40 Million Mistakes: Is your credit report accurate?

This is a rather troublesome piece that 60 Minutes featured a few weeks ago regarding your credit in America.  Mistakes in your credit score occur far more often than one might imagine   But even if you detect the errors, trying to correct them as the piece below explains is a whole different ballgame.

What was enlightening to us is that the credit report/score that you can purchase on your own from one the the 3 major firms, can be vastly different than the one a company uses to determine your credit worthiness.

Jeremy Grantham on Investing in a Low-Growth World

You never know where Jeremy Grantham, head of GMO, quarterly newsletter will appear. This past quarter for Q4 2012 appeared front and center in the editor's section of Barron's.  I have also enclosed a link to a PDF version here located on the GMO website.

As usual Grantham's newsletters are always extremely insightful but can also get quite lengthy.  Below is a few bullet points that we took away from his piece this quarter.

• For there to be a stable equilibrium, assets, including entire corporations in the stock market, must sell at replacement cost. If they were to sell below that, no one would invest and instead would merely buy assets in the marketplace cheaper than they could build themselves until shortages developed and prices rose, eventually back to replacement cost, at which price a corporation would make a fair return on a new investment, etc.
• The history of market returns completely supports this replacement cost view. The fact that growth companies historically have underperformed the market – probably because too much was expected of them and because they were more appealing to clients – was not accepted for decades, but by about the mid-1990s the historical data in favor of "value" stocks began to overwhelm the earlier logically appealing idea that growth should win out. It was clear that "value" or low growth stocks had won for the prior 50 years at least.
• In the meantime for us at GMO it means emphasizing care and maintaining a heightened sense of value discipline, not only in stock selection, as the whole world is once again bid up over fair value in a way so typical of the post 1994 era, but also in forestry and farmland. GMO has investments in those areas too and recognizes the need to sidestep overpricing by emphasizing the nooks and crannies. Fortunately there are more nooks and deeper crannies in forests and farmland than there are in almost any other area, certainly including stocks.
• When one combines the apparent determination and influence of those who do the bullying with the career risk and short-termism of the bullied and the desire of the general public to believe unbelievable good news, these overpricings can go much further and the Fed can win another round or two. That's the problem. A clue to timing would be when we begin to hear more passionate new era arguments: profit margins will always be higher; growth will snap back to 3% for the developed world; and new ones I can't think of … maybe "when the discount rate is this low the Dow should sell at, perhaps, 36,000." In the meantime, prudent managers should be increasingly careful. Same ole, same ole.

2013 Week 7 Performance.....Finishing where we started

Three of the four major indices finished just about where they started this week.  The only diverging index was the broad based Russell 2000 which finished higher by 1%.  The S&P 500 barely kept it's positive weekly winning streak alive for 2013 with a 0.01% gain.

The VIX, which measures volatility finished under 13 which really indicates a subdued markets as far as volatility is concerned.  Although markets were roughly flat for the week, this doesn't mean that there wasn't much movement.  The DJIA had about a 150 point range between it's high and low of the week.

With the mandatory budget cuts only a week week away...again, people are likely just sitting back watching how things are going to play out.  Many of the stocks that did move this week were ones that reported their earnings.

Buffalo Wild Wings BWLD, (a name that we own in the TAMMA Fund and our own personal portfolio) reported strong growth for the quarter and the full year despite the rise in chicken prices.  

• Sally Smith, President and Chief Executive Officer, commented, "We achieved a 37.8% increase in revenue for the fourth quarter as a result of strong same-store sales of 5.8% at company-owned restaurants and 7.4% at franchised locations, 62 additional company-owned locations in 2012, and incremental revenue from our fourteenth fiscal week. For the year, our total revenue exceeded $1 billion, a new milestone for Buffalo Wild Wings! High cost of sales continued in the fourth quarter, offsetting some of the bottom-line benefit of the fourteenth week, resulting in net earnings growth of 22.3% for the fourth quarter and 13.6% for the year."

The stock dropped on the news but rebounded throughout the rest of the week to finished up 1% for the week.

We also noted that we were following Archer Daniels Midland (own in personal account) who reported solid results in the previous week (see here for details).  ADM finished higher in the week by over 4% due to reports that Warren Buffet had taken a stake in the company.

Gold Miner Kinross Gold Corp (own in TAMMA Fund and personal account) finished 4% lower on the week after it reported a wider loss than expected on better than expected revenue.  The concern here is that prices to mine gold are rising faster than anticipated.

These are just a few examples of the names we were keeping a close on eye this week, but bottom line, it is becoming more of a stock pickers market where all stocks are not moving in the same direction either up or down.  Which is a good situation for us at TAMMA.

Initial jobless claims caught our attention this week.  See below the positive commentary by Econoday

• Initial and continuing claims are at their lowest levels of the recovery and are pointing to building strength for job growth. Initial claims fell 27,000 in the February 9 week to a 341,000 level that is nearly 20,000 below the Econoday consensus. The four-week average, at 352,500, is about 10,000 below the month-ago trend which offers an early indication of strength for the February employment report. Next week's report, which will offer data on the survey week of the monthly employment report, will provide a more telling indication.

Another data point we were watching this week was retail sales.  Given the increase in the payroll tax that affects every working American, we surmise that this data source will tell us how big this tax impact is having on people.  The number for January was actually quite decent with the actual number matching the consensus estimate of a gain of 0.1%.  We believe that February and March numbers will be more telling of the tax impact.

