Will The Real 60/40 Please Stand Up? [View article]
I appreciate all of the comments and praise. Let me answer the question regarding relevancy with another question: does diversification matter?
If diversification does not matter, then this is not relevant to anyone regardless of their age. If diversification does matter, then the concepts underlying this discussion are not only relevant, they are somewhat crucial to success.
While I chose to focus on asset allocation between fixed income and equities in order to extend on another SA contributor's article, this same analysis can readily be applied to any asset mix under review-including 100% equity portfolios.
MLPs Continue To Be A Great Investment Opportunity [View article]
Na...I didn't take that much time with it when I wrote that comment. I simply clicked on Google finance, put in the ticker, checked the box to overlay S&P 500 and then proceeded to click through from left to right the time frames I said in my comment and found what I found...that SRV doesn't perform better than the S&P 500. Ok, so now I am curious about whether Google incorporates dividends into their return calculation. So, I just pulled holding period returns including dividend payments and here is what I am seeing...
In the past 12 months ended Nov'11 SRV = (8%) SPY = (1.44%) AMLP = 4.59% My MLP Portfolio = 11.7%
However if you extend the time period to 15 months which is what is shown in the chart above...
So, I guess there are specific time periods possible in which SRV did outperform the S&P 500. Just in case you are curious over the entire time period 12'07 through 11'11...
MLPs Continue To Be A Great Investment Opportunity [View article]
Thank you for the comments. Every time frame (5d, 1m, 3m, 6m, ytd, 1yr) I looked at, SRV underperformed vs. the S&P 500. Like I said in my article messing around with K-1's is some extra work but if you like being down over 16% while the S&P 500 is only down 3.3% and my MLP Portfolio is actually up...by all means have at it.
The problem with countless funds out there are that they are DESIGNED to track an index and if they get lucky and slightly outperform their index that is seen as a huge accomplishment. Funny thing, when I took a quick gander at their top 10 holdings on Swank's website...the fund factsheet indicated their largest single holding is a 6.6% short position in the JPMorgan Alerian MLP Index ETN. Hopefully this is not the case...but one could argue that they are not even bullish of MLP's as an asset class so they are holding this short position in the index fund so they can marginally outperform their benchmark if a bearish scenario on MLP's plays out. Again, that is probably a bit harsh...but the point being how a fund is constructed determines the outcome of the fund...it is not enough to simply hold some of the same securities.
Why MLPs Are Extremely Overvalued As An Asset Class (Part 1) [View article]
After reading most of the comments, I saw very few that mention a discounted cash flow analysis. Some people did mention that MLP's compete with fixed income investments...so why not use the same technique to value them? After all, lots of MLP's operate extremely stable businesses which lends itself to a discounted cash flow analysis. It would be tedious but I think it would completely change the results of your conclusions in many cases - while I am sure there are actually overvalued MLP's out there. I guess I just want to know what makes the metrics you highlight relevant? And if they are relevant, why is it superior to use them to make an investment decision vs a discounted cash flow valuation?
Disclosure: I have long positions in 11 different MLP's. Most of which can be seen in this article I posted on MLP's a little while back. seekingalpha.com/artic...
Chinese Monetary Policy Doesn't Spell the End for Copper [View article]
I appreciate both the comments. First in addressing the comment about never ending upward prices...copper might retrace 50 cents back to $4/lb which would totally suck in the short term as a mining shareholder...but $4.00/lb is still a hell of a price for copper. With a cash cost of production far below $4.00, copper mining companies will fare just fine.
With respect to the Yuan: U.S. Consumers will be dramatically impacted by an appreciating Yuan, there is almost no doubt about that in my mind. While exporting might get some degree of "boost" it is difficult to believe that there will be a total revolution in the American economy. I have encountered one report that argued the wage differential and cost of production is SO FAR slanted in China's favor that the yuan would have to appreciate by an insane amount before American labor would be remotely close to competitive.
My overall point was not that America will prosper if/when China allows their currency to re-value closer to fair value...but rather I believe Chinese growth and inflation will not come crashing down based on interest rate hikes alone (in China).
