Posts Tagged ‘USA’
Tuesday, January 12th, 2010Public companies first and foremost have to answer to their shareholders. If public companies don’t, then their shareholders will abandon ship.
Many Americans primarily hold stock through Mutual Funds and Exchange Traded Funds. This fact is proven by the percentage of ownership of companies by Institutional & Mutual Fund companies. Let’s take a look at the Dow Industrial 30 and their percentage of ownership by Institutional & Mutual Fund companies (as of 1/12/2010, information gathered from Yahoo Finance).
Company : % Owned by Institutional & Mutual Fund companies
3M : 68%
Alcoa : 68%
American Express : 80%
AT&T : 57%
Bank of America : 63%
Boeing : 60%
Caterpillar : 70%
Chevron : 63%
The Travelers Companies : 87%
DuPont : 65%
Exxon Mobil : 48%
GE : 50%
Cisco : 70%
Hewlett Packard Company : 77%
Intel : 65%
IBM : 61%
Johnson & Johnson : 65%
J.P. Morgan : 72%
Kraft : 57%
McDonalds : 71%
Merck : 80%
Microsoft : 63%
Pfizer : 59%
Wal-Mart : 37%
Disney : 67%
Out of the Dow 30 stocks only 2 (Exxon Mobil at 48% and Wal-Mart at 37%) have under 50% ownership Institutional & Mutual Fund companies. Over 93% of the Dow Industrial stocks have 50% or greater ownership by Institutional & Mutual Fund companies. Many of the Institutional & Mutual Fund company owners where the same for the Dow 30 stocks.
The above data shows that most individual investors have chosen to hold stock in the Dow Industrial 30 stock through Exchange Traded Funds and Mutual Funds. But who has the real shareholder control over these companies? Do you have shareholder voting rights as a fund holder with these stocks in it? The answer is no. The fund manager makes the decision for you, theoretically for the best interest of the fund holder. One thing is for sure, Wall Street hold the vote and therefore the control.
Wall Street nearly collapsed the US economy last year with their excessive risks. What type of risks are they forcing these companies to take?
Tags: dow 30, etf, exchange traded funds, mutual funds, USA, wall street
Posted in Economics, Industrials, Politics, Stock Market Actions | No Comments »
Tuesday, April 7th, 2009The US Government in one breathe attempts to sink the Dollar in the next speaks of a commitment to a strong Dollar. Even with all of their “innovative” methods of sinking the Dollar, it just keeps getting back up. The Dollar of recent has the resilience of a “Rocky” opponent.
So what keeps the Dollar moving up even in the face of such dramatic attempts to keep it down? Probably the most obvious is that the rest of the world is in worse shape than the USA. The old saying goes “if the USA gets a cold, typically the rest of the world gets pneumonia”.
With the US Government printing money at a feverish pace, other countries that are dependent on exports to the USA must do the same to keep their currency in pace. This process seems to extend the financial pain and fuel social unrest.
The Dollar is the Ocean eroding the cost of goods and services in the US, the solutions so far are looking like poor conceived Jetties, which typically cause more harm than good.
Tags: dollar, Economics, economy, money, recession, USA
Posted in Economics, Federal Reserve Actions | No Comments »
Saturday, March 28th, 2009Is it possible the Dow Industrial Average really could descent to 1529? The answer is absolutely yes.
From 1929-1932 the Dow Industrial Average went from a high of 381 to a low of 41 (closing prices). The index corrected 89.2% in about 3 years. So if the Dow Industrial went down 89.2% from its high of 14,164 that would leave us at 1529.
In December of 1903 the Dow Industrial Average touched 44. On September 3rd, 1929 the Dow Industrial reached 381. In 27 years the Dow Industrial Average grew 865%. On April 21rst 1980 the Dow industrial Average was 759. On October 9th, 2007 the Dow industrial average was 14,164. In 27 years the Dow industrial Average grew 1866%.
From September 3rd, 1929 (Dow 381) till April 21rst, 1980 (Dow 759) the Dow Industrial Average grew 199%. So it took over 50 years to grow a little over 199% but in just the last 30 years the Dow was able to grow nearly 10 times that.
So even if the Dow where to go to 1529, that still would be a 201% gain on the Dow Industrial average over 30 years which is not bad considering the last 80 years.
I am not saying that this will happen, but I definitely feel as though the last 3 decades have been somewhat of an anomaly. Remember price is determined not by Wall Street professions, it is determined by demand. If investors are unwilling to accept the risk of equities (stock), then the perceived value is worthless.
Dow Industrial Average from 1929 till 1980
Tags: average, crisis, demand, dow, economy, index, industrial, market, stock, stock market history, supply, USA
Posted in Economics, Side Notes, Stock Market Actions | No Comments »
Friday, March 27th, 2009Several weeks ago when the US Stock market was selling off with no bottom in sight we heard much of the financial populous using the term “capitulation”. Capitulation is defined by Webster’s dictionary as “surrendering or giving up”, traders characterize it as panic selling typically accompanied by large volume. Many professionals look at capitulation as a way to capitalize on another’s emotional bad decision. If the masses, “mob”, sells out then the market would have nowhere to go but up because all the sellers are gone. The theory is that it pays to contrarian.
