wearmanyhats

President Obama gave a wonderful, no nonsense scolding to the boys on Wall Street that took both ridiculous bonuses and handouts from the government.  He called their actions “shameful” and hinted that if any of that nonsense continued, they’d be called to testify in Washington for their greed.  He minced no words about their sheer lack of good taste during a time when so many Americans are out of work and suffering.

After he’s done being President, give that man a preacher’s robe and put him in the Chuch or Common Sense. Hallelujah! Sign me right up as a first member.

Here are some sermon topics he might like to have:

1.) Is anyone really such a good athlete as to command more than two million dollars a year?

2) Is it a sin to make 200 million dollars a year while paying the lowest paid company employee less than $20,000 a year?

4) Let’s freeze the pay of Congress for four years!

5) Just why does a Hollywood star have to make over one or two million dollars a picture?  

6) In a planet of 8 billion people and quickly depleting resources, is having six children already “enough?”

Perhaps Bernie Maddox can become the Choir Boy, a born again convert into the New Church of Common Sense.  He could preach about his loss of common sense when he bilked people out of their life savings.  He could beg for forgiveness.  He could talk about how getting common sense back into his life again would give him a new sense of direction.  The church ought to be packed with witnessing like that!

There is probably more than one American that would like to see those Wall Street executives squirm if called to Congress to testify why on earth they gave out bonuses in a year when they needed the American Taxpayer to bail them out.  It might be like witnessing a public hanging.  For sure, the Treasury Department should check into whether or not the holdings from these rascals can be confiscated and given back to the American Treasury.  A little jail time would do them some good, too.

Hopefully as President, Obama can continue to preach the merits of common sense. We wouldn’t do well to wait for four or eight years for that Church of Common Sense to open up.

In 1924, a middle aged man bought a small house for his mother in a sneeze of a town in mid central Minnesota.  After she passed away in 1929, the man decided to rent out the house because the stock market fall had eroded the value of the home.  Banks were failing, fortunes were being lost, and the man thought it prudent to rent out the home.

What he didn’t know was that the next decade would later become known as the Great Depression, that the financial landscape would become void of any money, and the decade would redefine Americans as never before. A whole generation would become suspicious of banks, tight with money because they remembered a time when money was darned hard to get.  All he knew was that he was renting it for $2 a month.

Who would have thought that $2 a month was more than they could muster.  No one had any money back then, so the man was faced with trying to decide whether to throw the people out or let them stay there just so someone was living in there.  In the end, he let them stay, mindful that a house needed to be lived in to not develop problems.  An empty house invited vagrants, and there were plenty of those around.

Fast forward to another town in 2009, and a family sits in a trailer, unable to pay the rent on the land they are renting. One has lost her job, the husband, a trucker, has not had work on his contract all month.  The landowner this time is the granddaughter of the man who had let his house for free so many years earlier. Once again the choice needs to be made: to force out the tenants or let them stay.

This problem is not unique.  All around the United States, people are not just losing their homes, but they are suddenly unable to make their rent payments, credit card payments, or pay for their cars.  Will apartment owners or those who have spent a lifetime renting out single family homes  be faced with someday deciding whether to allow people to stay there rent free?

Eviction seemed a clear cut choice to the current landowner, until she spoke about it to her father, and brother, who both urged her to show her renters mercy.  “These are tough times,”  said her father.  “They might just get themselves caught up before too long, and you’ll be glad someone’s living out there.”

Her brother, in a separate conversation, took the same point of view.  “You know, a couple of months might make all the world of difference in their life.  You might want to just wait it out.”

What will the next decade bring for her this time?  Will it be a virtual desert of no money?  Will it be a blip in time, or a redefining of a generation?  The story is yet to be written.

In an earlier blog, I mentioned a number of 22 million people being unemployed.  I arrived at that number erroneously and stand corrected.  The number I had calculated was dependent on the number of people in the United States and a 7% unemployment rate.  I forgot the people who are retired, children, and disabled. 

The true numbers of unemployed were listed today by the Labor Department at 6.7  million people.  (AP) This includes the number of people who have had extended benefits. 

It’s difficult to keep things into perspective, but it’s critical that readers do.  For example, there is a difference between a loss of profit and a loss in general.  Most companies are reporting a profit, but there is a loss in how much that profit is.  The media is reporting these losses in such a way, too, that makes it would very hyped.  For example, today Jay Alabaster, writing for the AP reported that Sony’s profit, “shrivelled to 10.4 billion yen…”

It’s never pretty to lose profitabiltiy.  It almost always means that labor costs must be trimmed, and that’s why so many people are getting laid off worldwide.  However, it is important that we keep profitability in perspective. Staying in the black is essential for a corporation to keep financially liquid.  Some of these companies, such as GM, can not continue to bleed red ink and stay in business indefinately, no matter how big they are.

