The Success Continues for McDonald’s (MCD)

21 Oct

McDonald’s released Q3 earnings this morning, and the fast food king affirmed its dominance.  The company reported its 9th straight quarter of earnings gains, delivering a 9% increase in net income of $1.51B.  The news sent the stock to a new 52-week high.

CEO, Jim Skinner, provided commentary on the company’s continued success.  Most notably, he said,

“The investments we are making to optimize our menu, modernize the restaurant experience, and broaden McDonald’s accessibility with ongoing convenience and value platforms are driving profitable market share growth – a clear indication our strategy is working.”

The strategy McDonald’s has in place is called, Plan to Win. The strategy keeps the business geared towards the future to meet customer desires before they arise.  Read more about McDonald’s “Plan to Win” strategy in this press release by the Financial Times.

Q3 Key Numbers 

  • Revenue was $7.17B, up from $6.30B in Q3 2010 (14% increase)
  • Operating income was $2.39B, up from $2.10B in Q3 2010 (14% increase)
  • Net Income was $1.51B, up from $1.39B in Q3 2010 (9% increase)
  • Earnings per share dilutes was $1.45, up from $1.29 in Q3 2010 (12% increase)

 Shareholder Impact

  • The company repurchased 10.5 million shares of stock, bringing total share repurchases to $3B (talk about confidence in your company!)
  • They declared a 4th quarter dividend of $0.70, a 15% increase

 Tax Rate

  • Income was taxed at a rate of 33.4% compared to 29.7% in Q3 2010.  As outlined in the company’s 8k, the higher rate was a result of reduced tax benefits in foreign operations

What stood out to me?

I was impressed by McDonald’s growth in comparable sales abroad.  McDonald’s has truly become a global enterprise as they penetrate new markets on a quarterly basis.  Their customer base and brand recognition in the U.S. has been solidified for decades, and they are slowly achieving this same recognition internationally.

European sales growth was led by the nations of France, Russia, Germany, and the U.K.  There was also robust revenue growth in the Asian/Pacific, Middle Eastern, and African markets (APMEA).  The operating income of these markets grew 26%, even with the continued setback in Japan as a result of the earthquake earlier this year.  Total revenue in the U.S. grew 5% compared to 16% in Europe, 20% in APMEA, and 22% in Corporate and other Countries (Canada, Latin America, and various corporate activities)

The sales growth abroad is remarkable, and many of the international markets remain untapped with vast room for growth.  Although the potential for dramatic growth in the U.S. is limited, the potential for growth internationally is abundant.  McDonald’s management has worked precisely to infiltrate international markets and secure their fast-food reign in these countries.  McDonald’s execution in these markets will be paramount for future revenue growth.

I also look for McDonald’s to increase their exposure in the emerging markets, most notably the BRIC nations (Brazil, Russia, India, China).  As these nations thrive and their populations grow, demand for food will increase.  It is imperative that McDonald’s establishes a foothold in these countries to capture consumer demand.  The company’s current expansion into Africa could also provide large future revenue streams as the continent is vastly underdeveloped.

Recommendation: BUY

Amidst the recent market downturn, McDonald’s has delivered another impressive quarter.  Sales and revenue are growing and the trend is on track to continue.  The company’s continued success will be driven by its ability to assimilate in international and emerging markets.  They are committed to deciphering these markets and implementing menu items in line with the local culture.  The “Plan to Win” strategy has proven successful over the years and reaffirms the company’s commitment to global expansion.  As McDonald’s develops brand loyalty abroad, the revenues will follow suit.  They have a proven business model and a strategy that works.  Their continued execution domestically and internationally will be to the delight of shareholders.  This is a stock that should be a bellwether of any portfolio.


State of the Market: Policy or Bust

9 Oct

Politics and investing are a bad combination.  Volatility is at center stage, and the inaction of policy makers is keeping it there.  Issues in Europe and the U.S. are rampant, and until these issues are alleviated, volatility will be the name of the game. On days when the market appears poised for a rally, it ends in a triple digit swoon, and vice versa to the upside.  Inadequate policy efforts have fueled the uncertainty that rests at the core of the recent market volatility.  Such volatile markets offer little hope for short term investors. I had the opportunity to hear Tony Crescenzi, SVP at PIMCO, speak in Philadelphia last week, and I use his quote to surmise the current state of investing, “Investors get chopped up in choppy markets.” If you are not investing for the long term, you are better off on the sidelines.

Do not hold your breath for the end of the markets’ volatile ways.  Analysts have been pouring over charts and economic numbers to determine a market bottom, but this endeavor is left to the fool.  At a time when company fundamentals are vastly ignored and the drivers of stocks are central banks and policy makers, it is nearly impossible to determine the next direction of the market.  The market has an uncanny ability of pricing in many factors, but politics is not one of them.

Europe on a Death Spiral

Europe remains the biggest laggard on the markets, and it will continue to assume this role until concrete policy measures are set forth.  The debt
crisis in Greece worsens by the day and has led to fears of a banking crisis in the Eurozone.  Much of the problem lies in that Eurozone banks hold a considerable amount of Greek debt.  It is becoming more and more likely that this money will not be returned and these banks will face huge write downs on their balance sheets. 

The Eurozone banking environment is eerily reminiscent of the Lehman Brother’s collapse in 2008.  Lehman was forced to write down billions of dollars in toxic mortgage-backed securities.  The news sent Lehman investors running to the hills, which sent Lehman’s stock into single digits.  As demand for ownership in Lehman evaporated, the company was forced into bankruptcy.  Stock prices for Eurozone banks have followed a similar trajectory.  Dwindling market caps have led to ominously low valuations.  Reduced valuations clamp the banks ability to lend, and in a world of growth fueled by credit, no economy can grow with diminished lines of credit. 

French banks are the largest holders of Greek debt and they have found it difficult to raise capital on the open market.  Just this week, France has called for a recapitalization of its banks to sure up balance sheet holes created by Greek debt.  Rumors are that France would like to tap into the European Financial Stability Fund (ESFS) to recapitalize its banks.  However, German chancellor, Angela Merkel, opposes the plea.  She believes that the ESFS should be used as a last resort and that France should recapitalize its banks through the open market or the national government.  French officials fear that national recapitalization efforts will prompt a credit downgrade of the country.  A French downgrade would destroy the crumbling efforts to stabilize Greece.  Greece would default and would most likely be followed by Portugal and Ireland…

The situation in the Eurozone is at crisis level.  It is unclear how the mess will be resolved, but Europe is headed into a recession if it has not started already.  It is imperative that Eurozone leaders come together to formulate a plan for handling a Greek default and ensuring the stability of the European banking system.  Until some finality is reached in Europe, the Eurozone will remain on the brink of catastrophe and volatility will rule the markets.

