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  • What Is Your Financial Game Plan?
    There is growing concern over the future of retirement benefits in the United States; specifically, the potential for the Social Security system to implode, in a matter of speaking, is a source of animosity between the younger and older generations. Age warfare seems likely as the “Boomer” generation begins drawing from the system they have paid into for 30+ years, while at the same time depleting that same system due to the very fact that they make up such an unusually large percentage of the population. Post-boomers continue to feed Social Security with little hope of seeing the full redemptions currently available to retirees. While the concerns of the younger generations surrounding Social Security are not without merit, it seems to me that there is a larger issue at play. The lack of basic knowledge regarding retirement planning, especially in the 40-and-under crowd, is something that must be addressed.
     
    As companies trade in their pension plans for 401(k) programs, the responsibility for making smart retirement investment decisions is shifting from employer to employee. This is troubling in the sense that many people do not have the knowledge-base to draw from that will allow them to make informed investment decisions. To make matters worse, the post-boomers who do have experience investing their own capital have been taken for a not-so-pleasant rollercoaster ride over that past 15 years. We need not look any further than the fixed-income market to realize that many people are simply fed up with today’s volatile equity markets and content themselves with the meager returns available in today’s debt markets.
     
    What, then, can be done to educate the younger generations about retirement planning? I think part of the answer is visible in the rise of the Registered Investment Adviser RIA). As stock-brokers break away from their old commission-based models and set up fee-based RIAs, there is a fundamental shift in the way these professionals are managing client assets.  Many Investment Advisers are incorporating holistic financial planning into their business, allowing client families to create a game plan for their current and future wealth management. This model is tailor-made for younger generations who have neither the time, nor the inclination to try their hand at investing for retirement.
     
    Younger generations have the ability to employ fee-based Investment Advisers at a relatively low cost when compared with commission-driver stock brokers. Advisers are able to educate clients while also bearing the fiduciary responsibility of providing each client with the highest level of service and plan execution. The education piece is perhaps the most important aspect for young investors. By providing clients full transparency with regards to their investment plan and its execution, clients are given the opportunity to actually take part in their retirement planning. The transparency gives clients the ability to see what is being done and ask why, as opposed to throwing money at one of four mutual funds offered by their employer’s plan and hoping for the best.
     
    If there is any hope for the post-boomers to continue the trend of higher living standards in retirement, younger generations need to take the bull by the horns, link up with an investment adviser, and start building a financial game plan. One thing is for sure, we cannot afford to continue kicking the Social Security-can down the road any longer.


    Disclosure: No Positions
    Oct 24 6:48 PM | Link | Comment!
  • Can You Hear Me Now?
    The future of communications is here, and American Tower Corp. is welcoming this fact with open arms. As a leader in wireless and broadcast communications infrastructure, American Tower owns and operates approximately 27,000 communications sites in the United States, Mexico, Brazil and India as of December 31, 2009. American Tower’s primary business is leasing antenna space to wireless service providers, radio, and television broadcast companies.
    American Tower has many operating advantages that will allow them to continue their consistent incremental growth. Leasing tenants are often locked in to five to ten year contracts that provide lease payment increases of 3-5% per year. Because service interruptions resulting from antenna repositioning are revenue killers in the communications industry,lease renewal rates are extremely high. The costs associated with adding tenants to a site are minimal; and when combined with the low cost of maintaining these communications sites, each additional tenant provides meaningful increases to American Tower’s operating profit.
    If there is any doubt that American Tower is positioned for continued success, consider the following. American Tower is the largest Tower company by a large margin. With quarterly year-over-year revenue growth of 11%, operating margins of 40%, and $325 Million in net earnings over the past twelve months, American Tower is leaps and bounds ahead of its competition. According to industry data, in the United States, cellular voice minutes increased to over 1.1 Trillion for the six months ending June 30, 2009, an increase of approximately 3%. The more significant increase is the increase of data services to over 27% of total service revenue.  What then does this mean for American Tower as an investment opportunity?
    Industry data indicates that 2009 saw 15 million new wireless subscribers, while landlines were trimmed by 10 million; a trend that very much plays into growth in the tower industry. With American Tower's shares are trading at 63 times earnings expectations, I’d be hard pressed to argue American Tower’s stock is trading cheaply. Shares are near their 52-week high, a high that has been broken and re-broken numerous times over the past few weeks. With this said, I believe American Tower offers investors an opportunity to play the growing  penetration rate of smart phones, not only in the United States, but also in the growing Brazilian and Indian middle-class markets.

