Archive for February, 2009
Jim Chanos: Short sellers are market’s real-time detectives
Thursday, February 26th, 2009
Jim Chanos’ Kynikos Associates has gained legendary status as the world’s biggest short seller, managing some $7-billion in assets this way. Chanos is renown for exposing the Enron ‘irregularities’ back in 2001. It was easy to get caught up in last year’s blame game when the Wall Street CEOs were pointing the finger at short-sellers, which resulted in the ensuing short selling ban, however, as Chanos puts it, short sellers are the real-time detectives of the market, and regulators, the SEC, are archeologists.
Hugh Hendry, CIO, Eclectica points out that short sellers take on far more onerous risks than long-only asset managers, and they have to do far more homework to uncover problems that can potentially lead them into profitable short sales.
Here’s noted short seller Jim Chanos’ latest interview where he talks investment opportunities in the current market on the PBS Nightly Business Report, citing his distaste for the Healthcare and Defense sectors: Video
Click on the image to see the interview:
Short sellers may provide valuable insight, and guidance by serving as an indicator that problems exist in particular companies, and sectors, and short sellers provide an important element of support to the liquidity of the market, acting as bottom-fishers when they cover their positions, at weak spots in the market.
This is a worthwhile interview to listen to, as Chanos has a mild-mannered intellect that is both refreshing and honest.
Hat tip: MarketFolly.com
Tags: Archeologists, Asset Managers, Blame Game, Current Market, Defense Sectors, Distaste, Eclectica, ETF, Hat Tip, Hugh Hendry, Intellect, Irregularities, Jim Chanos, Kynikos Associates, Legendary Status, liquidity, Nightly Business Report, Pbs Nightly Business Report, Pointing The Finger, Renown, Short Sellers, Time Detectives
Posted in ETFs, Markets | Comments Off
Jeremy Grantham: Beware of terminal paralysis
Thursday, February 26th, 2009
As the stock market indices are flirting with key charting levels and we are waiting for Mr Market to show his hand, it is useful to get an update on the outlook from Jeremy Grantham.
Grantham, chairman of Boston-based GMO, was a great skeptic between 1999 and October last year when he started propagating “hesitant and careful buying”. His latest thinking has just been reported in an interview with CNN Money as quoted below.
“Meanwhile, GMO chairman Jeremy Grantham is more upbeat – though he does expect more pain to precede any recovery.
“Looking back at historic bear markets, Grantham draws comparisons to 1974 and 1982, when the S&P 500 lost roughly half its value. Since he estimates the current S&P 500 fair value at 900, Grantham puts his worst-case bottom at a hair-raising 450.
“‘That’s fairly scary, but on the one hand we look at the massive stimulus, and then on the other we try to work out the fact that the global economy is in worse shape than it was in ‘74 or ‘82,’ says Grantham. ‘I’d say there are three-to-one odds that we go to a material new low. We should count on [the S&P 500] hitting 600 for a little while, and we should hope like mad it doesn’t get deep into the 500s.’
“Patience rules. Another looming threat is that the market may enter an extended period of drops and rebounds that flatten long-term returns and strand buy-and-hold investors for decades.
“Japan’s stalled stock market is one recent example, but the U.S. has had its shares of quagmires, too. Grantham likes to point out that investors who bought at market crests in 1929 and 1965 had to wait 19 years each time just to break even.
“Still, Grantham says buy-and-hold still makes sense for long-term investors when stocks are trading below fair value. He especially favors U.S. blue chips, and his fund is on a strict, slow schedule to invest as valuations dip even lower.
“‘If you don’t have a schedule for investing, you will not do it,” he says. “When the market goes down, it reinforces the hoarding of cash. By the bottom, you suffer what we called in 1974 terminal paralysis – you cannot pull the trigger. Almost everyone who avoids the great pain is very slow to get back.’
Source: Eugenia Levenson, CNN Money, February 25, 2009 (hat tip: Investorazzi).
Tags: 19 Years, Bear Markets, Blue Chips, Cnn, Cnn Money, Crests, Global Economy, Gmo, Jeremy Grantham, Paralysis, Patience, Quagmires, Rebounds, Skeptic, Stimulus, Stock Market Indices, Term Investors, Valuations, Worst Case
Posted in Economy, Markets, Outlook | Comments Off
Bill Gross: Hairy Lips Sink Ships (March 2009)
Wednesday, February 25th, 2009
Bill Gross has just released his Investment Outlook for March 2009, titled “Hairy Lips Sink Ships,” and it is a must read, and answers several burning questions as only Mr. Bond can, the Bond King himself. Here are some of the questions:
- Question: Mr. Gross, is this a recession or a depression?
