Hoisington Quarterly Review and Outlook

This week John Mauldin presents the quarterly Hoisington Review and Outlook.  This quarterly review is one that I never miss and offers great insight.  Van Hoisington and Dr. Lacy Hunt of Hoisington Investment operate the Wasatch-Hoisington US Treasury fund.

Here is the PDF version of the newsletter.

• Based upon the historical record of effects of excessive and low quality indebtedness, along with the academic research, the 30-year Treasury bond, with a recent yield of less than 3%, still holds value for patient long-term investors. Even when this bond drops to a 2% yield, it may still have value in relation to other assets. If high indebtedness is indeed the main determinant of future economic growth and further government “stimulus” is counterproductive, then a prolonged state of debt induced coma may so limit returns on other riskier assets that a 30-year Treasury bond with a 2% yield would be a highly desirable asset to hold.

Banks Need Just One Thing to Spur Lending: Borrowers

When will people, especially politicians understand that giving another money is not creating demand.  Just because someone is able to receive a loan doesn't mean they should.  Think of the housing bubble.  And just because there are fewer loans being made doesn't mean that banks are stifling growth.

If you think in simple terms of supply and demand, the demand being consumers doesn't match the supply when it comes to lending.  Most statistics say that Americans are being diligent about getting their fiscal house in order and reducing debt, not taking on new debt.  About the only real growth in debt has been in student loans which is cause for concern.

From the WSJ

• While overall loans and leases at commercial banks have shown positive year-over-year growth for the past four quarters, they still are 3% lower than a peak of $7.32 trillion in October 2008. That's even more striking considering the big shrinkage of credit outside of banks during that time.
• Banks contend they would gladly lend more but that demand just isn't there. Falling levels of interest income at many banks, along with soggy share prices, suggest their argument is more than just bluster. After all, they would be lending if they thought it would raise lackluster profits. Given this, it isn't clear how much benefit will result from further attempts to juice the supply of lending.
• But potential borrowers aren't necessarily clamoring for new loans. Business loans have picked up of late, yet many companies remain flush and are sitting on record cash piles. Consumers still are largely in debt-shedding mode as they try to restore household balance sheets.

Breaking Up Is Hard to Do

Sandy Weill, former Citibank chief made headlines last week when he called out that the big banks should be broken up.  Note that growing big was something that Weill had pushed for when he was at the helm at Citi.

In his weekly column, Marty Zweig from the WSJ points out that merely breaking up the banks would be no easy task.  His last point is one that people should pay attention to, "Investors should take the lessons of history to heart: Even if, by some legislative miracle, banks are cleft in two, they will find infinitely crafty ways to get risks back onto their balance sheets. And the additional "capital buffers" that regulators are demanding now are likely to make banks safer for society, but less lucrative for investors."

Full article here

Having a financial plan builds confidence and saving

This Reuters article confirms what many people might already now which is, having a financial plan builds confidence and savings.  We believe that having a plan gives you structure and something to look forward too.  We often note that it is very important to know what your investment strategy is because in order to achieve your goals you need to know how to get there.  How you get there is largely determined by the strategies that you choose.

We often strive to people that no matter what your income or level of savings is, it is extremely important just to get a financial plan started.  The first step is likely the hardest but it could prove to be the most rewarding.

From the Reuters article

• As expected, the percentage of consumers with plans was highest in the $100,000-plus income bracket, with 55 percent having a comprehensive plan in contrast to 35 percent in the $50,000-$99,999 bracket. The high earners with plans were the most likely to say they live comfortably. Also, 100 percent of them have retirement savings, 92 percent have emergency savings and 73 percent are saving 10 percent or more of their income annually.
• Those in the $50,000-$99,999 bracket who had a plan, 40 percent had 10 months or more of emergency savings, while of those in the higher bracket who had no plan, only 36 percent had at least 10 months of emergency savings. The same pattern applied to paying off credit card bills each month (45 percent to 41 percent), and never having declared bankruptcy (90 percent to 85 percent).

Fed Eases Toward More Unconventional Action .

As the Fed look at the option of additional quantitative action these week during it's meeting, the debate will begin to rage as to whether or not this stimulus will do much good.  There is no doubt that the world economy is slowing as Europe continues to deal with it's debt issues and is in recession.  While China the economy every one could count on for growth has been slowing eroding.

In this WSJ piece a specific question is raised as who would be the beneficiary of another round of QE?  It likely won't be the people that need it the most who are already struggling with higher food and gas costs.  Those that are still without employment aren't likely to get much relief either because with out demand, companies will still have no need to hire.

• Over the past five years, people in the lower income strata have taken the hardest hits, but the benefits of lower mortgage rates and higher stock prices flow most directly to the better off.
• Only 37.2% of families in the bottom-fifth income bracket owned a home in 2010, according to the Fed, versus 91.5% for the top fifth. Only 12.5% in the bottom fifth owned stocks versus 86.6% in the top fifth.
• Moreover, if QE3 ended up contributing to higher food and energy prices, it is the poor who would suffer most. As of 2010, families in the bottom fifth devoted 26.7% of their spending toward food and gasoline and other energy costs, according to the Labor Department, compared with 18% for the top fifth.

