Michael Jackson and the Federal Government... Coming to a Town Near You...

Michael Jackson and the Federal Government
O.K., I'll admit it. I grew up in the 80's and listened to some of Michael Jackson's music... How couldn't you? Michael Jackson in the 80's was like Elvis in the 50s, The Beatles in the 60s, and The Rolling Stone in the 70s. But enough of the stardom talk. After all singers come and singers go... and while each have entertained us in a unique and revolutionary way, there is always another star waiting to take the spotlight.

We can make several observations about Michael Jackson:

1. MJ had a name the preceded him; and a brand name has a value unto itself.
2. MJ owned a considerable amount of property rights from artistic property (see Jackson Five, Beatles, and Michael Jackson)... and a ton of other collectibles.
3. MJ was on the verge of bankruptcy because his liabilities far exceeded his assets... Most reasonable assets list his debt at $500,000,000.

To be sure, there is a long list of creditors that will be left holding the bag once Michael Jackson's estate is settled. Undoubtedly, someone will own the Neverland Ranch, someone else will own the property rights to Billy Jean, and who knows what will happen to the Beatles music. But that is part of the problem when you are in debt... your creditors are not necessarily your friends... and in the end, their need to collect on a debt will supersede any final wishes Jackson had for his estate. One of his creditors went as far as to book a 50 date tour for Jackson that was to start in the near future... Only having insurance on 10 of the 50 dates as no shows, these speculators will be at the bottom of a very long list.

The Office of Accounting released a statistic today that the United States will exceed 100% of GDP by 2023. That means that our country will be officially broke by that date. Some of the more hawkish figures have the date moved up approximately three years to 2020. During WWII, we sold War Bonds to help raise money to pay for the war. This time around, we are in way over our heads, as governments like China, Russia, and Saudi Arabia are holding our debt. And just like Michael Jackson found out, your creditors are not always your friends... and in the end, they own you!!!

I do however, believe that there are workable solutions to our problems... tough decisions, no doubt. Hard decisions, absolutely. Painful choices, for sure. And to be quite frank, I am not so certain that Congress nor the American people will have the stomach to make the necessary changes until a crisis actually hits... By then, a lot of the difficult decisions will be made out of pure necessity. Hopefully, we can all learn a lesson from Michael Jackson.

Coming to a Town Near You...
According to the National Coalition Against Legalized Gambling, the United States is experiencing its third great gambling wave. The first wave took place during the 1840s to 60 with the opening of the Wild West, and riverboat runs up and down the Mississippi. The second great wave took place from 1910 to approximately 1929 where mafia families pushed numbers rackets in factories, and gambling halls in speak easies. Now the 1990's to 2010s marks the third great gambling wave in the United States.

I write this from the view point of an Ohioan who has voted against legalized gambling on three separate ballot issues. It is not that I do not like gambling, it is more that I do not like gambling in my back yard. Look at the states that have legalized casino gambling, and at the root of every casino you will find rich and opportunistic millionaires trying to become billionaires on someone else's dime.

In Ohio, Governor Stickland who was once a minister, social worker, Congressman, and now governor is trying to pass legislation that will have the state legislature create a slots in race track bill and simply sing it into law. This is the equivalent of political suicide. The governor recognizes that casinos are not good for the state, but he is desperate to find money... any money to keep Ohio away from the time of fiscal meltdown that is taking place in California.

Fellow blogger Ax (www.bigbigbet.blogspot.com) observed the impact a casino in Philadelphia will have on Atlantic City. The impact will be devastating. Yet, I will also remind readers that any government that is reliant on seeing its citizens lose money in casinos, is a government that is doomed to fail. Call me a conservative... call me a do-gooder... and yes, call me a guy who does not mind a game of chance... But a casino on every street corner is not the American Dream.

WYNN and MCRI still very much remain on my short list. MCRI in particular lost approximately 9% of its value today. EFU, SRS, and TM still remain on the short list.

SLV and D are long. Possibly FAZ when it breeches 4.5.

Who Wants to be a Custodian? We Shall Overcome Someday... Intrinsic Investing Part II...

