Saturday, June 9, 2012

Review of Barron's -- Dated 11 June

I am pleased that we have eased up a bit in our lives (no Italian class, at least for a while) and that I now have re-found the mental energy to resume my reviews of Barron's, the iconic weekend financial paper.  At 7/11 today, I noted with some happiness the Cover Story: "Midyear Roundtable", yes the "investment pros" (hey, Rublin's words) are back in action telling us what to buy and what not to.  So, I will jump right into the Cover Story this weekend.

Author Lauren R. Rublin writes that almost all of them are concerned about Europe, a Chinese slowdown and the "Fiscal Cliff" that awaits us on January 1 if Congress and Obama do not agree on a budget (taxes will go up automatically and spending will also automatically be slashed as well).  Most of them expect the Fed to do some kind of QE this year to get things going, but most of them expect that that would not work (I agree with the latter statement, re will the Fed ease: How the Hell do I know?).  Let's take each of them in order, look at their picks and then look at their record vs. last time (using Robert's own simplified and proprietary "Track-o-Meter") to see how they did in the interval (The S&P is up about +4.8% over the past 5 months, for context re each pro).

Abby Joseph Cohen (Goldman Sachs) likes Wells Fargo (ticker WFC) and Pfizer (PFE), she likes WFC because they dominate mortgage finance (is that really a good thing now?) and PFE because they have a lot ofd cash, pay a 4% dividend and may have some new drugs of interest in the pipeline.  Abby is bullish, but only mildly so.  Abby's picks last time averaged up +1.8%.  (Edit, I miscalculated her average return yesterday evening)

Felix Zulauf (runs money out of Switzerland) likes cash, gold and Australian 3-Year Bond Futures.  He would short EEM (an emerging markets index fund).  Felix is typically cautious and bearish.  Felix's record ( a little hard to figure out as he bought 10-Year Bonds, FYI the ticker for that at stockcharts.com is "$UST"): -7.6%  Ah, well, gold was up only 0.1% (he liked it then too).

Meryl Witmer likes Gildan Activewear (GIL) and Phillips 66 (PSX).  GIL is a vertically integrated clothing manufacturer and wholesaler benefiting from retailers wanting shorter supply chains.  Cotton prices are down, and rival Hanesbrands is exiting the US wholesale market.  PSX has refineries located well and a chemical JV with Chevron that is doing well.  Meryl's record: +2.2%  Meh.

Brian Rogers, new I believe, to Barron's Roundtable, has the following picks: Emerson Electric (EMR), JPMorgan Chase (JPM, strike one pal), Thermo Fisher Scientific (TMO), Microsoft (MSFT), Juniper Networks (JNPR) and Murphy Oil (MUR).  EMR I like, JPM I do NOT!  The others are beyond my scope to comment.  Brian's record: -9.6%  Ugh...

Bill Gross (the Bond King), a bond oriented guy obviously, picks Siemens (SI, the German equivalent of our GE) as well as Sanofi (bond?) and Mexican bonds  7.75% in 2042...  <--- WTF?  Bill's recent record: + 6.8%, bravo!  Bill sez Treasuries are OVERVALUED!  I agree.  But with the weird financial environment we are in, Treasuries ARE something of a safe haven..., as long as you don't trade them...  Bill also says that we are stuck in the mud (my words) for a decade...

Scott Black likes Qualcomm (QCOM, always a contender in cell phone technology) and Triangle Capital (TCAP).  QCOM has nice technology.  TCAP specializes in "mezzanine financing"...  And since your humble scribe barely knows what that means..., I would stay away.  Scott's record: -6.8%, bitchezz...

Mario Gabelli likes Gaylord Entertainment (GET, a hotel and a convention-center operator), Kellogg (K, they bought Pringle's which I see EVERYWHERE when I travel overseas), Smart Balance (SMBL, no opinion), Pep Boys (PBY, US auto parts and service chain nationwide) and National Fuel Gas (NFG, a Buffalo, NY supplier of Marcellus Shale NatGas, hmm...!!!).  His record: +8.2%, the big winner was Gaylord / GET.

Marc Faber (famous pony-tailed, weed-smoking bear living int he Far East and author of "The Gloom, Boom and Doom Report") likes gold, Goldcorp (GG) and a slew of Singapore REITS (that all trade in Singapore).  When questioned will things get worse before they better, he responded, "Yes, possibly much worse.  Central bankers will argue that more stimulus is needed.  But the crisis has occurred in large part because governments have grown excessively large."  He goes on to say that big government crowds out the private sector and that the breaking point could be 3 - 5 years away.  Oh, great....  How did Marc do last time with his picks?  +3.1%

Oscar Schafer (a long time Barron's Roundtable participant and NYC money manager) likes Xerox (XRX) and Covanta Holding (CVA).  He says both companies are misunderstood (and until reading him, I did not know this either), that Xerox is transforming itself to a services model (doing hi-tech contracting rather than duking it out in the photocopy machine business), much like IBM has done.  CVA is misunderstood as well, Wall Street does not know how to "peg" this company, as waste company or an energy company.  CVA has a bunch of contracts, foreign and domestic, to take waste by the ton, burn it, sell the electricity and recover some metals. CVA is solidly cash flow positive.  Hmm...  So how did Oscar do last go 'round?  -2.1%  Ah, well.

