2 Strategies for Maximizing Social Security

See the video below courtesy of Morningstarfor a few strategies to maximize social security benefits for married couples.

Just a note if you are under age 60 you no longer receive an annual social security statement in the mail.  You will need to create an account at the Social Security site.

A Written Plan Can Help Your Portfolio

It's been said and likely proven out somewhere that if you write your goals down on paper you stand a much greater chance of achieving those goals.  One of the first items we address with people at DWCM are what our your investment and lifestyle goals?  Often people have a very hard time defining those goals let along trying to quantify them.

At DWCM we move and encourage people to create SMART goals; think in terms of Specific, Measurable, Achievable, Realistic, and Time Based.  A person can have a goal of retirement.  However a SMART goal is retiring at age 60 with $1M in investable assets with a monthly income stream of $5K per month.

Like Goals an Investment Policy Statement is a key driver in the increased success rate of achieving your goals.  An IPS is a guide post to be used in good times and bad.  More importantly having this road map with how to reach your goals helps you whether the most turbulent times in the markets.

This WSJ article here lays out the basic principles behind an IPS.

• Professionals who advise pension plans, foundations and other institutional accounts are generally required by law to write up investment-policy statements with their clients. These documents describe how the money is to be managed, and detail things like asset allocation, time horizon, and any restrictions on holdings, based on moral or ideological convictions.
• Writing an investment-policy statement lets the adviser explain right away that if lower volatility is a must, the client may have to agree to accept lower returns than if he or she invested in equities. "The client signs off on it, and you review it together once a year at least," 

• When markets get choppy, reviewing the policy statement can remind investors that trying to time markets is a sucker's game, and that over time—periodic rebalancing aside—investors are better off leaving their portfolios alone. In the 20 years through 2011, the Standard & Poor's 500-stock index returned a yearly average of 7.8%, but the average investor gleaned a yearly average of just 3.5%, according to Boston-based investment-research firm Dalbar Inc. Bond investors did even worse against the Barclays Capital Aggregate Bond Index, Dalbar says.
• "An investment-policy statement forces the client to lay out a game plan, maybe for a comfortable retirement," says Mr. Lyons. "In reviewing it, you're asking if it's worth putting that plan in danger because of what's in the headlines."
• Morningstar Inc. MORN -1.76% has a two-page template for an investment-policy statement on its website, including questions on investment objectives and philosophy, investment selection criteria and monitoring procedures. On Morningstar.com, search for an article titled "Making Your Investment Policy Statement," which has a link to the template and offers guidance on completing it.

As always we are here at DWCM to assist you in any way.

Reid Hoffman And Peter Thiel Share The Secrets Of Breaking Into Tech's Most Exclusive Network

Two tech heavyweights Peter Theil co-founder of Pay-Pal and Reid Hoffman co-founder of LinkedIn share their insights into the Silicon Valley network of technology.

Full interview with Forbes here

Peter Thiel and Reid Hoffman at Stanford University where they first met more than 25 years ago. (Brian Valdizno/Forbes)

Rory Sutherland: Perspective is everything

Rory Sutherland is an "advertising man" think AMC TV show Mad Men.  What I tend to find about these individuals is that they see things in a different light.  Think about it advertising is all about changing your perspective in order to get you to buy something.

The takeaway here is that investing shares at least one similar trait in that you have to have perspective on your specific investments.  What is your trading strategy, what is your edge or angle, how likely are you to change your perspective?

I've always said that you need to know what you own and why.  Having that perspective will help benefit you in being a successful investor.

Why Every Day is Memorial Day

Words cannot express how thankful we are that people continue to serve in our military.  The sacrifices made by those men and women and their families who served yesterday, today, and in the future we should be proud of.  Although there is much to debate about foreign policies and practices there is no debate as to why people continue to serve in our armed forces.  People serve out of a deep obligation for their country, for there brothers and sisters in arms, and more importantly for all of US!

For some families such as the Manions, Rozanskis, Snyders, Douvilles, Looneys, Memorial Day is every day.  As we learn in this WSJ piece by 30 year veteran Tom Manion, they have seen and experienced the ultimate sacrifice, the loss of a son, daughter, husband, or wife.

From the voice of Tom Manion


I served in the military for 30 years. But it was impossible to fully understand the sacrifices of our troops and their families until April 29, 2007, the day my son, First Lt. Travis Manion, was killed in Iraq.

Travis was just 26 years old when an enemy sniper's bullet pierced his heart after he had just helped save two wounded comrades. Even though our family knew the risks of Travis fighting on the violent streets of Fallujah, being notified of his death on a warm Sunday afternoon in Doylestown, Pa., was the worst moment of our lives.

While my son's life was relatively short, I spend every day marveling at his courage and wisdom. Before his second and final combat deployment, Travis said he wanted to go back to Iraq in order to spare a less-experienced Marine from going in his place. His words—"If not me, then who . . . "—continue to inspire me.

My son is one of thousands to die in combat since the terrorist attacks of September 11, 2001. Because of their sacrifices, as well as the heroism of previous generations, Memorial Day 2012 should have tremendous importance to our entire nation, with an impact stretching far beyond one day on the calendar.

In Afghanistan, tens of thousands of American troops continue to sweat, fight and bleed. In April alone, 35 U.S. troops were killed there, including Army Capt. Nick Rozanski, 36, who made the difficult decision to leave his wife and children to serve our country overseas.

"My brother didn't necessarily have to go to Afghanistan," Spc. Alex Rozanski, Nick's younger brother and fellow Ohio National Guard soldier, said. "He chose to because he felt an obligation."

