Mark Hulbert takes  a look at airlines. Airlines, with oil at $100?.  I mentioned SW Air LUV in class last week. Whatever day, the news was breaking over inspection failures and cracks in the planes which were grounded. Bingo, the stock dropped to the mid 11s, I suggested it was a buy.  The class thougt it would fall further. As their Chairman testitifed before Congress this week amid nothing but bad publicity the stock climbed to $12.71. Lesson, buy good stocks on bad news.

Michael Dell held his first analyst meeting in three years.   Dell is closing an Austin manufacturing plant and looking to cut costs declaring there are no fixed costs. Operating expenses have ballooned 65% while sales only increased 10%, whoops.  Only a few years back one of the finance textbooks swooned over how wonderful DELL was, is, and will be. So much for that financial analysis!

The story here is that so often yesterday’s leader is today’s laggard in the swirl of business change. Monitoring costs and profits are sine qua non for managerial accountants.  DELL stock has fallen to twenty bucks while HPQ has advanced.  APPLE, scorned by Dell just a few years back is the investor success story of the last few years. Costs are important but so is innovation, as Apple demonstarted wtih its i Series of products.  Dell is now backing off its made to order system in favor of outsourcing manufacturing to ready built products with add ons.  Flush with success, Dell himself retired from day to day involvement a few years ago, now he is back facing monumental problems. Some things like management are best not outsourced!

Dvorak on lthe lack of Dell innovation. I am running into more and more people that are not totally frustrated with the new MSFT Office 2007 and have switched to an Apple laptop, have you or do you know someone who has switched?

Speaking of which, Apple is out of i Phones.

Jonathan Hoenig holds forth on social safety nets.   He suggests that they are downright dangerous. Indeed I read an article suggesting that the ecoomy is somewhat safe in that many people now work for the government.  And they don’t lay people off.  True enough but do you see anytrhing wrong with that thinking.  A government exists by taking money from the productive sector and paying bureaucrats to do whatever they do.  That will only work to the 50% level. Once all governments start taking more than half the economy, the game will shortly be over. Do politicians understand this?  I don’t think so.

The WSJ on Adam Smith.  Tom Sowell on the wisdom of the FED.

It just keeps getting worse for newspapers. Here is the latest for year over year ad revenue changes.   If you can see what they should do, you will certainly make yourself famous as a consultant.

Here is a comparison of where Obama would take us versus what JFK actually proposed and did.

A Yale law professor looks at the  Continental Ill. bank bailout versus the Bear Stearns bailout. The differences are important.   FDIC was never created to save brokers but commercial banks.  Should they?  The prof suggest what will result, a round of mergers to get firms on Wall Street ‘too big to fail’ knowing the govt will rescue them from whatever madcap scheme they get themselves into.

Peter Schiff argues that the sooner we let the markets fix themselves, the sooner they will. Prices must get to an equilibrium.  Efforts to ‘force’ prices to be artificially high will not last for long.

D

ogBNSF has parked hundreds of container rail cars.   Transportation is the first to show a slowdown.  I suspect this will impact on the speed of the developmetn of the Dallas Logistics Hub.  Slowing economy means a less freight to haul. 

In the classic Americana song The Class of ’57 the Oak Ridge Boys opine that one of their class members ended up selling insurance and ‘part time real estate.’  Think about that. Back then one sold real estate part time. The reason was that not enough activity occurred to make it a full time profession. Yet as it turned out, real estate was the perfect vehicle for the upwardly mobile types that did not want to bother with the professional necessity of a college degree.  A nice outfit, a few flashy terms like wrap around mortgage, owner carry, and ‘after all you can itemize the taxes for an ordinary deduction while carrying forward the captial gain tax free’ and you certainly look and sounded the part.  This is a target rich scenario for the Tom Hopkins/Tony Robbins of the world. Wanna be successful, well by golly just think you are and you will be! Then couple all this with the go go inflation of the 70s that never stopped in Manhattan and California, not to mention commodity plays like Houston,  and by golly, the full time  real estate ‘profession’ was born!

It also used to be, back in that part time real estate sales era, that if you sold a house for what you paid for it, after living there a few years, it was a pretty good deal.  Inflation of course coupled with drive by appraisals and easy lending standards, cemented the idea that ‘real estate investing’ was a permanent win win plus sum game! Meanhile, governments had reached their volutary tax limit so to speak. Voters would just not likely stand for more taxes at the Federal State City County Community College Hospital Port Authority  level. What to do? Follow the Las Vegas lead and institutionalize gambling,hello lottery.  And by the way, make gambling illegal for private entrepreneurs giving the state a monopoly. Now it is not uncommon to encoounter someone, never mind the improbably high odds, who believes they will win the  lottery as a way of financing retirement. It is also no surprise that I recently encountered a class of 8th graders all of whom thought their junior high would grow (note I did not say graduate…) to populate the entire NBA!  Reflecting the national gambling mania the stock market shot to 10,000 and higher and Las Vegas became the fastest growing large city in the USA.

So is it any surprise that  individuals realized their ‘real estate investment’ a home otherwise known as a leveraged bet on  a permanent housing bubble, was not appreciating.  The result is that our ‘homeowner’ (really just a no asset debtor, the creditor ‘owns’ the house) simply walks away from the bet, er home ownership.  And the fear of four million vacant homes is exactly what is terrifying Washington DC today.  But then the ‘house’ never loses in a gambling situation,right?  Maybe not….

Ad revenue for newspaper dropped sharply this past quarter.   The winner, web based advertising. But I wonder, do you click on banner ads, I don’t.  Anyway, while one quarter may not sound bad but this has been going on for years and years.  The very future of big papers is in doubt quite frankly. This is how Murdoch took over the WSJ.  I suspect very small town papers with photo of kids playing this and that can survive as no one else has that coverage. But large papers like DMN continue to lose revenue.  Mid sized papers like Amarillo, Odessa, Abilene, just cannot figure out what to do.

Hre is a link to another Professor Blog.   Perhaps this professor blogging thing is catching on!