Rising Tensions in the U.S.

Turning to the American front, the U.S. is in a much better situation than Europe, but it is mediocre at best.  Unemployment remains dramatically high, support for the president is waning, and big businesses are refusing to deploy cash to hire and expand. 

Unemployment in the U.S. has been unchanged at 9.1%.  Ben Bernanke spoke in Cleveland last week, calling the unemployment situation “a national crisis.” Unfortunately, this long duration of unemployment appears to be structural rather than cyclical. Answers for alleviating the unemployment situation are few and far between. 

The effects of the unemployment crisis have been perpetuated by the recent Occupy Wall Street protests.  The original premise of these protests was to attack corporate greed and the governmental pull of Wall Street.  However, the protests have come to signify the general unrest and anger felt by American citizens.  The gap between the rich and the poor is growing, people are out of jobs, people are losing their homes, and there seems to be no hope in sight.  When things get bad, people protest.   The country-wide nature of these protests show that these are not isolated issues.  Americans across the country are fed up and dissatisfied.  An abysmal jobs market and a dead housing market are two catalysts for an unhappy population.  Perhaps, the Occupy Wall Street movement will deliver a wake-up call to Washington.

Much of the dissatisfaction of Americans has been placed on the shoulders of President, Barack Obama.  His approval ratings have followed the course of the stock market.  42% of Americans strongly disapprove of the president’s performance, and 55% of Americans somewhat disapprove of his performance.  These disapproval numbers have increased dramatically since he assumed the helm in 2008.  Although he faces the brunt of American resentment, much of the president’s disapproval stems from the inability of Congress to compromise.  The policy makers on Capitol Hill have utterly failed the American people.  News out of Congress is more reminiscent of drama in a high school than policy makers who are trying to lead a global power in the right direction.  It is imperative that the Super Committee of 8 can reach a credible plan for reducing the debt.  It is also imperative that both parties work together to determine the best ways to facilitate job growth.  The on-going policy uncertainty will leave the market flailing in the wind.

A lack of adequate policy-making destroys investor confidence.  This feeling is not limited to individual investors, but it also has the same effect on big businesses.  Corporations are hoarding cash, refusing to put their money to work in such an uncertain environment.  Given the inability of Congress to agree on pertinent issues like the debt ceiling, there is little incentive for companies to deploy cash without knowing how politicians will affect macroeconomic policies.  Even with unemployment at a steep 9.1%, corporations are stock piling cash with no intention of hiring.  Burdensome regulations on these companies also provide little cause for them to tap their reserves for expansion and hiring.  A move from cash hoarding to hiring would be advantageous to the economy, but once again we will attribute this inaction to bickering legislators.

The Diagnosis

The environment in Europe is awful.  Policy-makers have been moving at a snail’s pace to alleviate the ills in the Eurozone.  There have been several short-term “band-aids”, but it is time to implement a sweeping plan to right the ship.  The U.S. has its own slew of issues, yet we are not facing a banking crisis like Europe.  The crisis in the U.S. can be surmised as a lack of confidence in leadership.  If members in Washington can work together to harness the debt and facilitate job growth, the collective American anger will shift to confidence.  Confidence is the cure to wild market volatility.

All in all, policy-making rules the day.  Investors are not used to investing based on policies, but they are being forced to in the current environment.  As the pressure builds on world leaders, they will be compelled to pass credible plans that will stabilize global economies.  Unfortunately, the amelioration of many of the problems outlined above is easier said than done.  Until policies are ironed out, the markets will remain uncharacteristically volatile.  Do not try to be a hero in this market, remember the quote from Tony Crescenzi, “Investors get chopped up in choppy markets.”  Ride out the storm, brighter days will return…eventually.


“Writing for the People” 

Stock Picks: Look No Further Than the Obvious

25 Aug

Up, down, left, right?  Stocks in this market are all over the place.  Is it time to buy or sell?  This question is on the mind of every investor.  However, savvy investors will block out the noise and stay committed to proven companies.  Yes, this market is volatile, but that does not mean it is impossible to make money or position your portfolio for future gains.

In a market of uncertainty, investing actually becomes more simplified.  There is no high growth industry grabbing the attention of investors.  There is no momentum chasing industry (minus gold).  There is no sector that is poised to lead the market into a rally.  With a lack of investor sentiment, an investor must go back to the basics.  Look no further than the most boring stocks on the market; the stocks that seem to never make a sizeable move higher or lower.

These stocks, dubbed “boring”, provide a safe haven in volatile markets.  What constitutes a boring stock?  A boring stock is typically a multinational company that has been around for decades.  These companies have internationally recognized brands and are known by individuals who know nothing about stocks or investing.  These companies are not expected to explode with growth in the near future, but they have proven business models that provide consistent cash flow.  This cash flow gives birth to large dividend yields.  In a market where share price appreciation is highly uncertain, a consistent dividend becomes quite attractive.

Look no further than these “boring” stocks:

McDonald’s (MCD) – McDonald’s might be the most recognizable name of the bunch.  Not only is it a proven brand with high customer loyalty, their food is cheap!  With a market tough on consumer spending, McDonald’s will continue to perform well.  They have made a nice run of late, so look for a 2%-3% pullback before buying shares.
Quarterly Dividend = $0.61/share

CocaCola (KO) – Coca-Cola is right up there with McDonald’s as one of the most recognizable brands.  Operating in 6 global segments, the company
has plenty of international exposure.  Do not expect people to stop drinking Coke anytime soon.

