All Entries in the "Financials/Politics" Category

Citi Stock Soaring, $4 Coming Soon

On December 21st, I recommended everyone to invest within CitiGroup (C) based on several assumptions.  I believed that such a large brand could neverdissolve so fast.  Just check out these few basic numbers about CitiGroup.

1. Market Cap $78 Billion

2. Daily trading volume of 3 billion shares

3. Enough shares to give everyone in the world 4 shares, 22.86 billion to be exact

4. Billions of dollars in revenue the past 5 years

5. Stock price hovered around $50 from 06’ to 08’

All these numbers gave me faith in believing that Citi would rally sending the stock much higher.  Well until this week, CitiGroup has largely been a dissapointment doing very little in the past few months.  However this week the spark was finally ignited sending Citi up to a close of $3.96 today.  This was the kind of rally I have been looking for sometime and I don’t believe it will stop anytime soon.  Bearing any catastrophic bad news being released in the next few days I believe Citi will go well over $4.  Citi has made some strategic moves selling off bad assets to many various firms including Apollo Management. Cutting out the waste will only prove more beneficial for Citi in the long-run.  This gives Citi the ability to return to normal operations, which in most cases was very successful for 20 of the past 22 years. A 91% success rate, in my mind that’s all right. Now the key question is what is the government’s exit plan? Currently they hold around 7 billion Citi shares. With the recent surge I believe it would be a smart time to get out and allow Citi to not be beholden to the Government. There’s still a long way to go but I still have faith that Citi will continue to rise higher and higher.

How Much the Top CEO’s are Getting Paid?

So today I was reading the usual various articles and came across an interesting chart from Reuters.  The chart is an analysis of the world’s largest 18 banks and how much the CEO’s get paid.  It’s an interesting comparison to see how much these guys are making.  Do you think they deserve so much money to run these billion dollar corporations? Let me hear your thoughts by leaving a comment.

The Top Banking Brand: Buy Goldman Sachs

With banks slowly improving their stature within the financial world we have to look at who has the most recongizble brand and is one of the strongest buys. I say Goldman Sachs (GS) wins hands down and here’s why you should buy. My five reasons to own GS.

1. I feel Goldman is a very attractive opportunity right now and it is undervalued compared to what it should be pegged at. I feel that its 12-month price target should be roughly around $250.

2. Goldman’s business ventures should start to take off. We have started to see a pickup in M&A and IPO activity, which should help strengthen their Equity Capital Markets division. With huge M&A backlogs along with a strong demand for restructuring advice and improved IPO markets Goldman will be a big beneficiary.

3. Expect Goldman’s fixed-income, currencies and commodities business to continue to soar. Analysts say these divisions are up 99% year to date, don’t expect them to slow down anytime soon especially in 2010 where we should see a more upbeat, stable market and improved global economy. Expect for equity markets to rebound and for their fixed income market to open up proving for an improved operating environment for Goldman to capitalize on.

4. With recent protest from investors and Washington, compensation expenses will be lower. Bonuses are not being handed out in the form of stock options rather than cash. This is a rather cheap option at 11 times estimates it will be beneficiary. It is now projected that around 42% of revenues will be handed out as compensation against the 46%, which was originally projected. That 4% difference should be a nice bonus to investors.

5. Goldman has an advantage over its peers due to its high stature. Many analysts consider it to be a premium when valued against its peers due to its operating leverage, global power. Strong client relationships, and healthy balance sheet. The fact that it doesn’t carry as much baggage as the other financial institutions and has a relatively clean balance sheet should prove well and allow it to recover faster than the rest.

Some might claim that Goldman is the root of all evil and fear that Goldman has the game rigged, even if no one can ever prove how, not just because of its political connections but also because of its immense size and power. Think what you want but looking at the fundamentals of it all, Goldman is too good of an investment opportunity to pass up. 12 months from now I believe it will be trading at roughly $250 a share, quite a sizeable return. Enjoy!!!

Goldman Sachs (GS): Investment Opportunity that’s Hard to Pass Up

So looking to get your portfolio kick started in 2010, I have just the stock for you. I believe Goldman Sachs (GS) is a high growth stock with strong prospects. So why do I like Goldman Sachs so much? Well in general I feel the financial sector is a bullish market currently and will only continue its dominance within 2010. There are three banks I like, Goldman Sachs, Bank of America, and Citigroup. If your interested in hearing my thoughts on Citi read my past article, $3 Stock with Huge Potential: I Call if Big C. Moving on, why do I like Goldman so much? Here are several reasons:

1.  I feel Goldman is a very attractive opportunity right now and it is undervalued compared to what it should be pegged at. I feel that its 12-month price target should be roughly around $250.

2.  Goldman’s business ventures should start to take off. We have started to see a pickup in M&A and IPO activity, which should help strengthen their Equity Capital Markets division. With huge M&A backlogs  along with a strong demand for restructuring advice and improved IPO markets Goldman will be a big beneficiary.

3.  Expect Goldman’s fixed-income, currencies and commodities business to continue to soar. Analysts say these divisions are up 99% year to date, don’t expect them to slow down anytime soon especially in 2010 where we should see a more upbeat, stable market and improved global economy. Expect for equity markets to rebound and for their fixed income market to open up proving for an improved operating environment for Goldman to capitalize on.

4.  With recent protest from investors and Washington, compensation expenses will be lower. Bonuses are not being handed out in the form of stock options rather than cash. This is a rather cheap option at 11 times estimates it will be beneficiary. It is now projected that around 42% of revenues will be handed out as compensation against the 46%, which was originally projected. That 4% difference should be a nice bonus to investors.

5.  Goldman has an advantage over its peers due to its high stature. Many analysts consider it to be a premium when valued against its peers due to its operating leverage, global power. Strong client relationships, and healthy balance sheet. The fact that it doesn’t carry as much baggage as the other financial institutions and has a relatively clean balance sheet should prove well and allow it to recover faster than the rest.

Some might claim that Goldman is the root of all evil and fear that Goldman has the game rigged, even if no one can ever prove how, not just because of its political connections but also because of its immense size and power. Think what you want but looking at the fundamentals of it all, Goldman is too good of an investment opportunity to pass up. 12 months from now I believe it will be trading at roughly $250 a share, quite a sizeable return. Enjoy!!!

Major U.S. Indexes Ending the Year Strong

So with December coming to an end I think we can look at the month and call it a successful one at least. If trends continue we will end 2009 on a high note with all major stock indexes up heading into 2010. This will be a big achievement if you go back to the start of the year when everyone thought the financial markets were collapsing and the world was coming to and end. Lets look at December’s numbers:

-       Dow Jones up close to 1%

-       S&P 500 up 2.5%

-       U.S. Dollar Strengthening on All Major Currencies

These have all been optimistic signs for the U.S. economy and I see no reason for anything to change within the next 5 days of trading in 2009.

