Tag: Tony Sagami

 

“I’ve got a message for your friend Jim Cramer. The Fed cannot permanently raise stock prices. And to have him cheerleading for lower rates 24 hours a day is, I think, unsavory.”
—James Bullard, St. Louis Federal Reserve President

Watch these two video clips:

Clip #1 is a 41-second video clip of James Bullard, president of the St. Louis Federal Reserve, on CNBC where he gives Jim Cramer a good spanking for being too much of a stock market cheerleader.

Clip #2 is live CNBC coverage of the FOMC’s announcement to leave interest rates unchanged. In particular, listen to the cheering in the trading pit in the background.

When I first got into this business, the guys in the trading pits didn’t care which way the stock market moved, because they were professional traders and nimble enough to make money no matter what direction the stock market moved.

Continue reading “Wall Street Carnival Barkers, Cheerleaders, and Fools”

 

I was raised on a small vegetable farm near Tacoma, Washington. My father hired lots of high school kids to work the fields in the summer.

In February of 1968, when the minimum wage was increased from $1.40 an hour to $1.60 an hour, I overheard some of my father’s employees excitedly talking about the 20-cent raise they were about to receive.

11 years old at the time, I was delighted because $1.60 seemed like a fortune to a little boy who only made 25 cents an hour on the family farm.

When I asked my mild-mannered farmer-father about the raise I assumed I would get, he grumbled, “I feed you, I buy you clothes, and you live in my house. You are lucky that I pay you ANYTHING!”

I don’t live in western Washington anymore, but I still have family and friends there, and the minimum wage is still an important topic in the area.

One of my friends, who owns a successful restaurant near the Seattle-Tacoma airport, has been moaning to me about the impact of the new $15 minimum wage on his profits. In response, he has been forced to cut hours as well as lay off some of his staff to survive.

Continue reading “The Minimum-Wage Fight, Chinese Factories, and the Rise of Robots”

 

Are you worried about the stock market? You should be; at least according to your local Starbucks barista.

Starbucks CEO Howard Schultz told his 190,000 employees in his daily “Message from Howard” email communication: “Today’s financial market volatility, combined with great political uncertainty both at home and abroad, will undoubtedly have an effect on consumer confidence and … our customers are likely to experience an increased level of anxiety and concern. Let’s be very sensitive to the pressures our customers may be feeling.”

You can’t make this stuff up!

Hey, maybe I shouldn’t be too harsh on Mr. Schultz, because the stock market is in a lot of trouble… and not for the reasons the mass media and Wall Street experts are telling you.

The know-it-alls on CNBC are pointing their fingers at the Chinese stock market meltdown as the reason for our stock market turmoil, but that is just the catalyst… not the root problem.

Continue reading “Buy the Dip? Hell No! Sell the Rip Instead”

 

There are thousands of economic and business statistics that you can look at to gauge the health of the US economy, but at the economic roots of any developed country is the prosperity of its “makers” and “takers.”

The “makers” are our factories, and the “takers” are the transportation companies delivering those goods to the stores.

I have devoted several Connecting the Dots issues (see the July 14 issue here and the August 4 issue here) to the clear warning signs that are coming from transportation companies.

This week, I’m going to focus on the “makers” because this basic building block of the American economy is looking very sick.

The US manufacturing industry has been under attack for decades from cheap overseas competition, but it is now falling like a rock.

De-industrialization Sign #1: The latest report from the New York Federal Reserve Bank shows that manufacturing activity in New York has dropped to the lowest level since 2009. Yup, just as bad as during the depths of the Financial Crisis.

The New York Fed’s Empire State general business conditions index plummeted from 3.86 in July to negative 14.92 in August. The Wall Street crowd expected the index to rise to 4.5; boy, were they wrong.

Continue reading “The Declining Health of American Factories and the Wall Street Proctologist”

 

“Over the past five years, our businesses have created more than 11 million new jobs. Our economy is growing and creating jobs at the fastest pace since 1999.”
—President Obama

Sure, the headline jobs numbers suggest that Obama is right and that the job situation is improving:

The Labor Department reported that initial claims for unemployment insurance fell to their lowest level in 42 years.

