H J Mann

The Financial Times is just the latest of mainstream media to take issue with the prognostications of Jim Cramer.

Here is my reply to all of the criticism:

The way to get value from Cramer is in how you use the information he presents. FORGET his individual stock picks. He sucks, but in his defense, if any of us had to pick 25 stocks a day, we’d suck equally or worse. DO pay attention to his commentary about how the market works… there are very few who understand it better and are also willing to share so openly. And like any other advice presented to you, understand the difference between taking advice ( I take all the advice I can get) and listening to advice (ask anyone who knows me… I very rarely listen).

At the end of the day, it’s your life and your money. Own it and keep your own counsel.

 

 

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For me at least, the biggest problem I have with my 401K plan is the lack of investing options. For example, there is no clear way to own commodities such as gold. There is no clear way to short the market– or to own any sort of downside protection (you tell me a 401K plan can’t have a fund with some downside out of the money put options?). And, at least in the case of my 401K, there is no cash option– that is, I can have my money in a money market account, but not in cash.  And I believe that this is for the enrichment of the 401k manager, and certainly not for the benefit of the employee.

In March 2008 when the market was telegraphing ahead that the way forward was down, my only option was to move my money into a money market. I would have preferred cash– and by October the Feds had to step in to prop up Money Market Mutual Funds, my worst fears were nearly realized.

It’s not as if I work for a small shop or for one that generally doesn’t care. I work for a Fortune 500 company who was in the top 20 of Fortune’s Best Places To Work in 2008, and our 401K is administered through Fidelity. Whatever someone at my company thinks of their specific situation/ job/ manager, I think most if not all would agree that our company at the corporate level tries to do alot for its employees. And yet, in this best-of-all-possible circumstances, I find my 401k coming up short. I can only imagine what it is like for others.

And, even the “lifestage” investment strategies that have become popular with 401K plans in the past few years do little to compensate for “black swan” market events where every asset class precipitously falls–like the last 12 months. What’s more, a precipitous fall has occurred at least once a generation, so it must be anticipated by the 401K plan rather than ignored.

Want to see greater stewardship and ownership of the 401K for the retirement vehicle it is supposed to be? Give people additional methods to manage it that amount to more than “dump it in the market and pray it goes up forever.” And tell them simply that this is part of their job to make it happen. I think you’d be surprised.

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As you may know I am a contributor to SeekingAlpha.com. I also belong to their contributor forum on LinkedIn.com. On the forum members pose questions and have discussions on a myriad of topics. Recently the following question was posed: What are we running out of?

There were two comments. The first was by McDowell centered on the necessity of transferring wealth from the rich to the poor and the necessity of this to keeping the global economy at large robust. The second by Bloor simply stated that there is a lack of basic services such as water. My reply below:

Dirk– Bloor is correct. In the developed world, the constraints are more practical, such as basic services lagging population or consumption spikes. As an example, I live in Dallas, and when I first moved here in 2000, 8 of the top 50 fastest growing American cities were in the suburbs of Dallas. It was slow getting everything from telephone service to finding a doctor who was taking new patients (I ended up commuting two towns over for a doctor). With the DFW area adding 150000 new residents in 2008 and an even greater number expected for 2009, this trend will continue. And I predict that within 15 years the two biggest problems facing North Texas will be gridlock and lack of drinking water– all this population being added and we have not added any new sources of water– and it takes about 25 years to build a lake for such a purpose.

In the developing world, the constraints are similar, but more basic, such as no access to clean water. But there, the constraints are truly manifest because there is no genuine infrastructure at all. No infrastructure will come to these places until there is rule of law–  basic guarantees against the violation of property rights without due process. And who will invest in these places until such certainty exists?

I could not disagree more with Mr. McDowell’s assertion that simply giving money is the answer. I have my own theories about the failures of Socialism that I will save for another time, and simply counter that hundreds of billions if not trillions of dollars has been handed off to the undeveloped world in the last 60 years, and these places are as bad or even worse off than when we started handing them money. It has been a huge waste of time and resources. 

