Years ago several of our states got together and created the Powerball, a multi-state lottery offering jackpots much bigger than any of the individual states could on their own. The drawing is held twice per week, late Wednesday and Saturday nights.
After my wife and I came up losers on last Saturday's Powerball, I went the next day to buy a ticket, as I saw that no one else had won either. The ticket had the "estimated jackpot" of $425 million which was attractive enough for me to part with $2.00 to buy one (note that is two bucks, not the usual $1.00 for a run-of-the-mill lottery ticket).
While driving around today I heard on the radio that the estimate had gone up to $500 million, based I suppose on a much bigger round of ticket buying than they expected. I then went and bought two more tickets, and yes, the newer tickets said $500 million...
This is the SECOND biggest lottery jackpot EVER, only beaten by the "other" multi-state lottery (Mega Millions, which had a $600 million jackpot IIRC less than a handful of years ago). Wikipedia has an article on the multi-state lotteries: http://en.wikipedia.org/wiki/Multi-State_Lottery_Association.
***
I would like to go through some of the arithmetic of this lottery, the drawing being late tomorrow night (midnight Wednesday), whether there are winners should be known within an hour or so (so perhaps 1:00 AM US ET early Thursday morning, November 29).
The jackpot amount is a little deceptive (hey, almost everything about the government involves some deceit...). If there is but ONE winner (and when the jackpots get big, very often there are various winners who then SPLIT the jackpot), that winner does NOT get a check for $500 million.
1) The jackpot is $500 million if you take your payments over time ($25 million for each of the next 20 years). You can elect to take it the winning amount up front, but they discount the $500 million (present value of that $25 million per 20 years), so the amount I heard on the radio today that would be given in a lump-sum would be $320 million (64% of the stated jackpot), which is about my understanding from having observed what has happened in earlier big jackpots...
2) The winner(s) is/are subject to Income Tax (of course), which would be 35% at current 2012 rates (http://en.wikipedia.org/wiki/Income_tax_in_the_United_States). That is presuming the winner receives the money BEFORE the upcoming Fiscal Cliff... Various states impose their own income taxes (New York, Virginia and South Carolina, among many others), so the net winnings would of course be less...
Here in Florida then (should a single winner happen to be from here), the Lump-Sum, Income Tax paid amount would then be approximately $208 million.
In my household, however, my wife and I have agreed to split any big jackpots "50-50", on the reasonable assumption that I buy the tickets, and she gets half the money... So each of us would get about $104 million, which is not chump change!
***
The radio also stated the odds of winning were about 1:170,000,000 for a single ticket. So, for our case, spending $2.00 for a ticket and winning a net $208 million works out to about $2.00 spent:$208 million or about one dollar vs. $104,000,000. Which is still WORSE than a "fair" probability (but a lesser cut than the smaller jackpots). A "fair" amount would be a $370 million ($2.00 ticket, net of taxes and present value calculation done above)... So, the government STILL WINS!
"America, what a great country!" -- "Moe", my Iranian-American accountant friend in Virginia
***
If any of you are in a Powerball state, there will be many places offering up the winning numbers early Thursday, but here is the one I will be checking:
flalottery.com
Good Luck to any other players out there!
Tuesday, November 27, 2012
Monday, November 26, 2012
The Mercenary Geologist Muses On Graphite
The article below is by Mickey Fulp, the "Mercenary Geologist". I am having trouble (what else is new), in this case getting images from the article put into my blog piece, please excuse any low quality...
Also, please feel free to read his disclaimer at the end of the article. He is a shareholder Flinders Resources Ltd. (the first company he discusses).
I have decided to be a syndicator of Mr. Fulp's work (with their permission) as I majored in Geology when I was in college. His work is unique, a true "Field Geologist" who is also looking to make an honest buck!
GRAPHITE is now getting some attention as a high tech material that MAY change things (in certain forms it is very strong yet light weight). There is a lot of active research underway on graphite.
Without further ado, here is his article:
Mercenary Musing: Three Sharp Pencils
in the Graphite Game
A Monday Morning Musing from Mickey
the Mercenary Geologist
November 26, 2012
I always try to get in early on
a new area or commodity play. If I’m not in early, then I will simply choose not
to play. Obviously I miss some
opportunities with this conservative philosophy but, as a contrarian, I refuse
to follow the sheeple.
Let’s look at the seven junior
resource bubbles that have blown up and burst since 2008. Two attracted my
speculative dollars: REEs and the pre-Fukushima uranium boom. I ignored the
following: Saskatchewan coal, potash, lithium, Colombia, and the Yukon.
It appears that graphite is next
in line for a commodity boom. The market is driven by increasing demand from
traditional applications, new technology uses, and China’s 75% control of supply,
its depleting reserves, and efforts to consolidate operations and restrict
exports to the industrialized world. These factors led to graphite prices going
parabolic from 2010-2012. Despite 2012’s price fall as the world’s economy
slowed, graphite is still selling at more than double its early 2007 price and
has stabilized recently. In fact, I don’t think this play is over:
Chart Courtesy of
Northern Graphite Corp
I was first introduced to the
supply and demand fundamentals of graphite and a potentially looming shortage over
two years ago by one of my dedicated subscribers in the Chicago area. Tom
Hartel is a lay investor who quickly learned to do his own due diligence and
has become a savvy speculator in the junior resource sector.
So when Tom has an idea, I listen.
In the fall of 2010, he asked me about the commodity and soon thereafter
introduced me to an opportunity in what is now Northern Graphite Corp (NGC.V). Knowing little about graphite at the time, I
researched the commodity and the company, and declined the offer. My rejection
had little to do with the company’s share structure, its people, or its Bissett
Creek, Ontario project.
It was mainly because its
predecessor had an OTCBB listing and the corporate presentation I received did
not indicate a future listing on the Toronto Venture Exchange. Folks, I don’t
do the bulletin board. In hindsight, I missed a great opportunity.
Also around that time, I came
across another graphite play, Focus Graphite Inc’s (FMS.V)
Lac Knife project in northern Quebec. I reviewed the company, met with the CEO,
and ultimately passed on the opportunity because its main focus at the time was
as a graphene R&D company. Again, this was another one missed; FMS stock went
up over 1000% from the time of my first evaluation to a spike five months
later.
In early Q2 2011, these two
companies remained the only Toronto-listed junior resource companies dedicated
to graphite space.
Meanwhile, my search for a graphite
developer continued. In the early spring of last year I was approached by a
couple of geologists and alerted to a capital pool company that was acquiring
their option on a mothballed graphite mine in Sweden. Finally I had found the
early-on deal that met my investment criteria (Mercenary Musing, December 15, 2008) and speculative dollars were committed in August
2011. In early 2012 this company morphed into Flinders
Resources Ltd (FDR.V); it has
been a very good speculation for me.
By late 2011, there was a
buzz on Howe and Bay Streets about the graphite game and speculators were
starting to stir. For a brief while it seemed every snake, shark, charlatan,
and shyster occupying an office within sailing distance of Coal Harbor was
floating a graphite play. From just two companies in mid-2011, there were over
40 listed on the Toronto Exchanges a year later. Then came the downside of the price
parabola and the numerous Johnny-come-latelies are now left holding the bag for
tax-loss season.
That said, the three public companies
discussed above remain sharp pencils in graphite space. There are a handful of
others with recent geological discoveries but at this stage, only a couple can be
classified as potentially advanced explorers or developers.
Over the course of the late
summer and early fall, I toured the flagship properties of Flinders Resources,
Focus Graphite, and Northern Graphite and report on these visits herein.
