Eric Sprott: I Think We Are In For A Shortage Of Physical Gold [View article]
>> Some of the people I rely on suggest there is about a 40% chance >> of hyper-inflation starting in 2013 and about a 90% of it starting in >> 2014, so that's what I would imagine happens.
90%, really? Probably the same people who forecasted hyperinflation this year. All I can say, don't ask a barber if you need a haircut and don't ask Eric Sprott whether you should buy gold or silver.
I'd have to disagree with your conclusion. What you observe is a typical "volatility clustering." Look up GARCH model, the current day realized volatility is a function of the prior day volatility and the market lagged volatility.
There are two implications here: 1) once volatility spikes, it will take several days for it to come down, no matter what the market does, 2) VIX does not not necessarily come down at all during a strong market rally (look at VIX chart in 1996-1999). Just think of it, why would expect to pay less for option calls when the market in a strong rally mode?
Metaphor of VIX as a "fear gauge" is very far from perfect.
I was considering Canada, but Australia is much worse off. There are three important differences: Canada has decent amount of manufacturing (currency devaluation would help), Canadian banks don't depend on "kindness of strangers"(selling their bonds to foreigners), and Canada exports a lot of its commodities to US. Many commodity prices are somehwhat "local" (just compare WTI crude vs. Brent).
"It's fun to be able, for once, to place yourself on the cheerleaders' side of the U.S. markets," writes Richard Russell, advising his readers to buy the DJIA ETF (DIA). "It makes sense to be on the side of the (Fed)." Russell last week: I've never seen anything like this. [View news story]
The worst investment ever: paying for Richard Russell's newsletter.
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
The author seems to lack a basic grasp of what money supply is. He doesn't seem to know that money in circulation is only one measure of money supply: money velocity and credit are the other two.
You can have greatly expanded money supply by simply extending credit without putting a single new penny in a stock market. For example, "additional money" can be created out of thin air by simply lowering margin requirements if investors start actively buying on margin. In this case, the market capitalization can greatly exceed the actual money all investors put in.
So why "money on the sidelines" is a hyperbole, the concept itself is very, very real.
Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
Caiman, I would caution that your analysis is missing several key points:
1. Book Value is seldom relevant to telecoms. When you check their B/S statements, you will realize that a lot of book value is "good will". For example, if you look at FTE "tangible equity", it is near 0 and it's negative for TEF. This is a purely accounting issue: if a company creates an intangible asset "in house", it usually doesn't show up in the B/S at all. Once a company is bought, the intangible assets recognized as "good will" on the acquirer B/S. So there is little insight to be gained from the Price/Book Value as you would need to normalize everything for acquisition accounting (good luck with that even if you are a CPA!)
2. FTE and IT are very exposed to Europe which is over-saturated and shrinking revenue area. These companies are in a mild secular decline (look at Europe demographics trends) and should be valued as such (could still be a good value). This is not the case for TEF, which is, at worst, in a cyclical decline (LatAm), but the prospects look brighter (selling to poor countries which will eventually get richer)
3. VOD is a special case as it holds 45% minority-stake of Verizon wireless (about 25-30% of its overall business) which is not consolidated on its financial statements. Using ratios for valuation is too simplistic here (hint: look at Verizion dividends paid to VOD)
4. Finally, it doesn't look like you normalized earnings for one time right offs and asset sales. All TTM P/E ratios are all over the place for these companies because of various one-offs. EBITDA also needs to be normalized to remove non-operating items to match OIBDA.
All in all, you should probably build a good financial model before trying to arrive at any conclusions
CNBC's Jim Cramer says he's witnessing something in the market he hasn't seen in all his 34 years of investing - something that tells him this bull market is more powerful than any we've ever experienced. First, investors aren't taking profits after good news, which is usually the norm. Second, stocks aren't re-tracing to fill in any gaps after popping on good news, they just keep going higher. Lastly, even on bad news, stocks are roaring even higher. This is a "surrealist moment," Cramer says. Managers who have been taught never to chase stocks are getting killed. This is bull is "crushing even the most skilled of matadors." (Video) [View news story]
On the contrary, I think we are witnessing something we have seen many times last..ummm...12 years: irrationally exuberant Cramer making a bad emotional call or in his own immortal words: "No, no, no! The Bear Sterns is fine! Don't take your money out!"
