Hedge Fund Manager's Notebook: Why the Euro is Tanking, MGM's Folly, and an Attractive Farming Stock

1) Nice speech Hilary. You got my vote. Too bad you are not running for anything. The worse George Bush’s performance became the more radical the reaction had to be, hence Obama.

2) It is amazing that natural gas [NG] let you in at $7.75 when the hurricane season was only half over. It is up $1.10, or 14% in two days. [Editor's note: ETFs are iPath DJ-AIG Natural Gas Total Return Sub-Index (GAZ), United States Natural Gas Fund, LP ETF (UNG).]

3) July durable goods jumped a surprising +1.3% vs. a forecast -0.4%. Expect the data to be very volatile and contradictory at this stage of the economic cycle. That’s why you see so many bald economists. They have torn all of their hair out.

4) Your neighbor’s toxic lawn fertilizer, pesticide, and weed killer could become the new second hand smoke, especially if they make your kids sick. Scotts Miracle-Gro (SMG) is rolling out a line of all natural organic products next year to meet the burgeoning demand for environmentally friendly garden treatments. The stock has risen 54% to $26 since July. Check this out for its broader organic farming applications.

5) UK mortgage applications were down 65% YOY, sending the pound down to a new low for the year of $1.83. Britain is now the black hole of European real estate. Please see my March recommendation to sell the euro at $1.60 based on impending economic weakness in Europe. It hit the $1.45 handle yesterday. The return on a triple leveraged position would have been 28%. The dollar is currently the least ugly girl at a dance full of dogs. It won the race to the bottom.

6) 65% of the home sales in Las Vegas now are coming from foreclosures. In the meantime MGM Mirage (MGM) blindly pushes ahead with their gargantuan 18 million square foot City Center project, even though room rates in Sin City are down -28% YOY. A good chunk of the $9.2 billion cost was financed by foreign banks. No wonder the stock has tanked 80% from $100 in the past year.

7) Here are some sample Q2 profit margins, just to show you the opportunities that are out there. Microsoft (MSFT) 27%, Johnson and Johnson (JNJ) 20%, General Electric (GE) 10.8%, Exxon Mobile (XOM) 8.4%, and Wal-Mart Stores (WMT) 3.2%.

QUOTE OF THE DAY: ”You should never buy what’s being sold on Wall Street because the seller usually knows more than you do. You should only buy ideas that come out of your own analysis.” Warren Buffet.

Full disclosure: no long or short positions in any stocks mentioned.

Comments

[Richard Col...:]

This was a poorly written article. It was written without much research.

2008 Aug 28 10:58 AM