Sgt. Devin Snyder "loved being a girly-girl, wearing her heels and carrying her purses," according to her mother, Dineen Snyder. But Sgt. Snyder, 20, also took it upon herself to put on an Army uniform and serve in the mountains of northeastern Afghanistan as a military police officer. She was killed by an enemy roadside bomb, alongside three fellow soldiers and a civilian contractor, on June 4, 2011.

Air Force Tech. Sgt. Daniel Douville was an explosive ordnance disposal technician, doing an incredibly dangerous job depicted in "The Hurt Locker." He was a loving husband and father of three children. "He was my best friend," his wife, LaShana Douville, said. "He was a good person."



Douville, 33, was killed in a June 26, 2011, explosion in Afghanistan's Helmand province, where some of the fiercest fighting of the decade-long conflict continues to this day.

When my son died in Iraq, his U.S. Naval Academy roommate, Brendan Looney, was in the middle of BUD/S (basic underwater demolition) training to become a Navy SEAL. Devastated by his good friend's death, Brendan called us in anguish, telling my wife and me that losing Travis was too much for him to handle during the grueling training regimen.

Lt. Brendan Looney overcame his grief to become "Honor Man" of his SEAL class, and he served in Iraq before later deploying to Afghanistan. On Sept. 21, 2010, after completing 58 combat missions, Brendan died with eight fellow warriors when their helicopter crashed in Zabul province. He was 29. Brendan and Travis now rest side-by-side in Section 60 of Arlington National Cemetery.

"The friendship between First Lt. Travis Manion and Lt. Brendan Looney reflects the meaning of Memorial Day: brotherhood, sacrifice, love of country," President Obama said at Arlington on Memorial Day 2011. "And it is my fervent prayer that we may honor the memory of the fallen by living out those ideals every day of our lives, in the military and beyond."

But the essence of our country, which makes me even prouder than the president's speech, is the way our nation's military families continue to serve. Even after more than a decade of war, these remarkable men and women are still stepping forward.

As the father of a fallen Marine, I hope Americans will treat this Memorial Day as more than a time for pools to open, for barbecues or for a holiday from work. It should be a solemn day to remember heroes who made the ultimate sacrifice, and also a stark reminder that our country is still at war.

For the Rozanskis, Snyders, Douvilles, Looneys and thousands more like us, every day is Memorial Day. If the rest of the nation joins us to renew the spirit of patriotism, service and sacrifice, perhaps America can reunite, on this day of reverence, around the men and women who risk their lives to defend it.

Col. Manion, USMCR (Ret.), is on the board of the Travis Manion Foundation, which assists veterans and the families of the fallen.

Week 21 Performance....The Oversold Bounce Back

Even though it was a bounce back type of week for the equity markets the gains were not easily made.  Facebook and Europe (specifically Greece) were the headline grabbing stories all week which seem to dictate market direction.

As noted in previous weekly performance posts it feels as though we are back to all or nothing trading days.  Meaning we are all up or all down.  Bespoke had some supporting detail to back this theory up here.

Chart courtesy of Bespoke

What needs to be pointed out regarding the chart above is that this type of market action is nothing new.  We have seen a dominance of this all of nothing mentality since the early 2000's.

This makes stock picking that much more challenging as companies do not move on their own fundamentals rather they move with a herd mentality on macro news such as the European debt crisis.  One day everything looks bleak while the next day the sun is shining bright.

Trying to time the markets in these types of situations tends to lead to more losses than gains.  At DWCM we are dealing with the current markets in the following ways:

1. Staying with our long-term thesis holding agriculture names, solid companies with great fundamentals and a dividend yield, and selected technology which we believe will be growth leaders in the coming years
2. Scaling into positions and using options as a way to protect capital
3. Maintaining a relatively high cash position both as a defensive measure and as an opportunity to pick of positions at discounted prices.

This week in the DWCM Fund we took advantage of the market bounce by selling a few of our winning trades and scaling back a few of our larger positions in order to build back our cash reserve.  The whole situation with Europe and Greece has reached unsettling proportions with me so I want to try to protect our capital as much as possible.  Our cash position now stands at 45.5% up from 36% the week prior.

Although the recently added technology positions have not yet paid off, we are going to patiently wait them out over the summer and may add to some positions on further weakness.  I believe that we own the right companies that will lead to further growth down the road.

The agriculture names although up this week are still in the red in our Fund.  Again these are positions that I believe over the long-term will be the bedrock of our Fund.  I will be steadily adding to these positions on any continued weakness.

One group of stock that have held up rather well in the spring swoon has been the dividend paying stock such as AT&T, Eli Lilly, and to a certain degree BMW.  We especially like this group of stocks with solid fundamentals and a good dividend yield that helps whether the storm.

The Week Ahead

Even though this will be a short week with the Memorial Day holiday in the US, it will pack quite the punch being a jobs report week.  Typically this week has historically been quite volatile as well going both ways up and down.  Put it this way we are glad that we had the opportunity to increase our cash position last week because we're not sure if the opportunity would present itself this week.

• Mon - US Memorial Day
• Tue -  S&P Case-Shiller HPI,  Consumer Confidence,  State Street Investor Confidence Index
• Wed -  MBA Purchase Applications,  Challenger Job-Cut Report,  Pending Home Sales Index
• Thu -  ADP Employment Report,  GDP,  Jobless Claims,  Chicago PMI
• Fri -  Motor Vehicle Sales,  Employment Situation,  Personal Income and Outlays,  ISM Mfg Index,  Construction Spending
• Sat - CFA Level II Exam

As you can see there is much more this week than simply waiting for the jobs report at the end of the week. We can still foresee Europe and Greece dictating allot of the market action this week up until Friday when the jobs report will get all of the attention.

