When to Sell Stock

When to Sell Stock
from buyingvalue.com/2009/04/when-to-sell-stock/
Read any investment book, blog, or magazines and you will see a multitude of recommendations related to buying stocks. Unfortunately, little is written about selling the stocks that you already own.

I use three key principals in deciding when to sell a stock:

Principal 1: Don’t be greedy.
Principal 2: Don’t be afraid to admit you were wrong.
Principal 3: Don’t let your carriage turn into a pumpkin.
Don’t Be Greedy
This one is pretty obvious but I am always surprised by how often investors overlook this rule. Value investing is all about determining the intrinsic value of a company and then purchasing the company below this value. If done right the market eventually realizes its mistake and drives the price of the stock up, or past, your assessed value. It happens all the time though, encouraged by a sudden increase in the stock’s price to our assessed value we hold the stock hoping that it will continue its accent. We have put our brains on the shelf and greed is driving our decision making process.

Always set an exit point and get out there, be it a percent return or a fixed dollar amount. When you decide what a fair price to buy the stock is you should know what a fair price to sell the stock for is also. When emotion and excitement get involved mistakes are going to get made.

Don’t Be Afraid to Admit When You Were Wrong
We all make mistakes. If you have done a good job researching a company you will have read everything you can about it and have made a decision to buy based on the facts available at the time. Unfortunately new facts are always arising, or perhaps you missed something at the time of your initial investment. When these facts present themselves you need to reassess you decision and perhaps get out while you can. This may involve taking a substantial loss, but if the company you thought you invested in turns out not to be the company you actually invested in you had best get out quick.

Don’t Let Your Carriage Turn Into a Pumpkin
Companies don’t stand still, they develop new products, hire and fire senior roles, get contracts, loose contracts etc. If you bought stock in any fortune 500 company ten, or even five years ago, odds have it they are a substantially different company now than they were back then. It is your job as an investor to keep tabs on the company, understand its direction, understand how it makes money, and if it can continue to make money. If the company changes so much that the reasons you bought in aren’t there anymore then you had best get out.

I make an effort to reassess every company I own on a yearly basis. I ask myself, if I was buying this company today is what I paid still a good price? If the answer is no, or I can’t understand the business anymore then I am out and done with it.

Walter Shorenstein: what I've learned

Taken from the Bottom Line blog at SF Gate .com
Walter Shorenstein: what I've learned
The following is a transcript of San Francisco real estate owner Walter Shorenstein's contribution to an oral history project conducted by UC Berkeley's Bancroft Library Regional Oral History Office.

Lessons Learned from 94 Years of Perspective and Success

By Walter H. Shorenstein

After serving in World War II, I arrived in San Francisco with no job, a pregnant wife, and less than $1,000 to my name. Over the next 60 years I built one of the nation's largest privately-owned real estate firms -- San Francisco's largest owner of office properties with distinguished holdings including the iconic Bank of America Building.

I've lived through the Great Depression and several wars, and I've ridden the ups and downs of economic and real estate cycles. Now in my tenth decade, I've seen things and learned lessons that apply to individuals and families, small businesses and multinational corporations, as well as state and federal governments -- especially now, as people struggle to makes sense of the current financial upheaval. I don't mean to be preachy -- I simply want to share some of what I've learned.

It should be clear by now that we can't count on government regulators to protect us. Just because we can sign up for new credit cards or buy things called "credit default swaps," doesn't mean that we should use borrowed money to invest in things we don't understand. Even if our regulatory agencies rediscover their spines, government overseers will never supplant individual responsibility and common sense.

Maybe you should trade credit default swaps if you've spent your entire adult life studying derivative contracts. However, if terms like counter party risk, mark to market accounting, and capital structure arbitrage aren't part of your everyday conversation, then don't risk your future on something you don't understand.

As my company grew steadily larger and more successful, so-called "experts" told me to diversify. I wouldn't. I stuck to what I knew, what I had experience doing. (I have my own personal interests that I've always kept separate from my business, such as the Shorenstein Center for Press, Politics and Public Policy at the Kennedy School, and the Asian Pacific Studies Program at Stanford.)