Quarterly Dividend = $0.47/share

Pepsi (PEP) – Pepsi is the other beverage juggernaut.  In addition to beverages, the company also sell snacks, and they boast strong brands such as: Tropicana, Gatorade, Lay’s, and obviously, Pepsi.  After its Q2 earnings miss in July, Pepsi has dipped to attractive price levels.   I recommend PEP over KO.
Quarterly Dividend = $0.51/share

Johnson & Johnson (JNJ) – Johnson & Johnson is a staple of America.  Ironically, I find that many people know the company but have no idea what they do.  Their business is composed of three branches: pharmaceuticals, medical devices, and cosmetics.  For a frame of reference, Tylenol is produced by Johnson & Johnson.  JNJ has been around since the beginning of man, not really, but they have been in business for 125 years.  They have weathered many bear markets and they will continue to do the same in this one.
Quarterly Dividend = $0.57/share

If Johnson & Johnson is too boring for you, take a look at competing pharmaceutical companies like Merck (MRK), Pfizer (PFE), and Abbot Labs (ABT).  Merck is just off its 52-week low and trading at an attractive level.  Abbot Labs is a very stable company and is just $1.39 below its share price 10 years ago.  Although that number is not enticing, Abbot Labs has consistently raised their dividend providing nice profits for unwavering investors.

Proctor & Gamble (PG) – You know the Old Spice guy? The marketing team at Proctor & Gamble conceived him.  Proctor & Gamble is the leader in consumer-packaged goods with products sold in nearly 200 countries.  Their share price is relatively stagnant and the stock provides a safe harbor for volatile markets.
Quarterly Dividend = $0.52/share

If Proctor and Gamble is too cliché, check out their top competitor, Colgate Palmolive (CL).  I mentioned that JNJ has been around forever; well Colgate trumps them, dating back to 1806.  They should have little difficulty weathering the storm.

Wall-Mart (WMT) – Wall-Mart is another American icon that has had little price movement over the past 10 years.  They are up just 4.75% over the past decade.  However, their dividend has elevated from $.07 to $.37.  Consistent dividend increases always make a stock more attractive.
Quarterly Dividend = $0.37

Boring stocks a.k.a big name, multinational, proven companies, are the places to park your money during these uncertain times.  These stocks will serve as safe havens to ride out this turbulent market.  There is no need to hit a home during times like this.  Stay conservative and remain risk-averse.  Negative headwinds are abundant, and until the U.S. and Europe get their acts together, volatility will be the name of the game.  I do not recommend buying into any rally; wait for pullbacks before entering positions.

One final comment…

Keep in mind, the aforementioned companies are not the only boring stocks available.  To see if other companies match the boring mold, make sure they have these attributes:

  1. Multinational company with a recognizable brand
  2. Healthy balance sheet with considerable cash on hand
  3. Solid dividend yield that has consistently increased over the past decade

“When buying shares, ask yourself, would you buy the whole company?”
– Rene Rivkin


“Writing For the People”

Good Ol’ Value Investing for this Wild Market

14 Aug

Buy or Sell? Although this question is a basic premise of investing, the recent market movements have made the answer to this question more elusive than ever.  Have we entered a bear market, or have we faced a simple correction? Fears of a 2008-2009 plunge have bubbled to the surface after last weeks tumultuous trading.  Headlines on CNBC have been rather ominous, but is all this fear over hyped? I believe so.

The negative headwinds facing this market are clear.  However, much of these are a result of macroeconomic issues, rather than corporate balance sheets.  These issues do put the clamps on a bull market, and more downside could be in store, but this should not spook you out of the market.  If you pulled out your money ahead of the debt-ceiling debacle, I commend you.  However, if you liquidated your holdings during the recent downslide, I do not extend this same applause.  Panic selling is a trigger of fear and is a poor reason to sell stocks.  If the news and facts are really that bad, then selling is understandable, but selling in fear of a highly uncertain possibility is a fool’s endeavor.

Instead of panic selling…

Take a look at your stock investments.  Think about the original reason why you invested in a particular company, whether it was momentum chasing, high growth potential, high dividend yield, or pure speculation. The volatility in the market will bring down the share price of a company, but is the company actually weakening?  Are the macroeconomic issues facing the markets poised to negatively affect that particular company?  If not, then the overall market may just be dragging the stock down.  With continued selling that stock may just be getting cheaper and cheaper.

If you are confident in the companies that you have invested in, then do not sell out of fear.  When you pull the sell trigger, you are locking in losses and preventing the possibility of future gains.  Instead, try a different approach to hedge your losses.  Dollar-cost-average your holdings.  Buy into the sell-offs, and continue to buy on the way down.  This will reduce your cost per share as you buy into the falling share prices.  If the market stabilizes and starts to inch back up you will begin to profit on your positions, and these profits will hedge the losses of positions you entered at higher prices.  Ultimately, if the stock rises past all the points you bought at, you will see very handsome profits.

Many investors find it difficult to buy into a market when everyone is selling, but you must have faith behind your investments.  The best times to buy in a market are when people are skeptical; these provide the best value opportunities.  However, this is not for the faint-hearted investor, you may need to stomach losses for an extended period before you return to profitability.  Hold strong to your convictions, shoot for the long-term, and ignore the noise.

“Be fearful when others are greedy and greedy only when others are fearful” – Warren Buffett


P.S. Investment recommendations are on the way!

A Market in Turmoil

12 Aug

This market has been a spectacle of late; rationality has given way to extreme volatility. 400+ point swings in the Down Jones Industrial Average (DJIA) are becoming the norm.  A lack of stability has sent the market on a seesaw binge leaving both professional and novice investors bewildered.  This confusion has sparked the debate on whether the market is poised to take a 2008-2009 plunge or a heroic move to new highs.  Neither appears imminent, but with a market that is moved by traders who are confused, worried, nervous, erratic, and emotional; anything is possible.

The roller-coaster movement of the market is a tell tale sign that it is wrought with a lack of stability and direction.  It has proven that any bit of news can turn it on a dime. Whether it is a rumor of default in France, or lower than expected jobless claims, this market will use any news, rumor or truth, to fuel a triple digit move. 

These violent swings have been seldom seen this year.  Typically, a 100+ point movement for the DJIA is considered significant.  However, this pales in comparison to the movements the market has made this week.  This can be attributed to extreme volatility and the lack of balance between buyers and sellers.  When the news is good, everyone is buying, and when the news is bad, everyone is selling.  In a less volatile market, the more balanced ratio of buyers to sellers prevents such dramatic swings. However, in the current environment, a lack of certainty in the intermediate direction of the market has left people with little conviction.  The smallest news has the ability to tilt the scales one way or the other. 