The Institute of Supply Management’s index of non-manufacturing employment (“Would you like some fries with that, sir?”) hit the highest level in 10 years.

The Labor Department reported that the US economy created 223,000 new jobs—the 57th month in a row of net job creation—and a drop in the unemployment rate to 5.3%, the lowest level since April 2008.

Sounds good… right? However, despite those feel-good headlines, the average American is far, far from solid financial footing. Here’s what I mean:

Continue reading “Distressed American Workers Expose the Fallacy of Improving Unemployment Numbers”

 

On July 14, I wrote about the danger developing in the transportation sector, and things are looking even worse today. Here’s what I mean:

Look Out Below #1: Royal Dutch Shell reported its quarterly results last week—$3.4 billion, down from $5.1 billion for the same quarter a year ago—and warned that “today’s oil price downturn could last for several years.”

In anticipation of tough times, Shell slashed its 2015 capital expenditure budget by 20% and is going to lay off 6,500 high-paying jobs (not Burger King-type jobs) this year.

Look Out Below #2: UPS is a very good barometer of the consumer end of our economy: It’s the largest component of the Dow Jones Transportation Average both by sales and market valuation.

Continue reading “6 Warning Signs That the Economy Is in Trouble”

 

“I would highlight that equity market valuations at this point generally are quite high.”

—Janet Yellen

Are you worried about the stock market? If you are, you’re in the minority of investors.

Greece… China… don’t worry about it!

At least that seems to be Wall Street’s reaction to what could have been a catastrophic fall of dominoes if the European and Chinese governments hadn’t come to the rescue with another massive monetary intervention.

If you think you’ve heard the last about Greece or a Chinese stock market meltdown, you’re in the majority. Investors are pretty darn confident about the stock market.

The John Hancock Investor Sentiment Index hit +29 in the second quarter, the highest reading since the inception of the index in January of 2011.

However, overconfidence is dangerous and often accompanies market tops.

Continue reading “The Wall Street Titanic and You”

 

You can gnash your teeth over the Greek debt crisis or the Chinese stock meltdown, but one economic sure-thing you should be watching is the collapsing fundamentals of the transportation industry.

Check out this headline:

More problematic for the stock market is that the profit outlook for transportation stocks, particularly ocean shipping companies, is horrible.

The story was about container ships facing the business-killing environment of expenses exceeding revenues. According to the Wall Street Journal, the container-freight rates on the Asia-to-Europe route have sunk like rocks and are now below the cost of fuel. And that doesn’t even include all the other fixed and variable costs.

The Shanghai Containerized Freight Index—the cost of shipping a container from Shanghai to Rotterdam—fell to $243 per TEU (twenty foot equivalent unit), a new all-time low and below the cost of fuel, estimated to be $300 per TEU.

That’s right: For every container an Asia-to-Europe ship transports, it will lose $57. Ouch!

Continue reading “Sinking Ships, Train Wrecks, and Empty Trucks: My Case Against Transportation Stocks”

 

Question: How do you get a $1 million portfolio?
Answer: Give $2 million to a stockbroker.

Don’t you hate phone solicitors?

Well, if you lived in western Washington during the 1980s, I may have very well interrupted your dinner with a “can’t miss” stock solicitation. I worked as a Merrill Lynch stockbroker in the 1980s, and we had mandatory work nights where everyone with less than five years of service cold-called everyone that lived in the best zip codes.

I made pretty good money as a stockbroker, but I didn’t like the business. There was intense pressure to push certain products, but that wasn’t all.

One of the greatest paradoxes of the investment industry was that the safest investments paid the lowest commissions while the riskiest investments paid the highest commissions.

Example #1: The commission on a CD was half of 1% while the commission for an illiquid oil/gas limited partnership was 8%.

I would have had to sell 16 times as many CDs to make as much as one of my dirt-bag co-workers who pushed little old ladies into oil & gas limited partnerships that locked up their money for six, seven, or eight years, or more.

Continue reading “The Wall Street Raid on Your Piggy Bank”

2006.

The last time the Federal Reserve raised interest rates was way back in June of 2006. Moreover, the Fed has kept interest rates near 0% since 2008.

