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Mark Bern, CFA

 
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  • Swine Flu, MERS, Ebola And Medical News Concentrator June 7, 2014 To August 16, 2014 [View instapost]
    Thanks
    Aug 10 03:04 PM | 2 Likes Like |Link to Comment
  • Swine Flu, MERS, Ebola And Medical News Concentrator June 7, 2014 To August 16, 2014 [View instapost]
    Guns - I saw another version of this map and thought it was the same one so I didn't give it a thought at the time (a couple of days ago). But I distinctly remember that there were 4 locations identified on that map. 5 cases in the same location as 6 exist today (scares not actual cases), the other one already there and two others, with one near Toronto, Canada. I don't remember the location of the other. I suppose this could still be the same map with a change in diagnosis for the other two sites?

    Have you noticed changes in the locations over the last few days?
    Aug 10 01:29 PM | 3 Likes Like |Link to Comment
  • Why Thursday's Sell-Off Matters [View article]
    Trader - I think your observation that "its a perfect storm of factors" is probably more the case. The list is long and who knows which factor was what broke confidence. But that may be temporary and it might be a preview. The more the better because as many have pointed out here in this thread any good drop provides opportunity to find some bargains.
    Aug 1 12:59 AM | Likes Like |Link to Comment
  • Why Thursday's Sell-Off Matters [View article]
    Michael - The $1.5 billion represents only 10% of the bonds held by the disputing parties. The full amount is closer to $15 billion; still not a huge sum. Argentina cannot pay any of its creditors until it settles with the hold-out group. If it agrees to pay the hold-out group what it wants it will be forced to renegotiate with all other creditors. That creates a larger problem. But that may be only the tip of the proverbial iceberg. I suspect that there is a tangled web beneath the surface including not only insurance sold by large banks in developed countries (US and Europe) but also many layers of credit default swaps sold and resold. In the end the bill will still be less than the $15 billion, but untangling the web creates uncertainty and no one knows who is liable for what at this stage. My concern is that is too much of the liability points to one or two large European banks that may already be in trouble it will require fast action by the ECB or the government of the country where the bank resides. We all know that the ECB doesn't do anything "fast." So, if the country in question is either Spain or Portugal, where the governments cannot afford the bailout, a can or worms gets opened up. All will probably be "fixed" within a few hours or days after the problem is discovered, but the worry is not knowing who it is or how big the problem could be or if the bank can be saved in time. If a large bank in Spain fails it could get messy with all the international trading and debt/default insurance and credit swaps they could hold. The bank will also hold tons of sovereign debt from its own government and probably quite a bit from Greece, as well. Liquidation of assets by a large bank could have a ripple affect on the system.

    That's probably a long shot, I admit. But my thought is that there could be institutional investors moving to the sidelines until they figure out what the real magnitude of the default might be. Then it will probably be back to business as usual. Bottom line is that it is probably much ado about nothing.

    Sorry that I did not make that statement in the first post.
    Jul 31 10:30 PM | 5 Likes Like |Link to Comment
  • Why Thursday's Sell-Off Matters [View article]
    snoopy & Trader - I don't really think that Russia or ebola caused today's liquidation-like move. The only thing that seems to have the immediate potential to create chaos in the financial markets is the Argentina default. I think most institutional investors had assumed that Argentina and the hedgies would find a reasonable accommodation. When that didn't happen it created a scenario that had not been consider a possibility and now there is a big unknown as to how the default will affect the international banking industry. Many European banks are in very fragile states already and may have significant exposure to Argentina.

    The courts ruled that if Argentina could not come to terms with 100% of its creditors it could not pay any of them. Thus, this hold out by a small group has turned into a major sovereign debt default...again. This is the 2nd default by Argentina in 13 years so it is not new. But since it was assumed that default would not happen I don't think anyone has done much homework on what the fallout will be. That being the case, we'll have to wait until tomorrow or maybe even Monday to find out who is exposed and if there is likely any ripple effect that could create a problem for the financial systems of the developed world.

