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The US Census Bureau is a great resource that most entrepreneurs over look. Aside from all of the excellent demographic information that you can find, the Census also handles industry classification codes, known as NAICS (pronounced nix), which stands for North American Industry Classification System. While it is certainly important to understand the demographics of an area to better target your advertising and marketing, it is equally important to understand who your competitors are, and the Census Bureau can help us there, too.

The NAICS code for a given business will be six digits long. For instance, I am engaged in the sale of real estate. But if you type in Real Estate into the search box on the NAICS website, you get numerous results. There is Lessor of Nonresidential Buildings, code 531120. Since I am a Realtor, I am better classified under Offices of Real Estate Agents and Brokers, code 531210. This is a good time to point out that any one business could fall into multiple class codes. If I was a Realtor that also handled the leasing of non-residential buildings, both codes might apply. You certainly wouldn’t be able to put General Electric into one classification code; rather, you would have to determine a number of codes that apply to its divisions.

One more important thing to note: the classifications can be very broad or very narrow. The more zeros there are at the end of a classification code, the broader the label. For instance, code 445000 is Food & Beverage Stores. Code 445100 is Grocery Stores. Code 445120 is Convenience Stores. This helps identify the industry and any particular niches within the industry.

So where am I going with all of this? If you know the classification that applies to your own business, your products and services, and your industry in general, then you can identify a number of things. You can identify who your greatest threats are with respect to competition. Then there are potential new customers if you’re a Business-to-Business (B2B) entity. You can even see whom your suppliers’ competitors are in your supply chain to help you find the best prices for the things you need to run your business.

So you’re saying to yourself: so I have a few numbers scribbled on a sheet of paper. What do I do with these things?! Well, aside from scouring the Internet and researching individual companies, my best advice is to walk into any public library and head to the reference section. Ask any librarian where you can look up companies by NAICS codes and they should have a directory to assist you. You may have to specify the full name of the NAICS when asking for its directory.

Also, as a brief side note, the NAICS replaced the US Standard Industrial Classification system (known as the SIC). Since the NAICS is relatively newer, you will see references to both codes. Just know they are essentially serving the same purpose, to identify industries and classes of businesses.

This same data can be used by investors when deciding whether to invest in a company or not! Using this data can help compare a company to its peers and the industry as a whole. Is the company considered a leader or a laggard?! Even if they are a leader, is this an industry that you want to be investing in right now?! This data helps find answers to these questions.

As always, I welcome your comments and feedback…

You will notice that I posted this same entry on the Cinventure.com website, where I am a regular guest blogger. CinVenture is a website geared toward entrepreneurs in the Cincinnati, Ohio metropolitan area (but is not restricted or limited to people in the area). Please check out the other interesting articles and links on the CinVenture website… and tell them Thomas Goodwin sent ya!!! Well, better yet… subscribe to the feed or check back often to get the latest news and columns on business start ups in the Cincinnati area! Leave comments and feedback, network, and feel free to email and submit ideas for new articles. We’d love to hear from you on CinVenture AND on ThomasGoodwin.com…. Thanks!

Wow. It’s been less than a month since I posted a chart on this blog about the Dow reaching 14,000 and closing at that price (look back at my July 19th blog post). Just 4 days shy of a month and the Dow has fallen over a thousand points on concerns over the sluggish real estate market, over-extended consumers and therefore a concern that consumer confidence is wavering, subprime mortgage defaults potentially exploding, and a lack of liquidity as investors shun mortgage-backed securities - especially those by subprime borrowers.

While the market briefly rebounded for a day in response to the Federal Reserve injecting more liquidity into the banking system, the sell-off continues and the Dow Jones Industrial Average has closed today at 12,861.47. The article posted to Yahoo! Finance does an excellent job summarizing what’s currently going on in the market. (Adobe PDF Version).

Unless we start to see some positive economic data or corporate earnings being released, I would expect to see a few more weeks of the market trading overall downward, with a few upswings as some investors jump back in to buy shares at lower prices than they previously sold as well as investors covering their calls or adding more shares to their account to lower their average basis (those die-hard dollar cost averaging investors). In general though, the Yahoo! article was right that historically and typically the months of August and September are the slower months for the stock market. It may be an excellent time to buy if you are in it for the long-term, say 1-3 years. But I am not expecting to see the Dow Jones Industrial Average back up to its all-time high, or even remotely close to 14,000, by the end of the year.

