Even with oil having gone from $148 to $118, it is not going to be easy for this market to work if oil is going down because the economy is getting worse. It's a positive that consumption is down, though.
Boy oh boy I wouldn't want to be the new CEO of Motorola.
Sirius CEO Mel Karmazin yesterday walked on hot coals, put is head in a lion's mouth and then bought some of his company's stock.
"Someone" has now "broken" the story of "Lehman considering selling Neuberger" about 50 times.
I can't imagine the Fed doing anything this afternoon. I bet they are as confused as we all are.
Tuesday, August 5, 2008
Monday, August 4, 2008
More on Obama/Windfall Profits
If you have a 401(K) plan or own a mutual fund, you probably own some Exxon or some other oil company. Look out.
If this windfall tax idea gets any traction, you may well lose some real money. I could say that it could be more money than you would save at the pumps, but a bogus windfall profits tax isn't going to make gas prices go down.
Whoever runs the mutual fund that you own owns Exxon, or any company for that matter, with the expectation that it is going to go up. Stocks usually go up when returns available to investors exceed expectations. If those returns are capped, the stocks are going to get murdered.
If this windfall tax idea gets any traction, you may well lose some real money. I could say that it could be more money than you would save at the pumps, but a bogus windfall profits tax isn't going to make gas prices go down.
Whoever runs the mutual fund that you own owns Exxon, or any company for that matter, with the expectation that it is going to go up. Stocks usually go up when returns available to investors exceed expectations. If those returns are capped, the stocks are going to get murdered.
Required Reading
An editorial today in the Wall Street Journal should be required reading for American voters no matter what party they are leaning toward. (I'm not an American voter).
What Is A Windfall Profit? is similar in sentiment to something I wrote in a previous iteration of this blog. The WSJ version is better.
Tuesday, June 10, 2008
Windfall Profits Taxes are a Bad Idea
Google (GOOG) and Goldman Sachs (GS) should be very worried. Obama again today said that he would if elected impose windfall taxes on the oil industry.
"I'll make oil companies like Exxon (XOM) pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills," the Illinois senator said.
I don't understand why he or anyone else thinks this is a good idea. What he is really doing other than currying favor with voters is punishing Exxon for being big, and lucky to be in an industry that is in tight supply right now.Last fiscal year, Exxon made $40 billion net. Yes, that is a lot of money.GOOG and GS, two fine and revered American companies only made $4 billion and $11 billion respectively.
GS's net profit margin, after all costs including taxes, was 13% last year.
What Is A Windfall Profit? is similar in sentiment to something I wrote in a previous iteration of this blog. The WSJ version is better.
Tuesday, June 10, 2008
Windfall Profits Taxes are a Bad Idea
Google (GOOG) and Goldman Sachs (GS) should be very worried. Obama again today said that he would if elected impose windfall taxes on the oil industry.
"I'll make oil companies like Exxon (XOM) pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills," the Illinois senator said.
I don't understand why he or anyone else thinks this is a good idea. What he is really doing other than currying favor with voters is punishing Exxon for being big, and lucky to be in an industry that is in tight supply right now.Last fiscal year, Exxon made $40 billion net. Yes, that is a lot of money.GOOG and GS, two fine and revered American companies only made $4 billion and $11 billion respectively.
GS's net profit margin, after all costs including taxes, was 13% last year.
Google's was 25%. Exxon's was only 10%.Economists, but maybe not Obama's economists, would tell you that this is a very silly time to disincentive the oil companies from producing more oil, as I hear happened back in the 1980's. I was young then. Mr. Supply and Mr. Demand are running most of the economy. If the powers that be want to help the market in the right direction, they need to:
- encourage less energy use (demand)
- encourage more production of traditional forms of energy to the extent we don't wipe out the environment (supply)
- vigorously encourage development and production of alternative forms of energy (supply)
Instead, Obama is promising to punish Exxon for being big and fairly profitable and telling U.S. consumers, "Go ahead and use all the energy you want."
Smaller, very profitable American companies should hurry up and figure out a way to make less money.
McCain Getting Jiggy?
PRINCETON, NJ -- According to Gallup Poll Daily tracking from July 29-31, John McCain and Barack Obama are now tied at 44% in the preferences of national registered voters.
I have thought since both candidates were obvious nominees, that Obama's campaign had some holes in it that could be exploited. It looks like McCain has made some real progress even though I didn't/don't think the race is that close.
InTrade, the online prediction market, still gives Obama a huge 60/40 lead.
I have thought since both candidates were obvious nominees, that Obama's campaign had some holes in it that could be exploited. It looks like McCain has made some real progress even though I didn't/don't think the race is that close.
InTrade, the online prediction market, still gives Obama a huge 60/40 lead.
If You Own a Mutual Fund
That goes up more than 100% in one year, you probably should sell it.
Abnormal out sized gains feel great when you are on the receiving end. The risks one needs to take to get there are significant.
The Wall Street Journal today is reporting the Garrett Van Wagoner, skipper of the Van Wagoner Emerging Growth Fund is hitting the showers. The fund gained nearly 300% in 1999. Even including that year, the fund has lost 10% per year over the last decade.
Van Wagoner narrowly focused, as the name if the fund implies, on emerging growth stock - small, rapidly growing companies, many of them in the technology space. That is a very tough sport. When the market turns against these types of names, the selling can be devastating. Valuations tend to get so stretched on the way up that there is almost no suport on the way down.
I have a buddy we call Dirt who was a Chief Financial Officer type at smallish firms for years. He once told me that he wouuld never work for a pubicly traded company. Probably for lots of reasons but the strain of making estimates quarter after quarter is a big deal.
Abnormal out sized gains feel great when you are on the receiving end. The risks one needs to take to get there are significant.
The Wall Street Journal today is reporting the Garrett Van Wagoner, skipper of the Van Wagoner Emerging Growth Fund is hitting the showers. The fund gained nearly 300% in 1999. Even including that year, the fund has lost 10% per year over the last decade.
Van Wagoner narrowly focused, as the name if the fund implies, on emerging growth stock - small, rapidly growing companies, many of them in the technology space. That is a very tough sport. When the market turns against these types of names, the selling can be devastating. Valuations tend to get so stretched on the way up that there is almost no suport on the way down.
I have a buddy we call Dirt who was a Chief Financial Officer type at smallish firms for years. He once told me that he wouuld never work for a pubicly traded company. Probably for lots of reasons but the strain of making estimates quarter after quarter is a big deal.
Friday, August 1, 2008
Happy Friday
I am out of town and wasn't planning on writing anything today but a couple of things struck me.
GM is leaking oil in a big way and the market is shrugging it off pretty well. I think the U.S. manufacturing industry has reached a level of unimportance to all not employed by it that it is going to be easier and quicker for us to pull out of economic downturns.
Sun Micro (JAVA) cannot seem to figure this whole thing out. I'm not sure what's next but Jonathan Schwartz is certainly not delivering Sun shareholders to the promised land.
Enjoy the weekend.
GM is leaking oil in a big way and the market is shrugging it off pretty well. I think the U.S. manufacturing industry has reached a level of unimportance to all not employed by it that it is going to be easier and quicker for us to pull out of economic downturns.
Sun Micro (JAVA) cannot seem to figure this whole thing out. I'm not sure what's next but Jonathan Schwartz is certainly not delivering Sun shareholders to the promised land.
Enjoy the weekend.
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