On a personal note you can see above this Saturday is the annual CFA exam day.  You may have noticed that the posts had been hit or miss the past few days and this is why.  I am currently dedicating more hours last week and this week in order to finish prepping for the Level II exam.  Writing may be my only break this week so please bear with me.

I hope that everyone in the US has a great Memorial Day holiday.  Make the opportunity to thank a veteran  and their family for their service because without them we would not be able to do what we do.

Thank You Veterans from all of us at DWCM.

DreamWorks Capital Management Update
REGISTER NOW for the quarterly seminar "401k & 403b Rollovers, You have Options" on Monday June 18th at The Community House located in Birmingham, MI.  The event is free and you can register by calling TCH at 248-644-5832 or you can email me directly at pfenner@dwcmllc.com.  We hope that you will consider this great event and learn more about the services we offer here at DWCM.

Barry Ritholtz sounds off: Why Facebook Is Almost as Greedy as Bernie Madoff

Ray Dalio's World

Last weekend Barron's edition featured an interview with famed hedge fund manager Ray Dailo.  Dalio runs the Bridgewater Pure Alpha which he founded back in 1975.  Since it's inception the fund has generated a total gain of $35.8 Billion making it The Most Successful Hedge Fund Ever.

Below are the highlights I took away from the interview.

So what is the solution to this? How will the European debt crisis be resolved?


What is happening in Europe now is essentially the same, almost totally analogous, to what happened in the U.S. in 1789. It is an interesting comparison.

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Post-American Revolution?

Yes. In 1776, the colonies declared independence from Great Britain. We didn't have a country. We had independent states that had a treaty with each other, called the Articles of Confederation, and it was similar to the Maastricht Treaty that created the European Union and the euro currency. The independent states had debt problems and they had tariffs with each other. It wasn't until 13 years later, 1789, that those states started to form a central government, largely because of their debt problems. There was a constitutional convention, and we formed a country and we chose a president. We formed a treasury and imposed central taxation. That gave us the ability to produce revenue for the country and restructure our debts. There was the ability to have taxation and to issue bonds and to borrow. Europe does not have an ability to borrow. It doesn't have central taxation, that's material, and it doesn't have a treasury. It is a collection of countries operating for their own individual needs.

Europe is approaching a decision point. It will have to decide whether it wants to create a sufficient central government that has more than a treaty, that has the ability to collect taxes from the whole and the ability to issue debt that obligates the whole, or whether it does not. That is the crux of this issue. The question is how much pain is it going to cause in Europe, and does the pain cause a collapse before it causes the choices? When a debtor can't print money and depreciate its currency, it will go into a self-reinforcing terrible economic situation. The deleveraging in Spain is just beginning, and they already have nearly 25% unemployment. They need relief.

And so?

So the main picture I'm trying to create is there could be a shock. I would say that there is maybe a 30% chance in the next six-month to two-year period of a really bad shock from Europe. And that shock is made worse because there is no clarity of who has got authority or control. When you have a centralized government and you have the ability to enforce laws, you can resolve problems. There might be a lot of arguments, but ultimately decisions can be made.

There are no provisions in the Maastricht Treaty for the breakup of the monetary union. There are no rules, there are no means. If a country is exiting the monetary union and then says I'm going to pay off the debt in my local currency, how does that work? The Maastricht Treaty doesn't have any provision for any country leaving the monetary union. It doesn't say if this happens, then that happens. There is a question of enforceability.

Every society has to have the ability to enforce laws. How does Germany actually force Italy to pay? It isn't clear. Supposing Spain decides they want to exit the union. The unemployment rate is terrible. That's a very scary thought. Maybe they say, "We're going to pay you back in Spanish pesetas even though the contract is for euros." That's the history, by the way: Argentina and Brazil and Mexico did that.

Yes, but local currencies no longer exist.

That's the whole other complication. There are good incentives not to take that course, and yet there are also big problems if you don't take it. In any event, there isn't a good decision-making process. There isn't a single means of achieving resolution in Europe, and that's the big problem here.

Again, how do you see world markets behaving as a result?

At the moment, there is a tipping toward slowing growth and a question of whether there will be a negative European shock, and that will favor low-risk assets. But to whatever extent we have negative conditions, central banks will respond by printing more money. There will be a big spurt of printing of money, and that will cause a rally and an improvement in the stock markets around the world. It's like a shot of adrenaline: The heart starts pumping again and then it fades. Then there is another shot of adrenaline.

Everybody is asking, "Are we going to have a bull market or a bear market?" I expect we will have both with no big trend. Typically, in these up and down cycles, the upswing will last about twice as long as a down swing. We are now in the higher range of the up-cycle. 

What's your outlook for the U.S.?

The economy will be slowing into the end of the year, and then it will become more risky in 2013. Then, in 2013, we have the so-called fiscal cliff and the prospect of significantly higher taxes, as well as worsening conditions in Europe to contend with. This is coming immediately after the U.S. presidential election, which makes it more difficult. This can be successfully dealt with, but it won't necessarily be successfully dealt with. We have the equipment and the policy makers, and as long as policy is well managed, we'll be okay.

Are you still a fan of gold?

Longer term, yes. It could temporarily be a bumpy ride because Europeans will have to sell gold in order to raise funds because they are squeezed. Most people should have in the vicinity of 10% of their assets in gold, not only because I think it will be a good investment longer term, but because I think it is a very effective diversifier against the other 90%.

It's amazing to think that four years into it, the world is still deleveraging.

