Archive - 2010 - Blog entry

Looks like private equity is staging a comeback but will it last?

Summary and my thoughts on a trio of Dr. Marc Faber's latest interview where he discussed his 2010 outlook on China bubble, sovereign default risk, stocks and commodities.

If this pattern reasserts, watch out over the next week.

The bull case for commodities, energy, food, and water. But skip natural gas. The sixth in a series of seven on The Mad Hedge Fund Trader’s Annual Asset Allocation Review. (FCX), (VALE), (RIG), (JOY), (CCJ), (FSLR), (UNG), (USO), (MOO), (DBA), (MOS), (MON), (AGU), (POT), (PHO), (FIW)

An all-out war on public pensions is brewing in Canada...

What a beating the Administration took tonight! I think this is a real life example of a Greek Tragedy. What does it mean? I think it could mean a lot.

Banks are giving up to 10x leverage to investors to buy MBS while foreclosures and unemployment are still on the rise against the backdrop of continuing diminishing home prices - all at interest rates that have nowhere to go but UP!

Are the regulators going to wait until after this blows up (AGAIN) or do something about it as it is blowing up.

Money managers are always looking for an advantage to help them better understand the market and get an edge in their stock selection process. The Applied Finance Group's (AFG’s) Market Forecast Project (MFP) has served that purpose for over 300 investment professionals that participate, and it continues to grow. In our 6th issue of the MFP we have identified the favorite long and short equity ideas from participants, trends in the movements of investor sentiment over the last 6 surveys, as well as other key topics affecting the economy and the markets.

This month’s survey contains questions on topics such as:

• How many seats will change in the House of Representatives in the 2010 election from (D) to (R)?

• What are investor’s Stock Market and Economy predictions for 2010?

• Is the current stock market fundamentally undervalued, fairly valued, or overvalued?

• Best performing BRIC of 2010?

Pfizer also fits the profile of a stock that should do well in our steroidally challenged economy, as its revenues are unaffected by economic cyclicality. In case of inflation it has significant pricing power to pass cost increases to consumers (yes, and even the government). In case of deflation it should be able to maintain prices, and its ample cash flows will allow Pfizer to pay off its debt in a few years, if it chooses to. It is priced like a very safe bond with an embedded nonexpiring, free call option, yielding 4%. If Pfizer doesn’t come up with a single new drug its price will not change much; it will be where it is today. Any new drugs are just an added bonus.

Today's banks are much more complex than LTVs and 2nd liens, but when these risky products on the downturn are multiples of your tangible capital, it really doesn't take more than that to start causing some severe solvency issues. You can have a trillion dollars in assets, but if you have $20 billion in equity with $100 billion in investments that will take a 50% loss, you are underwater by $30 billion. You can talk about these banks using terms such as "complicated", "complex", "fancy" and all of the other high falutin' adjectives that you can think of, but at the end of the day, if you lose more than you own you are insolvent. Now, that's a simple concept and it works quite well for my investment pursuits.

As you recall, my take on the deflation vs inflation debate is much less crystal ball-ish than many other pundits on the web. I never was very much into fortune telling or forecasting the future. From what I observed and researched, if I had to make a call that call would be stagflation.

On that note, here is an interesting note from one of my site's subscribers on how China is exporting to what is amounting to stagflation to the United States, now!

JP Morgan's Q4 results show that banks are not only still in hot water yet, but the pot hasn't even really started to boil. Why is it that I look at the info and get such a different impression than much of the media and the sell side who proclaim "blow out results"? Yeah, the results "blow" alright...

Let’s Try Chinese Style Securities Regulation. Just execute the bastards! Great for the human organ business, but not so good for crime prevention, or getting your money back. The urban legend about a vast secret complex of government concentration camps is true. The next kidney up for sale may be yours.

According to the C.D. Howe Institute and the British-North American Committee, the governments of the UK, US and Canada are understating the true cost of public sector pension plans. If true, then you got the seeds to the next debt time bomb. The hard road ahead is looking harder when you sit back and analyze the implications of all these pension liabilities, especially if you consider the possibility that they're grossly understated.

Complacency reigns as they don't ring a bell at the top.