Saturday, February 27, 2010

“Why going with things like Coke could prove a better philosophy - Age” plus 3 more

“Why going with things like Coke could prove a better philosophy - Age” plus 3 more

Why going with things like Coke could prove a better philosophy - Age

Posted: 27 Feb 2010 02:27 PM PST

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INVESTMENT banker-turned-fund manager Christopher Mackay is a little bit bearish and a little bit bullish.

He says that although financial Armageddon has been avoided, investors have much to worry about on the economic and political landscapes, particularly sovereign debt and risks relating to stimulus unwinding.

Mackay says contagion and panic are again possible, but he thinks his investment philosophy - holding shares in such global powerhouses as Coca-Cola, McDonald's, American Express, Wal-Mart, Nestle and Procter & Gamble - will do all right, no matter what happens, because of their competitive advantages.

''The crisis has forced many investors to focus on short-term risks and returns and overlook some outstanding companies,'' he says, adding that some company valuations remain absolutely compelling. Mackay throws in an example from nine decades ago.

''Short-term market movements are sometimes simply wrong and no indicator of long-term prospects. Consider the halving in Coca-Cola's share price shortly after listing in 1919 in response (to the rising sugar price).''

Mackay says that if the world recovers strongly his beloved big global companies will do very well, while if it falls back into a double dip recession they will do relatively better and replicate their satisfactory returns of the past few years.

''If the world 'muddles along' they will outstrip competition and strengthen their competitive advantages while continuing to earn billions of dollars annually in cash flows and profits.''

While some investors might think investing in big names such as Coke is dull and boring, Mackay's thesis is that the ''extraordinary values'' of these companies in emerging markets are ''hidden in plain sight''.

He notes that in the early 1970s, the market values of the Nifty Fifty companies were pushed to extremely high levels relative to their then prospects as they were regarded as one-stop companies likely to benefit from global growth.

''In time,'' he says, ''the highest-quality companies will again command a premium as they pick up profitable market shares and strengthen their competitive advantages around the world while concurrently demonstrating strong defensive characteristics in many established markets. We also believe current emerging markets' earnings for our companies materially understate their potential.''

And like all good Buffett fans, Mackay - the chief investment officer of Magellan Financial Group - is happy to admit his mistakes. ''We missed the opportunity to hedge the Australian dollar when we looked closely at doing so in early calendar 2009 and hence our currency position has adversely impacted (our) results.

''By the time we properly recognised factors such as the impact of China's stimulus and other forces upon commodity markets, the $A had already appreciated above long-term averages.''

?The reporter owns Magellan Financial shares.

Sims on front foot

SIMS Metal has come out fighting against the Stock Exchange's probe into when the company became aware that its earnings would be 46 per cent lower.

After Sims recently announced its results the scrip lost as much as 12 per cent.

Sims has told the exchange it did consider the earnings fall material because the company had not provided quantitative guidance; research estimates from six analysts were on average only 6 per cent higher than the actual results reported, and Sims' quarterly reports from May last year talked about big earnings falls.

''The company does not believe that there was any basis for the market to expect this trend to be reversed in any material way for the fiscal 10 half-year,'' Sims' Frank Moratti told the exchange.

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Taylor Armerding: We can't continue to punish success, reward failure - Newburyport Daily News

Posted: 27 Feb 2010 01:08 PM PST

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My friend isn't rich.

He is in no immediate danger of making more than $250,000 a year. So he's well short of the line beyond which President Obama says Americans deserve to have the feds take more of what they earn, because he has decreed that they can afford it. Well at least outside the line that would prompt Gov. Deval Patrick to "ask" him to pay more.

But my friend is still paying higher taxes. The philosophy that those who are "more fortunate" should, to paraphrase the president, spread their wealth around, trickles down to the local level. Hence, he took a major tax hit this year. And he deserved it, at least when viewed through the Obamanation lens.

He made the mistake of working harder, putting days and weeks of labor into improving his house.

It's always been a nice piece of property with a lovely view across rolling hills. But the house was rundown and horribly inefficient when he bought it.

That was OK with him and his wife. They saw the potential. They had four growing kids and figured if they put some serious sweat equity into it, this would be the place the kids could grow up and they could grow old.

So, they set to work. She did most of the home-schooling of the kids, and he worked as a contractor. Sometimes the work was plentiful, sometimes it wasn't. And on weekends or whenever he got the time, he worked on the house.

Over the past five years, he replaced all the windows. He tore out the interior walls and made them tight with insulation. New siding. New roof. New paint. New wallpaper. Some refurbished appliances. He did it all himself, and sacrificed to buy materials.

Slowly, it was transformed. It still has its original New England charm, now combined with quality workmanship. The drafts are gone. So are the crumbling interior walls and peeling paint.

It's still modest, but it is welcoming and warm. A piece of property that had been sliding into dereliction is now something of a showpiece.

And the reward for this?

"My property taxes almost doubled," he told me a couple of weekends ago.

"The guy down the street from me has a trailer that's practically falling down. He hasn't done a thing in the past 10 years. I checked, and of course his taxes were low to start and they haven't budged.

"I guess I just should have sat around and done nothing."

Especially now since two of his children will be in college in the next two years. He thinks about the money and time he could have saved if he had just done the minimum of maintenance and his taxes had stayed the same. He would have had $3,000 or more every year to put toward those crushing college bills.

Yes, my friend's is just one story, one result, from the "punish success, reward failure" philosophy that now prevails under what is cloaked in the high-minded euphemism, "progressive tax rates."

But that philosophy is eating away at what really spreads the wealth — the opportunity to succeed and to be able to enjoy and pass along the fruits of honest labor.

That used to be the great promise of America. Now it is condemned by those from the president on down as unconscionable greed, of being unwilling to "pay your fair share."

