Sunday, November 25, 2012

Review of Barron's -- Dated 26 November 2012

Finally back at work here on my blog after visiting family and taking part of my wife's family to Orlando and Miami. I was lucky to have a good time, as well as lucky to review this weekend's interesting edition of Barron's!

Barron's this weekend features a Cover Story about Hain Celestial (ticker HAIN), "Trouble in Teal Land."  The natural-foods company is facing a lot of competition in its various brands.  Bill Alpert writes this bearish article, which HAS grown impressively (share price) since 1997.  Hain now has a large collection of brands (Terra Chips, Earth's Best Organic baby food), Celestial Seasonings tea, Linda McCartney meat-free frozen meals, Greek Gods yogurt), and they sell to Whole Foods as well as the grocery stores and other outlets.

Alpert sees two big problems with Hain: they are a fairly small fish in the food business and the corporate valuation is very high.  He says the stock could go down 30% or more.    Hain has BOUGHT most of its brands, the competition is coming to grab market share...

On the other hand, founder and CEO Irwin Simon sees bright prospects ahead, as he believes we are in the early innings of a great future for organic foods.

Your call!


Alan Abelson is back at work!  Which of course is great news for those of us who appreciate his skeptical take on the markets.  His first comments concern the Mass Delusion (seen at Zero Hedge as well, lamentably) that Hamas "won" in the latest round of Israel vs. Hamas fighting, which last I heard the truce was holding.  The damage and the casualty tolls are heavily weighted on the Palestinians...  Abelson: "If smoldering ruin and wreckage constitutes victory, one can only wonder what wondrous outcome mass delusion would assign to an even more disastrous defeat.  That the bulk of what passes for international punditry solemnly took the bait and agreed that Hamas has come out the winner, for reasons to convoluted and abstruse to be credible. simply suggests that these wiseacres fell victim to the same berserk delusion that befell the population at large."

Abelson then goes on to write that the USA may very well overtake Russia as the number one producer of natural gas by 2015, and few years later overtake Saudi Arabia as the number one producer of oil (according to the International Energy Agency).  And by 2035, we would be energy self-sufficient!  Well, IMHO, predictions out to 2035 are not worth all that much, but "fracking" and deep-water deposits of oil really will help us out in coming years, they have raised oil & gas production significantly ALREADY!

He goes on to say nice nice things about gold (yes) as well as mining shares (ahh....).

He then finishes with comments that the Drought is still on in the Midwest, something I was not aware of (as the media has not given the Drought much play since last summer).  Corn, soybeans and wheat are all affected ("Commodities Corner" has more to say about wheat, which I will discuss a bit more about below). ABelson then goes on to write about Jeremy Grantham's new report with the ominous title "On the Road to Zero Growth".  Grantham sees just 0.9% or so real growth for the next several years.  The full report is available FREE at:


Kopin Tan ("Streetwise") notes that high-end retailers are not doing as well as the low-end guys.  There are several variables at play here regarding retail: new taxes (the Fiscal Cliff scenario would cost anyone earning over $108,000 (that includes YOU, NYC-ers!) would see an after-tax income decline a hefty 7.7%, while those who earn less would see LESS of a tax increase (taxes would still go UP on them though), those making less have less ability to sustain a tax hit...  Tan suggests that if the high-end retailers keep going down vs. the El Cheapos (Family Dollar Stores (FDO, Target (TGT), etc.), the high-end would likely look better.

He also mentions that various companies (17) have paid, are announcing early payment or are likely to pay dividends (higher and/or sooner) before year's end, in fear of the Fiscal Cliff hitting dividend recipients.


"He Said":

Obamacare "adds a massive, expensive, unworkable government program...  We can't afford it, and we can't afford to leave it intact."

