Susan's Comments

Goldman and Morgan Stanley: Banks of Choice - Barron's

Mon, 16 Mar 2009 02:53:24 -0400

GS was one of the biggest beneficiaries (if not the biggest) of the latest TARP money to AIG to cover CDS implosion liabilities.

Does anyone know the remaining numbers of GS exposure to CDSs vs the cash infusion they just got via AIG?

Essentially, betting on GS is a bet that the CDS bleeding is now under control. AIG is being 'saved' in order to save its insured counter-parties.

The 15 Most Cash Rich Companies

Sun, 15 Mar 2009 21:20:42 -0400

MSFT Cash is much lower than it was a few years ago. This is due to both their dividend paying and aggressive acquisitions (like AQuantive for 6B).

In addition, their growth has slowed down significantly. MSFT highly favorable ecosystem were computers costing ~$500-1000. Machines at this price range may justify a $150 OS (plus another $200+ for 'Office software'), but this ecosystem is rapidly shrinking.

Computing devices from iPhones (no Microsoft software at all) to $200 notebooks are quickly becoming "the personal computer market". MSFT can no longer charge $150 per copy of the OS when the whole machine costs $200 or less. They are forced to offer crippled versions of their OS for $50 or less per copy just to remain in the game and even so, there are a few takers. These lower ASPs are ensuring that Microsoft's best days are long gone. Cash, unfortunately will not help a company whose business model has hit a wall.

Please don't get me wrong, MSFT will keep on living for a long long time because many less informed people will keep on buying their software despite much better (including free) alternatives. But I think it is safe to assume that the nice growth and the good old golden-egged goose days are not coming back.

Which ETF Markets Benefitted Most From Last Week's Global Rally?

Sun, 30 Nov 2008 15:53:03 -0500

Vlada, a comment about data representation: when looking at relative performance in one point in time (a simple numeric vector) it doesn't make sense to present these is alphanumeric order on a very hard to read white text against bright green background. Instead the most logical representation of such data is a simple bar chart representing the magnitude of the percentages visually and clearly, ordered from highest to lowest. Thanks.

UltraShort ETFs: Is Betting Against the Dow Still the Way to Go?

Tue, 04 Nov 2008 13:19:23 -0500

Not to argue if this is a bottom or not, just to correct misinformation.

It is not true that the Great Depression bear market "took 4 years to find a bottom".

The stock market bottomed on July 8, 1932. About 2.5 years after the peak. This market bottom came more than a year before GDP started to improve and many years before the broader economy great-depression was over.

en.wikipedia.org/wiki/...

Risk Management in Trending Markets

Sun, 27 Jul 2008 21:25:27 -0400

Excellent article.
One correction though: DBA is agricultural commodities, MOO is Agricultural stocks, not the other way round.

Energy: The Year In (P)review

Tue, 22 Jul 2008 00:32:52 -0400

Too much "conventional" thinking here. Allow me to play devil's advocate. Actually, perhaps I should say, Angel's advocate.

Current prevalent estimates greatly underestimate the effect of clean alternative energy deployments and Solar in particular. Advanced solar cells are already at grid parity (same cost to generate electricity with current technology as coming from the grid). High-end solar PV cells (from Spectrolab, SolFocus and others) are already achieving 200-500x sunlight intensity concentration, while at the low-end, thin-film PV (from First Solar and others) is seeing manufacturing efficiency and price drops reminiscent of the drop in the cost of flat-panel technology in the past few years. Remember a 24" LCD monitor dropping from $5000 to $600? The same thing will happen with solar panels. After a period of shortages, world polysilicon (the main basic material used in the manufacturing of PV cells) capacity is growing fast as a large number of new fabs are being built, especially in China.

The biggest consumer of Oil is transportation (cars). Tesla motors (100% electric car) founder Elon Musk sees a $30k model coming in 4 years. 5-10 years from now with a critical mass of consumers investing in Solar panels to power the home and turn the utlity meter backwards during daylight, plug-in hybrids and pure-electric cars getting into the mainstream, plus flex-fuel cars as options, Oil consumption and prices, will be taking the dive of a lifetime.

The high price of Oil has brought about an unprecedented venture capital investment in alternative energy. Go to pickensplan.com (T Boone Pickens site) and read about his wind-farm plan for the central plains. In his view the US is the Saudi Arabia of wind energy. The stakes are huge (the US imports about $700B/year of Oil. Never before have the stakes, and the amount of investment been this high.

The results will come sooner rather than later.

Black Swans, Real Estate and Financial Stocks

Wed, 02 Jan 2008 12:56:43 -0500

Mr Taleb's is a great thinker/writer.
His main issue is lack of numbers in his arguments.

Things You Should Know About ETFs XLK & QQQQ

Thu, 25 Oct 2007 23:49:49 -0400

Indeed, based on the past 52 weeks, on a weekly basis, QQQQ and XLK are 0.94 (Pearson linear correlation coefficient) correlated. XLK wins on overall value; for instance, it's average P/E is about 15% lower. QQQQ's "wins" on past return. In the past 52 weeks QQQQ is up 29.93% (vs XLK's 22.33%). This is another reason to prefer XLK, when momentum reverses QQQQ should be more vulnerable.

