Sunday, July 15, 2012

Review of Barron's -- Dated 16 July

The Cover Story this weekend shows a big graphic of $1 = 1 euro, so I thought, yeah, OK, I'll buy it...

Randall W. Forsyth ("What Europe Must Do") writes about Europe's plight, with which we are all pretty familiar. Part of the genesis of all the Eurozone problems has been the fact that the euro is a fairly rigid currency for countries that work rather differently (more differently than our own states).  I will note that at the outset of the euro experiment, it "seemed like a good idea" to me.  Well, I was wrong on that one wrong...

So, Europe is floundering about, trying to relatively easy solutions, like trying to impose austrity on Greece and setting up all of those confusing entities like the EFSF, to be succeeded by the ESM.  And the ECB behind it all.  LTROs and the like abound.

Forsyth writes that two key people re the euro re ECB chief Mario Draghi and German Chancellor Angela Merkel.

Forsyth notes that several BIG European companies have set up shop here in the USA to manufacture (BMW and Mercedes-Benz to make cars) and will soon be joined by mighty Airbus.

He then writes that his opinion (and others, including the respected Bank Credit Analyst) is that they should just devalue to euro.  He notes that Germany would suffer unwanted inflation.  And he believes austerity will not work (Spain has become a land of rioters now under austerity).

I really do not have the expertise to offer an opinion as to whether Forsyth is right or not.  It's a good article, and he makes a good case, but devaluation...?

***

Barron's "Pole Position" writer Alan Abelson writes of Ponzi's Legacy...  Now we have yet another brokerage reun off with their customers' money, PFGBest.  It is getting hard for me to keep up with all the thievery we have seen, despite my attempts to chronicle the BIG scams that we are witnessing after the Bubble.  The big scams are always seen after the Bubble.  PFGBest, at this point, is believed to have lost a "mere" $225 million.  Abelson then goes on to note that JPMorgan has fessed up to its recent $5.8 billion trading loss.  All these numbers always seem to go UP, not down.

Abelson then goes on to write some history for us: that one of the very worst hyperinflations happened in Greece after the Nazis took over in WWII.  Worse, he writes, than Weimar Germany's (uhm, a fact check might be of use here). Nonetheless, a bout of German-induced hyperinflation in Greece would likely indeed left some hard feelings towards German among the Greeks...

He finishes this week with a comment and nice pair of graphs on China.  He doubts that China is really doing well.  The two graphs note a very high correlation between China's real GDP growth rate and China Shnaghai Composite (stock index).

***

What is $306,338,843,832,754?


That number is not just a big number, but it is "SwapClear's total outstanding notional debt as of July 4, 2012".


I presume that means the world total, not SwapClear's share of it.


Readers of last week's review might remember that I mentioned these guys, apparently pretty new (at least at Barron's) as the only ones to have successfully resolved an IRSwap default).


If you are interested in derivatives clearing, etc.: swapclear.com

***

Michael Santoli writes the FIRST PIECE I have ever seen (by a non-conspiracy-theorist-whacko) that says that it does not matter much whether our next Capo is Obama or Romney!

He says that the economic cycle and central-bank policies that matter more.

I still would rather endure Romney...

***

"He Said:"

"We made a mistake.  We completely disclosed [it]...  We are in better shape than we were before."

JPMorgan CEO Jamie Dimon on the earnings call.

Barron's!  It is almost always Dimon, Bernanke, Draghi or Soros that you guys always quote!  Let's see what some others, OUTSIDE the bankster circle have to say!

***

One of my favorite writers there at Barron's is their DC Pro Jim McTeague ("D.C. Current", this week's article is titled "The Greased-Palm Index).

He writes this week that the Center for Responsive Politics puts out a list of companies that gave the most in political contributions.  Among the 32 companies studied, the average stock price went up 8.1% (as of July 9)  while the S&P 500 was up 7.5%.

Surprise!  But, an outperformace of 0.6% is not all that much.  I hope that Jim keeps up with this analysis in future columns.  He would then be chronicling "Corruption at Work"...

***

Author Tiernan Ray ("Technology Week") writes that earnings for many big tech names are likely to be ugly...

Intel (INTC), Yahoo! (YHOO), eBay (EBAY), IBM, Qualcomm (QCOM), Nokia (NOK), Verizon (VZ), Advanced Micro DEvices (AMD), Google (GOOG), Microsoft (MSFT) and Xerox (XRX) all report in this week.

He says to start preparing your shopping list if tech goes down.  Uhm, I will wait...

***

I always give myself an "Inner Smile", thanks Susan A, hey Susan, you're famous!, when I see that "investment pros" or others (in this case) perform worse than the S&P or even LOSE!

Andrew Bary writes "Nothing to Write Home About", which is this edition's review of Barron's recent stock picks (that is, by their writers).  In sum, they picked about 3 times as many bullish picks vs. bearish ones.

