Is A Worldwide Recession Looming?

"The four most expensive words in the English language are, 'This time it's different.'" 
-- Sir John Templeton

A. Gary Shilling is predicting a worldwide recession caused by the housing crisis, credit crisis, and weak U.S. consumer spending.  From my last post, U.S. consumer spending is 20% of world GDP.  

He believes this recession will be the worst one after World War II.   

Recently, Japan has shown negative growth as they are an export nation.   Maybe it's already happening.   Europe is also starting to have problems.  

Shilling believes hotels, restaurants, consumer electronics, airlines, Starbucks, carmakers, fashion, etc. will all suffer.   Therefore, he doesn't recommend holding stocks in these companies.   

This makes sense.  If there is a recession, do you go to Hyundai Department Store or E-mart?   Will you sleep at an expensive hotel or take an expensive vacation?    

Be careful.  Stocks and other investments take a tumble during a recession.  

Be brave.   One of the best times to invest in stocks is also during a recession.  Not in the beginning though, you have to wait 6-12 months later when everyone realizes the economy sucks.   And everyone is feeling depressed.  Buy at the point of maximum pessimism, Sir John (Templeton) would insist.

What should you do?  Save as much cash as possible, because I also think a pretty bad recession is coming.  If you are going to graduate in 6-12 months, you better find a job as soon as possible.   Most companies do not hire a lot of workers before a downturn and freeze hiring during a recession.    

It'll Be An Empty Christmas

I think retailers and manufacturers will be suffering this Christmas.   

1.  In the U.S., banks are reducing credit limits on cards.   This is probably going to shock a lot of consumers.   Reduced credit limits = less spending.

2.  If the value of your house decreases, are you going to spend a lot of money?  

3.  If the value of your stocks or retirement account is falling, are you going to spend a lot of money?  

4.  U.S. consumer spending accounts for around 70% of U.S. GDP and 20% of world GDP.   lol 

(CNN Money.com)

6.  Exports account for 2/5 of the Korean economy.    

(Bloomberg)

7.  Debt and late payments affect FICO scores in the U.S., which in turn can raise your car insurance.  lol   Higher car insurance = less money to spend.  

8.  Gas prices are still high. 

9.  Food prices are increasing.

10.  Unemployment is close to 6% in the U.S.   South Korea's unemployment rate is around 4%.  

More people without jobs = less spending.

11.  In the U.S., mergers and acquisitions usually involve a lot of layoffs, which will increase the unemployment rate.  

12.  Housing has not bottomed.  Prices fell in July.  There are 4.67 million (and rising) unsold houses and condos in the U.S.   You need to have a great credit score and 20% downpayment if you want to buy a house now.  How many people do you know have that?  

13.  We will not have another Great Depression, but there are quite a few similarities.  One of the causes of The Great Depression was leverage.  People were putting 10% down to buy stocks --  thousands of shares of stocks.  Our current financial crisis is also due to leverage. People put zero down to buy houses.   In 1929, J.P. Morgan tried to save the economy by investing billions in certain banks.  In 2008, Warren Buffett invested $5 billion in Goldman Sachs.   J.P. Morgan was able to prop up the market temporarily before another crash.  Will Buffett be doing the same?  In the 1930s, private and corporate investment ceased.  Companies could not expand and had to consolidate in order to pay debt.  In 2008, banks are not loaning money as freely and companies are consolidating.  Finally, during The Great Depression, banks foreclosed on a lot of homes.  Unfortunately, no one had money to buy these foreclosed properties.  So, banks ended up with tons of properties but no way to get cash from them.  Sound familiar?  

Overall, I think a worldwide recession is unavoidable.   All this talk about China becoming a world economic power... but the U.S. still has the greatest impact on world economies.   

Do you know anyone that's going to be spending a lot this Christmas?   

Cannes Lions 2008

The Cannes Golden Lions are back in Seoul again.  You can see them at CineCube in Gwanghwamun from Thursday 9/25 thru Wednesday 10/1.   This will be my fourth consecutive year of watching these amazing ads.  If you've never gone before, I recommend a trip.  You can find more information here.   Some of the highlights from last year's festival can be found in this post.  

Here's a Golden Lion winner from 2000.  

 

Razor Commercial - More free videos are here

Why I Love Dividends...

