Financial Methods

Take Advantage of Low Price Guarantees

Many major retailers reduce the risk involved in making a major purchase by guaranteeing that their price is the lowest, typically for about 30 days after you make your purchase. 

If you spot a lower price, your retailer may match the lower price. 

The problem is, after making the purchase, it's very easy to stop price-watching.  After all, the shopping is done and we're busy enjoying our new purchase.

Enter http://www.priceprotectr.com/. 

Go to Priceprotectr, enter your email address and the URL of the item you purchased and they will notify you if they find a lower price during the guarantee period. 

What a great idea.

Hat tip: The Consumerist

© 2007 Michael Cale

The Slowdown Continues

Many transportation companies continue to confirm the softening of the economy. 

One of the larger trucking companies, Swift (SWFT), posted a 5% decline in revenue. Swift CEO Robert Cunningham noted (emphasis mine):

The quarter reflects one of the most challenging freight environments in recent memory, and the normal holiday surge did not materialize for a variety of reasons. We were also impacted by the downturn in the housing and automotive markets, and the increase in Class 8 truck builds prior to the new 2007 EPA requirements, both of which added capacity to the market. ¹

The CEO of USA Truck (USAK) echoes this sentiment -

We experienced declining demand for truckload freight services throughout the quarter consistent with the declining truck tonnage reported by the American Trucking Associations. This was the most difficult operating environment that we have seen in several years due to the deteriorating demand and the absence of the normal peak shipping season.²

One exception has been the railroads, as shippers seek out lower costs (but longer transit times). Stronger demand allowed the Union Pacific (UNP) to post record profits. Volume was up, but at a modest pace.

Business volumes, as measured by total carloads, increased three percent to a record level of 9.9 million.³

The cratering of the housing market is cascading into other areas of the economy. 

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Source:

1. Swift Transportation. Swift Transportation Reports Earnings for the Fourth Quarter and Year Ended 2006.
Press Release. January 24, 2007.
http://phx.corporate-ir.net/phoenix.zhtml?c=67346&p=irol-newsArticle&t=Regular&id=953998&

2. USA Truck. Press Release.
January 25, 2007.
http://www.usa-truck.com/investor_relations/Press%20Releases/4th%20Quarter%202006%20Earnings%20Release.pdf

3. Union Pacific. Union Pacific Reports Record Fourth Quarter and Full Year Earnings.
Press Release. January 25, 2007.
http://www.up.com/investors/attachments/earnings/2006/4q2006pressrelease.pdf

© 2007 Michael Cale

At the time of publication, Mr. Cale held a long position in JBHT.

TV Executives See The Light

Back in the dark ages, convenience store owners resisted adopting point-of-sale (pay-at-the-pump) gasoline pumps.  They feared that they would sell fewer overpriced in-store merchandise. 

What they found, was that the new gas pumps acted as another cash register.  Customers spent less time waiting at the pump, so turnover increased, especially when demand was highest. 

TV executives are learning a similar lesson.  More distribution channels equals more customers, or in their case, viewers.   

Television networks have discovered that when they distribute their shows over the internet, they reach a new audience. Also, a study suggests that this tech-savy audience is also younger and wealthier than the standard TV audience. ¹

Larry Gerbrandt, of Nielsen Analytics, added:

If you're an advertiser, this is who you want to reach.¹

Also, internet ads cannot be skipped via DVR (Digital Video Recorder).

Now if only the music industry will reach the realization that more channels of distribution means more customers. 

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Source:

1. Reuters. TV shows find young, affluent viewers on 'net: study.
January 24, 2006
http://news.yahoo.com/s/nm/20070124/wr_nm/nielsen_study_dc_1

© 2007 Michael Cale

Every ad in Times Square

Ironic Sans has posted Every ad in Times Square.

It's worth the visit.

Transportation Focus - YRC Worldwide

Barron's  features a story this week about the company formerly known as Yellow Roadway, now YRC Worldwide (YRCW).

Last month, the company significantly reduced its earnings estimate for the fourth quarter and the year, citing a slowing economy.

As a result, the company CFO and John Neff (former portfolio manager at Vanguard) both like the stock. 

Given "how dismal the industry is," YRC's announcement last month "doesn't sound that bad"¹

Truck freight volume has experienced the largest decline since 2001.²  The economy is slowing and railroads have been gaining freight at the expense of truckers.

The transportation sector is often a good choice during slowdowns since they often lead the recovery.    However, I think the timing may be too early.