Deleveragings go on for about 15 years. The process of raising debt relative to incomes goes on for 30 or 40 years, typically. There's a last big surge, which we had in the two years from 2005 to 2007 and from 1927 to 1929, and in Japan from 1988 to 1990, when the pace becomes manic. That's the classic bubble.

And then it takes about 15 years to adjust.

Five Market Wizard Lessons by Jack Schwager

Jack Schwager author of the original Market Wizard books which we featured in this post [A Summary of Market Wizards], is out with his new book Hedge Fund Market Wizards.  Below is a summary of 5 lessons from his work.


From Jack Schwager:

“Five Market Wizard Lessons”

“Five Market Wizard Lessons”
Hedge Fund Market Wizards is ultimately a search for insights to be drawn from the most successful market practitioners. The last chapter distills the wisdom of the 15 skilled traders interviewed into 40 key market lessons. A sampling is provided below:

1. There Is No Holy Grail in Trading
Many traders mistakenly believe that there is some single solution to defining market behavior. Not only is there no single solution to the markets, but those solutions that do exist are continually changing. The range of the methods used by the traders interviewed in Hedge Fund Market Wizards, some of which are even polar opposites, is a testament to the diversity of possible approaches. There are a multitude of ways to be successful in the markets, albeit they are all hard to find and achieve.

2. Don’t Confuse the Concepts of Winning and Losing Trades with Good and Bad Trades
A good trade can lose money, and a bad trade can make money. Even the best trading processes will lose a certain percentage of the time. There is no way of knowing a priori which individual trade will make money. As long as a trade adhered to a process with a positive edge, it is a good trade, regardless of whether it wins or loses because if similar trades are repeated multiple times, they will come out ahead. Conversely, a trade that is taken as a gamble is a bad trade regardless of whether it wins or loses because over time such trades will lose money.

3. The Road to Success Is Paved with Mistakes
Ray Dalio, the founder of Bridgewater, the world’s largest hedge fund, strongly believes that learning from mistakes is essential to improvement and ultimate success. Each mistake, if recognized and acted upon, provides an opportunity for improving a trading approach. Most traders would benefit by writing down each mistake, the implied lesson, and the intended change in the trading process. Such a trading log can be periodically reviewed for reinforcement. Trading mistakes cannot be avoided, but repeating the same mistakes can be, and doing so is often the difference between success and failure.

4. The Importance of Doing Nothing
For some traders, the discipline and patience to do nothing when the environment is unfavorable or opportunities are lacking is a crucial element in their success. For example, despite making minimal use of short positions, Kevin Daly, the manager of the Five Corners fund, achieved cumulative gross returns in excess of 800% during a 12-year period when the broad equity markets were essentially flat. In part, he accomplished this feat by having the discipline to remain largely in cash during negative environments, which allowed him to sidestep large drawdowns during two major bear markets. The lesson is that if conditions are not right, or the return/risk is not sufficiently favorable, don’t do anything. Beware of taking dubious trades out of impatience.

5. Volatility and Risk Are Not Synonymous
Low volatility does not imply low risk and high volatility does not imply high risk. Investments subject to sporadic large risks may exhibit low volatility if a risk event is not present in the existing track record. For example, the strategy of selling out-of-the-money options can exhibit low volatility if there are no large, abrupt price moves, but is at risk of asymptotically increasing losses in the event of a sudden, steep selloff. On the other hand, traders such as Jamie Mai, the portfolio manager for Cornwall Capital, will exhibit high volatility because of occasional very large gains-not a factor that most investors would associate with risk or even consider undesirable-but will have strictly curtailed risk because of the asymmetric structure of their trades. So some strategies, such as option selling, can have both low volatility and large, open-ended risk, and some strategies, such as Mai’s, can have both high volatility and constrained risk.

As a related point, investors often make the mistake of equating manager performance in a given year with manager skill. Sometimes, more skilled managers will underperform because they refuse to participate in market bubbles. The best performers during such periods are often the most imprudent rather than the most skilled managers. Martin Taylor, the portfolio manager of the Nevsky Fund, underperformed in 1999 because he thought it was ridiculous to buy tech stocks at their inflated price levels. This same investment decision, however, was instrumental to his large outperformance in subsequent years when these stocks witnessed a prolonged, massive decline. In this sense, past performance can sometimes even be an inverse indicator. 

Facebook IPO Post Mortem – Killer – but not for the reasons you think !

Think what you will of Mark Cuban but I am a big find of his.  If you don't like his personality that is one thing but I don't see how you can knock his business savy.  Every week on the ABC series "The Shark Tank" you can see some of his business skills on display.

In addition to having a large presence on Twitter, Cuban also writes frequently on his blogmaverick.com.  This week he goes into some very good detail about the Facebook IPO and some of the repercussions and what the event went down like it did.

Via Cuban's post

1. Say goodbye to the individual investor on Wall Street. Whatever positive impression they had of the IPO market and the stock market in general was just torched to the ground. When everyone you know associated with the stock market is telling you and the media is confirming that this could be a huge IPO that will make money for those lucky enough to get shares and the opposite happens, goodnight. All confidence in the stock is destroyed. Put your money in the bank or if you want to gamble, at least slot machines in Vegas pay out 98pct.

2. The Valuation Bubble in Silicon Valley is bursting - but not for the reasons you think. Historically IPOs function as a means of getting stock to outsiders. People who were not sold/assigned/granted shares could only buy shares once they reached the public markets. The new secondary markets in private shares changed that. They allowed outsiders to purchase shares in a market with very little liquidity.

The demand for shares outstripped the supply and you know what happens when demand outstrips supply ? The price goes up. So shares of FB on secondary market went up and up and up. (Just as LinkedIn had done before them, but it greater volumes) When it was time to go public the IPO had to be priced higher than the prevailing share price on the secondary market.

