See Ya 2011, On to 2012, Israeli Startups, Google's New Ad Format, and Issues at Sears!!!

The last week of 2011 has been a good microcosm of what much of the entire year looked like, a market undecided about what it believes. Going into the last day of the last week of 2011, US equity markets are slightly ahead of where they started 2011, like a rolller coaster which ends up where it started, and both have had their heart thumping drops and exciting climbs to the top. However, as usual, companies which had stocks that were egregiously priced eventually saw the froth taken out of their share price, be it Green Mountain by the always astute David Einhorn, Netflix, Molycorp, Human Genome Sciences, or any number of others which pop to mind (Salesforce, Opentable, etc). Many companies had good performance which was rewarded, and as usual, those which did not make money or had poor results were punished severely. As 2011 comes to a close, I find it interesting gold has not held up very well these last few weeks as I am sure many investors want to lock in their massive gains in the metal's price, especially if you had invested five or ten years ago when it was dirt cheap. The price of oil has hung in there pretty well, certainly helped by the saber rattling of the Iranians with respect to the Strait of Hormuz. Still, much of what I read about oil leads me to conclude the United States is gradually moving towards developing and our huge natural gas supplies through fracking based exploration, and combined with the development in the Canadian Tar Sands, and increased activity efforts in the Gulf of Mexico and other parts of South and Central America, OPEC's choke hold on mature countries may not last more than another decade, and hopefully sooner. The quicker we can not rely on lunatic countries for our oil supplies the better. Romney has taken a bit of a lead in Iowa, so with a few days left before the first primary, we will see what happens but the Republican nomination might be over pretty quick, especially if he takes Iowa, and then follows it up with a big romp in Massachusetts, after which he would head to South Carolina with a ton of momentum. Interesting situation developing in Israel with reduced funding for startups by their government- http://www.bloomberg.com/news/2011-12-29/google-backs-israeli-startups-as-local-financing-hits-12-year-low-tech.html Google is testing a new advertising format-http://techcrunch.com/2011/12/29/google-testing-new-email-subscription-ad-format/ The problems at Sears are instructive of a few good lessons. First, Eddie Lampert has been a great investor for a long time, and is a brilliant guy, but what did he know about big box retailing, especially considering the worthy competitors like Wal-Mart, Target, Home Depot, Lowes, Amazon.com, etc? Second, when companies do not reinvest in their basic business, in this case merchandising, product assortment and breadth, and human resources (among others), it is hard to break the cycle of losing customers and reduced sales. With the shares down 80% from their all time high, maybe Mr. Lampart will rethink his strategy-http://online.wsj.com/article/SB10001424052970204632204577129122795672382.html?mod=WSJ_hp_LEFTWhatsNewsCollection Finally, I hope everyone has a healthy and happy 2012! If you have any comments or questions about this blog, please post them, I love your feedback! Happy new year everyone! As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.

Good News From Europe (after 3 years?), Zynga vs Groupon, James Altucher's Secrets of Entrepreneurship, and Buying Low and Selling High!

So after almost three years, the market finally got some news from Europe that it liked. What was it? First, Spain held a bond auction which was well bought and their interest rate is far lower than what anyone previously thought. Next, the German economy showed stronger growth than anyone in the investment community imagined. As a result, risk was now back on and the market turned positive for the year. The best performing stock in the Dow Jones Industrial Average for 2011 has been McDonalds, which makes my skin crawl. McDonald's has all kinds of products, many of them tailored to the low cost consumer. They always seem to copy everything else which might be working somewhere else. The stock is up 30% for the year and has been hitting all time highs daily. I remember when the stock was sitting at 12 bucks a share about 10 years ago and thinking Ronald McDonald for 12 bucks. Did I buy it? No. Bad mistake by me as you would also own Chipolte as well. When things get cheap, look really hard as you can bet the only thing constant is change. Politically, we are getting to primary season as Iowa, New Hampshire, South Carolina, and Florida will be on us very soon. Ron Paul may win Iowa, but he will not win the Republican nomination. In watching Mitt Romney speak, he appears very confident, and does not even acknowledge the other Republican candidates. His focus is on Obama, which makes me think he knows he is going to be the nominee. I hope so, and then its on like Donkey Kong. Interesting article on the performance of Zynga vs Groupon in the public markets and how it is related to the float: http://dealbook.nytimes.com/2011/12/23/groupons-real-deals-trump-zyngas-virtual-sheep/?ref=business Always enjoy articles by James Altucher, this one on his secrets of entrepreneurship: http://techcrunch.com/2011/12/24/secrets-of-the-accidental-entrepreneur/ Trying to buy low and sell high and having a rough time? Here are some tips: http://www.businessinsider.com/the-psychology-of-buying-high-and-selling-low-2011-12 I hope everyone has a great holiday season and gets health and happiness for yours and your family. If you have any comments on the blog or posts, please share them!!!! As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.

Europe Hold's the Market Hostage, MF Global's Ignorance, Why Amazon Wins, Military I Phone Apps, and Zynga's IPO Bust!

