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Oscar Sahlberg  

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  • Green Energy, Red Ink: Prospects For Solar In A Recession [View article]
    A bulge bracket broker revised their global demand lower. Changes were made to for Germany (-20%), India (-20%), Japan (-17%) and Italy (+33%). Meanwhile they forsee a large poly oversupply which is reverberating through the system by continuing to bring down wafer, cell and module prices.
    Sep 20, 2011. 01:06 AM | Likes Like |Link to Comment
  • Investment Themes In A Low Growth, Zero Rate, Deleveraging Economy [View article]
    Daneel – I would like to just point out that the calmer the markets, the lower the vol, and thus the lower the premium you will obtain. And just like Nassem Taleb’s example of the Thanksgiving Turkey that feels most comfortable and fattest the day before it gets cut, the vol spike that could come around the corner would be very expensive. Whereas selling calls when the market is in a panic probably means that vol is overpriced...
    Sep 18, 2011. 04:52 PM | Likes Like |Link to Comment
  • Investment Themes In A Low Growth, Zero Rate, Deleveraging Economy [View article]
    Dear American in Paris - As per OECD Data German real GDP contracted by 4.7% in 2009, grew by 3.5% in 2010 and expected to grow 3.4% in 2011, whereas US shrunk 2.6%, and grew 2.9% and is expected to grow 2.6% in 2011. That puts the cumulative impact at year end around 0.6% to the advantage of the US... Sweden contracted by 5.3% and grew by 5.3% while the Netherlands contracted by 3.9% and grew by 1.8%...
    Sep 18, 2011. 04:31 PM | Likes Like |Link to Comment
  • Investment Themes In A Low Growth, Zero Rate, Deleveraging Economy [View article]
    Johann Galt, in addition to your comment I want to add that I find the Norwegian and Swedish companies to be highly capitalistic and global (high exposure to eastern european emerging markets). And they were not prone to financial crises either (Norwegian and Swedish banking sectors were in full fledged crisis throughout the late 1980s and early 1990s)...
    Sep 18, 2011. 04:01 PM | Likes Like |Link to Comment
  • Green Energy, Red Ink: Prospects For Solar In A Recession [View article]
    nice site visolaris. I will be visiting to keep a tab on developments. thanks
    Sep 18, 2011. 03:54 PM | Likes Like |Link to Comment
  • Green Energy, Red Ink: Prospects For Solar In A Recession [View article]
    Dear LEGaLiZeIT – thanks a lot for your reply. I appreciate your feedback and enjoy our discussion here. However I actually have to disagree with you again on a few points regarding your argument on valuation if I may. Let me first separate cash and gold from the other examples you have provided here as they are, as you said predominantly seen as mediums of exchange. i.e. they are literally accounting units that are able to store value and act as mediums of exchange. Therefore, they do not have value in and of themselves (gold is a little bit tougher because it also has other industrial uses as well as acting as a unit of exchange). However, all other examples you have provided will be valued inherently on their power of economic earnings. Again I would like to reiterate the point of economic earning as opposed to accounting earnings (and maybe even cast the net a little wider to say economic benefits but that’s a new card I am putting on the table so you can bar it if you’d like).

    I think this also illustrates the multiple based valuation techniques’ weaknesses. Please do not misunderstand me, I think they are fantastic quick valuation tools, but they can fail in a few cases. First of all, when you look at the 2.9%, that is nominal yield (I assume you're looking at 20 yr?). Land being a real asset and the product coming out of it, being a commodity, is also indexed to real prices (i’ll get some abuse here, but let’s continue). So instead of the nominal yield, if you look at the 1.1% real yield on the 30 year bonds, 2.9% does not look so horrible (actually 20yr works better for me which sports a 0.78% real yield). (On a separate note, can I point you to my article which tries to take a stab at explaining this low yield environment – would love to hear your thoughts. A second crack at explaining the cap rate in economic returns in this case would be to look at the price curve on the crops. While rent is based on 1 year prices (I rent, get product for that year and pay my rent and I’m done, I get 1 period’s worth of cashflow), ownership entitles you to cashflows for the lifetime of that asset – in case of land, many many years...) Thus with a steep enough futures curve, it is quite conceivable that you can have a funny looking cap rate on spot prices...

    And yes there are many valuation methods, and they all come to use in many ways. However, my argument, and I still maintain it, is that the fundamental underlying driver of all these is discounting economic earnings (benefits, whatever we want to call them). Take your example of adjusted net book value. Again this is accounting based. And even if we assume that the companies really carry these (I still maintain that accounting rules are way too slow and lax in interpretation to force companies to adjust assets to fair market value in a timely and correct fashion) at "fair market value", how is that fair market value determined? Easy answer: supply and demand? How does that equilibrium occur? Each participant makes an estimate (explicit or implicit) of the NPV of the benefits accruing to them again. So what I still maintain is that in valuation, it is not possible to divorce the concept of economic earnings from the concept of value of an asset.
    Sep 18, 2011. 03:48 PM | Likes Like |Link to Comment
  • Green Energy, Red Ink: Prospects For Solar In A Recession [View article]
    LEGaLiZeIT- Thanks for your comment, and thanks for pointing out the typo where I missed the word "listed" in describing the mentioned stocks. However, I beg to differ with you on your comment regarding methods of valuation. An asset's inherent value is always based on the earnings power it generates (I am using the word earnings in an economic context, not accounting context). Every respectable corporate investment decision goes through a test whereby companies will look at the present value of these economic earnings versus the cost see if the former cover the latter.

