Sunday, January 13, 2013

Review of Barron's -- Dated 14 January 2013

But, before I review this weekend's edition, I will make a mention of last weekend's, which I was unable to do because I did not have time.  Actually, it is too bad that I did not, as the Cover Story last weekend was about INCOME, a topic that I have wanted to study some more.

Andrew Bary wrote the article, and pointed to the below asset classes that throw a (relatively) good yield:

-- Preferred shares (yields up to over 6% in apparently strong companies)
-- Junk bonds (yields as high as you want to go, uh, no thanks)
-- Convertible bonds (elsewhere I read that these may be good speculations/investments)
-- REITs (lower yields than I would have expected, only some 3.52% and lower)
-- Municipal bonds (yields keep going down, and RISKY IMO)
-- High-Dividend stocks (many over 3%, 3% is HIGH???)
-- Utilities (many over 4%)
-- MLPs (like the Alerian energy MLP (ticker: AMLP), some yielding over 6%)

My general view?  There are still no easy, low-risk ways to get any income that matches our inflation (call it 6% to be nice...).  Most of the above investments have been written about before many times, in Barron's and elsewhere.  Convertible bonds may be a niche worth taking a look at, though.  But, convertibles are beyond my paygrade...

Once again, I will try to revisit INCOME again soon.


In this weekend's Barron's, the Cover Story is about how some mutual fund managers have outperformed by "digging deep" and by "taking intelligent risks".  The Cover Story really, just leads you to the Quarterly Review of mutual funds...

I have been reading N. N. Taleb's new book Antifragile lately, and have become re-acquainted with his view that many of these managers are just lucky (the ones who performed well last year).

It is my opinion that most mutual funds will at best match the S&P 500 (or similar benchmark, depending on what the fund is investing in).  Very few beat the averages over time.  Do you want to buy stocks?  Then either pick 'em yourself or just go with a mutual fund that tracks the S&P (or a sector) or ETFs that do the same.

If there were ANY mutual fund managers out there who way overperformed it would be by luck (except perhaps a few exceptional cases).


Alan Abelson this week kicks off his column by noting that Maurice Greenberg (ex-honcho of AIG) is displaying "chutzpah", whose definition Abelson kindly shares with us (a Yiddish word for "brazen impudence or gall").  It seems that Greenberg feels that he and AIG shareholders got a BAD DEAL when they were bailed out...  Even AIG itself has not joined with Greenberg on this.  Neil Barofsky (a former inspector general in the financial industry writes Abelson) thinks this lawsuit is "a giant middle finger" pointed at us taxpayers.  Yes.  So, Hank Greenberg: STFU!

Abelson then goes on to write about how "fracking" and other technologies have helped raise domestic oil output from 5.0 million bbl / day to about 7.3 million now, and some 7.9 million expected next year.  This is a real benefit to the USA.  Unmentioned is the kicker of more natural gas.  This not getting as much attention as it should be he writes, and I agree.  (By the way, those faucets in Pennsylvania that "light up" were doing that 100 years ago, whoops...)

Abelson then writes two short sets of remarks about bullish sentiment (bullish sentiment over 51%, Investors Intelligence number), which often leads to declines, and discusses an analyst who sees GOLD going to $2400 by the end of 2013 because of all the Fed asset buying (QE, money-printing, whatever you want to call it/them)...


Kopin Tan ("Streetwise") writes a somewhat bullish column noting that stocks have done well lately (well, yes) and that may continue.

Unless interest rates go up, then maybe not.


Mr. Tan also writes up a "Follow-Up" on two stocks reviewed by Barron's earlier, tech powerhouses Apple (AAPL) and Google (GOOG).  He notes that AAPL is relatively unchanged (net) since the November 19, 2012 article) while Samsung is up some 17%.  He likes BOTH.