- Question: How did this happen so fast?
- Question: How bad could this get?
- Question: What can be done?
- Question: Are there no negative consequences from “shock and awe?” Will these policies destroy capitalism while trying to save it?
- Question: Why do we assume that the U.S. can unilaterally do whatever it wants?
- Question: What do you think about nationalizing the banks?
- Question: Enough already about this still confusing crisis – how should I invest my own money?
You may view the document below (which you can full screen and print), or download the PDF file here.
Tags: Banks, Bill Gross, Burning Questions, capitalism, Depression, Free Legal Forms, Hairy Lips, Investment Outlook, Money, Mr Bond, Negative Consequences, Pdf File, Recession, Ships, Shock And Awe
Posted in Bonds, Markets, Outlook | Comments Off
Seth Klarman: The Value of Not Being Sure
Wednesday, February 25th, 2009
Seth Klarman, Founder, Baupost Group, an investor with a remarkable long-term track record, has from time to time offered his valuable insights on investing.
The following February 23, 2009 article published in Value Investor Insight (www.valueinvestorinsight.com) covers some of Seth Klarman’s profound and experienced views, learned from his early experience working with investing legends Max Heine and Michael Price at Mutual Shares, now part of Franklin Templeton. Klarman’s partnership, Baupost Group, has consistently produced annual returns in the 20% compounded range, since it was founded in 1983.
Tags: Array, Baupost Group, Franklin Templeton, Free Legal Forms, Insights, Investing, Investor Insight, Legends, Max Heine, Mutual Shares, Partnership, Seth Klarman, Value Investing, Value Investor
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Hans Rosling: Debunking third-world myths with the best stats you’ve ever seen
Wednesday, February 25th, 2009
Get ready to learn about the developing world from a source of fascinating perspective. “You’ve never seen data presented like this. With the drama and urgency of a sportscaster, statistics guru Hans Rosling debunks myths about the so-called “developing world.”
Even the most worldly and well-traveled among us will have their perspectives shifted by Hans Rosling. A professor of global health at Sweden’s Karolinska Institute, his current work focuses on dispelling common myths about the so-called developing world, which (he points out) is no longer worlds away from the west. In fact, most of the third world is on the same trajectory toward health and prosperity, and many countries are moving twice as fast as the west did.
Tags: Debunking, Developing World, Dispelling Common Myths, ETF, Global Health, Guru, Hans Rosling, Karolinska Institute, Perspective, Perspectives, Prosperity, Sportscaster, Statistics, Sweden, Third World, Trajectory, Urgency, World Myths
Posted in ETFs, Markets | Comments Off
James Montier: The Psychology of Happiness
Tuesday, February 24th, 2009
James Montier, Co-Chief, Cross Global Strategy, at Société Générale in London, not only has a long term track record of accurate market calls, he also happens to be well renown on the subject of behavioural psychology. Some years before joining SocGen, he was, along with Albert Edwards, at Dresdner Kleinwort Wasserstein, writing some of the best known papers on behavioural finance and in the case of this article, ”The Psychology of Happiness”. Montier is eloquent in his writing. Here is the synopsis from the front page of the report, a classic:
If you are after specific investment advice, stop reading now. We seek to explore one of Adam Smith’s obsessions: what it means to be happy. We also discuss why that’s important to investors, and how we can seek to improve our own levels of happiness. The list below shows our top ten suggestions for improving happiness.
- Don’t equate happiness with money. People adapt to income shifts relatively quickly, the long lasting benefits are essentially zero.
- Exercise regularly. Taking regular exercise generates further energy, and stimulates the mind and the body.
- Have sex (preferably with someone you love). Sex is consistently rated as amongst the highest generators of happiness. So what are you waiting for?
- Devote time and effort to close relationships. Close relationships require work and effort, but pay vast rewards in terms of happiness.
- Pause for reflection, meditate on the good things in life. Simple reflection on the good aspects of life helps prevent hedonic adaptation.
- Seek work that engages your skills, look to enjoy your job. It makes sense to do something you enjoy. This in turn is likely to allow you to flourish at your job, creating a pleasant feedback loop.
- Give your body the sleep it needs.
- Don’t pursue happiness for its own sake, enjoy the moment. Faulty perceptions of what makes you happy, may lead to the wrong pursuits. Additionally, activities may become a means to an end, rather than something to be enjoyed, defeating the purpose in the first place.
- Take control of your life, set yourself achievable goals.
- Remember to follow all the rules.
Download the complete paper here.