The recent market movements can also be pinned on technical analysis and trading.  Technical analysis largely ignores the fundamentals and hones in on historical price movements and investor sentiment.  This week, the market developed a confined trading range, creating bottom level and upper level resistance points.  The market has used any economic news to trigger the climb, and descent, to and from these points.  Once these levels are reached, technical charts flash buy or sell signals prompting a change in the direction of the market.  Most of the trading this week has not been based off the strength of the companies being traded.  It has been based off macroeconomic news and technical signals.  These movements are perpetuated by computer generated trading, which trades based on algorithms derived from technical analysis.  (David Randall, a business writer for the Associated Press, provides great insight on technical trading and its role in the recent market movements.  Read his piece at YahooFinance).

The volatility of the markets is transparent, and so are the reasons behind it:

  • The debt ceiling debacle has cast a black eye on the American political system.  Congress appears incompetent in its ability to handle economic issues.  We have been punished for this mismanagement via the credit downgrade from S&P.  A continued lack of leadership and consensus in Washington will leave the market in peril.  Members of congress need to wise up and head back from vacation to iron out a debt deal that takes concrete steps in drastically eliminating the country’s debt.
  • The credit crisis in Europe is creating a major roadblock for any advancement in the market.  The European banking system is under heavy stress as it absorbs debt from the debt-plagued nations of Greece, Italy, and Spain.  The European Central Bank is doing its best to keep the negative fiscal conditions isolated, but fear remains that contagion will spread throughout Europe and the central banking system will be unable to support the load.
  • FEAR is the name of the game in this market mayhem.  The crash of 2008-2009 is fresh in people’s minds, and when it comes to money, people get emotional.  The market is more or less a barometer of human psychology.  It is tough for both professional and novice investors to watch their money evaporate. This causes people to bail out of the stock market and stay on the sidelines until a clear direction is signaled.  (Fear in the market can create the best buying opportunities for nimble investors)

Conclusion:  The current volatility in the market is going nowhere.  The same sentiment goes for the global economic problems around the world.  These events will be monitored day by day, and as I said, any news has the ability to send the market north or south.  This is definitely a time to invest defensively, however I do not support selling all your stocks and sitting on the sidelines.  I will compose a post over the weekend on how to position your portfolio to ride out the storm.

Stay the course, the U.S. economy is resilient.


“Writing For the People” 

S&P, How Could You?

6 Aug

For the first time in history, the U.S. has been downgraded from its pristine AAA rating to AA+.  After enduring one of the most volatile weeks on the market, S&P had the audacity to slap a credit downgrade on the U.S.  Investors have been fearing that a credit downgrade would be the final shock to send the market into…dare I say it, a RECESSION.

With so much negativity swirling around the market, how did S&P determine it was an appropriate time to downgrade the U.S?  The Euro zone is hanging on by a thread with the debt-ridden nations of Greece, Italy, Spain, Portugal, and Ireland on the verge of forcing a break up of the Euro.  The U.S. market has suffered a vicious sell off after the shenanigans in Washington produced a half-baked plan to reduce the debt.  Based on the way the market traded on Friday, any piece of evidence, good or bad, could send the market one way or the other. S&P has made their best effort to push the market off a cliff.

The reason behind the S&P downgrade is that the government’s handling of the debt ceiling was a complete debauchery.  S&P believes it set a precedent for future clashes of American politics and fiscal policy.  Congress is very deserving of the blame, and I agree that a downgrade will force policy-makers to implement tough austerity measures they should have made.  However, with the market in such disarray, a downgrade delivers a stifling blow to the U.S. economy and ultimately, the global economy.  Both Fitch and Moody’s chose to maintain the country’s triple A rating, yet S&P had to be the stickler to slash it.

The impact of a credit downgrade will lead to an increase in interest rates across the board.  The U.S. will be forced to pay higher interest rates on government bonds, thus adding to the current debt and forcing tougher budget cuts a.k.a. job cuts.  Furthermore, interest rate increases will extend to the consumer pocket.  Interest rates will rise on credit cards, student loans, mortgages, etc.  Banks will also charge higher interest on loans to businesses.  This will have a dramatic impact on cash strapped businesses that rely on loans to stimulate growth and expansion.  This is especially troublesome for small businesses and start-ups that simply cannot afford to borrow money with back-breaking interest payments.  Profit margins will be squeezed and growth prospects will be snubbed.  All of this ultimately leads to: a slow down in business growth, more layoffs, a decrease in consumer spending, and a weakening economy.

This move by S&P is deserving, however, it is inappropriate given this current environment. Amidst so much negativity, this crushing blow guarantees a tough road ahead for the economy.  Maybe their goal was to launch a global recession.  Perhaps they all sold their stocks and are now shorting the market…

The fall out of this downgrade could be ugly.


“Writing For The People” 

Default? Not a Chance.

28 Jul

The U.S. is NOT going to default. Neither the democrats nor the republicans will allow the country to default on their accord.  The recent proceedings are simply political grandstanding.  Both sides have stood unwavering to prove to their constituents that they will always and relentlessly fight for their interests.  However, we all know that a default would be the worst outcome for any constituent, regardless of party affiliation.  Therefore, a default WILL NOT HAPPEN.  If you are one of the many people that have been freaking out about a default, I have a suggestion for you. Throw a bag of popcorn in the microwave, kick back, and enjoy the political circus that continues to unfold.  Maybe you will even see Obama do a backflip off Boehner’s head.. A deal will be struck; maybe not today, maybe not tomorrow, maybe not August 2nd, but once the pressure is at its peak, a deal will be made.

Another very important item to clarify is that August 2nd is MEANINGLESS.  Who came up with this arbitrary default date anyways?  I am not sure, but Obama has embraced it like a person who found their  lost dog.  He claims that if the debt ceiling is not raised by August 2nd, the U.S. will default on its obligations and the economic gods will smite America.  Give us a break, Obama. In a world filled with infidelity, you think we will not catch a bold-faced lie when we hear one?!

Mr. Obama, a lack of  debt deal by August 2nd will not force the U.S. into defualt.  There are funds available to pay the interest on bonds and cover all other necessary obligations.  A lack of a debt deal will not lead to a default unless several weeks pass without a deal.  If a deal is not passed by the “August 2nd deadline”, the government may have to put a freeze on some expenditures.  Perhaps we would see a hold on the department of commerce, department of agriculture, and other branches of the government that eat up more tax-payer money then they need.  This is not a major issue, it would simply add more pressure on the political parties to get the deal done.