To make matters worse, those folks who bought shares in the secondary private market, driving up the share price now had the shares they wanted to buy , so they were no longer going to be the buyers the IPO counted on to eat up shares in the open market.

Can you imagine how pissed you would be if you bought a boatload of Facebook thinking you got in at a better than IPO price only to watch the price on the open market post IPO drop below the price you paid in the private market ? Ouch.

The law of unintended consequences is that the dynamics for how private companies are valued and are able to raise Pre IPO rounds could quickly change if the prices and volumes on SecondMarket and its competitors declined significantly.

3. I always laugh at all the pundits /analysts who try to tell you what any non dividend paying stock is worth. Its a function of supply and demand. Its never fundamentals. Read what I wrote a long time ago about the stock market. In the case of facebook they put an ENORMOUS number of shares into the market. Too much supply. Valuation has no relevance what so ever. Conventional wisdom says the buyers of stocks will try to determine the value of a stock before they buy or sell and make the appropriate rational decision. Not even in a Richie Rich cartoon does that happen.

4. Mobile is going to crush Facebook. The logic for Facebook's price decline is that they have a problem in mobile. They can't offer all the games they can in a browser. They can't offer the same ads or branding opportunities. All true.

From the Wall Street Journal :
"As more people gravitate to smartphones and tablets, they're increasingly forgoing the desktop to the access the Web. Between 2008 and 2011, the percentage of U.S. adults who accessed the Internet from PCs daily grew to 62% from 54%. In the same period, the percentage of daily mobile Internet users rocketed to 26% from 4%, according to Forrester Research.

"People see this modality of consumption shifting from the PC to mobile," said Matt Murphy, a venture capitalist at Kleiner Perkins Caufield & Byers. "On top of that, mobile feels like it's much more the kind of wide open that anybody can win kind of arena."

All true as well.

However the same is absolutely true for every ad driven internet site. They face limitations in what they can offer on mobile vs what they can offer through a PC brower. Look at the Google search results on mobile. No where near the number of results. Thats fewer click and CPM opportunities and ZERO display ad opportunities. Of course Google has Android, but that still isn't generating much , if any revenue for them and it isnt currently designed to.

And then lets not forget Youtube. Everyone is supposed to be dumping TV and heading to video right ? Well how can that be if most online consumption is headed to mobile ? With so few mobile users having unlimited data plans, and that number most likely declining, then what is Youtube going to do when users start complaining and going nuts over the fact that they are having to pay for the data they use to watch Youtube mobile ads ? How many youtube ads have you seen on a mobile device lately ?

Which leads to a much broader question. Just what percentage of PC Online usage will mobile displace ? Is it feasible that people will "cut the broadband cord" and live exclusively off of their mobile internet access ? Why not use your mobile as an in home hotspot rather than paying for 2 internet connections ? If you avoid streaming video and downloads its easy to stay within your caps. Do you know anyone that has cut their broadband access to go exclusively mobile internet ?

Bottom line, if you think mobile will displace online usage from PCs then you should immediately short Google and other ad plays and buy TV stations and networks. If you can't buy an ad effectively on mobile and no one is using a PC to connect to the internet any more, then the only way to reach an audience is going to be via good old tv. And all that over the top video noise, forgettabout it.

I wonder what Netflix thinks about mobile vs pc online consumption ?

5. An in the interest of disclosure I bought 150k shares of FB. 50k shares at 33, 50k shares at 31.97 and 50k shares around 32.50. Its a trade, not an investment. Kind of like buying a Mickey Mantle, a Hank Aaron and a Barry Bonds Rookie Card knowing there is a card show in town next week

People Want Jobs That Make A Difference, Even If It Means A Pay Cut

This is shocking or new news to me that young people are looking for positions that make a difference or can create an impact.  I don't believe that this frame of mind is only attributable to young people either.  People all of ages, genders, and backgrounds want to feel that they are apart of something special.  They want to have a direct impact on the success of a project, product, or even an entire company.

People are willing to do a lot in order to secure a job that they can feel good about even taking a pay cut.

Via Fast Company article here, Talent Report: What Workers Want in 2012 from Net Impact, which surveyed 1,726 college students about to enter the workforce as well as employed four-year college graduates (including Millennials, Generation X, and Baby Boomers) on their life goals, job satisfaction, and desire to have an "impact job."

• Somewhat surprisingly, current workers said that having an impact job was more important than having children, a prestigious career, wealth, and community leadership. The top two most important things to have for happiness: financial security and marriage. Financial security still matters more than making a difference, but wealth isn’t important for people if they can do some good.
• That’s especially true for students: 58% of student respondents say they would take a 15% pay cut to “work for an organization whose values are like my own."
• Almost 60% of students also expect to have multiple job offers to choose from (that may be a little overly idealistic); 37% believe they can make a positive social or environmental impact within five years.
• Among current workers, work/life balance is the most important aspect of an ideal job. A positive environment is the second most important piece (it’s most important overall for students), and interesting work is third. Having a prestigious employer is the least important piece.
• There are a few big differences between students and workers: 50% of students say it’s important to have an employer that prioritizes CSR, while only 38% of current workers care. Half of current workers care if their job helps make a better world, but 65% of students care.

• Overall, women care more about impact jobs than men: 30% of women say they would take a pay cut for an impact job, while 19% of men say the same thing. And 60% of employed women believe that working for a socially and environmentally conscious employer is important, compared to 38% of men.
• In spite of the student population’s idealism, Boomers are most likely to vote (73% compared to 43% of students in the last year), boycott a product or company, or volunteer outside of work.