James Montier has also written the quintessential books on the subject of Behavioural Finance, Behavioural Finance: A User’s Guide
Tags: Accurate Market, Achievable Goals, Adam Smith, Adaptation, Aspects Of Life, Defeating The Purpose, Dresdner Kleinwort Wasserstein, Exercise, Faulty Perceptions, Feedback Loop, Generators, Global Market, Global Strategy, Investment Advice, James Montier, Levels Of Happiness, Market Strategists, Means To An End, Obsessions, Psychology Of Happiness, Reflection, Relationships, Renown, Rewards, Sake, Sleep, Societe Generale
Posted in Markets | 2 Comments »
George Soros: Loading up Potash and Petrobras (13F Filings)
Monday, February 23rd, 2009
Thanks to the work of MarketFolly.com, we can get a glimpse into the dealings of some of the most prominent and successful hedge funds and institutional investors. These are useful as they point to tactical opportunities and sometimes, when hedge funds take short positions, they provide lucid guidance, pointing to areas or stocks in the market that should be sold or avoided, or for those with the stomachs, to follow short.
This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.
Next up is Soros Fund Management run by George Soros. Soros is famous for his stellar returns with partner Jim Rogers when they ran the Quantum fund. Now, he has carried his investment style over to his own firm, Soros Fund Management. Whether it be equities, bonds, currencies, debt, or commodities, Soros is more of a global macro player, seeking investments in whatever market they can gain an edge. So, keep in mind that these equity positions only represent a portion of the fund’s overall holdings. They are not required to disclose holdings outside of equities, notes, and stock options. 2008 was an interesting time to be investing, to say the least. Recently, Soros detailed his thoughts about his portfolio from 2008 and it makes for a good read.
Soros is good to track because of his excellent macro sense and formidable track record as an investor. His thoughts on the current financial landscape are detailed in his latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. Soros sees a vast consolidation in the hedge fund space in the near future, as we noted when we recently checked in on Quantum Fund ex-partners Jim Rogers & George Soros. If you want to get a better sense as to how Soros formulates his investment theses, we highly recommend reading his first book, The Alchemy of Finance. This book is a staple in our recommended reading list and after you read it, you’ll understand why. We like to track Soros since he has a solid track record and a great macro sense. We’ll see what he has in his portfolio this time around.
The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.
Some New Positions (Brand new positions that they initiated in the last quarter):
Merrill Lynch (MER)
Mylan (MYL)
Homex (HXM)
R.R. Donnelly & Sons (RRD)
Harmonic (HLIT)
Kinross Gold (KGC)
Streettracks Gold ETF (GLD)
Genworth Financial (GNW)
EMC (EMC)
Solera (SLH)
CBL & Associates (CBL)
Discovery Communications (DISCK)
Discovery Communications (DISCA)
Yahoo (YHOO)
Amdocs (DOX)
Texas Instruments (TXN)
JB Hunt (JBHT)
Symantec (SYMC)
Cirrus Logic (CRUS)
Covidien (COV)
…among others
Some Increased Positions (A few positions they already owned but added shares to; major moves listed)
Petroleo Brasileiro (PBR)
Potash (POT)
Best Buy (BBY)
Hess (HES)
Conoco Philips (COP)
Union Pacific (UNP)
Arch Coal (ACI)
Schlumberger (SLB)
Lorillard (LO)
Teradata (TDC)
Google (GOOG)
Consol Energy (CNX)
Lattice Semiconductor (LSCC)
…among others
Some Reduced Positions (Some positions they sold some shares of – note not all sales listed, just the major moves)
Walmart (WMT)
Wind River (WIND)
JetBlue (JBLU)
…among others
Removed Positions (Positions they sold out of completely)
Research in Motion (RIMM), ishares Dow Real Estate (IYR), Powershares QQQ (QQQQ), Auxilium Pharmaceuticals (AUXL), Whiting Petroleum (WLL), Suncor (SU), Chesapeake Energy (CHK), International Rectifier (IRF), Buffalo Wild Wings (BWLD), Anheuser Busch (BUD), Frontline (FRO), Bank of America (BAC), Collective Brands (PSS), Companhia Siderugica (SID), Centennial Communications (CYCL), Entergy (ETR), Suntrust Banks (STI), Nasdaq (NDAQ), General Growth Properties (GGP), Kimco Realty (KIM), Bank of New York Mellon (BK), CSG Systems (CSGS), Tekelec (TKLC), GATX (GMT), Carmax (KMX), Echostar (SATS), Extreme Networks (EXTR), Amazon (AMZN), Radisys (RSYS), Medivation (MDVN), ITT Corporation (ITT), Micron Technology (MU), Alcatel (ALU)