First it starts with feeling that your head is stuffed with rags and there is no way you should do anything but sleep. Then it takes an unpleasant turn involving the toilet.  No matter how it hits, the “stomach flu” as our ancestors called it, is an untidy event filled with something nobody wants. 

The problem is that people have been getting laid off of work, and missing work suddenly has gotten to be a bad idea.  Will the boss think that you are replaceable if you call in sick?  Will your job be cut if you look as though you are slacking off a day?  Torn between not spreading it within the population or keeping your employment, usually results in a trip into work.  There is something about appearing before the boss and then racing to the toilet, followed by any kinds of terrible sounds, that makes illness look more legitimate.  

Fear of unemployment is helping to spread the flu around quite nicely.  No matter how many people sit at home and collect unemployment, there are always people out there who are scared to death of losing their job because they appear to be slackers.

There is one good thing about all of this.  According to most doctors, the general population builds up a resistance as it is exposed.  But it is no consolation when the victim is lying around suffering. And it is no consolation to the human resources people who have to tolerate a parade of loyal but obviously sick individuals coming into work. 

Throughout all of the corrections in the market, some stocks are holding steady.  One, in particular, has been running between the same range now for over three years:  British Petroleum Prudhoe Bay Royalty Trust. (BPT)  It vacillates between $69 to $96 depending on the price of oil or the time of the dividend payout.  And it’s on the low side right now.

There are good reasons to like BPT.  First, it has a quarterly dividend of 9%, a P/E of 6 and a consistent payout record.  In this time of economic trial, BPT is like the Energizer Bunny that just keeps moving along.

Consider the upside potential with BPT.  First, it is holding its value even though the price of crude is the lowest it has been in years.  That means if -or when- the price of oil goes back up, so will the price of BPT.

Critics say that the pipeline of Alaska is going to need replacement, that more sudden leaks could cost the company millions in clean up and restoration.  That’s true, but this cost is borne by all of the companies that partner in this pipeline endeavor.  Besides, any replacement parts will be one time expenses designed to last for many years, not a repeated fix.  The nice part about the pipeline: it’s in a relatively stable are of the world.  It doesn’t have to fight tornadoes or hurricanes, though earthquakes make everyone jump.  Only men can make it an environmental disaster, as happened several yeas ago when a man shot a hole in the line causing millions of gallons to spray out everywhere.

In general, though, BPT has been a great stock to have in this economic downturn.  And that is the finest thing anyone could have.

In 2008 we saw the incompetent businesses, or ones where the market was saturated, go under.  Now, with gas prices still at half the rate it was in the middle of last year, what will happen this year?  

Some business situations won’t change much.  Large businesses will still buy up smaller ones.  Today, for example, Pfizer bought out Wyeth, and then cut jobs in hopes of making the business run leaner.  While that has happened to companies in the past, it hasn’t usually been announced on acquisition day that there would be job cuts.  Businesses don’t have the luxury of time any more to analyze how the changes will go through.  So some buying and selling will still go on.

Building will also continue.  New projects are going on in towns that are growing, but the building won’t be as extensive as it was in the past twenty years.  However, contractors will find themselves giving in a bit.  People who would only do new construction, may start doing reconstruction.  Smaller outfits may have to take on handyman or painting jobs.  Fussiness will go by the wayside.

Theaters have seen a decline in business, but it will get worse next year.  Family movies will probably be only attended once or twice a year rather than whenever a new movie comes out.  Play productions will continue to struggle, especially in mid sized towns where theater classes in the schools have been cut.  The entertainment industry on the smaller scale such as dinner theaters shall suffer, whether they are good or not. But just as in the Great Depression, big name actors and actresses will continue to attract the big bucks.

The flower industry will see a dramatic decline.  Towns where there are more than one flower shop will see them close.  Businesses that gave poor customer service or just can’t hack being a business owner have already been ousted.  Watch now as good, solid companies suffer a decline in flower orders.  Only special holidays such as Valentines and Mother’s days will be big.  Husbands who know that their wives are cutting back on clothes acquisitions will give gift certificates to clothing businesses or health care treats such as massages.  Hair salons may see a fall off in business as more women look to save household budget money by wearing their hair straight or not coloring it.  High end salons may close, especially if they bought into any luxury items such as expensive tanning beds or foot baths.