The Week Ahead

This is a shortened trading week in the US with markets closed on Monday in observance of President's Day.  The rest of the week has some solid economic data points mostly surrounding the housing market.  The housing recovery does not seem to be loosing any steam.  And as the employment situation continues to gain traction, this could keep the momentum in the housing segment going as well.  We are continuing to hold our own short position of a basket of home builders.  We will likely let this strategy ride until the spring and make a determination then as to it's future.

• Mon - Markets closed for President's Day
• Tue - Housing Market Index
• Wed - Housing Starts, Producer Price Index
• Thu - Consumer Price Index, Jobless Claims, PMI Manufacturing Index Flash, Existing Home Sales, Leading Indicators
• Fri - N/A

Have a great week!

TAMMA Capital - Our Mission

TAMMA Capital LLC is an investment management firm dedicated to being a responsible steward of our clients’ assets, and helping them to achieve their investment and life style goals.

TAMMA’s Strategic Investment Advantage

At TAMMA, we buy individual securities and specialized ETF’s.  TAMMA is less expensive than most mutual funds even though we create a personalized, tailored portfolio for each client.  Our entire focus is on doing what is best for our clients.  In addition, TAMMA

• Personally select assets to build customized client portfolios
• Is an independent RIA which allows for increased flexibility to utilize multiple investment options
• Has the ability to manage all of a client’s investable assets including brokerage, retirement, 401k, and business accounts

The TAMMA Value Chain

TAMMA strives to provide value to individuals and small/medium sized businesses.  Key components include:

• Return on Investment (ROI)
• Peace of Mind
• Quality Network of Professionals
• Turnkey Solutions
• Business Operational Solutions

TAMMA Capital LLC is a Registered Investment Advisor (RIA) in the State of Michigan

Happy Valentine's Day via Ronald Reagan

I had originally posted this piece regarding the personal life of former President Ronald Reagan in September of last year.  I thought that it was very fitting to post again given that today is Valentine's Day.

It has been well documented in a series of letters and books the relationship that President Reagan had with his wife Nancy.  The two shared some type of love and connection that would make any couple envious.

In a letter to his son Michael, the night before he was to marry, the President wrote the following letter courtesy of the website Letters of Note.

• There is no greater happiness for a man than approaching a door at the end of a day knowing someone on the other side of that door is waiting for the sound of his footsteps.

(Source: Reagan: A Life In Letters; Image: Ronald Reagan, via.)

Yahoo January Traffic Growth Topped Google

According to Susquehanna Financial and ComScore, U.S. Internet traffic was up 1% year-over-year in January, slightly better than the flat year-over-year growth rate last month.  The big shocker was that Yahoo unique visitors was up 5% year-over-year vs. a 2% increase at  Google. 

See Full Barron's article here

A Beautiful Vision Of An American High-Speed Rail Map

Fast Company post

Day Trading Apple and Other Investment Tales

This is a good post at Barron's that shows you how the varying investment thesis' can be so different person by person.  The article makes some very good points surrounding Apple's current strangle hold on some markets and the dominance of their ecosystem.  I own a few Apple products and love them.  However when it came time to buy a new computer last year, I originally bought a MacAir but after a week using it, I decided that the learning curve just wasn't worth it.  Instead I bought a similar Lennovo ultra weight laptop that I really like.  However, I have had nothing but problem with it.

2013 Week 6 Performance.....Not even a Blizzard can stop these markets

I imagine many people in the northeast are either beginning to dig themselves out from the giant storm that has taken place over the past few days or even some are continuing to wait it out.  Here in the Midwest where we reside, the snow totals were only about half of what was expected.

Nonetheless, nothing can seem to stop these equity markets from pushing higher.  The S&P 500 capped it's 6th winning week in a row and has yet to see a down week so far this year.  Just about everyone is waiting for some type of pull back which has yet to happen.  This may indicate the higher the rise, the harder the fall.

The broader based Russell 2000 index which includes many smaller market cap companies, continues to lead the way as far as performance is concerned this year.  Out of the four major indices that we track, the Russell is leading the pack with a return of 7.6%.  

The TAMMA Fund had a difficult week due to the continued out performance of Netflix.  This is one stock that has quite a bit of momentum behind it.  We are still standing behind our call that the company is severely overvalued and will eventually come back down to earth.

Apple showed signs of strength this week despite being in the limelight as famed hedge fund manager David Einhorn of Greenlight Capital, suggested that the company needs to do more with it's cash position.  Einhorn reportedly owns between 1.3M and 1.5M shares of Apple.  We particularly liked a discussion we heard on Bloomberg Friday morning with The Big Picture's Barry Ritholtz.  

Ritholtz's point was who knows more about what to do with Apple's cash than Apple.  He went on to suggest that just because the company has retreated in price the past two quarters does not make it a damaged company.  People weren't telling Apple what to do on the way up so why are people trying to tell them what to do now given a lower stock price?  We completely agree with Ritholtz while we also continue to stand behind out current long Apple positions.

Moving on from Apple, a sector that continues to perform well this year and is part of our long-term strategy are the agriculture companies.  Currently we own Mosaic, Monsanto, Terra Nitrogen, and Lindsay.  We are also following equipment maker Agrium, but are hesitant to take a position given the run in the stock over the past 12 months.  However, any signs of a pullback we would be buyers of this company.

