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Tom Armistead

 
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  • Drop in Shipping Indicates Slowing Global Economy [View article]
    The Baltic Dry INdex is not shipping. It's a measure of the spot price commanded by dry bulk vessels.

    Considerable overbuilding and failure of some dry bulk carriers such as DRYS to get their vessels under contract has created a problem with excess supply, a problem that was apparent in the making some three years ago.

    I would hesitate to draw conclusions about the global economy based on this data.
    Jun 30 11:12 AM | 16 Likes Like |Link to Comment
  • Thoughts on the Equity Premium Puzzle [View article]
    You are correct that I used consensus estimates, GS's ideas were in an article today so I used them as being typical of optimistic analyst viewpoints. I don't develop my own estimates on S&P earnings, instead I use NIPA corporate profits and historical ratios to arrive at a target figure for the S&P. These methods place me a little bit on the high side of consensus, at 1,300 as of the last time I did it.

    A realistic view of the economy needs to acknowledge the weakness in housing and employment. However, US companies have been pretty swift to accommodate to the new normal and I suspect that they will continue to generate profits in a slowly growing economy.

    Where this leaves me is I think the ability to reliably generate a profit in US dollars is undervalued right now, and the current or forward P/E multiples rely on a risk premium that in turn can only be justified by the belief that stocks have about another 15% downside which is inevitable.
    Jun 30 10:45 AM | Likes Like |Link to Comment
  • 10-Year Treasury Yield Hits a 52-Week Low [View article]
    The bond market is full of refugees from the equity markets. They may experience additional pain if the CEOs are right, bailed out of equities at the bottom and bought into bonds at the top.
    Jun 23 10:55 AM | Likes Like |Link to Comment
  • Vishay Provides More Details of Pending Spinoff [View article]
    It's hard to see why the spin off would do much either way.

    I wrote the company up favorably in October 2008 and have owned it on and off since, pretty good profits.

    I like it at today's price and just bought some.
    Jun 23 09:52 AM | Likes Like |Link to Comment
  • The Credit Derivative Tsunami [View article]
    Thank you DrJ, these naked CDS need regulation, if not downright prohibition.
    Jun 22 03:54 PM | 6 Likes Like |Link to Comment
  • Minimizing 'Luck' in Investment Strategy [View article]
    I read the linked article, the main assertion made is that there is no permanent risk premium for stocks compared to bonds or other potentially less risky. So it makes quite a bit of sense to diversify among assets classes.

    However, the risk premium for stocks vs. bonds does vary quite a bit over time, and it is very possible that superior returns can be made by investing in stocks when the risk premium is high.

    Comparisons can be made, for example, between the yield on 10 year Treasuries against some metric for the earnings yield on stock, something like Shiller's P/E10 comes to mind. On that basis, the risk premium was huge (4%) in the 1st quarter of 2009 and is still in the 2% area.
    Jun 22 11:43 AM | 1 Like Like |Link to Comment
  • Just One Safe Haven [View article]
    No, just wrong. Excessive bearishness has cost a lot of investors a lot of lost opportunity since the March last year, whether standing on its own or conflated with negative views on the social and political issues facing the country today.

    A careful reading of Mr. Shaefer's aricle reveals that he is bullish on the American people, while harboring some reservations about the way the way the country is run, and stating he would be more enthusiastic about the investment climate if he were more confident in the managment of monetary and fiscal policy.

    Nothing too controversial here. He sees 50% cash as viable allocation, and would be more accurately described as cautious than as a perma-bear.

    As for those who conflate a bearish economic view with a host of negative opinions on the possiblity that this country will solve the social, economic and political issues it faces, there are plenty of them on this site, and they can wallow in it all they want.

    I personally invest where I see profit potential. Last year it was US equities and my portfolio was up 60% on the year. This year it is still US equities and I'm up 11% on the year to date.
    Jun 20 10:34 AM | 9 Likes Like |Link to Comment
  • Just One Safe Haven [View article]
    CASH is a logical choice as a largest position - I normally try to hold 20% of my portfolio in cash and would not put that much into any one stock. When considered against the "just one stock" idea it is pretty clear that USG (US Government) would have to be that stock.

