Monday, May 21, 2018

Trying to get all the macroeconomic forces in my head

Macroeconomic factors impacting investment in the US Version 1.3

??? Is the trade war a force, or simply an accelerator of existing forces???

1) Stock buybacks are setting a record, and fueling the latest success of a good, long, bull run:
    1a) Money on the sidelines may be better invested after a correction or recession:
    1b) 7/5/18 the move to cash is growing:

2) 200 years of interest rates show they are very low compared to history and have been for an unprecedented length of time:

3) Aging demographic, as the baby boomers age, they will rapidly need services and care from younger persons almost certainly going through economic change:

    3a) There is a class of retirees that are wealthy:

4) Depending on the source you use, consumer debt is at an all time high, or is about to be:

5) Corporate debt is also at a high level:

6) US debt ratio to GDP is 105.4%, average is 61%, all time high 118.9 in 1946, all time low 31.70% in 1981:

7) High number of created jobs, and we are starting wage increase:

    7a) However, medical care, child care, college tuition, college text books and most significantly, hospital services rose at a faster rate than wages:

    7b) Certain jobs will be largely automated in 10 years, retail sales, fast food, are expected to the the largest categories, (retail sales is the largest job category today):

    7c) Shipping costs are going up, this will increase the cost of about everything:

    7c) Gilded age 2, the number of people squeezing to the bottom of the middle class is increasing:

8) Not a surprise, there are some indicators of inflation. The current stance of the Fed is to let it begin, (probably to avoid stagflation):

9) China's bond market, which is only slightly open to foreign investment has been suffering defaults. China is working to shore up this area of their economy:

Microeconomic factors worth considering

Climate change will impact coastal areas. Upper middle class tend to have first and second homes in these zones. In some percent of cases this will reduce their net worth:

Foreign money pouring into Miami, perhaps the hardest hit high end US market by rising sea levels. The main point of the article, they think they can get out in time:

Pressure on the Euro continues in increase:

Tuesday, March 27, 2018

3/27/2018 Buy Facebook. Now?

Just gotta text:, "Facebook is on sale. If you can get in at $152, you've scored. :)"

Well I certainly want to score, so let's take a look.

For starters the 52 week low is 138.77, that is way South of 152.

Facebook has been in the news with Cambridge Analytica, and that is probably the MICRO force that drove the most recent drop.

However, more importantly, the stock market in general and tech in particularly is dropping and that is the MACRO force behind this curve.

The biggest problems Facebook has at this time are:

1) Loss of younger people to other services such as Snapgram and Instachat.

2) The side effect of the fake news, extremists, trolls etc, is an increasing number of people are just getting tired of it. And since the FB business model is to sell your data, that is, in a word, bad.

Conclusion: buying on dips is smart. There probably are bargains out there in tech world. AMD, for instance is well worth watching. But, at the current price point, I will pass on FB, if they hit 80 wake me up!

Tuesday, March 20, 2018


03/20/18 CNBC has an article on a pilot project: Fedex store within a store at Walmart. I never put a lot of stock in pilot projects, but this is interesting. AMZN makes noises from time to time about their own delivery systems, that could make this tie up good for both Fedex and WMT. The big thing for me is that the photo printing part of all of the Walmart stores I have visited "feels" like an after thought. Imagine a section devoted to packing, copying, shipping. Worth watching, could be big. If the pilot makes it to Kauai, I will be sure to take note.

"I don’t see how anyone can buy WMT stock at 26 times earnings when those earnings not only aren’t growing, but have been shrinking. If Walmart stock was paying a 5% dividend, that might make for a different story, yet it only pays a 2% yield."

I don't have my full brain on, I meant to take a nap, but was productive so I stayed at the keyboard. So maybe I am wrong, but doesn't that just mean their stock, like everyone else's is overpriced?

My moma would never allow me to use the everyone else argument. So, the rich question is for the ten thousandth time, whither goeth Walmart.

Some thoughts:

Walmart is the largest retailer in the world. Period. Forget all the Amazon hype, they aren't even close.

90% of Americans live within 10 miles of a Walmart.

Walmart is trying harder at online retail. Yawn. I used to travel for a living, no matter where I was, I could find a Walmart store . . . AND they are not always tied to big box shopping centers . . . AND their parking lots are not empty. . . even at night. If I want it in a cardboard box, I will use Amazon, if I am in Lihue and I want to pick something up, Walmart works for me. 

