Monday, March 26, 2012

Government is the Problem

Heading off to east central Ohio to visit relatives & help out my home town.

Government is part of the problem at all levels. The foolishness of the people running the government and their waste and favoritism puts private people in cement overshoes. Let's get rid of half of it.

Monday, March 12, 2012

Only Dividends Matter

Your writer will take a reactionary stance here, contrary to most modern finance theory.

For the long term investor, only dividends matter for the value of a stock.

I chose that terminolgy for the reason that there is a "theorum" taught in business schools and by finance academics that dividends don't matter.  They are totally wrong.

A simple gedanken experiment proves my case.  Suppose you buy the IPO of a stock, such as GM, EK (Eastman Kodak), or AAPL and, as a long term investor, simply hold on to it ... to the bitter end.

What money do you ever receive?  The "bitter end" - the eschaton of stock investing - is either a cash buyout or bankruptcy.  All cash buyouts are pretty rare nowadays.  Can anyone name one in the past few years?  Bankruptcies are much more common:  GM, EK, etc.

Suppose the firm never pays a dividend.  If the end result is bankruptcy, the value of a long string of zeroes is ... a big zero. 

Suppose the firm pays dividends.  Then even if the end result is bankruptcy, the long term investor has received some value that he can reinvest in bonds or other stocks.

Over the long term, the bankrupcty of firms is rather common.  Management squanders cash and makes bad investments.  How we can marvel at the recurring "non-recurring" losses!

They buy back stock.  That only benefits the sellers by propping up their selling price.  Who is a seller?  For one, management is.  They use stock buybacks to prop up their pay.

Why is AAPL stock apparently undervalued?  No dividend.  They have a huge and growing hoard of cash.  The "market" obviously thinks management will squander it.  And continue to squander it.

GE bought back huge amounts of stock while the price was high.  And then proceeded to sell huge amounts when the price was low during and after the Panic of 2008.  Buy high, sell low - brilliant management.  Dopes?  No, self-serving hogs!

Long term investors should only pay for dividends.  Period.  Full stop.

Monday, March 5, 2012

Poor Leadership

Bad decisions by the leaders of a strong nation weaken it massively, leading to a future downfall.  History of great nations of the past shows this.

Read the history of the East Roman Empire, aka Byzantium.  That nation had two falls.  The first occurred circa the years 560-630 after Justinian bankrupted the Empire with endless wars.  The East Roman empire was weakened by the debts, had a short reprieve but was further weakened in another war, then proceeded to lose huge swaths of territory to the Arab invaders in the east and Slav invaders in the west as its poor leaders and weakened army lost battle after battle against enemies it could have easily crushed in its heydays.

The second occurred in circa 1025-1072.  The successors of Basil II reversed his decisions that aided the common farmer and small landholders.  The aristocracy was permitted to gobble up huge swathes of land and reduced the people to serfdom.  Thus the backbone of a loyal army was gutted.  The army then was forced to rely on mercenaries who were unreliable in key battles, including the disaster of Manzikert in 1072.  Further civil strife led the Seljuk Turks to occupy the crucial territory of central Anatolia.  After that, the Byzantine Empire was trying to survive with one arm - its Balkan territory.  Without the diversity of two economic bases, the Byzantine Empire, which at the time was far advanced technologically and economically over any empire or nation within thousands of miles, was mortally weakened.

Third, consider the great nation of Poland.  In the 17th century, Poland was one of the largest and most powerful nations in Europe.  Its aristocracy destroyed its unity in their greed for more power and land.  Poland began a one way path to oblivion and partition.

What about America?

We have a huge debt still increasing; the money is being wasted and not spent on national improvements.  We are being weakened by endless wars in parts of the world mostly irrelevant to American interests.  The billionaires, CEOs and government bureacrats and thier allies grab more and more while the living standards of the common people are stagnant, National "leaders" bicker and fight for their own power while ignoring the needs of the common people.

Our only hope:  the people will choose wisely ... soon.  We need true leadership, a 21st century Teddy Roosevelt who will give the common man and woman a square deal, beat back the power of the Ruling Classes and their Pharisee allies, and stop fighting pointless wars that only enrich the military-industrial complex.

