Proper Preparation for Prosperity

Genesis 41:33-36 (NET) - Joseph is speaking:
"So now Pharaoh should look for a wise and discerning man and give him authority over all the land of Egypt.  Pharaoh should do this - he should appoint officials throughout the land to collect one-fifth of the produce of the land of Egypt during the seven years of abundance.  They should gather all the excess food during these good years that are coming.  By Pharaoh's authority they should store up grain so the cities will have food, and they should preserve it.  This food should be held in storage for the land in preparation for the seven years of famine that will occur throughout the land of Egypt.  In this way the land will survive the famine."


The Pharaoh of Egypt was provided special guidance from the Lord (through Joseph) as to what would be occurring economically over the next 14 years in his country.  This provided him with a huge opportunity to plan for the tough times.  Although we do not have ability to look into the future, it is crucial that we focus on being prepared for whatever might occur.  


In his book Great By Choice, Jim Collins provides a great example of Roald Amundsen who in 1911 successfully led the first team to reach the South Pole. Prior to his expedition's departure, the preparation that he undertook was very intense and disciplined - which played a huge role in him achieving his goal. To illustrate how he prepared, here is an excerpt from Jim Collins' book:

 

"While in his late twenties, Roald Amundsen travelled from Norway to Spain for a two-month sailing trip to earn a master's certificate. It was 1899. He had a nearly two-thousand-mile journey ahead of him. And how did Amundsen make the journey?  By carriage?  By horse?  By ship?  By rail? - He bicycled.

Amundsen then experimented with eating raw dolphin meat to determine its usefulness as an energy supply. After all, he reasoned, someday he might be shipwrecked, finding himself surrounded by dolphins, so he might as well know if he could eat one.

It was all part of Amundsen's years of building a foundation for his quest, training his body and learning as much as possible from practical experience about what actually worked. Amundsen even made a pilgrimage to apprentice with Eskimos. What better way to learn what worked in polar conditions than to spend time with a people who have hundreds of years of accumulated experience in ice and cold and snow and wind?  He learned how Eskimos used dogs to pull sleds.  He observed how Eskimos never hurried, moving slowly and steadily, avoiding excessive sweat that could turn to ice in sub-zero temperatures. He adopted Eskimo clothing, loose fitting (to help sweat evaporate) and protective. He systematically practiced Eskimo methods and trained himself for every conceivable situation he might encounter en route to the Pole.

Amundsen's philosophy:  You don't wait until you're in an unexpected storm to discover that you need more strength and endurance.  You don't wait until you're shipwrecked to determine if you can eat raw dolphin. You don't wait until you're on the Antarctic journey to become a superb skier and dog handler.  You prepare with intensity, all the time, so that when conditions turn against you, you can draw from a deep reservoir of strength. And equally, you prepare so that when conditions turn in your favor, you can strike hard."


As Christians, we need to make sure that we focus on the basics in order to be prepared for all future trials and temptations!

Jim Cramer's 2012 Outlook for the 30 Dow Stocks

Cramer: What 2012 Holds for the Dow Components

Jim Cramer

12/28/11 - 09:31 AM EST

NEW YORK (RealMoney) -- What a difference a year makes. Last year at this time I saw a continuation of worldwide growth, a nice double-digit gain in the Dow Jones Averages and some lift to interest rates.

My game plan was going along just fine, as the year, at first, seemed headed to be a good one. But then Europe intruded and all bets were off.  The question for me is how much do we have to fear Europe going into 2012, especially because I didn't fear it enough going into 2011?

I think we have to fear it plenty, but that's not necessarily bad news for most Dow stocks. Remember, I am a bottoms-up guy and as you will see from my analysis, I think we can have a decent -- not spectacular -- but decent year, even if Europe contracts anything but severely, although we certainly have to leave open the prospect that things really break down over there. What's a breakdown mean? The nationalization of many of the biggest banks, as well as a potential receivership of sorts for Italy, which is, ridiculously, the third-largest bond market in the world.

Let me tell you how I see things shaking out on a stock-by-stock basis.

