Friday, March 27, 2015

Operation Dessert Storm

March 18, 2015
General Mills Tops Earnings. Misses Sales, Cutting 800 Jobs

1. As part of Project Catalyst restructuring plan, General Mills announced its plans to cut 800 jobs...

Catalyst is to fire, what Project Catalyst is to fired. The irony should not be lost on us.

2. In addition, the company is undertaking another restructuring plan - Project Century...

Let me guess. This is the kind of bold and innovative new restructuring plan that only comes around every hundred years or so. Invest now or forever be priced out!

3. The Holistic Margin Management (HMM) program is also in place...

It was smart not to call it the Holistic Margin System in honor of the HMS Hood, because the German Bismarck sank that battleship in WW2 with just a couple of shells. And I'm not talking pasta shells either.

Damn, the Food General sure has been busy. Expect shock and awe, baby. Shock and awe. Yes, sir. Ramping up nicely for Operation Dessert Storm. I hope the first wave is led by a processed cheesecake battalion. Get in my belly!!

Thursday, March 26, 2015

$39.82

That's roughly how much the average American spent at Starbucks in 2014. Of course, averages can be deceiving. Seems unlikely that babies and toddlers felt the need for a caffeine fix.

March 21, 2015
Starbucks passes Subway in U.S. sales

With almost $12.7 billion in U.S. sales in 2014, Starbucks pulled away from Subway and claimed the No. 2 slot for the first time, according to the report.

Have no fear investors. It is only a matter of time before a Starbucks opens in each new home constructed, perhaps even more than one. The stairs can be tricky to negotiate without a fix before descending. I'm therefore optimistic that the U.S. growth opportunities for Starbucks will exceed expectations by a wide margin for many, many years to come.

This is not investment advice.

Disclosure: I never acquired a taste for coffee. No desire to start now.

Wednesday, March 25, 2015

Quote of the Day

March 25, 2015
Munger Says Prepare for Harder World as Buying Power Slides

(Bloomberg) -- Charles Munger, who became a billionaire while helping Warren Buffett build Berkshire Hathaway Inc., predicted it’s going to get tougher for consumers to maintain their standard of living in coming decades.

This would probably be a depressingly bad time to point out that real median household income is at 1989 levels after peaking in 1999.

The Illusion of Prosperity Special Hyperinflation Report for 2015

Let's see. Where to start?

March 25, 2015
The 20 Million Barrels of Pure Profit Sitting in U.S. Oil Tanks

Traders’ attempts to use every cubic inch of storage underscores how desperate the market has become to stow oil.

Oh, crap. This is not at all how I wanted to start my first ever special hyperinflation report. That's okay though. I'll just have to make the best of it with smoke, mirrors, dogs, ponies, and just a smidge of Peter Schiff style alarmist propaganda.

1. All hyperinflations start with an oil supply glut. There's no reason to link to studies backing this claim. It's a self evident truth. Don't believe me? Let's say there was 5' of standing oil on all of our highways. Traffic would cease. Goods would not be delivered. This would lead to a shortage of goods and a hoarding of goods. That's right. Hyperinflation. Prices of goods would skyrocket.

2. Traders are desperate to store oil. Why would they do this if the currency wasn't about to collapse completely and utterly? Short term profits you say? A dangerous game if storage runs out? That's just crazy talk. Traders are in it for the long haul. The term trader is actually just a euphemism for long-term buy and hold hoarder. Everyone knows this. Once a trader buys something, you can bet your life savings that it will be off the market permanently.

3. Oil is predicted to go to $200 within two years. Oh, wait. That's from 2008, which was during the Great Recession. Let me find you a better prediction from this year.

January 26, 2015
OPEC’s El-Badri: $200 Oil Possible If No One Invests

Prices as high as $200 probably won’t happen because “a move back above $100 will bring the shale oil drillers out in force as they can relatively quickly react to rising prices.”

You heard it here first folks. $200 oil is possible if nobody invests! And that's just a drop in the bucket if nobody invests when it hits $200. $500? $1000? $5000? There's no telling how high oil could go if nobody invests! Just like there was no telling how high oil could go during the Great Recession!

The key to hyperinflation going forward will be to drive the price of oil up without anyone actually realizing that we're already in a recession. You know, like last time, only without people ever figuring it out. And how do we do this? As jobs are lost as the price of oil rises, we convince the unemployed to keep driving to work anyway. You know, to keep the oil demand high.

This concludes the first ever Special Hyperinflation report on this blog. Invest accordingly! And as you do that I'll be watching the 30 year treasury yield meander around the 2.5% level, just for kicks and giggles.

How to Protect Your Portfolio Against Fleece

March 25, 2015
CNBC: How to protect your portfolio against Greece

Buying put spreads on the S&P 500 allows one to make a defined-risk bet that stocks will drop, protecting against a fall of a given magnitude within a given time.

Got it. Bought those downside puts. Feelin' good about my chances to outsmart my financial gambling counterparts over at Goldman Sachs using this sure thing "As Seen on TV" time-tested trading strategy.

March 25, 2015
CNBC: This could be the best way to bet on stocks now

The bottom line, however, is simple. Given current pricing dynamics, if one wants to increase one's exposure to the market, buying slightly out-of-the-money upside calls is not a bad way to do it.

Got it. Bought those upside calls. Feelin' good about my chances to outsmart my financial gambling counterparts over at Goldman Sachs using this sure thing "As Seen on TV" time-tested trading strategy.

Now that I have protected myself with zero-sum game gambling puts and am swinging for the fences with zero-sum game gambling calls, what do I do next? Is it safe to store them both in the same online account? I only ask because mixing matter and antimatter tends to create a rather impressive explosion.

