Welcome Mats Out for Stem Cell Agency
California is at work trying to be the leading area for stem cell research. This controversial research holds huge potential for the betterment of mankind. Ethical questions are in the news. One can expect heath care issues to loom large in the years ahead. In the short run, the momentum of the stock market is in industrial goods.
If you stay 100% invested in a diversified stock portfolio, you will do well during the next several years. IPO's are heating up but the steady money will be made in big cap American companies.
Thursday, March 31, 2005
Welcome Mats Out for Stem Cell Agency
Posted by Jack Miller at 3/31/2005 08:34:00 PM
Corning Glass--Ready For Another Run? (click on image to enlarge)
Congratulations to patient investor number 5. After Corning bottomed in 2002 and then after it made a "higher low" in early 2004, patient investor number 5 purchased shares. Within a few months, this investor had more than a 50% gain when more money was available to invest. It is sometimes hard to do the smart thing but I suggested that he should buy more. As you can see, the stock went all the way from the $4 to $12 range.
For the past year, the stock has been locked in a trading range. During this time, it has become clear that the companies products are being adopted at an ever faster pace. New factories have been built. Economies of scale are being realized. Prices are on the way down. Consumers need the companies product. An explosion in sales is just around the corner.
As a early adopter, I paid over $1,500 for my first pocket calculator and almost $2,000 for my first car phone (I lost the calculator but the phone still works). I wised up. I have not purchased my first LCD TV screen yet (I have purchased a Dell computer with a wonderful UltraSharp screen). I learned a valuable lesson. My family more than doubled our investment in satellite radio before we bought out first satellite radio, we made more than 6 times our money in NXTL before we bought our first NXTL phone and we have made almost 300 percent on our first investment in GLW before buying our first LCD-TV.
GLW is ready to run again. Broadband internet service is ready to take the next leap forward. Companies such as VZ, SBC and others are spending billions installing fibre-optic cable. GLW has a portfolio of patents that make light speed data transmissions possible. Buy GLW with confidence! GLW is one of those companies you will want to say you held for 20 years or more!
I write for education and entertainment purposes. Investing in stocks can result in losses of capital. As an amateur investor for 42 years, I have enjoyed great successes and great failures; my wife and children do not permit me to make investment recommendations (they follow my advice but will not allow me to give it too others).
Posted by Jack Miller at 3/31/2005 03:17:00 PM
Peter Brimelow: Market bounce emboldens bulls - Opinion - Markets/Exchanges - Market News
After many weeks of negative attitudes, several newsletter publishers have turned at least a little positive. Most are still calling for a bounce within a trading range. No real enthusiasm yet!
The market has impressively fought through negative news today. The Dow and the NAS are off their lows and the S&P is up! Climbing against negative news is often a sign of a powerful market. Don't miss the next three years! Don't miss the first 5 to 15 days of the move, missing the first 5 to 10% of a a big move is harmful to your portfolios health!
Posted by Jack Miller at 3/31/2005 02:59:00 PM
Goldman sees oil price 'super spike' to $105 a barrel - Oil and Gas - Energy - Analyst
Can you believe $105 per barrel of oil in the near future? I don't! Just the thought is enough to shock the market and even to slow the economy a bit. I pumped $39 worth of gas last night, my all time high. With gas prices up because of the refinery explosion, the idea of $105 per barrel strikes fear in the hearts of men.
CAL made the deal with labor to save $418 million per year. One might argue that fuel costs will rise at least that much. I believe fuel costs will be higher but revenues will be higher as well. The Yellow Freight Chairman reports that fuel surcharges are being passed through to customers. The PCED is still only 2.3% and the largest component of costs, labor costs, are still rising at moderate rates. Productivity is still strong.
Can you imagine what all you would do to reduce consumption if the oil price were to double from here? Demand would drop precipitously. One of the important indicators I follow suggest that oil prices are near the peak for this economic cycle. The supply build announced yesterday was large. Germany just announced a 12% unemployment rate and industrial output in Japan just declined. The market is already adjusting to current oil prices.
President Bush continues to "win". For the first time ever, Government workers are not receiving automatic raises. Merit pay is actually creeping into the US bureaucracy. I predict that the congress will pass an energy bill within the next several months. Congress and the President will get the credit for solving the current energy crisis. By year end, I predict oil prices of $42 per barrel. From there it will take a few more years to bring online new resources to reduce the price further.
Posted by Jack Miller at 3/31/2005 11:28:00 AM
The deal is done to save $418 million per year in labor costs. The stewards did not reach agreement. It is anticipated that the final savings will reach $500 million per year.
THE WORM HAS TURNED! IT MAY TAKE ANOTHER YEAR FOR PROFITS TO SHOW! CAL SHOULD INCREASE IN VALUE WELL BEFORE THE PROFIT FLOW BEGINS!
Posted by Jack Miller at 3/31/2005 10:46:00 AM
Boersenreport.de - Microsoft launches TV-to-go service
$19.95 per month will get you TV to Go. Napster, Samsung, MTV, and TiVo are among the business partners. The service will allow certain shows to be down-loaded to portable devices. The time is near when one will not need to rent or buy a DVD.
Posted by Jack Miller at 3/31/2005 04:29:00 AM
CommsDesign - Understanding the Design Challenges of VoWiFi
In the first Big Bull of the century, Henry Ford was able to push a car into half the homes through the use of low cost assembly techniques. It took GM to figure out how to sell to the other half the population. The second Boom created by GM was the bigger Boom. The linked article is about the convergence of VoIP and WiFi which will serve to sell the second half of the population on the need for broadband internet service.
The investments and savings will be remarkable. Today, many folks pay $50 per month for home phone service, another $70 per month for cell phone service and another $200 per month for business phone service. A VoWiFi phone would eliminate the need for these services. The one phone would be very feature rich and offer unlimited calling for a low fixed rate.
Entire networks must be redesigned to take advantage of the convergence. The process is well underway; equipment is being installed all across America. Billions are being spent. Equipment company earnings are going to surprise investors. Productivity and wealth will increase at a steady pace as communication capabilities are enhanced.
Many folks simply do not appreciate how much time, energy and money is wasted each year playing games such as phone tag. If you look at a phone display that shows your business associate is on another call, you may want to click a button to tell the phone to ring you both after the first call is completed. You might also chose to send an instant message or an instant voice message. You might even realize that he is currently handling the problem you were about to call about. A truck driver that avoids one unnecessary stop as a result of good communications capabilities might save a whole years worth of communications expense.
It will take major investments to put the new systems into the hands of businesses and consumers. Consumers will be given a compelling reason to purchase broadband internet for their homes. Having a nationwide broadband network will allow many other services to be adopted. The second half of the internet Big Boom Bubble Bust is ahead. Invest now to avoid playing a game of catch-up!
Posted by Jack Miller at 3/31/2005 03:36:00 AM
Another good chart from Chart of the Day! (click image to enlarge)
Good charts are always worth more than a thousand words. All charts are subject to many interpretations. The glaring mistake in the chart as presented is the failure to recognize that the US economy benefits from productivity to produce a geometric growth pattern. The best regression line for the data would probably be 6 or 7% compounded rates. The log scale used does not do the data justice. The information revolution we are enjoying appears to have increased the nominal non-inflation adjusted growth rate from 6 to 7%. This same data posted as non inflation adjusted data on a standard scale would look very different.
A pattern in the data that is consistent with the "investment clock" that I use is that high earnings can fool investors into investing at the wrong time. The market is a forward looking animal it does not have eyes in the back of its head. The chart as presented might lead one to conclude that the cycle peak in earnings has already been reached. When one understands that he "line of best fit" is a geometric line, one can extrapolate from what happened in the mid 1990's. The comparison is that earnings exploded in the first half of the 1990's, hesitated for a short time and then took off again to finish the typical pattern of a strong decade finish.
If you have not noticed from my other posts, I am very optimistic about the market for the next few years. At least 30 times a day, I am getting buy signals. While writing this, I have been listening to a replay of the "Neil Cavuto Show". Even after today's explosive rally, the panelist have tended to emphasize the trading range. Then jokes were made about not needing the S&P break out chart that was prepared weeks ago.
Sentiment was very negative before the big rally and current indications are most traders will sell into the rally or at least sell strongly when the market gets back to the peak of the trading range. A break out would cause a lot of folks to need to jump back in the market at higher prices. Markets explode to the upside violently because the break outs come when short-term traders are out of the market or on the short side. Over the past few days, I have posted links to several bearish posts by respected short-term traders; the makings of a violent turn like we saw today. Will this move be the big break? Who knows? Are conditions ripe for a multi-year move? Yes!
Posted by Jack Miller at 3/31/2005 02:20:00 AM
Ten years ago, I bet Papa John that world wide down-towns were going to make a comeback. At the time, it was hard to believe. Towns such as my own home town of Winston-Salem had all been "malled". Citizens had all moved to the suburbs and down-town was dark after about 6 PM each week day and dead on the week ends.
Down-towns, large and small, are making the turn. The old tobacco factories in Winston are being remodeled into modern office and research facilities. Wake Forest University and Winston-Salem State University are cooperating to build a 70 Billion Dollar research park.
As the linked article mentions, hotel operators are buying into down town areas. Harry Dent has written about the new "urbanites". Seniors can live in many down-town areas and not need to drive. They can enjoy theater, restaurants and community services within walking distance or on bus and other public transportation routes.