1. We will see light volume due to the large amounts of investor taking off early to spend the holidays with their families.
2. Historically Santa Claus has always stimulated the stock market and send it higher in the last couple days of the year, some might sell for tax reasons but the majority of folks find it hard to be bearish during the holiday seasons.

So unless anything catastrophic happens we can close out the year on an upside. Good to hear, lets just hope 2010 isn’t as rocky as 2009.

$3 Stock with Huge Potential: I Call it Big C

Looking for a strong large cap stock with long-term potential then I have the perfect holiday pick for you. At one time it was a giants investment bank that controlled the financial world. Due to the credit crunch and worldwide global recession the stock price dropped however I believe that the good times are ahead.

Check out these numbers:
1. Market Cap $78 Billion

2. Daily trading volume of 3 billion shares

3. Enough shares to give everyone in the world 4 shares, 22.86 billion to be exact

4. Billions of dollars in revenue the past 5 years

5. Stock price hovered around $50 from 06’ to 08’

I’m thinking minimum this is a $10 stock if not higher. Nope this in-fact is Citigroup (C), the multi-billion dollar investment bank that is currently trading at a meager $3.25. I mean is this a joke. Normally I am the biggest opponent to any stock below $5, my theory being that they are usually on the down and out or a penny stock which posses far to much risk to reward, but in this case Citigroup helped change my mind. With Citigroup trading in the $3-$4 range I feel there is a very low risk to huge reward ratio that I would be ignorant not to capitalize on. With Citi’s latest dilution of shares they are now able to pay off all the TARP. This helps out in both ways; it keeps the government invested within C as a major shareholder but limits their ability to control the company. This gives Citi the ability to return to normal operations, which in most cases was very successful for 20 of the past 22 years. A 91% success rate, in my mind that’s all right.

So you’re still concerned about the Government being a major shareholder?

Don’t be, in fact it benefits Citi. The government has over 7 billion shares invested within Citi, this meaning they are going to do anything to their ability to make sure this invested rises to pay off the numerous amounts of debts they have tallied up. Obama, Peloski, and Co. are not going to take on loss on that investment so this is my insurance that the stock will not fall below $3.25. Consider that to be the support level for all Citigroup shares. I mean Citigroup doesn’t need to have outstanding numbers for the stock to soar. We already know that revenues will be down in 2010 due to lower asset base. However if they are able to show improvement internally that could be a bullish sign for the future prospects of the company. Currently Citigroup is planning on restructuring its business into Citicorp and Citi Holdings, with Citi Holdings carrying mostly non-core and distressed assets. The goal is to unwind Citi Holdings; this will eventually lead to a more stable revenue stream. Adding to this I believe C’s tangible capital levels are more adequate now with the government and public/private investors switching their preferred shares to common equity. Even with all this restructuring I think long-term Citi will be able to regain its earnings power it once had. If so that can make this company’s share prices worth well over $10 if not higher. I feel the company has seen its worst times. Leaving them behind, Citi is at such a discount price I feel it would be foolish not to make a play. It’s a big company, strong brand name, with lots of cash on hand. What doesn’t sound good? Valuations for Citi next year are hard to predict, though take my word that Citi will be trading over $5.50 within a year if not higher.

U.S. and U.K. Investment Banks Losing Competitive Advantage against Asian Firms

Due to the troubles of the credit crunch we have seen a string of top investment bankers leaving the U.S. and U.K. for Asia. Yes these bankers are following the money and corporate activity has remained buoyant in Asia where credit is scarce in the U.S. and Europe. This year deals in Asia have rose 15% where as they have fallen every elsewhere in the world. I see this as a early signal to the government on how we cannot cap salaries on Wall Street. If we do, we will just see all the talent move away which is a long-term loss for the industry and corporate America. Its true, investment bankers follow the money and right now Asia is where it’s at. I think it will be a snowball effect with many bankers across the globe leaving there jobs on route to Hong Kong and Shanghai. Currently the U.S. banks are profits are squeezed whereas the Chinese firms are flushed with cash. This should launch Hong Kong into the Financial Services Headquarter for the Globe as they are usually competing against New York and London. Recently one of my mentors and an Managing Director at HSBC left to go work for a Chinese Private Equity firm. He was telling me the opportunities there were to good to turn down. For the American firms they need to find a quick way to address these problems so they can continue to be competitive on a global front. If not times could get tough and we could lose our spot as the financial capital of the world.

Why is there Resentment Towards Goldman Sachs and their String of Success?

So just read Vanity Fair’s, Bethany McLean’s 8,500 word profile on Goldman Sachs in which she claims “One of the biggest disconnects on Wall Street today is between the way Goldman Sachs sees itself (they’re the smartest) and the way everyone else sees Goldman (they’re the smartest, greediest, and most dangerous).” Within the article she outlines the Goldman culture and the shift in the firm’s way it deals with clients and how in her opinion all they care about now a days is MONEY!!! Here are my opinions on the article.

What is Wrong with Profits?

I say this because this constantly seems to be the number one critic of Goldman, they make to much money. What is wrong with profits? Shouldn’t we be standing by Goldman congratulating them on reporting $17 billion in profits? Nope instead we are bashing them claiming Goldman was the result of this financial Armageddon and frankly it’s not true. Goldman wasn’t the problem, plain and simple. Luckily enough they did not become a causality of the crisis like Lehman and Bear Sterns. This crisis was caused by excessive greed and risk taken on by numerous amounts of banks. Thousands in fact. Frankly Goldman was the smartest of the group shorting all mortgage back securities back in Summer 2007. Yes Goldman was seeing the signs of the collapse before everyone else and they capitalized on it making boatloads of money. Is this unethical? Nope it’s just the result of having top-tier talent and being surrounded by the Wall Street Elite.

Did Goldman Manipulate the System?

People love to hate success. We see this with the array of comments coming out attacking Goldman personally. “They say Goldman was responsible for huge systemic risk, and now they’re trying to pretend they weren’t.” Blankfein did address this issue and issued a public apology: “We participated in things that were clearly wrong and have reason to regret.” People were outraged his admittance though frankly it should have been joined with the CEO’s of over 1,000 other financial institutions that participated in the same risky ventures. As for playing the system, no Goldman made a bold predication when others doubted the market would continue to fall. Did they make money? Yes but how can we punish them going out on a limb.

Why Does Everyone Loves to Hate Goldman Sachs?