There was a mixed bag of economic data released this week.  The big stunner was the drop in productivity which showed a decline of 2%.  This drop supports the lower GDP number for Q4 reported last week.  Some of this could be attributed to the uncertainty caused by the fiscal cliff as companies pulled back not knowing what to expect.  Initial jobless claims continued to slow and steady march lower which has to be seen as a positive.

The Week Ahead
Another light schedule of economic data lies ahead of us this week.  Again, look for individual company earnings report to drive stocks.  We will be specifically watching Buffalo Wild Wings, Kinross Gold, and Archer-Daniels Midland.

• Mon - N/A
• Tue - NFIB Small Business Optimism Index
• Wed - Retail Sales, Import and Export Prices, Business Inventories
• Thu - Jobless Claims
• Fri - Empire State Mfg Survey, Industrial Production, Consumer Sentiment

Have a great week!


TAMMA CapitalI wanted to thank everyone who attended our business book club review of “The Power of Habit: Why We Do What We Do in Life and Business” by Charles Duhigg at The Community House in Birmingham this past week.  We had a great turnout of approximately 35 people.  For those of you who could not attend or are interested in learning more about the book, please email us for a "Guide to Changing Habits" by the author as well as an outline of our discussion.

During the past few weeks, you may have noticed that we have not been writing as many posts as we typically do. Our focus over the past few weeks has been working on the redesigned website that we hope to launch within the next week.  We appreciate everyone's understanding and we look forward to bringing you continued great content once this project is complete.

Bill Gross: Credit Supernova!

Manager Director of PIMCO, Bill Gross, penned this nicely written article Credit Supernova, which he attempts to explain the way credit has been working or accurately put has not been working within our monetary system.

As more and more QE is spread across the land, it returns less and less.

• Each additional dollar of credit seems to create less and less heat. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. Over the last decade, it has taken $10, and since 2006, $20 to produce the same result.
• So our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic – it is running out of energy and time. When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets.

2013 Week 5 Performance.....And Five Years Later We Are Back

In case you hadn't heard on Friday the Dow Jones Industrial Average finished above 14,000 and the S&P closed above the 1,500 mark.  The significance behind these two numbers is that we have not been at these levels in over 5 years just prior to the bottoming out of the equity markets during the Great Recession.

A lot has happened over the last 5 years but no use walking down memory lane.  What people really want to know is if this rally can continue to steam ahead?  We wish we knew what the answer was although it makes us a little nervous when almost every night this week the lead story on ABC World News was about the stock markets. 

As usual there is no shortage of uncertainties, but there are also pockets of "goodness" that continue to appear.  The jobs number on Friday came in just about where people expected, initial jobless claims are still trending lower, and auto sales released on Friday have us on a record pace for 2013.  I guess the best way to sum things up is that we are cautiously optimistic.

No one wants to be left behind in this current rally especially if you already missed most of the upswing over the past 5 years.  According to a few reports that we have seen, those that stuck it through the great downturn are basically back to the same level prior to the crash or maybe even a little ahead.

But returning back to the question at heart, where do we go from here?  The answer lies somewhere in the middle as usual.  Those of you you have followed us over the course of the past few years already know that investing is not about being either all in or all out.  We believe that it takes a balanced approach to succeed because you won't be able to avoid every bottom or catch every top.

At TAMMA, we have focused on both long-term and short-term strategies while basing our overall cash position within the portfolio on where we think the markets and economy are headed.  This has resulted in sometimes excessively high cash positions which was most of the second half of 2012 while during the end of 2011 and beginning of 2012 we had a much lower cash position.

Currently our cash position is overly high for where we would like to be but part of that is due to market conditions.  We will not chase performance.  We want to ensure that we are buying positions at the price levels that will bring increased value and provide a level of safety.

Other news to note this week included the Case-Shiller Home Price Index which one again reiterated the climb in housing prices.  The Consumer Confidence and Sentiment surveys were a bit mixed with one report up while the other was down.  The big shocker of the week had to be the negative GDP number for Q4 2012. The decline was largely driven by a decrease in inventory build and a decline in government spending.  We would say overall that most economic data released throughout the week showed a steady recovery which likely helped push the overall equity markets higher.



The Week Ahead
Compared to last week, this week is rather light on economic data.  There doesn't appear to be any big drivers that could move market activity.  So look for external news and continued company earnings reports to guide the markets.

• Mon - Factory Orders
• Tue - ISM Non-Mfg Index
• Wed - N/A
• Thu - Jobless Claims, Productivity and Costs, Consumer Credit
• Fri - International Trade, Wholesale Trade

Have a great week!

TAMMA Capital Management

I hope that readers have noticed the conversion to our new name and logo atop the website.  You may have noticed that during the month of January we were not able to write as many posts as we usually do.  Instead we have been spending a lot of time on the redesign project of the entire site.  We hope to be able to launch the new site this week so stay tuned.

I also wanted to mention for those readers who live locally in Metro Detroit, we will be hosting a business book club review at The Community House in Birmingham this Wednesday February 6th from 6:30 to 8 PM.  We will be discussing “The Power of Habit: Why We Do What We Do in Life and Business” by Charles Duhigg.  Individuals and businesses are capable of tremendous shifts. It’s needed, because 40% of actions people perform each day aren't decisions, they’re habits. The way we organize our thoughts and work routines has tremendous impact on our productivity, financial security, health, and happiness. This book explores how habits emerge in individuals; examines the habits of successful companies; as well as the habits of society.

