cstauffer's Comments

Emerson Electric CEO: Washington Is Destroying U.S. Manufacturing

Thu, 12 Nov 2009 20:34:10 -0500

Mr. Farr's comments are a smoke screen to deflect the realities inherent in their industry segment. The fact is that many manufacturing businesses are finding that it makes sense to move the labor component of their costs to lower skilled and lower cost locations outside of the U.S. The reality is that your product must be condusive to being made by less educated and lower skilled workers. That is what happened to the textile industry in this country 40-50 years ago, the toy making industry and virtually every other low value added industry. As long as our country continues to become more highly educated and more prosperous this trend will continue. It has been occuring in less complex electrical components and it should not be surprising that this trend is making its way into Emerson Electric.

It is shameless for a CEO to blame the government for a normal capitalistic trend which has been occurring for almost 100 years in one fashion or another.

Fuel Systems Rockets Higher: Wish We Had More Exposure

Thu, 05 Nov 2009 21:56:47 -0500

We exited our FSYS on today's spike, after trimming our positions in the mid-thirties a while back. In the low 20's this company was an unappreciated and under owned. It has now been discovered, but is richly priced.

Has anyone gotten interested in Westport Innovations (WPRT)? This company is not yet profitable like FSYS, but Westport's technology and joint venture with Cummins may make Westport much more scalable.

Treasury Slashes Q4 Borrowing Plans

Wed, 04 Nov 2009 11:34:09 -0500

Wow! That might have the makings of a movie. Throw in a couple of conspiracies and a Jack Bauer character or two and you have a blockbuster. :)

On Nov 03 11:29 AM Mad Hedge Fund Trader wrote:

> ljs I know what keeps Obama awake at night. Let’s say we spend our
> $2 trillion in stimulus and get a couple of quarters of weak growth.
> Then once the effects of the stimulus wear off, we slip back into
> a deep recession, setting up a classic “W.” Unemployment never does
> stop climbing. This happened to Roosevelt in the thirties. So congress
> passes another $2 trillion reflationary budget. Everybody gets wonderful
> new mass transit upgrades, alternative energy infrastructure, and
> bridges to nowhere. But with $4 trillion in spending packed into
> two years, inflation really takes off. The bond market collapses,
> the dollar tanks big time, gold goes ballistic to $5,000, and silver
> explodes to $50. Ben Bernanke has no choice but to engineer an interest
> rate spike, taking the Fed funds rate up to a Volkeresque 18%. Housing,
> having never recovered, drops by half again. This all happens in
> the 2012 election year. Obama is burned in effigy, a Mormon is elected
> president, and the Republicans, reinvigorated by new leadership,
> retake both houses of congress. We invade Iran. Crude hits $500.
> This is not exactly a low probability scenario. Remember Jimmy Carter?
> This is why junk bond yields are still stubbornly high at 12.5%,
> and credit default swaps live at lofty levels. Are the equity markets
> pricing in this possibility? No chance. The risk of Armageddon is
> still out there. Personally, I give it a one in three chance. Pass
> the Xanax.

'Dollar Up Stocks Down' Will Likely Change Soon

Mon, 02 Nov 2009 08:25:17 -0500

As an "investor" it truly amazing me how much focus people put on trying to determine whether the "market" is overvalued or undervalued at any given time. It is hard enough to get a handle on the true earnings or earnings quality of one company. One can reasonably ascertain a current valuation and compare it to an assumed intrinsic value for an individual company, however to try and do that with the broad market of 500 or 3000 stocks is really a fool's game.

I agree with Roger, it really does not matter much to an investor who is inherently focused on individual securities whether or not the broad market is under-valued or over-valued. What matters is whether you are purchasing those individual securties at suffiently attractive valuation in order to give yourself the opportunity to generate exceptional returns over the next 3-5 years. I often hear people talking about the "lost decade" for stocks based upon the returns of the indices. However, it is not very difficult at all to find companies whose stocks are up 400, 500 and even 1000 percent over the last 10 years. Gaming the market is for traders in my opinion. Investors need something to value and that is much easier to do with individual companies as opposed to the broad market.

