wearmanyhats

Check out Fargo, North Dakota.  Here is a bustling city filled with young professionals working in a fast paced city filled with many factories and thriving businesses.

Enter the Red River, which flows toward Grand Forks and then Canada on its way to the Hudson Bay.  It is fed by dozens  of other rivers as the rain and snowmelt run to the sea.  As the weather patterns change and more water comes into the Prehistoric Lake Aggasiz the river gets higher every year.   This year the city valiantly fought and won the first battle of the water, but the price on the small businesses has been tough to bear.

Millions of dollars of revenue has been stopped as businesses closed for the possible flooding.  In the past week, Fargo has been hit with at least two blizzards, and people are still fighting to keep water from their homes.  After days of being closed, the mayor asked small businesses to open back up.  The money lost by the small businesses being closed or people evacuating the town is still not measured, but is most likely in the millions.

Fargo is not unusual in many ways.  It’s a college town, just like many others.  It has industry, just like other cities.  It has many businesses and is thriving.  And like many other cities under stress, the people pull together to make things happen.  The volunteers put together three million sandbags to keep the Red River from overflowing. That’s a dedicated community.

The loss of millions of dollars in a weakened economy is more than one could expect in a city. But these people have resilience.  The city will rebound after time,  because the citizens will pull together. And Fargo is not unusual.  Detroit has lost jobs before, had foreclosures before, and bounced back.  Fargo is just a miniature example of how bad times will not last forever.

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This blog will be a Monday-Friday only from today on.

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The question was asked, which stocks would you buy now?  Let’s give some titled nominations.

Best long term investments:

GLD:  This is the spider for gold bullion, and gold always goes up when there is inflation.  It will sit still for a while, but then will probably go up dramatically.

SLV:  This is the spider for silver.  If gold goes up, so will this metal, and often more dramatically.  Someone once called it gold on steroids.  It’s like that.

Best Thing to Do with Money if You Have a Dime:

CVDT: China Voip and Digital Telecom:  This one has a P/E of under ten, and revenue that has exploded in the past year.  Imagine a company in China that is exploding in growth in a country that is exploding.  This is a cheap investment that you can toss into an account and forget about for a while.  Remember, a penny stock will swing dramatically when it loses just a penny.  Be ready for that.  Also, this is a purely speculative play; it’s risky beyond belief.  It’s similar to shooting dice.  If risk is not your thing, don’t put in more than anything you can lose.  It may make big, but when dealing with overseas stock, you need to watch it closely and be prepared for anything to mess it up.

Stocks to Throw in Your Portfolio and Forget About Them:

Think the big companies that you use every day:  Proctor and Gamble (PG), Coke (K), and Johnson and Johnson (JNJ).  Let’s face it, in ten years, these stocks will have come roaring back.  After all, you still have to buy bandaids, something to drink for a party and stuff to clean your house.  No home made cleaner does the job of some of these commercially made cleaners, that is for sure.

Screaming bargains:

British Petroleum Prudhoe Bay Trust (BPT) They make money, money, money and pass it on to you.  It took a recent hit, but consider that the price of oil has already been creeping upward.

There are many shipping companies that are “on sale” right now.  They will boom as the next couple of years begin to rev upward.  Keep in mind that while we have tough times now, in the next couple of years, the nations should begin to recover.  When they do, shippers will need to be working hard to get goods to market.  That will help them be successful, and they always pass those dividends to you.

Good luck!

Consider the situation:  one family rents a chunk of land, puts on their trailer house and goes about the business of paying bills. Then work slows down for the breadwinner.  And the wife and grandchild is staying at home, hoping the husband will get work.  They miss a rental payment.  The owners, trying to work things out, have to pick up the bank payment.  The breadwinner slips on ice and gets hurt.  Again, they miss a payment.

Now the landowner/ landlord faces a problem. It’s a bad time in the economy, these people are in distress.  How can you kick people who are already down? Since they owe the landlord money and since the trailer is sitting on the property, now the landlord has a right to the trailer. How do you make a family homeless?