The market actually feels a lot like the Spring of 2011 - the news were getting worse but the stock prices kept on creeping up. It was a great time to buy...4 month later and 20% lower.
Amazon's Revenue Deceleration Probably Continued [View article]
>> intrinsic bias to paint the numbers as rosy as possible
Channel Advisor clearly has a dog in this race. It's a middle-man between a seller and various e-commerce sites, helping sellers optimize sales via Amazon, eBay, etc. CA function is not that much different from a real estate broker.
Therefore, this report is a bit like NAR existing home sales reports: the numbers are objective, the commentary ("analysis") is not.
I am pretty pessimistic of Australian long-term outlook. Australia has no economy of note left outside of mining sector, which is now slowing down. For example, their strong currency put Yellow Tail and other wine makers on a verge of bankruptcy.
By the way, their banking system is not in a good shape at all. Australia has a tremendous household debt, undercapitilized banks (look at load to deposit ratios), grossly overpriced real estate, and probably a large chunk of construction and industrial loans about to go bad to the mining sector.
The terminal growth number of 3.5% is way too high. The terminal number should roughly match GDP growth so a choice of 2-3% is more reasonable.
In you model, 2014 and 2016 revenue growth will exceed 2013 revenue growth. Why do you think the revenue growth will accelerate while AMZN will be focusing on its bottom line (cost controls)?
Finally, are GOOG, EBAY, etc. really AMZN peers? Google makes most money selling ads, Ebay is a pure service company that carries no inventory. GOOG gross margin is over 50% and Ebay's is over 70%. If you plugged in Walmart and Target as peers (their gross margins are similar to Amazon's), you would get much lower multiples.
Finally, even when you apply your aggressive assumptions, you arrive that AMZN trades at its intrinsic value. Why bother holding it?
Amazon.com (AMZN): Q1 EPS of $0.18 beats by $0.09. Revenue of $16.07B (+22% Y/Y) misses by $90M. Expects Q2 revenue of $14.5B-$16.2B vs. $15.9B consensus. Expects Q2 operating income of -$340M to +$10M; EPS consensus is at $0.22. Shares +1.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
Old story. The revenue and guidance missed, the stock is up. I don't read much in "earnings beat" (let's see how they arrive at it), the guidance is now for a loss in Q2 vs. expected profit (-$0.36 vs. $0.22 a share!), which means further revisions down in yearly EPS. They may end losing money again in 2013.
Shouldn't they just declare bankruptcy so the stock can skyrocket to $1,000 a share?
Are Australian Cyclical Stocks Cheap Now? [View article]
Why would you think that Australian banks are "cheap"? As a matter of fact they are the highest priced on P/E (around 15), Book Value (near 2), Tangible Book Value (over 2) and any other reasonable measure compared to banks anywhere else in the world. Look at their loan/deposit ratios - they are all above 100%. They don't have enough deposits to cover their loans and have to borrow wholesale,.
The only metrics you look is a dividend payout. The banks foolishly payout almost all their earning as dividends while issuing bonds to borrow money to pay for it. By the same dividend metric, Citi, WaMu, and GM were "cheap" in 2007 (they all paid high dividends while borrowing money).
Take a look at Australian real estate prices. Australia and China the only remaining countries where the real estate prices didn't really adjust post 2007 real estate bubble. What do you think will happen to the banks when the s* hit the fan?
France is downgraded to Aa1 from Aaa at Moody's, which also maintains its negative outlook. "The predictability of France's resilience to future euro area shocks is diminishing in view of the risks to economic growth." [View news story]
"a strong commitment to structural reforms and fiscal consolidation, as reflected in recent governmental announcements"
Which one?
