Portfolio - "Update'

I now own two new stocks which were spinoffs from my holdings of ADP and KMB. CDK Global (CDK) is a spinoff of ADP's auto dealer services/technology. Halyard Health is a spinoff of KMB's healthcare division. I plan to hold these stocks forever.

My portfolio, in order of largest holding to least....

WAG (Walgreen)
PEP (Pepsi)
PG (Procter & Gamble)
MAT (Mattel)
GPC (Genuine Parts)
MMM (3M)
HAS (Hasbro)
KO (Coca Cola)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
VZ (Verizon)
K (Kellogg)
SYY (Sysco)
DPS (Dr. Pepper, Snapple)
CDK (CDK Global)
HYH (Halyard Health)
6% GNMA (Government National Mortgage Association) Bonds

Stocks make up abt 24% of my assets.  Other assets are CDs, a home mortgage and about 2% precious metals..

My Review of "The Shifts and the Shocks"

4 out of 5 stars.....

This is an in depth economic look into the financial crash of 2008, how it happened and prognoses into how such a crisis can be avoided by several different improvement approaches to financial systems, here and around the world.

The author, Martin Wolf and the book, come with lots of superlatives from noted economists. I also agree it is a worthwhile read.

In general, he sees the crash as inevitable. Plus, he  thinks although there were ways to minimize its after affects, it is too late to avoid future catastrophe.

He is basically a Keynesian, and thinks the initial stimulus should have been larger, but it and the Fed did avoid an immediate depression, but without further fiscal help, the recovery was/is doomed for a full recovery.

Of the ways to structure a banking system to minimize risk is higher capital ratios, as much as 100%, with at least 10%, but because of animal spirits, risk is too much rewarded to have safer ratios.

Here are some of the points raised in the book....

1. The Fed's quantitative easing (QE) is generally hated by the GOP, but it is right out of the book of traditional GOP, Milton Friedman style, monetarist control of money.

2. The author credits Hyman Minsky for best at understanding this kind of situation, in fact all capitalism.....stability, destabilizes....and governments must always respond when inevitable crises happen.

3. Starting over 30 years ago, the trend in market based economies led to more income inequality around the world, which brings about serious financial problems.

4. When the 2008 crash hit, US employment participation plunged abt 3%, while Germany's rose abt 6%. Note, that our economy is stronger.The reasonable conclusion, based on facts about profits, is major US corporations became more productive and Germany's less.

5. The Eurozone is handling the crisis poorly, with so may individual nations concerned more about themselves, than for what is best overall. It is exporting recessionary stuff.

6. The author relates what happened in the late 90s, crisis for the emerging nations, especially in Asia. So, they have handled this crisis better, so far.

Overall, it is a book I recommend even for those who may not agree with all of the book, since the author covers so many bases.

Portfolio - "Update"

I recently sold all my Intel (INTC) stock. It had gone up a lot and I  could take the gain as long term. Plus, Intel hadn't increased its dividend in over a year, so it violated one of my rules. I plan to hold most of the proceeds until the market provides a better buying opportunity. I did add more to my Mattel (MAT) and Kellogg (K) positions.

My portfolio, in order of largest holding to least....

WAG (Walgreen)
PEP (Pepsi)
MAT (Mattel)
PG (Procter & Gamble)
GPC (Genuine Parts)
MMM (3M)
KO (Coca Cola)
HAS (Hasbro)
ADP (Automatic Data Processing)
KMB (Kimberly Clark)
T (AT&T)
VZ (Verizon)
K (Kellogg)
SYY (Sysco)
DPS (Dr. Pepper, Snapple)
6% GNMA (Government National Mortgage Association) Bonds

Stocks make up abt 23% of my assets.  Other assets are CDs, a home mortgage and about 2% precious metals..

Portfolio - "Update"

I recently added some cash to my portfolio because my broker offered a cash incentive, plus some free trades. I then used the cash to add to my Mattel (MAT) position and take a new position in Verizon (VZ). MAT, because it still had a reasonable PE of about 15 and dividend of about 4%, VZ, because it had a PE of about 10 and dividend of about 4.5%. Both are consistent with my strategy of buying businesses which have products or services always in demand, pay a good dividend with a history of raising it each year, also having a good balance sheet.

Then, I did sell my TIPS since they had risen above par value, also making it convenient to add a cash position to take advantage of any stock price dips.

My portfolio, in order of largest holding to least....

INTC (Intel)
WAG (Walgreen)
MAT (Mattel)
PEP (Pepsi)
PG (Procter & Gamble)
GPC (Genuine Parts)
MMM (3M)
KO (Coca Cola)
HAS (Hasbro)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
SYY (Sysco)
VZ (Verizon)
K (Kellogg)
DPS (Dr. Pepper, Snapple)
6% GNMA (Government National Mortgage Association) Bonds

Stocks make up abt 25% of my assets.  Other assets are CDs, a home mortgage and about 2% precious metals..

My Review of "Turbulent And Mighty Continent: What Future For Europe"

4 out of 5 stars....