Week 30 Performance.....What the heck is going on out there?

Legendary Green Bay Packer football coach Vince Lombardi used to echo the phrase, "what the heck is going on out there" when things weren't going as expected.  Well this is precisely how we could sum up this week's economic and perplexing market events.


Let's begin with Tuesday's late heroic effort by the Fed to change the direction of the markets in the last hour of the trading day.  With the DJIA down over 200 points the WSJ releases a story that the Fed stands ready to make a move if growth does not pick up soon.  Losses were almost cut in half and we were on our way to a rally that would last the rest of the week.


Then on Thursday, Mario Dragi, head of the European Central Bank announces that the ECB stands ready to do whatever it takes to support the European Union.  In essence his statement put the floor in the markets which were just ready to touch or break through a key technical support level.


If that wasn't enough news worthy drama, on Wednesday former Citibank head Sandy Weill announced on CNBC that the big banks should be broken up.  I guess he is now a believer in "too big to fail".


With all that being said, Friday's GDP number came in at a 1.5% which may have been better than the 1.2% consensus estimates but was well under the annualized 2% number that is critical to keep the economy moving forward.


We also had some major earnings releases including misses by Apple and Facebook which filed it's report for the first time as a publicly traded company on Friday.  The real story behind the results thus far this earnings season has been the misses in revenue.  It has been reported that nearly 60% of those companies who have released earnings have missed on the revenue line.


Companies can massage earnings but revenues are a bit harder to smooth out.  The revenue misses are confirming that the world economies are indeed slowing.  So the challenge then becomes how do you devise an investment strategy around a slowing global economy?


In our view you can still find companies that are growing revenue which we believe is one of the key metrics to follow.  They're just a little harder to find.


So what was so perplexing in this week's market action?  You have to ask yourself if you have a slowing economy and central banks willing to take on more debt why are the markets rallying?  We don't believe that additional quantitative easing will do much to boost economic activity.  Right now you have a crisis of confidence with uncertain headwinds such as the looming fiscal cliff, a tight presidential election in the US, and still no specific plans to fix the European debt crisis.


Consumers just aren't willing to open up there wallets facing this wall of uncertainty.  Throw in anemic job growth and you still have a large group of Americans struggling to cover the basics.  We will be paying close attention to the monthly auto sales releases as we believe that this could be a good leading economic indicator.


We were quite active in the markets this week adding the following positions:

• Buffalo Wild Wings - Although consumers may be tightening their wallets we believe this company can still grow in the face of some headwinds such as rising input costs and a slower overall economy.
• Ford Motor - From a technical standpoint this stock came down to our buy target.  As noted below we believe that monthly auto sales will be a telling sign as to the overall health of the economy.  We believe that Ford with a strong dividend and balance sheet is a moderate risk position we are willing to take on
• Novartis - We have had a high rating on this name based upon our fundamental analysis.  Again this company has a string balance sheet and pays a healthy dividend which we believe is better than hold cash and prevents more upside than risk.
• Kronos - A name which most people might not know, KRO is a chemical company that produces a product used in virtually ever color pigment.  The stock has rated out very high from a fundamental standpoint and looked to be bottoming from a technical standpoint.
• Connoco Phillips - Again this is a name with a strong balance sheet and healthy dividend.  We see a low level of risk being in a position such as this vs. staying in cash.  We also believe that oil will eventually head higher but may experience some turbulence as the economy continues to slow.
• Merk - We hope that people are seeing our consistent theme in strong balance sheet and good dividend payers as Merk is such a company that fits this mold.
• Apple - We see the earnings miss as a small blip on the Apple radar screen.  The miss was largely attributed to lower iPhone sales as people are likely waiting for the new iPhone 5 to come out in October.  

The Week Ahead

This will be a another big week with economic data and a full slate of earnings releases.  The most important driver this week will likely be on Friday when the US jobs report is released.  As noted previously, we believe that auto sales will be a telling economic indicator.  Strong sales might give the economy hope that consumers are still willing to show some confidence.

The FOMC reconvenes this week beginning on Monday and will release it's statement on Tuesday which could send the markets in a decided direction depending if QE 3 is expected.

• Mon -  Dallas Fed Mfg Survey
• Tue -  Personal Income and Outlays,  Employment Cost Index,  S&P Case-Shiller HPI,  Chicago PMI,  Consumer Confidence
• Wed -  Motor Vehicle Sales,  Challenger Job-Cut Report,  ADP Employment Report,  PMI Manufacturing Index,  ISM Mfg Index
• Thu -  Jobless Claims
• Fri -  Employment Situation,  ISM Non-Mfg Index

With so much activity going on this week we will keep our watchlist close and our sell list even closer.

Have a great week!

DreamWorks Capital Management
FREE Seminar:  Our next finance seminar will be on Tuesday September 18th at the The Community House.   The topic will be Balancing Your Changing Investment Needs: Emergency Fund, Investments, Retirement, Education, and Philanthropy.  We will cover significant points regarding creating, developing, and executing on your wealth management plan.  We hope to have another interactive group, so be sure to sign up by emailing me directly at pfenner@dwcmllc.com or by contacting The Community House at 248-644-5832.  There is no charge and light refreshments will be served.