1) Rolling back retirement age 2) Raising taxes to 75% 3) Hiring more teachers 4) Raising a minimum wage
Amazon (AMZN +0.3%) acknowledges it received a claim from France's taxing authority for $252M to cover what it calls "the allocation of income between foreign jurisdictions" for the years 2006 through 2010. The move follows efforts by counterparts in the U.K. to question the company along with U.S.-based firms Starbucks and Google over similar issues. [View news story]
I agree with Amazon here. They are non-profit, charitable organization that supplies its customers goods below cost. They should not be taxed at all.
Eric Sprott: I Think We Are In For A Shortage Of Physical Gold [View article]
90%, really? Probably the same people who forecasted hyperinflation this year. All I can say, don't ask a barber if you need a haircut and don't ask Eric Sprott whether you should buy gold or silver.
VIX Suggests Investors Don't Believe Today's Rally Is Sustainable [View article]
I'd have to disagree with your conclusion. What you observe is a typical "volatility clustering." Look up GARCH model, the current day realized volatility is a function of the prior day volatility and the market lagged volatility.
There are two implications here: 1) once volatility spikes, it will take several days for it to come down, no matter what the market does, 2) VIX does not not necessarily come down at all during a strong market rally (look at VIX chart in 1996-1999). Just think of it, why would expect to pay less for option calls when the market in a strong rally mode?
Metaphor of VIX as a "fear gauge" is very far from perfect.
An Epic Australian Bust [View article]
"It's fun to be able, for once, to place yourself on the cheerleaders' side of the U.S. markets," writes Richard Russell, advising his readers to buy the DJIA ETF (DIA). "It makes sense to be on the side of the (Fed)." Russell last week: I've never seen anything like this. [View news story]
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
You can have greatly expanded money supply by simply extending credit without putting a single new penny in a stock market. For example, "additional money" can be created out of thin air by simply lowering margin requirements if investors start actively buying on margin. In this case, the market capitalization can greatly exceed the actual money all investors put in.
So why "money on the sidelines" is a hyperbole, the concept itself is very, very real.
Telefonica: Cheap For A Reason (Equity) - A Comparative Valuation [View article]
1. Book Value is seldom relevant to telecoms. When you check their B/S statements, you will realize that a lot of book value is "good will". For example, if you look at FTE "tangible equity", it is near 0 and it's negative for TEF. This is a purely accounting issue: if a company creates an intangible asset "in house", it usually doesn't show up in the B/S at all. Once a company is bought, the intangible assets recognized as "good will" on the acquirer B/S. So there is little insight to be gained from the Price/Book Value as you would need to normalize everything for acquisition accounting (good luck with that even if you are a CPA!)
2. FTE and IT are very exposed to Europe which is over-saturated and shrinking revenue area. These companies are in a mild secular decline (look at Europe demographics trends) and should be valued as such (could still be a good value). This is not the case for TEF, which is, at worst, in a cyclical decline (LatAm), but the prospects look brighter (selling to poor countries which will eventually get richer)
3. VOD is a special case as it holds 45% minority-stake of Verizon wireless (about 25-30% of its overall business) which is not consolidated on its financial statements. Using ratios for valuation is too simplistic here (hint: look at Verizion dividends paid to VOD)
4. Finally, it doesn't look like you normalized earnings for one time right offs and asset sales. All TTM P/E ratios are all over the place for these companies because of various one-offs. EBITDA also needs to be normalized to remove non-operating items to match OIBDA.
All in all, you should probably build a good financial model before trying to arrive at any conclusions
CNBC's Jim Cramer says he's witnessing something in the market he hasn't seen in all his 34 years of investing - something that tells him this bull market is more powerful than any we've ever experienced. First, investors aren't taking profits after good news, which is usually the norm. Second, stocks aren't re-tracing to fill in any gaps after popping on good news, they just keep going higher. Lastly, even on bad news, stocks are roaring even higher. This is a "surrealist moment," Cramer says. Managers who have been taught never to chase stocks are getting killed. This is bull is "crushing even the most skilled of matadors." (Video) [View news story]
The market actually feels a lot like the Spring of 2011 - the news were getting worse but the stock prices kept on creeping up. It was a great time to buy...4 month later and 20% lower.
