Which Bad Word is it...

It was interesting how a few months ago; the talk of the town was inflation. The massive amounts of dollars being pumped into the economy was a lifesaver but many experts also predicted this would lead to inflation down the road. A short description of inflation is the rise in a basket of staple consumer goods due to the fact that it takes more dollars to buy those goods. It kinda makes sense, there is more money out there, therefore; more dollars will be needed in the future. Experts have also tacked on the fact that it the Federal Reserve has dropped interest rates to the point of "It can’t go any lower". The funny thing is that both of these points are exactly right and inflation and interest rates have not risen. WHY??

Because of the other nasty word that’s been surfacing…DEFLATION. This is the decline in value of goods, because there is not enough money circulating throughout the economy. This may be more accurate at this point because of:

• DEMAND – there is less demand for consumer goods, costs drop to keep people buying
• VELOCITY – Banks are not lending and this means money is not changing hands…the velocity is not circulating the money
• SAVINGS – Consumers are saving more money…the savings rate is 6.4% and rising. We are also demanding more and more deals (i.e., LOWER PRICES) see the heighten interest in sites like Groupon, Slickdeals, coupon sites, etc
• HIRING – Companies are turning a profit, but hiring has not returned. Productivity is high, temp workers are common…but all out hiring has not been seen.

This is my list of stocks that I've wanted to purchase. Some at the recommendation of key analysts or experts and others because I like the technicals observed:

POTASH - a little late on this one now that it has run up on takeover talks.

HPQ - 40.20

RRR - 6.76

IRM - 21.68

BAC - 13

RF - 6.67

CMCSK 15.90

The Assessment...

Its time for me to chime in and give you my assessment. We are more than half way through 2010 and its been an interesting ride. I can thank Lebron James for keeping me glued to the television a little bit more than usual. And I will admit that I didn't think it could financially get done...going to Miami that is and forming the Big 3 with Wade and Bosh. This move all of a sudden places Miami in playoff contention right?? Well we'll see because Orlando is still a good team and those Celtics keep signing veteran players. Shaq is the latest addition to Boston and now is Boston officially the Big 4?? I guess the questions keep coming, is Brett Favre staying or going. Wow this story sounds familiar, and it still seems like he doesn't know. So I don't have an assessment on these sport questions but I do have an assessment on the market.

Since the economic downturn, I have been more interested in market events and I been forming themes that may lead to investing decisions. This is traditionally against what I do, but its more fun that just looking at quantitative indicators. So here is my assessment:

~ Jobs, Jobs, Jobs: There is a lot of confusing information out there but it appears that the job situation is trending in a positive direction. It is very slow and we are not even close to turning a corner but the number are off of the all-time lows. This is the most critical part to the recovery and I am still not sold that we are turning a corner. There is a very odd trend that is forming and its: Companies are making and holding onto their cash, and Consumers are strapped for cash

~ Shock Value: I think that people are still jittery because its been hard to catch a break. In general, we all want to hear and see good news but we just haven't been able to get it. I think the wars, the oil spill, politicians fighting, immigration, etc have all been important issues but serve as distractions from getting people stabilized.

~ Trading Ranges: Lastly, I believe that because our politicians can't rally around effort after effort that will spur job growth, people will still feel uneasy. So oddly enough I think it makes sense to trade defensively and hold onto only core holdings. I think it makes sense to look at the ranges that stocks are currently trading in and take advantage of buying in on sharp dips and selling or even shorting stocks trading at the top of their range. I think most stocks will not be aggressively raising their guidance because I frankly don't believe the demand is there. This will keep most stocks trading in a range that could allow us to make some cash and we wait for our core holdings to outperform the rest.

Should I Buy These Stocks ~ May 2010

I hope that my efforts both here on the web and in person begin to slowly impact the way that people think about some of the daily decisions they make in a different light. As you know, my reasoning tends to have an economical twist to it..."If it don't make dollars, it don't make sense". And the outcome doesn't always have to involve money, but it does need to make sense to you and the people you care about.

So I am glad whenever friends and readers ask me about the economy or in this case to analyze a few stocks they are interested in buying. So in this round I received four stocks from a close friend who works in real estate. Here were the stocks he presented:

• Bruker Corporation
• Reliant Steel
• British Petroleum
• Unilife

Bruker Corp (NASDAQ: BRKR) - Biotech toolmaker (X-ray, MRI,etc)
- Barrons Article, "Biotech toolmaker Bruker Corp's shares could climb as business and the economy improves this year, financial weekly Barron's said. The paper reported in its April 12 edition that Bruker shares could rise from a current $15.20 to $18 as its sales rise 10 percent a year -- twice as fast as its rivals."