I believe that Goldman gets bashed now days for their string of success and secrecy. In the last decade or so the U.S. has shifted to resent success and people who makes lots of money. We are leading into class warfare between the haves and the have-nots and Goldman is deep in the trenches. It quotes like this that I resent.

“It’s a fear that, as one person puts it, Goldman’s “skill set” is “walking between the raindrops over and over again and getting away with it.” It is a fear that Goldman has the game rigged, even if no one can ever prove how, not just because of its political connections but also because of its immense size and power. And it is a belief that despite all the happy talk about clients and culture (and, boy, is there a lot of that) the Goldman of today cares about one thing and one thing only: making money for itself.”

First Goldman deserves every dollar they make, the reason they are so successful is they go the extra effort, put in the hours, and hire the best of the best. They have developed a unique culture, characterized by impossibly hard work, loyalty, and secrecy.

“I worked there as an analyst for three years in the early 90s, and I remember that most people couldn’t take advantage of the long line of black cars that waited until midnight outside 85 Broad Street to take them home. Instead, they had to call for cars, because they never got out early enough. I also recall being told that having a tan in the summer was a bad sign, because it meant that you weren’t working hard enough.”

Looks like those extra hours and hard work have paid off and that average $700,000 annual bonus per employee is well deserved. The other huge concern other than money is the secrecy of Goldman’s culture. Yes Goldman is followed by huge conspiracy theories that secretly they control the U.S. Economy. Adding to this are the concerns that we don’t know how they make all that money, as no one can understand their Financial Statements. More to the problem is the government is infiltrated with ex-goldmanites. The last two Secretary’s of the Treasury along with half the fed, an array of senators, representatives, etc. Is it their fault that these people still have strong feelings to the company that launched their career? As a result Goldman does get the benefits being helped out by its huge list of powerful alumni. How can we stop these people from helping out?

Goldman Doesn’t Care About its Clients

Goldman was founded on 14 principles, the first “Our clients’ interests always come first.” Has this thought process shifted under the new regime? Has money become the number one interest? I say no, this is not the same time as the 1890s when Goldman was founded. The commercialized economy has made Goldman into what it is, plus if they didn’t care about there clients then why do they all keep coming back? Its because Goldman is the best.

“And while some say they do business with Goldman because the firm’s omnipresence means they have to, there is another reason, which even its most bitter critics concede: Goldman is better. Why is that? I ask a hedge-fund manager who has just finished his own heated explanation about how he doesn’t trust Goldman. “I can’t really tell you why it’s better. It’s just better,” he says. “It’s six p.m. in New York City, and Goldman will figure out how to get the right person in Hong Kong—a guy we’ve never spoken to—on the phone to walk us through exactly what we want to know. He’ll be fully knowledgeable.” He laughs. “Try the same thing with Citi. They can’t even figure out what they know, let alone how to take advantage of it.”

So go right ahead have your resentments, hate Goldman’s success as in my opinion it only makes them stronger. We need someone in this country striving for perfection, success, defying all odds. Honestly all in all a strong Goldman Sachs is good for the country.

Time to Take Profits: Too Much Government Involvement Will Ruin the Economy

2009 has been an epic year to date for the average trader. It’s been a rally since March, but the key question is when will we see a major reversal. With the S&P already up 66%, can we expect this kind of trend to continue? My firm opinion is that the markets have become oversold and its time to invest in strong sectors or hard assets rather than the paper assets such as the market itself. I feel the gains we have been seeing throughout the past year have been overexagerated and almost created an optical illusion that the economy is at full strength. It’s through the mass amount of stimulus, bailouts, and rescue plans that the world has somehow saved us from mass chaos and kept markets going higher. The thing I question is what is going to make me want to be a long-term investor if we can’t see any form of sustainable growth. Frankly this past year has been all superficial, temporary growth supported by the bailouts. The key questions that need to be answered are what will happen to these companies when the stimulus checks stop coming through? Will they all fall off the map? I have questions with the way things will be run in the future. When will we see the side effects of the bailouts? If its anything like projected this could mean decades of debt, inflation, and higher taxes. I have my skeptics with the way the government is handling this whole ordeal. Why can’t we let banks fail? To read more about my opinions on this read last weeks article, Too Big to Fail Too Big to Survive. I just feel with the way the government is controlling everything they are taking away the personal risks companies take on. I would cut out any form of government intervention with the economy and allow free market principles to take place. We are already seeing the start of this with the government passing an amendment to where they can control the size of investment banks. How’s this make sense? So we tell Goldman Sachs not to make top dollar and become the biggest bank in the world because it imposes risk. Since when should the government decide what type of return a company should pursue? When you penalize growth and signal to companies that their success is getting out of hand then less growth is expected. Ultimately if this plan were to pass we would just see less growth, which would hurt the overall strength of the markets. Plus with the huge debts coming from health care reform, etc what confidence can we have in the American economy? What we have to look for is investment possibilities overseas. Aka China who is taking the opposite direction of the U.S. promoting growth. Though how much can China grow if the U.S. has decided not to?

Goldman Outsmarting Us Again: Charitable Trust More Like New Business Venture

It takes a lot for the CEO of the most powerful Investment Bank in the world to apologize for contributing to the cause of the financial crisis. For Lloyd Blankfein however, this was the right decision to save face for Goldman. On Tuesday he announced, “Goldman participated in things that were clearly wrong and have reason to regret.” On a side note Blankfein also initiated a $500 million lending program to small U.S. Businesses that will be watched over by Warren Buffet. So what’s this need for such generosity? Why aren’t J.P. Morgan, Wells Fargo, Bank of America, and Citi offering the same helping hand or does Goldman have something else up their sleeve? For one I don’t think Goldman has anything to apologize about, they were one of the numerous contributors to the financial crisis. Moving on what’s wrong with handing out big bonuses when they have earned it with record profits so far this year. Yes Goldman has $16.7 billion stashed in bonuses for employees this year. That’s a $527,192 bonus per employee. So in the grand scheme of things, $500 million is chump change.

What’s Goldman Really Up To?

What Blankfein is doing is saving face with Main Street and its reputation with America to help launch its next operation, Consumer Banking. It makes perfect sense, Goldman doesn’t care what the consumer thinks overall. As long as other institutions know that Goldman is the best place to buy a security, seek advice about a merger, or float a company, Goldman will make money. As for hiring process, as long as all the top talent knows they will get paid top dollar for their work then Goldman is where they will land. All together they have no interactions with the retail customer. Many speculated that Goldman wanted to enter the consumer lending business before the sub prime crisis got out of control. Currently though marketing any service to Middle America would be a tough sale. Unless of course they were to help lead a resurgence in Small Businesses within America, hence the $500 million charitable donation. This package can be Goldman’s entry into small business banking which down the road can become a separate decision within the bank. It is a plan destined for success. Blankfein has outsmarted America again. Look at the time-line of the plan. Instead of handing out it all at one he has set it up in small payments over the next five years so slowly the banks reputation will improve. Even more genius was whom he chose to head the project. Warren Buffet the king of growing small/medium sized companies. I think this is a sneaky but effective plan for Goldman and in the end it’s more like a strategic business plan not a charitable donation.