Want a novel approach? Consider that it would have been less expensive and far more effective to take that 50 years worth of money and buy a million acres of land with access to natural resources, clean water such as a river, and a warm water port.  On this land we establish a government, a constitution, and basic enforcement controls and services. We allow corporations to come in and set up shop, and literally invite people to become citizens. Over time we allow this new country to become self-governing. This would have done more to help those people and would have established a model to be replicated–flaws and all. Instead, we handed off money to corrupt thugs in exchange for tacit stability. And though I agree with McDowell that giving money to these governments does not get the money to the alleged intended recipient (I say ‘alleged’ because I believe the primary purpose of most aid money is to prop up the government of the receiving country, not to help the masses– though tacit, a little stability is viewed as better than none at all), helicoptering in the money directly to the masses would only provide temporary relief and let’s face it, is not a real solution.

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The plan is to convert the Government’s preferred shares to common shares. The value of the Government’s preferred to common conversion is $45 billion.

At $2.50 per share (Citi closed lower than that today), that is 18 billion shares.

Citi has a current float of 5 billion shares. Are they talking about quadrupling the float of the common stock?

Oh vey. Tell me again how this is going to make the stock price go up?

Disclosure: As of publication I have no position. I am not a professional, but I am trying this at home. It is highly recommended that you consult a licensed financial advisor or broker before making any and all investment decisions.

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Let’s just get it out on the table. The subscription radio business is a terrific model. But the delivery method of satellite is simply not viable because it is not cost effective, and it is grossly overcomplicated.

And, that is, not financially viable with just today’s financial pressures. Sirius XM can’t even pay the bills they have, let alone any new obligations.

When the new high speed internet networks arrive–which for it to consistently stream an audio program and provide nearly ubiquitous nationwide coverage will not be as long as you think–look for either the Sirius XM delivery model to change (if they are still alive) or look for them to get eliminated by the emergence of a low-cost competitor. Hint: anyone who owns a sliver of nationwide broadband spectrum can move into this business fast. And with broadband, issues like line-of-sight are a thing of the past.

To be fair, Sirius XM as a company might survive in some form because they have the two key ingredients to success for any subscription-based business: customers (nearly 10 million of them) and established content that those 10 million users are willing to pay for. 

But at some point, you have to get serious: If you have a lick of sense, you know the way forward for the common stock is to be zeroed out.

Disclosure: As of publication I have no position. I am not a professional, but I am trying this at home. It is highly recommended that you consult a licensed financial advisor or broker before making any and all investment decisions.

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I read here that the Obama stimulus plan will create 286,000 jobs for Texas.

That’s a brand-spanking new, permanent job created out of thin air for 1 in every 86 Texans. Not working- age Texans. Texans period.

Take out the 9.5 million Texans who are either under 18 or over 65, and that’s a brand spanking new permanent job for one in 51 working-age Texans.

So I am supposed to believe that this plan–which is little more than wealth transfer from those who pay taxes to those who don’t– will generate this many permanent jobs? This is an exaggeration so very obvious that it borders on ridiculous. Makes me wonder what other exaggerated projections of success are contained in this bill.

 

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What concerns me about Obama does not involve his politics or his party or his tax policies or any of that. America has had its share of good and bad Presidents and economies. Whatever it ends up being, I am pretty sure we’ll survive this too.

What really concerns me is that, quite simply, Obama is in no way qualified to be President. I said as much almost a year ago to this day. A term as a state senator, and a cakewalk election to two (mostly absent) years as a US Senator does not a President make. Bill Clinton’s lack of experience began to show early on, and most of his two terms were nothing more than a protracted exercise in covering his tracks. That covering your tracks nonsense leads to things like 9/11.

And, at least as a Governor, Clinton had experience handling appointments, managing a budget process, and working with two houses of a legislature. Obama isn’t even this prepared.

I am very afraid that Obama is going to be on the job about three days and quickly realize how far over his head he is. And in that we will end up with a spin machine, just like we did with Clinton, complete with the FBI investigating when our sailors are blown up in our own warcraft in foreign ports, and ridiculous arguments over the definition of ‘is.’ 

In this, of all times in our history, it was not a time to take a flyer on newbie, no matter how historic his election or flowery his rhetoric. As a father to be, I am genuinely afraid for our country, its future and my child’s future. And though I despised Clinton (I lived in Arkansas when he was Governor), I never was worried like I am now.