Obama’s statement that an August 2nd doomsday is inevitable without a raise in the debt ceiling is simply untrue and unwarranted.  His words and actions have rendered him the biggest culprit in this whole political charade. It is a shame that he is resorting to lies and the demonization of the republican party to positively portray his stance in the public eye. Nonetheless, American politics would not be the politics we know and love without Obama starting his 2012 campaign with a fistful of lies and smears.  Oh, American politics!

The short and sweet: NO DEFAULT. The political grandstanding will end and a deal will be struck.  Both sides will wait until the final second to ensure their political egos have been satisfied. If you are holding your breath for financial Armageddon, please stop, you are starting to turn purple…

P.S.  Wondering why I didn’t mention the potential for a credit downgrade?  That will be discussed in my next outburst.


“Writing For The People” 

Summer Silk (Podcast)

1 Jun
♦♦ Another summer of love is upon us.  Jumpstart the season with these new tracks. ♦♦

Track Listing:

1. Quintin v. Calle & Cruz – Ranked (Original Mix) 
2. Andrew Bennet – Phoenix (Original Mix) 
3. Manufactured Superstars Ft. Scarlett Quinn – Take Me Over (Bingo Players Remix) 
4. Stephan Luke – Body Talk (Original Mix) 
5. Austin Leads – Sting (David Solano Remix) 
6. Michelle David & Housequake (Roog & Erick E) – Out of the Dark (Nicky Romero Remix) 
7. Marco V – Rock The Boat (Pleasure Island 2011 Theme) 
8. Chris Montana & Chris Bekker – Tribiza (Swanky Tunes Remix) 
9. Quick Jaxx – Hey Bill (Bang Bang) (Club Mix) 
10. Firebeatz, Josh Newson & Jay Ronko – Keizer (Original Mix) 
11. Pixel Cheese & Kamil Pankowski feat. Yolanda Selini – Vibe of Summer (Original Mix) 

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Take Out the Trash (Podcast)

25 May
♦♦ Here is my first full length podcast.  It consists of 12 recently released house tracks.  I plan to continue posting podcasts of the latest house music.  Be sure to check back next week for a fresh podcast with new beats.  Enjoy! ♦♦

Track Listing:

1. Paul Thomas – Skaramoosh (Original Mix) 
2. Disfunktion Ft. Nicky Price – Lost All the Ways (Original Mix) 
3. Michael Woods – Fruitcake (Original Mix) 
4. Jono Fernandez & Katrina Noorbergen – Hear Me (Digital Lab Remix) 
5. Swanky Tunes & Hard Rock Sofa – Steam Gun (Original Mix) 
6. Pier Poropat & Adam Rickfors v. Antillas – Crooked Lightning (Antillas & Dankaan Rework) 
7. Melanie Morena Feat. Andy P – How We Gonna Live (Dohr & Mangold Remix) 
8. Fussy Boy – Gold (Mord Fustang Remix) 
9. Gregori Klosman – Low Battery (Original Mix) 
10. Marco Petralia ft. Zsuzsa – When Will I Be Famous 2011 (Plastik Funk Remix) 
11. Markus Schulz & Jochen Miller – Rotunda (Original Mix) 
12. Alex Kenji, Starkillers, & Nadia Ali – Pressure (Alesso Remix)

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Stable Investments for this Turbulent Market

17 Mar

There is an abundance of negativity swirling around the market.  This should set the stage for a volatile market over the next couple of months.  News headlines will continue to tap into the emotions of investors.  As negativity lingers, investors will remain cautious with their money.  Keep in mind that is much easier to stay negative rather than positive.  Positive headlines only emerge after consistent positive news.  With the global turmoil we are experiencing now, it could be awhile before financial news turns positive.  It is important that investors stay tuned to these global events because they will have a major impact on the movement of the market.

With all the negativity in the market, are there still areas to invest?  I believe so, however do not be fooled by a quick bullish run in a stock.  Due to unhinged volatility, I only suggest buying into large sell-offs.  As we have seen over the past several weeks, 100+ point gains in the DJIA have been quickly erased by 100+ losses the following day.  Timing is very important in this market, so buy on the dip, do not allow yourself to be enticed by a bullish day.

The area of investment that appears to be the most attractive is the steel/aluminum/iron ore industry, which will benefit from the rebuilding of Japan.  These companies will contribute to the construction of new buildings and transportation systems.  Here are a few companies that could see increased demand for their resources:


Other companies poised to benefit from a Japan recovery:


Or simply invest in the country itself using the iShares MSCI Japan Index: EWJ

Furthermore, fears of radiation at the Japanese nuclear plants have already had an impact on energy stocks.  Nuclear energy has taken a hit, but it is too early to tell if the industry is going to die.  In the mean time, other sources of energy will receive a boost.  It is easy to say that it is time for the world to focus on clean energy, and I believe solar and wind stocks will receive a nice push.  However, this industry is years away from being a dominant force.  I look to natural gas, coal, and oil stocks as safer and more profitable investments.

Many oil companies are expanding their exposure to natural gas.  There is plenty of natural gas to go around and its cheap price makes it an increasingly popular energy alternative.  Here are some companies that can benefit from the increase in demand for natural gas:


Oil companies are always safe investments.  With the recent hit to nuclear energy coupled with high oil prices, the oil juggernauts are poised to generate huge profits.  The big names will not fail you:


Perhaps diversify oil exposure with oilfield and rig companies, like:


Lastly, on the energy front, coal companies may receive the biggest boost.  Coal is easier to transport than oil and natural gas, so it makes sense for Japan to use coal to meet its pressing energy needs.  Here are a few strong companies in the coal industry:


Much of these stocks follow the consensus of market analysts.  Therefore, they are already moving upward.  Do not worry about the short-term gains you are missing out.  I would wait for a retraction to enter a position in these companies.  I expect most of these to outperform the S&P for the rest of 2011.  Many of these companies are big names that pay dividends and would serve as suitable investments in any market.  The market is in a rut right now, but that does not mean your portfolio needs to suffer with it. In order to protect and grow your money, I urge consideration of the stocks listed above.


* Stocks I own

From Bull to Bear, What Happend to this Market?