The trend is just getting started. The down trend in Winston-Salem lasted the better part of 25 years. Investors should consider down-town real estate. Millions of baby boomers may wish to retire to more urban settings in the years to come.
Posted by Jack Miller at 3/31/2005 01:39:00 AM
Is EV-DV dead?
The linked article is highly technical and of little interest to most investors. I have linked to it for one reason only; it demonstrates the power of QCOM. QCOM has set many of the standards for cell phone communications and earns large royalties. Mr. Jacobs has step aside and given his son control of day to day operations. Transfers of power always raise risk levels and depress shares. Mr. Jacobs handled the transfer like Dean Smith and the UNC Basketball program. He left at a time when the "team" was very strong. The program took some time to regain its footing. QCOM is still rolling in revenues and the next generation of cell phone equipment will pay-off for the company. This is a buying opportunity!
Posted by Jack Miller at 3/31/2005 01:22:00 AM
Kiplinger.com - THE SOCIAL SECURITY DEBATE
The number of articles about Social Security grows. Most, such as this one at Kiplinger.com, acknowledge that reform is needed. Two arguments made on the Fox News -- Special Report are that the very reason to support private accounts is to reduce the future claims on the Social Security Trust Fund and that the original purpose of Social Security has in fact changed. The opponents get these arguments up-side down. They argue that the private accounts will take away from the trust account. The other argument is that Social Security was designed to transfer wealth from "well to do workers" to the elderly poor. The system currently takes money from the relatively poor young folks to pay to many relatively wealthy seniors. This argument is not oft repeated because it sounds as if the argument is to reduce the benefits paid to seniors. The real idea is to increase the investment returns to the young who are in the position of paying for others retirements. Investors simply need to recognize that the system must be fixed and when it is an anchor will be removed from the US economy--boom markets are ahead.
Posted by Jack Miller at 3/31/2005 12:59:00 AM
London Calling: U.K. demand seen weak for stripped-down Windows XP - Computer Software - Software - Markets/Exchanges - Market News
London Calling: U.K. demand seen weak for stripped-down Windows XP - Computer Software - Software - Markets/Exchanges - Market News
A few weeks ago, I wrote that a train wreck is imminent. The MSFT share price has been coming down while all the value ratios improve. The price to book, price to sales and other measures give MSFT the look of a value play. The growing hoard of cash is not bad either. The fight in Europe has lasted a long time but as the linked article shows, consumers show little interest in buying a Windows version that does not include the "free media components". The fight is not over but the next version of Windows is almost ready for market. A huge up-grade cycle is approaching. MSFT has won a significant role in media delivery. Investors can buy this big cap stock with confidence that patient investors will be well rewarded.
Posted by Jack Miller at 3/31/2005 12:44:00 AM
WSJ.com - GE Projects Gain Of $2.6 Billion In Unit Stock Sale
For months, I have written that the big caps are where you want to invest. Stocks don't get bigger than XOM or GE (these two are taking turns as the biggest company in America). The Wall Street Journal reports that GE is raising projections and doing well. It is not too late to participate.
Posted by Jack Miller at 3/31/2005 12:34:00 AM
Texas Instruments Delivers Enhanced Voice over Cable Software for Cable OEMs
TXN and other "equipment" companies continue to improve the performance and reliability of communicating over the internet. The growth in this area is going to be big for a number of years. The savings over traditional phone service is too big to ignore.
As a current user of Vonage, I can refer you to Vonage for one free month of service. I would also receive a free month. I have referred several family members who all enjoy the low cost and the feature rich service. It is my hope to buy Vonage shares on the IPO but I fear the price will be very high. TXN is probably one of the best ways to play this fast growing industry. TXN technology is frequently the best available. The DLP technology has helped lower the cost of products from cell phones to big screen TVs.
Remember the marketing "S-curve". Only the early adopters have purchased many of the products served by DLP. There will be several years of fast growth in these areas.
Posted by Jack Miller at 3/31/2005 12:25:00 AM
E-Commerce News: Trends: Web Sites' Sideline: TV-Type Shows
Free markets find the way to the lowest price. Even semi-free markets are often successful in finding the lowest price. The latest Forbes Magazine reported that some companies have set up divisions in the low tax state of Nevada. Divisions in other states pay the divisions in Nevada for services, such as the use of logos. The earnings are reduced in the high tax states and increased in the low tax state.
The latest "web TV station" shows that the free market is going to gradually work its way around cable TV oligopolies. My family owns both CMCSA and TWX. We appreciate that these firms generate large cash flows because of virtual locks on large customer bases. As consumers, my family wants the freedom to watch the shows we want to watch without being forced to buy the "whole cable package". Internet TV is a serious competitive risk for the cable companies. TIVO and others have the potential to organize internet TV content and to distribute it to the public. CMCSA has entered an agreement with TIVO. No doubt CMCSA is trying to insure that TIVO and CMCSA will both "win" by supporting the "package deal" concept.
The "Web TV show" in the article is all about weddings. Other "Web TV shows" will be produced. The shows will likely be niche shows until someone does something special. Then all bets are off. Free markets are famous for delivering "creative destruction". In a free market, if you build a better mouse trap, the world will beat a path to your door. My family will continue to hold TWX and CMCSA but we will keep our eyes open for good viewing opportunities.
Posted by Jack Miller at 3/31/2005 12:13:00 AM
Wednesday, March 30, 2005
Forbes.com: Study Shows Sirius Has Brand Awareness Lead Over XM
When SIRI ran to the $7 to $9 range, there was too much excitement for the sector and I encourage the sell of the shares. SIRI and XMSR each traded down in the following months. Each firms stock has built a base price again. To my knowledge, none of my friends or family have purchased shares again but the shares are less risky now. As the linked article in Forbes reports, 40 million Americans are likely to subscribe.
On the other hand, SIRI has raised additional capital through convertible securities which indicates the near term upside is limited. Only patient investors should consider these shares at the current time. Other stocks will likely out-perform; can we figure out which ones?
Posted by Jack Miller at 3/30/2005 11:52:00 PM
Bush pushes Social Security accounts in Iowa - Financial - Financial Services - Bond Market - Economy
Bush pushes Social Security accounts in Iowa - Financial - Financial Services - Bond Market - Economy
Pressure is growing to save Social Security. Bush says those who oppose will pay a political price. Bush has shown his willingness to drop support for Republican or Democratic congressmen who work against his policies. Bush has a lot of levers to pull. The main one continues to be the fact that the Social Security Trust Fund is under-funded and needs to be addressed. Should reform not be passed, Social Security will be a Republican issue. In the past, Demo crates were able to use Social Security to attack Republicans. Failure to address the short-fall will provide the President a tool to bludgeon Democrats who oppose.
Posted by Jack Miller at 3/30/2005 11:39:00 PM
Congratulations to Mrs. Tucker. She has now made 131 times her original investment in one stock. The investment returns are getting so large that they are hard to comprehend.
Mrs. Tucker's cost basis in UNH (United Health Care) is $.73 per share. The stock closed at $95.71 per share today, up $2.64 on the day. Dividing the one day move by the original cost results in a one day gain of 361%! Funny math is being used to make a point that many folks miss. Folks are often content to earn a 5% bond yield while passing up a 3% tax advantaged stock dividend. By the maturity date of the bond, the dividend may have increased to the equivalent of a 15% bond yield. The stock value is likely to have increased as well. In the case of solid growth, the compounding effect, like in Mrs. Tucker's case, makes future gains very high relative to the original investment.
Last night a news program mentioned that investors in Warren Buffet's firm have made 6,000 percent during the life of the company. Mrs. Tucker has made 13,100 percent in about 22 years of ownership. The original purchase was not in United Heath Care but it was taken-over by United around 1985. The returns above do not count the nominal dividend that has grown to 4% of the the original investment. Mrs. Tucker has owned other stocks that did very well and others that did poorly but it only takes one 131 "bagger" to forever appreciate the potential returns in the market.
My Mom enjoys planting, tending and harvesting a garden. There are few things better than home grown beans, corn and tomatoes. Tending a stock portfolio is similar to tending a garden. You have to weed the garden and replant when the frost kills early plants but the rewards are many. Mom's Tractor Supply Stock, symbol TSCO, has been one of the pleasant surprises she planted in her portfolio garden. Mom and Mrs. Tucker will continue to plant the seeds, weed the weeds and harvest the bountiful harvest. Some years will yield better returns than others. Only the very best plantings will yield 361% in one day. How long do you suppose it will be before Mrs. Tuckers stock splits again and then one day yields her 722% return in one day?
Posted by Jack Miller at 3/30/2005 05:03:00 PM
Safe Haven Even Stephen Roach Has It Wrong
It is not just the technicians and the stock pickers who are negative. Economist are writing negative articles and the big media are ready to "report the news". The above article screams about the "looming economic danger". It tries to make the case that the Chinese would somehow be better off if they were not selling their goods to Americans; how ridiculous can one get?
The standard of living in China has been soaring for the past several years. It is free trade that is benefiting them and us. This is the classic case of the orange gower benefiting by trading some of his oranges for wheat. Both growers enjoy oranges and wheat.
Bears are piling on from all directions; don't be fooled. The good news is being ignored. The use of monetary and fiscal policies to "prime the pump" has worked exactly as one would hope. The economy is now so strong that interest rates are being allowed to return to market levels. With productivity and free trade holding down inflation, there is already evidence that rates are again near equilibrium levels.