- I really like the medical device segment. I have written about these types of companies and think they have room especially with the recent changes in health care. I would reference my reviews of Boston Scientific
- Recommendation: This meets some of my screening criteria, nice call. BUY @ $13.91 – 14.08

Reliant Steel (NYSE: RS) – Steel Maker
- Steel is a solid play if you are a believer that the economy, more importantly the world economy is stabilizing and rebounding. I personally and not fully sold. A good chunk of steel would need to be bolstered by China and they may be reigning in a hot economy over there. Manufacturing and real estate are at divergent ends and you may need both (i.e., signs of a growing to really buy this play)
- Dissapointing Outlook: http://www.thestreet.com/_yahoo/story/10733603/1/reliance-steels-outlook-disappoints.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

- Recommendation: Not Buying

British Petroleum (BP) – Oil
- I like your enthusiasm here and slowly over the years have played the contrarian play more than any other. Buying the guy that’s down and out or that got clobbered by some negative news. Need a recent example, Boston Scientific got hammered by the FDA and I waited then bought after the story played out. The difference is this story hasn’t played out and the government needs a whooping boy and BP is it. No one is happy about what’s going on in the Gulf, even the oil lovers down in the Gulf!
- Recommendation: I personally would wait until a little more news comes out. I think it may be safe to buy at the 52 week low levels of $44, because a 7% dividend is paying you to wait for this stock to rebound. But your downside risk still exists big time…which could lead to a dividend cut and no one likes that.

Unilife – Medical Devices
- I like this sector don’t like this stock. In 5 minutes outside of the sector they are in I can’t find a reason to love this stock. Being a contrarian, I tend to want to buy these guys because it looks like they been beat down…like they stole something. But I can’t do it:
- Negative news (got sour around Apr) and changing of management and board members tells me something wasn’t going right.
- Recommendation: I personally would not buy this company, even if it was with your money. LMAO

Portfolio Spring Cleaning...

It is technically still spring, right? I know judging from the mid 50 degree weather here in Chicago that this seems about right! Although I have been really busy I am starting to understand my investing habits a little. I think I tend to get more interested in the markets when volatility begins to pick up. This could be it or maybe I am finally drinking my own Kool-Aid and using the volatility to find deeply discounted bargains. Well, lets hope its the latter because I have been tuning in alot more lately. I continue to write about the extraordinary run that we've been on lately. It started earlier in the year when one of our largest holdings was liquidated due to a buyout of Burlington Northern Santa Fe (NYSE: BNI). I felt good here because we owned this position for almost two years, and held strong (thanks to the dividend) through the downturn and watched the company get bought out by Berkshire Hathaway.

Next, we've seen positive moves in the stocks we screened so diligently during the market downturn and decided to keep. I've gone with a concentrated portfolio and this has served well since the market stabilized. Besides BNI, my concentrated portfolio includes:

Radisys Corporation (NASDAQ: RSYS) - Largest Position
BNI - Second largest, liquidated
Collectors Universe (NASDAQ: CLCT) Now second largest position.
Visa (NYSE: V) - Liquidated most of this position for a nice gain; Still retain a minor position
Boston Scientific (NYSE: BSX) - New, small position

I'll keep beating the drum on RSYS as it went from $4 to now $10. It was a rough ride but we should be seeing some upside as they outsource their production model and grow with new products.

Collectors Universe is easily my second largest holding and has been on an outright tear and we owe thanks to new management cutting costs and reimplementing the dividend. This has brought investors searching for yield running to this stock. It has seen a run also from $4 to now roughly $14 bucks. A recent increase in the dividend yield now it paying out a whooping 30c a share!!! This healthy dividend allows me to continue to grow ownership in the country.

Visa was a classic buy during the downturn as we began accumulating a large amount of shares at roughly the IPO price. This was a no-brainer as the downside risk could not have been much lower than the levels that analysts had expected for a public offering. So at one point V was my fourth largest position behind RSYS, BNI and CLCT, because I had a conviction that V wouldn't slip much further. After a nice return, I sold most of V but retained a small portion which I still hold.

URB Update: Visa is experiencing some downside risk in their stock due to some recent legislation. The CEO recently spoke about the amendments passed in the Senate and the affects they could have. Being in the industry I need to better understand what's in the potential amendment but it seems like there could be some additional regulation around the "interchange" or swipe fees that are paid by merchants. I do believe this could have the most impact in their bottom line because this is how they make their money on a per transaction basis. I think investors are concerned with this and with the fact that a major part of the amendment is limiting the fees around debit and even credit transactions. This part would only impact V if their issues see a significant decrease in volume.

My recommendation is to wait for this legislation to play out. V and other networks will not be impacted as much as issuers are. Keep the stock if you own it and use the dividend to accumulate more of a position. I will be keeping the small position that I own, however for the tracking portfolio I will take some profits.

Boston Scientific - I like this sector but my research shows that there may be too much risk involved in holding this stock. I may look to stay in this sector by finding a stronger company that offers a dividend.

I am exhausted but here are the stocks that I am still watching:

• Energy Partners
• Legg Mason
• Becton Dickinson
• CapitalSource
• Theravance
• ViaSat
• ADC Telecommunications
• Solar Capital

Back to Business...

