Sorry Charlie, Meredith Whitney Lives in a Free Country
by ilene - January 19th, 2011 1:58 pm
Courtesy of Joshua M Brown, The Reformed Broker
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I’ve always been a fan of Charlie Gasparino’s, I like his hard-nosed, old school journalism style and generally have agreed with a lot of his opinions over the years. But his rant about Meredith Whitney’s municipal bond research is so far off the reservation, he may be in danger of losing his Indian name (Reports With Martinis).
Here’s Gasparino excoriating Whitney for being negative about the prospects for municipal fixed income investing in the Huffington Post:
And yet, as the municipal market is crashing on her prediction, with deals being pulled and slashed in size, with prices falling and taxpayers having to pay extra so cities and states can sell debt, Whitney is refusing to release the actual report that would tell us how she came to such a brash, and unprecedented prediction, on the grounds that her research is proprietary and for the use of the clients of her research firm only.
It’s about time Whitney came clean and released her report to the public so we can determine if it should be given so much credence; and if it shouldn’t, traders and investors can stop a possibly misguided prediction from causing further damage.
Hey Charlie, I don’t exactly agree with Whitney’s assertion that a Munigeddon is imminent, but she has the right to publish her research as publicly or as privately as she likes. I’ll also note that muni bonds are suffering from limited liquidity as the mutual funds that make up a large portion of their ownership are seeing week after week of redemption. Little Meredith Whitney may have a decent platform but she hardly moves hundreds of billions of dollars.
No, if anything, the blame here goes to the municipalities themselves for writing checks and making promises that their tax bases couldn’t cash. The townsfolk won’t get fooled again – they are at the school board meetings and the Town Halls, they know there isn’t any money there. Whitney’s call has simply been the most vocal expression of this general consensus.
Don’t kill the messenger.
Source:
Meredith Whitney Should Show Her Cards (Huffington Post)
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Bespoke’s Earnings Season Map
by ilene - January 11th, 2011 9:38 pm
Courtesy of Joshua M Brown, The Reformed Broker
This map from the Notorious B.I.G. should give you a pretty good idea of the shape of earnings season, we’re about two weeks away from the heart of it…
Source:
Earnings Reports By Day this Season (Bespoke Investment Group)
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DAVID EINHORN: A RARE INTERVIEW
by ilene - November 23rd, 2010 12:01 am
Great interview with David Einhorn, "DAVID EINHORN: A RARE INTERVIEW."
Courtesy of The Pragmatic Capitalist
WealthTrack with Consuelo Mack aired this rare interview over the weekend with David Einhorn of Greenlight Capital. Mr. Einhorn describes what happened to the US financial system that resulted in the current crisis and how many of these problems persist. Einhorn also covers his broader investment outlook. He says QE2 will not succeed, he would not own any of the big banks and explains his outlook on gold and why gold represents real
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7 WAYS TO PLAY DEFLATION
by ilene - September 20th, 2010 4:24 pm
7 WAYS TO PLAY DEFLATION
Courtesy of The Pragmatic Capitalist
In this morning’s report David Rosenberg cited the non-existent inflation trend in recent years. Rosenberg is of course very negative about the economy, but does provide some excellent thoughts on how to play the current environment. Attached are his 7 tips for a deflationary environment:
1. Focus on safe yield: High-quality corporates (non-cyclical, high cash reserves, minimal refinancing needs). Corporate balance sheets are in very good shape.
2. Equities: focus on reliable dividend growth/yield; preferred shares (“income” orientation). Starbucks just caught on to the importance of paying out a dividend.
3. Whether it be credit or equities, focus on companies with low debt/equity ratios and high liquid asset ratios – balance sheet quality is even more important than usual. Avoid highly leveraged companies.
4. Even hard assets that provide an income stream work well in a deflationary environment (ie, oil and gas royalties, REITs, etc…).
5. Focus on sectors or companies with these micro characteristics: low fixed costs, high variable cost, high barriers to entry/some sort of oligopolistic features, a relatively high level of demand inelasticity (utilities, staples, health care — these sectors are also unloved and under owned by institutional portfolio managers).
6. Alternative assets: allocate significant portion of asset mix to strategies that are not reliant on rising equity markets and where volatility can be used to advantage.
7. Precious metals: A hedge against the reflationary policies aimed at defusing deflationary risks — money printing, rolling currency depreciations, heightened trade frictions, and government procurement policies.
Source: Gluskin Sheff
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How Investors Get Suckered Time After Time
by ilene - September 16th, 2010 1:04 pm
Dr. Paul viewed David Rosenberg’s chart picked up by Clusterstock as the "chart of the day" yesterday (posted here, with comments by Edward Harrison) and Paul concluded that this is not a good time to start buying gold. Obviously, with the rise in gold prices over the last decade, there was a great decade-long trade opportunity. But prices go up and down, and past performance does not dictate future results. - Ilene
How Investors Get Suckered Time After Time
Courtesy of Dr. Paul Price at Beating Buffett
The following chart was published on Clusterstock yesterday with commentary explaining how this proved that stocks were no longer a good place to invest…
As the S&P 500 was the only major asset class to have shown negative results over the past 10-years, they felt it was obvious that Gold, Long-term Bonds and Commodities would continue to be the best place for the next decade. In other wordsthe conclusion was that new money should be allocated to whatever had just finished going up the most!