Morningstar Director of Technology

Since a growing portion of the TAMMA Fund and our individually managed client portfolios hold extensive technology positions, we thought that this Morningstar video report would give some additional insight into the tech sector.

Susan Cain Helped Introverts Find Their Voice; Now, She'll Teach Them To Embrace Public Speaking

For those of you looking for public speaking help either personally or for your business, take a look at this TED video of Susan Cain and the corresponding Fast Company article.  Cain is a s self proclaimed introvert living in an extrovert world.  Her message is to be true to yourself and listen to your own voice.

Why You Should Work From A Coffee Shop, Even When You Have An Office

Working out of a home office I personally can really relate to this Fast Company article highlighting some of the benefits of working outside of your home base.  Some time just a change of scenary can do a world of good both from a creative and productivity standpoint.

• A change of environment stimulates creativity
• Fewer distractions
• Community and meeting new people

Do January Returns Bode Well for 2013?

As we close out the first trading month of 2013 on a positive note, some investors may be wondering about the January Effect when it comes to the equity markets.  The January Effect is simply looking at how the rest of the year performs vs. how the actual month of January performed.  Not very scientific but nonetheless the data according to this Barron's article shows the DOW has better shot of staying in the positive than if January was a down month.

It goes with out saying, we would not make investment decisions based upon this data point alone.

January Barometer

Dow in January is…	% of time Dow rises from February through December	Average Dow gain from February through December
Up	73%	7.68%
Down	52%	3.78%
All years in sample	66%	6.27%

Best Values in Public Colleges, 2013

Kiplinger is out with it's top 100 college value choices.  According to Kiplinger their criteria is based upon tangible measures of academic quality—including test scores and four-year graduation rates—as well as affordability.

Top 5 list is below along with a couple of highlights.  The University of North Carolina takes the top spot for the 12th time.  Go Heels!

• Despite a slowly improving economy, the landscape for public colleges continues to look bleak. Having endured cuts in state appropriations over the past several years, colleges have bumped up class sizes and trimmed administrative staff. Meanwhile, the average sticker price—$17,860 for in-staters and $30,911 for out-of-staters, according to the College Board—climbed 4.2% and 4.1%, respectively, over last year, once again outpacing inflation and family incomes. An even bigger cause for concern: The net price (sticker price minus financial aid) for in-state students has risen for the third year in a row.
• The outlook for new grads isn’t much better. Many recent graduates are swapping mortarboards for part-time or low-paying jobs, while tackling student debt. "The notion that college is a ticket to a good, middle-class life of prosperity is perceived to be less true today," says Richard Vedder, of the Center for College Affordability and Productivity. Still, a typical college grad can expect to make about $20,000 more per year than the typical high school graduate.

Top 5 Ranked Colleges according to value

1. University of North Carolina at Chapel Hill
2. University of Virginia
3. University of Florida
4. College of William and Mary
5. University of Maryland, College Park

Speedier Internet Rivals Push Past Cable

How much internet speed does one really need?  Well the need may or may not be there, but the demand is surely growing.  According to the graph below by RVA Market Research courtesy of this WSJ article, high speed internet users are scheduled to reach over 10M by 2016.

This could mean costly upgrades for current carriers who have been using huge amounts of free cash flow to buy back stock and increase dividends.  This would also mean pressure on earnings but would the investment be worth it?  Some costs would likely be passed along to consumers who are already looking for low costs alternatives to the current major cable subscribers.

This is likely a very long trend that would have to play itself out, but one worth keeping your eye on.

Everything Is Marketing: How Growth Hackers Redefine The Game

For those of you small business owners out there struggling without a lofty ad budget, review this piece in Fast Company that discusses the new ways of marketing.

• At the core, marketing is lead generation. Ads drive awareness…to drive sales. PR and publicity drive attention…to drive sales. Social media drives communication…to drive sales. Marketing, too many people forget, is not an end unto itself. It is simply getting customers. And by the transitive property, anything that gets customers is marketing.
• innovations were possible because they came from startups, businesses typically averse to traditional marketing for two reasons: 1) they don't have the money and 2) they don't have the experience. Because they didn't have access to the "luxuries" of an ad budget or the burden of proper training, they were able to be creative enough to broaden the definition of marketing to immense advantage. Meanwhile, companies with the ability to spend millions a year (or month), chug along with poorer results and poorer ROI.

Although the article may be light on specifics, if may give you a spark to think of something different that you can do as far as getting the word out about your own product or business.

Ray Dalio on CNBC

Amazing that Ray Dalio, founder of Bridgewater Associates, one of the largest hedge funds in the world started with $5M and grew it into $130B in asset under management.  Notice how he sets the stage for the interview.  We like Dalio because he is not about stock tips but how the economic machine works and understanding its cause and effect.

