With Europe cratering… it’s time to think about shorting companies with big exposure there, like IBM, GM, KO, PM, MCD and ABT. You can get a bigger list in a recent Forbes piece. Click here.
Today’s Wall Street Journal writes:
… amid an uncertain U.S. economy, many companies have spent the past several years focusing expansion efforts overseas, with the consequence that any sales shortfalls could have outsize consequences for earnings. Layer in currency-translation effects—the euro is 13% below its year-earlier level—and matters are only worse. See below on Ford and Nike’s recent news, which crashed that stock.
Gift horses bearing presents are always suspicious. I define “Wall Street” as everything from Goldman Sachs to your local financial adviser, to everything and everybody in between.
Wall Street is a product machine. Its job is to sell you products so it can make a fee — a one-time fee on the sale, but preferably also a regular fee (monthly, quarterly or annual) fee to “manage” your product.
Despite the rhetoric, its job is to look after its (Wall Street’s) interests, not yours. Wall Street biggest success is not the financial success of the products it creates, but the sales training it provides its people. It doesn’t call them salespeople. It calls them financial advisors, vice presidents, and even senior vice presidents. But they’re all salesmen. They’re identical to the guy in the corner lot selling you a used car. Only they wear better suits and have nicer corner offices.
A reader emails:
I’m looking at a 7% 10 year fixed annuity – tied to marker performance but 7% guaranteed – if market does better you get the better return – equity is reset every 12 months – if markets go down you are guaranteed 7%. You get your money back at ten years.
I call him. But that’s all he knows for now. What do we know?
+ It smells. How can anyone guarantee you 7% for the next ten years in today’s world. Ten year treasuries are paying 1.5%.
+ If you want your money back before ten years, there are probably huge penalties.
+ There are at least a zillion “gotchas” in the fine print.
The rule is “if it’s too good to believe, it’s too good to be true.” When in doubt, say out.
How to permanently delete your LinkedIn entry. Click here.
If you need a new job, leave it. Recruiters use LinkedIn.Otherwise delete it.
Don’t say you never learned nothing here. Here’s your problem (mine too):
Someone with an iPhone sends us an “awesome” photo they just took. The photo is always called Photo.jpg. It comes as an attachment to an email. You can’t open the photo in Microsoft’s Outlook. You have two choices:
+ You can forward the email to your gmail account.
+ You can fix your Windows machine thus:
1. Use Windows Explorer to make a new folder c:\temp0. (That’s temp zero.)
2. Open regedit. You do this by Start/Run/regedit. Be very careful. Don’t make any changes except those below.
3. Find this: HKEY_CURRENT_USER\Software\Microsoft\Office\XX.0\Outlook\Security\ — where XX is either 14 or 11 or some number corresponding to the version of Outlook you’re runng.
4. Move over to the right pane. Double-click OutlookSecureTempFolder.
5. In the Value Data field, change what’s there (it’s long) to C:\temp0\ and then click OK.
6. Exit Registry Editor. You don’t need to save. It does that automatically.
7. Restart your computer.
The best weekend reading:
+ Foreign Forces Are Striking U.S. Earnings.
…Lags in the release of economic data-to say nothing of the uncertain quality of official Chinese economic statistics-make figuring out exactly what conditions are like in Europe and China a guessing game. But to judge from what companies have been saying, the world outside the U.S. has gotten much worse.
Shares of Ford Motor )F -5.21%) fell sharply Friday after the company said it expects to lose up to three times as much overseas in the second quarter as the $190 million it lost in the first. The bulk of those losses are in Europe, where the combination of sharply falling demand and chronic overcapacity is leaching the auto sector. Consultancy AlixPartners reckons that two in five European auto plants aren’t producing enough cars to stay out of the red.
For the full Wall Street Journal article, click here.
+ The Supreme Court’s health law decision. Click here.
+ Already Plagued by Inflation, Iran Is Bracing for Worse. Buy hard assets and speculate. Click here.
+ Europe on the block.
Any fair reckoning of the euro must therefore judge it to have been a failure. For noble reasons, perhaps, the euro’s founding fathers created a federal currency before creating a federal state to back it. Like Victor Frankenstein, they defied nature and created a monster. Part of the horror story is that the cost of returning to national currencies is greater than keeping the euro. …
Europe’s most senior officials presented a compromise before this week’s summit, whereby financial, economic and political union would move in parallel. Their paper breaks a taboo but is vague, with no timetable or sequence of steps. It proposes drawing up a clearer plan-perhaps the successor to Mr Delors’s 1989 report-in December. Can the euro zone survive the rack for that long? Perhaps the pain will be such that citizens and leaders will look to integration for relief. The danger is that, if the torture goes on, the European project will expire first.
P.S. The Eurozone jobless rate in the 17 member countries hit 11.1% in May, but was much higher in the southern countries. Spain’s unemployment rate was the highest in the euro zone at 24.6%, while Austria maintained the lowest jobless rate at 4.1%.
+ 100 incredible pictures taken out of airplane windows. Click here. Two samples. First, the Grand Canyon.
Second,Mt. McLoughlin, Oregon.
+ “This is not a novel to be tossed aside lightly. It should be thrown with great force.” — Dorothy Parker
Harry Newton who notes there is more money being spent on breast implants and Viagra today than on Alzheimer’s research. This means that by 2040, there should be a large elderly population with perky boobs and huge erections and absolutely no recollection of what to do with them.
Daughter Claire and son-in-law Ted visited Boulder Junction’s favorite destination wedding site:
They stayed in one suite called the Polar Bear Palace which had more wooden carvings than Carter had liver pills. A carved bear dispensed toilet paper. This is Claire doing her best eagle imitation. They had a blast.
Regarding the 7% thing, there has to be some written documentation about the product. At any rate, usually, these things are set up so that within a certain market performance range, you get x%, but outside that range, other things kick in. Typically, you're on the hook for the entire downside, so basically, what you've done is write a really long-term naked put option with your cash as collateral, and this “interest” is really the price of the put option. I don't think this is “too good to be true,” it's what it is. It's more like “there is no such thing as a free lunch.”
There you go again Harry! These are your words with respect to an unusually / abnormaly high yield (on an annuity – “The rule is “if it’s too good to believe, it’s too good to be true.” When in doubt, say out. So yopu continue to promote and recommend AGNC with its too good to be true 15% + yield. I guarenttee that is going to blow up!. So you give advice to avoid a 7-10% yield on an annuity and you say “stay out” yet you own AGNC! Insanity!