Financial Almanac

This is the Financial Almanac for Wednesday, February 9, 2011.

6-Minute Podcast Episode
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It was on this day in 1969 that Boeing first tested its iconic 747 commercial airliner, commonly called the “Jumbo Jet” because it was the first widebody ever produced and the largest models can seat almost 600 passengers. It was so big that Boeing needed to build a new plant to assemble it, and did so about 30 miles north of Seattle on 780 acres. In building the plant, Boeing moved more than 4 million cubic yards of earth. The plant remains the largest building by volume ever constructed. The 747 debuted commercially with Pan Am in January 1970 after being christened by First Lady of the United States Pat Nixon. To date, Boeing has built more than 1,400 747 jets. If you want one for yourself, expect to shell out some $300M.

It’s the birthday of businessman Chris Gardner, born 1954 in Milwaukee. While barely making ends meet as a medical-equipment salesman, he one day asked a well-dressed man in a red Ferrari what he did for a living. The man replied that he was a stock broker, and Gardner decided that’s what he’d become, too. With the man’s help, he embarked on a series of interviews with brokerage firms that offered training. He had to take a break to serve 10 days in jail for unpaid parking tickets, then went to work at Dean Witter Reynolds as a trainee.

His salary was so low that he and his son lived on the streets of San Francisco’s Tenderloin District for almost a year while he worked his way up in the firm. The two sometimes slept secretly at the office or in a locked bathroom at a Bay Area Rapid Transit station, and received food from soup lines. Gardner became better at stocks and improved his situation until he used $10,000 to form his own brokerage firm, called Gardner Rich & Co, in Chicago. The office was in his own apartment with just a wooden desk, on which his family also ate dinner. Gardner eventually became a multi-millionaire and his story was told in the 2006 film The Pursuit of Happyness, starring Will Smith.

On this day in 2007, the Financial Times wrote that Democratic congressmen were “pressing the Bush administration to persuade Tokyo to strengthen the yen.” They claimed the currency’s weakness was “bolstering Japanese imports at the expense of US manufacturers.” That may have been a case of needing to be careful what we wish for. At the time, the yen traded at 121 per dollar. Since then, as US debts mounted and the Federal Reserve created great quantities of dollars, the dollar has crumbled against foreign currencies including the yen. The yen currently trades at just 82 per dollar, showing that the dollar has lost almost a third of its value against the yen in the past four years.

Today’s stock idea is Navigant Consulting, symbol NCI, a specialty consulting firm in Chicago that focuses on litigation. In business since 1982. The stock is down from $14 a year ago to less than $10 today. It has struggled in the recession as companies scaled back spending. It has historically sported a PE ratio well above that of the S&P 500’s, however, and its recent PE compression suggests that it will be rebounding soon. Even if its business remains flat while the economy improves, returning to its five-year average PE will see its stock hit a price of $12. Recovering to its 2008 business performance and PE would see the share price rise to more than $15. Thus a gain of 20- to 50-percent looks likely.

Finally, a quote for today. The British novelist Samuel Butler wrote in his 1872 novel Erewhon, about a place that seems like a utopia but isn’t quite, that money “is the symbol of duty, it is the sacrament of having done for mankind that which mankind wanted. Mankind may not be a very good judge, but there is no better.”

From Sano, Japan, I’m Jason Kelly saying observe the world, find what makes it better, and profit from your discoveries.

Have a great day!
Jason Kelly

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