The U.S. economy languishes in a quagmire of uncertainty and fear. We all need a jolt from Napoleon Hill’s, Think and Grow Rich. We’ve lost our imagination. We depend on government. We think if we just hang on, things will get better; when they won’t, unless we collectively take action.

Actions begin with thoughts, with imagination, with dreams.   Ideas get buried in political gambit. Dreams get squashed by disconsolate pessimism. “I can’t do it” echoes along Main Street more often than, “Let’s just get it done!”

Americans have been here at other times. The Great Depression was the time for despair, and many Americans were desperate.

How much of this information sounds familiar?`
• October “ is the cruellest month . . .” for the stock market.  Time’s cruelty is  T.S. Eliot’s theme in The Waste Land. Time, greed, and fear coalesced on “Black Tuesday” (October 29, 1929).  Stocks lost 38 points as 16 million shares changed owners (the Dow Jones did not trade as many shares until 1968). The Dow Jones Industrial Average declined 89% from its peak and found a bottom at 41.32.
• In the 1920′s, industry and business announced exceptional profits.
• Wages were low and credit purchases were high.
• Real estate prices peaked in 1935 and lost value prior to and after the 1939 collapse.
• 40% of US banks failed.
• Unemployment climbed to 25% in 1933
• During his first year as President, Roosevelt charged the “unscrupulous money lenders” and ” self-seekers” for the economic collapse.
• The American family saw a drop in income from $2,300 to $1,500 annually; that is a 40% decline. A 2009 survey by FinaMetrica indicates that 64% of respondents expect a drop in life style.
• Government initiatives created road and building projects.
• The Dust Bowl of 1935-1938 forced 800,000 out of their homes and off the farm. Did Al Gore catch a cyclical event or an inexorable global catastrophe that might be mitigated?
• The Home Owners Refinancing Act passed through Congress in 1933 helping about one million families get mortgages.

Sounds familiar and worse.

Maybe imagination, hope, belief, expectation, and ideas helped Americans get through the effects of avarice.  Maybe changes are just simple economic cycles. Maybe,  World War II gave Americans focus, hope, and incidentally, economic growth.  Who knows for certain? I think energy and necessity (“the mother of invention) exceeds the impact of circumstance.  What we are matters more than where we are.

Napoleon Hill writes, “Never in the history of America has there been so great an opportunity,  for practical dreamers as now exists….The rules of the race have changed, because we now live in a changed world that definitely favors the masses, those who had little or no opportunity to win under the conditions existing during the depression, when fear paralyzed fear and development. ”

“We who are in this new race for riches, should be encouraged to know that this changed world in which we lives is demanding new ideas, new ways of doing things, new leaders, new inventions, new methods of teaching, new methods of marketing, new books, new literature, new features for the radio, new ideas for moving pictures.”

“Back of all this demand for new and better things, there is one quality which one must possess to win, and that is definiteness of purpose, the knowledge of what one wants, and a burning desire to possess it.”

Where are the inventors and innovators? They are doing what inventors and innovators do. They change our world; they lead us because they dream, they innovate, they invent, and they have ”burning desire”.

You may think that America has lost its “burning desire” for invention and innovation;  not so. The Kauffmann Foundation tracks the creative and inventive spirit of America.

Here are recent news stories from the Kauffman Foundatin newsletter:

