by ilene - April 24th, 2010 5:40 am
Courtesy of Prieur du Plessis at Investment Postcards from Cape Town
Jeremy Grantham has become a familiar and very popular face on this site. For those treasuring his insight, wisdom and prescient calls, the co-founder and chief investment strategist of Boston-based GMO has just published the April edition of his quarterly newsletter entitled “Playing with Fire (A Possible Race to the Old Highs)”.
Here are a few excerpts from Grantham’s newsletter.
“So what do I think will happen? That’s easy: I don’t know. We have been spoiled in the last 10 years with many near certainties – mainly that real bubbles would break – but this is definitely not one of them. Not yet anyway. (However, I am still willing to play guessing games despite the fact that “I don’t know.” So here, as Exhibit 1, is my probability tree.)
“The general conclusion is that the line of least resistance is a market move in the next 18 months or so back to the old highs, say, 1500 to 1600 on the S&P, accompanied by an equivalent gain in most risk measures, followed once again by a very dangerous break. If that happens, rates will still be low and thus difficult to use as a jump starter, the financial system will still be fragile, and the piggybank will be more or less empty. It is remarkably silly for the Fed to allow, even encourage, this flight path. It is also remarkably silly for investors to be so carefree, given their recent experiences. Fortunately, there are several less likely outcomes that collectively,…
by ilene - April 4th, 2010 6:44 pm
Courtesy of The Pragmatic Capitalist
MIT professor Simon Johnson says the next big down leg in the bear market will come from emerging markets:
by Phil - March 18th, 2010 7:59 am
130 S&P 500 companies hit 52-week highs yesterday.
Things must be even better than I thought in yesterday’s post and there has been a conga line of pom-pom waving analysts on GE/CNBC this morning telling us how UNDER valued everything is because we just don’t see the BIG PICTURE. As Bespoke notes in their chart of the S&P and it’s new highs, you want to see more and more stocks hitting new highs to sustain a rally but my question is – with the market now at 17-month highs and making new highs every day – what’s up with the other 370 stocks?
In an ordinary market, I wouldn’t question it but this is not an ordinary market. 52 weeks ago we were at 666 on the S&P and stocks were making DECADE lows. Here we are with the index up almost 80% off that bottom and we can’t pull a lousy 52-week high from 2/3 of the index??? We’ll be keeping an eye on this indicator to see how things pan out but notice when the market fell – there were no doubts, 80% of the stocks made 52-week lows last fall – not THAT’S a sell-off. That’s the kind of dramatic numbers you expect to see in a dramatic market move – not this wimpy 40% stuff – let’s see some conviction people!
AAPL is convicted – they are up 191% from their lows and AAPL is 15% of the Nasdaq so, all by themselves, AAPL has accounted for 28% of the Nasdaq’s move from 1,265 to 2,389 (89%). TRV is also moving with conviction, up 54% since March and adding 160 much-needed points to the Dow, a great swap for C, who would have only added about 24 had they remained in the index. CSCO replaced GM (because they are soooooo similar) and they too have been a great trade for the Dow, up 100% off the March lows and slapping 104 bonus points on the index.
Ah, now we see how our industrials can do so well despite all the unemployment and lower cap utilization and lack of demand and high commodity input costs – we just shuffle the deck until we find a set of cards that work! Even so, as I’ve pointed out this week, the Dow has been lagging the Nasdaq and the Russell by a wide margin and the NYSE and S&P have…
by ilene - January 19th, 2010 2:19 pm
Courtesy of The Pragmatic Capitalist
This week’s Guru Outlook brings us the brilliance of Felix Zulauf. Zulauf is the founder of Zulauf Asset Management based in Switzerland and is well known for his appearances in Barron’s annual roundtable. Zulauf has nailed the secular bear market downturn and 2009 upturn about as well as anyone. More importantly, he has been nearly flawless in connecting the dots in the macro picture. From the de-leveraging cycle that led to the downturn to the government stimulus that led to the upturn – Zulauf has been remarkably prescient.
At the 2008 roundtable Zulauf recommended investors purchase gold and short stocks due to concerns with the consumer. He remained bearish throughout the year. At the 2009 roundtable Zulauf said stocks would bottom at some point in the second quarter after making a new 2009 low. He got aggressive and said stocks would rally after that. His recommendations to purchase oil, gold and emerging markets were home runs.
