Saturday, August 11, 2012

Review of Barron's -- Dated 13 August

Before I get to Barron's this weekend, I want to reassure you, dear readers, that I have not been asleep re my blog.  I have a couple of special pieces coming up soon the next few days!


This weekend's Barron's is pretty loaded up with interesting material, we have a lot of ground to cover, so let's get at it!

The Cover Story is "China's Top Brands".  Author Kopin Tan says that we "must know" know these 10 brands out of China.  This matters because the Chinese leadership is making it ever clearer that they want to drive up domestic consumption, and they are doing this in a variety of ways (various reforms).  Chinese urbanization will likely also drive up demand for consumption.  Mr. Tan informs us that even though there are indeed important Chinese brands, that there are holes (all the airlines are bad, no Chinese equivalents of Chanel or Gucci, highly rated food brands, etc.).

Without further ado, here is the list of the 10 brands he discusses (in alphabetical order):

-- Baidu  (China's Google, traded here on NASDAQ)
-- China Mobile  (world's largest telecom network)
-- Great Wall Motor  (SUVs and trucks, higher quality than other auto cos.)
-- Haier  (appliances and LOTS of products, but murky ownership)
-- Lenovo  (used to be IBM's PC manufacturer)
-- Li Ning  (named after Olympic gymnast Li Ning, their Nike)
-- Moutai  (Moutai is their national booze (from sorghum), 53% alcohol...)
-- Tencent  (China's most diversified Internet company, they host blogs too)
-- Tsingtao Brewery  (the beer you can get at Chinese restaurants here)
-- Yunnan Baiyao  (provider of Chinese herbal products to other cos.)

The only real comment I have is that there are a LOT of car manufacturers in China.  I would not buy ANY Chinese car manufacturer, the competition in the years will be brutal and bloody.


Alan Abelson marvels at how the markets keep going up even with all the bad news.  Indeed.  Reminds me of a comment I see a lot at Zero Hedge: "Bullish!"

Abelson then goes on to tell of how Tim "Turbotax" Geithner was recently spotted on the North Sea German island of Sylt.  Felix Zulauf (of Barron's Roundtable fame, a money manager from Switzerland) mentioned that Geithner was not at Sylt to enjoy the beach or the bracing fresh air.  So why was Timmah there?  Word has it that he was there to quietly meet Wolfgang Schauble, Germany's finance minister.  Why?  Geithner is trying to have the Germans and the ECB hold back any European financial crisis until after the election....

Abelson finishes up by saying that 2012 may not be like 2010 and 2011 were -- in that stocks recovered nicely after bad news was digested and nothing bad happened.  It may not work out that way this year...


Michael Santoli ("Streetwise") writes firstly that trading volumes are down, but that figure may be misleading.  Then he goes on to note that economic uncertainty is higher than ever (economic uncertainty  HAS always been high), what with the menacing "Fiscal Cliff" drawing ever closer.  He then goes on to mention that high yielding dividend stocks are a crowded trade [yes of course], and he finishes his article noting that another study has show that value stocks (over generally: low P/Es) perform better than growth stocks.  Santoli covered a lot of ground in one page.


At "Review & Preview" there is a short piece about the cost to business of "compliance with Federal agency-written regulations", the amount is estimated by the Competitive Enterprise Institute to be $1.806 trillion just for the first 6 months of 2012.  Staggering, these are not costs of complying with LAWS, but REGULATIONS by .gov.

"He Said":

"There will be no winner in Syria.  Now, we face the grim possibility of long-tern civil war dsetroying Syria's rich tapestries of...communities."

U.N. Secretary General Ban Ki-Moon

The other short piece at "Review & Preview" describes the growing problem of what will happen as the garbage piles up all over the world.  Lots of problems, I will allow you to think about them.  Short version, it won't be pretty as the garbage piles up....


Barron's DC pro Jim McTague writes an article on High-Frequency Trading.  He does not  like it.  He looks with favor on the idea of forcing trading traffic to slow to 10 milliseconds.  Right now, the fastest trades are done in under 1 millisecond, especially if the servers are close to the various servers of the exchanges (so THAT notion I recently read about at Zero Hedge is true).  The exchanges even have their own huge server farms and rent-out highly prized space closer to their servers...


