ONE YEAR LATER – THE EASY PART IS OVER, NOW THE FUN BEGINS
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On 3/23/2009, I sent out a memo about the S&P 500 being back over 800. In retrospect, it was up 22.6% over the 10 trading days since the 3/9/09 low; the next 239 trading days produced a 36.5% gain. So, with the one-year anniversary of the Bull market coming up Tuesday (technically the opening of Wednesday, March 10), below is a status report.
I’ve added a few text lines to highlight, but mostly its data (file attached) for your use.While 97.6% of the S&P 500 are up over the year, only 24.1% are up from the October 2007 high. Turning things around and getting them to work again was key. However, the driving forces over the last year – fewer layoffs, a reversal of the credit crunch, and fewer massive write-offs, have been replaced by the need for stable jobs and growth, which may prove a bit slower to develop. Hopefully things will get better, but don’t count on them getting easier.
Original source for this article: Business Week
Consumers Just Didn’t Get The Memo – Everything Is Beautiful
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February was a sweetheart of a month, with love for all (it’s all in the definition), and not just on the 14th. The FDIC loved another 500 banks, raising its list of ‘challenged’ institutions to 702 from the 252 that were the center of their admiration at year-end 2008. Google decided to engage China in talks, as one part of Congress accelerated their love for Toyota, while another part of Congress yielded their approval for Ben with hopes of him not yielding some back. The quick Volker rule seemed to be more of a dating process, sometimes called discovery, other times called politics. Wall Street quantified that its love for bonuses had derived a 17% growth rate (not sure if there is a default swap on it – they never tell you to after the event), as both buybacks (at least for authorizations – the proof however is in the trade) and dividends (best month in 2 years – and that’s cash in your hand) come back into fashion. The Democrats and Republicans tenderly played with Health Care, in a picture (or photo) perfect setting, as investors fell in love with the dollar (actually they just liked the Euro a lot less), new home builders decided they loved their homes too much to sell them, translating into an 11.2% sales decline in January, as existing home owners also stayed put, as represented by a 7.2% decline in existing home sales. GDP was set 5.9% for Q4, but warnings emerged that 2010 may not be as good (everything is relative, and as stated in the definition). Canada started off depressed by its lack of metal, but cheered up as its ladies hockey team took gold (with the ladies starting the party on the ice); Canadian investors however were much more happy, as Canada performed the best of all global equity markets in February, permitting those people to party even more. The only one left on the side line appeared to be the consumer, whom with no one to turn to, were down right depressed over their insecure, paranoid, emotionally inspired belief that higher prices, higher taxes, and fewer jobs were ahead of them (where do they get that from? didn’t they get the memo?). That, even though it now appears that many of them may be classified as rich. These malcontents sent the Consumer Confidence Index down to 46 from an already discouraging 56.5; someone needs to lobby them a pick-me-up e-card, or at least something more than a token stimulus package. March madness is coming (Syracuse will beat Villanova, but in the end ‘you’re not in Kansas anymore’; if the President speaks basketball, you need to speak basketball), but in Washington, March madness will be called reconciliation, which should insure late-night TV employment.
Full February report available
Original source for this article: Business Week
The Good News Is Washington Is Working On It, The Bad News Is Washington Is Working On It
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The 8.1% market decline from the Jan 19th Bull market high through the Feb 8th pullback low appears to have stabilized, at least for now, with the market gaining back about half of it’s loss, and holding onto a 63% gain, as the one-year anniversary of the Bull rally that started March 9th approaches. Of course, we still need another 41% to get back to the March 2007 high and even more depressing is that the hang over from the 1999 party remains (when the S&P 500 posted an annualized total return of 18.2% for the decade, or 433% in all), with long term investors down 33% from the turn of the century. Oh well, that was yesterday and today is now. And while today is still not clear, it is starting to take shape with familiar issues and arguments. The current debate is between the higher Bank rate by the Fed which could push rates up versa the January Core consumer rate which was down -0.1%, the first negative since 1982; the political debate is over the impact of the stimulus spending on jobs – both prior and the expected new one.
The market has had low volume for several months now, which includes the mini-pullback, and while there have been numerous opportunities inspired by economic, fiscal and issue data to trade, many investors are standing pat, with a sizable amount of cash on the side line. Overall, this lack of commitment is viewed as a sign of uncertainty and to some degree a lack of faith in global leadership to make things better – which in itself is a sad commentary.
