In my previous post, I mentioned the need to allow the rich to naturally be punished for stupid mistakes and risks. You know? Reality has a way of correcting stupidity. The only role of government should be to hold thieves accountable. Especially powerful thieves in corporations. But taxing successful people heavily is stupid and a great demotivator.
Let’s crack down on white collar thieves. Like these people.
What Obama doesn’t realize is that human behavior is pretty simple. You need to reward good behaviors and punish bad behaviors. Punishing people who put resources to good use, make smart investments and think long term is counter productive to a strong economy.
But that’s a lesson that simply is going to have to be learned the hard way. There was an easier way to do this. A smarter way. Let rich people who make stupid decisions take the fall. And stop policies that punish poor people for making smart decisions.
There are some good points in this infographic, though I think the idea of “booting Bernake” is a little silly. The Fed is bigger than Bernake. He’s just a figurehead. What’s wrong with the Fed is systematic and fundamental.
As for going back to the gold standard, I’m not certain we could do it without massive pain.
Here at the Common Sense Investor, along with the odd post on complex adaptive systems or peer-to-peer lending or the SEC, we’ve also posted a few individual stock picks and some quick guides for choosing quality companies to invest in. But I don’t think we’ve ever actually explained what a ‘stock’ is.
A few years ago, we explained that the only way to achieve serious gains in your portfolio is to invest in small and ignored companies. We showed that nine out of ten of the top performing stocks from 1998 to 2007 were Micro Cap stocks (worth less than $250 million dollars) and essentially ignored by Wall Street. The first question on our Top 3 questions to ask about every stock is: Does this company have room to grow?
The fact is, if you’re looking to do really well in the stock market, you have to focus on small, ignored companies. If you just want to protect your wealth, invest in ETFs or put your money in gold. Bear in mind, however, that 95% of public-company bankruptcies were small and micro cap stocks as well. Just because a company is small doesn’t mean it’s going to get big, and it’s not an easy task to find the quality stocks among all those potential failures. You have to do your due diligence by looking into the economics of the company: does it have a low-debt, cash-rich balance sheet? Does it have a steady free cash flow and increasing profits every year? Does it pay dividends?
Also remember, on average, companies with high and increasing consumer satisfaction rates do better than the S&P 500. So once you’ve found a small company with good financials, and a product or service you understand, look into their customer satisfaction statistics. Are they high? Have they been increasing year over year? If yes, then move on to what I consider to be one of the most important and telling metrics about a company: Insider ownership.
Simple numbers like this always astound me. $29 billion in 2010. Greater than GDP of 28 poorest countries. Google is a powerful company. Not just because they make a lot of money. But because they control most of the world’s information. Google’s control of information is much like the nations that controlled the trade routes of the past… as long as they have that control, they will find ways to make huge money off of it.
Based on this infographic, if they want to grow profits, it would be in Google’s interest to 1) find a way to monetize their other products 2) reduce energy consumption or cost of energy consumption and 3) gain more cell phone market share.
Google has been notoriously bad about monetizing outside of advertising. However, with the market share that Android has gained in the cell phone industry, a simple $3 licensing fee per phone would get them over an extra billion in revenue (if my math is correct). And it is well past time that Google start making money off premium video products through their YouTube channel.
As for reducing energy consumption, I understand they are investing heavily in green energy, but how well that will pay off is to be determined.
Much has been made lately of a looming education bubble in the United States. It’s a case of degrees losing their value while the cost of education continues to go up. According to some, this is an especially acute issue in the world of law:
In other words, 1 in every 2 law student is graduating with big debt and no law job. And the ones who are getting jobs are often getting paid less than glamorous salaries while being saddled with back breaking debt.
Not necessarily for the better, mind you. But here’s a site called SuperScholar that has listed what it considers the 20 most influential economists alive today and we think they’ve done a good job with most of their choices. Not sure that Paul Krugman would agree though:-)
And despite the current economic malaise, not all of the economists listed are bad guys.
Every Wednesday at 8:00pm Eastern (5:00pm Pacific), Peter Schiff broadcasts Wall Street Unspun, which is his mid-week run-down on the market dealing with any issues making the headlines at the time. This week’s episode is one of the best I’ve heard yet, in fact, I think this episode may actually be one of the best talks on the current economic crisis that I’ve ever heard, period. Highly, highly recommended.
Initially, Peter Schiff talks about Barack Obama’s newly unveiled stimulus package. He highlights some obvious holes in that package and uses that as his launching off point. He compares the stimulus package to an individual home owner: Say you’re deep in debt, you’ve lost your job, and you’re generally in the midst of a severe financial crisis, would the solution be to remodel your house? Of course not. Obviously it would be nice to have an updated infrastructure with new roads and bridges, but this is the worst possible time to undertake that kind of activity, since we don’t have the money to do it. Read on for the rest of the episode split into 6 parts: Read the rest of this entry »