Visit NBCNews.com for breaking news, world news, and news about the economy

Hoisington Quarterly Review and Outlook, Fourth Quarter 2012

Each quarter we post the Hoisington Quarterly Review.  There team does a tremendous job of breaking down the future US and global economic outlook.  This quarter there is a keen focus on the increases in taxes and the effects that it could have or will have upon the US economy.  We had listed in a previous post the tax increases that were going to occur as part of the American Taxpayer Relief Act, we have listed them again below as part of the Hoisington Quarterly Review

1. A 4.6% increase in the top marginal tax rate to 39.6%;
2. A phase-out of itemized deductions (mortgage interest expense, various state taxes - income, property and sales - and charitable gifts) for high-earners;
3. A phase-out and elimination of personal exemptions for high-earners;
4. An increase in the tax rate to 20% for capital gains and dividends for highearners;
5. A 3.8% surtax on capital gains, dividends and other investment-type incomes for high-earners;
6. A 0.9% surtax added to the Medicare tax for high-earners;
7. A 2.3% excise tax on medical device manufacturers;

Barron's: The Next Boom

This weekends edition of Barron's featured a great cover story called  Made in America which highlights the cheap natural gas and oil boom occurring within the US and how it is making manufacturing more affordable than producing goods overseas.  This is certainly not a new theme to TAMMA readers as we have been pounding this story for the past few years.

The Barron's article highlights 8 specific companies that they think will do well given the energy boom and related increases in manufacturing.  While we do not agree with all or many of there choices, we do see value in the railroads which the article highlights two companies Union Pacific and Kansas City Southern.

Most of the eight companies featured are large companies but within this strategy we would prefer to find smaller companies with the ability to grow faster or be acquired by one of their larger competitors.

Billionaire Hedge Fund Showdown on CNBC

For those of you that follow the big hedge fund managers, Bill Ackman and Carl Icahn are two of the biggest.  This is an extremely rare event for this type of conversation to take place on air.  Behind closed doors any thing can go.

2013 Week 4 Performance.....8 Days in a Row

Yes believe it or not, the equity markets have now been up 8 days in a row.  We have not seen this type of streak since 2004.  Also this week marked a return to a 5 year high in the S&P 500.

Unfortunately not everyone is participating in this rally.  You have a group of people that have

1. Sat on the sidelines
2. Bet against the market during this rally mode
3. Chosen specific stocks that for one reason or another have not participated in this upward momentum, especially within the last month

At TAMMA Capital we could fall into a 4th category if you will, touching points two and three but also participating in the increased gains as well.

We had an earlier post this week, Why does this bull market get no respect?  We discussed the upcoming four year anniversary of the Great Recession bottom in market terms as well as the fears people have in getting into the equity markets now fearing a new top.

At TAMMA we have always emphasized that being invested in the markets is not a all or nothing strategy.  There are times when caution is the best way to proceed while at other times, it is best to be more aggressive.

You are never going to be able to call every bottom or top so the best strategy to employ in our opinion is one of balance based upon our own analysis and conviction.  Right now that conviction is being put to the test in the form of Apple and Netflix.

These two stocks which we highlighted in this post, have completely changed spots as far as a stock that was the envy of the market to one that no one wants to own.  Apple was once hot and now it is not.  Netflix was once cold and now it is not.

The question that we posed is what strategy or analysis will come out on top?  The fundamental strategy that Apple is a much better company than Netflix?  Or the current technical trend that says Netflix is the one to own and Apple is the one to dump?

We have squarly made our decision and that is to continue to back our long position of Apple and add to our short of Netflix.  Yes, Apple could turn into a value trap but with a Fwd P/E of 7.4 vs. a 68.5 for Netflix, we like our chances with a proven winner like Apple vs. Netflix.

Our performance this week underscores the change in market prices between these two stocks.  We finished this week down while the rest of the markets were up.  To offset the unfavorable Apple/Netflix performance, we have had our other long-term strategies of agriculture and solid companies with good dividends continue to pay off.  This is where the balance that we spoke about earlier pays off and why it is never a good idea to bet the "farm" on one stock.

On the economic front this week we learned that the supply of exiting homes is getting tighter which is helping to increase home prices.  Good for those that own a house and are trying to sell.  On the flip side, new home sales are seeing continued strong momentum and price increases.  The median price of $248,900 is the highest in more than five years. This does not bode well for our short home builder position which we will be exiting next week.

Continued improvement in the labor markets showed again in the release of initial jobless claims.  The four-week average is nearly at a five-year low.  More people keeping their jobs could increase consumer confidence and thus spending.

The Week Ahead

This week is the bonanza of economic data releases.  The biggest event will be the jobs report at the end of the week but there is so much data to get through before Friday that could have major implications upon the equity markets.  A better than expected GDP number on Wednesday or jobs number on Friday could push equity markets towards all time highs.  Also pay attention to the auto sales numbers are Friday which could give further indication of how well the consumer is willing to spend.

• Mon - Durable Goods Orders, Pending Home Sales Index, Dallas Fed Mfg Survey
• Tue - FOMC Meeting Begins, S&P Case-Shiller HPI, Consumer Confidence
• Wed - ADP Employment Report, GDP, FOMC Meeting Announcement
• Thu - Challenger Job-Cut Report, Jobless Claims, Personal Income and Outlays, Employment Cost Index, Chicago PMI
• Fri - Motor Vehicle Sales, Employment Situation, PMI Manufacturing Index, Consumer Sentiment, ISM Mfg Index

Have a great week!

TAMMA Capital Management

If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what TAMMA can do for you.  No matter what stage in life you are currently at, TAMMA can help you plan for your ever changing needs.

TAMMA can you help you with any of the steps in your wealth management journey including;

• Addressing emergency fund needs
• Developing a retirement plan
• Sending a child to college
• Looking at various investment options
• Determining how to involve philanthropic passions as apart of your planning process

With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.

Who Cares About Debt if We're All Dead in the Long Run?

There is not much that I am going to add to this Randal Forsyth Barron's column except for that it makes for a very good discussion between those that are married and those that are single.

