Headline Readers

I was glad to see that Obamacare is getting ripped by the Supreme Court.  Thank goodness some people realize that it's unconstitutional to force you to buy healthcare.

Stansberry Editor had a great piece yesterday.  It's a little long but I think it's important for any investor.

For the life of me, I (Dan Ferris) often can't fathom how people believe the headlines they read are true. And worse, believing they're true, then going into the stock market and committing new capital based on what they say.

Working off yesterday's news that Federal Reserve Chairman Ben Bernanke made opaque reference to being willing to renew his quantitative easing (QE) efforts (read: print more money)… the Financial Times website this morning proclaimed: "Stocks stable on more hopes for Fed QE."

People hear a few comments that indicate the Federal Reserve might print more money than they previously thought it would print… and decide to go buy stocks? It's as though American corporations suddenly have more value because the Federal Reserve might print up more dollars with which to buy their wares… and their shares. But when the Fed prints more money, it doesn't increase your capacity for Coca-Cola or McDonald's cheeseburgers, does it? No. So why bid their shares up?

Remember… the Fed kept rates low, inflating the stock market bubble of the late 1990s. Then, the stock market tanked in 2000-2002, so the Fed lowered rates again… bringing about the housing bubble. That resulted in the biggest economic/financial disaster since the Great Depression. Now, rates are lower than ever… And both stocks and bonds have enjoyed a huge rally.

 In Chapter 8 of his landmark investing book, The Intelligent Investor, Ben Graham described "Mr. Market." Graham, the father of value investing, said that when you venture into the stock market, you should imagine you're business partners with a manic depressive. The poor fellow, Mr. Market, comes into work every day and, based on his mood, offers to buy out your stake or sell his. When he's depressed, he'll sell you his half of the business at a rock-bottom price. When he's riding high, no price is too great for your share of the business.

 Were Graham alive today, he'd certainly note Mr. Market's latest obsession – bonds. According to market researchers at the Investment Company Institute, investors took $2.57 billion out of equity mutual funds during the week ended March 14… and put $9.1 billion into bond mutual funds. Clearly, Mr. Market hates stocks and loves bonds.

Like most popular investments, bonds are a lousy place to put new money right now… especially the higher-quality issues. The benchmark 10-year Treasury bond yields just 3.3% these days. Once you account for taxes and 3% inflation, your real rate of return is negative. Your investment is losing value. Inflation will do a number on triple-A corporate bonds, too. Credit-ratings agency Moody's forecasts the yield on triple-A corporate bonds in March will be 3.92%. (It's a forecast because March isn't over yet.) That's about 60 basis points (0.6 percentage points) over Treasurys. Moody's predicts this'll sink to 3.78% in April.

I've heard it said that $1 of income is $1 of income, and the source doesn't matter. But I don't see it that way…

Consider that $1 of bond income this year will buy you $1 worth of stuff this year. But next year, after 3% inflation, that same $1 will only buy you $0.97 worth of stuff.

That'll keep happening every year you own that bond. After 10 years, your $1 of income will buy you about $0.74 worth of stuff. The bond market is supposed to be the smart money. But that doesn't seem very smart to me.

 Now consider $1 of dividend income from a World Dominating Dividend Grower (WDDG) stock. WDDG stocks are the shares of the best businesses in the world. And these companies raise their dividends every year like clockwork for decades on end. The WDDG stocks recommended in my 12% Letter newsletter raised dividends at an average rate of about 11.5% over the past year. Last year, they paid you $1 of income… This year, they paid you $1.115 of income. After 3% inflation, that's worth about $1.08. After 10 years of 11.5% dividend growth and 3% inflation, the value of the WDDG income will more than double.

So you can wind up with $1 that's worth $0.74 after 10 years, or you can wind up with an income stream that's worth $2 in today's money.

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I will call this the Krieger Section for today.

