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Andy So

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  • Are U.S. Banks Really Worthless? [View article]
    The idea is sound, but in practice it would be difficult to implement such a plan. I see two issues in your article. The first is the degree of leverage. In your sample bank you wrote:

    "given the leveraged nature of a bank, significant losses in its portfolio of assets -- in this case, 11% of total assets -- can very quickly result in negative equity"

    We only know an approximate degree of how leveraged banks are.

    There is already a problem of transparency in the products held by banks. There is a fear of what else might be hidden. You have to remember that many of these products were spawned by a structured products industry that simply didn't exist. These packaged derivatives have all kinds of clauses that can very quickly lead to cash calls and erosion of your NPV.

    So the first problem is how to absolutely quantify the total value of these bad assets. Do you use the last mark-to-market value? Average historical prices? Also not every bank wants to come clean about these assets since some of the risks they took are borderline illegal. Full disclosure will involve government intervention and assuredly something bad is bound to come up. Just look at the very simple example of hidden expenditures tied to structuring fees for these products. Which bank wants to get their name out there? That's why this is taking so long to sort out.

    So your theory states that "All troubled legacy assets are placed in a special portfolio of non-performing, non-earning assets that have to be charged off over time." In my comment above, it's never going to be "All" but rather "Some". That figure is never likely going to be fully trusted either.

    The second problem with your idea is the backbone of your article.

    "An ROA of 1.1% is applied to the performing earning assets, after charge-offs from delinquencies in these assets. The ROA on earning assets is conservative, given that many US banks have historically achieved ROAs of 1.2%-1.4%."

    What if there were flat to negative ROA figures? Banks will never be what they were for the past twenty+ years. If you take away or minimize structured products, investment banking and broker/dealer operations, what you are left with is the brunt of earnings dependent on consumer and commercial lending. Remember twenty to thirty years ago we didn't have structured products or investment banking operations on the scale that we've had in recent decades. Some of these things (CDS, ABS etc.) didn't exist 10 years ago.

    Assuming there is government intervention and forced lending to the public. Your comparison to Japan becomes increasing valid since we are throwing good money after bad. You are lending money to an American public that has a savings rate of 1% and no driving industry or growth in sight. There's no biotech boom like the 80's, .com boom like the 90's, or structured finance boom of our current decade around the corner. We are likely to face Japan like conditions of flat growth.

    Feb 25 08:31 AM | 2 Likes Like |Link to Comment
  • Analysts Flip-Flop on Oil Again [View article]
    “I don’t think there’s anything they [OPEC] can say at this point,” said analyst Stephen Schork, who doesn’t expect a sustained rally in oil prices during the first half of this year.

    “They didn’t have control of oil prices when it was on the way up,” he said. “They don’t have control of it when it’s on the way down.”

    Edit this line: "It’s amazing how different the oil tune sounds from analysts." to

    While I'm not familiar with Stephen Schork's historical view on crude oil, may analysts have rapidly switched their views on oil to echo the sentiments of the quote above.
    Jan 20 01:54 PM | 1 Like Like |Link to Comment
  • Analysts Flip-Flop on Oil Again [View article]
    Fair enough, Schork's opinion's in 2008 contradicted many of his peers. His comments in the Yahoo! article are now echoed by a large group of energy analysts that previously sided on demand driving crude oil prices. I would be interested to see what Schork's opinions were once oil broke $80.
    Jan 20 01:46 PM | Likes Like |Link to Comment
  • Value Investing: Going for the Gold (and Silver) [View article]
    To Marc, I consider LMC a tremendous value at under $5. Considering the negative sentiment surrounding mining stocks I wouldn't be surprised to see further downside below $4. The Lundin family has a stellar record developing natural resource projects and they are large shareholders in Lundin Mining. The Lundin family has incentive to improve the share price. I believe the Congo project, with increased cost estimates, is weighing down on LMC. Freeport has agreed to finance any overruns in the cost estimate originally given to Lundin Mining at favorable terms.

    As far as CDE, I believe the stock is a favorite of precious metals shorts. CDE is prone to heavy volatility. If you hold onto your believe that silver is in a long-term uptrend, CDE is a great place to be given that they are poised to be one of the largest silver miners in the world. Bolivia is being developed at a timely pace and the performance of CDE is centered around the short-term fall in silver prices.

    I've posted more detailed analysis in the past about LMC and CDE on my blog.

    Cheers.

    Aug 9 06:00 AM | Likes Like |Link to Comment
  • Value Investing: Going for the Gold (and Silver) [View article]
    Dear All,

    I didn't republish the article on my blog.

    Best,

    Andy
    Aug 9 05:48 AM | Likes Like |Link to Comment
  • The Current Market Atmosphere: Easy Money Hard to Come by [View article]
    Mike, I couldn't have said it any better myself. Kudos for a great article.