And don't worry -- you won't be missing out on some magical, get-rich-quick, money-making scheme. Just because a new investment fad sweeps through certain crowds, that doesn't necessarily mean it's a smart place to put your money.

Just look at the recent track record of the so-called "Best and The Brightest" -- the titans of our financial industry and government. While often mistakenly used as a compliment, it's worth remembering the intended irony in David Halberstam's use of the term in his book about the academics and intellectuals responsible for the Vietnam War debacle.

Halberstam used the term to make the point that even educated (and wealthy) people can show extremely bad judgment and make stupid mistakes. He detailed how the "best and brightest" made "brilliant policies that defied common sense" in Vietnam, and ignored the advice of experienced policy experts.

Education is a wonderful thing, (which is why I'm closely involved with both Harvard and Stanford), but it's not everything, and classroom learning can never completely replace real-world experience. Most of the successful real estate folks in my day never went beyond grammar school.

My most valuable education came from serving in the military, and spending the Great Depression helping my dad sell clothes at his store. There's a great Yiddish word, "seykyl" which translates loosely as "street smarts." I always preferred to hire people with street smarts than book smarts.

It's said that if you're chased by a tiger, you don't need to outrun the tiger, you just need to be faster than the person next to you. Similarly, many wealthy people have learned that you don't have to be super smart to succeed, because there are always dumber people out there.

Advanced degrees and computer models too often replace common sense. Financial common sense is not that different from old-fashioned, back to basics, everyday common sense: What goes up usually goes down, and vice versa. If you don't understand it, don't invest in it. If it sounds too good to be true, it probably is. Invest in things you understand -- companies you trust, that make products you use and appreciate. Don't over-think things, trust your gut instincts.

In the military, one of my duties was to assess new recruits and assign them to a service branch. I had 15 minutes to evaluate their character and decide their fate -- I had to trust my gut. And I still trust common sense and gut instincts more than a group of people with PhD's and fancy computer models.

Be careful with credit. Using leverage can be useful and necessary -- but don't overdo it. When I bought the Bank of America building, the most cash I had into the deal was $2 million -- a relatively small portion of the total package, but I did my homework and understood my risks.

Too many families and governments underestimate or simply don't understand the power of compound interest. Just as compound interest can work for you in a good investment, it works against you with lingering debt stuck on a credit card or a mortgage. Warren Buffett says that "borrowed money is the most common way that smart guys go broke." I would emend that adage to include smart countries.

Brokers used to be limited to a 10:1 leverage ratio; however, recent regulatory changes loosened the limits and freed companies like the late Lehman Brothers to gamble recklessly with the house's money. After they crashed and burned, we learned that Bear Stearns and Lehman Brothers were leveraged more than 30:1.

In the midst of the froth and excitement of a bubble economy, there is always a boisterous and delusional group declaring an end to gravity and logic. People claiming that "the old rules don't apply" are simply part of the pattern -- an element of the cycle that repeats itself in every bubble, from Tulip-mania in 1636 to the recent tech bubble. In my line of work, for example, Real Estate Investment Trusts (REITs) were all the rage in the early 70s and late 90s, but what do you think happened to them in the 80s and again now? To paraphrase: "Those who refuse to acknowledge the cycles of the past are condemned to be unprepared for them."

The absurdity of bubbles seems obvious in retrospect, but it's the simple things that get overlooked and forgotten during wildly prosperous times. Deregulation and irresponsibility have combined to give individuals, businesses and governments too much access to capital and not enough understanding of market cycles.

My military experience taught me to be ready -- to have not just a Plan A, but also a Plan B and a Plan C, because things change, and while you can't control everything, you can be prepared for variety of circumstances. These are interesting, but not unprecedented financial times. It's simply time for Plan C and an extra helping of good old-fashioned common sense.

List To Live By from Marc and Angel

List To Live By
http://www.marcandangel.com/2006/11/11/a-list-to-live-by/


Okay, this list isn’ perfect. Some of these bullet points may be a little cheesy, and there are a few too many “God” comments. However, you caught me a little drunk on a friday night, because right now I think this is a fairly decent list to live by.

