Ford, A Good Investment?

I'm being asked the following question quite frequently lately,

"So how much Ford stock have you been buying?"

My gut reaction is to say, "Ford Stock, are you crazy? That investment is toxic!"

But I'm a Michigan guy, and I'm a Ford guy, (I just bought a Ford last Friday...a Focus...39 MPG, sticker price of $17,000, but a crazy amount of rebates). Half my family works for Ford, or has retired from the company.

Here's the deal. When you live in Michigan it is hard for you to imagine a world without Ford. I share that feeling, but I believe that Ford will not survive in it's current form. I believe that the company will go bankrupt, use the bankruptcy to get huge amounts of debt off it's books, and reemerge from bankruptcy court as a lean, mean auto-making machine. Ford is a great brand with a TON of smart people at the helm.

The problem with this scenario is that everyone who owns common stock when this happens will probably lose everything. Here is why.

• Ford had $170 Billion in sales last year, but lost billions of dollars in the process. I've read that Ford losses over $1000 dollars on every car that it sells in the U.S. and barely breaks even on overseas auto sales.
• Ford currently has over $160 Billion in debt on it's books. HOW IS A COMPANY THAT IS LOSING SO MUCH MONEY EVER GOING TO PAY OFF THAT DEBT?
• Even if the government extends new loans to Ford, GM and Chrysler, this is only a band-aid. It is going to take years (and probably bankruptcy to get rid of that mountain of debt) before Ford ever makes significant profits.
• Less than a year ago, Billionaire Kirk Kerkorian invested $1 Billion to own a bit over 6% of Ford Motor Company. Two weeks ago he decided that it was not a good investment and started selling his shares which are now only worth about $250 Million...it appears that he DOES NOT believe that Ford stock will be going up in the future. He is taking his $2.00 a share that he can still get, and running away from Ford.
• According to their second-quarter results, Ford and GM each are burning roughly $1 billion in cash per month. Citing cash burn, JPMorgan Chase & Co. analyst Himanshu Patel on Tuesday widened loss expectations for Ford and GM in 2008 and 2009.
• Ford, like GM and Chrysler, has been the subject of bankruptcy speculation recently. None of these companies have been able to tap debt markets. (Who would want to give them more debt, they already have too much? Oh wait, the government would). That, plus sliding revenue, is forcing them to make ends meet by using fast-diminishing stockpiles of cash. If Ford continues to burn cast at the rate of $1 Billion a month, it will not last two years, and the stock will continue to fall.

Anyways, these and many more reasons are why I'm not buying Ford stock. There are way too many AWESOME companies with no debt that are selling for amazingly cheap valuations.

THAT BEING SAID, I understand why people are buying Ford stock. Who knows, between now and bankruptcy, it could bounce between $1 per share and $3 per share. I would love to buy at $1 and sell at $3 over and over again...but that is not risk that I'm willing to take.

Stock Hunting

I’ve been going crazy latly spending what little resources that I have on buying the common stock of great companies the I believe have serious long term potential. I must admit that I’ve also made a short term trade or two…it’s hard not to take advantage of this type of volatility!

Well, the background is that in about October of 2002 the US stock market took what I believed to be a ”short term beating.” This beating left solid companies, with strong balance sheets, at prices that would suggest they were no doubt going out of business. BUT I WAS BULLISH ON THE US ECONOMY, blah, blah, blah…bottom line, by 2006 the $10,000 of stocks that I’d picked up in 2002 had grown to just a hair shy of $40,000. And non of them went bankrupt…(though VTSS almost has, I bought at $1.00, it went to over $10.00, I was stupid and didn’t sell, now it is at $.40…you can’t win them all!)

On to what I’ve bought over the last couple of weeks:

Aloca (AA) Strong, well managed Dow Component. This stock historically goes up and down alot based on the price of certain commodities. I feel like I bought low, and that world demand for Aloca’s products is certainly going to increase over the next decade.