Mind Blowing Turn of Events

Apple and Netflix are certainly a tale of two different companies and two different stock prices right now.  Once the envy of the market, we have well documented the free fall that Apple's share price has been in since last fall.  On the other side of the equation, Netflix whose stock was being hammered for most of 2012 is now on a trajectory towards the moon.  The reason...one company reports an unbelievable quarter and misses expectations i.e. Apple, while Netflix beats expectations while turning in a decent quarter.

Full disclosure we are long Apple and short Netflix.  The stories between these two companies could not be more different.  In the Apple, you have a company setting all time records as far as revenue, profit and cash are concerned but there is fear of where the next big break through will occur and legitimate concern over margin compression.  With Netflix, you have decent but not great subscriber growth and an ever rising cost of content that is sure to eat into profits and cash.

The big winner in this surge in Netflix share price is billionaire investor Carl Icahn.  Icahn reported a 10% stake in the company in November, buying about 5.5 million shares at around $58 a share. He is now sitting on a nearly $500 million gain.

From a fundamental standpoint Apple and Netflix are on opposite ends of the spectrum.  From a technical standpoint Apple and Netflix are on opposite ends of the spectrum.  So which side wins?

We are betting that the fundamentals are going to eventually win out in this current dual between these two companies.  In fact, we will likely be adding to our short position of Netflix today and have already indicated that we would be buying Apple near the $425 mark.

Investors should be somewhat patient with this strategy as it could take come time to play out.

Morningstar piece on Nertflix

WSJ piece on Apple

Reconstructing Apple

As Apple’s stock price continues to decline, it becomes cheaper on a fundamental basis.  There are times within a stock’s price history that it relative value discounts from the actual market value.  Is this one of those times for Apple?

A key question investors are asking themselves is what will drive the stock higher?  This quarter’s earnings report shows the slowest growth in almost a decade and margins may be compressing due to pressure to serve lower price markets and a change in product mix.

Is Apple going the way of Microsoft where it is a huge generator of cash but cannot move the needle on growth because of its massive size?  Think...The Law of Large Numbers courtesy of the Kahn Academy and a partial definition below from  Investopedia

• If a large company continues to grow at 30-50% every year, it would eventually become bigger than the economy itself! Obviously, this can't happen and eventually growth has to slow down. As a result, investing in companies with very high market capitalization can dampen the potential for stock appreciation.

As you can see, there are more questions than answers.  What is clear is that Apple’s stock was heading to the moon up until it hit the $700 mark and then from there has been in a complete free fall.  It has blown through the key technical support of $500 and the next level of support looks to be around $425.  If the stock did reach back down to $425 per share, that would represent a drop from it's high of nearly 40%.

Full disclosure, we currently are long the stock and long an option position that doesn't expire until January 2014 in our TAMMA Fund.  We also hold Apple positions in our client managed accounts.  With that said, we are going to hold onto Apple for now and would look to be buyers around the $425 price.

While growth may be slowing we believe that other catalysts and opportunities will present themselves such as TV and delivering lower cost product to more of the mass market will certainly help to expand the massive brand.  Margins may not be as high as the last few years but cash flow will certainly grow.  This could lead to an increase in the dividend, special one time dividends, and/or future acquisitions.

Reuters article

Marketwatch article

Why does this bull market get no respect?

This quarter we mark the 4 year anniversary of the bottoming of the great recession, at least in equity market terms, because as we know there is still a large portion of the country that has still not recovered.

The past weekend's edition of USA today was headlined by a question Why does this bull market get no respect?  One of the short answers is the lack of confidence people have in investing period.  After being rocked by the dot.com bubble in the early 2000's then enduring the subsequent equity market free fall along with the bursting of the housing bubble, investors are practically scared stiff.

To make matters worse investors who have sat this huge rally out are probably even more fearful to get back in now as the equity markets touch new 5 year highs.  With investing you have to be forward looking.  Does the future look better than the past?

As we pointed out in this post along with Doug Kass, there will always be varying degrees of uncertainty.  The question then becomes, which ones are worth dealing with and which ones are not?  As more "black swam" events appear to be occurring more frequently, it gets harder and harder trying to decided when to be in the markets and when to be out.  In our minds, it is not an all or nothing strategy.  Rather it is having a basic understanding of what future risks could be and then adjusting your strategy to minimize those risks head on.

Full USA Today article here

Websites Vary Prices, Deals Based on Users' Information

Have you ever noticed the variation in pricing among online retail sites?  Have you ever wondered why?  Personally I have seen prices for items on Amazon change by the hour.  This WSJ article takes an in depth look at the why and how of online pricing.

In case you were wondering, price discrimination is perfectly legal as long as it does not discriminate based upon race, gender, religion, etc.  Case in point an airline can charge you $400 for a plane ticket while the person next to you only paid $200.

This article can give you some additional insights as to what to look for in online deals and also provides details on how some of the mentioned companies look to maintain or increase profitability.  Maybe some of these methods could work for you business owners out there.

Doug Kass: 15 Surprises for 2013

We wanted to get this post out before the first month of the new year passed us by.  Every year mark news maker and portfolio manager Doug Kass of Seabreeze Partners puts out his list of 15 surprises.  His list can tackle not only financial topics but also political and world issues.

What I like about the Kass article is what he says right off the bat which are the lessons he has learned from putting together such a list year after year.

