Saturday, January 28, 2012

Review of Barron's, Dated 30 January

Another Saturday, another Italian class (No. 3), another set of errands to run, and another review of the weekend's Barron's.  Once again I was "locked into" buying this issue because I wanted to cover the last of the Roundtable meeting (split into three weeks), so I had no choice but to buy it...

I will get to the Cover Story ("Don't Lose My Money!") below, today I will just go straight through the paper reviewing what I choose (remember, Barron's is BIG and DENSELY PACKED with information).

Alan Abelson kicks off (hey, it's Super Bowl Weekend, OK?) his column by noting that it is not the "La Niña" weather phenomenon that is responsible for the mild winter that the US is having but really more due to all of the hot air coming from the President, the Fed Chairman's latest spiel, Congress being back in business and, last but certainly not least all the hot air from the Republican debates about who should be the next President.

Abelson notes that President Obama blamed it all on the last administration (just like last year and the year before that) in the State of the Union address.

Republicans Newt and Mitt are going at it hammer and tong, here in Florida I am hearing remarkably savage ads attacking each other.

Abelson then turns his attention to the latest Fed comments, reducing its characterization of our economy's growth from a "moderate" rate to a "modest" rate.  Mmm.  Doesn't sound good, does it?  The Fed then goes on to say that ZIRP will stay with us until late 2014!!!  Wow, zero interest rates as far as the eye can see...  Abelson then goes on to say that another round of QE "looks like a sure thing comfortably before Nov. 6."

Abelson then goes on to write that neither Stephanie Pomboy (MacroMavens) nor Kevin Logan (HSBC) are not enthused about stocks.  How about gold to $2000?  [ed. note: it is very possible that I will write a piece soon on gold's NICE spike post-Fed blather...]

He finishes by writing that trying to call the bottom in real estate might be dangerous.  Uh, yes.  I will not be buying any for a long time...

***

David Rosenberg (famed bear from Gluskin Sheff) is quoted on Page 14 (my edition) as saying that Treasuries of longer duration will bring much lower yields than the already very low ones we see now.

[ed. note: My readers might care to note that famed gold analyst Antal Fekete has said that an environment where interest rates are going DOWN means that capital is being destroyed (as the value of previous investment goes down).  Our lousy economy since I read this (maybe 2 - 3 years ago) would lend evidence to Fekete's views, what with NOBODY doing any serious capital investment (plant and equipment) in this country for YEARS now.  If you want to know more, Google Professor Antal Fekete's works.]

On Page 15 is a column about how various analysts are forecasting a possible decline in global trade this year (ruh roh for bearing companies bringing in product from Asia...).

***

The Cover Story by Kopin Tan chronicles that even with the recent run-up in stocks that investors are concerned about not wanting to be hit with big losses (like in 2008).  Many are asking their money managers if they should sell their winning stocks rather than risk getting hit again...  Author Kopin Tan writes:

"Can you blame them?  The markets are in the throes of Europe's solvency crisis, and gripped by policy paralysis following the bursting of Earth's debt bubble.  The messy demise of MF Global -- with billions of client money still missing -- coming so soon after the Bernie Madoff scandal further reinforces the suspicion that our fragile financial system is a house of cards."


[I could not have written that better myself, even if I had a month to do it]

He goes on to write that A LOT of surveys are finding that investors are putting less into stocks and putting more into Treasuries, even with such abysmally low yields.  Investors are heading towards lower volatility and dividend payers.  And young "Generation Y" investors are among the most alarmed.  Citigroup's London-based economist Michael Saunders even expects more credit downgrades of the US, Japan, France and other countries over the next two - three years.

The author does not offer many solutions (nor have I for that matter, I am thinking through how to write an article on INCOME), but he does show JP Morgan's and U.S. Trust's portfolio recommendations (allocation of financial assets).  JPM suggests 4% in commodities while U.S. Trust suggests 6% in tangible assets.  Gold would be a subset of both of those.  Neither suggests how much to hold in gold.