Target Retirement Date Lifecycle Funds: Ignorance Is Never Bliss [View article]
An a perfect world, the fund companies would have you believe that you only need to invest in a single fund...since technically speaking they follow your entire investment lifecycle thus shifting with your theoretical risk tolerance over time. Your point about throwing off the balance of a lifecycle fund is correct in my estimation. If you are going to invest in several funds it theoretically defeats the purpose of investing in the lifecycle fund.
Lifecycle funds are not too likely to be index fund killers namely because they themselves invest in their own companies' index funds. Take a look at any of the ishares lifecycle funds that Seeking Alpha posted at the top. Every single one of the holdings in the ishares 2040 retirement target fund is an ishares product. If anything the fund companies will likely be making incremental money off of these funds in addition to the fees charged on their ordinary index funds.
I sincerely hope that these poorly conceptualized investments don't replace the options available in 401(k) accounts. The ability to construct a properly diversified portfolio using relative return investment funds that are all essentially 95% correlated with one another is a pretty tough task as it is. These lifecycle funds, in my estimation, bring very little to the table except a cloud of fog further masquerading the poor performance of relative return strategies.
Higher Oil Prices Will Stymie Reform in Russia [View article]
I must respectfully disagree with the core argument. It is sometimes fun to hold a totally opposing view to others-particularly when others are missing a crucial perspective or argument. However, I think you might be on your own on this issue because your perspective is just off the mark.
Russia might very well gain or lose hegemonic-like power with the rise or fall of oil prices, but in terms of their economic/political fundamentals internally...there is practically nothing compelling about the viewpoint that higher oil prices actually work against the liberalization/evolution of Russia.
I think Ian Bremmer's simplistic J-curve model is a far better framework for explaining Russian political/economic development. I personally believe (although I am sure many will disagree) under Putin there was substantial progress for development until the global financial crisis struck. In fact, quite frankly, one of the reasons Russia (from an economic perspective) has handled the global recession so well is that during the period of high commodity prices the government was able to build up a mammoth capital base in their Sovereign Wealth Fund which has no doubt helped offset a significant amount of the fallout that would have otherwise occurred in Russia.
Of course, there has been some retracing of political freedom/economic liberalization as of late. In my opinion, to a large extent, this is more likely a result of anxiety/nervous fear on the part of Medvedev/Putin...AND perhaps their decisions have been flat out wrong. BUT, I find it more compelling that they made these bad decisions out of fear of political instability getting out of control vs. your view that higher oil prices have given them a shot of testosterone in which they just decide to be more aggressive and move backwards in favor of authoritarianism instead of liberalization.
Under your viewpoint, Putin would have passed (which he had full support for at the time) the constitutional amendment to make him president for life. Why didn't he? Because, in my view, in the end he wants to see Russia as a liberalized economic/political power house that is as stable as any Western country - even though the path can be rocky as hell at times.
Putin (and to a lesser extent Medvedev) might very well believe that Russia should take full advantage of their natural resources to gain as much of a competitive advantage over their sphere of influence but that does not equate to retracing towards an authoritarian state.
Russia is on a long, and at times rocky, journey towards a more liberalized political/economic climate. They are still quite unstable and have a long ways to go. BUT I think the trend in Russia is clear...it is from the lower left to the upper right AND in direct correlation with commodity prices (not the other way around).
Commodities Are Sizzling, Risks Are Building [View article]
I can easily own that criticism, I didn't mention anything about energy demands from developing economies although I am well aware that the majority of incremental demand for energy is stemming from developing economies. It does seem to me that Chris is in agreement with me to a large extent, he just believes I should have included a contrary data point in my post. I don't believe including comments surrounding increasing demand from emerging economies is a game changer in my analysis though...as short term price seems to be getting stretched (a point that Chris concedes in his second comment). I did cherry pick, to some extent, as I wanted to manage the size of the posting. Thanks for reading and I appreciate all the comments.
Why David Tepper Is Only Half Right [View article]
"A better metric would be to use the price of gold, which has increased 30% YoY."
