Tag: STOCK MARKETS

  • Poor Richard’s Report

    Poor Richard’s Report

    Poor Richard’s Report

    Over 300,001 readers
    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
    860-315-7413 Home/Office
    rdegraff@coburnfinancial.com

    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.

  • Poor Richard’s Report

    Poor Richard’s Report

    WARNING !

    THE SELLERS  HAVE NOT STOPPED SELLINGS SO ONCE DEMAND DRIES UP MOST FINANCIAL MARKETS COULD SEE A SUDDEN DOWN DRAFT. BE VERY CAREFUL

    CHEERIO !

  • POOR RICHARD’S REPORT

    POOR RICHARD’S REPORT

    Poor Richard’s Report                                                                        

     

                                                                                                    Over 300,000 readers

    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. 

    March 10, 2000 the stock market topped out.

    March 10, 2009 the stock market bottomed. 

    This does not mean it is going to run back up. The leaders of past bull markets do not lead the charge in new bull markets. This bear market has been the second worst in our history and probably the worst ever in other countries. It will be 5, 10, maybe 15 years before the averages make new highs- that is, if they do not change the components too much. Stocks bottom when the future looks the bleakest. So I believe we are near or at the bottom of a major cycle. It is a market of stocks not a stock market.

                 I have written that the market has bottomed, but the recovery is going to be long and painful for some. We have to institute new global regulations and retrain ourselves to be more frugal. We buy a home because we love it and want to live in it, not to turn a quick profit. We buy a stock because the company has a good product, provides a necessary function for the good of the community, and over a period of time will grow.

                Countries and consumers are tapped out. The ratio of household debt to Gross Domestic Product (GDP) rose from 66% in 1997 to 100% in 2007. We are not alone. In the United Kingdom it was an even bigger jump.

                In the US the overall debt reached 350% of GDP. Only 85% is private. This figure was 180% in 1980. The next bubble to burst will be credit cards and then, if we are unlucky, we will have a debt implosion. Individuals and corporations will do their best to reduce debt. They will be shut out from borrowing because of the massive borrowing the US Government will have to do. This will be true for many other countries also.

                Today there is a debate between Socialists and their foes that want less government intervention in their daily lives. I believe the truth lies in the middle. We can not be all things to all people. In the past we have borrowed on the future and it is now pay back time. We have to downsize our dreams and expectations or we could find ourselves in the same straight jacket that the Germans found themselves in 1930’s. The American spirit is that of a “can do will try for it” attitude. Today, while you are reading this letter, there is someone trying to figure out a cheaper source of energy. Until the discovery is achieved we will have a slow recovery. I believe that day will come from an area we least expect. Have faith.

                    With a slow recovery major corporations will wallow in the mud. Medium size companies that can move and change quickly and do not have a built in bureaucracy will become the new leaders. It has been my observation that the pinnacle of leadership lasts about 10 years. That leadership is attained because the new hires believe in the company. Later hires join because of the name and it’s safety. Competitors multiply and the growth rate slows down. As Andrew Carnegie was fond of saying “shirt sleeves to shirtsleeves in three generations” can apply to this corporate sequence.

                If you want to participate in this new bull market you must change your thinking. The averages mean nothing today. The market is made up of individual securities. You will want to know how your stock is doing. Not the market. Some stocks are going to drift lower because they are still over priced or because they have had a good run in the past and accounts are now overloaded with a past leader. These stocks should be sold. Taking a loss is really a good deal. First you limit your loss and you have given yourself liquidity. Liquidity means you have constant funds for your next purchase. The losses you accumulate can be used to reduce your taxes by $3,000 per year. This applies, as of 3/10/2009, before Obama changes the system. 

                Now lets say you have taken $25,000 in losses. Smile! You have just set yourself for the future. I am not referring to the next 8 years of  $3,000 worth of deductions. Let’s say two years from now that you have taken $20,000 gains in various trades and you face a monster tax bite. You can now use the remainder of your tax loss carried forward, which could be $19,000. Now your tax bite is only $1,000. This is why taking a loss is smart. More money has been lost by investors not doing a trade because of “taxes”.

