Rafael Grillo

Is Wal-Mart Trying to Lure the Rich?

Great article. A few months ago, I wrote an article in my blog entitled "Wal-Mart: more than just low prices?" where I discussed the efforts Wal-Mart is making to lure more affluent consumers. When you think about its fundamental proposition, Wal-Mart should the sensible shopping alternative for most people. What Wal-Mart has failed to recognize and change, though, is that the fundamental barrier they have to expand their franchise is not advertising or assortment. It is the absolutely sordid shopping experience you have to endure at the place. The dark, disordered shops, the excruciatingly long lines and the dwindling numbers of under-paid, over-worked and apathetic associates who can't tell you much more than the time of the day. Unless Wal-Mart seriously addresses the shopping experience it delivers, those horrified looks will not go away.

Memo to Bank of America's Directors: Shame on You!

A brave and courageous article. No matter how tough the economic scenario, no Board should tolerate a CEO under whose leadership the company has lost 90% of its value. The Boards are supposed to represent the shareholders interests, but more often than not, they've turned to be just good ol' boys clubs covering each other's backs and treating the companies they have a fiduciary reponsibility to manage as if they were there for their own benefit. At the end, the CEO of a company is a board member of a pal's and viceversa. It is a small oligarchy that is self-preserving and that scavenges on the thousands of owners whose only saying is through a yearly mockery were fixed proxys leave little chance but to timidly express one's disatisfaction by withholding one's vote. While strategically the purchase of ML by BAC made sense, it is clear now that it was haphazardly negotiated and worsely executed. Lewis might have a vision, but his ultimate responsibility is to create value for his shareholders. If the goal is not met, he has to be held accountable. The Board can't keep blaming the poor performance on external factors, for it is exacltly in these sort ofconditions that management must excel and demonstrate prudence and careful, well-thought-through and meticulous decision making.

If Only Hope Were an Investment Strategy

Great comments! There are no bullish signs out there. None. There is not reason for the stock market to go up. More and more, the not-so-long-ago unthinkable scenario of Dow 6500 becomes a possibility. At some point, I even considered the 8000's very unlikely. Yet, I have to agree that some stock prices have reached an almost surreal level. It feels like we are heading towards a dramatic depression. And yet, folks, I truly believe a depression like the 30's has been averted. The recession will follow its course: people will curl in their homes waiting for end of the times, a few strong companies will take the opportunitiy to strengthen their positions, and after a few months, we will realize the sun still come up everyday and we will go out and re-ignite the economy again. I am not trying to under-estimate the challenges ahead. But I think the worst part of the financial crisis is behind us. It is re-construction time. Taxes will have to raise, we will have to curtail our consumption, interest rates will have to go up (think 3%) and a few inefficient companies will have to disappear (think auto industry). This has been an economic earthquake. The plaques had to reacommodate and the pressure liberated. The pain is not over. But tthe overall stock prices, at these levels, are pricing this adjustment. We will be in a 7500-9500 trading range until next summer. Dow 10,000 by third quarter next year, and then, slow growth. Expect the new Government to launch a national initiative to re-energize the country behind renewable energy. Get positions in wind, solar and nuclear at some point during the next quarter, but be prepared to sell. That is going to be the next short-term bubble; after that, they'll become a solid investment for the long haul. Pollyannish? Perhaps. But I think we are rather rattled by the violence of this correction. We've had in a couple of months what took two years and a terrorist attack to unravel in 2000-2002. There is light at the end of the tunnel. And, by the way, Toro and I must have the same portfolio: I am sure if I sell now, this was the bottom; and if I don' sell, we will get to Dow 6,500 :-).

Hormel Foods Looks Appetizing in this Market

Thank you for your comment, Leser. I am not a food expert, but I think your concerns are being addressed by Hormel in two ways:

a) they recently launched their "healthy" line. From their website:

"The new line of Hormel Compleats provides on-the-go adults with a quick and tasty lunchtime meal solution that works with a healthy nutrition plan.

Meets USDA guidelines for “healthy lifestyle”
Under 320 calories
Under 10 grams of fat and less than 3 grams saturated fat
0 grams trans fats
600 mg or less of sodium
Provides 2+ grams of fiber and up to 22 grams of protein
Contains Vitamin A, C or Iron"

When I discovered the line, I was quite surprised by the reasonable caloric content of their products.

b) I understand that the meals are preserved by the vacuum process they follow (equivalent to canning), rather than relying on high levels of preservatives .

In any case, consumer choices are limited when dealing with lunch. My impression is that the Compleats meals are quite competitive in terms of nutritional values vs. the alternatives.

7 Rules For Investing During the Fourth Quarter

Let's see what the week brings. I am not sure what to expect: the sky is falling, yet commodities are heading lower (i.e. lower costs for companies), governments are responding (support for financial companies), a coordinated rate cut might be in the horizon, the financial sector is consolidating and we have elections in a few weeks. It feels like the glass is half full. It is always darkest before dawn. I hope we hit 10,000 this week to get over with it.

Starbucks Gets Re-Caffeinated - Barron's

We will have to see what the specific turnaround strategy is. However, I still believe that Starbucks responds to very fundamental pleasure needs of a new generation of consumers. Indulgence will not go away for them. More importantly, this quest for fulfillment and deeper satsifaction is global. I've stated repeatedly that SBUX real opportunity for growth is overseas. I am glad to see that addressed in Schultz turnaround strategy. I believe we will se SBUX in the upper 20's again.

Bank of America: Bank on This Opportunity

Thank you, Bingie. Indeed, I am writing about a strategic move that will have significant impact over the long-term, not the next-day trade. Having said that: juan77, this article was originally posted in my blog on September 17th, when BAC share price was at around $28! Be patient, though: we might still revisit that price point in the weeks to come.

