Tag Archives: career builder

The Abyss; Valuation Exercises; This Will End

Supply side

Sliding into the Keynesian Abyss

The decline of the U.S. economy is the logical outcome of Keynesian economics, which enshrines central economic planning and embraces central banking. The unholy alliance of the federal government, the Federal Reserve, and Wall Street has all but eliminated capitalism and has transformed the United States from a burgeoning free-market economy into a failing corporate state.

The U.S. federal government, the Federal Reserve, and Wall Street each played a role in the progression from central economic planning and central banking to a corporate state. Politicians used Keynesian economics to justify big government, a welfare state, and budget deficits. The Federal Reserve sought to grow the economy through monetary expansion, thereby crippling it. At the same time, Wall Street sought higher profits through influence over the government. The resulting corporate state undermined capitalism and the free market in the United States and produced a downward spiral of economic decline from which there is no escape without fundamental reforms. See full article: August2012

30-minute lecture on Austrian Business Cycle: http://youtu.be/VETB4DZbZwQ

Study Guide and Courses on Austrian Economics: http://lewrockwell.com/woods/woods177.html INCREDIBLE!


Valuation Exercises

Remember that I will review our last exercise in this post, http://wp.me/p2OaYY-1MO after Easter (this weekend). Also, take five minutes each at a maximum and say whether you would buy the businesses and at what price? Why or why not? EXPD_VL and NVDA_VL.

This Will End (Financial Repression as represented by the low VIX)


 Like this:

If you don’t believe me then sit in on an FOMC (Federal Open Market Committee) meeting here:

Have a Great Easter!

P.S. Insiders buying: http://www.theglobeandmail.com/globe-investor/inside-the-market/corporate-insiders-increasingly-bullish-on-gold/article6482759/

Update on Lexmark (LXK) Case Study

An Update about a Month Later

I first mentioned LXK here on Friday the 13th (I should have known!) http://wp.me/p1PgpH-11x

This Post is to establish a basis for a case study in the future. This post is NOT a recommendation to do what I do (buy LXK today at $20.71) because you may be doing this:http://www.youtube.com/watch?v=go9uekKOcKM.


Knife Catching

Was I catching a falling knife? Here is research on that subject: Falling Knives Around the World Paper

When LXK announced earnings, the price plummeted further. What I did not want to do is this: http://www.youtube.com/watch?v=VfiY2nbV9RI&feature=related I don’t want to ignore the market’s reaction. I concluded that LXK’s intrinsic value had declined due to a lowing of future cash flows, but that price had more than compensated for the news. I decided to hold.

I could have done this:http://www.youtube.com/watch?v=tZnkql_Xkhc or http://www.youtube.com/watch?v=4ywfiKl5fsc&feature=related or http://www.youtube.com/watch?v=CvbTjM5HPCI

But I needed to step back and reflect on the situation and my portfolio’s condition. First, LXK is not a franchise. It’s business allows some customer captivity for reselling toner, but the business is changing/shrinking while the company transitions into more software services where the company may not have a competitive advantage.

Secondly, management announced and is–so far– returning capital to shareholders, so I view this as an asset/special situation type of investment. Though the overall printing market will shrink, it won’t disappear within five years and if the company can buy in shares at lower prices, value will out unless the business is permanently impaired. A more in-depth view/valuation will be forthcoming in another update.

I noted that about 1/4th of the company shares traded hands on the last big sell-off. I don’t know if that indicated capitulation, but I am estimating that the sellers where not the most informed participants. Why wait to sell after the price of the company has dropped by 50% and AFTER the news has been announced twice?

Since I weight special situation/asset investments smaller than franchise (compounding machine) investments, this was about 1% which I could build to 2% or 3%. I may have 20% of my account in my favorite holding. But I won’t buy more because management doesn’t own a significant share of the business, there are impediments for a take-over and I don’t see management buying shares for themselves.

I would sell if I find a more compelling investment for the capital, especially if I could acquire a tax asset (loss) while having the same margin of safety in another investment.

I hold LXK, and I will have another update in due course.

Update Jan 23, 2013. Unfortunately my target has been reached so I have sold around $28 per share my remaining stake.  Oh no, cash is building up.