So, I will: you should hold 5% - 10% of your financial assets in gold.

***

Miriam Gottfried writes a positive piece Cliffs Natural Resources (ticker CLF), which is the big US iron ore miner, they also mine iron ore in Australia and Brazil.  They also have some coal mines.  Ahhh, ah, I dunno.  If you like mining (dangerous with a slowing China), I might look elsewhere...

Bill Alpert writes an article on the sleazy Chinese reverse-merger stocks.  There have been a number of scandals, yet there are bulls on many of these companies.  There are also bears who are shorting them.  My suggestion: screw 'em, don't touch them either way, long or short!

***

Coverage of the Roundtable meet-fest finishes with this issue.  New member Brian Rogers offers up his picks and gives his reasons:

Emerson Electric (EMR, a good company IMO)
Ingersoll-Rand (IR, they used to own Torrington bearing before selling it to Timken)
JP Morgan Chase (JPM)  [see my Note 1 below]
Thermos Fisher Scientific (TMO)
Microsoft (MSFT)  [see my Note 2 below]
Juniper Networks (JNPR)

Abby Cohen (of Goldman Sachs) sees risks in the global economy (Europe and China), but all in all a decent global economic growth of 3.2% (lowered from 3.5%).  Her picks:

Edwards Lifeeciences (EW)
Boeing (BA)
Embraer (ERJ) <--- they make smaller passenger jets in Brazil
ExxonMobil (XOM) <--- some would say the best managed of the majors oils
JP Morgan Chase [see my Note 1 below]
American Express (AXP)
 (I left out her pick of Domino's Pizza UK & Ireland, shares might be hard to buy)

Scott Black offers lower growth numbers than Abby did.  His picks:

Apache (APA) he says it's real cheap because investor concern over holdings in Egypt
CBS (CBS)
FedEx (FDX)
Deere & Co. (DE)  <--- could be a big winner as food production goes up...
BioMed Realty Trust (BMR)
Digital Realty Trust (DLR)

His last two kind of rub me wrong, they are (specialized) real estate plays...

Fred Hickey (long time follower of technology and Editor of The High-Tech Strategist) starts off great with the below comment:

"I remain overweight gold.  The secular bull market in gold isn't over.  A negative interest-rate environment is bullish for gold, and rates keep getting more negative as central banks keep cutting rates that aren't yet zero-bound.  Where interest rates are close to zero, as in the U.S., the U.K. and Japan, they engage in quantitative easing."


He is just starting to warm up to technology (he has been bearish for years), he thinks opportunities may soon come.  Here are his picks:

iShares Gold Trust (IAU), aw, c'mon Fred, just buy PHYSICAL GOLD!
Mkt Vectors Gold Miners ETF (GDX)
BMC Software (BMC, complex software for systems, also now in the "Cloud")
Marvell Technology Group (MRVL)
Microsoft (MFST)  [see my Note 2 below]

Notes:

1)  JP Morgan Chase was picked by two investment pros @ $35.36, we'll be watching
2)  Microsoft was also picked by two investment pros @$28.11, we'll be watching too.

***

CEO Spotlight features the life of Yum! Brands (KFC, Pizza Hut and Taco Bell) boss David Novak.  In my own personal reading, I am not into biographies, but I have noted that CEO Spotlight has been much more interesting than I would have earlier guessed.  David Novak has done a great job of leading Yum! since being at the helm, especially growing the business in China.

Note that each time I go to Peru, I walk to the local Pizza Hut once per visit there in Lima.

***

Jim McTague ("D.C. Current") writes of the struggle in Washington to bring US corporate money now stashed overseas (legally) back to the US.  The problem is that companies do not want to do that because of high taxes they would pay.  This complex issue is now in deadlock.

Jim writes near the end of his column that the president wants to try and pick winners & losers, again.  Looks like he has not learned his lesson from Solyndra...

