Saturday, June 16, 2012

Review of Barron's -- Dated 18 June

Ah, the tranquility of a weekend without Italian class…  It allows me more time to write for my blog.  Time I really need this weekend, Barron’s is excellent, and this Review will be LONG!

The Cover Story “Here Comes Trouble!” is about the looming disasters of Social Security, Medicare, Medicaid and the new Obamacare.   Author Gene Epstein chronicles something almost all of you dear readers already know: that there are HUGE holes in financing these entitlements, and that it will be VERY HARD for Washington to resolve these problems.  There is a nice graph which shows how these programs will eat up over 25% of GDP by 2087, when the last of the Baby Boomers reaches 110 years of age…

There is no money to fund all of this.  Not even Treasury bonds.  Just some IOUs…  The first of America’s 78 million baby boomers turns 66 this year, and so are now eligible for full Social Security benefits.  Epstein writes:

“In short, the future has arrived, and it doesn’t look pretty.”

Indeed, it is a very good article.  Sobering…  I am 56 and not eligible for Social Security.  Medicare may come in handy though, if it is still there when I need it…

***

Alan Abelson (“Rumors to the Rescue”) reminds us that the G-20 guys are all getting together for tacos and margaritas down in Mexico, and maybe talk about the world economy.  “Lady Rumor”, he writes, passes word around that the Fed’s Open Market Committee may just do a little easing, and that pushed stocks up.  He then goes on to mention Jamie Dimon (CEO of JP Morgan) easily batting away questions from Congressmen.  He says the coming week will likely be exciting…

He then goes on to write that the banks still have a lot of housing REO (that own via foreclosure).  Things look, still, pretty bad for banks and homebuilders.

Abelson then finishes with comments on other economic indicators that are, well, rather bleak.  Manufacturing is down.  Business conditions are down in another survey.  The Chicago PMI down from last month.  No “Green Shoots” from Alan Abelson this weekend!

***

Michael Santoli (“Streetwise”) sees continued value in global companies with good positions and strong financials, companies like Abbott Labs. (ABT), Pepsico (PEP), Clorox (CLX), MasterCard (MA), Brown-Forman (BF/B) and McGraw-Hill (MHP).

***

The “Review & Preview” double page has some nice little gems.  There is a short piece on how the railroads will get a lot of business when the economy eventually comes back (as truckers have cut their fleets and they themselves are customers of the railroads for long distance intermodal transport).

Nizar Manek writes that “Italy is moving into the cross-hairs.”  “Italy is too big to save save, says [Ed] Altman…”

[Ed. comment: if Italy goes, then France goes, then Germany goes…]

“Review & Preview is also where “He said:” is.  Here is this weekend’s He said:”

“There are serious downside risks here.  The ECB…will continue to supply liquidity to solvent banks where needed.”

ECB President Mario Draghi

Feel better?  Oh, and by the way, Barron’s has LOTS more to say, negative, about Europe this weekend.  Read on…

***

Andrew Bary interviews Thomas Russo of Gardner, Russo and Gardner.  Russo manages about $5 billion of assets.  He is a big fan of companies with big global brands (Santoli (above) has written thoughts like this in the past two issues of Barron’s), some of these companies he has been holding for over 20 years. 

He even likes these kinds of companies even where the founding families retain control.  In these cases, the families are thinking longer term, not about short –term profits, but building wealth over time.  Family controlled companies he likes:

Berkshire Hathaway (BRK/A, BRK/B)
Brown-Forman (BF/B)     ß mentioned twice, they own Jack Daniel’s
Pernod Ricard (RI.France)    ßthey make a very good absinthe!

He also likes:

Nestle (NSRGY)
Richemont (CFR.Switzerland)   ß luxury brands like Cartier and Montblanc
Heineken Holding (HEIO.Netherlands)
Unilever (UN)   ß which he likes more than PG

Russo also offered up an interesting comment about HIMSELF and investing.  He chooses companies involved in making what he likes, and what he will stay close to.  He does not care about semiconductors, because he feels that he would be a poor investor in that industry.  That is a take that you rarely hear from professional money managers, bravo Thomas Russo!

