Free Markets work to create opportunity, jobs, growth and value in our region!
Many of you have already heard that Liquid Web has purchased a building and will begin renovating it to house their expanding web hosting and data center operations along with employee growth. Read more on this story by clicking here. More people than ever before believe that Lansing, MI is where they want to be to work, live and raise their family.
WE HAVE:
Better paying Jobs coming here than in the recent past.
Better paying jobs bring families, not only singles. Families have children; children go to our schools and do a wealth of other activities in Michigan together.
More Jobs being created than in the recent past!
More residents will stay and not leave; more companies will want to expand here as our work force grows, more home buyers and renters will remove homes from the market - fewer homes on the market will increase home prices.
We have a Greater diversity in Job creation than ever before.
This will hold many positives for us. For example, both spouses will find employment in their field here in mid-Michigan now more often than before.
Diversity in job sector opportunity is the number one priority for economic development in any region.
In and around Texas during the 1980’s after the drop in oil prices devastated that 5 state region, job diversity is credited as the reason why they made such a long lasting recovery. It is no surprise to many that even in the last three years, many of the hard hit regions in Texas in the 1980’s are not experiencing real estate value decline right now. Their growing economy, based on a very diverse job market, is almost unstoppable.
In addition to our staple manufacturing, university, and state government we are expanding rapidly in health care, technology and the insurance industry. As we become known for having a presence in certain industries, we get “on the map”. For corporations considering new regions to expand into, qualified employees that insure their stable growth is high on their list or qualifying determinants.
All positive growth begins with the truth!
Here’s the truth:
The best is yet to come in Lansing!
Friday, June 27, 2008
600 Jobs, 600 Families, 600 Homes
Wednesday, June 25, 2008
Warren Makes a Bet
By John Mauldin
FrontLineThoughts.com
The Sage of Omaha made a bet that was written up in a recent Fortune magazine article. Basically, Warren Buffett bet that the S&P 500 would outperform a group of funds of hedge funds over the next ten years. A million dollars to someone’s favorite charity is on the line. This week we will analyze the bet, using it as a springboard to learn about valuation and value investing. As we will see, there are times that making a bet on the S&P 500 to outperform hedge funds (or bonds or real estate or whatever asset class) makes sense and times when it doesn’t.
Warren Makes a Bet
Carol Loomis (one of my favorite financial writers) writes in this week’s Fortune about a bet that Warren Buffett made with a hedge fund management company. You can read the fascinating story
Quoting:
“And to that there is a certain history, which began at Berkshire’s May 2006 annual meeting. Expounding that weekend on the transaction and management costs borne by investors, Buffett offered to bet any taker $1 million that over 10 years and after fees, the performance of an S&P index fund would beat 10 hedge funds that any opponent might choose. Some time later he repeated the offer, adding that since he hadn’t been taken up on the bet, he must be right in his thinking.”
A New York firm, Protégé Partners, which manages $3.5 billion in a fund of hedge funds, decided to accept that bet. Basically, Buffet and Protégé each put $320,000 into 10-year zero-coupon Treasury bonds that will be worth $1 million in 10 years. The bet is straightforward. Protégé has chosen five funds of hedge funds, and these funds must return more than the S&P 500 over the 10 years beginning January of 2008. (The list of funds is a secret.) The winner gets the $1 million donated to their favorite charity.
Which way would you bet? If the online response at Fortune is any indication, 90% of you would bet with Warren. As one enthusiastic responder wrote, “How can you bet against Buffett? I’d bet my life savings on it …” Well, Tom, you might want to hedge your bet. Even Warren said he thinks his odds are only 60%.
The basic premise to Buffett’s position is that the high fees simply eat up any potential for extra profits, over those of a simple index fund. As Buffett writes:
“A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.”
And he is right about the fees. Hedge funds, and especially funds of funds, must do much better than average to overcome their high fees. Loomis sums it up as follows:
“As for the fees that investors pay in the hedge fund world – and that, of course, is the crux of Buffett's argument – they are both complicated and costly. A fund of funds normally charges a 1% annual management fee. The hedge funds it puts that money into charge an annual management fee of their own, which for funds of funds is typically 1.5%. (The fees are paid quarterly by an investor and are figured on the value of his account at the time.)
“So that's 2.5% of an investor's capital that continually goes for these fees, regardless of the returns earned during a year. In contrast, Vanguard's S&P 500 index fund had an expense ratio last year of 15 basis points (0.15%) for ordinary shares and only seven basis points for Admiral shares, which are available to large investors. Admiral shares are the ones ‘bought’ by Buffett in the bet.
