Working for a Living

Somedays won't end ever and somedays pass on by,
I'll be working here forever, at least until I die.
Dammed if you do, dammed if you don't
I'm supposed to get a raise week, you know damn well I won't.

Workin' for a livin' (workin')
Workin' for a livin' (workin')
Workin' for a livin', livin' and workin'
I'm taking what they giving 'cause I'm working for a livin'. 

"Workin for a Living" by Huey Lewis and the News

The Bureau of Economic Analysis (government employees) recently released the following data comparing Federal Civilian jobs to Private Industry jobs, and the data is jaw-dropping. The average Federal employee makes about twice what the average private sector employee makes. What Washington doesn't get is the anger out in the hinter-land is not anti-democrat, anti-republican, or even anti-banker, it is anti-government! As a security analyst one of the metrics we would often look at is revenue per employee and profit per employee, as an indicator of how efficient/profitable a firm was compared to their peers. For example, both Apple and Google generate over $1,000,000 per employee in revenues, but Google generates a bit over $200,000 per employee in profits, while Apple generates a bit over $150,000 per employee. Both excellent, but Google gets the nod based solely on this metric. Now how about those federal employees, what is their revenue per employee or their profit per employee? That's right, it's negative...they generate zero revenues and negative profits!

Last week, in the President's State of the Union address, President Obama stated that Washington must "make investments", "create jobs", increase "production", and "efficiency". Wow, that's quite a task, considering who is in Washington. You see, the President has only one member of his cabinet that has ever had a job in the private sector (you know, one of those jobs that generate revenues) and that is Secretary of State Hillary Clinton who was once a lawyer. 

Last weekend, I was talking to a realtor up at Seven Springs Resort (a ski resort about an hour from Pittsburgh and 4 hours from D.C.) about the local condo market, and he said things were picking up. "That's great", I said. And he said, "Yeah we're getting a lot of interest out of the Washington area, no recession there."

Maybe it's time we quit "taking what they giving".

Source: Bureau of Economic Analysis

Investment Considerations

I was recently talking with a good friend and client of mine, about our investment fears, and she said that her biggest fear is her muni-bond portfolio. With runaway municipal deficits she worries about the safety of what was originally purchased as a safe haven. I couldn't agree more with her, and since I still have a nice chunk of my families assets in PA. muni's, it is one area that gets constant monitoring. Fortunately Pennsylvania is not yet as bad as New York, New Jersey, Wisconsin, Oregon, Vermont, Michigan, Illinois, and of course California. California should be a good litmus test of what will happen when a state approaches bankruptcy. Recently, for political reasons, Gov. Schwarzenegger used the word Armageddon in describing his states precarious financial position. But, do we really need to worry about our muni's? Sure, we should worry about all of our investments, but we need to keep it in perspective. There has never been a state filling for bankruptcy. Never. Could it happen? Sure, anything can happen. New York City came close in 1975, and Cleveland came close in 1978. Orange County actually did file in 1994. There is no federal protection for a state filing for bankruptcy, and states can't print money like the federal government, so it will be interesting to see what happens in California. In Orange County, muni investors were eventually made whole, even though the citizens of the county had to pay significantly higher interest rates on future muni debt. 

Yes, we should be concerned about investing in states where bankruptcy is a possibility, we may not lose all of our investment in a bankruptcy, but we could take a serious hit to principal or interest...Muni's are not risk-free.

Even so-called risk-free U.S. Treasuries are not risk-free!

We need to diversify globally and across all asset types; equities, fixed income, real estate, commodities, currencies, and gold. Only active global asset allocation can hopefully protect from governments run amok. 

Keep workin' and be careful out there,

Chris Wiles

www.rockhavencapital.com

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.