Sunday, December 30, 2012

Review of Barron's -- Dated 31 December 2012

All weekend I have been torn between Antifragile and reading (and now reviewing Barron's), but I can pull this off...  One last comment re Taleb's book, he does not even mention perhaps the MOST ANTIFRAGILE investment of them all: Gold!

Onwards to Barron's, where I note the Cover Story: "The End Of Cash?".  Ackk!  No, no, no, no no, no!  I wanna spend CASH when I feel like it, and NOT leave a digital trail...  Alexander Eule writes this alarming story (alarming to me) about the latest trend in retail payments.  Here's why it alarmed me, Eule:

""Most of that [cash] spending will come from poorer Americans who don't have bank accounts and people who want to keep their purchases hidden."  

That's right, it's nobody's business what I spend my cash on.  Eule also provides an interesting data point: that just 2% of point-of-sale payments among households making over $60,000 / year (not that much...) is cash!  2%!  I would guess in OUR household that we spend perhaps 15% or more using cash.  Households making $35,000 however, use cash for some 55% of THEIR transactions (so who gets screwed again?).  He provides another data point of interest: that the Bureau of Engraving and Printing printed up some $359 billion in cash (fiscal 2012), of which $303 billion was in $100s...  Eule:

"In fact, economists at the Federal Reserve estimate that over 60% of all C-notes are now held overseas."

Eule then goes on to note that a lot of the new upcoming $100 bills have been printed already, and are waiting in bank vaults to be introduced.  These would be the new high-security ones.

But, Alexander Eule did not write his article with me in mind...  After all, Barron's main audience is investors, particularly STOCK investors.  Eule provides a nice graph (that would be difficult for me to copy and place here), but in 2011, cash was used for about 29% of retail transaction value.  The below shows 2011 and (estimate for) 2020:

Payment Type
% 2011
% 2020
Credit Cards
Debit Cards

Eule provided a GRAPH, so I had to give "eyeball estimates" in a couple of cases above.

His main point is that it is the credit card companies (mostly Visa (ticker V) and MasterCard (MA), Amex and Discover don't even really count...) will benefit greatly from the coming changes.  Both offer debit cards, and many of the "Other" transactions above are credit or debit card based (internet transactions, etc.).  

Visa and MasterCard will almost certainly grow their share overseas as well.  Already 60% of MasterCard's revenue comes from overseas and 45% of Visa's.  And, globally, 85% of retail transactions are still in cash.  Plenty of room to grow.

He raises another interesting point: that providing cash is essentially a public good, provided at no cost to consumers [leaving behind the point of the Fed and Banksters abusing this privilege], while all credit and debit card transactions have fees...

A fine article Mr. Eule!


Alan Abelson is back at work and has less than kind words for our Congress, Obama and Uncle Ben.  But, he limits himself (unlike many of us, hah!) to discussing the Fiscal Curb (err, Cliff, but I like my reader "Nobody"'s term better..., so "Fiscal Curb" it is for the rest of my piece).  He does not have much confidence that this will work out as both R-Teamers and D-Teamers hope.  Me either.

On the other hand, he quotes Paul Kasriel (recently retired from Northern Trust) as saying that a recession does not automatically hit if taxes go back to the Clinton-era levels.  Uh, I will tell you all this: if MY taxes go up a lot, that's it, we SLAM the door shut on spending!!!


Vito J. Racanelli ("Streetwise") notes that the Dow has real problems modeling the stock market as a whole (vs. the S&P 500 for example).  The Dow is imperfectly constructed, stocks with higher SHARE prices are weighted more heavily, and just one or two stocks that move the Dow (or, in the case of Apple, do NOT move the Dow, as AAPL is NOT in the Dow) move it much more than the S&P 500.  But, may of us already know that, that just means that we have TWO stock index numbers we have to keep track of...


"Review & Preview" offers up some nice morsels.  Zach Trenholm collects six "New Year's Resolutions" from some famous names.  Rather than list them all out (lots of typing), I will paraphrase the two that struck me:

-- Bill Gross wants return of capital than on, and that 2013 will not be like 2012.
-- Michael Thompson wants best places for decent yields without high risk.

Hey, Mr. Thompson!  If you find such a place or two, gmail me!

"He Said":

"There are probably many places...where living standards are higher than ours.  Are we going to send all our children there?"

-- Russian President Vladimir Putin, on recent US adoption ban.

OK...  Russia is HIS turf, he is The Boss there.  But, I heard that there are some 700,000 orphaned YOUNG children without parents there...

Jack Willoughby writes a short piece on the Dodd-Frank financial-reform (?) law, and how they are NOT addressing the "shadow banking system" (money-market funds, repurchase agreements, "dark pools", etc.).  He refers to a book called Misunderstanding Financial Crises (Gary Gorton).  Gorton says we only have appearance of reform under Dodd-Frank...


Economist Gene Epstein, who despite an economist I usually agree with (!) writes a cheerful article on the Fiscal Curb: "Cheer Up!  The Cliff Doesn't Look So Grim".  He bases his case on historical data when there were Keynesian contractions, and says that we did not do so badly...

Well we will see.  My view is that there is NO EASY WAY OUT, that we are going to suffer...


DC pro Jim McTague believes that the Fiscal Curb debate will get resolved one-way-or-another relatively soon.  Maybe a can kick or two, but he thinks that both sides need to show that they can govern.

And the longer the Fiscal Curb debate goes on, the less likely President Obama can get to the rest of his agenda, hmm...   :)


Leslie P. Norton writes a bullish piece on Motorola Solutions (MSI), the part that Google did not buy.  She asserts that municipalities are very likely to pony up the money to buy better communications equipment in coming years (Hurricanes Katrina and Sandy anyone?).

Well, OK, that's probably true.  But, MSI has TRIPLED off its 2009 lows...


Reshma Kapadia (until recently the writer of the "Emerging Markets" column) writes that Itau Unibanco of Brazil (ITUB) looks good for a turnaround after two hard years for Brazilian banks.  ITUB is Brazil's biggest private bank,a nd is likely to perform well now she says, especially since Brazil is no longer cutting rates.

