Our Fiscal Cents

Readings and Thoughts

Apr 272012

Here’s what I’m reading these days:

http://www.fooledbyrandomness.com/sais.pdf

Oh, and here’s a pearl of wisdom from Mario Draghi, president of the European Central Bank:

‘…The situation in the markets has calmed down since the beginning of the year, but now governments need to be more ambitious in spurring growth…”

In the meantime, any extra money that governments make from cutting spending is going directly to paying off debt they owe to mostly foreign banks. How are you supposed to spark growth when the people in government (e.g. Prime Minister Monti in Italy) come from the very same banks (often indirectly, but linked nonetheless) which want to be paid and don’t care about dragging down entire countries in the process?

The answer is you can’t. However, this game won’t last – what game you ask? The of installing puppets in governments aimed at making people feel safe that “competent academics” are at the reigns on one hand, while with the other hand they’re extracting as much money in as short of a time as possible so the “debt” holders are satisfied. The reason it won’t last is because people are fed up, and when people are fed they make noise, and when they make noise the establishment listens – or they better.

What does this have to do with our portfolios? Nothing, but I just want to give my two cents about an economic system that has been stretched to the limit by people cutting corners and thinking they can escape unharmed from the simple laws of economics. The problem now is that they reaped the benefits and are trying to pass on the drawbacks to the weakest. Not this time.

A History of IPOs

Headline, Investing

Feb 052012

In case you’ve been living under a rock, IPO’s are typically a bad investment – not always though. Still, most of the time you’re better off waiting on the sidelines for a more rational opportunity, rather than chasing a stock that’s being valued at 100 times its earnings (!). Check out the cool graph courtesy of the New York Times:

Late Night Thought

Investing

Dec 132011

Caught up on some reading and found this interesting article (link):

In short, software is eating the world….kind of. I think software eats most of the world but not all. Cisco for example makes a lot of hardware that is being replaced by software doing the exact same thing – that’s why their stock price has been terrible and as a company they should figure out a better strategy.

If you build cars instead, software plays a greater role every year because car are getting “smarter” in terms of software that does everything from monitoring tire pressure to controlling the stability of your vehicle. However, the big difference is of course that you still need a real car to do this.

Not the best example in the world, but you get what I mean. Bottom line: if the output of your product/service is information, then you run the risk of being eaten by software. If your output is something different, for instance by enabling people to quickly move from point A to B, then you have other problems, but software eating you isn’t one of them.

This is very important when it comes to investing in technology companies – are you going to be eaten?

Reading Material

Uncategorized

Dec 072011

Must read post on the similarities between China and Japan. Link here.

The charade continues

Headline, Investing

Nov 302011

Give a man a gun and he can rob a bank; give a man a bank and he can rob the world

I found this quote today and thought it was hilarious at first, but then I realized it’s true. Holy cow, did you see what happened today? The bankers of the world are truly committed to keeping the charade going. What I’m referring to is of course the news that came out today of the United States Federal Reserve joining other central banks in an effort to make it easier for European countries to borrow dollars.

Great news! Or is it?

The problem with the EU is structural, meaning that you can’t have a central bank that is truly effective unless it has the ability to print money AND get money back from tax revenues. Currently, the European central bank does not have the latter power, making it a deer in the headlights when it comes to this economic situation. This “solution” that has been implemented does nothing to address huge debts that have been racked up by countries. More on this later.

Bottom Line

As usual, this is all interesting commentary, but how is this actually affecting your portfolio? Some of you may think the world was about to come to an end due to the EU crisis, but the truth is that the “bankers that be” will not allow this system to fail. It has been making them too much money. The euro and the EU will survive, although something must change in its structure in the long term, as I mentioned above. So, now that the world is not going to implode, how is this EU situation affecting you?

Well, take a look at you portfolio, and before you congratulate yourself for being a stock market genius because you happened to own stocks during the last 2 days, ask yourself if the companies you own should be priced the way they are. I always say this, but it’s exaclty during times like these that you have to keep you feet firmly planted in reality.

This actually gave me an idea for the next topic: why the market is biased to the upside. However, now it’s time for me to make some coffee and read company reports. Ciao!

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