1. Life isn’t fair, but it’s still good.
2. When in doubt, just take the next small step.
3. Life is too short to waste time hating anyone.
4. Don’t take yourself so seriously. No one else does.
5. Pay off your credit cards every month.
6. You don’t have to win every argument. Agree to disagree.
7. Cry with someone. It’s more healing than crying alone.
8. It’s OK to get angry with God. He can take it.
9. Save for retirement starting with your first paycheck.
10. When it comes to chocolate, resistance is futile.
11. Make peace with your past so it won’t screw up the present.
12. Its OK to let your children see you cry.
13. Don’t compare your life to others’. You have no idea what their journey is all about.
14 If a relationship has to be a secret, you shouldn’t be in it.
15. Everything can change in the blink of an eye. But don’t worry; God never blinks.
16. Life is too short for long pity parties. Get busy living, or get busy dying.
17. You can get through anything if you stay put in today.
18. A writer writes. If you want to be a writer, write.
19. It’s never too late to have a happy childhood. But the second one is up to you and no one else.
20. When it comes to going after what you love in life, don’t take no for an answer.
21. Burn the candles, use the nice sheets, wear the fancy lingerie. Don’t save it for a special occasion. Today is special.
22. Over prepare, then go with the flow.
23. Be eccentric now. Don’t wait for old age to wear purple.
24. The most important sex organ is the brain.
25. No one is in charge of your happiness except you.
26. Frame every so-called disaster with these words: “In five years will it matter?”
27. Always choose life.
28. Forgive everyone for everything.
29. What other people think of you is none of your business.
30. Time heals almost everything. Give time time.
31. However good or bad a situation is, it will change.
32. Your job won’t take care of you when you are sick. Your family will.
33. Believe in miracles.
34. God loves you because of who God is, not because of anything you did or didn’t do.
35. Whatever doesn’t kill you really does make you stronger.
36. Growing old beats the alternative — dying young.
37. Your children get only one childhood. Make it memorable.
38. Read the Psalms. They cover every human emotion.
39. Get outside every day. Miracles are waiting everywhere.
40. If we all threw our problems in a pile and saw everyone else’s, we’d grab ours back.
41. Don’t audit life. Show up and make the most of it now.
42. Get rid of anything that isn’t useful, beautiful or joyful.
43. All that truly matters in the end is that you loved.
44. Envy is a waste of time. You already have all you need.
45. The best is yet to come.
46. No matter how you feel, get up, dress up and show up.
47. Take a deep breath. It calms the mind.
48. If you don’t ask, you don’t get.
49. Yield.
50. Life isn’t tied with a bow, but it’s still a gift.
The author is unknown.

http://www.dumblittleman.com/2009/03/how-to-change-your-life-in-30-seconds.html
I'm sure you can find thirty seconds somewhere in your day, or better still, once every hour to make small, yet frequent positive changes to your life.

Here are some ideas.; take them or leave them. The point is that major change doesn't always have to take major effort or major amounts of time.


Start a 30 second savings habit
All it takes is 30 seconds to grab some cash and deposit a coin or note into your daily savings jar in the kitchen. I have a little pink pig which I feed happily each day in under 30 seconds.


Reduce your electricity bill
30 seconds is all it takes to walk over to the wall, bend down and turn all your electrical appliances off at the wall that are not being used. After one month, my kids are now experts at this new money saving habit.

Lose the frown
All it takes is less than 30 seconds to turn a frown into a smile. A smile literally relaxes hundreds of muscles and releases pockets of stress and tension held in your face. Feel your face now for any unnecessary squinting, frowning, or tight muscles.


Start a 30 second clutter clearing session
Walk to a cluttered draw/cupboard and spend a huge thirty seconds grabbing one thing that you no longer need and throw it out. No fuss and no stress. Allow thirty seconds each day to clear at least one thing from your chosen draw/cupboard. The beauty of 30 seconds is that you haven't got any time to have a discussion or argument with yourself. If in doubt, throw it out.