Zulauf’s macro outlook hasn’t changed all that much. He still believes the de-leveraging bear market cycle is with us and that we’re in the early stages. Zulauf sees a number of similarities with Japan and says the consumer is in the process of long-term balance sheet repair:
“we are in the early stages of a deleveraging process, which is marked by a shift from maximizing profits to minimizing debt. It is a multiyear process. The U.S. consumer is in bad shape, and the U.K. consumer is even worse.”
But Zulauf hasn’t turned bearish in the short-term yet. He says the markets have another 10% of upside before concerns over the end of the stimulus begin to weigh on the markets:
“Central bankers themselves are somewhat afraid of what they have been doing. Politicians are worried about public-sector debt. Therefore, the authorities will try to step away slowly from their stimulation efforts, because this policy isn’t sustainable. That’s the risk for the markets. The U.S. stock
market has enough momentum to rise another 10% or so. But the authorities will start leaning the other way as they see signs of economic growth in the first two quarters, and possibly a jump in inflation. That could push the market down.”
…
by ilene - December 17th, 2009 2:32 pm
Courtesy of The Pragmatic Capitalist
Strategists at Prudential are among the most bullish on Wall Street (for more very bullish outlooks please see RBC’s outlook, Merrill’s outlook & JP Morgan’s outlook). They see further government stimulus, low interest rates and the inventory rebuild driving the S&P up to 1,350 by the end of 2010 for a full 23% rally from current prices.
They believe inflation is likely to remain low as slack in the economy, high unemployment and low capacity utilization keep prices under wraps.
They remain very bullish on equity markets for 5 primary reasons:
1) GDP rebound sustaining in Q4 and into 2010, and growth expectations being revised higher.
2) Q3 earnings surprising on the upside outlook and earnings recovering further in Q4 and 2010 with solid GDP growth, widening margins and improved pricing power.
3) Inflation moving from disinflation to low inflation with excess capacity and high unemployment.
4) Global central banks holding interest
rates at crisis lows levels, long-term rates remaining low, and plenty of liquidity.5) Continued stabilization in financial
market conditions and risk appetite improving further.
How to play it? They want to be overweight stocks and underweight bonds. More specifically, they prefer emerging market and UK equities with a modest overweight in the Eurozone while being underweight Japan and the U.S.
In terms of sectors they prefer energy, info. tech, and materials with a modest overweight in financials and industrials. They are neutral consumer discretionary with modest underweights in consumers staples and healthcare. They underweight utilities and telecomm.
In the bond market they like emerging markets and Japanese debt with a modest overweight in UK debt. They are neutral on the Eurozone and underweight US debt.
The tend is much the same in terms of forex. They like the Euro and emerging market currencies, remain neutral on sterling & Yen with an underweight on the dollar.
Source: Prudential
by ilene - December 5th, 2009 9:49 pm
Courtesy of John Mauldin at Thoughts from the Frontline
This morning’s unemployment number, though still down by 11,000, is the best we have seen in a very long time. The birth/death ratio only added 30,000 jobs, and previous months were revised upwards. Given that the ADP employment number on Wednesday was so high, and the service ISM was not good, this comes as a very pleasant and positive surprise. Is this a trend, or something seasonal because the main driver was temporary jobs? We will see in a few months. Let’s hope we see a real turnaround soon.
With Damien Hoffman of Wall St. Cheat Sheet
John Mauldin coined the incredibly popular phrase, "Muddle Through Economy." If the next few years continue to drag along as we rebuild from the greatest credit bubble in history, then John’s term may become the catch phrase used by every financial journalist and economist in the land.
John is a passionate traveler with business partners all over the world. He also puts out a free newsletter to over one million people worldwide. This reach of friends and travels give John an excellent macro view of the world economy. Further, his multidisciplinary interests offer some unique insights into economics and human behavior.
I had a chance to catch up with John and talk about his experiences as an economist, his perspective on which countries will grow the fastest in the coming decades, how he sees demographics affecting the world, and a bonus question from one of our 1400 Twitter followers …
Damien Hoffman: John, was economics part of your schooling or a passion of yours right from the start?
