Profitable and proud: Campaign Monitor
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The idea for selling our own software really came out of frustration more than anything else. We were designing email newsletters for a lot of our clients but couldn’t find the right tool for the job. After trying everything on the market, we built a simple app that let our clients manage their own newsletters. All our clients loved it and it created a nice new revenue stream for us.
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Over the last six years we’ve gone from open plan, to all closed offices and then to a combination of both. I’ve paid close attention to the pros and cons of each layout, and I’m convinced that closed offices are the best layout for a software company.
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The reason for this is fairly simple. It’s all about removing distractions. Jobs like software development, design and copywriting often require juggling lots of different things in your head at once.
Very interesting article on successful entrepreneurship. I also appreciate the management ideas discussed which resonate with those I discuss in my management blog.
Related: Small Business Profit and Cash Flow – Y-Combinator’s Fresh Approach to Entrepreneurship
Failing to pay for the deferred costs of current expenditures gets all those practicing credit card budget thinking in trouble. That includes lots of individuals. But it also includes many governments. They pay huge rewards to special interests and act like they think the cost doesn’t exist. Only an extremely financially illiterate society could elect so many of these people. We have not learned that in the modern financial economies financial illiteracy is a huge societal problem (along with scientific illiteracy).
Padded Pensions Add to New York Fiscal Woes
Such poor financial management by public sector organization (California is horrible also) are causing huge damage to those living in such poorly managed states.
The use of public money for outsize retirement pay really stings when budgets don’t balance, teachers are being laid off, furloughs are being planned
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Roughly one of every 250 retired public workers in New York is collecting a six-figure pension, and that group is expected to grow rapidly in coming years, based on the number of highly paid people in the pipeline.
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Thirteen New York City police officers recently retired at age 40 with pensions above $100,000 a year; nine did so in their 30s.
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Before Yonkers adopted a richer pension formula for police in 2000, for instance, it was told the maximum cost would be $1.3 million a year. But instead, the yearly cost is now $3.75 million and rising. David Simpson, a spokesman for the mayor of Yonkers, said pension cost projections were “often lowballs,” so the city could get stuck. “Once you give something, you can’t take it away,” he said.
It isn’t complicated. So long as you elect people that are financial illiterate and only care about granting favors to special interests, not the consequences of doing so, you are setting yourself up for a great deal of pain once your credit card bill comes due.
Related: NY State Raises Pension Age to Save $48 Billion – Charge It to My Kids – Bogle on the Retirement Crisis – Politicians Again Raising Taxes On Your Children
The fallout of the credit crisis continues. The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.1% percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.4% in the fourth quarter of 2009 to 9.40% this quarter.
The percentage of loans on which foreclosure actions were started during the first quarter was 1.23%, up 3 basis points from last quarter but down 14 basis points from one year ago.
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 4.63%, an increase of five basis points from the fourth quarter of 2009 and 78 basis points from one year ago. This represents another record high. The combined percentage of loans in foreclosure or at least one payment past due was 14.0% on a non-seasonally adjusted basis, a decline from 15.0%.
The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 9.54%, a decrease of 13 basis points from last quarter, but an increase of 230 basis points from the first quarter of last year.
“The issue this quarter is that the seasonally adjusted delinquency rates went up while the unadjusted rates went down. Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data. The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement. Most importantly, the normal seasonal drop is coming right at the point where we believe delinquencies could potentially be declining and the problem for the statistical models is determining which is which,” said Jay Brinkmann, MBA’s chief economist.
“The seasonal models say it is not a fundamental improvement and that the seasonal drop should have been larger to represent a true improvement, hence the increase in the seasonally adjusted numbers. Yet there is reason to believe the seasonally adjusted numbers could be too high. Simply put, fundamental market factors may be having a greater influence on the delinquency rates than is normally the case, but mathematical models have difficulty discerning the difference over a short period of time.
“Since discerning what represents a fundamental improvement versus a simply seasonal improvement is probably more of an art than a mathematical science at this point, the seasonally adjusted numbers should be viewed with a degree of caution.
The seasonally adjusted delinquency rate increased for all loan types with the exception of FHA loans. On a seasonally adjusted basis, the delinquency rate stood at 6.2% for prime fixed loans, 13.5% for prime ARM loans, 25.7% for subprime fixed loans, 29.1% percent for subprime ARM loans, 13.2% for FHA loans, and 8.0% for VA loans. On a non-seasonally adjusted basis, the delinquency rate fell for all loan types.