Even the bad news is a bump in the PCED to 2.3 from 2.0. A 2.3% inflation rate is a good thing! Are any of you old enough to remember the 18% inflation rates of the late 70's? Bond rates continue to fluctuate around 4.5% and GNP is only slightly lower than 4%; Stephen Roach and his friends apparently can't see the forest for the trees. Good times are here!
Posted by Jack Miller at 3/30/2005 03:54:00 PM
Performance, Fortune & the U.S. President - www.bearmarketcentral.com
The Bears are Growling! Everywhere I turn, I hear bears growling--music to my ears. I have helped a number of folks position their accounts aggressively. We are ready for the Big Bull Boom Bubble Bust. The good news is that we are in full Boom now. The economy is doing very well. Job growth, revenue growth and profit growth abounds. The Boom should last several years. Stocks will Bubble toward the end of the BOOM.
The Dow is up 110 today, the NAS up 25 and the S&P is up 13 to 1178. All of this means nothing and everything. We are stuck in a trading range until we are stuck no more. Today's action says we are not about to break below the range. Another day or two like this would say we are going to break above. A break above would put a hurting on short sellers. They will want to cover quickly. After months of low volatility, a break out could be large. As I have reported for the last several months, it may take until November for the market to appreciate that Social Security Investments will be added to the market. In all probability the market will sense the move long before it arrives but all we can do is invest and then be patient.
By the way, another SS idea is being floated around congress. The idea would allow a small portion of SS money to go to private accounts to be matched by individual contributions. This is similar to what Federal Employees are allowed to do. The final compromise must solve the liquidity crises and establish the "lock-box" of ownership. Otherwise, the congress will sooner or later over spend the accounts again. The congress is caught in a tough spot. Some members are finally admitting that there is a solvency problem. The first step to compromising on a solution is to admit that the accounts are in a serious deficit.
The next big stock move is not far away; if you are not invested today, you may already be missing the first part of the jump!
Posted by Jack Miller at 3/30/2005 03:36:00 PM
Net Stocks: E-tax filing helps Adobe Systems - Internet Services - Electronic commerce - Internet - Analyst - M&A
Net Stocks: E-tax filing helps Adobe Systems - Internet Services - Electronic commerce - Internet - Analyst - M&A
This is an interesting follow-up to my report on ADBE made earlier today. This article shows that even the IRS has good reasons to purchase ADBE software. The IRS has saved about 4.8 Billion Dollars by using ADBE!
With so much positive news on the stock, I would hesitate to buy more right now. We will continue to hold and will buy more when the news is not so hot.
Posted by Jack Miller at 3/30/2005 03:12:00 PM
Winston-Salem Journal Greensboro creating an "electronic town square" with blogs
The above link is a nice article demonstrating the change that newspapers must make. In earlier discussions, we talked about how Dow Jones made the right move to buy CBSMarketWatch, the NY Times made the right move to buy About and the combination of Gannet, Knight-Ridder and The Tribune made the right move to buy the news aggregator.
Newspapers must respond to the internet challenge. Internet users can program the automatic delivery of "personalized" news. Newspapers have had the advantage of offering local news. Bloggers are taking this advantage away. The above article shows that there are many ways to innovate using the internet. I expect newspapers across the country and around the world to make similar moves. The productivity machine continues to march forward. Why should anyone waste precious resources driving a truck around filled with reams of paper? The internet can deliver the same content at a small fraction of the costs.
GOOD NEWS AHEAD! PRODUCTIVITY IS MATHEMATCALLY THE EQUIVALENT OF WEALTH! BIG MONEY WILL BE MADE (OR SAVED) IN THE YEARS AHEAD!
A big thank you to the heads up from Courtney. As a computer teacher, she has a good sense of were computer usage is going.
Posted by Jack Miller at 3/30/2005 03:03:00 PM
This is a congratulations to Jonathan blog. Jonathan purchased ADBE (Adobe) after hearing my take on the company. He is on a bucking bronco and enjoying a great ride. The stock continues to move up even after down-grades by a number of analysts.
The Morningstar report gives one a good sense of the problem. The stock has done extremely well and trades at 30 times next years earnings. It is within a stones throw of its all time high which was made during the internet bubble. The Morningstar analyst is impressed with the growth rate and with the "double moat". I too am impressed with the "double moat" which is a knowledge moat and a network moat. The knowledge moat is simply that students are trained in the usage at graphic arts schools around the world. The networking moat is that there are 500 million users.
One part that I do not believe the analyst appreciate is the tie-in with YHOO. YHOO is providing search services and promoting the product line.
Thank you Jonathan for buying and holding. I enjoy seeing folks make BIG MONEY!
The stock is an expensive stock based on price to earnings ratio. Growth in the current market is under-appreciated. I envision a relatively high grow rate for many years, hold on to this winner and do not let go!
Posted by Jack Miller at 3/30/2005 01:59:00 PM
Bill Cara: The End-of-1Q05 Equities Big Picture
Bill Cara does a great job of making his case. He is bearish. He and many others. This market has been a tough one. However, the economic cycle is in place to have four or five very strong years.
Keep in mind that there is an element of truth in the efficient market hypothesis. In other words, the market is currently fairly priced if one takes in to account all factors. The tricky part is that the factors include a psychological or perception factor. This sentiment factor can keep the market over or under-priced for a considerable period of time. The bubble of the late 90's is an oft mentioned example where the market went high on fundamentals but then went very high on misplaced sentiment. We have been in an upside down bubble for a few years. Stocks have an earnings yield equal or greater than bonds with growth potential as a bonus. The market has been discounting the growth potential heavily.
Again, the good news is that the short-term traders will jump on board and help push prices up quickly once the big move starts. Today the market is having an excellent day but it is hard to get excited when the market is simply bouncing off the lower end of a trading range. I am a bit excited about the gap up in AMR. A growth rate of 3 or 4% in seat miles will at some point cause a significant jump in revenues as rates will rise quickly when more seats are filled. The operating leverage of this business is huge. Profits will be very large in the next high utilization cycle.
Posted by Jack Miller at 3/30/2005 01:34:00 PM
This morning CNBC reported that Merrill Lynch has moved American Airlines from neutral to buy. It seems less than a month ago when Merrill upgraded to neutral. The legacy Airlines are producing so much revenue per share that it is only a matter of time before the negative dike will crumble. The same with the over-all market.
The average S&P company is growing earnings at 15%! Negative sentiment is holding share prices down but earnings continue to grow. Merger and acquisition activity is high because one company sees value in the shares of another.
AMR is up $1.1 per share this morning. My family purchased shares on 2/4/2005. We are up 25% in a little over a month. This is a blessing during a tough market. In the coming months and years, I expect the sentiment to do a 180 in regard to airlines. Baby Boomers are buying second homes at a rapid pace. In a similar situation in the late 80's, a close friend had reached the level of 6 weeks annual vacation. He decided to take Friday off for 30 plus weeks in a row. Counting holiday's I believe it was 35 weeks in a row. He was on a plane to somewhere every Thursday night; he saw much of the world on three day weekends. The extreme often illustrates the point. Our economy is growing at an extraordinarily fast pace--25% above historical norms! Americans are as wealthy as they have ever been. The average homeowner in America increased his net worth by approximately $16,000 last year! Think about how long it takes for the average person to save $16,000.
Short selling has become a popular tool. Hedge funds and speculators are betting stocks will go down. Short sellers will buy heavily when the market breaks to the up-side. If you are not in the market, you will not have time to "catch-up". Buy the big American companies now and hold on to Ken Fishers famous "bucking bronco bull market". Ken says the bronco will try to buck you off but if you hold-on you will reap extraordinary gains. Ken, Ed Yardeni, and other folks who look at the market with a longer term point of view are currently very bullish. Short-term traders are currently very bearish. In particular, chart readers are very negative. The risk of breaking below support levels appears to be high. Even those who call for a big rally suggest that one should sell into the rally. If this happens and the market breaks, the sellers into the rally will be chasing the market for weeks to come.
Posted by Jack Miller at 3/30/2005 10:32:00 AM
Movers & Shakers: Highlights of rising and falling U.S. stocks - General News - General
There have been lots of "BIG" headlines recently but the positive news for stocks is getting little press. Buried deep in the above article is a paragraph about Office Max (OMX) buying back 25% of all shares. This is a huge buyback. It comes on the heels of numerous other buyback announcements. It also comes on the heels of the leveraged buyout announced yesterday and on the heels of the start-up of a huge leverage buyout fund. What does all this mean?
Stocks are cheap; companies have the most ever cash on their balance sheet; if they do not buy back their shares, someone else will.
What to expect? More and more companies will buy back shares. Managements do not want to lose control and they face the risk of hostile take-over bids. Supply and demand for stocks is just like the supply and demand for anything else. If companies soak up supply of shares by buying back shares, the remaining shares will be bid up in price. What action should you take?
IGNOR SHORT TERM NEGATIVES--BUY STOCKS TO HOLD FOR THE NEXT 3 TO 5 YEARS. TRYING TO WAIT UNTIL THE SHORT-TERM BOTTOM IS MADE IS A MISTAKE; BUY NOW! IF YOU ARE EARLY AND SOME OF THE STOCKS YOU BUY GO DOWN, SELL THEM FOR THE SHORT-TERM TAX LOSS AND REPLACE THEM WITH OTHER GOOD VALUE STOCKS. AS AN AMATUER, I CANNOT RECOMMEND STOCKS BUT IT IS MY BELIEF THAT 5 YEAR GAINS WILL AVEARGE CLOSE TO 100%!