Down Fridays

Sat, 31 Oct 2009 17:11:48 -0400

I think that you will find that many hedge funds do indeed have an October 31 fiscal year end. There is absolutely no data related reason that caused the sell off over the last I was mistaken on the $30 billion figure, it was reported to have been $3.7 billion which was liquidated in its entirety during the days that the market first began to sell off.

I agree that the fact the mutual funds have an October 31 fiscal year end would have very little to do with the abrupt sell off.

On Oct 31 04:31 PM logicalthought wrote:

> First of all, hedge funds end their years on 12/31; it's the mutual
> funds that use 10/31, and if anything, the mutual funds would be
> more likely to "window dress" and spend money to mark up their year-end
> holdings, rather than let them get crushed.
>
> Second, Galleon had $3 billion in positions, not $30 billion, and
> had supposedly unwound almost all of them earlier in the week.

>
> I think there's now a different, more negative tone to this market,
> and you can see it in the broken charts of the financials, the transports,
> the Nasdaq and, perhaps, in the S&P 500. I have no idea what
> happens Monday, but I think the S&P will see the low 900s (if
> not lower) by year-end.

Down Fridays

Sat, 31 Oct 2009 16:10:31 -0400

Hedge fund fiscal year end with large unrealized gains over the preceding 6 months means that they most likely felt compelled to lock in those gains ahead of the GDP report in case it came in short. Let's not also forget that the Galleon hedge fund, which I believe was $30 billon was unwound over the last seven trading days or so. On balance, earnings and the economic numbers over the last two weeks did not change the outlook of the economic recovery for better or for worse.

Market: Spooked Today, But Panic Attack Is Likely Temporary

Fri, 30 Oct 2009 23:48:27 -0400

Oh, by the way on the banks going under, big surprise! Earlier this year we heard that over a 1000 banks were going to be seized, I think we just went over 100 a couple of weeks ago. This was a brutal recession, unemployment will stay stubornly high, banks will continue to fail and consumer spending will be lackluster for the foreseeable future. Most of us who are reasonably constructive on the market are not basing that premise on everything being back to normal next year, that's not going to happen. However, many stocks are still quite cheap and are profitable and growing. Many stocks are cheap because traders were focused on the quick hit with junk like many financials and consumer stocks, while good solid industrial, staple and energy stocks have been neglected. This is not a market where you can buy the S&P 500 and do well; one must pick his or her spots and not wait till the stock is overvalued to sell.

On Oct 30 10:37 PM Archman Investor wrote:

> Not even worth a real comment here. Just more of the same from the
> author who rationalizes every piece of news as good for his asset
> gathering buddies.
>
> BTW another half dozen banks just went under tonight.
>
> Yeah, everything is good.

Market: Spooked Today, But Panic Attack Is Likely Temporary

Fri, 30 Oct 2009 21:40:14 -0400

I am frankly very glad that the sentiment on these boards and many others is so negative. This snap back bull market that we have had since March will not end with so many people scared or willing to be scared whenever the market goes through a profit taking period such as we are experiencing recently. I am really not sure what it is that people want at this point in the recovery coming off such a significant downturn. I certainly do not expect robust top line growth and I certainly would expect a significant portion of positive economic activity to have been "stimulated" by the stimulus.

Is the Current Economic Growth Sustainable?

Fri, 30 Oct 2009 16:10:17 -0400

Not rose colored at all! In fact, I was beside myself in criticizing Bernanke, Paulson, and virtually all market strategists and economists between Spring of 2007 and the end of 2008. However, we now have come through the crisis and we are emerging from the recession. Those who allow themselves to get mired in the should of, could of, would of types of debates have missed and are missing terrific investment opportunities. The economy will recover with much help from stimulus, the markets will again go back to focusing on fundamentals, however in the meantime investors who can block out the noise and look forward will most likely find the best investment opportunities of their entire lives. I know I found such opportunities 9 months ago in both equities, corporate and municipal bonds.

