This week kicked off an annual economic council held in Davos, Switzerland. This is a huge conference that hears from political leaders as well as the private sector. Even many celebs have been present in the past, but this year China Premier came and pushed a lot of the blame on the United States for the state of the world economy as well as the huge losses china suffered in the US financial sector. I could not help but find this comical because they invested in us! They deemed Morgan Stanley, Freddie Mac, and Fannie Mae good investments despite not fully understanding them just as much as we did! You cannot just point the finger and say WTF, you need to do your homework just as much as we should have fully understood what it was that was going on.
From some things that I have hear among the market, there was a crash in 1907 because of the derivates trading that essentially allows insuring investments using advanced mathematics. This was outlawed after it caused the market horrors and then was passed again by President Clinton on his way out of the office. Yes the crisis may be American based, but don’t blame us because you can’t stimulate your own economy.
Thursday, January 29, 2009
Bentley Investment Group
Okay, this has really been bugging me over the past few days. This year I joined the Bentley Investment Group, aka BIG, and unlike most freshmen this was not my first time participating in an investment club that plays with real money. This week I sat in on the E-Board meeting where we discussed our current strategy due to the economic conditions facing the market. For anyone who is not familiar with the money that the group invests, it is part of the endowment. Essentially we play with (used to be more before the market crash) just above $500,000 of the schools money. Personally I believe that this is the only way that students are going to be able to understand investing in their personal and professional careers. No matter how many times you read about the best strategies and the fool proof methods to making millions in your IRA, you will never understand what it is like to front your own capital in the market or understand the feeling in the pit of your stomach when you make a bad choice.
Regardless, the essential mission of the club is to provide students with a learning opportunity. The club has performed an annualized return of just under 10% before the market crashed this year. This is unbelievable considering the goal is to teach students about investing. However, the topic this week was the accepted decision to sit out of the market at least in the short term. I understand that we are playing monopoly with hundreds of thousands of dollars, and I understand that the problems the market is facing may have been the worst we have ever seen. Another Waltham institution, Brandeis University, could potentially face selling off parts of their museum because they are so financially unsound (many of their longtime donors are victims of the Madoff scheme). Sitting out is not the solution. Nothing can be learned from this. I refuse to see the benefit to the students in simply studying the market trends for the next year to see what is happening; THAT IS WHAT WE DO IN CLASS EVERY DAY! The real value of this club and this institution is being able to walk up to a Fidelity recruiter and have him ask me about my experiences in the club, “What are you bullish on right now?” “Well I recently pitched Apple when it was down below $80 because I love the fundamentals and I feel that the market is overly scared about Steve Jobs health problems.” Then we could engage in a discussion that I have had a learning experience from. Maybe I will have to explain my biggest mistake as pitching Starbucks at $18 because I believed that the brand name and strong market share among those impenetrable to the recession. These are the types of experiences that are going to help students learn and grow and give them something to talk about. It would be irresponsible for the group to sit out just because the market is performing horribly because over the long run markets perform predictably.
Another problem I have with the club is their strategy, although they say that like to look for value companies. I cannot see how they can possibly look for value in one year (the lifespan they say they hold stocks). Given I have only invested since I was 16, everything I have read which ranges from Peter Lynch, to Warren Buffet analysis, to Monish Pabrai, to wealth managers like Robert Kiyosaki and Robert Shemin, as well as conversations I have had with analysts and C.E.O.s at small firms like Sentinal Securities, to large firms like Fidelity have reaffirmed my believe that the market does not perform reasonably in the short term. It is almost impossible to time the market in the short term and as their definition of short term refers to a year or less, medium length refers to one to three years, and long term means more than three years. Since the days of Benjamin Graham, value investing has been recognized as the smartest way to invest because the market moves predictably over the long term. Eventually if you buy an undervalued stock, the price will reflect the true value. How can BIG teach its students value investing if it is making plans for the short to medium time frame. IT CAN’T. This is an issue that needs to be addressed.
Thanks as always,
Matt
Regardless, the essential mission of the club is to provide students with a learning opportunity. The club has performed an annualized return of just under 10% before the market crashed this year. This is unbelievable considering the goal is to teach students about investing. However, the topic this week was the accepted decision to sit out of the market at least in the short term. I understand that we are playing monopoly with hundreds of thousands of dollars, and I understand that the problems the market is facing may have been the worst we have ever seen. Another Waltham institution, Brandeis University, could potentially face selling off parts of their museum because they are so financially unsound (many of their longtime donors are victims of the Madoff scheme). Sitting out is not the solution. Nothing can be learned from this. I refuse to see the benefit to the students in simply studying the market trends for the next year to see what is happening; THAT IS WHAT WE DO IN CLASS EVERY DAY! The real value of this club and this institution is being able to walk up to a Fidelity recruiter and have him ask me about my experiences in the club, “What are you bullish on right now?” “Well I recently pitched Apple when it was down below $80 because I love the fundamentals and I feel that the market is overly scared about Steve Jobs health problems.” Then we could engage in a discussion that I have had a learning experience from. Maybe I will have to explain my biggest mistake as pitching Starbucks at $18 because I believed that the brand name and strong market share among those impenetrable to the recession. These are the types of experiences that are going to help students learn and grow and give them something to talk about. It would be irresponsible for the group to sit out just because the market is performing horribly because over the long run markets perform predictably.