One final point: I believe that the endorsement of Obama by Colin Powell may have been the single greatest exercise of Powell’s conservative values. I think Powell believes that by electing a black man to the highest office in this land that black people can no longer lay claim to being victims of whites or victims of fate or victims of anything. Powell saw Obama’s election for its true historic  and hopefully lasting value: a motivating wake-up call to people of every color, creed, background, and situation that anything is possible if you put your mind to it. That there are no handouts or freebies or guarantees in this life, but there is an abundance of opportunity for those willing to work hard. This idea used to be at the core of the values of a Republican party I no longer recognize and that I sorely miss.  

 

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So all the buzz in the market is the new Dream phone running the new Android OS from Google.

To properly look at the Dream phone, it must be done in two distinct parts: The Google Android Operating System, and the actual telephone hardware. 

By every demonstration I have seen and the reviews that I have read, the indications are clear that the Android software is smartly-built, innovative technology, and the Google applications on board are awesome. Other words I have heard to describe it: stable, fast, easy to use, clean, fun.

All that is great but at every step and in every way, this phone was pitched and launched as a competitor to the iPhone. So is this an answer to the iPhone? At this point, no. In fact, it isn’t even strong enough to be a serious competitor.

The devil is in the details: music from Amazon…? No Outlook or other enterprise email access (I read that Motorola has GoodMail programmers working on apps for this phone. How about putting the GoodMail programmers to work on making GoodMail for Android, and take advantage of Apple’s iPhone mis-step that I wrote about previously). And, not only there is no enterprise email, but you must have a GMail account to get any email at all to the device? This is as heavy-handed than anything Microsoft has ever done. To the Company whose motto is “Don’t Be Evil,” I would say “you first.”

No enterprise email capability is probably the best evidence that it was rushed out the door… I mean, they can’t be serious about pushing a Google Apps -only strategy on enterprise email users and think that this will fly at all, let alone be a viable long term solution. If they would have launched the phone a year ago, they could have gotten away with this, but now, with Apple and every other smartphone supporting Exchange email, it is a gaping hole as conspicuous in it’s absence as a missing nose.

As for the phone hardware itself, I am even more leary. The hardware is manufactured by Taiwanese outfit High Tech Computing, also known as HTC. In the old Fake Steve Jobs blog, Fake Steve says that HTC stands for Heavy Taiwanese Crap. Funny, and from my personal experience, true.

Two years ago I owned the HTC Cingular 8525. It was Windows Mobile, so I will grant you that some of the issues could be OS. The phone sucked battery, was slow, hesitated constantly, locked up frequently which required pulling the battery and waiting five minutes for a reboot (try that seven times a day, right in the middle of phone calls no less). In short, it was a total piece, and I found myself back to unsexy predictability of a Blackberry (actually, there is something sexy about an electronic device that works exactly as advertised).

Fast forward to March of this year: my wife bought a very similar Windows-based HTC, this time from TMobile. And all the same issues were still prevalent on that phone. After less than 3 months she literally threw it away and bought a Blackberry.

Even if the stability issue was the Windows OS, the new Dream phone still has all the annoying “features” of older HTC hardware. For example, the phone does not accommodate a standard 1/8″ head phone jack. Want to listen to some of that great Amazon music? Don’t forget your 3/32″ to 1/8″ adapter. This is the second best evidence that the product was rushed.

Finally, have you seen this thing? It is longer and thicker than the iPhone. And as ugly as a mud fence. This design would have been cutting edge in 2003. But compared to the iPhone? The upcoming Blackberry Storm? Talk about the ugly sister. When you add to this stingy memory, TMobile’s not-quite ready for prime time 3G network, and a price point very similar to an iPhone, an iPhone killer it is not.

Conclusion about the Dream Phone:

The Dream phone is large and clunky and the design is awful, and the product looks and feels rushed. What’s worse, they are revealing it to an audience that mostly has already found a home in the iPhone, and the sole advantage of a keyboard will not bring them over to this phone. Google is trying to poach the iPhone set with bulky, ugly, substandard equipment, an unknown, unproven OS, and second-tier providers.