Fred Hickey (author if "The High-Tech Strategist", but has been mostly negative on technology as a whole in recent years) likes Agnico-Eagle Mines (AEM), Hecla Mining (HL) and the Canadian dollar.  He has liked real assets for as long as I can remember following him.  He does NOT like cloud computing companies for example, but kind of likes Microsoft (MSFT).  How did he do?  -0.6%

What is this?  The average of all of the investment pros is -0.46%!  Just buying the S&P would have done better, again up 4.8%.  On the other hand, most stocks that I own have not done well, and even gold itself is for flat this year.  All of the above do not include dividends or interest payments.

***

Alan Abelson writes of the pretty bad shape of the markets in China.  The Shanghai is just barely above 1/3rd of its high (2007) and lately has been performing poorly (the US stock market has done "OK" this year as noted above).  He advises that a hard landing in China will likely affect us to....

He then goes on to discuss The Bernank and what may or may not happen re easing in the near future.  Either way, it may not help our markets.

***

Michael Santoli ("Streetwise") notes that the "Fed Model" (in which "earnings yield" ought to track Treasury yields, at least approximately) is not working anymore.  It looks like the Fed is busting its model by keeping interest rates so low...

[editor comment: Antal Fekete has long said that declining interest rates are a destroyer of capital, Google his work]

***

"He Said":

"The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely."

Ben Bernanke, in recent testimony to Congress

[well, duh, Ben, but we're already monitoring Europe]

***

Washington pro Jin McTague writes a piece on which companies would likely benefit is the Supreme Court upholds Obamacare (Aetna (AET), Centene (CNC), and HCA (HCA)) and which would benefit if the Supremes strike down a significant part (WellPoint (WLP), UnitedHealth (UNH), and Becton Dickinson (BDX)).  Place your bets!

***

Andrew Bary writes an article on how Uncle Sam is getting tough on US companies moving their legal domiciles in order to pay less tax.  The IRS is changing the rules (they can do that?  /sarc) so that they cannot get away with that as easily.

Hey!  How about lowering corporate taxes and making things more transparent HERE, you know, make the USA a GREAT place to invest???

***

Barron's sometimes invites people to write a guest editorial, this week's "Other Voices" (by Barry D. Wood) is an interesting piece the current African investment boom.  It seems that China has displaced the US and Europe as their main outside investors.  They are building highways and railroads (along with mining whatever they can get their hands on).  Africa, as a whole, may be cleaning up its act, slowly, as a place to invest.  But corruption remains a huge problem.

[I have money in Peru, and will not consider an investment in Africa]

***

Editor Thomas Donlan writes that America has more competitive advantages than many now think.  Competitive advantages (or disadvantages) has long been an issue that our .gov has been kicking around.  So, they want "to do something" about, usually another program....  Donlan suggest that the government just GET OUT OF THE WAY, and let us do our own thing... (my words).  Donlan then writes a small piece about Wisconsin, his thought is that the public sector unions (= bad) loudly trumpeted their (bad) cause, and that the voters chose to keep R-Team Governor Walker.  Gov. Walker cut taxes and balanced the budget, and fired NO ONE.  What's not to like about that?

***


In the Market Week section Vito Racanelli and Avi Salzman kick things off by chronicling the week's pretty nice rally in stocks.  Are traders getting ahead of themselves?

"European Trader" columnist Jonathan Buck notes that Europe is spinning its wheels...  In fact events in Europe are running so fast that this is really kind of old news, but Barron's comes out only once a week...

"Asian Trader" Assif Shameen writes that Malaysia looks attractive as a place to invest.  Know what guys?  If Malaysia stops pussy-footing around re granting Lynas's rare earth processing plant permission to get on with it, THEN I might look at Malaysia, not before.

Randall W. Forsyth notes that stocks did well last week, but not Treasuries whose 10-Year yield is back up to 1.64% (which of course is still VERY LOW).

Steven Sears wrote the options column, which I normally do not read because I am not in to options, but he mainly discussed Corning (GLW), the glass maker and some nice innovations they are making.  Hmm...  GLW might be a good long-term pick.

"Commodities Corner" (by Simon Constable this time) is finally taking note that the central banks have been buying LOTS of gold (he says about 400 metric tonnes, but I have read that China alone has reportedly bought 500 tonnes on its own).  Central banks are no dummies (for the most part, perhaps partly evil, but not dumb).  He cites an analyst or two who say gold may go up quickly.  Or not.  My advice?  If you do not own any physical gold, then you should BUY SOME right away!

NOTHING of interest (to me) in the Classifieds.

No big sales by insiders of stocks last week (my threshold of "big sales" is about $30 million).

The Mighty Peruvian Sol has once again smashed up vs. the US$!  It rose almost 1% to a record 2.684 to a dollar.  I guess that $4.25 haircut I will get there in December may cost me nearer to $5.00...

***

EDIT:  Barron's also included a special section on COMPLICATED ETFs.  Read that at your peril!  I have the financial battle scars from buying SRS and FAZ...

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