Dichotomy of Small Jobs

Here's an important observation I was unaware of. I'd always seen statistics showing that almost all the job creation in the country is via small business - footing the idea of creative destruction, that as part of economic growth the old companies die and are replaced by the new.

Interestingly, it's easy to slide into an overly broad generalization that that small business creates jobs -which is true - but the deeper truth is that NEW STARTUP small business creates jobs, not existing longer-term small business.

This AP article gets a little politicky - but if you just ignore that part and read the economic references inside an interesting fresh observation is in there regarding new startups that I hadn't heard before:

"Haltiwanger and two other economists showed, in a study of millions of companies over 30 years, that small businesses no more than five years old — that's about 40 percent of them — are the only ones that create more jobs each year than they cut.

In 2005, for instance, more than 99 percent of the 2.5 million net new private-sector jobs in the United States came from these startups, according to the U.S. Census Bureau.

But the 60 percent of small businesses that have been around more than five years act as a slight drag on the number of jobs available in the United States. They have cut about 0.5 percent more staff than they have added in a typical year, according to Haltiwanger.

By contrast, big businesses, the ones that get all the headlines for layoffs, have hired more than they have cut — about 0.1 percent in a typical year."

Summary/Key Takeway: If we want job creation create incentives targeted not to small business broadly, but to NEW small business formation specifically.

Anyhow - I found that portion very interesting and not often discussed.

Have been adding funds back to equities

Over the past few weeks I've been a net buyer of stocks. I don't trust the feeling that the market wants to go up, but this just feels different than the long grind of most of last year. I had raised my portfolio to a fairly high level of cash - well over 50% - so it'll take me a while to move back in, but here's some of my main stock holdings as of the end of today

NEU Newmarket corp - petroleum additives
TEO Telecom Argentina - Telecom
LHCG LHC Group - home health
CLF Cliff's Natural Resources - iron ore / coal
CHL China Mobile - wireless
EBAY Ebay - retail / paypal
ASML ASML Holding - semiconductor equip
DAR Darling Int'l - grease recycling / biofuel
HITK HiTech Pharmacal - generic drugs
BBL BHP Billiton - oil / gas / mining

along with some smaller positions in much more speculative
GTAT GT Advanced Tech - solar
WFR MEMC Electronics - solar
ESIC Easylink services
ARCI Appliance Recylcing

still a lot of cash on the sidelines, but less than 2 months ago.

Good article on Apple iPhone manufacturing and supply chain

Here's a really good article detailing several key drivers pushing electronics manufacturing to Asia - with the specific example of Apple's iPhone used to illustrate. Here's the article: Apple, America and a Squeezed Middle Class
quote:

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

Restatement of Existing Home Sales by NAR

The National Association of Realtors just "restated" their existing homes sales from 2007 to present. While it was in their interest to keep the boom going and make the market seem better than it is, this should be enough of a datapoint to make you never trust their announcements regarding home sales going forward.

Here's the chart showing the initially reported homesales over the past 4 yrs. vs. restated figures. The decline was much worse and more rapid than initially reported.

Solar "gardens"

New models for solar - solar gardens
from Forbes. Pretty cool idea.

"The first such project in the country is currently underway in Colorado Springs, Colo., where an old landfill is being given a second life as a community solar garden. Three-and-a-half acres of the 40-acre site will soon host 500 kw of solar panels, all owned by local residents who will be seeing an average 10-percent reduction on their energy bills (the panels cost $550, with a minimum purchase of two panels)."

Drama vs. real life

Derek Sivers wrote this of Kurt Vonnegut talking of Drama vs. real life... thought it was interesting perspective.

How Doctors Die

I saw this article claiming doctors tend to be far less aggressive on themselves than on the average patient when treating terminal situations. I don't know if this claim is substantiated by a study, but the article claims:

"It’s not a frequent topic of discussion, but doctors die, too. And they don’t die like the rest of us. What’s unusual about them is not how much treatment they get compared to most Americans, but how little. For all the time they spend fending off the deaths of others, they tend to be fairly serene when faced with death themselves. They know exactly what is going to happen, they know the choices, and they generally have access to any sort of medical care they could want. But they go gently."

This is a really good article that's worth a read.

Making a mess

My wife tells me sometimes you have to make a mess to clean up a mess... Well I'm making a mess. I really need to clear some some stuff out of the house. Putting some things up on ebay.

and sometimes things just need to be thrown away.

government, democracy, and the will of the people

which is the higher goal of democratic government?
- to reflect the will of the people, or
- to protect from the will of the people?