Posted by Jack Miller at 3/30/2005 08:52:00 AM
Tuesday, March 29, 2005
Gizmondo arrives in the UK - Engadget - www.engadget.com +++
Nokia's latest entry is a wireless game, music and video player. This market is competitive. As a result, I have not been a fan of Apple. It seems that there are too many companies competing for the same market. My family owns MOT and TXN which also make competitive products. We like patents. TXN in particular has patented inventions that make their products cost efficient. One needs less battery power to operate the DLP products of TXN than others. NOK is a market leader and I would not fuss about owning this company. TXN is still my favorite in the area.
Posted by Jack Miller at 3/29/2005 03:11:00 PM
Forbes.com: Recession Alert
Great article with very nice charts; wrong conclusions!
Several newsletters and bloggers are very negative! The contrarian play is to buy when others are saying sale! Look at the charts presented carefully; you can see that conditions are ripe for a very strong market move!
Posted by Jack Miller at 3/29/2005 02:22:00 PM
WSJ.com - Delta Air Adds New Measures To Cash-Conservation Effort
Correction: I misstated the DAL savings in an earlier blog. The $240 Million of savings is over a five year period. The linked WSJ story outlines other steps DAL is taking to avert a cash crunch later in the year. Again, this is a distressed company in a distressed industry, only aggressive investors should consider investing.
Posted by Jack Miller at 3/29/2005 01:02:00 PM
Chances are you or someone you know has had to have an X-ray, MIR, CT or Ultrasound recently. If you have active children you have probably experienced this thrill too often. Recently, I discovered an 8-year old company in a growth business that fits our "good value" screening criteria. It is a company that is living up to its commitment to provide high quality, cost effective radiology services. Company literature says that Radiologix (RGX) strives to be the premier provider of diagnostic imaging services through high-quality service to patients, referring physicians and mutually beneficial relationships with radiologists who provide expert interpretations of diagnostic images. Through the commitment of valued employees, Radiologix is dedicated to growing shareholder value by delivering personalized, timely and cost-effective services to patients, affiliated physicians, referring physicians, and the health care community.
In November 1997, seven successful, geographically diverse, physician-owned radiology practices joined together to form what is now known as Radiologix. (http://www.radiologix.com/). Each of these physicians contributed their imaging center and administrative assets in exchange for ownership in the Company. The Corporate Office and National Support Center is based in Dallas, TX and provides functional support to the subsidiaries.
Today, Radiologix owns and operates 76 freestanding, outpatient diagnostic imaging centers. The centers employ 2,000 and provide a broad range of diagnostic imaging services in 10 states. The company maintains a strong presence in all of its markets. Thanks to the efforts of their family of employees and member physicians, Radiologix has become one of the leading providers of radiology services in the United States. The company utilizes technology and technical expertise to perform a range of imaging procedures, such as magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, ultrasound, mammography, bone densitometry, general radiology and fluoroscopy.
Radiologix’s mission statement is to offer the benefits of small, family type practices, combined with the structure, security and funding of a publicly traded corporation. The radiologist partners work closely with the staff to ensure the highest possible patient care. Management feels it is important to kept the family feeling in the centers while providing "best in class" radiology services.
We have often noted the aging of the "baby boomers". Data show remarkable growth in the number of doctor visits in the USA. US citizens who have reached 51 years of age are taking 7 times the number of prescriptions as they were taking 10 years ago. Health Care is a growth business. Employment for radio-logic technologists is expected to grow most rapidly in offices and clinics of physicians, including diagnostic imaging centers. Health facilities such as Radiologix are expected to grow very rapidly due to the strong shift toward outpatient care, encouraged by third-party payers and made possible by technological advances that permit more procedures to be performed outside the hospital.
Fiscal year end results did not fully reflect the successful year Radiologix had. "2004 was a watershed year for our company. We focused our efforts on stabilizing our operations, building our leadership team, and strengthening our internal controls. As such, we made many difficult operational, financial and personnel decisions that resulted in significant but primarily non-cash financial charges. These decisions challenged our team, tested our resolve, and blurred our true underlying performance," said Sami S. Abbasi, president and chief executive officer of Radiologix. "However, by making these decisions and acting on them, we left 2004 stronger, healthier financially, and better positioned for the future. I am confident in our operations and in our potential to create long-term sustainable shareholder value."
Radiologix’s largest competitors, Alliance Imaging, (AIQ) (http://www.allianceimaging.com/) founded in 1983 has 478 diagnostic imaging systems with over 1,000 clients in 43 states. This stock was volatile during the year. The 52 week low of $3.60 was made on 3-29-04 and the 52 week high of $14.15 was hit 2-1-05, Alliance reported an increase in fourth quarter revenue of 5.5%. Revenue for 2004 increased 4.0%.
Per the Center for Disease Control, (www.cdc.gov/), emergency department visits are on the increase. Two factors are involved: overall population growth and the aging of our population. Older Americans, those 75 years of age and over, had the highest rate of emergency department visits-65 visits per 100 persons per year while the national average was 39 visits per 100 persons per year. You or your family member will likely use diagnostic and imaging services in any 5 year time.
The recent roller coaster ride may have be contributing to the cheapness of the stock. Radiologix’s 52 week high of $4.98 on 2-4-04 and 52 week low of $2.99 on 10-24-04 is too exciting for conservative investors. However, patient investors should be well rewarded by the stock. With a price now of $4.29 per share, are you willing to take a chance on this 8 year old diagnostic imaging company?
Posted by Jack Miller at 3/29/2005 12:51:00 PM
The New York Times > Technology > Google Acquires Urchin Software
In the big Cisco run, Cisco had the best technology. Whenever a small company created a new technology Cisco was quick to buy it. Cisco had a run of maybe 15 years of incredible growth. Google, Yahoo and MSFT continue to buy companies that will help these firms stay in the leadership pack. The owners of the companies that are lucky enough to be bought cash-in big time. The competitors not purchased are left to suffer trying to compete against the three giants of the industry.
Other "major" players are trying to make it the big four instead of the big three. Interactive Corp, Cendant, AOL, HP and others continue to buy companies to break into the "big circle". Google purchased Picasa, HP paid dearly for Snapfish and YHOO purchased flkr. Of course, ADBE, Kodak and others offer photo sites. Many of these purchases are designed to integrate services such that a person stays with the one provider. The Urchin Software purchase by Google will give Google advertisers the ability to maximize their coverage at the lowest costs. This is a good service that is a natural addition to Google.
Some investors will buy little internet companies in the hope of hitting the next take-over. I prefer to own the solid companies in the leading positions. Many folks are quick to point out several other search companies have lost out along the way. This is true but YHOO and GOOG have commanding positions. EBay and AOL have leadership products that are not going to go away quietly. Portfolio management is about managing risks. If one takes no risk, one makes no profit. The key is to take risks that have a high probability of paying off. Long-term investors in GOOG, YHOO, TWX, and EBay will do well. Ownership in internet stocks should be tempered with ownership in other areas
Posted by Jack Miller at 3/29/2005 09:46:00 AM
Forbes.com: Delta Announces Tech Operations Cuts
The airlines are cutting costs like never before. As reported in Forbes, Delta will contract-out its maintenance services; it will save $240 million per year! Sometimes it is hard to get perspective on large numbers. The numbers mean something only in relation to other numbers. The following comparisons are significant: Delta has a market capitalization of little more than $500 million but the latest move will save the company $250 million! Delta has 141 million shares outstanding and the latest move will save $1.77 per share! A $4 share that cuts costs by $1.77 per share makes that share worth more!
I am not an analyst. I am not even a professional investor. I am an amateur with more than 40 years of experiences. I cannot and do not recommend DAL. The company has lost a lot of money in recent years and has a debt to capital ration well in excess of 100% (in other words, the company has a negative book value). Some of my best buys ever have been companies in similar situations. For example, I bought Chrysler in 1982 and NXTL in 2002 at times when neither company had positive book values. Like Jim Cramer, I made the mistake of buying Bethlehem Steel when it was on the way out.
For aggressive investors, it makes sense to own shares in the stronger legacy lines such as AMR and DAL buying with a little money may make sense. One of the value measures that I like is the price to sales ratio. You are unlikely to ever find stocks with lower price to sales ratios that have a decent chance of survival. These shares will do extremely well if the company survives.
Posted by Jack Miller at 3/29/2005 08:51:00 AM
My thanks to Eric Levitt for posting my "big picture" comments to his blog. One of the things readers can learn from Eric is to moderate their enthusiasm to "run in crowds". Such notable investors as John Maynard Keynes, Sir John Templeton and David Dreman, to name just a few, have done well by buying what was or is unpopular. Eric and I have each posted comments about the piles of money flowing into developing country funds. Like Keynes said, in economics, the majority is always wrong. Sure enough, Brazil, Mexico and other funds have done poorly in recent weeks.
Several weeks ago, I wrote that big cap American Companies are the ones to own in this market. Take a look at what has been happening. Companies such as GE and Boeing have done well. XOM and GE have played tit for tat to claim the biggest company prize. Not all of the big names have gone up but few have been slammed like some of the developing country funds.
Congratulations to my Mom. She has the patience required to be a great investor; day after day she is being rewarded with good news. Her Norfolk Southern Corp just made a deal with the Canadian National Railway. The deal will ease traffic in the Chicago area and benefit both firms. For a year or so I have suggested that the day may come when Canadian National buys NSC. My family does not own the stock because it has take-over potential. We like the company because it is enjoying very high operating ratios; in other words we like it because it is making money. A take-over would be a bonus but it is not necessary for our investment success. I thank my Mom for taking my advice to buy the stock and for her patience.
