Friday, August 29, 2008

The Lazy Days of Summer - A Dog's Life

We are packing up here in Kelowna B.C. to begin our long journey back home to CT. It has been a great summer.... and no one enjoyed it more than our dog Sunnie! Don't you sometimes wish you had a dog's life? Pictured here, on the boat, in the middle of Okanagan Lake it is clear that she does not have a care in the world. I am trying to take a big deep breath as I think ahead of all the craziness that lies ahead when I return home - months of mail, the start of the school year, work, projects I kept on the back burner. All Good as my brand new friend MJ would say... all good.

Enjoy these last few days of August!

Thursday, August 21, 2008

Lamont - My First Music Entry

Today a dear friend, gifted musician, brilliant songwriter and an outstanding human being launched his third musical release. Lamont leads the group TEN SHEKEL SHIRT and his new cd is called JUBILEE. Buy it now on Amazon. I have had the pleasure of hearing the whole album and yet again Lamont’s words moved me like few other artists ever have. He chooses to write songs that inspire, liberate and empower. His previous two CDs are also excellent and won him and his band much acclaim in the Chrisitian Music Catagory.

In his spare time Lamont pours his immense energy in to trying to make the world a safer place for women and children escaping slavery around the world. Check out LOVE146.
May God Bless you Lamont, your band, your beautiful family..... Thank you for being the change that you want to see in the world.

Spread the word. Buy Jubillee.

For more on Lamont check this out.

Thursday, August 14, 2008

Home Prices

I was scanning the headlines this morning and read this piece on the most recent home sales data in the US. The numbers were so shocking that I feel compelled to link to it. Here it is. I continue to think that the worst is not over for the equity markets overall, or for the US economy. The housing market has to hit bottom and show signs of recovery before everything else can follow. Consumption is what drives drives growth and in the US the average consumer has been using their home equity as a checking account. That party is over and will be for a long time to come.

Saturday, August 9, 2008

Fannie, Freddie and More

Well the news seems to be going from bad to worse for these two mortgage giants. Both reported earnings this week and losses were multiples of what analysts expected. Freddie, the smaller of the two, reported a quarterly loss of $821 MM and cut its dividend 80% to preserve cash. Fannie Mae, lost $2.b BB for the quarter and also slashed its dividend to 5 cents from 35 cents. Both are going to be in need of more capital before year end. Combined these quasi government entities own or guarantee one half of the $12 trillion in US home loans currently outstanding. With delinquencies continuing to rise I doubt that their problems are over.

On a brighter note the US markets and particularly the US Dollar had a great week. Faith the in Greenback has returned seemingly on the back of falling commodity prices. I continue to be a commodity bull in general and view these pullbacks as a buying opportunity. Natural Gas in particular, but also the precious metals, seems to be offering good entry points. I do believe that growth is slowing, particularly in the developed countries, but not enough to grind the global economy to a halt. Rising prices has resulted in some demand destruction, which could explain at least some of the pullback, but longer term demand has nowhere to go but up for most of the core commodities. The tough part is figuring out what price brings the forces of supply and demand in to equilibrium over the longer term, and the experts I rely on are telling me higher then prices at the moment.

No doubt with this much uncertainly over so many core economic and financial variables, the volatility will continue. Keep those seat belts fastened.

Thursday, August 7, 2008

Unemployment Continues to Rise

The bad news continues on the employment front, with jobless claims posting yet another increase over analysts expectations. The headline number showed a seasonablly adjusted increase of 7,000 to 455,000. This number is the highest since March 02. Last week the overall unemployment rate hit the meter at 5.7%, again a 5 year high. This is certainly not surprising given what is going on in the economy and it is likely that these numbers will continue to rise until the economy shows signs of a turn-around. The hardest hit sector so far have been anything related to housing, but the ripple effect is extending through financial sectors and of course consumer related companies. STARBUCKS caught headlines recently with announcements of massive store closures and lay-offs.

Where I am here in BC there are help wanted signs everywhere, but the problem is the jobs are low paying, service related positions. Tim Hortons, The Shoe Warehouse, Winners... $10-$15/yr jobs do not pay for housing or put food in the table in these parts, certainly not when a loaf of healthy bread cost $4.25 at the local market.

My heart goes out to all people who are struggling to make ends meet in this difficult economic environment.

Sunday, August 3, 2008

$15.5 Billion of Losses with More to Come

Do you remember when one million dollars seemed like a lot of money? Reading the business headlines these days one million dollars truly feels like a drop in the ocean, especially when those numbers are referring to corporate losses. On Friday, GM reported a quarterly loss of $15.5 billion. A QUARTERLY loss of $15.5 BILLION on total revenue of $38 billion. Am I the only one out there that asks, how is that possible? The reported loss per share was $27.33 on a stock price of $10.

So how exactly do you lose $27 billion dollars in a quarter? First of all you take a long list of one time charges and hope they do not become more time charges. This quarter the total came to $9.1 billion, including $3.3 billion for the buyouts of 19,000 US hourly workers. Now if you have a calculator that goes that high you will quickly figure out that that is over $170,000 per person. Is this really the end of their problems with human capital challenges? We are likely to see more one -time charges to come only for a different 19,000 workers.

They also booked $2 billion worth or write-offs related to “drops in the value of pickup trucks and SUVs coming back to the company after their lease term ends.” Ouch. I guess $4.00 gas is leading some to change their consumption behavior. Good for them, bad for GM. But $2 billion in one quarter? What about next quarter? This problem is not going away.

Another $1.3 billion went to write-offs due to a reduction in the value ofGM’s interest in its former financial arm, GMAC.

If you eliminate the entire one -time charges they still lost $6.3 billion or $11.21 per share. So let’s think about that on an operating basis. What the numbers are saying is that in order for GM to just break even in a more or less steady state they need revenues of about $45 billion, quarterly. I am no equity analyst but I think that is going to be hard to do given that people do not seem to be buying too many cars, and especially not the gas guzzling ones that are GM’s specialty. Speaking of equity analysts, the associated press reported that of twelve analysts surveyed by Thomson Financial the average prediction was a loss of $2.62 per share. That is only off by a multiple of 10. Excuse me, but aren’t these people paid to know what is going on in their companies?

One of the many questions I was left with after reading the earning reported is how in the world are they not already bankrupt? Where is the cash coming from? According to the same report they burned through $3.6 billion in the second quarter.

Years ago, and I mean years ago, by husband said GM was going to go under and he shorted the stock. No not at the 2000 high of $93, but in the 30’s. He watched in pain as the stock rose north of 50, and finally covered the short in the 20s after hearing way too much about it from your truly. Now as it looks headed below $10 I am hearing a lot of I told you so’s.

By the way… he also thinks GOLD is going to $1200.

(info on GM's quarter from the Associated Press as reported in the Kelowna Courier)