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Archive by category: Quarterly NewsletterReturn
A Fool and His Money Are Soon Parted (Hers Too)We're not quietly intimating that investors who buy stocks based on research reports are foolish. Rather, we are emphatically shouting it from the rooftops. You may remember that after the high tech stock craze of the late 1990's, and their subsequent huge crash in the early 2000's, the SEC handed out some huge fines and reached settlement with ten Wall Street firms. These firms agreed that they would separate their investment banking business from their research departments.Why the separation? The SEC noticed that when a public company hired a Wall Street firm to raise capital, that firm's research department just happened to overwhelmingly recommend that their retail customers buy that stock. It gets worse. Evidence then came to light that a certain firm's research staff actually made in-house jokes about how poor the buy-rated company's financials really were. This finally got the SEC into gear. That's when W...
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Picking WinnersWhen your TV shows a skier shooting a rifle, and there are no police involved, you know it is once again time for the Winter Olympics. Team USA performed remarkably well this year. Few expected that. Attempting to predict just which athletes would win their events proved difficult, if not impossible. Some examples:Bode MillerIn 2002's Olympics, Miller won 2 Silver medals in alpine skiing. In 2005, he won the overall World Cup title, the first American to do that in decades. He was the Gold medal favorite in the 2006 Olympics. What happened? Nothing. He didn't place in any of the 5 races he entered. He did, apparently, enjoy the Olympic nightlife, and appeared unfazed when media criticized him for his unprofessional behavior. In 2007, Miller quit the US Team, and slowly sank in both fame and wins until 2009 when he completed his worst season on record, with no wins on the World Cup circuit. He was quoted: "The fire goes out after a while," and hinted at ...
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It's All In Your HeadYou may have heard the story about a set of identical twin sons (David and Donald) who were born to very horrible parents. The alcoholic father was physically and mentally abusive to his family, and due to criminal acts, was sent to prison for life when the boys were six. Their mother was a heavy drug addict, and died when the boys were nine. The brothers were then separated and sent to different facilities, where they stayed until the age of majority. They never reconnected with each other. When the brothers were thirty, a researcher located both and interviewed them.Donald was in prison as a result of various crimes. He was an alcoholic, a drug abuser and had the AIDS virus. He was a loner and had never held a steady job. When asked why he turned out the way he did, he responded that "with a childhood like mine, how could I have turned out any other way?"David was a manager in a small consulting company. When he told the researcher about his early c...
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Oprah’s IronyEven subterranean rock-dwellers know who Oprah is. She’s a talk show host of the highest rated program of its kind, a publisher and literary critic, an actress, and a TV and film producer. She has made the world’s most powerful celebrity lists several times, and both CNN and Time have called her arguably the most influential woman in the world. In 1991, at age 41, she became the only African American on the Forbes 400 World’s Richest People list, with a net worth of $340 million. In the last two decades, her wealth has only increased. She became the first African American billionaire and was ranked as the richest African American of the 20th century. Her annual income has been above $250 million in each of the last 2 years.The power flowing from her fame and wealth has allowed Oprah to have free reign over her creative and charitable desires. She not only gives away freebees to disturbingly appreciative members of her talk show audience, but Forbes ...
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Ding, Dong, the Wicked Witch is DeadIf you were a child the first time you saw The Wizard of Oz, chances are you covered youreyes at least once during the movie. That ugly, green-skinned witch or those creepy flyingmonkeys were most likely the culprits. Adults viewing the film for the first time probably didnot cover their eyes. After all, they knew that the green skin was makeup and the monkeyswere little people dressed in costumes.That's not to say that adults never get scared when watching movies. Immediately afterwatching Alfred Hitchcock's bloody bathroom scene in Psycho, there were most likelythousands of women (and a few men) who thought twice about taking a shower when homealone. Or how about hitting the surf the same day you saw Jaws? Or thinking about satanicfears after viewing the head spinning, bile-spewing, possessed little girl in The Exorcist?Unfortunately, the fears felt from these movies are based on some reality. Knife wieldingpsychopaths do exist, some shark ...