The other reason to bring up Mom's account is to say to you, you can do just as well as Mom. You do not need to pay a fee to a mutual fund to own NSC and other good companies. The brokerage fee to buy $2,000 or $10,000 worth is only $5. There is no carrying charge. A fund might charge $70 to $200 per year to hold Mom's NSC for her. As it is, her $5 cost gets to be a bigger bargain every year.
I hope you will listen to Eric and others who do not push you into high cost products. One of the secrets to market success is to avoid unnecessary fees. If you wouldn't pay a gas station an annual fee for the privilege of buying gas at the station, don't pay 12b-1 and other unnecessary fees!
GO MOM GO!
Posted by Jack Miller at 3/29/2005 08:15:00 AM
Barron's Online - Technology Trader
WiMax is on the way. High speed internet service that requires no wires and works for up to 30 miles. INTC and other equipment vendors expect to sell billions of dollars of equipment in the next couple of years.
Posted by Jack Miller at 3/29/2005 12:03:00 AM
Monday, March 28, 2005
WSJ.com - Gray Area On Whether IRS Can Tax Internet Auction Income
"Buyers bought $34 billion worth of merchandise there last year." EBay is a business of millions of small businesses. More than 135 million people have registered. This is a long-term hold for my family. We have large profits in the first shares purchased and have continued to add to holdings. We are at a small loss in the last shares purchased.
MSFT is now offering a service similar to the Froogle service offered by Google. There is a risk that these and other "shopping services" will take business from EBay. EBay is spending heavily to the be market leader in China. It is a very big market. EBay is the top auction house in over 50 countries although YHOO and a partner are the leaders in Japan and are fighting for leadership in China.
First quarter internet earnings will be out soon. I expect good results from YHOO and GOOG advertising. The business is growing quickly around the globe.
Posted by Jack Miller at 3/28/2005 11:00:00 PM
Futures Movers: Crude prices close above $54; analysts see $50 - Oil and Gas - Energy - Commodities
Oil inventories are building. One of my leading indicators suggest that the peak is over. Oil prices may get to the $40--$50 range in the months ahead. Aggressive investors should consider buying the most solid of the legacy airlines such as Continental and American.
Posted by Jack Miller at 3/28/2005 06:21:00 PM
Net Stocks: Yahoo, Google get Goldman embrace; IAC's reverse split - Electronic commerce - Internet Services - Internet - Analyst - M&A
Net Stocks: Yahoo, Google get Goldman embrace; IAC's reverse split - Electronic commerce - Internet Services - Internet - Analyst - M&A
More than one brokerage has raised the advertising estimates for YHOO and GOOG. Jim Cramer is doing a two show comparison of estimates. The news is heating up.
International sales are ramping up. I suspect growth will be strong. We have been through some negative sentiment and YHOO is buying back shares. My family will hold these for the long-term projected growth.
Posted by Jack Miller at 3/28/2005 06:06:00 PM
Sizzlin' Summer Travel Deals - Get 'Em While They're Hot; AmericanAirlines Vacations Launches Summer Sale
Traffic is back. American is the largest of the airlines. It will make it through the rough patch and then make a lot of money. Costs have been cut and are continuing to be cut. A rebound in business will cause fares to rise but costs will remain low. Profits are ahead!
Posted by Jack Miller at 3/28/2005 03:35:00 PM
Myrtle Beach Luxury Homes and Condos
Myrtle Beach Living reports that while there are 65 homes listed in Myrtle Beach for over $1,000,000 the number of condos for sale for less than $100,000 is fading fast. $100,000 does not buy much. Good quality rental units typically trade for $250,000 or more.
This past Friday, I met with Jim Springs of Century 21--Broadhurst Reality. His multiple listing sheets showed that around 150 units have been sold in the Kingston Plantation area in the past 3 months and only 30 are currently listed!
Boomers and Echo-Boomers are buying homes. To build more ocean front condos, older buildings will need to be torn down. Prices must rise to meet the demand.
Posted by Jack Miller at 3/28/2005 03:03:00 PM
SunGard> to be taken private in $11.3 billion buyout - Computer Software - Technology, Software - Software - M&A
In the mid-eighties leveraged buyouts were in vogue. T-Boone Pickens was the most famous buyer. Time and again he was able to purchase an entire company by getting an investment bank or group of investment banks to loan 100% of the purchase price. The trick was to find an under-valued company and to pledge the assets of the company as the collateral for the loan! Many times after the company was purchased, the pieces were sold off one at a time with the total sales price greater than the purchase price. I picked up the nick name of T-Bond during this time because I "tried to buy the US government bond market on a leveraged buyout". I borrowed money at 13% interest to buy T-Bonds paying 13.75%.
The current economic cycle is similar to the cycle of the mid 1980's. Today, it was announced that 7 investors have formed a group to buy SunGard. The purchase price is 11.3 Billion Dollars. It is only common sense that leverage buyouts should happen now. The public is afraid of the stock market because many were burned in the 2000 bubble. The result is that stocks are cheap relative to borrowed money. Companies can be purchased on 100% borrowed money! Stocks are yielding more than bonds! Such a situation can only last so long until the market finds a way to correct the discrepancy.
The BIG BULL BOOM BUBBLE BUST is on the way. For the past few months, I have written that the BIG BULL BOOM is under-way. World wide economic growth is BIG. US exports and imports are BOOMING. Boomers have money to spend and they are spending it. US consumers are as wealthy as they have ever been. The opportunity is huge.
Unless the market goes up substantially soon, I expect many more leveraged buy-outs to occur. A regular reader has noted that buy-out premiums have not been very large. He is correct. Companies such as AT&T, ASK, NXTL and others needed to merge. In the face of soaring prices for inputs, businesses have not been able to raise output prices to match; in fact, many businesses are having to lower prices to compete. Businesses have fought hard to improve productivity. Unit labor cost have gone down. Companies such as Vonage and Google are putting the hurt on a lot of other "traditional" businesses. Who wants to run a newspaper advertisement for more money and less coverage than a Google ad. Who wants to pay more money for local only service than they can pay Vonage for local and unlimited long-distance.
There will continue to be mergers and leveraged buyouts. For example, Yellow Freight just announced another deal! A report today suggest that the savings to be realized by the merged companies will be bigger than first thought.
The rumor mill is starting to crank-up; which company will be next? Chasing rumors is a losing game. Buy good companies at fair value and you will hit more than your fair share of mergers. Last year, our family accounts enjoyed several buyouts. In most cases, we bought the stocks because we liked the business prospects. The companies on the buying end are getting great deals. Again, Yellow has more than doubled its size and has fully absorbed previous deals with little or no dilution. Buy stocks before they are bought out by someone else!
Posted by Jack Miller at 3/28/2005 02:23:00 PM
Paul B. Farrell: Save money in retirement by self-managing portfolio - Financial - Financial Services - Mutual Funds - Personal Finance
What a spread!
charges $5 for the same trade for which the "discount broker" Wachovia charges $34.95. "Full service" firms charge over $325 for the same trade! How can this be? If one gas station charged $2 per gallon, a second could sell very little gas at $14 per gallon and a "full service" station could not charge $130 per gallon. The "full service" broker would argue that while everyone can pump gas, not everyone can select stocks.
In the above referenced article, Paul B. Farrell argues that one can save a lot of money by managing ones own portfolio. He makes the point that index funds do well relative to managed mutual funds.
Some folks need more investment assistance than others. Those who need help should be careful not to overpay.
Posted by Jack Miller at 3/28/2005 01:23:00 PM
Thursday, March 24, 2005
has plans to recruit more brokers. The firm plans to try to hire brokers away from other firms. Is this not an interesting situation?
The discount brokers are in a price war and the "big boys" are hiring! The indication is that the big firms are gearing up for IPO's and then distribution of institutional holdings. It will take two or three years to beef up the "force" and to be ready. The IPO market may heat up fairly soon. Vonage is the next big IPO. VOIP has been growing but perhaps a little slower than expected. AT&T Call Advantage only added 54,000 subscribers in 2004. Vonage is making steady gains but the free service offered by Skype has picked up 29 million users! Skype is adding paid features.
Sometimes individuals forget that the big brokerage firms act as distribution arms for big institutional investors. My forecast is for a strong market run over the next 3 or 4 years but the retirement of the baby boomers should bring about a slower growth economy.
Posted by Jack Miller at 3/24/2005 03:31:00 PM
My friend Mike Taylor continues to study the Boomers and Echo Boomers. My focus on the housing boom has been on the fact that the boomers are at the prime age to buy second homes. This indeed has been happening and it should continue to happen for several more years. Mike has reminded me of the Echo Boomers. My two daughters are smack in the middle of this group. The oldest bought her first home two years ago; a four bed-room three-bath brick home with a two car garage. It is a sign of the times that the two car garage is the part that is not big enough (my son-in-law owns classic cars in addition to his everyday vehicles). My youngest daughter will graduate from graduate school this fall and I am sure she will buy her first home soon.
The majority of the Echo Boomers, according to Mike's figures, will be at peak first home buying ages in the next few years. Knowing how far the housing boom will last is difficult. My wife and I plan to down-size out first home and to retain ownership in a second home or two. This is the trend--never fight the trend!