Take a chill pill
How often do you hold your breath and suck in the stress. Spend longer on your exhale to support your body in releasing built up stress and tension. Ten seconds on the inhale and twenty seconds on the exhale is a good formula for inviting space into your body and creating distance between you and your worries.


Get unstuck
Always keep a copy of your favorite inspirational book close by. Open randomly and read a few paragraphs to bring insight, to your current situation. I often pick up a book when my mind is going around in circles to regroup/refocus an unproductive mind. One of my favorites is The Power of Intention by Wayne Dyer. No matter what page I read, it always seems to put me back on track again.


Repeat a mantra
When confusion hits, step back, take a breather, and spend a valuable thirty seconds calming those erratic thoughts with a sanity saving mantra. My favorite "I trust" allows me to "let go" and relax into the situation.


The 30 second detox
Did you know that 70% of waste is eliminated via your lungs? Improve the efficiency of your lungs by breathing deeply into your lower abdomen. Place your hands on your belly and feel it rise and fall with each breath cycle. A thirty second detox every hour will do wonders for your health.


Stay hydrated
Your brain needs water to think clearly. It's the first place in the body to lose water. Get into the habit of sipping on water for thirty seconds every hour.


Do nothing for 30 seconds
Put some space between you and your hectic schedule. Treat yourself to regular 30 second breaks and give your body an opportunity to re-balance itself. Close your eyes, cup the palm of your hands over your ears and listen to the blissful sounds of the ocean playing inside your head.


Cancel a complaining thought
Each time you catch yourself complaining, spend thirty seconds focusing on the opposite and increase your ratio between helpful and unhelpful thoughts.

Take a 30 second exercise break
Stand up, roll your shoulders, stretch or try some wall push ups. Better still keep two cans of food beside your computer. When reading an article, grab a can in each hand and lift up to your shoulders and back down again, repeat as if lifting weights.

Adjust the speed of your day
Take some time out and notice if your mind is racing, your breathing shallow or your body feels rushed and uptight. Simply by taking thirty seconds to observe your body, you can slow down your thoughts, your breath and the speed of your day.You might even realize that your body is hungry, thirsty or simply needs some fresh air.

Turn off the TV
Value your time. All it takes is 30 seconds to get up off your seat and turn the TV off. Do something meaningful like talk to your family or connect to nature by talking a walk.

Eat mindfully
Take thirty seconds before you eat your meal to make sure you are settled, present and ready to smell, taste, eat and enjoy your food consciously. Breathe in "I am calm" Breathe out "I smile" Repeat five times.
What do you think? Can small decisions make major changes?

Written on 3/19/2009 by Carole Fogarty. Carole is the Editor of the Rejuvenation Lounge, a blog focused on sharing ways of living a relaxed lifestyle.

Top-performing tortoise plays bear-market rally by Peter Brimelow, MarketWatch

Yamamoto is certainly making bearish noises. He writes "the consumer remains on life support" and worries that the presence of Paul Volcker on President Obama's economic team means that interest rates will be raised quickly to snuff out the inflation he expects with any business rebound: "This backdrop looks like Japan's decade of malaise. The nightmare might be revisited on the landscape of America."
Still, in his previous letter, dated Jan. 30, Yamamoto did note that "historically a countertrend rally of 30 to 50 percent is not uncommon in a bear market." He said "a substantial surge might be forthcoming" but from lower levels.
And the market promptly provided the lower levels -- the Dow was then above 8000.
Currently, Yamamoto's 15% equity exposure is divided equally between Alexander & Baldwin Inc. (AXB)Alexander & Baldwin Inc Charles Schwab & Co. Inc. (SCHW)Charles Schwab & Co., Inc (SLB) Schlumberger Ltd. (SLB)
He recommended additional 5% commitments at or below $17.75, $10.50 and $33.75 respectively.
Yamamoto also recommended an additional 10% commitment to iShares:FTSE/Xinhua (FXIiShares:FTSE/Xinhua
FXI) below $24, and 5% each to Helmerich & Payne Inc. (HPHelmerich & Payne, Inc
HP) $21.25 or below, and Rydex:Juno Fund;Inv (RYJUXRydex:Juno Fund;Inv
RYJUX) at $13.25 or below.
Yamamoto warns sternly in every issue: "Don't go chasing after a stock ... If the stock is selling below our recommended price, chances are you are getting a better bargain. If it's above our recommended price, wait for the stock to drop back. If not, look at our other selections."
On his inverse bond play, he wrote in January: "In the foreseeable future, perhaps within months, a top for the bond market could be in the offing. Still, as in every bubble, a final push to the peak takes time to materialize."

