Legg Mason...Do they have a Legg to stand on?

Like Fifty Cent said, "I've been patiently waiting for a track to explode on". Well my game isn't music, its stock picking. And I am glad I was patient. I saw some indicators that would have lead me to purchase Legg Mason (NYSE: LM) between 28 on up. I admit I haven't been following individual securities lately but I was very suprised to see LM’s recent decline after it began picking up steam towards the end of last year (see the charts). The catalyst (for the decline) after some quick analysis was the recent quarterly earnings report. For financial firms, these meetings have caused serious havoc to the stock prices. The stock is now under both its 50 and 200 day moving averages. I am going to assume that this means new support levels will need to be established and all those investors that bought a few months ago will need to cost average down. But in order for them to buy in again at these lower a level they need to believers in what Legg Mason does and that’s asset management. Yep, these guys make their money investing in the damn stock market (Sigh).

Here is a quick rundown of the Pros:

- Good indicators show support for the stock
- Bill Miller is a fund manager that historically has had a great track record. He finds great companies and holds onto them for a long duration
- The stock has broken through its technical moving day averages, which could lead to additional support needed from investors
- I believe that I read that retirement portfolio outflows have stabilized, likely due to the run-up in the economy since last March
- I have the basic belief that the Federal Reserve won’t turn the spigot off too soon, which should keep the economy from “double-dipping”

Here is a quick rundown of the Cons:

- The stock broke through its technical moving day averages which could lead to investors cutting their losses…why would they cut their losses see the next bullet
- Although Bill Miller is the man, his fund consists of a large number of financial institutions…arguably one of the most volatile sectors right now
- The economy, which is still teetering could send the funds managed by Legg Mason lower

Superbowl Investing Tip ~ Invest in What You Know

This simple tip comes from the mastermind, Peter Lynch. I am completely engrossed in this strategy but rarely put it into existence and it has cost me dearly. It is so simple sometimes that we overlook the power of our own consumption and what it means. Here are some solid stocks where I have used their service and in some instances I keep returning. And if I would have bought the stock I would a very happy man.

Dominos (NYSE: DPZ) - Lets take this pizza chain. I decided to buy pizza and because I consider myself tech savvy I wanted to place the order over the internet. So I decided to use Dominos new site and technology to place and monitor my order. For someone like me, this was great to create my own pizza with toppings, see the price as I made it, and know how long it would take to expect a delivery or to go in and pick up my pizza. I did this over 2 or three months ago and had such a positive experience that I would definitely buy my pizza that way again. To read about Dominos new site and technology check out these articles from the Wall Street Journal and the website 'Storefrontbacktalk' for more information:


http://online.wsj.com/article/SB10001424052748704779704574552080042033284.html

http://www.storefrontbacktalk.com/e-commerce/dominos-gets-e-commerce-creative/

Amazon.com Inc. (NASDAQ:AMZN) - To be honest I love the fact that I know when I shop on their website that I am getting quality products at the best prices out there. My holiday shopping is quick and easy and the one thing I know is a money maker is shipping and handling, because we all have impulses and will pay more to have our goods quicker.

Wal-Mart Stores Inc. (NYSE: WMT) The last company I will right about is Walmart. I go out of my way to shop and buy products online at this store because they truly care about service and offer me the lowest prices out there. In this economy I don't want to have to think about who is giving me the best deal...I know already WMT will deliver. And I truly believe their website and site to store capability will continue to allow shopper convenience like it did for me when I found my Playstation3 bundle package there at a price that could not be matched.

SuperBowl Sunday Predictions

My predictions for this game are easy. I think the New Orleans Saints will come marching in on a wave of energy and make it an exciting game. The seasoned vets known as the Indianapolis Colts will regain the upper hand and gallop to the finish line. I love the Colts, and being that I am from Indianapolis, its a slightly biased prediction. I am proud of my boys in blue and no city deserves to be forgotten in this game.

I hope that we can remember that this is just a game and many things need to be done to bring our economies back and our vibrant cities. These two teams are perfect examples of that. Indianapolis is definitely a working class city in a state has been decimated by manufacturing jobs being lost. I am a testament to the brain drain of Indiana with great college educational institutions, but with limited jobs to keep natives in state. When you can boast about the likes of Purdue, Indiana Univ, and Notre Dame to just name a few, this state should be churning out companies, products and innovation. New Orleans and the lower ninth ward deserve not to be forgotten either. After suffering from a natural disaster that ravaged the coast, this city should a beacon for how we all need to rally around each other. A victory will be much needed for both cities and more importantly lets hope that we don't forget their stories when the game ends and a champion is crowned.

