Tom Colangelo

Preview from Europe: Is the Summer Rally Over?

Sentiment drives the market in the short term.

Fundamentals drive the market in the long term.

Predicting the short term is impossible. Consumer sentiment dipped but a piece of good news or gov't official jawboning about the progress we've made could turn that aroung in a minute.

For Friday and perhaps today, it looks like the bears have it.
But come tomorrow, it could easily swing the other way.

Retal investors who get frightened into jumping into and out of positions because of short-term swings will get hurt the most.

The best rule to follow for retail investors is never buy anything that you would not want to own in the long run ( Warren Buffet).

That way you are not inclined to sell just because of a short-term swing.

Huron Consulting Group's Crash: Red Flags Abound

The BUY assumed no extraneous event that could adversly effect the price. Obviously when that event occured, his initial recommendation was null and void and he was free to make a fresh assessment.

I don't think that reflects on him at all. It happens all the time that an unexpected event changes an outlook and a forecast.

What the stock went down to (15) had nothing to do with his new assessment that put fair value at 25 in 9-12 months.

And lastly, I see no reason why he couldn't have whipsawed his rating since the firm's blunder gave him that out. And yet, after talking with HURON management during the weekend, he gave it a BUY.

In my opinion, that says it is very likely to blow over in a month or so.

On Aug 06 10:11 AM District Banker wrote:

> Tom -
>
> There's one major flaw in your logic: the UBS analyst in which you
> seem to be abundantly confident had a 'buy' on the stock at $45...
> and it went to $15. Doesn't sound like a 'buy' to me. Now, he feels
> like an idiot and cant whipsaw his rating on the stock around ("buy
> at $45, hold/sell at $15"). Happens all the time on the sell-side.

Huron Consulting Group's Crash: Red Flags Abound

On Monday, after reviewing the issues at hand, the UBS analyst EXPERIENCED with HURN reiterated his BUY RECOMMENDATION with a fair mkt value of 25 in 9-12 months.

He could have taken the easy, safe way out and recommended a HOLD or SELL, but he said BUY.

Think about it, a guy who knows this firm inside and out says BUY when, if he's wrong, he gets his career blasted. Yet he says BUY.

I'm confident he knows more about this situation than any of the armchair analyst who gather charts from all over the web to piece together a fashionable presentation on something they only heard about yesterday.

This is like GE when all of the wannabe analysts jump on the bandwagon and declare thast this firm is in trouble, when nothing could be further fron the truth.

Will Fundamentals Improve Fast Enough to Keep Up with Markets This Week?

P/E RATIOS SET TO RISE IN Q4 2009 THRU 2010

WARNING: IF YOU CAN'T CONCENTRATE FOR MORE THAN 60 SECONDS, SKIP THIS ENTRY.

The New Normal theory states that the recovery will be long and hard with GDP at 1.5 - 2.0% for possibly a decade.

If true, Earnings will bump along at a similar pace and will not recover to the high Earnings before the recession. So now we have low Earnings.

Why should the Price part of the P/E ratio rise?

Simple. Once investors that have nearly a trillion dollars earning nothing in money market funds come to accept this new low Earnings rate, and they come to realize that this is the way it will be for some time, they will decide to jump into the market because it is the lesser of two evils (i.e. no earnings vs. low earnings with some risk). This will bid up the price of stocks based simply on greater demand, not greater performance.

So now you have a new LOW Earnings number and a new HIGHER Price number and the new P/E ratios will jump higher than before the recession.

Again, this will not signify a higher expectation of future earnings as in the past, but instead, will reflect the New Normal of low growth, high unemployment and a long drawn out 5 years of debt defaults in credit cards, commercial loans, and housing mortgages which will force the further consolidation of the banking industry.

WHAT THIS MEANS TODAY IS THAT YOU CAN INVEST IN JUST ABOUT ANYTHING AND YOU WILL SEE A GAIN IN YOUR POSITIONS OVER THE NEXT 6 – 12 MONTHS, JUST BECAUSE OF THE NEW MONEY POURING BACK INTO THE MARKET.

July Markets: The Running of the Sheep

P/E RATIOS SET TO RISE IN Q4 2009 THRU 2010

WARNING: IF YOU CAN'T CONCENTRATE FOR MORE THAN 60 SECONDS, SKIP THIS ENTRY.

The New Normal theory states that the recovery will be long and hard with GDP at 1.5 - 2.0% for possibly a decade.

If true, Earnings will bump along at a similar pace and will not recover to the high Earnings before the recession. So now we have low Earnings.

Why should the Price part of the P/E ratio rise?

