The ongoing financial turmoil and financial discussion thread

[Phanuthier]

Originally Posted by fotze

I refuse to look at my stock price today, but some jerk poster here keeps emailing me the horror.

Unless you have CNRL, its looking pretty green right now.

(And a few others, I bought Fairchild Semicondutor earlier this week, guess I could have waited. Ah well.)

[Phanuthier]

Originally Posted by jonesy

Yes I agree, it can't be random in what you buy. For example it might make sense to buy a cash strapped company in your industry that had a good product/service/technology but had very slow sales or a debt, then you would control the assests when times got better, but you bought it at a fraction of its potential value.

So should Toyota buy GM as an example Only if they think that in the future the products/technology will be good enough to make a large return in the long haul. Guess you have to look at the potential bagged of said company as well. Don't want that to drag you down to your own death.

Yup, AMD learned that lesson pretty good.

[MoneyGuy]

Originally Posted by Slava

I don't recall saying that it was all up from here...but nonetheless if I'm wrong the anonymity of the internet will protect me!

Pfft, I know who you are and where your office is. For $131.25 I'll tell all.

[Phanuthier]

Looks like the Big Fat 3 are getting their bailout:

http://www.bloomberg.com/apps/news?p...wwE&refer=home

While I don't want to see families left out in the dark with job losses and I can see a second huge wave crash the markets, I just don't support this. Even if Detriot ventures into smaller, fuel efficient cars, they're entering territory they're unfamiliar with, and I would never gamble on success for a company who long has maintained status quo to try stepping out of the dark and venturing into new territory; especially one that other competitors (i.e. Toyota) hold a comfortable grasp. My annoyance with this bailout is that its taxpayer money being invested into a business with poor profitability margins (i.e. negative) and proven poor management; and with poor management, they're going to go from something they're comfortable and know what to do (poorly) and try doing something foreign to them.

Here is a post I did earlier, just looking at the income statements of these companies, for those that didn't catch it:

At a glance (quarterly, annual 2007, annual TTM; negative numbers in red, positive numbers in green)::

Ford: -0.96%, -3.07%, -8.75%
GM: -2.33%, -2.42%, -10.21%
Chrysler: N/A

vs

Toyota: 2.84%, 8.64%, 6.21%
Honda: 5.27%, 7.94%, 6.91%
Mazda: 3.96%, 4.60%, -
Nissan: 3.3%, 6.56%, -
Volkswagon: 5.13%, 5.65%, 5.99%

And a more in depth look,

Ford:
Profitability Ratios:
Operating Margin TTIM: -8.75%
5 year Operating Margin: -2.48%
Net Profit Margin TTM: -6.92%
5 year Net Profit Margin: -1.01%

Management Effectiveness:
Return on Assets TTM: -4.3%
5 year Return on Assets: -0.59%
Return on Investment TTM: -6.47%
5 year Return on Investment: -0.83%

GM:
Operating Margin TTM: -10.21%
5 year Operating Margin: -2.48%
Net Profit Margin TTM: -14.01%
5 year Net Profit Margin: -5.51%
Return on Assets TTM: -17.85%
5 year Return on Assets: -2.86%
Return on Investment TTM: -39.35%

Industry sector average:
OM TTM: 2.91%
5Y OM: 8.07%
NPM TTM: 1.59%
5Y NPM: 5.11%

RoA TTM: 2.17%
5Y RoA: 4.51%
ROI TTM: 3.47%
5Y ROI: 6.78%

(And I'm ignoring the reliability issue since that stuff is public knowledge and its hard to give a fair estimate on a few cases here and there)

[Bagor]

I honestly don't understand why people just don't buy land.

Seriously

[Claeren]

Originally Posted by Phanuthier

Looks like the Big Fat 3 are getting their bailout:

http://www.bloomberg.com/apps/news?p...wwE&refer=home

While I don't want to see families left out in the dark with job losses and I can see a second huge wave crash the markets, I just don't support this. Even if Detriot ventures into smaller, fuel efficient cars, they're entering territory they're unfamiliar with, and I would never gamble on success for a company who long has maintained status quo to try stepping out of the dark and venturing into new territory; especially one that other competitors (i.e. Toyota) hold a comfortable grasp. My annoyance with this bailout is that its taxpayer money being invested into a business with poor profitability margins (i.e. negative) and proven poor management; and with poor management, they're going to go from something they're comfortable and know what to do (poorly) and try doing something foreign to them.