The foreclosure starts rate increased for all loan types with the exception of subprime loans. The foreclosure starts rate increased six basis points for prime fixed loans to 0.7%, 17 basis points for prime ARM loans to 2.3%, 18 basis points for FHA loans to 1.5%, and 8 basis points for VA loans to 0.9%. For subprime fixed loans, the rate decreased nine basis points to 2.6% and for subprime ARM loans the rate decreased 39 basis points to 4.3%.
Predicting is much harder than explaining past data. But I believe the odds for better reports on foreclosures and delinquencies over the next 12 months. Delinquencies may well rise. But it is certainly possibly things will get worse. And if the jobs added each month doesn’t average close to 200,000 things will likely not be very good. My guess is we will add over 2.0 million jobs in the USA in the next 12 months but that is far from certain.
Related: Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Another Wave of Foreclosures Loom (July 2009) – Nearly 10% of Mortgages Delinquent or in Foreclosure (Dec 2008)
Charlie Munger’s Thoughts on Just About Everything by Morgan Housel
Benjamin Graham used to say, “It’s not the bad investment ideas that fail; it’s the good ideas that get pushed into excess.” And that’s a lot of what happened here.
Some economic distortions come from the masses believing that other people are right. Others come from the need to make a living through behavior that may be less than socially desirable. I’ve always been skeptical of conventional wisdom. You have to be able to keep your head on when everyone else is losing theirs.
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Take soccer as an example. It’s a tremendously competitive sport, and often times one team tries to work mayhem on the other team’s best player. The referee’s job is to limit this mayhem and rein in extreme forms of competition.
Regulation is similar. Most ambitious young men will be more aggressive than they should. That’s what happened with investment banking. I mean, look at Lehman Brothers. Everyone did what they damn well wanted until the whole place was pathological about its extremeness.
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A lot of this [financial collapse] can be blamed on accountants. Accountants as a whole have been trained with too much math and not enough horse sense. If some of these insane accounting practices were never allowed, huge messes could have been avoided. Bankers have become quite good at manipulating accountants
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Learning has never been work for me. It’s play. I was born innately curious. If that doesn’t work for you, figure out your own damn system.
More good thoughts from Warren Buffett’s partner at Berkshire Hathaway.
Related: Buffett and Munger’s 2009 Q&A With Shareholders – Berkshire Hathaway Annual Meeting 2008 – Misuse of Statistics, Mania in Financial Markets – Leverage, Complex Deals and Mania
To me, the prospects of a Euro currency surviving over the long term were not helped this week. The markets have behaved as though some great solutions have been adopted but it seems to me the fundamental problems if anything are worse now. It is true the short term is more stable. But at what cost?
Bailout Is ‘Nail in the Coffin’ for Euro, Rogers Says
“I was stunned,” Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview in Singapore. “This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue.”
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“It’s a political currency and nobody is minding the economics behind the necessities to have a strong currency,” Rogers said. “I’m afraid it’s going to dissolve. They’re throwing more money at the problem and it’s going to make things worse down the road.”
This makes sense to me. The problems with the Euro also explain why the dollar hasn’t fallen more over the last few years. The only significant alternative is the Yen. The BRIC countries (Brazil, Russia, India and China) are looking to increase the profile of their currencies supposedly – or even forming their version of the Euro (I can’t see how that could happen).
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[Rogers suggests] Investors should instead buy precious metals including gold or currencies of countries that have large natural resources, Rogers said. Among other asset classes, he favors agricultural commodities as the best bet for the next decade as well as silver because prices haven’t rallied.
It is very difficult for the politicians in the USA, United Kingdom and other countries to behave fiscally responsible when their taxpayers will eventually have to pay the bill. When you can hope to have others bail you out it seems that much less likely people will behave responsibly. Then again I was skeptical the Euro would be created without first having more consolidation of European governments. There are lots of good things about having the Euro, but in the long run there are very challenging issues to deal with.
Related: Jim Rogers on the Financial Market Mess – Why the Dollar is Falling – A Bull on China
Bogle on Bankers, Buffett, Obama; an interview of John Bogle, from February 2010.