Posted by Jack Miller at 3/24/2005 12:54:00 PM
Mr. Softy's Hard Sell [Fool.com: Motley Fool Take] March 21, 2005
The Fool has laid out the the key questions. The race is on by MSFT and others to build-out distribution channels for advertising. Google has captured a lot of real estate cheaply. Investors such as Barry Diller and MSFT are spending heavily to "own" more space. Buying ASK JEEVES gives Diller and ASK a way to reach the customers while paying the advertising out of one hand and into the other.
The new MSFT search is highly target-able and therefore attractive to advertisers. In the same way that Yahoo and MSFT have had to copy Google, Google will have to offer similar products. The speculation is that Google will offer such a product before MSFT can get its distribution channel built. Of course, MSFT already has distribution through a lot of sites; it simply made a mistake by not going after this business earlier.
Ironically it was GoTo.com that developed the model that is used by Google and GoTo was eventually purchased by YHOO. Eventually large ad buys will be competitively placed. Those large firms that need to advertise will negotiate the tightest deals they can get through GOOG, YHOO, MSFT, ASK, AOL and others.
It is so easy to sign up for Google's AdSense program. Google does all the work. Google has promised to be more open in regard to the way revenues are split. Small advertisers and providers will never get the best deal. Since the internet is a place with a very wide distribution, the millions of little guys will keep Google in the green for years to come.
Posted by Jack Miller at 3/24/2005 11:43:00 AM
Net Stocks: Plaxo pushes for-pay services - Internet Services - Electronic commerce - Internet - Analyst - M&A
Net Stocks: Plaxo pushes for-pay services - Internet Services - Electronic commerce - Internet - Analyst - M&A
As a Plaxo user, I report that I love the service. However, I have stalled my usage as I wait for the full roll-out of Gmail. I have a Gmail account but do not use it much. I believe the full featured Gmail account may make Plaxo unnecessary.
I am speculating. I have no "insider" information. I simply know that I like Plaxo very much but am not likely to pay a fee to use it at this time. Plaxo has a difficult challenge to face. The system ties into the MSFT Outlook product very neatly. It is a wonderful improvement over the Outlook program. The day will come when one never needs to update ones address book as it will automatically be updated by friends and associates. Will Plaxo be one of the leaders? Will services such as Yahoo Mail and Gmail not develop their own similar services?
Posted by Jack Miller at 3/24/2005 11:17:00 AM
Yahoo board OKs $3 bln stock-buyback plan - Internet Services - Internet - Company Announcements
Buying back $3 Billion of shares in a company with a market cap exceeding $40 Billion is not nirvana but it is not chopped liver either.
Advertising revenues will be the next key numbers to be reported. I read an article, I believe in Investors Business Daily, that speculated on when internet advertising will exceed magazine advertising. Approximately $150 million is spent on magazine advertising. Last years internet numbers were somewhere in the one half that range.
The problem for Google and Yahoo is that even if they each get one third of $150 million in revenues, these amounts are small relative to market caps approaching $50 Billion. Buying Google and Yahoo still takes faith. Faith in international growth in advertising revenues and faith that eventually internet advertising will approach current levels for TV advertising.
Articles such as the one mentioned can dampen ones spirits. Even the linked article is not exciting because the purchase of shares is spread out over 5 years and during this time employee options will account for a large portion of the shares.
I believe it will take the patience of Job to hold these shares long-term. I am thankful that folks such as my Mother have the kind of patience required. I hope you will buy a few shares and hang on for dear life. I write only for education and entertainment purposes. If you buy stocks after reading my reports, I hope you will be kind enough to let me know. I try to make a difference in the lives of others and it is nice to know if I have succeeded.
Posted by Jack Miller at 3/24/2005 11:08:00 AM
The housing numbers are out again and the trend continues. Baby Boomers are buying homes and second homes. The wealth in our country has never been higher and Boomers have the empty next syndrome. They have the resources to own a second home. They are likely to own two homes for the next 20 years or more. This trend implies frequent travel including frequent air travel. The airlines have a long way to go before revenues will exceed costs but major strides have been made. Boomers are buying second homes primarily in resorts. Prices are soaring. Second home buyers should get in on the trend early as prices are not likely to see these levels again.
New home sales up 9.4% last month!
Posted by Jack Miller at 3/24/2005 10:14:00 AM
Now one can click on Ad Links by Google. The little innovations at Google continue to build on advertising revenue potential. I am not permitted to recommend any stock but if I had money to invest in Google, I would do so before the next earnings announcement. The growth just may be a significant surprise.
Posted by Jack Miller at 3/24/2005 04:05:00 AM
The Internet Stock Blog: Online brokerage price cuts continue - SCH cuts options fees
One of my regular readers recently pointed to the weak performance of our online brokerage stocks. We own ETrade and Ameritrade and they have each traded down in recent weeks. What has basically happened is that Schwab gave up on charging higher rates for "premium services". Schwab has made several price cuts and ET and AMTD responded.
Morgan Stanly was quoted in the article as believing the price competition is largely over and consolidation in the industry may occur. As I expect a long sustained bull market ahead, I will continue to hold ET and AMTD. These companies should see significant trading increases when the market finally breaks out of the current trading range.
Posted by Jack Miller at 3/24/2005 03:58:00 AM
The past few weeks have not generally been kind to my family portfolios. Many of our long-term positions have come well off their highs. EBAY has been one of the worst but it and several others deserve a good rest. We will hold the long positions without worrying about them. Our timing was excellent in regard to the Gold hedge. We made a nice profit and took it off before the big rally in the dollar.
We have added and added and added to our airline positions. We have a lot of patience when it comes to turn-around plays. Ironically, our airline stocks have out performed our oil drilling stocks over selected time frames in the past couple of years. The airlines hit lows and bounced. The stocks tested the lows and now are in the long process of recovery. Some may not survive but my bet is that my family will own several survivors that will do extremely well over the next five years or more. The recent fare increases are encouraging. Fuel prices are only the excuse needed to raise fares. The reality is that the market supply and demand conditions currently allow the carriers to raise rates.
Diversification is often used as a means to avoid taking a stand. Many intelligent investment advisers hide behind the concept of diversification. These folks sometimes lack confidence and do not want to take a stand. Others are simply avoiding the potential of law suits while earning fees for placing clients in "products". Others are correctly diversifying portfolios for those who truly have a main goal of preserving capital; those who are happy with average returns of 6 to 9% provided they don't ever suffer draw downs of equity. A few are carefully analyzing markets and diversifying into securities that offer high probability of success for the customers, these advisers typically take a reasonable fee but do not place clients in the highest cost funds.
Investors certainly need to be careful. They certainly need to understand relative risks. If an investor has the goal of stock market returns of 11% or better, he must take the risk of being in the market. One problem I often see is that in order to avoid risks they do not understand, investors often unnecessarily accept large fees in the attempt to guarantee against large losses. Paying 2% of assets to invest in a covered option fund is a bad risk since the long-term track record of option funds is not good.
John Maynard Keynes was one of the most successful investors of all time. He is responsible for the large endowment enjoyed by Oxford University. This is the fund that gave Bill Clinton and thousands of other Americans full scholarships. Mr. Keynes spent only a few hours each week investing the Universities funds. He did much of his work from his bed as he was very ill for many years. Perhaps it was his pending death that allowed him to perceive that risk is a necessary evil. He was known to concentrate his investments into as little as 6 companies or industries. He decided which industry was ripe for profits and "loaded up the truck".
One interesting phenomenon is that from time to time Americans decide to start their own businesses. These Americans are typically unhappy with the returns of their portfolios, tired of their jobs and ready to seek their fortune. Ironically they often sale diversified retirement accounts and sink their life savings into a very risky proposition. The long-term history has been horrible. About 90% of all of these folks close their businesses at huge losses within 5 years.
Owning a large position of shares in DAL, CAL, AMR, and NWAC is a risky proposition. However, not nearly as risky as owning the same total investment in any one of these stocks. Although my investment is not evenly divided, for sake of discussion if one puts 25% in each of these stocks and if one liquidates while the other three are five year home runs, the total return will be 300%!
Owning shares in these large companies is certainly less risky than starting the typical small business. The owner of a small business must typically give up his job and investment income in the hope that the business will pay-off. The buyer of airline stocks does not have this problem.
Diversification is a good idea. Even John Maynard purchased 6 or more industries. Many other famous investors have held and currently hold concentrated positions. Perhaps Mark Twain's insight serves to make the point. Twain said he had decided to put all his eggs in one basket but he would watch the basket.
In truth, Twain was not very smart with money. My recollection is that he died without any. The idea here is to encourage all to think carefully about the concept of diversification and not blindly purchase high cost funds as a place to hide. As Mr. Keynes once said, perfect diversification would lead to zero profit.
BIG PROFITS AHEAD FOR THOSE WILLING TO TAKE MARKET RISKS!
Posted by Jack Miller at 3/24/2005 02:07:00 AM
USATODAY.com - 10 reasons why Nasdaq won't recover soon
Wave after wave of negative news is a very positive indicator. The more negative the news, the bigger the move when it comes!
Posted by Jack Miller at 3/24/2005 02:01:00 AM
MSN Money - TheStreet.com
I see more and more signs of negative sentiment--a positive development. The media is reflective of the thoughts of readers. This article shows that the market is "wearing out" the active small trader. Choppy markets are hard to successfully trade. Another recent contrary sign was posted by the odd lot short sellers. The level of selling reached a 15 year high! A significant level as 1990 was a tough market year at the start of a significant recession. The economy was nowhere near as strong as the current economy. We have a "reality--perception gap". The reality is that the economy is strong, productivity is strong and the law of substitution is keeping prices in check. The perception is that inflation is roaring ahead and the economy is weak. The market will surge to the up-side before the false perception is corrected. Stay tuned as the Big Bull Boom Bubble Bust is just ahead (my forecast is the next big move starts by November--don't play games and miss the big move).
