jstratt

16 Comments

    • Why The Paulson Plan Won’t Work [view article]
      Excellent article! I enjoyed your perspective.

      When I heard Paulsen tell congress that they just had to authorize a blank check and he couldnt tell them what he would do he lost my support. It is crazy to just hand over $2000 for every citizen with no true plan that you can articulate.

      I think it is possible to bail out the system without a huge long term cost to taxpayers. However it is just as easy to inject money into the system which is lost forever with additional risk added on.

      You bet the government needs an equity stake! My guess is the government would do best to start small by gathering investors and supporting assets they think are good buys with a passive equity stake.

      If hedge fund A is willing to buy 100 with a 5% upfront government support... go for it. Get the ball rolling with investors to create interest.

      Some serious dangers to avoid include using 100% government money to by huge positions from WaMu, Leh, Merrill, BAC...

      Finally I suspect Paulsen has a plan for 700 billion. He just wasnt willing to reveal it. At least I hope so.

      PS I still want pounds of flesh!!!       Sep 24 07:37 PM
    • Job Numbers: Deteriorating, and Understated [view article]
      Some people look down and are only able to see a dark hole. They become afraid and imagine monsters and outrageous calamity.

      Others are able to look up, down and all around and see the bad, but also see the good. Over many years I have seen doomsayers with the best of credentials and they have always been wrong for 30 years.

      You may be right! It is easy to see problems and we have many. At the same time when we are in the middle of a downturn it is extremely hard to see opportunities.

      In the 1980 timeframe we had real unemployment near 17% and inflation in the area of 17%. During that time commodities spiked. Gold reached $850, Silver $50, and Oil was rising to the moon. Everyone was 100% convinced that Oil could only go up. People heard about an Oil glut and laughed uncontrolably at such a foolish thought.

      Today is nowhere near as bad as 1980. Unemployment isnt even close and as an example the 8th largest metro area had a help wanted section of 1.5 pages. Inflation today is perhaps 30% of what it was then.

      We have some economic pain to endure and it might end in 6 months or 3 years. When things look the darkest we will find the beginning of the next big multi year boom.

      In the meantime perhaps you should try some yoga       Sep 05 08:17 PM
    • GDP Shows Economy Is Far from Recession [view article]
      I used to have more faith in government statistics. With the entire world slowing or in recession it is hard to believe the GDP number. For my planning purposes the GDP is 0 based on inflation.

      That said stocks have been attractively priced and will find future earnings comparisons easier to attain. We are at a time when it feels as dangerous to be out of the market as it is to be in the market.

      I hope I am proved wrong but cant help but feel that government statistics are being manipulated. Inflation as reported is not credible. Also the government spending portion and the accounting for Fed Reserves is suspect.

      The best indicator that we are coming out of a recession will be when they declare that we have been in a recession.

      JS       Aug 28 09:05 PM
    • Global Market Performance: Nowhere to Hide [view article]
      Thank you for an insightful article. The chart of a status from around the world is an excellent broad view.

      This is a good time for strategic rebalancing. For those who have wanted to enter China and India it is a good time to start dollar cost averaging into it.

      I have wanted some exposure to these countries but emerging is synonomous with volitile. I always prefer to enter new markets during a period of calamity when I can clearly see some level of darkness priced into the market.

      It is time to purchase into these two markets with 33% of my target long term exposure. That said China could drop another 50% for all anyone knows. Emerging is synonymous with the statement "we really dont know how to value this opportunity"

      Finally isnt it nice to see that for US citizens that for all the US problems, most of the rest of the world has been hit harder so far.       Jul 06 09:25 AM
    • Is Oil a Bubble? Part 3 [view article]
      Stay optimistic! Our country is starting to demand an energy policy from congress and we will get one. That will change alot of things quicker than many think it will.

      The Oil price problem is not that we dont have current supply in my opinion as much as extrapolating increasing demand forward with a static supply curve makes investors and governments worldwide forecast long term price increases.

      I saw the same thing in 1980 when I worked in the Oil industry in Houston. People scoffed at the idea that Oil could do anything but go up. It was a demented soul who would even argue such a possibility. Then came an Oil glut! People hooted and laughed when someone would mention that. Six months later they were all unemployed.

      Energy is available in unlimited supplys in many forms. Oil is available but the price to get large quantities is an open question.

      In the end I think oil will drop below $80 a barrel. However that wont be until we get an energy policy and take steps to become independent. My fear is that we will then lose our resolve to have a meaningful energy policy.       Jun 09 11:30 PM
    • The Home Start Numbers Are Not a Positive [view article]
      Good article. You provided an interesting analysis to the reported housing starts. JS May 16 08:45 PM
    • Charter Communications, Inc. Q1 2008 Earnings Call Transcript [view article]
      I thought there was a lot to like about the Charter earnings for the 1st quarter. Significant gains of customers in Digital Cable, High Speed Internet and in Telephone was great. The Average Revenue per user increased to over $100 for the first time. Finally a big new area took off with huge gains. The Video on demand revenue grew rapidly which I think holds much long term promise.

      I dont expect Charter to make profits as long as it is financed by about 97% debt. However Charter appears to be growing more valuable every day. I think the market will recognize the proper value of the business in the future.

      The proper value for a cable company with 5.6 Million customers and growing consistently with over $100 ARPU may be in excess of $4,000 a customer.

      Several years ago it was worth around $5000 a customer and it only had one Television product line.       May 13 09:00 PM
    • Blood in the Streets: Buy and Hold GE, For Now [view article]
      I have turned from an enthusiastic shareholder of GE to a smaller shareholder. Do I think GE will get through this... probably yes. However the risk is much higher than most people expect in my opinion.

      I looked at the GECS 10k and at GEs reported results. First GE is a financial company and its industrial businesses are irrelevant. GE is a financial company with 81% of its Assets and 86% of its liabilities being financial.