 
• World Turns On Its Entrepreneurial Axis: During Global Entrepreneurship Week, November 16-22, millions of young people around the world joined a growing movement of entrepreneurial people to generate new ideas and to seek better ways of doing things. Eighty-eight countries across six continents came together during the second annual global celebration of entrepreneurship to inspire young people to embrace innovation, imagination, and creativity.
  Find out more arrow
• Company Founders Credit Experience, Management, and Luck for Entrepreneurial Success: While fostering new business creation could again help the United States move more swiftly toward ending the current recession, little has been known about the factors that cultivate and support entrepreneurialism. However, a new study from the Kauffman Foundation, “Making of a Successful Entrepreneur,” provides insight into company owners’ views about what influences the success or failure of a startup business.
  Find out more arrow
• Canadian Student Takes 2009 Global Student Entrepreneur Award: Simon Fraser University student Milun Tesovic, founder of MetroLyrics.com, has been named champion of the 2009 Global Student Entrepreneur Awards (GSEA) and the recipient of $150,000 in cash and donated services that will help support his company and development as an entrepreneur. The GSEA Global Finals, featuring students from eighteen countries, were held at the Kauffman Foundation during Global Entrepreneurship Week.
  Watch video highlights of the competition more arrow
• OECD Report on Entrepreneurship Reveals Economic Impact on Firm Formation: The Organisation for Economic Co-operation and Development (OECD) has unveiled the first indications of how the economic slump has affected entrepreneurship in the United States and eleven other countries in 2008 and most of 2009. The report, Timely Entrepreneurship Indicators, shows that firm formation declined and exits increased, which economists say could have significant implications for job creation.
  Find out more arrow
• College Freshman Show Increasing Interest in Entrepreneurship: The most ubiquitous survey of college freshmen in the United States reveals that interest in entrepreneurship among first-year college students has risen over time. Trends in Business Interest Among U.S. College Students bases its findings on data available through the Cooperative Institutional Research Program, which for forty years has conducted the CIRP Freshman Survey. Find out more arrow
• Partnership to Launch Book Series on Innovation and Entrepreneurship: The Kauffman Foundation, Princeton University Press, and the Berkley Center for Entrepreneurial Studies at New York University have announced a publishing partnership to launch the Kauffman Series on Innovation and Entrepreneurship.
  Find out more arrow

Do you believe history is repetitious?

Do you believe that what happened then can happen anytime?

Are you dreaming…inventing…innovating?

This morning a friend and I talked by telephone.

The Bible says, “Friends come and friends go, but a true friend sticks by you like family,” and he is family.

My friend works for a major insurance company overseeing new product development management from the technology side: databases, daily valuation updates, client statement. He’s not a geek, but he understands geekdom.

Today, we talked about the power and impact of personality during good times and bad times.  No one found a pink slip on their desk, but company bonuses and matching pension contributions got axed.

Most employees groused. He understands, accepts, and does his job effectively.

His tone is even, but never bores. As his wife says, “He can walk in a room without sensing any emotion. I walk in a room and absorb every one’s feelings.” He does sense feelings, but never messes with them.

My friend’s temperament and commitment merits a promotion, and he got one.

Temperament and tone matter. Personality is the message. Impeccable expression changes lives.

Paul Hawken’s commencement address, “Healing or Stealing?” expresses his passion, intelligence, and vision. His words: energetic; his challenge: relevant.

Loving the word, ideas, concepts, and having a vision matter. Too often, we overlook the power of ideas because we exert too much attention getting people to buy a product or service. The power of language, the impact of passion that words convey, and the power of redemptive change elevates above the base and mundane.

Mark Twain wrote, “The difference between a word and the right word is the difference between the lighting bug and lightning.”

Paul Hawken’s University of Oregon 2009 graduation commencement address affirms and encourages. When bleak news fatigues and arouses fear, Hawken’s says, “You are brilliant and the earth is hiring.” Economic policy, human toys, and avarice must give way to the enduring necessity of life on earth.

Every day we commence activities, and every day our economic obligations and initiatives must conform to what works best for the earth and all her inhabitants. Investing is not just for you, or me; investing demands moral temperament and sensitive tones. Investing ourselves for the highest purpose creates a portfolio legacy that Wall Street cannot take nor diminish.

To read Hawken’s message, look at the toolbar at the bottom for the word “full” (screen). Hit escape when you’re done.

“Well we’re movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up,
To the east side.
We finally got a piece of the pie.