American Eagle (AEO) Clothing retailer that targets men and women ages 15-25. I feel like this demographic cares about being trendy, so in ups or downs, they will spend less on clothes, but they will still spend. This company is profitable, expects a forward P/E of about 8 for 2009. Is sitting on over $300 Million of cash and has only $75 Million of LT Debt.

APPLE (APPL) What can I say, every gadget that I own or want to own is made by Apple. This company is sitting on more cash than Microsoft, is growing like a weed, has NO DEBT, and I was able to buy near a multi-year low.

CANON (CAJ) I’ve been successful investing over the years by asking my wife (who cares nothing of stocks and investing) “Honey, where are you spending our money right now?” This strategy has led me to many great long-term investments…she got us into Carters baby clothes at $25 a share, and we rode it to $75. She has had similar success with DIS, LF, BEBE, and more over the last 5 years. ANYWAYS, she likes the digital camera space, and Canon is the 500 lb gorilla of the industry. It doesn’t hurt that they are growing profits, sitting on $7 Billion of cash, and have almost no debt.

Chicago Bridge and Iron (CBI) Don’t let the name fool you, This company was founded in 1889 and is based in The Hague, the Netherlands. At $8 a share recently, this company was selling for less than 5 times 2009 expected earnings per share. I figured if the global economy does go into a longer term recession, governments might try to kick start things by passing massive infrastructure spending projects. I figure that CBI and GE would be huge beneficiaries of that spending.

Anyways, I could probably bore you all day with this crap, but it really gets me going. I bought about seven other companies too. Small positions, but I’m excited about where I think their valuations will be in 5-10 years.

History of Social Security

Our Social Security System:
Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:
1.) That participation in the Program would be completely voluntary.
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program,
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
4.) That the money the participants put into the Independent 'Trust Fund' rather than into the General Operating Fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other government program, and,
5.) That the annuity payments to the retirees would never be taxed as income.
Since many of us have paid into FICA for years and are now receiving a Social Security check every month -- and then finding that we are getting taxed on 85% of the money we paid to the federal government to 'put away', you may be interested in the following:

Q: Which political party took Social Security from the Independent 'Trust Fund' and put it into the General Fund so that Congress could spend it?
A: It was Lyndon Johnson and the Democrat- controlled House and Senate.

Q: Which political party eliminated the income tax deduction for Social Security (FICA) withholding?
A : The Democrat Party.

Q: Which political party started taxing Social Security annuities?
A: The Democrat Party, with Al Gore casting the 'tie -breaking' deciding vote as President of the Senate, while he was Vice President of the U.S.

Q: Which political party decided to start giving annuity payments to immigrants?
AND MY FAVORITE:
A: That's right! Jimmy Carter and the Democrat Party. Immigrants moved into this country, and at age 65, they began to receive Social Security payments! The Democrat Party gave these payments to them even though they never paid a dime into it!


It's an exciting election year, just some food for thought...an undecided voter?

ChaCha

I've actually came across a new company that offers a real "work at home" opportunity for all those out there who have some common sense, and a knack for searching on the web.

ChaCha.com is a service where you can text any question that you can think of to 242242 (chacha) and you will very quickly get a text message back with an accurate answer. It is an extremely cool service. It is free, you have to check it out!

Anyways, they rely on a network of tens of thousands of "guides" to answer the millions of questions that they get every month.

THIS IS THE OPPORTUNITY!

I've just signed my wife up for the program. She will be paid between $.10 and $.20 per question that she answers, and she can log on to their program at her convience, whenever she is available to do a little work. We figure that she can answer about 50 questions in about an hour. So the money is not amazing, but the work is fun and flexible. If she averages $7.00 per hour, it will add an additional $140 a month if she works just 5 hours a week. This is cash that will go a long way in this tough economy.

I'll keep you posted on how things progress!

The Almost Thousandaire?