You've Got Mail: Trade a Recall

I used to have a phrase that I would use when I felt like I was getting a good deal. I would say “Who Could Ask for Anything More……. Toyota”. This was the old tag line from old commercials that won me and millions of Americans over for this Japanese automaker. But my point for this simple post was to give an example of keeping your ear to the streets. After following the reports, this trade was easy to sniff out. I placed a NEGATIVE rating on Toyota Motors (TM) shares when the rumors came out that they were going to be halting production. Not only have they halted production but more rumors are coming out recalls and problems with their different models and car lines.

Stay tuned I have a post that I have been sitting on for awhile. Oddly enough it started with me thinking about the situation of interestingly large group of Americans who still have a job, can easily pay their bills, but happen to be underwater on their mortgages. Should you stay, should you go and what to do if you are in this situation…some say the moral thing, but I was wondering if there is another option. Stay tuned for Urbanomics 101 and my interesting take of how you should calculate your next move.

How Low Can Mortgage Rates Go...

Its interesting as I look back almost a year ago... we wondered how low the mortgage rate environment could go. A year ago I remember following a CNBC article that quoted a market expert who said the 30 year mortgage rate would fall to nearly 4 percent!!! Its safe to say that we didn't hit that historic mark on the 30 year rate but as we dropped under 5 percent there were days when we wondered.

History books will go back and reflect on this time period and wonder whether the monetary policies by the Federal Reserve were helpful. The policy used by the Fed was commonly called monetary or quantitative easing and involved their buying of mortgage backed assets in large amounts to keep pushing down the rates. In turn, by depressing rates you attempt to spur economic activity in a housing market that was on its death bed. The overall goal is and was to put a floor on the troublesome housing market and now it appears its working. Home prices now appear to be stabilizing but a few things appear to be forming like clouds that will predict the direction of rates.

The first is the admission by the Fed that they will stop by mortgaged back assets by the end of March. This will begin to have an immediate impact on rates. I would anticipate that rate inch up from there and they will then move up further on the potential that the Fed may raise interest rates by the end of the year.

So look for rates to move up in April, possibly hampering the stabilization seen recently in housing. But you wonder if the government has already anticipated that. The timing of newly communicated program look to spur one last effort in demand before rates begin to creep up. Here is a quick summary of programs (new and improved):

- Home Affordable Mortgage Program - new requirements to have documents before you get the modifications

- The FHA allows investors who "FLIP" homes to buy FHA homes in a bid to offer remodeled homes to first time home buyers. With pricing guidelines included this should keep prices affordable

- Fannie Mae is offering new incentives to home buyers. 3.5% in assistance can be used for closing costs or brand new appliances and only for owner occupants.

Economic Indicators ~ (Dec '09) Monthly Job Numbers

The Labor Department's monthly jobs numbers are out and everyone on Wall Street and in the federal government have been waiting on these figures. FYI, for us regular folks in the city and in the burbs these numbers that came out this week are a summary of the previous month ...so the numbers that were announced this month are DECEMBER's unemployment numbers. The government also takes the time to go back and revise the number they've reported for the previous months. The numbers continue to paint a mixed bag with more negatives than positives at this point. I've highlighted the negatives in RED and the positives in GREEN.

December’s Unemployment Numbers are out. Here are the points based on numbers from the different surveys:

- The actual unemployment job loss number is – 85K for December. This is not what was expected because the estimated number from experts was to see a loss of roughly -10K or even a slightly positive number. So this number was worse than expected.

- The Household Survey has the number of unemployed persons at 15.3 million and the unemployment rate at 10%. Here is the breakdown among working groups (amazing when you see the actual numbers):

• Adult men (10.2 percent),
• Adult women (8.2 percent),
• Teenagers (27.1 percent),
• Whites (9.0 percent),
• Blacks (16.2 percent),
• Hispanics (12.9 percent),
• Asians (8.4 percent)

- The number of long-term unemployed (longer than 27 weeks) continues to rise.