As always, I appreciate your comments and feedback…

After last week’s sell-off I would expect to see some buying opportunities this coming week, especially if you’re looking to invest for the long-term and not just a quick trade. It may be a while before the indices climb back up to their record levels seen earlier this month.

On Friday, August 3rd, the unemployment rate and nonfarm payroll data will be released by the Commerce Department. I’m expecting the results to be in line with the market expectations. If the unemployment rate comes in even slightly lower you will probably see a brief end-of-the-week rally on Friday due to last week’s sell-off.

Investors will be willing to shrug off short-term concerns of subprime mortgage woes if the unemployment rate is declining and therefore the economy is actually doing better. Those subprime borrowers are still employed in the aggregate sense if the unemployment rate is dropping! If the unemployment rate comes in higher than expected, which I doubt will be the case, you will see another repeat of last Friday… more selling despite an otherwise healthy economy.

With all the news about the real estate market not expected to rebound until 2008 or even 2009, the sluggish real estate market and its affect on homebuilders, big box retailers like Home Depot, and durable goods manufacturers like Whirlpool should all have those concerns already priced into the stock. Therefore you can only stand to profit if the real estate market stages a come back prior to 2009. I don’t want to be misleading though, if 2008 and 2009 are down years for real estate again, these same stocks could have farther to fall.

As always, I welcome your feedback and comments… have a great week!

Oh how far we’ve fallen… the Dow closed the week at 13,265. On Friday the advances were outnumbered by the declines by more than 2 to 1 on both the NASDAQ and the NYSE exchanges.

Despite some companies posting better than expected results, the dark clouds hovering over the real estate market and likewise the concern about possible sub-prime loans defaulting by the truck load kept the investors from hitting the buy button.

With such a dismal ending to a week I feel it’s best to cap my summary there and look forward to The Week Ahead, both literally and my upcoming blog topic that I expect to post sometime tomorrow.

On a side note: I have been contemplating a change in my website and I want some opinions from my regular readers. If you could, please take a moment and email me any thoughts you have on what you like and don’t like about my current layout, content, etc. I would greatly appreciate it. I am considering combining my Week in Review and my Week Ahead blog postings to make it easier to visit one time and get the recap as well as the upcoming events in the market. This would be a combined entry on either a Saturday or Sunday. It is my goal to then use the time during the week to highlight individual stocks that I feel are noteworthy as well as other interesting things going on in real estate or insurance related topics. Let me know what you think…

As always, I appreciate your feedback and comments…

The housing slump has undoubtedly put some home sellers in a bind. And even those not currently in the market to buy or sell can be affected by a rise in mortgage interest rates, just ask the homeowners with Interest-only mortgages or those with ARMs (see the last blog posting from yesterday, July 26th for more discussion on these types of loans).

The overall market was sent reeling again yesterday amid reports that the housing sector only continues to get much worse. The Dow fell more than 300 points yesterday (at one point being down more than 400) mainly because of investors jittery over the slowing housing market and therefore perceived lack of consumer confidence.

Think about this: everyone knows that real estate is in a slump right now, yet not many buyers are using this opportunity as a time to buy. It’s easily understandable that buyers are worried. They don’t want to buy a house only to see the prices fall further. But it’s a dangerous game to play when you try to predict the bottom - this is true in housing just as it is in stocks. More homebuilders and mortgage companies are coming out and publicly saying that the bottom (which was expected in early 2008) may now even be extended into 2009! Even companies like Whirlpool are blaming the housing market on slowing sales (see my July 22nd blog entry about Whirlpool’s earnings announcement).

It seems the media only fuels the consumer sentiment in either direction. When the Dow was breaking 14,000 just a week and a half ago on July 17th, that’s all you could read about it seems. Then investors started pulling money out. And the bad news came with the existing home sales, quickly followed by similar bad news on the new construction homes. It all adds up to investors feeling too uncertain about the future and seeing the markets at or near all-time highs and deciding now is the time to take some profits.