December is usually the best month of the year for the stock market as the 'Santa Claus' rally coincides with a generally positive feeling when the holidays are here. In 2011, there has been no rally as the European debt crisis continues to hold equity markets hostage. France and Britain are beginning to point fingers, while Germany maintains there should be no debt monetization from the ECB. Meanwhile, the U.S. economy slowly continues to perform better than expected, even with the issues surrounding European governments and banks. Investors are scared, frustrated, upset, and taking money off the table at every opportunity. In addition, now is the time when tax loss selling is an issue for those who are trying to be tax efficient. If you put it all together, equity investors are finding it very difficult to outperform indexes as good performances from any stock are scarce, to say the least. Conversely, there is value in the market, in almost every sector, depending on what you are trying to find. Be patient, look at all kinds of things, and make sure you get what fits your budget, objective, risk profile, time horizon, and needs. Jon Corzine, the ex NJ Senator, Governor, and CEO of MF Global, gets in front of Congress and says he has no idea what happened to 1.2 billion dollars of customer money. Last I remember, when you go to traffic school, they tell you ignorance is not a valid defense for any violation. Just consider the audacity to tell people you have no idea where 1.2 billion dollars of customer money is and what happened to it. Congress's approval rate is 11-13%, and they continue to do business where the modus operandi is to wait until one or two days until they have to get something done, and then they start negotiating. There are lots of great things happening in the United States, but our leaders in the political and justice system are in serious need of shall we say, a closer look, at the very least. A great quote from Alan Abelson of Barron's is applicable to our politicians- "They couldn't run water." If you want to know why Amazon.com is such a dominant company, here is a great article on how they see things: http://www.nytimes.com/2011/12/17/business/at-amazon-jeff-bezos-talks-long-term-and-means-it.html?ref=business Apps for the I-phone are starting to gain traction in the military: http://www.bloomberg.com/news/2011-12-15/soldiers-iphones-guide-artillery-fire-as-pentagon-plans-app-store-tech.html Zynga's IPO value is less than half what pre-IPO investors thought it would be. The social networking bubble from last spring is being repriced, as have a lot of other stocks: http://seattletimes.nwsource.com/html/businesstechnology/2017034422_zyngaipo17.html I hope everyone has a great holidays, healthy and happy and enjoying your families. If you have any comments or thoughts about this blog post, please share them!!! As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.

Thoughts from the CFA Value Conference In New York (and more), Video Sharing on Facebook, J.C Penny's vs Macy's, and Living Social Raises More Cash

In thinking about the presentations from the CFA Value Investing Conference held last week in New York, some prevailing ideas come to mind. First, talking about finding value is easy, actually doing it successfully is much harder. As I stated in the December 2011 newsletter, (here is the link: http://www.y-hc.com/resources/newsletters/45-2011-newsletters/242-yale-bock.html, ) usually great investing requires the ability to take some pain. In an environment where high frequency traders buy and sell stocks every 10-20 seconds, taking pain (unrealized losses) for 6 months to more than 1 year is a whole different approach. However, a key point to recognize is value and growth are tied at the hip, as Mr. Buffett says. Ultimately, great investors have the ability to buy assets at great prices and hold them until the market recognizes the asset is mispriced. How long that takes, nobody knows. Sometimes it can happen in days, other instances may take multiple years. Another key point I think is critical is how people present has nothing to do with how substantive the points being made are. There was a presentation from a current high profile analyst which essentially was a regurgitation of his previous ten years worth of industry calls. He did it in a very flamboyant way, but the underlying material was just average. Another thought which was constantly echoed, as if we did not know, is that Wall Street is interested in fees and transactions. Yeah, really, no kidding. One only needed to go back to any kind of history of wall street, or read books from any great investing talent to know it has always been that way, probably always will be. The key point is Wall Street is there to be taken advantage of, when they misprice assets, which they do every day. It is a question of what assets do you want and what price are they being sold at, and even more important, what are you getting when you buy those assets. In looking at recent news from the market, the more you see from rating agencies like S&P, Moody's, and Fitch, it becomes self evident the only philosophy the ratings agencies believe in is "Kicking the dog when it is down." For example, it make no sense, nor is it analytically precise, to downgrade 15 European countries at the same time. Yes, the European countries are tied together with the same currency, but conditions in Germany are not the same as those in Greece or Spain. Piling on is what the rating agencies specialize in, and it is hard to imagine a group, other than politicians, with shall we say, a lower standard with respect to how it treats its constituency. Facebook will try and do for videos what it has done with music- http://techcrunch.com/2011/12/07/video-history-law-passes-houses-struggling-netflix-could-finally-stream-on-facebook-in-us/ Bill Ackman's J.C. Penny's takes a big piece of Martha Stewart, and it makes Macy's rethink their relationship with the cooking diva-http://dealbook.nytimes.com/2011/12/07/macys-to-review-martha-stewart-relationship/?ref=business Living Social, a rising star and very worthy competitor to Groupon, raises some more dough before it gets ready for an IPO-http://online.wsj.com/article/SB10001424052970203413304577084803856892004.html?mod=WSJ_hp_LEFTWhatsNewsCollection Hey- let me know your thoughts about the blog, these articles, what I have written about the market, or anything else regarding markets or business in general. I want to hear your thoughts so please post your timely comments or questions! Thanks so much for reading and hope you have a good week. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.