Sunday, July 5, 2009

Oreos and Iran... The Emperor's New Clothes...

Still the Greatest
Dear Readers,
As we celebrate our country's Independence once again, I wanted to remind readers of all the things that make it great... perfect...of course not... but the simple things we take for granted such as the unalienable rights which Thomas Jefferson mentioned in the Declaration of Independence Life, Liberty, and the Pursuit of Happiness. Governments are created by the people, and get their legitimacy to govern from the people. Any government that does not seek the people's will... or the legitimacy of those that the government is supposed to represent is no better than oppression by tyranny... Let's look around the world for a moment... China is a great economic power to which to one can deny. However, the people have no true freedoms. The government censors their internet, represses any mention of Tenimen Square, and often times dictates what the people will do as opposed to what they wish to do... At the end of the day, the majority of Chinese will push for the same freedoms that the west has...
According to Jefferson "That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed." An amazing statement if you thin about it. i would like to think that every time we hold an election in this country, we are in fact holding some type of peaceful revolution...

Iran and the Oreo

Make no doubt about it, the leadership in Iran is feeling a bit of heat. If it is the state of protest that still exists in the country (albeit underground protests),there is also a sense of illegitimacy that is increasing tension among the ruling elite. Throw into the mix a fledgling democracy to the west, and another to the east. To be sure, this is probably one of the most under-reported, and under-recognized stories in the media, if not only on Main Street. To be sure, the future of the Middle East may lie in what happens in this region over the next two to three years... Godspeed to those who are creating democracy. I also want to remind readers that the most unhealthy part on an Oreo in the creamy center... made up up factory created fats known as hydrogenated fat... Kind of reminds me of Iran...
The economic significance would be a long position on oil and gold in this scenario. i would also look specifically for companies who draw their oil fro reserves other than this area of the world.


The Emperor's New Clothes
I always laugh when I hear the story of the Emperor's New Clothes. Maybe it is the naivety of the Emperor... maybe it is his arrogance... I know part of it is the swindle that has taken place. the best part of all, is the fact that the emperor is parading himself in front of the people with nothing on...

Like fund manager Kirby Daley , I believe that stock market rally is a lot like the emperor's New clothes. Aside from the stimulus money that is currently pumping into the economy, there is no real growth (unless you are counting the unemployment line).
A sustainable rally,just like a sustainable economy is built on growth of legitimate businesses not simply emergency government spending. With all the positive spin on the economic recovery, no one has really that of the scenario where the worst has yet to come." (2) Daley is also considering low interest rate investments where a hedge in taken against inflation... and the loan can be paid back over time with worth-less (as opposed to worthless) dollars. He considers a 30 year mortgage on distressed property to be a legitimate idea.

Daley is also mindful of crumbling consumer confidence. Not simply an unemployment rate that is hoovering near 10%, but people who are starting to find a knack for thrift. I even met a doctor who is talking about fixing things in his own house... something that was unheard of two years ago!!! For instance, if the Cash for Clunkers program were to gain passage in Congress, it could create a new revenue stream for car manufacturers. Let's face it, a company like Toyota who will eventually pick up some market share from the GM and Chrylser bankruptcies in the future needs real help in the here and now. Facing an unprecedented loss (the first in 71 years), TM realizes that credit markets in the United States, and a desire for their product have created current losses at $1.6 billion through March, and could eventually hit double digits by year end. (3)

CSTR
http://www.google.com/finance?client=ob&q=NASDAQ:CSTR Last blog I mentioned my Red Box experience. I even made reference to Red Box Killing the Video store. on our trip to Tennessee, I noted a Red Box in a McDonald's. Now it is next to impossible to get anything into a McDonald's. However, upon further research we have found a business relationship between the two entities. A Red Box in every McDonald's would mean MASSIVE leverage.

However, I am always mindful that innovation in the information age comesquicky... And when it hits... it is often fast and lethal in the business world. I believe the day of DVD rentals is approaching a rapid end. More than likely, we will witness on-line video stores via cable or satellite. Maybe even via the internet. That would turn the lights off on Red Box, Blockbuster, and any other brick and mortar business.
at $25 per share of CSTR, this might be a short candidate, especially it the stock hits $30.00 via half-baked speculation.

1. http://www.moneycontrol.com/mccode/news/article/news_article.php?autono=404328&special=highlights
2. http://www.moneycontrol.com/mccode/news/article/news_article.php?autono=404328&special=highlights
3. http://www.moneymorning.com/2008/12/23/toyota-sales-2/

2 comments:

AX said...

TC, Kirby Daley has been right about a lot, wish I had stuck with him longer through the Lehman collapse last year. Yes, we still live in the greatest country on earth but this is a canned statement. We are still allowed to feel like slaves in a Banana Republic when our govt. continues to act against the best interests of the majority of its citizens....

Tiger Coach said...

Ax...
trickle down economics in almost every form really means that the upper class feasts, the middle class gets leftovers, and the poor get crumbs...

there is no doubt about teh state of affairs in the U.S....are dire, and more than likely more unstable than many of these yo-yos will admit.

TC