Daily Intent

Santa Barbara, CA
“It’s an all-in wager on the economic future of the United States…I love those bets.”
Warren Buffett, this week after solidifying Berkshire Hathaway’s largest deal ever.

Warren Buffett’s company went all-in on Burlington Northern Santa Fe Corp.  Burlington Northern is a giant railroad company.  They transport foreign and domestic products - from televisions to refrigerators to clothing to even cars - from the West Coast (Los Angeles and Long Beach) to the major cities in the Midwest.  Asia supplies most of the goods.  And Buffett believes our economy, once it begins humming along, will invigorate large profits for this company.

Buffett’s philosophy has always been to invest in what you know.  He knows railroads.  He has ownership in a couple other major railroads.

Secondly, he is forever an optimist about the American economy.  We can get ourselves into trouble, march forward creating bubbles and inequalities, but, at the end of the day, there is no better country in which to invest.  He’s giddy about the opportunity. 

Thirdly, it doesn’t hurt that railroads are coming back into favor as companies look to be more “green” and the efficiencies of railways return.

Are you in agreement with Buffett?  Would you put an all-in wager on the American economy?  Do you believe the United States is capable?  Do you believe your sphere of loved ones and coworkers are able and willing to break the current American cycle back into the positive frontier?  If not, why?  Might it start with you and your innovations?

On a side note:  I happened to take the train last weekend from Los Angeles to Santa Barbara.  Being one that has traveled about much of Europe by train and very little in the USA, I was encouraged.  The workers were cheerful, the views were expansive, the interior was comfortable, and the price was reasonable.  Moreover, I was amused by the European sounds, many different languages, and found relaxation in being able to let my mind wander while traveling.  It took a bit longer, yet the journey was far more enjoyable.  I would highly recommend the experience.
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PLAN
Catalyst for Thought - Sync.  November 10th.  6pm - 8pm.  $10 RSVP online.  At the Canary Hotel as well.  The speaker, Susan Urquhart-Brown, will begin at 6:45pm.  She is author of The Accidental Entrepreneur.  All proceeds will go toward the non-profit Global Partners for Development.
Inspire Santa Barbara.   “Self Management.  Making Relationships Work”.  Yoga Soup.  November 19th. 8-10pm.  Manage yourself rather than attempting to manage others.
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LEARN
Buzzword: Exotic Option
“An option that differs from common American or European options in terms of the underlying asset or the calculation of how or when the investor receives a certain payoff. These options are more complex than options that trade on an exchange, and generally trade over the counter.

For example, one type of exotic option is known as a chooser option. This instrument allows an investor to choose whether the options is a put or call at a certain point during the option’s life. Because this type of option can change over the holding period, it is not found on a regular exchange, which is why it is classified as an exotic option.

Other types of exotic options include: barrier options, Asian options, digital options and compound options, among others.  “  -Investopedia.com   …and you thought an exotic option was going to be something else.  You rascal.

  Six Points to Ponder:

   1. Market Pessimists.  The pessimists are back to winning out.  Last Friday we lost over 200pts in the Dow due to bank blunders.  - The Dow is trading  at 9,797, S&P 500 at 1050 and the Nasdaq stands at 2067.  Oil is level at $80/bbl.
   2. Elections Everywhere.  Helene Schneider will be Santa Barbara’s next mayor.  Michael Bloomberg held his post as New York’s Mayor for a third term. 
   3. Ford Fusion.  Ford posted 3rd quarter profits of $1Bn compared to a $161m loss a year ago.
   4. Berkshire Buys Burlington.  Warren Buffet’s Berkshire already owned part of the railroad company, now they own all of it.  It is Berkshire’s largest deal ever, $26Bn in cash and stock (note: each news publication states a different figure).
   5. Dine and Dash.  Randy Quaid and his wife Evi took a trick from their adolescent youth.  They dashed on a bill of $10K at San Ysidro Ranch in Montecito.  They’re going T.P-ing Friday if anyone wants to join.
   6. Fighting Phillies.   Down 3 to 1 in the World Series, the Phillies eeked out a victory to preserve their chances at a repeat.  Fantasy Football.  Scott Devore devoured our very own sports guy “Fire Marshall Phil” on a last second interception that meant nothing in the game, but everything in fantasy.

Positives:

    * As of October 1st, 357 S&P companies have reported, and 84% have exceeded estimates.  Increasing exports, as our dollar remains cheap, and mounting efficiencies look to be the US economies propulsion moving forward.  GDP grew for the first time in a year. 
    * While Ford was boasting profits and shining amidst the other two American car company travesties, Viacom, the owner of MTV and Paramount, saw 3rd quarter gains of 15%.  Higher box-office revenue and a slowdown in the advertising slump led to their heightened numbers.  This is solid news for the entertainment industry.  Moreover, Polo Ralph Lauren Corp posted a 10% 2nd quarter profit jump.
    * One major investor in our economy, aka Warren Buffett, is showing confidence in America’s long term success.
    * A possibility of two more World Series games.  Tonight is game 6!

Negatives:

    * “It is expected 13 percent of the banks on the “problem list” will fail, which translates to 54 more banks.”  -Market Street Report last week.  Nine banks were taken over last Friday alone, causing the markets to tail spin downward.  In Europe, the Royal Bank of Scotland (RBS) fell victim to the world’s most expensive bank bailout this week.  The FDIC has now built up its force.  Expect more quick take overs to come.
    * Efficiencies in this stage of the economy come in the form of firings.  Johnson & Johnson reported this week that they will be laying off 8400 people.  Nokia announced 5760 job cuts.
    * The pessimists in the market are taking their profits off the table.  The last couple weeks we’ve seen the markets react differently than the last six months.  Over the last six months, investors were powering forward on any slightly positive news.  They were holding on to these positive sound bites and pushing aside any negative market indicator.  Presently, the naa-sayers have won back favor.  Positive data points and profits are being pushed aside, while negative indicators have become the fuel for downward market pressures.  This all said, volatility is to be expected in this stage of the market.

GET INVOLVED
Local:

Team in Training - Casino for a Cure
Where: Canary Hotel.
When: November 7th.  6:30pm - 9:30pm.
Cost: $45.  Order tickets at www.SBTNT.com
Why:    Pretend you are in Vegas for a night!  Music, cash prizes, heavy hors ‘doeurvres, one drink ticket and plenty of gambling chips. 
For other fun weekend ideas, go to www.lovemikana.com

Live and Be Well,

Jeff Bochsler