Consumer Spending Higher Than Expected

I am shocked that consumer spending crept higher in the month of August. This could be a sign that we will not enter into a recession. Former Fed Chairman Alan Greenspan commented yesterday that the likelihood of a recession is less than 50-50.

The key rate cut by the Fed certainly helps ease some credit worries, and it seems consumers are responding favorably for the most part; however, overall economic growth is expected to lag in the coming quarters.

The better than expected consumer spending data will hopefully lift the already increasing financial markets. However, I think we are headed for a correction in the short run.

See the full report at Yahoo!

New-Home Sales Tumble in August

New home sales for the month of August fell to the lowest levels since June 2000.

The credit crunch is beginning to take effect, but not to worry if you have cash. If you are a contrarian, now might be a good time to accumulate real estate at bargain prices.

Read the full article from Yahoo!

Market Rally..........

After the Fed lowered rates by 1/2 point, everyone knew the market would enjoy a nice ride. However, I didn't expect the cut to propel the Dow near 14,000, a place the index hasn't been since July 23rd.

Even with the rate cut, the housing market continues to struggle, while analysts believe it could be a year or two before there is much stability in the sector. I think the ripple effect from the housing slump will be company earnings. I would be extremely surprised if many Dow components beat the street in the upcoming quarter.

My concern is that there just isn't much driving the market right now. Although the rate cut helps, I question the long term sustainability of any major market rally. I hope I am wrong here, but based on historical valuations of the market, we may be headed for another correction.

This is a good time to be liquid!

A Bidding War for Facebook?

Deemed "rumor and speculation" by Facebook, Microsoft Corp. is apparently considering a stake in the popular social networking site.

In my opinion, Facebook founder and CEO Mark Zuckerberg wishes to remain independent, especially after declining a $1 billion offer from Yahoo last year. Moreover, with $100 million in annual revenue after just 3.5 years, there is no urgent need to offer such a stake.

However, if the rumors are true, I could also see Google entering the bidding war....

Read the full article on Yahoo!

If Not You, Who? If Not Now, When?

As I begin reading the book War On The Middle Class by Lou Dobbs, the assertion he makes that large businesses and special interest groups continue widening the gap between rich and poor is not a stunning revelation--at least not in my mind.

In a society marred by overpaid CEO's, elected officials ceasing to enact legislation for their majority constituents, weakening public education systems, rising health care costs, and the loss of domestic jobs to cheap overseas labor, one can only wonder when America will wake up. In my opinion, we will wake up when common people begin to change the world. Yes, you and me, one day at a time.

I just finished reading Ben Casnocha's book My Start-Up Life, which I highly recommend to all you business minded folks. However, it isn't the business side of things that stuck in my mind. It is a simple anecdote that describes the power within each of us to change the world. If not you, who? If not now, when? Ask yourself seriously: "Am I helping solve the worlds problems, or am I contributing to them?"

If you are upset with elected officials, than go vote. If you don't like a particular corporation, than don't give them your business. If you want to change the world, than do something about it. Instead of complaining, start acting. If you want to be heard, write a blog. Volunteer in your local community. Seek out mentors. Help someone in need. If not you, who? If not now, when?

What am I Doing Here on Earth?

I am a firm believer that every person at one time or another asks themselves a simple and yet very complex question. What am I doing here on earth?

Seven tiny words, with no more than two syllables, that sparks an endless debate spanning the dawn of civilization. Although I believe it is everyone's quest to find the truth, simply slicing the world into bits of scientific matter is an incredibly shallow attempt to explain your purpose here on earth.

I fear many people ask the above question with no religious grounding leading them to an acceptable conclusion. Moreover, I continue to find individuals who attack religion, while attempting to explain everything using a mathematical formula.

Occasionally, a random individual will ask questions about my religious views, and I attempt to answer them in a fair and honest manner. Although it is easier to deflect questions such as these, one of the reasons they are asking stems from a restlessness to find the truth. However, it is that individuals choice whether or not they accept the truth as reality.

I often ponder why the non-believer asks the most questions. I have come to realize that the seeker is simply following the seed God has planted. If someone speaks out against organized religion, they are probably struggling with their own beliefs at the same time. On the other hand, seeking the truth and asking questions remains a good start towards finding God's will for your life.

