Equity Risk Premium Levels Suggest March Lows Will Hold [View article]
chap08 is correct. A peak can only be identified well after it occurs. We could be at a peak right now or half way to a peak. There are points on the chart where someone might have called a peak only to be early. Both in time and in pain.
When deflation is causing the pain, as in the 1930s and now, the Treasury yields are much lower and the peaks much higher.
GM kept the $40 billion+ tax loss carry forward that would normally be lost in bankruptcy but also assumed the $40 billion pension liability that would otherwise be discharged in bankruptcy.
The US Government did not want that pension liability to transfer to the Pension Benefit Guarantee Corp. The tax loss benefit and the pension liability are almost equal. A good move by Treasury.
The truth is not sad. The GM story is a great success.
As investors we are in the midst of something and there is little certainty.
The US Treasury bonds and notes are clearly bets on deflation. To loan this government money at 3.2% for 30 years doesn't make sense under any other scenario.
Gold at $750/oz is a bet on inflation. The US would prefer inflation to deflation and is working towards achieving that end. Inflation would solve the most important current problem: falling real estate prices.
Using Alan's own analysis, there isn't much gold around compared to all the other forms of money. $211 billion is a lot of money, but I think we have already put a greater amount into saving Citigroup. About the same amount has gone to try to save AIG. Can you imagine the uproar if the US Treasury announced that it was selling all its gold to save Citigroup?
If people decide they want to own more gold the price could have a significant increase. After all, governments can sell what they have but they cannot make it.
The Small, But Important, Flaw In The Tepper Analysis [View article]
Picture a large banquet with 100 attendees. One of the attendees is the FED. Only desert will be served at the banquet. 100 deserts are served.
The attendees pass the deserts around for hours. The total number of desert transactions is over 5000. When the function is over the FED eats all the deserts.
General Motors IPO: Baffled by the Negativity [View article]
I am here to make money. When I want to complain, I don't think about GM and Chrysler, I think about the week where Lehman was filed bankruptcy on Monday morning and AIG was bailed out Tuesday afternoon.
General Motors IPO: Baffled by the Negativity [View article]
The support at $33 is not permanent and there is no obligation on the part of the Morgan Stanley lead syndicate to bid for stock. The underwriters ability to do that ends 30 days after the offering price is set. GM can certainly go down. Believe me, in the 38 years I have been trading stocks I have had many surprises.
The likelihood of a syndicate bid at 33 does provide a degree of near term support as was seen on Friday when the shares traded down to $33.11 and then rallied.
I feel that knowledge of the inner workings of the market is more valuable than fundamental or technical research.
The half truth is the mention of the tax loss carry forward without mentioning the equal amount of pension liability that the new GM picked up. In a normal bankruptcy this liability is discharged.
The tax loss carry forward was a trade off from Treasury for the assumed pension liability.
It’s Time for Microsoft’s Second 'Inception' [View article]
Microsoft reminds me of Eastman Kodak. In 1972, EK had the #3 market cap in the world, behind IBM and GM. IBM is out of the top 10 now and GM went bankrupt. EK is a small cap company. Time marches on.
Like EK, MSFT has (had) one dominant product: Windows. EK had film. When was the last time you bought a roll of film?
EK failed at other technology like video discs, instant cameras and film (remember "the crank?") EK invented super glue.
MSFT does have Office, but you can get "Open Office" for free. Everything else is second rate at best. Seen a Zune lately? How is Bing, Hotmail, Windows phones? Everyone talks about XBOX but is it enough for a $200 billion company.
I Want A Change In Leadership At Chesapeake Energy [View article]
Aubrey McClendon owns less than 5% of the company. The board of directors may decide that continuing to support him is no longer in their own and the company's best interest.
Four Strategies for September's Bad Reputation [View article]
Good advice. I write this comment with the Dow Jones Industrials and S&P 500 both up around 1% in the pre market in response to the August employement report. SPX futures are at 1102.
Traders got too bearish earlier this week and paid the price.
