E.D. Hart

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147 Comments

    • Wed Feb 20th 20:00 PM | Rating: 0 0
      Commented on:
      Kraft Foods: Buffett's Commodity Prediction
      I'm from Omaha, and Im a big Buffett fan but....your reasoning and evidence will determine if you're correct, not who agrees with you.

      Another possible logical conclusion to BRK purchase of Kraft shares: Buffett is wrong and Kraft's moat will not protect it sufficiently from input inflation; that consumers will shift to off label brands; that Kraft will undergo longterm margin compression, that this was not a good purchase for Berkshire.

      Basic Consumer staple brands will only protect you if the consumer thinks that the extra quality is worth the extra cost. But lets be honest, I might buy a brand name box of cereal for $5, but not for $8, at which point, (for example) I will switch to a store brand, or off label.

      Look what happened to big Pharma---undercut by generics as they come off patent protection, yes, but also this was due to consumers becoming educated that the name brand drug at twice the cost doesn't have twice the benefit of the generic drug. Big Pharma is experiencing margin compression partly due to generic competition.

      The analogy with food and drugs is not perfect, obviously, but I don't agree that Kraft will just be able to raise prices to meet the input cost as they rise--they are competing against alot of other brands out there that may lose loyalty when the prices get past a certain point.

      A better bet: Big Tobacco, Big Alcohol, and Natural Gas---these are stocks that are much more likely to survive the inflationary period we are entering.
      View article »
    • Wed Feb 13th 15:29 PM | Rating: 0 0
      Commented on:
      WTF Headline of the Day: "Dow 18,500? Believe It"
      Using valuations to predict the direction of the markets over the short to medium term is a poor way to go about predicting. More important is the changing economic macro-environment. I agree with Mr. Ritholz. Its amusing...

      but also perplexing why peoples mental models don't get revised.

      Consider: rising inflation of both PPI and CPI last year that pegs inflation between 4-6% (this is from Gov. numbers which are bogus and vastly understate inflation), likely interest rate increase after the elections, a recessionary environment going forward in the US, falling home prices, and all time peak corporate margins that can only revert to the mean--what does this spell?

      I don't know, but its a good bet that its not DOW 18,500.
      Commodities anyone?
      View article »
    • Mon Feb 11th 19:11 PM | Rating: 0 0
      Commented on:
      Dow 15,000 Will Be Here Sooner Than You Think
      I respectfully disagree with most everything this writer has penned. Not only will we not see 15,000 soon, we may not see 15,000 for another ten years. See US market history over the last 100 years.

      Barron's has correctly pointed out that valuations are only compelling if you assume that margins stay at their historical highs, which is highly unlikely.

      A possible scenario to consider: Inflation finally becomes anchored this year, and interest rates are effectively prevented from falling further; (maybe another cut before the election, to be undone after the election) consumers cut spending as unemployment ticks up, and home values drop, thus depriving the US economy of its great horsepower; the combination of higher interest rates in 18 months, and lower growth results in a stagflation lite; companies p/e compress as growth expectations are dimmed; historically high margins come down from their peaks to a reverted mean; under this scenario--currently the DOW is overvalued by 25%-33%.

      My prediction is DOW 9,000 by 2010. If I was wagering $100 as to which was more likely by 2010--DOW 15,000 or 9000, I would inclined to take the DOW 9,000 bet .

      Money indeed will go where return are greatest, but failure to take into account eroding earnings, rising interest rates (after the election), and rising inflation will not result in a good risk adjusted trade.
      View article »
    • Fri Feb 8th 19:01 PM | Rating: 0 0
      Commented on:
      Switching to Value and Cutting Exposure to the Inflation Trade
      Oil inventory reports are notoriously unreliable.(todays close $91.77) Trading them is beyond my area of expertise.

      However, oil is not the key driving inflation, its the money spigots around the world open at full throttle. Moreover, gas will be a good value even if oil drops to $50. Deliveries are being taken in Japan and Asia for $18 mmbtu, which is what you would expect for a less polluting fuel that should trade at a slight premium to its equivalent BTU value. (i.e.-at equivalent btu value: when oil is at $91.77, natural gas should be approximately $15.26 mmbtu). Because gas is less polluting, it should eventually trade at a premium, as LNG trades globally.

      Opinions inevitably vary, but I'm buying VGZ and XTO with both hands. Recession or not, the long term trend in gas and gold are going up, up, and away.

      In fact, recession is almost irrelevant to gold and oil...Yuan will likely revalue this year up 7-10%, which alone will increase demand for oil, gold, and gas.

      "The financials and homebuilders haven’t yet come back far enough to tempt me, but I continue to watch and wait."

      You may have quite a wait.
      View article »
    • Fri Feb 8th 18:36 PM | Rating: 0 0
      Commented on:
      John Lee Responds to Nobel Laureate Stiglitz's Subprime Thesis
      Mr. Lee,
      Your libertarian free market philosophy, if taken to its logical conclusion, leads to some interesting conclusions:

      1) Most of our governments intervention in markets would be eliminated, including the SEC
      2) Federal reserve would be eliminated
      3) FDIC insurance eliminated
      4) and really, why not have each state defend its own borders (by private contractors) instead of the socialized national defense we have now?

      Let each person fend for themselves and see what happens.

      Apart from the fact that the vast majority of the public doesn't support these objectives, the contradictions inherent in the ideology would ultimately do it in.

      A major reason that so many investors flock to the US with their dollars is that we have well (mostly) regulated markets. Take away that regulation and you seriously curtail the flow of capital across borders. See Zimbabwean stock market...