When the chips are down, when times are bad, and no scientific evidence points towards the truth....What will you believe?

For me it's faith. One word explains many of life's most daunting questions. Some things cannot be broken down further. Sometimes the whole does not add up to the sum of it's parts. I cannot prove this using a mathematical formula or some other worldly example, that's why it is faith. Faith is faith. It is believing in the unseen, and accepting the truth even in the shadow of doubt.

The point of this post is not to change you or your beliefs. However, I do challenge you to seek the truth. Find out the reasons why you wake up every morning, and write them down. Live these reasons in your life. Overcome your mistakes and be a better person. Learn more about something you don't understand. Be a source of encouragement in a troubled world.

After all, the simple fact you are seeking means you want to know the truth. However, some things are not meant to be explained. Faith is faith. Make sure you understand the difference between faith and science.

Chipotle Mexican Grill (CMG)

I have been a huge supporter of Chipotle since taking my first bite of a giant burrito back in 2003. The food is great, the service is fast, and the stores are just flat out busy....all the time.

In my opinion, one way to examine the prospects of a business is to simply go and observe. What is the atmosphere? Who is the target market? How is the food? How is the service? Talk to customers about the product or service offered. Ask them what they like, and what they don't like.

I am a believer in the Warren Buffett philosophy of "buying companies you know and understand." Chipotle Mexican Grill (CMG) is one of those companies. I know what they offer customers, and I understand how they make money. However, even in this case, some information about the company will never be known, which creates some amount of risk when buying individual stocks.

A quick look at company financials reveals a solid business with outstanding growth potential....key word: potential

With a P/E ratio near 62, and a PEG ratio of 2.16, the market continues to "price in" many years of future growth in the stock price today. Earnings are great, while the company has aggressive growth plans that include another 90 locations by the end of 2008.

I bought shares between $49-$52, just after the company's IPO, and selling now doesn't make since because I think there is still a considerable amount of growth potential.

On the other hand, with the recent rate cut and rise in financial markets over the past week, I highly doubt the price will stay at $113 a share when stocks correct a bit. However, I remain bullish on Chipotle long term, refusing to sell my shares because of future growth expectations.

If you don't already own shares, I would wait until they make a small correction.

Recommendation: hold shares of Chipotle Mexican Grill (CMG) long term

I am long Chipotle

Whether You Like It Or Not

Fast learners pay attention! Over the last four years at the Air Force Academy, where there are more tasks to accomplish than the 24 hours in a day; your mind begins to change whether you like it or not. The world you live in changes. How you value free time changes.

In this system, a person learns to prioritize and value personal time more than most in a slower paced environment. In addition, every moment spent that we deem "worthless," gives an opportunity to finish something that must be accomplished in order to move on in our daily routine.

At the Academy, these lessons are absolutely engraved in the subconscious. After a while, you look at the world differently. Life is now a race in order to have more personal time. You begin to prioritize every second of your life, examining what you would like to do versus what you have to do. I have always thought this may be the case, but today proved my assumptions correct.

In a routine class exercise where we have all been given a packet of questions for individual completion, I couldn't help but look around the room and come to this stunning conclusion about the Academy graduates.

Theoretically, before anyone in the room would be proficient enough to accomplish the questions in the workbook, a step by step PowerPoint discussion for one hour would be necessary. The topic, basic algebra and economics.

As the civilians in the room diligently took notes on the PowerPoint slides, those who have been forever changed rustled their workbooks.

Before any civilian even realized we had an individual assignment, every Air Force Academy graduate in the room was or nearly finished with the entire packet of questions, which was supposed to take 45 minutes.

The price-analysis material to us was simple (basic math and economics). However, if you have never had basic algebra, the questions may have been confusing. The point is, whether we realize it or not, we work and examine material on a different level, always wanting to "hurry up and be finished" so we can do what we want to do.

Thinking and working in this manner usually allows us to accomplish tasks quickly and move on. However, I caution everyone to relax every now and then, and take it all in! Life's a journey not a destination. Slow down and smell the roses!

Best Buy Beats!

Just days after posting the article about the problems with Best Buy, they beat the street for the first time in a long time.

International sales and online revenue helped lead the surge, which hopefully means the company can sustain some level of growth in the future.

However, even though they beat the street and raised estimates, I remain bearish on the stock long term because of increased competition and troubling same store sales, which were up just 1.7%.