Back on subject, we will come out of this recession and history will write that the stimulus and quantitative easing averted a depression and protracted deflationary spiral.

On Oct 30 12:51 PM tunaman4u2 wrote:

> I need some of what you're smoking... must be great stuff... does
> it also come with rose colored glasses?

Is the Current Economic Growth Sustainable?

Fri, 30 Oct 2009 09:28:07 -0400

It is very interesting to me that the same individuals who were critical of the stimulus program and the Federal Reserve's quantitative easing programs are now the one's who are criticizing the economy's growth as "artificial" and unsustainable. This does not reconcile for me because had we had capitalistic destruction run its course undeterred, without the extraordinary measures that we have seen from the government and Fed, we would not have had any growth at all and more likely would have had continued contraction, much higher unemployment and we would be mired in a deflationary spiral.

Of course most of 3Q's growth is attributed to stimulus, that is the very point of stimulus isn't it? Now, as a result, we have signs of returning consumer confidence, the bond markets are functioning and the stock market is recovering. Job losses are less bad and bank's are returning the TARP monies. The stimulus measures have done exactly what they were designed to do and more will kick in over the next year. We now need private business to do its part.

Bucyrus: From Tepid to Bullish

Mon, 26 Oct 2009 11:53:08 -0400

I have to agree on the valuation concern. I sold BUCY in the low 30's based upon a mid-teen forward PE and the prospect of their results lagging any recovery given their extended sales cycle. I made this same decision on several other long cycle companies and they have begun to disappoint, however BUCY has remarkably come through this quarter much better than expected.

Tapping into Geothermal

Thu, 15 Oct 2009 21:25:43 -0400

I accidentally stumbled over LSB Industries, Inc.(LXU) and through my research on the company I was pleasantly surprised that over half of sales come from manufacturing and selling geothermal and water source heat pumps and related HVAC supplies. The company is headquartered in Oklahoma City, but it has an international sales footprint. It is very profitable and is sporting a low 10X forward PE. Its ROA is 8.4 and ROE is 20.5. I find this company to be a conservative investment if one is looking to investing in the growing interest Geothermal.

The Evolution of U.S. Manufacturing

Wed, 07 Oct 2009 21:26:33 -0400

I have read Marc's latest book two times over the last month and it is truely inspiring in light of all of the hand ringing that is occurring today about just how terrible our economy is and will be for the foreseeable future. That fact is that our economy has modernized greatly over the last several decade. As an economy, we have moved up the food chain as a manufacturer and service provider. The problem that we have is that our economy has moved up that food chain faster than our workforce has.

When you think about all of the life changing and world changing accomplishments that have been born from our domestic economy over the last 100 years, you cannot argue that our greatest strength is not basic manufacturing or providing low level services. The concept is not much different than the "highest and best use" assessment that a real estate appraiser performs when he or she appraises a commercial property. Our economy's highest and best use is not manufacturing toys and clothes or assembling technology equipment. Our highest and best use is evident when one looks around the world and realizes that it is American ingenuity that brought the world a vaccine against polio and anti-biotics, the semi-conductor chip, the airplane, and the internet. Without American entrepenaurship the world would not have products and services from McDonalds, Nike, Google, Microsoft, Coke, Caterpillar, Boeing, Apple, Disney, GE, as well as Pfizer, Merck, Johnson & Johnson, Bristol Myers and Amgen. We have what the world wants. The more affluent the developing world becomes, the more money that they will have to buy our products and services. We have the brands, the franchises and the innovative edge to disproportionately benefit from the the economic success of the BRIC countries.

Are High Dividends Sustainable?

Mon, 05 Oct 2009 08:42:50 -0400

To all of you "oldsters" I would not recommend short-term trading. To the person who looks at equity investing as "loaning the company money", that is bond investing not stock investing. Don't take equity risk in order to get a bond like return. If you want income invest in a bond fund or buy individual bonds. Buying bonds earlier this year, particularly corporate bonds, would have provided you yields to maturity of between 7% and 12% in very high quality companies. If you are buying equities, buy them for their total return over a 3 -5 year period or longer. Buy dividend paying stocks with a history of an increasing payout ratio and buy the stocks at a low relative P/E. Another way to own equities with a good total return is to purchase a closed end or open end fund which owns dividend paying stocks and combines that strategy with covered call selling. Many of these funds are throwing off annual yeilds between 8-10% and you still have opportunity for appreciation.