Amazon's Revenue Deceleration Probably Continued [View article]
Channel Advisor clearly has a dog in this race. It's a middle-man between a seller and various e-commerce sites, helping sellers optimize sales via Amazon, eBay, etc. CA function is not that much different from a real estate broker.
Therefore, this report is a bit like NAR existing home sales reports: the numbers are objective, the commentary ("analysis") is not.
Downgrading Down Under [View article]
By the way, their banking system is not in a good shape at all. Australia has a tremendous household debt, undercapitilized banks (look at load to deposit ratios), grossly overpriced real estate, and probably a large chunk of construction and industrial loans about to go bad to the mining sector.
Bank-wise, Australia 2013 = US 2007.
Is Amazon Expensive? Not To Me [View article]
I see three technical issues with you DCF:
The terminal growth number of 3.5% is way too high. The terminal number should roughly match GDP growth so a choice of 2-3% is more reasonable.
In you model, 2014 and 2016 revenue growth will exceed 2013 revenue growth. Why do you think the revenue growth will accelerate while AMZN will be focusing on its bottom line (cost controls)?
Finally, are GOOG, EBAY, etc. really AMZN peers? Google makes most money selling ads, Ebay is a pure service company that carries no inventory. GOOG gross margin is over 50% and Ebay's is over 70%. If you plugged in Walmart and Target as peers (their gross margins are similar to Amazon's), you would get much lower multiples.
Finally, even when you apply your aggressive assumptions, you arrive that AMZN trades at its intrinsic value. Why bother holding it?
Amazon.com (AMZN): Q1 EPS of $0.18 beats by $0.09. Revenue of $16.07B (+22% Y/Y) misses by $90M. Expects Q2 revenue of $14.5B-$16.2B vs. $15.9B consensus. Expects Q2 operating income of -$340M to +$10M; EPS consensus is at $0.22. Shares +1.4% AH. CC at 5PM ET (webcast). (PR) [View news story]
Shouldn't they just declare bankruptcy so the stock can skyrocket to $1,000 a share?
Are Australian Cyclical Stocks Cheap Now? [View article]
The only metrics you look is a dividend payout. The banks foolishly payout almost all their earning as dividends while issuing bonds to borrow money to pay for it. By the same dividend metric, Citi, WaMu, and GM were "cheap" in 2007 (they all paid high dividends while borrowing money).
Take a look at Australian real estate prices. Australia and China the only remaining countries where the real estate prices didn't really adjust post 2007 real estate bubble. What do you think will happen to the banks when the s* hit the fan?
Goldman Sachs' 23 best stocks for fat dividends and big buybacks: AIZ, UFS, VR, CCE, WYN, HFC, LOW, AMP, MPC, NSC, AXS, FITB, AMAT, PFE, JPM, DELL, RSG, PRU, BLK, CSX, GLW, TRV, CMCSA. [View news story]
Just look at their last list (if you followed, you'd be one of few people to lose money in 2012):
http://bit.ly/WKWggY
France is downgraded to Aa1 from Aaa at Moody's, which also maintains its negative outlook. "The predictability of France's resilience to future euro area shocks is diminishing in view of the risks to economic growth." [View news story]
Which one?
1) Rolling back retirement age
2) Raising taxes to 75%
3) Hiring more teachers
4) Raising a minimum wage
Amazon (AMZN +0.3%) acknowledges it received a claim from France's taxing authority for $252M to cover what it calls "the allocation of income between foreign jurisdictions" for the years 2006 through 2010. The move follows efforts by counterparts in the U.K. to question the company along with U.S.-based firms Starbucks and Google over similar issues. [View news story]