Apple Founder Wozniak to Buy Facebook Regardless of Price

I came across this interview with Apple co-founder Steve Wozniak in which "Woz" stated that he would buy Facebook at any price.  I'm wondering if he has made any purchases yet?

The other facinating part of the interview was when asked how he would like to be remember Woz simply stated to be known as a great engineer.  Although they may have been the odd couple it once again proves that there was something special between Jobs and Wozniak when they started Apple.  Jobs needed Woz and Woz needed Jobs in order to make Apple into the company it is today.

“I was thankful to have a partnership with Steve Jobs and I see Mark Zuckerberg closer to the combination of us,” he said. “When he speaks he speaks with a lot of idealism for the users and a lot of good ideas for the product overall.”

Full disclosure Wozniak is Chief Scientist at Fusion IO a maker of flash-memory technology which we own in the DWCM Fund and I own in my personal account as well. We also own options call in the DWCM Fund and I own in my personal account as well.

Tavi Gevinson: A teen just trying to figure it out

A teen living beyond her years.  What is amazing is how confident and comfortable she is on stage for being a sophomore in high school.  Here the link to Tavi's website.

Who is to blame for Facebook's Face-plant?

I haven't talked about the Facebook debacle but if you were watching any of the market coverage today even the national evening news (if anyone watches that any longer) you couldn't miss it.  Zuckerberg in the first two days of trading this week is down a cool $3 billion.

The story today was all the back and forth action of whose fault it was when trades were mishandled on Friday by the NASDAQ, who had inside information as the underwriters of the stock came out with with analyst coverage today which offered lower guidance basically saying the stock was overvalued.

This morning I was listening to a CNBC interview with Bill Hambrecht who is an investment banker and was al lead on the Google IPO.  Hambrecht gives a good overview on how the IPO process works and discusses the "greater of fools theory".  The theory goes that the individual retail investor gets sucked into buying a stuck after the IPO pops while the insiders are selling to get their money back out.  In order to make any money you have to find a buyer willing to pay a higher price despite fundamentals.

Shopping Cart Abandonment Rate Statistics

Here are some interesting stats regarding online purchases.  Click the link below for the full graph version



Infographic by invesp, click here for full version

DoubleLine's Gundlach on Mortgage Market, Strategy

One of the foremost bond traders in the world gives his take on investment strategies and the trade he made to short Apple and go long Natural Gas.

I’m Sorry, But Your Child Has 18 Months To Live

We hear stories too often regarding a terrible disease that takes the life of a young child.  The story below of McKenna Claire Wetzel is no different.  What is different about this story is how her parents decided to fight on and find a cure for the cancer that took there child.  Here is part of their story.

Happy Birthday with almost a little bit of history

For those of you are are daily and/or regular readers of the site I apologize for not getting a post in yesterday.  However yesterday was my wife's birthday.  For her birthday we were able to find out the sex of our new baby  on the way.  It's going to be a girl!  And Yes that will make a total of 4 kids (3 + 1 = 4).


If that wasn't exiting enough we went to the Detroit Tigers game against the Pittsburgh Pirates where history was almost made.  Justin Verlander, Detroit Tiger starting pitcher and arguably the best pitcher in the game for the past few seasons was within 2 outs of completing his third career no-hitter.  It wasn't meant to be as Pirate Josh Harrison flared a hit into center field with one out in the ninth.


Nonetheless it was a great night at an electric pallpark with a beautiful lady.

Week 20 Performance.... Facebook Flameout

No even the mighty Facebook $FB IPO could save us or the markets this week.  All of the major indices had their worst performing weeks of the year.  Both the DJIA and the Russell 2000 indices are within about 1% of wiping out all of their gains for the year.


Although it was another rough week for the DWCM Fund down 2.9%, we were still better than all four of the major benchmarks.  At this point we are clinging onto our positive YTD performance of 11.7%.  When do you ever refer to clinging onto a double digit positive performance?  Now!


Some market observers are calling this the worst market they have seen in years.  They must have short-term memory loss as 2007 to 2009 was not that far away.  At least back then you knew more specifics as why we were crashing aka the housing bubble, Lehman going down, etc.  Although you might not have been privy to all of the specific details you could tell something bad was going on.


Today we are at the mercy of our European brethren dealing with their own financial crisis.  We are certainly back to the days when our markets are taking their cues directly from the events taking place in Greece, Spain, Portugal, or name any Euro member at this point.


Most of the major market indices have been down 11 of the past 12 trading sessions.  Hindsight being 20/20 the time to exit would have been the beginning of April.  It looks to me like the "sell in May, go away" crowd came a little early this year.


Good or bad this is why I love doing what I do managing investments.  Your results are always on the scoreboard and there is nowhere to hide.  No one can time the markets with any certainty.  This is why if you are involved in investing in the stock markets or any investment period you must understand what you own and why you own it.


Even though your investment could be taking a hit it helps to avoid panic selling.  If the uncertainty causes you to not be able to sleep at night then it's time to look at other investment options outside of the equity markets.  Knowing your risk tolerance is just as important as knowing what and why you own an investment.

This week we again paired back our gains in our Apple long call position.  We still have plenty of exposure to Apple on the long side with a few other call positions.  But right now I wanted to start building back up the cash position in case things continue to get worse.  We also sold out of our Penn Virginia $PVA long position.  We added to our current K12 $LRN and also started a position in network security provider Fortinet $FTNT.

Our cash position representing 36% of the total DWCM Fund is still lower than we would like to be.  However we are not seeing much else in our Fund that we would like to exit out of.  We are looking at scaling back our CME Group $CME position only because it represents such a big portion of the overall Fund.

