My recent interview about Enslaved by Consumption can be listened to below. The audio was broadcast on the first segment of KYOS 1480’s Community Conversation show.
Enslaved by Consumption author, Dominico Johnston, sits down and discusses his newly released work. Engage your mind and your pocket book.
The overall market will remain bullish with economic strength continuing via the expansion of jobs within the economy and relative weakness in energy prices. My best guess at where US GDP growth will come in at for the New Year (2015) is at +3%. The dollar’s strength and weakness in foreign markets are likely to be two major bearish pressures on the market in at least the first half of the year.
Boomers will continue to exit the job market and draw from pensions and retirement savings. Millennials will find increased traction entering the job market and career upward mobility caused by both economic growth and Boomer retirements. This will begin to translate into increased housing demand as younger workers mature, start families and gain the necessary cash flow to afford home ownership.
One spill-over factor that will be felt from Boomers retiring and Millennials gaining an increased presence in the job market will be demand for leisure services. In particular, the travel and leisure industry will be well positioned. The Great Recession and subsequent lagging economic recovery has caused hotel chains and cruise lines to throttle back expansion efforts. Demand will outpace supply in the short-term, which will result in greater pricing power amongst existing travel and leisure players.
Technology will continue its rapid expansion into what seems to be every facet of our lives. Specifically, look forward to see Apple release its Apple watch sometime in the spring. The trend toward wearable technology is very strong, yet most of the current players (Fitbit and Jawbone) are private companies. Apple’s stock could see a boost based on anticipation and actual sales of its watch. Keep an eye on public offerings from companies that produce wearable technology and the analytic-social software that accompanies the hardware.
With technology creeping further into every aspect of society, security will continue be a paramount concern. Security breaches at major companies, such as Sony, JPMorgan Chase, Target and Home Depot have heightened business and consumer awareness and anxiety. Companies that provide solutions to these threats will not only expand business, but profitability, as well.
Investment ideas given the thoughts presented above…
|Travel and Leisure|
Well fellow investors, this news is certainly worth noting…
“At Tuesday’s BioFEST conference in Boston, Biogen (NASDAQ:BIIB) research and development head Douglas Williams said that an interim analysis of a 194-patient phase one trial for BIIB-037, which it is jointly developing with Japan’s Eisai drug firm, was good enough to push it straight into phase three. The numbers won’t be formally reported until the spring, but Williams said that a statistically significant improvement in cognition appeared after 54 weeks of treatment…”
Unless you’ve been living in a cave for the past few months, you are aware that the price of oil has dropped considerably. To the public, this change in price has been evident via every gas station. What was once around $4 per gallon (in California markets), is now sub $3. Two dollar gasoline has not been seen in years. While this is music to the ears of automobile drivers, it has huge implications for oil exploration companies.
Over the last 6-8 years North America has experienced a shale gas/oil exploration boom. The reason for the great expansion hinged upon two key drivers. First, drilling techniques and technology had advanced to the point where previously inaccessible oil reservoirs were accessible. Secondly, the price of oil had remained at such an elevated level that the assumed profit from drilling in these oil fields made financial sense. With oil plummeting (chart below), investors are running from companies heavily exposed to shale oil extraction. At the depressed levels we are currently seeing, these companies will need to make some very difficult financial decisions in the near term. Many companies, such as shale darling Linn Energy (LINE), have been high dividend yield plays for a number of years. High payout ratios and regular increases to the dividend payout were common practice. Even with hedged oil contracts, the ability to maintain operations with yesterday’s oil pricing only can last so long.
The winds of change are blowing in the oil commodity market. Right now the discussion we are seeing is based around whether this is a temporary fluctuation or a game changing fluctuation. If oil prices stay in the 60’s or below, what changes not only in the shale arena, but also in the automotive, refinery, rail car, pipeline and other businesses that are influenced by the price of energy? The implications are far from limited to one industry or sector.
On October 20th (my last posting), I recommended Winnebego (WGO) as an investment play on declining gas prices and increasing amounts of baby boomers retiring. Since 10/20 the price has gone from $20.47 to $25.18 per share. This represents a 23% jump in valuation within a little over one month. What other companies thrive in a cheap oil environment? Or another way to think about this situation would be; what stocks got clobbered in the latter part of the last decade when oil prices skyrocketed?
Bellow are some thoughts from Simon Black and the folks at ZeroHedge. I all too well remember the dot-com bubble that burst as we entered a new decade almost a decade and a half ago. No the most exciting of times for many investors. Yet, are we pushing toward that point again today? The discussion below argues that such a situation is now brewing. I tend to see the validity in many of the observations made.
Having a good sense of history is important for investors. What we see in the market is driven by human logic and emotions. Things might not be exactly the same, but behavioral patterns can be similar. If such patterns exist, it is good to be on watch in order to avoid being caught off guard and thus losing a bunch of money.
No investor wants to be on top of the bubble when it decides to burst.
If someone mentions the Dotcom Bubble, Pets.com is easily the first thing to come to mind.