    As people trade landlines and desktop computers for their mobile counterparts, American Tower and its investors will find themselves in a position to soak up the profits resulting additional tower leasing, higher margins, and low maintenance costs. American Tower shares appear poised for a pullback towards their 50-day moving average. This pullback should be seen as an opportunity to take a position in this growth industry with emerging market exposure.


    Disclosure: No Position
    Tags: AMT
    Oct 02 7:07 PM | Link | Comment!
  • America's Manic Economy
    We’re going to see hyperinflation in 2011! I mean, we’re going to see deflation! No the biggest problem is that states across the country are going to default on their debts! I mean, we’re going to see state tax rates spike to prevent defaults! Could the economic outlook be any more manic? There are as many opinions as there are possible outcomes; and they are all in response the some economic indicator, that is equally as irrational and manic as it turns out. So, I’d like to state definitively that there is a 100% chance that somebody might to be right!
    It astounds me that so many intelligent people are willing to say “X” on Monday and change their story to “Y” by Thursday. CNBC would have you believe there are two possible outcomes: full recovery, or economic ruin; and the future will be clear to us before the next morning at 8:30 AM when the next data-set is released and the process is repeated. But what if things don’t get worse? Or better? What if the economy just bounces around over the next few weeks, months, years; up one month down the next? After all, it is human beings that drive markets; and let’s be honest with ourselves, we aren’t exactly models of rationality! With all of this said, let me throw my opinion in the hat by looking at some of the things that drive our markets.
    Corporate earnings help us gauge the health of the economy. Companies like Wal-Mart (WMT), General Electric (GE), and AT&T (T) are generating massive amounts of revenue and using their piles of cash to buy back shares, or reinstate/raise their dividends. As Americans, we look to these behemoths to provide the jobs, services, and consumer goods that make this great country go round. AT&T has reportedly spent $19 Billion dollars on wireless tower expansion in 2010. GE has reinstated their dividend after suspending it during the economic downturn in 2008. Earnings reports have largely been solid, and there is no reason to believe this will change.
    I’d be remiss in my duties if I failed to acknowledge that these industrials are global in scope, and generating much growth in the world’s emerging markets. This however, does not tell the whole story. Let’s use Wal-Mart as an example of the size of revenues we’re talking about. According to Fortune Magazine, If Wal-Mart is to grow by 3% in 2011, they will need to generate additional revenues large enough that, were they generated by a separate company, they would place that company in the Fortune 500 also! This type of growth must and will be supported by the U.S. consumer!
    Low interest rates have historically been good for equity markets. Companies borrow to access capital for growth. Often credit-worthy companies can earn higher rates of return by investing their cash than the interest charges on their debt. Higher interest rates often mean less corporate borrowing/spending, leading to slower growth and lower profits.  High interest rates also mean higher credit card interest rates, causing consumers to cut their spending According to Ben Bernanke, interest rates are, and look to remain low for “an extended period.” “So what is happening out there with these low interest rates?” you might ask. We needn’t look much further than the increase in all-cash mergers and acquisitions activity over recent months to get a feel for companies’ willingness to borrow/spend on growth. Credit card use is still down. Consumers are still in the process of deleveraging after their decade-long spending spree. Sure as the sun rises, as a sense of normalcy returns to the economic world, so too will the pace of credit card swipes!
    At the end of the day, I think the future of our economy is largely dependent on Washington rhetoric. Before you throw your hands up in disgust, consider the following: 1) it appears that the Bush Tax cuts will remain, at least partially, intact. 1 point on the board for clarity; 2) The Obama Administration is, at the very least, attempting to promote business spending by offering incentives to companies spending to improve their technology and heavy machinery. Chalk one up for backing business!; 3) Mid-term elections have a way of bringing politicians toward the rational moderate end of their political spectrums; this will likely result in more certainty on issues regarding payroll expenses, and taxation. As investors’ many questions begin to be answered in a straight forward manner by Washington, the markets will slowly begin to settle in. In the mean time, we need to accept that these are volatile times, and continue to look for the many buying opportunities being provided by this economic mania. That is my Game Plan!    


    Disclosure: No Positions
    Tags: WMT, GE, T
    Sep 19 6:10 PM | Link | Comment!
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