Hold The Press: The IMF Changes Sides [View article]
The IMF obsession with imposing fiscal austerity in the time of crisis defies common sense and the facts on the ground. Clearly the countries that followed this paradigm in the latest economic crisis fared much worse than countries that applied countercyclical measures like we did in the US.
correction. This is old news but I was misled by my newsfeed in etrade to believe that this happened this morning. I should have doublechecked before writing a post.
New press release this morning that VRNG had a direct offering of 10.3M share for proceeds of $46M. It looks to me they are building a war chest for a prolonged battle with Google and al. I am not sure you can expect a quick return on an investment in VRNG.
Lessons From 5 Years Of Economic Crisis [View article]
Roger, US has recovered much better than the Baltic countries. For example, Estonia had a peak GDP of about $24B that dropped to about $19B during the crisis and is now around $22B. They are still about 8% below their pre-crisis level. In US we have surpassed the pre-crisis GDP.
Under Pressure: Profit Margins On North American Hydraulic Fracturing [View article]
The prices for hydraulic fracturing have already come down about 17% this year compared to last year. For CJES the revenue per horsepower in Q2 this year was $307 compared to $371 in Q2 2011. The overcapacity is taking toll on their pricing power. But it looks to me that this is already old news and has been priced in the valuation. 20% overcapacity causes about 20% drop in prices. Sounds about right. If they don't experience further price decreases in Q3, then this must be the bottom. I am working on my own DCF valuation of CJES that I will try to publish on SA when ready (hopefully soon).
Profiting From QE3: Spotting The Mistakes [View article]
There was a good article on SA a week or so ago that showed that the market reaction was also muted after the announcements of the first two (or three, depends how you count) rounds of QE. It takes almost a month every time for the market to digest and react. In 2010 there was a runup in stock prices after the Jackson Hole speech but after the actual announcement the market stalled for a month. The current QE is in a different context. The European crisis was just starting in 2010 and China was still booming. Now we have Europe in recession and China slowing down rather fast. The latter explains why commodities (except precious metals) have not benefited so much. Another complicating factor is the slowdown in corporate profits. This is from WSJ this morning: “The downward trajectory of corporate guidance…is nearing levels last seen immediately preceding the 2000-01 tech-wreck recession,” says Nicholas Bohnsack, sector strategist at Strategas." Most analysts and economists I read don't explain how the changing context may eventually alter the effects of the current QE round.
Apple By The Numbers - No Smoke, No Hype [View article]
More than half of Apple's market value hinges on the fortunes of one product: iPhone. See Prof. Damodaran's analysis for reference: http://bit.ly/ReCLhr
Weighing The Week Ahead: Time For A Rebound In Confidence? [View article]
Jeff, I understand it is a vicious circle. I think it can be turned into a virtuous circle and that one entity that can eventually do this is the American government: all branches plus the Fed. Bernanke did his job with QE3 but he looks pretty lonely in his efforts. If the Congress steps in forcefully right now and does its job avoiding the so called Fiscal Cliff, we will have a boost of confidence that may turn not only the US economy but the global economy around. Why is it so difficult for politicians to do the obvious right thing? Is there a sane investor or economist out there who thinks going over the cliff is a good thing? Then what are the politicians waiting for???
Weighing The Week Ahead: Time For A Rebound In Confidence? [View article]
For the confidence to return, there must be some acceleration of the global economic growth. There must be some reversal of the current trend around the world of reducing growth estimates and earnings outlooks. Bonddad had a good review on Sep 20 of several central banks around the world showing increasing pessimism. Slow growth is not fertile ground for confidence.
Apple By The Numbers - No Smoke, No Hype [View article]
It is interesting though to see what the risks associated with Apple are. The biggest risk would be that half of the market value of Apple comes from just one product: iPhone. Unlike all other companies at the top of the S&P 500, Apple does not have a diversified product portfolio. The life cycle of iPhone is about 2 years. This means that every two years Apple's fortune depends on its ability to deliver a superior product with outstanding quality. One miss may be OK because of the powerful Apple brand which would protect the iPhone franchise for some time. iPhone was a vastly superior product for some time but today the early adopters seem to be enamored by some other phones like Samsung Galaxy and even Lumia from Nokia. As I said, the brand will compensate for the lack of technological leadership for a while but someday not only the early adopters but the masses of very late adopters who are now flocking to the Apple stores will catch up with the fact that Apple is not anymore the technological leader that it used to be. Since Apple is so dependent on just one product - the iPhone - it just can't afford to lose its position as an innovation leader.
QE - Infinity: A Game Changer For Mortgage REITs [View article]
Richard, to the best of my recollection, the Fed bought $500B of agency MBS in QE1. This first round was the only one that had pronounced effect on yields. Once the markets recovered and there was already ample liquidity in the system, the subsequent rounds of stimulative Fed policy had only marginal impact. My own expectation is that QE3 will be the biggest monetary non-event with no impact on the real economy and marginal impact on yields. The only positive effect will be on the stock market and the prices of commodities.
