Humor

I’m cheap.

I like to buy stuff when its on sale. The same applies to stocks. I recently bought Johnson & Johnson, and Google. Both are trading at historically low P/E and Price/Free Cash Flow ratios.

But, the market for bubble stocks seems to be alive and kicking.

LinkedIn (LNKD) just went public at 1,000 times earnings. Yeah, its trailing P/E is 1,000!

Even some established companies are ridiculously expensive. Salesforce.com (CRM) is currently trading at a trailing P/E of 300 and a forward P/E of 75. I can’t imagine who’s buying the stock at this level.

The CEO and other insiders are dumping stock like its going out of style. In the past year, they’ve sold $234 million worth of stock. And they’re continuing to sell it. Reminds me of CountryWide insiders selling the stock before the real estate bubble burst in 2007.

Here’s a funny video by someone who shares my disbelief about investing in Salesforce.

Foreclosure is not a fun process.

Losing your house for any reason is a stressful, disheartening experience. And banks are notoriously difficult to deal with. Mainly because they’re not really interested in working out a deal with you. Especially if you have equity in your house.

That being said, I’m greatly amused by people who get the better end of the foreclosure process, especially when it comes to Bank of America. (I’m not a big fan of Bank of America – I have my reasons…)

Bank of America filed for foreclosure on a house in Florida, about six months ago. The strange thing was that the homeowners, Mr & Mrs. Nyergers, owned their home free and clear. They had bought their house with cash. They had never had a mortgage on it.

In court the judge found the bank wrongfully tried to foreclose on them. Basically he said BofA was trying to scam them out of their home, and ordered the bank to pay their legal fees.

So how did the couple end up foreclosing on the bank?

After more than 5 months of the judge’s ruling, the bank still hadn’t paid the legal fees, and the homeowner’s attorney did exactly what the bank tried to do to the homeowners. He seized the bank’s assets.

According to CBS, the attorney said, “They’ve ignored our calls, ignored our letters, legally this is the next step to get my clients compensated.”

Sheriff’s deputies, movers, and the Nyergers’ attorney went to the bank and foreclosed on it. The attorney gave instructions to to remove desks, computers, copiers, filing cabinets and any cash in the teller’s drawers.

After about an hour of being locked out of the bank, the bank manager handed the attorney a check for the legal fees.

“As a foreclosure defense attorney this is sweet justice” said Allen.

The unfortunate sad part is that bank errors like this are quite common.

The couple’s foreclosure attorney said he sees happen a lot in court, because banks didn’t investigate the foreclosure and it becomes a lengthy and expensive battle for the homeowner.

At least this story had a happy ending.

I’m always in search of good books to read and a few people recommended Michael Lewis’ new bestseller The Big Short. I put off reading it because I didn’t really want to read yet another book about the subprime mortgage meltdown. However, I finally got the kindle version to read on my new iPad and was pleasantly surprised by how good it was. Actually, I wish I had read it earlier – the book was rather amazing. It was as fast paced and entertaining as his first book, Liar’s Poker.

Lewis describes the financial industry collapse induced by subprime mortgage bond derivative market from the point of view of a couple of hedge fund managers who shorted them. Not very large hedge funds either. Instead of focusing on well known managers like John Paulson, he focuses on relatively unknown and minor investors, with interesting personalities.

There’s Steve Eisman, the most pedigreed of the bunch with actual wall street experience, who’s abrasive personality insists on telling the truth even if it rubs everyone the wrong way. Running a fund that was owned by Morgan Stanley, Eisman desperately wanted to short his parent company but was prohibited by his lawyers. At one point in the book his partner asks “Who takes out a home loan and doesn’t make the the first payment?” to which Steve Eisman responds “Who the #$%^ lends money to people who can’t make the first payment?”  But that’s what happens when you lend $700,000 to a strawberry picker who makes $14,000 a year.

Dr Mark Burry, a one-eyed doctor with Aspergers syndrome,who quits his medical career to start a hedge fund with his own money and makes nearly $750 million for his investors.  And an almost comical garage-band hedge fund called Cornwall Capital that starts out with $110,000 and ends up with a whopping $135 million.