The Hidden Depression of the 2000s

Tue, 22 Sep 2009 08:49:50 -0400

Very interesting article and collection of data. I have sensed for a while that a significant portion of our economic growth in the 2000's could be attributed to an increase in personal leverage given the stagnation of wage growth. What facinates me in all of this is what policy decision (tax, labor or otherwise) has lead to the stagnation of wages over the last 10+ years or more. One of the issues that strikes me is the change in the way inflation is calculated has changed a number of times over the last 30 years. In my opinion, that change in the way inflation is calculated served to under state inflation, thereby providing cover for employers to keep a lid on wage growth for decades. This disparity between wage growth and "real" inflation over many years has put significant pressure on households to maintain their standard of living. With a signficant number of households already in the catagory of two wage earner families the only way to bridge the gap between insufficient wage growth was increasing leverage.

Irwin Kellner shrugs off long-range estimates that peg the federal deficit at $9T over the next 10 years. "Somehow or other, unexpected developments have a way of changing what seems to be a certainty. In today's case, it could be such developments as stronger growth, greater productivity, innovation and technology."

Tue, 15 Sep 2009 21:48:30 -0400

I am also not a big fan of Irwin, however all gloomy pessimists should heed his message because he has history on his side on this one. Also, it is interesting to note that even John Mauldin made a similar statement during an interview when he was discussing that quantitatively we would need to see 9-10% GDP over a series of year in order to bring unemployment back down to around 5%. However, John qualified this statement by saying that he believes unemployment will come down to that level again sooner than most people believe even without the unrealistic 9-10% GDP growth because unforeseen innovations and new industries will develop which will create jobs that we cannot necessarily even conceive of today. He says that is why he is optimistic.

G20: What the Big Deal Is

Sat, 29 Aug 2009 22:03:38 -0400

Marc,

I just finished your book, Making Sense of the Dollar. It was a very refreshing factual argument that many of the assumptions that financial professionals and the media make regarding various economic relationships are not only ill-founded but may very well be the opposite of what most people have been lead to believe. As the Chief Investment Officer of an asset management firm, my job and that of our advisors would be much easier if all of our client read this book. I will do what I can to encourage people to read your book.

Thank you!

On Aug 24 04:12 PM Marc Chandler wrote:

> Conceptwizard, perhaps it is because you are commenting so much on
> other people's work, you do not have time to read them very carefully,
> but I clearly state that economic and financial crisis continues
> to command the attention of policy makers. There is no assumption
> that the crisis is over, but rather I argue that the way the crisis
> has been responded to and in particular the commitment to export
> led growth in Germany, Japan and China will prevent a serious address
> of the structural imbalances. It seems to me that you took advantage
> of my original work, simply to make your own point.

Marc Chandler's Compelling Perspective in 'Making Sense of the Dollar'

Sat, 22 Aug 2009 18:23:15 -0400

Carneades is onto something and I am glad that he wrote this piece and recommended the book. I manage money for individuals and institutions alike and I continue to be shocked at the stupendous level of pessimism and ignorance of how our economy actually works. People are usually in total disbelief when I tell them how much the U.S. manufactures each year relative to the rest of our trading partners. Our manufacturing sector has evolved over the last 4 decades for the better not worse. However, if someone looks at the label on their shirt or where their child's toy is made and sees a foreign country, they automatically assume that we don't make anything any more.

I am a firm believer that we will not only maintain our manafacturing dominance going forward, but that this dominance will grow even greater as we produce more and more to both enable the developing countries of the world to bring their ballooning middle class the transportation, food and luxuries that we enjoy, as well as putting Apple, Nike, McDonalds, Ralph Lauren, and Tommy Hilfiger product in the hands and on the backs of all of these young "western wannabe" consumers.

