Monday, May 29, 2017

USA and global debt

This NYTIMES article is a must read. Two quotes say it all: "Americans have now borrowed more money than they had at the height of the credit bubble in 2008, just as the global financial system began to collapse."

"The fear is that ballooning debt from student loans — and from auto loans and credit cards — could put many Americans back into a hole, prompting a new wave of defaults, much like the one that accompanied the mortgage meltdown a decade ago."

One factor is that new car sales are declining and the auto manufacturers have been using discounts and other profit shrinking methods to keep the cash register ringing. This is largely based on April 2017 and may be temporary. If the declining new car sales trend continues it will become a bit of a drag on the overall economy.

USA Today asserts that the average USA consumer owes $5k in credit card debt. "According to Experian's latest State of Credit report, the average U.S. consumer holds about two bank-issued credit cards and carries a total balance of $5,551. That's a lot of money, especially if you're paying interest of 15% to 20%."

Student loan debt is also of note, studentloanhero reports, "Americans owe over $1.4 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year." That would not be such a serious problem if students that graduate with debt could find high paying jobs to pay back the loans. However, as NPR reports, "Every day, 3,000 people default on their federal student loans — and those lack of payments amount to an unpaid bill of $137 billion for the federal government. For decades, the government has tried to get borrowers to pay up by hiring debt collection agencies to call and send letters. But now the government is trying this new lawsuit strategy." The government debt collection agency plan is not working, we pay far more to the collectors than we collect. We can ill afford that because the government debt is also growing to a troublesome level.

This is not a USA only problem. Last year, global debt reached an all time high. And there are impacts, last week Moody's downgraded China to Aa3 even though their debt to GDP is fairly healthy. In fact, the canary in the coal mine remains Japan, the world's 3rd largest economy. However,  despite all the debt, the IMF report tends to balance this out expecting higher growth in 2017/2018.

As investors, what do we do? Are the cards in place for another pull back in the stock market. Warren Buffet has moved to a high cash position look to capitalize on a major dip with a focus on buying a large, well run company.

  • Wal-Mart is still on my list though I would be looking for a dip. They have largely licked the same store sales problem and are making some traction in online sales.  They are high right now, up 10% for a YoY period, but in a dip it might be a good move.  This would be in the steady Eddie category, not a big score. They might get some benefit from the collapse of Sears, Macy's and other troubled big box stores, if they can find the right smaller store format, (if not keep an eye on Target).
  • I have been thinking about the Internet of Things movement. Even if we head back into a recession, smart this and smart that will keep happening. Motley Fool suggests Verizon, Amazon and Cisco are poised for success. I honestly do not see how Verizon is poised for a lot of growth, I already own Amazon, and Cisco, while up 9% for the year is less than the S&P 500 for the year. I thought a lot about an ETF, (your choice is SNSR or SNSR), but this article points out that is essentially an investment in technology.
  • If you believe that a result of all this debt is a shortage of cash, (or usable cash), then perhaps a barter site is worth considering. One driver will be millenials that cannot afford to buy a house and use Craigslist etc to find a room or apartment to rent. NOTE: many barter sites have some sort of reputation score. If you believe this is an important avenue to explore you may want to start sooner than later. A similar approach is reverse supply chain, I think LQDT might be best positioned here.
  • One way to minimize debt is to encourage inflation. If you borrow $250k fixed rate for 30 years in a home mortgage and significant inflation occurs, you pay off that loan with "cheaper dollars". Other than the debt, one of the biggest inflation drivers is the unemployment rate. It is now historically low
The bottom line. The increasing debt is a driver that will affect the economy, both USA and global. This is not a crisis, I would not expect the sky to start falling tomorrow. However, the level of debt is a force on the global economy and is something the wise investor should watch and consider. In the mean time, to the extent possible, Polonius was right, "Neither a borrower nor a lender be; / For loan oft loses both itself and friend.”"

Tuesday, May 23, 2017


I came across this post: "The total value of all the robots in the United States, from Roombas to aut0-manufacturing plants to those that fold laundry, and everything in between, is $732 billion, a number that, according to a study released today by researchers at CEBR and Redwood Software, is larger than that of the economy of Switzerland.