Earnings were very good for Q4, and Q1 is also expected to show a nice increase, with a notable increase in Energy mostly due to a devastating Q1,’09 comparative. But sales remain the true issue, and they haven’t increased that much, and future sales growth is expected to be slow. Margins for Q4 were very high due to cost cutting, and that is expected to continue throughout 2010. We have already seen several issues announce additional layoffs, with some being minor when compared to their last year’s move. Humana and Boston Scientific will layoff 2,700 employees, but Merck will cut 15% of their newly acquired Schering-Plough division, Xerox is letting 5% go, and Verizon is targeting 13,000 employees for 2010. Those should help corporate earnings, but they can’t be good for those let go, the economy or municipalities, and they defiantly won’t inspire consumers to go out and spend more, which in the end can’t be good for long term profits.
Balance sheets are looking good. While cash appears to have dropped from its Q3 all time high, it remains very high at 72 weeks of expected 2010 operating income, giving company’s many options, including more aggressive M&A to increase sales. Buybacks are now back in style, at least in the announcements. The actual market buybacks, while up from the lows, remains well off the peak, and I expect that they will stay off their peak, but still outpace dividends, as companies buyback enough shares to prevent dilution, but not enough to improve EPS through share count reduction. The dividend news is all good with more issues increasing, fewer decreasing and coverage ratios for the top payer being at a more comfortable level. I believe the full year will produce a 5.6% dividend gain, with the second half being better than the first, if the economy cooperates.
The bottom line however is that a good deal of the markets fate lies in Washington. Companies can position themselves, develop product, form alliance and trim down, but if the overall economy doesn’t continue to improve, or if consumers and companies don’t believe that it will improve, then it won’t. And the bottom line to that item is jobs. The good news is Washington is working on it, the bad news is Washington is working on it.
Original source for this article: Business Week
Ouch, Berkshire Hathaway Negates 3 Months of Dividend Gains
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(but we still love you Warren)
You need to think about this first before you calculate it. After the close of business tonight BNI with an index value of $26 billion and which pays a dividend will be removed from the S&P 500, and BRK.B, with an index market value of $127 billion (float adjusted) and which does not pay a dividend will be added. The removal will reduce the S&P 500 indicated dividend rate by $0.05, and also cause the index divisor (think of them as shares outstanding) to be increased by over 1%, to insure that there is no gain or loss in the index price. One of the side items however is that when you add up the index dividend rate in billions of dollars, you are dividing by a larger divisor, so the per share rate goes down. The full impact of the BRK / BNI deal is to negate all of the positive good dividend news we’ve had over the past three months. The simplified explanation is that your dividends in billions are only slightly lower but since you have more shares outstanding your piece of the pie is smaller (a concept to keep in mind when looking at Financial EPS).
That said, we are still holding to our initial 2010 overall 5.6% S&P 500 dividend growth rate, anticipating a good February, followed by a few decreases and better news in the second half (if the economy cooperates). Not that I knew about the change, but I certainly calculated it, just as I calculated if those three top issues (of the top 15 by market value) that don’t currently pay a dividend decided to yield their cash and pay (they would add $0.495 for each 1% yield; BRK would add another $0.141 for each 1% yield – no harm in knowing the numbers).
See file for issues, values and aggregates
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Original source for this article: Business Week
Four Weeks Down, But Limited Damage
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The index posted its fourth week of market losses, an event not seen since March 2009. However, this week’s damage was a minor -0.72% (Monday was up 1.43%, with Tuesday was up 1.30%) and the cumulative four weeks of damage was 6.88% (7.31% off the 1/19 high), compared to the 16.01% in March, and today ended with a field goal, as the market moved up slightly (0.29%) in afternoon trading. U.S. volatility (and damage) was much less than global, as concern over sovereign debt was added to the concern over the pace of growth.
With over 75% of the Q4 EPS in the bottom-line is good, relative to where we are in the recovery cycle, but non-financial sales still lag, and until they pick up, hiring won’t pick up. Dividend increases continued throughout the week, with more positive news expected next week. February is the busiest month for increases (fiscal over, annual being printed and share holder meeting coming up), but there are still issues that are straining to pay their dividend (didn’t make it in ‘08 or ’09), and we expect some negative news to start late in the quarter.
Its time to look at the long term whole picture, not just the trader’s notes. Look to the basic fundamentals – earnings, balance sheets, production and capacity, as well as balance sheets and business models. When these items come back in style and become relevant to investors, short-term tick by tick trading based on each news items or stat will diminish (but still exist, risk vs. reward), and investors will return to the market.