Such is the problem facing one couple in central Minnesota today.  These are people who are trying to help this couple out, to keep the renters they have.  But slowly the situation is falling apart, and slowly the family moves toward homelessness.

In 1929, the same thing happened to a landowner in the small town of Frazee.  The renters had no money; many people had no money. The landlord was just happy to have someone living in the house so vagrants didn’t take up residence.  In the end, those people who stayed there left for California and never did pay their rent.  Those were bad times, and so are these.

It’s not just rental properties.  On a long stretch of Highway 78 just north of Ottertail is a storage business.  Here the owners are fighting to keep the payments to their bank so they don’t lose their livelihood.  People have been unable to pay the bills, so they leave the storage unit and run.  The owners never know until it is too late, and then they are left with worthless junk.  With money tight in the area, even auctions won’t recover the loss.  

There have been financial gurus predicting a commercial real estate crash for several years now, and we are most likely in the throws of it.  Thank goodness for the All American enthusiasm and ability to bounce back. Because this nation is going to need that more than anything.

On a quiet spring day in 1997, a Northwest Airlines Flight flew in from Minneapolis.  A loud gasp came from one of the passengers as the city of Fargo came into view.  Water lay across the land, and silence filled the cabin.  People crowded the window to get a good look at the flooded country that lay all around their destination.  There was a tiny island of a runway, and a few streets that were open here and there.  Other than that, the town lay helpless to the Red River.

Unlike most rivers in America, the Red runs north, it’s muddy banks carry water from Breckenridge/ Whapeton to Fargo, and then on to Winepeg.  The flood in ‘97 carried chunks of ice down the center of Breckenridge; that’s how bad it was.   Now a bigger crest of water is spilling over the banks, devastating homes that are miles away from the river itself.

It’s not just the river, but the all of the water, melting from the snow, coming from the rain that fell in inches two days ago.  It is seeping into the drain pipes in the basements.  These are not luxury basements; they are a necessity in a town where tornadoes visit often during the summer.  The water shoots up through downstairs toilets, or seeps in around the slightest crack in the foundation.  Some home owners are lucky enough to stay dry. But others can’t stop the water.

The river has flooded often, but the town never had the total flooding like this until after 1988.  Then every so many years, the river spilled all over and the town filled with water more often.  Unlike the victims of Katrina, these people rounded up volunteers and filled sandbags until they could see their sandbags in their dreams.  These people don’t riot or loot; there’s no worry that gangs will patrol the streets and night and break into places.  No one is screaming for trailers or “Why isn’t someone helping us?”  That’s not how they do it there.  Instead, volunteers fill sandbags, rescue people from their homes, help set up shelters for the homeless, and trt to make the best of this bad time.  It is a bad time, too.  Sandbags had to be installed in a raging blizzard, people had to deal with flood water in weather so cold that a person could get frostbite.

The cost is measurable, of course.  There are always people who didn’t have flood insurance.  There is loss of productivity to consider, and businesses that lost revenue.  There is the loss of the houses that will be flooded or the items that get swept away, the land that is too wet to plant on time, winter wheat that will die.  But the cost is more than that.

No one can put into words what must be going through a person’s head when facing water of this magnitude.  Will it damage my house?  Will I have to pay to get something fixed?  Will some people be homeless after this?  And then there is the fact that just last month, this city was hit hard with unemployment.  Suddenly there are extra working hands simply because there are people out there with time on their hands.  That is the only good thing when looking for volunteers.

How long before Fargo faces the same dilemma that confronted Devil’s Lake?  They had to move some of the city.  What about the island of Shismaref, Alaska?  They faced erosion and rising water.  They will have to relocate the whole city on the main land.  Rising waters are changing the landscape a little bit at a time.

