E Nuff Sed

Positioning for a Bond Rally

Looks like the entire US deficit + stimulus is being funded is going to funded by the Fed (via QE) till 2012.
There are only 2 ways to get out of it - (a) devaluation of the US dollar or (b) higher taxation.
I am betting the politicians will choose (a) to pander to the public.

IMS Health Is Being Stolen from Shareholders

I agree. I have held this goddamn stock since 1999 with the same logic and have a 4.1% gain for my pains over ten years. At least the private equity guys are a lot smarter than the investors. I am going to vote against this buyout.

Fed Maintains the Emergency Rate While Saying 'All is Well'

Good article and advise. However as you say we are not out of the woods by a long shot. The economic recovery following the 29-32 market crash was short circuited by a tight fed and a consumption tax. This tipped the economy into the depression again from which it took a world war and untold misery to dig out.

Buffett's Burlington Buy Is Really a Bet on China

Brian, you see a chinese under every bed. The simplest explanation is " a bet of the recovering economy" with a wide moat company which can absorb and utilize the massive amount of cash being thrown off by BRK.
BNI's ROE for the last 5 years has been between 15 to 20% while BRK's ROE has been languishing at around 5 to 10%.

Where else can you get this kind of return but in your very own RR?

6 Reasons S&P Will Go to 1250 - Credit Suisse

I find points 3 and 4 quite compelling. As to PE ratio's being high - we are just emerging out of a recession. Also you have to look at PE's in light of low interest rates. Forward earning yield (e/p) is around 6.5%. 10 year bond rates are 4%. The FED model would assume stocks to be undervalued by over 50% (unlikely!). S&P 1250 in 2 years is certainly plausible. That is a 20% move from here.

Job Losses Worse than Expected

Situation was worse in the 70's. Unemployment was similar or worse and interest rates were sky high. Somehow we came back for a 20 year bull market.

Consumer Credit Decline Continues

I notice that consumer credit is roughly at 2006 levels (total available credit in $). The markets are at 2003 level.

Intrinsic Value and Warren Buffett's BNSF Purchase

The key asset Buffet looks for is "a wide moat". Railroads have the widest moat there is. Second, Warren is also looking to leverage - not financial leverage - but economic leverage.

Ask the question - which companies will leverage the improving economy the most- answer: companies which own capital. Like railroads, steel plants, heavy industries etc. This is as the man himself said - an all in bet on the "recovering" American economy and a $44 billion dollar snub to the bears.

Gold Fever Spreads to India

Looks like the Indians have been listening to Marc Faber too much.

The Roots of the Coming Crash

Attractive theory, but it does not fit the facts. The stock market is still 33% below where it was in Oct 2007. The Canadian dollar is at about the same level as it was last summer. US dollar index is at higher level than it was in 2008.
tinyurl.com/y95zmys
The flight from cash is simply because US cash is trash. It pays no interest, inflation is a threat.

However Gold is in prob. in bubble territory now and so are prob emerging markets. (funny an emerging market India has just bought 200 tons of gold) - bubble upon bubble.

Riding the Rails: Why BNI Was Berkshire's Best Bet - And Vintage Buffett

Chuck, You did not mention Canadian National Railways. It generates even higher margins and return on equity than BNI. CNI is very strong in agriculture and its network covers the vast Canadian prairie's. It has now access to the Alberta Tar Sands and the uncrowded Prince Rupert port in northern BC from which it can serve the east and midwest via direct rail links.
As the economy recovers it will have tremendous leverage and pricing power and stock price in my opinion can double in 3 years.

Bear Market Rallies and Lessons of History

I do not think inflation more than 2 -3% is likely in the next 2 years because of the precarious state of the banks. They are not releasing capital into the street. Velocity of money is only now flattening out of a deep decline.

research.stlouisfed.or...

Banks are basically getting funds at 0% and buying treasuries at 4% and pocketing the spread. They are just not lending to main street.

low lending -> low credit -> low demand -> low inflation.

The shadow banking system has completely disappeared (latest is CIT).

Healthcare Profits: Assessing Company Sensitivity to Obamacare

How do explain the fact that US Pharma companies spend 2 - 3 times in BME (business development, advertising, marketing and lobbying) than R&D. Look at the income statement of any big pharma.
The fact is that most drugs are me-too molecules marketed the hell out by armies of expensive sales reps.

Bear Market Rallies and Lessons of History

The link I gave above to the technical chart in my original comment was truncated - here is a short link:
tinyurl.com/y97866v

Regarding recovery, I am not wearing rose colored glasses. The damage done by this bear can take 5 - 10 years to repair before we begin another secular bull. However there will be many money making opportunities as long as you dance without too much baggage and make a quick exit when the technicals turn bearish.

Note: The greater the depth of a cyclical bear market the longer it takes to recover. This analysis backs up this observation.

www.scribd.com/doc/180...

Bear Market Rallies and Lessons of History

I respectfully disagree with the pessimistic view point.

First, the intermediate term technicals are still solid. None of the longer term moving averages have crossed path towards the downside (as was in late 07-early 08) which is an indica of an impending bear market.
freestockcharts.co...

Second, I don't think the US economy has as much to do with S&P 500 companies as in the past. Most of the multinationals are more and more relying on global growth. The emerging economies of the BRIC's and other mini-BRIC's will more than make up for the weakness in the US.

Third, the decline of the US dollar is a huge tail wind for the S&P 500 (increasing export, repatriation of foreign profits) which I believe will keep earnings healthy.

Fourth, I don't think the S&P 500 is over-valued (I think it is fairly valued) at a forward P/E of ~18 - 20. While this may seem high you have to consider this in terms of the low interest rate environment we are in.

Fifth, the Fed will keep interest rates low until unemployment falls below ~8%. This is unlikely to happen in 2010. By being bearish you are fighting the Fed which I don't think is a wise strategy unless it is for tactical / short term reasons.

I feel that many of you have fallen into the trap of pessimism which invariably follows a traumatic event. A year ago we were in the middle of a full blown financial panic and no doubt the recovery since then seems like a mirage. But I think it is real. Just my personal opinion for whatever it is worth.