Sunday, April 21, 2013

Review of Barron's -- Dated 22 April 2013

Barron's, for the second time in the past several months, has a bullish Cover Story that is almost begging to be shown as a huge contrary indicator...  Photo from Zero Hedge ( just this afternoon:

For the Dow to make it to 16,000 that would mean a jump of about 10% from here, it could happen.  The previous (in)famous bullish cover was published in October 2012, and stocks are up some 10%.  So, the Big Money Poll was actually correct at least in the six months from October until now.

I pay attention to their Big Money Poll ever since I read in September 2007 they predicted (BEFORE the primaries and caucuses) that Barack Obama would be the next president, at the time it seemed that Hillary Clinton had the lock for the Democrat nomination.

Author Jack Willoughby writes up the results of Barron's "Big Money Poll", their every six months tabulations of predictions of professional money managers (135 of them this time).  He notes that only ONE THIRD of these money managers have the Dow at at over 16,000 by mid-2014, so, uh, the title is just a wee bit deceptive...

Willoughby notes that 73% of these money managers are Bullish now, very high (previous percentages cited by Willoughby range from 45% - 55%), and that 73% might be the contrary indicator (1% are "Very Bullish").  Only 19% are Neutral and just 7% Bearish (27% were Bearish in October 2012).

Barron's asked the money managers to put the stock rally (since March 2009) into baseball terms, 61% of them put the rally in the fifth through seventh innings...

They are an astonishing 94% optimistic on stocks for the next five years!

Here are the most loved and the most hated stocks, I put the names in blue that are hated AND loved:

Favorite Stocks:

Apple, Ford, Intel, Gilead Sciences, eBay, Google, National Oilwell Varco, Uni-Pixel

Most Overvalued:, Facebook, Apple,, Netflix, Best Buy, Google, Groupon, J C Penney, Progressive

I can note that some of the unpopular stocks have all gotten very bad press from CNBC, etc.

Which will be the best performing asset class in the next six to 12 months?:

Equities                      70%
Real Estate                 16%
Gold                           11%

(Gold was at $1550 or so when the poll was conducted)

Many of the money managers see a drop in the Dow to 13,500 or so, some 7%.


Am I going to have to stop calling "Up & Down Wall Street" Alan Abelson's column, and now call it Randall W. Forsyth's?  Forsyth once again writes this one up, titled "A Deflationary Wave".

"Keep calm and carry on" he writes, this phrase invoked as a kind of magic charm that some are pushing re last week's declines in stocks (and gold).  Forsyth goes into more detail than is normal for Barron's in discussing gold.  While gold is down sharply, he notes that so is Apple (ticker: AAPL), gold is down 15% over the past 12 months, Apple is down 42%...

The other commodities are down too.  Hence the title about deflation.  He notes that Treasuries, and especially "TIPS" (the Treasuries that are "inflation protected") are throwing off signs of deflation as well.  The Fed notes this, and there is backpedaling on talk about ending QE...  QE does not seem to be working...

Finally, Forsyth passes along the views of Paul Desmond (Lowry Research) who is bullish.  Desmond is bullish indicator No. 2 this week.


"Streetwise" author Kopin Tan pitches a mixed picture re stocks and certain sectors.  I have noted before than Mr. Tan is sometimes not easy for me to summarize, but it looks like he is passing along a view here that maybe the correction is over, or nearly so, and that cyclicals are worth looking at.  He quotes ever-popular Stephanie Pomboy as saying the Fed is nowhere near done buying up US debt either (which parallels this afternoon's Zero Hedge story:


"He Said":

"Our fidelity to our way of life, for a free and open society, will only grow stronger...inthe face of evil, Americans will lift up what is good."

President Obama after the Boston bombings


Kopin Tan writes a piece in "Follow-Up" about Apple.  It has gone down over $100 since the original piece appeared in mid November 2012.  Arch-rival Samsung is up.  And Exxon-Mobil (XOM) is once again the world's largest company (market value).


Andrew Bary writes up a bullish piece on the gold miners.  He notes that the three stocks and the four ETFs he lists are down between 17% - 49%, Barrick Gold (ABX) down the most (49%) and the junior gold stocks ETF (GDXJ) is down 41%.

[Ed. comment: Uhm, well maybe so.  But the miners are MUCH riskier than physical gold.]

Gold stocks would best be left to traders...


Jack Hough writes of a class of companies that I did not know even existed (as traded stocks): "business-development companies" (BDCs).  BDCs typically loan money out to smaller companies who cannot arrange for bank loans.

The four BDCs profiled by Hough yield an average of 8.8%!  Well above typical junk bonds yielding +/- 5.7%.  The four of them are:

Ares Capital (ARCC) yielding 9.0%
Golub Capital (GBDC) yielding 8.0%
Hercules Tech Growth (HTGC) yielding 8.4%
New Mountain Fin (NMFC) yielding 9.8%

All four of the above have 75% or more of their yields covered by loan interest alone, which Hough says is probably the best way to judge relative safety of these guys...  Please note that these seem RISKY to me, but, I feel obliged to point out income opportunities when available, as it is hard to make passive income now.