    Jun 25 08:30 AM | 1 Like Like |Link to Comment
  • Penn West Energy: More Questions Than Answers [View article]
    Gorealist don't you have something better to do than to post 300+ mostly negative comments? With all that time why don't you pony up your picks? If you are so eager to find advice with guts and commitment why not start your own blog? You don't have 20 minutes to goto wordpress.com? Bui doesn't owe you a dime. By all accounts his blog is among a very select few that publish their picks and portfolio performance statistics.

    Anyone who writes trivial regarding fundamental analysis has his mind set firmly in one direction. So what if the author missed a major run-up for PWE? His portfolio is up 16.6%. Hasn't anyone told you that it's better not to lose money than to make money?
    Jun 24 01:04 PM | Likes Like |Link to Comment
  • Will the Market Keep Falling? I Hope So [View article]
    Leon assuming that $300 was the high price of your stock, I wouldn't have started to buy until the stock hit a 70% discount i.e. $90.

    For a blue-chip stock the odds of dropping to 70% are low, not to mention 80% or even 90% off of previous highs. If you play the short game you are betting on further downside after the stock has already dropped 70% or greater. No one knows where the bottom is, so it makes no sense to try and short an investment that you believe is a quality one at $300 or at $90. None of your examples above are quality examples. ARBA, CMGI, NT and YHOO built business models from networks and services that were relatively new and untested.

    A better example would be INTC or MSFT in the tech sector. Picking up either of these at 70% or greater discounts would be a solid buy.
    Jun 18 10:10 PM | Likes Like |Link to Comment
  • Hyperinflation, Here We Come [View article]
    My only recovered page of Raw Greed's portfolio is at

    www.rawgreed.com/?page...

    Since inception of the blog in 2005, I have written over 400 articles. I get nothing from it other than producing a track record. My analysis may be simple, but in trading, quality simply means consistent picking. I'm a value investor. When I buy I detail, cash, debt, ROE, ROI etc. I look at the trend, I look at RSI, among my personal observations. Keeping things simple gives you clear direction and conviction.

    It doesn't matter if you employ throwing darts or elliot wave analysis as long as your results in B&W prove profitable to you.
    Jun 18 11:14 AM | Likes Like |Link to Comment
  • Hyperinflation, Here We Come [View article]
    A simple glance at the recovery of the 2001 recession can tell you where we may be headed as we recover from the current economic crises.

    The most BASIC premise of inflation is not an increase in prices. It simply means more dollars competing for the same goods. Looking at MZM money supply as I posted in previous articles shows that our money supply has increased over 16% in just the first half of this year. We recovered in roughly 3 years following the .com lead recession after the Fed increased money supply 21% in 2001.

    Can anyone point to a single recession in U.S. history that hasn't lead to an higher adjustment in the cost of living following our recovery?

    CT recovery if you want hard statistics I offer you to read my historical calls on buys and sells 100% have been posted in the past and in SA articles. My personal belief is the quality of analysis is tied to accountability. I post my buys and sells to produce a track record, of which I have roughly 3 years posted for all to see.
    Jun 18 11:03 AM | Likes Like |Link to Comment
  • Investing in China's Falling Stock Market [View article]
    The article is a follow-up to an older article, "A True China Bear". CAF and FXI are prime investments to consider when you believe the Shanghai Composite Index may have reached a bottom.
    Jun 18 10:47 AM | Likes Like |Link to Comment
  • Buying Airlines as a Gold and Silver Hedge [View article]
    $60 Oil would mean airlines would likely return to 2007 prices, the gain would be 300% or greater for the entire sector. If oil were to rise to $200 it would be extremely inflationary and bullish for gold and silver. Your precious metal investments would likely double or more. Long-term you are buying into a sector that is down on average 70%. In this sense you can afford to be wrong about one carrier, as long as the sector returns to historical norms at some point. History has shown that as we emerge from a recession the stock market and individual sectors will end up higher than previously set levels.

    You are staring at an opportunity to buy travel infrastructure starting at .30 on the dollar.

    A few years ago CAL was under $9 and shot to $40 in about a year, giving some investors a few hundred percent gains. The same was true for AMR and basically all airlines. This is the cyclical nature of the sector.
    Jun 8 10:40 PM | Likes Like |Link to Comment
  • A True China Bear [View article]
    Ivy,

    I will follow up with an article about bear markets.

    Best,

    Andy
    May 3 12:28 PM | Likes Like |Link to Comment
  • Gold Prices in for Short-Term Rise, According to 'Gold to Oil Ratio' [View article]
    I posted a new image of the historical gold to oil ratio on Raw Greed.
    Apr 29 06:27 AM | 1 Like Like |Link to Comment
  • Using the Gold to Oil Ratio to Monitor Gold Equity Investments [View article]
    Arcturus, there has been a historical relationship of oil to gold. They tend to rise in line with each other. The article is meant to point out that gold has potential upside to $1200 levels for the 10:1 ratio to hold true. I've written and invested in NXG in the past.

    Johngonole, the September 2006 article points out that I suspected gold would continue to rise. You are correct that inflation and hyperinflation will cause both gold and oil to rise. The articles objective is to point out that oil was/is rising dramatically out of line compared to gold.
    Apr 25 12:03 AM | Likes Like |Link to Comment
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