In Search of the Perfect Investment

Take the pain or get out? Some friends are increasingly in cash. Some are staying the route, hopeful that sanity will eventually reign in Washington. I’m staying in. Earnings are OK and should buoy stocks when sanity returns.

Weird affects: Look at Berkshire Hathaway. Great news of recent great profits. Yet the stock slides and slides.

Two shorts of mine are good : BBY and HPQ. Need to find a couple more. Suggestions?

Some bright spots: IPOs like Noodles (NDLS) and Potbelly (PBPB),  trading well above their open. And Apple which is suddenly getting great positive buzz. And Apple.

There is now talk of a larger iPhone 6.  From Business Insider:

Apple is getting an upgrade from previously bearish Jefferies analyst Peter Misek.

Misek is rating the stock a “buy” with a $600 price target, up from being a “hold” with a $450 price target.

The reason for his newfound optimism? Improving margins and the iPhone 6.

Apple’s suppliers have become “far more lenient on price,” says Misek. This is going to boost Apple’s gross margins. Earlier in the year, suppliers were telling Misek that they would be able to dictate prices to Apple, and Apple’s margins would get hammered. That’s no longer the case.

Suppliers also say Apple is targeting a 4.8-inch iPhone for the iPhone 6.

Misek thinks that over 50% of the smartphones sold today are bigger than 4-inches, the current size of the iPhone. Apple has been missing out on over half the market by not offering a bigger phone.

As the bigger iPhone gets further into development, he expects investor enthusiasm.

There is some negativity in Misek’s report, though. He says Apple is cutting orders for the iPhone 5C because it’s not selling as well as hoped. He thinks Apple could end up cutting prices to boost sales.

For what it’s worth, my entire family is about to have the iPhone 5s. Michael and Claire’s employers both gave them one in recent days. And Susan will upgrade today. Meantime, I really love my 5S. The faster processor means it’s more like a computer. and being more like one, it’s faster and more useable for things like email, messages, web surfing, etc. Everyone on the subway seems to have one also. I rarely see an Android phone any longer.

Credit cards are a rat’s nest.

+ Reader Mike D. wrote ” called 2 credit card companies in an attempt to cut my cash advance limit to $0 and both told me my cash advance limit was a percentage of my credit limit so to cut my cash advance, they’d have to lower my credit limit. I declined to do it for now. You didn’t have that problem?”

I didn’t.

+ Vito wrote “Some cards have virtual account numbers (Citi Bankcard, BOA Bankcard) just for this reason. You can only use it at one merchant and only for the max amount you set per purchase. You’ll need to get one virtual account for each merchant but if thieves get ahold of one of these numbers you will only have to change that one not all.”

Sounds like a great idea. I need to check.

+ Lucky wrote “My new United Airlines Chase Visa gives me all the usual 40,000 miles plus free first checked bag for everyone on my reservation, Priority Boarding, Two free airport lounge passes and etc…the thing I really like is there zero foreign exchange fee…we like to travel to Europe and we live in Canada for 4 months each summer…this saves me a bundle. The annual fee of $99. is quickly made-up in checked baggage alone. I use Everbank debit card for ATM cash abroad 1% exchange fee and the card is free.”

I know Lucky. He travels. His deal seems to be better than the Citi Platinum AAdvantage World MasterCard which I wrote about yesterday.

I have a pricey American Express Platinum which I got for only one reason — to get their business class twofers on international travel. But the last time I went international, I simply called Delta and asked them for the same deal. They gave me the twofer at a slightly better price thatn Amex.

In short, it’s time to revisit your credit cards.

The Business End of Obamacare, from this week’s New Yorker and written by James Surowiecki, one of my favorite financial writers:

Of the countless reasons that congressional Republicans hate the Affordable Care Act enough to shut down the government, the most politically potent is the claim that it will do untold damage to the economy and cripple small companies. Orrin Hatch has said that Obamacare will be “devastating to small business.” Ted Cruz argues that it is already “the No. 1 job killer.” And the vice-president of the National Federation of Independent Businesses called it simply “terrible.” So it comes as some surprise to learn that Obamacare may well be the best thing Washington has done for American small business in decades.