David Englander writes a bullish piece on Chiquita (CQB), famous for bananas.  They are lost money in 2012, but he says they will make money in 2013, and that their shares could rise 20% or more.


Michael Kahn joins the parade of analysts looking at "the technicals" of gold, hey, I did that too a week ago!  LOL...  He draws a chart with lines and everything, and goes on to note that maybe the technicals are showing some signs of a bottom, but that there is momentum to the downside.  He mentions a survey by Jack Bernstein ( that most traders are bearish, as are the miners who hedge.

He draws to two lines, parallel, but very close to each other on his chart: $1300.  Hmm.


Tiernan Ray ("Technology Week") writes of a battle going on re Dish Network (DISH) trying to take over Sprint-Nextel (S).  I did not know this was even going on.

FWIW, I could care less, neither company is of interest to me.


Vito J. Racanelli writes about poorly-performing REIT CommonWealth REIT (CWH).  It looks like their management has performed poorly, and there are activist shareholders pushing for changes.



Jim McTague writes about "The Number".  Hey!  Another thing I knew nothing about.  The Number is being calculated by the GAO and is, in simple language, the amount of the subsidy that the TBTF banks get to keep their status of "TBTF"...  Meaning that they can pay less for deposits.

Senators Sherrod Brown and David Vitter want to impose higher capital cushions on those banks.  Both Senators (as well as many other Senators) are still angry about the banks in the wake of 2008.

No one knows when The Number is due out, but McTague says it will "surely emit shock waves".  well, we'll be watching.


Lawrence C. Strauss interviews Scott Minerd (Guggenheim Partners).  Minerd discusses gold's price plunge and how that will affect other assets in the short-term.  He feels "a fairly healthy correction" of around 10% is likely [I concur].  But, he is bullish further out.  Minerd believes that low interest rates (he uses the words "financial repression", a term I like very much) will be the norm for many years (at least through 2017, likely 2019).

After short-term issues, however, he likes the USA, vs. Europe and Japan.  Here's what else he likes:

-- US financials (not me!)
-- US housing (not me!)  <-- US housing is at risk IMO: bad demographic trends
-- technology stocks (hey, could be OK)
-- he likes somewhat the BRICs
-- he likes even more the MIPS (Malaysia, Indonesia, the Philippines & Singapore)


Dyan Machan interviews Francois-Henri Pinault ("CEO Spotlight"), CEO of French luxury company PPR.  He is a rival of LVMH's Bernard Arnault.

For me this biography was not of interest, usually I find "CEO Spotlight" to be more interesting.

[Am I being overly negative today?]


Editor Thomas Donlan writes that the USA is edging into a tax revolt with companies leading the way.  Currently the underground economy here in the USA is about 10% of GDP (vs. some 30% in at least parts of Europe).  And yet the problems of the Baby Boomers will cost money, big money, and that will be financed (as long as possible) with debt (which Americans accept) rather than taxes (which they do not like).

He notes two important trends among companies: leaving states like California (high taxes) and keeping income offshore (when companies are big enough and structured correctly to be able to do it).

Donlan writes that companies will be a vanguard for popular tax revolts in the future.


In the Market Week section we find that banks fell because of bad earnings last week...

"European Trader" Jonathan Buck writes that Adidas (ADDYY) of Germany will "outrun the pack".  I have no confidence in my ability to judge the market prospects for sneaker maunfacturers, so I will decline further comment.

"Asian Trader" author Leslie P. Norton writes of Chinese online status retailer VIPshop Holdings.  It seems that this company HAS been selling FAKE goods though...  Enough said for me.

"Emerging Markets" columnist Ben Levison notes that when China released worse than expected growth figures, the equities markets in Brazil and China dropped sharply along with commodities.  Commodities may stay under pressure if China continues being weak.  On the other hand, countries that are NOT big in the commodity export realm (eg Turkey, India, Malaysia, the Philippines, Taiwan, etc.) may do relatively well with lower oil and other commodity costs.

"Current Yield" writer Michael Aneiro writes that bond investors have less fear of inflation now.  [Ed. note: I am seeing LOTS of analysts who see less inflation coming...]  Aneiro notes that the bond markets have been behaving oddly as well (like almost everything?), particularly corporate bonds (they have gotten gotten stronger with lowered inflation expectation, apparently the opposite of their normal behavior).  The 10-Year yield fell to 1.703%.

"Commodities Corner" authors Owen Fletcher write about bearish prospects for soybeans (lots of sybeans in South America and a big crop anticipated for the USA) and Tatyana Shumway about possible bearish prospects for gold (technical levels at $1300, then $1100...).

Insider sold some $42 million worth of popularly reviled Monsanto and $36 million in Verisk shares recently.

The Mighty Peruvian Sol weakened almost exactly 1% last week, perhaps due to worries about commodity exports to China.


Verdict:  Well, this issue was a bit less interesting than normal, but I will be watching to see how the Big Money guys do re their predictions...

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