The online pet product store failed hard and it failed fast. In just 268 days, the company went from IPO to liquidation, managing to lose $300 million in the process.
Yet it had looked good to investors, at least for a while.
Pets.com spent exorbitant amounts of money on advertising; its sock-puppet mascot was the 90s equivalent of a viral phenomenon.
But while the company spent hand over fist on advertising, Pets.com’s was losing money on every sale because they priced their inventory at BELOW cost. Duh.
Pets.com went public on the NASDAQ in February 2000 (right as the bubble burst) at $11 per share.
The stock peaked at $14, valuing the company at over $300 million. Not bad for a company whose business model virtually assured they would lose money.
But reality set in just nine months later. The company’s stock fell over 99%, and management announced they would liquidate.
Now… we could criticize Pets.com management all day long for a ridiculous business model. But bear in mind, investors bought the story.
People believed that profits didn’t matter. And back then it was typical for loss-making companies to be valued at hundreds of millions of dollars.
Have things really changed since then?
Facebook bought revenueless Instagram for $1 billion in 2012. Snapchat, the revenueless sexting app, is now valued at $10 billion.
There are so many examples like this. And like 1999, no one seems to care.
Silicon Valley investors keep writing huge checks. “Likes” are the new valuation metric. Not profits.
Several top Silicon Valley insiders are now hoisting the red flag saying enough is enough.
Bill Gurley, one of the most successful venture capitalists in the world, told the Wall Street Journal last week that “Silicon Valley as a whole . . . is taking on an excessive amount of risk right now. Unprecedented since ’99.”
Fred Wilson of Union Square Ventures echoed this sentiment on his blog, railing against the widely accepted model that it’s acceptable for companies to be “[b]urning cash. Losing money. Emphasis on the losing.”
George Zachary of Charles River Ventures wrote, “It reminds me of 2000, when investment capital was flooding into startups and flooded a lot of marginal companies. If 2000 was a bubble factor of 10, we are at an 8 to 9 in my opinion right now.”
As with all bubbles, it all comes down to there being too much money in the system.
Capital is far too cheap, and that pushes people into making risky and foolish decisions.
When you’re guaranteed to lose money on a tax-adjusted, inflation-adjusted basis by holding your savings in a bank account, almost anything else looks like a better alternative.
That’s why stocks keep pushing higher, why junk bonds yield a pitiful 5%, and why bankrupt governments can borrow at 0%.
Jared Flieser of Matrix Partners in Palo Alto summed it up when he told the Wall Street Journal, “You can’t afford to sit on the bench.”
In other words, money managers view NOT investing as losing, even if investing means taking huge risks.
It’s an abominable position to be in. If you do nothing, you lose. If you do anything, you take on huge risks.
This, of course, is thanks to a monetary system in which a tiny central banking elite conjures trillions of dollars out of thin air in its sole discretion.
History tells us that this party eventually stops, creating all sorts of unpleasant financial carnage. This has happened so many times before, and it would be arrogant to presume that this time is any different.
But it begs the question: what does one do? Is it worth trying to ride the bubble and try to get out before it all collapses?
Perhaps. But there are still pockets of value in the world that I would submit are more secure places to be.
In public markets, the junior mining sector has many companies that are trading for less than their tangible cash value. It is the exact antithesis of Pets.com.
In private markets, Startups in other thriving communities around the world (from New Zealand to right here in Chile) are valued at much more appropriate levels.
For yield, we’ve seen US dollar bank accounts in certain parts of the world paying upwards of 7%, and one low-risk company owned by the debt-free government of Singapore issuing bonds yielding over 5%.
There are options.
It’s like music. A lot of people think that music is dead. Where are today’s Led Zeppelin, Pink Floyd, Grateful Dead, Bob Marley, and Bob Dylan?
And based on the crap spewed out over the centralized, corporate-controlled radio, they’d be right.
But music is definitely not dead. There’s some amazing stuff out there. The corporate titans that control the system aren’t going to play any of it for you.
But it’s there. Just like the great investments. You have to look where no one else is looking. And you have to dig a little bit more to find gold.
In less than two weeks (Sept 18th) Scotland will vote to decide whether or not they will stay a part of the United Kingdom. This would be a huge political schism. For over 300 years England and Scotland have been united. The depth at which the political and economic ramifications would be from such a split can only be speculated about…Here are some speculations from yours truly.
In the middle of the last decade I studied politics and economics abroad in England. At the time, a major push in the House of Commons was to enact what was termed “devolution”. Devolution references the central government granting powers back to other lower regional governing bodies to make certain legislative decisions. For example, while studying in England I took a train to Edinburgh, Scotland where their new parliament had recently been constructed. This is part of the political devolution enacted in the United Kingdom to provide Scotland with greater governing autonomy.
Now, around ten years later we have a situation where the drive for political independence has grown from devolution to outright independence. A few months ago the thought of independence from the United Kingdom was more or less a funny detraction for news outlets. Now polls reflect what might become a reality. Recent polling shows the drive for independence, yes vote, to have the support of over 50% of decided voters. Months ago those supporting independence lagged those of support of unification by over +20%. This has been a dramatic momentum shift.
