there is no problem. Right now, everyone worries that the U.S. has a debt problem – including the government. That is a bullish sign. So, I think that the debt will be eased off. Eventually the dollar will strengthen.
Subscribe to:
Posts (Atom)