16 Mar

Investors entered 2011 with no shortage of bullish optimism.  The market had nearly doubled from its 2009 lows and was well positioned to continue upward.  I, like most other analysts, firmly supported this bullish stance, expecting the market to grow 11%-13% by the end of 2011.  However, I noted in my post back in January that this growth would only be attainable without global disruptions, such as: European bankruptcies, terrorist attacks, or natural disasters.  Now 3.5 months into the new year, the market has been stricken by a variation of these three elements.

The DJIA and the S&P 500 have retracted their early year gains and are right back where they started the year.  Strong earning reports and declining jobless claims have not been enough to keep the market resilient through the recent global turmoil.  North Africa and the Middle East have been a hotbed of political unrest as citizens have clashed with their political superiors.  Revolution and whispers of revolt of have dominated the countries of Tunisia, Egypt, Libya, Bahrain, and Saudi Arabia.  The oil exposure of some of these countries has sent oil prices well over $100 a barrel.  A continued price escalation could stunt global growth.  Companies unable to parlay the cost of rising commodity prices onto consumers will be the most adversely affected.  High prices at the pump will also put a pinch on consumer spending.  The only benefactors of this price hike will be the oil juggernauts, but high profits will be offset by decreased demand.  Increasing oil prices do not bode well for a bull market.

Adding to the burden of expensive oil are the failing economies of several eurozone countries.  The PIIGS (Portugal, Ireland, Italy, Greece, Spain) are squealing again, confirming investor fears that their economies are closer to default then recovery. Greece, Spain, and Portugal are going nowhere fast as Moody’s slapped all three with downgrades this past week. Buying up the debt of these countries appears to be more of a donation rather than an investment.  Their borrowing power is near nothing, suggesting that bailouts may be necessary.  A lack of competiveness in these economies deters any foreign investment and will have a negative impact on their growth.  As the markets become more globally integrated, the failure of one country will hinder the growth of all markets.

Completing the trifecta of negativity is the recent tragedy in Japan.  The country has been devastated by one of the worst earthquakes in the world’s history.  The natural disaster has resulted in billions of dollars in damage and will require billions more for rebuilding.  Additionally, nuclear meltdown fears have crippled Japan’s energy supply and have forced thousands of people to evacuate.  Many people are without homes and jobs, and have little idea when their lives will regain normalcy.  These uncontrollable factors leave Japan’s economy hanging in the balance.  Being the 3rd largest economy in the world, Japan’s recovery will be crucial for not only Japan, but for all markets.  Fortunately, Japan has one of the best performing economies and has considerable cash on hand to confront these challenges.  However, they may need to free up more cash to pump back into their economy.

Since Japan is the second largest holder of American debt, there is speculation that they will sell off American treasury notes to increase their money supply.  This would dramatically hurt the value of the dollar and put a clamp on U.S. borrowing.  An outcome like this will send the American market downward and have a ripple affect through all global markets.  This is speculation for now, but the events in Japan will continue to dominate U.S. and global markets.  In the short-term, if they can alleviate the radiation risk at the nuclear power plants, much of the existing fear will be taken out of the market.  But until then, fears of nuclear catastrophe will drive investors away from the market.  Japan is a strong economy and it will recover, but the road to recovery may be a long and painful one for investors.

It is rare that the market sees a combination of three separate and very negative events happening all at the same time.  The events in Japan are the most driving factor in the markets right now, but concerns over expensive oil and debt-ridden euro nations will continue to suppress the market.  These events will dominate economic headlines and provide a harsh reality for investors.  The bullish optimism that started the year has evaporated and it is time to get defensive.  In my next post I will discuss some potential investment options to keep your portfolio stable amongst all this turmoil.


Long-Term Retail Idea: Macy’s (M)

23 Feb

Retail giant, Macy’s, reported 4th quarter earnings yesterday.  In a conference call from CFO/EVP, Karen Hoguet, Macy’s quarterly numbers were discussed as well as guidance for 2011.  I read through the transcript and pulled out the major revenue numbers and plans for further development.

Financial Numbers:

–       penetration of private brands sales grew 20%

  • percentage of business done in private, exclusive, and limited distribution brands is now approximately 43%

–       Internet business grew faster than expected

–       Operating income grew 32%, EPS grew 55%

  • Ended year with $1.5 billion in cash
    • Paid off $1.2 billion in debt and $825 million to the employee pension fund

–       Return on invested capital grew to 17.4% from 14.9% last year

–       4th quarter sales grew 4.3%, EPS also exceeded expectations

–       gross margin was 41.3% down from 41.5% from last year

–       operating income was $1.169 billion, which was 14.1% of sales. This was up 10% over the last year

–       diluted EPS was $1.55 or $1.59, this exceeded expectations of $1.44 or $1.49

–       cash provided by operating activities was $1.5 billion less than last years $1.75 billion.  This can be attributed to the $825 million contribution to the pension plan compared to $325 million the year before

–       they are working to continue paying down their debt in hopes of gating a ratings boost from Moody’s and S&P

New Stores:

–       successfully opened Bloomingdale’s store in Santa Monica, initiated licensing agreement for Bloomingdale’s in Dubai

–       launched Bloomingdale’s outlet concept, opening 4 stores

2011 Plans

–       recognize issues of rising commodity costs and implement strategies to combat the issue

–       focus on 4 key strategic imperatives:

  • drive a growth culture – encourage risk, maximize big ideas, mining white spaces, vendor collaboration, continue to grow private and exclusive market brands
  • maximize My Macy’s – meet the needs of local customers by focusing on key subjects, like:
    • sizing, climatic variation, and multi-cultural differences
  • embrace customer-centricity – MAGIC selling, focus on engaging with customers
    • new scheduling system designed to better match staffing to customers in department
  • drive omnichannel business – align store and Internet merchandising and marketing strategies, build capabilities of getting customers what they want
    • do a better job of embracing technology in stores, bring online knowledge into the store *
    • Hoguet’s words in regard to the internet, ”The whole area is very exciting and will continue to be a terrific source of growth for us”

–       Concluding message from Karen Hoguet:

“The bottom line, we had a great year in 2010 and we expect an even better one in 2011.  Our new structure is enabling us to make faster, bigger and better decisions, while at the same time staying very close to the customer at the local level.  And there is so much progress we expect to make as we go forward because most of our key strategies are in the very early stages of producing the results we expect.  At the same time, we are mining and testing new ideas and new ways of thinking to drive the business forward.  And  we are comfortable taking more calculated risks, consistent with our interest in building a sustainable growth culture.”

