Basketball Jones

We enjoyed two basketball games this morning both in the city of Irvine California.  Jack's team lost the first but won the second.  Both were a win for Devin and I as we watched our Man Child play the best and most aggressive we have ever seen him play.  In the 6 months he has been playing basketball we have seen him grow and become a fine young man.  (Not that he wasn't already.) 

We finished two games about noon and he (and I) were treated to In and Out Burgers.  I don't get the whole In and Out thing.  They are OK and the fries are horrid, but Jack loves them.

We finished our lunch and Jack has been catching up on some summer school homework, I have been catching up on the John Deere Classic, and Devin is grooming the horses.  Life is good.  Let's hope the idiots in DC don't mess things up.

The Dems and The GOP are really playing with fire and I think they know it.  This is the most irresponsible game of political chicken in our countries history.  Spending is out of control, we are about to exceed our debt ceiling, in essence forcing us to default on bond payments, various entitlement programs, and the stalemates taking place in DC will bit us in the buts very shortly.

Except for the very ignorant in this country, most people know we need to cut back and we need to raise taxes or at the very least close some of the corporate loop holes.  The message Obama sends about taxing the wealthy is a gross misrepresentation of the facts.  He consistently implies that people who make more than $250,000 a year need to step up to the plate.  From personal experience, if there are tax loop holes and things someone with a good income can do to not pay taxes, I'd like to know what they are. 

Currently, the highest federal income tax bracket in the US is 35%.  If you are fortunate to live in California and are doing really well, you can tack on another 13%.  That puts you ate 48%.  The only legal deductions, though you will probably succumb to the AMT alternative minimum Tax, are home mortgages and charitable deductions.  You can pay less taxes if you invest your money and make capital gains on your investments generating a 15% tax.  (That would be stocks, bonds, loans that qualify as in investment.) 

Most people as we said, know we are going to have to cut and tax to get through this debt ceiling issue.  There is no way around it.  Now they are talking about a smaller compromise with no tax adjustments and no cuts to entitlement programs.  In essence this buys the parliament of whores enough time to focus on what is really important, getting re-elected.  A 2 trillion dollar extension gets us through the 2012-2013 budget cycles.  How convenient.

You really should regardless of your political persuasion right to your congressman or senator and let them know that you know how important this issue is.  If you don not know the name of your US congressman or senator, drop me a note I will provide you their name and address and a form letter that you can e-mail or snail mail.  This is getting way to serious to ignore.

Yeah I know, you are saying it won't matter.  Well it does.  These people want to get re-elected.  Depending upon your congressional district, you letter carries X number of votes and your e-mail carries X number of votes.  They do usually track and tally their constituents input.  Don't think they don't.  So please let them know your thoughts.

This week in Barron's

The supplement insert is the second quarter installment of the mutual fund report for 2011.  You know we just don't dig mutual funds so we have not look at the section as of yet.  We will because it is a great insight into the strategies of fund managers and what actual equities they choose to include in their holdings.  For instance if you think real estate is going to come back some time soon, you can see who the top performing real estate or REIT funds are and what they are buying. 

In the main sections, Andrew Bary does a first half forensic on the  companies that Barron's have pimped or critiqued.  This review was one of their worst.  Typically when Barron's writes a positive profile the stock see a nice gain over the subsequent 12-18 months.  Perhaps because they are right or the readers are influential investors.  Gains of 15-20% are not uncommon.  The first six months of 2011, positive profiles have yielded less than 1%.  The years is not over and there are some great names on the list.  If you believe the balance of the year will have decent earnings reports, take a look at the list in this article. 

Larry Straus writes a great piece, actually an interview with Jan Loeys from J.P. Morgan,  explaining why slow growth is good for the market.  They discuss equities, currencies, and bonds.

Jonathan Liang does a meaty piece on Ruth Hospitality aka Ruth Chris Steakhouses.  When you read all they have done to control expenses and what their growth prospects are, it looks very appetizing.

Horrid, putrid, lackluster, lousy, terrible, unfortunate, crummy, sickly, ugly, are just few of the platitudes used through Barron's this week to describe Friday's surprise labor report.  Some said they though it was a typos coming off the Bloomberg on Friday.  People were looking for 120-150 thousand news jobs.  When the number hit 18,000, some actually thought they had forgotten a 1. 

Alan Abelson spends a good amount of time going over the report and remind Washington to pay attention to what is going on.  This is one of Alan's better columns in a while.

Micheal Santoli takes a better shot at the job numbers and puts them in perspective of the market in general.  He is more positive, and makes a very important observation which I will borrow here:

"Sure, the S&P 500 multiple on the next 12 months' forecast earnings is below 13, thus seemingly cheap. Yet the biggest 30 mega-cap stocks are so inexpensive and scorned that the other 470 together trade right at their long-term average, notes Morgan Stanley strategist Adam Parker. And Ned Davis Research notes that the median stock has a trailing multiple above 18, above the 42-year median and "neutral at best."

Ok, in Salve Lucrum Blog Layman speak, the biggest 30 companies with the largest market cap (Outstanding shares time the current price.) are trading much lower than the overall average of the entire S&P 500.  That means they are bargains.  If the market were to improve the balance of the year, these should improve as much or more.  Want the names of these 30.  Drop me a note and I will get them to you.

Santoli goes on to give a beautiful example of one of the components undervalued and poised to do well.  WMT Wal Mart.  It is going on our watch list.  Cash Flow issues at the moment keeps us from starting position.

And Shirley Lazo does a piece called A Sunny Payout Period regarding the first 6 months of dividends for the S&P 500.  The payouts and number of issuers were on the rise.  For you dividend hounds, it is a great article.