"CEO Spotlight" (Leslie P. Norton) this week features Robert Benmosche, CEO of AIG.  Benmosche had retired from the insurance business (with MetLife until 2006) and was asked to come and help repair tattered AIG.  He left behind (but still owns) an impressive estate and inn in Croatia, to work for AIG in 2009, he was called in after the $182 billion bailout to AIG.

Using his congeniality along with emotional intelligence he has rallied the troops there (restoring morale, important if you want to save a firm), intelligently downsized the firm and managing often rocky relationships with Washington.  I'll bet...

He is hoping that the US taxpayers will own none of the company by the end of 2013 (we own 58% of it now).


Gene Epstein ("Economic Beat") writes that most of the economic forecasts over the past few years have been usually too high...

The pessimists have been right all along!


Tiernan Ray ("Technology Week") starts his column on the big moves up in many companies involved in "Big Data".  Companies like Oracle (ORCL), SAP (SAP), Teradata (TDC), Informatica (INFA), EMC (EMC), Fusion-io (FIO) and a slew of others have levitated...  There may not be much to keep their prices up if anything goes wrong and they disappoint...

He then goes on to write about graphic chip maker Nvidia (NVDA) and its competitors Qualcomm (QCOM) and Broadcom (BRCM) are all fighting it out to make chips for smart-phoes and tablets.  NVDA has a fighting chance with a new line of chips, but they are smaller than the other two competitors...


Mike Hogan ("The Electronic Investor") writes of "moats" that some companies enjoy.  Moats are situations where they are protected from competition by high barriers to entry, drug patents, monopoly cable companies, and so on.  It seems that Warren Buffett himself popularized this notion of moats.  Morningstar and are two sources of information for finding companies with protective moats.  There are various kinds of moats, I will present s short list of some mentioned in his column: Oracle (ORCL, customers tend to stick with their providers of complicated software), International Speedway (ISCA, only one NASCAR racetrack per city...), and Applied Materials (AMAT, great technology).

There is even an ETF (of course) for moat companies: Market Vectors Morningstar Wide Moat Research ETF (ticker: MOAT, of course).


Lawrence C. Strauss interviews two French-American guys who run IVA Worldwide, a mutual fund.  These two guys like American stalwart companies, and in particular Berkshire Hathaway (BRK/A), Applied Materials (AMAT, and again their technology is mentioned), Expeditors International (EXPD) and Google (GOOG).


The Classifieds offer some interesting items to look at this weekend.  Someone is offering 65,000 acres of Bakken Shale as an oil play (Alberta and Montana).  A fellow in China is offering his help as a bilingual expert with contacts in Shanghai and other cities.  There are TWO ads this time re gold & silver mines (the guy who left his email on ANOTHER one a few weeks ago never replied to my email to him).  That makes THREE gold mines up there at the Classifieds in just a few weeks.  That's too many for me to feel comfortable...


Editor Thomas Donlan writes this weekend about Social Security...  Its future is not good, we all know.  I myself remember the 1983 rescue of Social Security so that its problems would be pushed down the road until well into the 21st Century, and here are!

Donlan believes (and this is my understanding as well) that Social Security is likely to be the easiest of the three Big Ones: Social Security, Medicare and Medicaid.  He writes (and I had never known this) that Congress can change the benefits if they want to, just because you paid into the system does not GUARANTEE you a payout, this was upheld by the Supreme Court in 1960.

A Reagan Republican and a Roosevelt Democrat have teamed up to offer a compromise.  Compromise looks like the only right way to save Social Security: some combination of raising the eligibility age, cutting benefits, raising taxes above the $110,000 per year where it maxes out and cutting the cost of living increases which (they say anyway, I have heard differently) which go up faster than inflation.

IMO, something like that has to be done, in a compromise kind of way.  Everyone will and should feel the pain of saving this entitlement.

And then we get cracking on the harder ones: Medicare, Medicaid, and incentives for Americans to save more.  To save more?  That's going to be hard with low interest rates, high debts and greedy & corrupt .govs at levels getting in the way...