PETER BRIMELOW
Top-performing tortoise plays bear-market rally

By Peter Brimelow, MarketWatch
Last update: 12:01 a.m. EDT March 12, 2009NEW YORK (MarketWatch) -- So was that the much-anticipated bear market rally? Two investment letter hares suspect so, but a top-performing tortoise has put out a hopeful claw.
I call Stealth Stock Daily's Dennis Slothower and Dow Theory Letters' Richard Russell hares because they put out commentaries after every market close, making my job much easier.
Slothower is a new star, who actually made money in the Crash of 2008. (See Dec. 4, 2008 column.)
Last night, he stayed 100% in cash, saying "I can't see how the stock market can get a foothold here if the credit markets continue to deteriorate."
Russell is a renowned long-time permabear whose record has been damaged by paradoxically going briefly bullish at the top in 2007. (See Sept. 19, 2008 column.) He didn't think Tuesday's follow-through was strong enough to change his renewed bearish stance. But he said last night that, for younger subscribers with lower blood pressure, "a speculative position in Dow Diamonds ETF (DIADow Diamonds ETF
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DIA) with a stop-loss at 64 is an interesting trade."
I call The Yamamoto Forecast's Irwin Yamamoto a tortoise because he only publishes once a month -- and only a few laconic pages at that. Yet Yamamoto too is one of the stars of the Crash of 2008, and his strong record extends much further back. (See Oct. 29, 2008 column.)
For 2008, Yamamoto is up 6.06% by Hulbert Financial Digest count, vs. a 43.42% loss for the dividend-reinvested Dow Jones Wilshire 5000. Over the past three years, the letter has achieved a 5.25% annualized gain, vs. a loss of 15.19% annualized for the total return DJ-Wilshire 5000. Over the past five years, the letter has achieved a. 8.02% annualized gain, vs. a 6.14% annualized loss for the total return DJ-W 5000.
In his most recent letter, dated March 5, Yamamoto was coy about his (relative) bullishness, pointing out that he was only 15% in stocks. But this was partly because price targets on all his recommendations weren't reached. And, in contrast, he's been completely out of the market most of the last year.
Yamamoto is certainly making bearish noises. He writes "the consumer remains on life support" and worries that the presence of Paul Volcker on President Obama's economic team means that interest rates will be raised quickly to snuff out the inflation he expects with any business rebound: "This backdrop looks like Japan's decade of malaise. The nightmare might be revisited on the landscape of America."
Still, in his previous letter, dated Jan. 30, Yamamoto did note that "historically a countertrend rally of 30 to 50 percent is not uncommon in a bear market." He said "a substantial surge might be forthcoming" but from lower levels.
And the market promptly provided the lower levels -- the Dow was then above 8000.
Currently, Yamamoto's 15% equity exposure is divided equally between Alexander & Baldwin Inc. (AXBAlexander & Baldwin Inc
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AXB) , Charles Schwab & Co. Inc. (SCHWCharles Schwab & Co., Inc
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SCHW) and Schlumberger Ltd. (SLBSchlumberger Limited
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SLB) . He recommended additional 5% commitments at or below $17.75, $10.50 and $33.75 respectively.
Yamamoto also recommended an additional 10% commitment to iShares:FTSE/Xinhua (FXIiShares:FTSE/Xinhua
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FXI) below $24, and 5% each to Helmerich & Payne Inc. (HPHelmerich & Payne, Inc
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HP) $21.25 or below, and Rydex:Juno Fund;Inv (RYJUXRydex:Juno Fund;Inv
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RYJUX) at $13.25 or below.
Yamamoto warns sternly in every issue: "Don't go chasing after a stock ... If the stock is selling below our recommended price, chances are you are getting a better bargain. If it's above our recommended price, wait for the stock to drop back. If not, look at our other selections."
On his inverse bond play, he wrote in January: "In the foreseeable future, perhaps within months, a top for the bond market could be in the offing. Still, as in every bubble, a final push to the peak takes time to materialize."