• how wrong conventional wisdom can consistently be;
• that uncertainty will persist;
• to expect the unexpected;
• that the occurrence of black swan events are growing in frequency; and
• with rapidly changing conditions, investors can't change the direction of the wind, but we can adjust our sails (and our portfolios) in an attempt to reach our destination of good investment returns.

I especially like his second point, "that uncertainty will persist."  As we celebrate the ceremonial inauguration of President Obama today as well as Martin Luther King, hope and optimism rain supreme.  There is a phrase that I often hear which is "It's always morning in America".  Translation, tomorrow is a new day and anything is possible.While there will always be opportunities to tackle, there will always be opportunities for success.

For the complete Kass list go here

2013 Week 3 Performance.....Divergence

While the equity markets continued their steady climb higher since the beginning of the year, there has been a divergence of late between the benchmark averages.  This week the DJIA, S&P 500, and Russell were all up over 1% while the NASDAQ could only muster a gain of 0.3%.  The answer comes down to one word, Apple.

Apple continued its slide lower down another 3.9% this week alone.  For the year it is down just over 6%.  This has definitely impacted our performance with the TAMMA fund as Apple is our largest holding representing about 5.1% of our total portfolio value.  This can largely sum up our under performance thus far this year but we are not alone.  The strong rally this month has caught many fund managers off guard and the questions now becomes will there be a pullback and when?

The railroad companies CSX and Norfolk Southern both report earning after the close on Tuesday this week.  The rails can be a good indicator of the overall health of the economy.  We have had these two names on our watchlist for sometime now just waiting for the right entry point.

Living in Detroit there has been a buzz about the city surrounding the international auto show this week. As noted there were over 50 new vehicles launches and while some were just cosmetic in nature other vehicles received a complete overhaul.  So far traffic is up for all of the shows events including opening day to the public which occurred on Saturday.  Some estimates have total vehicle volumes over 15M units this year which would put us back on pace to where we were pre-Great Recession.  The big difference this time around is the automakers have right sized their businesses to really take advantage of this increase in demand.  Currently we own Ford in the portfolio have have previously owned BMW.

Things in Washington have were once again on the quiet side this week.  It appears as though politicians are preparing to kick the debt ceiling and deficit cuts down the road a few more months.  Although it shouldn't come to a surprise for any of us, it is baffling on how this group of people cannot come together to do what is right for the country.  When do we ever see clarity again?

Credit the equity markets and their resilient nature for having the ability to look beyond this set of current uncertainties and rally strong as they have done basically all month long.  Sooner or later fund managers are likely to capitulate and start buying in order to not be left behind which could in the short term drive markets even higher.  It takes a balanced approach, one that we are looking at every day in order to decide how to enter the markets and at what price level on specific positions.

You can never predict the markets so you use the best data available to drive decisions that affect when and what to buy.  Having conviction in whatever strategy you choose is a must have requirement which we certainly have at TAMMA.  However, you have to have a level of flexibility to change with market conditions   A bend but don't break mentality if you will.

As we noted the portfolio trailed the benchmarks this week and we are working on various ways we can enter this market with some degree of confidence and most importantly a margin of safety. 

The Week Ahead
There is a rich amount of housing and manufacturing data of this week.  Markets are closed on for the Martin Luther King holiday.  Monday is also the public Presidential swearing in ceremony.  The President was actually sworn in on Sunday the 20th.

Look for earnings reports to come fast and furious this week.  In addition to CSX and NSC, we will be watching the following names; F5, McDonald's, and Microsoft.

• Mon - Markets closed
• Tue - Chicago Fed National Activity Index, Existing Home Sales, Richmond Fed Manufacturing Index
• Wed - FHFA House Price Index
• Thu - Jobless Claims, PMI Manufacturing Index Flash, Leading Indicators, Kansas City Fed Manufacturing Index
• Fri - New Home Sales

Have a great week!

TAMMA Capital Management

If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what TAMMA can do for you.  No matter what stage in life you are currently at, TAMMA can help you plan for your ever changing needs.

TAMMA can you help you with any of the steps in your wealth management journey including;

• Addressing emergency fund needs
• Developing a retirement plan
• Sending a child to college
• Looking at various investment options
• Determining how to involve philanthropic passions as apart of your planning process

With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.

Google Throws Open Doors to Its Top-Secret Data Center

In my attempt to catch up on my readings over the Holidays which includes Wired Magazine, I cam across this piece about Google data centers.  In an unprecedented manor, Google granted access to Wire writer Steven Levy who was able to tour a few facilities including the data center in Lenoir, NC which is close to where I used to reside.

Typically you would think of these giant centers as the ultimate consumers of energy.  While they do consume a lot, Google has been able to re-engineer these data centers to use less while producing additional capacity.  These data centers definitively help to provide Google with a competitive advantage.