My first stop was in central
Sweden at Flinders’ 100% owned Woxna graphite project. This fully permitted and
financed mining project is located in central Sweden about 300 km northwest of
Stockholm. It encompasses four graphite deposits including the Kringel mine,
which produced graphite from 1997-2001. In addition, the company owns
concessions covering 60 km of strike length of a favorable geological horizon
with many known graphite occurrences and geophysical targets awaiting
exploration.
I toured the project in August
in the company of CEO Martin McFarlane, process engineer Don Pettersson,
consulting geologist Lars Dahlenborg, general manager Folke Soderstrom. Office manager
Astrid Soderstrom provided logistical support.
Woxna Graphite Project, Sweden
Here’s a photo of geologist Lars Dahlenborg and yours truly at the Kringel pit, which is expected to be completely dewatered by the end of Q1 2013 and available for development and exploitation:
Kringel Open-Pit Graphite Mine
Flinders drilled delineation
and exploration core holes throughout the spring and summer to successfully
qualify and expand a previous historic resource. Currently Kringel has a 43-101
measured and indicated resource of 2.6 million tonnes grading 10.5% graphitic
carbon at 7.0% cutoff grade that is open to expansion along strike and at depth.
The photo below shows a high-grade zone of graphitic schist:
Graphite-bearing
Core from the Kringel Deposit
As part of project
remediation, Flinders has cleaned up, re-bagged, and sold low-grade ore
stockpiles to its previous European customers. This effort generated minor cash
flow to the coffers but more importantly, re-established relationships with
past buyers of Woxna Graphite.
One Tonne Bags of Graphite Ready for Shipment to Customers
In recent news, Flinders appointed
London-based GBM Engineering to complete a process flow sheet, design, and
refurbishment of the existing mill and concentration plant. It is progressing
with mine
de-watering, tailings dam
remediation, and procurement of mining and processing equipment.
CEO McFarlane recently
provided guidance that the company is within its budget and timeline to achieve
commercial production at an annualized 13,000 tonnes of graphite in Q1 of 2014.
I expect the Kringel deposit to be a robustly economic graphite mine. Plans for
expansion are expected after the first phase of production is achieved.
My second tour was at Focus
Graphite’s 100% owned Lac Knife deposit in northern Quebec. It is located about
30 km southwest of Labrador City and is accessible via highway and 32 km of
unimproved dirt road. The main provincial power line is located five km from
the site, and a public railway is 30 km away.
Lac Knife Project, Quebec
I was accompanied on the
visit by CEO Gary Economo and two company geologists, Director Marc-Andre
Bernier and Benoit LaFrance. Here’s a photo of our tour group, including four Quebec-based
analysts and the aforementioned company personnel:
Lac Knife Tour, September 2012
We first examined an outcrop that was stripped to
obtain surface samples for metallurgical testing:
Lac Knife High-Grade Graphite Outcrop
Other stops included the core
shed for examination of recently drilled core, a current exploration drill
site, and large diameter core to be used for additional metallurgical and
process tests:
Graphite-bearing Core for Metallurgical
Testing
Graphite was discovered at
Lac Knife in 1959 and the project was explored and developed by various
entities with a feasibility study in 1990 by Graftech International. Focus
acquired the project in 2010 from Iamgold. Lac Knife hosts a qualified indicated
resource of 4.9 million tonnes grading 15.8% graphitic carbon and an inferred
resource of 3.0 million tonnes at 15.6% graphite, both at a cutoff grade of
5.0%.
A recent preliminary economic
analysis studied a 20-year open-pit mining operation with a strip ratio of
1.1:1, 15.6% head grade, and 91 % recovery. Production of 46,600 tonnes of
graphite per annum had a total capital cost of $154 million (including working
capital and contingency) and $435 per tonne milled operating cost. These
estimates gave a pre-tax NPV of $246 million and 32% IRR at a 10% discount
rate. Focus Graphite currently projects initial production in Q2 2014. FMS has
$20 million in cash and will require project financing in the near future to
meet its timeline.
My third project tour was Northern
Graphite Corp’s Bissett Creek project located 100 km east of North Bay, Ontario
and 17 km from the Trans-Canada highway and a natural gas pipeline.
Bissett Creek Graphite Project, Ontario
Northern Graphite’s President
Don Baxter was my tour guide for the day. Consulting geologist Mehmet Tanner
was present at the project site to show me outcrops, current drilling, and
core.
Don Baxter and Mehmet Tanner at Old Test Mining Pit
Bissett Creek is a shallowly-dipping, tabular ore body that crops out or is covered by a thin till over a broad area, and thus is amenable to reserve expansion with little increase in strip ratio:
It is entirely composed of
flake graphite with a significant portion in the large to jumbo category:
Very Large Flake Bissett Creek Graphite
Northern Graphite tabled a
bankable feasibility study in July. It is based on a 23-year mine life, an
open-pit probable reserve of 18.9 million tonnes of 1.89% graphitic carbon at a
cutoff of 1.2%, strip ratio of 0.5:1, processing of 2500 tonnes per day, 94.7% recovery,
and annual production of 19,000 tonnes of graphite for the first five years.
Capital costs are $103 million, and life-of-mine operating costs are $968 per
tonne of concentrate. Using an $1800/t graphite price and 8% discount rate resulted
in an after-tax NPV of $65 million and IRR of 14.8%.
Management sees room for
improvement in this financial model with recent drilling to move higher grade inferred
resources into the indicated category, resolution of higher pilot plant graphite
recoveries than head grade calculations, using company versus contract mining, permitting
of lower cost tailings disposal options, and economic analysis of value-added
spherical graphite. The company is confident operating costs can be reduced to
$800 per tonne and result in better project economics.
The company’s current
timeline to commercial production is Q2 2014. It has $10 million in cash and
will require project financing in the near term to achieve this schedule.
Discussions with potential strategic partners are ongoing. Company guidance
indicates significant news flow is forthcoming within the next two months.
I consider myself fortunate
to have visited the three current Toronto-listed graphite developers. I thank
Marty McFarlane of Flinders Resources Ltd, Gary Economo of Focus Graphite Inc,
and Greg Bowes and Don Baxter of Northern Graphite Corp for their graciousness
and hospitality in arranging these tours and for reimbursement of my expenses.
Please note my opinion of Flinders is skewed by financial involvement with the
company.
Finally, I wish these
gentlemen my best and hope their projects are developed into profitable
graphite mines and loyal shareholders are justly rewarded.
Ciao for now,
Mickey Fulp
Mercenary Geologist
The Mercenary
Geologist Michael S. “Mickey” Fulp
is a Certified Professional Geologist with a
B.Sc. Earth Sciences with honor from the University
of Tulsa , and M.Sc. Geology from the University of New Mexico
Mickey worked for junior explorers, major
mining companies, private companies, and investors as a consulting economic
geologist for over 20 years, specializing in geological mapping, property
evaluation, and business development. In
addition to Mickey’s professional credentials and experience, he is high-altitude
proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made
four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia.
Mickey is well-known and highly respected throughout
the mining and exploration community due to his ongoing work as an analyst, writer,
and speaker.
Disclaimer: I am a shareholder of Flinders Resources
Ltd and it pays a fee of $4000 per month as a sponsor of this website. I am not
a certified financial analyst, broker, or professional qualified to offer
investment advice. Nothing in a report, commentary, this website, interview,
and other content constitutes or can be construed as investment advice or an
offer or solicitation to buy or sell stock. Information is obtained from
research of public documents and content available on the company’s website,
regulatory filings, various stock exchange websites, and stock information
services, through discussions with company representatives, agents, other
professionals and investors, and field visits. While the information is
believed to be accurate and reliable, it is not guaranteed or implied to be so.