If you haven't been paying attention lately it has definitely been back to business on Wall Street. Quietly the markets have roared up and surpassed the levels before the great recession of our times, started. We are roughly hovering around Dow 11000 and I am still interested because good companies are recovering and making money. If you go back in time, you will remember that I mentioned the good times will begin to roll again however we need to be better stop pickers this time around. In the past few years, we could afford to buy almost anything and watch it go up. Now we've learned that this is no longer the case a good pickers will be rewarded. I am not a great stock picker so I will say good and that is why I went through that cleansing period. I said if you don't see a stock as a long term hold and can't bear waiting for it to recover through the difficult times then get rid of it. And that what we did, now I would have loved to go back and hold on to my Microsoft holdings but besides that I was pleased with my focused results.

My main holdings continue to be:

Radisys - my largest position with is up fairly nicely. Since the hitting lows in the 4s this stock along with many others has rebounded and is roughly in the 9-10 range.

Collector's Universe my second largest position is poised and looking very strong. It has surprised be and scared me a bit by bouncing off of levels in the 4s and surprising coming in around $14 lately. I followed the advice of the greats and really read through their filings and statements when things were bad. As I've written in the past, they have a good representation of outside investors who have kept the company honest. They shedded non-performing parts of the business...the gem grading business if I recall and maintained their bread and butter...authentication of stuff. They also instituted expense saving processes and cut the dividend which hurt and sent investors scrambling away. But reading through the filing showed me they could continue to make the payments but wanted to reserve the cash to make it through the storm. And that they did, and when they reannounced a short while ago that they were bringing back their 25c dividend things were rolling for this company. Earnings looked good and I was buying more shares through my dividend reinvestment program. Now my holdings are going up even more and they are soaring. They just announced an increase in dividends which is bringing in more investors and we are loving it. Dividends have been increased to 30c and this company looks to be in a great position. I will need to be careful here but we are easily profitable on this trade and making steady dividends each quarter.

Burlington Northern - This is no longer a holding as we made a healthy return after the company was bought out and taken private.

I watching the usual suspects in my watch portfolio:

Legg Mason (LM)
Boston Scientific (BSX)
...and a few new ones:
ViaSat (VST)
Theravance (THX)

Keep u posted, Peace

Homebuying 101 ~ Tour Baby Tour

Before you begin, you may want to read my previous post on homebuying:
http://urbanomics.blogspot.com/2009/08/my-reality-show-homebuyer-101-searching.html

I have now equipped you with a list of things that are great to get you started and these should really be used. Speaking honestly, you don't need to do any of these things if money is not an option. But because I treat real estate just like I do stocks then we will be looking at this investment as a long-term buy that must have upside potentional and there is a large margin of safety built in to protect my downside risk.

So what I did was I took the criteria listed out and began scouring the internet. I needed to suffer from 'sticker shock' and this was my first realization that I wasn't going to have everything that I wished for...without some sort of sacrifice. For me, it came down to not compromising on my must have features within the unit: SPACE, GARAGE, NOT FIXER UPPER. So I started by using Realtor.com to enter all of my needs and wants into their search engine for the areas I selected. So you may have to run a few different searches but this is critical because it shows you want the current listing prices are for the areas. I used this to begin to identify areas that are affordable. Remember, we have already limited our list to areas that are relatively safe, close to mass transportation, grocery stores, bars, the lake, etc.

URBANOMICS TIP ~ I then created a spreadsheet and documented all fo the properties that I could afford based on my pre-approved amount.

I visited these homes because they created a baseline of what I thought I wanted on paper. Here is where your Real Estate Agent comes into play. Now we must find an agent, interview them, and have them schedule tours for us if their is not an open house. I told the first agent what I was looking for after intreviewing him with list of questions and quickly was told, "You aren't going to get what you're looking for in you in that price range". Since I had previously been scouring the net on my own, I knew that he had a strong opinion to what type of property he wanted to put me in and true enough I kicked him to the curb a few weeks later. The second agent gave me his reservations also about how difficult it was going to be, but he schedule some homes to prove his point of what was out there.

Urbanomis Tip 2 ~ To show my agent I was a team player, I sent him a few of my houses I found on my own and we toured during that same trip.

To quickly summarize, the tour was great as they pick you up and drive you around and point out all of these great details that you never knew. And when viewing 4-8 properties in a day you may get house overload and this is where a camera is very important. So I was able to see my list in person and make adjustments because some things you have to see and feel to know how you may react...like layouts. Do you like an open layout, or separate rooms for kitchen and dining? These are the types of things I was confronted with. The tour went well but I found myself a little jaded, the homes my agent picked were a little shabby and while I probably was hitting 50% on my picks the ones we all loved including my agent were from my list (go figure). Over the next few months I started realizing that my research was finding great homes that I absolutely thought were great. Here is a quick snapshot of some of my finds:

Stay tuned to find out more about these properties.

Please use this link to find the last post on my homebuying experience:

http://urbanomics.blogspot.com/2009/08/my-reality-show-homebuyer-101-searching.html

SCRABBLE...

Currently, we are in a market that is swinging up and down. So instead of guessing which letter to put in your portfolio I would suggest an alphabet soup of stocks that are being snapped up by veteran investors. Here are a few on my short list:

Boston Scientific (BSX)

CIT Group (CIT)


Becton Dickinson (BDX)


Corrections Corp of America (CXW)


Citrix (CTXS)

Wells Fargo (WFC)

Republic Services (RSG)