(Image from Carl the Custodian in The Breakfast Club)
Who Wants to be a Custodian?
Massilon used to be called Tiger Town. It was a tough city with tough people living there. Massilon and surrounding cities in Stark county used to have the bragging rights of such companies as Hoover Home Products... Manufacturing is still the crown jewel of this area. Timken makes some of the best bearings in the world... Diebold produces products for financial services and security. J & L Steel builds products that are used in heavy construction. Now things are rough in this little area of the state. According to Yahoo News, "Evidence of the slumping economy is stacking up at an Ohio school which has nearly 700 applications for one open janitorial job." (1) The job based on experience pays approximately $12-15 dollars per hour with benefits. I have deep respect for anyone who goes out and forges their way in today's economy. The number of applications suggests there are many Americans who will willingly take shovel ready jobs as part of Obama's budget and stimulus package.
We Shall Overcome One Day...
According to one report, the powers that be are trying to spend our way out of the economic slow-down. The Obama budget looks to ramp up government spending to an un-precedented level. This move is an attempt to "shock" the economy back to its regular beat, and encourage private investments to follow. One point of concern about the Obama budget is that it is based on positive GDP by the end of fiscal year 2009, with a lofty projection of 3% by the end of 2010. While I would like to see these predictions come true, we are reminded that during the Great Depression, Herbert Hoover said that "No country can squander itself to prosperity on the ruin of its taxpayers." That being said, Barack Obama is right, there MUST be accountability in government spending. And, the spending spigot should be turned off once the economy has recovered. This includes a closer look at government out-lays on entitlement programs that do not promote growth. I believe that Barack's stance on competitive government bidding is a great place to start!!!

Intrinsic Investing Part II...
There is value in today's market. There are companies that have been unduly punished by the bears on Wall Street. Many companies are trading at a significant discount to book value. That being said, there are two underlying factors which are keeping a person like me out of the long side:
1. Accounting practices: There really isn't a firm way to determine value on a number of companies based on traditional accounting formulas. The pressure to fudge numbers, under-report losses, and over-project earnings is one variable that no one can quite but a finger on yet. The unfortunate fact is that an under-funded if not completely inept SEC has not been able to take companies to task for stock market schemes (see Madoff...Stanford... Tyco... MCI... Enron... etc). This could well have been the real beginning of the meltdown. Without honesty and truth, credibility is lost. When panic strikes, it penetrates to the very core of reality. No artist and no paint brush can create a rosy picture if the very canvas of the art is flawed.

2. Credit: With injections of money from TARP... TALP... and whatever acronym that is currently being used, companies are destroying additoinal credit as soon as it is being created. Many big banks are still hedging on lending, because it has become more prudent to preserve capital. Other companies like AIG have become nothing more than a bottomless pit. The government could have easily purchased the company twice over as opposed to injecting additional funds into the company. Mark my words, AIG will be back for more... and maybe even more after that.

3. With accounting irregularities and credit issues at the heart of the matter. Confidence is the last, and maybe the most critical factor impacting Wall Street as well as the world economy. For instance, the Bank of England has for the first time in its 315 year history cut its rate to .5%. "The central bank is aiming to boost the money supply in hopes the moves will ease tight credit conditions and translate into increased spending, thereby preventing a sustained, widespread and potentially destructive fall in prices." (3) Unlike Iceland, and many of the eastern European nations, Great Britain in many ways effects the psyche of practically every country in the world. These is still time to short the Pound!!!

I do believe that many companies are on sale in today's stock market. I do however, believe that that the market in general, and stocks specifically offer considerable risk under the current economic conditions. A dear friend called her broker again to receive the latest casualty report of her investment portfolio. Now her portfolio is down 49.6%. Her broker's recommendation was to ride out the storm. While I am not a financial professional, I recommended that this individual take 25-50% of her funds out. Investments like mutual funds truly hold the biggest risk since they are so spread out. If this person's broker was honest, he would admit that he has a vested interested in keeping all of his clients in the market. That, he actually gets paid for the amount of money he manages. That, he will take a percentage of the profit from each person's portfolio when times are good, but not share in the loss when times are tough. A different approach would suggest that ANY companies worth a look would fit on a very short list of names. This broker has his needs placed before his clients. Just ask the guy who found out that his son's college money was halved, as he prepares to enter school in the fall.
Stock Moves
Added positions on MCRI 6/2.5s and BNI 7/30s.
I have bids on NOC, DE, and TM. MTM and PPD are on the board as well. With on-going analysis of several other lovelies.


Sources Cited
1. http://news.yahoo.com/s/ap/20090307/ap_on_re_us/janitor_applications
http://www.google.com/search?hl=en&q=Lessons+from+the+Great+Depression%3A++You+Just+Don%27t+Know!!!&btnG=Google+Search&aq=f&oq=
3. http://www.marketwatch.com/news/story/Bank-England-cuts-key-rate/story.aspx?guid={E1B35879-BDA9-4A0B-9299-7E5DB7669EE2}