Fish don’t fry in the kitchen;
Beans don’t burn on the grill.
Took a whole lotta tryin’,
Just to get up that hill.
Now we’re up in the big leagues,
Gettin’ our turn at bat.
As long as we live, it’s you and me baby,
There ain’t nothin wrong with that.

Well we’re movin on up,
To the east side.
To a deluxe apartment in the sky.
Movin on up,
To the east side.
We finally got a piece of the pie.”

Did you watch the Jefferson’s in their  “apartment in the sky”? Life was good, goofy, and gilded; they “finally got a piece of the pie.”

High net worth families have a net worth of one million dollars. How they got there is a prism reflecting unique ideas, good timing (luck), passion, determination, prudence, and focus.

Keeping their wealth takes momentum, persistence, risk-taking, and entrepreneurial instincts. Adding complex global economic trends, currency and commodity values gives wealthy folks economic vertigo.Wealthy living on the upper east-side or a Tuscan village differs.

A successful, high-net worth hairstylist said to me, “In Italy you live, but make no money. In America, you make money, but have no life. My best times in Italy are sitting at a cafe, drinking coffee, reading the morning paper, and watching ocean waves. When leaving, I say, ‘Thanks…I’ll be back.’”

Making it and maintaining it became difficult and frustrating for wealthy Americans during this recession, just like the rest of us.

Millionaires don’t feel as good about their income:
• Most, like the rest, consider their cash flow worse.
• 54% feel “worse off”
• 32% think this could be a better year (optimism matters)
• 42% think not much’s gonna change
• 26% are downright pessimistic: things won’t stay the same, they’ll get worse.
• 38% shifted funds or will shift funds to certificates of deposit

Read, “Hard knocks for the high net worth” by Investment News, August 17, 2009

What you don’t measure, you can’t track.

This axiom matters when bear markets hobble your investment portfolio. Understanding the cause, measuring the result, and tracking the patterns,  guides and instructs.

Most of the news we get heightens anxiety or accelerates our greed.

When the news affects personal assets, we shun the obvious in catatonic stupors. Many investors acknowledge choking on their emotions during this recession and stock market decline.

We forget  economic rhythms that always undulate between profit and loss. We sometimes  see economic trends as irrational and bizarre and forget the simplicity of supply and demand.

As long as humans trade dollars for stock ownership, loan money to corporations or  governments for bonds, and manage risk with options, markets will remain rational most of the time and irrational some of the time.

George Soros says, “The key to understanding this crisis — the worst since the 1930s — is to see that it was generated within the financial system itself. What we are witnessing is not the result of some exogenous shock that knocked things off balance.”   “A New Motor For the World Economy”; The Bangkok Post (Thailand); Oct 18, 2008.

Opportunity drives us, taking chances absorbs us, money comforts us, but tracking effectively often eludes us.  Wall Street markers tell us where we’ve been, not where we’re going.

The hiking trail cairns on Mount Washington stand as immovable rock formations that do both. What makes investing so difficult that we don’t use simple indicators rather than a cacophony of mixed-messages?

“Teach a parrot the terms “supply and demand” and you’ve got an economist.”
Thomas Carlyle quotes (Scottish Historian and Essayist, leading figure in the Victorian era. 1795-1881)

Carlyle overreached when saying this, but he’s on to something rudimentary about economic predictions.

Investor cairns or markers include the S&P 500, Russell 2000, and the Wilshire 5000 (intrepid investors may use the Investor’s Business Daily 1000).  An index tells us where we’ve been with myopic predictions.

In 1744, a group of captains and merchants met at Starbucks (well,  the coffee shop on Threadneedle Street in London). Coffee houses were then what they are today, social gathering places where business deals and loud conversation filled the place.

Merchants and investors  wanted to track shipments between Virginia and the Baltic at the “Virginia and Baltic Coffee House”.  They tracked shipments of “tallows, oils, flax, hemp and seeds from the Baltic states”.