***

Sandra Ward contributes a bullish piece: “Nabors: Ready for Pay Dirt”.  NBR is the world’s largest onshore oil & gas drilling company.  The stock lost over 50% of its value, partly because of upper management abuses (wildly over paid).  She writes that NBR seems undervalued almost any way you look at it, and that if oil drilling picks up, this could be a big winner.  I’ll go along with that, we will see.

***

Neil Martin writes a piece where he discusses Japan with Ed Merner, who has been in Japan since 1961.  Merner believes much of Japan is undervalued, and that many investment companies closed shop after Fukushima.  Merner notes that about 70% of companies on the Topix (an index, like our S&P 500) trade below book value (vs. 20% on the S&P 500 or 30% on London’s FTSE).

***

Jim McTague (“D. C. Current”) writes that Obama has changed his tune on oil drilling.  Obama is now claiming credit increased US oil and gas production!  Even though most oil and gas is produced on private land…  McTague:

“…, Obama feels he must lip-sync a version of “drill, baby, drill””.

The president’s pollsters must have found that the public largely FAVORS more drilling.

McTague goes on to write that the voters are increasingly viewing Obama’s policies as flops.  The president promised a healthy economy by now (some 3 and ½ years since taking the helm), and Obamacare is unpopular.  The oil industry views Obama as job killer…  They would be happy to see him lose.

***

Andrew Bary writes a bullish piece Scotts Miracle-Gro (SMG).  The stock took a recent hit on a pair of bad results and projections.

Ah, no thanks.

***

Bob O’Brien writes a bullish piece on Lamar, the nation’s third largest billboard company.

Ah, no thanks.  Three bullish pieces so far…

***

Shirley A. Lazo writes that some tech companies are finally strting to pay decent dividends.  AAPL, IBM, Intel (INTC) and MSFT are paying dividends now.  HP has been paying dividends since 1965.

Google (GOOG) and eBay (EBAY) are not expected to pay dividends anytime soon however.

***


Tiernan Ray (“Technology Week”) tells us that at long last that Dell (DELL) will pay dividends as well.

He also writes of the general paranoia (“Only the paranoid survive.”  Andy Grove) among the tech companies.  Most tech companies view their industry as zero sum game, and that each may have to eat up others or get eaten in turn.  He provides a list of companies that failed or got eaten up:

Eastman Kodak
Digital Equipment
Wang Labs
National Cash Register
Silicon Graphics
Sun Microsystems
Amdahl

He finishes by writing about struggling Nokia, it will have to take another 1 billion euro charge…

***

Mark Veverka (“Plugged In”) gives us a sneak peak from Apple.  Even though Apple did not show off an Apple TV nor a new iPhone, the company DID release a barrage of new technology to keep them ahead of Google, Microsoft and H-P.  It looks like they are going to team up (at least to some degree) with Facebook (FB) to allow, iPhones (etc.) to share photos (etc.).  They working with TomTom to get their own mapping technology, and Apple has said that they would eventually like an iPhone in every CAR, which course would not be good for GPS maker Garmin (GRMN).  Apple’s new iPhone OS 6 will likely work out very well for them.

***

Mike Hogan (“The Electronic Investor” caught my eye when he described in detail a company offering information on ALL 40,000 publicly traded companies in the world!  Each night CapitalCube runs an automated valuation analysis on each of these companies, focusing in fundamentals, not technical analysis.  The service is FREE now, for about a month, then it will cost $79 / month (more for premium services).

I went and tried it out: capitalcube.com.  I entered NSK, Ltd., Japan’s big bearing company (very little information is available about NSK here in the USA, it does not trade as an ADR).  Out came metrics and ratings.

You should take a look, especially if you invest overseas.

***

“ETF Focus” has written before about new and complex ETFs hitting the market now.  Author Brendan Conway writes of new ETFs attempting to track purchases and sales of stocks bought by Hedge Funds.