This book makes a pretty good case for the challenges Europe faces in the coming years as it recovers from the 2008 financial crash and tackles with what the EU is and can be, and the future of the Euro.
The author maintains that great creativity must be used as the recovery is slow and it can't just rely on some normal course of events to handle the job.

He actually wants Europe to look to the US for direction, as our economy is currently the best in the world and we've confronted immigration and done pretty well, for example.
Some points from the book....

1. Europe is no longer mighty, but still must face some internal differences. Most countries have mounted up enormous debt and the Welfare state approach which has existed for years,can't stay that way because governments can't afford to do so without major changes, like with pensions, using a more defined contribution approach as the US does. The author describes such an eventuality as a social investment state - embrace opportunity and risk - flexsecurity.

2. The three main EU institutions are the Commission, Council and Parliament. EU1 has evolved into EU2, where rule, so to speak, is decided, but that's the problem - no voting by all EU people, just basically out of sight with basically France and Germany's leaders making the decisions.

3 Climate change is big, but the EU is mixed up. It should evolve into renewable energy like getting off coal first since that is the worst pollutant, so even advance more into fracking as the US is doing, since natural gas can replace coal. The author sees coal as worse than nuclear.

4. The IMF has turned into a big player, also the ECB. But, unlike the US, there is no EU bond like US Treasuries.

5. The author thinks an economic federalism has to occur, call it EU3. Each state must have some voice. It could take up to ten years.

6. English should be made the official EU language, with everyone speaking/writing both English and their native country's language.

7. The author talks about a representative democracy, but with more visibility, a monitory democracy, maybe incorporating advances in social media....a global village. Embrace a re-industrialization like the US - 3D printing, etc.

8. Austerity is bad, but still reform is necessary in most states.

9. Smart growth needed - reform education, innovation, R&D, information and communication technologies.

10. Take action on tax havens and tax avoidance. Income inequality is a problem.

11. Interculturism must replace multiculturalism in a globalized world - accepting people as different, not expecting assimilation.

12. The author, basically agreeing that China is more democratic than the US. The US being a showbiz democracy, more about showmanship than leadership, while China has deep discussions before agreeing on a 5 year plan.

13. The EU tried to be in the forefront on climate change, wanting to establish a carbon tax and have a trading system, but it ran into all kinds of problems, with any reduction of emissions mostly due to the recession. CA has had more success with such a trading system. Obama met with major nations and at least came up with in informal agreement, where the dysfunctional EU was essentially left out. So, basically the world has done nothing to reduce emissions, while also we have entered an anthropocene age, where humans have influenced nature everywhere. Conservation is no longer relevant, must use artificial means like biotechnology to recreate what has been lost. Again, the EU is especially dependent on more creatively doing things, rather than looking to the past.

14. As for energy, the EU is messed up. Coal is the worst, and reducing nuclear energy just means greater use of coal, plus natural gas is best until renewables dominate, but EU lags the US in fracking knowledge.

Anyway, the book is very good in showing how Europe is facing a critical time where it faces many challenges while not very united as needed, so must embark on more creativity to solve the problems, hence even more important to look to the US, which does lead in creativity even with its dysfunctional government.

My Look At The Economy

This economic recovery is now about five years old. So, time to reflect. Well, inflation is low, less than 2%. Treasury rates are low...10 year at 2.75%. Stock market around all-time high, Dow abt 16,500. Home prices have recovered, but except for prime locations, are reasonable and not back to all-time highs. Unemployment is down but far from full employment. Plus, when looking globally, the US has perhaps the best economy of the major nations.

So, with inflation low and likely to remain tame since there is an oversupply of labor....so no inflation pressure on the wage front, other than for the small amount of highly skilled jobs.

But, there are some good signs for the un- or under-employed. One, ACA makes for a healthier workforce and more healthcare jobs, plus allows companies to focus more on performance than a worker's healthcare costs.

Plus, sooner or later immigration and tax reform will happen, which will help the economy. And, no new wars on the horizon and ending the Afghanistan one is scheduled for this year. So, more money for the government to improve education and spend to re-train many for higher skilled jobs.

Sure, some unexpected event or events can change things severely, but there is no reason for now not to be optimistic for the future economy. Also, generally the two years leading up to a presidential election the stock market does well.

About stocks, there is some risk with the stocks that have little earnings, which are many, so some correction is overdue and likely healthy. But, many stocks have good fundamentals and unless 10 year Treasury rates go over 4% or a sharp spike in short term rates, things look OK for now, though no one can predict the future with stocks.

Politically, a split government is usually good for stocks, so we will have to see what happens with the 2016 elections, to evaluate the political environment meaningfully.

In sum, for now, the economy looks fine.

Portfolio - "Update"

I just bought some Mattel stock. It had been one of my core holdings, but had swapped out of it for Hasbro, but Mattel dropped recently and has low PE and over 4% dividend, so now back to one of my core holdings, along with Hasbro.

Also, added some to my AT&T stock, since price dip and high dividend.

I just had a CD mature, so invested some in those stocks.

