My local HD has been eerily quiet in recent weeks. It was in a frenzy in Spring 08. This is merely an anecdotal observation, perhaps without real significance, but makes me stay clear of HD at current levels.
CEOs Must Bring Investors Along for the Ride (WSJ) [View article]
The collapse in corporate governance is another reason to be sceptical about long-term exposure to US equities. It is one of the main factors that have motivated me to cash-in gains in the recent rally, rather than hold more stocks for their long-term dividend income.
I believe any board of directors that considers the interest of its long-term shareholders would not permit any raises, bonuses, or options to executives when dividends to shareholders are cut; and only to restore executive raises, bonuses, or option grants when dividends are restored to prior levels.
Any board of directors that considers the interest of its long-term shareholders would fire executives who bring about great damage to their shareholders' investment by poor management decisions (witness what happened to shareholders of DOW, GE, PFE, MRK, just to name a few, and not to even mention the banks).
However, the reality is that our entitled class of managements and their crony boards govern our public corporations as though they, and not the shareholders, are the owners; and this should be considered as a discounting factor when evaluating US equities as an asset class.
Yes, you are right about Sir Isaac Newton scoffing about the absurdity of financial bubbles, such as the tulip mania, which happened in the 1630's.
Sir Isaac Newton was "Master of the Mint" at the time of the South Seas bubble which imploded in 1720. At first, he resisted investing in companies that had no visible business models that could justify their share prices. As the bubble kept growing, he felt left out, as his friends boasted of their (Ponzi) profits. So he is said to have invested 7000 Pounds (a lot of money at the time). Even the King George I bought shares. As the bubble was on the verge of imploding, and word was spreading about its unsustainability, the King kept buying to encourage the public to follow suit and not sell-off. When it finally crashed, Newton suffered a significant loss, and is said to have remarked something to the effect "... I can predict the motion of the stars in the heavens, but not the folly of mankind ...".
On Apr 17 01:09 PM Samuri wrote:
> The bubble phenomenon has been with us for a very long time. > > A short description of various notable bubbles can be found here: > www.caslon.com.au/boom... > > The trouble is, as everyone knows, it is possible to get rich by > just following the crowd and/or getting lucky. > > After all, every year or so someone has 50 million dollars fall on > his/her head by following the simple investment strategy of buying > a lottery ticket. > > Not to mention the luck of modestly intelligent people who flipped > apartment buildings or bought dot com startups with nose bleed levels > of margin. > > One of the greatest minds that England ever produced, Sir Isaac Newton, > scoffed at the absurd prices of tulips (one tulip could exchanged > for one of the finest homes in Holland) as a demonstration of simple > human irrationality. > > But even Newton finally gave in, joined the crowd at the very top > of the craze, and ended up losing his financial shirt. > > If Newton couldn't resist, what's going to happen to us mere mental > mortals?
I agree with your big picture concept that the dominant economy moves periodically, but please permit me to take issue with your historic sequence.
Spain was a dominant economy before The Netherlands (not after as you mention), and not for 250 years, as the Arabs/Persians were dominant until the mid-1300's. Additionally, I doubt that many historians woud agree that our economy exceeded that of Britain as far back as 250 years ago (1760). A better estmate for when economic dominance passed from Britain to America would be at some point between 1890 and 1915.
On Apr 17 12:09 PM Bjarne Jensen wrote:
> Good article but, I believe Joel is missing the bigger picture. And > that is we simply don't have sufficient resources, physical and financial, > left to "solve' the problem. And thus, when this economic storm has > passed, we will no longer hold the global economic high ground. > > > Can't happen here? Consider that the economic high ground has changed > every 250 years for the last 750 years. The Dutch lost the economic > high ground to Spain. History remembers it as the Tulip Bubble. 250 > years later, Spain lost it to England and England lost it to us 250 > years ago. We are in the process of losing the economic high ground > to China. > > Each of those economic transitions was caused by the same two conditions: > The losing country had accumulated more debt than their economy could > support and the losing country had such incredible hubris they were > unable to see it. > > I predict that in two years, we will be a third world country no > longer able to save ourselves.
The 'Sell After Dividend Cut/Freeze' Rule, With Exceptions [View article]
A very sensible and excellent article. However, those who say that the stocks mentioned by the author are down just because of the general market downtrend have a very good point.
The author would be commended if he were to present, in a future article, data over a longer period, and to show the change suffered by the stock which froze or cut its dividend relative to the change in the S&P500 12 months after the dividend freeze or cut. My hunch is that the author would indeed find a correlation that concurs with his current thesis.