My cost of living hasn't gone up 30% in the past year. In the business I work in, numerous contract prices are adjusted annually to reflect inflation. Many of these contracts use a straight up CPI measurement while others use more esoteric formulas that are oriented around more specific CPI data. Imagine tieing these contracts to the price of gold. We would be in and out of real businesses like day traders...which is entirely unfeasible. Real economics in business just don't work that way.
Directionally, maybe gold does contain some kind of pertinent information on inflation (although I am not entirely sure) but it definitely isn't correct in terms of magnitude. GLD is up 175% over the past 5 years. How many readers have actually seen an increase of 175% in their cost of living? I suspect not many. In part most Americans would be homeless-given their propensity to live pay check to pay check. If those folks, living pay check to pay check, had an increase in their cost of living of 35% annually...they would be homeless, starving, and probably on the cusp of death.
Fixed-Income Bubble: Should Investors Just Buy Stocks? [View article]
First of all, I appreciate all of the responses.
To Mr. Fish, I don't find myself compelled to buy into the fixed income bubble argument. It could turn out that 2010 represents a secular low for interest rates, but this does not directly lead to a major bout of losses for investors...just lost opportunity to invest in higher yielding securities. The case for a government bond bubble seems much more compelling...but the unfortunate fact is that if the U.S. Government actually goes through some serious distress in the debt markets, it will have severe ramifications in ALL OTHER CAPITAL MARKETS. For instance take a look at the 10 Year Treasuries in comparison to the JPY/USD exchange rate. If memory serves the correlation between the two is in the vicinity of 70-80%, and that was based on 20-30 years of data. The simple fact is that the USD and U.S. interest rates (short term and long term) are the fundamental building blocks that a subtantial portion of all risky/financial assets are built on. If the U.S. goes through any meaninful distress, the fabric of all capital markets will be shaken and there is no where to hide in that environment. Needless to say I am hopeful that the government will actually find the intestinal fortitude to restructure the debt/obligations before it is too late. But, who ever said it first was spot on..."hope is not a strategy".
With respect to the core level of demand, I would argue that the core level of demand is WAY below existing demand currently. Think about all the discretionary purchases that lots of people make per pay check. The issue at hand is that as savings rates tick up (a good thing in the long run) discretionary spending decreases. I don't really have a feel for the exact numbers...but if discretionary spending was reduced 30-50% total GDP would fall pretty dramatically.
A the present time, I find myself most compelled by the argument that the U.S. is the new Japan. Essentially, the decision makers have elected to work off the 30 years of excessive living standards in the least efficient way possible (i.e. slowest). Even these latest policies of buying mortgages, reinvesting proceeds into treasuries, and possibly outright purchases of equities (if that actually occurs) do very little to the real economy. Perhaps it adds some degree of stability to the capital markets, but nonetheless the real problems of 30 years of debt accumulation are still present slowly being resolved one paycheck at a time. In the context of substantial macro financial risk, I am not convinced quantitative easing is more than a flea on the elephant in terms of reducing volatility.
Is Standard & Poor's Any Better With Stocks Than Asset Backed Debt? [View article]
Steve, I appreciate the comment and because of that I just took a look at what the dividend for the portfolio would be. The approximate yield of the portfolio is 2.183% which compares to the S&P 500 Yield (seekingalpha.com/symbo...) of 1.88%. This was calculated using the data from the SPDR website and using the weights of the portfolio as shown in the article. I did use google for the telecom ETF dividend yield. Thanks for reading.
That would be a huge short coming in MPT software - which might very well be the case. MPT software should be looking at actual securities that make up an asset class i.e. all equities. But, if you are correct that the software being used starts with a list of asset classes as a whole and does not include the individual securities within that asset class...there is a significant gap in that software that needs improvement.
What I am arguing is that if it were possible to run an optimization of all the instruments in each asset class (dividend paying, non dividend paying, plain bonds, convertible bonds, preferred shares, etc), MPT software will naturally shift the holdings towards the assets with the highest returns per unit of risk that has historically been occuring.