I hear ads for gold every day shouting that, “I invested in gold 10 years ago and it’s the best decision I ever made.” “Gold has tripled since 2000. Get in now for the move to $3000 /oz.”
How many times have you made great profits buying something that just finished tripling? How did your real estate purchase in 2006 work out using that reasoning?
The same ‘Gold Bug’ ads were running in 1979 – 1980 sucking people in right at the top as Gold briefly broke through $800 /oz. for the first time. The second chart shows the disastrous results for those who took the bait.
See the longer-term chart below to learn that it took about 30 years for Gold to regain its 1980 highs (without adjusting for inflation). Even at this week’s new all-time nominal high Gold is still well below the old peak. So much for Gold as an inflation hedge.
I look at the first chart presented and draw the opposite conclusion from the Clusterstock article. If stocks suffered through 10 years of negative returns they might be quite cheap considering all the revenue, earnings and book value growth that took place.
I’d be avoiding bonds and…
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Will Quantitative Easing Spur Inflation? Job Creation? Credit Expansion? Do Anything?
by ilene - August 6th, 2010 11:14 am
Will Quantitative Easing Spur Inflation? Job Creation? Credit Expansion? Do Anything?
Courtesy of Mish
St. Louis Fed James Bullard’s proposal to start "quantitative easing" is creating a stir. Chris Ciovacco at Ciovacco Capital Management (and many others) propose the Fed can and will use quantitative easing to induce inflation. I disagree.
The following are snips from Chris Ciovacco’s article, Reading Between The Lines: James Bullard’s Seven Faces of “The Peril” followed by my point-by-point replies.
The titles in "bold red" below are questions Chris Ciovacco proposed and answered. My answers are quite different.
What could all this mean to me and my investments?
Chris Ciovacco: Let’s start with quantitative easing, where the Federal Reserve buys Treasury bonds. Using a hypothetical example to illustrate the basic concepts, assume a typical American citizen has some Treasury Bond certificates in a shoebox under their bed. If the Fed offers to buy those bonds, they will be exchanging paper money, not currently in circulation, for a bond certificate. After the transaction, the American citizen has newly printed money and the Fed now has a bond certificate. It is easy to see in this example the Fed has increased the money supply by buying the bonds. The Treasury Bond represents an IOU from the U.S. Government. When the Fed buys bonds in the open market, it is like the government buying back its own IOU with newly created money. This is about as close to pure money printing as it gets.
Mish: The typical American citizen does not have Treasury Bond certificates in a shoebox, under their bed, or anywhere else. Those who do have treasury bonds, more than likely have them in a mutual fund portfolio or treasury EFF and they probably do not even realize they have them. The very few who hold treasury bonds outright, are highly unlikely to sell them.
How is this policy any different from lowering interest rates or increasing bank reserves?
Chris Ciovacco: Lowering interest rates and flooding the banking system with cash has one major drawback; if the banks won’t issue loans or customers do not want to take out loans, the low rates and excess bank reserves do little to expand the supply of money in the real economy. Therefore, these policies can fall into the "pushing on a rope" category. Quantitative easing, or Fed purchases of Treasury bonds, injects cash directly into…
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USING THE ECRI AS AN INVESTMENT TOOL
by ilene - June 2nd, 2010 12:42 pm
USING THE ECRI AS AN INVESTMENT TOOL
Courtesy of The Pragmatic Capitalist
Great tool here from David Rosenberg at Gluskin Sheff. As we note on a weekly basis the ECRI’s leading index has proven to be a fairly prescient market indicator. Mr. Rosenberg did the legwork for us and shows us how to utilize this tool in our investment plans. He broke down the historical market performance based on the ECRI’s varying phases. As noted last Friday, we are clearly in a Phase 3 slowdown according to the ECRI. Therefore, it can be expected that the S&P will remain volatile and likely underperform:
(Right click for larger image)
Source: Gluskin Sheff
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Cancer Treatments: The New Frontier
by ilene - April 18th, 2010 2:51 pm
Cancer Treatments: The New Frontier
Courtesy of Pharmboy
Cancer is characterized by a group of abnormal cells that grow and replicate uncontrollably. These cells’ rapid replication allows them to invade adjacent tissues and organs and even spread to other parts of the body. As they replicate, they can crowd out organs, preventing the body’s essential processes from occurring normally. Cancer, if left untreated, can hinder the body’s organs from performing their functions enough to cause death.
Cancer is the second leading cause of death in the U.S. in 2009. Figures 1 and 2 show the Male and Female breakdown of different cancer types from the CDC (as of 2006) and we can understand why now prostate and breast cancer research top the list. Next comes lung, and Figure 3 shows a adenocarcinoma in the lung.