Dividends are great, especially in a down stock market.  Since 1871, the S&P 500 averaged a 9.2% return.  That's a long time.  =)    However, dividends accounted for 4.8% out of the 9.2%.   Therefore, over half of the return is from dividends.  The rest is from capital appreciation (2.2%) and inflation (2.2%).  When stocks are down, you can sit back, relax, and collect your dividends.   The last time I checked, almost all of Warren Buffet's stocks pay a dividend.  Here are most of them:

Stocks (Symbol)        Dividend (%)

IR                                   2.10        

SNY                               4.60

BNI                                 1.60

KFT                                3.50

WFC                               4.40

USB                                5.10

UNH                                 .10

GSK                               4.70

JNJ                                2.60

NKE                               1.50

LOW                              1.40

HD                                 3.20

KO                                 2.80

AXP                               2.00

PKX                               3.50

In 2007, Buffet pocketed $1.6 billion in dividend income.  That's around $133 million a month from dividends.   lol   Is that why he's always smiling?

Whenever you look at a company's financial information, it can be confusing, arbitrary, and the numbers can be faked.   But you can't fake a dividend.  

Do your stocks pay a dividend?  

Wealthy, Thin, and Fluent

Saving money, losing weight, and learning a language all have one thing in common.  

In order to achieve any of these goals, you need to have discipline.  The root of discipline originates from "discere - to learn."   

People are naturally full of excuses.  I've heard everything (and also used a few of these myself):

My friend is having a birthday party.

I'm having a birthday party.

My friend is leaving for military service (party).  

My friend is graduating (party).

My friend is leaving to study abroad (party).

I don't have time.

I don't have any money.

I don't have any money or time.  

I'm too tired.

I'm sleepy.  

It's too early in the morning, so I'm sleepy at 9:30AM.

It's close too lunch time, so I'm tired and hungry at 11:30AM. 

 

I ate a big lunch, so I'm sleepy at 1:30PM.  

It's been a long day, so I'm tired at 3:30PM.

It's too hard.

I woke up late.

(Someone) passed away.  

I forgot.  

I missed the bus.

I missed the subway.

There's too much traffic.

It's raining.

It's snowing.

It's too hot.  

It's too windy. 

I broke up with my boyfriend.

I broke up with my girlfriend. 

My friend broke up with his or her girlfriend/boyfriend.  

I have a date with my boyfriend.

I have a date with my girlfriend.  

I have a blind date. 

It's Valentines Day.

It's White Day.

It's Black Day.

It's a holiday.  

It's Valentines Day. I met my girlfriend in the snow, but we missed the last subway and now I don't have time or money.  

Usually, when I hear an excuse I think:

1.  Have I heard this one before?

2.  Does this person need more self-discipline?  

"Do or do not...there is no try." - Yoda 

Is it a Google Earth?

Google Chrome reached 1.5% market share (of the web browser market) in one day.   That's pretty respectable for a new product. However, Google's real threat to take over the world is Android.  

Android is basically software for mobile phones.  Currently, each mobile phone maker uses their own software.  It's annoying when you buy a new phone, and you have to learn how to use it.  In addtion, it's difficult to transfer over your saved phone numbers and contacts.  Usually, workers at the cellphone store have to do this for you.  Google's goal is for every mobile phone to use Google's operating system - similar to how almost every computer uses Micro$oft Windows.   If they succeed, it will truly be a Google Earth. The cellphone market will become like computers with hardware makers and software makers.   If you want to know which one makes more profit, just think of Bill Gates.     

Will they succeed?  Google has $13 billion in cash.   lol  To put it in perspective, Samsung Electronics has around $1.8 billion in cash.  

In 2007, over 1 billion mobile phones were sold around the world.   Do you see the huge potential?  They only need to make a few dollars from each mobile phone sold.  My guess is that Google will initially give Android to mobile phone manufacturers for free.  Then, try to gain market share and begin to rule the earth.   

More info:

Currently, the Google search engine dominates the world.  They have a 65% market share of searches around the world.   There are approximately 400 million Internet users in the world.  

That means around 260 million people are using Google search everyday.  lol   

The founders of Google, Sergey Brin and Larry Page are both 35 years old.  They each have $18 billion.  lol  

Sergey Brin's father is a math professor at Maryland University.  

Larry Page's father is a computer science professor at Michigan State University.  