[Ed. Note, I know a guy who works for a "major US capital goods manufacturer" who sells equipment to South America including Brazil.  I was asking him the other day about whether or not lefty-sounding new President Dilma Roussef was going to wreck Brazil.  He told me quite to the contrary, that she is cleaning house of corruption, and that capital good imports were likely to increase after his disappointing year in 2012]


Tiernan Ray ("Technology Week") writes that "no matter how you look at it, Apple's shares are cheap".  He notes that Apple (AAPL) has always come through hard times to dazzle customers with their user-friendly and innovative iGizmos.  He notes tha AAPL is selling at just 7.5 or so P/E.  And that the future still looks very good, IF they can maintain their higher prices vs. competitors (offering less desirable products).


Leslie P. Norton has an interview with Ian Bremmer (Eurasia Group, a political-risk consultancy) and author of Every Nation for Itself: Winners and Losers in a G-Zero World.  Bremmer's term "G-Zero" means a world without a dominant superpower to play World Policeman, or Lender of Last Resort.  The USA would pull back from sea-lane guard duty, etc.  This is quite different than the "Flat World" that many thought we would get (sort of a more homogenous world, kind of bland and American-like with fewer troubles).

In a G-Zero world, foreign governments matter more.  Multinational companies will have to dedicate more attention to issues like the current spat between China and Japan over those islands...  Nor do the American people want to deal with problems like Syria anymore.  Bremmer thinks that a lot of worrisome issues will likely not matter much into 2013 and beyond.  The US will not strike Iran, Israel will find that we care less about them, Europe will likely not implode, China is still run by a small (actually smaller now) group at the top.  He expects relatively few surprises, except maybe in Japan as their new government is rightist.

What companies will benefit?  Companies with strong brands and diversification (Cocoa-Cola (C) and General Electric (GE)).  Who might have problems?  Companies that let their technology go to China (Siemens) or are "one-trick ponies" (AAPL)...


Jack Hough again sticks to the pattern I have seen, picking four bullish stocks.  He discusses  a "Reverse January Effect", in which stocks that have had a good run, but lately gotten hit, might be good picks in the year to come.  His list includes stocks with recent losses of between 17% and 28%.  The P/Es are relatively low, and he makes a good case that they are quality companies.

Apple (AAPL)
Cirrus Logic (CRUS)  <--- makes audio chips for Apple
Nat'l-Oilwell Varco (NOV)  <--- world leader in various oil drilling eqmt
Ross Stores (ROST)

Do your own diligence, but NOV is a quality company, and has been since I worked in the oilfields (1979 - 1981).


"CEO Spotlight" this weekend is by Dyan Machan, who writes about Macy's (M) CEO Terry Lundgren.

Lundgren saw the light after too much partying in college, and then went to work.  He WORKED and he found mentors (which would make a good subject to study, mentoring potential high-level performers).  He has been at Macy's about 10 years and turned the company around.  The stock has doubled since late 2009.


"Other Voices" this week is by Mike Astrachan (4L Macro Opportunities of Tel Aviv, Israel).  He is very bearish on Europe, believes that Germany will leave the Eurozone and that hyperinflation is a real risk after all the defaults to come there in Europe...


Editor Thomas Donlan writes two pieces this weekend.  The longer one discusses the failures of the Fed from 2008 - 2011, and how that in 2012 they have cemented into place what appear to be failed policies of Quantitative Easing...  He believes that the Fed's "Dual Mandate" (set for it by Humphrey-Hawkins in 1977) should be dropped, and the Fed should only concentrate on a stable price level as its goal.

I would agree.

His shorter piece makes the case for ending the ability of the minority party in the Senate to filibuster.  He quotes Vice President Richard Nixon (acting as president of the Senate) in January, 1957 as wanting to end the ability to filibuster if the minority party can round up 40 votes...

I don't know about this one, have not given this any thought until now. One part of me LIKES Donlan's idea that the people elected the Senators, so the majority should be free to act.  The other part of me LIKES the idea of a Senate that can only move slowly...


In the Market Week section, we are reminded that stocks lost about 1.9%, perhaps on doubts that D.C can cut a deal on the Fiscal Curb...

Assif Shameen ("Asian Trader") is pretty well convinced that Japan is serious about weakening the Yen to jump-start it export sector.  Who gains?  Japanese auto makers Toyota, Nissan and Honda.  Who loses?  Korean exporters, especially if Korea does not weaken ITS currency...  Shameen then goes on to write that two analysts like Asia, especially China and northeast Asia (Japan, Korea, Taiwan and Hong Kong).

Ben Levisohn ("Emerging Markets") writes a bullish piece on the whole world!  I exaggerate a little, but he rounds up two experts as well that say that Asia (especially China) seems past its down-in-the-dumps, and looks to well.  I hope so!  If China does well, it will import more primary commodities from Peru...

Jonathan Buck ("European Trader") writes that various analysts are bullish on Europe, even on companies in weaker Spain (Repsol) and Italy (Pirelli).  Buck believes that most of the political risk in Europe is in the past (well, uh...).  He is careful not to be specific by using strong language, he writes "can" and "could" a lot...  We will see, I'll look elsewhere.

Bradley Davis writes this edition's "Current Yield".  He believes the long love affair of investors buying Treasuries will continue...  Until inflation comes anyway...

Mary de Wet ("Commodities Corner") writes that SUPPLY of commodities may be important to watch.  She brings in THREE experts (so take that Messrs. Shameenm Levisohn and Buck!) who believe that many commodities will have increased supply and likely lower prices.  Possible exceptions?  Corn and wheat, depending on the weather in the USA, as well as GOLD, production is increasing a scanty 2% per year, well under monetary growth...

Three insiders unloaded just over $70 million in Fidelity National Info Services (FIS, I leave it to the reader to look into who they are), while other insiders dumped $49 million in Visa (V -- despite the rosy prospects cited in the Cover Story...), $41 million in Exacttarget, Inc. (ET, who?) and almost $32 million SI Green Realty Corp (SLG, again, who?).