Chinese Applicants Flood U.S. Graduate Schools

It still appears that the US is the chosen destination for higher education, at least with the Chinese.  Applications are up 18% for master and doctoral programs according to this WSJ report

• That is on top of a 21% jump last year and a 20% rise in 2010—and is the seventh consecutive year of double-digit gains from China, according to the graduate-school industry group. Applications from China now comprise nearly half of all international applications to U.S. graduate programs.
• Specific programs of interest include engineering, business and earth sciences.

Taxmageddon: Massive Tax Increase Coming in 2013

Here is a summary of the taxes set to expire at year end setting up the dreaded "fiscal cliff" that is being heavily discussed.

Full report here

Playing with fire: Financial innovation

Greed is bad, according this Economist article that touches on financial innovation.  As with anything too much of a good thing can turn bad.  The housing bubble is one clear example that should come to mind.


Full piece here

• When bubbles froth, greedy folk use innovations inappropriately—to take on exposures that they should not, to manufacture risk rather than transfer it, to add complexity in order to plump up margins rather than solve problems. But in those circumstances old-fashioned finance goes mad, too: for every securitisation stuffed with subprime loans in America, there was a stinking property loan sitting on the balance-sheet of an Irish bank or a Spanish caja. “Duff credit analysis is always the cause of the problem,” says Simon Gleeson of Clifford Chance, a law firm.

Key Reason for Wage Inequality Is Education

Study after study consistently shows the same data that college educated workers make more over their careers than those that do not earn college degrees.  The complex question to answer is that in the face of escalating college costs, rising debt, and a bleak job outlook is the risk worth it?

It depends upon your situation but no one tells you that you have to or send your kids to an ivy league school to get an ivy level education.  There are other options that people need to look at before jumping head first into a situation that could lead to debts that you cannot afford to pay back.  Or getting into a field that cannot support your lifestyle.

So here is s sneak peak that deal with part of this topic in our upcoming lecture in September.  Here are some ideas that may help you with your specific education delima.

• Start saving early
• Invest consistently 
• Choose a tax deferred saving option i.e. 529 Plan, IRA
• Pick a school you can afford - think state school or start out at a community college
• Go a different route - college isn't for everyone and can be a very expensive place to find yourself
• Know what you are getting into - if you have to take on debt can you afford to pay it back?
• If you borrow, stick with federal loans

Here is some additional detail and specifics regarding this topic from the WSJ

For LinkedIn Founder Reid Hoffman, Relationships Rule the World

Reid Hoffman, co-founder of LinkedIn in an interview with Wired discusses his life as a philosopher, investor, and author of his new book The Start-Up of You.

• In February Hoffman published his first book, The Start-Up of You, which does in fact try to help us figure out who we all should be. Cowritten with fellow entrepreneur Ben Casnocha, the book argues that “every individual is a small business.” It urges readers to “craft iterative, flexible plans,” to be in “permanent beta.” It cites as case studies the rise of Netflix and the fall of Detroit, the pivots of Flickr and PayPal, the arc of George Clooney’s acting career. But at its heart, The Start-Up of You is the gospel of LinkedIn, down to the familiar blue and white logo that graces the cover. “All of the attributes of a business now apply to an individual,” says Hoffman, who cofounded LinkedIn in 2003 and served as its CEO until 2007, when he stepped aside to serve as executive chair. “And if you want to get better at your job, you should be an active member of LinkedIn. Because we can connect you not just to new people but to new insights.

Are You a Right Brain or Left Brain Investor?

Understanding weather you are left or right brain can help you become a better investor.  The key take away from this Forbes article is to understand how you function.  By understanding your bias' you can gain an edge and help yourself preserve capital when needed or take advantage of opportunities when they appear.  It's much more than saying I am left or right brain, it is knowing what type of person or specifically investor you are.


See Nobel laureate Daniel Kahneman's  book, Thinking, Fast and Slow, for more information on this topic.  Full article here from Forbes

• Right brain investing requires little knowledge and no heavy thinking, which is why most people invest poorly. They hear a story from a financial person, or read about an ETF on Yahoo news, and then they invest thousands of dollars without doing any research. Ironically, these same people will agonize for weeks over which cell phone to buy.
• Left brain investors examine all the facts that are available before making a reasonable choice between risk and return. They look at the past figures and future probabilities. They’ll consider overall portfolio construction, fund expenses, turnover, taxes, etc. This analytical work uncovers many issues with investments that right brain people miss.

How to Spot the Future

Full article via Wired here

• So how do we spot the future—and how might you? The seven rules that follow are not a bad place to start. They are the principles that underlie many of our contemporary innovations. Odds are that any story in our pages, any idea we deem potentially transformative, any trend we think has legs, draws on one or more of these core principles. They have played a major part in creating the world we see today. And they’ll be the forces behind the world we’ll be living in tomorrow.

