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.
Available at Amazon.com in late July 2015…
Enslaved by Consumption – How frivolous consumption fueled by debt is leading to your voluntary enslavement
Whether we are young or old, with debt or without debt, each of us has the power to guide our financial futures toward the goals we seek to achieve. To sail toward and reach our financial goals, we must have discipline.
Today’s personal finance topics are often composed of recipes. Financial advisors are paid to insist you save $X per year and invest in the market in order for you to achieve the life goals you have set before yourself. This advice is well and good, but only scratches the surface of the introspection that needs to be had amongst the majority of society. It is not that we lack the knowledge of what needs to be saved; the problem is we lack the will to save, the will to defer consumption, the will to say no to frivolous debt.
To cure our affliction we must understand the root causes of what is enabling detrimental patterns of behavior to shape and control our lives. To break the chains of enslavement, it is necessary for us to know how we arrived at this point in history, what is causing the problem to perpetuate itself and how we each can take action to reverse its progression. Breaking the chains of frivolous consumption must be done one-by-one, to not only create a better future for ourselves, but a better future for our entire society.
Enslaved by Consumption goes beyond the standard personal finance playbook and explores the underlying streams of thought that are causing us to compromise our future and voluntarily enslave ourselves. Whether you are looking for financial advice or are seeking to understand what is driving our nation of debtors, Enslaved by Consumption will take you on a journey that will lead to a deeper introspection and an understanding of the financial landscape that surrounds us all. It’s time you invest in yourself.
We live in a data driven age. Today data is being collected at every turn; from what you’re visiting online to the type of food you’re buying at the supermarket. Concurrently, data captured in decades prior is being unlocked to the public. This mass of data can be overwhelming, yet create various potential opportunities for idea seeking investors.
National Parks across the U.S. attract millions of domestic and foreign tourists annually. It’s a big business for the Park Services. Now, you can’t invest in the actual Park Service, which is part of the Federal government, but you can think about businesses that profit from increased tourism to National Parks. The first thing that comes to mind is outdoor sporting goods manufacturers and stores.
Changes in attendance to our National Parks, in my mind, reveal a larger trend that is occurring. If more people are visiting these parks, the general trend is likely the same for all general outdoor actives. Thus, their should be increased demand for outdoor gear and accessories. This is how trend tracking can lead you to investment ideas.
From the mid 90’s until 2014 you will notice a similar trend occurring within the three most popular National Parks in the U.S. In the mid to late 90’s Yosemite, Yellowstone and the Grand Canyon all experienced declines in visitation that continued for about 10 years. In the latter part of the first decade of the 2000’s, visitation began to increase and has continued to trend higher year after year.
What explains the change in the trend that happened in the 90’s and then reversed about 10 years later? I speculate that demographics played the most significant role. A large part of the echo-boom population was in or around their teenage years. This age range in general is not very interested in family vacations, especially the outdoor flavor. If you look back at the early 90’s and 80’s the attendance at these parks was experiencing growth. The demographic group was younger and more conducive to outdoors family functions. Fast forward to around 10 years ago and you find the echo-boomers starting families and thus a increase in attendance starts to occur at the parks; a signal that more outdoors activities are occurring.
I can only speculate what cause the trend to shift, but I do know that the current trend is for more year over year park visitations. This implies more outdoor activities happening across the country. If the general public behavior is shifting to more outdoor functions, then companies that provide such products for those functions are going to have an easier time growing their existing business. This creates a more hospitable climate for investors in such companies.
Where do you turn to when looking for pure plays in the outdoor recreation market? One option is Sportsman Warehouse Holdings (SPWH). SPWH operates 49 stores in 18 states that provide outdoor sporting goods including hunting, shooting, fishing and camping gear. It’s very well positioned to benefit from any increase in society’s inclination to venture into the great outdoors.
The bottom line is that piles of data are now accessible to us with the click of the mouse. A little work can reveal helpful observations that can lead us to achieving investment success.
Over and over we are told to save for retirement. The necessity and priority are not some secret knowledge only a few are entitled to. From the time we enter the workforce, and sometimes prior, the necessity of saving for retirement is stressed.
As an incentive, the federal government has created all sorts of special retirement savings accounts with odd names, such as 401k, 403b and 457. These accounts are tax protected, which means they are not subject federal or state taxes. On top of this, it is not uncommon for employers, particularly private companies, to offer some type of match when you contribute an account.