The information may not be complete or correct; it is provided in good faith
but without any legal responsibility or obligation to provide future updates. I
accept no responsibility, or assume any liability, whatsoever, for any direct,
indirect or consequential loss arising from the use of the information. The information
contained in a report, commentary, this website, interview, and other content
is subject to change without notice, may become outdated, and will not be
updated. A report, commentary, this website, interview, and other content
reflect my personal opinions and views and nothing more. All content of this
website is subject to international copyright protection and no part or portion
of this website, report, commentary, interview, and other content may be
altered, reproduced, copied, emailed, faxed, or distributed in any form without
the express written consent of Michael S. (Mickey) Fulp, Mercenary
Geologist.com LLC.
Copyright © 2012
MercenaryGeologist.com. LLC All Rights Reserved. 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:
gmo.com
***
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.
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:
gmo.com
***
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.
Sunday, November 11, 2012
Review of Barron's -- Dated 12 November 2012
This week's review will be short, as we are going on a short trip!
The Cover Story ("Are We Headed for a Recession?") shows Obama and Speaker Boehner in a car speeding off a cliff. Obama is driving naturally... Boehner, in the back seat with his arms folded and Obama both are beautifully drawn, both are very grim. The most artistic Barron's cover in years? The illustrator is Scott Pollack, I will look for him again.
Well, it turns out that there are three articles on this subject. Wall Street must be alarmed! Resident economist Gene Epstein writes the Cover Story. He starts with Bernanke's recent warning to Congress:
"If the fiscal cliff isn't addressed, I don't think our tools are strong enough to offset the effects." (Bernanke, September 13 appearance before the Senate). In other words, the Fed is not taking responsibility if we go into recession.
Epstein writes that they rate the odds of a recession at 50/50.
Focusing in on the fiscal cliff itself, he shows that it is mostly TAX INCREASES with little spending to be cut (except military spending). Not only that, "... most of the pending tax increases will fall on the "non-rich"."
Jim McTague also writes an article on the fiscal cliff. McTague writes that Obama must stand up and LEAD... He (and many others) believe that the president is in a strong position, having won and with Democrat gains in the Senate. Even Republicans are talking like they will allow some tax hikes to go through...
Kopin Tan then writes a shorter piece on Thomas Peterffy, the founder and CEO of Interactive Brokers, Peterffy was a BIG contributor to Romney and describes himself as a fiscal conservative but a social liberal. Peterffy grew up in Communist Hungary (arriving in the USA at 21 years old in 1955).
Bottom Line? If we go over the fiscal cliff, we may expect that out current growth rate of +/- 2% become a drop (recession) of about 1%... And, TAX HIKES, few spending cuts.
[Ed. note: Cut the damn spending idiots!]
***
Randall W. Forsyth pinch-hits again for Alan Abelson (third week, I hope you're doing Mr. Abelson). And what does he write about? The fiscal cliff!
Maybe there will be a compromise, maybe not.
He does mention that Dr. Paul Krugman wrote in a New York Times op-ed column:
"Republicans are trying, for the third time since he [Obama] took office, to use economic blackmail to achieve a goal they lack the votes to achieve through the normal legislative process."
[Ed. note: This may end badly...]
***
Kopin Tan ("Streetwise", this is HIS third time in a row writing this column, maybe it's his new gig) writes about, wait for it, the fiscal cliff! He goes on to mention, however, that prospects for the economy may not be as bad as they look, as money is seeping into the USA as well as overseas ("risk-on"?).
***
"He Said":
"Ladies and Gentlemen, let's soak this in. Our long national nightmare is over."
Conan O'Brien on the long presidential campaign.
Hey, Conan: What if it has just begun?
***
Andrew Bary comes out with a bullish piece on Berkshire-Hathway (BRK.A). Bary notes that various analysts think Berkshire is undervalued.
My take? Warren Buffett is a gold hater, so... On the other hand, Berkshire now owns possibly the best run railroad in the USA (BNSF).
***
David Englander writes a bullish piece on FXCM (FXCM) a company that became public in December 2010, it is an on-line foreign exchange broker. He thinks they can cut costs.
I have no opinion, but kind of do not have a good feeling about this one...
***
Tiernan Ray ("Technology Week") writes that new-ish CEO of Yahoo! (YHOO) Marissa Mayer looks to have a tough job ahead of her, turning around Yahoo! Google (GOOG), Facebook (FB) and Twitter are all fighting with YHOO in the new, and apparently deadly, arena of the shift to mobile (smartphones)...
***
Brendan Conway ("ETF Focus") writes that certain dividend oriented stock ETFs may be in a stronger position (than I would think). He writes that dividend taxes will not hurt very many, only the VERY wealthy. The main risk? A big market decline due to the fiscal cliff or similar. But, even then he says that dividend-oriented ETFs would be that much better a buy.
Ahh, I dunno, the whole high dividend stock trade seems crowded to me, but what do I know?
***
Andrew Bary (busy this week!) interviews Chris Mittelman, CIO of Mittleman Brothers Investment Management. Mittleman uses a "privtae-equity mindset" in making his stock picks. As I wrote up at the top of my article, I am keeping my Barron's review short, so I will just mention the stocks that Mittleman likes, if you want the details, go buy Barron's!
Revlon (REV)
Carmike Cinemas (CKEC)
Avis Budget Group (CAR)
Virgin Media (VMED)
Harbinger Group (HRG)
***
Jack Hough (who seems to have a history of writing bullish pieces about four or five stocks at a pop) writes positively about the below four sellers of products with good Holiday prospects:
Apple (AAPL, well, at least it is down $170 or so from its peak!)
Bed, Bath & Beyond (BBBY)
Coach (COH)
FedEx (FDX)
Jos. A. Bank (JOSB, he writes "riding the jobs recovery...")
***
PENTA, the erstwhile special section ("Trusted advice for families with $5 million or more") that is now just a page or two once in a while, writes that there may be "Fresh Bargains on the Auction Block", referring to modern art sales coming up.
Just thought you might want to know...
***
"Other Voices" (an occasional column written by someone off the Barron's reservation) is by ex-permabear Peter Navarro. He has turned into a bull, here are his four reasons:
1) Profits of big US multinationals are increasingly coming from overseas
2) US companies have done a good job of "right-sizing" (becoming smaller)
3) Likely continued Quantitative Easing...
4) The (unforeseen) energy revolution (more US oil & gas production)
Navarro hedges a bit and says that things could still go wrong (fiscal cliff or the Middle East).
***
Editor Thomas Donlan writes about the fiscal cliff (but, he says that maybe it would not be so bad, and then we could repair our system...). He writes that there is still some time to prevent going over the cliff however (my preference).
Donlan then goes on to write that Obama may start doing what many second-term presidents do, involve himself in foreign policy more than before.
He finishes with some comments that Europe has many problems (Greece and France here).
***
In the market week section, Jim Grant is quoted ("The Trader"): "Buy element 79 on the periodic table." (gold)
Jonathan Buck ("European Trader") writes that Obama's win does not impact Europe much (I would agree). He then writes about Dutch vitamin and health products maker DSM (DSM.Netherlands) looks good.
Assif Shameen ("Asian Trader") writes that China might be back on track, now that their new leadership is apparently a done deal. Shameen quotes two China analysts as saying infrastructure and reform plays might be good.
Erin McCarthy ("Emerging Markets") writes that overseas bonds may be a good bet (Reshma Kapadia, the usual write of this column, has mentioned that as well).