1. Alcoa(AA). This was a year of colossal disappointment for Alcoa. Just an abysmal, awful year where aluminum prices plummeted and the company failed to come near any of the analysts' earnings estimates. Guess what? They won't hit them in 2012 either, as aluminum is in glut and there are many countries, notably China, where the country is committed to losing money to keep people employed. In that environment, barring a takeover bid, it is difficult to foresee how this stock can trade any higher than $10 given that I think it will be lucky to earn 50 cents a share, which is a dramatically lower estimate than what Wall Street is using. They aren't incompetent and they are extremely competitive, it's just that China has to pump out aluminum from dirty smelters just to keep people employed. In the meantime, the value of its new plants is totally lost in the lousy earnings shuffle. It would not surprise me if Alcoa actually reports a couple of quarters' worth of breakeven or losses.

2. American Express(AXP). Not clear to me what this company has to do to earn the respect it used to have. Mastercard(MA) and Visa(V), two not-as-well-run companies, generated fantastic performance in 2011, up about 60% and 40% respectively, while American Express barely budged. But that's because AXP has some credit risk and those other two are simply considered tech financials. Wall Street's worried that AXP's spending too much to get new clients and that the world is slowing down, so it can't do as well. I think small business is coming back in this country and that will be terrific for AXP's bottom line. But I do think it will struggle to get much past $50.

3. AT&T(T). Now that the disastrous T-Mobile bid is behind AT&T, and its huge $4 billion separation fee, perhaps T can return to $32 where it was before its adventurism. T needed more spectrum to improve calling and T-Mobile was supposed to be the answer. If I were T, I would make major changes after this, including an evaluation of CEO Randall Stephenson, as this foray was a major debacle. Did anyone float this one past the lawyers who know anything about the Obama administration? Too bad they agreed to the big penalty on the walkaway because otherwise they did so much to destroy a competitor like T-Mobile that it would have made great sense. Of course it was just the opposite, so $32 is about as lofty as you can expect to get.

4. Bank of America's(BAC) in trouble. How much trouble? Enough that this will be the year where management is replaced if nothing good happens. Bank of America has devolved into a collection of losing lawsuits connected to a deposit company. I have never seen so much legal exposure to one solvent firm except the asbestos makers, and we know how that turned out. I thought that BAC would turn the corner under Brian Moynihan. Instead it fell off a cliff. No bank's been that good in 2011 but this one's been disastrous. It will be lucky if it can get back to the $7, where Buffett put his imprimatur on it. If gigantic European banks implode, you are looking at a price as low as $3.

5.Boeing's(BA) at the beginning of a gigantic aircraft cycle, the 787, and when we have had these cycles they tend to last for seven years. That means Boeing's become one of my favorite stocks in the Dow because it has literally done next to nothing despite this huge catalyst and a decent dividend. I thought the stock would go to $85 last year and that was way too bullish. The story is even better this year, so am loath to cut my price target and am leaving it at $85 and calling myself "early."

6. Caterpillar's(CAT) the kind of stock that hedge fund managers love to go short or long depending upon whether Europe or China has had a stich of positive or negative news. Caterpillar does have power to do $12 in earnings, but the slowdown in Chinese construction, the tightening of rates in emerging markets, the inability of the United States to jumpstart its housing market and, of course, Europe, combined to almost cut that projection in half. I think the company can earn $7 if all goes well and it should get a 12x multiple for the high-quality company it is. All that said, if Europe takes another leg down or China doesn't cut rates fast enough you will see $6 and a 12x multiple. All depends on the ECB and the Chinese central bank and neither is all that trustworthy.

7. Chevron(CVX) has been in a plateau around $100 for some time now and I think it will take oil to go convincingly through $100 to get this stock to advance above these levels. I am betting that oil's not going anywhere for now, with OPEC seemingly bent on keeping prices no higher than this for fear that the developed world will push harder for alternative fuels. But the combined return with Chevron's terrific dividend makes it worth buying any time the stock goes to $90.

8. Cisco(CSCO). I predicted this stock would have a disappointing year, but I never figured it would be this disappointing and I thought the stock could trade to $21. All that said, the last two quarters from Cisco were positive surprises and the cost structure is lean enough for me to think $21 is a realistic goal for the year.