This is a great article with some striking analysis on the auto market.  2008 is going to look like a picnic.
Quote:  “The answer is just what you expected. A phenomenal amount of debt peddled to people without the means or intent to ever repay the debt by the usual suspects: Ally Financial, Capital One, Wells Fargo, JP Morgan and Bank of America. These fine upstanding institutions control 25% of the auto loan market. They doled out $24 billion of new car loans in the 4th quarter of 2011, with an outpouring of loans to those downtrodden subprime borrowers and an extension in the average loan length beyond 6 years. Subprime borrowers now account for 45% of all auto loans. As a refresher, subprime borrowers generally have little or no assets, have a history of late payments or defaulting on obligations, and have low incomes. No worries there. When has making hundreds of billions in subprime loans ever caused a problem before. Ally Financial CEO Michael Carpenter had this to say about the market:” “We have seen crazy, irrational competition in the subprime end of the marketplace, which is one reason why more banks are targeting the lower end of the market.”

“I spend two hours per day on the road and have plenty of time to observe my surroundings. I drive through the Mantua section of West Philadelphia every day. The average household income in this neighborhood is $16,000. The average home value is $25,000. The true unemployment rate exceeds 40%. At least 20% of the properties are vacant and the neighborhood resembles Baghdad. Last week, I counted six brand new vehicles with registration tags in their back windows in a one block radius of this neighborhood. Every block has newer model Ford Expeditions, GMC Sierras, BMWs, Acuras, Cadillacs, and Mercedes sprinkled among the squalor. Someone is loaning these people the money to buy these $40,000 vehicles or approving them for leases. This neighborhood puts the SUB in subprime. No financial firm worth spit would make a six year $35,000 auto loan to someone in this neighborhood unless they were instructed to do so by the Federal government or were guaranteed that the future loss would be borne by someone else – YOU.”

Full article here…

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I reiterate my call from 2009.  The Onion is still a short.

No joke: NYC Dept. of Education is banning words
Posted on March 27, 2012 by Doug Gibson
As my friend Robert Becker mentioned, this seems like it came from The Onion, but it’s no joke. The New York City Department of Education is asking teachers to ban words from tests for students in schools. One banned word is dinosaur, ostensibly because it might offend creationists. (Read) Read another story here.

As legal scholar Jonathan Turley points out, creationists actually believe in dinosaurs. (Read) Maybe NYC educators need some remedial studies? Here is a list of the 50 “offensive words,” which I got from Turley’s blog. It’ll blow your mind. According to the New York Post, educators claim the list of banned words is needed because they “could evoke unpleasant emotions in the students.” … Like birthday, because it offends Jehova Witnesses, and terrorism because it scares students. This is The Onion turned into real life! I thought school was designed to prepare students to grow and learn. Here’s the list:

Abuse (physical, sexual, emotional, or psychological)
Alcohol (beer and liquor), tobacco, or drugs
Birthday celebrations (and birthdays)
Bodily functions
Cancer (and other diseases)
Catastrophes/disasters (tsunamis and hurricanes)
Celebrities
Children dealing with serious issues
Cigarettes (and other smoking paraphernalia)
Computers in the home (acceptable in a school or library setting)
Crime
Death and disease
Divorce
Evolution
Expensive gifts, vacations, and prizes
Gambling involving money
Halloween
Homelessness
Homes with swimming pools
Hunting
Junk food
In-depth discussions of sports that require prior knowledge
Loss of employment
Nuclear weapons
Occult topics (i.e. fortune-telling)
Parapsychology
Politics
Pornography
Poverty
Rap Music
Religion
Religious holidays and festivals (including but not limited to Christmas, Yom Kippur, and Ramadan)
Rock-and-Roll music
Running away
Sex
Slavery
Terrorism
Television and video games (excessive use)
Traumatic material (including material that may be particularly upsetting such as animal shelters)
Vermin (rats and roaches)
Violence
War and bloodshed
Weapons (guns, knives, etc.)
Witchcraft, sorcery, etc.
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This is another reason why we need to get this clown out of the White House.  Most other countries think he is a complete joke.  What a nice little puppet.

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Here is some local news about the price of energy affecting businesses.

CEO Donnie Smith On How High Gas Prices Affect Tyson Foods
By Arkansas Business Staff
3/27/2012 8:41:01 AM

It's not easy getting the attention of some CEOs, particularly one who heads a global business with 115,000 employees and $32 billion in sales.