1. Look for cross-pollinators
2. Surf the exponentials
3. Favor the liberators
4. Give points for audacity
5. Bank on openness
6. Demand deep design
7. Spend time with time wasters

Photo: Brock Davis

The Apple Experience: Secrets to Building Insanely Great Customer Loyalty

The Apple Experience: Secrets to Building Insanely Great Customer Loyalty - Carmine Gallo from Carmine Gallo

Week 29 Performance.....Up, Up, and Down

It was looking like a pretty good week on Wall Street in the equity markets until Friday.  Earnings this week had been a mixed bag with some decent economic news blended in.  But then the wheels fell off when Chipotle Mexican Grill missed sales expectations and finished down 21.5%.


$CMG is one of those classic momentum names that when it is flying it is flying high and when it misses it gets shots down in a hurry.  CMG was able to bring down other names in the sector such as Buffalo Wild Wings $BWLD, Panera Bread $PNRA, and a host of other restaurant .  The fear about trying to pick up these names today as they were getting crushed is the fact that the carnage may not be over yet.  


As the drought continues to stricken the Midwest and corn prices hit all time highs, profit margins with the food names could face additional pressures.  Even if companies are able to push some costs onto consumers, that could lead to lower revenues and still impact the bottom line.


However, every time these names have pulled back, it has represented a buying opportunity.  We still believe that there are growth opportunities within $CMG, $BWLD, and $PNRA and that these are all names we would like to own.  But, we think there may be even better buying opportunities within the next few months.


We believe that if there is one way to play the severe drought conditions it is to wait patiently for these growth names to pull back.  Trying to buy into the grains and other commodities at this point would be a riskier move.


The DWCM fund was in line with the rest of the major markets this week, up 0.6%.  For the year we remain solidly in the black up 16.3% beating all four major equity benchmarks.  Our ag and dividend payer strategies have performed extremely well especially over the past few weeks. Our home builder short position after two weeks is flat despite the bevy of stronger housing reports this past week.  [see Housing Starts & Sentiment]

The Week Ahead
Earnings season rolls on this week which should be our main focus.  Dare I say that Europe has been quite and after Bernanke's speech this past week, the focus could be squarely on earnings?  That may be good news for some companies and bad for others.


Again here is a link to an Earnings Calendar.  You can sort by company or just input the stock symbol of the company that you are looking for.  I had posted early this week here the list of companies that we are keeping a close eye on.


It will be another test of our housing sector strategy as new and pending home sales are reported this week.  Friday will be the big economic day with both GDP and consumer sentiment releases in the AM.

• Mon -  Chicago Fed National Activity Index
• Tue -  PMI Manufacturing Index Flash,  FHFA House Price Index
• Wed -  New Home Sales
• Thu -  Durable Goods Orders,  Jobless Claims,  Bloomberg Consumer Comfort Index,  Pending Home Sales Index Kansas City Fed Manufacturing Index
• Fri -  GDP,  Consumer Sentiment

DreamWorks Capital Management

FREE Seminar:  Our next finance seminar will be on Tuesday September 18th at the The Community House.   The topic will be Balancing Your Changing Investment Needs: Emergency Fund, Investments, Retirement, Education, and Philanthropy.  We will cover significant points regarding creating, developing, and executing on your wealth management plan.  We hope to have another interactive group, so be sure to sign up by emailing me directly at pfenner@dwcmllc.com or by contacting The Community House at 248-644-5832.  There is no charge and light refreshments will be served.

Housing Starts & Sentiment

There was a slue of housing data released this week and if you watch any of the headlines coming out you would become very bullish on the housing sector.  I've come across over a half dozen articles stating the the housing recovery is well under way and that the housing bottom has been formed.  We are not buying.

We still believe that as long as the job picture remains under pressure people will have second thoughts to making big purchases such as houses.  You also have the astigmatism that real estate doesn't hold the value that it used to given the bursting of the bubble a few years ago.  Millions of home owners are still under water making mobility very difficult and refinancing to lower mortgage rates nearly impossible.

Data sources can be found in these article from WSJ, Bloomberg, and Econoday

• Housing starts rose 6.9 percent to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated
• June pace was the fastest since October 2008, and estimates in the Bloomberg survey ranged from 710,000 to 800,000. Ground-breaking on new homes in May was revised from a previously reported 708,000. 
• Building permits fell in June, reflecting a drop in applications for apartment construction. 

Full disclosure we have a short position in the following home builders MHO, PHM, RYL, LEN, DHI, KBH

Special Deflation Report

I came across this interesting piece on deflation from Comstock Partners. In it the authors state their opinion that it is deflation that we still have to fear rather than inflation that is largely talked about as a consequence of the Fed's monetary policies and decisions.

I can understand the logic from both camps and the authors note that points as well throughout their analysis. Sooner or later debts will have to be reduced causing a pull in demand (which has and is likely still occurring)  and promises once made will have to rescinded.

Here is the link to the full report below.  The link includes some additional charts.

App Developers Who Are Too Young to Drive

I often think about my triplets who are are under 2 years old what they may be developing in their later years when I read an article like this one in the WSJ.  The article features a few young entrepreneurs that were invited to attend Apple's Developer Conference.