Derivatives are financial weapons of mass destruction. - Warren Buffett

Keep in mind that there must be one loser for every winner in the derivatives market. Based on the impressive trading revenue of Goldman Sachs, I think one can pretty much assume who the loser will be.

The sixth sick sheik's sixth sheep's sick. Couldn't even afford "crude" medication after dabbling in the $691 trillion derivatives market.

Tuesday, March 24, 2015

Quote of the Day

March 24, 2015
What funds the next leg up in equities

We’re not sounding an alarm but it takes increasing money flows to push equities higher and its not immediately clear from where the next huge source of additional demand for equities will come.

Rest easy. I will be the additional demand. I know that I have stated on this blog on more than a few occassions that they can pry the long-term TIPS and I-bonds from my cold dead fingers, as I was fully intending to hold to maturity. I have had a change of heart though.

The majority has convinced me. There is no risk in investing in stocks after they have tripled off the lows of the Great Recession. I'm loving this whole buy high and sell even higher momentum vibe. Nothing bad will ever happen again. I get that now. I'm totally on board.

There are just two things I need to do before taking the plunge.

1. I need to wash my hair. Now I realize that many men have been told this by many women over the years, and it has often led to disappointment when dating. Believe me when I say this though. I'm not looking to postpone the buying of stocks here. I am super excited to have this once in a lifetime opportunity. There is nothing I look forward to more.

2. I need to capture one of the monkeys that will be flying out of my bottom. I'll be in the shower anyway washing my hair. There's no better time to look for them. Shouldn't take me much additional time at all.

In summary, there's no reason to panic. I will be selling my long-term bonds and buying stocks after I wash my hair and capture a monkey flying out of my bottom. You can take that to the bank. I will single-handedly support this market. Trust in me!

Now we just need to find someone else to follow my lead once I have fully loaded up on stocks. Otherwise, this will start to look like a failed ponzi scheme again, and we certainly don't want that! Again!

The stock market must generate 10% returns for all eternity or an eternity's worth of hope is lost!

19% Guaranteed Real Return!

That's how much today's 0.59% 30-year inflation protected treasury will get you if held the full 30 years, assuming you can wisely reinvest the interest generated at that same great 0.59% rate!

Hey, you didn't think I meant an annual real return of 19% did you? In this environment? Seriously? What kind of blog do you think I'm running here?

Save that kind of delusional and optimistic thinking for the blogs reminiscing about the good times of the past or the ones attempting to extrapolate it forward like nothing has changed. Yes, yes. We all loved the 80s and 90s. Good times. We can't live there forever though. At some point we need to wake up and smell the dying flowers!

Of course, your guaranteed real return will likely fall short of 19% if taxes are considered, especially if you are in the 19% tax bracket.

Have you given any thought to hoarding socks? May or may not do better than that. Hard to say. I certainly have mine stashed away though. No complaints!

Yes, sir. Really looking forward to the prosperity of the future in this land of unlimited opportunity! 30 years of exceptional returns are headed our way!!

Don't forget. Long-term interest rates are rising over the long-term! If everyone keeps chanting it then it must be true. In fact, the louder and more desperate the chanting the higher the rates will go. No proof is necessary! You just need to have faith and believe!!

The stock market you say? Guaranteed to do better over the long-term? That's the spirit! You really do have faith! What's it like to be a true believer?

Have you borrowed cheap money on margin to invest? If so, why do you suppose "they" lent it to you instead of investing in the "sure thing" themselves? I'm not prone to conspiracy theories, so this is actually quite puzzling.

But hey, no worries. Everyone knows the stock market can only go up, just like long-term interest rates can only go up. Some common knowledge facts are universal.

Monday, March 23, 2015

Who to Believe? Math or Hearsay from Someone's Dad?

March 23, 2015
5 Things My Dad Taught Me About Investing

Despite its treacherous pitfalls, the market is one of the few time-tested routes to financial security.

Time-tested means proven reliable or tried and true. I'm therefore going to assume that he did not grow up in Japan after their housing bust in the early 1990s or in one of the many other countries on this planet where the stock market did not necessarily lead to financial security.

You want to know what else was once tried and true? The earth is flat. It was true for even longer, until it wasn't true. To this day, some still refuse to accept it though. That's how powerful time-tested rear view mirror looking beliefs can be.

And in the other corner we have math, straight from the American Association of Individual Investors.

For Long-Term Investors, the Focus Should Be on Risk

For the mathematically inclined, proof positive of how stocks are risky even in the long run is that if you try to insure a portfolio against a shortfall, you will find that the premium rises as the time horizon lengthens, exactly as would the price for a put option on the termination value of the portfolio.

It's almost like the longer the time horizon, the greater the risk something can go horribly wrong. Yeah, it's almost exactly like that.

How long has the United States been time-tested? Just over 200 years. Didn't stop 19 suicidal individuals from flying our own planes into our own skyscrapers though. What did that cost us, per crazed fanatic, over the long-term, if one factors in the cost of wars? @#$% happens.

Here's a fun thought experiment. Want real safety in the stock market? Invest all of your money in stocks then call Lloyds of London. Ask for a price quote on an insurance policy to protect against any and all possible losses on those stocks until the day of your passing, in real inflation adjusted terms. The insurance quote may give you a ballpark estimate on how much risk you are taking.

Well, maybe not entirely. You still have to hope Lloyds of London will remain solvent if your insurance policy actually does pay off. I mean, something must have gone horribly wrong in the global economy for that to happen. Right? Further, what if Lloyds of London was investing your premiums in the U.S. stock market? You know, because it only goes up over the long-term? Wouldn't that be ironically tragic for you?

This is not investment advice.