Derek Syphrett

Time to Retire Roubini

Angry Banker - think you make a very valid point about the politics of regulation. Politicians should be ashamed - that is my one political conviction.

As for Roubini - I think he deserves his victory lap he called for a serious correction for years in the face of a rising market - let's give him his due.

The sledding will get easier for the market from here but I suspect much of it will be spent going downhill - the normalized earnings for the S&P 500 will be much lower without our past leverage - best case scenario the stock market will only provide ~5% annualized returns from our current level of 920 on the S&P 500 if you assume a 15x multiple for the next years earnings.

Short duration corporate debt looks much more appealing at this point especially during the summer with stocks near their highs for the year.

Notes from My Conversation with Cal-Maine CFO Tim Dawson

Jim thanks for your gracious reply - in fact hats off to you in that your reply was much more gracious than my original post.

I think your investment club will be disappointed with their decision. Low PE's can be deceptive. Cyclical stocks peak with low PE's and bottom with high PE's.... beware of buying cyclicals with low PE's after they've had a good run.

I think the CFO actually gave you the best data point for selling CALM stock... the company trades at north of $40 per chicken and their competition will sell for $13 per chicken.... that gives you some idea of how overvalued CALM may actually be.

Notes from My Conversation with Cal-Maine CFO Tim Dawson

Jim I am not sure I understood your answer to South Shore earlier. He asked you about CALM not about your returns at Primus Guaranty.

Also if Tim Dawson likes the CALM story so much why was he and several CALM insiders selling stock at an accelerated rate this month.

CALM insiders sold over $7M worth of stock in august only (1 month) vs. only about $4.5M for the prior 11 month period

I think Tim Dawson - Calmine CFO gave you a snow job son and your investment club is about to learn a few hard lessons about owning stocks with 80% short interests and CFO selling.


P.S.
I suppose that I should congratulate you on your 75% return on Primus Guaranty - though I'd have a hard time believing that anyone can understand an insurer (in this market) better than an egg company.

I know many money managers who've been confused by what these insurance companies are doing - it's great you made 75% with your play at primus... but don't get cocky... investors usually lose money right when they start bragging

Valuing GE (It's Cheap)

why bother getting ahead of the business cycle... the risk reward doesn't seem to make much sense here. There is so much not known about GE's forward borrowing costs and its equity destroying write downs via tremendous exposure to cash poor customers like Aerospace and Hospitals. This is not the point in the business cycle to mess with GE... it's discounted for good reasons.

Granted there may be 30% upside - but on a relative basis to other opportunities in the market place that's not amazing.

GE will be a buy when they announce a break-up of the un-related businesses. They don't need to manage a portfolio of companies for the investing public or institutions... they frankly haven't done a great job re-investing and creating shareholder value.

When Will Fifth Third Bancorp Turn Around?

Macro Guy,

Great point. Ockham "Research" could learn from your perspective as they dont' seem to have much of a clue of which metrics to use in order to value a bank.

That goes for Stewie too... banks don't trade on PE's they trade on multiples of tangible asset value or book value.

I'm in a bit of a rush here at home so I'm going to get right to the point.

Fifth Third is in serious jeopardy of wiping out all shareholder equity. The number of their 100% loan to value (LTV) HELOC's and 90% LTV portfolio is on par with Countrywide Financial and Washington Mutual.

In other words Fifth Third is expensive at any price. It may rally much like Thornburg and Country Wide did before they cratered.

A Contrarian Look at Pfizer

PFIZER IS NOT A GREAT BUY. DON'T BUY DRUG STOCKS FOR DIVIDEND YIELDS... THAT'S A MIS-MATCH OF INVESTMENT STYLES.

Drug Stocks trade on drug pipelines. Buying them for dividends is asking for trouble.

While I tend to agree that the best time to buy a pharma stock is when the cubbard is empty. I wouldn't chase after Pfizer for three reasons.

1. Pfizer has shown a distinct inability to discover novel drugs or even acquire well over the past 10 years.

2.It's such a large cap that Pfizer will many new drugs to move the needle at this point and drug development is only getting harder... there are many great drugs coming off patent and the next blockbuster need to be substantially better to out-earn them.

3. In an election year where national healthcare is a campaign issue you could be asking for more trouble than you can know.

To summarize my point I'd say:

There are easier ways to make a lot more money a lot sooner than buying a under-managed pharmaceutical company facing monumental secular and competitive challenges

I used to work at Pfizer and I thoroughly enjoyed my time there but that doesn't change the fact that Pfizer hasn't developed a blockbuster drug "on purpose" in about 10 years... remember Viagra was a lucky mistake that failed it's first indication.

Frontier Oil Poised to Benefit from Strong Diesel Demand

Good Post - I read the FTO conference call last week and a couple things I would also mention here are:

1. FTO has more cash than debt ~300M cash vs. 150M debt

2. FTO has recently upgraded its facilities to produce better yields from crude - mgt was very proud of the ROC their going to get from these changes

3. FTO could be a takeout target for a cash rich strategic buyer like VLO, MRO or any of the Oil Sands E&P producers who crave integrated operations.

4. The sulfur extracted from sour crude is now a profit center because prices have increased from $10 per ton to $300 per ton. This isn't a big profit center but it was about 3.75% of operating income ($2M) in Q1 and if you adjust earnings for 1x issues the it would have been about 2% of operating income.

Thornburg's a Huge Bargain After Monday's Crash

HAVE YOU CONSIDERED 2 THINGS:

1. THORNBURG'S MASSIVE LEVERAGE
2. TMA NEEDS MONEY FROM BANKS WHO DON'T HAVE ENOUGH CASH AND ALREADY CARRY TOO MUCH RISK.

... that is the issue here it's not credit quality it's liquidity, liquidity, liquidity... the big issue is that TMA is levered up like 20x on it's own capital... while they were conservative with their loan practices they were very greedy and wild with their leverage.

I slow breeze could & has blown their house of cards now.

NOW HEY - CAN YOU TRADE THIS BY GETTING LONG CALLS - SURE... but who knows if TMA can convince it's cash constrained lenders