But after the June 17 FOMC meeting, just about everybody—and I mean everybody—is assuming that the Federal Reserve will raise interest rates later this year.

The Fed has been so convincing that the market sees a 34% probability for a rate hike by September and an overwhelming 88% probability for a rate hike before or in December.

Heck, even Fed Chairperson Janet Yellen has said that she expects the Fed to raise rates in 2015.

Frankly, I don’t trust the Fed to do anything right, so my prediction is that Janet Yellen and her Fed buddies should not and will not raise interest rates this year.

Hey, I’m not the only person who thinks so.

Continue reading “The Wizard of Oz and the Case for a Later Liftoff”

 

It made me laugh.

One of my sons brought me to Bring Your Father to School Day when he was in kindergarten. Each child took turns introducing their father and explaining what he did for a living.

“My dad makes houses.”

“My dad drives a truck.”

“My dad cooks food.”

When my son introduced me, he said, “My dad looks at a computer.”

My son wasn’t far from being right. If you’re like me, you spend a lot of time reading; reading about the economy and the markets.

I spend three to four hours a day reading, and in addition to all the major financial publications like the Wall Street Journal and Financial Times, there are a couple dozen e-letters I read more faithfully than my parents did the Bible.

One of my absolute favorites is written by David Hay of Evergreen Capital Management in Bellevue, Washington. If you like John Mauldin’s Thoughts From The Frontline, you will love Hay’s Evergreen Virtual Advisor, which is free and is published once a week.

Above is a chart (one of many) from Hay’s most recent e-letter. It really hit home with me because I have three children in their 20s. They’re all currently in college, but the job situation for young adults is so bleak that a growing number of them have moved back home into mom and dad’s basement.

Continue reading “Get Your Ass out of the Basement and Find a Job!”

 

Memorial Day is a very nostalgic, solemn day for me.

America is a nation of immigrants, and most of us can trace our roots to some place other than the US. For many Americans, this means European ancestry.

I can’t claim any lineage to any passengers on the Mayflower, nor did any of my ancestors cross the vast prairies of the Midwest in covered wagons. Like yours, however, my ancestors came to America in search of a better life.

My grandfather, Fusakichi Sagami, was from Hiroshima, Japan. He traveled across the Pacific Ocean in 1893 as a kitchen helper on an American sail-powered freighter. He continued to work in galleys on any ship that would hire him, including a short stint on the naval schooner USS Augusta.

He married Mitsu, a picture bride, in 1906, started a small vegetable farm in western Washington, and produced 10 children—including my father, Ken.

Fusakichi, Mitsu, and their 10 children were among the 110,000 American citizens of Japanese ancestry held in the World War II internment camps, and despite being unjustly imprisoned and stripped of his land, Fusakichi believed so strongly in America that he ordered all his sons to volunteer for the US Army.

“You may very well die, but you MUST do this to prove that we are loyal to America,” he told his eight sons from behind the barbed wired walls of the Minidoka War Relocation Center in Idaho.

Continue reading “Connecting the Dots: Memorial Day, Yohei Sagami, and the Price of Freedom”

Education is a Way of Life

My mother and I journeyed to the United States from Japan in 1957.

Our long, two-month trip on a slow naval transport ship must have been frightening to my then 20-year-old mother. But she was eager to start a new life in America… a place where anyone who studied hard and worked hard could be successful.

I was less than two years old when my parents divorced in 1957. My 20-year-old Japanese mother suddenly found herself living in a strange country with no family, friends, money, food or place to live.

Yet instead of returning to Japan where her family and friends were, she scratched, rummaged and scavenged enough to make a new life for us in the US. Why?

My mother knew that a half-Japanese, half-American child had limited opportunities in Japan. It wasn’t like it is today; the wounds from World War II were too fresh. I would have never gone to a top university or landed a top job.

Even though my mother barely spoke English and seldom had more than two nickels to rub together, she fiercely held to the idea of the American dream. “In America, anybody can get rich if they work hard,” she told me.

And she was determined to have me prove her right.

Putting the “Earn” in “Learn”

Continue reading “Connecting the Dots: Investing in the American Dream”