Michael Aneiro ("Current Yield") writes that S&P put the probability of the US going over the fiscal cliff at just 15%, how optimistic... The election has assured the continuation of QE. Treasury yields still are going down, and even companies like Microsoft (MSFT), ExxonMobil (XOM) and Johnson & Johnson (JNJ) are selling debt for very cheap (low yields).
Leslie Josephs writes this weekend's "Commodities Corner". She expects cheaper chocolate, due to good weather and a bad world economy.
Three insiders sold BIG at Kohl's (KSS): $90 million worth...
The Mighty Peruvian Sol for the second week in a row was not so mighty, falling about 0.6%. Well, that means my upcoming haircut (just a little over a month away!) will be a bit cheaper...
Verdict: Hey it can't hurt if you at least LOOK at the Contents page this week...
The Cover Story ("Are We Headed for a Recession?") shows Obama and Speaker Boehner in a car speeding off a cliff. Obama is driving naturally... Boehner, in the back seat with his arms folded and Obama both are beautifully drawn, both are very grim. The most artistic Barron's cover in years? The illustrator is Scott Pollack, I will look for him again.
Well, it turns out that there are three articles on this subject. Wall Street must be alarmed! Resident economist Gene Epstein writes the Cover Story. He starts with Bernanke's recent warning to Congress:
"If the fiscal cliff isn't addressed, I don't think our tools are strong enough to offset the effects." (Bernanke, September 13 appearance before the Senate). In other words, the Fed is not taking responsibility if we go into recession.
Epstein writes that they rate the odds of a recession at 50/50.
Focusing in on the fiscal cliff itself, he shows that it is mostly TAX INCREASES with little spending to be cut (except military spending). Not only that, "... most of the pending tax increases will fall on the "non-rich"."
Jim McTague also writes an article on the fiscal cliff. McTague writes that Obama must stand up and LEAD... He (and many others) believe that the president is in a strong position, having won and with Democrat gains in the Senate. Even Republicans are talking like they will allow some tax hikes to go through...
Kopin Tan then writes a shorter piece on Thomas Peterffy, the founder and CEO of Interactive Brokers, Peterffy was a BIG contributor to Romney and describes himself as a fiscal conservative but a social liberal. Peterffy grew up in Communist Hungary (arriving in the USA at 21 years old in 1955).
Bottom Line? If we go over the fiscal cliff, we may expect that out current growth rate of +/- 2% become a drop (recession) of about 1%... And, TAX HIKES, few spending cuts.
[Ed. note: Cut the damn spending idiots!]
***
Randall W. Forsyth pinch-hits again for Alan Abelson (third week, I hope you're doing Mr. Abelson). And what does he write about? The fiscal cliff!
Maybe there will be a compromise, maybe not.
He does mention that Dr. Paul Krugman wrote in a New York Times op-ed column:
"Republicans are trying, for the third time since he [Obama] took office, to use economic blackmail to achieve a goal they lack the votes to achieve through the normal legislative process."
[Ed. note: This may end badly...]
***
Kopin Tan ("Streetwise", this is HIS third time in a row writing this column, maybe it's his new gig) writes about, wait for it, the fiscal cliff! He goes on to mention, however, that prospects for the economy may not be as bad as they look, as money is seeping into the USA as well as overseas ("risk-on"?).
***
"He Said":
"Ladies and Gentlemen, let's soak this in. Our long national nightmare is over."
Conan O'Brien on the long presidential campaign.
Hey, Conan: What if it has just begun?
***
Andrew Bary comes out with a bullish piece on Berkshire-Hathway (BRK.A). Bary notes that various analysts think Berkshire is undervalued.
My take? Warren Buffett is a gold hater, so... On the other hand, Berkshire now owns possibly the best run railroad in the USA (BNSF).
***
David Englander writes a bullish piece on FXCM (FXCM) a company that became public in December 2010, it is an on-line foreign exchange broker. He thinks they can cut costs.
I have no opinion, but kind of do not have a good feeling about this one...
***
Tiernan Ray ("Technology Week") writes that new-ish CEO of Yahoo! (YHOO) Marissa Mayer looks to have a tough job ahead of her, turning around Yahoo! Google (GOOG), Facebook (FB) and Twitter are all fighting with YHOO in the new, and apparently deadly, arena of the shift to mobile (smartphones)...
***
Brendan Conway ("ETF Focus") writes that certain dividend oriented stock ETFs may be in a stronger position (than I would think). He writes that dividend taxes will not hurt very many, only the VERY wealthy. The main risk? A big market decline due to the fiscal cliff or similar. But, even then he says that dividend-oriented ETFs would be that much better a buy.
Ahh, I dunno, the whole high dividend stock trade seems crowded to me, but what do I know?
***
Andrew Bary (busy this week!) interviews Chris Mittelman, CIO of Mittleman Brothers Investment Management. Mittleman uses a "privtae-equity mindset" in making his stock picks. As I wrote up at the top of my article, I am keeping my Barron's review short, so I will just mention the stocks that Mittleman likes, if you want the details, go buy Barron's!
Revlon (REV)
Carmike Cinemas (CKEC)
Avis Budget Group (CAR)
Virgin Media (VMED)
Harbinger Group (HRG)
***
Jack Hough (who seems to have a history of writing bullish pieces about four or five stocks at a pop) writes positively about the below four sellers of products with good Holiday prospects:
Apple (AAPL, well, at least it is down $170 or so from its peak!)
Bed, Bath & Beyond (BBBY)
Coach (COH)
FedEx (FDX)
Jos. A. Bank (JOSB, he writes "riding the jobs recovery...")
***
PENTA, the erstwhile special section ("Trusted advice for families with $5 million or more") that is now just a page or two once in a while, writes that there may be "Fresh Bargains on the Auction Block", referring to modern art sales coming up.
Just thought you might want to know...
***
"Other Voices" (an occasional column written by someone off the Barron's reservation) is by ex-permabear Peter Navarro. He has turned into a bull, here are his four reasons:
1) Profits of big US multinationals are increasingly coming from overseas
2) US companies have done a good job of "right-sizing" (becoming smaller)
3) Likely continued Quantitative Easing...
4) The (unforeseen) energy revolution (more US oil & gas production)
Navarro hedges a bit and says that things could still go wrong (fiscal cliff or the Middle East).
***
Editor Thomas Donlan writes about the fiscal cliff (but, he says that maybe it would not be so bad, and then we could repair our system...). He writes that there is still some time to prevent going over the cliff however (my preference).
Donlan then goes on to write that Obama may start doing what many second-term presidents do, involve himself in foreign policy more than before.
He finishes with some comments that Europe has many problems (Greece and France here).
***
In the market week section, Jim Grant is quoted ("The Trader"): "Buy element 79 on the periodic table." (gold)
Jonathan Buck ("European Trader") writes that Obama's win does not impact Europe much (I would agree). He then writes about Dutch vitamin and health products maker DSM (DSM.Netherlands) looks good.
Assif Shameen ("Asian Trader") writes that China might be back on track, now that their new leadership is apparently a done deal. Shameen quotes two China analysts as saying infrastructure and reform plays might be good.
Erin McCarthy ("Emerging Markets") writes that overseas bonds may be a good bet (Reshma Kapadia, the usual write of this column, has mentioned that as well).
Michael Aneiro ("Current Yield") writes that S&P put the probability of the US going over the fiscal cliff at just 15%, how optimistic... The election has assured the continuation of QE. Treasury yields still are going down, and even companies like Microsoft (MSFT), ExxonMobil (XOM) and Johnson & Johnson (JNJ) are selling debt for very cheap (low yields).
