Save them? Who should save them? I say the government.
Why!
Follow me for a second...
GM and Ford are good businesses they make lots of money. Unfortunantly, they bad management and unions have lead them not to be competitive. Between 1k to 2k of every GM and Ford car goes to fund the pensions of hundreds of thousands of people that don't work at the company any more. This combined with union rates prevents the companies from competing with the Honda's and Toyota's of the world.
Currently, the government is giving these companies "loans" to keep them alive. Lets be honest if nothing is done they will go out of business. Also, the government will end up lossing all the "loan" money and political pressure will probably force them to back the pension liability. If we do nothing, this is the path for the american tax payer.
OR ...
We take bold steps. The government should buy both companies (they have market caps around 3 billion). As part of the purchase process they should negotiate major concessions from the unions. The government could trade desolving the unions for guaranteeing the pensions. Next the government seperates the pension liability from the company. After that it should fire the entire management teams (they people who got them in the mess obviously can't lead). The next step should be to spin the companies back into the market without the pension liability (the government should hold 51% ownership). These should raise 100's of billions of dollars (which will go to pay for the pension liabilities). The new companies should be able to invest into R&D and compete in the global market for cars.
OR we could do nothing and let them go out of business and loss lots of tax payer money in the process. Doesn't make a lot of cents to me.
Tuesday, October 28, 2008
Tuesday, September 23, 2008
Financial Chaos!
The markets are burning! Everyone is going bankrupt! Buy? Buy? Buy?
Yes, I'll say it now this is a good time to start new positions. Banks and investment banks are going out of business, but the remaining ones will be stronger on the other side. I wouldn't buy the cheapest stocks; instead, think back to when times were great. What companies did you want to buy that were wide moat and have great pricing power? Those are the stocks you should be buying.
I've been buying Google (GOOG), Goldman Sacs (GS), Diageo (DEO), General Electric (GE). I want JP Morgan, but its still too expensive for me. These companies are stocks I've always wanted, but were always too expensive. Today, warren buffet made an investment in Goldman Sacs, so obviously some great investors are seeing good deals in the market.
Buying when things look bad is scary, but buy the best companies in the world and you'll be in good hands. It doesn't make a lot of sense, but I guess that's why its chicken cents.
Yes, I'll say it now this is a good time to start new positions. Banks and investment banks are going out of business, but the remaining ones will be stronger on the other side. I wouldn't buy the cheapest stocks; instead, think back to when times were great. What companies did you want to buy that were wide moat and have great pricing power? Those are the stocks you should be buying.
I've been buying Google (GOOG), Goldman Sacs (GS), Diageo (DEO), General Electric (GE). I want JP Morgan, but its still too expensive for me. These companies are stocks I've always wanted, but were always too expensive. Today, warren buffet made an investment in Goldman Sacs, so obviously some great investors are seeing good deals in the market.
Buying when things look bad is scary, but buy the best companies in the world and you'll be in good hands. It doesn't make a lot of sense, but I guess that's why its chicken cents.
Wednesday, June 11, 2008
Its a sale!
Today the market went on sale. You can tell when you look at any stock and its red. One interesting stock is Maxim (MXIM), currently at $21. I've talked about it before. From what morningstar says the company just submitted its financials for review. When that goes through expect the stock to take a jump. I'm expecting the company to raise its dividend another 20% and announce a major buy back. The company has over a billion in cash and no debt.
Another stock that looks interesting is Bank of America (BAC), currently at $29. The dividend yield is over 8.5%! Sure banks have all sorts of problems with sub prime, but that will blow over at some point. The long term earnings potential of the company is STRONGER now before the crisis (with the country wide acquisition).
Banks are very hard to value, so there is risk. However, this is a case where the long term potential of the company is strong and you get paid an amazing dividend while you wait. Better yet buy and never look at the price again. Just sit back and enjoy the dividend.
Last on my plate is Ebay, currently at $27. The company's US operations are in trouble. They are losing market share. However, I think that should be expected. Amazon's model is just better. At amazon you spend time reading reviews of the products. At ebay you spend time reading reviews of the seller. That's a big problem. However, low cost auctions will have their place. Also, in the rest of the world which isn't as developed ebay is growing rapidly. On top of that its paypal division is impressive. The most shocking thing is that value mutual funds are jumping aboard. The top institutional holder is dodge & cox! Ebay has gone value. Doesn't make a lot of cents to me, but I'm sure there are a lot of cents to be made.