My Thoughts: Overall, Macy’s had a very solid quarter.  Their operating income grew and they have considerable free cash on hand to re-invest and continue paying off their debt.  They have been effective at reducing their debt and they will continue to reduce this number throughout 2011. Income should be steady over the next quarter as rising commodity costs will keep them from having breakout profits.  The launch of the new Bloomingdale’s outlet concept is poised to continue to grow as it taps into a popular consumer niche.  The licensing agreement in Dubai will increase the international recognition of Bloomingdale’s/Macy’s, which will increase their market presence abroad.  This stock is not something you can expect to see quick, short-term gains.  However, Macy’s has a very focused strategy that will provide the backbone for future growth and profit.  As consumer confidence continues to rise, a company like Macy’s could reap the benefits of the changing economic climate.  Macy’s looks like a solid, long-term investment, that could serve as a way to capitalize on the emergence of the retail sector.  Unless commodity prices go through the roof or the market double-dips, their downside is minimal. The risk/reward ratio is ideal, so I suggest a long-term position.

Over-Sold Opportunities? (LVS, F, GM)

8 Feb

Two ideas to capitalize on heavy selling from missed earnings estimates:

Las Vegas Sands (LVS) sold off large after missing estimates last week. They have flat-lined this week, looks like investors are done selling. Expect buyers to re-enter, it is at an attractive price right now.

Pre-earnings Price: $50.26

Last Close: $46.36

Ford (F) and General Motors (GM) sold off after Ford didn’t meet revenue estimates on 1/27/11.  Both have bottomed out and have moved upward over the past week.  Their current prices are attractive entry points.  The movement of these two stocks is fairly identical, feel comfortable playing them the same way.

(F) Pre-Earnings Price: $18.79

(F) Last Close: $16.24

(GM) Before Ford’s Earnings: $38.67

(GM) Last Close: $36.89

I am a buyer of all three companies, especially after the recent sell-off’s.  They should all serve as stable long-term investments.

Quote #99 (Gabriel Meurier)

20 Jan

“He who excuses himself accuses himself.”

— Gabriel Meurier

Gay Marriage?!

19 Jan
A funny take on gay marriage.

College Tuition Too High? Colorado Student Pays in $1 Bills

18 Jan

The cost of college education is a student’s nightmare. If you are not from a wealthy family, then you may be stuck with the burden of paying for college. The average 4-year undergraduate tuition is $120,000.  This is no small debt for student’s who are unable to generate wealth while they are in school.

The financial struggles of college education have prompted many angry students to speak out.  One Colorado University student chose a unique way to exemplify his angst. Nic Ramos, decided that he would pay his $14,309.51 tuition in cash.  Not only did he pay in cash, he paid in mostly $1 bills.

The total tuition payment weighed in at 30 pounds and required several university employees to count the cash.  The school did not release a comment on Nic’s actions, but many students from across the country have praised his efforts.  His actions speak on behalf of millions of students that are struggling to meet tuition bills.  Nic’s act should pave the way for more scrutiny on the ridiculous cost of college education.

As a current student, I was delighted to see such a bold move by a peer.  I have continually criticized the rising cost of college education.  The financial burden of paying for college is deterring many individuals from applying to college.  It is stripping away an individual’s right to education. Furthermore, my experience has led me to believe that college is over-priced, and the learned skills do not match the price of the education.

In recent years, a college degree has become a necessity for highger-level employment.  People are paying the high price of college to show they have earned a degree from an established university.  Regardless if sufficient skills were developed, the label of a degree typically prevails.  This outcome has led to a growing injustice across social classes.  One’s ability to pay for education has too much of an affect on their future potential.  The playing ground should be more neutralized.  This issue is beginning to make its presence known in the political realm.  The price of college education is too high and changes need to be made.


“Writing For The People”

Quote #98 (Mark Twain)

11 Jan

“A man is never more truthful than when he acknowledges himself a liar.”

— Mark Twain

Mantis Shrimp

10 Jan
A photo of one of the most eccentric looking inhabitants of the sea, the mantis shrimp.

Fake Lawyer Busted After Trying 60+ Cases

10 Jan

Lawyers are famously known for their crafty words and boisterous acts of persuasion.  Many people have defined trial lawyers as starving actors because they never cease at putting on an entertaining show.  This type of zealous persuasion is what many clients pay to receive, and what lawyers use to sway the jury to their side.  One Chicago attorney represented many clients using these same tactics.  However, there was one catch, he was not a certified lawyer.

Tahir Malik, from Skokie, Illinois, was arrested on two counts of false impersonation of a lawyer.  Malik had tried over 60 cases before he was busted. He developed a way with words that withheld scrutiny from other members of the courtroom. Nobody ever thought a man with no law degree and no legal education would be parading around the courtroom on behalf of his clients.  However, this fake lawyer had everyone fooled for quite awhile.

Malik became known as one of those stereotypical lawyers as depicted in movies.  One of his clients said that he, “walked around the courtroom like he was a hot shot, strutting around.”  He had mastered the ego of a lawyer, and this type of confidence shielded him from speculation.  He was even charging a hefty price for his services, ranging between $500-$4,500 per case. However, like most good crooks do, he took his act slightly too far.  In a case on December 17th a Cook County official called into question his credentials.  After a little bit of research the truth was revealed.  Tahir Malik was not a lawyer, in fact he had a criminal background that most likely served as the basis for his legal knowledge.

Malik now awaits his trial set for January 28th.  He has not announced whether he will represent himself or hire a lawyer.  Malik’s run as an attorney may be over, but the mystique behind his actions continue to grow.  Only a rare talent could pull off such a feat, maybe his charm will spare him from the fangs of the criminal justice system. Untill then, he waits, and conjures his defense.


“Writing For The People”

Quote #97 (Robert Frost)

10 Jan

“College is a refuge from hasty judgment.”

— Robert Frost

Market Outlook and Analysis (1/3/11-1/7/11)

7 Jan

My last post about the market dates back to the summer.  Over the winter break I have had an abundance of free time to do research and make financial moves for the new year.  Therefore, the time has come for me to give you the latest updates on my portfolio and my thoughts on the market.

