- A world at peace? Not really
- Two mil-tech profit opportunities come and go in days…
- … Will you be on board for No. 3?
- How Amazon did it: An unlikely 100-bagger goes under the microscope
- Student loans drive up tuition? Say it ain’t so!
- Ignoring Puerto Rico… the Fed in a corner… the scam that won’t go away… and more!
“The world has become much more peaceful in recent decades and is getting more peaceful all the time,” declared writer Michael Lind in a Salon article two years ago.
In recent years, a virtual cottage industry has grown up around the idea that — contrary to the drumbeat of headlines — the world is becoming a less violent place.
Harvard psychologist Steven Pinker got the ball rolling in 2011 with a book called The Better Angels of Our Nature: Why Violence Has Declined. It was chock-a-block with statistics like this: Deaths on the battlefield, relative to the global population, have dropped by 1,000-fold since the 1500s.
Then came American University professor Joshua Goldstein with a book called Winning the War on War. “Think about that war that started 70 years ago, World War II,” he told an NPR interviewer. “That was a war in which the levels of violence were 100 times higher than the wars today. And if you measure it, the 1990s were double today. The Cold War years were triple.”
Last year, President Obama got in on the act: “The world is less violent than it has ever been.” Of course, as a recipient of the Nobel Peace Prize, he might have a vested interest in promoting the notion. Heh…
Then again, we might have hit Peak Peace shortly before the president took office.
Starting in 2007, an outfit called the Institute for Economics and Peace has issued an annual Global Peace Index. “The world has become slightly less peaceful over the last eight years, deteriorating by 2.4%,” says the most recent report, issued in June.
“This decrease in peacefulness reverses a long-term trend dating back to the Second World War which had seen steady increases in peace, especially after the end of the Cold War.”
Hmmm…
Global defense spending grew sharply during 2014 after a flat 2013, according to a new analysis out yesterday from the consulting firm Strategy Analytics.
The report projects a 2% increase in defense spending this year, accelerating to an average 3% annually between now and 2024.
That sounds like a slow and laborious pace of growth if you’re looking at it from an investment angle.
The reality is much different — and more exciting. You might recall last month our military-tech maven Byron King took the wraps off a new strategy to help readers like you cash in on U.S. defense contracts.
Since then, two of the “Big Five” contractors turned in good quarterly numbers. Lockheed grew revenues 2.7% and profits 6.5%. General Dynamics grew sales 5.5% and earnings 13% — a performance the CEO understatedly called “rock solid.”
Within days, Byron’s strategy was already paying off for readers big-time — with gains of 34% in eight days… and 50% in eight days.
But it’s not too late for you to take advantage. Byron has his eyes on a key date and another profit catalyst — this coming Thursday. Two days from now.
With time of the essence, he’s recorded an urgent message via video chat. You can watch it right here.
After yesterday’s losses, the major U.S. stock indexes are treading water this morning. The S&P is ruler-flat, three points below 2,100.
Traders are generally shrugging off the news that Puerto Rico’s government missed a debt payment. Even the municipal bond ETFs are little moved as we check our screens.
Gold is recovering some of yesterday’s losses, the bid back to $1,092. A weakening dollar helps; the dollar index is down to 97.3.
Crude has arrested its free fall for the moment — a barrel of West Texas Intermediate up 2% as we write, at $46.11.
Yesterday, WTI was threatening the $45 level. Hedge fund manager Erik Townsend tells us the swoon isn’t over yet — and the tell might be tomorrow morning’s weekly inventory report from the Energy Department. “If we see a significant inventory build, I predict it will be the catalyst to take out $42.50 and make new lows. If we get a significant draw on inventory, it should be good for a pretty good bounce, but it won’t last. I predict WTI prices in the low-mid-$30s by October.”
Yikes — that’d be a retest of the early 2009 lows.
“On a purely technical basis,” says Erik, “the market is already oversold and long overdue for a bounce. But I predict any strength will be temporary. The fundamentals still say this thing ain’t over yet.”
The party’s over for Amazon Prime customers — the folks who pay $99 a year for two-day free shipping and other benefits.
Up to now, you could add four people to your account and share the benefits. No more: Now it’s only one other person, that person must live in your household and you must be willing to authorize each other to make charges using your saved credit cards. Bummer.
The business news site Quartz ventures to suggest Amazon is “looking beyond growth numbers to consider, at least somewhat, profitability.” Oh, yeah, that.
Which makes this morning as good a time as any to briefly examine AMZN’s history turning a $10,000 investment into $1 million. Amazon is one of the 365 companies that made the list of 100 Baggers in Chris Mayer’s new book of that name.
We mock Amazon now and then for rarely turning a profit — and when it does, for selling at some ridiculous multiple like 358 times earnings. Still… it became a 100-bagger in only 13 years.