Friends,

Wow, what a crazy reversal of fortunes for the US and World economies. Yesterday's plunge in the markets was exactly one year from the High the Dow Jones Industrial Average hit of just over 14,000.

Now we sit at about Dow 8500 and with $3 TRILLION of US wealth wiped out. Most of that happening in the last 30 days. The effects of this are so far reaching that even the smartest economists in the world are baffled about what it really means to the world population.
Well here is a brief outline of what it means for me.

Personal cash is tight. My "stripped down" family budget currently is significantly larger than my income.

MORE $ GOING OUT THAN COMING IN...NOT GOOD!

This means that I'm often relying on borrowing or retirement savings to keep the ball rolling. This didn't seem like a problem a year ago. All the experts were saying that by Mid 2009 all would be well. Housing values would start to climb again, the market would go back up, oil and gas prices would settle down, incomes would expand, businesses would return to profitably again, etc. IT APPEARS THAT IS NOT GOING TO PAN OUT!

My businesses can't get credit. In the normal world, when a business needs a line of credit to smooth out cashflow they just go to the bank and ask for it. I've approached 5 local banks, and non are willing to extend a little short term credit. Even worse, the bank that I have my business loan with (with a 4 year PERFECT track record of paying on time) has asked that I try to refinance at another bank because they are trying to scale back their lending to restaurants. (Thanks for the help, Mr. Banker)

SO WHY AM I OPITIMISTIC, YOU MIGHT ASK?

Well, there is one amazing asset that God has blessed me with, my ability to work! (And in the event that I'm ever hurt, my disability policy will step in to help pick up the slack.) I'm going to continue to work as hard as I possibly can. I have a duty to my family, partners, lenders, and employees. That is all I can give them...100% every day. Mind you, this is a huge balancing act, but one that most everyone deals with. So I just want to put it out there. THANK YOU GOD FOR MY LIFE, HEALTH, AND ABILITY TO WORK. I TRUST YOU TO GUIDE THIS WORLD THROUGH ALL THE CRAZINESS, AND I REFUSE TO BOW DOWN TO FEAR.

5 Years From Now...

Think of yourself 5 years from now. What do you look like? What are you doing? Have you made forward progress towards your goals?

What things in your life are going to contribute to who you are in 5 years?

-The people you meet.
-The books you read.
-The places you go.

Spend your time wisely, 5 years goes by faster than you might think.

Emergency Cash

Your Personal Cash Position: Definition...How much cash you have EASY access to in 36 hours or less.

During times of anxiety and crises, it is REALLY important to know how much cash you and your family has access too. We generally all go through life thinking that we will always have quick access to our bank accounts, credit cards that will always be accepted, stocks we could sell, home equity lines we could tap, etc.

I'm here to tell you though, that this is NOT always the case. Recent events have proved this much. Case in point:

• In the last 6 months, there have been bank branches in the UNITED STATES that have closed their doors because they literally had No More Cash for their customers to withdraw.
• 
  I have a personal friend who had his credit card company simply "shut down" his account. This required him to continue to make his regular payments, but allowed him No Access to additional credit. A card he used for years was simply "shut down."
  
• I know of people with significant stock positions in Lehman Brothers. A month ago they would have expected to be able to sell shares and get a check within a few days...now if they sell shares, they probably will not have enough proceeds to cover the brokerage commission.
  
• IN MY PERSONAL LIFE I have a small Home Equity Line of Credit (HELOC) from a local bank. I have a credit score over 750 and have NEVER even used my line of credit...I've always had it there in case of an emergency. A couple of months ago I get a mysterious letter from my bank letting me know that they will be closing completely my Home Equity Line unless I respond in writing in the next 36 hours. I'm very glad I read that "junk mail" and was able to save my Line of Credit!
  

My point is that the world of personal finance has become extremely complex and fast paced. PROTECT YOURSELF! Take steps today to ensure easy access to cash in the event of an emergency.