In "Review & Preview" William Waitzman writes a short piece on how small entrepreneurs may be put at a disadvantage vs. the Big Guys (like Google) based on a recent settlement Google had the the FTC re loosening patent protections.  Patent protection is a complicated subject, but the worry is that big companies could sue small entrepreneurs who have "similar" (my word) technology to a giant like Google just because they can.  [Ed. Note: N. N. Taleb says that what is keeping the USA ahead of the pack is that we have a risk-taking culture that encourages new technologies to emerge, this development may help put that at risk]

"He Said:"

"Economic activity should gradually recover...The risks surrounding the outlook for for the euro area remain on the downside."

Mario Draghi, ECB President


Christopher C. Williams writes up a bullish piece on Ensco (ESV), the world's second largest offshore driller.  OK, I could buy into that, as offshore oil production (at least long term) is likelt to be a larger part of the world's energy picture in the coming years.  Also, ESV has a younger fleet of rigs than big rival Transocean (RIG).


Jack Hough writes a piece about (wait for it...) four companies in the movie theater sector.  He is bullish on all four.

Hollywood is making more bets on safe movies (comic book characters, sequels and prequels, etc.) so that may make 2013 sales pretty good, which of course helps the cinemas.


Andrew Bary this week interviews Charles Lieberman. the founder of Advisors Capital Management.  In brief, Lieberman looks for a high yield (keep reading...) as well as growth prospects (and at the risk tolerance of each investor).  They manage money in separate accounts for each (so not a mutual fund), portfolio customization minimum investment would be $250,000.

Lieberman likes some energy MLPs, espcially Breitburn Energy (BBEP, who?) sporting a  NICE yield of some 9.6%, which he thinks is likely to be stable (as BBEP is hedged) and Energy Transfer Partners (ETP, 7.9% yield).

Lieberman picks stocks from the same general universe as Bary's article of last week (about income, right at the beginning of my review).  But, Lieberman's income picks average maybe 7%!

Ahh, I don't know...  So many people are looking for yield (which Lieberman acknowledges, he is look at LESS POPULAR investments in those sectors).  7% seems very high to me, and very risky.

Lieberman does point out that if rates go up (say the Fed funds rate to 4%, the 10-Year rate then would be some 5% - 6%), then many income investments would be hurt, Treasuries very badly.  So, many of his bond picks are shorter term corporate bonds.


Tiernan Ray ("Technology Week") writes of new TV technology coming down the pike.  One is the new (it will take some years for this to be rolled however) ultra-high-definition TVs, that are about "four times sharper" of current HD TVs.  This will take time as it will require a LOT of bandwidth infrastructure to be put down by the cable companies, etc.

Ray also writes about the continuing efforts to marry TVs and the Internet, this is going more slowly than Google and others had hoped.  Tiernan Ray puts this perfectly for me (me being a kind-of lo-tech guy):

"..., I thought, "This is very complicated," even for a tech reporter with years spent fiddling with gadgets."

Hey!  If this is complicated for HIM, then I am not interested.  We already have THREE controllers just to run our TV, Blu-Ray, etc...


Jim McTague ("D. C. Current") writes that Republicans would like nothing better than to strike at Obamacare in the upcoming Debt Ceiling talks.  But, crafty ol' Obama will not let that happen, even with flaws recognized even by Democrats.  Obama will wait until later to fix, maybe, any flaws in Obamacare.

McTague says the Republicans do not have a "strong hand to play" in their negotiations with Obama.  He may be right, he probably is.  The Republicans will make a deal to avoid "sequestration" (what would presumably happen with no Debt Ceiling Levitation).

A big question remains: Would Republicans go along with ANOTHER tax hike (which is what Obama and his Democrat buddies want)?


Dyan Machan writes this weekend's "CEO Spotlight", about Honeywell (HON) CEO David Cote.  NON is a a diversified manufacturer that was more heavily into Defense Department business than now.  Cote has pulled the company around since he took charge (2002), and the stock has more than doubled (both from 2002 as well as its 2009 lows).

