Trevor Stasik - About Me

Friday, August 31, 2007

The Bernanke Put - Is It For Real?

As Jim Cramer would call him, "Uncle Ben" has declared that the Fed will sweep in and save the day if needed. (Check out the article on Yahoo) I assume that the Fed will be lowering the Fed Funds rate in September. This is a good thing for the markets, at least temporarily. This may help slow the collapse of the markets from the sub-prime credit mess. However, similar to Mr. Greenspan, could Ben Bernake just be holding up a bubble. Supporting the markets is nice, but at the expense of capitalism? The Bernanke Put, if it's real, would remove a lot of risk from the markets.

I'm not saying that Ben Bernanke is doing the wrong thing. I'm just asking the questions. Can the Fed do the right correction without overshooting and creating much more inflation? Could significant Fed action indefinitely hold off further market correction? This remains to be seen.

--------Sincerely, Trevor Stasik.

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Thursday, August 30, 2007

How To Use Inventory Turnover Ratio


When an investor or stock analyst wants to find out how fast a company is selling it's inventory, they merely need to turn to the Inventory Turnover Ratio. An easily calculated ratio, the Inventory Turnover is found by seeing how many times average inventory can be divided into cost of goods sold. This is one tool that a financial analyst might use.

Inventory Turnover Ratio = (Cost of Goods Sold) / (Inventory)

Use of this equation can also give someone an idea of how long inventory is sitting around in the warehouse. For example, if inventory is rotating out at a ratio of 5, that means that the entire inventory has sold 5 times. Simple take 365 days and divide by 5. There you go, the inventory will turnover once every 73 days.

This ratio is best used with a little bit of comparison. See how particular companies compare against their peers in the same industry.

Thanks for visiting. -------Sincerely, Trevor Stasik


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First To Market Advantage - Chocolate Goodness


Having the first mover advantage in a market can be extremely important. This is true in most markets, but is especially true when it comes to technology. A recent article in Popular Science illustrates this fact beautifully. The story describes how the iClone and other knock-offs are stealing, reverse engineering, and replicating US goods. About halfway through the article, the author describes how the Korean tech company LG lost marketshare in China with their "Chocolate" phone. The product was cloned in China before the official LG phone could be released. By the time the release was made official, the clone had already been on the market for months. The article said:
Quality wasn't an issue. The fake phone was "exactly like the real one in design," a company spokesperson told Chosun Ilbo, Korea's largest daily newspaper. "Chinese people think it's LG electronics that manufactures the fakes."
The concern of being first to market is a concern with other tech products as well. Remember the release of the Playstation 3? Sony was the leader in the game market for several years with their Playstation 2. However, after Microsoft announced that they were working on a next-gen XBox, the race was on... and then over. The PS3 was released in late 2006, nearly a year after the XBox 360 had been on the market. PS3 was never able to recover.

There can be some risks associated with being the first mover. Being first to market also means that you will be the first to make mistakes; mistakes that your competitors can learn from. Coke Vanilla was on the market a full year before Pepsi Vanilla debuted. According to an article in The Copernicus MZine, it took less than 4 weeks for Pepsi Vanilla to win the market. The reason was because Pepsi learned that people didn't like the stronger Vanilla taste in Coke. They countered by creating a Pepsi with a lighter Vanilla flavor.

There is a lot of information about the first mover advantage floating about on the web. I may re-visit the topic again in the future to examine many of the articles calling the First Mover Advantage a myth. There may be validity to that statement, but I'll look into it more later.

Thanks for visiting. -Sincerely, Trevor Stasik.


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Tuesday, August 28, 2007

Should The Government Bailout Companies From Credit Crisis?

I just read a very interesting article by Bill Fleckenstein, a contrarian writer from MSN Money. He was questioning any interference by the Fed in the current credit crunch. Would a government bailout be like rewarding banks and lenders for bad behavior?

I'm not sure that the government should subsidize poor business decisions. Anyway, you should read Bill's article. It's very interesting. Click HERE to read that article.
------Sincerely, Trevor.

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Falling Home Prices May Signal Recession


The world has been flipped upside-down for a lot of homeowners right now, especially for those that have taken loans out against their recently bought homes. This is quite a shock for those that expected the value of their homes to increase, which has been the norm for many years now.

However, homeowners are now having difficulty meeting their mortgage payments. Plus fewer young people have the money to pay the inflated prices for homes. Simple supply and demand dictates that as demand for a product goes down, the price that will be bid for a product will go down. As foreclosures increase over the next year, the supply of homes on the market will rise, which will also tend to force prices further down.

The S&P/Case-Shiller reported today that home prices have fallen faster than they have in 20 years. (click here to see article) This could continue for some time, barring a bailout by the government, and could spread to the rest of the economy. These falling prices may be signaling the beginning of a recession. Remain cautious with your money. Until this crisis gets closer to an end, investors may want to stay in conservative stocks, govt. bonds, or in cash for the next few months.