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Source:

1. Tom Sullivan. A Green Light for Yellow
Barron's. January 15, 2007.
http://online.barrons.com/article/SB116865962543876042.html (subscription)

2.  James Amend.  Truckers Feel Pinch of No Peak Season.
Associated Press.  December 26, 2006.
http://biz.yahoo.com/ap/061226/trucking_year_ender.html?.v=1

At the time of publication, Mr. Cale held a long position in J.B. Hunt Transport (JBHT).

© 2007 Michael Cale

2007 Outlook

Most professional financial pontificators offer their opinion on what the market will do in the year ahead.  There has been some academic research that suggests that market returns are predictable over some time periods, but one year is much too short.

These widely-publicized predictions can be useful as a measure of investor consensus.  The consensus is often incorrect.

       Data courtesy of Business Week

Last year,  A Contrarian Look at 2006, there were a few pundits that were very close, but the market missed the 'mountain peak' of investor expectation. 

The chart for 2007 has shifted to the left from last year.  Last year's 'mountain' didn't taper off until 20%, with a singular high reading of over 30% .  This year, it drops off at 12% with a high reading of almost 16%.

If we rule out the 4% to 12% range as consensus, and therefore improbable in a contrarian view, that leaves us with the possibilities of a very good year or a year that is flat (or worse).

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2007 S&P 500 Outlook

Elaine Garzarelli	Garzarelli Capital	15.6%
Ed Yardeni	Oak Associates	14.2%
John Regan	Americal Investment Strategies	14.2%
Charlie Crane	Scotsman Capital Management	13.9%
Keith Wirtz	Fifth Third Asset Management	12.9%
Charles Reinhard	Lehman Brothers Asset Management	12.8%
Robert Froehlich	DWS Scudder	12.8%
Warren Bagatelle	Loeb Partners	12.8%
Lincoln Anderson	LPL Financial Services	12.1%
Bernie Schaeffer	Schaeffer's Investment Research	11.4%
Marc Zabicki	H&R Block Financial Advisors	10.7%
Linda Duessel	Federated Investors	10.7%
Brian Stine	Allegiant Asset Management	10.0%
David Katz	Matrix Asset Advisors	9.8%
Ralph Acampora	Knight Equity Markets	9.3%
Chris Conkey	Evergreen Investments	9.3%
Asher Plaut	Brill Securities	9.3%
John Kattar	Eastern Investment Advisors	9.3%
Price Headley	BigTrends.com	9.3%
Clare Zempel	Zempel Strategic	9.3%
Tobin Smith	ChangeWave Research	9.3%
David Goerz	HighMark Capital Management	9.3%
Larry Smith	Third Wave Global Investors	9.3%
Jim Cramer	CNBC/TheStreet.com	9.3%
George Jacobsen	Trevor Stewart Burton & Jacobsen	9.3%
Robert Morris	Lord Abbett	9.3%
Stuart Freeman	A.G. Edwards & Sons	9.3%
James Wong	Payden & Rygel	8.6%
John Clarke	H.C. Wainwright	8.2%
Arthur Hogan	Jefferies	8.1%
Jason Trennert	Strategas Research Partners	7.9%
Rod Smyth	Wachovia Securities	7.9%
Mark Jordahl	FAF Advisors	7.9%
Jeffrey Kleintop	PNC Wealth Management	7.5%
Tim Swanson	National City Private Client Group	7.5%
Robert Baur	Principal Global Investors	7.5%
William Greiner	UMB Asset Management	7.5%
Joseph Liro	Stone & McCarthy Research Associates	7.2%
Harvey Hirschhorn	Bank of America	7.2%
James McGlynn	Summit Investment Partners	7.2%
Chris Sheldon	Mellon Private Wealth Management	7.2%
Jack Ablin	Harris Private Bank	6.8%
Robert Stovall	Wood Asset Management	6.7%
Jeffrey Knight	Putnam Investments	6.5%
Gary Tapp	SunTrust Robinson Humphrey	6.5%
Roger Ibbotson	Yale School of Management/Morningstar	5.9%
Mike Ryan	UBS	5.8%
Benjamin Pace	Deutsche Bank Private Wealth Management	5.8%
Sam Stovall	Standard & Poor's	5.8%
Hugh Johnson	Johnson Illington Advisors	5.8%
John Roberts	Hilliard Lyons	5.8%
Leo Grohowski	U.S. Trust	5.8%
Vincent Gallagher	Needham Funds	5.8%
Charles Mayer	Pioneer Investments	5.1%
Mark Elenowitz	TriPoint Capital Advisors	5.1%
Richard Bernstein	Merrill Lynch	4.9%
Ivan Gefen	vFinance Investments	4.8%
Barry Ritholtz	Ritholtz Research & Analytics	4.0%
Barry Hyman	EKN Financial Services	4.0%
Doug Bermingham	Jesup & Lamont	4.0%
Joseph Battipaglia	Ryan Beck	3.6%
Tom McManus	Banc of America Securities	3.3%
Allan Roness	ASR Corporate Consultants	3.3%
Richard Sichel	The Philadelphia Trust Co.	3.2%
Daniel Dektar	Smith Breeden Associates	2.9%
Bruce Bittles	Robert W. Baird	2.9%
Roger Debard	iGlobal Capital	2.6%
Peter Trapp	Bifrost Partners	2.2%
Abhijit Chakrabortti	JPMorgan	1.5%
Dorsey Farr	French Wolf & Farr	1.5%
Wendell Perkins	Johnson Asset Management	1.5%
Tobias Levkovich	Citigroup	-1.3%
Jeff Tyler	American Century Investments	-1.3%
Lawrence McMillan	McMillan Analysis	-4.1%
David Yoy	RiverSource Investments	-4.8%
C. Kim Goodwin	Credit Suisse	-5.2%
Richard Driehaus	Driehaus Capital Management	-6.2%
Subodh Kumar	Subodh Kumar & Associates	-10.1%
Vinny Catalano	Blue Marble Research	-11.2%
Michael Painchaud	Market Profile Theorems	-22.9%
Data courtesy of Business Week

