Friday, April 30, 2010

Did Redbox Kill the Video Store? New Ideas with Old Themes

What did you tell them?
Red Box killed the video store.
Red Box killed the video store. 

For those of you who remember the days of your vcr, a beta or vhs tape and a date, this walk down Memory Lane will also take you into the local video store. Year you remember the old brick and mortar store that sprung up for about a 30 year period  in the United States.

Those who got in early... and got out within the first 20 years of the video rental business then got out were the smart ones. (Does anyone remember paying $100.00 or more to belind to a video club?)  Movie Gallery (formerly known as Video Update) was the last of these stores that died a slow and painful death in our town. Sure expenses like rent at the shopping plaza, and employees took its toll. But the real culprit to the death of this local store was one little Redbox 150 feet away. The brick and mortar store just couldn't compete with a machine. Of course in the world of business, natural selection takes over unless you are part of a government subsidized business lobby. See CAIGGM and friends.

In terms of movie rentals, Redbox has a simple model. Place machines in high traffic areas and let the machine do the work of the video store. Let's face it, for those who remember video store experience, this is not much different. For only $1.00 you can stay home and enjoy a video.

However, Netflix has stormed onto the scene. It's first business approach was a simple. Utilize monthly membership fee and mail service to deliver dvd's right to your door. Netflix even offered a free trial to those who are weary of new consumer options. The more recent move into streaming video options and a recession that finds people looking for cheaper entertainment options positions Netflix to be the of ebusiness.  Investors have been handsomely rewarded.

The question is whether Blockbuster can change fast enough to challenge Netflix. Blockbuster has abandoned many of their video stores. And, Blockbuster has a long-established name. Blockbuster has even attempted to rival Netflix with an on-line video experience which also offers a free trial.  The question is only if it is too little, too late?

Growth areas? Great question. The current market suggests that games are another place to attract consumers. Gamestop appears to have successfully transformed itself from a shopping plaza storefront to a viable on-line business model. Gamefly's IPO  (GFLY) could however pose a problem to Gamestop. Could it be a case of Movie Gallery all over again? With free trialmembers and an endless mass of gamers, we can only see new opportunities.

The meteroic rise of Netflix and the potential of GFLY should not be under-estimated. Let us remember that it is not always the company that has the best name. But it is the company that builds a name with a new and more savvy consumer that usually succeeds.

Sunday, April 25, 2010

A Closer Look at the World of Jim Cramer and Weekly Economic Calendar...

Jim Cramer's World
It wasn't so long ago that Jim Cramer demonized the the hedge funds and short sellers. Let's face it, our banking system was on the verge of collapse and hedge funds were any easy target. Put a ban on short-selling...and everything will be o.k..  After all, U.S. banks provide capital and credit for almost every aspect of our economy. However, one will note the deafening silence of Cramer when leaked emails show that Goldman Sachs was one of the companies shorting Lehman Brothers into oblivion. So, Cramer could easily echo the words of Walt Kelly's first Earth Day poster in 1970...  "We have met the enemy and he is us". Walt Kelly  More importantly, the tangled web of lies, half-truths, and out-right deceptions leading to passage of TARP only angers and confuses a public who is still feeling the ripples of our Great Recession. 

Weekly Economic Calendar
DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Apr 279:00 AMCase-Shiller 20-city IndexFeb-NA-0.10%-0.7%-
Apr 279:00 AMCase-Shiller 20-city Index (y/y)Feb-0.7%1.1%-0.7%-
Apr 2710:00 AMConsumer ConfidenceApr-54.053.752.5-
Apr 2810:30 AMCrude Inventories04/24-NANA1.89M-
Apr 282:15 PMFOMC Rate Decision4/28-0.25%0.25%0.25%-
Apr 298:30 AMContinuing Claims04/17-4625K4625K4646K-
Apr 298:30 AMInitial Claims04/24-435K440K456K-
Apr 308:30 AMGDP-Adv.Q1-1.8%3.2%5.6%-
Apr 308:30 AMChain Deflator-Adv.Q1-0.9%0.9%0.5%-
Apr 308:30 AMEmployment Cost IndexQ1-0.5%0.5%0.5%-
Apr 309:45 AMChicago PMIApr-59.559.858.8-
Apr 309:55 AMMich SentimentApr-72.071.569.5-

Tuesday, April 20, 2010

Is the Rally Real???

One New York Post writer seems to think so...Here is his argument...  Anyone care to respond?

1. Average hourly wages are $18.90, up from $18.52 a year ago. (Before employers hire full-time, they get their workers to work overtime, resulting in higher pay).

2. Aggregate weekly hours worked is the highest it's been since June 2009 -- again, suggesting overtime. Only so much overtime can be worked before hiring begins.