It’s misery in Fargo today, but they will not scream obscenities at the camera.  They will not demand that everyone send money or stop what they are doing.  No, it’s not as bad as Katrina, but it’s still misery.  And they suffer quietly, pull together and keep moving. Admirable in the face of changing economic times in what otherwise has been a prosperous city.

This past six months is redefining the use of the stock market as a tool for retirement.  After all, it used to be that if you put money in, invested wisely in basic blue chips, or good solid mutual funds, that in your old age, you could retire and have more than enough.  Even if you sold your house and invested the proceeds, the history of performance in the stock market was enough to be wildly successful by investing.

Then came last year, and the nosedive of regular stocks.  People dumped and fled and true believers in stocks were left holding equities that had shed half or more of their value.  Even high yield dividend stocks took a beating.

Have the rules of investing changed?  After all, money managers’ mantra was “invest, invest,”  or “buy and hold.”  Has this all changed?

First, consider that before the stock market headed south, President Bush was all in favor of letting people invest their social security in the stock market.  Now no one is talking about that option.  People who advocated this recognized that some aspects of retirement should not be subjected to the volatility of the market.

Second, this was not a sector bubble.  There was no mass diminishing value of tech stocks, as there was in the crash of the 1990’s.  Instead, equity value across the spectrum disappeared.  While there might have been a few stocks that still gained in value, they were darned few.  Also, not all of the market was terribly overvalued.  Many of the stocks that took a beating had a P/E ratio of under 20.  The only big bubble we were experiencing was in the price of homes.

Knowing all of that, then, consider investing basics.  Choose a stock with a P/E of 20 or less..  Make sure it is a stock that has a positive net.  If you don’t care about the risk these stocks have, then understand why you think the company will do well.  What are their goals?

Pretend that you work for a board of investors that want to hear your reasons for buying into a company.  What would you say to them to make your case?  What would you use for facts and figures to show that it is worth investing all of these hard assets?

Some investing basics will never change.  Insiders buying is always a good sign.  A low P/E is great.  A positive net is super.  as are good news stories.

But one fundamental has changed indeed:  the market will not always go up.  It can, and will have serious corrections.

After Hurricane Ike, the price of TELOZ, a high dividend yield stock that distributed trust money from wells off of the Gulf Coast, fell like it had dropped from the sky.  At that time, I recommended jumping into it because I had seen this happen before.  There was a storm, and people fled the stock.  Those investors who grabbed it in the low teens, watched the stock race into the mid 30s.

The company did not release any news of the impact from Hurricane Ike for well over 30 days, which was the time I waited before saying to grab.  I, too, grabbed a fair amount of the stock.

Then the company released a statement saying that the rigs had sustained a high amount of damage and probably would not be fixed.  This severely negated the dividend capacity of this trust.   Of course, the stock dropped down to the floor and many people, including me, lost value on the stock.

Today, the stock moved over 14%.  The most recent press release from the company indicates that Chevron has not made a decision about what to do with this trust. They are looking into drilling new wells, fixing the damaged wells, and completely closing it down.  They did put out a small dividend last quarter, which was from the production of some of the wells that were not damaged.

It’s hard to say whether you should sell on a run up of the stock. If you feel you can ride this out, and hope for good news, plus continue to get dividends, that is probably a good idea.  Any run up on the stock at this point is either pure speculation or someone knows something about the future that is not being publicly released.

All in all, these kinds of stocks are to be a long term holding.  Perhaps in a couple more months, wells will be fixed or redrilled.  Or the company will buy out the stocks.  Hopefully it will be the an outcome that will affect us positively in the long run.

Pretend for a moment that the Stock Market is on trial.  It is it done going down?

Look at the evidence that it may still go on down:  Unemployment is over 8%, a period of deflation has been in force, and the market has been dropping like a rock.  The big banks have tanked, the nation’s been in recession, precious metals have been climbing because of insecurity in the market, credit is tight, foreclosures are high, and businesses are failing.  Personal debt in this nation is super high, though it is going down.

