Archives for January 2009

Roth IRA’s vs. Traditional IRA’s

Planning for retirement is one of the most critical endeavors that an individual must undertake. Selecting the proper retirement plan can help to ensure a smooth transition into retirement.  Today we will take a look at two of the more popular retirement plans available: the Roth IRA and the Traditional IRA. An individual retirement account (IRA) is a personal retirement savings plan for those who receive taxable income during the year. Think of an IRA as an umbrella and you can put almost anything that you want under it. An IRA may be invested in stocks, bonds, mutual funds, certificates of deposits, money markets and real estate. Individual retirement accounts can either be set up with a bank, broker, credit union or a mutual fund.

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CNBC Childish Behavior

Charlie Gasparino vs. Dennis Kneale

Another example of childish behavior on CNBC. This type of behavior is becoming a regular occurrence on CNBC. Exchanges like this one can only hurt CNBC’s credibility in the business world. I have started watching CNBC with the volume muted so that I do not have to listen to such ridiculous exchanges. From the over talking of guests to the infighting, CNBC is becoming an entertainment channel. You know that things are getting bad when Larry Kudlow is the voice of reason.

Manitowoc Earnings

Manitowoc announced earnings last night of 51 cents per share. The company missed analyst earnings expectations of 57 cents per share. The good news is that Manitowoc had a 16% jump in sales and expects increased revenue from the purchase of food equipment maker Enodis. The bad news is that the 4th quarter resulted in a net loss based on the financing of the Enodis purchase and restructuring charges from the crane making division.

Manitowoc reaffirmed 2009 earnings guidance of $1.35 to $1.60 per share. The stock is currently trading at $6 per share which puts a 4.4 multiple on the stock if the company comes in on the lowest end of guidance. I think that the stock is cheap because the multiple is much lower than other industrial firms. Caterpillar(CAT) expects earnings of $2.50 per share and the stock is trading over $30. Deere(DE) currently trades at $36 on estimated EPS of $4.37 per share. Joy Global(JOYG) is selling for $22 a share with an expected EPS of $3.72.  These stocks are trading with multiples of 12, 8, 6.

As you can see Manitowoc trades at a multiple that is much cheaper than other machinery companies. The one company that trades closer to the levels of Manitowoc is Terex(TEX) which is trading at $14 per share on 2009 EPS of $4.00. Caterpillar and Deere look as if they have significant room to decline based on lower earnings. I think that Manitowoc is a good value at $6. The average PE for machinery companies is 6.  Manitowoc would need 2009 earnings to drop an additional 25% and EPS to reach $1.02 a share for the stock to be fairly valued at $6 per share. The next year or two may be pretty rocky for Manitowoc but long term I like the shares.

XLF Sale

Bought 350 shares of Textron(TXT) at $9.07.

Bought 150 shares of Schwab(SCHW) at $13.63.

Bought 150 more shares of Allstate(ALL) at $23.11.

Bought 250 shares of DryShips(DRYS) at $8.90. DryShips is down over 27% today and $3.30 today. The company has announced that it has violated debt covenants and will have to sell shares to raise capital. This is a very very risky play.

Sold the rest of my Financial Spyder ETF(XLF) position at $10.00. This trade worked well.

Today’s Layoffs

When will this perpetual cycle of job losses end?

Aerospace and defense giant Boeing(BA) announced that the company will be laying off 10,000 employees after reporting terrible earnings for the 4th quarter.

Starbucks(SBUX) announced that the company will be laying off 6,700 employees and closing 300 stores due to declining sales. In a tough economic environment, high priced coffee is a luxury.

According to the Financial Times, AOL issued an internal memo that they will be laying off 700 more employees. Time Warner(TWX) has never figured out how to make money off of AOL.

Even IBM who just reported a good earnings report has had to layoff employees.  Estimates are that IBM is laying off about 3,000 employees.

Target(TGT) is letting 600 employees go that work at the company’s main headquarters in Minnesota. Target will also be closing one of the company’s distribution centers that employs 500 employees.

America’s Cheapest Family

I came across a website detailing how a family of 7 live debt free on $44,000 a year. Their names are Steve and Annette Economides and they call themselves America’s Cheapest Family. They budget all of their expenses and stretch each dollar as far as possible. They plan food menus around coupons and discounts. Their children are able to buy designer clothing for pennies on the dollar for what most of us pay. The Economides have been featured on ABC News, Fox News, MSNBC and US News & World Report. Here are a few stunning facts about America’s Cheapest Family:

– Their average monthly grocery store bill is $350.

– The average money spent on Christmas gifts is $90.

– They paid off their 1st house in 9 years on a $33,000 salary.

– Their average income was $44,000 over the past 26 years.

– They never use credit and pay cash for all cars and purchases.

It is incredible that 7 people can live debt free on such a small amount of money. This illustrates that it doesn’t take large sums of money to be financially stable. With a little planning, patience and a willingness to save we can all be debt free. I think that stories like this are inspirational and give hope to us all. You can visit America’s Cheapest Family’s website by clicking here.


Added 300 more shares of Aflac at $24.90. This is higher than my original cost basis but I think the stock could be a bargain. As I stated before the stock has lost roughly half of its value in the last two weeks. Aflac is expected to benefit under a good bank, bad bank scenario.

Financial Stocks

Sold 750 shares of XLF at $10.10 for a 15% gain. There was a tremendous run up in XLF today and I wanted to take some profits. Only made $1500 but in this market I will take it. I still hold almost 400 shares but I didn’t want to be greedy.

Sold 350 shares of Bank of America today. The stock has been on a run from the $5.70 level that I bought it at. I still have shares in my long term portfolio.

More Dividend Cuts Coming

1. Dow Chemical

The $1.68 dividend that Dow Chemical(DOW) pays is toast. Dow Chemical CEO Andrew Liveris caved today and admitted that a dividend cut is a definite possibility. This is a change in tune from Liveris who defiantly defended the dividend after the collapse of the Kuwaiti deal. In the beginning of January, Liveris stated that, “Dow is the only company in the Fortune 200 to have paid its regular quarterly cash dividend without reduction or interruption since 1912. That is 388 consecutive quarters. I have said it before, but I want to say it again, we will not break that streak. Not Dow, not on my watch.” These words will likely cost Liveris his job.

2. CBS

CBS Corporation(CBS) has an extremely high dividend yield which is currently approaching 16.6%. This is way too high at a time when traditional media companies are experiencing significantly declines in ad revenue. CBS is seeing 25% drops in television and radio station ratio. Approximately 70 percent of CBS’s revenue is tied to advertising sales. The current dividend of $1.08 is higher than the expected earnings for 2009 of $.86.

 3. Harley Davidson

Harley Davidson(HOG) will soon be faced with paying its dividend or staying in business. The company’s dividend yield is 11.5% at a time when the company is down to less than 600 million in cash. The current payout rate is over 50% of estimated earnings for 2009. Harley can save over 300 million in cash by cutting the dividend.

4. Newell Rubbermaid

I expect that Newell(NWL) will cut the dividend when they announce earnings this week. Newell currently pays out 75% of earnings in the form of dividends to shareholders. Newell is trying to preserve cash wherever possible through layoffs, salary feezes and factory closings. With over 2 billion in debt and a few hundred million in cash, a dividend cut appears likely.


Bought 120 more shares of the Financial Select Spyder(XLF) at $9.17. I know that financials are struggling but I expect the government will come up with a plan to save them. My total shares are now up to about 1120.

Bought 90 more shares of Aflac(AFL) at 22.70.