Top 20 Holdings (by % of portfolio)
- Petroleo Brasileiro (PBR): 19.53% of portfolio
- Potash (POT): 9.4% of portfolio
- Merrill Lynch (MER): 5.84% of portfolio
- Best Buy (BBY): 5.79% of portfolio
- Hess (HES): 4.74% of portfolio
- Conoco Phillips (COP): 3.84% of portfolio
- Union Pacific (UNP): 1.77% of portfolio
- Arch Coal (ACI): 1.7% of portfolio
- Schlumberger (SLB): 1.56% of portfolio
- RR Donnelly (RRD): 1.48% of portfolio
- Homex (HXM): 1.37% of portfolio
- Consol Energy (CNX): 0.75% of portfolio
- Map Pharmaceuticals (MAPP): 0.62% of portfolio
- Walmart (WMT): 0.57% of portfolio
- Hologic (HOLX): 0.57% of portfolio
- Heinz (HNZ): 0.53% of portfolio
- JetBlue Airways (JBLU): 0.52% of portfolio
- Home Depot (HD): 0.52% of portfolio
- Lowes (LOW): 0.51% of portfolio
- Citi Trends (CTRN): 0.29% of portfolio
The major moves in Soros’ portfolio come from energy and agriculture. He added large to his PBR and POT positions, among many other global growth type names. He definitely seems to think all these energy related names are attractive. He sold out of a lot of his Walmart (WMT) and all of his Research in Motion (RIMM). He also added heavily to his position in Best Buy (BBY). He also started a new, large position in Merrill Lynch (MER). Assets from the collective long US equity, options, and note holdings listed above were $4.6 billion. If you want to hear some more insightful thoughts from George Soros himself, head over to our post on Hedge Fund manager interviews or check out his recent interview with Fareed Zakaria to discuss the current crisis. This is just one of many funds in our hedge fund portfolio tracking series in which we’re tracking 35+ prominent funds. We’ve already covered Paulson & Co (John Paulson), Carl Icahn, Warren Buffett, and Stephen Mandel’s Lone Pine Capital. Look for our updates each day over the next few weeks.
This article was contributed by MarketFolly.com.
Tags: 13f Filings, 4th Quarter, Alchemy Of Finance, Better Sense, Credit Crisis, Equity Positions, ETF, Financial Landscape, Fund Portfolio, George Soros, Global Macro, Hedge Fund, Hedge Funds, Institutional Investors, Investment Style, Jim Rogers, Macro Sense, New Paradigm, Partner Jim, Potash, Quantum Fund, Soros Fund Management, Tactical Opportunities
Posted in Bonds, Commodities, Credit Markets, ETFs, Gold, Markets | Comments Off
Richard Russell (Dow Theory Letters): Potential buyers of gold?
Monday, February 23rd, 2009
The following is an excerpt from Richard Russell’s Dow Theory Letters, February 18, 2009.
“Here are some figures, the first number is the nation’s holding of gold and the second figure is the percentage that gold is of their reserves. Nations with low percentages of gold in their reserves may be expected to be potential buyers of gold.
US — owns 8,135 metric tons of gold … Gold makes up 64.4% of US reserves. The US will not sell any of its gold.
Germany — 3,412 … 64.4% of reserves
IMF — 3,217 …
France — 2,508 … 58.7%
Italy — 2,451 … 61.9%
Switzerland — 1,040 … 23.8%
Japan — 765.2 … 1.9% (a potential gold-buyer)
China — 600.0 … 0.9% (should be a big buyer)
Russia — 495. 9 … 2.2% (is a buyer)
Taiwan — 422.2 … 3.6% (should be a buyer)
India — 357.7% … 3.0% (should be a buyer)
UK — 310.3 … 14.5% (sold most of its gold at the low price)
Saudi Arabia — 143.0 … 11.4% (should buy gold)
South Africa — 124.4 … only 9.0%
Australia — 79.8 … 6.3%”
Source: Richard Russell, Dow Theory Letters, February 18, 2009.
Hat tip: Investment Postcards
Tags: Buy Gold, Buyers Of Gold, Dow Theory Letters, Emerging Markets, Excerpt From, France 2, Gold Buyer, Gold Gold, Hat Tip, Imf 3, India, Italy, Metric Tons, Percentages, Postcards, Richard Russell Dow Theory, Russia, Saudi Arabia, Sell Gold, South Africa, Taiwan
Posted in Emerging Markets, Gold, India, Markets | Comments Off
David Fuller (Fullermoney): Invest in creditor nations
Monday, February 23rd, 2009
This is a guest contribution from David Fuller, Fullermoney.