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Source:

Sonal Rupani, Anne Tergesen, and Bremen Leak. Fearless Forecasts From The Pros.
Business Week. December 27, 2006.
http://bwnt.businessweek.com/fearless_forecasters/2006/index.asp?sortCol=dow_jones_mid_year&sortOrder=ASC&pageNum=1&resultNum=81

© 2007 Michael Cale

Million Dollar Sculpture of 'fragile Earth' Collapses

A 175-ton sculpture at Kennesaw State University collapsed three months after being unveiled. The sculpture was titled 'Spaceship Earth' and was built to remind future generations of Earth's fragility.¹

The Finnish-born sculptor Eino, asked:

"How can stone collapse by itself?"

Gravity.

---

Source:

1. Associated Press. $1 million sculpture of 'fragile Earth' collapses.
Houston Chronicle. January 4, 2007.
http://www.chron.com/disp/story.mpl/bizarre/4444070.html

© 2007 Michael Cale

Government Against Democracy

In Massachusetts, democratically-elected officials vow to prevent a public vote on the gay marriage issue. 

The founding fathers occasionally mentioned the 'tyranny of the majority' as a weakness of a pure democracy.  What is shaping up in Massachusetts is the tyranny of special interest.

Special interest groups, many legislators, and Governor-elect Deval Patrick are determined to not allow a public vote on the issue.¹

---

Source:

1. Steve LeBlanc. Patrick concedes being surprised by gay marriage outcome.
Boston Globe. January 3, 2007.
http://www.boston.com/news/local/massachusetts/articles/2007/01/03/patrick_concedes_being_surprised_by_gay_marriage_outcome/

© 2007 Michael Cale

Investing Tips for 2007

Get the financial new year off to a good start.

1. Pay off your credit cards.
2. Save a bit more.
3. Spend a bit less.

An easy way to spend less is to review your investments.  You are probably paying too much in mutual fund fees.

Henry Blodget, yes that Henry Blodget, has some good tips for the new year.

How To Get Rich: Invest $100,000 in a low-cost equity index fund for 50 years. This should make you about $11 million...You must reinvest all dividends. You must make the investment in a tax-free account. Inflation will maul you. But no investment strategy is more likely to make you rich than this combination of low costs, equity returns, and time.

How To Get Taken to the Cleaners: Invest $100,000 in an average-cost equity mutual fund for 50 years. This should make you about $6 million … and cost you about $5 million.¹

The remainder of the article in Slate has more detail on the numbers and some good advice, like trade less.

That's easy enough to do for yourself, but you can't control what your mutual fund manager does.  If you must invest in mutual funds, find a fund with low expenses and and manager who trades infrequently.

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Source:

1. Henry Blodget. The Wall Street Self Defense Manual.
Slate. January 1, 2007.
http://www.slate.com/id/2155871/entry/0/

© 2007 Michael Cale