Now let’s look at the evidence that it will go up:  We’ve had quite a few days of the market going up, some jumps, like today, have been big.  Home starts are up, credit is slowly loosening, and the Baltic Dry Index is going up.

Finding a bottom during a market like this is sometimes absolutely impossible.  Any long term investor can tell you that.  Investing when “there is blood in the streets” is the time to jump in, but when is the bloodiest? There is no telling until after the fact.

One thing that you need to look at is whether or not the recession is going to turn around.  That is tough to predict when layoffs are still occurring.  Sometimes you’ll just have to ride the market down a little lower in order to catch the train going back up.

This blog has been the source of recommendations for high dividend stocks that are now both value and dividend stocks.  They have fallen as other stocks have, but now are excellent values.  Many are bouncing back.  If you bought in a while back, ride with it.  Otherwise, revisit previous entries for ideas of good solid companies to buy into.  The one that I would say should be dropped is GE.  But others such as PG, FRO, BPT, NAT, ESEA, Coke, and JNJ are probably grabs at this date.  Not all of these are excellent dividend payers, but they are so cheap at this point that it’s worth  a grab.

If you are holding, your patience will begin to pay off soon.  Just take care of your personal debts, and you will survive any times of high inflation that may follow this time period.  Remember, just because some financial guru guesses that the end of the world is coming doesn’t mean it will happen.  And merely because they predict hyper inflation doesn’t mean it will happen.  It just is likely to.  There is historical precedence that this will occur.  But there has never been an administration that tackled a possible depression as quickly as this one has.

Something else to consider: there has never been this much money in the nation before. During the last major depression, so many people were poor before the bad times even happened.   Another consideration, there was a major drought on.  Farmers were losing their farms quickly.  Today, that isn’t a factor.  Any farmers that are going under have faced poor farm prices now for a long time.  Often it is the working wives that have brought home enough money to support the farm.  Anyone using their farm for a credit card will be killing their business, so that would fall under poor business management.

If there was ever a time to compare the plight of the American people, it would be to the 1970’s.  The recession that occurred then was one that has been very similar to this one.  But there is differences, too.  For one thing, the banks didn’t have nearly the same difficulty that they do now. Another thing, is that there hasn’t been as much consumer debt as there is today.  There were plenty of foreclosures, but the banks weren’t as saddled with high risk lending vehicles such as derivatives.

So you see, it is fairly difficult to predict what  will happen in the market now because there isn’t a clear historical precedence. It looks bad, that’s for sure, but that doesn’t mean that good old fashioned American frugality might not kick in and save the day.  One thing’s for sure, you don’t want to wait so long for the window of opportunity to close completely.

The idea of stewardship is one that is not new; very simply, it means taking care of something.  Money stewardship, then, is the responsibility to take care of money wisely.  Although there are people in our nation that have been frugal, good stewards of their money, let’s face it: many people have not.

Look at the evidence:  how many foreclosures have we had in this nation?  Many people let their houses go willingly because they felt they would never get out from under the mortgage.  Did they figure they would stay in that home thirty years, and by then the prices would be back to more than what they would need to recover?  Many did not; they just left themselves go into foreclosure.

Consider the sheer number of families that filled garages with four wheelers that were used just to burn gas. How many used leaf blowers instead of rakes?  How many people ran up their credit card with fancy vacations, expensive clothes and eating out? The list of this affluenza is long and cuts a wide swath.

Let’s take desperate people who are trying to save their business.  Credit cards are coming in handy when banks aren’t loaning.  Or let’s look at people who ran up their cards while there was an illness in the family.  These are people who are trying to make a go of it, trying to survive.  Stewardship, in these cases, are not the essence.  It is survival.  Stewardship is when you have plenty, things are going good, and you are taking care of it to provide for you in your old age.

After the 1930’s, there was a feeling in America that went something like this, “If I get money, I’m going to have fun with it,”  or “Someday my children will be more prosperous than me and enjoy everything that life has to give them.”  America was the land of plenty, and we could keep up with the goods that the person next door would have.