We have updated our watchlist which you can access here.  We are continuing to look for good value despite the rough trading waters we are currently in.

The Week Ahead

It will be both interesting and telling to see how Facebook performs in the first few days of market action this upcoming week.  Will the underwriters continue to come in and support the stock at the IPO price of $38 as they did on Friday?  Any weakness here will likely carry through to the rest of the equity markets.

This week has a good deal of economic data packed into it.  From home sales and durable goods orders to regional fed reports and consumer sentiment.

• Mon -  Chicago Fed National Activity Index
• Tue -  Existing Home Sales,  Richmond Fed Manufacturing Index
• Wed -  New Home Sales,  FHFA House Price Index
• Thu -  Durable Goods Orders,  Jobless Claims,  Bloomberg Consumer Comfort Index
• Fri -  Consumer Sentiment

The equity markets could swing to another 1,000 point loss just as easily as it could swing to a 1,000 point gain.  Prior to this pullback everyone was waiting for a pullback and now we have one.  Now consensus is building that we are now on the oversold side of things.  The pendulum swings violently from one direction to another in the short-term.


Again I re-emphasize that in choppy markets such as these it is crucial to understand what and and why you own an investment.  Most of the issues we are talking about are short-term related with the exception of Europe.  There it depends upon what solution they come up with to save themselves.  But have confidence and conviction in what you own or pair back some positions in order to sleep at night.


DreamWorks Capital Management Update
REGISTER NOW for the quarterly seminar "401k & 403b Rollovers, You have Options" on Monday June 18th at The Community House located in Birmingham, MI.  The event is free and you can register by calling TCH at 248-644-5832 or you can email me directly at pfenner@dwcmllc.com.  We hope that you will consider this great event and learn more about the services we offer here at DWCM.

The World Happiness Report Explains What Makes People Happy

I'm posting the full article from this Fast Company piece on a new World Happiness Report.  The piece summarizes the results of the report and if you read anything on happiness these shouldn't come as a surprise to you.

Via the Fast Company article here


Happiness isn’t easy to quantify, but a lot of people have tried: Bhutan has its Gross National Happiness survey, global research company Ipsos has its annual world happiness poll, and now Columbia University’s Earth Institute has put out the first World Happiness Report, which has the ambitious goal of surveying the state of happiness in the world today and looking at how the science of happiness plays into it.

The report, commissioned by the United Nations Conference on Happiness (yes, that exists), contains over a hundred pages of musings on world happiness. Here’s an ultra-abridged version of the findings.

• Richer people are happier than poorer people on average, but wealth is only one factor in overall happiness. The same goes for countries, where factors like personal freedom, lack of corruption, and social support are more important.
• Unemployment obviously reduces happiness, but not because of what you may think. It’s not the loss of income, but the loss of things like self-esteem and workplace social life that lead to a drop in happiness. High unemployment rates can trigger unhappiness even in the employed, who suddenly become fearful of losing their jobs. According to the study, even low-quality jobs yield more satisfaction than being unemployed.
• In some countries, the self-employed report higher levels of job satisfaction than the employed. The study found a positive correlation between happiness and self-employment in both American and European data, but not in Latin America. The possible reason: Self-employment may be a necessity in developing countries where formal employment is not as readily available. When it’s not a choice, it doesn’t lead to happiness.
• Higher living standards correspond with increased happiness in some countries, but not all. In the U.S., for example, happiness levels have remained stagnant while living standards have risen over the past 50 years or so.
• Levels of trust (i.e. whether you think someone would return a cash-stuffed wallet) have fallen dramatically over time in certain countries--including the U.S. and U.K.--but risen in others, like Denmark and Italy. One explanation may be that overall life satisfaction has dropped in the former countries, but has risen in many continental European countries.
• Lack of perceived equality can reduce happiness. The report explains: "The most positive results are in an interesting time-series study using both the U.S. General Social Survey and Eurobarometer. This finds that in both the U.S. and Europe increases in inequality have (other things equal) produced reductions in happiness. The effect has been stronger in Europe than in the U.S. This difference probably reflects ideological differences: Some 70% of Americans believe that the poor have a chance of escaping poverty, compared with only 40% of Europeans."
• Mental health is the biggest contributing factor to happiness in all countries, but only a quarter of mentally ill people get sufficient treatment in the most developed nations.
• Married people across the world (studies have been done in the U.S., EU countries, Switzerland, Latin America, Russia, Eastern Europe, and Asia) claim that they’re happier than single counterparts. A stable family life also contributes to happiness.

It’s not hard to conclude from these findings that gross domestic product is not the ultimate indicator of happiness.


The report sums it up well:


"GDP is important but not all that is important. This is especially true in developed countries, where most or all of the population has living standards far above basic material needs. Except in the very poorest countries happiness varies more with the quality of human relationships than with income. And in the richest countries it is essential not to subordinate the happiness of the people to the 'interests of the economy,' since the marginal utility of income is low when income is so high. The economy exists to serve the people, not vice versa. Incremental gains in income in a rich country may be much less beneficial to the population than steps to ensure the vibrancy of local communities or better mental health. "


Check out the whole report here (PDF).

How to Raise a Financial Wizard

Ron Lieber column writer for the NYT had a recent article where he probed behind the parents of a couple young finance writers.  How to Be Richer, Smarter, and Better-Looking Than Your Parents by Zac Bissonnette and Ramit Sethi, the author of I Will Teach You to Be Rich.

With catchy titles such as these, parents are bound to scoop up these books full of common sense financial practices.  So how did these authors turn out to be these semi-financial gurus?  Lieber went to ask their parents.