House Speaker John Boehner


Barron's "Follow-Up" piece is about Intel (INTC).  Intel's stock has done badly over the past year or so (while over the long haul (30 years) it has done VERY WELL -- I know as a long-time shareholder of INTC).  The problem is that Intel has not come up with a popular chip for smartphones.  And the short-term does not look too good for them, they would not make much money on smartphone chips and/or would not make much money opening up their chip plants to fabricate other companies' designs (Intel has some of the best manufacturing technology that exists).


Andrew Bary writes a bearish piece on Atlantic City and its casinos, ALL are currently losing money except Carl Icahn's Tropicana (TPCA).  In particular, the new Revel hotel & casino is having a rough time.


Jonathan Buck (Barron's go-to Europe guy) writes an interesting piece on what seven money guys (attending Sohn London Investment Conference) are doing re overseas stocks.  The most famous name (China bear Jim Chanos) says to short Brazilian stocks, he says SELL Petrobras (PBR) and Vale (VALE), as China looks to be hitting the skids...  Chris Hohn has an interesting paired trade: buy Porsche and sell Fiat (neither available easily here in the USA).  Nicolai Tangen likes Assa Abloy (a Swedish lock maker with "a dominant position" (?)) and L'Oreal, the cosmetics maker in France.


Johanna Bennett ("Weekday Trader") suggests that Novartis (NVS, the big Swiss drug-maker) ought to do better soon vs. its recent declines (lower sales to one fo it drugs going generic and some other problems).  NVS, she writes, has a good pipeline of drugs coming...


Economist Gene Epstein ("our resident skeptic", whoa...!) rebuts various positive statements that Jim Paulsen (Wells Capital Management) about the economy.  Epstein asked various commentators for their reasons to be thankful this year.  Epstein was not having any of Paulsen's BS about how good the economy is (although he agreed that we should all be thankful the political ads are over)...

Epstein goes on to share some other tidbits from others:

-- Ivan Eland thinks (as does Epstein) that the Fiscal Cliff will be resolved by cutting taxes and raising spending, at least for the short-term.

-- Christopher Low is thankful of the boom in natural gas!  This will ultimately lead to lower costs and vehicle emissions (gas fired truck engines) while making depressed areas like parts of West Virginia and Pennsylvania prosperous (shale gas).

-- Matt Welch gives thanks that Colorado and Washington State have almost caused the "Drug Wars" to come to an end.  I hope he is right, the Drug Wars have always been a stupid idea.


Tiernan Ray ("Technology Week") believes that both Rim (RIMM) and Nokia (NOK) are both so far behind Apple, Google and Samsung Electronics that the two of them will fail in the long haul.


PENTA (for all of you rich guys with $5 million +) Editor Richard C. Morais reviews four recent jazz albums having songs from HBO's new hit show "Treme" (about New Orleans), I have not seen the show nor like jazz music, but I pass this along to any of you who ARE interested...


Jack Hough writes a bullish piece on four European stocks ( I have not yet noted Jack Hough writing a BEARISH piece on anything, but I am still not an expert on all the Barron's authors).  He likes Lufthansa (German airline) and Inchcape (UK auto sales).


IMO the highlight of this issue of Barron's is Lawrence C. Strauss's interview with Carmen Reinhart and Kenneth Rogoff.

You may recall that these two Harvard professors wrote THE book on financial crises (the famed This Time is Different -- 2009).  They were bearish on OUR prospects then (they wrote the book during our 2008 crash) as well as all the others with severe debt problems.

It is difficult to briefly summarize their comments with Strauss.  They say that the economy has grown essentially back to where we started out in 2007, but it has been very slow (which they essentially predicted in their book.  Whenever countries, for CENTURIES, have had severe financial crises, the path to growth is slow and painful, full of bad endings like defaults and hyperinflation...

Reinhart and Rogoff suggest LOOSENING both monetary (interest rates) and fiscal (more government spending) for the short-term as we try to get our financial house in order...

Erm, I would just cut government spending period, but these two are very respected economists and financial historians, their opinions are worth far more than mine...