The dividend. Is 2 something measly or smart? Take either side of the argument you want, but it is sustainable.

Warren Buffet is selling it. OK maybe I can add to my position on a price drop.  

Monday, March 5, 2018

Annuities are bad for you?

Article I found on Yahoo Finance says:

"If you’re unfamiliar with annuities — you give an insurance company your money and in return they pay you an income stream, usually for the rest of your life. In some annuities, if you die before you’ve received all of your money back, too bad for you. The insurance company keeps the money."

"Essentially, you’re betting the insurance company that you’re going to live longer than they think you will. They take your money, invest it and give it back to you in dribs and drabs (with steep penalties if you want to withdraw more than the contract states)."

If your biased journalism spidey sense is tingling, that makes perfect sense. The author, while badly biased, is sort of correct, things to consider:

- Annuities come in many flavors, in general, the more complicated one is, the farther you should stay away from it.
- Some of these do have very high commissions, the 5 - 7% the salesman pockets comes directly out of the money you need to live on. The salesman needs to eat, but maybe hamburger instead of filet mignon, make sure you understand the commission structure.
- Kathy and I both have one from AARP/NY Life, you pay a lump sum, you receive a payment for life. Seems like a reasonable part of a retirement strategy to me. Simple, you know exactly what you are going to get. Highly recommended if you can afford it.
- Because it is a fixed payout, things like the interest rate environment impact your payout. In general, if you are in a rising interest rate climate, look for the guaranteed payouts to increase.

In closing, let me use an example. Supposed you invested $35k in Amazon in September of 2015 @$500 a share. And you are still holding it today at $1,500 a share and change. Is it likely to triple again? Certainly not that quickly? Do some people feels stocks are currently overvalued? Yes, in March 2018, many analysts feel stocks are on the high end of valuation.  And suppose you are between 55 and 65 years of age. Is it dumb, to take that money, buy a one time premium annuity, and start getting checks for ~$500/month for the rest of your life?

Seems like part of a rational portfolio to me.

Saturday, January 6, 2018

Consumer debt #307

Everybody gets a pat on the back, economics are as good right now as they have ever been globally:

US Households have too much debt, guess none of us have ever heard that before.

Moody’s Vice President Rita Sahu, “Auto loan delinquencies are above pre-crisis levels at around 2.3 percent,” Sahu warned, “and credit card charge-offs have increased sharply to around 3.6 percent as of the third quarter 2017.”

"According to Black Knight, in November, mortgage delinquencies jumped by 13 percent, the largest monthly rise since 2008, when the financial crisis was beginning to ravage housing."

Tuesday, January 2, 2018

Retail Costco

Three things never cease to amaze me about Costco:
- There are always a lot of cars in the parking lot
- There are always a lot of carts in line with ~$500.00 worth of booty
- There are always things that I totally do not need that end up in my cart

Before we talk about stock, I need to disclose a bias. I live in Hawaii in the winter time and you can't live here without going to Costco and Walmart, the grocery store prices are VERY HIGH.

But despite my bias, here are some thoughts on Costco as an investment.

This guy is shorting the stock and he has a point about both valuation and margins, "I think Costco should be much, much lower than it is today and its lack of margin growth is the reason why."

Buy it now because its online sales are going to rock:

Buy Costco now because they have retail 3.0 voodoo! What is retail 3.0?

Costco in my view is high right now. So is everything else. My pastor said there were 70 stock record highs in 2017. I have no idea if that is correct, but record high certainly is. The short idea is very attractive, but for the moment I have an aggressive limit order @179.00. That gives me some time to think.

Saturday, December 30, 2017

Retail Kroger

We are clearly going to buy a lot of groceries from Walmart and probably Amazon will get a chunk of that money. What about Kroger? One concern I have is their debt, they added it before really trying to get strategic and build white space between them and the other two companies:

Some of that was to buy Roundy's, purchase or compete. But that still leaves Walmart and their fleet of stores.

There is the new Kroger Marketplace format which resembles a Wegman's:

But they can only deploy so many of these and they already had Fred Meyer which is similar:

Here is a guy that thinks they are undervalued:

I think I will pass on Kroger!