It Will Not End Well

My journey examining Europe began with Greece which seems wholly appropriate given its historical precedence. It started simply enough with the addition of their real assets and their real liabilities. It ended simply enough with the realization that the numbers did not add up. There was no prejudice then and there is none now. The numbers just don’t work; not for Greece and not for Europe and so a moment of disembarkation is coming because it has too and it is as simple as that.  – From Mark Grant, author of Out of the Box

I wholly agree with Mr. Grant.  I have been saying the same basic thing for several years now.  It really is not that complicated when one simply focuses on the issue and removes all the noise.  “There isn’t enough money.”  Please stop with the “we can print our way out of this” nonsense.  No you can’t.  It will not work and anyone who takes the time to do some simple arithmetic knows this.  Taking the pain of eliminating the bad debt through write downs, sales and in some cases default will be the medicine that actually fixes the problem.  This will not come without significant costs and pain, however, it is the only real solution to the sickness that ails us all on a global basis.

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

FACEBOOK

Well there certainly seems to be an awful lot of chatter about the pending IPO (initial public offering) of Facebook’s stock.  First and foremost please know that as of the writing of this post the IPO has not even occurred.  The IPO is scheduled for the week of May 14^th.

 Currently the offering price talk is $28- $35 per share.  It has been reported to be “over-subscribed” which simply means there are plenty of folks, institutions and individuals,  who would love to buy the stock at the offering price.  Trust me everyone who wants to buy it at the offering price will not get it.  I suspect that if you are one of the lucky folks to get it at the offering price you stand a better than average chance of turning a profit.  For everyone else here is my advice:

 Just wait and see how this company and its stock do after it starts trading for a few days or weeks.  Based on its current earnings estimates the offering price is about 99 times its earnings.  Which in financial jargon means it has a P/E ratio (price to earnings) of 99x.  Historically not cheap.  Apparently from the analysis that I have read Facebook’s profit growth is slowing not accelerating, not good for a company with a 99x multiple.  I am not bashing Facebook here, many companies have shown the ability to adapt their business model and Facebook may well be able to do just that. 

 My approach here is to remain cautiously optimistic and if the stock presents an agreeable entry point then perhaps an investment can be made, but it strikes me that at this offering price you are not getting a great bargain and if the stock does rise after the offering it’s even less of a bargain.  I just do not see the need to rush in and buy anything, ever, Facebook included.

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

MF Global, Chemists or Criminals?

Are you kidding me?

MF Global Funds Feared “Vaporized”  WSJ 1/30/2012 (subscription req’d).

What does that even mean?  Vaporized!?  Was there some type of chemical experiment conducted with MF Global’s clients’ money?  I bet the clients never authorized that experiment.  This story line would actually be funny if it wasn’t so insulting and sad. 

Here is what happened,  so we can all understand this very technical financial vernacular:  MF Global took money it was not authorized to take,  made investments it was not authorized to make and lost the money on those investments.  The money was not vaporized – it was lost, plain and simple.  The only thing I do not understand is how Jon Corzine is not in jail.

(For those without a WSJ subscription, articles covering the same topic may be found here, here, or here.)

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

The “Fed”

I had the pleasure of attending the Simon School’s Annual Economic Seminar yesterday.  I enjoyed Federal Reserve Bank of Philadelphia President Charles Plosser’s thoughts and perspective.  Mr. Plosser gave a fairly subdued yet constructive outlook on the nation’s economy.  He believed the U.S. would not find it’s way into recession this year, he believes the nations GDP will track at a 3% growth rate.  He feels the housing market will stabilize , however, does not foresee robust growth.  All in all, my sense is he is in the “muddle along “ camp. 

 I thought the most interesting points Mr. Plosser made were in reference to his interpretation of current and future Fed policy decisions and how the message is disseminated to the public.  Mr. Plosser assured me that the federal reserve does have independent thinkers who are encouraged to voice their opinion both publically and privately.  A quote that struck me was ”federal reserve policy should not be set by the calendar.”  This is a reference to Dr. Bernanke’s decision to publically disclose that the Federal Reserve will hold short term interest rates low until mid 2013.  Mr. Plosser’s contention and I wholly agree that “ how does anyone know now what fed policy should be 12 months from now?”  Mr. Plosser also contends that the more transparency there is with respect to how Fed policy is established and what the factors were that went into the policy decisions the better it is for our nations citizens.  Once again, I agree.

 

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

You Cannot Solve a Debt Problem with More Debt

If you are one of my clients, you’ve heard that statement over and over again.  I say it because the logic behind our central bank and apparently the ECB is just that.