Ah, no thanks.

***

Lawrence C. Strauss writes this weekend’s “CEO Spotlight”, an article I have grown to enjoy when Barron’s publishes it (looks about every two weeks).

George Barrett is the CEO of Cardinal Health (CAH), they are a close second in size to drug distributor McKesson (MCK).  Cardinal distributes generic drugs (as well as other medical products) to independent pharmacies and may other types of medical customers.  Companies like Cardinal are one of the few in health care that work to LOWER health care costs.

Barrett is 57 and appears to have done a nice job running Cardinal.  He graduated with a BA in History and Music.  Right out of school, he played folk-music at night, before landing a job in the medical industry.  He found working in the corporate world fulfilling.  George Barrett is proof that Music majors and History majors can make it out there in the corporate world.

***

A couple of times I have tried to pass along the essence of CARTOONS that I see in Barron’s.  Many of the cartoons are extremely good! 

P. C. Vey draws two guys sitting at the bar with drinks.  One is a doctor, in uniform.  The doctor turns to the other man (his patient) and asks “If not now, when do you want to talk about these test results?”



I started reading the Editorial by Thomas Donlan about computerizing the campus, an idea that MIT offered up a couple of years or so ago where you could take real classes via the internet.  When he then went on to write that the government should get involved, I then asked myself, “What, is Thomas Donlan running off the reservation again (acting out of character by favoring more government)…”?  I took another look, this week’s Editorial is NOT by Thomas Donlan but by someone else: Steve Klinsky.  LOL!    |;.!

***

In the Market Week Section Vito Racanelli and Jacqueline Doherty jointly write "The Trader" which reviews the equity market of the past week.  FINALLY we are seeing Europe discussed (disgust?), and we also see a theme mentioned TWICE above in this weekend's issue: STRONG that don't need to borrow from banks, companies like Johson & Johnson (JNJ), IBM, Texas Instruments (TXN) and SAP (SAP).

They do not like truck and engine maker Navistar (NAV) as the company has not been able to get its new diesel engine up to new EPA cleanliness standards...

"European Trader" columnist Jonathan Buck has lately been keeping a good eye the perils there in Europe.  He writes that even though things are very bad in Greece (big French retailer Carrefour just pulled out of Greece), that main act is really going to be Spain.  I agree.  ALL of Europe's sovereign debt went south last week (that is, investors demanded higher yields) even on German debt.  Egan-Jones (finally I read about them somewhere else other than Zero Hedge) rates Spain as junk. The cowardly other ratings agencies have not.  Yet.

Randall W. Forsyth ("Current Yield") writes that the central banks are just buying time...  Well, yes.  Treasuries are at their lowest ever, as Europeans and others flock to the safe haven (not so safe?) of Traesuries.  He points out the Germans cannot, as in are not able to, keep covering the bad debts of the likes of Spain.

"Commodities Corner" today was about cotton.  Cotton prices are low, so China took the opportunity to buy a whole lot from the US.  Cotton prices may go up, writes author Leslie Josephs, but much.

Another cartoon, this one by Danny Shanahan.  The bum on the corner says to the man giving him a donation: "Everything goes straight back into the business."  I am telling you, the CARTOONS in Barron's are often very good!

NO big insider sales or 144 Filings this week, although insiders at AutoZone have been selling for a long time.

The Mighty Peruvian Sol, yes YET AGAIN, reaches a new record vs. the US$, rising some 1.0%!  OUCH, it is going to hurt paying $5.00 to get my haircut down there...

3 comments:

  1. Which is better Pepsi or Coke?
    ANSWER THE POLL and you could get a prepaid VISA gift card!

    ReplyDelete
  2. Get all the best alcoholic drinks on Duty Free Depot!

    All the world famous brand name beverages for unbelievable low prices.

    ReplyDelete
  3. Do you love Pepsi or Coca-Cola?
    ANSWER THE POLL and you could receive a prepaid VISA gift card!

    ReplyDelete

Note: Only a member of this blog may post a comment.