State of the Economy....

The announcement by Bank of America (owner of Countrywide), CitiBank, Fannie Mae, and Freddie Mac that they will start renegotiating mortgages may begin what turns around the economy, in the least it may help keep this bail out to a minimal. Times are tough however and more outside the bank world companies are going to start asking for money. Tough times are ahead.

More signs of a down market that I have heard / seen:

* Paint orders are still extremely low.
* Construction orders are being put on hold / slowed down.
* People I know are still worried about losing their home.

For now my money besides what is already in, is going to wait. What I would like to know is what is the everyday investor's sign of a turn around? So what are your ideas, metals stabilize? New house orders rise? You tell me...

My Last Post on Baldor, I think...for awhile, & More on Recession.

Cramer and Baldor CEO John McFarland on Mad Money last Friday:

http://www.cnbc.com/id/15840232?video=780431599

Because I don't have any stupid sound effects developed yet.


So yesterday I spoke about this quote from a Fortune article:

"...the Fed remains skeptical that high commodity prices will ripple through the
economy, leading to broad price hikes and big wage increases. "The committee
expects inflation to moderate later this year and next year," the Federal Open
Market Committee said in holding the fed funds rate steady at 2%, though it did
note that "uncertainty" remains high and suggested inflation concerns could
rise."

I wanted to elaborate on the subject a little more. I work for a commodity-based product company and we are in fact completely increasing our pricing due to ripple effects in costs on all of our products and passing that cost onto our customers which will then pass that problem onto the public. We are doing that right now. Also, we are expecting large wage increases next year due to an recession with inflation environment. Additionally, if Buffett is suggesting this as well, I would damn near listen, not because Buffett is the man but because Buffett knows commodities.

Buffett typically purchases companies that are simple, balance sheets make sense, products are straight forward, and they are selling at a value at the time. Those types of companies are commodity based by default, well most of the time. When Buffett goes buying these stocks, he tends to buy enough to get someone on their board of directors, or at least get access to the companies financial situation. So it can be surmised that he is seeing this type of development in most of his investments across a large swath of products and businesses and is just speaking up. Meanwhile, our Fed is holding its breathe and hoping for the best.

Snap out of it people, we are already in the recession and high inflation is occurring and rippling through the pricing right now. If companies aren't doing this yet (i.e. airlines), then their survival may be limited. Open your eyes.

Thoughts for the week: 6/29-7/4

A few links and thoughts for the week:

Remember my post a few days ago about "Recession with High Inflation", well apparently Buffett agrees and is telling it to Bernanke. And here is a quote from it that scares the crap out of me:

...the Fed remains skeptical that high commodity prices will ripple through the economy, leading to broad price hikes and big wage increases.

"The committee expects inflation to moderate later this year and next year," the Federal Open Market Committee said in holding the fed funds rate steady at 2%, though it did note that "uncertainty" remains high and suggested inflation concerns could rise.

Determined to find some good values in the market (and keep the mind sharp), I did some good old "Magic Formula" stock screening this weekend and noticed some sectors with good stock values, at least according to the screen. They are:

Airline equipment manufacturers: LMT, NOC, RTN, GD, BA
Electronic circuit equipment manufacturers: VSEA, KLAC
Furniture manufacturers: MLHR, KNL

I am currently doing research on each and may do updates this week on each identified sector and its stocks. Most of these companies are name brands for their business sector and probably have some good long term upside. I guess I will see when I go through them.

Some other good looking stocks on the screen that came up is Garmin (GRMN) which I think I may cover, and one of Mike's (w/Rational Speculation) recently covered stocks Pfizer (PFE). I like Mike's thoughts on the company, but have recently seen PFE mentioned everywhere as a value stock potential. That can be a good or bad thing.

More thorough stuff later this week...

"Recession with High Inflation"

A conversation with someone very important today revealed that our company is planning on the title comment. The second comment was that Dow's 20% increase on prices is doing everyone a favor.

Look the point is that everyone is holding their breathe hoping that this thing is going to turn around, and it's not. Dow finally has said enough is enough, US dollar value is down, steel is up, oil is up, copper is up, raw materials are up, and farming related products are up. So in the next two months you are going to see the ripple effects of these costs finally incorporated into everything you do and everything you buy. You can't expect that these prices are going to go down now, we've gone too far.

There is only one way to calm this economical climb now, stop buying gas, ride a bike, commute, and car pool. It's a pain but until we reduce the demand for the current oil supply loads, nothing will change. It's like we all are a bunch of smokers. Stay with me here, smokers are probably taxed more than any other group of people out there, and each time the tax goes up, they just shell out more money.

"How much for a pack, f@<* that's crap! Well Carl, see you tomorrow."

The green technology isn't quite here in the mainstream yet and will take I think a couple more years to mature nicely, so in the meantime, it's those normal simple things that will help. Things like buying a smaller car, moving closer to work, and not eating out are what will really make a difference.

So recession is here, inflation will be high, and enjoy the next two years. You heard it here 121st.