John: I had a triple major in college, one of them being economics and history. So I’ve always been fascinated by history, economics, and finance. The markets are a big puzzle to me and I’m a puzzle addict. So it feeds my addiction. I started reading the Austrian economists first, in the early ’80s as I entered the investment world. That was my real introduction to economics. Over time, if you stay around long enough and read enough, you can pick up all the other schools of thought, like I did.
Damien: Based on some of your newsletters,…
by ilene - November 29th, 2009 7:12 pm
Courtesy of Adam Sharp at Bearish News
Dubai’s man-made islands are stunning technological achievements. But they may end up being the poster-children for this era’s reckless real estate ventures. These projects are turning out to play a big role in the ongoing debt crisis in Dubai.
Here’s “The World” island project:
And here’s one of the three palm tree islands, where you can see construction underway:
I remember being struck by the scale of the project while watching a Discovery Channel documentary. What a cool concept. Unfortunately, it looks like reality is catching up to this pipe dream.
Recent revelations show that the islands’ parent company, Nakheel PJSC, is in trouble. Their attempt to delay debt payments sparked a global selloff on 11/27. Fears of a debt crisis in Dubai spreading to other emerging markets (EM) roiled stocks.
Investors collectively paused the day after Thanksgiving, “Wait a sec… I thought emerging markets were going to be the engine driving us out of this mess… Now their bubbles are popping? Uhhh-Ohhh.”
Bloomberg provides a detailed example of island building gone-wrong:
Samsung C&T Corp., builder of the world’s tallest tower in Dubai, said it stopped work on a $350 million bridge in the city after a unit of Dubai World halted payments.
Construction of the half-finished bridge, to the man-made Palm Jebel Ali island, was suspended earlier this month after Nakheel PJSC made no payments for about two months, Cho Keun Ho, a spokesman for the Seoul-based builder, said today. Calls to Nakheel’s spokeswoman Anna McGovern went unanswered.
Not all emerging markets have the same debt issues Dubai does, of course. But there are tons of risky investments lurking out there, and they’re not just in EM (hint – many are hidden off US bank’s balance sheets).
Some are speculating that Dubai’s debt problems will be a catalyst, sparking major selloffs worldwide, particularly in EM. If so, I would think those countries with stronger balance sheets, like China, will fare better than those with high debt loads. That said, I am considering reducing my personal EM holdings, but haven’t done so yet.
by ilene - November 28th, 2009 11:30 am
Courtesy of Joe Weisenthal at Clusterstock
After you’ve gotten your Dubai fill, take a break and check out the situation in Greece.
Here’s the Telegraph from earlier this week:
When the European Central Bank’s Jean-Claude Trichet said last week that certain sinners on the edges of the eurozone were "very close to losing their credibility", everybody knew he meant Greece.
The interest spread between 10-year Greek bonds and German bunds has jumped to 178 basis points. Greek debt has decoupled from Italian debt. Athens can no longer hide behind others in EMU’s soft South.
"As far as the bond vigilantes are concerned, the Bat-Signal is up for Greece," said Francesco Garzarelli in a Goldman Sachs client note, Tremors at the EMU Periphery.
The newly-elected Hellenic Socialists (PASOK) of George Papandreou confess that the budget deficit will be more than 12pc of GDP this year, four times the original claim of the last lot. After campaigning on extra spending, it will have to do the exact opposite. "We need to save the country from bankruptcy," he said.
Good luck. Communist-led shipyard workers have already clashed violently with police. Some 200 anarchists were arrested in Athens last week after they torched streets of cars in a tear gas battle.
by ilene - November 3rd, 2009 9:24 pm
Courtesy of Credit Writedowns
This article by Peter Tasker, a well-regarded financial analyst in Asia, comes via the Financial Times (hat tip Marshall). He sees an enormous bubble forming in China – and parallels to Japan circa 1987:
Emerging markets, it seems, have had a good crisis. In contrast to the debt-ridden G7 economies, they have quickly resumed their growth trajectory. No surprise, then, that US emerging market mutual funds are experiencing record inflows. The stellar performance of the Brics markets – Brazil, Russia, Indian and China – is due to continue into the distant future.