Given the current skid in the local real estate market as described in the Cincinnati Enquirer on July 25th, it will be interesting to see if investors start to look for buying opportunities in real estate now that the real estate market has softened and the stock market is beginning to look over priced. (Adobe PDF version of the Cincinnati Enquirer article).

Even if investors don’t pull money from stocks and pour it into buying land and homes, the investors can help the real estate economy by moving money from stocks to bonds. Putting more money in Treasuries and mortgage-backed securities will help balance out the load and make banks more happy to write more mortgages.

How so? you ask… Well, since there will be investors pushing the price of the Treasuries up through the additional purchasing, they yield on the Treasuries will fall and the mortgage rates will start to move downward as it will cost the banks less to borrow money… therefore driving down the mortgage rates. Meanwhile investors, if they are also buying mortgage-backed securities, will add liquidity to the market thus giving banks added funds to loan out in the form of mortgages. As if this wasn’t just the icing on the cake, the banks existing loan portfolios will be worth more to investors as their existing loans will carry higher interest rates than the new loans they are writing at the lower rates. So the bank benefits by writing new loans at lower rates and selling the old loans with the higher rates to investors.

Let’s hope the real estate market and the stock market both rebound! However it’s more likely that only one will bouce back sooner than the other… and my bets are on the stock market right now! Real estate is a much longer-term play than the stocks and I think it will therefore have a longer tail end to the slowdown than a slump in the stock market would. As always, I welcome your comments and feedback…

The start of another week is upon us and there’s plenty of upcoming activity to consider. Existing home sales will be reported July 25th, with new home sales being reported the following day. Expect another monthly report of sluggish home sales.

Durable goods orders are also expected to be reported on the 26th. I would expect to see these orders down slightly following Whirlpool’s earnings announcement last week that the slow housing market is driving down demand for new washers, dryers, and other household appliances.

There are more companies expected to report earnings as well. The list for Monday alone is over 90 companies so I won’t go into great detail. If there’s a particular company that interests you I would encourage you to go to Yahoo! Finance or Bloomberg and check to see when they report their earnings. If you follow the market as a whole, say through an ETF or index-based mutual fund, I would encourage you to look up when the 30 stocks in the Dow post their earnings. Texas Instruments (symbol TXN) and Halliburton (HAL) are two of the stocks reporting quarterly earnings tomorrow. Also, Thomas Group (TGIS) is expected to report tomorrow as well… I have absolutely no affiliation with the company and actually do not follow the stock, I just liked the name so I thought I would point it out!

Here’s looking to the week ahead! As always, I welcome your comments and feedback…

Was it something I said?!

The markets were sent reeling yesterday as the Dow have back all that it had gained during the entire week and then some! The Dow finished the week at 13,851 after falling 149 points (1.07%) on Friday, well off Thursday’s record and lower than it started the week.

The other major indices followed suit… the NASDAQ was down 1.19% on Friday and the S&P 500 was down 1.22%.

Disappointing earnings were much to blame but perhaps there was some profit-taking in there, too. Everytime the market breaks a “pyschological barrier” as it did when the Dow broke 14,000 there are people out there who are locking in some profits… for instance, if someone had been investing in a mutual fund or Exchange Traded Fund (ETF) that tracks one of the market indices, if the investor had dumped a bunch of money in around 13,000 they would be happy to sell at the 14,000 level that it reached on Thursday. It would not have taken long to lock in these kind of returns either. If you purchased a fund that tracks the Dow on April 30th when the Dow closed at 13,062.91 you would have locked in a return of around 7% in just under 4 months. Do that kind of return in a quarter and if you’re able to do it a few quarters in a row and you’re on your way to a healthy 21-28% return for the year… but most investors can’t consistently do it every quarter. Hence, when we do see those profits, we like to lock them in.

Think I’m full of it? Think I’m crazy?! There’s actually a lot of research and studies that have been predicated on this notion that most people will lock in when the see profits and likewise will hold on to a stock too long when they’re losing money because they’re hoping to regain it. It’s the same pyschological factors at play in compulsive gamblers; they think they can win it back. Of course, compulsive gamblers don’t typically cash out when they’re up… I guess that’s the difference. A smart gambler will take some off the table, for instance the amount they started with, and just play with the winnings. Alas, I digress. I didn’t mean for this to become a poker or gambling discussion. My point being I could see where a lot of people used this past week as an opportunity to cash in a nice gain.