But what made the decade quite so bad is that we then had a major recession or light depression at the end of 2008 to 2009 which is still with us. That coming with the market so highly valued meant that earnings growth was much less than what we might have expected. So looking out from here, I think we can look for better earnings growth. And dividend yields are back in decent territory but not great. We started this decade with a 1% dividend yield, and that’s an important part of investment returns, and now the dividend yield is around 2.25%, so a higher dividend yield contributing to future growth. So I think it’s highly likely that stocks will outpace bonds in the decade that just began.
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Are we on the right path now? Has America learned its lesson?
Bogle: No. Unequivocally not. The long overdue reforms being discussed in Washington do not go nearly far enough, in my opinion. We need protection for consumers. Canada has a financial structure similar to ours except it has a consumer-protection board, which would prevent banks from giving people mortgages if they have no ability to pay them back. To get that done has been very difficult. Also, Senators (John) McCain and (Maria) Cantwell have proposed a return of the Glass-Steagall Act, and that’s gotten nowhere but it is long overdue. We should have banks behave as banks and not as investment banks or hedge-fund managers.
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But let’s suppose the stock market creates a 10% return. And the value of the stock market today is around $13 trillion so 10% is $1.3 trillion. By my numbers, Wall Street and the mutual fund industry take $600 billion a year out of that return. That’s half of the return. So the only way investors are going to get their fair share of the $1.3 trillion is to reduce the costs and get the casinos out.
As usually John Bogle provides excellent analysis and vision.
Related: Bogle on the Retirement Crisis – Is Trying to Beat the Market Foolish? – Lazy Portfolios Seven-year Winning Streak – Sneaky Fees
10 Jobs With Great Return on Investment
Radiation therapist
Most common degree: Associate’s
Median pay: $72,910
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Employment in the occupation is expected to grow by nearly a third between 2008 and 2018
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Dental hygienist
Most common degree: Associate’s
Median pay: $66,570
It’s no surprise that the healthcare field is home to several careers that offer the best pay and opportunities for the education required, given that the healthcare industry has faced steady increases in demand despite the recession.
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Petroleum engineer
Most common degree: Bachelor’s
Median pay: $108,020
When it comes to jobs for which the typical degree is a bachelor’s, only airline pilots earn more than petroleum engineers. For one thing, engineers’ salaries reflect the technical skills required, says Margaret Watson of the Society of Petroleum Engineers. But the salaries are also a result of supply and demand, as there are relatively few graduates in petroleum engineering—some enter the field with degrees in other engineering disciplines, as well—and demand is expected to increase as more engineers reach retirement age.
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Nuclear power reactor operator
Most common training: Long-term, on-the-job training
Median pay: $73,320
Nuclear power reactor operators might start their careers as plant equipment operators while they become familiar with the operations. In fact, reactor operators need at least three years of experience working in a power plant—including at least one year in a nuclear plant. To earn the right to control the equipment as reactor operators, they must be licensed by the Nuclear Regulatory Commission. Employment of nuclear power reactors is expected to grow by 20 percent between 2008 and 2018.
Follow the link for more of the top 10 job paths that payoff well. I certain don’t think it makes sense to pursue a career that doesn’t interest you just because it pays well. But if you are choosing among several careers that appeal to you, one factor worth considering are the employment prospects in the careers.
Related: Engineering Majors Hold 8 of Top 10 Highest Paid Majors – The Declining Value of a college degree – Manufacturing Jobs Data: USA and China – Medieval Peasants had More Vacation Time
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According to Sharpe, who is also the founder of Financial Engines, the typical 4% rule recommends that a retiree annually spend a fixed, real amount equal to 4% of his initial wealth, and rebalance the remainder of his money in a 60%-40% mix of stocks and bonds throughout a 30-year retirement period.
What’s more, he shows the price paid for funding what he calls “unspent surpluses and the overpayments made to purchase its spending policy.” According to Sharpe, a typical rule allocates 10%-20% of a retiree’s initial wealth to surpluses and an additional 2%-4% to overpayments.
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The only problem with what academia knows to be right and what’s practical in the field — even by Sharpe’s own admission — is this: “Many practical issues remain to be addressed before advisers can hope to create individualized retirement financial plans that maximize expected utility for investors with diverse circumstances, other sources of income, and preferences,” Sharpe wrote in his paper.