The book explains in great detail exactly how the great investment banks were creating junk bond securities with AAA ratings and selling them to institutional investors.  Companies like Bear Stearns, Lehman and Goldman Sachs blatantly lied about the quality of investment-grade bond products they were selling. The ratings agencies weren’t competent enough to properly rate these securities and they got hoodwinked like everyone else. In the end, everyone wins (except the US taxpayer) and no one goes to jail!

In all it’s a fascinating read on the excesses of wall street, the complexities of the financial derivative markets, and the crooks who run the show.

Bob Parsons is the multi-millionaire founder of Godaddy, probably the world’s largest domain registrar company. Here’s an interesting video about the top 5 rules for starting a business that they don’t teach you in business school.

#5. Start small

Don’t go all in when first starting a business. Get a proof of concept first and make sure you have a fallback plan. Parsons worked at a day job for 3 yrs while he started his first business, which he subsequently sold for $64 million.

#4. The best business partner is no partner

As opposed to conventional wisdom, two heads are not better than one. Having a partner or investor usually ends badly. You too much time discussing and negotiating than doing anything productive.

#3. Solve your own problems

Don’t use mentors and don’t copy what others do. According to the founder of Sony, Akio Morito, “You never succeed in business, technology or life by following the footsteps of others”. Indeed, a wise man keeps his own council. Speaking of Akio Morito, check out his highly acclaimed book, Made in Japan.

#2. Don’t fight fate

Keep eyes open to act on new opps when they arrive. For example,  Yamaha started out making pianos before they ventured in motorcycles, and Godday started out building custom websites.  You also need to be lucky. Strategy and planning are important but talent lies in spotting a a lucky break and taking action.  He gives the example of the first superbowl ad that got censored. The in-game censorship resulted in tremendous publicity and they jumped on it.

#1: Get and stay out of your comfort zone

Security is for cadavers!

You can watch the entire video below, but I’ve covered the main parts, except for the hot blonde! And speaking about wisdom that they don’t teach in business school, check out Never Wrestle with a Pig and Ninety Other Ideas to Build Your Business and Career.


Here’s a funny video explaining the true unemployment numbers that the BLS just released.

The Bureau of Labor Statistics (BLS) announced today that the unemployment rate for November fell to 10%. This figure represents 15.4 million officially unemployed people.

In reality there are over 26 million Americans who are either jobless or underemployed. The “real” jobless rate takes into account part-time workers seeking full-time work, discouraged job seekers and persons furloughed from full-time to part-time status. The real rate of unemployment is 17.2% and is a more accurate indicator of the labor market.

cheap home for saleSource: Miz Duke

As everyone knows the only thing wrong with America right now, is the lagging economy. If we could only boost our economy and increase our GDP we’d be able to unleash prosperity on everyone.  So building on the resounding success of its “cash for clunkers” program, the Obama administration just announced a cash for junkers or “we buy ugly houses” program. Since the median home price is about 10 times that of a median priced car, the government will offer 10 times the rebate for the purchase of a new home.  Other than that, the “cash for junkers” program is identical to the preceding program:

  • If you “trade-in” your old home, you’ll get $35,000 towards the purchase of a brand new one
  • If you had a jumbo-mortgage or your house was over 5,000 square feet, you qualify for $45,000
  • You must have owned the home for at least 1 year to prevent misuse of these funds
  • The “trade-in” house must be bulldozed and the debris shipped off to China
  • If your house is worth more than the rebate amount, you’re out of luck!

The government has earmarked $20 billion for this program and it estimates that the sales of 500,000 homes will cannibalized this year from future sales numbers. Wait, did I say cannibalize? My apologies, I meant to say that the demand for 500,000 new homes would be created.  The total effect will be to boost the economy by $100 billion dollars or nearly 0.7%! Since the destruction of the existing houses doesn’t count in GDP numbers it’s a net positive result!

The GDP is a number that calculates the amount of services and goods produces without the effects of taxation, so the negative effect of an extra $20 Billion burden on the taxpayers (or their unborn grandchildren) isn’t a part of the calculation either. So you see, it’s a win-win situation for everyone!