Monday, February 20, 2012

Rewards for Failure

This post is not about the Ruling Classes (CEOs, government bureaucrats and politicians) who loot the public to get richer & more powerful while failing to deliver anything to the common man and woman.  This post is about the beefers, aka big, evil funds, mostly private investment partnerships also known as hedge funds, who led the hoard of financial vikings who looted the nation before and during the Panic of 2008 and its aftermath.  A new book shows that nearly the entire industry is a scam.  The hedge fund managers make plenty of money, but the investors get nothing cumulatively.  Remember that old book and adage about the financial industry during the Great Depression - "Where are the Customers' Yachts?".  The hedge fund industry is a reprise writ large.

A review of "The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to be True" [Simon Lack, Wiley] in the weekend Financial Times contains all you need to know.  "If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good."

More: "Never in the field of human finance has so much been charged for so little."

And:  "The prime purpose of the sector is to provide jobs and wealth creation for the industry professionals:  managers, consultants, allocators, prime brokers, and other service providers."

The total amount of money lost by hedge funds in the Panic of 2008  - "some $450bn-odd vaporised in a single year ... destroyed all the value that hedge funds ever created."

The managers made big money. "From 1998 to 2010, the cumulative split was just $9bn to investors versus $440bn to managers."  That is a breathtaking vision of pure greed and fraud.

The author has the numbers and data to back up every conclusion ... and every smirk of disgust at the hogs at the trough.  In the end, though, he blames the investors.  They are the stupid cows being milked and leeched by the parasites in the hedge fund industry.  They want to get ... more.  And they get what they deserve - less.

Your author, the Bunkerman, has been saying and writing this for years, to the smirks and jibes of various pontificating (and well paid) pundits and some hedge fund managers themselves.  It's nice to see Bunkerman proven right ... again.

Thursday, February 9, 2012

Woof! Woof!

This little rally in the morning has woken up Krypto from her nap.  She has given me re-balancing sell orders in US stocks, Europe and Emerging Market stocks.  All proceeds to cash.  The larger orders are in Europe, next US, last Emerging Markets.

Monday, February 6, 2012

Hmmmm ...

Krypto opened her eyes to check the markets, but stayed on the couch.  Close, but ...

Jobs data were better.  Without Ben doing his heavy shelling, the common man would be suffering far more than he now is.

Giants win.  Oh well, it was a good game.  My Super Bowl feast of roast beef, sweet potatoes, sauteed red peppers & onions, Lucky Star Pinot Noir wine (vintage 2009) and a whoopie pie for dessert was suberb. 

Interesting article in the NY Times about the views of an officer with mucho experience in Afghanistan.  His opinions check with what I've heard from some grunts.  That ten year war is another Vietnam - a complete waste on faulty strategy & tactics that is merely enriching the military-industrial complex.  Thank you Bush-Rumsfeld-Barry for making the same mistake of your grandfathers.  Dopes.

Declare victory for getting bin Ladin and come home.

Newt is cratering - good.  What a whiner!  That guy is a disgrace, self-promoter and seems to think with another organ of his body.

Davos was a non-event.  Good.  People are learning.

The common man and woman are still in shock and suffering much hardship.  Either they or someone they know are out of work or seriously underemployed or have no hopes.  There savings are disappearing.  Retirement is a dream.  Bagging groceries at 80 ... but wait - the supermarkets want to replace them with machines, too.  Thank you, US government tax policy.

The rich & powerful comtinue to feed at the trough.  Witness P&G executives.  They write off billions, yet collect millions in pay without bearing the pain of their mistakes ... and try to cover up their failures with more layoffs of the innocent.

When will people begin to say the Emperor is naked as a jaybird?

CFOs contine to hoard cash in the US and overseas and refuse to pay dividends, while buying back stock to prop up the value of their restricted stock and options.  Utterly dishonest behavior.  Why is Apple stock at such a low P/E ratio?  The market thinks they will waste the cash.

There is nothing wrong with free enterprise that a heavy dose of integrity and fair play cannot fix.  Get rid of the trough and made the hogs truly perform for their pay.  Cut their pay!!!

Barry is a joke.  He has done nothing for three years to help the common man and woman.  Without Ben, he'd be at 30% in the polls. 

Oh well ... Is there nothing new under the Sun?

Yes ... the solar cycle is weak, likely a harbinger of a multi-decade cooling period with major storms.

Thursday, January 26, 2012

Snooozing ...

Krypto is still snoozing on the sofa ... what a princess!

Her model is quiet, no orders.  We are riding the bull elephant to the next water hole.  My guess is that arounf S&P 1350 she will do some across the baord selling to stock up on provisions [aka cash] for the next beefer panic.

This post, while boring, proves that I still work for the benefit of my millions of readers :)