Leslie Josephs writes this weekend's "Commodities Corner". She expects cheaper chocolate, due to good weather and a bad world economy.
Three insiders sold BIG at Kohl's (KSS): $90 million worth...
The Mighty Peruvian Sol for the second week in a row was not so mighty, falling about 0.6%. Well, that means my upcoming haircut (just a little over a month away!) will be a bit cheaper...
Verdict: Hey it can't hurt if you at least LOOK at the Contents page this week...
Friday, November 9, 2012
The User's Guide To A New America
The results of the election on Tuesday point to a "New America", in which we find that the new voting majority in the USA is now a coalition of the urban areas, traditionally Democrat union and liberal areas and minority populated area. Take a look at the below map (courtesy drudgereport.com):
The "red" counties voted for Mitt Romney, the "blue" for President Obama. There are really not too many too many surprises above, and I believe that the trend of the voting population is clear: that "traditional conservatism" (that America is a "Center-Right" country) may be dead or in danger. My conclusion is disputed, in that many feel Romney was NOT a "real conservative" in the mold of Ronald Reagan, but I believe the logic of a "New America" is more important than the credentials of candidate Romney.
***
What does this mean to those of us concerned with an America deeply divided and deeply in debt? First off, none of us (as individuals) can change the reality that we have President Obama for four more years and that the Democrats now have cemented two important realities:
1) Obamacare will not go away, we are stuck with it
2) The Senate remains in Democrat hands, this means that Supreme Court nominees and treaties with other countries ("Agenda 21" and the small arms treaties of the UN for example) will further cement President Obama's (and that of the Democrats in general) policies in place as far as the eye can see.
So as individuals, we cannot change the above realities. The Democrats can go to town. And noting that President Obama can see how he had but two years to act before the Republicans seized the House, I would expect fast action by the Democrats while they are strong.
***
I have recently crystallized my thinking re personal action into three simple phrases: "Physically Fit, Financially Fit and Spiritually Fit". I believe that each of us should be in as good a condition as possible re our health, our financial circumstances and our spiritual foundation and growth. I am "eating my own dogfood here", that is trying my best to improve my fitness in all of three of the above.
I briefly discuss each of the above as to how it pertains to me (and perhaps to you too). My personal GUESS is that we are in for a few hard years. Being in good condition in ALL THREE will make it easier for each of us to deal with any trials to come.
***
Physically Fit
I mean this in all the normal ways that the term above is usually perceived. Our health is very important! In any strenuous time, being fit means that we are able to endure more as well be able to carry out more difficult tasks.
Now is as good a time as any to improve our health!
Exercise! (I do Tai Chi and other exercise each week)
Eat better! (As time goes by, I make some progress here)
Lose bad habits! (I am working on that, one of them IS being lost!)
Maintain good health! (eg, get a check-up at your doctor)
Don't forget your brain! (Exercise your brain, especially by doing something different)
***
Financially Fit
Do I have to even cover this one? Almost all the readers of my blog understand this one! But, allow me to point out certain aspects of financial fitness that we should all be aware of:
Diversification! Diversification is the easiest way to make your financial position more secure and also to allow the possibility of greater gains. Diversification allows one to sleep better at night...
Get out of debt! In bad economic times (coming to America soon?), DEBT can be a killer. Prudence would suggest that if any of our debts are high, that it is better to reduce them ASAP.
Save! Even though interest rates are very low (and so destroying the value of savings because inflation is higher than most interest rates that savers can get), saving for the future is one of this centuries-old ideas that is still good... Remember there are other ways to save other than getting very low rates on bank CDs or in Treasury Bonds. One of them is gold...
Plan carefully! The tax laws are changing... Taxes are likely to go up. NOW is a good time to consider two things: SELLING some longer-term investments that have gone up (as capital gains taxes (and dividend taxes) are likely to go up in 2013), and GIVING money to your children or grandchildren (estate (death) taxes are almost sure to go up, probably gift taxes as well).
Also, as financial conditions deteriorate crime and scams become more common (as we have seen in history). Do not be conned into parting with you money or becoming involved with anything illegal! You will likely lose...
***
Spiritually Fit
And what do I mean by this? Nothing dogmatic. I am not suggesting that you go to church every Sunday. I am not telling you to take up Buddhism, nor to meditate on the beach or in the mountains every day.
Being "spiritually fit" will give you emotional strength to withstand the ups and downs of life! Life IS difficult, and it might become more so. History is full of cycles: things (nations) get strong and they decline... Certain families become wealthy, and then many of them lose their wealth... Lao Tse, the founder of Taoism wrote: "The Ten Thousand Things rise and fall without cease." That means that things are always changing, the only thing that remains constant is change...
I suggest that there are several things each of us can do to make progress spiritually, to strengthen our internal selves:
1) Become more aware of your day-to-day actions. Your actions not only affect you, but they affect others, and to a degree each action you take affects the world...
2) Most of the world's great faiths suggest many of the same things:
The "red" counties voted for Mitt Romney, the "blue" for President Obama. There are really not too many too many surprises above, and I believe that the trend of the voting population is clear: that "traditional conservatism" (that America is a "Center-Right" country) may be dead or in danger. My conclusion is disputed, in that many feel Romney was NOT a "real conservative" in the mold of Ronald Reagan, but I believe the logic of a "New America" is more important than the credentials of candidate Romney.
***
What does this mean to those of us concerned with an America deeply divided and deeply in debt? First off, none of us (as individuals) can change the reality that we have President Obama for four more years and that the Democrats now have cemented two important realities:
1) Obamacare will not go away, we are stuck with it
2) The Senate remains in Democrat hands, this means that Supreme Court nominees and treaties with other countries ("Agenda 21" and the small arms treaties of the UN for example) will further cement President Obama's (and that of the Democrats in general) policies in place as far as the eye can see.
So as individuals, we cannot change the above realities. The Democrats can go to town. And noting that President Obama can see how he had but two years to act before the Republicans seized the House, I would expect fast action by the Democrats while they are strong.
***
I have recently crystallized my thinking re personal action into three simple phrases: "Physically Fit, Financially Fit and Spiritually Fit". I believe that each of us should be in as good a condition as possible re our health, our financial circumstances and our spiritual foundation and growth. I am "eating my own dogfood here", that is trying my best to improve my fitness in all of three of the above.
I briefly discuss each of the above as to how it pertains to me (and perhaps to you too). My personal GUESS is that we are in for a few hard years. Being in good condition in ALL THREE will make it easier for each of us to deal with any trials to come.
***
Physically Fit
I mean this in all the normal ways that the term above is usually perceived. Our health is very important! In any strenuous time, being fit means that we are able to endure more as well be able to carry out more difficult tasks.
Now is as good a time as any to improve our health!
Exercise! (I do Tai Chi and other exercise each week)
Eat better! (As time goes by, I make some progress here)
Lose bad habits! (I am working on that, one of them IS being lost!)
Maintain good health! (eg, get a check-up at your doctor)
Don't forget your brain! (Exercise your brain, especially by doing something different)
***
Financially Fit
Do I have to even cover this one? Almost all the readers of my blog understand this one! But, allow me to point out certain aspects of financial fitness that we should all be aware of:
Diversification! Diversification is the easiest way to make your financial position more secure and also to allow the possibility of greater gains. Diversification allows one to sleep better at night...
Get out of debt! In bad economic times (coming to America soon?), DEBT can be a killer. Prudence would suggest that if any of our debts are high, that it is better to reduce them ASAP.