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A GlimmerAfter a miserable February and early March, wherein the markets made a sixth new low since itpeaked in October 2007, something interesting happened. The market actually went up. In fact, intwelve trading days, it moved more than 20%. That is the S&P 500's greatest bounce in the shortesttime since 1938. Should we be excited, or leery, or just continue to hide under the bed? Perhaps abit of all three. During the last three weeks of March, there were also a few surprising news itemsthat got the market's attention. Among them were:• Citigroup announces profit for the first two months of 2009.• New and existing housing numbers positive for February.• Retail sales and personal consumption reports suggest growth in 1st quarter '09.• Rapid liquidation of February's business inventories reported.Clearly, there was other economic news that was not so cheery, but the markets showed someoptimism with a quick upward response. So, ...
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Is It Soup Yet?Have we bottomed? Is the worst over? Has the bull market started yet? No matter how you say it,many investors are thinking, or at least hoping, that the market will go no lower than it did in midNovember. The above chart shows the S&P 500 Index from its high in October 2007 until the end of2008. We can see that there have been five distinct "bottoms" or new lows, since peaking in late2007. Notice that some of the bottoms are literally single day events, while others are double ortriple bottoms that take several weeks or months to occur. With each new low, the market hasbounced back up, with gains of 10-20% or more, only to come down and make a new low.The point of this graph is not to bring back miserable memories. Rather, it is to show the difficulty in"calling" market bottoms. We may not know for several more months whether the November 2008low is in fact the bottom or not. If it turns out that November was the low, then chances are, by thetime ...
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They Shoot Horses Don't They? Despite the fact that global Capitalism is more prevalent today then ever before, it does have itsdrawbacks. For starters, it doesn't have empathy. It doesn't feel sorry for those negatively affectedby it. You're in a recession? Tough! Your company's gone bankrupt? Big deal! Can't feed yourkids? Not its problem! Capitalism is similar to the law of the jungle -- survival of the fittest. Whensupply and demand line up against each other, Capitalism really doesn't care who wins. The weakbecome dust, and the strong continue onward until a future time when they may also hit theground. With Capitalism, it's all in a day's work, and there are no emotional repercussionsregardless of the outcome.With humans, it's a different story. We simply aren't fond of economic hardships, or losing our jobs,or not providing for our families. Consequently, we empower our government to attempt to tweakCapitalism so that we can thrive fro...
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Pachyderms & AssesElephants and donkeys. Republicans and Democrats. No matter whatyou call them or what your affiliation, the conventions and big election arecoming soon. In less than four months, we will all know who our nextPresident will be.This subject may make you somewhat nervous, just in case the currentmarket conditions haven't made you nervous enough. It appears to be aclose race, with the Democratic candidate having as much chance to winas the Republican. Conventional wisdom says that a DemocraticPresident poses some dangers to the stock market and investing ingeneral. Whether correct or not, many see Democrats as "tax andspenders", while viewing Republicans as champions of tax cuts.Republicans are known as pro big business, whereas Democrats are seen as pro-regulatory andpotentially anti stock market. This line of reasoning says that, simply put, a Democrat in the WhiteHouse is a scary proposition for the average investor.Fortunately, as we have discussed i...
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Bombs AwayBy the time you see the flash and mushroom cloud, it’s probably too late to run from an atom bomb. Recessions and bear markets aren’t much different. When you realize you are actually in one, the damage is already done. By that time, you are undoubtedly closer to the bottom, and it is historically a good time to be in the market.Bear markets are defined as 20% retracements from market highs. Using that formula, the broad U.S. market has not quite become an official bear as of the end of the quarter. However, that does not alleviate the unpleasantness of watching the monthly declines on your account statement. The first quarter of 2008 was the worst in the last 5 ½ years. After hitting a market high last October, virtually every month has been down.The only thing worse than the stock market has been the news that has accompanied it. The bloodletting of the over-inflated US single family housing market, the frozen-credit mess that started with unregulated sub...
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