NOTHING in the classifieds drew my attention...

Despite the Peruvian Central Bank's apparent intervention a little over a week ago to weaken the Mighty Peruvian Sol (one of my readers sent me a Bloomberg news item about that), the sol yet again climbed to yet another all-time high vs. the US dollar, climbing some 0.7% last week.  While that mightily benefits Ameru (why, almost making our lil ol bearing company "mighty"), it HURTS Peruvian exporters.  The Peruvian Sol has risen some 34% vs. the dollar in the past three or so years.  34%!  Who would have predicted that?


Verdict:  If you feel like I do about the importance of CASH, that alone is worth the five bucks (plus sales tax) to buy this issue.

Saturday, December 29, 2012

Antifragile -- A New Book By N. N. Taleb

I have just started the new book by Nassim Nicholas Taleb: Antifragile.  Taleb is the author of the enormously influential book The Black Swan, the ideas from his book in 2007 changed many investment ideas radically on Wall Street.  I enjoyed The Black Swan, and can confidently recommend it to all readers who have an interest in money or in unusual events and even probability...

Taleb is an example of a polymath, someone who is competent to write on a broad range of subjects.  We are very fortunate to have him writing books for us...

This book, like the last one, is written for an "educated but not technical" audience.  Almost anyone can read this and gain great understanding albeit with some perseverance.  I anticipate writing a series of articles here on various of his ideas, I am not sure if I will put up a "Book Review".  My aim here is explore various of his ideas that I find interesting as I plow my way through his book.

I also hope that many of you readers will offer up comments, especially those of you who read the book, and I anticipate that various of you will!


Today, I would like to examine his concept of "antifragile".  Taleb wrote that he had to coin this term as there is no word for it in English (nor in many other languages, he checked).  The term "fragile" he uses just as most of us would, anything that fragile can be broken easily.  Fragile things do NOT like errors, uncertainties, rough handling, changes...  Taleb explores what other people have thought would be the OPPOSITE of fragile, these others (I imagine some would have been friends or other contacts of his while he was working on the ideas he would be writing about) used terms like the below as the opposite of "fragile":


and other synonyms.  But, Taleb writes that the above words and similar are NOT the opposite of fragile.  Robust, strong and resilient things (systems, people, etc.) do not break when handled roughly.  But, fragile things BREAK or get weaker.  Taleb is interested in things that get STRONGER under certain kinds of stress, so he coined the term "Antifragile" as the logical opposite of fragile.

He goes on to paint a picture along a spectrum of fragility-to-resilience-to-antifragile, that LOTS of things fall somewhere along this general line (idea):

----  Fragile  ------------  Resilient  ------------  Antifragile ----

Antifragile things get stronger as they get banged around (within limits).  A quick example would be the human body's response to mild arsenic poisoning.  In earlier times (in Europe) killing people by poisoning them with arsenic was fairly common.  Poisoners soon learned, however, that they themselves could take small doses of arsenic, and build up something of an immunity to it.  This would allow them to drink from the same poisoned chalice, just as much arsenic in the wine, as the victim, the victim would die, but the poisoner would not.  In many respects the human body is antifragile, it responds well to many kinds of stress (exercise and fasting are but two well known examples.


Taleb likes to take his time to make his points, and does not hesitate to explain things in detail and by illustrations and examples.  Here are some examples (pp 23 - 27):

Plato, Aritotle
Early Stoics, Popper
Roman Stoics, Nietsche
Oral Tradition
Venture Capital
Public Debt
Prvt Debt, no bailout
Small, specialized
Small, unspecialized
Soccer Mom
Street Life
Street Fights & Parental Library

OK, he uses terms that may not be clear without his explanantions ("Soccer Mom" education is where the parents tightly control their kids risk exposure, etc.), but you can get a feel for his ideas.  Re his ideas on Finance (purple colored one in the table), he is illustrating his concept that in Silicon Valley (Venture Capital) it is OK to fail!  It happens all the time out there, people LEARN from their mistakes...


Taleb tells of his own experiences in his own program to make himself more antifragile.  Eliminate sugar!  He likes hard workouts (the MAXIMUM weight he can bench-press, one lift, for example), say, a couple of times a week rather than the treadmill or the jogging track 5 times a week...  He is comfortable eating vegetables one day, and a big steak the next.  Medicine is learning some of this, ELIMINATING things (anti-depressants and other pills typically help MORE than adding a new pill to the regimin).

He is "eating his own dogfood" (Larry Ellison), he has "skin in the game."


As I have only started the book, I only scratched the surface with my comments above.  His book is laden with many ideas, I hope to journey with many of you to explore what is likely to be great new virgin territory in understanding much around us.  I hope you will join me (and BUY his book!).

Sunday, December 23, 2012

Review of Barron's -- Dated 24 December 2012

I wish a Merry Christmas to all of you who found their way here, I hope that you feel as blessed as we do.  And thanks for dropping by!

This issue is relatively short, as will be my review, as we are busy making holiday preparations here as well.


Many times Barron's has Cover Stories with seductive titles...  This weekend's edition has the Cover Story "Europe: Time To Buy".  Which is an invitation to buy the the issue if I have ever seen one.  There is a picture of a demonstration, lots of signs & flags, and people chanting, singing or yelling...  I cannot ID the city, as I cannot read anything, the photo is not clear enough for me to even know what language...

Author Jonathan Buck advises us that "Europe is on Sale".  Buck:

"So, is now a good time to buy European stocks?  You bet."

Well, maybe.  He indicates that the Stoxx Europe 600 index has risen 15% this year (vs. roughly 12% - 13% for the US S&P 500, although the Stoxx 600 trails on a three year basis).  Also that the Stoxx 600 has a (2013 estimated) PE of about 11.5 (vs. S&P 500's 12.5), and that the yield on the average yield on the Stoxx 600 is 3.8% vs. S&P 500's 2.2%.  So, on those three measures, yes, Europe looks attractive...  Also, he says that European companies are awash in cash.  OK, FOUR winning items.