Democracy - in my mind at least - has little meaning absent a bill of rights. As new democracies form around the world I wish more emphasis was given to the later.

Interesting observation from Jeff Bezos of Amazon

"If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue."

Here's the Forbes interview - good stuff.

Jinx

I think the post about trying to pay off the house caused the universe to reassert its primacy. Found out the main heating/cooling unit for the house needs replacement. ;-)

Pay off house by end of next year

My wife and I were talking and assuming all goes well (meaning my job holds out that long - vehicles hold out - no other unexpected runs on the bank acct ) we're going to try to pay off the house by the end of next year. We just sent in another payment against principle and I'm really OK with diverting cashflow there.

At this point, there's really only a couple key concerns in my mind:
- maintain sufficient liquidity in event of emergency (emergency fund). This is my top concern by a far stretch, esp. given job uncertainty.
- I used to have a concern about alternative stock market returns I'd be missing out on, but I'm really 50/50 on the market right now anyhow, so using extra cash to remove a certain mortgage debt seems a reasonable way to go. While a surge in the markets could happen, I don't expect it, and even if it did I'd still be holding alot of cash, so going ahead and paying down the house makes sense in this context also given a guaranteed return of whatever our mortgage rate is vs. almost 0% for holding cash right now.

I still plan to fund the 401k, maintain investing accts, and fund other retirement accts, but just be willing to send in extra payments against principle as liquidity permits.

I like the flexibility that having cash-on-hand brings - but think it's time to spend it down some to get rid of this debt overhang of the home mortgage. As much as anything I think the mortgage weighs on my mind, pre-occupies my thinking and decision-making, and strangles my perspective.

Yeah, I'm 40 and it's mid-life crisis time - if such a thing exists - but debt is an insidious little thing that creeps in and has a way of taking over. It has kept me on the hampster wheel - that much is for sure. But I'm not built to handle debt very well, so getting rid of it will hopefully free my soul a bit to do better and more interesting things with my life.

Karl Denninger goes off

This rant by Karl Denninger is good. Karl has been on the Armegeddon watch for a long time and I just hope he's not right that everything is a house of cards, but I do like reading his perspective. Warning, this will likely scare your pants off.

The catalyst at present is that Greek default begins the process that brings the whole system down and that govts are so weak now they can't prevent it. His thesis that the bankers and over-leveraged financial hucksters have scammed and skimmed for so long that they've killed the beast that they make a living from - and it's our own fault for not stopping them and letting them get away with it.

Portfolio update

It's been a long time since I've updated my investing info on here. Early in the year I raised cash levels and have been running at a high cash level most of the year. I've been moving in and out of positions, but overall had not real strong convictions.

Here's my holdings right now from largest to smallest.

AAPL - Apple
INTC - Intel
NEU - Newmarket Corp (petroleum additives and products)
TEO - Telecom Argentina (telecom)
CHL - China Mobile (wireless)
MFB - Maidenform Brands (apparel)
ASML - ASML Holding (semiconductor equipment)
MDF - Metropolitan Health Networks (healthcare provider)
GPS - The Gap (retail)
MED - Medifast (diet/health foods)

One big move I made recently was to exit a large position in Ebix. I'd just reached max pain with the losses on that one and with so much else on the market cheap I felt like I'd move that money into something else for the time being. Ebix seems very inexpensive to me, but there's very big money on the short side of that one pushing that stock around in a big way.

All-in-all I'm still about 50% cash as it's not clear there's much upside to things right now, although there do appear to be alot of inexpensive stocks.

I've been adding to TEO and INTC several times of the past few months, and gotten yanked around by market moves in AAPL, but I'm liking alot of valuations I see. Some I'm looking to add to in near future include those I hold plus MSFT. I'm really wanting to get MSFT a point or two lower from where it's now. Things move on and off of my radar but for the most part I remain confused by how much value the big techs seem to have in them - especially AAPL, INTC, MSFT, and others. There's alot of other very interesting stuff out there - including more semi-equips AMAT KLIC LRCX, some retailers GES ROST, some basic material companies CF CLF FCX, healthcare AGP LHCG AFAM, other telecoms AMX, oil CVX XOM CEO.... lots of value - but I'm just trying to be deliberate with buys and maybe sell some rallies.