These are just my thoughts and opinions. Do your own research and consult a professional financial advisor before making any investment decisions. See you next time. --------Sincerely, Trevor Stasik.

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A Brief Introduction To Game Theory


This short scene from the movie "A Beautiful Mind" is a good introduction to game theory.***

Game Theory is a concept that enables an analyst or mathematician to deduce the most likely scenarios that will occur, based on the interactions of rational decisions between beings. These interactions are like a series of games in which each side of a decision will attempt to make the choice that will benefit themselves the most.

If you're saying "huh?" then you're not alone. I am learning this stuff myself and I think that blogging about game theory will give me the opportunity to reinforce what I'm learning.

As an introduction, I don't want to delve any deeper today. Suffice it to say that Game Theory may aid in a variety of decision making situations. I will return to game theory again in the next few weeks as I learn more about it.

---------Sincerely, Trevor Stasik

*** Thanks to "Clinisbud" for loading the video on youtube. The video is his youtube object I linked to.

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Monday, August 27, 2007

How To Use The Quick Ratio



How well would your company perform if it lost all of it's inventory? How long could it last? How would it stack up against an industry competitor? These are a few of the questions that may be answered with the use of the Quick Ratio.

Named the "Quick" ratio because it is fairly quick to calculate, this ratio is a quick way for financial analysts to compare the fundamentals of a stock. Crack open the annual report and pull out the Balance Sheet for two related companies, because you'll need them to compare ratios.

The Ratio is calculated as the Current Assets minus the inventory, and then divided by the Current Liabilities. Let's take a quick look at Coke vs Pepsi as an example to see which stock is the real thing. Values are left in the millions just to make calculating easier.

For Year 2006:Coca-ColaPepsi
Current Assets$8441$9130
Less inventory$1641$1926
Subtotal$6800$7204
Divide Cur. Liabilities$8890$6860
QUICK RATIO0.7651.050

As you can see, according to the ratio, Pepsi may be in a better position to absorb a hit on inventories (and thus revenue sales) than Coke. This is just one example. When using the Quick Ratio, it is best to compare companies within their own industry. Coke vs Pepsi makes some sense since they produce very similar products. Comparing quick ratios between Coke vs Evergreen Solar is meaningless because the companies do completely different things.

If anyone would like to submit additional advice for using the quick ratio, please submit a comment for this blog. Thanks for visiting.

-------Sincerely, Trevor Stasik.

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Sunday, August 26, 2007

Track the Progress of my Fitness Program

Consider this fact I heard on the radio the other day:
Fewer than 15% of CEO's are considered overweight.

Being physically fit provides a person with more energy, creativity, and happiness. I'm out of shape and I need to fix it if I'm to move significantly up the ladder of success.

I decided today that it might be helpful if friends and colleagues could follow my progress in improving my fitness. Use the link to MapMyRun to see how I'm improving. I thought that finding some support from my friends or others online might help. If you see this message, any comments or advice would be welcome. Thanks.
-----Sincerely, Trevor Stasik.







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Winterize Your Stock Portfolio Early



Summer is almost over. It may not be too early to begin thinking about winter clothes, snow shovels, and rock salt. I'm not suggesting that you pull your showshoes out of storage yet. What I am suggesting is that you winterize your portfolio early. Probably over September and October, a lot of fund managers and individual investors will load up on seasonal winter market plays. Knowing this in advance may help an investor take advantage. Moving into cold weather stocks early could be risky if the winter isn't very severe. However, if you wait until CNBC and Bloomberg are talking about it, you are probably too late.


Note:
I think of it as a piece of market psychology. People may be more likely to buy stocks that reflect their general attitude. When people are cold, they think that cold weather stocks are good market plays.




Seasoned investors and even novices like me can make educated guesses about what businesses could be affected by the change in seasons. Consider thinning down the hotel and vacation stocks in your portfolio, such as for companies like Royal Caribbean or the Bluegreen Corporation. Even if a warm weather company has innovation and good strategy, they will need to work harder for their sales during the winter months. Why not find a winterized stock pick that you can get for a discount at this time of year? Then hold on for a month or two untl it goes up.

Winterized stock ideas that you may want to research further include:
Columbia - as a winter coat play.
Bayer - as a cold/flu play.
Devon Energy - Natural gas play on heating.


These are just a few of my ideas. Be sure to do your own research before investing.

-------Sincerely, Trevor Stasik

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Saturday, August 25, 2007

How To Prepare For A Phone Interview



What should you do when you have a phone interview with a company? Knowing the company inside and out are an excellent way to prepare. However, if you do not have time for a full preparation, then you need to "cram for the exam".