Simple. Once investors that have nearly a trillion dollars earning nothing in money market funds come to accept this new low Earnings rate, and they come to realize that this is the way it will be for some time, they will decide to jump into the market because it is the lesser of two evils (i.e. no earnings vs. low earnings with some risk). This will bid up the price of stocks based simply on greater demand, not greater performance.

So now you have a new LOW Earnings number and a new HIGHER Price number and the new P/E ratios will jump higher than before the recession.

Again, this will not signify a higher expectation of future earnings as in the past, but instead, will reflect the New Normal of low growth, high unemployment and a long drawn out 5 years of debt defaults in credit cards, commercial loans, and housing mortgages which will force the further consolidation of the banking industry.

WHAT THIS MEANS TODAY IS THAT YOU CAN INVEST IN JUST ABOUT ANYTHING AND YOU WILL SEE A GAIN IN YOUR POSITIONS OVER THE NEXT 6 – 12 MONTHS, JUST BECAUSE OF THE NEW MONEY POURING BACK INTO THE MARKET.

A Reality Check on U.S. 'Economic Recovery'

Hi Jeff,

Under your scenario, how do you justify mining (minerals or metals I'm assuming) assets? Won't they fade if the economy weakens as you describe?

The gold is pretty standard response to a negatricve forecast, but the mining is hard for me to rationalize.

On Jul 30 04:34 PM Jeff Nielson wrote:

> Hi Tom.
>
> Last fall, when I had more time I actually swing-traded the market,
> since it was pretty obvious that while people were in panic-mode
> there would be excessive back-and-forth reactions in the market.
>
>
> Personally, I find CURRENT markets much more terrifying, because
> there is still virtually no buying and selling being done on fundamentals.
> The same propaganda-machine and Plunge Protection Team which conspire
> to push markets higher TODAY could make a 180-degree turn TOMORROW
> - for example, when they need to try to semi-inflate the bond-bubble
> - which has now burst (like using a bicycle pump on a tire with a
> slow leak).
>
> Also, because I now have less time, that makes trying to trade through
> this even more perilous. I
>
> I've got my holdings in quality, Canadian mining companies, and a
> portion still stuck in some questionable juniors, which I won't exit
> at current prices.
>
> The rest of my "excess dollars" go into bullion.

A Reality Check on U.S. 'Economic Recovery'

WE know that pure lies and fabrications have levitated the market for 7 months, ever since the green shoots mirage started to appear.

The question that GS has answered so well is "How do you make money in this market?"

So I ask you, Jeff, what are you investing in to make money despite the ugly scenario you describe?

I'll start the sauce. INothing fancy. 'm betting on the things we can't do without no matter what the economy. ENERGY, FOOD, AND PHARMA...with some utilities thrown in for extra dividends. Yes they may decline in market value until we pull out of the recession, but they will pay good dividends because they won;t go out of business and everyone needs what they sell.

Now your turn.

Noticed the Oil Backup?

Stop dinking around with small talk trivia, like in the above article.

Reported today that UK GDP was off approx. 50%.
Also today, oil advanced into the upper $60/bbl range.

With comparable GDP declines in other major markets, IT IS OBVIOUS TO THE MOST CASUAL OBSERVER that even the slightest GDP recovery will stretch oil supplies to the breaking point.

BUY OIL NOW while you can still afford it. Most pay great dividends while you wait for the recession to ebb and most have significant off-shore earnings which deflect some of our expected inflation.

STOP TALKING ABOUT TRIVIA.

Leading Economic Index Signals End of the Recession

OIL WILL STAY IN $60 – 75 RANGE FOR 3-5 YEARS, UNLESS THE GLOBAL ECONOMY SLIPS INTO A MORE SERIOUS RECESSION.

WHY DOES THAT MAKE SENSE? The Chinese think long range.

If you were responsible for China’s economy for the next 25 years, what would you be concerned about?

* Not a 6 – 12 month slack in oil demand from the global recession.
* Not the imminent decline of your largest competitor/ customer’s economy over the nxt 5 years.
* Not your temporary embarrassment of riches accumulated over the last 30 years.

NO, NO, NO!

You would be celebrating the above because they allow you to buy / hoard natural resources you will desperately need for your economy over the next 20 years, at the lowest cost possible.


Look at what we worry about:

• When will the recession end?
• How bad will the taxes be for the rescue?
• Will our jobs come back?

China needs the U.S. consumer for the short term. They have an enormous home market to develop and they will internalize our technology, creativity, and intellectual resources, like the Japanese did, and become the dominant economy for the next 100 years.

Yes there are many ways this vision could fail, but as of today, it is a viable outlook, in my opinion.

