Paper Chase: Value in This Year’s Ganjapreneurship
New home sales were stronger than expected with 433,000 units sold in April. Sales of existing homes rose 1.3% to an annual rate of 4.65 million. This was the first monthly increase of the year and both numbers suggest a rebound in the housing market.
The Federal Open Market Committee released minutes from their last meeting where they discussed a rate increase but indicated no signs of action any time in the near future. They also talked about the housing market, China, and Ukraine.
The coffee rust disease has cost about a billion dollars worth of damage to coffee crops in Latin America. U.S. companies are working with growers as well as searching for other suppliers, but don’t be surprised that your coffee is going up.
The paper chase has been fruitful as we are currently in a good, positive market. The nature of the market has changed however with high frequency trading and dark pools. We discussed HFT in the last paper chase and in our focus on freelancing.
To recap, high frequency trading is a program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. Typically, traders with the fastest execution speeds will be more profitable than traders with slower execution speeds.
Traders are driving the market more than investors. On the surface, this is a bad thing. If you are picking stocks, there are a lot of opportunities.
The Volatility in the Market and the Effect of Traders and Program Traders
Program traders could care less what a stock will be in three months as they are looking for a nickel or a quarter per share. They are constantly entering and exiting positions in a very short amount of time.
Program trading is not sitting at a desk flipping a switch telling a computer what to do. The computers are preprogrammed to identify certain characteristics and continue operating without human urging. This is changing the way markets trade, but there is still plenty of opportunity and there always will be.
There is no such thing as “can’t lose,” but essentially sell offs (7 to 8 points) are generally buying opportunities in this market. While this kind of volatility makes the market more hazardous, if you are looking for value (as I am), you are a long-term investor. There is comfort in a market like this for the value investor as opposed to the investor looking for small moves and quick turnaround.
I believe interest rates will remain low until the economy shows evidence of improving. I don’t think we will ever go back to the “full employment” that we used to have because technology has eliminated a lot of those jobs that existed.
What I Like
Investigating individual companies will reveal value over the long-term. Stocks out of favor that will regain favor exist in the market at all times. I like oil and oil related stocks, airlines, industrials, and retailers to rebound. After a weak first quarter, growth should pick up significantly in some cases but moderately on average when looking at the marketplace as a whole.
The cybersecurity industry is changing from legacy security practices, which have proved ineffective, to legacy safeguards. During this transition, there is no doubt people are vulnerable; however, compromise does not open up for fraud. There exists fraud based safeguards in place as a second line of defense.
It Will Affect You If It Hasn’t Already
The median number of days before an organization discovers a network breach is 229 down from 2011, when that number was 416. However, the percent of organizations that detect breaches on their own is 33%, meaning 67% of organizations learn of breaches from law enforcement or other organizations.
There is 1 incidence of identity fraud every 3 seconds. There is 21 billion dollars stolen annually and 12.6 million U.S. adults are affected. More than 50% of the victims were actively detecting fraud when it happened.
To put the costs of cyber crime into context, the estimated annual cost of general piracy is between 1 and 16 billion dollars and drug trafficking is around 600 billion dollars. Malicious cyber activity’s estimated global cost is between 300 billion and 1 trillion dollars.
Pretty basic stuff. Have a different user account and password for different things you do online. This will prevent the attacker from logging into different accounts under your name. There is little you can do from being breached, but you can certainly mitigate any damage or loss. The government itself is not immune to these breaches and as it watches and responds to the attacks, it exchanges knowledge with and transfers it to the private sector.
There is a military unit in China, specifically PLA UNIT 61398, that is compromising the private sector by conducting corporate espionage. When this was discussed on the cover of the New York Times, they stopped for approximately 40 days. Security experts say that now they are apparently back at it.
We’re Not Effing Around
Three years ago, the House Intelligence Committee told the world we are witnessing the largest theft of international property in history. The involvement of the Department Of Justice elevates the game another notch; for it’s very easy for the Chinese government to say there are flaws or bias with reports released by private industries. It’s another thing entirely when a sovereign nation’s lead cop calls them out on it.
The most expensive city to live in, using cost of living above national average as the metric, is New York at 120.4%. Honolulu is second at 69.1% followed by San Francisco (61.6%), San Jose (49.3%), and Stamford, Ct (44.1%).
New graduates, when choosing a city, want to think about both the cost of living and the job market. Some of the most expensive cities are favorable for new grads because of the job market even though the cost of living tends to be higher.
Maybe Not New York?
New York is particularly tough for new graduates as unemployment is above the national average hovering at 8% and the cost of living is the highest. While San Francisco’s cost of living is 61.6% above the U.S. average, the median entry-level salary of $51,600 is above the median income level of the country, and the unemployment rate is below the national average hovering at 6%.
While bigger coastal cities generally offer higher starting salaries to defray costs, places such as Boulder, Colorado and Dallas, Texas, the middle of the country are places that offer decent starting salaries with low costs of living.
Marijuana is an industry that is trying to be legitimized under a cloud of federal illegality. A lot of the rules are simply being made up as we go along.
Straight Cash Homey
In Denver, recreational marijuana and cash must be separated from medical marijuana supplies. Cash management is quickly becoming a new sector of the business. While there is packaging, labeling, and testing, there still is no banking. It remains an all cash business where even taxes are paid in cash. While the government has allowed banks to accept money from the recreational marijuana industry, most won’t as they view the risk of accepting illegal cash as too high.
The bulk of the tax money and sales revenues are still on the medicinal side as those sales are subjected to lower taxes. In fact, the total tax could be as much as 50% higher on recreational sales. The margins are narrower on the recreational side because of the new rules and regulations. People who can get prescriptions are still going the medicinal rout. The bulk of recreational sales in Denver have come from tourists.
Women, Investment, and Legitimacy
A lot of women are running the businesses. In fact, women have formed a cooperative in Denver to help each other get into the business. While there are no doubt shady characters trying to “pump and dump” marijuana related penny stocks, legitimate investors and established vendors (including architects and plumbers) are now looking at marijuana. Even Silicon Valley is getting involved as the marijuana business is still shockingly low tech.
Disclaimer: Killing The Breeze is not a registered investment advisor or advisory service. It does not tell or suggest which securities or currencies should be bought or sold. The employees or affiliates of Killing The Breeze may hold positions in the stocks, currencies or industries discussed here. There is a very high degree of risk involved in the market. Killing The Breeze assumes no responsibility or liability for any trading or investment results. All content posted is for educational purposes only and independent advice should be sought from a professional to confirm validity and accuracy of any claim made.
The information should only be a starting point for doing additional independent research in order to allow you to form your own opinion regarding trading decisions. You should ask the firm with which you deal about the terms and conditions of the specific securities which you are trading and associated obligations. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.