Too Big to Fail then Too Big to Survive

With all this talk surrounding the stability of the banks man are still using the same claim that they are “Too Big to Fail.” To me, this is a cop-out. No one is too big too fail and if so then they are too big to survive. I think what the government needs to do is allow some banks to fail in order to return to the way it use to be. Right now we are in a way different situation as last year and are in better position to allow them to drop off the map. A year ago I would disagree saying if we allowed these big banks to fail then the markets would have tanked and dropped way further than they already did. The question is now how do we regulate the banks to stop another crisis from happening? More regulation, should we have a government enforcement agency that overseas the banks? I say NO to any government regulation. The last thing Wall Street needs is to have the politicians making the calls. Instantly that will shut down huge growth opportunities and destroy the profitability of the banks. I believe there are no perfect answers to this question and how to control the amount of risk these banks take on. One thing that needs to happen is to stop mixing in personal banking and private banking. Last year we saw the risk shift from the trading of exotic products to the mortgages, loans, etc. We need to be able to differentiate these two parts of business for the banks and make sure they don’t cross over again. As for any government agency overseeing the operations, I believe that is an awful idea. Wall Street breeds innovation and that’s why they pay top dollar for the talent they attract. Having a government-controlled agency overseeing all operations would limit the profitability of the banks and hold them back from reaching their full potential. Plus who says we can even trust the government as a watchdog. Since 1998 the SEC investigated Bernie Madoff eight times and all eight times they found nothing, I think something is wrong with their judgment.

The Dow Hits 10,000: Technicals Show the Earnings Rally Will Continue

The Dow Jones topped 10,000 yesterday!!! First time since October 2008. Can you say we are on a rally? Only in March the Dow hit a 7-year low near 6,500 now popping 53% in a year. Big news? I think so. We have watched the DIJA go back and forth throughout this decade crossing this magical line many times. The question now is will it stay? Many folks are skeptical claiming that the bulls are running to far ahead of themselves. The markets right now are leading the pack and many people are scared that the economy is still in disarray, unemployment being the big issue. In this case, we are looking at the stock market being the leading indicator with unemployment being the lagging indicator. Throughout time the market has always traded six months ahead of a healthy economy whereas unemployment is usually six months behind. This being said the market is telling us come March we should see the unemployment rate start to fall. So with this all said, what’s next for the markets? In this case I think the Technicals are in our favor. I think 10,000 will become a support level and history backs me up. In the past, when the Dow has traded near 10,000 it has stayed there for many months, sometimes even years. Look at the graph below for proof. (The circled spots show where the Dow traded over 10,000 and for how long showing the support levels exist)

I think the Dow can trade up to 10,300 in the next month and a half being carried by both earnings reports and technicals. For one the 50 day is trading over the 200 day Moving Average indicating we are in a Bullish run. Plus with Goldman Sachs, IBM, and Google (Read this article on GS, GOOG, & IBM’s Earnings) all set to blow analyst out of the water this week, what’s going to stop the rally? I say nothing, ride the rally and don’t be too scared to jump back in the markets as if you don’t you will just miss out on the gains.

The Start of Earning Season: What to Expect from GOOG, GS, & IBM

As we enter the start of earning season many people are nervous on what to expect and whether or not earnings alone can rally us into another bull market. Should be an interesting first week, here are my Top 3 Most Important Earnings Reports:

Google (GOOG) – If anyone doubts the Internet King, think again. Google has been rallying since all year up 80% ytd. Google has the momentum behind them with three recent upgrades that I am sure they will come through and crush the earnings report and report a positive long-term outlook. I think we are starting to see a resurgence in Ad spending that will send Google to $600.

Goldman Sachs (GS) – Goldman, the cream of the crop when it comes to investment banks. Up 175% ytd and I don’t see them stopping anytime soon. With M&A activity picking up along with large trading gains $200 is inevitable. Look for them to report amazing numbers.

International Business Machines (IBM) – Fall is always a bull market for Tech stocks and I see nothing different this year. We saw IBM soar on Friday look for them to continue the streak leading to the report. With strong recent upgrades, a clean balance sheet, and a good-looking P/E the future looks good.

Wall Street and Main Street are on Completely Different Levels

Last week I wrote about whether or not the recession was truly over with the intentions on getting your point of view first (Here is the link to the previous article), now here is what I think.

Wall Street and Main Street are on Completely Different Levels

Just because Mr. Bernanke says the recession is over has no actual correlation to the real standing of the economy. Yes, he may be the head of the Federal Reserve but his statement last week didn’t connect with many Americans. Yes the economy is improving, yet we are nowhere near our optimal level of production. I think the huge problem and something Bernanke hasn’t realized is that there is a huge disconnect between Wall Street and Main Street. On Wall Street we are acting like these are prosperous times with stock prices soaring, banks improving, and big bonuses being handed out. Though when you bring it back to Main Street and the level of the average American we are struggling to make ends meet. Unemployment levels are at frightening levels, housing prices are at an all-time low, and the average person is being further pushed into debt. The big problem I have with the health of the economy is the psychological aspect of the economy. On Wall Street now the excitement is rolling with the soaring markets. However across the

nation, the recession mentality is holding strong and it’s not a good one at that. This mentality has taken a direct hit on retail as consumer spending is down significantly this year. Most Americans are cutting back on discretionary spending and are planning on continuing this habit, which I see as a huge hit to the resurgence in the economy. If the economy continues to not facet a healthy recovery then elections in 2010 will become interesting. History has shown us a low unemployment rate directly hurts the party in power. This bodes well for the Republican Party, as it’s very likely we could see the Democrats lose a significant amount of congressional seats. What the government needs to realize is everything they are doing now is completely wrong. People are tired of hearing excuses they just want to see results. Plus the constant push of the healthcare bill is not helping his party either. To facilitate a strong recovery Obama needs to forgo his health care reform and create new jobs. He needs to create new industries that can thrive throughout the next century. All spending should go towards high-tech, environmentally friendly jobs. Investments in huge capital expenditures and public projects.