Is the Red Hot Korean ETF Still Cheap?

Mon, 01 Oct 2007 13:04:49 -0400

Apologies for the double post. When I submitted the first time, there was no indication that the post went through. Unlike the second time where both appeared together.

Is the Red Hot Korean ETF Still Cheap?

Mon, 01 Oct 2007 13:02:22 -0400

The statement that korea's etf PE is higher that Singapore, Netherlands and Sweden seem wrong. Numbers from Morningstar, (confirmed also on yahoo finance):

EWS (Singapore): 17.84
EWD (Sweden): 15.13
EWN (Netherlands): 14.36

None of these are lower than "a bit above 13" which the article claims EWY (South Korea) trades at.

Something's wrong with the data?

Is the Red Hot Korean ETF Still Cheap?

Mon, 01 Oct 2007 13:00:29 -0400

The statement that korea's etf PE is higher that Singapore, Netherlands and Sweden seem wrong. Numbers from Morningstar, same numbers on yahoo finance:

EWS (Singapore): 17.84
EWD (Sweden): 15.13
EWN (Netherlands): 14.36

None of these are lower than "a bit above 13" which the article claims EWY (South Korea) trades at.

Something's wrong with the data?

Emerging Markets Now Trading At Premium To Developed

Thu, 27 Sep 2007 17:33:23 -0400

How good is EEM as a proxy for emerging markets?
How is the average representative of all the countries?

Two extreme points to consider:
One Brazil proxy (EWZ) trades at about PE=13
One China proxy (FXI) tardes above PE=21

So the disparities seem very large. China with its large average market-cap pulls the averages way up.
It seems like some emerging countries are reasonably values while others are in bubble territory.

By the way, some countries classified as Emerging, like Korea and Taiwan are very close to being considered "developed" at this point.

Moment and Omega Rankings of Index ETFs

Tue, 25 Sep 2007 11:46:31 -0400

Since Omega already takes into account all the moments of the distribution, what is the rationale behind the double accounting?

Also, during bear markets, when the means are negative, skewness cannot possibly be a positive thing, right?

More Support For Disciplined ETF Strategy

Tue, 03 Jul 2007 22:15:27 -0400

The main problem with the approach of selling when a holding dips 8% from its high is that often when there's a sharp correction, almost all assets become very correlated. In fact, last summer, (May-June 2006) was a classic example where almost all ETFs had a very significant dip, with almost no hiding place to park money and with most exceeding the 8% threshold suggested in the article. Last summer, even "defensive ETFs" like energy, commodities, precious metals, all went down with the emerging market ETFs.

It is not clear whether in that case the author would have liquidated his whole portfolio at the worst possible moment.

Of course, in hindsight we can say that June 2006 was the best time to load up the truck on the ETFs that dipped 8% or more. I'm not sure if the 8% rule was rigorously back-tested with historical data, but I suspect it would have faired pretty poorly as a general "golden rule" to live by,

Can ETF Options Offer Cheap Leverage to Reliably Boost Returns?

Tue, 08 May 2007 11:26:07 -0400

This idea is not new. If you want to take it further (more diversifiation and longer time horizons) see indexroll.com
-- Susan

Overvalued, Overbought, Overbullish Conditions

Wed, 24 Jan 2007 03:22:57 -0500

>>&g... Overvalued: S&P 500 price/peak earnings greater than 18

Does this refer to forward looking earnings?
The TTM on the SPY right now is P/E=15.75

Portfolio Building With Forward Looking Asset Allocation

Fri, 19 Jan 2007 13:50:47 -0500

This is an unusually insighful article. Thank you!
Bernstein (both books, not just the first) is a must read.

The 'Best' Way to Capture Foreign Exposure

Fri, 19 Jan 2007 12:09:51 -0500

EWM and EWS have high correlation among themselves but relatively low correlation vs the SPY.

I have wondered if this is because of the time (one day) difference between the markets, but when I switch from daily to weekly price change correlation (past 1 year) I still get low correlations vs the SPY:

Correlation vs SPY ---------------------- Ticker: Daily Weekly EWS 0.62 0.65 EWM 0.51 0.45

This data is based on closing prices (daily and weekly) over the past year (252 trading says). Correlation is simple linear correlation between two percent change series.

Emerging Market ETF Has Seen Better Times

Thu, 11 Jan 2007 21:15:34 -0500

These kind of predictions rarely pan out. Globalization did not exist in 1988. Brazil and other emerging economies were big debtor nations, now many are running surpluses. China's growth and growing middle-income class is driving significant growth in raw material exporting countries.

The big drop was an overreaction to Chavez Venezuela's nationalization plans.

My prediction: EEM will break new highs this year, several times.

Capital-Protected ETFs: Seeking Alpha via ETF?

Fri, 10 Nov 2006 20:13:27 -0500

Hmmm...


managers who “examine the market” and “anticipate future trends”

So, what we have here is essentially a new high-cost (for an index fund) "market timers" fund.

Is there anything really new here (except for this being an ETF)?
Any doubts that they will, over time, underperform their index?

A Closed-End Fund For Income Investors

Tue, 07 Nov 2006 03:43:13 -0500

Hmm, isn't the 1.70% expense ratio excessive for an slow-growers/income fund?