The key to its success turns up in CEO Jeff Bezos’ 1997 shareholder letter: “Market leadership can translate directly to higher revenue, higher profitability, greater capital velocity and correspondingly stronger returns on invested capital.”
It’s that last phrase that makes all the difference, says Chris. Amazon spends boatloads of money on research and development. If you backed R&D out of Amazon’s numbers, it would routinely generate profit margins of 10%. “If he wanted to,” says Chris, “Bezos could cut R&D expenses and Amazon would gush cash. Instead, he invests the money and creates new growth.”
[Ed. note: Chris’ book is packed with fascinating case studies just like this, in much greater detail than we can present in our 5 Mins. The book might change the way you look at the stocks… to say nothing of how it could help build a fortune for you and the generations that come after you.
You can still claim a FREE hardbound copy of 100 Baggers. All we ask is you cover our shipping and handling costs. Click here, enter the password “100x” and you’re in.]
Even the Federal Reserve can figure it out: EZ credit for student loans drives up the cost of higher education.
Or as a new study by the New York Fed concludes: “We find that institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65%.”
Robby Soave at Reason puts it another way: “Since government aid programs make it easier for students to pay the sticker price of admission, no matter how high that price rises, universities have every incentive to respond by charging more. The universities have little to worry about — they get paid upfront, regardless of how difficult it is for the students to repay the government (or the government’s actual creditors: the U.S. taxpayer).”
Which is how Syracuse University wound up hiring hundreds of administrators with little or nothing to do.
The university performed an audit this year — finding 345 managers supervise only one or two other people. The audit’s conclusion — “too many decision makers.” The university is now offering buyouts to many of them.
You know the higher-education bubble is finally bursting when a bunch of assistant provosts, vice chancellors and associate directors start to get the heave-ho…
“The Fed has itself in a real pickle,” a reader writes after we noted yesterday its preferred measure of inflation is well below its 2% target.
“It always kept food and energy out of its equation so as to mask the true inflation rate and make it appear falsely lower. Now I’m guessing they have to keep it out of the equation for fear of showing that we are actually entering deflation.
“With energy prices having fallen into a sinkhole and once again sinking further, it is starting to show up in lower prices everywhere. Everywhere except this hellhole of California in which I reside. Gasoline is still above $4 a gallon for regular here.
“On another note,” our reader continues, “it appears one of my wife’s friends and family fell for the Iraqi dinar scam.
[Oh, no. This was a hot topic in late June. Check out the Overtime briefing in this episode of The 5 if you’re not up to speed…]
“They fell for a pitch from some Italian guy promising that a $30,000 investment would net them $2 million in the near future. I found out about it when they tried to talk me into it. My wife is Chinese, and so are her friends. Because of the huge importance they place on not losing face, we cannot even tell them it is a scam. All we could do was lie and say our money was tied up elsewhere. They are still waiting on delivery of the dinars. They probably will actually get them, because they were told that one dinar was equal to $5 U.S. dollar.
“Well, a quick check today reveals that it actually takes 1,190 dinars to equal $1 U.S. dollar. Oops…”
“Though it’s become a well worn-out theme and undoubtedly fodder for editorial filler,” writes one of our longtimers, “I remain nonplussed that readers of The 5 can’t comprehend how this works and snipe their discontent.
“I remember the early days of The Daily Reckoning, The Rude Awakening (complete with coffee rings) and then the appearance of The 5 — whose format and content seemed the perfect mix of filtered financial news in bite-sized chunks with a few ads to pay for it.
“Now we get Laissez Faire Today, Tomorrow in Review and the three aforementioned for FREE! Not only do you offer fantastic value (did I mention that it’s free?) but the entertainment value would be worth it even if periodically you required click-throughs to ensure quid pro quo. How someone gets from this to ‘regret’ I can’t sort out.
“I regret that we are where we are as a country. I regret some of the voting decisions I’ve made. I regret failing to put my collected knowledge into action at certain times. If I have any minor complaint at all, it would be that you tend to share actionable insights a little too readily in your free missives. But my feeling about the wealth of information you put in easily digested form would be more in line with appreciation.”
The 5: Well, thank you. We sometimes wonder if we’re a little stingy in sharing the actionable insights — so your feedback is valuable as we figure out where to draw the line!
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. “Two companies have already shot out of the gate,” says Byron King by way of an update to our lead item today — “and now our third horse is getting warmed up in the stable.
“Even I didn’t think the gains would come this fast — but it’s happening. And I want to make sure you have my full market strategy before the next quick moonshot hits.”
To seize maximum advantage, Byron says you have to act by Thursday. So you’ll want to check out his message now, before it’s out of date and the opportunity’s passed you by.