Obama’s Possible Tax Rate Mishap

Anyone with aspirations of making a good living in America please pay up? This is the straight forward statement that Obama has delivered since becoming president. This is his plan to help cut the U.S. major debt problems. As it will go any couple making over $250,000 a year can expect to have substantially increased tax rates to help pay for the lower income families tax cuts. Now my dream of being a Goldman Sachs Trader will cost more than I thought with Federal tax rates rising from 35% to 39.6% for High-Income families. Plus my other goal of starting a Hedge Fund is shot as well as now all Hedge Funds will have to pay Income Tax Rates not Capital Gains Tax Rates on profits. That is a substantial number and the Obama Administration expects $28 billion tax revenue from just the Hedge Funds alone. Don’t be surprised if we see the outsourcing of Hedge Funds with many located outside the U.S. to save the tax breaks. For normal investors, expect to see your Capital Gains Rates rise from 15% to 20%. This I believe is an awful proposition. The increase in Capital Gains hurts no one more than the Middle Class. The High-Income are not affected as they have the capital to allocate resources outside of the U.S. to save on tax breaks. The Middle Class however, does not have this option. Another option they do not have is to stop investing. The Middle Class thrives on the Markets, as it is their opportunity to grow their 401k’s to a level, which will offer retirement and the chance to send their children to college. Obama clearly didn’t educate himself on this situation and should have a sit down with Mitt Romney and be explained why he should cut the rates. Mitt Romney was the one who proposed the plan of Zero Capital Gains Rates for the Middle Class during the election. In this case he classified the Middle Class as families earning less than $200,000 annually. This would apply to 95% of American citizens. The simple fact is nothing would stimulate the economy and markets more than reducing capital gains rates and this is why. Capital Gains play a unique role in fostering economic activity, especially by entrepreneurs in high-technology areas. Many economists even believe that the optimal tax rate is 0 percent. So why not lower them temporally? Temporary capital gains cuts would to nothing than induce investors to sell assets not stimulate new investors. However, a permanent cut would provide incentives for people to sell long-held unproductive assets and reinvest in prospering industries. Many government officials are also scared of the possibility that Markets would fall if we cut the tax rate. This is false, as cutting capital gains rates will cause asset values and the stock market to rise. Lowering capital gains rates increases the price of stock and other assets and the stock markets reflect the collective action of people looking forward. For example, in 1997 the Fed cut the top Capital Gains tax rate from 28% to 20% and markets responded with an 8% increase. Currently companies are also being screwed over as many receive double taxation on both Capital Gains and Income Taxes. For example, say McDonalds earned $100; the Fed takes $35 in corporate taxes leaving $65, which is distributed to investors and then taxed at 20%. That takes another $13 leaving $52 to investors and $48 to the Government. These companies are still exposed to a tax on dividends. Capital Gains taxes are structured so poorly that it is no wonder the economy would rise without them. They are not even adjusted for inflation, which in current times could cause some problems for most investors. So the last complaint that everyone has is that the Government cannot afford large and permanent capital gains taxes. This is untrue as improving economic growth increases federal tax revenue from many sources (Property Taxes, Income Taxes, Corporate Taxes, etc) The government’s goal is to not act like a business trying to maximize tax revenue. The goal should be to enhance economic growth and raise only as much tax revenue as needed.

Take Some Profits: Sell Some of Your Stock Positions

Recently, the stock market has been trading at crazy levels, soaring  higher and higher day by  day. So far my personal stock picks have been solid as my account has surged over 36% in the past month and a half. The question is now when to sell? Now after last weeks surge, some of my picks have surpassed their 12-month target so I am selling postitions and I wanted to update you on what I am selling and why.

Foster Wheeler (FWLT) Bought on 7/16/2009 at $19.75 now at $34.26, Total Return: ↑75% HOLD

HOLD. Foster Wheeler has surged a lot recently, up 75% in two months. Foster Wheeler is a strong global brand in a growing industry. This stock however is no longer undervalued and has surpassed my 12-month expectations in such a short period of time. I would say take your profits and move on. Here is the link to read the original research report.

U.S. Corporation (USG) Bought on 7/23/2009 at $12.03 now at $17.77, Total Return: ↑49% HOLD

Hold. This stock soared big time last week and now it is up over 49%. I have concerns that it might get shorted down in the upcoming weeks and that is why I am selling half of my position. You can read more into detail on why I am selling half my USG Position. Long-term the potential is still there. As the housing market continues to recover within the next few years more and more new projects will start up offering new business which USG will feed off of. Here is the link to read the original research report.

Baidu (BIDU) Short on 7/30/2009 at $351.18 now at $390.25, Total Return: ↓9% SELL

Stop Shorting. I got out of this stock completely. No longer shorting it yet not recommending it as a buy either. You can read more about why to stop shorting it in my recent article. It was my first failed stock pick of the year and for some reason I don’t understand why it continues to go up when all the technical and fundamental indicators point differently. Instead of risking more potential losses I am pulling the plug. Here is the link to read the original research report.

Gamestop (GME) Bought on 8/4/2009 at $22.86 now at $26.79, Total Return: ↑18% BUY

Buy. This stock continues to steadily go up backed by strong company fundamentals. Long-term though it is still a great stock pick. It is still overlooked by most invesotrs. The reason the video game industry has been struggling is not because of the recession but because no good video game titles have been released. Not one top title has come out within a year. Madden kicked it off and now the titles will be pouring out and gamers will be rushing to the stores. Backing this up the company has strong financials, management, and a healthy balance sheet which all bodes well. Stay in or buy in which ever fits you. Here is the link to read the original research report.

Is the Recession Finally Over

Is the recession finally over? This question has been bothering most people for quite some time yet still I cannot give a definite answer. Bernanke did rule today that the recession is over yet I believe it is more of a rally call than a legitimate statement. In fact he had to refer to the term “likely over” which to me doesn’t show much confidence. His basis was on the fact that the stock market has gone up mass amounts and the fact that retail has recently grown 2.7%. Yes these are good signs as anything positive can always be taken as times of good, however I think we still have bigger problems that have yet to be addressed. 11%+ unemployment, a failing housing market, and billions on billions of dollars in debt. Do we still think this recession is blown over? In the next couple days, I will follow up on what my thoughts of the health of the economy are but first I want to hear my readers thoughts. As a result, either comment below or post your response on my forum.