I am a shareholder of Best Buy, and I believe the stock could hit $60 a share in the short term; however, the long term growth I continue to question.

If you have another opinion, I am always open to feedback! Cheers!

Save Even More Money......And Lose Weight!

Now that I experience the daily one hour lunch break, I can't help but notice those around me.

I pack my own lunch nearly everyday, with some exceptions for Friday's or other special events.
Most people get together and decide where to eat lunch everyday. For all you who go out to lunch, consider this:

1. COST. A decent lunch out these days runs between $8-$10 per person. Assuming 30 days vacation, that is 334 days of eating. An average cost of $9 per day is used for this scenario. 334 x $9 = $3,006 a year......ouch!

2. CALORIES, CALORIES, CALORIES.... a one hour break is hardly enough time to sit and enjoy a healthy meal. Eating lunch in a short time period makes a person more likely to eat quickly, resulting in larger portions consumed. In addition, fast food is high in calories, and can contribute to your growing waist line.

Whatever your daily routine, ten minutes in the morning is enough time to pack a decent lunch. I actually enjoy preparing my own meal, and you probably will too. Moreover, you will shed the extra calories and save some hard earned cash!

Recession-Proof Your Investment Strategy by Ben Stein

Please follow the link below for a nice blurb from financial guru Ben Stein.

I completely agree that if short term traders vacate the market during down times, take a long term approach, and pick up shares of good companies when their P/E ratios fall below historical moving averages.

Read the full article by clicking the link:

Recession-Proof Your Investment Strategy by Ben Stein

The Trouble With Best Buy (BBY)

To answer this question, one must simply look at the "competitors" tab on Yahoo Finance.

I am a true believer that a companies stock price will increase as it produces real returns earned from sales and investments. In addition, if I buy a company, I must have a reasonable understanding of their business and future projections. I know and understand Best Buy, and I love their stores and product assortment. However, I feel there are signs of trouble ahead.

I was Best Buy's (BBY) biggest advocate a few years back. The technology sector was booming, and Best Buy served as a medium of exchange for many new products, offering good quality items at low prices. However, even though the financials look great on paper, the market continues to weigh future returns, which is up for discussion among many brokers and investors.

They are profitable, with continued growth expected (PEG ratio of .95), P/E of 16.22, and a very clean balance sheet with plenty of cash. However, in my opinion, there is one major problem--Wal-Mart.

Wal-Mart continues to increase their technology product lines, carrying most, if not all the products Best Buy carries. The problem is that Wal-Mart carries most of the same products while undercutting Best Buys pricing. Best Buy offers discounted products, but Wal-Mart offers deep discounted products, which could be a major problem in the future.

Although Best Buy is a $20.8 billion company, Wal-Mart is a $177 billion company, and largely controls pricing power in the United States. In addition, Wal-Mart operates at extremely thin margins, which they can do because of their incredible volume and scale. However, Best Buy is small relative to Wal-Mart, and yet their company has operating margins of 5.31%, while Wal-Mart sits at 5.80%.

Even though Best Buy's growth expectations are better on paper than Wal-Mart's, I am scared to think what may happen if Wal-Mart engages in a price war.

I own shares of Best Buy, and the stock may hit $60 a share by years end. However, if earnings fall short of growth expectations, I would expect the stock to continue to lag the market, as evidenced by its flat stock price over the past year.

Recommendation: do not buy shares of Best Buy (BBY)

I am currently long Best Buy

Perception = Reality

In my short 24 years on this earth, I can honestly tell you that perception is reality. The way each and every person perceives the world around them shapes their life, both positively and negatively. However, I argue that as humans we often choose the latter because it is simply easier. Much of the time we perceive things in a negative way because it makes life simpler, and allows us to project our own shortcomings to other individuals lack of internal controls

In my opinion, the reason why negative perceptions are bad is because it leads to the judging of another. We examine our surroundings (perception) whether it be a situation, another person, etc, which leads to a judgement about that particular topic. This judgement often distorts our reality and forces us into quick decision making, which sometimes leads to the wrong conclusion. A wrong conclusion may harm relationships, negatively effect business decisions, etc, because we are a society of a first impressions.