And a lot of people get caught up in their daily lives and don’t pay attention (at least not too closely) to the daily changes in their investments. With the Dow setting a record and that being news worthy, even the investors that normally don’t pay close attention to their investments would be thinking about them when they opened the morning newspaper on Friday or when they listened to the news on the radio or in the car. When a major index breaks a milestone, it gets media attention. In turn it gets more attention from the general public, and that can either send it screaming to even further heights as we saw in the Dot Com Era or it can bring it down like it did yesterday.

Here’s looking forward to The Week Ahead. As always, I welcome your comments and feedback…

Well, it’s not the first time the Dow hit 14,000 but today marks the first time that the Dow advanced above the milestone and stayed there. The market closed at 14,000 exactly today.

It will be interesting to see if there is some profit-taking tomorrow to round out the week and put some downward pressure on the indices, namely to push the Dow back down below 14,000 to close the week just off the record.

The record close comes despite warnings from Yahoo! that future quarters’ earnings growth may be tough to achieve and the expectations may need to be revised downward. Google also posted disappointing numbers.

If we end the week on a positive note of more announcements of solid earnings and investors continue to push the Dow higher you may see some selling early next week. Even if the Dow drops tomorrow it will still most likely end the week up from where it was last Friday. It would have to drop nearly 100 points (about 93 actually) to finish where it was on Friday, July 13th… the Friday the 13th that turned out to be a good day for the bulls!

Here’s looking forward to another week being put in the books. I hope you all have a great Friday and weekend. As always, I welcome your comments and feedback…

Well, yesterday the Dow Jones Industrial Average (DJIA) crossed the 14,000 mile marker to set another all-time high as well as eclipse another pyschological barrier. It seems like any time the DJIA gets close to another 1,000 we hear the same talk re-hashed on the news about “How high can it go?” and “what will it do next?”

I wonder what the news commentaries sounded like back when the DJIA was trying to break 5,000 or 1,000. It would probably be comical to go back and listen to them actually. Imagine some market pundit on the screen being scoffed and laughed at for even suggesting DOW 10,000. Now for us to see DOW 10,000 we would have to have a major economic pull back. I mean, that would be shaving nearly 1/3 of the value off of the average at this point!

So, where does it go from here? Is it more likely to head higher? Or lower? Rather than focus on which “mile marker” (as defined by the 1,000 intervals that we now follow), let’s make it a little more short term and easier to follow. Will it be 13,500 or 14,500 that we see the Dow hit next? Who knows… anyone could make a good case for either one. Some say equities are over priced now, it’s time to pull some off of the table. Others proclaim the market has hit a nice stride and the economy is humming along nicely so enjoy the bull market and prosper from it.

So what exactly is causing this tremendous run-up? If you look at the chart for the past year it is a steady climb (minus a short downturn in or around March 2007) from 11,000 to 14,000 for the Dow.

China’s economy grew at an annualized rate of 11.9% for the second quarter this year according to Bloomberg.com. Perhaps that had something to do with it. I’m quite sure it did. With global companies like Procter & Gamble, Wal-Mart, and Coca Cola already doing business in China, it’s hard to imagine this large country’s growth NOT having an impact in some way.

It may also be that more and more people are buying stock because they feel they can earn a decent return on it relative to other investments. This is especially true when you look at it comparatively with the recent problems in the residential real estate market in many areas of the country. Also, if people feel they can earn 10-15% or more by putting their money in the stock market instead of paying off car loans at say 0-7% or home loans ranging from 6-8% then you can bet more people are staying in debt to invest their money and make a bigger return. Essentially they are using the power of leverage to generate higher returns with greater risk. The greater risk being that they still owe that money even if they lose it in the stock market… similar situation if more people are buying on margin.