OK to be cautious, but I do not believe that the "doom and gloom" scenario will play out. More like a muddle through with both good numbers and bad numbers from the economy.
I am long Citigroup from last week's offering. Anyone who is negative on C can easily sell the stock short.
Back at the end of 2006, Citigroup was at $56 with 5 billion shares outstanding for a market value of $280 billion.
Now, with the massive dilution, C is a $3.36 stock with 30 billion shares outstanding, let's call it a market value of $101 billion, 36% of the year end 2006 market value.
The scale of the comparison makes sense. From the point of view of a buyer today, it is like the company did not issue any additional shares and the stock declined from $56 to 36% of that, or $20.
Citigroup has issues, but it also has great potential as the only US bank that is truly international. With all these shares outstanding it isn't going back to 56, but certainly it could double in 2010.
Or, if you are bearish, sell it short. Back in the summer when the preferred exchange offer was going on, you couldn't borrow C to sell short or you had to pay to borrow. Not a problem now.
Why Congress Is Asking Bernanke Bogus Questions [View article]
Bernanke repeatedly states that BAC would not have been successful invoking the "material adverse change" (MAC) clause. That opinion is a convenient explanation for why the Fed jawboned BAC to keep the deal together.
In my opinion it seems that BAC might well have prevailed in court if they used MAC.
Several times the Fed Chairman stated that he is not an attorney, but in the case of BAC invoking MAC he gives a legal opinion anyway.
American Capital Agency Corp.'s Detailed Dividend Sustainability Analysis [View article]
AGNC is a highly leveraged REIT (7-1) taking advantage of sustained and dropping interest rates. Very few analysts thought, at the depths of the financial crisis in Mar 2009, that rates would be LOWER 4 years later. But, here we are.
AGNC keeps offering more shares at least twice a year, so to me it is a house that keeps getting larger, but built on a weak foundation.
Any analysis of the dividend sustainability is dependent on a successful prediction of future interest rates.
Silver Breakout Has Serious Fundamental Legs [View article]
The all time high price for silver was $47.80/oz in March 1980. Since that time silver has had to overcome the loss of photographic industry consumption that once accounted for 40% of the silver mined annually. Additionally, the quantity of silver mined has doubled since 1980.
That said, silver seems to be in a bull market with a lot of upside potential. Jewelry use is increasing and people worldwide are buying silver as protection from inflation and the other weaknesses in paper money. As an electrical conductor, silver is unequalled.
Not in a straight line, but I see silver going much higher.
Why Class Action Against Apple and AT&T Is a Big Deal [View article]
In the Toyota example, the altered Toyota has no effect on the millions of other Toyotas on the road. With the Apple iPhone, opening the phone to other software, aps, and carriers may subject existing iPhone users to viruses, etc. I agree with most of the comments, if you don't like the iPhone as it is, don't buy it.
Equity Risk Premium Levels Suggest March Lows Will Hold [View article]
We could be at a peak right now or half way to a peak. There are points on the chart where someone might have called a peak only
to be early. Both in time and in pain.
When deflation is causing the pain, as in the 1930s and now, the Treasury yields are much lower and the peaks much higher.
The Sad Truth of the GM IPO [View article]
The US Government did not want that pension liability to transfer to the Pension Benefit Guarantee Corp.
The tax loss benefit and the pension liability are almost equal.
A good move by Treasury.
The truth is not sad. The GM story is a great success.
Own Gold? Time to Fold [View article]
The US Treasury bonds and notes are clearly bets on deflation. To loan this government money at 3.2% for 30 years doesn't make sense under any other scenario.
Gold at $750/oz is a bet on inflation. The US would prefer inflation to deflation and is working towards achieving that end. Inflation would solve the most important current problem: falling real estate prices.
Using Alan's own analysis, there isn't much gold around compared to all
the other forms of money. $211 billion is a lot of money, but I think we have already put a greater amount into saving Citigroup. About the same amount has gone to try to save AIG. Can you imagine the uproar if the US Treasury announced that it was selling all its gold to save Citigroup?