                Now initially in this new market preferred stocks that have the 85% tax credit should do well, especially if it is selling below its call price. If they call it from you, you stand to make a gain. Corporate debt that is selling below par of strong companies will represent good value. Companies that hired a key person for the future while others have been downsizing is a big tip off.

                Gold is an investment for caution. The President’s strategy is to have a little inflation to support the housing market. Incidentally, the European Union and world leaders are debating over what should happen.  Some of the foreign politicians that carry a big stick are as follows: Wen Jiabao, 66, the Chinese prime minister who is under fire at home because he “put the brakes on too fast”. Angela Merkel, 54, the Chancellor of Germany who favors a “new global constitution” for financial markets. Nicolas Sarkozy, 54, President of France who regards himself as de facto leader of Europe given Gordon Brown’s domestic, political, and economic woes and Angela Merkel’s cumbersome coalition.  Gordon Brown, 58, UK prime minister who was the former Chancellor of the Exchequer and believes he is ideally equipped to tackle the crisis. He will host the Group of 20 summit of industrial and developing nations in London on April 2.

                Central bankers include the following: Jean-Claude Trichet, 66, President, European Central Bank who believes politicians and central bankers must do their utmost to shore up economic confidence. Zhou Xiaochuan, 61, Governor, Peoples Bank of China who has held that position since 2002 and is considered a principal supporter of faster market reforms. Fluent in English he can hold his own among economists. A sleeper is Mario Draghi, 61, Chairman, Financial Stability Forum and governor, Bank of Italy who is a US educated economist, former Goldman Sachs executive, and a respected transatlanticist.

                Regulators of note are: Adair Turner, 53 of the UK. Sheila Blair, 54 Chairman of the FDIC. Mary Shapiro, 53, Chairman of the SEC.

                Economists include: Robert Shiller of Yale. Montek Singh Ahuwalia, 65, Deputy Chairman, Indian Planning Commission. Robert Zoellick, 55, President, World Bank. Pascal Lamy, 61, who is Director General of the WTO. Paul Volcker, 81, Chairman, Economic Advisory Board. Fed Chairman in 1979-1987. He warned early and powerfully about subprime mortgages. Paul Krugman, Professor at Princeton University and columnist, NY Times. He has carved out a niche as the democrats’ liberal conscience. Then we have Leszek Balcerowicxz, 62, Professor of economics, Warsaw School of Economics.  

                Bankers to watch are: Lloyd Blankfein, 54, Goldman Sachs chief executive. Jamie Dimon, 52, Chairman of JP Morgan. Stephen Green, 60, Chairman of HSBC since 1962. He has voiced strong views about the need for reform of banking.  A lay preacher and author of a book about reconciling religion with free markets, he has criticized the industry’s excesses during the boom along with Peyton Patterson, Chairman, President, and Chief Financial Officer of NewAlliance Bank.  

                At the top of the list is President Barack Obama, 47, the revues on his economic rescue plan are mixed, but much detail is awaited.  In the meantime, the president is pressing ahead with radical domestic reform agenda encompassing healthcare, the environment, and education. As promised, it has a strong whiff of both audacity and hope. Then we have Ben Bernanke, 55, Chairman of the US Federal Reserve who is a scholar of the Great Depression. He has knowledge of measures that the central banks can use at times of great crisis and he has had ample opportunity to put his theories into effect, using an expanding range of tools too try to arrest the slide.”

                With this list of partial names one can see that this is a global problem; global problems need global answers. This will take time and patience. This is why I recommend the sales mentioned above and a hefty cash position. Sure, the market is trying to bottom, but the prudent way in the 21st century is to wade in step by step. One should also check in with a professional – like me.

     Cheerio !!!

    Richard C De Graff

    256 Ashford Road

    RER       Eastford Ct 06242     

    860-522-7171 Main Office  

    800-821-6665 Watts

    860-315-7413 Home/Office

    rdegraff@coburnfinancial.com

     

    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.

     


     

    This analysis is courtesy of the Financial Times and this assessment is by Lionel Barber, editor.  March 11,2009 page 7