Google frills:  

A lot of companies offer their workers some benefits, but Google is extreme:

•	Food Hungry? Check out our free lunch and dinner – our gourmet chefs create a wide variety of healthy and delicious meals every day. Got the munchies? Google also offers snacks to help satisfy you in between meals.
•	On-site Doctor At Google headquarters in Mountain View, California you have the convenience of seeing a doctor on-site.
•	Shuttle Service Google is pleased to provide its Mountain View employees with free shuttles to several San Francisco, East Bay and South Bay locations.
•	Financial Planning Classes Google provides objective and conflict-free financial education classes. The courses are comprehensive and cover a variety of financial topics.
•	Other On-Site Services  At Google headquarters in Mountain View, there’s on-site oil change, car wash, dry cleaning, massage therapy, gym, hair stylist, fitness classes and bike repair.

•	Vacation 1st year 15 days 4th year 20 days 6th year 25 days
•	Holidays 12 paid holidays each year (sick days taken as necessary)

So, they have free food, free dry cleaning, a free doctor, a free shuttle service from your home to their office, etc.  lol  Not surprisingly, Google was rated as the number one company to work for.  

One of my friends started working for Google 8 years ago.  Today, he has about $4 million in Google stock.  He just bought his mom a $500,000 house.   

Do you think their employees are happy?  

Why didn't I major in computer science?  

Do you google?

When the name of a brand becomes the description for a product or service, it's called a genericized trademark.  Some examples of this are Kleenex, Xerox, Escalator, or Band-Aid.   Yes.  Escalator was once just a brand-name.  The newest example of this is Google, since they are the best search engine -- to google (used as a verb) means to search.  

Recently, Google released their new web browser"Chrome."   Most people (about 70% of the world) use Microsoft's Internet Explorer.   

Why do I prefer Chrome?  

1.  Since it is the most popular web browser, most viruses and trojans are written for Internet Explorer.  If you have no girlfriend, and you spend every weekend on your computer programming a new virus, then you want to reach the biggest audience.  

2.  Chrome is faster than IE.  You will be surprised how fast web pages load with the Chrome browser.  

3.  Chrome is smaller.  IE takes up so much hard drive space.  Actually, pretty much anything made by Micro$oft takes up a lot of space.  

4.  Chrome has a simple user interface.  It's simple and clean, which are my preferences.  

5.  Chrome is open source software and is more secure.   There are a lot of security features in Chrome.   

Finally, my favorite feature is the new "omnibar."  There is one space to enter web page addresses or you can just type in your search.  (The default search engine is Google of course.) 

I hope this new web browser gains market share, because I hate using IE.  

See how clean this browser looks?  

For those interested here are the Chrome shortcut/hotkeys: 

New Shortcuts:
Task Manager-------------------------------------Shift+Esc
New Incognito Window----------------------------Ctrl+Shift+N
Regular Shortcuts:
Bookmark This Page-----------------------------Ctrl + D
Bookmarks---------------------------------------Ctrl + B
New Incognito Window----------------------------Ctrl+Shift+N
Downloads----------------------------------------Ctrl + J
Help----------------------------------------------No keys
History-------------------------------------------Ctrl + H
Page Source--------------------------------------Ctrl + U
Print---------------------------------------------Ctrl + P
Refresh Page-------------------------------------F5
Refresh Page & Cache----------------------------Ctrl + F5
Save Page As-------------------------------------No keys
Back---------------------------------------------Alt + Left Arrow
Down One Line-----------------------------------Down
Down One Page-----------------------------------PageDown
File Open-----------------------------------------Ctrl + O
Find in page--------------------------------------Ctrl+F
Forward------------------------------------------Alt + Right Arrow
Home Page----------------------------------------Alt + Home
Jump to Address Bar------------------------------Ctrl + L
Jump to Search Bar(opens search bar in the address bar)--Ctrl + K
Page Bottom---------------------------------------End
Page Top------------------------------------------ Home
Stop-----------------------------------------------Esc
Tab Close------------------------------------------ Ctrl + W
Tab New------------------------------------------ Ctrl + T
Tab Next------------------------------------------Ctrl + Tab
Tab Previous-------------------------------------- Ctrl + Shift + Tab
Tab Select-----------------------------------------Ctrl + [1 - 9]
Up One Line--------------------------------------- Up
Up One Page---------------------------------------PageUp
Window Close--------------------------------------Alt + F4
Window New---------------------------------------Ctrl + N
Copy-----------------------------------------------Ctrl + C
Cut-------------------------------------------------Ctrl + X
Delete----------------------------------------------Del
Task Manager--------------------------------------Shift+Esc
Text Size Decrease----------------------------------Ctrl + -
Text Size Increase----------------------------------Ctrl + +
Text Size Default------------------------------------Ctrl + 0
Undo------------------------------------------------Ctrl + Z