In a world that moves very quickly, let stimuli marinate a bit longer in order to form a more accurate conclusion regarding a particular situation. In doing so, we give our brains extra time, which hopefully leads to a more positive outcome. Thinking positively rather than negatively effects our entire mood and outlook on life, and that attitude is contagious around others. If we all want to be happier, perceive things in a more positive manner with a little more time, and watch your life turn really real and really happy. Because after all, perception is reality.

Air Force Downs TCU!

In case you missed it, the Air Force vs TCU football game shaped up to be a beauty!

Jim Hollis turned a 4th and 1 into a 71 yard TD run that eventually tied the score 17-17, which led to a Ryan Harrison field goal in overtime. However, Harrison's field goal came after the TCU kicker hit the upright, allowing for some Falcon heroics. The first win vs TCU since 1987.

Truly dramatic. As a former Air Force hockey player, any Academy victory feels like a win for everyone. I was incredibly proud of the perseverance displayed by the players, along with the calm and collected play calling by Air Force head coach Troy Calhoun.

I bet Falcon Stadium will have a capacity crowd for the next home game to cheer on the now
3-0 Air Force football team.

Where Is My Money!

In case you are like me, and wonder "where has all my money gone," I highly recommend making a simple budget.

In a world where it is incredibly easy to swipe a plastic card, a little money managing can go a long way. However, up until the past three weeks, I didn't really know how to manage my money.

I found out it is very easy if you follow some simple rules. In addition, there are many programs to assist with planning and budgeting, but most of them require a small purchase. However, a program like Microsoft Excel will do everything you need, and is usually already on your home computer.

Here are a few easy steps to save and manage your money:

1. WRITE IT DOWN! If you don't write down every little detail, you begin to let other expenses and purchases slide. In fact, I even found myself not including small purchases in the budget because I didn't think they would add up. Trust me......they do!

2. CHECK YOUR RECEIPTS! I had no idea how many times businesses screw up. Whether they intended to or not, if you don't check your receipt line by line , you often times get overcharged. During the move to my home in Phoenix, numerous receipts had mistakes that my family corrected.

3. SPECIFY A WANT VS. A NEED! Yes, there is a huge difference. Ask yourself seriously, "Is this a want or a need." I was surprised that when I actually thought about a purchase, I would decide something is a want rather than a need.

Simple money management requires some level of commitment, but if you really want to save, a little perspiration will go a long way!

Scientist Burns Water!

An amazing discovery by an Erie cancer researcher that found a way to burn salt water "is being touted by one chemist as the most remarkable water science discovery in a century."

According to Pittsburgh Post journalist David Templeton, "John Kanzius happened upon the discovery accidentally when he tried to desalinate seawater with a radio-frequency generator he developed to treat cancer. He discovered that as long as the salt water was exposed to the radio frequencies, it would burn."

The thought of the worlds most abundant natural resource as a source of energy is unbelievable. I have no idea if and when scientists will be able to market the energy application, but in the meantime this is a great story with unlimited potential.

For full details, check out the story at Yahoo News!

Heavy Equipment: The Case for Caterpillar....

Caterpillar, the golden nugget of heavy equipment makers in the United States, faces strategic change, which has some investors running for the hills. The recent housing slump, which continues to slow construction projects, pushed Caterpillar's (CAT) profits down 21% in the recent quarter (Fortune).

Although there are concerns surrounding the company's disgruntled employees and struggling world growth (specifically in Japan and China), I feel CEO Jim Owens is taking the necessary steps to avoid a major downturn.

According to Fortune Magazine, "despite the falloff in North American business this year, Owen's hasn't cut his forecast of a compound annual growth rate of 15% to 20% for the rest of the decade, with $60 billion in sales possible by 2010."

Leading a large corporation through major strategic change is no easy task. However, Owen's continues to move forward as evidenced by the implementation of a process known as the "Caterpillar Production System," (CPS) which hopes to speed inventory turn times more than 40%, and boost productivity 20% by 2010.

Simply put, the world moves at an incredibly fast rate, and neither Caterpillar nor it's customers can afford to stash millions of dollars aside waiting 4-6 months for machinery. Recently, companies such as Japanese heavy equipment maker Komatsu, offering 10% to 20% discounts, continues to take market share overseas, forcing Caterpillar to rethink global operations.