In the Market Week section, Jacqueline Doherty starts us off by noting that last week was the fifth straight week that the stock market has gone up.  Bet you did NOT read that at Zero Hedge!  She quotes a market strategist: "This is the most loathed market recovery in my career."

"European Trader" author Jonathan Buck says that German stocks still look attractive, even with the DAX nearly 18% this year (to 6945, I had to look that up elsewhere, Mr. Buck, you should have put that current index in your article).  He says that German stocks over the past few years have had an underperformance vs. commodities (like gold).  OK, he makes a prediction that the DAX should go up, you're on record now!  We'll keep a watch out, but kudos to Mr. Buck for making a real prediction.

"Asian Trader" author Kopin Tan (who wrote the Cover Story this week) writes that Standard Chartered's money laundering scandal (violating US laws and making shady deals with Iran to the tune of $250 BILLION) are not likely to hurt the bank that much.   One analyst noted to the author that the bank has a less than 10% chance of losing its license here in the USA.  They will wind up paying a fine, and that will be that.  The analyst (Derek Ovington) thinks that Standard Chartered is "grossly oversold"...  Ehrmm, once a scandal seems to have hit a company, you should think that there is more to come...  Hey, IMO.

"Commodities Corner" author Tatyana Shumway writes that is is hard to find a good silver miner...  Two large  primary miners of silver (that is, they own silver mines, and do not produce silver as a by-product at copper mines for example) Pan American Silver (Paas) and Coeur d'Alene Mines (CDE) each have a problem, the former can't get a license to start mining in Argentina [why do people invest money in Argentina anyway, particularly in investments where government interference is such a threat?] and the latter forgot to renew some mining claims, whoops, that got snatched up by another company.  London-listed Fresnillo (FRES.U.K.) is the best of the lot she writes, it costs them only $5.00 / oz to dig it up out of the ground, wait a minute!  That troll at Zero Hedge might have been right!  LOL...

I am very happy to report that indeed Barron's is going to make "Emerging Markets" a permanent column.  I emailed author Reshma Kapadia just that question, she kindly emailed me back saying yes, the column will stay.  This weekend she writes that higher company dividend yields can be found in some emerging markets.  She mentions mutual funds, which would likely be a safer approach than just buying one or two single companies, say in Brazil or China.  Many of these emerging markets offer better demographics and growth prospects than in the USA and in Europe.  She quotes Ryan Wibberly (CIC Wealth Management): "One of my fears about emerging markets is whether we can trust the numbers but dividends you can't fake."

Michael Aneiro has been quite on top of the bond markets ("Current Yield"), in fact I would venture to write that if he keeps up his good work that he has about the most stable career prospects possible: there are SO MANY issues now in the debt marketplaces that there will always be something worthwhile to write about for the next few decades...  This week he notes that junk bonds have rallied, they are now yielding relatively low rates, and what has happened lately is that each time the "average" junk bond yield (Bank of America Merrill Lynch) has fallen below 7%, the junk bonds then reverse course.  Aneiro quotes Kevin Lorenz (TIAA-CREF High Yield Fund) as having a different view, that 500 - 600 basis points over Treasuries is pretty good, he is still OK with junk...  Aneiro finishes by noting that Treasuries had a tough week, the 10-Year note now yields 1.657%.  I believe I saw the 10-Year yielding 1.39% (intra-day) not long ago.

The "Bond Center" shows the Euro Short Term Rate matching that of Japan (approximately 0.2%).  That is a rate decline of an awesome +/- 60% in just six weeks (it was at 0.5% six weeks ago)...

In contrast to last week, there were NO big insider sales of stock (at my arbitrary $40 million amount).

The Mighty Peruvian Sol returns to beat up the US dollar once again!  Last week the sol was up about 0.44%. Your US buck now fetches 2.6165 soles three years ago you could buy 3.45 soles for a dollar...  The sol has climbed about 32% vs. the dollar!

1 comment:

  1. Regarding silver miners, ever heard of Hochschild? If I recall, has operations in Peru, right up your alley.

    Been holding a mutual fund in the emerging markets for years now myself. More watchful of the dividend pattern than the price swings in the daily ticker. Makes me feel benevolent for helping poverty stricken masses, while hopefully also subliminally bearing down on the birth rate in overpopulating nations.


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