Advocating Panic

Posted by T.W. Hanson - Feb 29th, 2008 at 23:02

Panic

I am going to differ from my colleague on an important point: the benefits of panic related to the stock market. I believe emotional reactions to the stock market spur reflection and analysis, positives for the market. One of the worst things for the market is ignorant, apathetic stoicism. Evaluate what you own and why you own it.

Trying to time the market on a daily, hourly or tick by tick basis is clearly not advised.

Twice every month, money is taken out of my paycheck through a 401k program. My management of this consists of periodically evaluating the portfolio allocation between sectors, geographies and other characteristics. However, this gets to my point, I am reviewing and understanding where my assets are and what they are doing.

In my personal account, I take a more active role. On an almost daily basis, I look at what I own. If I cannot justify its place in my portfolio, I get rid of it. Past data show that equities outperform almost all other classes of securities in the long run. However, past performance is no guarantee of future success. Tell former employees of Enron who had invested in their company that stocks go up in the long run and see what reaction you get.

A healthy dose of panic and the rational reflection that follow can be a very good thing.

Vicenarian Travel Tips

Posted by Tad Johnson - Feb 28th, 2008 at 5:02

passport.jpgIn the U.S. we work too much and take too little vacation. In an attempt to correct this in my young professional life, I’ve taken off a week in between projects to visit a friend in Brussels. Nothing clears the mind and replenishes one’s internal motivation engine like a week free of work and daily life.

Travel doesn’t mean spending $2000 on a three day cruise. As a vicenarian, there are a lot of great ways to travel on a budget. Here are some tips that I’ve picked up:

  1. Pack light. Regardless of how long you’re planning to travel, there’s no reason you can’t carry all your gear in a carry-on sized bag. By carrying all your gear, you’re able to move quickly (no heavy suitcases or waiting for checked luggage) and you can adjust to flight changes effortlessly. While you may think that you need to bring more stuff, I assure you that you don’t.
  2. Use your network. If you have friends and family in a city you’d like to visit, give them a call. You might find a free place to stay and visit a friend in one fell swoop. Otherwise, you can always get a good recommendation from someone who knows the area.
  3. Pack some snacks. Airports are notorious for low quality $8 fast food meals and $2 bottles of water. Bring some easy snacks like energy bars and an empty water bottle that you can fill at a fountain once you make it through security. A hungry traveler makes poor decisions. Don’t let yourself get too hungry.
  4. Go for groceries. Once you’ve reached your destination, stop in at a grocery store and pickup simple wholesome foods like cheese bread, juice, and fruit. You’ll spend less money and eat a better diet than eating in restaurants at every meal. As an added bonus, you’ll get to rub elbows with the locals and test your basic language skills.
  5. Use the trains. Most large cities outside the U.S. have very efficient and inexpensive public transportation. Since you’re traveling light, it won’t be hard for you to hop on and off a few trains. You’ll save money vs. taxis and you’ll better orient yourself with the city by learning the train routes.

Don’t let your best years slip by without experiencing the world around you. Pack your bags and go travel (and save some money while you do).

Suing Your Own Client?

Posted by T.W. Hanson - Feb 27th, 2008 at 20:02

lawsuit

Wachovia has filed suit against Providence Equity Partners, one if its clients. It is arguing that by Providence improving the terms of a leveraged buyout of Clear Channel Communications it no longer has an obligation to provide a portion of the financing. They are well within the legal rights to do this and may win. However, what is their motivation?

The terms of the deal improved. Providence’s renegotiation of the buyout makes the financing more palpable to lenders like Wachovia. This is analogous to stopping at a Waffle House, arguing that the bill is to high and refusing to pay after they lower the tab.

This is a PR nightmare for any future Wachovia financings with private equity firms. Providence is large, and this will not go unnoticed by other PE shops.

Appetite for risk at Wachovia has clearly contracted since they orginally agreed to the Clear Channel buyout financing. The big question is what has made them bring in their horns: a greater level of intelligence than at the original time of signing, fear or big trouble in the banking sector.

Buy more RAM!

Posted by Tad Johnson - Feb 27th, 2008 at 6:02

fix-computer.jpgComputer feeling a little sluggish? Doesn’t have the pep it used to? Don’t buy a new one until you’ve purchased more RAM.

For years, computer manufacturers have been pushing their latest and greatest in terms of processor speeds and capabilities. Intel has some pretty flashy ads out right now pimping their Core 2 Duo chips. Since processor speeds climb every few months, this has been a pretty effective marketing tactic.

There’s only one issue : it’s RAM that has the biggest impact on overall computer “speed”. If you’re running the latest Mac OS (or, sadly, Windows Vista) you need at least 1GB of RAM. 2GB and you’re sitting pretty.

Here’s the best part–RAM is cheap. You can buy 1GB for about $50 online. Next time you’re tempted to drop $1000 on a brand new computer, buy some more RAM first. You just may find that you can get another year or two out of that dusty old computer.

dual-opteron-mb-ram.jpg

Today’s Equity Market Conundrum

Posted by T.W. Hanson - Feb 26th, 2008 at 19:02

 

What the hell is going on out here?

lombardi

Despite two bad economic numbers, the market moved higher today. We learned that home values continue to plummet and that prices are going up at the wholesale level. Apparently IBM’s announcement of a large share-buyback and positive guidance was enough for many to justify buying equities, not me.

The producer price index (PPI) was up 7.4% from last January. When prices rise at the producer/wholesale level, the increase is either passed on to you the consumer or their businesses profit margin decreases. Although not everyone reading this is a big fan of corporate America, a large contraction of company margins would have an effect on vicenarians. An unprofitable business is far more likely to fire you than hire you.

Second, only because the data came out a bit later than the PPI, is the dreadful house price data. Across the country, home prices were 9.1% lower in December than they were last December. The last three months of data indicate that house prices are falling at an annualized rate greater than 20%!!!

With all of this, the stock market went up…

As we have be writing, don’t try to time the market.

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