Another problem I have with the club is their strategy, although they say that like to look for value companies. I cannot see how they can possibly look for value in one year (the lifespan they say they hold stocks). Given I have only invested since I was 16, everything I have read which ranges from Peter Lynch, to Warren Buffet analysis, to Monish Pabrai, to wealth managers like Robert Kiyosaki and Robert Shemin, as well as conversations I have had with analysts and C.E.O.s at small firms like Sentinal Securities, to large firms like Fidelity have reaffirmed my believe that the market does not perform reasonably in the short term. It is almost impossible to time the market in the short term and as their definition of short term refers to a year or less, medium length refers to one to three years, and long term means more than three years. Since the days of Benjamin Graham, value investing has been recognized as the smartest way to invest because the market moves predictably over the long term. Eventually if you buy an undervalued stock, the price will reflect the true value. How can BIG teach its students value investing if it is making plans for the short to medium time frame. IT CAN’T. This is an issue that needs to be addressed.
Thanks as always,
Matt
Friday, January 23, 2009
Steve Jobs is the Only Employee at Apple?
Good evening everyone,
I promise I will try to refrain from my usual rants on the economy and all of its problems today. My most recent observation has to do with a small company call Apple, you may have heard of it. My love for for this stock dates back to my first semester of junior year (in high school). In my first year of an investment club at my high school I decided to make a pitch for this stock because of strong fundamentals. I love their products, I love their design, and I loved that they cornered the mp3 market. When people refer to any device that plays music, they don't call it an mp3, but rather an Ipod. This simple fact is a testiment to the entire marketing team at Apple.
Simillarly, when the iphone was released my senior year in high school, people raved about all of the things it was capable of: playing music, browsing the internet, keeping track of everything from your photo album to stock portfolio, and of course the simple task of providing you with a phone service. In reality, these features had been out for years, but as far as the American public is concerned the iphone is the only phone that does it. Once again the beauty of Apple.
Within the last five years sales for the Macintosh brand of computers have been slowly rising in market share for personal computers and laptops. One reason it has been helping create large profits for the company is the restructuring of the manufacturing by senior executive Tim Cook.
Cook is not the only executive to play a large behind the scenes role, Johnathan Ive serves as Senior VP of Industrial design at Apple, as well as believed to be the mastermind behind the ipod, iphone, and new imacs. These two are some that receive the most recognition among an unbelievably talented team at Apple.
To me it was no surprise that the company's stock price soared to above $200 at the end of 2007. However, nowadays the company is trading somewhere around the $80 dollar range largely because of the economic slump as well as the health problems with Steve Jobs, C.E.O.
Jobs is arguably one of the best leaders in business today and seems to have taken on a role greater than the face of the franchise. There is no one like him in business today. With the exception of Bill Gates as the face of Microsoft for the past two decades, there may not be anyone that has ever been regarded to as responsible for the success of his company. It is no surprise that when there are rumors about Jobs health arose that the stock tumbled blelow $80 for the first time in a long time. Does this mean that the entire vision of the company is lost?
No one can replace Steve Jobs at Apple, ever. Yet, if he were to step down tomorrow as head of the company, I don't forsee much changing. The company's place in the market is already established and with the minds of Ive and Cook in the drivers seat, not to mention the talent of the entire Apple team this company looks like they will remain a large player in the electronics market for a long time.
Oh and in terms of the stock now, it seems like a great time to buy with the company consistantly weathering the economic storm and the current price drop due to Job's health conditions. Needless to say I was bullish on this stock months ago when I bought in at $105. This is a strong company with great leadership and quality fundamentals, don't miss out on a bargain simply because someone caught a cold.
keep on keeping on young minds,
Matt
I promise I will try to refrain from my usual rants on the economy and all of its problems today. My most recent observation has to do with a small company call Apple, you may have heard of it. My love for for this stock dates back to my first semester of junior year (in high school). In my first year of an investment club at my high school I decided to make a pitch for this stock because of strong fundamentals. I love their products, I love their design, and I loved that they cornered the mp3 market. When people refer to any device that plays music, they don't call it an mp3, but rather an Ipod. This simple fact is a testiment to the entire marketing team at Apple.