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Meanwhile, Stephen P. Utkus, a principal with the Vanguard Center for Retirement Research, agrees that the 4% rule is flawed. But he also notes, as did Sharpe, that there’s no practical mechanism to replace it with and that further research is required.
I think this is exactly right. The proper personal financial actions in this case are not easy. The 4% rule is far from perfect but it does give a general idea that is a decent quick snapshot. But you can’t rely on such a quick, overly simplified method. At the same time there are simple ideas that do work, such as saving money for retirement is necessary. The majority of people continue to fail to take the most basis steps to save money each year for retirement.
Related: Spending Guidelines in Retirement – How Much Will I Need to Save for Retirement? – Bogle on the Retirement Crisis
For the most part my investment philosophy is based on fundamental long term investing strategies. But I do also occasionally speculate with a portion of my portfolio. It is risky (and honestly most people will lose money trying so it is unwise for most, if not all, to try) but can bring great returns for the successful speculator/trader. My methods are significantly influenced by Nicolas Darvas who wrote the classic investment book – How I Made $2,000,000 in the Stock Market (which I am re-reading now). In it he provides an honest and open look at his experience from his naive start to his eventual success. He lays out, in great detail, exactly what he did and how foolish some of his actions were. Then he explains how he came to find success by focusing on the price and volume action of stocks and a pseudo fundamental component (more of a story that could presage future fundamental success than actual fundamental strength). While honing his investment strategy, in the 1950′s, he traveled the world working as a world class ballroom dancer and placed order via cable.
Darvas’ method was a forerunner of the many technical analysis schemes used today. He is extensively referenced by William O’Neil (of Investor’s Business Daily fame) and other leading technicians. An extremely simplified overview of Darvas’ method: determine “boxes” (trading ranges) for a stock and buy on the breakout, to the upside, of the topmost box. He used a rest period of several days to set the top of the box and then determine the bottom of the box after that top was set. He used very close trailing stop loss orders to minimize losses. He sought to make large gains (let his winners run) and cut losses quickly.
Nicholas Darvas’ ideas and books included a disdain for wall street insiders, analysts and rumors. The CAN SLIM (William O’Neil and Investor’s Business Daily) investing style owes a great deal to Darvas’ ideas on investing.
I have created a new twitter account for to comment and follow others trading ideas. I would suggest only experience and successful investors even consider trading with a small portion of their portfolio. For most it is a losing proposition.
More on Darvas’ investing ideas and other leading investors. Books by Nicolas Darvas: Wall Street: The Other Las Vegas – You Can Still Make It in the Market (republished after a long period when it was not available) – Darvas System for Over the Counter Profits
Google posted very good earnings yesterday but not good enough for many. The earnings, and a 5% fall in Google’s stock price, were good enough for me to add a few more shares to my long term investment in the company. Earnings per share grew from $4.49, $1.42 billion total, in the 1st quarter of 2009 to $6.06, $1.96 billion (38% increase in profits and 35% on a earnings per share basis). On a non-GAAP basis earning per share grew from $5.16 to $6.76. Revenue increased from $5.51 billion to $6.78 billion and the operating margin increased from 34.2% to 36.7%.
Chris Bulkey has a good article on TheSteet.com, Google Tax Rate Inflates EPS, though I disagree with his conclusion.
Recall that Google records gains from marketable securities with interest income. This gives management flexibility to boost income by timing investment sales. Normalizing this line item with the year-ago period shaves 3 cents a share from the bottom line. The effective tax rate came in below the prior year with essentially no change in revenue from international customers (53% vs. 52% in the first quarter of 2009). It is therefore likely that deliberate utilization of deferred tax assets was responsible for the easy comparison. Attempts to ascertain specific amounts deferred were unsuccessful; we’ll have to wait for the 10-Q.
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Cash flow decelerated to $2.58 billion from $2.73 billion sequentially. On a year-over-year basis, cash generated from operations increased 15% — respectable in absolute terms, but loosely correlated with net income, up 38% from last year.
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We reiterate a “sell” rating and $544 price objective; Our target multiple moves to 21 times revised 2010 EPS estimate from 23 times.
Obviously I bought more, so I don’t agree with the conclusion, but his points are sensible and worth considering.
Related: Great Google Earnings (April 2007) – Buy Google (Feb 2008) – Is Google Overpriced? (July 2007) – Stop Picking Stocks?
Google profit up 38%, helped by ads by John Letzing
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