Other findings in the study suggest that American investment in robotics has doubled since 2009, and went up 30% between 2011 and 2015. The researchers also concluded that investing in robotics has a higher long-term return than that of transportation, financial services, or real estate. And all-told, robotics investment in the 35 countries that make up the OECD—including the U.S., Canada, France, Germany, and others—amounted to 10% of GDP growth between 1993 and 2016. In short: Robots are very, very big business."

I believe the rough outline, robots could be the next big business. A few years ago I found a robot ETF, but it did not do so well, (NOTE: If I had stayed with it I would have a small gain today). If you have ideas, please leave them in the comments.

Found this page by Redwood. Curious they do not spell out RPA, guess you just have to know.

Here is a piece by Motley Fool. (NOTE: I lost money on ISRG, not saying that is a reason not to buy, but be wise.)

CNN has an investing guide. They mention robo stock advisor BKFS, but I am inclined to pass. The most interesting thing I saw was ROK.

Friday, May 19, 2017


Wal-Mart Thesis V 1.3

First, this is one of the largest and most influential companies in the world, of course I want a piece of that, (at the right price).

Second, they are expanding their e-commerce offerings. I really need to give that a try, last time, (early 2016), I got so frustrated, I gave up. See section.

Third the grocery store business is a tough one with razor thin margins in many cases. WMT continues to expand in that area. They are the perfect anchor for smaller malls.

Fourth, what held their shares back in the past was US store sales were losing year over year share. They were doing well internationally, but US is the core. But that is the past and they have turned that around.

Fifth, (and a distant factor), if Target is their competitor, (I personally think it is Amazon), but if so, Target has been doing a pretty good job of playing dead and they have a lot of debt to face.

6/6/17 WMT dropped 1.33 to 78.93 today, probably general market and insider selling.
6/15/17 Kroger announced more price pressure competition
6/20/17 Bit of a chest beating on why AMZN purchase Whole Foods should have raised WMT

6/20/17 Looked at a Spyderco Delica 4 page no blade length! (AMZN does this too sometimes, what kind of an idiot would buy a knife not knowing the blade length? Same thing for the Endura 4, I xrefed and it is 3 3/4" assuming they are all the same.

Document history:
Originally created 10/9/12
Version 1.1 2/11/15 in anticipation of earnings results 2/19/15
Version 1.2 4/1/15 based on U.S. Strategic Update
Version 13 5/19/17 considering adding to my position in basket Es.

Thursday, May 18, 2017

Time to plan on profit taking

Please note, most of my investments are in Vanguard index ETFs and mutual funds in fire and forget mode. I do still have some active "mad money" in basket Es. These are just my ideas, I am not a professional, do your own research.

My biggest holding since the stock split is GOOG/GOOGL and my family is grateful to the Lord for His providence. I still think it is a great company with legs for the future, but since it is far and away our biggest investment, this is the logical place to profit take. I think I will sell GOOG and keep GOOGL, there seems to be a slight premium on the voting shares.

Now the rich question is what to buy, or hold on for a drop in the market and try to do my shopping that way. I will be going back to my older notes looking for ideas and analysis. In the mean time, here are my first observations.

Defensive stocks in general, (toilet paper and baby formula), are trading at a high, have limited growth prospects and tend to have shabby dividends. I think I would be better off stockpiling toilet paper, (just kidding).

Nike has been beaten down. But the big box tidal wave is going to give them at least a year of chop. I might try to buy on a dip, but those are pretty cheesy dips. Pass.

I looked at Moody's. I have a warm place in my heart for companies that manage to monetize information and I applaud their recent acquisition. However, I lost my shirt on Morningstar back in 2008 and this is a long term bet with limited payback. Pass.

The Ts basket benefitted from Corning and they have done very well this year. I already have a dividend basket, but as I look over my notes they seem very solid, the big question is do they have another gorilla glass up their sleeves. I think I will set a Google alert for GLW and watch for a dip or a game changing innovation.

My notes on Wal-Mart got me thinking. I deleted all the stuff that did not pan out and will return this trading idea to the "parking lot".