9. Coca-Cola(KO). Despite its 2.75% yield and its consistent growth, KO went nowhere this year, which is a real disappointment. Some of it is simple high valuation because on a price-to-earnings multiple vs. its growth rate the stock is fully valued in the high $60s. I think that KO's consistency isn't fully represented in the price and it can inch its way to $70 without stretching the valuation too much. They have accelerating sales in Asia, which is where the growth has to come from because it is not going to put up any appreciable numbers in the United States.

10. When Disney(DIS) boosted its dividend by 40% that was the signal that management realizes how bright the future for the company is. I think that in the mid-$30s Disney represents compelling value. Down about 20% from its high with terrific momentum to its parks and its ESPN unit, but not its films, Disney could deliver more earnings surprises like the last one and go back the $40 level.

11. DuPont(DD) yields almost 4%, but it is an accidental high-yielder, meaning it is only because business turned so disappointing that it got to that level. What happened? Too much cyclicality and not enough agriculture and safety. At least not yet. There's still too much exposure to the housing and auto cycles and while the latter is coming back, there's not a lot of money to be made in it. And the former is simply awful. I think that Ellen Kullman's recent preannouncement to the downside made people suspicious of the turn. I think that without some strong economic growth in either Europe or the United States this stock will remain hunkered down in the $40s and it will become a total return vehicle, meaning you will be paid to wait with a bountiful dividend until worldwide GDP growth kicks in.

12. ExxonMobil(XOM). This company is still living with its colossal overpay for XTO as the price of natgas crumbles. Meanwhile, the company's growth away from natgas remains subpar. If oil can go to $110 I can see the stock going to $85, slightly less than it was when oil was that lofty last time. I can't be as bullish because natgas had been so atrocious.

13.General Electric(GE). I am partial to 4% yielders because they pay you to wait, in this case paying you to wait for the transformation from a financial company with manufacturing abilities to a manufacturing company with financial savvy and credit availability for large financing purchases. I think the basic businesses (health, aerospace and energy) are all in a very good place and I think that the company's not done raisings its dividend. Stock goes to $20 if it continues to deliver these strong earnings and continues the dividend increases.

14. Hewlett-Packard(HPQ). I was incredibly negative about this stock going into last year, thinking it could lose a few points because I was concerned about the newness of management and the competition from everyone from IBM and Dell(DELL) to Cisco andAccenture(ACN). Turns out I was too bullish! Everything seemed to hit a wall for these guys and, for the first time I can recall, the balance sheet's been dinged. That's how bad things are. I do like Meg Whitman for her stability at the helm though and the fact that she has lowered the bar enough that it can be beaten. Call it $30 and change, no more because of a huge business in Europe.

15. Home Depot's(HD) doing everything right and we are still in a housing crisis. Who knows what this company could do if we actually catch a bottom in housing, which is something that is possible in 2012 given that we are building so few homes in this country these days, about as many as we built when we had half as many people. CEO Frank Blake's done a remarkable job steering Home Depot back from a Bob Nardelli-inspired oblivion and I think the good news continues, which will allow HD to appreciate another 10% without much problem, including the dividend as this company, like so many others in the Dow, keeps boosting its payout.

16. Intel(INTC) The company's recent preannouncement to the downside left people scratching their heads. How much was an actual macro decline, courtesy the gigantic European market for hardware vs. a problem in component parts out of Thailand that has shut down the personal computer supply chain. The company told us not to worry and things will bounce back rather quickly in the first quarter. I say you can stick with the stock because of its almost-4% yield, but don't expect a return to the glory days of growth. It's still too levered to PCs and not enough to smartphones.

17. IBM's(IBM) burning up the joint. I think that it can earn $15 next year and I think that a 14x multiple for those earnings, given IBM's consistency, is not out of the realm. That means IBM could count up to $210 by year end. I am not that concerned about Europe here, even though the company does have large European business, because IBM has been able to put up good numbers despite European weakness and I think it can continue to do so. Some criticize the company for boosting its bottom line through aggressive share repurchases, but I believe the market's thrilled to see the numbers and the company, under a new CEO, will continue to be rewarded.

