Perkins’ Picks

 

 

INVEST AND GET RICH?

It’s really not that hard. We are starting to see people finally get it out of their system. I’ve said it before and I will say it again, being a seller in this market doesn’t make any sense. Many have finally recalled monies and now “feel better” as they have ”done something” about it. Well, that is the wrong thing to do. You cannot trade your portfolio’s decline back in a few days. Sure it feels good now that you have pulled your money out and you can go back to whatever it was that you were doing with a faux sense of security, and yes, I too have made this mistake, but it is just that, a mistake. My father liked to say to me, “Why make a mistake when you can read about someone else’s?”

(Not quite that easy Pops, but I understand his point) You can learn from my mistakes as a young investor.

Warren Buffet was famously quoted in Forbes magazine in 1974 as saying, “Now is the time to invest and get rich.” The Dow was around 600 when he said this and he also said before that, “Look, I can’t construct a disaster-proof portfolio. But if you’re only worried about corporate profits, panic or depression, these things don’t bother me at these prices.” I am asking myself every day, “Is this the perfect time for young/ new investors to put money in the market and patiently make a killing?” At today’

s prices should we be bothered by the fact that we are facing sliding and in some cases faux corporate profits, historic levels of panic and volatility, and a depression, recession, whatever you want to call it. I say, no. This whole situation smells of opportunity.

Trust me, there is going to be some supposed genius, a la George Soros, when all this is over who will have made a killing simply because he invested.

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PUT MONEY IN PEOPLE’S POCKETS

Are they Ksubi pockets?

• Last I wrote to you regarding the Failout Plan, I said, “Are we forgetting that the economy got so worrisome, that we actually had to send people a real check in the mail? We put money in their pockets. Quite simply how will the Bailout Plan affect Joe Six-Pack’s mortgage and help him juggle all the other economic hardships? Quite simply the above two questions have to be answered before the markets can turn around with any real confidence.” 

• If the economy is worse, don’t we need more money? I mean, the theoretical problem was that people didn’t have money to pay their mortgages, that’s precisely why they were sub-prime to begin with. 

WHAT TO WATCH

• We are now seeing the markets show some semblance of normalcy, and ironically, in concert with talks of another stimulus package emerging. Helloooooo? Money in people’s pocket. 

• Watch how the stimulus package talks unfold as this will be a key component as to whether or not we will enter a deep recession.
• 2/3rds of the U.S. economy is driven by the consumer. In order to help the economy, we have to help the consumer. Look for help. If we don’t get it, you won’t get rich, you’ll get hurt. 

• The market will most likely sell-off as retailers report the hesitation of consumers over the last 2 months before we even reach the holidays which make up 40 to 50 of some retailers revenues for the year.
• Also, continue to watch the jobless claims. I am still not hearing of major job losses and according to New York magazine nor are they: “According to the Office of the Comptroller, 35,000 bankers and brokers may be laid off in New York City in the next two years, far more than initially forecast, with investment-banking fees falling 23 percent globally. (But as of now, employment has remained relatively steady, for a total of 345,000 finance and insurance jobs in the city.)”from: The Autumn of the I-Banker 

• It is almost not even a question of having faith in the stock market or economy, but having faith in the U.S. government. If the economy is left alone it is no secret that it is not fun times. But the government is now heavily involved and they have a history of attempting to fix markets rather than let them run their course. Invest and get rich? Again, the market will probably sell off after retailers have their go at reporting bad news but after that, there aren’t too many shoes left to drop. I like stocks now, and the more they sell off the more I like them. For investors that look to wait it out, be careful as the stimulus plan part deux talks heat up. A combination of that; plus healthier credit is Robitusin to the market’s sick ears. 

DONT BE A MUTUAL FUND DUMMY

Trim Tabs reported $75 billion left U.S. mutual funds during the month of September, three times the monthly record set in 2001. I mean guys, the bailout plan is $700 billion, you could fund over 10% of the plan with that cash. The numbers have been reported to be just as staggering in October. The biggest investor in the world right now is the U.S. government and while most of us are either not investing or pulling money out, they are investing at unprecedented rates and at unprecedented levels. We should not just complain (that can be therapeutic), but also follow in action.

Again, I repeat, there is going to be some supposed genius, a la George Soros, when all this is over who will have made a killing simply because he invested with the government; which is as close as you’

ll ever get to risk free investing.

 

NO RECESSION AT MARC JACOBS

So this weekend I hit the streets of Manhattan to see what was going on in the world of retail. I was quite nervous as most who know my investment style know that I am fond of selecting winning retailers, but as I talked to an old industry buddy of mine, Norm, at the café of Sports Club LA he, and another long-time retailer friend of his who is based out of Florida (who I spoke to for over an hour) gave me reason for pause.

Norm:

This kid James is a good kid, I like this kid, a real good kid. Clever. He knows this Wall Street stuff. But I am telling him it is bad for the fashion business now, really bad, I have talked to buyers who haven’t placed an order in they don’t know how long…

 

Norm’s friend who is also a high end retailer described the environment in similar terms. As he put it retailers are always the last to be hit. When I asked how his high-end customers were holding up he said that they are only buying one “it”

bag as opposed to three for the season.