The Long Road to Recovery: Obama’s Legacy or Demise

The legacy of Mr. Obama is twirling out of control. For all the buzz that was created during election time you would think we were in a different decade. Last Tuesday, approval rating fell again for Obama’s down to 53%. This has taken a huge dip as only a few weeks ago he was sitting above 60%. To put this in a better perspective, George Bush had a 56% approval rating at the same point in his first term and he dropped early due to the criticism brought on by Al Gore’s infamous recount cry. The way its heading right now Mr. Obama will not be in office for any longer than one term and those big visions for America he has will be washed away. To determine Obama’s legacy or demise I believe he needs to install a whole new order into both the White House and American Politics. Obama needs to ignore the pressures put on by the left of his party and the ignore the economically illiterate folks pushing him to follow through on their plans. Obama should take a page out of fellow Democrat Bill Clinton and his presidency. Clinton to had a huge big spending agenda yet his presidency was saved when he ditched the agenda to focus on the countries interests not his parties. At first all was going well for Mr. Obama until recently when its gone downhill.

Too Many Campaign Promises

He promised to fix unemployment with the stimulus plan yet since coming into office unemployment has gone up from 8% to 10%. The sensible solution would be for Obama to initiate a more centrist policy program to help prevent permeant economic damage. It would be a big step as both a man and a president for him to put his plans aside to focus on the countries interests.  The thing is if he doesn’t I feel the pain will be much more harsh. We are starting to see the outcry against him on the fact that he has yet to do anything despite promising us lavish initiatives. For Obama, a change of action needs to take place soon before he digs a deeper hole and puts himself in a rut. This current path is not working and will lead to his demise and the country will take the fall as well. Obama is on pace to be a clone of Jimmy Carter. Scary thought. Time will tell on how this situation plays out but as of right now its not looking good for Mr. Obama. I just hope that for Obama’s sake and the countries interest that he can turn it around and lead us to prosperity.

The Long Road to Recovery: Obama Needs a New Plan

Onwards with part two of the Long Road to Recovery I am going to talk about what Mr. Obama should do about saving us from this painful recovery? On the budget crisis, he should test out some of his ideas on a smaller scale. If they work at sensible cost, then he will get support from Congress to expand them. If they fail not much has been committed so we haven’t dug ourselves into a big hole. The Health Care bill needs to be refocused to offer individuals low cost, high deductible, catastrophic insurance. It also needs to be only there for the one’s in need, not for offer it to the population as a whole. It is far too costly for us to offer health care to the whole population when it’s only necessary to offer it to those in need. In the long run, many of Obama’s ideas need to be scrapped. For both financial reasons and personal. For example, the costly climate change bill needs to be trashed. It will have no impact on the climate; even Obama’s own EPA administrator admitted that. What we need to incorporate is a transparent carbon tax that benefits all. We need to continue to offer energy efficient initiatives and need to expand our domestic oil and gas production before the Chinese steal it right in front of us.

We need Answers and Solutions

The problem with the Obama’s administration’s financial-reform policies is it contains many dangers and unanswered questions. The dangers ahead are the Federal Reserve as a systemic risk regulator and their toxic asset bet. I don’t believe we need to enforce more regulation on Wall Street. Wall Street breeds innovation by attracting the top-talent with large salaries and bonuses. Frankly more regulation won’t stop them as compared to the government; Wall Street firms have leagues ahead of talent. Next on the agenda is what to do with Fannie Mae and Freddie Mac? Many claim they are “too big to fail” however are they “too big to succeed?” Any policy should be centered on converting the debt, raising the size of capital ratios all with the goal of decreasing the need for future bailouts. So what’s the next threat? Inflation. To me independent monetary policy is the only way to control inflation. We need to take it slow and instill effective tax and debt policies to make sure all mayhem doesn’t run wild. For example, in 1970s the Fed ignited inflation by pumping money to control the deficit. I feel that currently the Treasury is risking a Japanese style lost decade as it bets that time and profitability will work to reduce the financial firms toxic assets. I mean if we don’t control the situation properly we could have a 1980s Latin American debt crisis on our hands. We just have to weigh the situation and decide whether or not these large subsidized institutions will damage healthy, unsubsidized ones. The Fed needs to show what the future entails. The Fed needs to exit its long-term Treasury purchases to signal it has no intention of monetizing government debt. Smart and strategic monetary, fiscal, and regulatory policy adjustments could go a long way to improving the prospects of our economy. We need to provide confidence to households that they don’t need to save massive amounts of money to pay for future tax hikes along with making capital accessible for growing businesses.

Tune Back in next week for the third installment of this article, The Long Road to Recovery: Obama’s Legacy or Demise

The Long Road to Recovery: Obama’s Miscues

To expect a strong recovery following this deep recession will be wishful thinking. Most likely the recovery will be slow and painful as we battle through harsh times and this is why. The way the situation is being handled does not shine a positive light. The massive tax hikes and inflation are only making this situation worse. America needs a more coherent policy to take us back to a strong free market economy not the European style social-welfare state Obama is enforcing. We don’t need permanent government lifelines or universal healthcare. What we need is our taxes cut not raised. History teaches us that permanent tax rate cuts are most effective. The last time we were in this same situation was in the late 1970s when Jimmy Carter was in power, and we all know how that turned out. Double-digit inflation, 11% unemployment, and an inflated stock market. So how did we prosper and lead the U.S. to a quarter-century of growth? Well Regan instilled a new policy consisting of lower taxes, free trade, slower spending growth, and less intrusive government regulation. Regan said it best during his inauguration speech

“Government is not the solution to our problems; government is the problem.”

These new policies pulled us out of the rut and led to the booming 80s and 90s of America. The problem with Obama I find is that he is on an agenda to strip the rich and feed the poor, however where does that leave the Middle Class? If Obama wanted to help the Middle Class he would cut income taxes and get rid of capital gains taxes. Why? Well it’s a long topic but if you read my past article on Obama’s Tax Slip-Up, it will explain why increased Capital Gains hurts no one more than the middle class.

Immediate Help is on its Way…NOT

During the election when Barack Obama promised “immediate help” we thought times would change quickly. Unfortunately, this is not the case as six months since the stimulus was passed and less than 10% of the funds have been disbursed. So far we can score the stimulus as an expensive, tragic bust. Yes we have seen the Financials stabilize but not due to the stimulus. As of July, less than 9% of the stimulus had been handed out. To add to this we still have major problems on hand. Rising unemployment and a depleted housing market are the major concerns holding us back from any long-term recovery. For Obama, the smart decision would be to shift this left over money to revamp the infrastructure in America and create a formidable new green energy that can carry us throughout the next century. The administration and Congress are taking advantage of this crisis to promote expense big-government spending agenda. The Universal Health Care is a perfect example however those who read my recent article on HealthCare can see that the idea is slowly becoming less appealing. These trillion dollar deficits will only result in much higher income and payroll taxes sending us closer and closer to European Socialism. All we are doing right now is delaying the process, back loading taxes for the next generation, my generation to pay for. Just look at long-term interest rates as an example. Despite the massive Fed purchases of long-term treasuries they still continually go up. I think that the government buying up assets is just crowding out other borrowers and adding greater risks of inflation. Is this really what we want?