BET ON OIL & related services stocks like BP, HES, XON, RDSB, COP, OXY, NBR, RIG, etc.

Much of their revenues are international and will actually benefit from the U.S. inflation we expect.
They pay strong dividends and will make money no matter which country’s economy is growing.

Today in Commodities: It's All About Timing

OIL WILL STAY IN $60 – 75 RANGE FOR 3-5 YEARS, UNLESS THE GLOBAL ECONOMY SLIPS INTO A MORE SERIOUS RECESSION.

WHY DOES THAT MAKE SENSE? The Chinese think long range.

If you were responsible for China’s economy for the next 25 years, what would you be concerned about?

* Not a 6 – 12 month slack in oil demand from the global recession.
* Not the imminent decline of your largest competitor/ customer’s economy over the nxt 5 years.
* Not your temporary embarrassment of riches accumulated over the last 30 years.

NO, NO, NO!

You would be celebrating the above because they allow you to buy / hoard natural resources you will desperately need for your economy over the next 20 years, at the lowest cost possible.


Look at what we worry about:

• When will the recession end?
• How bad will the taxes be for the rescue?
• Will our jobs come back?

China needs the U.S. consumer for the short term. They have an enormous home market to develop and they will internalize our technology, creativity, and intellectual resources, like the Japanese did, and become the dominant economy for the next 100 years.

Yes there are many ways this vision could fail, but as of today, it is a viable outlook, in my opinion.

BET ON OIL & related services stocks like BP, HES, XON, RDSB, COP, OXY, NBR, RIG, etc.

Much of their revenues are international and will actually benefit from the U.S. inflation we expect.
They pay strong dividends and will make money no matter which country’s economy is growing.

Gold: Long Term Outlook Robust but Vulnerable Short Term

The market will continue to move sideways based on the numbers and guidance given this week BECAUSE:

1) FIRMS will say nothing or say that the outlook looks better than the recent past. It would be a SELF-FULFILLING PROPHESY if companies with weak Q2 results give negative guidance for Q3. A literal death wish for any firm saying that they won’t improve their numbers even though the economy is beginning to level out and the stimulus is still gaining momentum.

2) The banks will report good numbers because they talk to Geithner EVERY DAY about how they are doing. He is protecting the $1 trillion we have given to banks and financial institutions and for his own sake, must know how the banks are faring. If they were in trouble, we would know about it already because nobody likes surprises.


3) Q2 earnings will be presented as improving month-to-month versus the less favorable Y-O-Y. You will be sold on how things are improving and to forget about t he Y-O-Y because it is not valid in this recession.


The market will meander until Q3 reports. In the mean time, get dividends while you wait for the market to move. Take advantage of this by getting into a strong position in some of the things that we CANNOT DO WITHOUT like:

OIL – BP (Yield = 7.43%), RDSB (Yield = 7.11%), etc.

UTILITIES - ATT (Yield = 7 %), VZ (Yield = 6.4%), VOD (Yield = 6.2%), NGG (Yield = 5.9%), CHL, etc.

FOOD - ADM (Yield = 2.1%), MOO (Total Return = 23.7%)

BANKS - NYB (Yield = 9.3%)

I hold positions in all of the mentioned stocks.

Good Luck.

Could There Actually Be Another Reason Why Oil Prices Are Falling?

The market will continue to move sideways based on the numbers and guidance given this week BECAUSE:

1) FIRMS will say nothing or say that the outlook looks better than the recent past. It would be a SELF-FULFILLING PROPHESY if companies with weak Q2 results give negative guidance for Q3. A literal death wish for any firm saying that they won’t improve their numbers even though the economy is beginning to level out and the stimulus is still gaining momentum.

2) The banks will report good numbers because they talk to Geithner EVERY DAY about how they are doing. He is protecting the $1 trillion we have given to banks and financial institutions and for his own sake, must know how the banks are faring. If they were in trouble, we would know about it already because nobody likes surprises.


3) Q2 earnings will be presented as improving month-to-month versus the less favorable Y-O-Y. You will be sold on how things are improving and to forget about t he Y-O-Y because it is not valid in this recession.


The market will meander until Q3 reports. In the mean time, get dividends while you wait for the market to move. Take advantage of this by getting into a strong position in some of the things that we CANNOT DO WITHOUT like:

OIL – BP (Yield = 7.43%), RDSB (Yield = 7.11%), etc.

UTILITIES - ATT (Yield = 7 %), VZ (Yield = 6.4%), VOD (Yield = 6.2%), NGG (Yield = 5.9%), CHL, etc.

FOOD - ADM (Yield = 2.1%), MOO (Total Return = 23.7%)

BANKS - NYB (Yield = 9.3%)

I hold positions in all of the mentioned stocks.