As for winning over other smartphone users, remember: There is substantial overlap between mobile users whose needs demand a keyboard and users who require enterprise email access. Those who have shunned the iPhone for this reason will simply await the new Blackberry models (which are reliable and sexy).

In spite of these early issues, you really have to hand it to Google.

Google gives away this OS for free, so long as they can serve ads through it. Google understands that there are more people in this country that are between 18 and 35 than there are over 65. And this demographic wants to interact with the internet in real time, always on, at their whim and leisure. And they don’t want to carry a 13- or even 3- pound device around to do it. Google sees the potential and knows that serving this audience in the way this audience desires is the next great frontier for advertising. 

Google has built a nice OS, and the ideas around applications that take advantage of sensors and crowdsourcing are really innovative and will catch on. Google will learn and innovate more and find a significant role for themselves in the mobile space. The Android OS is designed to assure that Google will succeed as the medium for advertising moves from internet to mobile.   

Finally a thought you absolutely have not heard anywhere else: Though Google is pushing this as an OS for smartphones, the new Google internet smart search auto-complete functionality will certainly benefit users on a standard 12-button phone trying to do searches. 90+ percent of the phone market consists of those 12-button phones. And Google was recently selected as the default search provider for Verizon mobile phones.

So what about Google stock? Paid Ads and Paid Search are going down with retail sales, and for the next several months there will be little joy to report out of Google. Add to that the recent announcement to hold off their Yahoo ad partnership pending a look by the DOJ. Google recently achieved 63% of internet search– and this is primed to fall as well (how much higher can it really go? And sad to say, but even staying the same will be seen as a disappointment).

All that bad news will not be made brighter by the Google Phone version 1. With the obvious flaws, economic headwinds, and the strong competition (now even HP is getting in the smartphone game with an updated iPaq), there will be no joy from the initial sales results (my fearless prediction: less than 300,000 sold in the first 75 days, compared to 1 million iPhones over the same span). Put all this together and you get a much lower stock price. But longer term, this OS will be something special, the ad business will return, and Google is ever formidable in that they have the brains and the cash to compete in any space they choose. I would be a hard looker at anywhere under $350, and a certain but patient buyer under $300.

The Extra Rich Disclaimer: As of this writing, I am long QCOM stock and QCOM stock options. I am a QCOM employee, though I am not employed within any of the divisions that build or license phone chips, 3G technology assets, or the BREW application. The views expressed herein are mine solely and the content herein is derived entirely from publicly available news sources.

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Buffett gets massively into Goldman Sachs and GE, and the market yawns. The terms were fabulous for Berkshire, and the companies will be issuing new shares which will lead to EPS dilution, so I kind of understand why no one took it as a broader signal.

Then today, Wells goes in for Wachovia, saying that they will take it all on without any federal bailout help. This is a brilliant move for Wells, as the Wachovia retail branch footprint and cash-cow brokerage business has long been coveted by ALL of the larger players.

More importantly for everyone out there, lightning has struck, and this bold move is a solid indication that things are not as bad as they seem. Stop watching TV and start watching the big-boy investors who are placing their bets now. I am not saying mimic them; just be aware that they are laying their money down.

At this point do you buy WFC? Not until after the new shares are floated and they have an actual handle on how bad the bad stuff that sunk Wachovia really is. This way you go in eyes wide open.

If you are trading, here are stocks to watch for the next two weeks: CHK (own some, disgustingly beat down, buying more Monday first thing if the broad market futures are up or even), GS, BAC, MOS (oversold to the point of ridiculous), and QCOM (beaten down; dominant position, cash rich at a time when cash is king).

If you are investing, you have heard this from me before: This market is not coming back until the mess in financials is over. The bailout signed today should help get things moving. For now, sit on your cash, as the turnaround in this market is still aways off, and will be telegraphed way in advance, so you will have all the time you need to get reinvested. And, in my opinion, the DOW has not yet put in a bottom.

Disclosure: As of publication I am long CHK and QCOM, but positions can change at any time. I am not a professional, but I am trying this at home. It is highly recommended that you consult a licensed financial advisor or broker before making any and all investment decisions.

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