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Andres Rueda

 
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  • For All The Shouting, This Is Still A Normal Correction [View article]
    The market is in panic mode. Investors are dumping equities in favor of perceived safe havens. T-bonds, German debt, UK bonds trade at yields well below inflation. So, there's a built-in loss and yet people lap them up. At these prices, there are also huge interest rate risks to these instruments, but these risks are ignored. You put Greece on a headline right now, and the Dow Jones goes down 100 points. It's fear driven-behavior. Folks don't really know what they should be afraid of, but that's no excuse not to sell.

    The flip side is that you can get some equities at valuations that are grotesquely cheap. The markets are always driven by a mix of emotions and fundamentals. Right now, emotions dominate. This will reverse itself, but this is where we're at right now.
    May 19 01:34 PM | 9 Likes Like |Link to Comment
  • The big news isn't the €100B, tweets Pawel Morski, it's that the eurozone (Germany) for the first time passed on imposing more austerity as a condition of the bailout.  [View news story]
    Yipee!!! Print, print, print...
    Jun 9 05:32 PM | 8 Likes Like |Link to Comment
  • For All The Shouting, This Is Still A Normal Correction [View article]
    10-yr T-bonds at 1.72% when annual CPI inflation (even using the government's own statistics!) is at 2.1% do not make economic sense and indicate irrational, fear-driven behavior. (Let's not even talk about German long bonds!) Why would you commit yourself to lend money to the government for 10 years at an interest rate which - right now, let's not even think about the future! - is negative? Why would you purchase that "safe haven" bond when interest rates could spike any time (say to even as low as 3.4%, which is a yield 100% higher than now), causing the market value of your bond to crater? Simple - because you have been watching too much television, reading too many headlines about Greece, you are scared about all the "uncertainties", and have not really stopped to think things through. In other words, you are in a panic, and are therefore acting irrationally.
    May 19 07:53 PM | 8 Likes Like |Link to Comment
  • Why I'm More Confident Of My Herbalife Short Position Today [View article]
    The presentation was a disaster for Bill Ackman. Truly embarrassing. He brought nothing to new to the table, just blah, blah, blah about the "poor people" who do business with Herbalife, and when he started crying... all anyone could think is, PHONEY. That's why the stock popped. He was laughed off the stage.
    Jul 23 12:59 AM | 7 Likes Like |Link to Comment
  • The €100B Spanish bailout added to EU/IMF pledges to Greece, Ireland, and Portugal brings the total to €486B since 2010, reports Linda Yueh. Got gold?  [View news story]
    I guess there is no financial crisis, panic, or debt problem that can withstand a central bank's ability to print unlimited amounts of cash. In the latest instance, it seems that the debts of a few Spanish banks will be monetized. The European Stability Mechanism will issue bonds to the banks, and the banks will turn around and pledge these bonds to the ECB in exchange for cash. There, problem solved. Investors willing to purchase "safe haven" bonds at 1.63% for the 10-yr T-bond or 1.33% for the German 10-yr. should be forewarned.
    Jun 9 03:37 PM | 7 Likes Like |Link to Comment
  • How JPMorgan Just Lost A Huge Source Of Profits, Now A Terrible Investment [View article]
    From the article... "Investing in JPMorgan, Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS), or the like is simply irresponsible."

    This statement is just stupid (sorry). Whether an investment is good or bad comes down to price. At current price levels, and given that 10-yr T-bonds (ie., the "non-irresponsible" (wink, wink) asset class) are at an astonishingly low 1.49% yield, shares in these banks are pretty cheap in my humble opinion.
    Jul 14 03:51 PM | 6 Likes Like |Link to Comment
  • The Correction Cometh - And Everything You Need To Know About Why [View article]
    Anyone who was concerned about Greece already sold. The rest of us just shrug every time Greece gets mentioned. The story is getting a little bit old... so much ado about an economy the size of Tennessee. Plus, the dividend yield on the S&P 500 is still well above the 10-yr T-bill rate. And probably much safer!! End of story.

    As to the bankers, if they cannot stomach having the pay on credit default swaps on Greece, they should not have written so much insurance!! It's getting ridiculous. Every time they need to pay up, they endlessly bellyache.

    Besides, we need not worry about the bankers. Those brainiacs already stuffed their balance sheets with "risk-free" T-debt. (Or maybe we should??? Ha, that one will get interesting!! :) )

