Saturday, July 25, 2009

Full of Bull -- Book Review

Full of Bull written by former Wall St analyst Stephen T McClellan may yet be one of the most important books an individual investor could read. The soft cover updated version just released by FT Press "Unscrambles Wall Street Doubletalk to protect and build your portfolio".

The comments and insights are fresh and compelling. The book contains many references to 2009 events and positions the information in a right here right now context.

If you manage your own money buy it now. If you use a professional advisor make sure that person has read the book.

Friday, July 24, 2009

AOL Can It Monetize Warren Buffet

AOL which is still grafted onto Time Warner (TWX) is about to carry a new animated series entitled “The Secret Millionaires Club. The program features Warren Buffett teaching valuable financial lessons to young children. How can you argue with Warren Buffett about money?

The question for AOL and ultimately Time Warner is how to control and monetize the intellectual capital. Many will want to see the episodes but we have to go to AOL. Personally I do not want to go to AOL. Others may feel the same way.

Many will want to bootleg and download. So the billionaire’s careful lessons will be stolen without just compensation. Which means a lot of people will learn to make money by stealing the lesson plan. The program could go viral in a pervasive way.

If AOL cannot successfully monetize Warren Buffett well just stick a fork into it.

For those of you who will steal well we can get into real interesting discussions about karma on that one.

Warren Buffett's Cartoon Debut

You have to hand it to the guy; not many billionaires would start their own cartoon show. The secret millionaires club is a cartoon supposedly aimed at children. The editorial line will teach some very basic and fundamental lessons. Everyone should listen to Warren Buffett.

Wonder if the DVD's will be in Blu-ray. Wonder if other rich guy's will do something similar. Wonder if CNBC will run the reruns at night instead of those terrible infomercials. Wonder if Amazon (AMZN) will sell box sets of the shows.

Thursday, July 23, 2009

3M Dividend Reality Check Coming Soon

3M (MMM) announced Q2 results and admitted to lower revenues and lower earnings. But it beat expectations so the market is now going gaga. OK times are tough no one is truly happy with the fundamentals but it’s all understandable until you look at dividends and then the sources and uses of cash.

The dividend is up in the face of declining earnings. How long can you keep that bluff up? Net cash from operations for six months is close to the same when comparing 2009 to 2008. Debt has been repaid which is good. Purchases of Treasury stock have been drastically reduced. The company is redecorating its financial engineering profile. The other shoe will drop sooner than later.

Wednesday, July 22, 2009

Apple 80% Increase In Marketable Securities

Apple (AAPL) announced results and got the market very excited. They cannot keep up with demand. How many businesses can say that? Their chief guru Steve Jobs goes in for liver transplant and the machine keeps rolling along.

But lets take a look at the balance sheet.

Cash and equivalents are down in the past nine months from $11.8 Billion to $5.6 Billion. At the same time marketable securities are up dramatically from $10.2 Billion to $ 18.6 Billion. When you cast an eye on the sources and uses of cash you will see a very active asset category.

Just two questions

1. Why is Apple even doing this?
2. Given the market melt down we can use more transparency on the Marketable Securities Category.

Boeing To Change Guidance When 787 Schedule/Costing Works Out

Boeing (BA) released results and says they have identified technical solutions to the 787 wide body. But then they qualify there guidance by saying that a new schedule with new costing will be release sometime in Q3 and then they will re-evaluate guidance. Which means the current guidance is shaky and they all know it.

Yahoo Needs Better Slicing and Dicing

Yahoo (YHOO) emulated Google when they released their earnings. Claiming success in ad sales Yahoo did not explain what sectors and categories are working. The promise of the algorithm is that the ad will be appropriate to the viewers probable interests, tastes and or needs.Just throwing out large macro numbers and telling investors where they are in the roller coaster is no longer adequate.

Ethan Allen Early Disclosure

Ethan Allan (ETH) announced a dividend that will be payable some three months from now; indicating their liquidity looks good. They claim to have cut costs on an annualized basis of $120 million. They also patted themselves on the back by saying they are not discounting and keeping their margins up there. They expect a federal tax refund of $8 million which they claim will augment pretty good liquidity. Revenues for Q4 are positioned as pretty good but overall revenues for the year dropped some 31%

Then Farooq Kathwari, Chairman and CEO lets you know that the real earnings results will be coming out Aug 12 which is three weeks in the future. Farooq you need a remedial class in disclosure. Coming out three weeks early and singing sunny sky’s has pretty well signalled to the market what you expect the final results to be. Hopefully now that everyone is warm and fuzzy you will not release a little bit of bad news when the market is no longer looking.

But seriously Farooq there may be a few lawyers who want to talk to you.

Tuesday, July 21, 2009

Merck Strange R&D Increase

Merck (MRK) announced Q2 results. Revenues are down 3% but costs are down even more. Margins have improved in the face of declining sales which means production costs are down dramatically, Marketing and admin costs are down by 10%. R&D costs are up 19% which of course looks excellent until we all realize that 2009 R&D includes $108 million of global restructuring costs. So basically they fired a lot of the brains that will drive tomorrows revenues.

BlackRock Predicts Choppy Markets

BlackRock (BLK) issued Q2 results and claims it’s all improving. Read this effusive quote.

“BlackRock’s results reflect improving momentum in the business. Equity and fixed income markets have improved during the second quarter, more than offsetting first quarter market declines and contributing to positive momentum for net new business. BlackRock continues to maintain cost discipline and to benefit from a strong and diversified business model.”

The quote was preceded by this sentence

“Net income, as adjusted (2), was 117% higher than first quarter 2009 and 16% lower than second quarter 2008.”

Laurence D. Fink, Chairman and CEO of BlackRock inadvertently commented on Blackrock’s prospects when he praised his own managers by saying “While markets were significantly more favorable during the second quarter, they remain choppy in the face of conflicting signals about global economic conditions. These are difficult conditions for portfolio managers to navigate, and I am proud of the job our teams are doing.

That is the essence of BlackRock. The markets are choppy. Conflicting signals which can change in the blink of an eye are more the norm.

In the Blackrock press release there is no real information on how the company is planning to sail in choppy waters.