Here is a post I did earlier, just looking at the income statements of these companies, for those that didn't catch it:

At a glance (quarterly, annual 2007, annual TTM; negative numbers in red, positive numbers in green)::

Ford: -0.96%, -3.07%, -8.75%
GM: -2.33%, -2.42%, -10.21%
Chrysler: N/A

vs

Toyota: 2.84%, 8.64%, 6.21%
Honda: 5.27%, 7.94%, 6.91%
Mazda: 3.96%, 4.60%, -
Nissan: 3.3%, 6.56%, -
Volkswagon: 5.13%, 5.65%, 5.99%

And a more in depth look,

Ford:
Profitability Ratios:
Operating Margin TTIM: -8.75%
5 year Operating Margin: -2.48%
Net Profit Margin TTM: -6.92%
5 year Net Profit Margin: -1.01%

Management Effectiveness:
Return on Assets TTM: -4.3%
5 year Return on Assets: -0.59%
Return on Investment TTM: -6.47%
5 year Return on Investment: -0.83%

GM:
Operating Margin TTM: -10.21%
5 year Operating Margin: -2.48%
Net Profit Margin TTM: -14.01%
5 year Net Profit Margin: -5.51%
Return on Assets TTM: -17.85%
5 year Return on Assets: -2.86%
Return on Investment TTM: -39.35%

Industry sector average:
OM TTM: 2.91%
5Y OM: 8.07%
NPM TTM: 1.59%
5Y NPM: 5.11%

RoA TTM: 2.17%
5Y RoA: 4.51%
ROI TTM: 3.47%
5Y ROI: 6.78%

(And I'm ignoring the reliability issue since that stuff is public knowledge and its hard to give a fair estimate on a few cases here and there)

I agree 100%.


You can pay the price now or pay it later.


I would not at all be surprised to see a false calm hit the markets after a bailout, only to have a second wave of crisis months/years later when we are back to this point again.


You cannot buy your way out of this mess (which is surprising given the amount of effort in this direction by what are supposed to be the greatest financial minds in the world).


I guess the hope is that the markets/country will be better prepared to handle the final death throws of its manufacturing base in a year or two than it is now?



Claeren.

[Jason14h]

I honestly don't understand why people just don't buy land.

Seriously

Yeah real estate would have been a great investment recently in the United States

[macker]

Originally Posted by Bagor

I honestly don't understand why people just don't buy land.

Seriously

Got MLS?

[Slava]

Originally Posted by Bagor

I honestly don't understand why people just don't buy land.

Seriously

Because in Canada the long term average is a little over 4% per year. That is enough to beat inflation and not a lot more! Also its not very liquid, so it makes it nearly impossible to generate a steady income from it.

Lastly, while there are ways around this there are a huge amount of investment strategies that simply make no sense with land. Because raw land will not be capable of producing an income and zero probability of doing so, you can't write off interest on monies borrowed to buy this. (Before someone dives all over me here, yes there are ways to circumvent this, but it involves using other investments in the process).

[MoneyGuy]

Originally Posted by Bagor

I honestly don't understand why people just don't buy land.

Seriously

You have two investment choices:

A. Has returned about 4-4.5% long term and has outperformed its average lately, which would suggest it's overpriced. (This would be real estate.)
B. Has returned about double that long term, and prices are almost cut in half right now, therefore underpriced. (This would be stocks.)

I'm choosing B.

Seriously.

[Phanuthier]

While we're on this topic, Obama talks about his possible economic stimulous package.

http://www.nytimes.com/2008/12/08/us...s/08obama.html

Saying that the United States economy was likely to worsen before it improves, President-elect Barack Obama on Sunday pledged to pursue a recovery plan “equal to the task ahead,” including the creation of a vast public works program built just not around bridge and highway projects, but on creating “green jobs” and disseminating new technologies.

I wonder who is going to win these contracts? There could be some real winners if you already own a stock of one of these companies. (i.e. IBM?)

[Phanuthier]

http://www.nytimes.com/2008/12/08/bu..._r=1&ref=media

The Tribute (i.e. LA Times, Chicago Tribune) are fighting off bankrupcy and trying to negotiate with their creditors to stay alive.

Also there,

The companies that own The Inquirer and The Daily News in Philadelphia and The Star Tribune in Minneapolis recently suspended debt payments but have not filed for bankruptcy.

[Claeren]

hahaha, I love it!