    Feb 15 10:27 AM | 6 Likes Like |Link to Comment
  • A $132 Million Company Worth Less Than $0: Short Inscor [View article]
    Hi, Ashraf. I don't doubt the analysis of your excellent article. The small cap and micro cap space is full of frauds and promoters who overhype stocks of dubious value. However, in terms of actually shorting these pink sheet, low volume names - how practical is that? How readily can these names be borrowed for shorting? How easily is it to cover your short? Given that the price of these names can so easily be manipulated by others, are you in danger of a huge run-up of the stock, even if its fundamental value is zero or close to zero? What about the risks of a short squeeze? Sometimes, these companies change their names and ticker symbols just to squeeze the shorts. I've never done this type of trade before, and I am not sure I have the risk appetite for it. I am just curious how this type of thing works out in practice.
    Aug 9 08:52 AM | 5 Likes Like |Link to Comment
  • Seriously, Can Hewlett-Packard Be This Cheap? [View article]
    The technology sector is all about intellectual property. Research and development costs are not capitalized. They are expensed when incurred. Therefore, book value does a poor job of measuring the company's true "capital". There are other issues.
    Sep 8 02:19 PM | 5 Likes Like |Link to Comment
  • ECB Meeting: What To Expect And How To Position [View article]
    Southern euro countries are not insolvent, with the notable exception perhaps of Greece. If you however charged the US govt the same interest rate on its debt that panicky investors require from Spain or Italy, it would be inches away from insolvent (unless of course Bernanke, with a magic wand, decided to monetize its debt).
    Sep 1 12:56 PM | 5 Likes Like |Link to Comment
  • Long-Term Treasuries: How Low Can Yields Go? [View article]
    Hi, Eric. I don't agree with your analysis.

    Current high prices for the long T-bonds are not supported by fundamentals. The yield for the 10-yr. T-bond is currently 1.7%. This is below the rate of inflation, per US govt statistics. Would you commit yourself to lend to the US government for 10 years below the rate of inflation? Not unless you are essentially panic-driven (Greece, blah, blah, blah).

    Also, there are very large interest rate risks to these instruments.
    If yields on the 10-yr. bond crept back to 3.4% (which historically is not high at all), the yields would be 100% higher than today. The market value of your bond WOULD CRATER. However, if the yield went down to 1.5% and then up to 3.4%, the yield would then be 127% above its low point. In other words, the lower the yield goes, the more risky these instruments become. Also, the lower the yields go, the less you are compensated for the risk. Is a yield of 1.7% sufficient to compensate you solely for the interest rate risks inherent in these instruments? Not in my view - unless, of course, you are panic-driven.

    Right now the market for long T-bonds stands on two legs: 1. fear, and 2. Fed purchases. The Fed will stop its purchases next month, as Operation Twist winds down. As for the fear-trade, it is not sustainable over the long term, and certainly not over the 10 to 30 yr. maturity of a long govt bond. Fundamentals eventually will prevail.
    May 20 03:36 PM | 5 Likes Like |Link to Comment
  • S&P 500 futures gap down 1% at the open following Hollande's victory in France and a poor showing by Pasok and New Democracy in Greece (regional elections in Germany didn't go Merkel's way either). German Dax futures -1.3%, France's CAC 40 -1.5%. The euro gaps down 70 pips to $1.3009 vs. the greenback, and £0.8059 vs. sterling, the lowest level since late 2008.  [View news story]
    No. What is happening is that some people are dumping equities without paying any attention to the fundamentals of the equities that are being sold, and buying "safe haven" government debt at any price. This is panic-driven, headline-crazed behavior that does not make any rational sense and is not sustainable over the long term.
    May 6 08:18 PM | 5 Likes Like |Link to Comment
  • Spain: 2 Recent Developments With Long-Term Consequences [View article]
    Blah, blah, blah. More macro mumbo-jumbo from the headline-obsessed, painfully uninformed. Listen, you go ahead and dump all your money in 10-yr. US T notes at 1.94% interest (a negative interest rate), and bear the not insiginifcant risk of an upward jolt in interest rates or a spike in inflation. Meanwhile, I will go ahead and invest in great Spanish companies like Santander and Telefonica, that yield in excess of 13%. Then, we can talk.
    Apr 29 04:01 PM | 5 Likes Like |Link to Comment
  • Betting Against Energy By Going Long Airlines [View article]
    Nobody has ever made a cent investing in airlines over the long term. The industry has a miserable track record as far as investor-friendliness is concerned. Does any airline stock currently pay dividends? Is there a realistic expectation that the industry will ever pay dividends? Not just grow dividends, but pay any dividends whatsover? Repurchase stock? Return a dime to investors? Every airline company eventually ends up like American Airlines, Delta, PanAm, etc., etc., etc... bankrupt. If there are any profits for any quarter, the unions confiscate it; if there are losses, or even if the airline bleeds money, wages are not adjusted downward. Airlines are constantly at the mercy of the oil market, no matter how much they try to hedge. There is also a low barrier to entry for profitable routes. If you want to invest in air transportation try airplane leasing or, maybe, airplane manufacturing. Steer clear from the airlines.
    Mar 5 12:05 PM | 5 Likes Like |Link to Comment
  • 9 Best Dividend Picks With Single-Digit P/Es [View article]
    You can't just look at a screener and stop there. YPF for example, is under continuous assault by the Argentine government, and just as recently as yesterday was considered under threat of nationalization. The government among others accuses the company of not investing enough, and has challenged its dividend payout practices. The stock therefore carries a large risk premium, and has recently been highly volatile. On the other hand, YPF/Repsol recently made a signficant shale oil discovery.
    Mar 2 10:03 AM | 5 Likes Like |Link to Comment
COMMENTS STATS
174 Comments
287 Likes