Archive - Jun 28, 2010 - Blog entry

Despite Krugman's poor choice of words, I also worry that policy blunders and this myopic focus on austerity to assuage bond vigilantes will kill any recovery going on right now. And make no mistake, the recovery is gaining traction.

We recently watched a certain TV personality jumping up and down, like Jo-Jo The Idiot Circus Boy with a pretty new pet, and yelling at his viewers to “Sell, Sell, Sell” The St. Joe Company (JOE) after the stock had lost nearly half of its market capitalization in under two months. Viewers were told, “I know it’s got a strong balance sheet. SO WHAT! It may have acquired 477,000 acres of land in North West Florida at a very low cost. SO WHAT! . . . The risk from the oil spill is no longer a question of if, it’s not even a question of when. Now the only question is how much is this going to hurt? Could it wipe out the company??”

We’ll spare the suspense here and answer that one right up front – not a chance.

This guy has got to go. Maybe we should just get rid of the lot of them.

BP has discovered the largest and most powerful well in history, and control of it may be outside existing technology. Less than 1% of the spilled oil is ending up on the beaches. Possibly 36 million barrels will end up in the sea, the same amount put there by German U-boats during WWII. The best historical analogy is not asbestos or tobacco, but Vioxx. Not for widows and orphans

The culmination of several man/months of short research has whittled a pool of 1,800 companies down to just 10, half of which appeared on our short scan list in 2008. You can guess how profitably that ended. Now that the "Great Melt-up of 2009" seems to have run its course, these companies are poised to fall back down to earth - and fall relatively hard at that. I have featured one particular company herein, closely tied to housing, construction and CRE, three of the worst sectors for a weak balance sheet to be in right now.

This is Part 3 of a major four part series dealing with what I feel is the primary question investors must now answer: is our future to be inflation or deflation? The answer has vast implications to our investment planning and decisions for the near term, and possibly for our long term. It is a very complex question with a lot of moving parts involving economics and politics.