One such youngster, Midas Kwant, 15, lives in the Netherlands.  Kwant made the most of his visit swinging through Silicon Valley for casual visits to Apple's offices, Facebook's old headquarters, the house where Apple co-founder Steve Jobs grew up and Stanford University, which he hopes to attend. Ultimately, he said, he wants to work at Apple.

I hope that my kids catch the entrepreneurial bug and are able to write their own career ticket.

5 Ways Brands Use Pinterest To Authentically Connect

I have yet to use Pinterest personally but I know that clients and readers do.  When I come across articles such as this 5 Ways Brands Use Pinterest To Authentically Connect that I believe could add value to you the client or reader I post it.  In some ways this is very similar to how Pinterest works.

The author notes "if you don't think about strategy before you dive into Pinterest marketing, your pinning efforts are very likely to be a giant waste of time."  This advice and point of the article is really about strategy which can be applied to any business.  

• Defining Your Ideal Client
• What Does Your Ideal Client Want?
• Becoming a Source of Valuable Information
• Your Action Plan

• Create your ideal client profile(s).
• Brainstorm the needs and wants of your ideal client(s).
• Make a list of ways that you can solve or share on
• Pinterest, to help out your ideal client.
• Regularly remind yourself that social media is a means to an end--not an end in and of itself.

Drivers Pay Secret Road Tax in $15 Billion for Car Repair

As the summer continues to blister along not only at a rapid pace but also from extreme weather conditions, the nation's road repairs are certainly under way as well.  This Bloomberg story takes at look at the high toll that our nations roads are extracting on both our autos and pocket books.


With more efficient vehicles on the road ways and Americans scaling back their driving due to higher gasoline prices, collection in taxes to repair for all of the much needed road repairs comes up short.


It would be extremely unpopular on either political side of the isle to increase the tax.  However there is no way that the current system will be able to keep up with the both the need and increasing costs of repair.


Full story here

•   The U.S. Highway Trust Fund, which helps pay for road and transit projects in Washington and all 50 states, has been bailed out by Congress three times since 2008 for a total of $34.5 billion. The gasoline tax that supports the fund hasn’t been raised in 19 years, and with the cost of materials such as steel and asphalt on the rise, the fund is expected to have a deficit of about $10 billion this year.
• Motorists pay $67 billion annually for increased fuel consumption, body dents, worn tires and premature wear wrought by pitted roads, according to The Road Information Program, a Washington-based research group. The group’s board includes representatives from construction-equipment makers Caterpillar Inc. (CAT) and Deere & Co. (DE), as well as Vulcan Materials Co. (VMC), a Birmingham, Alabama-based asphalt and concrete producer.
• That works out to $324 per licensed driver, says Frank Moretti, TRIP’s director of policy and research. The figure is an average of all vehicles and can vary widely between cars and large commercial trucks, which are prone to costlier damage, he says.

Photo: Justin Sullivan/Getty Images

• Justin Nisly, a spokesman for the Department of Transportation, said in an e-mailed statement that Transportation Secretary Ray LaHood has often stated that “America’s transportation infrastructure is in desperate need of repair, which is why it is so important that Congress pass a transportation bill.”
• “The key is passing a long-term funding bill,” says Michael Green, a spokesman for the American Automobile Association, a non-profit motor club and leisure travel organization with 53 million members in North America. “Without that, states and counties can’t implement projects.”
• Still, to match Clinton-era purchasing power, the gasoline tax would need to rise to 29 cents, according to the Bureau of Labor Statistics inflation calculator.
• The funding crunch has been magnified in recent years by a decline in gasoline tax proceeds as consumers drive cars with better mileage and curtail gasoline purchases. Fuel taxes raised a total of $33.7 billion for road projects in 2006, compared with $30.1 billion in 2009.

The Beginning of the Endgame

Here is the PDF link to John Mauldin's latest Thoughts from the Frontline newsletters.  I have highlighted a couple passages from his letter that I found to be of interest.

• Yes, I have long made the case that we are in a secular bear market in the US (and much of the developed world). But that simply means that I think equities in general offer little upside potential at today’s valuations. These periods run in very long cycles and to ignore them is simply, well, dumb. So we look for opportunities elsewhere than in index investing. What makes it particularly challenging today is that central banks are pushing interest rates down and forcing investors to work far harder for their returns. Simple bond investing will not give us the returns that most of us need for our retirement and desired lifestyles.
• I am bearish on much of the developed world, because the majority of “developed-nation” governments have simply gone too far in debt creation. By “gone too far” I mean that the debt is now too large for them to grow their way out of it. Dealing with the debt is, at best, going to hurt growth and at worst will result in depressions.

Forbes Conference “Brain on Stocks” Presentation

Barry Ritholtz's posted two presentations that he presented at a Forbes conference last week.  The detail on his Top 10 Investor Mistakes can be found here

A Day in the Life of Steve Jobs

After a few months of reading the Job's autobiography by Walter Isaacson I am now half way through.  Mind you I am also reading several other books at the same time.


What is very clear to me as I make my way through his book, is that Jobs lived in a world that seemed to revolve around him and only him.  “He acted as if the normal rules didn’t apply to him, and the passion, intensity, and extreme emotionalism he brought to everyday life were things he also poured into the products he made. His petulance and impatience were part and parcel of his perfectionism," Isaacson writes.