Tune Back in next week for the second installment of this article, The Long Road to Recovery: Obama Needs a New Plan</strong>

Bull Market Rally: The Golden Cross shows Bullish Technical Indicators

Opinions are what drive the market. These could come from an analyst, Fund Manager, or Warren Buffet himself. Throughout 2009 we have seen are share of volatility and many are questioning, where are the markets heading next? Some say we should buy stocks other say after the recent rally investing is the wrong option and we are just playing into another “Bear Market Rally.” Others think quite the opposite that equity markets will continue to rise. Its time to take the market under a microscopic view. The S&P was trading at as low as 676 in March with the Dow Jones equally as low at 6,547. Since then the S&P has is up 46% and has risen 310 points to 986. The Dow Jones is equally impressive going up 40% a total of 2,607 points to a high of 9,154. I am a firm supporter that long-term the markets will continue to follow this ongoing trend and will head upwards. Analysts all over have become very negative especially towards equities quoting that due to the fiscal deficits our economies currently hold history has a lesson to teach us. I say to them, yes history will repeat each for the better good of the equity markets. Deficits have always been preceded by significant rises in equity markets. Look back at the markets in 1949, 1975, 1982, 1992, or 2003. Those who were not scared off by the downfalls in the markets and maintained their equity positions welcomed in the gains. To add to this we seeing the more bullish signals come out. Most importantly the Golden Cross has come into play, which has been seen or is about to take place in many indexes across the world. What is the Golden Cross? The Golden Cross is a signal of bullish markets and occurs when the short-term moving average overtakes the long-term moving average. In this case we will set the 50-day moving average has overtaken the 200-day moving average in both the Dow Jones and the S&P 500. Look at the graphs for example. See the crossover of the 50-day moving average taking over the 200-day moving average.

(The green arrow here shows the Golden Cross where the 50-Day Moving Average in Blue crosses over the 200-Day Moving Average. On the contrary this also shows the Death Cross which is the complete opposite. This can be seen by the Red arrow at the top and as a result markets collapsed)

What Does this Mean?

Historically, the Golden Cross has been a reliable sign that equities are on the rise. Just as the Death Cross has been an effective indicator of downfall. The Golden Cross is a signal of a shift of power to the bulls in the market. You can date this all the way back to 1900. Since then all the net gains in the U.S. Stock Market have occurred when the 50-day moving average is above the 200-day. To support the Golden Cross we can look at other bullish indicators. Another is that volume is rising. This shows that the bulls have support of the market. For Investors, who are long equity markets, these indicators would suggest you should continue to buy and trade stocks now as its one of the best opportunities to benefit from the recovery. Short-term traders ride the Golden Cross as long as it is in play. Warren Buffet has supported this theory advising investors to continue to trade and buy stocks despite the Dow reaching 9,000. He sees the markets continuing to strengthen and grow leading towards a rally of some sort. As a result I will end with a quote of his relating to the way history plays within trading. “Chains of habit are too light to be felt until they are too strong to be broken.”

ObamaCare Causing Problems in the Democratic Party

President Obama’s plan for universal health care is slowly becoming less appealing to the general public. Only last week was it reported that now only 49% of the population approves his handling of health care whereas 44% disapprove. He is slowly becoming outnumbered on all fronts and frankly it does not look plausible for him to get the Universal Health Care Bill passed through congress. More bad news came on his front as last week Democratic governors from Colorado, Tennessee, New Mexico and Washington joined GOP colleagues at the National Governors Association summer meeting to blast the administration for plans to shift millions of families into Medicaid. This is becoming a reoccurring theme as many doubt that the American Government can afford to take on such a burden like Universal Health Care, especially with the huge deficit we already have. That could stick states with $440 billion in new costs over the next decade. Though what I think could be a final blow to his plan recently came from Congressional Budget Office Director Douglas Elmendorf, who said last week that the White House’s health-care proposals would not “reduce the trajectory of federal health spending by a significant amount.” This shattered the central claim Mr. Obama has been making: that his health-care plan controls costs. All signs show that any form of Universal Health Care will increase the U.S. deficit of $239 billion over 10 years something many don’t believe can be justified. I personally am against any form of Universal Health Care. That’s likely a low-ball estimate because it assumes that Congress will increase taxes by $583 billion over the next decade. To help pay for Obamacare they have proposed to raise taxes on the rich, Americans making $280,000 a year or more. The main target however for higher taxes will be small business owners. Great, huh? No better way to ruin the economy than to help destroy small business yet Obama continues to break the back of all small business owners. This tax hike is causing distress among the Democratic Party. Of the 39 newly elected house members, 21 voted down the tax hike. Obama’s answer was that it would only force the rich to pay “a little bit more.” However when do we stop burdening the rich with all the costs to support the poor? Plus why does the middle class (the majority of small business owners are middle class) have to take on more burdens to as they are already struggling as it is. The Health Care plan has just caused more and more problems and ultimately I don’t think it will get passed or if it does it won’t be a unanimous decision. The bill is causing a split among the Democratic Party recently theDemocratic National Committee is now running ads pressuring Democrats to vote for the president’s health-care plans. Especially pushing ads in districts of senators and house members that opposed the bill. It is hard to think of a more obvious sign of weakness than attacking members of your own party. It will be an interesting sight to see how this all pans out. Obama will sure be giving his full on fight however will it be worth it if he loses the support of his own party.

North Korea a Growing Problem

North Korea is slowly growing into a bigger problem than many expect. Kim Jong-il has done more to taunt Barack Obama in five months than he did to George W. Bush in eight years. Jong is testing Obama’s skills as commander and chief, as due to the weak experience within this field he believes this is one factor he can antagonize the United States about. So how is he testing him, with these threats that in my opinion should not be allowed. The most recent threat coming from the North Korea Government is that North Korea is accusing the U.S. of trying to provoke another Korean war and warns it will wipe America off the map.  The exact words coming from the North Korea Central News Agency was “If the U.S. imperialists start another war, the army and people of Korea will … wipe out the aggressors on the globe once and for all.” If I were in the seat of President, this would not be acceptable. I would send an ultimatum to North Korea that they either stop operations of producing weapons of mass destructure and threatening America or we will strike with vengeance. In this case, the United Nations is useless, the U.S. needs to act on their own front initiating plans of attack if talks heaten up. At the end of the day, it’s the American population we have to protect and that final. With today’s news that North Korea will continue to test out long-range & short-range missiles I believe North Korea is walking on a fine line. If the U.S. can find a way to condemn the weapons yet not overplay the whole situation would be the best possible outcome though realistically that can’t happen. North Korea’s reckless actions have made this situation serious, any threat like that cannot be taken by America especially by a small dictatorship like North Korea. We need to make sure we control North Korea before they grow into a large military power. They have already shown they have weapons and nuclear ones at that, so I think some form of reaction is necessary. These situations can be so difficult, some might say that jumping in now would be to early, yet others might question that if we wait it might just create a bigger problem on our hands down the line. All in all, America has to hold up its duties of World Police as China is unwilling to accept that position, and if you don’t control one group of radicals, how will you stop the next?