But (you knew this was coming), Europe is apparently in far worse trouble than the USA is, at least for now.  In my eyes (not in his though) Europe looks to be on a perilous down-slope, it does not look to ME to that the Euro-area crisis is anywhere CLOSE to being resolved.  Pessimists like me can be found everywhere.  When looking at a BAD place to invest, I like to follow the below follow the below maxim (which I did by investing in Peru in 1991, when it was in grave peril):

"Buy when the blood is running in the streets."

I am not sure, but it may have been one of the Rothschilds who said that.  If you look at the COVER itself of Barron's, you see people demonstrating, but you do not see BLOOD.  Yes, sure, there were people beaten up, gassed and in a few cases killed over the past few years in European street demonstrations...  But, IMO (not worth much), here's another saying, I refer to Europe's coming future:

"You ain't seen nothin' yet."

MY opinion is that it would be better to wait.  On the other hand, Jonathan Buck knows the continent much better than I do (although I would be curious to see how his recommendations have worked out in recent years).  For the many of you who find Mr. Buck more credible than me (smile,,,), here is a list he compiled with the help of various analysts and through his own work (I am changing or modifying his comments to reduce space):

many global brands
Rio Tinto
global miner, China play
strong drug pipeline
big digital advertiser
great luxury brands
Deutsche Post
its DHL unit is growing
positive restructuring?
focusing on profit…
oversold utility

Buck discusses the prospects of each one of the above, in many cases I cannot dispute the quality nature of some of the above companies (Volkswagen, Roche, EADS and LVMH), but I do not like EUROPE.  The yields are fairly attractive though.

Good article on a needed topic, but I am staying away.  If I had to buy, the four just above mentioned companies look good re diversification from Europe and of high quality.


Randall W. Forsythe "pinch-hits" this weekend for Alan Abelson.  Forsythe notes that Congress did notake the Mayan Apocalypse scenario very seriously either, failing to even pass anything re the Looming Fiscal Cliff.  The stock market is NOW a little nervous...

He paraphrases Greg Valliere (Potomac Research Group), paraphrasing perhaps because Mr. Valliere may have used colorful language, that Washington, DC has LONG KNOWN about both our spending problems as well as the nature of the Fiscal Cliff, he warned about this IN BARRON'S in October, 2011.  There are still some avenues open for sort-of resolving this in a not too apocalyptic way ("Plan C", letting the D-Team handle this, or even more can kicking).

Forsythe goes on to write that no one knows, not even the strategists!, what is likely to happen re the Cliff (and related matters like the Debt Ceiling, etc.) nor how it will affect stocks.


Kopin Tan ("Streetwise") discusses GOLD and gold mining stocks.  The stocks have lost (on average I presume) almost 20% since late 2011.  Gold itself has lost some 8% since early October (but has gained roughly 6% vs miners' losses of 20%) in 2012.  Gold, at roughly $1650 is some 12% off its peak (2011).  Gold has NOT done as well as many other commodities he points out.  He likes the miners better.  I'll take the gold itself, physical only!

Mr. Tan also quotes a BofA Merrill strategist who says that stocks are a better bet than bonds (but lots of people have been wrong about that for years now).  Still Treasuries yield VERY LOW amounts, and the economy may, MAY, be coming back, which would be good for stocks and bad for over-valued bonds.


Andrew Bary writes a timely short piece at "Review & Preview" that resolves a question I have had for sometime: How bad WAS Hurricane Sandy's destruction (economic)?  Bad, but not catastrophic, using his title.  AIG has the biggest loss (est. $2.0 billion), but the losses at each of the firms mentioned do not appear to endanger ANY of them.  Some analysts now like these guys.

"He Said":

"I will use all the powers of this office to help advance efforts to help advance efforts aimed at preventing more tragedies like this."

President Obama, announcing his intent to tighten gun laws.

[Ed. Note: I do not doubt his sincerity here...]


Tiernan Ray (writing in "Follow-Up") notes that database giant Oracle (ORCL) is up some 17% since the Barron's article on it on April 30.  Oracle is pushing further into the cloud, and may have more room to run.

Jack Willoughby writes (same article, different column) that Paccar (PCAR, the truck respected maker of Kenworth and Peterbilt brands) is also doing well, and may also have good growth prospects (new plant in Brazil and recovering global economies).


Jacqueline Doherty writes that regional banks PNC may deserve some love from Wall Street.  Well maybe so, but I do not buy ANY bank stocks, than you.


Bill Alpert writes a refreshing (because it's NOT bullish!) piece on Thor Industries (THO), maker of RVs (Airstream) and campers.  He wonders if the sales are really there...


Jack Hough again writes of bullish prospects on four companies (is this what his boss wants him to do each week?  Identify four bullish prospects?).  The below companies have surging free cash flows:

Expedia (EXPE)
Microsoft (MSFT)
Terex (TEX)

His logic is that these four have BETTER cash flow than their P/Es would hint at.  And that is bullish.  Hey, could be!


Tiernan Ray ("Technology Week") reviews his own comments on various technology companies in a nice and candid manner.  He was right about Apple (AAPL), at least for the year even with its recent drop.  He notes that missed Samsung Electronics (005930.Korea), the other one of the BIG dynamic duo of smartphones.  He seems to have been right about Microsoft (MSFT) and Intel (INTC) both having not-so-great prospects, and even more so with Hewlett-Packard (HPQ), but acknowledges hits and misses...  Well, yeah, me too.  I have some hits and many misses...


Lawrence C. Strauss interviews famous growlin' bear Jim Chanos (famed even more so for being down on China).

[I still give the award of "World's Most Growlingest Bear" to Jim Willie CB, the write of "the Hat Trick Letter"]

Chanos is still DOWN on China, and in particular dislikes Agricultural Bank of China (ACGBY).  He does not like Brazilian raw material producers (Vale (VALE) and Petrobras (PBR)) because of China and Brazilian government meddling...