QE - Infinity: A Game Changer For Mortgage REITs [View article]
Quote from the article: "Worse, their currently profitable mortgages begin to melt away as debtors take advantage of new rounds of rate reductions to refinance out of the old rates." This spring there was a study by the San Francisco Fed that challenged the link between QE and lower mortgage rates. From MarketWatch (May, 2012): "A lack of competition in the mortgage market limited the impact from the Federal Reserve’s three rounds of unprecedented bond buying, according to a research report published Monday by the San Francisco Fed.
With fewer competitors writing mortgages, originators were not under as much pressure to pass on decreases in rates for mortgage-backed securities to homeowners, the research showed.
“This suggests that the weaker link between MBS yields and primary mortgages may persist for some time,” Michael Bauer, an economist in the San Francisco Fed’s economic research department, wrote in the latest San Francisco Fed Economic Letter."
Is China The Biggest Malinvestment Case Of All Time? [View article]
I agree that there is no way to predict when China will experience its hard landing or maybe a collapse. The Soviet Block looked so indestructible until the very last year of its existence. Then everything fell apart in a matter of months. 2007 was an up year for the markets until it wasn't anymore. Diagnosing the problems is different from timing the market. Many people confuse the two.
Hold The Press: The IMF Changes Sides [View article]
What Is Vringo Worth? [View article]
What Is Vringo Worth? [View article]
Lessons From 5 Years Of Economic Crisis [View article]
US has recovered much better than the Baltic countries. For example, Estonia had a peak GDP of about $24B that dropped to about $19B during the crisis and is now around $22B. They are still about 8% below their pre-crisis level.
In US we have surpassed the pre-crisis GDP.
2 Aces Up The Sleeve: Nokia Lumia Sold By 13,892 AT&T, T-Mobile And Verizon Locations [View article]
Under Pressure: Profit Margins On North American Hydraulic Fracturing [View article]
Profiting From QE3: Spotting The Mistakes [View article]
The current QE is in a different context. The European crisis was just starting in 2010 and China was still booming. Now we have Europe in recession and China slowing down rather fast. The latter explains why commodities (except precious metals) have not benefited so much. Another complicating factor is the slowdown in corporate profits. This is from WSJ this morning: “The downward trajectory of corporate guidance…is nearing levels last seen immediately preceding the 2000-01 tech-wreck recession,” says Nicholas Bohnsack, sector strategist at Strategas."
Most analysts and economists I read don't explain how the changing context may eventually alter the effects of the current QE round.
Apple By The Numbers - No Smoke, No Hype [View article]
http://bit.ly/ReCLhr
Weighing The Week Ahead: Time For A Rebound In Confidence? [View article]
I understand it is a vicious circle. I think it can be turned into a virtuous circle and that one entity that can eventually do this is the American government: all branches plus the Fed. Bernanke did his job with QE3 but he looks pretty lonely in his efforts. If the Congress steps in forcefully right now and does its job avoiding the so called Fiscal Cliff, we will have a boost of confidence that may turn not only the US economy but the global economy around. Why is it so difficult for politicians to do the obvious right thing? Is there a sane investor or economist out there who thinks going over the cliff is a good thing? Then what are the politicians waiting for???
Weighing The Week Ahead: Time For A Rebound In Confidence? [View article]
Apple By The Numbers - No Smoke, No Hype [View article]
QE - Infinity: A Game Changer For Mortgage REITs [View article]
QE - Infinity: A Game Changer For Mortgage REITs [View article]
to the best of my recollection, the Fed bought $500B of agency MBS in QE1. This first round was the only one that had pronounced effect on yields. Once the markets recovered and there was already ample liquidity in the system, the subsequent rounds of stimulative Fed policy had only marginal impact. My own expectation is that QE3 will be the biggest monetary non-event with no impact on the real economy and marginal impact on yields. The only positive effect will be on the stock market and the prices of commodities.
QE - Infinity: A Game Changer For Mortgage REITs [View article]
This spring there was a study by the San Francisco Fed that challenged the link between QE and lower mortgage rates. From MarketWatch (May, 2012):
"A lack of competition in the mortgage market limited the impact from the Federal Reserve’s three rounds of unprecedented bond buying, according to a research report published Monday by the San Francisco Fed.
With fewer competitors writing mortgages, originators were not under as much pressure to pass on decreases in rates for mortgage-backed securities to homeowners, the research showed.
“This suggests that the weaker link between MBS yields and primary mortgages may persist for some time,” Michael Bauer, an economist in the San Francisco Fed’s economic research department, wrote in the latest San Francisco Fed Economic Letter."
Is China The Biggest Malinvestment Case Of All Time? [View article]