Saving for each of us is a choice, just as consuming is a choice. The choice to consume is easy, while the choice to save takes restraint and control. From the time we enter the workforce and progress through our career, it is easy to deffer saving for retirement to a period when we make X dollars annually.
As life progresses and our income rises, new obligations come and, if we’re lucky, some of the old obligations go away. These obligations put strains on our cash flow and the resolution of obligations free funding to be reallocated.
If retirement savings is never made a priority, then it will never occur. Continually saying that the savings will occur once we reach a certain amount of income is simply a rationalization to ourselves and to others as to why we are not saving now.
A million opportunities exist for us to spend our money. It’s not as if we are going to reach a certain income level and realize that we have exhausted the variety of goods and services we can spend our money on.
If retirement matters, then we will take the time to save for that future day. If it does not matter, then we will give lip-service to the idea, but never engage in contributing towards the future and continue to work to death.
Many financial decisions are made in the month of January based on resolutions and the time people take to reflect on where they want to be by the end of the year. Don’t let saving for retirement take a backseat for another year.
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|
It’s a Wonderful Life is a classic Christmas movie. It was filmed in 1946 and is set in the teens and twenties of the 1900’s. This past weekend I watched It’s a Wonderful Life again, but this time it was in color and high-definition (HD).
As a result of the color and HD, I found myself paying more attention to everything in the movie. It was if I never had watched it before. Reflecting back on the experience, I see a number of great investment and general fiscal management lessons that appear in the movie.
If you’ve watched the movie before, you know a large part of the movie revolves around the town’s savings and loan business (bank). During the movie a run on the bank occurs. The lobby is packed with customers demanding their money. In an attempt to convince and educate the customers as to why they don’t want to with draw all their funds, George Bailey (main character), appeals to the groups communal senses. Within a few short breaths he conveys key fundamental principles about how banking works. The saver’s dollar is in the loan of another borrower. The savings aren’t static, they are dynamic and at work throughout the community in new housing construction and business operations. It’s amazing to see that which could be explained in a very complex manner be explained with such clarity and simplicity.
The point above hit me like a breath of fresh air. Not so much that the message was simple, passionate and informative, but it put in proper perspective the role and need of the saver within society. Today the idea of saving is too often vilified and painted as the activity that’s holding down economic progress. Outside of firing up the printing press and dropping money from helicopters, where do lenders find the capital to borrow? Savers.
The second part of the movie that stuck with me was the conclusion. In the end George Bailey is provided the opportunity to see the world as if he never existed. The change screams opportunity. You, whether it be investing, or some other area in your life have the ability to take action. You have the ability to craft your future. Doing so takes work, but it’s possible.
Investing in the market isn’t easy. Beating the market is a feat even most ‘experts’ have trouble with. Yet, it can be done. Through research, observation and most importantly being disciplined, you can overcome that which impairs you.
Where do you start? Well, find a good resource. Let’s say for example Barron’s online or Investors.com and dedicate yourself to reading a certain number of article or specific section every day. Every day that passes you’ll not only learn more, but you’ll start putting more aspects together. That which was so daunting at first will seem less with each passing day.
How do you eat an elephant? One bite at a time.
Between 2012 and 2022 the U.S. elderly dependency ratio is expected to increase by 32%. This is one of the ramifications of the exodus of the Baby Boomers from the workforce and into the realm of retirement. This shift that is currently in motion will have large implications for investors.
One of the primary goals retirees have is to travel. According to Merill Lynch research, Baby Boomers have a combined annual travel budget of $120 billion. With a stronger economy and more retirees, companies suited to provide travel solutions will be positioned to thrive. Where do you invest?
Carnival (CCL) and Royal Caribbean (RCL): Lower energy prices should favor cruise line operators. Also, the industry has high barriers to entry (think the cost of a single ship). Therefore, when the industry experiences growth, the increase will be felt amongst players that are known within the industry, not a smattering of off the wall newbies.
Marriott International (MAR): Hotel inventories have not expanded as they did in the last decade, primarily because of recessionary pressures. In our current state of economic expansion, new inventories of hotel rooms will come online, but not over night. As supply works to catch up with demand, hotel room rates will rise and thus the profit margins of hotel operators. Marriott is a best in class hotel operator. It serves two main markets; business travelers and mid-high level luxury traveler. Their properties are very well positioned to reap the benefits to growth in travel amongst Boomers and the general population.
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?