The G.O.P.’s case hinges on the employer mandate, which requires companies with fifty or more full-time employees to provide health insurance. It also regulates the kind of insurance that companies can offer: insurance has to cover at least sixty per cent of costs, and premiums can’t be more than 9.5 per cent of employees’ income. Companies that don’t offer insurance will pay a penalty. Republicans argue that this will hurt companies’ profits, forcing them to stop hiring and to cut workers’ hours, in order to stay below the fifty-employee threshold.

The story is guaranteed to feed the fears of small-business owners. But the overwhelming majority of American businesses — ninety-six per cent-have fewer than fifty employees. The employer mandate doesn’t touch them. And more than ninety per cent of the companies above that threshold already offer health insurance. Only three per cent are in the zone (between forty and seventy-five employees) where the threshold will be an issue. Even if these firms get more cautious about hiring-and there’s little evidence that they will — the impact on the economy would be small.

Meanwhile, the likely benefits of Obamacare for small businesses are enormous. To begin with, it’ll make it easier for people to start their own companies — which has always been a risky proposition in the U.S., because you couldn’t be sure of finding affordable health insurance. As John Arensmeyer, who heads the advocacy group Small Business Majority, and is himself a former small-business owner, told me, “In the U.S., we pride ourselves on our entrepreneurial spirit, but we’ve had this bizarre disincentive in the system that’s kept people from starting new businesses.” Purely for the sake of health insurance, people stay in jobs they aren’t suited to-a phenomenon that economists call “job lock.” “With the new law, job lock goes away,” Arensmeyer said. “Anyone who wants to start a business can do so independent of the health-care costs.” Studies show that people who are freed from job lock (for instance, when they start qualifying for Medicare) are more likely to undertake something entrepreneurial, and one recent study projects that Obamacare could enable 1.5 million people to become self-employed.

Even more important, Obamacare will help small businesses with health-care costs, which have long been a source of anxiety. The fact that most Americans get their insurance through work is a historical accident: during the Second World War, wages were frozen, so companies began offering health insurance instead. After the war, attempts to create universal heath care were stymied by conservatives and doctors, and Congress gave corporations tax incentives to keep providing insurance. The system has worked well enough for big employers, since large workforces make possible the pooling of risk that any healthy insurance market requires. But small businesses often face so-called “experience rating”: a business with a lot of women or older workers faces high premiums, and even a single employee who runs up medical costs can be a disaster. A business that Arensmeyer represents recently saw premiums skyrocket because one employee has a child with diabetes. Insurance costs small companies as much as eighteen per cent more than it does large companies; worse, it’s also a crapshoot. Arensmeyer said, “Companies live in fear that if one or two employees get sick their whole cost structure will radically change.” No wonder that fewer than half the companies with under fifty employees insure their employees, and that half of uninsured workers work for small businesses or are self-employed. In fact, a full quarter of small-business owners are uninsured, too.

Obamacare changes all this. It provides tax credits to smaller businesses that want to insure their employees. And it requires “community rating” for small businesses, just as it does for individuals, sharply restricting insurers’ ability to charge a company more because it has employees with higher health costs. And small-business exchanges will in effect allow companies to pool their risks to get better rates. “You’re really taking the benefits that big companies enjoy, and letting small businesses tap into that,” Arensmeyer said. This may lower costs, and it will insure that small businesses can hire the best person for a job rather than worry about health issues.

The U.S. likes to think of itself as friendly to small businesses. But, as a 2009 study by the economists John Schmitt and Nathan Lane documented, our small-business sector is among the smallest in the developed world, and has one of the lowest rates of self-employment. One reason is that we’ve never had anything like national health insurance. In a saner world, changing this would be a reform that the “party of small business” would celebrate. 

My God. It’s true. I actually got this message at 11:12 PM last night.

Favorite recent New Yorker cartoons.

Harry Newton who faces the wonderful task of giving his new credit card to his old merchants like Amazon, FedEx, UPS, NetFlix, etc. etc.