Today, “The Baltic produces independent shipping market assessments. Using a panel of international shipbrokers, we provide daily assessments on over 50 dry and wet routes, weekly sale & purchase and demolition assessments as well as daily forward prices.” (Read more about: The Baltic Exchange)

What makes this index prescient? Well, the Baltic Index is a leading indicator. We learn how many cargo ships travel, where they’re going, what they’re carrying (lumber, coal, iron, grain, cement, as examples), and the value of their cargo.  Every business day, the the Baltic membership accesses ” a dry cargo fixture list.  Each fixture is carefully checked and verified.”   The Baltic … is regarded as the most comprehensive and independent such list available.” (The Baltic website)

There’s no economic prognostication or guesswork. The Baltic Exchange motto: “Our Word Our Bond”.

An economist reading “The Baltic” magazine gets the facts. The Baltic Exchange measures what it tracks. When economies do well, shipments increase; no guessing, estimating, or preponderance of divergent economic opinions.

You can peruse “The Baltic” magazine on line; the June 2009 issue bids farewell to Michael Drayton as The Baltic Chairman.  Read his answer to the question “What are your greatest fears for the shipping markets over the medium to long-term?” (The Baltic, June 2009, page 5)

When you want a foward-looking indicator, look  at Bloomberg’s  Baltic Dry Index chart.

The Kaufman Foundation’s passion and mission gives life to entrepreneurial thoughts and innovation.

What you’ll learn with some of my thoughts:

1. The age of entrepreneurs is changing.

2. Venture Capital is necessary.

3. Business start-ups spark new economic growth.

4. New firms revive economies in most instances.

5.  Most Congressman just don’t “get it”.

6. Innovators change economies.

7. You may be one of many entrepreneurs who sprouts the BIG idea in a small place.

8.  All economics is local. Where you live is where you spend your time and money.

9.  All economics is global. An entrepreneur in Seoul or Yangshuo (Guangxi), China may change your life.

10. Your ideas matter. What you discard as worthless may become the leading innovation of all time. Either you graspe the moment, or someone will adhere to the idea. Read Russell Conwell’s Acres of Diamonds.

Edward Yardeni once worked for Prudential Securities (now defunct). Yardeni reminded and instructed stock brokers about many economic patterns. One that sticks with me is his observation of “rolling recessions”.

Recessions happen in strong economies; we get more of them in a weak economy. When rolling recessions happen in all economic sectors, we have an economic pandemic. The world gets a runny nose.

Despite worry, consternation, and fidgeting when watching Bloomberg news, there are metropolitan areas that show life, vibrance, innovation, employment, and hope. The downside is that there are metropolitan areas where there’s inactivity, darkness, boredom, unemployment, and despair.

Everyone does, in my opinion, possess hopeful opportunity. For reasons somewhat inexplicable, not everyone catches or wears the “gold ring”.

Alan Berube, Senior Fellow at the Brookings Institution, reminds us that there are 366 metropolitan areas. We are not, as Berube says, a single economy. We are “a nation of 366 different economies, fueled by varying industries.”

Given the diversity, the time of recovery will differ from one metropolitan area to another.

Utopia has all 366 metropolitan areas productive and growing. Unfortunately, utopia is no place.

And there’s joy at Fenway as  Boston Puts It To the Yankees.

If….you love the Yankees, I understand.

Every morning after a Red Sox game, Lisa’s grandmother tells me about the game. I already know what she tells me, but she gets quite excited at age 95.

She says, “Big Poppie (David Ortiz) clocked his third home run, and things are looking up for him” and “the stock market”, I add.

OK; not so fast, Randall. We have a lot of ground to travel before returning to solid ground. No banners hanging over Wall Street yet.

Just the same, the news is better.

Market analysts support viewpoints with statistics. Most of us find the data dreary. We scan the dull parts faster than a furtive glance.

Baseball stats dull the sound of the bat, the “wave”, and a Fenway Frank. Just the same, statistics and probabilities matter.