“The US has elected an interesting, intelligent and charismatic new president. This will help the country in terms of international relations. However, debt-laden economies and the USA in particular, given its size, remain at the epicentre of global economic risk. In a best-case scenario, the economic outlook might show some evidence of improvement during the secondhalf of 2009. I hope so but even in this event, global investment remains an international beauty contest.
“The investment question for all of us, I suggest, is would we rather back the debtor or creditor nations. Some may see this as a rhetorical question. Run it through a price chart filter showing relative strength since the climactic selling in October, and the choice becomes even easier for me. Not all creditor nations are doing well, but Fullermoney themes such as Brazil and especially China (note also the strength of A-Share Banks) certainly are.
“I do not doubt that if Wall Street experiences a new down leg of consequence, that its leash effect would pull other stock markets lower as well. This is an ongoing risk. However, it might not drag today’s better performers to new bear market lows. More importantly, I have already seen enough to feel confident that among larger countries, China and Brazil will be upside leaders in the next significant stock market recovery. This will occur sooner rather than later if, and this is a big IF, Obama’s policies can help the S&P 500 Index to remain within its current trading range.”
Source: David Fuller, Fullermoney, February 16, 2009.
Hat Tip: InvestmentPostcards.com
Tags: Bear Market, Best Case Scenario, Brazil, Creditor Nations, Current Trading, David Fuller, Debtor, Economic Outlook, Economic Risk, Epicentre, Fullermoney, Global Investment, Hat Tip, International Beauty Contest, International Relations, Investment Question, Lows, New President, Relative Strength, Rhetorical Question, Stock Markets
Posted in Credit Markets, Markets, Outlook | Comments Off
Doug Kass: Recipe for Recovery
Sunday, February 22nd, 2009
Thanks to the work of MarketFolly.com, we can get a glimpse into the dealings of some of the most prominent and successful hedge funds and institutional investors. These are useful as they point to tactical opportunities and sometimes, when hedge funds take short positions, they provide lucid guidance, pointing to areas or stocks in the market that should be sold or avoided, or for those with the stomachs, to follow short.
Doug Kass’ recent piece, ‘Fear and Loathing on Wall Street,’ highlights some excellent points. In it, he creates a list of things the markets need to see to begin their return to normality:
- Bank balance sheets must be recapitalized. We await a bank rescue package in the week ahead.
- Bank lending must be restored. Bank lending standards remain tight. For now, we are in a liquidity trap.
- Financial stocks’ performance must improve. We are not yet there. Financials’ performance is still drek.
- Commodity prices must rise as confirmation of worldwide economic growth. There has been some recent evidence of higher commodities, but it’s still inconclusive.
- Credit spreads and credit availability must improve. While credit spreads are improving, the yield curve is rising and interest rates have rebounded, the transmission of credit remains poor. Time will tell whether monetary and fiscal policies will serve to unclog credit.
- We need evidence of a bottom in the economy, housing markets and housing prices. The economy’s downturn continues apace. Months of inventory of unsold homes are declining and so are mortgage rates, but home prices have yet to stabilize despite an improvement in affordability indices.
- We also need evidence of more favorable reactions to disappointing earnings and weak guidance. We are not yet there, but this will tell us a lot about the state of the stock market’s discounting process.
- Emerging markets must improve. China’s economy (PMI and retail sales) and the performance of its year-to-date stock market have turned decidedly more constructive.
- Market volatility must decline. The world’s stock markets remain more volatile than a Mexican jumping bean.
- Hedge fund and mutual fund redemptions must ease. While I am comfortable in writing that most of the forced redemptions have likely passed, we will find out more over the next few months. Regardless, the disintermediation and disarray of hedge funds and fund of funds have a ways to go.
- A marginal buyer must emerge. Pension funds seem to be the likely marginal buyer as they reallocate out of fixed income into equities, but we have not yet seen the emergence of this trend.”
Read the entire piece.
This article was contributed by MarketFolly.com.
Tags: Affordability, Balance Sheets, Bank Balance, Commodity Prices, Credit Availability, Credit Spreads, Doug Kass, Downturn, ETF, Fear And Loathing, financial stocks, Fiscal Policies, Hedge Funds, Institutional Investors, Liquidity Trap, Mortgage Rates, Poor Time, Recovery Thanks, Stomachs, Tactical Opportunities, Yield Curve
Posted in Commodities, Credit Markets, Economy, Emerging Markets, ETFs, Markets | Comments Off