Having been a dividend investor for over thirty years, my experience is that dividend cuts are usually (perhaps 80% of the time) a sign that a stock will underperform.
Sliding Home Depot as Bellwether for Domestic Economy [View article]
It takes courage, or foolishness, to confidently project HD revenues for 2009, 2010 and beyond. Since any valuation model is sensitive to assumptions of future revenue and profit, I'd be sceptical at this point of the accuracy of this result.
Home Depot's Not So Awful News [View article]
CEOs Must Bring Investors Along for the Ride (WSJ) [View article]
I believe any board of directors that considers the interest of its long-term shareholders would not permit any raises, bonuses, or options to executives when dividends to shareholders are cut; and only to restore executive raises, bonuses, or option grants when dividends are restored to prior levels.
Any board of directors that considers the interest of its long-term shareholders would fire executives who bring about great damage to their shareholders' investment by poor management decisions (witness what happened to shareholders of DOW, GE, PFE, MRK, just to name a few, and not to even mention the banks).
However, the reality is that our entitled class of managements and their crony boards govern our public corporations as though they, and not the shareholders, are the owners; and this should be considered as a discounting factor when evaluating US equities as an asset class.
The Worst Isn't Over Yet [View article]
Sir Isaac Newton was "Master of the Mint" at the time of the South Seas bubble which imploded in 1720. At first, he resisted investing in companies that had no visible business models that could justify their share prices. As the bubble kept growing, he felt left out, as his friends boasted of their (Ponzi) profits. So he is said to have invested 7000 Pounds (a lot of money at the time). Even the King George I bought shares. As the bubble was on the verge of imploding, and word was spreading about its unsustainability, the King kept buying to encourage the public to follow suit and not sell-off. When it finally crashed, Newton suffered a significant loss, and is said to have remarked something to the effect "... I can predict the motion of the stars in the heavens, but not the folly of mankind ...".
On Apr 17 01:09 PM Samuri wrote:
> The bubble phenomenon has been with us for a very long time.
>
> A short description of various notable bubbles can be found here:
> www.caslon.com.au/boom...
>
> The trouble is, as everyone knows, it is possible to get rich by
> just following the crowd and/or getting lucky.
>
> After all, every year or so someone has 50 million dollars fall on
> his/her head by following the simple investment strategy of buying
> a lottery ticket.
>
> Not to mention the luck of modestly intelligent people who flipped
> apartment buildings or bought dot com startups with nose bleed levels
> of margin.
>
> One of the greatest minds that England ever produced, Sir Isaac Newton,
> scoffed at the absurd prices of tulips (one tulip could exchanged
> for one of the finest homes in Holland) as a demonstration of simple
> human irrationality.
>
> But even Newton finally gave in, joined the crowd at the very top
> of the craze, and ended up losing his financial shirt.
>
> If Newton couldn't resist, what's going to happen to us mere mental
> mortals?
The Worst Isn't Over Yet [View article]
Spain was a dominant economy before The Netherlands (not after as you mention), and not for 250 years, as the Arabs/Persians were dominant until the mid-1300's. Additionally, I doubt that many historians woud agree that our economy exceeded that of Britain as far back as 250 years ago (1760). A better estmate for when economic dominance passed from Britain to America would be at some point between 1890 and 1915.
On Apr 17 12:09 PM Bjarne Jensen wrote:
> Good article but, I believe Joel is missing the bigger picture. And
> that is we simply don't have sufficient resources, physical and financial,
> left to "solve' the problem. And thus, when this economic storm has
> passed, we will no longer hold the global economic high ground.
>
>
> Can't happen here? Consider that the economic high ground has changed
> every 250 years for the last 750 years. The Dutch lost the economic
> high ground to Spain. History remembers it as the Tulip Bubble. 250
> years later, Spain lost it to England and England lost it to us 250
> years ago. We are in the process of losing the economic high ground
> to China.
>
> Each of those economic transitions was caused by the same two conditions:
> The losing country had accumulated more debt than their economy could
> support and the losing country had such incredible hubris they were
> unable to see it.
>
> I predict that in two years, we will be a third world country no
> longer able to save ourselves.
The 'Sell After Dividend Cut/Freeze' Rule, With Exceptions [View article]
The author would be commended if he were to present, in a future article, data over a longer period, and to show the change suffered by the stock which froze or cut its dividend relative to the change in the S&P500 12 months after the dividend freeze or cut. My hunch is that the author would indeed find a correlation that concurs with his current thesis.
Having been a dividend investor for over thirty years, my experience is that dividend cuts are usually (perhaps 80% of the time) a sign that a stock will underperform.
Sliding Home Depot as Bellwether for Domestic Economy [View article]