    That's my guess as to why the markets sold off. IMHO, it has nothing to do with the US economy. And, at this point in time, it is also impossible to determine how much or how little damage the event will create. Mr. Market doesn't mind climbing a wall of worry as long as he knows the range of likely outcomes. But he does not like the totally unknown. In other words, investors jumped to the sidelines (and may or may not continue) until they get a better understanding of what might happen. Just my 2 cents.
    Jul 31 09:41 PM | 5 Likes Like |Link to Comment
  • The Time To Hedge Is Now! July 2014 Update [View article]
    I used to but I found the premiums were much higher to protect my portfolio holdings. Also, I have watched double tops that did not turn out to be tops and the market went higher. The current environment with the Fed holding interest rates down has made many usually good indicators become worthless. This has not been a rational market. Much of the increase in S&P EPS has come from stock buy backs rather than increased sales. Cost cutting, while admirable and necessary, has also been a strong contributing factor. Growth in emerging markets has probably done the most to help revenue growth. The US economy is not as strong as the headlines have indicated and, while there is no real way to time the market under current conditions, I just don' t want to get caught waiting for the turn to occur only to find that I have already lost 10% and the cost to hedge has more than doubled. My hedge position, which has cost less than 2% of my total portfolio, is down by a total of about 14% because I continued to add new positions as equities made new highs. I am now fully hedged and feel quite comfortable know that I am risking 2% instead of 30%.
    Jul 28 03:03 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! July 2014 Update [View article]
    vocuer - Once weakness occurs the price will go up. I try to set my positions when the premiums are cheap; on strong up days.
    Jul 26 09:50 AM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! July 2014 Update [View article]
    Dennis - Good response. Thanks for sharing your perspective.
    Jul 25 12:57 PM | Likes Like |Link to Comment
  • The Time To Hedge Is Now! July 2014 Update [View article]
    Vocuer: I agree with Dennis on the perspective piece. I like expiration dates sufficiently far enough in the future to give me a chance of success, but not so far away that I overpay on the intrinsic side of the equation.

    Your selections appear to fit your style (IWM and IBB) more than mine, which is fine because it is a good fit for you. However, I like to pay less for my hedge positions (therefore something with a shorter time frame) and then roll the position forward to another maturity somewhat further out if the timing is off. I do this because I consider the hedge insurance rather than an opportunity. Therefore I like to keep my hedge costs as low as possible. If I am right I protect my portfolio from major losses; if I'm wrong I only give up less than 2% of my portfolio for peace of mind.
    Jul 25 12:57 PM | Likes Like |Link to Comment
  • Bulls Take Notice - Caution Suggested As Credit Markets And Equity Markets Diverge [View article]
    Chris - Excellent analysis of what to watch. Calling a top or bottom is next to impossible, but I do agree that the credit markets usually get it right long before equities investors. But the credit spread between junk and Treasuries is near record levels and I have a hard time seeing that as an oversold situation. Technical indicators may disagree with me, but when the spread narrows it means to me that too many investors are reaching for yield without paying enough respect to risk. That is often the case at turning points. Just a thought.
    Jul 24 01:16 PM | Likes Like |Link to Comment
  • China Creates A Buying Opportunity For Nu Skin [View article]
    I have no deal nor obsession with MLM. The company is growing revenue and earnings. The business model has been questioned many times in the courts and the companies have prevailed.

    If you compare it against the insurance business or brokerage business the percentage of folks who fail after being sold a dream isn't much worse. Anytime an industry churns through 80% of its new hires on average it is not necessarily a bad thing. It happens in insurance and it happens in securities brokerages. Most people who enter those professions on a commission only basis end up either quitting or being fired because they cannot meet quotas or make a living.

    Insurance companies (not all, but many) regularly hire individuals and, as part of the training, have them list 50 people they know well (friends and family). The trainer then helps them set up "practice" presentations with as many of those 50 as possible and does most of the sales pitch. The trainer closes as many of those "practice sessions" as possible to earn an override commission and eventually trailing commissions knowing full well that the trainee is not likely to stay with the company. New hires are not much more than a source of new leads and future commissions.

    I don't see anyone talking about how abusive the insurance industry is but I don't see them as being much different. I have been on several friends and family lists over my life and endured watching those poor souls being used over and over again. If that's okay with you, then I don't see how MLM is much worse.