    One has to be careful about citing asset based multiples in this context. History is ridden with examples where assets losing their earning power trading below book. Accounting rules especially are way too slow and lax in interpretation to force companies to recognize this loss of earning power quickly too (it can be fudged easily under the value in use method). This also leads into the mismatch in book value over time for assets carried at cost as companies revert to practices that minimize asset impairments. This is especially problematic for high-tech capital intensive businesses whereby the initial pricing of the capex is based on lofty earnings estimates (i.e. you’ve overpaid for your assets)

    The thesis of the piece was that with the industry facing a challenge to its earnings power due to the subsidy risk, the companies will be facing a tough time in the next couple of years (please also see supply-demand situation and price elastic arguments above).
    Happy to talk valuation issues further but I hope that this explanation is useful in terms of delineating the real driver when it comes to valuation and I hope you find it useful in your other analyses.
    Sep 17, 2011. 02:32 AM | Likes Like |Link to Comment
  • Green Energy, Red Ink: Prospects For Solar In A Recession [View article]
    EysteinH - Thanks for your comment. The thesis of this article is based on the unsustanability of the spending patterns, specifically arising out of Europe, with the potential to spread to other countries. To summarize the line of though, it argues that for the government to be able to provide subsidies, it will have to be able to finance these. Yet with deteriorating public finances, spending cuts are a serious option. Take Greece for example. Far from stimulating the economy, the country is biting on a nasty pill of austerity. In such an environment governments are in no position to sustain the current rate of spending, and they have to think the marginal impact of every euro/dollar spent and allocate accordingly. As I said in the intro, the future of solar is bright, however, as it continues to depend on government subsidies, in an environment where gov't budgets are under strain, the industry is likely to face difficulties.
    Sep 17, 2011. 01:35 AM | Likes Like |Link to Comment
  • Recognize The Risk Of A 2008 Repeat And Allocate Accordingly [View article]
    Hi. You would really have to analyze the underlying distribution. If the weightings are not too far from the S&P, then the option strategy will not necessarily work. It really has to help aiding with the rebalancing rather than capping the upside and juicing up the yields in the interim, because a pure covered call strategy will not protect you from the downside except for the premium cushion you get initially.
    Sep 14, 2011. 02:23 PM | Likes Like |Link to Comment
  • A Balanced Income Portfolio With Secure Dividends [View article]

    Thanks for your comment & article links. While there will be some nuances between the nature of the companies in the list, my aim was to cast the net as wide a possible in terms of industry exposures (notice the lack of financials - I believe the risks are far too great there). Would be happy to hear any specific thoughts on dropping T especially.
    Sep 14, 2011. 02:52 AM | 2 Likes Like |Link to Comment
  • 2 Stocks That Are Falling From The Good Graces Of The Street [View article]
    Thanks for your comment. I agree that FDX would be a pretty good buy if there is a big selloff. Timing is the key here. With such a high sensitivity of earnings to the economy, the argument goes both ways. When there is a big sell-off due to slowdown, the stock can act like a spring under pressure and recoil really fast the other way around when positive signs appear.
    Sep 14, 2011. 02:45 AM | Likes Like |Link to Comment
  • DryClean/EnviroStar: Customers and Suppliers Reduce Risk [View article]
    Management of this company is a horror to deal with. They simply refuse to talk to anybody by making up reasons like "SEC has banned us from talking to anyone" which is not true (I have confirmed this with the SEC) and if true I would be running away fast from a company that's been banned from communicating with their investors. On paper things may look good but I am not going and this stock may make money but I simply refuse to put my hard earned cash into managements that are antagonistic to their shareholders/managers that I do not believe in or wish to be associated with. Why risk it?
    Nov 26, 2009. 01:54 PM | 1 Like Like |Link to Comment
  • Trading the UltraShort China Hedge [View article]
    If you want to short China, DO NOT use the FXP, instead go short the FXI directly (adjust your position depending on what your appetite for volatility is accordingly). For example, if you had gone short FXI vs Long FXP, you would have actually made money over the past 2 years (I have included the inverse of FXI) rather than being long the FXP (which completely would have destroyed your capital). This has to do with the underlying setup with the swap, which is basically an "double or nothing" structure. Please see the link below for the evidence of what I mean... (FXI inverted left axis rebased to 100 - so you're up when you are short it--- FXP right hand sight, you're long it).. Also note that if FXI halves to its all time low tomorrow, FXP will only go to 16 NOT the high of 170...
    Nov 3, 2009. 04:02 PM | Likes Like |Link to Comment
  • What Happens If Roubini Is Right? [View article]
    Roubini's predictions could indeed come true but how you get there is more important than whether you get there or not. One should always remember the power of the speculative flows and the reflexivity of the process (i.e. as more people sell, the lower dollar goes, making it more appealing). Of course the process will end at some point but is this the right time to call the trend reversal? There will be enough time and volatility at that point to give signal to all, in my view...

    Also looking at DXY or the The Major Dollar Index leads into many fund managers salivating about oversold dollar but checking out the Broad Index dampens that a little (encompasses 90% of all imports and exports). You've had a massive 30 year run there, and we're only 7 years into the reversal (see graph link).
    Nov 3, 2009. 03:35 PM | Likes Like |Link to Comment
  • Big Bear Rosenberg and the Great Rally [View article]
    David is a great commentator but he's not really been disciplined by a daily P&L at ML. Maybe GS+A will be different. Also there is the time-portal fallacy (nicely delineated in DE Shaw's market insights in july 2009) which a lot of these sophisticated market strategies exhibit...
    Oct 20, 2009. 06:12 PM | Likes Like |Link to Comment