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Original source for this article: Business Week
The Different Types of Business Plans
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Business plans are also called expansion, strategic, internal , operational, growth, annual, product and feasibility plans. There are also many other names, bottom line, these are all Business Strategic Planning. In all these different varieties of business plan, the plan matches your specific situation. For example, if you’re developing a plan for internal use only, not for sending out to banks or investors, you may not need to include all the background details that you already know. Description of the management team is very important for investors, while financial history is most important for banks.Some of these specific case differences lead to different types of plans:
- The most standard business plan is a start-up plan, which defines the steps for a new business. It covers standard topics including the company, product or service, market, forecasts, strategy, implementation milestones, management team, and financial analysis. The financial analysis includes projected sales, profit and loss, balance sheet, cash flow, and probably a few other tables. The plan starts with an executive summary and ends with appendices showing monthly projections for the first year.
- Internal plans are not intended for outside investors, banks, or other third parties. They might not include detailed description of company or management team. They may or may not include detailed financial projections that become forecasts and budgets. They may cover main points as bullet points in slides (such as PowerPoint slides) rather than detailed texts.
- An operations plan is normally an internal plan, and it might also be called an internal plan or an annual plan. It would normally be more detailed on specific implementation milestones, dates, deadlines, and responsibilities of teams and managers.
- A strategic plan is usually also an internal plan, but it focuses more on high-level options and setting main priorities than on the detailed dates and specific responsibilities. Like most internal plans, it wouldn’t include descriptions of the company or the management team. It might also leave out some of the detailed financial projections. It might be more bullet points and slides than text.
- A growth plan or expansion plan or new product plan will sometimes focus on a specific area of business, or a subset of the business. These plans could be internal plans or not, depending on whether or not they are being linked to loan applications or new investment. For example, an expansion plan requiring new investment would include full company descriptions and background on the management team, as much as a start-up plan for investors. Loan applications will require this much detail as well. However, an internal plan, used to set the steps for growth or expansion funded internally, might skip these descriptions. It might not include detailed financial projections for the whole company, but it should at least include detailed forecasts of sales and expenses for the new venture.
- A feasibility plan is a very simple start-up plan that includes a summary, mission statement, keys to success, basic market analysis, and preliminary analysis of costs, pricing, and probable expenses. This kind of plan is good for deciding whether or not to proceed with a plan, to tell if there is a business worth pursuing.
Original source for this article: Successful Investments
The Best Ways to Invest Your Money
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If you want to save some cash and earn some money from it on a monthly basis, you should start investing. Money that lies in a drawer or a bank account is essential idle money and hence you should know how to invest so that you can start earning some money from it.Investing means that you should set for yourself some rules that you will follow. Some of the most important decisions like when to buy and sell can be made by means of using these rules. It also helps in making you stay calm and hold on to your holdings.
A lot of these rules come from past experiences which are a mixed bag of good and bad experiences. If you are an investor you should not lose heart but learn from past bad experiences.
Some people are seen to base their opinions on what other investors think and do. But it is better if you do your own research and then look at testing this out by analyzing the findings. With this you will be able to form firmer investment opinions too. It is always advisable to be guided by your own convictions and not by the convictions or opinions of others. This is why it is important that you learn various techniques of investing and then apply these quite strongly.
One of the best things is if you can guide yourself. The reason is that you will be able to base your opinion on past experiences. From his you will benefit as you will be able to know what the various phases of investment are. The first step is to do proper and vigorous research after which you need to invest and leave the rest to fate or chance.
It is important to believe in your own convictions. It is fine if others follow our recommendations but you should not follow them. After all, you do not know they rationale or way of thinking. If things do not turn out well, you would regret that you did not follow your own judgment and just followed others.
There are many programs that can help you in investing. It is possible to invest in property, gold etc where you can sell on appreciation. Investment in stocks and bonds is also essential. Buying and selling in the stock market is essential for which you need to learn speculation. This is like gambling where you can become hit or perhaps make money while trying the play in the market. If you learn the truck, you can invest in the safest way.
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Doug has been writing articles online since he was in middle school. Now he continues to write and build projects on a professional level, you can check out his latest advice on water softener pellets and also new information about water softener maintenance.
Original source for this article: Successful Investments
Business or Hobby?
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The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
In order to make this determination, taxpayers should consider the following factors:
- Does the time and effort put into the activity indicate an intention to make a profit?
- Does the taxpayer depend on income from the activity?
- If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
- Has the taxpayer changed methods of operation to improve profitability?
- Does the taxpayer or his/her advisers have the knowledge needed to carry on the activity as a successful business?
- Has the taxpayer made a profit in similar activities in the past?
- Does the activity make a profit in some years?
- Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:
- Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
- Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
- Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
Future Africa recommends Individual Coaching and MentoringFurther information is available in IRS Publication 535, Business Expenses
Original source for this article: Successful Investments
The great turnaround of 2010
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Today is a huge day for this country. Not only did the GOP take back a pivotal seat, but the markets are reacting fiercely and appropriately to a horde of economic data. The possibilities from here are unlimited.