What’s that? Who do I mean by everyone? I mean the administration and the small sub-section of the population who own sub-$35,000 homes who are able to go out and get $125,000 mortgages. Now I’m not sure whether these are low-income families or rich slumlords, but that discussion is merely an academic argument.

Not only that, but demolishing the existing homes would help reduce the old inventory thats casting a dark shadow over the entire real estate industry.  So this we buy ugly houses program would really help the economy’s green shoots sprout in to a young sapling.  What’s that you say? We need job and income growth to actually boost the economy. No, that was the old economy.  This time it’s different!

Finding A Job

Regular readers know that I’m a full-time MBA student. I haven’t had much time to post mainly because I was spending a lot of time looking for a summer job. With the economy being as bad as it is, it’s been quite hard to get a paid job this summer. Unpaid internships are a dime a dozen and I was able to procure a few of those, which I turned down.  Eventually, I was able to find three paid gigs. One was in the IT department of a large cruise line company which didn’t really excite me.  Another was an online marketing analytics job that was very tempting. However, I turned that down in order to research distressed commercial real estate at Marcus & Millichap. Finding any sort of paid real estate job is tough in this environment and I figured that spending 3 months over the summer was a good way to gain some experience in the field of commercial real estate.

But landing these jobs was very tough. It probably would have been easier if I had looked for product management jobs, since i have a programming background, but I really wanted to do something different over the summer. If I’m spending all this time and money getting an MBA, I might as well do something that doesn’t just slot me as another techie.  My first preference would have been a job in investment management but despite having several interviews that didn’t pan out.  I think if I had networked a lot more, that could’ve become a reality but that’s probably true of any field. If you network hard enough, you’re bound to land a job sooner or later.

One thing all students should do is contact alumni in their fields of interest and offer to buy them coffee to learn about the industry. It’s much easier to do as a student otherwise you’re just some weird random dude who wants to meet them! You never know who will be able to help you get a job. And it probably won’t be the friends you hang out with all the time. You’re all part of the same network and if there were an openings, you would have known about them already. So go out and expand your network!

Check out this funny video for more job finding tips.

The Colbert Report Mon – Thurs 11:30pm / 10:30c
Stephen’s Sound Advice – Summer Jobs
www.colbertnation.com
Colbert Report Full Episodes Political Humor Stephen Colbert in Iraq

Happy Thanksgiving! Here’s an interesting cartoon on the topic.

[Thanksgiving In Washington]

[source: NaturalNews.com]

There’s certainly one group of people who have a lot to be thankful for this Thanksgiving: The white-collar criminals in Washington who are looting the U.S. Treasury and stealing trillions of dollars from taxpayers.

That’s what this financial bailout really is, of course: A grand, desperate swindle that seeks to wring every last cent out of the U.S. dollar before the coming currency collapse. A collapse of the value of the U.S. dollar is coming soon. Just do the math: The end result is obvious. It will either be runaway inflation that leaves dollars virtually worthless or the abandonment of the dollar by the U.S. government and the adoption of a new currency (the Amero?) at confiscatory exchange rates that will wipe out the savings of most Americans.

You are witnessing the downfall of the American empire, and the Federal Reserve — a private bank that was stupidly handed the power over our nation’s money supply — is heaping new debt onto old debt, sending the U.S. into a tailspin of bad money from which it will never emerge. Consider this: It took the United States over 230 years to accumulate $5 trillion in debt. That national debt has now roughly tripled in the last 60 days. Officially, the national debt is now about $10 trillion, but with the Fed just announcing another $7 trillion in bailout money, we’re talking about a $17 trillion national debt that nobody even has a clue how to pay back.

The very idea that we can pay off bad debt with more bad debt is so utterly stupid in the first place, it could have only been dreamed up by politicians. It makes as much sense as paying off one credit card by taking out a cash advance on another credit card. That’s not a financial bailout; it’s more like a financial tar pit. But it’s exactly what the United States of America has decided to do.

Read the rest of the article here.