Save! Even though interest rates are very low (and so destroying the value of savings because inflation is higher than most interest rates that savers can get), saving for the future is one of this centuries-old ideas that is still good... Remember there are other ways to save other than getting very low rates on bank CDs or in Treasury Bonds. One of them is gold...
Plan carefully! The tax laws are changing... Taxes are likely to go up. NOW is a good time to consider two things: SELLING some longer-term investments that have gone up (as capital gains taxes (and dividend taxes) are likely to go up in 2013), and GIVING money to your children or grandchildren (estate (death) taxes are almost sure to go up, probably gift taxes as well).
Also, as financial conditions deteriorate crime and scams become more common (as we have seen in history). Do not be conned into parting with you money or becoming involved with anything illegal! You will likely lose...
***
Spiritually Fit
And what do I mean by this? Nothing dogmatic. I am not suggesting that you go to church every Sunday. I am not telling you to take up Buddhism, nor to meditate on the beach or in the mountains every day.
Being "spiritually fit" will give you emotional strength to withstand the ups and downs of life! Life IS difficult, and it might become more so. History is full of cycles: things (nations) get strong and they decline... Certain families become wealthy, and then many of them lose their wealth... Lao Tse, the founder of Taoism wrote: "The Ten Thousand Things rise and fall without cease." That means that things are always changing, the only thing that remains constant is change...
I suggest that there are several things each of us can do to make progress spiritually, to strengthen our internal selves:
1) Become more aware of your day-to-day actions. Your actions not only affect you, but they affect others, and to a degree each action you take affects the world...
2) Most of the world's great faiths suggest many of the same things:
- acting with kindness to all others
- being humble, acting with humility and being honest
- acting to improve oneself in accord with the world we live in
- ACTIVE prayer or meditation
- "Faith without works is dead." <-- means faith is not enough.
Personally, I believe there are many routes to God, if you will. My personal belief is that the key here is acting according to the "will of God, as we understand Him to be."
What I believe is important is to progress spiritually, we will never attain spiritual perfection, we (most of us) are not saints... So to me, the general principles apply: love they neighbor as thyself, be aware of your actions, try to improve every day, etc.. Spiritual progress seems to be the key concept.
Sunday, November 4, 2012
Review of Barron's -- Dated 5 November 2012
As I write today (so far, both late morning and now early afternoon), my wife has her "Composer of the Month" on (she has a series of best hits from a number of classical music composers), this month is Brahms. Other than his "Lullaby", I am not familiar with Brahms' work, my wife even described his music as "background music", ohh, harsh! In recent months we have both enjoyed Beethoven, Grieg and Tchaikovski rather more.
***
The Cover Story of this weekend's Barron's is "Best 25 Dividend Funds", which on the face of it comes pretty close to examining a subject that I really want to sink my teeth into soon: income in a low interest environment.
Author Steve Garmhausen got Barron's and Lipper started their screening to exclude income mutual funds that had less than $100 million in assets and lacked a three year record. That left them with a list of 53 funds, they then pick the top 25, based mostly on three year total return. The lowest of these 25 funds had a total return of 12.9% (all returns are annualized I believe, although this was not stated in the article), Number One was JPMorgan Equity Income (ticker: OIEIX) with a 15.6% total return.
The lowest return of the 53 had an 8.5% total return, so while there WAS a real difference, I think that "Total Return" is almost a "Random Variable" (defined in my probability textbook as: "A real-valued function defined on the outcome of a probability experiment is called a random variable.", Ross, Sheldon, A First Course in Probability). I believe this to be true as you RARELY find that anyone outperforms the averages or similar other funds (the JPM fund here was quite middle-of-the-pack in the 10-year total return).
Also, of the 53 funds in Garmhausen's table, just THREE had dividend yields of over 3%, and only 24 had dividend yields higher than 2.1% (which is the S&P 500's yield).
Garmhausend did note that dividend yield was not the only criterion for each fund. He also noted (as I and many others have mentioned for many months now) that the high dividend yield space is a very crowded trade now.
So, this article solved very little of the "Income Conundrum" (c) that I face, both for myself and for you, my readers.
I found only one real gem in the article: some of the companies (Intel: INTC, ExxonMobil: XOM and Home Depot: HD) have both a reasonable yield and "moat", a sustainable competitive advantage. I fully understand the concept of a moat, that is what we a re seeking in Peru with our Korean bearings...
***
Randall W. Forsyth once again pinch-hits (not "pitch-hits", my error from last week), with his column describing "Politicians and Other Disasters". Hurricane Sandy and the economic effects, both current and future are still not clear, other than that the GDP will see a bump up as people are put to work (but GDP ignores the "Broken Window Effect" of Frederic Bastiat).
Forsyth notes that the employment numbers are improving, but so slowly that it will take years to get back to where we were before the Bust.
He finishes by noting how uncertain both the election and the markets are likely to be. Apparently recent stock market performance offers no real clues as to how an election will turn out, nor how elections affect the stock market...
***
Kopin Tan ("Streetwise") offers up a prediction that the utility stocks may not do well in coming months, as they have run-up nicely due to high yields and are vulnerable if interest rates go up...
***
"Review and Preview" features a piece by Zach Trenholm quoting five high-level names answering thsi question: "What's the most pressing issue for Washington to tackle postelection?" FOUR of the five responded that reaching an agreement on the budget is No. 1, two came right out and said it must be bipartisan. [Ed. comment: Yes, I agree, we have to find a way to agree in a bipartisan manner how to cut our long-term spending on the entititlements.]
"He Said:"
"Experts say the entire 2012 election could come down to just eight states: confusion, dismay, depression, apathy, shock, disbelief, despair and anxiety."
-- Jay Leno
Ha ha ha! Good for Barron's bringing in a little relief here!
***
In "Follow-Up", Generac Holdings (GNRC), a maker of high-end electric power generating systems for homes, had a BIG SPIKE last week, due to the hurricane. The stock has had a big run since Barron's ran a bullish piece on it about a year ago. Buying it now might be chasing it...
Also in "Follow-Up" Andrew Bary writes that although the hurricane will cost insurers a lot, it will not substantially affect their balance sheets.
***
Jim McTague comes back with another article ("The Momentum Favors Romney") that again predicts Romney will win.
(Note that Randall Forsyth wrote that Obama would likely win)
At this point, I really do not know. The patter I have noted over the last few elections is that the Democrats seem to poll better than the actual election results later show...
***
Jonathan R. Laing comes out swinging, hard!, on Radian Group (RDN). RDN is one of three big players in the private mortgage insurance business, which I know nothing about. One of its two competitors was seized by state regulators last fall, the other competitor is drowning in red ink.
It looks like Radian has a lot of liabilities coming up as well as little cash. They are starting to REJECT CLAIMS...
Good for you Mr. Laing for spotting this. It would have been even better if you had caught caught this turket earlier. Stay away from RDN.
***
Jack Hough writes an interesting piece on earnings estimates and the prospects for four companies that might benefit.
Hough mentions research by University of Texas Accounting Professor Michael Clement who has found that earnings estimates that move AWAY from the consensus tend to be more accurate than those whose estimates are CLOSER to the pack.
"Fortune favors those who dare." (I forget who wrote that)
Recent bold bullish estimates have been made on the below 4 companies:
Celgene (CELG)
GameStop (GME)
Humana (HUM)
Ruth's Hospitality (RUTH)
***
Tiernan Ray ("Technology Week") writes that tech stocks have continued to be under pressure (ie, going down) because of bad earnings... Even purported winners like Cirrus Logic (CRUS), which gets two thirds of it revenue from iPhones and other gadgets.