For example lets say convertible bonds had the best performance over the past 10 years - best return per unit of risk and lowest correlation to other assets. MPT software, if unconstrained, should shift the portfolio almost entirely into convertible bonds dependent upon the precise correlation with other instruments and whether some added diversification benifits can be manifested by holding a few other things. The point being that, if dividend stocks are included in the security universe of the optimization process then the asset class of dividend stocks is already being taken into account naturally and 'should' already be incorporated into the portfolio if it has superior statistical characteristics.
Hedge Funds: We Don't Need No Education [View article]
After reading Eisman's investment case against for-profit education companies, I found the story extremely compelling. I don't have the link but I am pretty sure PBS or something just did a story on the for-profit education industry a few months ago and arrived at the same conclusions.
The only key difference I can see between the poor underlying ethics of operators in the subprime industry and for-profit education is that in this instance the banks are not on the hook for the defaulting loans. As I understand it there is no way to escape student loans through any sort of bankruptcy. As such these companies, in many instances, are providing a horrid education with 0 credibility among employers at an insane premium. And it is strapping the government with a shadow arsenal of nearly worthless debt that these unfortunate people will have no hope to repay for a LONG time. Furthermore, the ramifications extend even further because the ultimate penalty might turn out to be people who would have previously qualified for federal student aid to attend solid state schools won't be able to attain financing because the for-profit education industry has made federally granted student aid a huge money loser for the government which serves to crowd out the rest of the market.
Now someone please speculate on how many liberal arts, business, or science degrees from these near worthless institutions actually find employment that yields enough of a profit differential (comparing the same person with and without the degree) such that the education actually pays for itself over time? The only qualitative data point I know of is HR staff literally tearing up the resume's of anyone who attended these sort of places-although they specifically mentioned the University of Phoenix. And I might add that this was specific for business education. This industry doesn't need to disappear, but it really needs to fundamental change.
First of all you are correct that I do not receive compensation from Barclays. Secondly, I tend to utilize Barclays research for several reasons...
1. I have a lot of respect for Barclays Capital research. I just happen to have a bias towards their work.
2. I find there research platform very easy to use and asthetically pleasing.
3. I have access to their research platform (which naturally prevents me from using another organizations research in the event I don't have access to it)
Next, with respect to arbitrage between the two exchanges...this is from the Barclays report I was using....
"It is also important not to overlook the supply picture. Price action on the SHFE has been lagging behind that on the LME, keeping the import arbitrage window closed, reflecting a domestic market in excess supply. This could be due to weak demand from other end-use sectors and/or the pace of supply growth exceeding demand growth. The latter appears to be a plausible explanation. According to preliminary Chinese import data, China’s imports of unwrought copper and products increased by 14% y/y in Q1 10, despite the fading away of temporary factors boosting imports in 2009, including government stockpiling and consumer re-stocking. However, strong domestic demand has kept the oversupply under control and physical discounts at relatively moderate levels. If imports ease in the coming months alongside a closed import arbitrage window, strong domestic demand suggests that inventories could be drawn down quickly and imports could rise again before too long."
So they did mention it, I just failed to include it in my posting. But since you specifically asked about it, I will be glad to share it.
The fact that I tend to focus on Barclays research says nothing about alternative sources of information. I am sure there are tons of good additional sources for fundamental information on copper out there. Please share if you know of some particularly good ones.
And finally, I try to post what I hope is helpful information/ideas as I see them - without regard to how complete the picture is. Over time, I try to cover the idea in a bit more comprehensive fashion-but given time contraints, I can rarely present a SOLID comprehensive case for my ideas in each posting (not that seeking alpha would publish 10+ page reports anyways...).
Will The Real 60/40 Please Stand Up? [View article]
If diversification does not matter, then this is not relevant to anyone regardless of their age. If diversification does matter, then the concepts underlying this discussion are not only relevant, they are somewhat crucial to success.
While I chose to focus on asset allocation between fixed income and equities in order to extend on another SA contributor's article, this same analysis can readily be applied to any asset mix under review-including 100% equity portfolios.
Thanks again for reading.
