Value Interrogator

What FDIC Auctions, Loss Sharing Deals Don't Tell Us

I tend to agree with this article. Although I have not studied the intricate details of FDIC asset sales there does seem to be a very wide dichotomy between what assumed loan losses are in these FDIC auctions, and where actual defaults and recovery rates are projected to be by Moody's, S&P, and other forecasters. In fact, Invesco Mortgage Capital (IVR) said on their last conference call that buying loans in FDIC auctions will be part of their investment strategy in the near term. I suspect Wilber Ross recognizes that the ultimate value realized on these loans is well above what the fire-sale FDIC auction value implies.

How Can We Regain Confidence in Financial Professionals?

User 466256 said: "There are lots of things one can adjust to ensure you have enough money for college/vacation home/retirement. You can save more, spend less, set up tax efficient plans, etc, it is not simply a matter of good investment performance."

I have to agree with that 100%. Investment performance alone isn't going to secure anybody's future. Just like walking 30 minutes a day while eating Big Macs won't make you fit. People have to take responsibility for their own financial future.

Why I'm Lowering My Bond Exposure

I agree, but for different reasons. The relative value trade in spreads normalizing from irrational levels earlier this year is over. LQD is back to pre-crisis levels, HYG is actually overvalued when considering likely High Yield default and recovery rates. Thus, investors are better off pulling back on duration in expectation of higher interest rates. However, higher rates will come not from inflation, but from the inevitable rise in treasury and mortgage rates as the federal government, and Federal reserve can't artificially hold these rates down forever.

Used Car Market Looks Strong

If the US is supposed to get a stronger than expected recovery (ie annual GDP growth of 3.0% or more), what are supposed to be the drivers of it? Consumer spending, exports?

How Can We Regain Confidence in Financial Professionals?

If you ever had to slog through three miserable years (or more) to get your CFA designation, you wouldn't be claiming that a CFA isn't enough of a certification to advise people about their money.

Energy Investing: Natural Gas Looks Especially Interesting

I would caution most investors on trying to play natural gas with UNG. The negative roll return when the markets are in contango kills the performance of this thing. In order to successfully play UNG, you have to correctly predict the future direction of natural gas prices AND the future makeup of the futures market (ie contango or backwardation).
A couple years ago, I bought UNG when gas was around $5.50. Within about 3 months or so, NG went up to $8, a 45% jump. Yet UNG only gained 22%. Very lousy tracking indeed. The actual stocks of natural gas companies track the price of gas MUCH better than UNG does. I would recommend an investors who is bullish on gas to buy FCG which tracks most of the major US gas producers.

The Coming Fiscal Train Wreck

Question. How much of the 2009 and 2010 budget are capital investments in the financial sector such as TARP, or GM as opposed to routine spending? It seems to me that much of the deficit in 2009 at least is comprised of the TARP.

Norfolk Southern - Why I'm Bullish

Jake2, if an investor bought the stock when/if NSC hits 33, then the total return (including dividends) over 24 months would be between 56% and 82% assuming the stock hits my target range $49.50 to $58. I judge that as a sufficient return for the risk. You're right in that Coal, Ag and Autos are risks. But then again, I see recovery in all three. Look at coal. Shipments are down mainly because the economy has contracted so hard that electricity production has acually contracted. The first time that's ever happened. And shipments will indeed recover with the economy, cheap natural gas notwithstanding. 50% of all the electricity in the US is produced with coal fired power plants. That's not something that's going to change overnight.

Inflation Concerns Are Premature

In this article I was limiting the inflation discussion to the US. So I'm not sure of the exact global number. I know that Japan's utilization percentage is well below their normal levels. From the bits and pieces I've read over the last couple months, its probably safe to say that capacity utilization in most countries is well below normal levels.

On Jun 08 12:18 PM Alex_G wrote:

> To the author:
>
> Any idea what the global capacity utilization number is at this point?

Inflation Concerns Are Premature

Whether oil is going back to $148 is another debate. But oil prices have been above $50 since late 2004 and spiked to $148 a barrel last summer, yet nominal CPI (including food and energy) in the rest of the economy remained around 2.5% - 3.5% during this period. All during a booming economy no less and an industrial capacity utilization rate of around 80%.

Banks' Loss Reserves Can't Keep Pace with Troubled Loans

Pitchingpennies,

Good point. But not all non-performing loans will be new construction. Most will probably be existing homes. So it is a fair assumption that banks won't realize anything close to a 100% loss on all NPL.

Recovery from China: Will the Debtors Lead the Debtors?

China's spending bonanza will be about as effective in stimulating sustained economic growth as Obama's porkulus bill. China is just buying time for their export customers (US and Europe) to recover. I'm afraid they just don't have enough ammunition to build ever more airports and bridges to nowhere to keep their economy from contracting. Watch out for China's day of reckoning.