Really? Then how do you define the demand that I deserve a chunk of the money you've made, just because I made less than you? That's not greed?

Some day my friend may become successful enough to hire a couple of people to work for him. He could become one of those thousands of small businessmen who create jobs — the kind of people to whom the president pays lip service.

But when I ask him about the president's proposal to give tax breaks to those who create jobs, he rolls his eyes.

"You mean, if I fill out all the extra paperwork, I get a one-time treat?" he scoffs. "What, he thinks we're all puppies who will 'sit' for a little handout?

"I don't want a handout. I just don't want to get strangled with regulations and taxes."

So, when the time comes, he'll probably pass on creating jobs. Why go through the 60- to 80-hour weeks just to get punished for it?

What breeds the resentment in people like him is that nobody knows how hard they worked to improve their circumstances. They're just branded as "more fortunate," as if what they have fell into their laps.

Class envy gets people elected these days. It plays well with the president's constituency of government dependents. But it doesn't play well with the real economic engine.

That's why the only sector that is showing real job growth is the public sector.

President Obama and Gov. Patrick probably won't be around to see the ultimate fruits of their philosophy put into practice. But I wonder if they ever consider, when everybody is working for, or collecting benefits from, the government, who is going to pay the bills.

¢¢¢

Taylor Armerding is a staff columnist. He may be reached at 978-946-2213 or at tarmerding@eagletribune.com.

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Election Letters: Texas House District 66 - Dallas Morning Views Blog

Posted: 27 Feb 2010 01:29 PM PST

A pinch of philosophy - Age

Posted: 26 Feb 2010 03:47 PM PST

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Arnold Zable grows basil every year, a variation on his father's dedication to a crop of horseradish.

Arnold Zable grows basil every year, a variation on his father's dedication to a crop of horseradish. Photo: Marco Del Grande

A family legacy lives on in pesto jars.

Throughout my childhood there was not one occasion when our family dined out. After mother died I finally persuaded my 86-year-old father to give it a try. It was a 10-minute walk from our North Carlton home to the Rathdowne Street restaurant. Aware of my father's tastes I kept it simple and ordered a bowl of minestrone.

"Well?" I asked after he had finished. "How was it?" He shrugged his shoulders, looked at me with a perplexed expression and said: "I can't understand it. Why pay for a bowl of soup when you can make it at home and save yourself all the trouble?" Needless to say it was the last time I took father out for a meal.

There was perhaps another reason for this reaction. In the final two years of his life, after mother died, father came into his own as a cook. The kitchen had been mother's domain. Within weeks he was enjoying his new-found kitchen freedom. His specialty was potato latkes. The recipe, he said, came from his mother, Sheine Liberman. She too had ruled the kitchen in their apartment in Bialystok, a border city in eastern Poland. Wars came and went, tribes fought, regimes changed, but Sheine's kitchen remained a constant.

Latkes are simple fare, a mixture of grated potato, flour, beaten eggs and shredded onions. Father added raisins and chopped almonds. "Something of myself," he would say. "In this way the recipe goes beyond nostalgia and becomes a living re-creation." Father could not resist garnishing everything he did with philosophical reflections.

His greatest love, apart from Yiddish poetry, was gardening. Restricted to the small space of the backyard of a single-fronted Carlton house, he grew tomatoes, silverbeet and horseradish. When the milkman still made his nightly deliveries by horse and cart, father collected the manure from the street, carried it in a bucket through the house and spread it over the vegetable patch.

From his produce there emerged the one recipe he could fully lay claim to, a horseradish sauce known in Yiddish as khrain. Once again father added his own touch, beetroot juice, to give the sauce a reddish colour. Khrain was an ideal condiment for the briskets, rissoles and roasts that were mother's specialties. The horseradish also served, as tradition demanded, as a reminder on the Passover table, of the bitterness of slavery.

The Passover dinner was the one celebratory family meal of the year. My mother, deeply disturbed by the loss of family to war, had become increasingly reclusive. Nevertheless she laboured for hours to produce a feast. She cooked her last Passover meal, aged 85, just months before she died. A proud woman, she insisted on delivering the dishes to the table despite the significant tremor in her hands. She moved slowly from the kitchen, carrying the bowls of chicken soup, one by one, and with supreme effort succeeded in placing them on the dining room table.

It was the one night in the year that we did not eat in the kitchen, the only time our special white tablecloth was brought out, and the one occasion when father assumed the role of head of the family to conduct the Passover service. As children, three brothers with just four years between us, we could not wait for the lengthy readings to end and the meal to begin. The highlight was the four ritual glasses of wine we were allowed to sip from. The drinking produced a night of comedy perfect for a Woody Allen or Groucho Marx script.

After the meal we stepped out into Canning Street for a sobering walk. At the time there were several Jewish families living nearby. On Passover nights their doors were left open. Inside, a glass of wine stood in readiness for Elijah the prophet's annual visit. "Look closely," father would say, holding up the glass at the end of the Seder. "Elijah has sipped at least one millimetre." We were so tipsy from our own efforts, that we readily accepted the optical illusion.

Mother died in 1990, Father two years later. Till his final year, he continued to harvest his horseradish. While I am yet to follow the tradition I have developed my own variant. Instead of horseradish, I grow basil. The herb is an ingredient of pesto sauce. It has become an annual ritual to harvest the bulk of the crop, chop it finely, and add to it the ground pine nuts, grated parmesan, crushed garlic and olive oil.

Perhaps we inherit more from our parents than we realise, in my case, jars of pesto in place of my father's jars of khrain. And like Father, in writing this piece, I have garnished the sauce with philosophical reflections.

Arnold Zable is a Melbourne writer.

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