- The number of people counted in the labor force is declining. This is strange because the stock market & GDP (economy) has been increasing. This is almost a sure sign that the unemployment rate will be rising this year to likely 10.5 to 11%. The experts say this is because the labor force will increase (not decrease) as the economy gets better and when those (dropped out) people are back and looking, they will be counted and the unemployment rates will increase.
- The number of part time, marginally looking, and now discouraged workers increased.

- The areas where jobs are increasing are Healthcare and Temporary help services. Temp employment has risen by 166,000. This is a good sign as companies usually bring temp and contract jobs back first.

Here are the revisions to October and November:

October - revised from -110K down to -127K
December - revised from -11K up to +4K

I stumbled onto the actual site where the Labor Department releases its employment numbers and that site will be posted in my favorites.

Week 1 ~ 2010

Here are a few things making some news this week:

Buying a Car – If buying a car, take a look at discontinued brands. General Motor’s Saturn and Pontiac brands may serve up some great discounts because they will soon no longer cease to exist. The real question may eventually be finding parts for any brands that will be discontinued, but if you read the consumer reviews and can find a reliable model this investment may be a good bet. If you don’t need the discontinued deal of the century, then take another look at Ford brand cars. For has resurrected itself from the dead and improved its car offerings and has grown in market share over the last year.

Throw Some Dimension’s on It – The D’s I am talking about are “DIMENSIONAL”. Here are a few reasons why movies and TV are going from 2D to 3D. Now I personally saw Avatar in 3D and now want to see it in 3D and in IMAX, why I guess because bigger is always better. If you are not noticing, the media industry is moving to 3D and this is no accident. It started with them testing us, with movies that were throwing objects at us…as I heard My Bloody Valentine and Final Destination did. Then they used it for fun films and now blockbuster biggies like Avatar. 3D is not only going to be hitting the big screen it will also be right there in your homes. Yes, the television industry wants to offer you 3D TV’s in the near future and even the station’s like ESPN have announced they will be offering certain games in 3D. The other reason I have heard that 3D is on the rise in the movie industry is to reduce piracy. Now this may make a lot of sense as this industry has been looking for the white knight answer of reducing movie piracy. It may be a great reason that Avatar, which will go down as one of the biggest movies in history is mainly being released in 3D. I truly believe it is because the movie is new and made with revolutionary detail. But I could also see the registers ringing (all the way to the bank) if one of the biggest movies of all time cannot be easily copied. I am now wondering if it is truly a better experience for watching TV and movies?? I imagine the experience will change slightly over time, but I am not sure if I would prefer to slip on my special 3D glasses if that were a requirement every time.

An Early 2010 Gift List:

GOOGLE NEXUS ONE – Google just entered the device market and is now making a phone, well sort of. The Google phone, Nexus One, is being made by HTC but is Google’s phone. One of the unique features Google will give you and me is the right to stick with our cell phone company if we like them. Most phones nowadays tell you to switch to an exclusive carrier; however, Google is going to offer its phone in a format that can work with YOUR carrier. Yes the phone is considered ‘Unlocked’, a feature that is common internationally but not here in the US. That usually explains the price, because your carrier is not helping you with the price and you aren’t locked into long –term contracts. (3.7 inch screen, 5.1 megapixel and $529 unlocked)


AMAZON KINDLE, TABLET PC’S – The first is the new e-reader device. For a generation of people that have grown up reading on screens this is the holy grail of eliminating night lights bookmarks. I am already used to downloading and it seems easy to download my books and go. For me this would be great on the train and if I can (download) and read the Wall Street Journal or web articles then I may never part with this thing. I am not sure what all formats it reads but who needs books. The Apple Tablet PC also made the list for all of the new PCs that are thin, light and will allow you to write on the screen. Yes, like you are writing on a piece of paper, hence the name tablet. Can you imagine how much paper and I didn’t even think of myself as much of a tree hugger.


TATA NANO – Tata, the Indian car manufacturer may actually set its sight on the US sooner than later. And I can fulfill my dream of adding a car to my Xmas list. For the whooping price of $2500 you can own a new vehicle. Now all I need to do is to get 100 friends to hold the gift cards and go in on purchasing me a car that will never have problems finding a parking spot in Chicago.