Simillarly, when the iphone was released my senior year in high school, people raved about all of the things it was capable of: playing music, browsing the internet, keeping track of everything from your photo album to stock portfolio, and of course the simple task of providing you with a phone service. In reality, these features had been out for years, but as far as the American public is concerned the iphone is the only phone that does it. Once again the beauty of Apple.
Within the last five years sales for the Macintosh brand of computers have been slowly rising in market share for personal computers and laptops. One reason it has been helping create large profits for the company is the restructuring of the manufacturing by senior executive Tim Cook.
Cook is not the only executive to play a large behind the scenes role, Johnathan Ive serves as Senior VP of Industrial design at Apple, as well as believed to be the mastermind behind the ipod, iphone, and new imacs. These two are some that receive the most recognition among an unbelievably talented team at Apple.
To me it was no surprise that the company's stock price soared to above $200 at the end of 2007. However, nowadays the company is trading somewhere around the $80 dollar range largely because of the economic slump as well as the health problems with Steve Jobs, C.E.O.
Jobs is arguably one of the best leaders in business today and seems to have taken on a role greater than the face of the franchise. There is no one like him in business today. With the exception of Bill Gates as the face of Microsoft for the past two decades, there may not be anyone that has ever been regarded to as responsible for the success of his company. It is no surprise that when there are rumors about Jobs health arose that the stock tumbled blelow $80 for the first time in a long time. Does this mean that the entire vision of the company is lost?
No one can replace Steve Jobs at Apple, ever. Yet, if he were to step down tomorrow as head of the company, I don't forsee much changing. The company's place in the market is already established and with the minds of Ive and Cook in the drivers seat, not to mention the talent of the entire Apple team this company looks like they will remain a large player in the electronics market for a long time.
Oh and in terms of the stock now, it seems like a great time to buy with the company consistantly weathering the economic storm and the current price drop due to Job's health conditions. Needless to say I was bullish on this stock months ago when I bought in at $105. This is a strong company with great leadership and quality fundamentals, don't miss out on a bargain simply because someone caught a cold.
keep on keeping on young minds,
Matt
Saturday, January 17, 2009
Obama to Pass on Gas Tax?
Just over a year ago I was planning on voting for Barrack Obama as President of the United States, my logic behind this had nothing to do with the current economic crisis we have fallen into today, nor any political ties to the democratic party; the sole logic behind my perceived necessity of Obama as president was for his proposed energy policy. He proposed a plan that would give tax cuts to the private sector if they could find a way to utilize renewable energy as well as throw millions of dollars at the research and development sector for finding more profitable ways to create renewable energy. However, it seems like President elect Obama may have stood in his own way by taking the idea of increasing the gasoline tax off the table.
For as long as I can remember I have been a proponent of raising the gas tax so that the entire economy would not fall prey to the volatility of fossil fuels. Once again I believe we have something to learn from Europeans as they have had gas taxes that help stabilize the economy for years. By instituting a tax that would hold the price of gas at let’s call it $5.00 per gallon. If the real price of gas was $1.50 then the government could collect $3.50 in taxes. However, if the real price of gas rose to $4.00 then the government would collect $1.00 in taxes. The public would not even realize the swings. Further, this would push our economy to find more fuel efficient cars. Once again we are faced with the realization that Europe has had an average mile per gallon of 40 in recent years and we are by no stretch of the imagination left in the dust. Maybe this has contributed to our current crisis in Detroit?
I am sorry to say that although we may not be in the best financial shape right now, I do believe that this tax is necessary to provide some stability to the economy in the long term. Further, if the new gas tax proposed is going to be that much of a problem, why not cycle the money generated by the taxes back into the economy in some form.
For a more complete look at this argument please refer to Steve Mufson’s article:
http://newsweek.washingtonpost.com/postglobal/energywire/2009/01/obamas_gas_taxing_problem.html
Better luck to the stock market this week,
Matt
For as long as I can remember I have been a proponent of raising the gas tax so that the entire economy would not fall prey to the volatility of fossil fuels. Once again I believe we have something to learn from Europeans as they have had gas taxes that help stabilize the economy for years. By instituting a tax that would hold the price of gas at let’s call it $5.00 per gallon. If the real price of gas was $1.50 then the government could collect $3.50 in taxes. However, if the real price of gas rose to $4.00 then the government would collect $1.00 in taxes. The public would not even realize the swings. Further, this would push our economy to find more fuel efficient cars. Once again we are faced with the realization that Europe has had an average mile per gallon of 40 in recent years and we are by no stretch of the imagination left in the dust. Maybe this has contributed to our current crisis in Detroit?
I am sorry to say that although we may not be in the best financial shape right now, I do believe that this tax is necessary to provide some stability to the economy in the long term. Further, if the new gas tax proposed is going to be that much of a problem, why not cycle the money generated by the taxes back into the economy in some form.