This is a quick and dirty list of things that I think are important before you take that phone call:

1. Know the company's brands. If they have multiple divisions or departments, know a little bit about that part of the company. For example, if you had an interview with Kimberly-Clark, it would be good to know that they do more than just consumer brands. They also have a health care department that produces products to aid digestion, surgical procedures and pain management. Kimberly-Clark also has a professional department that supplies safety eyewear and gloves to commercial industries.

2. Know the company's CEO, market cap and approximate income for last year. A good way to check this is to use google or Yahoo finance. While you are checking out that information, you may also want to pick up a "gotcha" fact. This is a cute thing such as the company founding year.

3. Understand what position you are applying for. Read the job description again. Try to think about what questions that they may ask you in advance about that job. These may be behavioral questions or they may be skill questions. It sometimes helps to write the anticipated question and answers ahead of time. Also, prepare at least one question ready to ask your interviewer about the job.

4. Check your schedule. It's wonderful to be offered an interview opportunity until you realize you already have something else scheduled. You should have a planner or calender with you when you set up the appointment.

5. On the morning of the phone interview, dress the part. It doesn't matter if they can't see you. If you can wear a suit, wear a suit! The idea is to build confidence before going into the interview. Pretend that this interview is the same as if you were in person.

6. Have a glass of water ready. You don't want your voice to become dry and raspy in the middle of the interview.

Phone interviews can be a little stressful, but with preparation you can do better.

Good Luck! -------Sincerely, Trevor Stasik.


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Friday, August 24, 2007

A Glance At The Market Today and Six Months Later

It's a day to watch on the market. Things have steadied quite a bit since last Friday's Discount Window Rate Cut. However, where the markets close today will give us an idea about what happens next week. A triple digit loss going into the weekend, or if the S&P closes below 1450, may signal the market moving negatively next week. If the markets can hold steady, perhaps next week will be benign. If the markets somehow end with a significant upside, it would be a pleasant surprise.

Ah, some news coming in. New home sales are unexpectedly up 2.8%. That could convince the Bernanke Fed that a Sept. rate cut is unnecessary.

Unfortunately, we are still talking about the short term. Over the next six months, I don't think that any of this solves the longer term problem of the credit crunch. (By the way, whoever coined the term "credit crunch" should be collecting royalties) The problem is still out there, and it's not just sub-prime lenders that
could be in trouble. Many people that were borrowing against their homes may not be able to continue doing that. Banks and brokers have started closing down subprime units and firing people. These upper-middle class unemployed will suddenly be unwilling to purchase homes. This housing problem has only lit the fuse. There are just too many things that are connected that could hurt the ecconomy. A weak economy will likely mean a bearish market.

I'm not sure that we are sliding into a recession yet but we could be going into a weaker market environment over the next six months. Stay cautious.

------------Sincerely, Trevor Stasik.

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Thursday, August 23, 2007

How to use the Current Ratio



Let's take a moment to discuss the Current Ratio, also known as the Working Capital Ratio. It's pretty simple to figure out from the name, that it's a ratio designed to analyze a company's ability to meet it's short term (current!) obligations. To find your ratio, go grab a balance sheet and find the current assets. Then divide them by the current liabilities.



That's your ratio... but what does it mean?

Obviously, you want there to be more assets than liabilities. If your company has a current ratio of less than 1, you should seriously consider selling that stock immediately. If the ratio is between 1.5 and 2.5, your stock is probably in good shape.

The Current Ratio is a good weeding tool. Use it to clear away a lot of the messy stocks first, and then you can look for your remaining picks. It also a useful and EASY tool for comparing stocks. If you have two nearly identical stocks, but one of them has a higher current ratio, that would be the stock you'd want to pick.

One thing to watch out for are stocks with really high ratios. Stocks with super high ratios may be making inefficient use of their assets.

Thanks for stopping by my blog. -----Sincerely, Trevor Stasik.

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Wednesday, August 22, 2007

CNBC Fast Money MBA Challenge Finale


Well that was certainly an interesting wrap-up. It suffered a little bit in the finale from "Milking The Cow" with too many commercial breaks. Hey, I guess they've got to pay the bills somewhere. I think that the market challenge between Yale School Of Management and McCombs U of Texas was especially interesting considering that the markets have been in the midst of a maelstrom. I felt for sure that Texas was going to come away with the win, but that's just me rooting for the underdog. Well done, Yale! Congrats.

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Price To Book Ratio


The Price To Book Ratio is one tool of a financial analyst.

Calculating it is a fairly simple task. Take the market price per share and divide it by the book value per share. If you don’t know where to find the market price for your stock, it’s as simple as can be. Just look up the current stock price on a site like Bloomberg or Yahoo Finance.