Good Luck.

This Week's 2Q Earnings Reports: An Economic Snapshot

The market will continue to move sideways based on the numbers and guidance given this week BECAUSE:

1) FIRMS will say nothing or say that the outlook looks better than the recent past. It would be a SELF-FULFILLING PROPHESY if companies with weak Q2 results give negative guidance for Q3. A literal death wish for any firm saying that they won’t improve their numbers even though the economy is beginning to level out and the stimulus is still gaining momentum.

2) The banks will report good numbers because they talk to Geithner EVERY DAY about how they are doing. He is protecting the $1 trillion we have given to banks and financial institutions and for his own sake, must know how the banks are faring. If they were in trouble, we would know about it already because nobody likes surprises.


3) Q2 earnings will be presented as improving month-to-month versus the less favorable Y-O-Y. You will be sold on how things are improving and to forget about t he Y-O-Y because it is not valid in this recession.


The market will meander until Q3 reports. In the mean time, get dividends while you wait for the market to move. Take advantage of this by getting into a strong position in some of the things that we CANNOT DO WITHOUT like:

OIL – BP (Yield = 7.43%), RDSB (Yield = 7.11%), etc.

UTILITIES - ATT (Yield = 7 %), VZ (Yield = 6.4%), VOD (Yield = 6.2%), NGG (Yield = 5.9%), CHL, etc.

FOOD - ADM (Yield = 2.1%), MOO (Total Return = 23.7%)

BANKS - NYB (Yield = 9.3%)

I hold positions in all of the mentioned stocks.

Good Luck.

Oil Heads Lower with Gulf Stocks: Buy Both on Weakness

The market will continue to move sideways based on the numbers and guidance given this week BECAUSE:

1) FIRMS will say nothing or say that the outlook looks better than the recent past. It would be a SELF-FULFILLING PROPHESY if companies with weak Q2 results give negative guidance for Q3. A literal death wish for any firm saying that they won’t improve their numbers even though the economy is beginning to level out and the stimulus is still gaining momentum.

2) The banks will report good numbers because they talk to Geithner EVERY DAY about how they are doing. He is protecting the $1 trillion we have given to banks and financial institutions and for his own sake, must know how the banks are faring. If they were in trouble, we would know about it already because nobody likes surprises.


3) Q2 earnings will be presented as improving month-to-month versus the less favorable Y-O-Y. You will be sold on how things are improving and to forget about t he Y-O-Y because it is not valid in this recession.


The market will meander until Q3 reports. In the mean time, get dividends while you wait for the market to move. Take advantage of this by getting into a strong position in some of the things that we CANNOT DO WITHOUT like:

OIL – BP (Yield = 7.43%), RDSB (Yield = 7.11%), etc.

UTILITIES - ATT (Yield = 7 %), VZ (Yield = 6.4%), VOD (Yield = 6.2%), NGG (Yield = 5.9%), CHL, etc.

FOOD - ADM (Yield = 2.1%), MOO (Total Return = 23.7%)

BANKS - NYB (Yield = 9.3%)

I hold positions in all of the mentioned stocks.

Good Luck.

Yellen's Stagnation View: A Real Possibility?

The market will continue to move sideways based on the numbers and guidance given this week BECAUSE:

1) FIRMS will say nothing or say that the outlook looks better than the recent past. It would be a SELF-FULFILLING PROPHESY if companies with weak Q2 results give negative guidance for Q3. A literal death wish for any firm saying that they won’t improve their numbers even though the economy is beginning to level out and the stimulus is still gaining momentum.

2) The banks will report good numbers because they talk to Geithner EVERY DAY about how they are doing. He is protecting the $1 trillion we have given to banks and financial institutions and for his own sake, must know how the banks are faring. If they were in trouble, we would know about it already because nobody likes surprises.


3) Q2 earnings will be presented as improving month-to-month versus the less favorable Y-O-Y. You will be sold on how things are improving and to forget about t he Y-O-Y because it is not valid in this recession.


The market will meander until Q3 reports. In the mean time, get dividends while you wait for the market to move. Take advantage of this by getting into a strong position in some of the things that we CANNOT DO WITHOUT like:

OIL – BP (Yield = 7.43%), RDSB (Yield = 7.11%), etc.

UTILITIES - ATT (Yield = 7 %), VZ (Yield = 6.4%), VOD (Yield = 6.2%), NGG (Yield = 5.9%), CHL, etc.

FOOD - ADM (Yield = 2.1%), MOO (Total Return = 23.7%)

BANKS - NYB (Yield = 9.3%)

I hold positions in all of the mentioned stocks.

Good Luck.