    I was going to bash the author for his bearish tone, but going back through his articles he clearly stated that he was buying on 3/3/2009 and what he was buying, which would have done as well as anything else. So having exhibited some courage at the bottom a little caution right now is understandable.

    From a logical point of view, it makes sense to look at market level rather than timing, and try to have more cash on the sidelines when the market is high and more in the market when it's low, adjusting gradually as the market moves.

    USG has some problems looking out into the future on cash flow and off balance sheet liabilities, so maybe a selection of strong balance sheet, dividend paying US stocks, with real physical productive assets, would be a good alternative.
    Jun 20 08:02 AM | 10 Likes Like |Link to Comment
  • Ban Naked Short-Side Derivatives Now [View article]
    You're missing the point, this is about naked short selling. Buying CDS protection in the absence of an insurable interest is the equivalent of a naked short sale of bonds issued by the referenced entity.

    Otherwise the short seller would have to locate and borrow the bonds in question, which would make the transactions far more difficult and expensive.

    Naked short-selling opens the door for fraud, abuse and manipulation and there is no reason why it should be permissable in any market.
    Jun 18 02:37 PM | 12 Likes Like |Link to Comment
  • Ban Naked Short-Side Derivatives Now [View article]
    Amen.

    CDS are insurance and should be regulated as such, with a requirement of adequate capital for the seller and insurable interest for the buyer.
    Jun 18 02:04 PM | 8 Likes Like |Link to Comment
  • ExxonMobil: No Brainer or Puzzler? [View article]
    Thanks for the links, both sites have a lot of good info.

    The occasional difference of opinion is good for all concerned, this type of discussion helps me develop a better understanding of the stocks I invest in.
    Jun 18 12:45 PM | 3 Likes Like |Link to Comment
  • ExxonMobil: No Brainer or Puzzler? [View article]
    I cant reproduce the Price to Cash Flow or Free Cash Flow ratios you mention.

    Using an S&P report and five year averages, I get free cash flow averaging 6.49 per year, that would be P/FCF of 9.5 on the average.

    Meanwhile what is the capex? If they are doing things that will generate their five year average return on assets which is 16% then the money is well spent.
    Jun 18 10:56 AM | 2 Likes Like |Link to Comment
  • Chicago-Style White House Shakedown for BP's Execs [View article]
    The point here is that the rules just changed - it is no longer possible for big business to take excessive risks and then walk away when things go wrong, leaving taxpayers and the general public to bear the consequences.

    The financial crisis demonstrated that the consequences of excessive risk-taking must be born by the gamblers and their shareholders: otherwise, moral hazard rears its lovely head.

    The author is totally obtuse: he wants to continue the gambling, with a big poker game and Hayward going all in when he's holding aces and eights.

    I like the photo - in the background is Teddy Roosevelt, who spoke softly and carried a big stick.
    Jun 18 09:13 AM | 6 Likes Like |Link to Comment
  • ExxonMobil: No Brainer or Puzzler? [View article]
    I did the math, proved reserves have been going a little less than 2% per year for the past three, on average. Meanwhile the XTO deal would result in about a 13% increase.

    If Chanos shorted oil majors with oil at 147 per barrel it was a good call, especially when it got down below 50 per barrel. No need to talk about 2% declines in reserves if you got that call right, as he apparently did.
    Jun 18 08:54 AM | 2 Likes Like |Link to Comment
  • ExxonMobil: No Brainer or Puzzler? [View article]
    Article says Jim Chanos is shorting XOM because his analysis reveals they are in effect liquidating the company, not adding enough to reserves to replace what is sold...

    www.businessinsider.co...

    I plan to go over the 10-Ks and see if I can arrive at a conclusion...
    Jun 18 07:18 AM | 1 Like Like |Link to Comment
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