The only good thing that has come out fo this recession is that this current generation is going to become more conscientious about money stewardship.  It is inevitable.  More people are gardening, fewer folks are eating out, and people are shopping at second hand stores for clothing.  As a result, these people are paying down their debt, establishing a savings, and learning to take better care of their resources.

Eventually prosperity will return to our nation.  But the people between the ages of fifteen and sixty will remember these times and take better care of their finances.  In the end, it will make our nation stronger.

This blog has been encouraging you to invest in Platinum if you have the spare change.   At the time, it was on sale for around $900.  Now it’s up over $1100.  Time to buy?

Yes, but expect it to pull back just a little bit.  That’s not to say it will for sure, but it might. However, the price of platinum is still good enough that you can ride out a little temporary downside.  This metal is truly on sale: the recent correction was due to the drop in demand of platinum for the car making industry.  Car production is temporarily down, and platinum is used in the making certain car parts. You can bet that when car production turns around, as it will, the price of platinum will go zooming upward again.

Only palladium will serve as an alternate to the platinum in the industrial world, so if you want to stock up on a cheaper metal, palladium is also a possibility.  From a historical perspective, palladium flew to a high in early 2000 of over $800.  This is not a usual run up, not terribly predictable.  Buying palladium is somewhat purely speculative.  Keep in mind, however, that it does generally make it up to well over $400, so with it currently selling at $200, it sincerely is in Bargainland right now.

If you buy these metals, consider purchasing beautiful coins, and always buy from a reputable storefront dealer.  On the day Paul Harvey died, his fill in announcer told of a woman who was approached in a parking lot, and offered to sell her a bar of gold for $5000.  She did it, the strangers left, and she noticed later that the flakes covering the bar started to peel off.  Moral of the story: buy from a reputable dealer.

As for other metals, gold and silver are still in hot demand. Dealers are reporting both selling and buying.  Seems that the sellers are taking advantage of why you buy gold in the first place: to protect you against inflation and to help out during difficult times.  Most financial gurus believe that gold will still go up in price and if you can get your hands on some, have money to burn, you should buy.

In the meantime, for the run up that will go the fastest, remember platinum.  It has been shiny all this last month, a trend that will likely continue.

AIG Chief Executive Liddy has been quite kind to take a $1 payment for his services.  Some of the employees who gave back their bonuses should be complimented on their ethics.  Now what about the people who have not given back that bonus money?

Here are some creative things Liddy could do to for AIG, now that the American taxpayer owns 80% of the company.

1.  Require all bonus keepers to attend a college course on ethics.

2. Take each person the the unemployment line and let them interview people who have been out of work, especially the ones who have not been working for the past ten months.

3.  Put out an ad advertising the job of the executive that accepted the largest bonus.  Require that executive to interview his/her replacement.  Be sure that one of the required interview questions is, “How would you help AIG unravel the financial mess it is currently experiencing?”

4.  Find the top executive that accepted their bonus and may have been most responsible for the problems that AIG is currently experiencing.   Give them new duties as the head of the custodial or in house mail department.  Explain to them that they can work their way back up.

5.  Fire ten employees who kept their bonuses.  Give reasons of poor judgment or unethical behavior for the firing. This is enough due cause to fire an employee.  Wait five days and fire ten more that have not given back their bonuses.  You would be surprised how many others give back the money.

6.  Offer to include a special statement in their employee file explaining the poor judgment they have shown in this matter.  

7.  Suspend retention and bonus pay until the the bonus keeping employee has explained how s/he is going to make AIG recover from the huge losses.

These are just some ways which Liddy could strongarm his employees into not keeping their bonuses.  Further, retention bonuses and other bonuses should be suspended indefinitely.  Liddy also needs to report in to the American taxpayer; we need to be kept informed of steps he is taking to “unravel the mess.”  One things is for sure, we need leadership at AIG that is going to look more competent and do less hand wringing than we see now.