Babeled

On Mondays I will give my Market advice for those with enough nerve to invest at a time like this, one where anything is liable to happen.  I will be maintaining a virtual portfolio to track performance of the advice and report on the performance of this portfolio.  This week’s Market Mondays features Aflac, Inc as the stock pick of the week.  Also included is an in-depth analysis of Aflac’s quarterly income statement, balance sheet, and statement of cash flows for the past four quarters as well as my forecast for the next two quarters.  Since Aflac has an earnings call for this most recent quarter’s earnings on Friday, October 24th, you can check on the accuracy of the first quarter I forecasted within a few days time.

Aflac, Inc (AFL NYSE) is an insurance provider of almost any type of insurance you can think of offhand for both businesses and individuals.  Licensed agents and other insurance companies such as AIG, CIGNA, Allstate, ING, among others.  This stock is in the financial sector that has been in so much trouble lately, causing the economic uncertainty and much of the stock market plunge.  However, Aflac is one of the few companies in their sector that is financially strong and has a concrete expansion plan in Japan which has been positively contributing to their business.

My only fear with Aflac is that it may already be too late to jump on the bandwagon.  Like many of its market brethren, Aflac has suffered serious per share losses over the past several weeks. Aflac dropped from $64.25 on September 18, 2008 to $39.50 on October 17, 2008 before settling to the Friday October 18th closing price of $43.14.  This stock, like many others in the market right now who are not directly impacted with the banking and credit crisis and are therefore financially healthy, is under-valued at the per share level.  This stock is very worth the current share price because within twelve months this stock will be back in the $60 to $65 per share range.

Source: Yahoo! Finance

Aflac has experienced strong revenue growth and made good decisions with their cash.  Through management of long term debt and use of cash to buy back stock, Aflac has managed to increase earnings per share and pay solid cash dividends to shareholders.  When the market begins to bounce back, and bounce back it will, especially if we get our confidence back and make informed investment decisions, a company with sound a financial position, solid business model, and continuing growth potential will experience large gains.  Aflac is one of these companies, poised to produce huge profits for those saavy enough to get in while the price is right.

I am writing this post today in typical Man Overboard fashion. Tonight I go so Overboard as to pledge that my vote, regardless of the outcome, will be decided by “Joe the Plumber.”

For those of you who did not watch the 3rd and last Presidential Debate tonight, Joe the Plumber is the working class man from Ohio who has worked hard his entire life as a plumber. Now, after all these years Joe is finally in a position to potentially buy the business he has worked for during the last decade.

At a rally earlier this week, Joe asked Barack Obama if his taxes would be raised by an Obama presidency. This was Barack Obama’s reply:

My pledge to my readers tonight is this: Joe the Plumber decides my vote.

Here is why:

1. I live in New Jersey and Obama will obviously carry the Garden State in the election, so it won’t matter anyway.

2. I am so confident that any self made man, struggling for a decade and finally in a position to make a better life for himself and his family by starting his own business does not want to “spread the wealth around,” that I am willing to stake my precious, meaningless vote on it.

You heard it here folks. Even if the decision is Obama, Joe the Plumber will decide my vote. I go with the working man from Ohio because I know he will not allow his hard work to be taken from him by the government and given away to those not willing to work as hard as him.

I know this becuase:

• Joe is a hard working, self made man.
• Joe does not want to spread it around, he wants to earn it.
• Joe does not think it is patriotic to pay higher taxes.
• Joe is not rich, even though Barack Obama thinks so.
• Joe is not a communist.
• Joe is not a socialist.
• Joe is an American.

So tell me Joe. Who am I voting for? It’s your call. I know you’ll make the right choice.

~Man Overboard

It was reported today that the Bush Administration officially approved the CIA to perform waterboarding techniques on al-Qaeda prisoners.  I always assumed this was common knowledge, but I guess what makes this report novel is the revelation of a paper trail.

I have to admit, I’ve always been a little hazy about what exactly waterboarding is.  At first glance it sounds like an interrogator dips a paddle in water and then starts hitting someone.  Well that isn’t what it is. According to the Washington Post, waterboarding is a term that describes several different torture techniques.

The victim may be immersed in water, have water forced into the nose and mouth, or have water poured onto material placed over the face so that the liquid is inhaled or swallowed. The media usually characterize the practice as ’simulated drowning.’ That’s incorrect. To be effective, waterboarding is usually real drowning that simulates death. That is, the victim experiences the sensations of drowning: struggle, panic, breath-holding, swallowing, vomiting, taking water into the lungs and, eventually, the same feeling of not being able to breathe that one experiences after being punched in the gut. The main difference is that the drowning process is halted. According to those who have studied waterboarding’s effects, it can cause severe psychological trauma, such as panic attacks, for years.