IPO’s on the Rebound

IPO’s are back on as becoming the new hot thing on Wall Street. The pace of new stock offerings perked up this spring after a cold winter, though who knows how long it will take before the market sees a real recovery. In the second quarter IPO numbers quadrupled what they were in the first quarter. Worldwide over 78 companies ended up raising a total of $10.6 billion compared to only $1.3 billion in the first quarter. These IPO’s were huge successes with companies like Rosetta Stone, Solar Winds, OpenTable, VisaNet, BridgePoint and several Chinese start-ups. OpenTable alone saw the best first-day performance since 2007 as the stock soared 59%. I feel optimistic about the overall shift within both IPO’s and Merger & Acquisitions, which are feeling the heat as they are being pressured to create new money. For IPO’s, this fall should show great success with several strong tech companies poised to take off most notably the Professional Social Networking Site LinkedIn. In fact, read my recent report on LinkedIn and the successes the company shall earn in the future. The whole industry feels assured that the IPO market will pick up in the fall and continue into the spring. I agree I don’t believe we are there yet but it’s coming. Merger & Acquisitions are also heating up with the talks of many buy-outs between oil conglomerates as long as the sale of many failing retailers mostly notably the recent purchase of FAO Schwartz by Toys R Us. Imagine that we are in the 5th inning so mid-way point of recovery with only good times to come. The consensus right now is that in the second half of the fiscal year we will see a large step towards extended economic growth. I want to believe this yet I still have my doubts with the large unanswered economic questions looming on President Obama’s agenda. Back to IPO’s however I expect the recovery within that industry to be seen primarily within China and the U.S. as these two countries have become very aggressive in responding to this economic slowdown. I don’t see a booming affect in IPO’s with them producing ridiculous returns yet I do see it as a starting point leading the wave for many new countries to turn public. Whatever way you look at this, the resurgence can only be seen as a positive as we see more once weak sectors within our financial system on the road to recovery.

NFL Taking a Stance on Fundamental Problem

Just imagine if you were a 23-year old college grad who just signed a multi-million dollar deal, you would think you could build off that wealth to last yourself a lifetime. Well that’s not the case for the current NFL players who are spending money as fast as the government is handing out bailouts. It’s this youthful movement that is destroying many young NFL players’ lives with no basic common sense of economics or savings. To them, if you have money in your pocket you spend it. Everyone wants the lifestyles of the rich and the famous and they actually employ without realizing the long-term consequences. They are never asked the question if they would you rather have a solid income for a lifetime or a fun, free-spending year living that lifestyle. Unfortunately most NFL players are not making the wise decision choosing to waste there million dollar contracts on lavish cars, thousand dollar night in the clubs, and stupid of investments. Michael Vick was a perfect example several years ago when he was advised by friends of his to invest millions into a failing wine business in which he knew nothing about. Result was millions in dollars of losses, money he could very much use today. Well, in a commitment to stop this behavior, newly appointed NFL Players Association executive director DeMaurice Smith’s has a goal to make every player learn the true meaning of economics. Its bad enough that these guys void college degrees for millions of dollars but you would think that if invested sensibly they would never have to work again. Unfortunately, not the case, yet time will tell if Smith’s plan will ratify the behavior of young NFL superstars The fact is these kids know nothing about the league in which they play in. Smith exploited this weakness in a recent rookie camp where he asked asks how many players saw the news about the league’s new deal with DirecTV, which guarantees teams an additional $4 billion through 2014. No one raised their hand. Smith goes on asking how many thinks that new NFL Stadium’s are paid by tax dollars? Again these men are clueless as Smith tells them virtually all stadium upgrades or expansions are paid by tax dollars. Smith gets to a point where he is so frustrated with the state of these players that he leaves the room. Is it inconceivable to believe that these pheneoms talk about themselves as brands and the next great player yet can’t even balance a checkbook or pass a 6th grade economics test. Well no longer will this be accepted in the NFL as Smith recently met with the league’s player’s representatives to initiate the largest, most intense labor standoff in the NFL’s history. The new approach of the NFL Players Association is to educate players on how this league they play in operates, what generates income, and how they can succeed within it. Well the big reason Mr. Smith is raising such uproar after just being assigned to the job is to save his players millions they are about to lose. With the league set to go under new contract negotiations in 2010, owners are pushing for players to get less money than they already earn. The thing is the average player has no clue that this initiative is taking place and by the time they find out it will already be cut out of their paycheck. Personally, it’s a shame we don’t see more successful players become investors within NFL teams or sports franchise. The problem is though even the ones who make millions on millions throughout there career’s have such bad spending habits that they have no cash to spare come retirement. Only three months after being placed in his role, Smith is mobilizing around 2,000 NFL football players for a fight against some of the most powerful businessmen in America, like Jerry Jones, Bob Craft, and Al Davis. The goal of the owners is to slow the growth of the NFL salary cap, which has been going up from $5 million to $12 million per team annually. If no deal goes through then who knows where the ceiling for salaries could go. As part of his effort to make the players conversant in the issues, Mr. Smith is stressing their value to their industry. Considering no one in the world can do their jobs as well as they can, that value is fairly high. So despite the blank stairs and stuttered answers he receives in the locker rooms, Smith is engaging players into the fundamentals of business and teaching them basic economics. Smith helps explain how NFL teams lure cities into throwing millions in tax dollars into renovations of stadiums and how much of an impact they have in an $8 billion dollar industry. Who knows what will become of the NFL or of these guys? Though after constant preaching maybe, maybe one day time will all click and they will consider whether or not they want to be the guy managing the money or owing it come retirement. The decision you make will decide on which route you take. Personally, I love the route Smith is taking; I believe economics should be instilled on everyone not to a point where you feel confident they can survive in the real world. To add to this, what about taking the NFL public? I would say, allow players to invest their money wisely within the teams and have a solid amount of investments to retire with and live a full-filled lifestyle after football with no financial worries. Or instead of giving them ridiculous rookie salaries in which they go out and spend we give them stock options of the team they play for. Well a long shot thought but a great one at that. I guess though the first step is education and its good to see Mr. Smith taking a leadership stance on that field.