For a more complete look at this argument please refer to Steve Mufson’s article:
http://newsweek.washingtonpost.com/postglobal/energywire/2009/01/obamas_gas_taxing_problem.html
Better luck to the stock market this week,
Matt
Tuesday, January 6, 2009
Where Can We Learn About Money?
My first experience with this concept came from real estate guru Robert Kiyosaki through his book, “Rich Dad Poor Dad.” Kiyosaki’s book compelled me to want to learn more about business. The overriding theory that I walked away from his work with was the idea that money runs our life but we are never fully educated about it. When people actually think about that concept it makes sense. Scholars may study history at Brown or Medicine at John’s Hopkins, but they still may get sucked into that adjustable rate mortgage that helped trigger the subprime crisis that we have on our hands today. As Kiyosaki uses the phrase in his book, “People are taught to work for money, not have their money work for them.”
Coming in to study business my freshman year I assumed that because we were business students, we could not fall into the trap of working for money. As the preliminary weeks grew on I quickly familiarized myself with the notion that despite what business schools try to do, many only turn over the next batch of businessmen that fall prey to the cycle. Of course there is nothing wrong with choosing this lifestyle; many people prefer the security of a weekly pay check and two weeks’ vacation each year. The point I am getting at has nothing to do with the right or wrong path to tread, but rather the recognition that despite how hard you work as an accountant at a big firm, someone else is always going to be reaping the benefits. Maybe you say to yourself, I’ll work my butt off this year so I can get that promotion and then I can take it easy. Maybe you do get it and then you’re working twice as hard trying to impress the new boss, all the while there is still someone collecting dividends on your hard work. My outlook has always been look to the end of the line, JP Morgan was a banker, what is the difference between him and everyone that now works for JP Morgan & Chase. Finally, graduating from a good school does not mean that you cannot fall into the cycle.
In his essay, “Against School” John Taylor Gatto explores the concept of the educational system as a whole and whether it serves its purpose. Gatto talks about the founding father’s lack of schooling and how we still follow what they have created today, he also talks about how the school system creates a structure that we are taught to follow, but his most compelling argument may be in the history of the American school system.
The American school system is based upon that of the Prussians many years ago. This system was designed to deny leadership roles and to create a manageable population that could maintain peace. As we can clearly see in the history of our school system, not much has changed. This further backs the theories about my peers falling into the trap of a job because they feel like they need its structure. That leads me once again to my question, where can I go to learn about money?
If our educational system fails to show us what we need to learn then the load is left on our shoulders. There are volumes written about business, and writers like Kiyosaki make some valid points about not only our educational system (or lack there of) but also ways to build wealth in our economy.
Bottom Line: Get out and supplement your education with voluntary learning because you can’t rely on formal schooling to get you through life.
I hope I at least raised some interesting points for you,
Thanks for reading,
Matt
Coming in to study business my freshman year I assumed that because we were business students, we could not fall into the trap of working for money. As the preliminary weeks grew on I quickly familiarized myself with the notion that despite what business schools try to do, many only turn over the next batch of businessmen that fall prey to the cycle. Of course there is nothing wrong with choosing this lifestyle; many people prefer the security of a weekly pay check and two weeks’ vacation each year. The point I am getting at has nothing to do with the right or wrong path to tread, but rather the recognition that despite how hard you work as an accountant at a big firm, someone else is always going to be reaping the benefits. Maybe you say to yourself, I’ll work my butt off this year so I can get that promotion and then I can take it easy. Maybe you do get it and then you’re working twice as hard trying to impress the new boss, all the while there is still someone collecting dividends on your hard work. My outlook has always been look to the end of the line, JP Morgan was a banker, what is the difference between him and everyone that now works for JP Morgan & Chase. Finally, graduating from a good school does not mean that you cannot fall into the cycle.
In his essay, “Against School” John Taylor Gatto explores the concept of the educational system as a whole and whether it serves its purpose. Gatto talks about the founding father’s lack of schooling and how we still follow what they have created today, he also talks about how the school system creates a structure that we are taught to follow, but his most compelling argument may be in the history of the American school system.
The American school system is based upon that of the Prussians many years ago. This system was designed to deny leadership roles and to create a manageable population that could maintain peace. As we can clearly see in the history of our school system, not much has changed. This further backs the theories about my peers falling into the trap of a job because they feel like they need its structure. That leads me once again to my question, where can I go to learn about money?
If our educational system fails to show us what we need to learn then the load is left on our shoulders. There are volumes written about business, and writers like Kiyosaki make some valid points about not only our educational system (or lack there of) but also ways to build wealth in our economy.
Bottom Line: Get out and supplement your education with voluntary learning because you can’t rely on formal schooling to get you through life.
I hope I at least raised some interesting points for you,
Thanks for reading,
Matt
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