Oddly, the action reminds me of my first few days as a fishing guide. There I was, a typical East Coast grad student with a vision and not much of a plan.
As I dropped my bags on the dock outside the state’s southernmost airport, I used the change in my pocket to dial my only contact in the 49th state. She did not answer. In fact her phone was disconnected.
Great… 4,000 miles from home and stranded in the rain.
I must have looked lost because a bushy bearded that most resembled the kind I’m used to see begging for change, asked me where I was headed. I told him some basic details and he grabbed my bags.
With nothing to lose, I followed.
Within an hour, I was strapped into a floatplane cruising 750 feet above what would turn out to be my new home for the next two years.
On the dock, I saw a figure.
Little did I know it would be the girl I would marry and who is now eagerly counting down the last four months until she becomes a mother.
For me, uncertainty led to great things. I see much the same for the country today.
Over the last six months, the economic data has told us very little. For the last several quarters, we’ve been told to “wait for next month’s figures.” Or we heard “this time next year, things are going to be better.”
So far, even with the help of massive stimulus and governmental manipulation, we’ve done little more than tread water. Instead of following the creepy guy on the dock, we’re waiting around for somebody familiar to pick up the phone.
Until, that is, today. Look at the market. It’s in crazy rough shape, cutting nearly two percent from the top indices.
At first glance, it’s horrifying.
But with some careful studying and a keen eye for what it all means, it is fantastic news. Right now, we’re circling over our destination and are closer than ever to uncovering our fate.
For America, until last night, the question was if the country’s citizens would roll over and let a government force us into something highly unpopular. Today, we know democracy still rules and the political power players are laying flat on their butts from a catastrophic blow.
They may get back up and throw a few more punches our way, but they will never have the deadly dangerous momentum they had just 48 hours ago.
For the nation’s economy – here’s the truly good news – a strong dollar and slipping interest rates proves we remain the beacon of safety for global investors. China may be a powerhouse, but when things get tough, we always run to those we trust the most.
As commodity prices plummet today, the prices you and I pay for just about everything from heating oil to creamed corn will follow. Just as inflation threatened to crimp our shot at growth, Mother Economy proves her ability to create equilibrium.
If all of this is sounding different than what you are hearing on TV or reading in the rags, you’re right. It is different. It’s the contrarian’s take. When everybody is fleeing for the exits, we’re holding the door open, eagerly waiting to take what they left behind.
It’s a good idea to be buying what these folks are selling today.
***As a guy that has spent thousands of hours on the nation’s coastal waterways, I have had my share of run-ins with the Coast Guard – all of them good.
To prove that the core of this nation remains strong and true, I have included a press release my friends at the Coast Guard emailed me this morning. It’s a small glimpse of what Americans are doing to help their global brothers in trouble.
Here it is:
The first U.S. asset to arrive on scene to Haiti after the earthquake remains engaged in Haitian relief operations one week later.
The Portsmouth based Coast Guard Cutter Forward arrived off Port au Prince Jan. 13, at about 8 a.m. The crew provided air traffic control for military aircraft due to the damaged and inoperable control tower at Toussaint Louverture International Airport. They also began assessing the port, and ferrying supplies and injured people with their small boat and helicopter.
One of their primary missions was to pave the way for supplies to be delivered into the port of Cap Hatien. They began assessing the port and noted significant damage and destruction of its infrastructure adding to the difficulty of bringing aid to the country. The Detroit based MH-65 Dolphin helicopter crew, that deployed with the Forward, flew over some of the roadways leaving the port and verified that relief efforts delivered to Cap Haitien can be trucked to Port au Prince. They also observed multiple oil, fuel and sewage spills in the area.
Monday they were able to perform medical evacuations with their helicopter from the Killick Haitian Coast Guard base to the Sacred Heart Hospital in Milot.
“The flight mechanic talked about two children on the first flight who wanted to hold his hand for comfort,” said Cdr. Diane Durham, the commanding officer of the Forward.
“I am glad to be a part of the relief efforts in Haiti. It is a life changing experience and is the reason I joined the Coast Guard. It feels good to be part of something bigger than myself,” said Fireman Kendall Wilson, a crewmember aboard the Forward.
The Coast Guard Cutter Forward deployed with Maritime Intelligence Support Team 0410 and an MH-65 Dolphin helicopter crew from Air Station Detroit.
In total, the Coast Guard has medically transported 29 critically injured U.S. Embassy personnel out of Haiti, evacuated approximately 662 American citizens and delivered 512 urban search and rescue team members to Port au Prince.