Company employees remain frustrated with the changes because slow suppliers continue to hinder production at home, which may be the main cause for slowing operations. I guess the main question is this: Will Caterpillar meet or exceed the expectations that CEO Jim Owen's has set for the company?

Personally, I think they will. Initially, increased competition overseas cut into market share, but Caterpillar has pulled even with Komatsu in China, and plans to triple its product offerings over the next three years (Fortune). Moreover, the companies production line initiatives should turn inventory much faster, which will clean up the balance sheet and generate more cash for other operations and investments.

Sales in the United States will lag in the short term, but overseas sales should improve, which will stabilize the companies financials until the housing market turns. Although it could be a while before Caterpillar realizes its full potential, a small investment at $73 a share seems reasonable. After all, CEO Jim Owen's sees potential sales of $100 billion by 2020 (Fortune).

Recommendation: Buy and hold Caterpillar for the long term

I currently do not own shares of this company

Conoco Phillips vs. Exxon Mobil Corp.

About six month's ago, I decided to make a small investment in one of America's oil companies, Conoco Phillips (COP).

The overall health of the company was very good, but oil price fluctuations worldwide had lowered the stock price to a bargain level. I decided to make a small investment at $63 a share.

A quick analysis of the company today (where the stock hovers between $80-$90 a share) shows there are still bullish signs. Comparing Conoco Phillips with industry standards reveals important financial information that may continue to push the price upwards.

Exxon Mobil Corp. (XOM) remains the largest U.S. oil company with market cap around $485 billion. Conoco Phillips has a market cap around $136 billion. However, I like the long term earnings estimate of COP better than XOM.

COP currently trades at about 12.7 times earnings, while XOM trades around 12.5 times earnings. However, the five year price to earnings growth estimate is what gets me excited (PEG Ratio = Price to Earnings Ratio / Annual Earnings Per Share Growth).

COP has an expected five year price to earnings growth ratio of 1.17, compared with XOM at 2.18. With very comparable gross margins (both over 33%), I like COP in terms of potential growth.

In my opinion, based on the numbers, COP will grow earnings faster than XOM, which will allow the stock to outperform its more mature counterpart.

Recommendation: buy shares of Conoco Phillips for the long haul

I am long Conoco Phillips

Book Review: Quiet Strength: The Principles, Practices, & Priorities of a Winning Life by Tony Dungy, Nathan Whitaker, and Denzel Washington

A fantastic first hand look into the life of Indianapolis Colts head coach Tony Dungy. According to Dungy, there is much more to life than coaching professional sports and winning the Super Bowl. In fact, faith through Jesus Christ provides the direction for all his decisions, both on and off the field.

When other coaches, players, and media members said his "soft" approach to the game simply wouldn't work, Dungy stuck to his plan, and silenced the critics by winning the Super Bowl in 2006. However, even on that grand stage, he took time to remember the important aspects of life: faith, family, and relationships.

His incredible journey through life forces the reader to reflect on what really matters. Is it my job? Am I living the life I really want to live? Am I living the life God wants me to live? Dive into the novel to find out!

A must read for the sports and entertainment fan!

Rating: *****

What to Expect in the Coming Weeks.....

Financial markets ended the week with continuing concerns about the sub prime mortgage crisis, although Federal Reserve Chairman Ben Bernanke vowed to "act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets."

Mr Bernanke refused, however, to "protect lenders and investors from the consequences of their financial decisions."

In my opinion, the Federal Reserve has it right. Their responsibility rests with the protection and overall health of the economy, not necessarily companies and individuals. However, Mr. Bernanke realizes the severity of the credit pinch, and has vowed to protect America from a downward spiral.

I eventually expect the Federal Reserve to lower the federal funds rate, possibly during their meeting on September 18th. However, market volatility will continue in the weeks leading up to the decision, so protect yourself. Here are a few simple ways.

1. Don't just dive into stocks with cash. Cautiously begin dollar cost averaging in index funds.

2. Let things settle in the real estate market before buying. Real estate is typically a good way to diversify, but don't put yourself in an unneeded credit crunch until the market stabilizes.

3. Keep cash on hand. Give yourself some flexibility to jump on a great buy. In volatile times, minor market interruptions present golden opportunities.

4. Stay strong. Savvy investors are not selling just because the markets lack stability. A portion of a portfolio is still buy and hold forever.

Have a great Labor Day weekend!