“On top of the management fee, the hedge funds typically collect 20% of any gains they make. That leaves 80% for the investors. The fund of funds takes 5% (or more) of that 80% as its share of the gains. The upshot is that only 76% (at most) of the annual return made on an investor's money accrues to him, with the rest going to the ‘helpers’ that Buffett has written about. Meanwhile, the investor is paying his inexorable management fee of 2.5% on capital.
“The summation is pretty obvious. For Protégé to win this bet, the five funds of funds it has picked must do much, much better than the S&P.”
FrontLineThoughts.com
The Sage of Omaha made a bet that was written up in a recent Fortune magazine article. Basically, Warren Buffett bet that the S&P 500 would outperform a group of funds of hedge funds over the next ten years. A million dollars to someone’s favorite charity is on the line. This week we will analyze the bet, using it as a springboard to learn about valuation and value investing. As we will see, there are times that making a bet on the S&P 500 to outperform hedge funds (or bonds or real estate or whatever asset class) makes sense and times when it doesn’t.
Warren Makes a Bet
Carol Loomis (one of my favorite financial writers) writes in this week’s Fortune about a bet that Warren Buffett made with a hedge fund management company. You can read the fascinating story
Quoting:
“And to that there is a certain history, which began at Berkshire’s May 2006 annual meeting. Expounding that weekend on the transaction and management costs borne by investors, Buffett offered to bet any taker $1 million that over 10 years and after fees, the performance of an S&P index fund would beat 10 hedge funds that any opponent might choose. Some time later he repeated the offer, adding that since he hadn’t been taken up on the bet, he must be right in his thinking.”
A New York firm, Protégé Partners, which manages $3.5 billion in a fund of hedge funds, decided to accept that bet. Basically, Buffet and Protégé each put $320,000 into 10-year zero-coupon Treasury bonds that will be worth $1 million in 10 years. The bet is straightforward. Protégé has chosen five funds of hedge funds, and these funds must return more than the S&P 500 over the 10 years beginning January of 2008. (The list of funds is a secret.) The winner gets the $1 million donated to their favorite charity.
Which way would you bet? If the online response at Fortune is any indication, 90% of you would bet with Warren. As one enthusiastic responder wrote, “How can you bet against Buffett? I’d bet my life savings on it …” Well, Tom, you might want to hedge your bet. Even Warren said he thinks his odds are only 60%.
The basic premise to Buffett’s position is that the high fees simply eat up any potential for extra profits, over those of a simple index fund. As Buffett writes:
“A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund than with a group of funds of funds.”
And he is right about the fees. Hedge funds, and especially funds of funds, must do much better than average to overcome their high fees. Loomis sums it up as follows:
“As for the fees that investors pay in the hedge fund world – and that, of course, is the crux of Buffett's argument – they are both complicated and costly. A fund of funds normally charges a 1% annual management fee. The hedge funds it puts that money into charge an annual management fee of their own, which for funds of funds is typically 1.5%. (The fees are paid quarterly by an investor and are figured on the value of his account at the time.)
“So that's 2.5% of an investor's capital that continually goes for these fees, regardless of the returns earned during a year. In contrast, Vanguard's S&P 500 index fund had an expense ratio last year of 15 basis points (0.15%) for ordinary shares and only seven basis points for Admiral shares, which are available to large investors. Admiral shares are the ones ‘bought’ by Buffett in the bet.
“On top of the management fee, the hedge funds typically collect 20% of any gains they make. That leaves 80% for the investors. The fund of funds takes 5% (or more) of that 80% as its share of the gains. The upshot is that only 76% (at most) of the annual return made on an investor's money accrues to him, with the rest going to the ‘helpers’ that Buffett has written about. Meanwhile, the investor is paying his inexorable management fee of 2.5% on capital.
“The summation is pretty obvious. For Protégé to win this bet, the five funds of funds it has picked must do much, much better than the S&P.”
Oil, Dollars, inflation and Fed rates - great expanation here!
Fed leaves the rate alone today as expected – if you are curious about how some of these things relate to one another, read below. This is clear and easily grasped. Be the expert at the dinner table tonight!
Barry Habib is an analyst for CNBC and writes for his Mortgage Market Guide website. Many of you have seen this sight in my office, we watch it closely every day in order to advise our clients about locking rates.
Enjoy!