18. Johnson & Johnson(JNJ). I thought that the FDA would be tougher on JNJ CEO William Weldon for the numerous infractions this company committed, but it looks like the wrist slaps are all that JNJ is going to get. Meanwhile, you have a decent dividend and a drug stock that has lagged so many others in the group despite a beefed-up pipeline and a return to the drug store aisles with all of its offerings. This might be a pick to go to $70 without too much of a stretch.

19. JPMorgan Chase(JPM). Here's a stock that might have to dip more before it can rally, one of those stocks that could have an undeserved swoon because of a wave of nationalizations in Europe. I think JPM's well hedged against any calamity over there as it was well hedged when it happened here. But in the end it is a bank and you are not going to see banks come to life until Europe's woes are put behind them. I don't think that can happen in 2012. The problems are too deep. So, while I think JPM will do everything it can to try to distinguish itself, including more dividend boosts, it won't be able to grow enough to satisfy the market and I bet it ends the year where it began.

20. Kraft(KFT). We are going to have to say goodbye to Kraft as we know it as this Dow sleeper is splitting into two, the slow-growing grocery business and the much-faster-growing snack business. Consider this break up like the one that split Altria(MO) with Phillip Morris International(PM), both pieces being terrific. But if you want yield, you go with the Kraft grocery business, a true cash cow. If you want growth and a higher P/E, then Kraft snacks will be for you. You can win both ways, no need to sell either.

21. McDonald's(MCD). Long one of my favorite stocks in the Dow, I had no idea that it could put on this many points and finish the year up more than 20%. That's staggering, especially when you consider that France and Germany were standouts. That's right, France and Germany, two markets that were black holes for just about everyone else. I don't know how much more McDonald's can do for an encore. I could see the stock rallying another 10% in 2012 on the late-night hours and the continued expansion in emerging markets. Just an exceedingly well-run company.

22. Merck(MRK). The deal with Schering-Plough, after initially not showing all that much upside, has started to really help the bottom line, allowing Merck to put through a nice dividend boost giving it an almost-5% yield. Merck's got a mid-single-digit growth rate but that could be accelerating so it wouldn't be a stretch to see this stock trade to $42, which would still give it an outsized yield and a valuation not all that stretched vs. its slower-growing competitors.

23. 3M(MMM). Boy, this one confounds me. MMM has multiple growth levers, a fantastic record on dividends -- just about the best there is -- terrific Asian growth prospects, but it has become a serial earnings-per-share disappointer and is finishing down for the year. I believe it could be one of the steals of the Dow if China starts cutting rates dramatically. And I believe it could trade to the high 80s where it would still be inexpensive on its growth rate. The company has let so many people down, though. It might take all year to rebuild that credibility.

24. Microsoft(MSFT). A down year for Mr. Softee despite some radical changes, including the admission of Skype into the fold. I think that the company better lay out a vision for Skype that shows how they are actually going to profit from it or it would not surprise me to see the stock staying right into the mid-$20s, with the best part of the appreciation coming from that plus-3% yield. The PC cycle just isn't going to drive enough profit and the gaming business, while good, still can't move the needle enough to matter.

25. Pfizer(PFE). No more big profit margins with Lipitor, but the company's acting as if the fall-off won't matter much and it remains committed to buying back shares and boosting its dividend as demonstrated by the surprise 10% hike in December. I think that the combination of stability and safety that Pfizer gives you makes it attractive again for 2012 and it can inch up to $24.

26.Procter & Gamble's(PG) still trying to deal with commodity inflation, the sale of its Pringles division and aggressive competition from the likes of Colgate(CL) and Unilever(UN). That said, PG is a huge user of a variety of plastics and surfactants and that means raw costs have probably peaked. With a better-than-3% yield and 9% growth, I think that buyers will reward this one by taking it to $70, where it still would be inexpensive vs. Colgate. Still, PG needs a hit, some new product that can put points on the growth board. And it doesn't have one that I can tell, which is why you will have to be satisfied with a pickup of just five points.