He thinks that our newly found abundant reserves of natural gas is, on balance, a good things for us.  But, it is somewhat energy-price deflationary, especially for coal.  Chanos:

"For every job we add in natural gas, we are losing half a job in coal."


OK, any of you rich guys & gals reading this!  Richard C. Morais (PENTA's editor, the part of Barron's oriented to families with over $5 million in wealth) writes that the Washington, DC suburbs is now the richest zone in America, and that the DC area has new attractions for visitors.  The suburbs are rich because the government has gown so much...

He also mentions (for you REALLY RICH guys!) that fine Bordeaux and Burgundies again dominated recent wine auctions, and that it is the 2009 Chateau Petrus  that is the next great collectors item for vintage Bordeaux collectors (uhh, that wine is priced int he THOUSANDS of dollars per bottle...).


Editor Thomas Donlan writes of natural gas, a subject I have grown to like very much (recall my recent article on Peru using NatGas and LPG was fuel for much of their fleet):

He notes that our NatGas prices run some $3.75 per thousand cubic feet vs. prices of $13 to $16 in other developed markets (which I presume to mean places like Europe and Japan).  But, our own government has thrown up some barriers to exporting NatGas (most economically by liquifyingt it like Cheniere Energy (LNG) does.  We can export to some countries, but to others!

Donlan notes that a study by NERA Economic Consulting finds that although domestic prices of NatGas would go up if the producers were free to export it, that the NET result would be a benefit if we exported NatGas on a large scale.  The other side (some Democrats (Ed Markey) and the environmentalists) worry about certain groups prospering (Markey) and the increased environmental risks.

Donlan believes we can take care of the environmental issues, but that the government should let the free market decide where the gas goes, to US consumers and new factories OR to bring in capital for our exports...  The government usually chooses WRONGLY, favoring one group or the other.  Why not let the free markets decide?


In the Market Week section, Vito J. Racanelli notes that "The Trader", a column he often (but not always) writes that "The Trader" stock picks underperformed the market (their recommendations were up an average of 4% this year vs. about 14% for the S&P 500)...

Kopin Tan ("Asian Trader") notes that Asian stocks had, on the whole, a very good year, most countries averages were up in the 20%-s range, domestic China was the only real laggard at about 0%.

Ben Levisohn ("Emerging Markets") chronicles hits & misses of the column since they started publishing it, but Levisohn is the new author, so he really cannot claim much credit or receive much blame (Brazil did very poorly) as he was not around making most of the picks...

Jonathan Buck ("European Trader" and author of this weekend's Cover Story) reviews what happened in Europe (Stoxx 600 up 14%) as well as some of the columns stock picks.  Winners and losers.  He does not net it out for us.

Michael Aneiro ("Current Yield") again notes the tax uncertainty of muni bonds...  Contributing to recent selling of muni bonds is the whole likely rise in Capital Gains Tax that seems to be coming...

Paul Rekoff ("Commodities Corner") reviews how various commodities performed in 2012.  Short version: grains were UP, crude oil and softs (sugar, coffee) were DOWN and copper and gold did not have much movement.  Rekoff quotes someone infamous re gold:

"Finishing the year with 0% - 4% gains is not what many had in mind when 2012 began," writes Jon Nadler, an analyst with Kitco Metals.

A number I have looked at, but not commented on for quite some time is the "Total" from their "Federal Reserve Data Bank", which when I looked at it before each week was nearing the $3 trillion mark, until beginning to back off (go down).  This week, however, I note that the Fed added a Total of $41 billion, bringing the Total to $2,960 billion, a mere $40 billion to cross that threshold.  You can bet Zero Hedge will note THAT when it happens, as now seems likely.

One of my favorite readers is an alert guy (that's YOU, Nobody, LOL!) who often sends along a comment or two by email.  Last week he sent me a link that the Peru's central bank was going to intervene to stop the rise of the Mighty Peruvian Sol, probably because exporters are being hurt.  This has not showed up in Barron's foreign exchange numbers (they show the Sol unchanged vs. last week), so I will wait to see how the Sol moves in response.

Friday, December 21, 2012

Port Stories...

I just read a story at Jim Sinclair's site ( that the International Longshoreman's Association ("ILA", the union that represents the East & Gulf Coast dockworkers) may go on strike on or about December 29.  Strikes by the dockworkers are serious business, as they affect all kinds of businesses and people up and down the economic food-chain.  Here is the link to the possible strike by the ILA:

Reading this story brought back a whole lot of memories of when I had various opportunities to visit US cargo ports...


My first port visit was in 1980/1981 when I was living in Houston (I was about 25).  One weekend, my good friend "Robertus Magnus" and I were bored, so we went out driving.  As we went around the "Loop" of Houston, we saw the Exit Sign for the Port of Houston.  "Wanna check it out?"  "Yeah, sure!"

In those days it was pretty easy to get into a port, remember no 9/11s had happened, etc.  I just told the Gate Guard that we just wanted to look around, that we would not damage or steal anything, etc.  He waved us in, and I found a place to park my truck.

We got out and walked a couple of hundred yards or so across the quay to a cargo ship.  As we got closer we saw it said "Algeria".  Cool, we thought.  There was a tall structure on the dock next to the ship with a chute running down into one of the ship's holds.  There was also a gangplank to board the ship, and since no one was around, we did.  Once aboard, we saw a guy standing leaning up against that same hold.

We walked over to chat.  He was just standing there, monitoring the loading of grain into the hold.  The ship was a "bulk carrier" type, the kind of ship with 5 - 8 BIG holds with BIG hatch covers, perhaps 50 ft x 50 ft by maybe 40 feet deep.  Here's a picture of a bulk carrier (from wikipedia,

File:Sabrina I cropped.jpg

Our conversation went more-or-less like this (when I write "Me" it was either me or my friend talking):

Me:  Hey, howzit going?
Him:  Good!
Me:  You work on the ship or for the port?
Him:  The port.
Me:  Ah, OK.  So, um, what are you loading for Algeria?
Him:  Corn.
Me:  And, um, how much money do you make to do this?
Him:  $25 / hour   [1980 or so remember, now it's over $50 / hour]
Me:  Wow, that's pretty good!  How do I get a job like this?
Him:  It's very hard, you have to be in the Union.
Me:  Oh, and how do you get in to the Union?
Him:  Can't, unless your dad is in it.
Me:  Oh.


