Sunday, June 06, 2010

Mr. Market has Finance Ministers muttering to themselves...

So, the G20 finance ministers can't seem to agree on a way to protect the precarious global recovery.

In the US, the market got whacked because job "growth" seems to have gone the way of BP's Beyond Petroleum ads. Obviously, that seems to tell Tim Geithner and Big Ben that the market wants more stimulus to prop up the slip 'n slide economy.

However, in Europe their markets are getting whacked over fears that they can't meet their obligations - debt, pensions, etc - so, they feel that they have to cut spending dramatically in order to restore confidence in the market. On a related note - BP is extremely important in many British Pension plans. Give the fact that it accounts for about 14% of all dividends paid by companies in the FTSE 100 it has been very popular with pension plan managers. If BP has to cut it's dividend to fund cleanup in the Gulf of Mexico expect to see some angry people in the streets of London when their pension checks get cut by 20%.

As I've said before - the markets don't like uncertainty and the confusion surrounding the EU - US split is likely to lead to more volatility in the near-term.

In short, if the Euro keeps falling - $1.16-1.10 to the € seems to be the next target - the US dollar will appreciate and that likely means stocks will fall.

Ah, remember the good old days when a company's performance determined its share price? Those were the days my friends. Unless, you can follow the markets 24/7 and understand the impacts of currencies, debt and commodity pricing on stocks you might be better off investing in scratch-offs.

*** Update: After the Asian markets plunged 2 - 4% overnight the Germans have stabilized things globally and that has offered the Euro some support. Remember, though if German exports are growing it may say less about a global recovery than it does about the falling value of the Euro. Any big ticket item priced in Euros has become meaningfully cheaper over the past few months.

"German factory orders unexpectedly jumped for a second month in April after the euro’s 16 percent plunge against the dollar this year made Europe more competitive in world markets."

Unfortunately, their gain may be our loss...
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So, everyone has the story of the one that got away. I spoke with the lead advisers to Larry and Sergey (the founders of Google) about 3 weeks before they took in their first big round of VC funding 1999. I also once owned 15,000 shares of a $0.20 stock that I happily sold at $0.52. The stock climbed to a high of $41.50 two years later (yeah, do the math, it's pretty sickening to this day).

But there has never been a story like this guy.... This guy make some of my trades look golden.

The OTHER Apple Founder....

"It's usually past midnight when Ron Wayne, co-founder of Apple leaves his home here and heads into town. Averting his eyes from a boneyard of abandoned mobile homes, he drives past Terrible's Lakeside Casino & RV Park, then makes a left at the massage parlor built in the shape of a castle.

When he arrives at that night's casino of choice, Wayne makes a beeline for the penny slot machines. If it's the middle of the month and he has just cashed his Social Security check, he will keep battling the one-armed bandits until 2 a.m. Wayne is waiting to hit the jackpot, and he is long overdue.

He was present at the birth of cool on April Fool's Day, 1976: Co-founder — along with Steve Jobs and Steve Wozniak — of the Apple Computer Inc., Wayne designed the company's original logo, wrote the manual for the Apple I computer, and drafted the fledgling company's partnership agreement.

That agreement gave him a 10 percent ownership stake in Apple, a position that would be worth about $22 billion today if Wayne had held onto it.

But he didn't.

Afraid that Jobs' wild spending and Woz's recurrent "flights of fancy" would cause Apple to flop, Wayne decided to abdicate his role as adult-in-chief and bailed out after 12 days. Terrified to be the only one of the three founders with assets that creditors could seize, he sold back his shares for $800."

Cheers!

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