I will start off by analyzing the results of this past week. Bullish optimism dominated at the beginning of the week. This was evident by Monday’s surge in the market.  Tuesday and Wednesday also bode well for the markets as both the DJIA and S&P 500 hit 52-week highs. However, the market retreated at the end of the week, finishing down both Thursday and Friday.

The bearish move at the end of the week appears to serve as a reality check for the recent rally. Lately, positive news has been crushing negative news as many analysts feel equities remain undervalued.  However, all this optimism makes me cautious as I feel the recent rally is based on too much positive speculation.  Most analysts believe 2011 will be great a year for the American market, I agree with this notion, but I do not think this assumption should be escalating stocks so high.  Personally, I foresee another correction before the market continues its path upward.

I was actually pleased to see the market retreat at the end of the week, I think many investors are starting to come to their senses and realize that we cannot keep riding this rally up and up.  Too much of a boost to the market, based purely on optimism, will result in a large correction. Considering that the dow has been on a tear since the summer time, it is imperative to not get too greedy and over-zealous with trading.  The market needs to progress slowly instead of sky-rocketing up due to over-buying.

I know that I sound slightly negative here, but it is my natural instinct to remain cautious and not get too caught up in a lot of writing without statistical backing. However, I am a BUYER in this current market. Barring natural disaster, a terrorist attack, or European bankruptcies, the market should continue to trend upward.  My stance reflects the overall consensus of market analysts.

If there was ever a time to invest, that time would be now.  Much of the perceived downside of early 2010 has given way to upside for 2011.  I believe the markets will be volatile in the upcoming months, so I recommend to do most purchasing on dips.  If you really love a company and they are oozing with positive news, then do not hesitate to buy on the way up.  Over the summer I would have recommended purely buying on dips, but the recent positive momentum no longer supports that stance.

For those that are still skeptical and looking to re-enter the market, the safest bet is going with the big names.  Many of these offer dividends, but not all.  Here are some of the notable names that I believe to be safe re-entry points to the market.

MCD, WMT, MSFT, AAPL, AA, VALE, KO, XOM, PBR, VZ, JNJ, (I own AAPL, I would love to own all these if I had enough cash!)

The financials have also been getting a lot of love.  All of these stocks were extremely hard hit after the market crash in ’08.  If they return to old levels, they could provide hefty profits for those willing to invest right now.

C, BAC, WFC, JPM, GS (I recently bought C and JPM. I recommend buying C while it is still under $5.  I am not the biggest fan of BAC, but the upside is evident. I would rather own WFC and I am looking to purchase shares on its next big dip. GS speaks for itself, like the rest, it has tremendous upside)

Here are some more of my recent purchases:

CIEN, MDF, LUV, TSCM, JOEZ, ZAGG (Zagg is my baby, I bought it over the summer at 2.84 and recently bought more at $7.47.  It closed today at $9.07. I highly recommend buying this stock on dips because it loves swinging back and forth. I see this going to $11 and maybe $13 if they continue to dominate their market)

Technology companies involved in wireless transportation of information are becoming very attractive.  Our world is becoming defined by the 4G network, any tech companies at the vanguard of fiberoptics, ethernet, and wireless communications, should receive a bullish push in the coming months.

Right now I am deciding on my next moves but I am waiting patiently.  I am hoping for another strong pull-back before I make any purchases. Congress is debating on raising the country’s debt ceiling, their ultimate ruling should have an influence on the market.  Also the unemployment rate remains high around 9%-10%, this could hold the market back from elevating.

Remember to make well informed purhcases, try not to be impulsive.  Acquire a firm understanding of a company’s growth prospects before making a purchase. Also stay tuned to the talking heads of the market, i.e. Jim Cramer.  Their outlooks on particular stocks have a large influence on the way they move.

*All of the information written here is my personal opinion derived from research and gut-instincts.  Nothing I say is guaranteed and I have no certifications to add to my credibility.  I am simply a 21-year old with a passion for the market, and I try to cram in as much investment research as my day will allow.  Feel free to contact me at to further discuss the market and specific stocks.  I have a plethora of opinions that  I did not share in this article.


“Writing For The People”

Two-Headed Cow

7 Jan
This past week a two-headed calf was born in the country of Georgia. The conjoined animal has attracted numerous visitors. Many animals and humans have endured the same medical condition, but it is quite rare. This video will definitely leave you a little weirded-out and curious as to how the animal is able to survive. However, don’t worry, we all have the same unanswered questions. Check it out.

Quote #96 (Plato)

7 Jan

“Music and rhythm find their way into the secret places of the soul”

— Plato

Insane Russian Teen Uses Homemade Bungee Chord

6 Jan
These Russian teens decided to make a homemade bungee setup across two high-rises.  The girl who makes the epic plunge has to be insane or a thrill-seeking junkie (probably both).  However, she avoids the obituary column and executes the jump flawlessly.  Even the way they throw her off the building gives me the chills. Enjoy! 😉

Newspaper Man

6 Jan
A man in a newspaper outfit, reading the newspaper in Seoul, South Korea.

Gorillaz – On Melancholy Hill (AN21 & Max Vangeli Remix)

6 Jan
♦♦ A great Gorillaz song turned house anthem. AN21 & Max Vangeli are young guys making a splash in the house scene.  Check out more from the duo at ♦♦

Quote #95 (Albert Einstein)

6 Jan

“Great spirits have always encountered violent opposition from mediocre minds.”

— Albert Einstein

Homeless Man Has Perfect Radio Voice

5 Jan
Broadcasting voices are a staple of the radio industry. Many people try to imitate these voices, but very few can master them. This homeless man, Ted Williams, is one individual that has the rare talent of commanding the airways.  Unfortunately, drugs and alcohol have derailed his attempts at success, but he is not giving up. I think a job offer is in his near future. Enjoy! 🙂
This guy is a celebrity now!!

Hayley v. Deadmau5 – Falling in Love with Brazil (Kaskade Mashup)

5 Jan
♥♥ You can’t go wrong with names like Deadmau5, Kaskade, and Haley.  This therapeutic jam that will put your mind at ease.  Enjoy. ♥♥

Download this song @

Quote #94 (John Rohn)

5 Jan

“Motivation is what gets you started. Habit is what keeps you going.”

— John Rohn