Such is the narrative now forming among investors. To anyone who has lived through the rise and fall of the Japanese bubble economy, it should set off alarm bells.
Remember that it was in the years following the 1987 "Black Monday" crash that Japanese assets went from being expensive to absurdly overvalued and the Nikkei’s dizzy rise to 39,000 forced the bears to throw in the towel…
But what you saw was decidedly not what you got. The crisis, far from leaving Japan unscathed, exacerbated its structural problems and laid the groundwork for a far greater disaster…
Interest rates have been far too low for far too long. If the natural interest rate is, as the Swedish economist Knut Wicksell posited, around the level of nominal GDP growth, then China’s interest rates should have been close to 10 per cent for most of this decade. Alan Greenspan, former chief of the US Federal Reserve, has been criticised for holding interest rates too low and setting off a housing and credit bubble in the US. But if US monetary policy was wrong for the US, it was even more wrong for the high-growth countries that "imported" it. The result could only be a massive misallocation of capital…
At the 2008 peak, the price-to-book ratio of the Shanghai stock exchange was over seven times, well above the five times achieved by Japanese stocks in 1989. After the turbulence of the past 18 months, the ratio has fallen to 3.3 times, still the world’s second highest after India, and residential real estate trades at multiples of income that make the US housing boom look tame…
What is scary is that the current frothiness of emerging markets,
…
by ilene - July 12th, 2009 5:33 pm
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Posted by TraderMark at Fund My Mutual Fund
If you’ve been around these markets for a while you generally know by the time the retail investor is piling into a group, chasing huge scores – it’s generally time to run away (at the least) and for the 5% among us who short, begin to think seriously about betting against the small fry. It sounds cold, but this is just the way it tends to work … trust me, I used to be one of these people, so I learned the hard (read: expensive) way. As we read the piece below let us trust in the fact that none of these people were buying in early March, but most likely jumped in when it was "safe" a month or so later.
Contrast the lemmings running into "what’s hot" with what you’ve been reading here – about a month ago I was saying commodities is crowded and I would not want to be exposed highly there. People who heeded that thought process avoided the sand blasting that has gone on for 3 weeks running in this sector. While I do like these emerging
I don’t really talk much bonds but while junk bonds (highest risk) has provided the most juice the past 3-4 months, its basically been a parallel to the stock
…
February 11th, 2012 11:03 pm
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
The prophetic words of Antal Fekete in his now infamous 'essay' on Gold are as relevant now (perhaps more so) as they were when he first wrote them 15 years ago - especially as the Euro-zone migrates from lossening fiat-money to quasi-money (greek pharma bonds for instance). While summarizing this must-read discussion of mainstream economic orthodoxy's mis-teachings is impractical, his initial introduction sets the stage for what is to come: "The year 1971 was a milestone in the history of money and credit. Previously, in the world's most developed countries, money (and hence cred...
February 11th, 2012 8:20 pm
Submitted by Mark HannaCourtesy of MarketMontage. View original post here.
Damn. Two (MJ and Whitney) of the big 4 of the 80s gone – Madonna and Prince remain. Probably the most well known Star Spangled Banner ever…
Disclosure NoticeAny securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund's holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
...February 11th, 2012 6:46 pm
It's Well Past Time for Plan ZCourtesy of The Automatic Earth
Mario Draghi captured the utter ineptitude of him and every other Eurocrat out there when he said the following at today’s press conference in response to a question about a Greek exit: “To have a Plan B means defeat already. I am confident that all the pieces of this will fall in the proper places.”
Most 5-year old children in pre-school have already been told not to believe that they can always win and that “winning isn’t everything”, but Draghi & Co. still refuse to consider the possibility of failure even as it is staring them in the face. What’s really disturbing is that the stakes here are obviously much, much higher than they are o...
February 11th, 2012 5:35 pm
Courtesy of Doug Short.
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
It's interesting to watch some of the terms bandied about in headline news. For example, the LA Times headline reads S&P says student loan debt could be next financial bubble.
Next? Could Be?
What with the word "next"? Also what's with the words "could be"? Without a doubt student loans are in a bubble and have been for many years. The source of the problem, as it always is with financial bubbles, is cheap money, loans to nearly anyone, and in the case of student loans, no way to discharge the debt, even in bankruptcy.
