Tycoon Research Weekly Market Update
Tycoon Research Weekly Advisory
December 10, 2004: Volume I, Issue VI
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
IN THIS WEEK'S ISSUE:
1. WATCHIN THE WHEELS GO ROUND AND ROUND: The decline of the dollarcan have some painful impacts on your portfolio in 2005.
What you can do now to protect yourself now. --By Tycoon Research
2. ANOTHER BRICK IN THE WALL: Two years after Carleton S. Fiorina,the CEO of Hewlett-Packard, staked her reputation on acquiringpersonal computer maker Compaq, shes now reversing herself and laying the groundwork for a spinoff.
Why Mrs. Fiorina should now be fired. -- By Tycoon Research
**STOCKS MENTIONED THIS WEEK: Intel (INTC), Gateway (GTW), Apple (AAPL), Hewlett-Packard (HWP), K-Swiss (KSWS),Timberland (TBL), Yankee Candle (YCC)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. WATCHIN THE WHEELS GO ROUND AND ROUND: The decline of the dollarcan have some painful impacts on your portfolio in 2005.
What you can do now to protect yourself now. --By Tycoon Research
DEAD IN THE WATER. THING OF THE PAST. NO LONGER RELEVANT.
You've heard the descriptions.
No, I'm not talking about Colin Powell.
Nor am I talking about John Snow (although it's worth noting thatAndy Card, the name mentioned as Snow's replacement, isn'tdreaming of a snow-white Christmas anymore).
I'm talking about the U.S. Dollar.
IT'S ALIVE.
Well Kind of - if you consider haveing a "pulse" being "alive."
Yes, the dollar is back. A rally in Peoria this week.
But many of you "regular" readers of this column know my thoughtson the dollar.
In short, if the dollar keeps declining at it's breakneck pace,that could have potentially painful effects on your portfolioin 2005.
Why?
Because the United States spends more money than she can afford.
And to spend that money we borrow from foreign governments.
The borrowing largely comes in the form of United StatesTreasury bonds that we issue each month.
During the past several years the largest buyers of our bonds (investors lending us money), have been the leading governments in Asia.
They’ve been lending us between $1.5 and $2 billion per day.
To date, the large (and rapidly growing) amount of external debt has not yet been much of a burden on our economy.
So far we’ve had no problem borrowing more money and interest rates haven’t been much of a burden to this point.
That’s likely to change though.
Foreign governments, believing that our imbalances are too large, are beginning to purchase less and less of our bonds.
Let me explain. When we issue bonds we borrow in our own currency.
Therefore, by letting the dollar drop, trillions of dollars are wiped off of the value of our lenders assets.
In other words, we owe the foreign governments that lent us the money trillions of dollars less than the amount we actually borrowed.
This amounts to the U.S. “defaulting” on its debt.
Not defaulting in the way you and I would default on our personal debt.
Defaulting in a way that only the most powerful government in the world could.
To put this in perspective, if the U.S. dollar falls by 40 percent in value this would amount to the biggest “stealth default” in world history.
This is, withought question, the biggest problemfacing U.S. investors in 2005.
Why?
Because the U.S. MUST borrow money to operate.
But lenders are going to stop lending us money if thevalue of what we already owe them drops.
Ultimately (and this is beginning to happen now), they'llstart to demand higher interest rates.
That (and a host of other issues) could bring on inflationpressures.
Inflation is to an investor what quicksand is to a hiker.
*Inflation makes it more expensive for companies like Intel to build new plants.
*Inflation makes it harder for some companies to pass increases to their customers.
*That means profit declines, which means a declinein stock prices.
But inflation can also be a friend to certain companies.
COmpanies that have pricing power. Companies that have brand names.
We own companies like this.
As a matter of fact, in our December 15th issue of theTycoon Report, we tell you who they are.
If you don't have money in the market read no further - nothing we say concerns you.
But if you do have money in the market and you've readthe news about the dollars decline, thereare 3 reasons you need our December report:
****You'll recieve a birds-eye view of the economic dangersfacing the stock market in 2005.
***You'll recieve 5 investing rules that are essential for2005.
***You'll receive 6 stocks we believe will have the bestchance to weather the storm in 2005.
This is serious business if you have money in the market.
Serious enough for you to read the report.
Remember, it's free.
Visit here now to learn more:
http://www.tycoonresearch.com/login_visitors.asp?Source=111
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2. ANOTHER BRICK IN THE WALL: Two years after Carleton S. Fiorina,the CEO of Hewlett-Packard, staked her reputation on acquiringpersonal computer maker Compaq, she's now reversing herself and laying the groundwork for a spinoff.