My portfolio, in order of largest holding to least....

INTC (Intel)
WAG (Walgreen)
PEP (Pepsi)
PG (Procter & Gamble)
GPC (Genuine Parts)
MAT (Mattel)
HAS (Hasbro)
MMM (3M)
KO (Coca Cola)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
SYY (Sysco)
.375 of 2023 TIPS (Treasury Inflation Protected Securities)
K (Kellogg)
DPS (Dr. Pepper, Snapple)
6% GNMA (Government National Mortgage Association) Bonds

Stocks make up abt 23% of my assets.  Other assets are CDs, a home mortgage and about 2% precious metals + TIPS.

My Review of "What Happened To Goldman Sachs"

4 out of 5 stars.....

This former Goldman Sachs insider employee, Steven Mandis, does a very good job in presenting both the history of the firm and how it changed.

Founded over a hundred years ago as a partnership, partners had the same values, extremely ethical, basically to care most for the customers and think "long-term greedy" so that if the customers were treated well and the customers knew that, the partners would do well even if the film would sacrifice profits in the short term to please the customers. And, as a partnership, the partners were personally liable, so that all the partners' money was at risk, not just their money in the firm, but their personal assets also, therefore creating an environment of trust between partners and customers.

So, a culture of both high ethical values and high profits created a renowned culture, so much so, the firm was able to easily recruit the best talent where each new recruit strove to be a partner. It created a real team approach, everything for the customers and all employees.

The author described how that once proud culture didn't change overnight or dramatically over time, but "drifted."

The drift began when the firm, around the 1980's changed to a limited partnership, LLC, so that only the partners' assets held at the firm were at risk. This change happened as competition grew and instead of concentrating on things like mergers and acquisitions, and financing for such deals - investment banking functions, expanded into where really big profits were, propriety trading. The industry had metastasized, so Goldman Sachs risked not attracting big clients.

Then, in 1999 the firm went public, with an IPO, the last major investment bank to do so. Now, the firm had a priority to shareholders first, clients second even though the firm still had fiduciary responsibilities to them. Plus, the partners no longer had much liability. So, the firm was now more concerned with following just legal responsibilities, making it harder to follow just high ethical standards with clients, as public companies were required to treat shareholders first, plus have a short term outlook, rather than the former long term outlook. Also, as the company became more complex, compensation policies changed, therefore less of a team approach.

The author is perhaps most critical of Jon Corzine and Lloyd Blankfien in transforming the firm around this time, to making it competitive with the other companies especially with propriety trading.But, there still was much of that previous culture around, almost religious, so much so, the employees believed so even if not as true anymore. So, the firm "drifted," still maybe a cut ahead of the competition on ethics and reputation. It did survive the 2008 financial crash, but needed help. Also, this drift happened at other firms and really a warning to all about the industry.

Some points also from the book:

1. After the crash it was revealed in an email some securities sold to clients were "s***y.'

2. Goldman Sachs always did have a commitment to public service, part of its culture of a sense of higher purpose, and thus around 1979 many former employees went to work for the federal government. This did have the effect of expanding the firm's powerful network.

3. Part of the firm's rationalizations that it's shareholder responsibilities didn't really hurt clients is that they considered the clients "big boys" and were aware of the new risks.

4. Goldman did branch out into asset management in 1928 with closed end trust funds, which cratered with the 1929 crash and Goldman did close down for a time.

5. In 2012, in an Op Ed, former employee, Greg Smith, called the culture at Goldman "toxic," specifically blaming CEO Blankfein and president Gary Cohn.

6. Since teamwork was so important to Goldman originally, it strove to recruit those with team sports, military and public service backgrounds.

7. As competition grew, Goldman expanded internationally, even taking on some questionable clients like the Libya sovereign wealth fund.

8. Goldman was accused of its privileged position of trust and confidentiality regarding its bailout of Long Term Capital Management (LTCM).

9. In 2003, Goldman settled charges by the SEC for conflicts of interest by research analysts by paying $110M in fines, because of the Sarbanes-Oxley Act, passed in 2002.

10. Beginning in 1999, Goldman's board of directors had some outside directors, so less knowledge of inside workings of the company.

11. It is debatable whether Goldman could have survived the 2008 financial crash without help from the government.

12 In 2006, Goldman was betting against mortgage bonds it was selling to clients, resulting in a fine.

13. The author counted negative and positive articles about Goldman in the NY Times from 1980-2012, and found more positive before 2007 and more negative after 2007. Most of the negative articles after 2007 dealt with conflicts with clients and connections to the government.

14. A former employee, Greg Smith, mentioned above, wrote a scathing Op Ed, criticizing Goldman with treating clients as "Muppets."

15. Goldman spent over $15M lobbying Dodd-Frank.

In conclusion, Goldman's culture drifted over time, less to welfare of its clients and more to welfare of it. All the while, even current employees felt they were serving a higher purpose, based on original culture. Meanwhile, clients still seemed to prefer Goldman because it was better than its competition, not a very good testimony to the industry