Like any person that has their flaws, he was also a person who was able to accomplish so much and do good in his own unique way.  We've featured several Jobs posts such as The Real Leadership Lessons of Steve Jobs and Steve Jobs - 20 life lessons.

This Forbes article highlights excerpts from the Isaacson book.

• “He astounded me with the intimacy and the openness about people, about ideas, about strategies, about family, about what was valuable, about his place on the Earth, and his mission and why he cared about things,” Isaacson said. “In the end, it was clear what his passions were and how he felt. As he said to me near the end of his life, he had taken a lot out of the flow of history, as we all do — things that people do in the flow of history that helps us be where we are. And so what really counts is what you put back into the flow of history, those things that you make that people after you will use.”

Image credit: Getty Images via @daylife

THE MOST IMPORTANT CHARTS IN THE WORLD

Business Insider was out with a post of THE MOST IMPORTANT CHARTS IN THE WORLD which includes some 69 charts by some of the best financial minds in the world and what they are looking at.

One chart that catches your attention is David Rosenberg's, chief economist and strategist at Gluskin Sheff & Associates.

Noonan: Ennui the People

America is in crisis. Why is the presidential campaign so lifeless?  Peggy Noonan addresses this issue in her weekly WSJ column.

• The 2012 presidential election is unusual. It is a crisis election like 1932 or 1980, with the American people knowing we're at a turning point and knowing that who we pick now really matters. But crisis elections tend to bring drama—a broad sense of excitement and passion. We're not seeing that this year. We're not seeing passionate proclamations from supporters of one candidate or the other that their guy is just right for the moment, their guy is the answer. I'm speaking of the excitement of deep belief: "FDR will save the day." "Reagan will turn it around."

Getty Images

America Has Too Many Teachers

A title such as the one above is sure to draw allot of attention.  However according to this WSJ report since 1970, the public school workforce has roughly doubled—to 6.4 million from 3.3 million—and two-thirds of those new hires are teachers or teachers' aides. Over the same period, enrollment rose by a tepid 8.5%. Employment has thus grown 11 times faster than enrollment. If we returned to the student-to-staff ratio of 1970, American taxpayers would save about $210 billion annually in personnel costs.

Full story here

• Stanford economist Eric Hanushek has shown that better-educated students contribute substantially to economic growth. If U.S. students could catch up to the mathematics performance of their Canadian counterparts, he has found, it would add roughly $70 trillion to the U.S. economy over the next 80 years. So if the additional three million public-school employees we've hired have helped students learn, the nation may be better off economically.
• We can look at the "long-term trends" of 17-year-olds on the federal National Assessment of Educational Progress. These tests, first administered four decades ago, show stagnation in reading and math and a decline in science. Scores for black and Hispanic students have improved somewhat, but the scores of white students (still the majority) are flat overall, and large demographic gaps persist. Graduation rates have also stagnated or fallen. So a doubling in staff size and more than a doubling in cost have done little to improve academic outcomes.
• The implication of these facts is clear: America's public schools have warehoused three million people in jobs that do little to improve student achievement—people who would be working productively in the private sector if that extra $210 billion were not taxed out of the economy each year.

Four fiscal cliffs ahead, and a jobs war

Paul B. Farrell, of MarketWatch who we featured on July 6th, 2012 with his piece 10 explosive bubbles that will kill capitalism, is out with his newest column which focuses on Four fiscal cliffs ahead, and a jobs war.


Below are Farrell's Four Cliffs

1. The health-care cliff: Admit it, it’s a systemic failure. And repealing or tweaking Obamacare won’t stop the hemorrhaging. Costs will keep rising, no matter who’s chief.
2. The taxes/spending cliff: The CBO says that allowing the Bush-era tax cuts to expire, combined with agreed-upon spending cuts, would reduce GDP by 1.3%. That deal is certain to get renegotiated. But until then, uncertainty, and if politicians just kick the can down the road again, new interest costs will increase the deficit, increasing long-term problems.
3. The military budget cliff: Do nothing and the Pentagon automatically gets $55 billion cut in 2013, more over the next decade. In addition, Romney’s on record to increase military spending, even as two wars wind down. U.S. Representative Paul Ryan, Republican from Wisconsin, has said the same.
4. The social programs cliff: Along with military cuts, the same deal negotiated last year included automatic cuts to domestic social-program spending by $492 billion over the next decade. Cuts will intensify stress on the poor and middle-class jobless.

Retail Sales Slip

Retail sales slipped for the second straight months as consumers tighten their belts.  Once again a gain was expected but the numbers courtesy of Barrons show otherwise.


The markets opened lower this morning possibly on this data but have since rebounded mid day off of the session lows.  It will be interesting to see if company earnings begin to show this weakness and if companies begin or in some cases continue to guide down future earnings.