Re their bullish picks, their writers averaged a -5.7% (vs. a benchmark +0.3%, the benchmark being an index similar in size or scope to the company written about), so they way under-performed.

Re their bearish picks, they came out with a 1.2% positive (they made money calling the bearish movement correctly) vs. a -1.2% benchmark.

Bary notes that stocks often DO need a longer time frame than six months.  I applaud Barron's in being transparent about their calls.  Mine would likely have been WORSE.

***

Leslie P. Norton interviews a man named Paul Isaac, who is very respected (Jim Grant dedicated a book thusly: To Paul Isaac, who knows everything).  Mr. Isaac runs a hedge fund and writes a nuanced and beautifully reasoned newsletter according to Ms. Norton.

Isaac thinks that we are not addressing our problems well (I would agree), that the Europeans maybe are (?),and yet that there are good ways to make money (his hedge fund has average 21% per year since its founding in 2001 -- an amazing number IMO).  He is a value investor, he likes good companies at cheap prices.  His two US picks: Devon Energy (DVN) and Greif Brothers B (GEFB).

***

I have written many times now that I have become enchanted with the "CEO Spotlight" and that I always try to read it.  This week Michael Santoli writes up Hyatt Hotels (ticker: H) CEO Mark Hoplamazian (an Armenian last name, literally meaning "one who doesn't jump or dance").  Hyatt had been owned for a long time by the large Prtizker family of Chicago, and some of the Pritskers wanted to cash out.  Hoplamazian, who did not have much experience in that industry (he worked on Wall Street as an analyst, banker and consultant), but he was able to bring Hyatt through the complicated Pritzker family politics and bring out this well respected hotel brand.  That he was chosen as interim CEO surprised him.  He spends much of his time on the road, listening...

A LOT of these CEOs have had interesting lives, and almost all of these pieces I have read have led me to respect many of them.

***

James Bovard this week pinch-hits for Thomas Donlan on the Editorial page.  I remember Bovard from years ago when he attacked our government giving special privileges YEARS ago (in that case, one the beneficiary companies was Timken, the US bearing company who had successfully lobbied to put up various import barriers to foreign bearings).

Bovard punches the government hard for wasting money, vast sums of money on programs that have proven themselves unworthy of funding.  And actually causing even more bad consequences, the same kind of thing as when a company miss-allocates capital.  Except those companies go broke if they keep it up.  Not Uncle Sam.  He specifically attacks ethanol, which boosts smog and damages car engines...  Unintended consequences...

Five stars Mr. Bovard!

***

In the Market Week section, I was dismayed that neither "Asian Trader" nor "European Trader" (weekly columns following those mega-markets) had anything of interest for me this wee.  Maybe next week!

***

"Current Yield" this week is by Michael Aneiro and discusses California municipal bonds...  Dangerous territory, as California has three cities seeking bankruptcy protection: Stockton, San Bernardino and Mammoth Lakes.  All three cities have been hit by two things: lower property tax revenues and onerous public sector union benefits.  Think that's the last of them to go bankrupt?  He does not come out and say so, so I will:  LOTS more municipal bankruptcies (and so muni bond holders) to come in California, if they do not FIX the public sector pensions (default on them in part).

Aneiro also mentions another under-funded muni sector: the tobacco bonds!  You remember, they were all going to get all this money and spend it wisely!  Ha ha ha!  Guess not!  Fewer people smoking, another example of unitended consequences by our .govs...

The "Bond Center" four graphs are on the same page.  I noted last week that European short term rates for the first time fell below ours (the ECB cut rates).  This week the European short term rates went down again, they are approaching Japanese levels...

***

Insiders sold at Visa (3 insiders, $36,500,000 worth) and Monsanto (7 insiders, $22,000,000).

Verisk Analytics (144 Filings) had their CEO sell $30,000,000 worth (after a big ride up, mentioned at Barrons's), Broadcom and GNC also had big 144 Filins (similar to Insider Trading reports).

***

Matt Day writes this week's "Commodities Corner", he thinks that even in tough times that Cliffs Natural Resources (CLF) and Peabody Coal (BTU) are good places to hide.

Well, maybe.  Not for me though.

***

Fender Musical Instruments may IPO soon, for any of you who like guitars...

***

M2 money supply is just shy of $10 trillion, a mere blink away at $9,991,500,000,000.  Hey, print it!  Less than $9 billion away from a VERY round number!

I always like to close my Review with the performance of the Mighty Peruvian Sol, which this week AGAIN reached an all-time high vs. the US$.  The Sol jumped over 1%, and now our buck fetches a mere 2.625 soles...  A few years ago it was 3.45 soles to the dollar.  Offhand, I cannot think of ANY other currency up so much vs. the US dollar.

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