3. Industrial production index up 9 months in a row after plummeting 13 percent from December 2007 to June 2009.

4. Retail sales up 10 percent year over year.

5. GDP last quarter showed 5.9 percent annual growth.

6. Initial unemployment claims have gone from a peak of 643,000 in April 2009 to 480,000 now.

7. The Greek debt crisis seems to be ending without major fallout in the form of other nations defaulting.

8. Home-improvement-related retail sales were up 3.1 percent, suggesting consumers are putting money back into their homes again.

9. Railroad traffic, a sign of interest in commodities, is up 16 percent, the highest since the recession began.

10. Rail shipments of metals were strongest as manufacturers are rebuilding inventories.

11. JPMorgan Chase and Bank of America both announced loan delinquencies were decreasing. JPMorgan also announced plans to hire 9000, their biggest hiring spree since the recession began.

12. UPS profits were 20 percent higher than expected as US shipments saw their first year-over-year increase since 2007.

13. Economists estimate that China GDP grew by 11 percent last quarter, the most in 3 years.

14. Singapore posted GDP growth of 9 percent last quarter and South Korea had the largest unemployment rate drop in over a decade.

15. A sharp increase in M&A activity where the acquirers are using cash rather than stock to buy companies (showing confidence in their businesses).

16. Target, Kohls, TJX and Aeropostale all increased earnings guidance for the next quarter, showing retail strength across the board.

17. Auto sales are spiking. March annualized auto sales showed a 15 percent gain over February.

18. ISM non-manufacturing index (showing the strength of non-manufacturing indexes) had the highest percent increase in five years.

19. The National Association of Realtors said that pending sales of existing homes jumped 8.2 percent over last month.

20. Employers added 162,000 jobs in March, the biggest gain in four years.

21. Ford reported the best monthly sales in 25 years.

22. The government has made money on its Troubled Asset Relief Program bailouts of Citigroup, Goldman Sachs, American Express, JPMorgan, Morgan Stanley, and almost every other bank they lent to.

23. Consumer spending had its fastest increase in three years last month.

24. Intel, a barometer of the entire tech sector, saw its earnings quadruple from a year ago and said its earnings were the best ever for that period. They also reported record results for the chips used in mobile devices and said corporate techn spending was growing across the US.

25. Despite growth and low interest rates, inflation is almost non-existent with the CPI coming in at 0.1 percent last month."

Sunday, April 18, 2010

Bobbing and Weaving...

Jimmy Braddock was a scrapper and a survivor...

Market Watch
This week should bring a curious turn of financial fortunes. Two economic stories could have a significant impact on Wall street. 1.  SEC charges against Goldman Sachs. and 2.  Bank Regulations

The markets took GS news with fear and trembling, sending the market down over 100 points, and punishing the entire financial industry. GS itself gave up nearly 13% of its value. Today, Tim Geithner's interview on Meet the Press echoed hard ball Obama style. I don't think punish is the right word, but there is definitely an air of yanking the dog's chain. Geithner said it best. "You've had eight and a half million Americans lose their jobs. You had millions of Americans lose their house. Tens of thousands of businesses fail. Worst financial crisis in generations. That is a powerful case for reform. And, again, that's why I'm so confident we're gonna see Americans come together and pass reform."  

However, readers of megatrends have been around long enough to realize there is a significant difference between wants v.s. needs. The Obama administration has a strong desire to put Wall Street on some type of chain. To demonstrate that in some way shape or form that Wall Street's importance to the economic system is such that financiers cannot be given free-reign to regulate themselves. That left unchecked, Wall Street caused a financial meltdown that was so serious that it almost threw the entire world into an economic depression.

Wall Street by far is the most cunning and manipulative body this country has ever seen. That is why I believe there is little to no chance that the financial reforms that are passed will have any real teeth. We are reminded that the best and the brightest go to Wall Street seeking the highest compensation possible. And, the knowledge and wit can easily out-pace those who attempt to regulate them. Should things get too sticky, a couple days of a market sell-off will sober Washington, Congress, and Obama up a bit. And let's face it mid-term elections are coming up soon and no one wants to rock that boat.

By the way here is a link of Earnings (note that C and Zion will be stock to watch) this week, and a link to the Economic Calendar:

My heart goes out to each and every American that is currently out of work, or under-employed. The true gauge of prosperity isn't how Wall Street is doing, it is how Main Street is doing.  I am growing more and more concerned about the number of unemployed is this country. Off the top of my head, I can name a half-dozen people who are unemployed. An electrical engineering, a project manager, vice-president of a food company, electrical design, commercial real estate, and truck equipment sales.  

There is no such thing as recovery until these people who want to work and provide for their families can rally back and regain some of the zip that has been beaten out of them by this recession. I am all for extending unemployment benefits to those who need relief, and even modifying home mortgages for those who are unemployed. Most of these folks would rather be working and paying their bills, and will more than likely step it up once they get back on their feet.

I do not really buy the official government number of 9.7% unemployment, and surely do not believe there are 22% of unemployed or underemployed Americans. However, that 16% figure looks and feels about right. 

