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This and That
MS All In
There is a big crowd of analysts that seems to be stuck with overly optimistic forecasts for Apple. For example, Citi did a bearish story on America's favorite stock today, but even with the bad news, Citi still thinks the stock should be $75 higher.
Morgan Stanley (MS) is stuck on what's looking like a bad call; the deep thinkers doubled up today. The one-year outlook for the stock is to trade at $714 (with a potential upside as high as $980). That's a big call for a stock that has lost $187B of market cap the past few months (equivalent to 3 Goldman Sachs, 5 Starbucks or 10 Dells)
Who knows? Maybe all these bulls are right. That rarely happens. What bothers me with the MS update on AAPL is that the firm sees the downside in the stock at close to zero (no lower than $495). That's never true. Talk to those who have been saying it has been a screaming buy the last $200.
Me and JA
I’ve been a member of JA most of my adult life. This important turning point came after I became addicted to the most powerful narcotic on earth. Like most addicts, I lost everything that I had. Were it not for JA, I probably would not be around writing blogs today.
Today, I’m somewhat of an elder statesman for this very private group. The grey hair and the decades without re-addiction have provided me some status. I keep in contact with senior JA members around the world. I do my own ‘self-help’ sessions with those who have recently fallen prey to this poison. Using this global network, I can observe the trends on the rate of those who become newly addicted, and also those poor souls who fall off the wagon, and make the fateful call to their dealer.
I have distressing news to report. The JA “Help” lines have been ringing off the hook. Tens of thousands of JA members, many of who had been ‘living clean’ for more than a decade, have started abusing the drug again. Worse still, is the explosive increase in first time users. (85% first time users become hopelessly addicted - 10Xs greater then heroin).
The full name for what is familiarly known as JA is, Japan Short Anonymous (JSA, or just JA). The group is patterned off of Alcoholics Anonymous (many JA members are also in AA). The only qualifications for joining JA are the loss of a great deal of money, and the willingness to (privately) admit to being a self-destructive Yen shorter.
Okay, I’m kidding, again. But I’m not kidding about the betting against Japan. It’s huge, both in the currency and debt markets. For the past few months, money has been making money on the short side of Japan. Nothing fans the short trade more than success.
This is the most seductive trade in the world, that’s why folks get addicted to it. I’m not going to re-iterate the dozen odd reasons why Japan Inc. is a screaming short. And I agree with the conventional wisdom that Abe is going to print to oblivion, and that, by itself, is good reason to rev up the short engines.
It’s possible that Short Japan is the trade of the next decade; a perpetual short that fuels the carry trade. But then again, this trade has killed tens of thousands over the past thirty years.
PS - I wasn't kidding about swearing off of the short yen trade 30 odd years ago. And I must admit, even I've had that old "itch" of late...
A Great Deal?
This is an update on an old story. This is about Munis and leverage.
Towson MD did a deal recently where it borrowed $256m for 30-years at a very sweet 3.43%. The money raised went into the Towson municipal employees' retirement fund. Some details.
Last summer the financial deep thinkers in Towson re-calibrated their investment returns on their $2b investment fund. The assumed rate of return had been a ridiculously high 7.875%, it was changed to a much more "conservative" assumption of 7.25% (It should be 5%). The drop in the benchmark return produced a whopping $760m hole in the Fund (Vs. the $2.4B it would be at 5%). The net present value of that hole comes to a much more manageable $250m.
Rather than raise taxes on the citizens, or cut future benefits for employees, Towson took the "bold" action of just borrowing the money and hoping like hell that it all sorts out over the next twenty odd years.
I don't get it, and I don't like it. Think of this from the perspective of the taxpayers. They are borrowing money at 3.43% in the hope that they can earn a much higher return. I think Towson is gambling. Consider the investment portfolio:
Note that 27% is fixed income. Towson is a high-grade yield buyer:
The "stuff"that Towson invests in has a yield today that is less than the cost of the new debt. This means that the results on the the other 73% of the portfolio have to be that much higher in order for Towson to achieve its new hurdle rate of 7.25%. I look at this 15-year chart of the S&P and wonder what happens if stocks don't go up a steady 8%+ for the next many years.
Anyway, Mr. Kamentz, the County Exec. for Towson had this to say when his borrowing deal got inked:
“Funding the pension fund in this manner protects employee benefits and shows taxpayers that we are serious about managing our budget”
(Egad)
Wall Street loves pension obligation deals. The Street makes money in every direction. WS gets paid to issue and place the debt, it makes money trading the debt after it's issued, it makes more money selling the stocks and bonds that Towson buys with the debt, it earns custodial fees for all the paper that is created and it gets nice advisory fees. Towson spent $14m in 2011 on fees, that number will go up every year for the next 30.
I don't have a list of the munis that have done Pension Obligation bond deals, nor the gross amount of this swill that is now outstanding (does anyone?) I do know that most big munis have done this, the amounts are huge. It's a time bomb.
