Archive - Jun 2011 - Blog entry

“My Registry will not be a knowing participant in this fraud against homeowners. From today forward, lenders be on notice, the Southern Essex District Registry of Deeds will not record robo-signed documents.” John O'Brien

The high-flying price of hot China internet stocks is driven largely by enormous estimated revenue growth, but if we take a closer look, the growth rates implied by stock prices are totally out of line with reality.

The US economy has taken a sharp turn for the worse in the last three months. Considering that we never had a recovery to begin with, I believe we’re heading into a very, VERY rough patch here in the US. Without adjustments, the US economy LOST (not gained) over 100,000 jobs in April. Nearly 30% of all mortgages in the US have negative equity. Food prices are through the roof. And we’re actively raiding pension funds in order to fund debt issuance.

I have told subscribers that I would have to revisit the Apple valuation numbers after finding out more about their cloud services offerings. After all, embracing the cloud could potentially enable Apple to win the Mobile Computing Wars. As I have stated in my many rants regarding the Mobile Computing Wars, Apple is (strategically) placed behind Google.

Inflation expresses itself in many forms. The price of Brazilian bikini waxes in Rio is going through the roof. The big picture here is that inflation is worsening, not only in Brazil, but other emerging markets, like China, India, and Vietnam. An economic indicator in the hand is worth two in the bush? And I won’t even get into the implications of “Stealth” inflation.

Our “first quarter” Broyhill Letter is embedded below. We promise to be more prompt with our second quarter letter, which is right around the corner.

S&P 500, Dow Jones, Nasdaq, Russell 2000, Nymex Crude Oil, Comex Gold, EURUSD, GBPUSD, USDJPY

Look out below...

Too little, too late?

Greece is not in court. But there is talk of a “higher law,” much as was discussed in the United States before the Civil War regarding slavery. At issue today is the financial analogue, debt peonage.

Top-down equities underperformed credit once again as day after day we see the QE2 froth being blown off the weak recovery beer. HY credit is at its widest in six months, financials CDS are starting to crack finally, and sector relative richness in stocks is beginning to sync back to credit.

Ladies, don't say we never treat you...

"Isn't it pretty obvious that Groupon is a massive Ponzi scheme?--Jose Ferreira (Knewton Blog)

Throughout most of 2009-early 2011, any and all bad news regarding the US economy was perceived as positive for stocks due to traders’ belief that a weak economy would mean more money printing from the US Federal Reserve. That situation now appears to have changed. The last two months have seen big misses on virtually every economic data point: the PMI, ISM, Housing, etc. However, rather than rallying, stocks have dropped nearly 5%, taking out numerous lines of support.

It's one thing for the EU to vote on a rescue plan for Greece that bounds the population into lives of servitude to pay off Central Bank loans but quite another to get the people to accept it.