Why Mrs. Fiorina should now be fired.
-- By Tycoon Researcj
OPEN: LATE 2001
A male and a female are standing in a dark alley discussing business. Both are dressed in sophisticated business attire (for California) and both are speaking in hushed, but forceful tones.
Lady: I'm counting on your vote.
Man: Look, I know what I said…but on further reflection, I just, I just….I don’t know. The deal just doesn’t make sense.
Long Pause. Stony Silence.
The lady slowly takes a pack of cigarettes out of her purse and lights one. It’s too dark to see her face, but we know she’s serious.
Lady (taking a long drag): The deal makes all the sense in the world. Think about it - once we buy Compaq, we'll be able to compete directly against IBM for the lucrative services market.
Man: Yea, but you don’t need Compaq to do that. They have terrible margins -Dell's killing them. You could become a services business without them. Come on, Carly.
Carly (Stepping into the light): Stop your whining. You and your Wall Street friends are such f----n wimps sometimes.
Carly drops the cigarette on the flow and steps on it,slowly crushing it into the ground.
Carly: Listen closley - I'm not gonna repeat myself. Here’s how it’s going to work – the shares your firm are incharge of are going to vote for this merger.
Man: But--
Carly (cutting him off): But nothing. If you don't vote with me I'm going to come down on you like a f-----n hammer!
You’ll never see another penny of investment banking business from us again. As a matter of fact, I’ll make sure you never get another technology underwriting as long as you live.
Man (Sheepishly): Yea...ok...
FAST FORWARD TO PRESENT DAY:
Carly Fiorina now wants out. She's had enough. Game over.
Why the sudden turnaround?
Because she learned.
It took $24 Billion dollar's of shareholders' money, but she learned.
She learned that unless you're Dell the PC business in America is dead.
For every $1,000 you invest into making a PC, you're lucky toget $50 back.
That's if you're lucky.
If you're not lucky you become Gateway (NYSE: GTW). You learnhow to hawk flat screen TV's in between restructuring charges.
If you're kind of lucky you become Apple (NNM: AAPL). They learnedhow to sell digital walkmans. They'll become the Sony of America. Ipods, flat screens, operating systems and oh, yes computers.
But Carly Fiorina is not Steve Jobs. Not even close.
And don't forget IBM (NYSE: IBM).
In a weird way, IBM is what this story is about.
You heard the news.
IBM announced that they were exiting the PC business this week.
Exiting to China. Selling to the one country that could compete withDell on price.
You weren't the only person who heard the news though.
So did Carly.
Yes, the same Carly who fought to the death for Compaq.
The same Carly that fought the Packard family (or was it the Hewlitt family?) to the teeth in the press.
The same Carly that paid $24 Billion two years ago to enterthe PC business in the first place.
The same Carly who announced this week that HP was consideringgetting out.
Reversing the deal.
Cutting her loses.
Why?
Carly know's IBM is right.
How couldn't she?
For every $1,000 she invests in PC's, she makes $25-50 back.
For every $1,000 she invests into printers, it's $200.
I know shlylocks in Brooklyn who wouldn't invest their moneyinto the PC business. They want the most for every buck.
But that's not what gets me.
What get's me is that nothing has changed in the PC business in the last two years.
As a matter of fact the PC business looks better than it has in some time.
What get's me is that all she needed to do was pick up a copyof the Tycoon Report and she would have learned one of the mostimportant rules to investing:
***Never invest into a company whose primary product only competeson price.
If she would have read the Tycoon Report she would have had a chance.
Instead of Compaq, she would have bought K-Swiss (NNM: KSWS) or Timberland (NYSE: TBL).
Both companies earn at least $200 for every $1000 they invest intotheir business.
Maybe she would have bought Yankee Candle (NYSE: YCC). For every$1,000 Yankee invests into it's business, it gets $490.00back.
That's $490 dollars versus $50 for Compaq.
Instead of being down on her Compaq investment, she'd be up 50 percent on KSWS and another 25 percent on TBL.
Instead of destroying shareholder value, she would have builtshareholder value.
Of course, HP wouldnt look like IBM.
They'd look much more like Berkshire Hathaway.
But so what?
You don't see their shareholders complaining do you?
Open minds mean larger wallets.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
You are subscribed to Tycoon Research's Weekly Advisory.
Weekly Advisory delivers to your mailbox timely investment information from Tycoon Research. The Weekly Advisor is sent out by your request only. If at any time you wish to unsubscribe, just follow the directions below.