Me:  And, um, what exactly are you doing for your $25 / hour now?
Him:  Watching them load the ship...
Me:  Uh, uh, they PAY you $25 just to stand here?
Him:  I watch so they don't load it too much on one side, or the ship might roll over.
Me:  Oh, yeah, that WOULD be a problem...
All of us:  *Laughs*


Me:  Do you ever, have to work HARD, like carrying stuff out of the ship?
Me:  You know, like in the movies, you know, carrying sacks & stuff up by hand?
Him:  Sometimes, rarely though.
Me:  Oh.

My friend and I shared some laughs about THAT on the way home...


My second visit was with my great friend Ed in about 1988 to the venerable Port of Newark (New Jersey), I was living outside of DC then and had JUST started my lil ol import company to bring in "green coffee" (unroasted coffee beans, green in color, they stay good for maybe a year that way).  I wanted to do a "test shipment" of 10 bags to see how it went before ponying up some $50,000 (for a full 20' containerload, the usual way green coffee is shipped).  Here's a picture of two container ships (, our bearings from Korea, Japan and China come in 20' containers straight to Peru):


So, Ed flew up from Houston to "help" me drive a rented 5-ton truck that I was to drive from DC to Newark.  He was kind enough to ask me: "Should I bring my gun?", well, I said no because handguns were likely illegal in New Jersey (unless of course you were Mafia...).

We left at 1:00 AM and drove through the night, arriving to the Port Gate at +/- 5:00 AM.  I presented my papers, and the guy told us to drive over to where the other trucks were waiting in line to get in to pick their cargoes.  While waiting line there, we did have the chance to interact with some of the locals:

"How bout dem Yankees?"  Etc.  We felt like we were on another planet...  Ports (at least then) were NOT women-friendly either.

After they let us in we went to a building to start the HUGE amount of paperwork necessary to get an import shipment (a "Formal Entry" as this was not some package by mail) cleared by US Customs.  We had been drinking coffee all night and into the morning.  Well, one of the side effects of coffee is that you must use the restroom a lot...  I enquired where the Men's was, and duly went.  Now, when I am seated in some stall in a bathroom with graffiti (and assuming I am not rushed or anything), I read it, graffiti is sometimes very funny (even in Miami).  I noticed that a Teamster (the truck driver's union) had kindly written what "ILA" REALLY meant...  So afterwards, I suggested to Ed that he visit the same stall and check it out for himself.  ILA means:

I'm a

Laughs (the Teamsters do not make NEARLY the money that dockworkers do, not even close, and they resented that)...  As the day went on, however, there was much less hilarity, as they kept sending us (driving a big truck remember) all over beautiful Newark to do paperwork shit.  But, we were able to get it all done by afternoon.  The last formal step was presenting our papers at "the window" there at warehouse port-side.  Just like in the movies!  The opaque glass window slid open, I handed the guy my papers and told him I was there to pick up my coffee...  The window slid closed.  90 seconds later, it slid back open, he growled at me, "Door 37".  We walked down the warehouse to Door 37 and found a dockworker waiting for us, I went and moved the truck there.  He was big...  He picked up those 155 lb bags and slung them aboard the truck as if you or I were throwing a 10 lb bag of potatoes...

Thus ended our day in Newark, and I drove back to DC and had my coffee stored nearby.


As my import business continued, I would visit the Port of Baltimore each time I had a containerload of coffee arrive.  Once it cleared Customs, I would go there and ask a dockworker to open up the container so I could pull a couple of lbs from several sacks to send out as samples to my prospective customers.  This got to be routine, so nothing of great interest here.

The FINAL visit I ever made to a port was with my wife!  She wanted to ship her old Honda down to Peru for her sister, what a gift.  We were told to take off the catalytic converter (no unleaded gasoline in Peru at that time) and make another modification or two.  The car would ride down in its own 20' container.  "Ahh, thought I!  Maybe I can put a few boxes of bearings in the trunk and maybe some engine parts in the back seat or elsewhere inside the container!  Save a little bit of money...!"  No, "against the rules"...  All these rules...


Nowadays, it is almost impossible to get into a port because of the MUCH higher security levels post 9/11.

Perhaps a song or three might get you into the spirit of things (first one shows Jimmy Buffett in Key West in 1973, THAT seems like ages ago!)?


An old Irish sailing song...


Roger Whittaker's classic song:

Wednesday, December 19, 2012

Korean Haiku?

Honoring our top two suppliers:

"Ameru Bearings from Korea" -- A haiku by Robert A. Mix

K-B-C, Iljin
In Peru, Korea rules.
Numbers One and Two!

At least for us, and NO, I have not been drinking...   :-)

Saturday, December 15, 2012

Review of Barron's -- Dated 17 December 2012

I am happy that my first weekend back from Peru is tranquil enough to write up a review of this weekend's issue.  The Cover Story ("Outlook 2013") is titled appropriately enough, but I wonder how much these "Wall Street's Top Strategists" will actually perform re grading their predictions.  I have noticed before that "Investment Pros" at Barron's often underperform the market.  I will try to check up on these predictions as 2013 goes on.

Vito J. Racanelli writes the article and begins by noting that the S&P 500 Index is up some 12.9% this year (so far).  For easy reference he provides a table showing the S&P 500 annual movements from 2009 - 2012, he also breaks it down by sector of the S&P.  Here are the price returns for these recent years:

2009    +23.5%
2010    +12.8%
2011    +  0.0%
2012    +12.9%

The S&P 500 beat the Dow (+ 7.8%) and gold (+8.5%) so far in 2012.