Picking up preferred stocks jim jubak

Picking up preferred stocks
The bond world can be a strange and alien one for anyone who has invested mostly in stocks. That's why so many people buy their bonds through bond funds and bond exchange-traded funds. But since funds and ETFs don't hold their portfolios to maturity -- they're constantly rolling over their holdings -- my strategy won't work with bond funds and ETFs.

Preferred stocks are a good alternative if you find the world of bonds daunting -- and even if you don't. For example, I bought preferred shares of W.R. Berkley (WRB-A, news, msgs) in December and January because I think this very conservative insurer is a survivor. The preferred shares were trading 23% below their high of May 6, 2008, and the shares pay a yield of 8.88%. I'm adding these shares to Jubak's Picks with this column. You'll find more detail on W.R. Berkley, including some comments on its most recent earnings report, in my "buy" on the next page.

Similarly, in the energy sector you could buy the preferred shares of Chesapeake Energy with a 9.56% yield. I sold the common shares of the company out of Jubak's Picks because I wasn't getting paid while I waited for the turn in natural-gas prices, but the preferred stock certainly removes that obstacle.

Coke? Oreos? That's so last year By Jon Markman

Coke? Oreos? That's so last year
In this recession economy, Americans are choosing cheap and generic over brand-name goods. That's bad news for stocks you may believe are solid and safe.

[Related content: stocks, consumer goods, Procter and Gamble, recession, Jon Markman]
By Jon Markman
MSN Money
In prosperous times, with jobs booming and wages rising, shoppers strolling down the aisles of their local supermarkets don't think twice about grabbing a pack of Bounty brand quilted paper napkins at $4.98 for 200. But in the current mess, are you kidding me? Grocers report that customers in record numbers are going for the generic house brand, priced at up to a dollar less.

Multiply this scene by a few hundred million, and you can see why consumer products manufacturers are suffering more in the recent slump than they have at any other time in the past several decades. Procter & Gamble (PG, news, msgs), the maker of dozens of the nation's leading branded goods, such as Bounty, is seeing some of the steepest sales declines in its history, and efforts to stem the tide by boosting advertising and cutting prices are having only limited effect.

The troubles faced by Procter & Gamble, Oreo-maker Kraft (KFT, news, msgs) and others are emblematic of a radical shift in the habits of consumers worldwide, as cheap has become chic. Much of the change is necessary, as many families have less money to spend, but a mood shift has mysteriously taken hold through both the mass media and new social networking, leading even well-off consumers to cut conspicuous consumption of everything from branded paper towels to rockin' cars.

Safe no more
The Puritanical roots of middle America emerge at times like these -- causing us to huff that it's about time -- yet it may be more than a little callous to just brush off the business plans of hundreds of the nations' most prosperous companies. And at any rate, institutional investors are accomplishing that brush-off all by themselves without waiting for the announcement of first-quarter results. That is something private investors need to keep in mind if they plan to hold onto these shares -- many of which have been handed down from generation to generation in middle-class families with strict instructions from grandpa: Never sell.

In the past six months, Procter & Gamble shares, which were largely oblivious to the pain suffered by the rest of the stock market until the autumn, have fallen like a stack of paper towels sideswiped by a 5-year-old, slipping from a peak of $72.50 to just a hair over $46. Much of the decline has come very recently, as the stock -- previously a bomb shelter for cautious investors -- has plunged 24% since New Year's Day.