• Retail sales in June were much softer than expected, including auto sales which contradicted manufacturers' numbers for the month. Retail sales in June fell 0.5 percent, following a 0.2 percent decrease in May (originally down 0.2 percent). Analysts forecast a 0.2 percent increase for June.
• Motor vehicle sales dropped 0.6 percent, following a 0.8 boost in May. In the latest month, unit new auto sales posted a moderate gain, which should show up in personal consumption expenditures later this month. 
• Excluding motor vehicles, retail sales decreased 0.4 percent after declining 0.4 percent in May (originally down 0.4 percent). Market expectations were for a 0.1 percent gain. Gasoline sales were a big factor, dropping 1.8 percent, following a 2.0 percent fall in May. 
• Sales excluding autos and gasoline in June slipped 0.2 percent, following a 0.1 percent dip in May (originally down 0.1 percent). Core sales showed widespread weakness in June.

Jane McGonigal: The game that can give you 10 extra years of life

Who knew that playing video games could help save or extend your life?  According to game design Jane Mcgonigal she might have just the answer for you in this TED video

Earnings Season gets into full swing

Below is a list of the companies we are following this earnings season.  As you can see we have some big players reporting this week.

ECRI’s Achuthan: We’re in a recession already

Lakshman Achuthan, chief operations officer of the Economic Cycle Research Institute reaffirms his recession call on Bloomberg Television’s “Surveillance.”

"It's about income and jobs", Achuthan

The Best Strategy for Reducing Stress

According to Peter Bregman in this Harvard Business Review piece he notes two choices when it comes to dealing with stress, "either change the reality around you or change your expectations."


He goes on to say that why it is rather difficult to change reality your best option to reduce stress is to change your expectations.


Bregman goes on to say, "Imagine a scale from 1-10 with 10 being the worst reality you can imagine. Like living in a war zone or being in the World Trade Center on 9/11. Maybe 9 is a serious illness that most probably will result in death. Perhaps 8 is something that will forever alter your life, like going to jail or an accident that puts you in a wheelchair. Let's say 7 is something that temporarily alters your life like losing your job or having to move out of a home you can no longer afford."

From Google, the Toughest Challenger to the iPad

Walt Mossberg, personal technology columnist for the WSJ is out with his review of the Google Nexus 7.


Column highlights from Mossberg

• The new Google tablet doesn't have all the features of the iPad. For instance, it lacks a cellular connectivity option, a rear camera and the iPad's dazzling screen resolution. Its base model has half the memory of the iPad's. It offers fewer content choices—music, movies, TV shows—than either the Apple or Amazon devices do. It also has very few apps designed for a tablet, as opposed to a phone, while the iPad boasts over 200,000 apps for tablet use. And its screen area is less than half the size of the iPad's.
• But Google's tablet is a better choice than the iPad for people on a budget; for those who prefer a lighter, more compact tablet that's easier to carry and operate with one hand; and for those who prefer Google's ecosystem of apps, services and content to Apple's.
• Despite some drawbacks, I found it a pleasure to use.



Photo courtesy of Google

• The Nexus 7, which was built for Google by Asus, is a special type of Google product, all labeled Nexus, which the company sees as a best-of-breed example for Android hardware makers. There have been Nexus phones, but this is the first Nexus tablet. It's is available for pre-order now at Google's online store, play.google.com, and the company expects to start delivering it next week. Also next week, it will become available at a few physical retailers. There's no cellular fee needed to use it, as it's a Wi-Fi only device.

Week 28 Performance.....Tough Trading Waters

The markets snapped their consecutive days loosing streak on Friday with a snap back rally of sorts.  Likely this action was due to people covering their shorts as most of the news this week either economic or earnings related had been weak and disappointing.


Below is a chart courtesy of Bespoke that summarizes the major earnings releases from the week.  We also noted that China's GDP had slipped again and is in a clear down trend.  The global economy is indeed slowing so how do you play it?





People are still flocking to bonds and quality dividend paying stocks.  Depending upon who you ask or what analysis you look at these assets can either been seen as in bubble territory (especially bonds) or close to reaching their full value.


We believe that for those investors that have a tilt toward risk aversion both of these assets are still a better place to be in right now vs. other more risky assets.  The remainder of the summer leading into September we expect continued volatility and choppy markets.  You then may catch a one month break until the US election is sorted out and if the US economy really enters into recession territory.


The DWCM Fund experienced no less than a good roller coaster ride this week swinging from up 1% to finishing the week with just under a 1% loss.  We did make one trade this week, we closed our SDS position which is the double short S&P 500 ETF.  The ETF never really tracked the S&P 500 like you would think it should.  With the markets looking oversold and ready to bounce we exited the position even though we took a loss on it.  This move brings our cash position up to 53% which we believe puts us in a good position to take advantage of opportunities we believe will reveal themselves in the coming months.

The Week Ahead
Earnings season continues to roll on this week which should drive market activities especially in those names releasing earnings.  Here is a link to an Earnings Calendar.  You can sort by company or just input the stock symbol of the company that you are looking for.  I'll include in a separate posts regarding the names we will be following this earnings season at DWCM.


Economic news this week will be focused on housing which could very well affect our short position of 6 home builders we are continuing to carry.  Retail sales could be a driver of market activity right off the bat on Monday morning.  And watch out for Bernanke speaking on Tuesday and Wednesday and what the markets take away as far as QE 3 being in the cards.