The Coast Guard will continue to support the massive relief effort in Haiti by providing humanitarian assistance to Haitian survivors, evacuating critically injured U.S. personnel and evacuating U.S. citizens from Haiti. The complexities crews face with this massive relief operation are immense due to the magnitude of damage to Haiti’s infrastructure.
Additional Coast Guard assets responding to the area are:
- An HC-144A Ocean Sentry aircraft from Coast Guard Aviation Training Center, Mobile, Ala.
- An HC-130J Hercules fixed-wing aircraft from Coast Guard Air Station Elizabeth City, N.C.
- An HC-130 Hercules fixed-wing aircraft from Coast Guard Air Station Sacramento, Calif.
- Two HC-130 Hercules fixed-wing aircraft from Barber’s Point, Hawaii.
- Two MH-65 Dolphin helicopter crews. They are from the Coast Guard HITRON based in Jacksonville, Fla., and Coast Guard Air Station Detroit, Mich.
-Two HU-25 Falcon jet crews from Coast Guard Air Station Miami, Fla.
-The Coast Guard Cutter Valiant, a 210-foot medium endurance cutter homeported in Miami, Fla.
-The Coast Guard Cutter Mohawk, a 270-foot medium endurance cutter homeported in Key West, Fla.
- The Coast Guard Cutter Tahoma, a 270-foot medium endurance cutter homeported in Portsmouth, N.H.
- The Coast Guard Cutter Oak, a 225-foot seagoing buoy tender homeported in Charleston, S.C.That’s the kind of showing that makes me proud to be an American, even if I am contrary.
Original source for this article: Contrarian Profits
Is Obama a closet capitalist?
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It’s a huge day in the nation’s history. As with a couple of other great revolutions, America’s latest smack to the face of an overpowering government comes from Massachusetts.
Six months ago, few would have guessed one of the most left leaning of states would hold the fate of the nation’s healthcare and a super-majority in its hands. But disappointingly, I am far from convinced a GOP win means the end of Obamacare.
I take Pelosi and her cronies at face value when they say they will cram this legislation down our throats at any cost. (I’m paraphrasing her actual words, but we all know that’s what she meant).
I can picture her and Barney Frank feverishly pouring through 234 years of laws, looking for any loophole to twist to their advantage in case Brown receives a concessionary phone call later tonight.
Healthcare and all the ways it will affect your life will be a popular topic for months, if not years to come. The majority of the healthcare sector today is trading in positive territory thanks to the brewing storm in the Bay State. It’s a small prelude of the volatility that is to come.
It is sad to think we only have a couple of more days to cover it all in Notes.
Because we’re operating on borrowed time, I’m going to put off the speculation of healthcare for tomorrow when we know (or at least hope to know) Massachusetts’ decision.
For now, let’s stick with what we know for sure.
One thing that is 100% going to happen is, in just a few weeks, Obama is going to unveil his latest budget proposal. In it is going to be increased defense spending (which I’ve already covered) and also decreased fiscal dedications to NASA.
Instead of giving cash directly to the top space agency, Obama wants to embrace his capitalism roots (there’s a line you don’t see every day) and give the cash to the private sector.
Now that the space shuttle fleet is up for sale, NASA needs a new way to get its astronauts into orbit. Of course, the big recipients of NASA-based money, Washington cozies like Lockheed Martin, Boeing and Raytheon, are not so keen on the idea.
After all, if NASA outsources the shuttles duties, they stand to lose a long-producing cash cow.
But that’s not the case for companies like Orbital Sciences (NYSE:ORB), SpaceX and Rocketplane Kistler that could be the recipient of healthy government contracts as Obama puts a toe into the private sector.
Unfortunately, Orbital Sciences is the only publicly traded of the three, but with a Street value of less than a billion bucks, it offers investors a shot at a “smallish” space-industry up-and-comer.
There are a couple of arguments against Orbital Sciences.
First, its price tag is inflated. With a trailing P/E of nearly 25, investors have obviously priced in lots of growth potential. But if Uncle Sam starts writing the company a couple extra checks each year, the current bottom line will look paltry in comparison.
But then there are the naysayers that believe the private sector cannot compete with the deep pockets and industry experience of NASA. They cite factors like national security and safety.
While I believe safety and quality is almost always better in the private sector, security is an issue Obama must measure before he goes and cuts NASA’s budget. Space superiority has been a significant ingredient in the country’s defensive success over the last 50 years.
The bottom line is if you’re looking for a place to put some speculative dollars and get your tax dollars back where they belong – in your pocket – than the aerospace sector is worthy of an in-depth look.
Original source for this article: Contrarian Profits