Another stock that looks interesting is Bank of America (BAC), currently at $29. The dividend yield is over 8.5%! Sure banks have all sorts of problems with sub prime, but that will blow over at some point. The long term earnings potential of the company is STRONGER now before the crisis (with the country wide acquisition).
Banks are very hard to value, so there is risk. However, this is a case where the long term potential of the company is strong and you get paid an amazing dividend while you wait. Better yet buy and never look at the price again. Just sit back and enjoy the dividend.
Last on my plate is Ebay, currently at $27. The company's US operations are in trouble. They are losing market share. However, I think that should be expected. Amazon's model is just better. At amazon you spend time reading reviews of the products. At ebay you spend time reading reviews of the seller. That's a big problem. However, low cost auctions will have their place. Also, in the rest of the world which isn't as developed ebay is growing rapidly. On top of that its paypal division is impressive. The most shocking thing is that value mutual funds are jumping aboard. The top institutional holder is dodge & cox! Ebay has gone value. Doesn't make a lot of cents to me, but I'm sure there are a lot of cents to be made.
Sunday, May 4, 2008
Wednesday, April 9, 2008
The markets are all over the place ...
Looking at recent market activity it really hits home how valuable cash is right now. Investments made in the next few months will probably have pretty good returns 3-5 years out. Now having the foresight to have cash on hand prior to a downturn is either lucky or a good business model (ex. look at BRK. They use extra cash to be able to back larger insurance policies that others can't.).
For the rest of us another trend shows its strength. Stocks that more investment value than speculation value have held up well and some have appreciated. Look at stocks like:
KO
JNJ
MMM
WMT
PEP
...
The list goes on and on. Investments in strong companies like these when the ecomony is booming can be used as a form of cash when parts of the economy sputter. Personally I rarely sell, but I am tempted to use cash from stable investments to go buy some growth stocks that were always too pricey for me in the past.
Remember being greedy when others are fearful is easier in good times than done in bad times.
For the rest of us another trend shows its strength. Stocks that more investment value than speculation value have held up well and some have appreciated. Look at stocks like:
KO
JNJ
MMM
WMT
PEP
...
The list goes on and on. Investments in strong companies like these when the ecomony is booming can be used as a form of cash when parts of the economy sputter. Personally I rarely sell, but I am tempted to use cash from stable investments to go buy some growth stocks that were always too pricey for me in the past.
Remember being greedy when others are fearful is easier in good times than done in bad times.
Tuesday, February 19, 2008
Dodge & Cox to Launch New Fund - Morningstar Fund Times
Dodge & Cox launches a new global (emerging?) fund
Dodge & Cox to Launch New Fund - Morningstar Fund Times
This fund company launches a new fund once every two decades on average.
Dodge & Cox to Launch New Fund - Morningstar Fund Times
This fund company launches a new fund once every two decades on average.
Monday, February 4, 2008
MXIM: Maxim Integrated Products Stock Report | Quote & News
Maxim looks cheap. +3.8% yield, 13 P/E, revenue growth and yield growth. The stock looks down because of the financial restatement (which caused it to get delisted). Should be a short term problem.
MXIM: Maxim Integrated Products Stock Report | Quote & News
I'd guess the stock will stay undervalued until the restatement is done, which the company thinks will be done in the summer (but I wouldn't be surprised it takes them longer). Long term holders shouldn't care. The yield is solid and they have $1 Billion with a 'B' in cash on their balance sheet. For a campany with a market cap of less than $6 Billion that's a lot. Expect a massive buy back after the restatement is done.
MXIM: Maxim Integrated Products Stock Report | Quote & News
I'd guess the stock will stay undervalued until the restatement is done, which the company thinks will be done in the summer (but I wouldn't be surprised it takes them longer). Long term holders shouldn't care. The yield is solid and they have $1 Billion with a 'B' in cash on their balance sheet. For a campany with a market cap of less than $6 Billion that's a lot. Expect a massive buy back after the restatement is done.
Subscribe to:
Posts (Atom)