Poor Richard’s Report

Poor Richard’s Report

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My Mission: God has uniquely designed me to seek, write, and speak the truth as I see it. Preservation of one’s wealth while providing needful income is my primary goal in these unsettled times. I have been given the ability to evaluate, study, and interpret world and national events and their influence on the future of the financial markets. This gift allows me to meet the needs of individual and institution clients. I evaluate situations first on a fundamental basis then try to confirm on a technical basis. In the past it has been fairly successful.

Sir Winston Churchill- Hansard, November 11, 1947
“Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.”

How true!
My long time readers know that I have been upset over the policies going on in Washington. I was euphoric over Republican victories. That would soon turn to utter betrayal as if I had personally been violated. These self serving idiots increased their benefits while ours decreased. Greedy lobbyists stuffed their pockets with ill begotten gains from unsavory laws that protected rapacious players from botched derivatives that could be spawned world wide.
Fear not, dear reader, for during panics leaders assume the mantel of justice. The fluff is out of the economy and it is now working at lower and more sustainable levels. It is onward and upward from here…slowly. The problem is that we are now riding in a WWII jeep and they can turn over quickly. Others, however, will slosh through the swamps and come out winners.
The problem is that OP&R (Obama Pelosi & Reid) gave the stimulus money to the bureaucrats in Washington to spend, instead of to us.
The stock market has a few years to go before it resumes its upward trend. However, don’t despair my friends, because on the bottom there are several “submarines” that in time will surface to become mighty aircraft carriers.
Why am I becoming positive when every one else is finally so upset?
This is a democracy- no matter who is President. Politicians are afraid of losing their power. Not money, but power. No bribes can forestall the loss of power. We could have an entirely new congress in 2010 made up of “independent” thinkers that could take control away from the President. Though, it would have to be veto proof. Now that would be a real positive change!
I watched Dr. Ben Bernanke, Chairman of the Fed, spar with various congressmen over the Bank of America and the Merrill Lynch deal. Everyone, except for a few on each side, was trying to get the other to say Ken Lewis (Chair of B of A) was a nincompoop (and a liar). It has become rather obvious to me, and to others, that Mr. Lewis was way in over his head and tried to get so big that he became “too big to fail”. This will be a continuing saga for the business journals and the “bad boy” image. I foresee many so-called prominent businessmen going to prison while others commit suicide. You might even find a congressman or two with them as the cracks in the floorboards open wider.
Listening to Dr. Bernanke, I realized how many checks and balances there are in our government. Dr. Ben was giving straightforward, honest answers in clear sentences. Usually it was a simple yes or no. I loved it.
The next positive event for me was reading an article in Bloomberg quoting Louis Gerstner, the worthwhile former Chairman of IBM.
One of his positive comments was to combine the 16,000 or so school districts into 70 or 80. He says, “I could not have run IBM with 16,000 profit centers.”
The next idea was the one that stirred all the fine memories of yesteryear. He proposed putting a CAPITAL GAINS TAX of 80% on short term trades. After six months it would drop to 60%. Securities held for 5 years would have no tax. This would stop all the greed and speculation that is going on today. Derivatives and sub prime would become dead meat and most of the discount brokerage houses would fall by the wayside.
When it comes to finances we must have the strictest laws in the world with an easy way to enforce them. Easy money attracts slothful guttersnipes.
So you see we have a lot of winners out there that will be heard. Some of them are just hot air, but I believe men like Mr. Gerstner are raising “trial Balloons” and must be taken seriously. It took the Congress almost 10 years to enact the laws and this time around I believe it could be done in 5 to 7 years. That depends on how fast the Congress is turned out and in.
Today you do not need a lot of services throwing junk at you to become a successful long term investor. You don’t need a chart either, unless you can get hold of the point and figure chart that Dorsey Wright does.
What you do need is common sense. Look around you. What are the necessary items for everyday use? What is the price of the stock? Selling below $15? Dividends?
There was a man who, in 1937, bought 300 shares of Standard Oil of NJ for seven dollars. At the end of the year the broker suggested he take a profit at $21.00. He did. If he had held on to it he would have been a multi-millionaire. He would have owned thousands of shares of EXXON. That is why I am not a multimillionaire today. Looking back at it; if dad had sold just 100 shares he would have had his investment back, and he would still be wealthy even today.
Another true story is about a wise lady, who when she received enough of her dividends to make an investment, she would first visit her banker and ask him what stock he liked. Then she would visit her broker and asked him what stock he liked. When they agreed she bought. The only one she did not buy was IBM. Her heirs are wealth even today.
Then there is Sir John Templeton. The story about him is that after the Battle of Midway he walked into a brokerage house and plunked down $100,000 cash. (Today the cops would come.) He Told his broker to buy 100 shares of every stock on the American Stock Exchange that is selling at $5.00 or under and do not touch them until he gets back when the war is over. He amassed a small fortune that would soon become the Templeton Fund.
I have hundreds of good stories like this that came out of the depression. Some successes were common sense while others were good investigative situations. None of these individuals invested to become rich overnight, but believed in the capital system of long term growth without any gimmicks or “funny money”.
So when the investment waters become very muddy- it is time to explore the bottom to find those US Naval submarines that have the potential of becoming tomorrows super nuclear powered aircraft carriers. These should be considered INVESTMENTS not bets.

Internet Tip:
When you have a problem and you’re told to “call this number”. When the phone rings, the first thing you hear is that this conversation may be recorded for training purposes & Press one for English ……

Well here is the tip- DO NOTHING. After a minute an operator will come on the line and take care of your problem – Cheerio!!!

Richard C De Graff
256 Ashford Road
RER Eastford Ct 06242
860-522-7171 Main Office
800-821-6665 Watts
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This report has been prepared from original sources and data which we believe reliable but we make no representation to its accuracy or completeness. Coburn & Meredith Inc. its subsidiaries and or officers may from time to time acquire, hold, sell a position discussed in this publications, and we may act as principal for our own account or as agent for both the buyer and seller.