Posted by Jack Miller at 3/24/2005 01:57:00 AM
Florida Home Sales Rise 6 Percent in February, According to Florida Association of Realtors(R)
The Florida Association of Realtors reports average annual appreciation of 25%, "fierce buyer demand and a shortage of inventory". Myrtle Beach SC realtors report a similar shortage of inventory.
Construction of second homes should continue to be strong as the "baby boom" generation is now 47 to 59 years of age. One market observer states that the peak age for purchasing a second home is from 52 to 59. He reports that a new fast growing trend among the oldest of the "boomers" is to down-size the first home and use the proceeds to purchase a second home. The down-sized first home is frequently a low mantenance patio or cluster home. "Boomers" are clearly planning to travel more. Airlines and resort areas should be beneficiaries of the trend.
In the late 1960's the boomers parents, who were part of the previous baby boom generation, purchased motor homes in record numbers. In 5 or 6 years, shares of Winnebago went from $2 to $110 per share. The energy crunch of the early 1970's killed the trend. This cycle it appears that the motor home trend will not be nearly as pronounced but the second home market is going to exceed all expectations. Resort properties in Las Vegas have reached unheard of prices. Bermuda ocean front condos in many resorts now begin at $4 million or more.
When any trend develops, investors should get on board early. I write this with mixed feelings as I promised my wife years ago that we would sell our resort rental business by the time our youngest child graduates from college but no later than the age of 55. We plan to keep ownership in at least three ocean front condos. The rest are for sale. I have raised my prices to reflect the current market and must only hope that I am not leaving millions on the table.
Posted by Jack Miller at 3/24/2005 01:17:00 AM
Forbes.com: Buying The Perfect Vacation Home
Escapehomes.com reports that Myrtle Beach is the number one location for second home purchases. Second home purchases grew by 16% last year. Baby Boomers are at the prime time in their life to own a second home. Prices may rise until the 47 to 52 year old boomers reach the peak buying age.
Posted by Jack Miller at 3/24/2005 12:54:00 AM
canada.com - travel
Another report showing airlines continue to seek cost cuts. In this one, the report is that NWAC seeks $950 million in annual labor savings after negotiating $300 million is compensation reductions among pilots and salaried workers.
It is always interesting to see how long it takes to negotiate union contracts. Managements seem to have all the patience needed. Delta's management talks about getting enough savings to make it through the tough times it projects for 1995 and 1996. NWAC says it hopes to conclude negotiations by year end. The optimism I have for the industry is that the annualized savings typically represents several dollars per share. An up-turn in the business, whenever it occurs, could send several dollars per share to the bottom line.
Posted by Jack Miller at 3/24/2005 12:45:00 AM
According to siliconindia.com Google AdWords are now available in 41 languages, Google now searches over 8 billion documents and Google plans to expand its operations in India. India, China and other less developed nations are leaping ahead. These countries never had phones in every home and they will never will. They are going directly from no phones to cell phones. The advertising market is also developing differently. I expect Google's international growth to be faster than is US growth in the years ahead.
Posted by Jack Miller at 3/24/2005 12:33:00 AM
WSJ.com - Delta Needs to Cut More Costs To Offset Mounting Fuel Prices
A billion here and 500 million there, sooner or later you have a real savings. Delta continues to make news because it needs cash to cover rising fuel costs. Delta expects rising fares to cover 25% of its needs. It is difficult to be optimistic about the prospects for Delta. On the other hand, experience tells us to buy what no one else will.
We have positions is CAL, AMR, and NWAC. We will hold what we have for now. When new USAir stock is issued we will take a look. It is expected that regional carriers such as Republic and Wisconsin Air will be the majority owners of the "new company".
In the absence of a new terrorist attack, the projected economy for the next few years could not be much better for the airlines. Businesses have money to spend and are indeed investing in plant and equipment. Business travel should be strong.
Delta is not the only carrier to reduce flights and employees. When demand begins to fill capacity, the pricing wonder will begin. That is the price of a $100 ticket will quickly rise to $300 or more. Can Delta hang on to see the turn?
Posted by Jack Miller at 3/24/2005 12:20:00 AM
Wednesday, March 23, 2005
GameStop's shares rally after Q1 forecast, Q4 results - Retail - Earnings - Company Announcements
Congratulations to Kupsky for a great Stock of the Week pick. GameStop fits a number of criteria we use to select stocks. The bottom line is that the stock is under appreciated. Today's numbers may serve to start changing the opinion of the market. It is interesting to note that ERTS just reduced guidance and took a huge hit. The stock was down $11 per share yesterday while GME announced that retail sales of games were strong last quarter.
Stocks that make such a sharp earnings turn usually continue to improve. Kupsky will do an update article on all of our Stock of the Week selections. Please note that all selections are made for educational and entertainment purposes. We are not stock analysts but we enjoy making money in the market.
Posted by Jack Miller at 3/23/2005 11:31:00 PM
I will not be blogging much for a few weeks because I plan to reside in Myrtle Beach off and on for a few weeks. Some of the time, I will relax with my family and some of the time I will work on the sale of our condominium rental business. Twenty 20 years ago, I promised my wife that we would retire at 55 if she would help build our resort rental business. (My great-grandfather, grandfather, and father all retired near the age of 55.) I may break my promise by a few months as selling a business is harder than building one. Only those who have built a substantial business from scratch have the slightest idea of what I am talking about. Operating a successful business requires many skills and many sacrifices. Marilyn and I believe we are better people for having fought the fight. Our marriage is strong after 33 years. We are blessed beyond measure.
Monday, Marilyn and I drove home from Myrtle the "old-way". We usually cut across country on "back roads". We can cut 20 miles and 20 minutes off the trip by taking several "short-cuts". It is amazing that Myrtle Beach has been the second fastest growing city in the United States for 40 years without access via interstate highways. Recently, the city hit a new gear. Millions and millions of baby boomers who have fallen in love with Myrtle over many years of vacationing there are now beginning to retire. Many are deciding to make Myrtle their first or second home. When one considers that there are 120 golf courses and 1700 restaurants in the area, one can begin to appreciate the attraction.
The "Grand Stand" is 60 miles long; sixty miles of beautiful beach with the accompanying moderation of temperatures that comes with the ocean. Myrtle is not the winter haven like Florida as the average high in the winter time is only about 40 degrees however, it is warmer in winter and cooler in summer than inland areas for many miles west.
The good news for Myrtle is that roads have been approved and are under-construction from all points. The main new additions are Interstates 73 and 74 which will cross about 2 miles from my ocean-front condos. These highways will give easy access to Myrtle from all the way from Michigan to New York and from Tennessee to Florida. The two highways are interesting because of the way they separate on their way from Michigan to Myrtle Beach in order to go near large population centers. They join together a few times but separate where needed. In the process they each cross other Interstates such as 95, 85 and 77 to give access from other areas. Finally they will complete the natural ending of Interstate 20 that now goes across the country but stops 50 miles from the beach in Florence. The connection to I-95 near Savanna GA and again near Lumberton NC will give easy access to Myrtle for north-south travelers.
Some folks are confused as to why so many North Carolinians vacation in Myrtle. There are two answers; unlike NC beaches, the wide flat beach at Myrtle is similar to the wide flat beaches of Daytona Florida and the distance to Myrtle is considerable shorter than to the outer banks of North Carolina. To put it another way, geography is the answer. The North Carolina coast butts directly into the Atlantic Ocean which makes the beaches relatively narrow and steep. The South Carolina coast is at an angle such that the waves come rolling into shore versus a more crashing pattern in North Carolina. The water temperatures are also effected by the geography. The Gulf Stream is able to flow up the coast and to stay near the South Carolina shore but it is pushed away from the North Carolina shore. This may sound insignificant but jump in the NC water and your breath is taken away. Through much of the year, SC water feels like bath water.
The water temperature is not nearly as important as what it does for the air temperature. It rarely snows in Myrtle because the Gulf Stream Water warms the air in the winter. My home town is often 10 degrees colder than Myrtle in the winter and 5 degrees hotter in the summer.
Two important trends are making a difference. The first is a benefit of high speed internet access. In our modern world, more and more folks have found that they can work from anywhere. Some can work full time from anywhere, others need to occasionally show up at the office year round and others can occasionally take a long break from the office if they have means of communicating regularly. Many folks now have the attitude that if they have to work, why not do so while watching the beauty of the beach.
The second trend represents a change in life style for the baby boomers. In the cycle of life, we tend to reach our peak level of disposable income at around 52 to 59 years of age. The disposable income peaks for two reasons; earnings typically max-out at this time and educational and other expenses for children typically decline sharpley during these years. A trend that has prevailed for many years has been that families buy the "big house" when their children are near high school ages. High school students bring friends over for visits and having the big house is desirable as a status symbol. Families can typically afford the "big house" at this point in their lives as the equity in their first home provides more than enough for the down-payment. The interesting developing trend is that "empty-nester's" are down-sizing while putting the excess equity into second homes.