Interesting how we really never did get this day of reckoning or “capitulation”. Instead a steady flow of relatively good news has spurred the major average up near 20% in a matter of weeks. With several weeks on a roll we have heard (not from all, but a large majority) from public officials, investment professionals and financial press that we may have seen the worst of this economic crisis.
If it pays to be contrarian then don’t you lose if you are part of the mainstream? Could the market be doing the same as capitulation but on the upside, panic buying for their jobs? Remember Wall Street suffers long term in a bear market.
President Herbert Hoover (31rst President of USA 1929-1933) on May 1, 1930 stated that United States was not through all its difficulties but he believed that United States had been through the worst (taken from The World in Depression 1929-1939 by Charles P. Kindleberger)
Red Circle Indicates End of April Beginning May 1930 Dow Industrial Average
Tags: bear, bull, chart, depression, economy, goverment, market, stock, USA
Posted in Books, Economics, Stock Market Actions | 1 Comment »
Monday, March 23rd, 2009At the beginning of the year I was under the impression that US markets were for the most part “Free Markets”. Recently these free markets have been coming under attack by the United States government. Seems lately like every week our government is formulating a new plan for recovery and forgetting the previous weeks plan. Lately I am likening the US Government to a child with ADD. Every week we are told to have patience, but every week those same preachers are no practicing their own advice.
My personal opinion on the government’s role in coping with an economic crisis is to uphold its current laws and not to create laws out of anger. I would wager that there are many responsible individuals (i.e. fraudulent mortgage practices) who perpetuated and fueled this economic mess illegally that we could prosecute and start on the road of closure. Instead we are focused on issues that stir the social unrest pot and steers a nation down the path of emotional and irrational rule.
I would plead to our leaders to start taking their roles as leaders and not as members of the mob. We are all taught that “fighting solves nothing”, it is just simple wisdom.
Tags: free market, goverment, market, money, stock, USA
Posted in Side Notes | No Comments »
Sunday, March 22nd, 2009We as the people of the United States are at a historic impasse where we can either band together to get through these hard time or fight and create a hostile environment where recovery is more difficult and prolonged.
When viewing an economic crisis over history many economists strictly view the flow of money, whether it is spending, lending or monetary. My view is somewhat more of the psychological viewpoint of the masses. If we strip out the dollars and cents of a crisis what we are left with is the acceptance of a failed endeavor.
We as individuals are able to handle extremely difficult stresses in life by going through stages of acceptance to finally moving on. As pointed out by Gustave Le Bon in The Crowd the individual is typically smarter than the crowd. As an individual we cope much faster with a crisis then the masses. Since this crisis is affecting so many people it makes it harder as an individual to go against the irrational actions of the crowd and move toward the somewhat obvious solution.
So instead of acting out of anger, we need to think as individuals and act rationally. If everyone thinks as an individual rather than part of the mob we would make more progress toward the resolution of this difficult time.
Unfortunately, if history is any indication of the future, people will jump on the bandwagon and the resolution will be prolonged and full of irrational behavior. Interesting that it is not the economic factors that determine the outcome, it is the human action.
Tags: econimics, economy, Gustave Lebon, the crowd, US, USA
Posted in Books, Economics, Side Notes | No Comments »
Thursday, March 19th, 2009Are they serious? The US Federal Reserve yesterday took significant action to promote lending and restore growth to the US economy. The Federal Reserve cited the following reason for the dramatic action:
Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession.
Inflation will be an issue in the USA when it actually starts growing instead of contracting. Read the above statement from the Federal Reserve, does this seem like growth is around the corner? If growth is so close, then why has the Federal Reserve taken made such a bold move? I think that Deflation is the real concern here. Remember that we can stop inflation; Deflation is the real scary one, especially since the Federal Reserve has already thrown the kitchen sink at the problem. It is funny how the stock market always seems to be so ahead of the news without actually thinking about the now. It is true, low rates makes growth easier because of the cheaper cost of money, but to get to the ending you have read the whole book.
Annual inflation rates in the United States from 1666 to 2004
Tags: deflation, economy, federal reserve, inflation, invest, investment, US, USA
Posted in Economics | No Comments »
Thursday, March 19th, 2009
Ben Bernanke US Federal Reserve Chairman
Okay so our beloved fed reserve chairman has come up with a brilliant way of killing the rest of the world economies, at least until they catch up. So what happens when you are the largest consumer in the world and you try your hardest to kill the value of your currency? Well you manage to make the life of countries that live off you harder. I call this protectionism, devaluing your currency in the face of a world recession is a real low blow to those countries that depend on you for your consumption. Now the other side of the coin is that large USA companies will benefit in the short term (a little protectionism), but what happens when those foreign economies you’ve damaged find their recession deepening because of currency exchange. Well large US companies, who receive a significant source of their revenue from overseas, will start to suffer on softening foreign sales.
The actions the Federal Reserve took yesterday are intentioned to expand credit in the United States, but isn’t that what started the problem in the first place. To me it seems like our Government can’t give up the past to move onto the future where we you don’t need a new car every 2 years and 5 LCD televisions per household. We need to focus on letting the market go through the difficult process of price discovery and start saving real money instead of looking at credit as a safety net (i.e. credit cards). The US government should stop trying to fix it and maintain the laws instead of inventing new ones.
Just my opinion.
Tags: ben bernanke, credit, economy, money, recession, US, USA
Posted in Federal Reserve Actions | No Comments »