    In gaining my CFA charter I was also taught to not allow my personal emotions to interfere with my analysis. Well-run insurance companies are also an area I like for long term investing potential. I don't particularly like the MLM business model, but it does create significant growth. The products usually aren't any better than what is offered in stores and they cost more. But somehow they grow, like insurance companies, on the dream of making a good living.
    Jul 21 09:47 AM | Likes Like |Link to Comment
  • Keurig Details Are Not Released: SodaStream Should Continue To Dominate The Home Soda Market [View article]
    The company should be pitching a commercial machine for schools to provide the kids with a healthier alternative and replace the Coke and Pepsi machines that are being removed. As those machines leave the schools the steady stream of shared revenues go with them; a healthy replacement would help replace the lost cash flow. Then SODA has the potential to change taste buds at an early stage and begin to wean away future business from the mega-competitors.
    Jul 20 11:38 PM | 2 Likes Like |Link to Comment
  • Keurig Details Are Not Released: SodaStream Should Continue To Dominate The Home Soda Market [View article]
    Illuminati - I agree that DPS would be the most suitable partner. With Coke in the game Pepsi could surprise us with an offer when the turbulence in the Middle East eases enough because they want to brand the company as having healthy alternative snacks. This would fit that approach. But DPS is playing 3rd fiddle to the two giants and may want to buy into a new product line with much higher growth potential. It would fit the DPS DNA.
    Jul 20 11:35 PM | 1 Like Like |Link to Comment
  • Keurig Details Are Not Released: SodaStream Should Continue To Dominate The Home Soda Market [View article]
    michaelkm8 - You make sense, especially with your assessment of the European market. I suspect it is similar in other parts of the world as well and the SODA has a good shot of continued success in those areas also.

    I totally agree that SODA is not likely hurting Coke or Pepsi or Dr Pepper sales. Taste is important. But I suspect that some of those lesser brands or generics could take a hit on the convenience and health issues. Still, the US market will probably grow far slower than the international market. But the cylinder replacement and syrup sales carry the big margins and will continue to grow from year to year. The installed base in the US will provide the cash for additional expansion overseas. I'll be very interested to see how Q2 results turn out!
    Jul 20 11:31 PM | Likes Like |Link to Comment
  • Keurig Details Are Not Released: SodaStream Should Continue To Dominate The Home Soda Market [View article]
    My 2 cents: Looking at the options, once we get out to Jan 15 the consensus seems to be strongly favoring higher prices. Most puts are already in the money now. Most calls are out of the money. If I were considering a "bet" on SODA at this point I would want to buy call options for Jan 2015 expiration in the $35 contract at a about $2. If the stock continues to tank one could lose a lot more than $2 per share. If the company reports stellar quarter 2 earnings (even a modest rise of 10% from Q1 would do wonders) the stock could blast off and the contracts would provide a huge profit. Assuming that the stock price regained $40 per share before January, one could then sell those calls for a price of over $6 per share booking a profit of 200% in less than 6 months. But if we buy the stock at $29 per share today and it goes to $40 we would only have a gain of 37% and have to take on more risk to get it. The maximum risk in the option contract is the $2 original investment (plus commission of $10 or less per contract).

    If you expect a pop from the July 30th earnings report, buy a call option. If the earnings are not spectacular you could lose a maximum of $2 or sell immediately on July 31st for a potentially minor loss of a few cents per share. Lower risk with much higher potential gain, especially in this particular case.

    A third option exists, of course. And that is to buy the option, see the price go up significantly (over $50) after the earnings report and then you decide to own the stock for the long term. Just tell your broker to execute the option and pay $35 per share for the stock.

    I am generally a buy and hold investor looking for dividend income. But the situation concerning SODA intrigues me. I wouldn't buy the stock personally because the company does not pay a dividend. But this is a special situation that could turn a tidy profit with very limited risk. I just might take a shot at SODA call options just before July 30th, especially if things settle down a bit in Israel before then.
    Jul 20 11:21 PM | 2 Likes Like |Link to Comment
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