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If you don't mind my asking: From Dodge to where?
luckily we are in a position to "sample" other parts of the country and the world for that matter, ...my wife hates the cold...so we will live for a year min. in different locations....if a place really grabs us we may elect to establish deeper roots...
but imho, real estate just has to many marks against it currently...a few are a loss of value , demographics, and the one that bothers me the most is a trapped and easy target for for the taxman to abuse....they have "protections" in place were taxes are capped. but if any of us have been paying attention these caps are in place until they arn't...like new jersy recently removed 2% cap because of sandy...so as the people in alabama are paying 400.00 or so a month for sewer charges due to a 250mil. loan ...(who would buy those properties with that charge being attached)...so the move is to get out before that...kamantz has put these wheels in motion and the furture results are gauranteed...so at this moment in time i feel it is best to be mobile... i dont think their are any good choices out there currently...just ones that may not be as bad as others....of course i could be completly wrong and those unicorns shitting skittles may be just around the corner.....
and one more thing bruce, for every reduction in the target rate of return, me, we the taxpayer have to fill that hole...the tab for this fractional reduction is 15mil to us... so instead of putting up a realistic return that the taxpayer would have to make up a large difference and most likely cost this sierra club loving member his re election...and we cant have that no matter what the final cost....
I would add or "nitpick," if you will, that those "fuckers" are never incompetent, stupid or mistaken: they do the best deal for themselves personally, as they are all criminals and don't give one ioda of a fuck about anyone but themselves. Period.
Let me repeat: pols and crats are NEVER incompetent, stupid or mistaken buy ALWAYS criminal.
yeah, they all pretty much need to be lined up and shot - I wonder if the Russian and Chinese elites were as bad as ours - I don't think so -our elites are pretty much sociopathic psychopaths with insatiable greed.
some of them tax and spend because it empowers them, since so many of the electorate benefit from the free lunches, therefore vote their self-interest. but some actually can be good-hearted and think they are helping humanity by their thought processes, hence their beaurocracy. the problem is that they are seeing small picture/short term. they arent doing the public any favors to do that. not even for the ones that get free lunches. the 'free' lunches will end at some point and then what will the dependent masses do?
"i will remain liquid and rent for the last 20 30 yrs of my life"
Well that doesn't guarentee you will be any better off. You just substituted one risk for another risk: that US currency won't take a swan dive in the next 20 years. Historically, land values out-survive fiat currencies. I have serious doubt on PMs since I suspect than TPTB will consciate it either by outlawing ownership or putting a 90%+ tax on PMs.
FWIW: I am planning to go the opposite: Purchase RE in a rural location and convert my cash into tangible assets. Some place where the property taxes are very low (ie no schools, no sewage plants, no recycling centers, etc), and adopt a self-reliant lifestyle. However I can't really say my plan is any safer or better than yours. In the end we are all probably screwed! Perhaps the only advantage I have is avoiding urban\suburban street riots when the sheeple finally realize they been screwed.
"it pisses me off to no end that i have to take these steps to protect my family"
+100. Stupid corrupt people control the gov't and don't give a damn, even if it end up destroying themselve when the crap they spewed comes right back to hit them in their face.
A friend of mine retired to the hills. He had quite a place 50 miles from nowhere. It was on a charming creek with tall trees all around. It didn't matter what happened to the rest of the world. He had all the creature comforts he could desire. And then he suffered a heart attack. He ended up selling the place and taking an apartment in the city next to a medical center where he could get quick attention. As the Hungarians used to say: "Life is what you experience while you make plans to do something else."
how true - in the same thought process; selling one property for sure(on the market). yea it is all about what one does with the proceeds.
thinking about small farm????
more pm????
one thing for sure, property owners are the next tax man mark, but renting doesn't avoid this.
no fucking where to hide from these batards taking away our freedome via taxation.
the anger boils...
http://benthetheif.blogspot.com/
Enslavethechild..., FWIW, I am at a loss why you have been junked 8 times (& counting) for that link?
Also, FWIW, it wadn't me.
Also, FWIW about FWIW, I wasn't pointing a finger at anyone, let alone at a Lady
;-)
Hi everybody, I'm The Alarmist and I've been short Japan since the Yen last saw 92. I thought I had it under control ... that I could handle it when it dropped below 90. That the country was bankrupt and on its last legs and that I would be back in the money any day. Then I awoke one day and it was sub 80. I've been walking around in a daze ever since, hoping ... no, praying that I could find some sanity in the world. But the sounder economies of the world seem to have gone stark raving mad to the point where Japan actually looks like a flight to quality. I'm beside myself ... I've done a little gold, but aside from that I'm lost ... I don't know what to do.
Hey Alarmist, I thought the same thing and added the bond bubble. I am not sure how long the charade will continue but we all know that at some point, it must come to an end. Japan has little social unrest and is an accepting lot. When the inevitable crunch comes as population simultaneously declines and ages, it will be interesting as to the reaction. (Protesters in wheel chairs?)
What are your thoughts on the enormous bond bubble?
Wow, you've been long UY for the last 2 and a half year!
As another guy posted, the Weekly chart is starting to look constructive to the upside but I think that we need to clear the 84.50/85.60 area first (not just 84.50). If that happens there's a great chance that you'll see break-even at 92 again (minus some huge carry charges I presume). If that area doesn't give then we most probably will go and retest/break the lows imho
Well, it's not sub-80 now; and it seems to be trending; so if you're not having margin crisis; why not just wait and let it work itself out?
Hi, Alarmist.