Tax laws have favored first and second homes for many years. Maybe 5 years or more ago an additional home-ownership benefit was passed. The law allows one to sell ones residence (of two years or more) and pay no capital gains taxes. Furthermore, the tax benefits of owning rental property are not as powerful as a number of benefits allowed on first and second homes. The first and second home owner can allow friends, family and associates to use the home for a fee and the owner usually owes no tax on the "incidental rental". The result is that many baby boomers are selling the "big house" and using the proceeds as a down-payment on a smaller first home and a second beach home. The Myrtle Beach night spots are hopping with the partying 47 to 59 year old "boomers".
On the way home Monday, we saw new roads paralleling the old roads much of the way. Both NC and SC are moving at quick-speed to build access to the beach. Las Vegas Nevada is "Boom Town, USA" but Myrtle Beach has a growth rate almost as big. Baby Boomers want to retire to where the action is or they at least want to own a second home there.
When all the roads are completed, Myrtle Beach access will spur further development and of course add value to prime located beach property. Roads are only part of the story. Airline traffic is now greater than before 2011. Flights have been added from numerous cities, including connections to European locals. The decline in the dollar have made a Myrtle Beach vacation very inexpensive for Europeans and 1 of 3 beach front condos are now being purchased by Europeans in a number of locals.
One can never know how long a trend will last, however, they trends usually last longer than initially predicted. The 47 year old boomers still have years before they reach peak earnings. Millions of Americans can afford a second home. Will these folks suddenly decide to put more money into the stock market? The wealth of Americans is at an all time high and disposable income is at record levels. I believe the records will be broken year after year for at least 4 more years. It might be wise for me to wait a few more years before selling the business but a promise is a promise. It is time for me and my wife to take an extra walk or two on the beach and let others worry about reserving vacations for others. All roads lead to Myrtle Beach but my wife and I are looking forward to spending more time in Myrtle versus traveling to and from.
Posted by Jack Miller at 3/23/2005 04:11:00 PM
WSJ.com - A Mixed Blessing
Gannett, Knight-Ridder and Tribune newspaper companies have purchased minority interests in Topix, a Google competitor for news aggregation. The trend continues; old line news media are buying into internet media. The old line firms resisted this move for as long as they could. Many hoped to build their existing papers into online juggernauts. Google, Topix and others are showing that the way to get eye-balls on pages is to use the online services as gateways.
Knight-Ridder in particular has been working at becoming an online news purveyor. Google has become powerful enough that alliances are being made to slow the growth. In the meantime, Google keeps adding to its levels of service. Individual users can now customize their news page. This is an old idea but previous versions were cumbersome. The Google set up is easy and of course free.
To reach the link to the article, you may need a subscription to the Wall Street Journal. I subscribe to a few magazines and a couple of newspapers online. Barron's and the WSJ still carry a lot of weight for me. I read a few business magazines to know what is "hot".
More and more news and info will be transmitted over the web. Investors should keep this in mind. Knight-Ridder, Gannett and the Tribune will be around for years to come. They may be able to slow the growth of this one Google service. Yahoo announced more "sticky" services today. Yahoo paid dearly for its new photo service program but this is the type of thing that keeps customers with Yahoo. Google has many similar "sticky" services. If you tend to search through Google, then you will tend to use many of the "free" Google services.
The willingness of Topix to sell is an indication that Google has been eating Topix's lunch. Having the support of three large newspapers will certainly help Topix. It still seems to me that Google will continue to grow the fastest of all firms mentioned.
Posted by Jack Miller at 3/23/2005 03:35:00 PM
Thursday, March 17, 2005
Chimera Technology Gains Access to Chinese Gaming Market
The US Justice Department has prevailed in discouraging the use of credit cards and advertisements for online money games. These restrictions are having little effect. The business is experiencing dramatic world wide growth and Americans have joined in droves. Americans do not break the law when they participate. (Sports betting online may get you in hot water but this business is also growing.)
The World Trade Commission has ruled that American sanctions are illegal. The ruling is being appealed. The situation is similar to North Carolina not having a lottery when all the surrounding states do. North Carolina citizens who wish to play the lottery are donating millions of dollars to Virginia, South Carolina and many other states. Sooner or later politicians will determine that the US is losing billions of tax dollars to other countries by not allowing online "money" games to be headquartered here.
I am a firm believer that the auto is a benefit to our society even though tens of thousands of drivers, passengers and pedestrians die each year. I am for allowing insurance companies to offer substantial discounts to those who allow GPS tracking of their driving habits. If the GPS is programmed to warn the driver that he is over the middle line or is approaching a stop light too fast, that would be great. In other words, as a country we have an obligation to design our systems to help one another and to give one another incentives to help each other. In most cases, Americans must be left with the freedom to live as they wish. In situations where they might harm another, such as when they drive a car too fast, we need to make all reasonable efforts to prohibit or discourage the activity.
Playing games online will grow quickly for many years. It is a losing argument to say that a adult should not be allowed to spend his own money on such an activity. Prohibition of alcohol did not work and money games are available in every state of the union. Games online is another area where the internet will grow because it is the most efficient way to perform the "task" at hand.
It is hard for any sensible investor to pay-up to own shares in high priced stocks such as YHOO, EBAY and GOOG. These firms have to grow at a good clip for many years to justify their current price. This is the history of the stock market.
Those who bought any of the "big names" Xerox, IBM, Ford, GM, Home Depot and thousands of others early in the life of the products made fantastic total returns. After the growth peaked, the returns have been mediocre at best. The GM buyer 34 years ago has a capital loss to realize if he sells the stock.
Purchases of high priced online stocks such as YHOO and GOOG need to be balanced with "value" stocks. Should you need assistance in constructing a portfolio, I would be happy to volunteer.
Posted by Jack Miller at 3/17/2005 10:47:00 AM
Calvary Baptist Day School
The above link is to news about and from a missions trip by Calvary Baptist Students. These students are spending their spring break in service to others in the country of Costa Rica. In my article titled IT'S THE PARENTS FAULT, I told about recent studies showing Mormon students perform better than Protestant students at the University of North Carolina. The Mormon students are able to articulate their beliefs; they know who they are and why they are in school. They are less likely to engage in risky behaviors such as alcohol abuse, drug abuse and sexual activities. Their performance in class shows that the students are in school to learn.
I wrote that the major reasons for the poor relative performance of US high school students are the attitudes of the parents (which are passed on to the students). Many parents in our society see more value in having their 16 year old son or daughter earn extra spending money "flipping burgers" than participating on a mission trip or performing in a school play.
Maintaining a part-time job to assist with family finances is honorable, but usually not of high importance. In most cases, it is the child that wants the job in order to "live like a king". The parents support or condone the work activity but are then frustrated about the time and money spent at activities such as cruising the town, going to the movies, playing video games, etc.
The Calvary Baptist student statistics indicate that these poor attitudes do not prevail among Calvary Baptist parents. From memory, I believe it is true that 98% of the students attend college. Like any group, some folks make mistakes along the way. The statistics at UNC show that Protestant students as a group perform better than most other students in the same measures where the Mormon students excel. I suspect that the CBDS students perform equally as well as the Mormon students.
The students in Costa Rica are to be congratulated. These folks are making a difference in the lives of others. These young folks would not have made this trip without the support of their parents. Congratulations to the parents; they have started an unknown number of chain reactions that will continue throughout eternity.
Posted by Jack Miller at 3/17/2005 09:35:00 AM
Wednesday, March 16, 2005
The big news today is about GM's negative outlook. The chart of GM shows the stock is at a ten year low. The stock had a nice run from 1995 to 2000 which was a similar time to the way 2005 to 2010 is shaping up. On the other hand, this stock is selling for the same price it was 34 years ago according to bigcharts.com!
This stock was selling for the same price 34 years ago! I repeated the statement for emphasis because no gain for 34 years is a terrible performance. The stock paid a good dividend during those years and the current yield is 6.87%!
A friend of mine who retired from GMAC says that Cadillac is offering a $17,000 discount. Don't tell me that the market is not rapidly adjusting to higher oil prices. The fact is that GM can not give away its biggest gasoline guzzlers. Oil prices soared this morning, back-tracked mid day and will likely close at all time highs. Contrary thinking suggest one should remember that the reason for high oil prices is a strong global economy.
Years ago, David Dreman wrote an article in Forbes or included in one of his "Contrarian" investment books about the one year rule. His one year rule is that one should wait about a year before buying shares in a fallen stock. The type of stock he was talking about was like GM. A widely known company that makes big news after it has already fallen far from its peak price. David ran a number of studies using Compustate data to show that the biggest part of the decline is over when the bad news makes front page but the up move takes an average of one more year.
The margins are so large on the big cars and SUV's that GM can offer free financing and discounts and still make a nice gross margin. The real problem GM has is that the costs of heath care and other benefits to well paid employees take away the margin. If it weren't for the payoff from the motor division to GMAC, the company would never show a profit.
The most interesting thing is that the car companies have been able to turn the normal business cycle on its head. Consumer discretionary big ticket items normally go begging when the industrial expansion phase of a recovery starts. By offering "free" financing, GM has made the deals look all the better when interest rates are high!
My bottom line is that I had much rather own GM than a bond right now. The risk of a bond declining in value is relatively high whereas the risk that GM will cut its 6.87% yield is relatively low. Some good years are ahead for stocks. While I might wait 6 months to a year before buying GM, I would not be uncomfortable owning it now and a 6% annual move in the stock price from here would yield a total return of upwards of 12%!
Posted by Jack Miller at 3/16/2005 12:50:00 PM