      "Let the careless and the weak fall, isn’t that what capitalism, evolution, and free markets are all about?" Well actually no. Read Adam Smith before the "Wealth of Nations". He states quite clearly the need for some governmental controls.

      Do we truly want our markets to be unrestrained evolutionary experiments? Then you would have to accept Exxon/Chevron/Conoco-P... and Mircosoft/oracle/yahoo... as mega monopolies.

      It is true that governments often over regulate...but the current mess is not an example of this over regulation.

      "Set the market truly free" ? Be careful what you wish for...
      Mr. Hart
      View article »
    • Thu Feb 7th 21:02 PM | Rating: 0 0
      Commented on:
      Undervalued Vista Gold May Present a Buying Opportunity
      Vista gold is a company I owned for a while and then dumped for a small profit. I have followed the company for ten years. I think the author is onto something. They have something like gold in the ground at approximately $9.11 market cap/oz. assuming a 165 million market cap, and 18 moz resource base. It is a company to watch. see: money.cnn.com/news/new...
      View article »
    • Fri Feb 1st 18:56 PM | Rating: 0 0
      Commented on:
      The Dollar Crisis and Coming Gold Boom
      Has anyone seen the price of palladium lately--no where near the highs of the past (aprox. $1000 if I recall) and a fall off in South African mining activity from the power shortages in that country. Wheres the Russian Palladium? Normally it comes to market this time of year, but the amount and timing is a state secret of the Russian Government. I'm a novice in the palladium market, but it seems logical to assume that perhaps, maybe, ever so possibly, palladium may be a better bet than gold right now as it is under major demand pressure upwards as platinum breaks out to new highs. Previously, if I can believe the news reports, platinum has been replaced by palladium at the margins for catalysts in the automotive, refining, and other industries. Any comments out there in SA reader-land who may have the inside scoop on the palladium market? I would love to hear your words wisdom from the palladium pros.
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    • Wed Jan 30th 20:00 PM | Rating: 0 0
      Commented on:
      The GATA Gold Rally
      A little (never?) mentioned fact of the current commodity cycle is that gold, when adjusted for inflation (using credible inflation numbers, not the US Government's) you get to approximately $4000 per ounce. This figure is approximate, but assumes $850 high in 1980 (spot) and 6% inflation, and rounding down because of poor precision. Why 6% inflation? Everyone knows that inflation has been under control and about 2-3% the last two decades...why 6%? Because more careful calculations of inflation, not relying on bogus governmental fudge factors such as hedonics calculations and the like, yield a more realistic calculation of inflation of 6-8% inflation annually since 1980. I used 6% as a conservative number.

      Historically, you can expect gold to match the inflation number over long enough time periods. I expect the catch up factor that gold needs to appreciate to $4000/ oz to reach roughly its historical relationship with inflation. Gold will be in bubble territory when it trades significantly above $4000/oz, but I would be a seller of half my position there.

      The media consistently misrepresents the gold story as one of a flight to a safe asset class during times of global turmoil, and this is half right. Its common to read that gold will reach its old inflation adjusted high when it surpasses approx. $2000/oz, which is all wrong.

      There is no gold bubble, there is a brewing global inflation trend that will last another 8-12 years and bring all commodities much higher. With vicious corrections along the way.
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    • Wed Jan 30th 18:53 PM | Rating: 0 0
      Commented on:
      Picking Apart the WSJ's Manipulative Gold Reporting
      The journalists confuse those who are gold bugs with those who take advantage of the current commodity cycle. Are we in a gold bubble? or a gold trend? or a gold cycle? It really matters what your time frame is that you select. Pick a decade: 70's= gold was a great investment, 80's= bad, 90's = bad, 00's=good (so far) . Admittedly this is somewhat simplistic, but I believe less simplistic than the WSJ article. Do yourself a favor and protect yourself against the coming inflation--all but inevitable--and pick your favorite basket of commodities to hedge against this risk to your portfolio. its amazing to me that journalist/anaylsts dont rail against the periods of time that bonds were a poor investment (the 70s) or when stocks were poor-(1968-1982-stocks went sideways, and after inflation, you lost money).

      The only thing that matters is what is your portfolio return after inflation. So far this decade, you lost money in most US index funds after dollar depreciation, and after inflation. Gold bubble? No, its cleverly disguised as a rising inflation trend, and currency erosion.
      Forget the arguments about why you should or shouldn't buy gold, instead buy a basket of commodities, and wait 5 years. Then check back with your portfolio.
      View article »
    • Mon Jan 21st 15:37 PM | Rating: 0 0
      Commented on:
      So Much for the Decoupling...
      Gold is a barbarous relic with no predictive power= bad investment

      If growth comes down, inflation comes down= we are headed to lower inflation in a recession
      View article »
    • Mon Jan 7th 15:35 PM | Rating: 0 0
      Commented on:
      The Basis for Long Dated Oil Futures Prices
      I agree that it is ludicrous to contend that price is set over the long term by cost of production--if they maintain this for oil, it is also true for natural gas? Natural gas marginal costs of production vary widely, but supply and demand as it varies seasonaly explains 95% of price movement.
      View article »
    • Sat Dec 29th 18:14 PM | Rating: 0 0
      Commented on:
      My Ten Predictions for 2008
      This is the best list of predictions Ive seen in a long time. My prediction is that more than 50% of these predictions comes true in 2008. Thanks!
      View article »
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