My lovely wife and I settled down to watch Cinderella Man last night...again.  I was reminded again and again that the Crash in 1929 didn't really hit Main Street until 1932. Sure 2008-2009 are much different. The market has rallied back considerably as well. All that I do know is there are a lot of people suffering out there and I don't like it!

Neop continued to roll along picking up .07 cents last week.

C calls are now 45 and 15 percent winners (as of now)... the contracts run until September...  Bove believes C will crush earnings...  I am just hopeful that good numbers are not lost in the malestrom of regulation and GS bashing.

I liquidated the potion of WMT, and long term hold which over the course of the last year earned somewhere in the area of 25%. The time seemed right and the getting was still good. 

D this is a channeling stock to be sure. I am looking for the company to increase dividends significantly, or initiate a larger stock-buy back plan.

Eyes on DRYS, AMBK, ZION, SRS (did you see that jump last week), and a few other to be disclosed at a later date.

Friday, April 9, 2010

Passing Thoughts...

It has been close to a month since I last blogged at Megatrends... I can honestly say that I missed the opportunity to unwind and analyze this little sphere of ours...

Take for instance the increased tension between the United States and Israel which was first noted during VP Biden's visit to Israel nearly one month ago. Since that time, the usual sibling type spats the countries generally have had in the past seem to be more pronounced. This is most noted by Netenyahu's snubbing of Obama's Nuclear Arms talks. We are reminded that Israel is the ONLY democracy in the Middle East (lest we call Iraq anything more than a fledgling oligarchy at this point). Iran now seems bent on quelling the pro-democracy movement within its own border by rejuvinating right-wing Islamists who need little help in vilifying the Israelis. Just the thought of this makes be want to purchase large positions in domestic oil, silver, and gold...

Healthcare has been a hot topic of conversation. Now all Americans are covered with some type of health plan... which in my humble opinion is not too different than what was going on before there was Obamacare...  think about all the stories you have heard about people who do not have health insurance, and have still gone to a hospital for treatment... Someone has been paying for them all along. Now, it appears that this whole system will be less of shadow statistic, and more above board. Who knows, maybe just maybe Obama et al. will be able to show American how this program actually saved Americans money.
Have you read your food packages lately?  I have, and I must say that I am seeing less and less of non-hydrogenated oils, high fructose corn syrup, and sun flower, soy, and cotton seed oil. It has been a fact for some time that america is eating itself to death. However, factory foods have helped make this problem worse through a variety of chemically modified foods. Not only are these food by-products unhealthy, but they are also a way for food companies to maximize profits at the expense of our health.
As an educator, I am convinced that we do our children a tremendous dis-service by not teaching them some of the most critical skills to be successful in life. sure reading, writing, and aritimetic are important but I do not want to underestimate some other fundamental classes that should be taught. for instance, we should teach students how to win friends and influence people (in other words) basic social skills for getting along in the work place. Another skill I would like to see taught is manners and ettiquette. Kids have to learn these skills somewhere, and if a mounting book of evidence suggests that many of these skills are not taught at home, some reformers believe school is the perfect place. Goal setting and time management should not be forgotten. In a day and age where students are constantly being pushed toward entertainment options, it is important that students learn the basics of how to prioritize daily goals, and set long-rage plans. Last, would would be completely remiss if we did not include basics on financial literacy. I spoke with my banker the other day and she clearly believes that there is a general illiteracy when it comes to finances. She sees it in both her high school and college educated customers.

Bank Reform:  The Game is Rigged
Sure the banks have a ton of debt off their books. I would also agree that accounting standards exist in a reality that is much different than the average person's checking account. Therefore, we cannot begin to understand Wall Street profit driven schemes. Quite simply, we can choose to accept them and profit, or be very selective and profit from their fall into oblivion. Let us surely understand that the game is rigged. In his book A Colossal Failure of Common Sense, Lawrence G. McDonald suggests that Wall Street is always a few steps ahead of regulators. This too would go along with the Dick Bove's scheme that bank stocks could go up an additional 400% by 2012. While my money has bet against Wall Street in the past, it only makes sense to place bets on horses that are guaranteed winners. On the other hand, Jim Chanos would ask that investors use common sense

Stock Watch
I entered into a 9/5s C contract only to watch it fall 20% the first week. However, a bit of patience has seen the investment rise to a 33% profit. I will look to add to this position as I am certain the banks will get away with murder when it comes to any type of regulation...

I purchased silver coins the other day from a gentlemen who was looking to unload a few silver dollars. I was able to purchase these coins at a 15% discount off retail price, and within the past couple of days have seen the investment in silver bullion itself increase and additional 7%.  I will continue this new and unexplored avenue. My only regret is that I was not more aggressive on this option in the early going.

NEOP continues to bewilder me. Obamacare did put a mild crimp on this one as there is serious discussion as to the amount developmental drug companies will have to pay in taxes. Still though Lymphoseek and Rigs continue to food toward final FDA approval.