"Whatever money you may need for the next five years, please take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market right now."
- Jim Cramer on October 6th, 2008 - less than 6-months before the market bottomed and after a 30% correction. Basically, exactly when you should have started buying (check out this little tidbit written by a guy named Warren Buffett titled simply, Buy America. I am., just 10 days later).
1. Don’t invest money you need over the next five years.
2. Don’t listen to a damn word out of Jim Cramer’s mouth.
3. Superman wears Warren Buffett PJs.
America has Attention Deficit Disorder - we pay way too much attention to the government’s federal deficit. The fact that we continue to obsess over this has me more crotchety than normal. Watching the debates has been excruciating. Hairpiece loves to quote the figure that the US government owes twenty trillion dollars to the rest of the world. Then you have HilDog conveniently reminding us that her husband was in office the last time the government ran a balanced book and actually had a surplus. Alright, we get it. Here’s a hot take: the US federal deficit does not matter because America is the best house in a bad neighborhood and will continue to be for quite some time. Show me a responsible global actor and I will show you yet another plot hole that was never resolved from Lost. Let’s dispel some myths, the Chinese do not own us (collectively with Japan, they own less than 15% of total debt). The United States government, central bank, and public are the largest holders of U.S. debt. So effectively, the system now is a giant circle jerk where the watchmen/women have decided that the rules society has constructed don’t apply to them. That leaves us with two options: spend, spend, spend and preserve our muted, but existent economic growth or decide we need to be responsible and cut government programs - most likely inducing a recession in the process with an unknown endgame. As a fellow disenchanted Millennial, I prefer the first option – let’s continue to kick the can and see if we can get the economy back into overdrive.
Why do I continue to shop at Whole Foods? I continue to promise myself I will stop shopping at Whole Foods ($WFM) or Whole Paycheck as my girlfriend calls it. I continue to promise myself that I will transition to an exclusively genetically modified organism diet, save money, and gain superpowers just like the research shows. I cave by telling myself I will only buy the produce and then gawk at yellow, red, and orange peppers costing twice as much as the green (rightfully so but, c’mon) and the $4/lb grapes (ever seen someone spend $10 on two servings of grapes, I have). And then I end up doing my entire shop for the week there. I am a Whole Food’s addict. A walking hypocrite that espouses being financially responsible but yet I burn a hole in my pocket overpaying for energy to fuel my body. The conclusion is simple. I need to go buy shares of $WFM for my portfolio because I know I can't be the only one.
Publicly traded prison stocks have been sent to solitary. Both Corrections Corporation of America ($CXW) and GEO Group ($GEO), are down roughly 60% of their highs after a Department of Justice investigation found that the facilities were inferior to state run equivalents in terms of many measures including safety. When situations like these arise, it begs an important question: should one forego their morals when a bigger steal than the Louisiana Purchase presents itself? These companies lobby against “common sense” criminal justice reform such as mandatory minimums for non-violent drug crimes, legalization of mary jane, et cetera because they profit off the crime according to a legal expert. Despite the clear abuses the companies seem to be committing, the process to phase out these facilities will be long - especially at the state level. With $CXW paying you a dividend of ~15% a year, investors almost assuredly stand to earn a solid return in the coming years if they can overcome the ethical concerns. I myself will most likely sit on the sideline but I know a bargain when I see one.
This week we introduce a rotating section, Half-Assed Due Diligence Stock Pick of the Week!
Pick of the Week: IMAX Corporation ($IMAX)
What do they do? These are the guys that make the state-of-the-art movie theatre systems that absolutely killed it when Avatar came out.
So why is it going higher? Because we are all sheep.
Please explain. We all sat through Batman Vs. Superman and Suicide Squad. We are enable Hollywood and allow them to continue pumping out big budget action-equivalents of Gigli. We also thought Episode 7 of Star Wars was a lot better than it actually was. It’s not your fault, it’s called an information cascade. So again, IMAX is going higher because we are sheep.
So give me the TL;DR business analysis: Cinemas love IMAX as they are able to squeeze a couple extra bucks out of your pocket for the premium experience and we tend to pay it for the right films. IMAX’s business is super sexy because a large portion of its business (and becoming even larger) now comes from receiving a percentage of ticket sales rather than just charging for their product. Typically, IMAX has been highly sensitive to the strength of the film pipeline but as our standards continue to drop for what we view as entertaining film, my guess is we see more and more of these mediocre releases become major hits which is a boon to IMAX. With over 1,000 projectors and another 550 on the come (big deal announced in China), IMAX should generate stacks on stacks on stack over the long term. Another plus, IMAX will have a nice pop when James Cameron finally tells us when Avatar 2 will be released.
DISCLOSURE: My mentors are big fans of the stock so I am admittedly biased.
IMPORTANT NOTE: This is not investing advice. This is pontification about the markets that we thought you might enjoy. If you would like a hot take on an issue or stock, email firstname.lastname@example.org. Please invest responsibly and thank you for playing Waylz!