So that 2012 is almost an "exact average" (my words) of the previous three years.  Racanelli writes that the Top Strategists are MORE bullish this year than last year, he suggests that it is because we have had a pretty good year so far, whereas 2011 was not.  Hmm.  Confirmation/Normalcy Bias?  The S&P 500 is now about 1419, a 10% move up would take it to 1561, which would be VERY CLOSE to its all time high of 1565 in October of 2007.  I was curious enough to want to do a little math on the 10 predictions (remember, "Top Strategists", but I do concede that they know far more than I do, and they are sticking their necks out with specific predictions, FWTW):

Average of the 10 predictions: 10.1%
Standard Deviation: 4.6% (72 pts on the S&P 500)
Highest prediction and analyst: 17.0% / Stephen Auth (Federated Investors)
Lowest prediction and analyst:   0.1% / Adam Parker (Morgan Stanley)

Favorite sectors: Industrials, Technology
Disliked sectors: Telecom, Utilities

Average guess of yield on the 10-Year Bond: 2.13% (now at 1.70%)

Various of the Strategists commented that we need to "solve" the Fiscal Cliff" business, or the market will not go up as they currently think...  They also say it will not be a straight line to 1562 +/- 72 pts...

[Ed. Note:  Duh, re last two comments!]

Racanelli goes on to report, that as a group, they LIKE stocks with more foreign exposure, he lists 10 companies, five BIG ones with good foreign exposure and five with the MOST foreign exposure:

General Electric
Int'l Business Machines
Molson Coors
Diamond Offshore Drlg.
Texas Instruments

I did not know that BRCM, TAP and QCOM has such high levels of foreign exposure, I might have guessed 90% re QCOM, but the other four surprised me...

Finally, Racanelli provides an interesting graphic that shows that a mere 10 companies accounted for the incremental (marginal) profit growth last year, just FOUR contributed about 58% of the increase in marginal profits (AAPL, BAC, AIG and GS)...  What does that mean to any stock investors?  "Danger, Will Robinson!"

They also note that China imploding or the Middle East exploding might mean they miss their targets...


Alan Abelson writes in his column this week that the Fed has essentially promised not to raise rates until the unemployment rate falls to 6.5% (which might take a while).  He notes lack of progress re the Fiscal Cliff (at least I did not miss anything about this in Peru...) and mentions that many are "fed up with the Fed".  He thinks that we may very well go over the Fiscal Cliff, which the "smart money" says we will avoid.

He then goes on to mention that Bank of America Merrill Lynch sees lower tax receipts than Obama is banking on, even though taxes on the rich (still an income over $250,000 I believe) are being so strongly pushed by the D-Team that that is likely to happen.  Merrill Lynch (or Abelson anyway) offered nothing re spending cuts (which, of course, is the real root of our financial woes).

[Ed. Note: As a conservative/libertarian, I would like to see the R-Team fight like dogs to cut spending, ONLY offering tax hikes for at least 3 - 5 times the spending cuts, but that will not happen, sigh...]

Abelson finishes by noting that Bank of America president Moynihan in a recent speech noted that the traditional assumption that all Americans ought to be homeowners might be wrong...


"Streetwise" author Kopin Tan wrote that the upcoming year is EVEN MORE uncertain than normal, with all kinds of conflicting economic signals...  I did not get what we used to call "actionable intelligence" from the column this week...


William Waitzman (at "Review & Preview") writes that Lending Club, "an online peer-lending network based in San Francisco" pays a yield of 9 - 10%.  Wow!  Uhm, but there was no ticker provided, this is probably one of those investments where you have to be an "Accredited Investor" (have over $500,000 to invest).

"He Said":

"Any protracted fall over the fiscal cliff would have grave economic consequences that I think most observers underestimate."

Former Treasury Secretary Lawrence Summers


Andrew Bary writes a bullish piece on Johnson & Johnson (JNJ).  ACtually the stock has not done all that badly, it has reached its 2008 highs.  But Bary notes that even Warren Buffett is fed up (he sold his stake) with the slow turnaround, Bary notes that JNJ may very well grow faster vs. peers like the major pharmas...


Kopin Tan more then redeems himself (re the boring "Streetwise" article) by writing about undervalued KOREA!  In his piece "Asia's Cheapest Market" he outlines various pluses and minuses re why Korea has underperformed vs. the rest of Asia.  Demographics (an aging society) and the murky ownerships of the Chaebols (Korean conglomerates) has kept investors away...  He thinks many analysts are cautious because of worries about the world economy.  He suggests that ETFs on Korea may be a good bet, and maybe buying certain companies like Samsung Electronics (005930.Korea, Korea's largest company I would add) and some others.

Nice piece Mr. Tan!

If I had the chance, I would buy into Iljin, Korea's manufacturer of wheel bearings, owned by ONE MAN.  Iljin is a high quality manufacturer of wheel bearings, they claim they are the LARGEST wheel bearing manufacturer in the world.  I visited two of their factories there in May, and I was very impressed, I have never seen such high-tech efficient bearing manufacturing...  Iljin is our (Ameru Trading del Peru S.A.) second biggest selling brand down there.


David Englander writes a bullish piece on Tronox (TROX), the world's largest producer of titanium dioxide (used in most paints, as it is a very opaque substance).  Meryl Witmer, a frequent visitor to Barron's has written about the stock before, but, alas, the stock has done badly for various reasons (bad economy, lawsuits, etc.).  Englander writes that if the world economy picks up, so will Tronox.


Jack Hough seems to pick four stocks to be bullish about almost every time I see his column.  I will keep an eye on this pattern, he picks (as safe, undervalued stocks) Aflac (AFL), Lab. Corp. of America (LH), Nasdaq OMX Group (NDAQ) and Western Union (WU).

Is someone at Barron's keeping an eye on his picks?


Lawrence C. Strauss interviews well-known and long-time market pro Laszlo Birinyi.  I have noted Mr. Birinyi's name for a LONG TIME now, But I do not know his longer term track record.  He contends that we are in "Stage Four" (of four stages) of a bull market since 2009 (and of course the market HAS gone up a lot since then).  Even though we are in Stage Four, he thinks that the market has another year or two to run up some more.  He likes Walgreen (WAG), Sears Holdings (SHLD) and Apple (AAPL).