Many of its fellow consumer goods manufacturers, whose sales are typically so steady that they are known as "staples" to investors, have also tumbled this year in contravention of most conventional wisdom. Paper goods maker Kimberly-Clark (KMB, news, msgs), maker of the Kleenex and Scott brands, has seen shares plunge 28% since October; Coca-Cola (KO, news, msgs) is down 26%, Pepsico (PEP, news, msgs), maker of Frito-Lay snacks as well as its eponymous cola, is down 32%; and Johnson & Johnson (JNJ, news, msgs), maker of Band-Aids, is down 30%, with much of that coming in the past week. Ditto for the branded food makers that were also once believed to be immune to downturns. Cereal kings General Mills (GIS, news, msgs) and Kellogg (K, news, msgs) are down 23% and 30% since October, while HJ Heinz (HNZ, news, msgs) is off 36%.

Collateral damage from this new parade of parsimony is not limited to the manufacturers. Costco Wholesale (COST, news, msgs) reported Wednesday that its fiscal second-quarter profit fell 27%, due in part to a decline in nonfood sales. And Berkshire Hathaway (BRK.A, news, msgs), the investment vehicle of Warren Buffett, reported this week that earnings had been crushed this quarter in part by the decline in the value of its huge investments in brand giants Coca-Cola and General Electric (GE, news, msgs).

Video on MSN Money
Brand names vs. store brands

One family discovers how to save up to $3,000 by buying generic foods over brand names, with, Today show correspondent Janice Lieberman and CNBC's Carmen Wong Ulrich.
Why is this happening so fast?
An important side effect of troubled times occurs when consumers start wondering what truly makes them happy and discover that material things may not be near the top. If the answer doesn't make them suicidal, then consumers typically realize that contentment is not all about spending an extra dollar for the status of branded paper napkins that offer a little extra quilting. In similar eras in the past, it's turned out that consumers downshift into lower consumption modes quite rapidly and with remarkable ease, and even start to pride themselves on developing an upside-down view of luxury.

In this new world, says the Amsterdam research firm Trendwatching in a recent report, luxury becomes more aligned with scarcity than with mere expensiveness, especially when consumers start to look for ways to be unique. A new meme of Bohemianism may emerge too, as the concept of frugality is mixed with rebellion against the previous system of consumption. A longing for all things local, ecologically friendly, empathetic and eccentric may also emerge as people seek opportunities both to make themselves happy without products that were formerly emblematic and to justify their new anti-establishment decision making.

Continued: For Bounty, it's mutiny


For Bounty, it's mutiny
While the likes of P&G and Starbucks (SBUX, news, msgs) may suffer when thrift overtakes ostentation, the new world will have many unexpected winners as well. One will be smaller manufacturers like Bill Molt, who runs the family-owned Pacific Paper in Tacoma, Wash.

Pacific Paper is known in the industry as a "converter"; it buys 3-ton rolls of paper and puts them on a machine that embosses, perforates and plastic-wraps them for use as paper towels or napkins that can be sold to stores as generic national-brand equivalents. In the Pacific Northwest, the largest house brand at groceries is Molt's Western Family, and his napkins sell for as much as 25% less than Bounty or Scott brands.

"Bounty is a great product, but people are getting smarter with their money and they're saying if they can get a product that's just as good but they don't have to pay for all the marketing, then why not," Molt told me in a phone interview. "The big companies can drop prices or do extra advertising for a little while to try to knock us down, but in the long run they can't touch us because of their cost structure." He's looking to expand this year, as business looks strong.

When you read between the lines of the outlooks for Molt, Costco and P&G, you can see the first threads of a new fabric of American life being woven, one day and one purchase at a time. At a time when jobs are being lost in the United States at a clip of around 600,000 per month and the income of even those with jobs is falling half a percent a month, the end game now is about a realignment of the consumer, bank and national balance sheets to levels that will allow families, executives and policymakers to pay off debts, rebuild savings and live within their means on less credit.

Although the shares of Kimberly-Clark, Kraft and Starbucks will stabilize before too much longer, they are very unlikely to recover much of their lost ground as the world finds a new equilibrium next year at around 1.5% annualized GDP growth over the next half-decade, which is less than half the growth rate witnessed from 2002-07.

This environment may be favorable to low-frills retailers such as Family Dollar Stores (FDO, news, msgs) and McDonald's (MCD, news, msgs), and defiant innovators like Apple (AAPL, news, msgs) and Amazon.com (AMZN, news, msgs), but not very many others, as margins are stripped to the bone and marketing costs pare back the value of marketing gains.