 

WARNING: RETAILERS TO REPORT NON-SEXY NUMBERS

Although there doesn’

t seem to be a recession over at Marc Jacobs as there was a line to wait on just to get in to the west village stores, and the Soho store (whose Spring collection was sick) this will not be the case for many and I am afraid my buddy Norm is right.

 

 

In fact, even for downtown Manhattan, there were people on the streets, but no shopping bags on the streets. In one of my favorite boutiques, Marni, there were only two other European women occupying the store and the shopping bags they carried read Prada (still waiting for them to go public) and Burberry (BRBY). As people were freaking out in response to Cramer and others giving them bad advice (funny, smart & helpful dude; bad advice) on the Today Show to sell everything you will need in five years and contribute to the ridiculous redemption number above (see mutual fund dummies) they also slowed down their consumption. This will be reflected in the fourth quarter. The industrials, energy, and financial sectors all have now reported horrible news, the retailers will soon take their turn.

 

But don’t fret. This should be the last of the truly un-pretty news. If your stomach can stand it (or just don’

t look), you can start building positions in your portfolios now. If not, you can probably wait for this last bit of headline risk. Today, as I perused business TV I saw headlines that read, Signs of Hope for the Credit Market or Credit Market Thawing Out. Headlining investor, Kirk Kerkorian, even contributed to the headlines, but not for an investment, as a seller of part of his stake in Ford Motor Company. Are there any more sellers left? Is the headline risk in the market beginning to bottom? I believe that it has started to and you definitely want to make sure your portfolio is in place.

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FORGET OBAMA & MCCAIN: IS $70 OIL THE REAL TAX-CUT?

Sorry Barack and John, but I don’t really think either one of you will be able to cure the economy via a firm speaking voice and reciting something somebody else wrote (sorry, but politics are kind of annoying me as usual. I kind of just want a candidate to say, “I don’t know, but we will try hard to fix it”, because I know they don’

t know, and I just hope that they actually try hard.)

I digress and want to draw your attention to a real tax cut, cheaper oil. Barron’

s noted that a crude price of $90 would produce an estimated overall energy savings of $150 billion over about six months. If the price holds at $80, the energy dividend could be closer to $170 billion. Crude oil closed today at $70.89. Unfortunately, declining credit , decreased wealth in homes and stocks will drain away most of the gains from energy; but at least were getting some help sans the bailout plan.

 

 

 

 

 

 

JPCULTURE

 

WHAT TO WATCH

We can watch what can be done with some extra oil and some rock & roll thanks to The Strokes (right).

 

WHAT TO WEAR

 

Make sure you are ready when the government puts money in your pocket with Ksubi/ Tsubi black grease jeans (pictured above).

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STOCK PICKS

Apple Inc. (AAPL) - Earnings Kinda Save the Day

Current Price: $91.49

Price Target: 162.27

PE: 17.89

FPE: 15.97

Q EPS Growth: 31%

Cash: $20.1 B

Debt: 0

Avg Vol: 39,310,760

Idea Rating: 8

Apple Inc. designs, manufactures, and sells personal computers, portable digital music players, and mobile communication devices, as well as related software, services, peripherals, and networking solutions worldwide.

• Everyone was holding their breath waiting for AAPL’s earnings as a potential silver bullet to the economy. And knowing that AAPL does a good job managing expectations, there was a lot of anticipation surrounding their performance. But, they impress again. 

• AAPL reported a 26% increase in profits.
• The company also reached their goal of selling 10 million iPhones for the year. In fact, AAPL sold more iPhones (6.9 million) than Research in Motion’s Blackberry (6.1 million), overtaking the phone icon in an astoundingly short period of time. 

• They also sold a record number of Macs selling 2.6 million Macs and just for fun 11.1 million ipods.
• And don’t forget AAPL’s balance sheet comes almost as strong as they get with about $25 billion in cash and no debt. 

• Bear Case: Consumer spending slowdown continues in the US and markets continue to exhibit fear and panic.

 

 

Power Share Water Resources (PHO) -People need water, right?

Current Price $13.79

Avg Vol: 810,760

Idea Rating: 8

The investment seeks results that correspond generally to the price and yield (before the Fund’s fees and expenses) of an equity index called the Palisades Water index. The fund normally invests at least 80% of total assets in American Depositary Receipts and common stocks of companies in the water industry.

• Trying to think about sound investments in this market led me to think about something that everyone needs. I don’t think I have to sell you on why water is a good investment, but suffice it to say that water is being used in more and more applications like construction in addition to drinking water and infrastructure for the commodity either needs to be invested in to produce or maintain as global economies grow. 

• Secondly, I wanted to look for something that was potentially over sold and as seen the chart below, PHO when compared to the major markets indices over the last 3months has sustained losses significantly greater than that of the broader markets.