On Aug 22 02:15 PM Carneades wrote:

> 1)The United States manufacturing sector is larger than the entire
> Chinese economy.
> 2)The United States is the largest exporter of goods and services
> in the world.
> 3)I'm not sure why some of you continue to confirm my point about
> iPods. There is an undue amount of focus devoted to where a product
> is actually being produced. A company from Cupertino, California
> designed that iPod, and profits each time one is sold. Technology
> will continue to advance, possibly at an exponential rate, which
> will inevitably reduce the number of humans employed in the manufacturing
> of that iPod. Eventually, a single person might be able to oversee
> an entire iPod manufacturing facility. This trend is extremely obvious;
> do we really want to decry our relative lack of dependence on manufacturing
> and exports?
>
> On Aug 22 01:35 PM Suncatcher wrote:

Marc Chandler's Compelling Perspective in 'Making Sense of the Dollar'

Sat, 22 Aug 2009 11:06:30 -0400

This book, Making Sense of the Dollar, would certainly be a valuable read for most Americans. It is so fashionable these days to bash the U.S., bash globalization of business and write off our great country's future. Unquestionably we have many fiscal and structural problems that need to be creatively delt with over the next several decades.

Citigroup Looks Overpriced

Wed, 19 Aug 2009 21:43:07 -0400

C is a purely a speculative investment in my book. As a professional investor, meaning that I am trusted and use my discretion to invest other people's money, no one can truely say that they understand Citi's businesses and therefore the various risks inherent in this company. For those who point to insider buying, technical analysis or simply blind faith, you are not acting as investors, you are speculating or betting that because insiders are buying or certain technical patterns have developed that the stock will continue to rise. These reasons are void of any "homework" as Cramer says needs to be done before buying a stock. If the "homework" was done, most everyone would come to the conclusion that their risks are still too opaq and that the visibility into their future business model is non-existent. What this means is that they cannot be adaquately valued and therefore any purchase of C can only be defined as speculative.

July Was a Good Month for Biotech

Tue, 04 Aug 2009 15:23:32 -0400

Correction: Agilent is buying VARI not VAR.

Potash's Negative Price Implications

Tue, 14 Jul 2009 10:45:19 -0400

Your comments are very insightful and extremely useful in an environment when information is freeflowing, but not usually all that usefull without proper context.

On Jul 13 10:58 PM Barry Isaacs wrote:

> Silvinit is a desperate, near bankrupt company that could be the
> subject of a takeover within the next 3 months which, as it happens,
> is the time period during which they cannot make any more potash
> sales at any price because they have committed themselves to delivering
> all that they can deliver during such period. If they deliver.
The
> timing of all this has to make one wonder. I am not even sure how
> real it is but assuming it is a 'reality' that must be taken into
> account, I remain doubtful that it will affect Canpotex or BPC pricing
> as far as negotiations with India, China and Brazil are concerned.
> Canpotex closed contract deals already with Korea, Taiwan and Japan
> at roughly $700 per ton and I will therefore be surprised if the
> price can be pushed much lower. Also, keep in mind that Silvinit
> has the lowest quality potash in the industry resulting in about
> 30% less yield than say a comparable amount of KCl coming out of
> Saskatchewan. I am a long term holder and am looking forward to at
> least the next 6 years during which time I believe investments like
> POT will vastly outperform the market.

Potash: Thesis versus Reality Yet Again

Thu, 18 Jun 2009 14:15:42 -0400

I would hardly say the POT has been reporting "poor" numbers for three quarters in a world where just producing a profit is reason for a sigh of relief. That being said, valuing POT or any other owner of a scarce but necessary commodity based upon quarterly profits is foolish. That being said, I am glad that this is ther way traders think because it gives those of us who focus on a longer time horizon than just next quarter opportunties to purchase shares of these companies at prices well below replacement value, intrinsic value or take out value. It has recently been stated that if BHP wanted to buy POT they would have to pay upwards of $150 per share. I was recently at an investor conference put on by AGU where it was illustrated very convincingly that AGU was trading at just 43% of replacement value.