As the Fed Runs Out of Money, Resolution Trust Plan Refloated

The nature of the beast is so huge and convoluted, nobody really understands at this point exactly what is required to solve it. One thing is certain: we are all going to pay for this mess in one way or another. Americans can't have the cake and eat it too. For starters, I'd like for the presidential candidates to stop talking about tax cuts. This country will need tight fiscal discipline to be able to face the financial issues. Even the Government can run out of money, and continue borrowing will only create a more fragile and explosive economic situation in the long run. RTC should be funded with tax money. Second, the responsibles for this mess should to held accountable. Grossly incompetent CEOs who failed on their fiduciary duties are being let go just to enjoy their millionaire golden parachutes. In the meantime, trusting investors are seeing their investments disappear. Failing firms should be orderly liquidated and penalties imposed to pay for the costs imposed on the taxpayers. I'd even love to seek the recovery of unearned bonuses in those for the last 3-5 years, although I know that is next to impossible.

EBay: The Doldrum Years

Desperation, greed, pure incompetence. Ebay is doomed. Management simply forgot what Ebay was all about: regular people coming together to do some business. With all sorts of very high fees for sellers, Ebay is discouraging the big public to participate. There is nothing left in that company.

The Mess on Wall Street: $4 Trillion Down the Drain

And yet, at the end of all this mess, there will be a few winners that will take it all. I am particualrly interested in Bank of America. They are taking some gutsy risks, but if they pay off -and I think they will-, BAC will come out of this turmoil as a financial power house. Some people have said they are reckless; I think they are being cleverly aggressive.

eBay Is a Losing Bid - Barron's

eBay is doomed. And that is simply because they lost sight of their true essence. eBay was built as an open market, on the premise than one man's trash is another man's tearsure. That is what made eBay so intriguing and fascinating at the beginning. There is where its magic lied. eBay then got greedy, and its organic nature got regimented and taxed beyond any common sense. Not happy with just a reasonable commission on sales, they started charging for listings, for adding words to your listing, exhorbitant commissions on sales, etc. eBay forgot that they were just a mean for the business, not the business itself. They became arrogant. As a result, eBay is now dominated for a few merchants of low-quality, expensive goods and the magic is gone. I don't check eBay anymore: I am afraid a fee will be levied just for seeing.

WaMu on the Brink

Harrison's comments seem quite logical. WM does not need much external help to continue going down. Just today is dropping another 20%, and not because of this post. CABANKER seems to have some additional research that suggests that WM is not in such dire position. Rather than just bashing the writer, I'd like to hear the basis to belie his article. I am personally long on WM, and not happy with it.

SanDisk: Flash Sales 'Soft' in April at Retail

Harari's comments come to no surprise. There is nothing new. Oil prices are making a dent in consumers' budgets, and not only through prices at the pump. These high costs are permeating throughout the whole system. So, yes, we shall see a few difficult quarters ahead of us, for Sandisk, Apple and any company that depends on the consumers' truly disposable income. But flash memory is here to stay (and thrive!), and Sandisk is well positioned to take full advantage of the forthcoming growth. I am not that concerned by the lower prices; that is the normal trend with any product that is becoming mainstream, and are accompanied by lower costs. Lower prices get compensated by the increase in memory demand created by more devices and hungrier applications. Who buys a digital camera today that is not at least 8 MP? Just for the kicks of it, check out this artcile www.news.com/2100-1040... written 8 years ago. If we keep our eyes beyond the current economic turmoil, this should be a great opportunity to load on the leader of a technological revolution.

E*Trade Primed for a Breakout

Heated discussion here!! No need to get nasty. I am long on E*Trade, and not without some hesitation. I am confident that they are doing the right things, and I particularly rely on the strong equity of their brand. But no doubt their financial situation is still fragile, and the economic and financial environment is not helping. Highly unlikely, but this is a company that could be pushed into bankruptcy not because of their wrongdoing, but because of adverse conditions should a second shoe drops on the credit crisis or the economy folds under the weight of high oil prices (this is my main concern right now). Having said that, I don't think E*Trade will go back to $2-$2.50. That was a panic bottom, not a technical one. If you remember, the sky was falling at that time and judgement day was around the corner. I would not be surprised if the share price goes to the high singles by year end. It will take several quarters for it to break the $10 mark though. I would not expect it to happen until next spring or so. I certainly hope to be wrong, and would be delighted to have a nice Christmas present, but I certainly don't expect it. Yet, we are talking of a great risk-reward profile here. Chances of losing half of your investment: very low. Chances of doubling your money: very high. That sounds good to me!

The Beginning of the End of the Credit Crisis?

I think the worst panics of the credit crisis are behind us as there is slightly better visibility of the level of exposure and vulnerabilities of the financial sector. Yet, the sector is still fragile. Add to that an oil-driven inflationary recession with no end in sight (with the consumers' disposible income shipped overseas to pay for oil) , and Lilguy is spot on. Skepticism and caution prevail in these conditions. I am optimistic though: the US economy has proven extraordinarily resilient. One would think the kind of run up in oil we've had would be enough to take it to its knees, and yet, it's chugging along. But it will take a burst in the oil bubble to see consumers optimistic and spending again. And that is unlikely to happen, since by all accounts, this increase in oil prices is truly demand-driven. Too many people having cars and electricity in too many countries. How ironic, isn't it? The premise of globalization was that by promoting the economic development of the world, everyone would be better off: more developed countries would mean more consumption and more production, raising everyone's quality of life. What nobody seemed to have taken into account is that the basic resources for production are limited, and that more thriving economies mean higher demand for those limited resources and therefore escalation of prices. Time for some serious disruptive innovation in the energy sector.