The full Wired article can be viewed here.  The video below also gives you good insight as well

• This is what makes Google Google: its physical network, its thousands of fiber miles, and those many thousands of servers that, in aggregate, add up to the mother of all clouds. This multibillion-dollar infrastructure allows the company to index 20 billion web pages a day. To handle more than 3 billion daily search queries. To conduct millions of ad auctions in real time. To offer free email storage to 425 million Gmail users. To zip millions of YouTube videos to users every day. To deliver search results before the user has finished typing the query. In the near future, when Google releases the wearable computing platform called Glass, this infrastructure will power its visual search results.
• Hölzle and his team designed the $600 million facility in light of a radical insight: Server rooms did not have to be kept so cold. The machines throw off prodigious amounts of heat. Traditionally, data centers cool them off with giant computer room air conditioners, or CRACs, typically jammed under raised floors and cranked up to arctic levels. That requires massive amounts of energy; data centers consume up to 1.5 percent of all the electricity in the world.
• Google’s breakthroughs extend well beyond energy. Indeed, while Google is still thought of as an Internet company, it has also grown into one of the world’s largest hardware manufacturers, thanks to the fact that it builds much of its own equipment. In 1999, Hölzle bought parts for 2,000 stripped-down “breadboards” from “three guys who had an electronics shop.” By going homebrew and eliminating unneeded components, Google built a batch of servers for about $1,500 apiece, instead of the then-standard $5,000. Hölzle, Page, and a third engineer designed the rigs themselves. “It wasn’t really ‘designed,’” Hölzle says, gesturing with air quotes.
• All of these innovations helped Google achieve unprecedented energy savings. The standard measurement of data center efficiency is called power usage effectiveness, or PUE. A perfect number is 1.0, meaning all the power drawn by the facility is put to use. Experts considered 2.0—indicating half the power is wasted—to be a reasonable number for a data center. Google was getting an unprecedented 1.2.

2013: Talk Gets Cheaper, TV Gets Smarter

WSJ tech columnist, Walt Mossberg, is out with his views for what to expect in 2013.  Below are a few of the topics that he addresses in his article here with our own comments.

• Tablets vs. PCs, your beginning to see more things that you can do on a tablet that you used to only be done on a PC
• Integrating Hardware and Software, companies are beginning to follow Apple's lead where they make the hardware and the software
• Rethinking Television, I personally own two Sony Google smart TV's and honestly they both come in very handy with my large family.  I agree that this technology will continue to improve especially if Apple can get into the ball game
• Cheaper Smartphones and Plans, Apple has already stated that it is coming after the low cost smart phone market...well maybe slightly below its current line of product pricing. 
• Costlier, Better Music Players, I abandoned my music player a long time ago when I went with my iPhone.  It's hard to imagine this sector being able to grow.  I can envision it walking away like the walk-man

Andy Puddicombe: All it takes is 10 mindful minutes

2013 Week 2 Performance.....A Quite, Steady Week

For the most part this week it was a steady march higher with the occasional bumps along the way. Economic news was light this week and there wasn't much news out of Washington which probably led to some of the calmness.

This week however things could begin to get a little more volatile especially for those companies that begin reporting their quarterly earnings and calendar full year performances.  We really like to use MSN Earnings Calendar function which can help you find out when specific companies report or to get a look at a total week's worth of reports.

Even though equity markets weren't as high as the first trading week of the year, gains were still positive.  Last year the DWCM Fund was hot hot hot in Q1 thanks to Apple's huge performance.  This year while we remain in positive territory, the gains have not been as large and we are actually trailing the four major benchmarks that we track against.

The under-performance can be broken down in a few different views.  First as we just mention, Apple which is our largest holding, has lagged the markets down 2.2% while the overall equity markets have been up over 3%.  Second, our portfolio positioning is more defensive than it was last year.  Our cash position is much higher and our current selection of stocks have a defensive tilt to them.  Finally, our short position in a group of home builders has continued to be under pressure as the housing segment delivers decent number, and our short position in Netflix has been disappointing as the stock has rallied higher and rewarded riskier names.

We plan on sticking by Apple and would look to add to our position down around the $500 level.  However, any drop below $500 would be detrimental to the stock and additional losses could ensue as this is a key technical level.

We want to get through this next fiscal debate in Washington before choosing to unwind any of our short positions.  We set up these positions as an additional defensive barrier to any declines in the markets due to going off the Fiscal Cliff.  That situation has since stabilized for now, but as the next date of Fiscal austerity comes closer so too will increased volatility.

Overall, the market feels a little overheated from the big gains that we have seen on the last day of 2012 and the first two weeks of 2013.  Much of our open orders continue to sit as prices have moved higher.  As we state time and time again, we are not in a hurry to chase market performance to the upside.  We can and have the ability to be patient in the short-term which could also result in some short-term under-performance which we are okay with.  Recall that our first objective is capital preservation and then long-term capital appreciation.

The Week Ahead
There will be a slightly heavier load of economic data being release this week along with a plethora of Fed speeches including Bernanke to start the week.  Look for markets to feed off of earnings report that begin to get into full swing.

Being in Metro Detroit, the North American International Auto Show kicks off in full gear on Monday.  There are a reported 50 new vehicle launches at the show this year although be careful what constitutes a new launch.  Most launches aren't a complete makeover of a vehicle, instead they are likely to be minor or subtle changes to the exiting line.

• Mon - Ben Bernanke Speaks
• Tue - Producer Price Index, Retail Sales, Empire State Mfg Survey, Business Inventories
• Wed - Consumer Price Index, Housing Market Index
• Thu - Housing Starts, Jobless Claims, Philadelphia Fed Survey, 
• Fri - Consumer Sentiment (p)

Have a great week!

DreamWorks Capital Management

If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what DWCM can do for you.  No matter what stage in life you are currently at, DWCM can help you plan for your ever changing needs.

DWCM can you help you with any of the steps in your wealth management journey including;

• Addressing emergency fund needs
• Developing a retirement plan
• Sending a child to college
• Looking at various investment options
• Determining how to involve philanthropic passions as apart of your planning process

With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.