Desperate job seekers are especially vulnerable to buying into MLMs that don’t work, or scoundrels who pretend to help them get out of debt.  Headhunter businesses will thrive.  Human Resource people, already overwhelmed by applications, will find the stress of that work even harder.  Jobs will open and close at a breakneck speed. Who you know and luck will often determine who gets the job.

Look for more people giving up their satellite and cable television.  Look for pay by the minute phones to become more vogue and fewer people talking to buddies. Look for more youth working jobs, and fewer running snowmobiles or four wheelers just for fun.  These industries, the snowmobile and four wheeler may suffer some job losses soon.  Watch as our fish population goes up due to sports fishermen not going out as much.  Look for insurance to cut rates as fewer people going out means fewer accidents.

The changes in our economy in the next six months will be unreal.  The landscape will look so different from the 1990s that people will shake their head in amazement.  Maybe these are not all bad changes. After all, at home parties were the norm in the 60s and 70s.  Surely it wasn’t good for our children to have bigger, badder birthday parties, bar mitzvahs, or quinceaneras  each year as the parents tried to out do their neighbors.  And family nights at home playing games instead of running off to pizza parlors and throwing money into video games is probably better for the family overall.  Maybe the changes in our economy will just bring back some good common sense after all.

In New York sits a writer and all around good guy wondering how awful his fuel bill is going to be when his tank gets filled this week.  In a small town in central Minnesota is a beautician who is kicking herself for signing a contract for the gas for her tank.  The fuel has gone down in price, but she’s locked into the higher price whether she likes it or not.  In Belgrade, a grandmother keeps her grandson wrapped in a snowsuit almost at all times.  The heat was turned off in the city as the Ukrainian and Russian governments squabble over who is holding up the fuel.  The cold there has fired up the anger of the people who are supposed to be heating their homes with this fuel, but their tempers are the only things that are getting hot.

The cold costs people more than just fuel. Broken power lines can happen after bad storms, and the cold that follows mandates that people heat their homes to prevent broken water pipes.  They have to buy generaters, sometimes have to move into hotels, or put in backup wood stoves.  With cold weather comes snow, the cost of snow removal.  Cars get run to warm up the inside for creature comfort, wasting fuel.   And the twenty below temperatures every night for several weeks, especially when there is a wind, means that the heaters in old homes run constantly.

Cold weather makes people cautious.  They hold their money tightly, and rightly so, until the end of the month when they know they have enough money to pay their fuel bill.  And the local restaurants suffer because foot traffic drops.  Theaters suffer, too, as do fundraisers set for the dead of winter.  Generosity can not be afforded.  The fuel bill comes first.

A car traveling outside of Fargo Thursday night went into the ditch.  Friday morning rescuers pulled out a man who remarkably was still alive.  His arms and legs were so frozen that they were stiff but remakably his heart was till beating.  The hospital tried to warm him, but he died before pulling out of the hypothermia.  A family lost a member, the hospital lost a patient.

Budget cuts to the state budgets mean fewer dollars to help the needy with their fuel bill.  On the outside of Wadena, Minnesota is a drafty old farmhouse with an ancient man inside who scrimps and saves to pay his heat.  Despite his family’s urgings, he refuses help of any kind, and to move into a warmer house.  He gave his word to stay on the family farm, and will do it even if the elements kill him.

The winter, for all of its beautiful swirling snow, draws more resources than most people care to admit.  Its cost, monetary and otherwise, is huge.  No wonder many animals migrate. They have the sense to conserve their resources; to listen to nature.

As promised from yesterday, here are a few oil refinery stocks that will may be able to gain some profitability after the successful tightening of the supply of gasoline.

Valero (VLO)  This company has always been a darling of the investing guru world because it is well managed and well connected.  When it comes to the public relations and the good books, Valero seems to have it mastered.  Unfortunately it seems that by the time the gurus tell people to grab the stock, the party is over.  The stock dropped from a high of $62 like all the rest of the stocks dropped during the bad market downturn last year.   It’s recovered from a low of $13 and is now at $22.  It has a great P/E ratio, is absolutely beautifully profitable. The problem, no insiders are buying, which probably is more due to the upcoming drop in the market that is predicted by most financial whizzes.  However, this one might be a good grab should the Dow finally bottom out in 5000 zone, which is where I predict it may end up at.  If you buy now, hold for a bumpy ride.

Tesoro (TSO) rides on the coattails of the sector.  Compared to VLO, it is overpriced with a P/E of 14. Pass.

