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Its clear the economy is weakening. Retail activity has slowed, and the consumer is "suppose" to be 70% of GDP. The economic numbers are being spun like the words in the Bible. You know the drill, people are always saying that you can't take the Bible literally. I guess if decency were left up to the liberals they would change the name of the "10 Commandments" to the "10 Suggestions". Okay, whatever.
Yesterday we saw a prime example of how the Republican's and Democrats basically serve the same master. The Democrats caved on the funding for the Iraq war, and mother of a fallen soldier, Cindy Sheehan stepped down as the Democrats poster child after she realized that she was being used.
Yesterday, I read a column by Charley Reese. I really like Charley since he has the guts to tell it the way it is. In a recent article, "What Goes Up, Must Come Down-Way Down"- Reese said;
"The core problem with most American corporations is that they are viewed as simply cash cows to be milked. A company making profits can do one of two things. It can invest its profits back into the company, especially in research and development, or it can tout its stock and try to drive the prices up.
Since the advent of stock options, which give the chosen few a chance to buy at a low price, the tendency is to tout the stock and then, when the price goes up, execise the options at a big profit.The outrageous salaries and perks for CEO's, the stock options, bonuses and golden parachutes all attest to the cash-cow model.
During a conversation with Edward Ball, Reese asked;
"why so many corporate executives were liberals". He said, "Because they don't own it. They do not care what happens after they leave".
That is the diiference between many of today's corporate executives and American's in the past like Henry Ford, who did own his company and did care what happened to it even after his death. Ownership is what is missing in so many corporations today.
Speaking of telling it the way it is, have you watched Google stock lately? The Google insiders continue to get rich selling their shares while googly-eyed investors provide the means by which these insiders get rich.
Here is what former internet analyst Henry Blodget had to say about GOOG's valuation recently;
April 20, 2007
Google: Strong Quarter, Still Expensive
Google-the-company is different from Google-the-stock. You can be in awe of one and ho-hum on the other. Even with a flat stock price and extraordinary growth over the past year, Google-the-company has yet to grow into its valuation.
At $490, Google's market cap is just north of $150 billion. This is 60X run-rate free cash flow of $2.5 billion and 50X a generous $3 billion FCF estimate for 2007. If the global economy stays strong and the company can haul back on its CAPEX in future years, perhaps FCF could hit $4 billion or $4.5 billion in 2008. At that level, the FCF multiple starts to look more comfortable (33X-38X), but it would still be far from cheap. And banking on $4-$4.5 billion in FCF in 2008 at this point requires some serious faith.
And here is an example of the constant selling by Google insiders- Google Insider Sales- Notice also how none of these guys bought a single share of stock.
Investors don't realize it, but insiders get rich on the backs of the investors buying their stock. Its simple math, you buy, they sell.