      I found I only like 54% of GEs Assets. I do not like the 211 billion of GE Money foriegn consumer and real estate debt. I do not like the 55 billion of off balance sheet securitization assets and I do not like the 44 billion of Real Estate assets purchased in the past 2 years.

      I think GE will sell for $38 a share by year end. On the other hand if they had to mark to market I am not so sure.       Apr 30 09:53 PM
    • Why New Oil Price Highs? [view article]
      I believe that the present decline in dollar value has contributed significantly to the rise in commodities. Unfortunately the perceived future prospects for the dollar contribute most of the rest.

      From the concern over the dollar large investors started investing in commodities. Some examples

      1) endowment funds (Yale)
      2) Hedge Funds
      3) In the past couple years SWFs have risen up to help secure access to commodities

      Finally the factors above have created a bubble. Instinct tells me the top of the bubble is still not immediate. In 1980 I remember scoffing at the idea of an oil glut. Everyone was aware that Oil was in short supply and could only go up based on the same arguments we hear now. We were all wrong.

      In conclusion a free market fight for access to resources and rampant speculation can make a nice bubble. Slowing world growth will cause a reduction in use and the high prices will cause an increase in supply. Every little Oil well is being uncapped and restarted today as it is economically viable.

      PS Observations just from today

      1) fewer cars on the road this week as I drove to work
      2) Rice hoarding as export restrictions put in effect, price soaring
      3) Chinese considering BHP investment for access rights, my BHP soaring
      4) I am still glad I joined the big players last year in hedging risk thru commodities. I better figure out how to handle the bubble.

      Apr 18 10:24 PM
    • Why I Bought the Ultrashort Financial Sector ETF [view article]
      I have also been investing in the financials through the XLF and in GS. I think the things mentioned in this article have been factored into the up to 40% drop in financials.

      Looking forward I see reduced risk (but clearly still risks) and greater reward opportunity. I am adding back to financials on pullbacks.

      It is at times like this I am reminded of the words of a past mentor who said "You cant lose something you never had" meaning dont get greedy. Just move toward your longer term target allocation.       Apr 06 11:07 AM
    • Global P/E Ratios: How the U.S. Stacks Up [view article]
      Excellent post as it summarizes the value level across markets.

      It is time to be a cautious bull utilizing ETFs to limit risk. We never know where the bottom is exactly but we know that the overall risk is reduced from where it was 3 or 6 months ago.

      At a time like this it is uncomfortable to invest in riskier opportunities. However forcing yourself to be in market areas that you want longer term is going to provide greater returns. As an example a 25% position taken now in QQQ with another 25% of desired investment on a pull back and again and again will generate a great return over the longer term.

      If you dont feel free to get bullish after prices are much higher.       Apr 06 10:41 AM
    • Economic Report Summary: Worst Labor Report In Years [view article]
      80000 jobs lost really means we are not growing. It is not a huge negative worst case scenario. We may well see more job losses which are more significant but I disagree with the contention of many media outlets that this is a huge negative number. Apr 06 10:04 AM
    • Existing Home Sales "Slipped" 23.4% [view article]
      I think this is all predictable. The contraction of credit means most potential buyers are unable to buy.

      We had a market driven by the price that someone with no money could buy a house. We are now in a market where the buyer has to have 10% down. Sounds like about a 15% reduction in buyers and prices to me.

      However another factor is operating at present. Banks and financial institutions are scared. As an example I went to a major regional bank and offered 2 paid off properties worth 250k as collateral for a loan to buy some RE. They said it wouldnt take a week. Then they put a freeze on and it is 6 weeks later.

      Meanwhile I have seen a house that was worth 110k at peak auction for 66k as an example. The scared bank issue will go away in a few months. The reduction in qualified buyers will not. We need a return to lending that utilizes risk management principles and I need a new bank.       Feb 25 10:40 PM
    • Now's Not the Time to Give Up on Stocks [view article]
      Your point is well made. At the same time we do have a credit contraction that will affect many businesses and we will likely have a recession because of it.

      With unemployment at 5% however we have a long way to go before we endure a bear market. I think it was 1982 when the Dow closed at a low of approximately 780 and we are now around 12500. Without a financial calculator that is about an increase of 15 times in 25 years. A great bull market!

      Before that we had 16 years of almost 0 gain or maybe even a loss. Today we are likely entering a period of slower growth over the next few years. I tend to think that international stocks like PG, GE, PEP, IBM, ORCL, JNJ, EMR, will grow at a slower historical rate but a faster rate than other companies.

      Needless to say I am a big fan of equities. At the same time I dont think the future growth is as high as it has been in the past.

      If you are living in the temporary world of credit crunch and all of the problems you probably cant see the forest for the trees. In the bigger picture this is nothing compared to 1980 ish when unemployment was 20% in some areas and inflation was around 15%. That created a big recession.

      What we have is a little tightening of credit which is needed. Make no mistake however it will affect growth in large corporations and small and individuals all. When it ends we will have a period of 4-5% inflation, slower growth but growth, and a stock market that has a PE of 15-16. That is lower than the 18 we have been used to and higher than the 14 we have seen.

      Feb 25 10:21 PM
    • So Much for the Decoupling... [view article]
      I must commend the author on this timely piece.
      Apparently Tuesday in the US will be down 5% based on futures. Since I dont intend to sell I guess it doesnt much matter. I dont intend to buy additional shares tomorrow either but may in the next week. Frankly it has been a while since a good bear market with some fear involved. It was only months ago that I could see people taking huge risks with little additional return required. It made prudent financial management look out of style. Still a little calm is in order. The shoes that have dropped to date dont justify a Dow under 12000.       Jan 21 09:22 PM
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