Let me be clear.
What I write about in this blog, and do with my investments is not for everyone. If I say gold may be interesting, don’t tell me I’m an idiot. I have a very small position in gold. I have made money with it in the past and kicked it out when it started to fall. Now it’s “cheap” and it may bounce back a little — though I am always loath to catch falling knives. And I know all the arguments about gold not paying a dividend, etc.
OK, to today’s madness. Look at these two charts. They’re from Fidelity’s site and they refer to FMILX, the Fidelity Millennium Fund.
The yellow line is the S&S 500.
Forever, my obsession has been NO MORTGAGES. And I don’t have any. Nada, Niente. None. Not one.
Maybe that made sense in the old days when mortgages were pricey. Over ten percent. But these days? I called my bank. They’ll give me a mortgage for 3.25% a year for 15 years fixed rate — or even less if I beg hard.
Why would I not borrow at 3.5% and buy FMILX, or perhaps a bundle of nice index funds? the spread is so huge. If I can’t make 5% on dividends and price appreciation, shoot me.
What am I missing?
IBM, The great Short?
Short IBM? That was the recommendation at a recent investment conference I attended. The reasons? Poor leadership. Poor business strategy. Heavy firings of talented (pricey) employees, replaced with cheap, overseas “talent.” And far too many hungry, entrepreneurial competitors.
Long-time (and hugely talented) computer industry writer, has written a Kindle book:
In his email telling his fans (that includes me) about his new book, he writes:
Even on the surface, IBM in early 2014 looks like a troubled company. Sales are flat to down, and earnings are too. More IBM customers are probably unhappy with Big Blue right now than are happy. After years of corporate downsizing, employee morale is at an all-time low. Bonuses and even annual raises are rare. But for all that, IBM is still an enormous multinational corporation with high profits, deep pockets, and grand ambitions for new technical initiatives in cloud computing, Big Data analytics, and artificial intelligence as embodied in the company’s Jeopardy game-show-winning Watson technology. Yet for all this, IBM seems to have lost some of its mojo, or at least that’s what Wall Street and the business analysts are starting to think.
Just starting to think? The truth is that IBM is in deep trouble and has been since before the Great Recession of 2008. The company has probably been doomed since 2010. It’s just that nobody knew it. These are harsh words, I know, and I don’t write them lightly. By doomed I mean that IBM has chosen a path that, if unchanged, can only lead to decline, corporate despair, and ultimately insignificance for what was once the mightiest of American businesses.
In Cringely’s email, he quotes an email an IBM employee sent him:
“Right now the pipeline is dry-the number of services folks on the bench is staggering and the next layoff is coming. The problem now is that the frequent rebalancing has destroyed morale, and so worried troops don’t perform well. Having taken punitive rather than thoughtful actions, Ginni has gutted the resources required to secure new business. Every B-School graduate learns not to do that. The result is a dry pipeline, and while you can try to blame the cloud for flagging sales, that doesn’t work. Those cloud data centers are growing. The demand for hardware didn’t shrink-it simply moved. Having eliminated what did not seem necessary, the brains and strategy behind the revenue are now gone, leaving only `do now’ perform people who cannot sell. Sales reps have no technical resources and so they cannot be effective. Right now we cannot sell. There is no one to provide technical support. The good people are finding jobs elsewhere. The [job] market outside IBM is improving. I am interviewing at a dozen companies now. Soon as I find something perfect for me, I’m gone. They don’t expect people like me to leave.
“Ever work anywhere where you were afraid to make a large purchase like a car because you don’t know that you will have a job in a month? That’s how everyone feels at IBM. Now we are doing badly on engagements. I cannot think of a single engagement where we are not in trouble. We lay off key people in the middle of major commitments. I cannot tell you how many times I’ve managed to get involved in an engagement and cannot lay my hands on the staff required to perform.
“The whole idea that people in different time zones, all over the world can deliver on an engagement in Chicago is absurd.
“Lastly, using the comparative scheme for employee evaluations is simply stupid. No matter how great the entire staff is, a stack ranking will result in someone at the top and someone at the bottom. It ignores that the dead wood is gone.
“Ginni has made one horrible mistake. Sam, and now, Ginni, has forgotten that IBM was made by its people. They have failed to understand their strongest assets, and shortly will pay for that. IBM just hit the tipping point. I do not think there is any way back.”
This is IBM over the past ten years. To me, it looks overpriced.
Don’t believe me. Go buy Cringely’s $3.99 book and read it yourself. He’s a good writer.. Click here.