Number of deaths for leading causes of death:
- Heart disease: 631,636
- Cancer: 559,888
- Stroke (cerebrovascular diseases): 137,119
- Chronic lower respiratory diseases: 124,583
- Accidents (unintentional injuries): 121,599
- Diabetes: 72,449
- Alzheimer’s disease: 72,432
- Influenza and Pneumonia: 56,326
- Nephritis, nephrotic syndrome, and nephrosis: 45,344
- Septicemia: 34,234
Figure 1. Top 10 Cancers: Male
Figure 2. Top 10 Cancers: Female
Figure 3. Adenocarcinoma – Lung cancer
For about 40 years, the pharmaceutical and government sponsored research have waged a war on cancer, and many think that it has been a failure as the age-adjusted mortality rate for cancer is essentially unchanged over that time. But that’s a deceptive metric. S. Dubner points out that the "flat mortality rate actually hides some good news. Over the same period, age-adjusted mortality from cardiovascular disease has plummeted, from nearly 600 people per 100,000 to well below 300. What does this mean? Many people who in previous generations would have died from heart disease are now living long enough to die from cancer instead."
BusinessWeek had an article on the costs of life, and as the population ages and the baby boomers start to retire, how are we to think about the costs associated with fighting cancer?
Eric C. Sun et al. (“An Economic Evaluation of the War on Cancer” (link) 2010) attempt to measure the degree to which R&D spending on cancer has benefited not only the life expectancy, but also the social and economic value to the economy.
For decades, the U.S. public and private sectors have committed substantial resources towards cancer research, but the societal
…
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GARY SHILLING’S FAVORITE 2010 TRADES
by ilene - January 13th, 2010 12:26 pm
GARY SHILLING’S FAVORITE 2010 TRADES
Courtesy of The Pragmatic Capitalist
Gary Shilling has become infamous in the last few years for predicting the credit crunch and the bear market. The bearish investor still believes deflation is the dominant force at work and that the credit crunch is in the process of unfolding. But he isn’t bearish about everything. The following are his 6 buys:
- Buy treasury bonds – the safehaven
trade will return.- Buy income-producing securities – high quality dividend names will be a safe place to hide.
- Buy consumer staples and foods – consumers won’t stop buying the necessities.
- Buy ’small luxuries’ – consumers are trading down.
- Buy the U. S. dollar – still the world’s safehaven currency.
- Buy eurodollar futures.
Unfortunately for market bulls Shilling is generally bearish about
- Sell U.S. stocks in general – U.S. stocks are just too expensive.
- Sell home-builder and selected related stocks – home prices will fall 10% in 2010 and the stocks will tank with it.
- Sell big-ticket consumer discretionary equities - consumers aren’t buying luxury goods due to the trade down.
- Sell banks & other financial institutions – the days of big bank profits and bailouts are over.
- Sell consumer lenders’ stocks – consumers will continue to deleverage.
- Sell many low- and old-tech capital-equipment producers.
- If you plan to sell a home or investment house, do so yesterday.
- Sell junk bonds.
- Sell commercial real estate – the real estate bubble is a slow motion train wreck.
- Sell most commodities – the dollar rally will crush commodities.
- Sell developing country stocks and bonds – there will be no decoupling.
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Business Cycle, Debt Cycle… And Now Printing Cycle
by Chart School - October 30th, 2009 10:08 pm
Nic Lenoir of ICAP discusses his thoughts on the market at Zero Hedge. – Ilene
Business Cycle, Debt Cycle… And Now Printing Cycle
Courtesy of Tyler Durden at Zero Hedge
Submitted by Nic Lenoir of ICAP
Today’s PMI data was very strong. There are experts in econometrics much more knowledgeable than I will ever be calling for further strength in production numbers that will lead to a turn in unemployment into Q1 2010. I don’t dispute their models or the indicators they look at. However I can’t come to terms with it. I think this is in great part because the business cycle which is supposed to lead us out of this recession is at odds with a much longer and bigger cycle: the debt cycle. I know this flies in the face of 50 years of econometrics that has made people a lot of money trading, but this is mainly due to the fact that the debt cycle is so long and stretched over time that we don’t really have data to measure its impact on previous cycles. It coincides in a sense with the Kondratieff cycle, but transposed into today’s financial markets, the burst of the debt bubble is a lot more pronounced. Basically modern technology and financial engineering has made it very easy to securitize credit and source funding or financing globally, so that the extent of the debt bubble has been allowed to grow far beyond what could have happened 50 years ago. There is also obviously the global aspect of it. Because financial markets are more and more global, so is the crisis.
Albert Edwards had a great piece the other day discussing the renewed importance in a post-bubble environment of the business cycle. This line of thought has also been outlined by the Global Macro Investor in the past. It relies a lot on the example given by Japan, or the 70s. One could argue that unlike the case of Japan which benefitted of the strong economy of the 90s to have a more robust business cycle due to exports, our current global economy will lack an engine to drive the cycle. The risk is that the consumer has retrenched enough in the US and in Europe that the business cycles becomes a restocking of shelves carrying products there is not necessarily much demand for. I…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site