We actually agree with a more hawkish view - and although the Fed will not hike, we hope they decide to do so sooner than later. There is a possibility of a hike in August but it is not likely. The Fed is in a tough spot - the economy stinks, housing is struggling, confidence is low and costs are rising. You need only look at your last receipt from the grocery store or gas station to see how quickly things have changed. And a walk through your local shopping Mall tells another story of individuals who are less able to spend. That is the Fed's problem...the smart move is clearly to hike. Inflation is rapidly eating away the value of money. And while food price increases hurt, oil is the real story. So why has oil risen so wildly? The answer...The Fed. The evidence is too clear to ignore.
Let's take a look at where we were before the first Fed cut on September 18th. The Fed Funds Rate was at 5.25%, Oil was at $73 per barrel and the Euro was $1.35. Not great, but not bad. Fearing a recession, the Fed did the right thing to stimulate the economy - they cut. But cutting rates in the US makes higher rates in Europe appear much more attractive. So the Dollar began to tank against the Euro and just got worse as the Fed continued to cut. Now it takes $1.56 to equal one Euro. That is a huge swing. And here is where it gets interesting...Oil is priced in Dollars, so as Dollars decline, Oil price per barrel must rise.
Oil has gone from $73 a barrel before the Fed cuts began in September '07 to yesterday's close of $137 a barrel. And the European Central Bank President, Jean - Claude Trichet, has been talking about a rate hike in Europe even though they are headed for a recession. Remember there is a big difference between the US Fed and the ECB - the US has a dual mandate, fight inflation and promote growth. The ECB just fights inflation. And just the talk of a hike from the ECB has sent oil even higher.
Again, oil prices are surging mainly because of the Dollar weakness and the Fed cuts. Think about it - has demand for oil suddenly skyrocketed in the past 8 or 9 months? Sure it has gone up, but oil had already doubled in price when it was at $70. And higher prices for oil hurts everything. Sure at the pump and for heating, which allows less to spend, but travel, manufacturing, shipping...the list goes on and on.
Back to this morning's news - New Home sales for May were reported at 512,000, inline with expectations. The inventory of New Homes rose to a 10.9 monthly supply. This report suggests the new home sale market is still struggling.
The more "hawkish" the Fed statement, the better it will be for Bonds. But if the Fed does not at least talk tough, Bonds will be pressured and Oil will move higher.
Barry Habib is an analyst for CNBC and writes for his Mortgage Market Guide website. Many of you have seen this sight in my office, we watch it closely every day in order to advise our clients about locking rates.
Enjoy!
Oil,Dollars, Inflation and Fed Rates
By Barry Habib, CNBC Analyst
By Barry Habib, CNBC Analyst
We actually agree with a more hawkish view - and although the Fed will not hike, we hope they decide to do so sooner than later. There is a possibility of a hike in August but it is not likely. The Fed is in a tough spot - the economy stinks, housing is struggling, confidence is low and costs are rising. You need only look at your last receipt from the grocery store or gas station to see how quickly things have changed. And a walk through your local shopping Mall tells another story of individuals who are less able to spend. That is the Fed's problem...the smart move is clearly to hike. Inflation is rapidly eating away the value of money. And while food price increases hurt, oil is the real story. So why has oil risen so wildly? The answer...The Fed. The evidence is too clear to ignore.
Let's take a look at where we were before the first Fed cut on September 18th. The Fed Funds Rate was at 5.25%, Oil was at $73 per barrel and the Euro was $1.35. Not great, but not bad. Fearing a recession, the Fed did the right thing to stimulate the economy - they cut. But cutting rates in the US makes higher rates in Europe appear much more attractive. So the Dollar began to tank against the Euro and just got worse as the Fed continued to cut. Now it takes $1.56 to equal one Euro. That is a huge swing. And here is where it gets interesting...Oil is priced in Dollars, so as Dollars decline, Oil price per barrel must rise.Again, oil prices are surging mainly because of the Dollar weakness and the Fed cuts. Think about it - has demand for oil suddenly skyrocketed in the past 8 or 9 months? Sure it has gone up, but oil had already doubled in price when it was at $70. And higher prices for oil hurts everything. Sure at the pump and for heating, which allows less to spend, but travel, manufacturing, shipping...the list goes on and on.
Back to this morning's news - New Home sales for May were reported at 512,000, inline with expectations. The inventory of New Homes rose to a 10.9 monthly supply. This report suggests the new home sale market is still struggling.
The more "hawkish" the Fed statement, the better it will be for Bonds. But if the Fed does not at least talk tough, Bonds will be pressured and Oil will move higher.
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