Must read if you have not encountered Reinhart and Rogoff before!  Worth the $5.00 just for the interview.


Leslie P. Norton wrtites an interesting piece on value-oriented hedge-fund manager Jamie Rosenwald, who has started teaching a class at NYU focusing on value stocks (which is kind-of Columbia University's turf...).  Rosenwald over the term invited several investment managers to talk and at the end allowed students to pitch stock ideas for NYU's endowment, the stocks so picked were Leucadia (LUK) and Arkansas Best (ABFS).


DC pro Jim McTague handicaps the Fiscal Cliff negotiations.  He writes that the ONLY Democrat who matters is President Obama.  What to watch for?  If the president goes into "campaign mode" (flying to Iowa, etc., talking to voters) rather than negotiating with the Republicans.  Harry Reid will follow Obama's lead, McTague writes, and that Nancy Pelosi just represents the left-fringe, so has no clout.  Re the Republicans, Speaker Boehner, of course, has the lead role, but Republican Minority Leader (Senate) Mitch McConnell has a powerful role as well.  McConnell is the only Republican who can deliver enough of his party's votes to get a compromise through, and he is known as a cautious fiscal conservative.

Hmm...  Looks like we have an interesting few weeks ahead...


Editor Thomas Donlan writes "Part 1" of "A Cause for Thanksgiving".  His piece this weekend is devoted to the lower price of natural gas and oil from unconventional sources (shale, via fracking).  This is the second time in this weekend's edition that this is mentioned, he also quotes from the International Energy Agency.

Lower natural gas prices (because of increased production and big discoveries here in the USA) are dragging down other energy prices, a good thing.  This will have "pin action" effects on chemical production (lower costs), etc.

And this has all been done by THE PRIVATE SECTOR.  It is rare that I find sharp disagreement with Thomas Donlan, yet another gem working at Barron's.


In the Market Week Section Vito J. Racanelli notes the stock market was up some 4% based on happy-sounding noises out of Washington re the Fiscal Cliff...  Well, we will see.  Racanelli also seems to like both Express Scripts Holding (ESRX) and Apache (APA), both of whom seem to have bright prospects yet whose shares have fallen.

Usually interesting columns "Asian Trader", "Emerging Markets" and "European Trader" did nothing for me...  Emerging Markets author Erin McCarthy did write of a new breed of mutual funds, "go anywhere" funds that invest in foreign stocks, bonds, and currencies are seeing investment in-flows.

Michael Aneiro (aka "Job For Life" as he has a great niche, and if he keeps up his good work) writes of the a new & perilous wrinkle for investors in municipal bonds.  Apparently "they" have put the taxation of munis on the table as a possible part of solving the Fiscal Cliff.  If things go "wrong" in the negotiations, those NEW taxes could be very high!  Holy Cow, Batman!  The 10-year Treasury yield rose to 1.693% (from 1.581% week earlier).

I mentioned WHEAT earlier when discussing Alan Abelson's comments re the Drought.  Owen Fletcher ("Commodities Corner") writes that winter wheat has now been affected as well here in the USA, and that other big exporters of wheat like Russia, the Ukraine and Canada have been hit by bad weather as well.  US wheat exports may go up, and so would prices...

Nothing of interest to me in this weekend's Classifieds.

And I note only ONE big inside sale: $47 million of Walt Disney (DIS) by CEO Robert Eiger.  Geez, we were just at Disney World, and everything there looked OK to me...

Finally, the Mighty Peruvian Sol was up again (some 0.7%, kind-of a big move in one week), now at 2.5865 (close to its all time high vs. the buck).  I leave for Peru in about a week (yay!), and when I get my hair cut, I will make it count, as my (US) barber did a bad job recently...


Verdict:  Yes, this is a must buy issue if you follow Reinhart and Rogoff or if any of the above issues affect you.  I congratulate Barron's staff on putting out a great issue.

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