Since we can’t get in every investor’s head we can only speculate. But we have to act rationally with our own investment decisions during a big run up in the market like this. Is now a good time to take a little off the table and lock in some gains? If you’ve been holding a steadily growing Dow component or other well-performing stock for the last year or more I would have to say yes it is. The long term capital gains tax and the trading costs shouldn’t eat away your return. A short term capital game might not be the best move unless you were buying in that small down turn that we mentioned in the first few months of the year.

Regardless when you bought or when you decide to buy or sell, use your head. Look at the P/E ratios. Look at the price you’re paying for those future earnings and make the call… do you think it’s sustained? Do you think it’s worth paying however much for those future earnings and dividends? Make an informed decision and remember that it’s ok to take profits. Here’s to Dow 15,000. Stay tuned!

As always, I welcome your comments and feedback…

As always, I appreciate when people take the time to post comments, provide feedback, or send me emails. I received an email yesterday from a reader named Connie after posting Sunday’s article The Week Ahead, which mentioned Berkshire Hathaway & Warren Buffett having an interest in Johnson & Johnson, Coca Cola, and Union Pacific - all three due to report quarterly earnings this week.

Connie writes: “Berkshire Hathaway owns Helzberg Diamonds. There is gossip that they might sale the company. Can you get some facts?”

I had not heard that Buffett/Berkshire Hathaway were looking to sell Helzberg Diamonds. Everything you read about in the financial blogs and press right now deals with the already-announced plan for Berkshire to take a stake, if not totally acquire, the homebuilder Hovnanian Enterprises (NYSE:HOV). Hovnanian has operations in 17 states, including those hit most hard by the sluggish real estate market - namely Florida and California.

With nothing published on a potential Helzberg spinoff or sale it’s entirely speculation at this point as neither the parent company Berkshire Hathaway (hereafter referred to as BRK) or subsidiary Helzberg would admit something like that unless the ink was drying on the paper.

But for the sake of arguement, let’s say it IS true that BRK wants to unload the diamond & jewelry retailer. It’s doubtful that the sale of the company would have a dramatic effect on BRK’s share price. BRK has equity interests in approximately 60 different companies. IF that equity was spread evenly among its investments that would mean that Helzberg would represent AT BEST a 1/60th proportion of BRK’s investment portfolio. We know that BRK has significant holdings in much larger companies like Coca Cola (a 8.6% stake).

But without diving into where all of BRK’s money is spread around, consider this: Warren Buffett is a long-term investor. He has owned Helzberg Diamonds since the 1990’s, which any investor would consider long-term given that it’s past the halfway point of the first decade in the 2000s. But Helzberg isn’t the only jeweler that BRK owns. Consider Borsheims, a jewelry store chain that is not so ironically based out of Omaha, NE where Buffett also calls home. BRK has owned this chain since 1989. Not to suggest that Buffett would automatically sell the business that he has owned the longest, we know that’s not the case. But I wouldn’t know how to determine which one he would be considering to sell if he thought the jewelry business was becoming over priced and wanted to cash out to bank a realized gain.

Rather than focusing on BRK and its subsidiary Helzberg, if you were to capitalize on the sale of Helzberg it would most likely be in taking a position (long or short) on the business that is acquiring Helzberg. If it’s not being acquired, namely if it’s being spun off and taken public, you have to analyze how much (if any) of the equity in the jeweler BRK is going to retain after the sale.

This might be a long shot but I could see a private equity company having an interest in Helzberg. Blackstone Group (NYSE:BX) is a good example to use because it’s publicly traded so there is more information available on it. This company recently announced it was buying Hilton Hotels (NYSE:HLT) and the deal is expected to close in October. Blackstone might be interested in Helzberg to 1) diversify and 2) as a real estate play. This is pure speculation on my part though. In fact, if a large company such as Blackstone came in and purchased Helzberg from BRK it probably wouldn’t be a sizable portion of Blackstone’s overall assets either. Blackstone might trade downward slightly on such news (so you would have a good short opportunity) as the buyer often faces some downward pressure in an acquisition while the seller often sees some increase in stock price… that’s when the seller is selling their entire company though not when they are raffling off pieces of their business.

This is probably a longer answer than most wanted, but I thought it warranted further investigation into WWWBD… What Would Warren Buffett Do? Or What WILL Warren Buffett Do?! Time will tell. As always I welcome your comments and feedback…