If people decide they want to own more gold the price could have a significant increase. After all, governments can sell what they have but they cannot make it.
The Small, But Important, Flaw In The Tepper Analysis [View article]
The attendees pass the deserts around for hours. The total number of desert transactions is over 5000. When the function is over
the FED eats all the deserts.
General Motors IPO: Baffled by the Negativity [View article]
General Motors IPO: Baffled by the Negativity [View article]
The likelihood of a syndicate bid at 33 does provide a degree of near term support as was seen on Friday when the shares traded down to $33.11 and then rallied.
I feel that knowledge of the inner workings of the market is more valuable than fundamental or technical research.
The Sad Truth of the GM IPO [View article]
The tax loss carry forward was a trade off from Treasury for the assumed pension liability.
It’s Time for Microsoft’s Second 'Inception' [View article]
Like EK, MSFT has (had) one dominant product: Windows. EK had film. When was the last time you bought a roll of film?
EK failed at other technology like video discs, instant cameras and film (remember "the crank?") EK invented super glue.
MSFT does have Office, but you can get "Open Office" for free.
Everything else is second rate at best. Seen a Zune lately? How is Bing, Hotmail, Windows phones? Everyone talks about XBOX but is it enough for a $200 billion company.
MSFT is a classic value trap.
I Want A Change In Leadership At Chesapeake Energy [View article]
Four Strategies for September's Bad Reputation [View article]
Traders got too bearish earlier this week and paid the price.
OK to be cautious, but I do not believe that the "doom and gloom" scenario will play out. More like a muddle through with both good numbers and bad numbers from the economy.
Citigroup: Take the Loss, Tim [View article]
Back at the end of 2006, Citigroup was at $56 with 5 billion shares outstanding for a market value of $280 billion.
Now, with the massive dilution, C is a $3.36 stock with 30 billion shares outstanding, let's call it a market value of $101 billion, 36% of the year end 2006 market value.
The scale of the comparison makes sense. From the point of view of a buyer today, it is like the company did not issue any additional shares and the stock declined from $56 to 36% of that, or $20.
Citigroup has issues, but it also has great potential as the only US bank that is truly international. With all these shares outstanding it isn't going back to 56, but certainly it could double in 2010.
Or, if you are bearish, sell it short. Back in the summer when the preferred exchange offer was going on, you couldn't borrow C to sell short or you had to pay to borrow. Not a problem now.
Go for it.
Why Congress Is Asking Bernanke Bogus Questions [View article]
been successful invoking the "material adverse change" (MAC) clause. That opinion is a convenient explanation for why the Fed jawboned BAC to keep the deal together.
In my opinion it seems that BAC might well have prevailed in court if they used MAC.
Several times the Fed Chairman stated that he is not an attorney, but in the case of BAC invoking MAC he gives a legal opinion anyway.
American Capital Agency Corp.'s Detailed Dividend Sustainability Analysis [View article]
sustained and dropping interest rates. Very few analysts thought, at the depths of the financial crisis in Mar 2009, that rates would be LOWER 4 years later. But, here we are.
AGNC keeps offering more shares at least twice a year, so to me it
is a house that keeps getting larger, but built on a weak foundation.
Any analysis of the dividend sustainability is dependent on a successful prediction of future interest rates.
Silver Breakout Has Serious Fundamental Legs [View article]
That said, silver seems to be in a bull market with a lot of upside potential. Jewelry use is increasing and people worldwide are buying silver as protection from inflation and the other weaknesses in paper money. As an electrical conductor, silver is unequalled.
Not in a straight line, but I see silver going much higher.
Why Class Action Against Apple and AT&T Is a Big Deal [View article]
With the Apple iPhone, opening the phone to other software, aps, and carriers may subject existing iPhone users to viruses, etc.
I agree with most of the comments, if you don't like the iPhone as it is, don't buy it.