This summer, I went to my second Red Sox game. We sat perpendicular to third base. What seats! To my right and to my left, two middle-aged men kept track of every hit and every pitch for every inning.

I asked, “How come you do that?” They both said, “I just enjoy the game more when I do.”

So, for those who enjoy stock statistics, the attached SEI Investments commentary gives you plenty to ponder.

Quiz:  Can you guess the stat before reading the right coloumn? They all seem esoteric to me.

Here’s the article, “Small-Cap Stocks: Too Far Too Fast or Just the Beginning?” by James Solloway, CFA, Senior Portfolio Manager, Global Portfolio Strategies, SEI Investments, Inc.

Last week’s chart illustrated the current plunge of S&P 500 earnings. Today’s chart illustrates how this plunge in earnings has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive. From 1936 into the late 1980s, the PE ratio tended to peak in the low 20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s) and the dot-com bust (early 2000s). As a result of the current plunge in earnings and the recent 2.5 month stock market rally, the PE ratio has spiked to the low 120s – a record high.

Notes:
- Where’s the market headed? The answer may surprise you. Find out right now with the exclusive & Barron’s recommended charts of Chart of the Day Plus.

Source: Chart of the Day

   

Whole Earth from Space

 

Good news always encourages. When reading any news about the stock market, we read circumspectively. Caution, discipline, and purpose should drive investment decisions. Asset allocation works when applied with patience and consistent commitment.

Here is a positive Bloomberg.com stock market comment after four days of positive numbers and during the G-20 Meeting.

Global Stocks Rally on Improving Economic, Banking Outlook

General Motors is an accident waiting to happen unless someone steers them toward safe routes. Whether they avoid economic potholes driving gas, diesel, or electric, UAW members will determine the outcome with GM’s management team.

UAW member talent made GM the leading automobile maker in the world. GM has lost the position, and I’ve pointed my criticism toward UAW members as part of the problem. That may be partly but not completely true.

Frank Hammer, age 65, a staff and line worker at GM makes fascinating comments about the role of UAW workers. His distinctions, recommendations, and passion recommend listening to him.

If you listened to Don Imus interview with Lou Dobbs, you heard Dobbs say that our legislators should be teachers and workers rather than “elitists”. Frank Hammer might be a candidate.

Listen to Frank Hammer’s commonsense during an interview provided by Bloomberg.com.

Hyperlinks on this website are provided as a convenience and we disclaim any responsibility for information, services or products found on websites linked hereto. 

NOTE: This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts. For more information, including a prospectus with charges and expenses, call the number of any brokerage firm, mutual fund company, investment advisor, or insurance company.. Please read the prospectus carefully before investing. . Mutual fund investing involves risk, including the possible loss of principal. In addition to the normal risks associated with equity investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments typically exhibit higher volatility. Products of companies in which technology funds invest may be subject to severe competition and rapid obsolescence. Index performance returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index. Past performance does not guarantee future results. Ethos provides this news page for information purposes only and it should not be construed as legal, accounting, tax, or professional advice. Ethos Advisory Services disclaims any loss or liability which is incurred as a consequence, directly or indirectly, of the use or application of this news page or any page on ethosadvisory.com or echievements.com.

Listen to Lou Dobbs guest appearance on Don Imus during the November 25th Imus In The Morning program.

You might appreciate their perspicuous perspective with their usual flare for terse viewpoints. You’ll have to endure the small talk.

Subjects they discuss:

• Don Imus has a temperature of 101.8
• The Obama Economic Team
• “The left and the right have it wrong….”
• Treasury Secretary Hank Paulson
• Secretary of Commerce designee Bill Richardson
• U.S. Trade Policy “…part of the problem…we are going through this economic crisis now.”
• “I’d like to see a Congress made up of bricklayers, teachers…(instead of) superior elitists….”
• Citigroup bailout
• The Bush Administration
• Family talk

Hyperlinks on this website are provided as a convenience and we disclaim any responsibility for information, services or products found on websites linked hereto.