Monthly Archives: February 2016

Proverbs 2:1

You’re never too old to learn.

You can’t teach an old dog new tricks.

A word to the wise is sufficient.

Talk is cheap.

Do unto others as you would have others do unto you.

Nice guys finish last.

The squeaky wheel gets the oil.

Silence is golden.

A stitch in time saves nine.

If it ain’t broke, don’t fix it.

Sell The Rip

The Economy: Contrary to the gloom and doom that has dominated the mainstream media recently, most economic indicators continue to show a U.S. economy that is expanding. Industrial Production rose more than expected. Capacity rose more than expected. Producer prices rose more than expected. But weakness was seen in housing starts. With the stock market in the tank and many portfolios bleeding, the Devil-May-Care exuberance of the past few years has left the zeitgeist. Mark Twain’s concern about the return of his capital instead of the return on his capital, is in full bloom. Yes Mabel, the stock market can go down despite the arcane mutterings of central bankers. While trillions in QE failed to validate the wealth effect, the global stock market selloff has gotten the full attention of the hoi polloi. The danger will always be that the media drumbeat of stock market doom will scare the U.S. consumer into hibernation, thereby creating an actual recession where one didn’t exit.

Food for Thought: The stock market rally of the past few days has been a welcome break from the kamikaze dive we’ve experienced since mid-December. This is the time for caution. We’ve urged you to have an exit strategy. Now is the time to implement that strategy. The recent strength in the stock market may be a bounce before we head lower. Selling into this rally and raising cash is the prudent move.

Uber Buyer Beware Uber

Uber is the most famous of the Unicorns. A Unicorn being a private company, in the pre-IPO pipeline, valued at more than $1 billion. Uber is the Big Dog in this space. It is seen by some as more valuable than AT&T, Kraft Foods, Delta Air Lines, General Mills, General Motors, CBS, Northrop Grumman,  Kroger, Hershey, Harley Davidson, Campbell Soup, Clorox, Hertz, MGM or Mattel.

Some say this high valuation is a fantasy number. They point to the fact that Uber is not a technology company but is a service company. After all, they don’t make anything but rather provide the service of connecting riders and drivers. Both rider and driver use their own cell phones to access the Uber service.

I used Uber for the first time this past week. It was not the experience that I expected. Uber has marketed itself as the “Anti-Cab Company” … as the alternative to the money-grubbing monopolistic cabbies with their fixed rates and arrogance.

I discovered that, contrary to their marketing image, Uber is just another cab company. Their technology may be different but the often adversarial relationship between driver and rider is very much alive.

A significant negative for Uber is that they stack the deck against riders with “Surge Pricing.” My experience with Surge Pricing was that it changed by the second and raised my fare by 350%. My 2-mile trip from Union Station to the Los Angeles Ritz Carlton cost $40. Yep, you read that right. $40 for a two mile ride. If that isn’t money grubbing highway robbery, please tell me what is. This occurred after the Uber driver who initially responded to my call, cancelled on me after I had stood in the 90 degree afternoon heat for 15-minutes waiting.

In all my years of taking conventional cabs, I have never had a cab that was dispatched, cancel on me by the driver. … and I’ve never had a fare jacked by 350% … anywhere in the world.

Having been burned by Uber, I took a conventional cab on the return trip from my hotel back to Union Station. The conventional cab cost $15 dollars including tip. There was no question of the cabbie cancelling on me. There was no question of the fare jumping to $55.

Uber may have its place as a recreational provider, but if you want true professionalism and reliability take a conventional cab.

Oil Opportunities

The Economy: Fed Chair Yellen appeared before Congress this week. She put on her most patient Grandma Face for the Alfred E. Neuman grandstanding of her inquisitors. Yellen acknowledged that the economic environment had become more uncertain. She mentioned falling stock and commodity prices, tightening credit conditions and uncertainty over China as causes for concern.  She observed that weakness in the global economy had made life more challenging for U.S. businesses. In response to questioning she indicated that while an interest rate cut was not in the cards, 4 increases this year was still a possibility. When asked about a possible Fed move to negative interest rates, Yellen said that the Fed hadn’t determined the legality of such a move. In short, specific targets are out and Fed opacity is back in.

Food for Thought: Oil is presenting a rare opportunity. Timing is everything. There are a variety of ways to position for this. Stocks, bonds, mutual funds, exchange traded funds and notes, futures and options are examples of how to participate in the coming price rise. We believe that a pure oil play is the most effective way to capture value. Contact us if you have questions.

Super Bowl Time

It flies and it drags. It’s precious and it’s wasted. It’s on my side and it’s passing me by. We have too much of it on our hands and not enough of it in the day. It’s endless and it runs out. It’s a gift and it’s a thief. It heals all wounds and we have to kill it. Time is a shape-shifter. Time Can’t keep its story straight. The Kentucky Derby is the fastest two minutes in sports, and a two-minute penalty killin the Stanley Cup playoffs lasts a century, but time claims they’re both 120 seconds. “Time” by Steve Rushin Sports Illustrated.

Stock Market Correction by the Numbers

The Economy:  It was a week of ugly numbers. The ISM Manufacturing Index came in at 48.2 indicating contraction. Likewise the ISM Non-manufacturing Index reported lower than in December. Construction spending posted its first decline in 1 ½ years. U.S. Durable Goods orders were down. Oil continued its fall, closing down $2.60/barrel from last Friday. January employment down. Foreign markets are also ugly. Chinese manufacturing contracted at the fastest pace since 2012. The Bank of England cut global growth forecasts. Super Mario scrambled to reassure markets with a review of QE in March. In many countries there are negative yields out to 5-years. We see talk of further interest rate hikes by the Fed as fanciful. The carnage in stocks continues with some of the most popular names getting hammered down from their highs: Amazon (AMZN) down 28%; Apple (AAPL) down 29%; Netflix (NFLX) down 37%; GoPro (GPRO) down 89%. But the “1929 Look Alike” award goes to LinkedIn (LNKD) down 44% overnight. Self-medicate with Super Bowl 50 on Sunday.

Food for Thought:  The stock market correction was long overdue. Though painful it’s been an orderly move down without signs of panic. We follow a number of indices which show how different sectors are performing compared to the major averages. From their 2015 highs, the following indices are down as follows (rounded): S&P 500 down 12%; NASDAQ down 16%; DOW down 11%; Russell 2000 (Small Caps) down 24%; Biotech Index down 36%; Semiconductor Index down 21%. Year to Date for 2016 the same indices are down as follows: S&P 500 down 9%; NASDAQ down 15%; DOW down 8%; Russell 2000 down 15%; Biotech Index down 32%; Semiconductor Index down 13%. Using August 19, 2015 as the date this correction began, we may have another month to go. Hang onto your hat and contact us if we can help you, your family or friends.