Archive - Aug 2010 - Blog entry

August 31st

Leo Kolivakis's picture

Magna Cum Laude?

Despite strong opposition from Canada's largest public pension funds, Magna International said it will move ahead with a deal to have founder Frank Stronach give up control over the auto parts giant. In all, the payout is valued at roughly $1 billion – an unprecedented 1,800% premium and dilution compared to other conversion deals.

Phoenix Capital Research's picture

In today’s Crony capitalist economy, the political system is bought outright by the large multinational corporations via various lobbying efforts/ corporate donations. These multinationals then receive kickbacks in the form of deregulatory policies and other tax loopholes, which permit them to further expand their power and influence.

Reggie Middleton's picture

CRE porn (about as sexy as the industry gets): Mrs. High End Condotel cum Condo Market is reintroduced to Mr. Gravity and their swinging partners, Mr. Supply and Mrs. Demand!

Note for you imaginative guys: A Latin or English linking word, which can be either the preposition with or a conjunction meaning when, because, or although.

Reggie Middleton's picture

Research in Motion's flagship product was obsolete upon launch and is getting discounted by 50% two weeks after release while competing handsets can't stay on the shelves at FULL price. RIM needed a home run with this product, and instead it struck out. This portends very bad things for the share price in the medium to long term, sans a buyout/takeover.

August 30th

Phoenix Capital Research's picture

In today’s world of trillion dollar bailouts, $2-4 billion doesn’t sound like much, so let’s give some perspective here… in its golden days, Lehman Brother’s market cap was roughly $47 billion. So you’re talking about bets equal to an amount between five and 10% of its market cap. Not exactly chump change.

And Lehman had no idea where it was or how much it really owed.

Mind you, we’re only addressing Lehman’s options and futures derivatives, we’re completely ignoring its mortgage backed securities, collateralized debt obligations (CDOs), and other Level 3 assets. Options and futures are literally the “tip of the iceberg,” the most visible portion of the behemoth that was Lehman’s off balance sheet derivative issues. After all, these are regulated securities unlike most derivatives.

Chris Pavese's picture

Consensus earnings estimates for 2011 and 2012 are still greater than $95 and $108, respectively, at the same time that GDP estimates are plummeting (although still don’t face the harsh economic reality). To put these figures into perspective, analysts were forecasting a near 20% decline in earnings at the market’s trough. Today, expectations are for 22% growth in the year ahead.

We show an example of this optimism below.

Chris Pavese's picture

The “Sunshine Pumper Strategists” are out in full force today, with earnings yields on stocks spiking higher than those available on bonds. So we were pleased to see that Ron Griess at The Chart Store provided us with a couple of charts this morning that illustrate this relationship (or lack thereof) over time. Ron’s long term perspective is critically important here, as any monkey can easily pick out a few bananas that accurately predict the market at any given moment in time.