MLPs Continue To Be A Great Investment Opportunity [View article]
In the past 12 months ended Nov'11
SRV = (8%)
SPY = (1.44%)
AMLP = 4.59%
My MLP Portfolio = 11.7%
However if you extend the time period to 15 months which is what is shown in the chart above...
SRV = 16.78%
SPY = 8.78%
AMLP = 10.08%
My MLP Portfolio = 20%
So, I guess there are specific time periods possible in which SRV did outperform the S&P 500. Just in case you are curious over the entire time period 12'07 through 11'11...
SRV = (16.668%)
SPY = (10.31%)
My MLP Portfolio = 43%
But there are those dreadful K-1 forms to mess with!
Thanks everyone.
MLPs Continue To Be A Great Investment Opportunity [View article]
The problem with countless funds out there are that they are DESIGNED to track an index and if they get lucky and slightly outperform their index that is seen as a huge accomplishment. Funny thing, when I took a quick gander at their top 10 holdings on Swank's website...the fund factsheet indicated their largest single holding is a 6.6% short position in the JPMorgan Alerian MLP Index ETN. Hopefully this is not the case...but one could argue that they are not even bullish of MLP's as an asset class so they are holding this short position in the index fund so they can marginally outperform their benchmark if a bearish scenario on MLP's plays out. Again, that is probably a bit harsh...but the point being how a fund is constructed determines the outcome of the fund...it is not enough to simply hold some of the same securities.
Why MLPs Are Extremely Overvalued As An Asset Class (Part 1) [View article]
sure there are actually overvalued MLP's out there. I guess I just want to know what makes the metrics you highlight relevant? And if they are relevant, why is it superior to use them to make an investment decision vs a discounted cash flow valuation?
Disclosure: I have long positions in 11 different MLP's. Most of which can be seen in this article I posted on MLP's a little while back. seekingalpha.com/artic...
Chinese Monetary Policy Doesn't Spell the End for Copper [View article]
With respect to the Yuan: U.S. Consumers will be dramatically impacted by an appreciating Yuan, there is almost no doubt about that in my mind. While exporting might get some degree of "boost" it is difficult to believe that there will be a total revolution in the American economy. I have encountered one report that argued the wage differential and cost of production is SO FAR slanted in China's favor that the yuan would have to appreciate by an insane amount before American labor would be remotely close to competitive.
My overall point was not that America will prosper if/when China allows their currency to re-value closer to fair value...but rather I believe Chinese growth and inflation will not come crashing down based on interest rate hikes alone (in China).
Thanks for reading.
Target Retirement Date Lifecycle Funds: Ignorance Is Never Bliss [View article]
Lifecycle funds are not too likely to be index fund killers namely because they themselves invest in their own companies' index funds. Take a look at any of the ishares lifecycle funds that Seeking Alpha posted at the top. Every single one of the holdings in the ishares 2040 retirement target fund is an ishares product. If anything the fund companies will likely be making incremental money off of these funds in addition to the fees charged on their ordinary index funds.
I sincerely hope that these poorly conceptualized investments don't replace the options available in 401(k) accounts. The ability to construct a properly diversified portfolio using relative return investment funds that are all essentially 95% correlated with one another is a pretty tough task as it is. These lifecycle funds, in my estimation, bring very little to the table except a cloud of fog further masquerading the poor performance of relative return strategies.
Thank you for reading and your comment.
Higher Oil Prices Will Stymie Reform in Russia [View article]
Russia might very well gain or lose hegemonic-like power with the rise or fall of oil prices, but in terms of their economic/political fundamentals internally...there is practically nothing compelling about the viewpoint that higher oil prices actually work against the liberalization/evolution of Russia.
I think Ian Bremmer's simplistic J-curve model is a far better framework for explaining Russian political/economic development. I personally believe (although I am sure many will disagree) under Putin there was substantial progress for development until the global financial crisis struck. In fact, quite frankly, one of the reasons Russia (from an economic perspective) has handled the global recession so well is that during the period of high commodity prices the government was able to build up a mammoth capital base in their Sovereign Wealth Fund which has no doubt helped offset a significant amount of the fallout that would have otherwise occurred in Russia.