Almost every sector is getting hit in tech-land, Ray mentions Sony (SNE), JDS Uniphase (JDSU, you remmeber them, they were going to be the Number One most valuable company by market value...) and Gartner (IT).
He finishes with comments on Microsoft (MSFT) which apparently has had a fairly successful roll-out of its new Windows 8 software (I read somewhere recently that it was buggy). He then writes that we have to see if PC sales will follow in the weeks ahead... And that it is smartphones and tablets that re big now, running on something other than Windows...
+ 1, Tiernan Ray!
***
"CEO Spotlight" this weekend is about Warren Stephens, the head of family-owned Stephens, Inc. of Little Rock, Arkansas. Fleming Meeks writes of the company's history (including the important facts re their not suffering during the financial crisis, they were not leveraged...) as well as Warren's earlier life before returning to Arkansas. He put in his dues elsewhere.
Warren Stephens:
-- admires Alan Mulally, CEO of Ford, because he too no bailout money
-- likes golf (he built is own high-end private course there in Arkansas)
-- collects art (1100 pieces)
And here is a quotation:
"It's ironic that [Warren] Buffett doesn't think there should be any change in the estate-tax law, but he's putting all of his money where it won't be taxed."
[Ed. note: For some time now, I have not admired Warren Buffett, despite his enriching many investors who signed on to Berkshire Hathaway and did very well]
***
Gene Epstein ("Economic Beat") drills down into the details of recent jobs numbers, it probably TAKES an economist to do this!
Epstein writes that the recent job gains have been much less significant than advertised. If job gains continue at their present (recent) pace, it will take two more years to get back to peak private-sector employment. He finishes:
"If President Obama wins re-election Tuesday, it will be despite the economy, not because of it."
***
Editor Thomas Donlan is unhappy with both presidential prospects as well as how elections are run as well as how Congress functions. Well, my guess is that NONE of his three complaints will be addressed or fixed (he suggests that a realistic reform might be to water-down the ability of Senators to filibuster, I doubt that will happen either).
Donlan then makes a suggestion in a shorter piece: that government STOP aiding people who choose to build in high-risk zones (shorelines vulnerable to hurricanes, people living on major earthquake fault-lines, etc.). YES, I agree. Let the private sector handle this one: if people want insurance for living in high risk areas, then they should pay for it! What's wrong with that?
***
This weekend's Barron's offers a special (but small) section on Brazil, similar to what they did a year ago. Brazil has recently slowed somewhat, in large part due to China slowing down. And this has meant that their stock market has badly lagged (growing but 2.9% year to date) almost everyone else has grown (S&P is up about 11%).
Writer Christopher C. Williams suggests a number of funds and ETFs for investing in Brazil and is BULLISH on Brazil (growing middle-class).
Reshma Kapadia interviews four Brazil experts who offer up a variety of Brazilian stocks and bonds. Banks and consumer stocks are the main companies that these four guys suggest taking a look at buying.
***
In the Market Week section, Vito J. Racanelli walks us through the short but (net) flat week in stocks. Racanelli later goes on to write bullish remarks on railroad CSX (CSX) and bearish remarks on Westport Innovations (WPRT), who has all their money on natural gas powered diesel engines. The problem with WPRT is that they have put in a lot of money into this, with no results (profit) to date. They have competition in this space (including might Cummins (CMI))...
Jonathan Buck ("European Trader") writes a bullish piece on French glass and construction materials supplier Saint-Gobain (SGO.France). They have cut costs and capacity, and apparently management has caught the religion of better responding to market conditions.
Assif Shameen ("Asian Trader") writes that Hong Kong residential property is very expensive, one of the most expensive cities in the world. He quotes two other analysts of Hong Kong who suggest that commercial property (and related) stocks might be a better bet.
Reshma Kapadia ("Emerging Markets") writes of huge recent interest among investors to buy bonds from developing markets. She notes that three analysts are saying that while caution might be in order (China), that there still are opportunities to buy higher yielding bonds overseas. She suggests that mutual funds might be a better bet re this complex but newly popular arena of placing money... [Ed. note: Maybe Ameru Trading del Peru S.A. ought to issue some debt, LOL!]
Michael Aneiro ("Current Yield") writes that municipal bonds from areas affected by Hurricane Sandy may not suffer much. But, S&P are keeping an eye on them... Aneiro recaps the change in the 10-Year treasury yield to 1.735% this week from 1.749% last week. Again, I find that last sentence of Aneiro's columns (recapping the change in 10-Year bonds) to be helpful, and I hope he continues to do that.
Jerry A. DiColo ("Commodities Corner") writes that US crude oil may slip further from its current $84.86 per barrel (from its $99 high in September), at least in part due to the hurricane...
Insiders (seven of them) at Goldman Sachs sold some $40 million of shares last week. Rats jumping off the ship? Insiders sold some $38 million at Millennial Media Inc (MM, who?) and $30 million at Honeywell Int'l. (HON).
The Mighty Peruvian Sol moved up the tiniest amount they can show (1% of one US cent), but, hey, up is up!
***
Verdict: If you need more information on any of the above, then BUY this issue!
***
The Cover Story of this weekend's Barron's is "Best 25 Dividend Funds", which on the face of it comes pretty close to examining a subject that I really want to sink my teeth into soon: income in a low interest environment.
Author Steve Garmhausen got Barron's and Lipper started their screening to exclude income mutual funds that had less than $100 million in assets and lacked a three year record. That left them with a list of 53 funds, they then pick the top 25, based mostly on three year total return. The lowest of these 25 funds had a total return of 12.9% (all returns are annualized I believe, although this was not stated in the article), Number One was JPMorgan Equity Income (ticker: OIEIX) with a 15.6% total return.
The lowest return of the 53 had an 8.5% total return, so while there WAS a real difference, I think that "Total Return" is almost a "Random Variable" (defined in my probability textbook as: "A real-valued function defined on the outcome of a probability experiment is called a random variable.", Ross, Sheldon, A First Course in Probability). I believe this to be true as you RARELY find that anyone outperforms the averages or similar other funds (the JPM fund here was quite middle-of-the-pack in the 10-year total return).
Also, of the 53 funds in Garmhausen's table, just THREE had dividend yields of over 3%, and only 24 had dividend yields higher than 2.1% (which is the S&P 500's yield).
Garmhausend did note that dividend yield was not the only criterion for each fund. He also noted (as I and many others have mentioned for many months now) that the high dividend yield space is a very crowded trade now.
So, this article solved very little of the "Income Conundrum" (c) that I face, both for myself and for you, my readers.
I found only one real gem in the article: some of the companies (Intel: INTC, ExxonMobil: XOM and Home Depot: HD) have both a reasonable yield and "moat", a sustainable competitive advantage. I fully understand the concept of a moat, that is what we a re seeking in Peru with our Korean bearings...
***
Randall W. Forsyth once again pinch-hits (not "pitch-hits", my error from last week), with his column describing "Politicians and Other Disasters". Hurricane Sandy and the economic effects, both current and future are still not clear, other than that the GDP will see a bump up as people are put to work (but GDP ignores the "Broken Window Effect" of Frederic Bastiat).
Forsyth notes that the employment numbers are improving, but so slowly that it will take years to get back to where we were before the Bust.
He finishes by noting how uncertain both the election and the markets are likely to be. Apparently recent stock market performance offers no real clues as to how an election will turn out, nor how elections affect the stock market...
***
Kopin Tan ("Streetwise") offers up a prediction that the utility stocks may not do well in coming months, as they have run-up nicely due to high yields and are vulnerable if interest rates go up...
