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Published by: Lyon Capital Management, LLC - A Registered Investment
Advisor
24B Grove Street * Pittsford, NY 14534 * Tel: 585-248-9821 *
www.lyoncapital.com
Stocks As Currency
By Doug Lyon
Would I rather hold shares of Intel stock or good old U.S. Federal Reserve notes, i.e.
greenbacks or dollars? This question may sound silly, but I think it will become
increasingly more commonplace over the next decade.
As the world becomes smaller, not physically, but in terms of people's mobility and
ability to gather information quickly, arbitrary political boundaries become less and less
important. As the peoples of the world become more well-educated and earn more personal
freedoms, they heavy hand of the great protector, government, becomes less and less
relevant in more and more people's lives. Naturally their reliance on a particular
government currency will decline.
Companies such as Intel, Coca-Cola or Exxon operate globally and have done so for some
time. The managements of these companies have successfully learned how to deal with issues
of global operations. Governments by definition are nationalistic organizations and have
difficulty successfully handling issues and situations beyond their borders.
Over the periods of the past 5, 10, and 15 years, the U.S. dollar and Japanese yen
displayed a much higher level of volatility in value relative to their change in value
than stocks of IBM< Merck, Coca Cola and Exxon. Gold, traditionally thought to be a
store of value, displayed a higher level of volatility than either the currency or the
stocks.
A prime attribute of a medium of trade or a store of value is the stability and
reliability of the value of that medium. Stocks of large U.S. based multinational
companies have been a more reliable, stable value over the past 5, 10, and 15 years than
either gold or the U.S. dollar. Witness the fact that even in our own country investors
tend to give stock to their favorite charities rather than cash. Granted, it is a way to
avoid large capital gains taxes but these kinds of transactions will become more and more
the norm.
If some time in the next 10 years you win an E-BAY auction to buy a Ferrari from an
Australian collector and she demands payment in shares of Walt Disney Company stock, don't
be too surprised.
What does this mean for investors? And, how does one capitalize on this potentially
huge trend without overpaying for large cap stocks that have run up in value recently? For
ideas and answers, contact us at Lyon Capital Management or learn more about us on the web
at www.lyoncapital.com. While you focus on your business and interests, we focus on the
business of making more money for you!$$
Merger Mania
by Doug Lyon, CFA
On September 3, 1999 the large copper producer Phelps Dodge offered to buy smaller
copper companies Asarco International and Cyprus Minerals Company in an exchange of stock.
This is a continuation of a growing trend in the industrial commodities business. Earlier
this year Exxon and Mobil agreed to merge. More recently five large aluminum producers
entered into talks to form two separate and much larger companies. Canadian based Alcan
leads one group and U.S. based Alcoa leads the other.
The trend that has led to this activity is every lower commodity prices. Although many
commodities like oil, copper, and aluminum have experienced price increases recently,
their prices adjusted for general price inflation are at multi-decade lows. As costs of
production, which include such things as labor and energy tend to increase at the rate of
overall inflation, many commodity producers have had a difficult time operating
profitably.
The current thinking is that merging smaller operations into one large operation will
allow the new organization to operate more efficiently and thus be able to deliver the
same product to market at a lower cost. In the copper industry Phelps Dodge (PD) is one of
the few companies that has a track record of managing for profit and maximizing
shareholder's return. Asarco and Cyprus have more of a history of managing their companies
for volume with profitability and shareholder return taking a back seat. With PD's track
record of maximizing shareholder returns through superior management, the combined larger
entity should be better able to take advantage of opportunities in the copper business
than any of the three separate entities can currently.
For shareholders of Cyprus and Asarco, turning their assets over to PD management
represents a huge improvement. For PD shareholders buying assets of under performing
companies represents a big opportunity for future growth. For the shareholders of all
three companies, the proposed combination is a winning proposition.
Investors with Lyon Capital Management may recognize some of the stocks named in this
article as those they have patiently held through ups and downs in these industries, but
the search for value is now most likely paying off. If you would like us to assist you in
your search for great stock market values, contact us via phone(585-248-9821) or email
(lyoncap@frontiernet.net). We spend our lives searching for values and watching market
trends. Why not let us pass this knowledge on to you?$$
Technology Matters
By Kate Lyon
Technologically savvy investment managers:
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are better able to identify
strong investments for clients. They understand the important role technology plays in a
corporation today. |
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often can identify values in
the market earlier. |
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use the latest technology in
business operations to pass substantial savings to clients through lower commissions, and NO
custodial fees. |
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provide better and faster
service and communications to clients. |
Are you using a manager comfortable with technology? If not visit our web site or
give us a call.$$
New Technologies
Special On-Line Only Article
By Kate Lyon
We have discovered that many of our readers are business owners or users of technology
looking for new advantages, processes to make their lives and businesses run more
smoothly. Along those lines we have decided to share with our readers some of the more
exciting technology tools we use. You may like them too.
www.connected.com--this is a web site that we
use to do on-line back up of our computer data. It sounds tricky, but it's not. Once you
use this service, you'll never go back to floppies, tapes or zip disks again. It is an
encrypted (that means secure) backup of your data saved on Connected's computers (not
yours) and on their off site storage media (not yours). You can do backups and restores as
often as you like. It is $20 a month and worth every penny. (We also looked at www.atbackup.com, but you are limited to 100MB of data
for backup). The first full back up is a doozy - meaning it takes a long time, but after
that it's a cinch.
www.eletter.com - this is a web site we now use to
mail our newsletters (for those who still haven't made the jump to this electronic
version) and other items. We produce the newsletter on our computer, then upload it to
eletter along with our mailing list. They print it, fold it, address it, check for correct
postal addressing, stamp it, and mail it. You can use the service for small or large
mailings. We found it to be less hassle, less labor intensive and faster. The best part is
you don't have to deal with the U.S. Postal service.
Still to be tested but under investigation is the following product:
www.efax.com - this service provides you with a phone
number for your own personal faxes. Give that number to clients, friends and family as
your fax number. When you get a fax - it is automatically e-mailed to you. The service is
free. You only pay when you want to have an 800 number or add on other bells and whistles.
If you want to transition to efax and get rid of an extra monthly phone charge, this may
be a viable option for you. Or if you don't have a fax machine, but want one - then you
are set. Upside: you can get faxes wherever you are as long as you have a computer.
Downside: you have to learn how to send faxes from your own computer. Upside: it's
a good excuse to get a scanner for those documents that aren't already on your computer.
As we discover more gems we'll post them at our web site under "links". Check
there for other useful e-tools.$$
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