Birinyi thinks that all the attention focused on the economy and sectors is misguided (oversimplifying his remarks) and that looking at the market itself is what's important.  Birinyi:

"You have to focus in on what's going on in the market, whereas the strategists too often are telling you what should be going on."

Also Birinyi:

"A lot of analysis is really commentary.  What we try to do is understand what's going on in the market and not necessarily forecast the future."

This sounds like "old market wisdom" I have not seen for a long time: "reading the tape".


DC pro Jim McTague ("D. C. Current") notes that the Business Roundtable, normally a reliable R-Team supporter, went along with Obama's suggestion of lower business taxes for support of HIS ideas re taxes and spending.  OUCH!  McTague notes that businesses look out for themselves, even if that means leaving principals behind.  I guess this is yet more proof that we are all (or almost all) just a bunch of selfish beings...


Tiernan Ray ("Technology Week") writes that various segments of the tech sector could do well in 2013.  Maybe even most sectors (except hapless PC-makers), as more tech companies will likely start throwing more dividends, low valuations now and perhaps better business prospects.  He then goes on to write about a new technology that will likely change mobile computing for the better: "LTE" (long-term evolution -- a technology standard that I know ZERO about but want to learn more soon...).  LTE will help enable more computation to be done on smartphones and tablets, it should mean up to 10 times the speed of internet data flow for us poor schlubs...  It will take a few years, but AT&T and Verizon (and others around the world) are already starting to build out the technology...  Ericsson (ERIC) is specifically mentioned as is Alcatel-Lucent (ALU, but Alcatel is in BIG TROUBLE, no?) as well as the Nokia-Siemens joint venture.  No American companies are mentioned in the infrastructure side here, but Qualcomm (QCOM) would benefit from more hand-set sales...


"Economic Beat" economist Gene Epstein writes of Yet Another Peril in 2013, namely that the IRS may be forced to delay sending out tax-refund checks because of lack of clarity in what Congress and the President will re the Fiscal Cliff.

Good observation, Mr. Epstein!


Wow..., "Other Voices" (Barron's occasional columns written by non-Barron's people) by Robert M. Sussman is extremely bearish on stocks because Obama won...  Sussman writes of many of the issues discussed at Zero Hedge (big defiicits, our welfare state, the electorate voting Obama despite presiding over the worst economic recovery on record, etc.) is compelling.  He says the S&P 500 fair value, based on Southern European multiples (which he compares the USA with) to be around 800.  Beware!


Editor Thomas Donlan writes Yet Another Piece on the Fiscal Cliff and related issues.  It is his guess that there will NOT be a resolution by year-end, and even if there were, so the f**k what (my term not his).  Every year brings more retiring baby boomers and higher health-care costs.

"Crisis Without End" is his final heading.  Yes, I think he is right.  Big problems ahead, f**king right.  While Donlan is better informed than I am, I seem to almost always be on his wavelength...


The front page of the Market Week section (always a cartoon of crusty old Mr. Barron from long ago I presume), "Mr. Barron" is "quoted":

"All aboard for QE4?  If you miss it, there will be more."



Moving right along through the Market Week section I note that investors ignore QE4 as stocks slip ("The Trader").  The authors suggest that Apple buy back some stock (cheaper now!) and that Puerto Rican debt should be avoided (I am certainly OK with avoiding Puerto Rican debt).

"Asian Trader" author Assif Shameen writes about CNOOC's recent acquisition of Canadian oil company Nexen (offshore in various countries as well as oil sands in Canada) in a positive way.  CNOOC has long stated that they want to be run like a "Western" oil company, and so may allow Nexen's policies to have some clout as time goes on...

"Emerging Markets" writer Ben Levisohn writes about a possible Russian Rebound.  He says that Russia may surprise us in 2013: that their stocks are cheap (always have been though) and that Russia is "finally embarking on some much-needed reform" (really?).  Ahh, Levisohn himself notes that Russia is ranked 112th out of 185 countries (World Bank), that is ALL I need to know to stay away...  LOL they're going to reform...  Right.  /sarc  As they say in Polish (I do not know Russian, so Polish will have to do for now: Nie Dzienkuje!  (No thanks!)).

"European Trader" author Jonathan Buck writes that two big British banks (HSBC and Standard Chartered) have ponied up a combined $2.6 billion to settle money-laundering charges with US regulators.  And so might be a Buy.  Ahh, no thanks!

Michael Aneiro (who has the most secure job at Barron's if he keeps cranking out nice pieces on the VERY IMPORTANT fixed-income markets, "Current Yield") writes that if the Fed indeed keeps its promise NOT to raise interest rates until we hit 6.5% unemployment, then when we DO get near that unemployment rate..., well, don't be left holding THAT bag!  Quite right.


Rhiannon Hoyle ("Commodities Corner") writes that coal may be a good play (as well as its miners of course).  She quotes three analysts who like coal's prospects because of recent price increases of natural gas and the prospect of a good China recovery.  Hmm.  I think I would stick with natural gas...


Insiders sold (remember, I use both of the somewhat different data sources in Barron's re insider sales) a lot (over $30 million) of several companies: NCR Corp (NCR), Henry Schein (HSIC), UnitedHealth Group (UNH), Verisk Alaytics (VRSK -- a company that had a nice write-up in Barron's sometime back), Warnaco Group (WRC -- who?), LinkedIn (LNKD), Lowes (LOW), Splunk (SPLK) and Yum Brands (YUM). Wow!  That's a LOT of selling since I started looking at these numbers...

Do I even have to mention that he Mighty Peruvian Sol once again reached another record vs. the US dollar, up 0.4% last week.  Yes, my haircut did indeed cost me almost exactly $5.00 (as I forecasted, vs. $4.00 last time I was there...).  Well, I will not be heading for Peru for a while yet, so let 'er rip guys!  A rising Sol, is, after all, good for Ameru.

Verdict:  Yes, if you need details on any of the stories I reviewed above, buy this issue!