From the article:
"Student-loan debt has ballooned and m...
February 11th, 2012 12:00 am
Top 5 RisersStockRatingAnalysisICABUYThe projected value for Empresas ICA is still rising quickly even though past earnings have already improved significantly.XBUYThe projected value for US Steel is still rising quickly even though past earnings have already improved significantly.FEICBUYProjected value continues to rise for FEI while long term increases in earnings growth are also becoming more widely expected.ASBCBUYMany analysts are expecting higher than previously expected long term growth from Associated Bancorp, and its near-term earnings outlook is also improving....February 10th, 2012 6:20 pm
Courtesy of Benzinga.
The following are the M&A deals, rumors and chatter circulating on Wall Street for Friday February 10, 2012:
Actuant Acquires Jeyco Pty
The Deal:
Actuant (NYSE: ATU) announced Friday that it has acquired Jeyco Pty Ltd (“Jeyco”). Headquartered near Perth, Australia, Jeyco designs and provides specialized mooring, rigging and towing systems and services to the offshore oil & gas industry in Australia and other international markets. Additionally, its highly engineered products are used in a variety of applications for other markets including cyclone mooring and marine, defense and mining tow systems. Jeyco generates annual revenues of approximately $20 million.
Actuant shares closed at $27.33 Friday, a loss of 0.18% on average volume.
...February 10th, 2012 4:11 pm
Courtesy of John Nyaradi.
Greece was “saved” for less than 24 hours but now major ETFs around the world skid into the weekend on Greek fearsAfter wangling for a week or more, Greek took their new deal to the European Ministers meeting, only to have it promptly rejected and so as we go into the weekend, major global markets and ETFs have again hit the skids on Greece.
After two years of wangling, the European zone is demanding yet more and deeper cuts for Greece to qualify for the next round of bailout loans that will keep the country from going bankrupt on March 20th.
Major European and United States ETF responded negatively to the new developments:
SPDR Dow Jones Industrial ETF (NYSEARCA:...
February 10th, 2012 1:40 pm
Reminder: David is available to chat with Members, comments are found below each post.
Click here for the full report.
February 10th, 2012 1:22 pm
Today’s tickers: TRLG, KR & IGT
...
more from Caitlin
February 6th, 2012 9:02 am
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
Optrader
...February 5th, 2012 5:19 am
NEW: Elliott and Ilene are available to chat with Members regarding topics presented in SWW, comments are found below each post.
Here's the latest Stock World Weekly, called "The Relentless Pursuit of Meaningless Metrics."
...January 30th, 2012 7:22 am
Here is a quick update of past trades and our current position. AA Money No trade this week as we wait for AA to settle. Phil remarked last week that AA seemed overvalued. In the meantime, it looks like we might have to roll our Feb 9 calls. Good thing we sold only 5 of them against our position. Last week P&L - 310.00 We lost ground last week, but we still have 11 months to sell premium! FAS Money Very good week for FAS Money as we benefited from the large amount of premium sold the previous week. We covered most of the shorts in advance of the Fed speech, but sold another set of options on Wednesday after the speech - 2 FAS calls that expired worthless on Friday, 2 FAS put that we are still holding and 2 FAZ put that we bought back for a profit on Friday. A late stick comparable to last week's almost gave us problems at the end of the day though! Last week P&L - $4277.00 IWM Money A decent week in this virtual portfo...January 18th, 2012 1:09 am
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Finding new and exciting Biotech companies that target novel mechanisms is like trying to find a needle in a haystack. Sure there are many companies working on cutting edge science, but investing in those companies to reap the rewards of their work is a very dangerous game. More often than not, companies fail because the mechanism does not pan out, the compound(s) do not have pharmacokinetics (get into the body or last very long in the body), or an adverse event happens that knocks years off a development timeline. In addition, the stock can be manipulated by market makers so investors don't know which way is up. I approach investing in biotechs as a long term prospect. I continue to like our current portfolio of biotech companies (join in chat for many of those plays), and we continually add/subtract shares and sell/buy options on ...
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Philstockworld, LLC (PSW) nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. |
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