Posts Tagged ‘Lehman Brothers’

Climate Action Partnership Stock Portfolio vs. Dow, S&P

March 12, 2009

We contended previously that membership in the U.S. Climate Action Partnership does not speak well of a company’s mission or strategy, although there are admittedly good performers on the list. This is because a well-managed corporation does not need government mandates to force businesses and individuals to buy its products (e.g. alternative energy sources, compact fluorescent lamps). As an example, if General Electric was up to the job of engineering cost-effective wind turbines and solar panels, it would probably not be able to make them quickly enough to keep up with demand even without tax credits to encourage their purchase. When Henry Ford engineered an affordable alternative to horses and their solid waste, he did not need government mandates to sell his product either.

As an experiment, we created a hypothetical stock portfolio that assumes the purchase of $1000 worth of each USCAP corporate member’s publicly traded stock on January 2, 2002. (It does not include Duke Energy, DUK, because there appears to have been a stock split of some kind, Shell Oil, which has multiple symbols, or NRG, which was not listed in 2002.) This gave us $18,000 in eighteen stocks. The Dow Jones Industrial Average was 10,073.40 and the Standard and Poor 500 closed at 1,154.67 on January 2, 2002. March 9’s closes were 6,547.05 (down 35%) and 676.53 (down 41.4%) respectively. Our hypothetical $18,000 worth of USCAP stock (18 companies) would be worth $10,555.58 (down 41.36%) on March 9. In other words, a portfolio of equally weighted USCAP publicly traded corporations underperformed the Dow, and just about equaled the S&P 500. Had we also purchased $1000 worth of former USCAP members Lehman Brothers and AIG, our $20,000 investment would now be worth about $10,556 or so, i.e. down 47 percent from January 2, 2002. (more…)

Americans Wake Up to Obama’s Carbon Emission Scam

March 7, 2009

We reported previously that the U.S. Climate Action Partnership’s (USCAP’s) members include some of the country’s worst-managed corporations, as demonstrated by their need for government bailouts. These include former USCAP members AIG and Lehman Brothers, as well as government-dependent entities like General Motors and Chrysler. Our position is that companies that need government mandates to force people to buy their products or services contribute nothing to society, and they should not be in business. If General Electric, for example, cannot engineer cost-effective wind turbines and solar panels, and must instead get the government to require businesses and utilities to buy its products, it is a liability to the country and should not be in business. This message comes across clearly in Kimberley Strassel’s “If the Cap Fits,” from the Wall Street Journal.

    GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE’s revenue from environmental products long ago passed the $10 billion mark, and it doesn’t take much “ecomagination” to see why Mr. Immelt is leading the pack of climate profiteers.

Americans are fortunately waking up to Barack Obama’s plans to raise prices for consumers and knife the unions and workers who helped elect him by imposing carbon taxes that would enrich special interests (USCAP members) while driving energy-intensive businesses offshore. (more…)

Repudiate Obama’s Carbon Regulation Plans to Start Economic Recovery

March 4, 2009

Banking problems and “toxic assets” are major contributors to the ongoing decline in the stock market, but it is quite likely that investors took them into account last year. The 800 pound gorilla in the living room that nobody seems to want to talk about consists of Barack Obama’s agenda (per his State of the Union Address) to impose taxes on all fossil fuels, or require users of fossil fuels to buy carbon offset credits from the modern counterparts of medieval indulgence peddlers.

As long as this agenda continues to menace the United States, investors are rightly reluctant to invest in American manufacturing, transportation, and other energy-intensive sectors. If, however, enough Senators (including Democrats from coal-producing and manufacturing states) pledged to vote against and filibuster Obama’s cap-and-trade agenda, it would restore investor confidence, break the downward momentum of the stock market, and set the stage for an economic recovery. (more…)

The Financial Crisis in One Sentence

September 30, 2008

The smart college boy/college girl MBAs* who run investment banks and other businesses have less practical ability than a man who did not even finish high school. Henry Ford told us in 1922 exactly why a good 20-30 percent of our investments vaporized during the past several months, and he summarized the cause in one sentence:

    The primary functions are agriculture, manufacture, and transportation.

There are exactly three ways to create wealth: grow it, mine it, or make it. While transportation does not add actual value, one usually has to move whatever one grows, mines, or manufactures. (more…)

Why General Electric is Heading South: Climate Action Partnership says it all

September 25, 2008

“GE slashes earnings view for 2008, but shares gain” by Marketwatch shows that General Electric is off about 38% from its high of about 42 only a year ago. Furthermore, “GE currently makes about 45% of its earnings from the financial unit, called GE Capital.”

From where we sit, General Electric’s problems are the direct result of a management belief, as exemplified by the company’s membership in the Climate Action Partnership, that the company does not have to create genuine value to earn a profit. As described by Kimberly Strassel’s “If the Cap Fits: Why our CEOs are warming to Kyoto,”

    Finally, there’s General Electric, whose CEO Jeffrey Immelt these days spends as much time in Washington as Connecticut. GE makes all the solar equipment and wind turbines (at $2 million a pop) that utilities would have to buy under a climate regime. GE’s revenue from environmental products long ago passed the $10 billion mark, and it doesn’t take much “ecomagination” to see why Mr. Immelt is leading the pack of climate profiteers.

In other words, instead of looking for ways to get the cost of solar panels and wind turbines down to where utilities and even homeowners will prefer them over traditional electricity sources (also known as “making money the old fashioned way, by earning it”), GE apparently wants the government to pass laws to compel utilities to buy his company’s products. This attitude, as well as a shift in resources from GE’s traditional manufacturing strategy to financial services, probably explains a good part of the company’s troubles.

On another note, another Climate Action Partnership member wanted the government to impose carbon emission caps, and a cap and trade regime, so it could make money by taking commissions on carbon credit trades. Its name was Lehman Brothers.

No Tears for Lehman Brothers

September 14, 2008

We literally feel our readers’ pain for today’s 504 point drop in the DJIA because of Lehman Brothers’ impending collapse on the stock market, because it impacts our own investments. However, we will shed no tears for Lehman Brothers itself, and we are not particularly surprised that it is going south. Furthermore, even if Lehman Brothers disappears tomorrow, it will in no way affect the United States’ remaining ability to create genuine wealth.

Henry Ford told us long ago that there are exactly three ways to create wealth: mine it, grow it, or make it, but Lehman Brothers apparently had the idea that it could create wealth (or at least enrich itself) by trading in carbon credits–an activity about as meritorious as speculation in baseball cards, coins, comic books, or tulip bulbs (ask the Dutch about the latter). The bubble eventually bursts (as it did with the dot-com stocks), and the chickens come home to roost. Lehman Brothers is a member of the Climate Action Partnership (CAP), whose agenda is to promote legislation to cap carbon dioxide emissions and then make money by trading in “carbon credits.” (more…)