The Real Reasons Fertilizer Stocks Are In the Dirt

Fri, 03 Oct 2008 14:25:22 -0400

BxCapricorn hit the nail on the head. However, as a fundamentally based portfolio manager, these situations allow us to either get into companies such as MOS at prices never imagined or average down existing positions, thus building a long position at a much lower cost basis.

The Real Reasons Fertilizer Stocks Are In the Dirt

Fri, 03 Oct 2008 11:28:21 -0400

Thanks for the posts. I am not alone, my sanity is intact. This market has ceased being a functional market and many people are trying to draw conclusions from the price movements of stocks during a time where forced selling is overwhelming rationale buying and pushing stock prices to unimaginal levels.

The Real Reasons Fertilizer Stocks Are In the Dirt

Fri, 03 Oct 2008 09:34:22 -0400

Fundamental analysis of the company behind a given stock is the only assessment of value for a given stock that is based in known inputs. Momentum caused by de-leveraging, sector rotation caused by program trades or false hope of a recovery in out of favor stocks or simply over-reaction to various reports that contradict long-term trends are much too unpredictable indicators for most investors to untilize. There is much more certainty associated with taking a company such as Mosaic, which today sells for a 2.5 forward PE and assign much more conservative earnings expectations and multiple to project a fair valuation for the stock. If this is done, it becomes very evident that the price of the stock today is significantly undervalued. These stocks are not dot.com stocks which had no earnings, no assets and no proven market. These stocks have substantial assets, strong balance sheets and an end market that is critical to the survival of the human race.

The Real Reasons Fertilizer Stocks Are In the Dirt

Fri, 03 Oct 2008 08:10:46 -0400

It is hard to argue that there was a lot of momentum in these stocks during the first half of 2008 and that for that reason expectations were too high. However, these stocks never really got significantly over-valued based upon even more realistic growth prospects. I believe that there is more a play here in recent price moves than a high momentum sector falling back to earth. If you take a look at non-fertilizer agriculture stocks such as AG, DE, and MON, they are also being hit extremely hard, while the world's grain inventories are still sitting at record lows. It is hard for me to believe that there has been significant demand destruction in the world over the last two months in soybean, wheat & corn to account for even a fraction of the multiple contraction that we have witnessed recently in agriculture stocks.

5 Reasons Why the $700B Bailout Could Translate to $250 Oil

Wed, 01 Oct 2008 14:30:10 -0400

I do agree with the author that passage of the Paulson plan would put upward pressure on oil for two simple reasons: 1. This increase in the supply of dollars in the world will put significant downward pressure on the U.S. Dollar, 2. the converse of the demand destruction argument would occur in that any improvement in credit flow will help stem the worldwide economic slow-down and thus reduce the impact of demand destruction on oil prices.

In reality, demand destruction outside of the U.S. are right now mostly based upon speculation and this speculation has given cover to hedge funds and other large institutional investors who were forced to de-leverage to justify the unwinding of their energy and commodity investments. If the credit markets improve, many institutional investors will re-establish many of these positions.

The Reason to Ignore Most Economists

Thu, 28 Aug 2008 13:55:10 -0400

One thing that I agree with in this article is that most brokerage house and bank economists publish outlooks that should be largely taken with a huge grain of salt. These economists, just like their counterparts, the Market Strategists, are not paid to publish their objective opinions, but they are generally public cheerleaders. Their are several economists who buck that trend, one is Northern Trust's Paul Kasriel.

The problem with the author and many other "experts" who argue that this financial and economic disruption that has resulted from over leveraged consumers, banks and brokers, is that these people pick and choose the data that they want to use to support their opinions. Can you say "weapons of mass destruction intelligence"? Today's GDP numbers are a prime example. Even though unemployment has risen over a full percentage over the last year or so, foreclosurers and personal bankruptcies have reached multi-decade highs, bank failures are on the rise, retail sales are contracting, and real wages have fallen for over seven years straight, GDP has not gone negative, therefore the economy is strong.