Markets are expected to surge today on hopes that Obama's stimulus package will be enough to turn around such a huge crisis in the markets! I LOVE the logic though, anytime borrowing/printing ANOTHER Trillion (or so) dollars to continue socializing the entire American economy is considered market stimulus I can't help but laugh!


In other news:
http://news.yahoo.com/s/ap/20081208/...mical_job_cuts

Dow Chemical Co. said Monday it will slash 5,000 full-time jobs — about 11 percent of its total work force — close 20 plants and sell several businesses to reign in costs amid the economic recession.

The company, one of the largest chemical makers in the world, expects the moves to save about $700 million per year by 2010. Dow also will temporarily idle 180 plants and prune 6,000 contractors from its payroll.

So the market is expected to go up because while real companies who sell real products to real customers are laying of tens of thousands and are in varying degrees of crisis the already bankrupt government will be hiring a bunch of road crews with yet more borrow/printed money?? lol




Claeren.

[SeeGeeWhy]

In my mind, land is a great way to retain personal wealth, not generate it.

You need a lot of money to make money on land... that usually means starting up a business and using borrowed cash or OPM (selling bonds and the like to raise funds - look at concrete equities, walton international, etc). If you're doing that, the risk is very big and all of a sudden you're looking at shorter timeframes to generate your return, which is never a good thing with land.

[SeeGeeWhy]

Lots of firms are cutting jobs. AT&T announced a bunch of layoffs last week, too.

Is there any good source available that tracks job creation, and the firms that are hiring en mass?

[LChoy]

Echoing the sentiments of an earlier poster, if things get bad, the best places to ride out a recession is:

- Government - they may shrink, but there is a chance some ministries like Employment and Health grow
- University/school - Get yourself another designation while times are bad and hopefully have access to a bunch of new job options when you are done
- Military - The Canadian forces are always hiring

[Flames in 07]

So for the economists in the crowd:

http://ca.news.finance.yahoo.com/s/0...-economic.html

where it says this:

Former IMF chief economist Kenneth Rogoff wrote recently that a two-year run of moderate inflation in the six-per-cent annual range - three times the Bank of Canada's sacrosanct target - might be good for the world because it would allow the mountains of debt that has piled up over the last decade or so to be paid off in debased currency.

Grauman said central bankers - especially those that have exhausted monetary policy because they have chopped their rates effectively to zero - can try and reduce longer-term interest rates and ignite inflation by printing money to buy up government bonds.

There is a risk that once the genie is out of the bottle, inflation will get out of control.



My questions are:

First of all, what is 'debased currency'?

Second of all, how does reducing long term interest rates increase inflation. Aren't they opposite things? ie wouldn't interest rates and inflation hold hands together?

[jammies]

Originally Posted by Flames in 07

My questions are:

First of all, what is 'debased currency'?

Second of all, how does reducing long term interest rates increase inflation. Aren't they opposite things? ie wouldn't interest rates and inflation hold hands together?

Debased currency simply means it has lost value against a "base" value, usually defined as a currency measured at a specific time (eg: the dollar in 1970). Inflation debases a currency as it is worth less per unit than it used to be worth; a dollar today doesn't buy as much as a dollar did in 1970.

Low interest rates encourage an increase in the money supply (as it is cheap to borrow and invest, and therefore more money is circulated and created), while high interest rates dampen investment, borrowing, and consumer spending, thereby slowing down inflation. The big economic "miracle" of the last decade and a half has been to have low interest rates AND low inflation, which historically been very difficult to achieve.

[Nancy]

Originally Posted by Flames in 07

So for the economists in the crowd:

http://ca.news.finance.yahoo.com/s/0...-economic.html

where it says this:

Former IMF chief economist Kenneth Rogoff wrote recently that a two-year run of moderate inflation in the six-per-cent annual range - three times the Bank of Canada's sacrosanct target - might be good for the world because it would allow the mountains of debt that has piled up over the last decade or so to be paid off in debased currency.

Grauman said central bankers - especially those that have exhausted monetary policy because they have chopped their rates effectively to zero - can try and reduce longer-term interest rates and ignite inflation by printing money to buy up government bonds.

There is a risk that once the genie is out of the bottle, inflation will get out of control.



My questions are:

First of all, what is 'debased currency'?

Second of all, how does reducing long term interest rates increase inflation. Aren't they opposite things? ie wouldn't interest rates and inflation hold hands together?

That's when you fold up the back of the bill to make the Queen's head look like a va... umm... regina.

[Flames in 07]

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