Of course, there has been some retracing of political freedom/economic liberalization as of late. In my opinion, to a large extent, this is more likely a result of anxiety/nervous fear on the part of Medvedev/Putin...AND perhaps their decisions have been flat out wrong. BUT, I find it more compelling that they made these bad decisions out of fear of political instability getting out of control vs. your view that higher oil prices have given them a shot of testosterone in which they just decide to be more aggressive and move backwards in favor of authoritarianism instead of liberalization.
Under your viewpoint, Putin would have passed (which he had full support for at the time) the constitutional amendment to make him president for life. Why didn't he? Because, in my view, in the end he wants to see Russia as a liberalized economic/political power house that is as stable as any Western country - even though the path can be rocky as hell at times.
Putin (and to a lesser extent Medvedev) might very well believe that Russia should take full advantage of their natural resources to gain as much of a competitive advantage over their sphere of influence but that does not equate to retracing towards an authoritarian state.
Russia is on a long, and at times rocky, journey towards a more liberalized political/economic climate. They are still quite unstable and have a long ways to go. BUT I think the trend in Russia is clear...it is from the lower left to the upper right AND in direct correlation with commodity prices (not the other way around).
Commodities Are Sizzling, Risks Are Building [View article]
Why David Tepper Is Only Half Right [View article]
My cost of living hasn't gone up 30% in the past year. In the business I work in, numerous contract prices are adjusted annually to reflect inflation. Many of these contracts use a straight up CPI measurement while others use more esoteric formulas that are oriented around more specific CPI data. Imagine tieing these contracts to the price of gold. We would be in and out of real businesses like day traders...which is entirely unfeasible. Real economics in business just don't work that way.
Directionally, maybe gold does contain some kind of pertinent information on inflation (although I am not entirely sure) but it definitely isn't correct in terms of magnitude. GLD is up 175% over the past 5 years. How many readers have actually seen an increase of 175% in their cost of living? I suspect not many. In part most Americans would be homeless-given their propensity to live pay check to pay check. If those folks, living pay check to pay check, had an increase in their cost of living of 35% annually...they would be homeless, starving, and probably on the cusp of death.
Fixed-Income Bubble: Should Investors Just Buy Stocks? [View article]
To Mr. Fish, I don't find myself compelled to buy into the fixed income bubble argument. It could turn out that 2010 represents a secular low for interest rates, but this does not directly lead to a major bout of losses for investors...just lost opportunity to invest in higher yielding securities. The case for a government bond bubble seems much more compelling...but the unfortunate fact is that if the U.S. Government actually goes through some serious distress in the debt markets, it will have severe ramifications in ALL OTHER CAPITAL MARKETS. For instance take a look at the 10 Year Treasuries in comparison to the JPY/USD exchange rate. If memory serves the correlation between the two is in the vicinity of 70-80%, and that was based on 20-30 years of data. The simple fact is that the USD and U.S. interest rates (short term and long term) are the fundamental building blocks that a subtantial portion of all risky/financial assets are built on. If the U.S. goes through any meaninful distress, the fabric of all capital markets will be shaken and there is no where to hide in that environment. Needless to say I am hopeful that the government will actually find the intestinal fortitude to restructure the debt/obligations before it is too late. But, who ever said it first was spot on..."hope is not a strategy".
With respect to the core level of demand, I would argue that the core level of demand is WAY below existing demand currently. Think about all the discretionary purchases that lots of people make per pay check. The issue at hand is that as savings rates tick up (a good thing in the long run) discretionary spending decreases. I don't really have a feel for the exact numbers...but if discretionary spending was reduced 30-50% total GDP would fall pretty dramatically.
A the present time, I find myself most compelled by the argument that the U.S. is the new Japan. Essentially, the decision makers have elected to work off the 30 years of excessive living standards in the least efficient way possible (i.e. slowest). Even these latest policies of buying mortgages, reinvesting proceeds into treasuries, and possibly outright purchases of equities (if that actually occurs) do very little to the real economy. Perhaps it adds some degree of stability to the capital markets, but nonetheless the real problems of 30 years of debt accumulation are still present slowly being resolved one paycheck at a time. In the context of substantial macro financial risk, I am not convinced quantitative easing is more than a flea on the elephant in terms of reducing volatility.