As an investor, I'll take one black coffee with a generic napkin in a plain paper box to go. I'll stick with my view that stocks should still be avoided, as the economy will fall over the next nine months at least and share values will follow. But if you must own equities, stick with the companies like McDonald's, Family Dollar, Amazon, Apple and Hershey that have shown the greatest agility in managing the most unpredictable part of the cycle, which is behind us. While they won't rise the most coming out of the bottom -- that'll be the province of the most damaged stocks -- they will be the least aggravating at the many twists and turns that still lie ahead.

At the time of publication, Jon Markman did not own or control shares of companies mentioned in this article.

A Chance to Get Pfizer at a Discount By STEVEN M. SEARS

A Chance to Get Pfizer at a Discount
By STEVEN M. SEARS | MORE ARTICLES BY AUTHOR

Selling puts on the drug maker's shares could be a cost-effective way of easing into the beaten-down stock.


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NO MATTER HOW BAD THINGS get with the economy, people will still be popping pills to control cholesterol, blood pressure and all matter of genetic and lifestyle ailments.

This thinking has more or less perpetually defined the pharmaceutical sector, and deserves some consideration now that Goldman Sachs has today named Pfizer (ticker: PFE) as one of the firm's best stock ideas.

The battered and bruised stock was added to Goldman's Conviction Buy List.

Even at $12.50 a share, and trading at just 10 times earnings, it's hard to feel good about buying a stock that has lost 67% of its value in the past five years. To put that decline in perspective, consider that Johnson & Johnson (JNJ) is down about 7% during the same period.

But on an absolute basis, $12.50 is not a lot of money to spend on a speculation. Investors who are comfortable with options can potentially buy Pfizer stock at an even lower price. Here's how, courtesy of Goldman derivatives strategists John Marshall and Stuart Kaiser.

The Goldman strategists recommend selling September 11 puts to collect $1.03 in exchange for committing to buy shares at a $9.97 effective entry price that is 20% below the current price of $12.50, they told clients in an early morning note.

If you want to speculate on Pfizer, this is a wise and cost-effective way to do so. Put sellers will benefit from Pfizer's high level of implied volatility. If implied volatility fell seven points to average levels versus the pharmaceutical sector, Marshall and Kaiser estimate the September 11 put would decline by 25%.

To be sure, it is important to recognize that selling puts is not tantamount to buying a stock. When you sell puts, you are committing yourself to buy the stock should the price fall below the put's strike price. If the stock advances, rather than declines, you don't get to buy the stock, but you can keep the money, otherwise known as a "premium," for selling the put.

Goldman pharmaceutical analyst Jami Rubin believes Pfizer's "large valuation discount" will become apparent as investors incorporate Wyeth's (WYE) robust product lineup into earnings estimates.

In January, Pfizer agreed to buy Wyeth, a stock that had hung around $40 a share for a long time on concerns about its ability to monetize its new product pipeline. If Pfizer's management successfully integrates Wyeth, cutting costs and maximizing revenue, while battling against aggressively litigious generic-drug makers like Teva Pharmaceutical Industries (TEVA), the new company could be a dominant force in the pharmaceutical industry.

Of course, if Pfizer makes any significant missteps during the integration, or has any product setbacks, the Wyeth merger could backfire as already nervous investors could start to seriously question the abilities, or lack thereof, of Pfizer's management team.

Goldman believes synergies and removal of deal overhang likely will reduce uncertainty about Pfizer's stock. The deal is scheduled to close in the fall, and cost savings and financing plans will be announced.

"We expect these announcements to reduce uncertainty and ease Pfizer options prices," Marshall and Kaiser said. "Pfizer may announce a bond offering in the second quarter to offset some of the $50 billion in bridge financing, which poses a headline risk for shares."

They are confident about the bond offering since more than $40 billion in debt has been issued year-to-date in the health-care sector, and because Pfizer has a solid balance sheet and free cash flow position.

Nothing is without risk. If Pfizer's risks are acceptable to you, selling puts as a way to buy the stock at a lower price makes an extraordinary amount of sense