According to Lieber "there were no compound-interest workbooks in any of their homes. Nor was there reading aloud from credit card terms or “The Millionaire Next Door.” But all of the offspring had a visceral memory of a habit or tactic they learned from their parents, which formed the foundation for the advice they give to other young adults today."

Dream New Dreams

It's hard to imagine that it has been nearly 4 years inspirational professor Randy Pausch passed away.  While watching the news last night ABC I saw this piece in which Diane Swayer interviewed Pausch's wife Jai.

Jai Pausch, who has recently remarried has written her own book, Dream New Dreams, Reimagining My Life After Loss.  In it she details the life of being a caregiver to her dying husband.

In the interview with Swayer, Jai Pausch discusses her fears that when Randy would finally pass the magic would be gone.  However she goes onto say that the magic didn't die when Randy passed but that there was magic within her.

Achieving your Dreams was the lasting lesson taught by Randy Pausch.  It's part of the reason why I named the firm DreamWorks



Here is the Last Lecture, "Really Achieving Your Childhood Dream" by Randy Pausch

Education Slowdown Threatens U.S.

People are thinking twice about going after that college degree.  Just about every generation has had a higher level of education than the previous.  Up until now.


With student loan debt spiraling out of control and jobs at a premium people are asking themselves if that college degree is worth it.  Study after study will tell you that people with a college degree make more than those that don't and that the unemployment rate is higher for those without a college degree.


However people are taking a serious look at the risk that college degree carries and with good reason.  As this WSJ article points out young people see recent college grads struggling to find a job and pay off on average $20k to $25k in student loan debt.  To some it is not a risk worth taking.


To some degree employers are still more concerned about where someone went to school rather than can they actually perform the job.  I've long contended that a college degree is merely a ticket that gets you into the dance.  Without that ticket some opportunities will simply not reveal themselves.


Via the WSJ article

• When baby boomers born in 1955 reached age 30, they had about two years more schooling than their parents, according to Harvard University economists Claudia Goldin and Lawrence Katz, who have calculated the average years of schooling for native-born Americans back to 1876.
• "Not all bachelor's degrees are the same," Georgetown University's Center on Education and the Workforce said in an extensive analysis issued last year. "While going to college is undoubtedly a wise decision, what you take while you're there matters a lot, too."
• There is a limit to how much schooling a person can get and to how many Americans have both the ability and interest in a four-year college degree. But the U.S. is nowhere near that point.
• Twenty countries have higher high-school graduation rates than the U.S.—including Slovenia, Finland, Japan, the U.K. and South Korea, according to the Organization for Economic Cooperation and Development. In the U.S., about one in five ninth-graders drop out before getting a diploma.
• About 30% of American adults have four-year college degrees, and there is little evidence that is a natural ceiling. Thirty years ago, the U.S. led the world in the percentage of 25- to 34-year-olds with the equivalent of at least a two-year degree; only Canada and Israel were close. As of 2009, the U.S. lagged behind 14 other developed countries, the OECD says.
• While not every college grad does better in the job market, statistics consistently show that, on average, the more educated the worker, the better he or she fares in today's job market. For example, 54% of high-school graduates over age 25 were working in March, the Labor Department says, while the rest were either looking for work or out of the labor force altogether. Among those with some college, 64% were working while 73% of those with a bachelor's degree or more were working.
• The fraction of 25- to 29-year-old men who had earned four-year degrees began a two-decade-long slide around 1975. After that, fewer young men sought refuge from the Vietnam War draft by going to college. Moreover, a decline in the size of the bonus that college graduates commanded, compared with high-school graduates, provided less reason to go to college.
• More men began going to college in the early 1990s. Changes in the economy and technology as well as a shortage of educated workers pushed the wages of college grads well above those of high-school graduates. The fraction of men in their late 20s with four-year degrees has been climbing since 1994, hitting 27.8% in 2010. Despite the uptick, however, that is barely above the 27.5% reported for 1976, according to the Census Bureau.
• For women, the trend is strikingly different. While male college-going fell off in the 1970s—in part because men were more likely than women to think they could get well-paid construction or factory jobs without degrees—women kept going. In 2010, 36% of women in their late 20s had earned at least a bachelor's degree, up from 20% in 1976.
• While college enrollment has risen lately—as often happens when people flee a lousy job market—completion rates are disappointing. "We've become very good at getting people to start college," says Harvard's Mr. Katz. "We are not very good at getting people through college."
• About 70% of high-school graduates enroll in a two- or four-year college soon after finishing high school, but many never get a degree or any other credential. At four-year colleges, 43% of those who enrolled as freshmen in 2002 hadn't received a degree six years later, according to the U.S. Department of Education.

• Tuition is up, particularly at public colleges that draw the most students. Over the past 10 years, for instance, average published tuition and fees (not counting room and board) at four-year public colleges rose by 72% to $8,240 from $4,790, adjusted for inflation, according to the College Board. Sticker prices are misleading because student aid has become more bountiful. After grants as well as tax deductions and credits, the average net price rose by a much smaller sum—$1,160—to $2,490 over the decade, but that is still an 87% increase.
• Today, student debt outstanding now exceeds Americans' total credit-card debt. In 2009-10, about 55% of public four-year college students graduated with debt; on average, they owed $22,000, the College Board says.
• "The greater society told me I had to go to college if I want to make it in life, but it's not true," said Mr. Gavic, who competes semiprofessionally in snowboarding. "I don't care about making a lot of money because I'm happy. I'm just living the life."
• "You spend all this time in school, then you are in debt, then you have to find a job to spend 20 years paying it back," he said. "That never made sense to me."