But Donnie Smith, chief of Tyson Foods Inc. since November 2009, promptly and thoroughly responded to a series of emailed questions from Arkansas Business.

Wanting to waste as little as possible, we're sharing a couple of our questions and his responses.

AB: What effects have increased gasoline prices had on Tyson Foods?

Smith: Like everyone else, we're doing our best to manage the impact of record high gas prices and high diesel prices. At current levels, gasoline prices are pressuring disposable household income, but we have not seen an unexpected impact on our business.

We, too, are a consumer of petroleum products and like everyone else, we certainly feel the impact of higher costs. If you use Springdale as our pricing point, there's been about a 57 percent increase in the cost of diesel over the past five years. That's significant since we use fuel to transport feed to family farmers, chickens to and from the farms and finished products to our customers around the world.

AB: Is there anything new the consumer can expect from Tyson Foods, e.g., new products, new pricing, new ad campaign?

Smith: We are constantly looking for new products that help meet consumer needs. Time-starved consumers are looking for more convenience at a good value, and we're developing a variety of value-added products to meet those needs. We also plan on extending some of our successful brands into new categories.

One of the stand-out products in our Prepared Foods business is Wright Brand Bacon. We increased points of distribution by nearly 10,000 locations across the country in fiscal 2011. And given the strength of the Wright brand, we plan on extending it to other categories in the next few months.

READ MORE

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10 Things You Should Never Say To Your Boss

Saying the wrong thing to your boss can really damage your career. From refusing to work with a colleague to bragging about your irreplaceability, here are 10 things you never want to say to your manager:
1. "Can you write that down for me?" When you're talking about the details of a project, writing notes to consult later is great. But you need to take them yourself, not ask your boss to do it for you.
2. "I just booked plane tickets for next month." Never book time off without clearing it with your boss. There might be a major project due that week, or she might have approved others to have that time off and therefore need you around. Check with her first before you do anything irreversible.
3. "My bad." There's nothing more frustrating than an employee who has made a mistake and doesn't seem to think it's a big deal. When you make a mistake, take responsibility for it, figure out how you're going to fix it, and make it clear that you understand its seriousness. Responses like "my bad" sound cavalier and signal that you don't take work seriously. Don't use it for anything other than the most minor mistake (like spilling something in the kitchen, which you then promptly clean up).
4. "I can't work with Joe." Refusing to work with a colleague is an unusually extreme statement and may mark you as difficult. Instead, try something like, "I find it hard to work well with Joe because of X and Y. Do you have any advice on how I can make it go more smoothly?"
5. "I don't know what you'd do without me." No one is irreplaceable, even the head of your company. Statements like this mark you as a prima donna who feels entitled to special treatment … and will make a lot of managers want to show you that you're wrong.
6. "Do this, or I quit." Whether you're asking for a raise or requesting a day off, don't threaten to quit if you don't get your way. If you don't get what you want, you can always think it over and decide to quit, but if you use it as a threat in the negotiation itself, you'll lose your manager's respect and poison the relationship.
7. "I have another offer. Can you match it?" Using another job offer as a bargaining chip to get your current employer to pay you more money may be tempting, but it often ends badly. First, you may be told to take the other offer, even if you don't really want it—and then you'll have to follow through. Second, even if your employer does match the offer, they'll now assume you're looking to leave, and you may be on the top of the lay-off list if the company needs to make cutbacks. If you want a raise, negotiate it on your own merits.
8. "What's the big deal?" Statements like this are dismissive and disrespectful. If your manager is concerned about something, you need to be concerned about it too. If you genuinely don't understand what the big deal is, say something like, "I want to understand where you're coming from so we're on the same page. Can you help me understand how you're seeing this?"
9. "I can't do X because I need to do Y." Don't say that you can't do something your manager is asking of you. Instead, if there's a conflict with another project, explain the conflict and ask your manager which is more important.
10."That's not my job." Protesting that something isn't in your job description is a good way to lose the support of your boss. Job descriptions aren't comprehensive, and most people end up doing work that doesn't fall squarely within that job description. (That's what "and other duties as assigned" means.) You want to make yourself more valuable to your employer, not less.