 I have truly grown weary of the nonsensical so-called “solutions”  to the problems that ail both the US and European economies.  Conceptually, this is the equivalent of taking out another credit card, in some cases with a higher interest rate, and using the proceeds from that debt to service your other debt.  I need one of “best and brightest” to explain how this works in the long term. 

 If our policy makers really want to address these problems at their core, then make the institutions that hold this debt either write it down to where it’s actually priced in the market and sell it, or put it on the balance sheet and accept that it’s an asset they must publicly acknowledge they own.

 Please do not tell me it cannot be sold because there is no market for it.  What that means is what we all know: IT’S WORTHLESS.  Hoping these asset values increase while hiding them from public view has been the modus operandi for too long for these institutions.

 I learned a long time ago that “hope” is not a viable investment strategy;  I’m pretty sure it’s not viable economic policy either.

 

 

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

This is how Congress spends its time ?

An interesting read in this morning’s Wall Street Journal is “Inside Capitol, Investor Access Yields Rich Tips.”  The story outlines how a New York based brokerage firm escorts clients(hedge fund managers) around Capitol Hill to meetings with congressmen. 

 I find it outrageous that these public servants cannot find time in their busy schedules to do things like read the 2,000 page  Health Care Bill in its entirety or actually work on passing a budget that puts the United States on a path of fiscal prudency (the types of things we elect them to do), yet apparently have time to sit down to meetings with hedge fund managers to disclose material non-public information, (which in some cases has lead to investments by the hedge funds).

 Oh, and please do not insult me with the nonsense explanation that these hedge fund managers help in forming policy decisions.  Of course they do,  because hedge fund managers represent congresses core constituency or, more to the point, campaign donors.

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Celebrating Our Acheivements

Last Saturday our firm came together for our annual holiday party. This year, we enjoyed dinner and jazz at The Inn on Broadway and, as always, celebrated career milestones and presented awards and promotions. Below is a summary of all the good news we have to share!

 First of all, congratulations to our newest colleagues:

Chris Cromwell

Sam DiNorma

Sal Fasciano

Laura Geyer

 

And to those celebrating 5 years with Brighton Securities:

Cathy Carnegie

Mike Francis

Rob Lohwater

 

 And finally, Tim Fenity celebrated 20 years with Brighton Securities – here’s to a great two decades!

 

Robert Kravetz was honored with his second year as a member of the President’s Circle. The President’s Circle recognizes exemplary advisors who achieve annual production goals while demonstrating a commitment to Brighton Securities’ professional standards and core values. For two years running, Bob has proven himself a cut above, epitomizing our firm’s values and standards while performing at a very high level. We congratulate him on his success.

 We also introduced a new award to recognize the efforts of our staff and management team. The Brighton Securities Excellence Award honors a team member who has made remarkable contributions to Brighton Securities while demonstrating a commitment to firm goals and exemplifying our core values. Over the past year, our 2011winner, Danielle Wilkins, has stepped up at every opportunity. She’s taken on new responsibilities without a second thought and has been a powerful agent for positive change. Danielle was described by colleagues as a superlative collaborator, never hesitating to team with other members of staff or management to achieve a consensus whenever possible. She seeks guidance and counsel from her peers, ensuring that her decisions will benefit both the firm and its employees to the best of her ability. We congratulate her on her achievement this year.

 

Finally, we are pleased to announce the promotion of 6 of our financial advisors to new executive titles. These titles reflect the level of annual production achieved by our advisors.  Receiving the title of Vice President:

George Arnold

Doug Hendee

Mike Francis

Brennan Redmond

 

Receiving the title of Senior Vice President:

Robert Kravetz

Caroline Korn

 

We’re so proud of all our colleagues! Thank you to all who joined us to celebrate on Saturday – here’s to a great 2011 and an even better 2012!

 

 Alexandra Conboy

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Goldman Sachs

While I am pleased to see some level of regulatory activity from our Securities Exchange Commission, I think we may all want to hold our applause for some further review.  Let’s try and put this fine levied on Goldman Sachs (without admitting any wrongdoing) in perspective.  The 2009 bonus pool available to Goldman employees was $16.2 billion dollars.  Allow me to remind you that Goldman also received $12.9 billion in compensation from AIG for credit default swaps that went bad.  That was not really AIG money, it was tax payer money.  A $550 million fine represents about 3% of the bonus pool and a fraction of the taxpayer money which Goldman received from AIG.  Without the public scrutiny of a civil trial, we will never know whether what Goldman did was criminal at worst or merely questionably ethical at best.

If the SEC is ever going to earn the respect it should have from the institutions it regulates,  it is long past time for this agency to start to enforce its regulations in a fashion which will be a deterrent for future questionable activity.  In my opinion, the SEC had a golden opportunity to let the world know that a capable cop was back on the street and simply passed on it.  Well, maybe next time.

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).