If you live in Houston, Texas you clearly understand what I'm talking about. After Hurricane Ike hit, you could not buy or sell ANYTHING with out good, old CASH. Cash was king and everything else was off the grid...just like the electrity!

Why did the stock market drop today?

The following are the top 5 reasons I believe that the market dropped today:

1. People are scared! Today’s sell off in the stock market was not just mom and pop investor scared about losing their retirement savings, there were huge institutional trades today that seem to be driven by fear.

2. People are confused! The world financial markets are so much more complex than the news anchors on CNBC make it appear to be. Generally, when I’m having trouble understanding something, I run from it. I believe folks all over the world did the same thing today. Many folks are realizing that the stock market is not a game to play.

3. People are irrational! There are sectors of our economy that are having huge struggles. In the middle of the struggles, there are companies that have made good decisions, and are doing extremely well because of those good choices. Unfortunately, on days like this, people don’t care about fundamental business metrics, they just want to get dollars away from the stock market.

4. People are fed up! If you are the average American, you get 99% of your market information from the media. This makes it difficult to navigate past the personal opinions and biases of those bringing you the news. With a presidential election on the horizon, the media seems to have gone extremely negative on the US economy. I believe that lots of hard working folks are simply tired of the daily dose of bad news there have having to digest. The natural way to combat that is to get your investments into cash, and turn off the tube.

5. People are funny! We really are funny. We are all experts in our own right. “We sure would do things differently if we were in charge.” “I got out before the fall.” “I wouldn’t have made that mistake.” Etc. I think that many people feel like if they get out now, their personal story is stronger. We humans HATE to be wrong!

Why Did Gas Prices Go Up?

I personally have a very sensitive edge towards gasoline right now. Mostly because of the 4 vehicles that I drive on a regular basis, they have a combined average highway MPG of about 15...that gets expensive.

Anyways, I was getting real excited last week when I was paying $3.41 a gallon in Ohio, and about $3.65 a gallon in Michigan. Oil was at about $107 a barrel on the NY merc. exchange. THEN THIS WEEK ROLLS AROUND!

On Tuesday of this week, Oil hit a low of around $102 a barrel...and it is still there. THE PROBLEM, is that for some reason gas prices shot up on Tues. and Wed. of this week to about $3.89 a gallon in Michigan.

Let's review the math:

LAST WEEK - Oil at $107 a barrel...gas in Michigan at $3.65 a gallon.

THIS WEEK - Oil at $102 a barrel...gas in Michigan at $3.89 a gallon.

I SMELL A RAT! AND IT IS CALLED PRICE FIXING.

It would seem to me that SOMEONE is getting together and trying to roll one over on the public. SOMEONE is taking advantage of the fact that there are Hurricanes all over the gulf coast and they are using that to pump the price of gas. This only works though if everyone does it, and wouldn't you know that every gas station in my home town raised their prices to about $3.89 a gallon this week. I'm truly not a conspiracy theorist, but the math just does not add up.

Talk Fusion Business Opportunity

I'm investigating a business opportunity called Talk Fusion.

Basically the deal is that it is very hard to send a video over e-mail that the recipient can actually play on his computer without having to download formatting software. It appears that Talk Fusion has some kind of patented system that allows you to send video e-mail to anyone, and they GUARANTEE that the receiver will be able to play it on their computer without any special software.

The gentleman who introduced me to this opportunity is an extremely nice guy named Bill Lomas. Bill is sold on this product and doing extremely well. The product costs about $350 up front and about $20 per month depending on how may folks you have in your contacts list who will receive video e-mails from them.

The only issue that I have with the program is the MLM component. I am kind of unclear about the compensation plan. I've been too busy to sit down with Bill and try to figure it out, but when I do, I will let you know what the deal is and if I think there is an opportunity there for us.

Please let me know if you have had any connection points with video e-mail, and what your experience was.