Measuring the Economy

It is very difficult to get a true gauge of the economy, the media is full of pundits and economists who create a dizzying amount of idle speculation. Getting down to brass tax is critical. When evaluating a business as a potential investment I often find myself in similar circumstances- too much information. To get past the noise I find the best thing to do is to focus on the fundamentals. In looking at the overall economy I think a similar approach can be taken.

The Vancouver port is one of the largest on the western sea board.  If you are exporting odds are the product went through this port. If you are importing odds are it came through. If we want to evaluate the overall health of the economy looking how the inbound and how outbound shipments have varied is at the very least an interesting prospect and perhaps can also provide some insight into the overall health of the economy.
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Greece Debt Default

Greece is in a bad state, there is no doubt about it. When a country builds up a billion dollars in debt (some estimates are 30% of GDP) and shows no mechanism to repay there is little good that can be said about the circumstance. Without the continued assistance of an EU German backed bailout there is a very good chance Greece will be forced to default on its debt. If you were to believe the general media this is tantamount to the outright failure of the nation which can result in nothing short of the entire country descending into chaos and likely taking the rest of Europe and the West with it.
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RSP and Tax Advantages

I don’t mind paying taxes but if there is ever an opportunity to pay less I am certainly interested. When my wife and I bought our home we had amassed a nest egg in RSPs. We cashed in the RSP funds as part of the first time home buyer’s plan.

This plan allows anyone who has not legally owned a home in the last five years to cash out $20,000 of RSPs for each person on title without enduring the regular taxation hit of withdrawing funds from an RSP- assuming you are willing to refuel your RSP back to its initial value over the course of 15 years. While this is certainly a help if you are coming up short on a down payment, it can also come in handy if you just want a nice tax advantage.
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Obama’s Bad News For Investors

While I have often been impressed with both President Obama’s speeches and candor I honestly was not a big fan of the President’s speech to Wall Street this last week. His comments, in my interpretation, amount to nothing short of bad news for all long term investors.
Obama, in his speech, said:
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Presidents and the Stock Market

How good are Presidents at predicting the future of the market? Often times they are down right terrible, the spin in speeches is often more prevalent than the truth. With President Obama’s comments about sunshine being the best disinfectant I thought it would be interested to see how his comments match up to reality.

The following collection represents many of the quotes Obama has made related to the US economy. Green arrows mark those days in the market where President Obama has made a positive comment about the future of the United States, red deltas indicate a day where President Obama has made a negative comment on the future of the economy. Click on the red and green arrows to read the exact quote.
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Recession & Depression Facts

The following are a compilation of interesting US recession facts I have collected by examining the DOW indicies between 1929 and now. All facts are compiled as a result of data drawn from yahoo finance and the use of the wikipedia page List of Recessions in the United States.

• The longest US recession took 84 months to run its course (Depression of 1807)
• The shortest US recession took just 6 months (Recession of 1980).
• The average recession/ depression lasts 20 months.
• The median recession runs 14 months.
• The current recession has run 21 months.

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2008 Recession and the Great Depression

Chiefly for the purposes of comical perspective if this was the second coming of the great depression this is where we would be as of this month.

Data points show change in % from previous months market close on the DOW.

Value Investing Four Filters

I am always looking for good high quality companies that are trading at a discount. Finding these companies is both challenging and time consuming. Finding cheap companies isn’t hard- finding cheap good ones is. A professional investor will spend the entire day researching company after company trying to find something the market has overlooked. As an amateur investor I don’t have that kind of time so I needed a method to reduce the number of companies I examine every week to a small handful that merit my further investigations.
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Is the stock market crash over?

Is the stock market crash over, Has the market rebounded, are we safe to jump back in?

Well lets look at the current state of affairs.  Unemployment rates are mounting all around the world and show no signs of rebounding. Companies both big and small are laying staff off and are revising financial estimates down for the coming year. Banks are still on life support. I just don’t see the good news.
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The Best Month To Buy Stock

Before starting I should say that I am not a fan of market timing, I think trying to plot an irrational event rationally is next to impossible. However, having said that, if you have the choice between two options both with equal merit why not pick the option with a track record of previous success? In my case the question is, should I get my tax forms prepared early and wait for the final forms to arrive next month and then send in, or wait until the final forms arrive before I start putting everything together.
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Buy What you Know: A Recipe for Investing in Tough Markets

“Buy what you know”, this quote first coined by Peter Lynch has been interpreted a number of different ways throughout the years. I am going to add to that list and suggest there is a way to interpret it in this economy and secure your investments.

During the stock market crash of 1929 almost all companies plummeted, but some investors still profited by picking companies that could make money in the economy of the day. If some of the dire predication about how long the current recession will continue are correct we may be entering a similar phase. So what companies are setup to make money when times are tough? Companies that serve our core human needs.
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Banks Stopped Investing and Started Speculating

Over Christmas I have had a bit of a chance to catch up on some reading, one of the books I read through was Garrett Gunderson’s Killing Sacred Cows: Overcoming the Financial Myths That Are Destroying Your Prosperity. In Gunderson’s book he suggests individuals look at investing in the same way that banks do as they have been so extremely efficient. As Gunderson puts it banks mitigate investment risk in personal loans by doing the following:
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• Check your credit.
• Secure their investments with collateral
• Require a down payment
• Determine the interest rate
• Determine the payment

Presidents and the Market

I was flipping through some books in the book store over Christmas I saw something similar to this in the Investor’s Almanac. So I borrowed the idea for this post (thanks Investor’s Almanac).
With President Elect Obama’s swearing in ceremony coming up in about 25 days it is somewhat interesting to have a look at what the first year in office typically looks like for new U.S. presidents.
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President Bush(R)
President Clinton(D)
President G. HW. Bush(R)
President Regan(R)
President Carter(D)
President Ford(R)
President Nixon(R)
President Johnson(D)

Automotive Bailout

A little bit of fun one today after so many serious articles. I was talking to my good friend the other day who works at a newspaper he was telling me how shocked he was that the bailout did not pass in its current form. Apparently he did not read my post in November

This is a perfect example of Mr. Market in action. In this modern era newsrooms don’t do investigative journalism, they don’t have the budgets, they recycle stories and do very limited research. If as a value investor you do your own research you can get the upper hand on the rest of the market.

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Buffet on the Economy

I enjoyed this so much I thought I would share it. Clipped from a Fortune Magazine Blog earlier:
Warren Buffett emailed this note to the directors of his company, Berkshire Hathaway (BRK.B), Tuesday after he heard that the U.S. Treasury sold $32 billion in 4-week bills at a yield of 0%:

Insider Traders Get Hungry

There is on old phrase, people sell stock for all sorts of reasons, but only buy them for one reason.

I am a follower of insider trading, there is just too many companies to look at out there, insider trading can help raise a company onto my radar. I thought I would put up this chart I put together. Fore color are the number of transactions made by insiders (according to SEC data) back color is the Dow Jones (for reference purposes).

A few random observations:
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No Senate Bailout for Auto Industry (with new money)

Ok, at risk of tainting my own poll a friend asked me my thoughts on this question today so here we go….

For the bailout plan to pass it must go though the senate first. Here are a few facts:
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1. The US is an extremely polarized country with Republicans and Democrats standing on either side of many issues. When it comes to the issue of bail outs Republicans do not fundamentally support it- it is really that black and white if it ain’t laissez faire they aren’t interested. (Why did they support the bank bailout you might ask? Because voters were going to the polls in 30 days.)