• Mon -  Retail Sales,  Empire State Mfg Survey,  Business Inventories
• Tue -  Consumer Price Index,  Industrial Production,  Housing Market Index,  Ben Bernanke Speaks
• Wed -  Housing Starts,  Ben Bernanke Speaks,  Beige Book
• Thu -  Jobless Claims,  Existing Home Sales,  Philadelphia Fed Survey,  Leading Indicators
• Fri - N/A

DreamWorks Capital Management

DWCM has scheduled our next finance lecture & seminar for Tuesday September 18th at the The Community House located in Birmingham, MI.  This quarters topic will be Balancing Your Changing Investment Needs: Emergency Fund, Investments, Retirement, Education, and Philanthropy.  This is going to be a very broad topic in which we will cover significant points regarding creating, developing, and executing on your wealth management plan.  We should have a very interactive group so be sure to sign up by emailing me directly at pfenner@dwcmllc.com or by contacting The Community House at 248-644-5832

China's GDP Slips Again

China's gross domestic product slowed to 7.6% year-over-year in the second quarter, down from 8.1% in the first quarter and its lowest level since the beginning of 2009.

Full story here in the WSJ

Fiscal Debate Conversation Almost Causes Sickness

I was listening to this fiscal debate conversation on CNBC as I was driving into the office this morning and I almost had to pull over because I was feeling sick.  This type of debate is precisely why we are heading off of the fiscal cliff.  There are those in government that believe that we can just continue to spend, spend, spend.

Simpson/Bowles may not be the perfect or the right answer, but it is a step in the right direction.  We tell our clients often that you can not be paralyzed by fear.  You have to be able to take the first step to solve a problem or put together a plan.  To do nothing is actually the worst decision that you can make.

Same theory applies to our national economic situation.  No matter what side of the isle you are on.

Sitting for More Than Three Hours a Day Cuts Life Expectancy

There is mounting evidence that sitting can be dangerous for your health.  Even if you are active and prescribe to getting 30 minutes of physical activity each day.

In a report by BMJ Open sitting for longer than 3 hours a day it could reduce your life expectancy by 2 years.

Full story here in the WSJ.

• "Sedentary behavior is something we need to take note of beyond telling people to get 30 minutes of activity a day," said Peter T. Katzmarzyk, one of the lead researchers for the study and a professor of population science at the Pennington Biomedical Research Center in Baton Rouge, La.
• "Several studies show that when you're sitting, your leg muscles are completely inactive," he said. "When you're sitting and completely inactive, this is when you run into trouble managing blood glucose."
• Last year, scientists found that people who worked 10 years in sedentary jobs, or jobs that don't require a lot of energy expenditure, had twice the risk of colon cancer and a 44% increased risk of rectal cancer, compared with people who had never worked sedentary jobs.

SuperStock

Investors’ 10 most common mistakes

In Barry Ritholtz's most recent Washington Post column he addresses what he sees as Investors’ 10 most common mistakes.  


Full article here, top 10 mistakes per Ritholtz listed below.


1. High Fees Are A Drag on Returns
2. Reaching for Yield
3. You (and your Behavior) Are Your Own Worst Enemy
4. Asset Allocation Matters More than Stock Picking
5. Passive vs Active Management
6. Mutual Fund vs ETFs
7. Not Understanding the Long Cycle
8. Cognitive Errors
9. Confusing Past Performance With Future Potential
10. When Paying Fees, Get What You Pay For

Fed Minutes Release

The Fed released the minutes from their June FMOC meeting.

Jon Hilsenrath of the WSJ issued this report that summarizes where he sees the Fed.  The question at large is whether or not we will see QE3?  And if so how much good would it actually do?

It would not surprise us to see an additional QE package but after seeing the results of the previous packages what is good for the markets may not be good for the economy.

Positive News with Initial Jobless Claims

There was a bit of good economic data that crossed the wires this morning which was the initial jobless claims ticking down for a second straight week.  The decline was attributed to low inventories in the auto sector and the fact that summer shutdown have either been pushed back, reduced, or postponed all together.

Consensus from Econoday

• Initial jobless claims fell 14,000 in the June 30 week to 374,000 which was well under Econoday expectations for 386,000. In a small offset, the prior week was revised 2,000 higher to 388,000 which however is still 4,000 lower than the prior week. The four-week average, at 385,750, was down slightly for a second straight week. Still, the average's trend versus a month-ago was not favorable and showed a 5,000 to 10,000 increase. Improvement for continuing claims, like that for initial claims, has stalled. Continuing claims in data for the June 23 week rose 4,000 to 3.306 million with the four-week average down 3,000 to 3.304 million.

The market obviously did not react positively to the news this morning as we opened down and have stayed down all day today.  Maybe it was the Bowles comment that we are indeed heading off the fiscal cliff.

CNBC Interview with Bowles, Simpson, & Buffet

If you have ever wondered who Bowles/Simpson were here they are,  Alan Simpson is a former senator from Wyoming while Erskine Bowles is former chief of staff to President Clinton.

Below is one of a series of videos posted on the CNBC website.  Go here to see all videos.

According to Bowles, "we're going over the fiscal cliff."