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Stocks as Currency |
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Merger Mania |
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Technology Matters |
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New Technologies |
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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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