Wow. That certainly doesn’t sound fun. In fact, it sounds pretty damn horrible for whoever has to go through it.

Now that we know exactly what waterboarding involves, the obvious question that comes to mind is whether it is ever justified to use this technique to get information or cooperation out of a prisoner?  Some may say yes, some may say no.  For some the issue will be decided by whether that prisoner is a terrorist who is involved in an anti-American organization with a history of planning and even successfully executing attacks on American soil.  After all, what if waterboarding could be effectively used to keep these kinds of violent attacks from ever happening again?

There are no absolute answers to these questions.  This is about ethics, and ethics are always personal.  In light of the subjective nature of ethics, it should come as no surprise that during World War II the United States held a very different stance towards waterboarding.

After Japan surrendered, the United States organized and participated in the International Military Tribunal for the Far East, generally called the Tokyo War Crimes Trials. Leading members of Japan’s military and government elite were charged, among their many other crimes, with torturing Allied military personnel and civilians. The principal proof upon which their torture convictions were based was conduct that we would now call waterboarding.  (Washington Post)

The U.S. has clearly changed its stance on waterboarding since World War II.  Some could call this a decay of morality, but it could also be perceived as a natural response to fear.  The 9/11 terror attacks on the Twin Towers were the worst attacks our country has ever experienced.  Unlike WWII and the attacks on Pearl Harbor, this time our enemies weren’t confined to one location that could be easily identified on a map.  They were potentially everywhere, even if primarily located in the Middle East.  When ideology is the enemy, the risk of an exponential increase in converts to that ideology is all too scary.  The fact is, fear changes the game.  An ambiguous enemy naturally evokes a primal fear, which naturally leads one to take advantage of whatever tools are at hand.  You can always count on fear to make a person do what they would not normally do.

This is the psychology of survival.  It applies to individuals, communities, and nations.

I personally do not agree with the use of waterboarding or torture in general, but I certainly understand why our government is using this tactic.  Now I want to know what you think.  Talk amongst yourselves.

Ethics appears to be a disappearing ideal in the business world, especially when executives are taking vacations with tax dollars, as well as getting their “golden parachutes” handed to them for a job poorly done.  In the midst of a crashing market, we have seen multiple bailouts given to companies that were on the verge of going belly up due to their excessive greed.  So for my amusement and I hope yours, I have compiled a list of quotes that I feel every Wall Street executive should read.  Enjoy.

1. Earnings can be pliable as putty when a charlatan heads the company reporting them. (Warren Buffet, American Investment Entrepreneur)

2. How do we know when irrational exuberance has unduly escalated asset values?  (Alan Greenspan, Chairman of US Federal Reserve Board)

3. If ethics are poor at the top, that behavior is copied down through the organization.  (Robert Noyce, inventor of the silicon chip)

4. The inherent vice of capitalism is the uneven division of blessings, while the inherent virtue of socialism is the equal division of misery. (Sir Winston Churchill, British Prime Minister)

5. I conceive that the great part of the miseries of mankind are brought upon them by false estimates they have made of the value of things.  (Benjamin Franklin, American diplomat, inventor, and writer)

Just when I thought the powers that be in San Francisco could not get any better at wasting taxpayer dollars,  I learned that the Board of Directors for the Golden Gate Bridge today voted 14 to 1 in favor of installing 3.4 miles of netting beneath the deck of the famous bridge in order to break the fall of individuals attempting suicide.

At a cost of $50 million this now wears the crown as the single most idiotic idea to ever emerge from the city of San Francisco.

Consider that 15% of those who attempt suicide and fail will only try again within the first six months.  Now consider that this announcement is being trumpeted across the city so anyone who wants to die will only do so by another means.

So anyone who actually does jump off of the bridge now knows the net is there.  Which means of course, the volume of jumpers will now only increase as stunt jockeys and losers in general jump off the bridge in an attempt to gain attention to themselves.

This also means, of course, rescue workers will be forced to endanger themselves to untangle and retrieve these idiots from the net.  This to me represents even more wasted money and also a needless risk to some good people who are NOT trying to kill themselves.

If you really want to deter suicide, then attack the cause (like needlessly high city taxes).  There are plenty of other ways to kill oneself and we can prevent those for less than $50 million.

~Man Overboard