Frontier Oil (FTO)  is just as good of one as Valero except that Valero is better.  FTO’s P/E is an interesting 6, but it’s the profit margin of 9% compared to Valero’s 5% that makes you sit up and take notice.  FTO’s revenue growth is also beautiful.  This would be all right for a grab in the future.

Holly Corp (HOC):  At first glance, HOC looks interesting. It’s a small value company with a possibility for growth.  If it ever drops more in price, investing in it could produce spectacular results.   Right now its P/E ratio at 9 makes Valero still look like a better bargain.

These are just a few of the major oil refinery companies, and perhaps for most people, getting in on the action with all of them would be to pick up OIH, the sector related ETF.  Although no one should be buying any stocks right now unless it is purely on speculation and with money you can afford to throw away, if you watch carefully, the time to buy will be soon.  For now, lay low, keep the cash ready, and wait patiently.

Oil refineries like profits.  Anyone who ran a business would like a profit.  And no one can deny that unless a business turns a profit, they won’t be in business long.  Therefore few people would say that oil refinery businesses shouldn’t turn a profit.

But the last time oil prices were this low, gas was almost a dollar a gallon.  Suddenly oil is low and gas prices are still double what they were the last time oil was this cheap.  What is with that?  The truth is that oil is getting bottlenecked on purpose at the refineries. Refinery producers, who enjoyed the nice profits they were getting when oil was over $100 a barrel were in the unusual position of being able to control their profits when their main commodity tumbled in price.  The result, less fuel on the market, more profits in their pockets.

This isn’t happening all over the world, and Americans should be concerned.  Sooner or later the cuts in production from OPEC will take hold and the price of oil will increase.  When that happens the price of a gallon of gas will double again, perhaps even up to six dollars a gallon.

A local business owner last week speculated that the reason people do not have any money to spend is because the price of fuel spiked so high at one time.  It was his humble opinion that people in rural America as well as bigger cities have never truly recovered from that time when gas was almost four dollars a gallon.   “People had to dip into their savings or on to their credit cards to live and get to work,” he said.  “And they have never recovered from it.”

Maybe.  But if oil refineries continue to tighten the squeeze on the American pocketbook, recovery during a recession or depression will be long indeed.  While there isn’t much that government can do about such things, there is something investors can do to hedge the money going out of their pockets:  buy oil refinery stocks soon before their quarterly profits statements come out.  That way the upward movement of gasoline can at least spearhead your portfolio.  Tomorrow we will look at a few of those stock.

Out of the blue on December 23rd, my cell phone rang.  It was the bank that holds the note on my laundromat.  “Your payment on your building is late,” said the pleasant loan officer on the other line. “And we were wondering when you were going to be paying.”

I was puzzled.  The payment was sometimes after the due date because of slow foot traffic, but always it was in during the month.  Since it is a business, I like it to make its own payments, just for tax reasons alone.  “It’s not thirty days late.”  I said.  “Is it?  Did I miss something?”

“Oh, no,” she said.  “We just like to make sure it’s going to come in.”

“Yes,” I said “It’ll be in.  I just like to let the business make as much of the payment as it can.”  After a few seconds, I asked, “Is there something I should be worried about your bank?”

Startled, the loan officer nervously laughed, “Oh no! Nothing like that.’

This was the first of other conversations that came up within the next thirty days.  Both my husband and I had paychecks that were held up due to clerical errors and deadline problems.  Last night, our credit card company called and offered to take a payment out of our account.  After I explained the situation, she thanked me and hung up.  Earlier that morning, another creditor called.

None of these payments are more than a few days pas the due date.  I lamented this to a friend who also is paid on a less than consistent basis.

“I know,” she sighed. “We’re getting the calls, too.”

I know that small businesses are hurting.  If average people completely stop paying our bills, they can’t afford to get judgments on everyone.  Big credit card companies are hurting. They can’t get blood out of a stone.

The good thing is that all of the customer service representatives can relate.  One secretary that I talked to dropped her voice quietly and said she totally understood. “We’re taking personal hits on all of our stuff, too,” she said.  “I don’t know how we are going to make it.”

In the meantime, beware of sharks lingering in the waters.  Last night, for some unknown reason, a company called and asked me if I were either, ‘behind in my mortgage payment and needed help, or in a house that had lost significant value, or was in a mortgage that had escalating payments.”  Since none of those applied to me, we almost ended the conversation.

“Who are you?” I asked.  She gave an evasive answer.  “Are you a non profit organization?”

She assured me that they were for profit.  Then she gave the name of a law firm.

Good grief.