***
"Review and Preview" features a piece by Zach Trenholm quoting five high-level names answering thsi question: "What's the most pressing issue for Washington to tackle postelection?" FOUR of the five responded that reaching an agreement on the budget is No. 1, two came right out and said it must be bipartisan. [Ed. comment: Yes, I agree, we have to find a way to agree in a bipartisan manner how to cut our long-term spending on the entititlements.]
"He Said:"
"Experts say the entire 2012 election could come down to just eight states: confusion, dismay, depression, apathy, shock, disbelief, despair and anxiety."
-- Jay Leno
Ha ha ha! Good for Barron's bringing in a little relief here!
***
In "Follow-Up", Generac Holdings (GNRC), a maker of high-end electric power generating systems for homes, had a BIG SPIKE last week, due to the hurricane. The stock has had a big run since Barron's ran a bullish piece on it about a year ago. Buying it now might be chasing it...
Also in "Follow-Up" Andrew Bary writes that although the hurricane will cost insurers a lot, it will not substantially affect their balance sheets.
***
Jim McTague comes back with another article ("The Momentum Favors Romney") that again predicts Romney will win.
(Note that Randall Forsyth wrote that Obama would likely win)
At this point, I really do not know. The patter I have noted over the last few elections is that the Democrats seem to poll better than the actual election results later show...
***
Jonathan R. Laing comes out swinging, hard!, on Radian Group (RDN). RDN is one of three big players in the private mortgage insurance business, which I know nothing about. One of its two competitors was seized by state regulators last fall, the other competitor is drowning in red ink.
It looks like Radian has a lot of liabilities coming up as well as little cash. They are starting to REJECT CLAIMS...
Good for you Mr. Laing for spotting this. It would have been even better if you had caught caught this turket earlier. Stay away from RDN.
***
Jack Hough writes an interesting piece on earnings estimates and the prospects for four companies that might benefit.
Hough mentions research by University of Texas Accounting Professor Michael Clement who has found that earnings estimates that move AWAY from the consensus tend to be more accurate than those whose estimates are CLOSER to the pack.
"Fortune favors those who dare." (I forget who wrote that)
Recent bold bullish estimates have been made on the below 4 companies:
Celgene (CELG)
GameStop (GME)
Humana (HUM)
Ruth's Hospitality (RUTH)
***
Tiernan Ray ("Technology Week") writes that tech stocks have continued to be under pressure (ie, going down) because of bad earnings... Even purported winners like Cirrus Logic (CRUS), which gets two thirds of it revenue from iPhones and other gadgets.
Almost every sector is getting hit in tech-land, Ray mentions Sony (SNE), JDS Uniphase (JDSU, you remmeber them, they were going to be the Number One most valuable company by market value...) and Gartner (IT).
He finishes with comments on Microsoft (MSFT) which apparently has had a fairly successful roll-out of its new Windows 8 software (I read somewhere recently that it was buggy). He then writes that we have to see if PC sales will follow in the weeks ahead... And that it is smartphones and tablets that re big now, running on something other than Windows...
+ 1, Tiernan Ray!
***
"CEO Spotlight" this weekend is about Warren Stephens, the head of family-owned Stephens, Inc. of Little Rock, Arkansas. Fleming Meeks writes of the company's history (including the important facts re their not suffering during the financial crisis, they were not leveraged...) as well as Warren's earlier life before returning to Arkansas. He put in his dues elsewhere.
Warren Stephens:
-- admires Alan Mulally, CEO of Ford, because he too no bailout money
-- likes golf (he built is own high-end private course there in Arkansas)
-- collects art (1100 pieces)
And here is a quotation:
"It's ironic that [Warren] Buffett doesn't think there should be any change in the estate-tax law, but he's putting all of his money where it won't be taxed."
[Ed. note: For some time now, I have not admired Warren Buffett, despite his enriching many investors who signed on to Berkshire Hathaway and did very well]
***
Gene Epstein ("Economic Beat") drills down into the details of recent jobs numbers, it probably TAKES an economist to do this!
Epstein writes that the recent job gains have been much less significant than advertised. If job gains continue at their present (recent) pace, it will take two more years to get back to peak private-sector employment. He finishes:
"If President Obama wins re-election Tuesday, it will be despite the economy, not because of it."
***
Editor Thomas Donlan is unhappy with both presidential prospects as well as how elections are run as well as how Congress functions. Well, my guess is that NONE of his three complaints will be addressed or fixed (he suggests that a realistic reform might be to water-down the ability of Senators to filibuster, I doubt that will happen either).
Donlan then makes a suggestion in a shorter piece: that government STOP aiding people who choose to build in high-risk zones (shorelines vulnerable to hurricanes, people living on major earthquake fault-lines, etc.). YES, I agree. Let the private sector handle this one: if people want insurance for living in high risk areas, then they should pay for it! What's wrong with that?
***
This weekend's Barron's offers a special (but small) section on Brazil, similar to what they did a year ago. Brazil has recently slowed somewhat, in large part due to China slowing down. And this has meant that their stock market has badly lagged (growing but 2.9% year to date) almost everyone else has grown (S&P is up about 11%).
Writer Christopher C. Williams suggests a number of funds and ETFs for investing in Brazil and is BULLISH on Brazil (growing middle-class).
Reshma Kapadia interviews four Brazil experts who offer up a variety of Brazilian stocks and bonds. Banks and consumer stocks are the main companies that these four guys suggest taking a look at buying.
***
In the Market Week section, Vito J. Racanelli walks us through the short but (net) flat week in stocks. Racanelli later goes on to write bullish remarks on railroad CSX (CSX) and bearish remarks on Westport Innovations (WPRT), who has all their money on natural gas powered diesel engines. The problem with WPRT is that they have put in a lot of money into this, with no results (profit) to date. They have competition in this space (including might Cummins (CMI))...
Jonathan Buck ("European Trader") writes a bullish piece on French glass and construction materials supplier Saint-Gobain (SGO.France). They have cut costs and capacity, and apparently management has caught the religion of better responding to market conditions.
Assif Shameen ("Asian Trader") writes that Hong Kong residential property is very expensive, one of the most expensive cities in the world. He quotes two other analysts of Hong Kong who suggest that commercial property (and related) stocks might be a better bet.
Reshma Kapadia ("Emerging Markets") writes of huge recent interest among investors to buy bonds from developing markets. She notes that three analysts are saying that while caution might be in order (China), that there still are opportunities to buy higher yielding bonds overseas. She suggests that mutual funds might be a better bet re this complex but newly popular arena of placing money... [Ed. note: Maybe Ameru Trading del Peru S.A. ought to issue some debt, LOL!]
Michael Aneiro ("Current Yield") writes that municipal bonds from areas affected by Hurricane Sandy may not suffer much. But, S&P are keeping an eye on them... Aneiro recaps the change in the 10-Year treasury yield to 1.735% this week from 1.749% last week. Again, I find that last sentence of Aneiro's columns (recapping the change in 10-Year bonds) to be helpful, and I hope he continues to do that.
Jerry A. DiColo ("Commodities Corner") writes that US crude oil may slip further from its current $84.86 per barrel (from its $99 high in September), at least in part due to the hurricane...
Insiders (seven of them) at Goldman Sachs sold some $40 million of shares last week. Rats jumping off the ship? Insiders sold some $38 million at Millennial Media Inc (MM, who?) and $30 million at Honeywell Int'l. (HON).
The Mighty Peruvian Sol moved up the tiniest amount they can show (1% of one US cent), but, hey, up is up!
***
Verdict: If you need more information on any of the above, then BUY this issue!
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