December 10, 2004: Volume I, Issue VI
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
IN THIS WEEK'S ISSUE:
1. WATCHIN THE WHEELS GO ROUND AND ROUND: The decline of the dollarcan have some painful impacts on your portfolio in 2005.
What you can do now to protect yourself now. --By Tycoon Research
2. ANOTHER BRICK IN THE WALL: Two years after Carleton S. Fiorina,the CEO of Hewlett-Packard, staked her reputation on acquiringpersonal computer maker Compaq, shes now reversing herself and laying the groundwork for a spinoff.
Why Mrs. Fiorina should now be fired. -- By Tycoon Research
**STOCKS MENTIONED THIS WEEK: Intel (INTC), Gateway (GTW), Apple (AAPL), Hewlett-Packard (HWP), K-Swiss (KSWS),Timberland (TBL), Yankee Candle (YCC)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. WATCHIN THE WHEELS GO ROUND AND ROUND: The decline of the dollarcan have some painful impacts on your portfolio in 2005.
What you can do now to protect yourself now. --By Tycoon Research
DEAD IN THE WATER. THING OF THE PAST. NO LONGER RELEVANT.
You've heard the descriptions.
No, I'm not talking about Colin Powell.
Nor am I talking about John Snow (although it's worth noting thatAndy Card, the name mentioned as Snow's replacement, isn'tdreaming of a snow-white Christmas anymore).
I'm talking about the U.S. Dollar.
IT'S ALIVE.
Well Kind of - if you consider haveing a "pulse" being "alive."
Yes, the dollar is back. A rally in Peoria this week.
But many of you "regular" readers of this column know my thoughtson the dollar.
In short, if the dollar keeps declining at it's breakneck pace,that could have potentially painful effects on your portfolioin 2005.
Why?
Because the United States spends more money than she can afford.
And to spend that money we borrow from foreign governments.
The borrowing largely comes in the form of United StatesTreasury bonds that we issue each month.
During the past several years the largest buyers of our bonds (investors lending us money), have been the leading governments in Asia.
They’ve been lending us between $1.5 and $2 billion per day.
To date, the large (and rapidly growing) amount of external debt has not yet been much of a burden on our economy.
So far we’ve had no problem borrowing more money and interest rates haven’t been much of a burden to this point.
That’s likely to change though.
Foreign governments, believing that our imbalances are too large, are beginning to purchase less and less of our bonds.
Let me explain. When we issue bonds we borrow in our own currency.
Therefore, by letting the dollar drop, trillions of dollars are wiped off of the value of our lenders assets.
In other words, we owe the foreign governments that lent us the money trillions of dollars less than the amount we actually borrowed.
This amounts to the U.S. “defaulting” on its debt.
Not defaulting in the way you and I would default on our personal debt.
Defaulting in a way that only the most powerful government in the world could.
To put this in perspective, if the U.S. dollar falls by 40 percent in value this would amount to the biggest “stealth default” in world history.
This is, withought question, the biggest problemfacing U.S. investors in 2005.
Why?
Because the U.S. MUST borrow money to operate.
But lenders are going to stop lending us money if thevalue of what we already owe them drops.
Ultimately (and this is beginning to happen now), they'llstart to demand higher interest rates.
That (and a host of other issues) could bring on inflationpressures.
Inflation is to an investor what quicksand is to a hiker.
*Inflation makes it more expensive for companies like Intel to build new plants.
*Inflation makes it harder for some companies to pass increases to their customers.
*That means profit declines, which means a declinein stock prices.
But inflation can also be a friend to certain companies.
COmpanies that have pricing power. Companies that have brand names.
We own companies like this.
As a matter of fact, in our December 15th issue of theTycoon Report, we tell you who they are.
If you don't have money in the market read no further - nothing we say concerns you.
But if you do have money in the market and you've readthe news about the dollars decline, thereare 3 reasons you need our December report:
****You'll recieve a birds-eye view of the economic dangersfacing the stock market in 2005.
***You'll recieve 5 investing rules that are essential for2005.
***You'll receive 6 stocks we believe will have the bestchance to weather the storm in 2005.
This is serious business if you have money in the market.
Serious enough for you to read the report.
Remember, it's free.
Visit here now to learn more:
http://www.tycoonresearch.com/login_visitors.asp?Source=111
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2. ANOTHER BRICK IN THE WALL: Two years after Carleton S. Fiorina,the CEO of Hewlett-Packard, staked her reputation on acquiringpersonal computer maker Compaq, she's now reversing herself and laying the groundwork for a spinoff.