It's a risky world out there.
Is Standard & Poor's Any Better With Stocks Than Asset Backed Debt? [View article]
Financing Retirement: Asset Allocation [View article]
What I am arguing is that if it were possible to run an optimization of all the instruments in each asset class (dividend paying, non dividend paying, plain bonds, convertible bonds, preferred shares, etc), MPT software will naturally shift the holdings towards the assets with the highest returns per unit of risk that has historically been occuring.
For example lets say convertible bonds had the best performance over the past 10 years - best return per unit of risk and lowest correlation to other assets. MPT software, if unconstrained, should shift the portfolio almost entirely into convertible bonds dependent upon the precise correlation with other instruments and whether some added diversification benifits can be manifested by holding a few other things. The point being that, if dividend stocks are included in the security universe of the optimization process then the asset class of dividend stocks is already being taken into account naturally and 'should' already be incorporated into the portfolio if it has superior statistical characteristics.
Is Standard & Poor's Any Better With Stocks Than Asset Backed Debt? [View article]
Hedge Funds: We Don't Need No Education [View article]
The only key difference I can see between the poor underlying ethics of operators in the subprime industry and for-profit education is that in this instance the banks are not on the hook for the defaulting loans. As I understand it there is no way to escape student loans through any sort of bankruptcy. As such these companies, in many instances, are providing a horrid education with 0 credibility among employers at an insane premium. And it is strapping the government with a shadow arsenal of nearly worthless debt that these unfortunate people will have no hope to repay for a LONG time. Furthermore, the ramifications extend even further because the ultimate penalty might turn out to be people who would have previously qualified for federal student aid to attend solid state schools won't be able to attain financing because the for-profit education industry has made federally granted student aid a huge money loser for the government which serves to crowd out the rest of the market.
Now someone please speculate on how many liberal arts, business, or science degrees from these near worthless institutions actually find employment that yields enough of a profit differential (comparing the same person with and without the degree) such that the education actually pays for itself over time? The only qualitative data point I know of is HR staff literally tearing up the resume's of anyone who attended these sort of places-although they specifically mentioned the University of Phoenix. And I might add that this was specific for business education. This industry doesn't need to disappear, but it really needs to fundamental change.
An Update on Copper Fundamentals [View article]
1. I have a lot of respect for Barclays Capital research. I just happen to have a bias towards their work.
2. I find there research platform very easy to use and asthetically pleasing.
3. I have access to their research platform (which naturally prevents me from using another organizations research in the event I don't have access to it)
Next, with respect to arbitrage between the two exchanges...this is from the Barclays report I was using....
"It is also important not to overlook the supply picture. Price action on the SHFE has been lagging behind that on the LME, keeping the import arbitrage window closed, reflecting a domestic market in excess supply. This could be due to weak demand from other end-use sectors and/or the pace of supply growth exceeding demand growth. The latter appears to be a plausible explanation. According to preliminary Chinese import data, China’s imports of unwrought copper and products increased by 14% y/y in Q1 10, despite the fading away of temporary factors boosting imports in 2009, including government stockpiling and consumer re-stocking. However, strong domestic demand has kept the oversupply under control and physical discounts at relatively moderate levels. If imports ease in the coming
months alongside a closed import arbitrage window, strong domestic demand suggests that inventories could be drawn down quickly and imports could rise again before too long."
So they did mention it, I just failed to include it in my posting. But since you specifically asked about it, I will be glad to share it.
The fact that I tend to focus on Barclays research says nothing about alternative sources of information. I am sure there are tons of good additional sources for fundamental information on copper out there. Please share if you know of some particularly good ones.
And finally, I try to post what I hope is helpful information/ideas as I see them - without regard to how complete the picture is. Over time, I try to cover the idea in a bit more comprehensive fashion-but given time contraints, I can rarely present a SOLID comprehensive case for my ideas in each posting (not that seeking alpha would publish 10+ page reports anyways...).
Thank you for your comments.