Cote, a diehard Boston sports teams fan (hey, when I was a teenager I lived near there, so know they type) worked his way up through GE and TRW before landing as CEO at Honeywell.


Dimitra DeFotis ("Weekday Trader") writes a bullish piece on FMC Technology (FTI), a maker of undersea "Christmas Trees" the pipe & valve devices that control flow of oil and gas from offshore fields).  She does concede that there are competitors in this sector...

R. Mix General Comment:  I like can-do companies in sectors like offshore oil & gas, as these guys can do things that few others can.  They have a moat.  I am always interested in companies that have a moat...


Editor Thomas Donlan tackles two situations this weekend.  First AIG.  He (rightly) believes that AIG (and hangers-on) should just STFU (my acronym there, not his).  The "rescue" will probably lead into more BAD DEALS like this in the future when a TBTF is in trouble again...

Donlan takes more-or-less the opposite view (than William Waitzman's column mentioned above) re the Google - FTC settlement.  He thinks that Google harmed no CONSUMERS (maybe they harmed competitors because they WON, fair & square), and so should be left alone to pursue their business.  Google does not FORCE anyone to buy via their ads, to use Google as their search engine, etc.  Any consumer who is NOT happy with any of Google's products can look elsewhere easily for alternatives.


In the Market Section, Vito J. Racanelli starts off by noting that we are up some 3% in stocks so far in 2013 (after 14% or so last year), in fact the S&P 500 hitting a 5-Year high.

"Asian Trader" author Assif Shameen writes up Tahiland for us, their benchmark index was up (US$ terms) 42% last year.  He gets suggestions from three analysts that Thailand could have more gains, as they need to (and are) building out infrastructure as well as being next door to booming economies in Vietname, Laos, Cambodia and Burma (hey who knew?).

Ben Levisohn ("Emerging Markets") writes that emerging markets are vulnerable if our Fed raises rates (as low rates here have pushed investors to buy emerging market debt and stocks).  Hey, could be.  He thinks that Taiwan and South Korea would emerge OK though, as those countries also have solid companies as well as good domestic markets for their own goods).

Jonathan Buck ("European Trader") writes a bullish case for UK retailer Marks & Spencer (which has an American ADR: MAKSY).  Marks & Spencer has a lot of shares short and may come around vs. competitors like Next in the UK.

Michael Aneiro ("Current Yield") writes of the continuing bull market we have seen for years now in junk bonds.  Junk bonds yield an average of only some 6.1% and returned a total of 15.6% (beating the S&P 500) last year.  Aneiro:  "We're surely testing the limits of our understanding of the junk bond market."  Yes, I would agree.  No junk for me.  Aneiro notes the 10-Year bond yields about 1.87% now.

David Winning writes this edition's "Commodities Corner", and he looks at "Dr. Copper" (the term refers to copper being a single decent measure of how the world economy is doing).  Apparently there are now warehouses in China stuffed full of copper, so this could mean lower prices...

Insiders sold some large amounts of some stocks, including Marc Benioff (whom Jim Cramer publicly praised on CNBC recently) selling some $68 million in stock.  An insider at Oracle sold some $49 million, three insiders at Bed Bath and Beyond sold some $41 million and an insider at Marriot Vacations (VAC) sold some $38 million.  NOTE!  I believe the trend I have seen is increasing insider sales since I started tracking them (largest sales only), but I have not kept any kind of systematic records.

(I am keeping an eye on the Federal Reserve Data Bank's "Total" (which I used to do) because it is again approaching $3 trillion, just $34 billion form that landmark)

The Mighty Peruvian Sol has moved very little in the past couple of weeks, despite apparently active measures taken by Peru's central bank to restrain it rise vs. the dollar.  It has been range-bound (no changes of 1%) for the past three weeks.

Verdict: There are a lot of investment ideas explored this week, if you are interested, buy it!

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