27. Travelers(TRV). Here's the best insurance company in the world and it can't get out of its own way. CEO Jay Fishman has been captaining this conservative financial and he hasn't been given much credit for all of the great work he is doing because people are loath to back a company that, in the end, has to take premiums and find something worthy and non-risky to do with them. I think that the problem here is that Travelers already trades at one of the higher multiples in the finance business, so it's hard to see the stock moving much over $60 a share. If the economy begins to recover in 2012 and you expect the Fed to start raising rates, Travelers could show some upside beyond that.

28.United Technologies(UTX) paid way too much for Goodrich, a move that came right before the big European-inspired breakdown. That, plus the fact that its elevator and heating and air conditioning businesses are seen as totally hostage to worldwide growth, keeps this one stuck in a range, albeit slightly higher than where it is now. I don't expect it to return to $91, the level it hit during the summer of 2011, anytime soon. But $80 seems reasonable if it can get its earnings per share for 2012 above $5.50. I am sure the Goodrich deal will pay off someday because of how strong the aerospace market is, but if you want exposure to that you should just buy Boeing.

29. Verizon(VZ). First full year of a new CEO, now that Ivan Seidenberg is retiring and I think that Lowell McAdam will just continue to deliver that consistent growth we like so much. The only issue here is that I don't see much acceleration of growth and the stock already sells at about two times its growth rate, so I would think that it would be difficult to get VZ much past $40. With the dividend, that's still a decent combined return.

30. Wal-Mart's(WMT) a creeper, creeping higher and higher, slowly, mounting a 7% advance in 2011. I think that Wal-Mart will not be able to replicate that advance and people will have to settle for something more on the order of 5% to the upside. I write that because that last quarter showed some structural weakness for the retailer as it seemed to be making a comeback of sorts. The problem with Wal-Mart is that it has neither the growth nor the dividend of the two other retailers in the Dow, Home Depot and McDonald's, if you are willing to lump restaurants into retail, so those are simply better bets than the Bentonville giant.

Bible Verses to End the Year On - December

Here are the texts that were shared in December:

December 1st - 2 Chronicles ends with chapter 36 where several verses talk about how many chances the Lord gave to the children of Israel.  But there chances ran out and there was great loss.  Let's never get to the point where our chances run out!

December 5th - I am reading thru Luke the next few days.  6:31 is the Golden Rule.  Let's make sure that we are kind and respectful and looking for ways to encourage each other.  Have a great day.  I prayed for you all this morning.

December 7th - A couple of verses today - Luke 10:20 "rejoice because your names are written in heaven."  Luke 11:28 "blessed are they that hear the word of God and keep it."  Have a great day!

December 9th - Luke 12:15 reminds us that this life should not be about us focusing on the amount of stuff we accumulate.  Luke 16:10 reminds us to be faithful in the little things.  Happy Friday!

December 12th - This morning I read about Noah and Abram.  They both had the Lord's blessing on them as a result of their faithfulness to Him.  Have a great day!

December 14th - In Genesis, we see that Isaac was blessed because of Abraham, Laban was blessed because of Jacob, and Potiphar was blessed because of Joseph.  Let's look for opportunities to positively influence others.  Have a great day!

December 16th - Sometimes bad things happen in peoples' lives but end up with really good results!  Joseph was treated poorly by his brothers and sold into slavery.  However, he ended up saving his family (and the nation of Egypt) when the famine came.  Gen 45:5 and 50:20.  Have a great day!

December 17th - The Lord blessed the Hebrew midwives because they feared God more than Pharoah and his ungodly commands.  Exodus 1:15-22.  Happy Saturday!

December 28th - As the Lord blesses us we need to "bless Him" (Deut. 8:10).  We need to beware that we forget not the Lord.  (Deut. 8:11+14).  Always remember how great our God is!

December 29th - Deut 10:12 - what doth the LORD thy God require of thee, but to fear the LORD thy God, to walk in all his ways, and to love him, and to serve the LORD thy God with all thy heart and with all thy soul.