Favorite store is closed today. You can’t buy from B&H because they’re celebrating the Jewish holiday called Shavuot, which ends tonight at sundown. Shavuot marks the giving of the Torah on Mt. Sinai. The Ten Commandments are read in synagogues during this holiday, just as they were in the desert on Mt. Sinai over 3,300 years ago. Before they had the ten commandments, the Jews had a zillion gods and worshiped idols. Moses did a brilliant sales job on them and really made the Jews Jews.
There are three elements to a Jewish festival, like Savuout.
1. They tried to kill us.
2. They failed.
3. So, let’s eat.
Favorite animal.
One of my first “entrepreneurial” jobs was photographing American tourists at Sydney’s Taronga Park Zoo. I only got paid if they liked and bought my photos. All my pictures were on “spec.” I researched all the animals to find out which would sell best to the Americans. The koala bear won hands down. The problem is they like living in trees. If I want to sell a photo, I have to fetch a koala, bring it to the Americans who were outside the cage and have the koala pose with the Americans. Koalas are not very cooperative. They don’t like being manhandled by a young kid and, if not held, they run back up the tree. They also have two lethal weapons — very sharp claws and very potent urine. I will admit to being pissed on by an angry koala, which amused the Americans no end, but did nothing for my clothes. “Throw them away. You can’t wash out koala piss,” the zookeeper told me.
All this came flooding back (deliberate pun) as I read a The Week article on how koalas stay cool in the blistering Australian summer. Read the piece. It’s interesting (at least to me). Click here.
Favorite scam:
Dearest friend,
I am Dr. Oleksandr Rekhniuk, a personal treasurer to Mikhail Khodorkovsky the Richest man in Russia and owner of the following companies:Chairman CEO: YUKOS OIL (Russian Largest Oil Company) Chairman CEO: Menatep SBP Bank (A well reputable financial institution with its Branches all over the world), I want to reprofile the total sum of $165.3 Million US Dollars to your country or any part of world where you maintain an offshore account for immediate investment without barring any delay.
It has been carefully networked with my experience and for the past three months I have worked out everything to ensure a hitch-free operation, if you can be honest with me, then you will take 35% of the total fund.
However, I am presently in London from where I will be handling the transaction with you for confidential reasons.
I will appreciate your help & cooperation.
Favorite funniest short video ever. A woman goes back to work after many years. Click here.
Favorite Dear Abby questions. Dear Abby admitted she was at a loss to answer these questions:
Dear Abby,
A couple of women moved in across the hall from me. One is a middle-aged gym teacher and the other is a social worker in her mid-twenties. These two women go everywhere together, and I’ve never seen a man go into or leave their apartment. Do you think they could be Lebanese?
Dear Abby,
What can I do about all the Sex, Nudity, Fowl Language and Violence on my VCR?
Dear Abby,
I am a twenty-three year old liberated woman who has been on the pill for two years. It’s getting expensive and
I think my boyfriend should share half the cost, but I don’t know him well enough to discuss money with him.
Dear Abby,
My forty year old son has been paying a psychiatrist $50 an hour every week for two and a half years. He must be
crazy.
Dear Abby,
My mother is mean and short tempered I think she is going through mental pause.
Dear Abby,
I have a man I can’t trust. He cheats so much, I’m not even sure the baby I’m carrying is his.
Harry Newton who is eyeing the falling rain and thinking this is not biking weather. Yet he needs the constant exercise…and the subway accepts bikes. April showers brought May flowers. And May showers brought Pilgrims. But June torrential rain..? Bike accidents?
I bought a little AIG yesterday. Its P/E is under 10 and it keeps hitting new highs. Yet by the end of the day, I was down $85.50. Maybe today will be better?
Harry, as you probably know, the Ten Commandments are key to our Western Civilization. You had one God and a firm set of commandments, – rules – of what was not acceptable, a sin. Prior to that you could bribe the gods to accept whatever it was you wanted to do. Offer a sacrifice and off you went. Now the rules were “set in stone”. No fudging. Important.
On scams, a telephone call from my father-in-law in Springfield, IL (I am in NYC) pulled me out of a meeting. It was actually him and he was quite upset because two people, posing as my son and a cop, called him in Illinois with an elaborate story about a car accident, an arrest, and the need to wire $3,000 to spring my son from jail. While he did think to call me he is old and frail enough to have believed the story and had written down wiring instructions! We’ve heard about these things before but the elaborate scheme and information they had makes you want to warn everyone.