Why Mrs. Fiorina should now be fired.
-- By Tycoon Researcj
OPEN: LATE 2001
A male and a female are standing in a dark alley discussing business. Both are dressed in sophisticated business attire (for California) and both are speaking in hushed, but forceful tones.
Lady: I'm counting on your vote.
Man: Look, I know what I said…but on further reflection, I just, I just….I don’t know. The deal just doesn’t make sense.
Long Pause. Stony Silence.
The lady slowly takes a pack of cigarettes out of her purse and lights one. It’s too dark to see her face, but we know she’s serious.
Lady (taking a long drag): The deal makes all the sense in the world. Think about it - once we buy Compaq, we'll be able to compete directly against IBM for the lucrative services market.
Man: Yea, but you don’t need Compaq to do that. They have terrible margins -Dell's killing them. You could become a services business without them. Come on, Carly.
Carly (Stepping into the light): Stop your whining. You and your Wall Street friends are such f----n wimps sometimes.
Carly drops the cigarette on the flow and steps on it,slowly crushing it into the ground.
Carly: Listen closley - I'm not gonna repeat myself. Here’s how it’s going to work – the shares your firm are incharge of are going to vote for this merger.
Man: But--
Carly (cutting him off): But nothing. If you don't vote with me I'm going to come down on you like a f-----n hammer!
You’ll never see another penny of investment banking business from us again. As a matter of fact, I’ll make sure you never get another technology underwriting as long as you live.
Man (Sheepishly): Yea...ok...
FAST FORWARD TO PRESENT DAY:
Carly Fiorina now wants out. She's had enough. Game over.
Why the sudden turnaround?
Because she learned.
It took $24 Billion dollar's of shareholders' money, but she learned.
She learned that unless you're Dell the PC business in America is dead.
For every $1,000 you invest into making a PC, you're lucky toget $50 back.
That's if you're lucky.
If you're not lucky you become Gateway (NYSE: GTW). You learnhow to hawk flat screen TV's in between restructuring charges.
If you're kind of lucky you become Apple (NNM: AAPL). They learnedhow to sell digital walkmans. They'll become the Sony of America. Ipods, flat screens, operating systems and oh, yes computers.
But Carly Fiorina is not Steve Jobs. Not even close.
And don't forget IBM (NYSE: IBM).
In a weird way, IBM is what this story is about.
You heard the news.
IBM announced that they were exiting the PC business this week.
Exiting to China. Selling to the one country that could compete withDell on price.
You weren't the only person who heard the news though.
So did Carly.
Yes, the same Carly who fought to the death for Compaq.
The same Carly that fought the Packard family (or was it the Hewlitt family?) to the teeth in the press.
The same Carly that paid $24 Billion two years ago to enterthe PC business in the first place.
The same Carly who announced this week that HP was consideringgetting out.
Reversing the deal.
Cutting her loses.
Why?
Carly know's IBM is right.
How couldn't she?
For every $1,000 she invests in PC's, she makes $25-50 back.
For every $1,000 she invests into printers, it's $200.
I know shlylocks in Brooklyn who wouldn't invest their moneyinto the PC business. They want the most for every buck.
But that's not what gets me.
What get's me is that nothing has changed in the PC business in the last two years.
As a matter of fact the PC business looks better than it has in some time.
What get's me is that all she needed to do was pick up a copyof the Tycoon Report and she would have learned one of the mostimportant rules to investing:
***Never invest into a company whose primary product only competeson price.
If she would have read the Tycoon Report she would have had a chance.
Instead of Compaq, she would have bought K-Swiss (NNM: KSWS) or Timberland (NYSE: TBL).
Both companies earn at least $200 for every $1000 they invest intotheir business.
Maybe she would have bought Yankee Candle (NYSE: YCC). For every$1,000 Yankee invests into it's business, it gets $490.00back.
That's $490 dollars versus $50 for Compaq.
Instead of being down on her Compaq investment, she'd be up 50 percent on KSWS and another 25 percent on TBL.
Instead of destroying shareholder value, she would have builtshareholder value.
Of course, HP wouldnt look like IBM.
They'd look much more like Berkshire Hathaway.
But so what?
You don't see their shareholders complaining do you?
Open minds mean larger wallets.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
You are subscribed to Tycoon Research's Weekly Advisory.
Weekly Advisory delivers to your mailbox timely investment information from Tycoon Research. The Weekly Advisor is sent out by your request only. If at any time you wish to unsubscribe, just follow the directions below.
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