If independence does succeed, it could serve as a tipping point for the start of similar political movements throughout mainland of Europe. The political change in the U.K. and any subsequent changes in other European regions will create a certain degree of uncertainty within the market. I do not foresee the uncertainty as being seen as a positive, at least in the short term.
I would assume that if the trend stays in tact, as the election approaches the British Pound (currency) will weaken versus the dollar and euro. I’m sure currency traders are salivating based on the build-up to this event.
If Scotland does vote for independence, a short-term ruffle in European markets will likely be felt. I don’t suspect the impact to be overly large, but who knows what kind of turmoil could be cause from the political shift.
There’s a good chance you’re throwing away hundreds or even thousands of dollars’ worth of food each year before it has gone bad if you’re using sell-by and expiration dates as gauges for whether food is still edible. These dates are just manufacturers’ best guess of when food is at peak quality and are not related to safety, according to Emily M. Broad Leib, director of the Harvard Law School Food Law and Policy Clinic. Because of confusion over food date labeling, a family of four spends between $1,365 and $2,275 per year, on average, on food that is wasted.
Consumers can usually expect food to be safe for another five to seven days past the sell-by date printed on the package. The best test to tell if something is still good is to smell it or take a small bite. To learn more, see Confusing Packages Lead to Wasted Food, Money.
The US Department of Agriculture (USDA) estimates the cost of raising a child in today’s environment averages around $250,00. Yes, that’s the cost per one child. Depending on the region of the country you live in, the average can range from over $280,000 to under $200,000. If we look at the cost categories where do the expenses exist and where can you find savings?
- Housing – 30%
- Food – 16%
- Transportation – 14%
- Clothing – 6%
- Healthcare – 8%
- Childcare & education – 18%
- Miscellaneous – 8%
The interesting part of the breakdown starts with housing costs. What the USDA is doing in their analysis is attempting to compartmentalize the idea of housing. By compartmentalizing per person, then a dollar value based on average mortgage costs can be associated per child. This is a reasonable way to estimate housing costs, but is it actually applicable to your living situation?
The assumption the USDA is making for housing is that your need for housing expands as you having more kids. This a logical assumption. What might cause you to consider the logic flawed for your situation is the fact that you may not have a mortgage to pay at the time of having a child or the fact that your given housing size would not increase or decrease with or without kids. Therefore, in many situations you could consider the housing cost a sunk cost that would have been incurred at the same level with or without kids.
The housing category does deserve special attention in you personal analysis of the USDA’s estimates. At 30% it comprises nearly 1/3rd of the estimated cost. Based on the $250,000 average, elimination of 30% of the cost means a reduction of $75,000.
The childcare area is another category that could have some significant variances. If you have a relative available to watch your child/children or have one parent able to stay at home, the childcare cost is going to be greatly reduced. In terms of education, private school versus public school for K-12 education will create a huge variance, as well.
It should be noted that the analysis the USDA did excluded college expenses, since the age range is from age 0 – 18 years.
In terms of personal finance, it’s important to understand when very general studies and statistics are provided, you must find where you fit into the mix. Often times news stories are written to capture your attention, which large figures are thrown around, such as $250,000. It’s not until you deconstruct the information that you’re able to see how you might not be “average” or the assumptions made in the model doesn’t fit into how you’ve structured your finances.
It’s late summer in California and things are dry. As it turns out, the state is in the midst of a record setting drought. Records kept since 1895 indicate that currently the state is in the worst drought since records started being kept. Where can an investor turn in such times?
The tail end of summer is the most dangerous time in the western part of the U.S. for forest fires. Extreme heat throughout the summer compounded with the complete depletion from water run-off from the prior winter’s snow pack leads to a lot of dry brush. Fire mixed with dry brush is a combination for a big disaster.
Currently, two fires are burning in California. One is in southern California near Azusa and the other is in the foothills in the Sierra Nevada mountain range near the town of Oakhurst.
While no one knows exactly how the remainder of the fire season in California plays out, it’s a safe bet that additional fires will spring up throughout the state before the latter part of fall sets in.
So what investment idea is worth entertaining given the state of the state of California and the rest of the south western U.S.?
A small cap player in the fire fighting world is GelTech (GLTC.OB). Around 201o the company’s product, Fire Ice, made it on the list of approved products for fire fighting with the U.S. Forrest Service.
The company’s stock price is around the range of its 52-week low and has bounced around that range since May. The stock is thinly traded, which could mean large downward or upward swings in price.
If you bet on the idea of a heavy season of California wildfires, it’s quite possible that sales for Fire Ice from GelTech will jump significantly. In such an instance, the ramifications for the stock price could be quite dramatic. Thinly traded stocks that see a sudden surge of interest will experience dramatic price swings.
To see an example of how dramatic the stock price movements can be, look back at GelTech’s stock price around March and April of 2011 (above). The stock price jumped dramatically because of news coverage of the Fire Ice product. As you will see, after the hype subsided the stock’s price quickly came down to Earth, as is expected. This would be a short term trade position.