Finding the book value per share is slightly trickier. First we will need to find the book value of the company. Go to the company website for the Annual Report, since that’s probably the quickest and most accurate location of the financial statements. If you can’t get the annual report, you can get the information off of the web. Now, take the total assets listed in the balance sheet and subtract all of the intangible assets. This will leave you with the value of assets that you can touch and feel. That’s the book value.

Then take the book value of the company and divide it by the number of shares outstanding. The number of shares outstanding can also be found on the balance sheet. There you have it, the Price To Book Ratio.

As an example, let’s take a look at Intel’s book to value (2006), since I currently own some shares in it. We can see that Intel has total assets of $48,368 million. There are intangibles such as goodwill that need to be subtracted. $48,368 - $3861 = $44,507 million. Then we take the $44,507 and divide it by the number of shares, which is 5766 million shares. $44,507 / 5766 = $7.718 book value per share. Then we can find today’s market value. For Intel, right now the market value is $24.07.

Market Per Share / Book Per Share = $24.07 / $7.718 = 3.12

The Price To Book is not always helpful, but can sometimes be useful for long term value investors. If the market price of a stock is lower than the book value, this may be a sign of a significantly undervalued stock. Use of a calculator or a good stock screener may help an investor find these undervalued stocks. Remember, the Price to Book ratio is just one tool. You should use multiple tools when researching investments.

Thanks again for sticking with me for another blog entry. I’m still learning, so if there is anything I calculated incorrectly or any information you’d like to add, please post a comment.

----------Sincerely, Trevor Stasik

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Tuesday, August 21, 2007

Identity Theft Is No Game


I just saw a news fact that almost made me jump out of my shoes. This story at netscape
(Click Here For Story)
about how over a million and a half ID's were stolen from monster.com. That's a big problem. Consider somebody like myself that has a resume posted there. A thief could use the information to send spam and to phish. An even bigger problem that I just learned about is a thing called "ransomware". Apparently, the ID thieves can lock up your computer and force you to send them a fee before they will let you back into your computer. I have to tell you, that could be a big deal for anybody with stolen information.

You should also watch out for theives pilfering information the old fashioned way, too. Several years ago, someone stole my mail. They were able to use that information to break into my bank account and steal some money. ID theft is no game. Make sure you run your anti-virus and anti-spyware programs frequently. Keep an eye out for bank statements. Lastly, shred any confidential data.

In the game of life, sometimes the best offense is a good defense.
-------Trevor.

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Monday, August 20, 2007

Don't Think We Have Heard The Last Of The Credit Crunch

The markets leveled off a bit today. Unfortunately, I don't think we have heard the last of the credit crunch. I know that many CNBC commentators feel that the consumer is doing fine and that the middle class isn't hurting. However, I work at a retail printing company that serves an upper-middle class. I've seen more people than usual faxing mortgage documents and talking about losing their home than before. The consumers that are buying things in the area seem to be stretching their dollar more.

Perhaps this is my local view from a Philadelphia suburb, but I think that consumer's pain just hasn't been completely reflected in the consumer sentiment report. I recommend caution for the next month or two. The markets may still have a bit more correcting to do.

Sincerely, Trevor Stasik

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The Fed Discount Window Rate

For my first Financial blog entry, I think I'm going to try my hand at describing the Fed Discount Window Rate. This is a pretty important and timely topic to discuss considering the last week in the markets (volatility!).

The Discount Window Rate is a tool that the Fed uses to moderate the liquidity of funds in the market. Sometimes when a bank needs to borrow money to meet it's needs, it will borrow from other banks at a rate known as the "Fed Funds Rate". However, if money is not available from another bank, the bank in need could go to the Fed and borrow money at the Discount Window Rate.

This last week, the markets were rocked by the subprime mortgage mess. There was a lack of liquidity, or ability to convert assets into cash, because the global financial institutions were concerned about home buyers' ability to pay back loans. The markets dropped for several days in a row. Then this Friday, the Fed dropped the Discount Window Rate and extended the payback period to 30 days. Dropping the rate made it easier for banks to borrow emergency funds from the government.

Thus the confidence has been restored in the banks and the stock market, at least temporarily. Let's see what the markets and the Fed do on Monday morning now.

Since I'm new to blogging, any comments about my style are welcome. I'm still learning, so if any of my information is wrong, please let me know.

Also, I'd love to hear any readers insights into the market turmoil!

------Sincerely, Trevor Stasik.

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Sunday, August 19, 2007

Welcome to my first blog entry.

Welcome one and all to my first blog ever.

I've decided on the title Analysis and Game for the time being. Hopefully you will enjoy reading the posts that will appear here over the coming weeks. Today I am just doing an initial set-up. I hope to place my thoughts on Financial Analysis. You will also find my opinions on various life strategies and hobbies. More interesting prose will be posted here in the near future, so visit back here often. Thanks for stopping by.


Trevor Stasik

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