***

"ETF Focus" author Murray Coleman writes about commercial realty plays there in ETF land.

Permit me a moment to offer a comment on ETFs.  ETFs offer what Bill Bonner (of Agora, the financial publishing group), I believe, called "Precision Guided Investments".  That is, there are so many ETFs that cover so many even very small sectors, that you can even invest in obscure sectors now and yet minimize single company risk.  There is a rare earth metals ETF now, for example.

He writes about the great variety of commercial realty ETFs out there now, and what this guy says about this ETF.  I am not going to venture to say what sub-space of commercial realty might work out the best.  In fact, I don't I even like any commercial real estate.

But, I will say this: a good book needs to be written on the ETF universe that is accessible to general readers, say, who are financially literate, even if only barely.  There may be such a book out there, but I have not seen one.

***

"Technology Week" author Tiernan Ray writes about Apple (AAPL), their BIG WEEK and prospects (like for a dividend, etc.).  AAPL is now worth more than ExxonMobil...

He also writes about the upcoming IPO of Facebook, which could fetch up to close to $100 BILLION.  Facebook now has 700,000,000 users (not just 600,000,000 here), that is 10% of the planet's population...

ALL of Ameru Trading del Peru S.A.'s employees are on Facebook.  And that is NOT a requirement...

He finishes with this nice flourish:

"Google famously vowed not to be "evil."  Facebook, perhaps, can vow not to be creepy as Google, while making a mint."


[Google has just changed (for the better or worse???) their privacy policy...]

***

I do not have much to say about Jonathan Buck's article on Davos, because the participants really did not have much to say, other than blather and blather.  George Soros blathered there too.  People are worried, some not so much.  What to do...  Blather...

***

"Other Voices" author Eric Grover writes about what happens when our government gets involved in making choices, picking winners and losers.

When Uncle Sam offers a helping hand to people a bit too poor to buy a home, what happens?  Yes, failed Fannie and Freddie and busted foreclosures...

When Uncle Sam offers a helping hand to get more people into and through college, what happens?  Yes, tuition goes up as does student debt.

When Uncle Sam offers "green energy" (a really bogus term I am starting to hate...), what happens?  Yes, Solyndras happen.

I believe Eric Grover and I would suggest that the government just stay out of these kinds of politico/financial adventures.  Let the private sector take the wins and losses rather than "privatizing the wins and socializing the losses."

***

Just like what happened last week, my comments re the main section ran long, so they will be short re the Market Week section this week.

Stocks were slightly down.

"Asian Trader" author Assif Shameen says that iron ore for China (etc.) will boost Rio Tinto, well, we'll see.

"Commodities Corner" author Marshall Eckblad says that Asian buying of US beef is on the rise, and so prices are heading up.  (No mention about gold...)

Randall W. Forsyth ("Current Yield") titles his piece "Fed Pulls Back the Curtain" re the announcement of QE to 2014, and how that dragged down yields of five and 10-year Treasuries.

Facebook is not mentioned in the normal IPO section of "Market Laboratory", but Facebook's IPO could happen next week...

Money stuff:

-- Total Fed balance sheet essentially unchanged.
-- M1, M2 and Monetary Base all down the tiniest amounts, essentially unchanged

And, most importantly, yes, the Peruvian Sol was UP yet again vs. the dollar (just a bit, some 0.3%).  I also read at Zero Hedge that Peru is one of the countries that is MOST able to come to the rescue of Europe (with the ability to spend more without much distortion)!  It may be that Peru might have to join with Saudi Arabia, Indonesia, Chile and a few others to save the world...  PLEASE take note that you read that here at my blog!

***

Verdict:  You should probably buy this weekend's edition, even if your faithful fringe blogger did not finish his review until 2:00 AM Sunday...  (next up, my absinthe and berry flavored vodka cocktail to guide me into a smooth glide path to bedtime...)

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