Value Expectations's blog

With the Obama economy limping along thanks in part to the Administration’s policies in favor of extreme dollar weakness, there’s growing speculation as to his re-election chances in 2012.

Contrary to the popular view among economists that currency devaluation is necessary during periods of economic hardship, debasement works against the very investment that drives company formation and job creation given the tautological reality that any returns on investment will come back in cheapened money.

Nobel Laureate Robert Mundell and his followers have made some noise of late about the need to achieve a fixed exchange rate between the dollar and the euro. About their desire for an exchange rate fix they're certainly correct, though they're wildly incorrect in suggesting that inflation and deflation can be cured if the U.S. Treasury simply ties the dollar to the euro.

For those who watched television with any frequency in the 1980s, they surely remember the ubiquitous presence of Robin Leach, host of Lifestyles of the Rich and Famous. With a recovering economy having powerfully revived the ability of Americans to grow very rich, Leach's show was a guilty pleasure for those eager to see how they lived.

Utilizing The Applied Finance Group’s backtest system, we ran a strategy of investing only in companies with a market capitalization of greater than US$ 1 Billion and a dividend yield above 3%. The strategy has worked fairly well with the annualized returns over the last 12 years beating the overall universe. While the dividend paying strategy worked well, a strategy based on AFG’s valuation metric performed better.

The presumed default catastrophe driven by an inability to increase debt is precisely why it shouldn't be increased.

The alleged scandal surrounding once-presumed Warren Buffett heir apparent David Sokol has quite predictably generated all manner of breathy headlines about a Teflon-coated Berkshire Hathaway suffering a besmirched reputation. As if often the case, the supposed ill deed in no way measures up to the hype.

The ongoing tragedy in Japan has unsurprisingly generated a great deal of commentary covering how - and if - the country will recover economically from difficulties that at least from the television screen, seem insurmountable. The happy news is that if history is any kind of indicator, Japan will rebound with great speed.

Taxes are always on the mind of the electorate, and while individual rates of taxation garner the greatest fraction of our attention, the way corporations are taxed is important too. A change in direction in this area could potentially free up a lot of capital, all the while reducing a great deal of waste.

Yesterday at Apple Inc.’s (NASDAQ:AAPL) live press event in San Francisco, CEO Steve Jobs unveiled the much anticipated second version of the iPad (iPad 2), which will begin shipping March 11th. Despite Jobs’ recent health concerns (he is still on medical leave), the man behind the most innovative technology company in the world right now was determined to unveil the iPad 2 on his own, and looked relatively healthy while doing it according to several attendees, saying that “we’ve been working on this product for awhile, and I didn’t want to miss it.”
The iPad 2 is a very impressive gadget – much like its predecessor – and should push the company further ahead in the tablet race (Apple owns 90% of the tablet market share selling approximately 15 million devices in nine months during 2010), making it that much more difficult for competitors to catch up in the near term. Here are some highlights of the iPad 2:

Target Corp. (NYSE:TGT) & Kohl’s Corp. (NYSE:KSS) reported yesterday that revenues and profits rose in the 4th quarter behind strong holiday season sales, helping lift their share prices in yesterday’s trading. Shares of Target rose 3.5% to $52 and shares of Kohl’s rose 3.4% to $53.80.

Investors involved in the equity markets often pay close attention to which stocks the prominent fund managers in the market are buying and selling every quarter when 13F filings begin to roll in. These reports provide insight into how the brightest investing minds and most successful money managers are currently investing their money and shed light on any big bets being made by these "gurus".

Today (On Wednesday), Sanofi-Aventis (NYSE:SNY) inked an agreement to acquire Genzyme Corp (NASDAQ:GENZ) after sweetening its bid price to $74 per share plus a contingent value right (CVR), up from the $69 per share bid that GENZ rejected as too low back in October. We wrote in October that SNY was overpaying for GENZ because we valued the shares at $64. Including the CVR, which is contingent on recovering from the manufacturing problems it’s faced for its 2 key biotech drugs, as well as receiving FDA approval to market its multiple sclerosis drug candidate Lemtrada, and increased sales targets, the market is valuing the total bid price at about $78 per share.

On February 12, 1973, after the second Treasury announced devaluation of the dollar, George Shultz said, “there is no doubt that we have achieved a major improvement in the competitive position of American workers and American business.” Translated, a weak dollar would stoke an exporting bonanza for U.S. businesses that would need to hire new workers to help fulfill all the demand driven by the dollar’s debasement. That Shultz was soon enough revealed as tragically incorrect is a classic understatement. Needless to say, the dollar’s devaluation predictably unleashed a lost decade of inflation and economic misery for the U.S. and the world.

Earlier this morning the Rafael Resendes, Co-Founder of The Applied Finance Group and co-manager for the Toreador Large Cap Fund: TORLX, appeared on CNBC’s Squawk on the Street alongside Roger Ibbotson, Yale Professor of Finance. In the interview Mr. Resendes provided three stocks that he believes are attractive investment opportunities.