User 5682

Why I Bought the Ultrashort Financial Sector ETF

I haven't yet come to a decision on the financial sector per se. But in general, remeber that stocks anticipate the future and that when crisis dominates the investment case, the time to buy is while the crisis is still present. So whenever the time to buy occurs -- now, next month, six months, next year, whenever -- you can be sure the day-to-day news will still be bad. So your task is not to assess today's news. Instead, determine whether the news is likely to be better a year from now.

Commodity ETF Overview

Check ProShares . . . I know thay have an ultra-short oil fund (DUG). I can't recall but perhpas there are others.

A Demon Of Our Own Design

I strongly disagree to the extent this book, or any other commentary, tries to pin the current financial woes on derivatives. The problem we have now stemming from sub-prime mortgages is not based on derivatives. It’s based on massive lending of money to borrowers who, form day one, had no hope of being able to repay, aggravated by security interests in assets that were not worth nearly as much as lenders assumed.

Bad lending equals financial crisis. The presence today of derivatives simply influences the flavor of the crisis, the day-to-day details of how it will look, how it will unfold. But derivatives play no role in the substance. If derivatives and hedge funds did not exist, we’d still have a crisis. The details would differ as would the scripts followed by reporters. But we’d still have a crisis.

Anybody who takes the focus away from the true source of today’s crisis – dumb lending practices – does a disservice.

By the way, the chapter on the 1987 crash fails to address the extreme overvaluations, based on plain old-fashioned P/E, that were widespread months before the crash. Heck, in I recall reading in 8/07 a sell-side strategy commentary, from a top-tier strategist, explaining how conventional valuation metrics were no longer relevant. Yeah.. right… we were in trouble with or without derivatives. Again, derivatives gave us the details, the day-to-day flavor. But even without them, the extreme overvaluation would have forced some sort of consequence.

Setting The Record Straight On My Wendy's Position

Skipping the who-quoted-who-correct... issues, I have to say I think the spin-off was a good idea.

I’ve been to WEN and I’ve been to THI. These are two completely different businesses, just like just like MCD and CMG. I think the operating synergies are no better with the former than the latter.

Even without THI, WEN can still sell coffee, even premium coffee. Who is stopping them ... aside from themselves? And it’s not as if Tim Horton is such an exciting brand in much of the U.S. WEN can sell Tim Horton coffee. Or any one of several other premium brands that I’m sure would love to get a distribution deal.

WEN simply became rudderless. Not only did Dave Thomas pass away, so, too, did a fairly capable CEO shortly thereafter ... it was a double hit. That cost them the edge they were building in the grown-up/quality end of the market. And there was no replacement vision to inspire them into the younger-bargain segment. They need to suit down ad re-thin what sort of chain they want to be (do they even have a breakfast menu yet?) and then execute it. Considering they’re still stuck at the starting gate, the last thing they need right now is to be distracted trying to teach folks south of the Canadian border to care about the Tim Horton name. Meanwhile, the latter is a task that can be better addressed by a management team that isn’t trying to re-invent a fast-food burger chain.

ETFs: Broadening or Perverting Index Investing?

I do not see the broadening of ETFs as a problem, mainly becasue I don't think of ETFs as having ever been passive. What's passive about the S&P 500? There's quite a bit of very active thought as to which stocks go in and which go out. It's a managed portfolio -- one that is very widely looked to as a benchmark, but a managed portfolio nonetheless. The only difference between SPY and the index is that in the case of the latter, it's just a paper portfolio.

I like the newer, borader, approach to indexing. Outfits like PowerSahres create their portfolios based on objective algorithm, rather than selection commitee debate. Why is that a perversion?

Either way, when you invest in an ETF, you invest, not in a company and not in the whim-skill of a portfolio manager (as in conventional open-end funds) but in a model. Bravo to the industry for offering us more models and for evolving models away from ciommittees toward disciplined algorithm. Not very nouvele ETF perfectly objective, but as long as the trend moves that way, I think the situation is improving for investors.

So You Want To Invest Like Buffett? Here's An Easy Trick

If SeekingAlpha still allowed readers to rate posts, I'd give this one five stars!

Verizon Puts the Heat on Apple with Mobile TV Launch

Anybody have any visibility into the issue of battery life? Even the best cell phones can't come close to an iPod. Might this make it hard for wireless firms to really compete in this space?

Response to Marc Gerstein: Which Value ETF?

Interesting ideas ... I'll dig into them and do a follow-up.

Building An All-Seasons Tech ETF Portfolio

I looked into the income ETFs but didn’t find as much opportunity to apply this sort of analysis. You do have a wide range of covariances, etc. but there’s more predictability here. If you expect rates to fall, longer-term instruments tend to outperform, etc, etc.

Seems to me, at least so far, that if you can correctly guess which way rates will go, pick one appropriate fund; that should do it. For those who are completely undecided, just stick with a middle of the road fund.

That said, I’m not sure any of these approaches are quite up to what one might accomplish with a good income-stock screen. In theory, higher yield means higher risk (dividend cut and/or poor growth), but from what I’ve been seeing, the market’s worries often tend to be disproportionate to real business threats. If you do a seekingalpha ticker search on WMT, you’ll see something I wrote in the past week on strip-mall REITS that look better the more Wal-Mart struggles; you have some nice yields there.

Building An All-Seasons Tech ETF Portfolio

Mick, good question.

If one determines ahead of time that it's to be semis, yes, SMH should be in the mix. But if one is looking for a diversified ETF portfolio, SMH, which strictly speaking is not en ETF but a HOLDR, might cause awkwardness since, as with all HOLDRs, purchases must be made in 100-share increments. Therefore, it may not mesh with allocation preferences. This may or may not be an issue, depending on the size of the portfolio ($ per security) and how firm one's convictions are regarding asset %s.

What Does Morningstar Have Against ETFs?

I saw the Morningstar article and did a double-take.

Roger .... Great article!

Writers of other comments ... Great points!

What's REALLY interesting is that Morningstar just launched a premium newsletter called ... drum roll... ETF Investor! I can't wait to see what value they add, or rather, I can't wait to hear from someone I can find who'll actually pay for it.

Microsoft Calls Sony's PS3 Kettle Black For Blu-ray Bundling (MSFT, SNE)

Interesting note on the irony of Microsoft's advocacy.

That said, I'm not sure about the prediction. Sure SNE will sell out the first run of PS3. But what happens when the hard-core nerd community is covered. What happens when SNE needs to sell to regular people. Taking off my stock research hat and switching to my parent role, it'll be a cold day in you-know-where before I even think of getting PS3 for my kid, notwithstanding his having been thru PS1 and PS2. I'm looking to raise a normal kid, not a super nerd, and there's no way I'm spending thatkind of money. I already boght him a good quality new pc for more-or-less the same money, and he's happy to shop for pc games; when it comes to the latest and greatest, he now prefers going to the park with his friends than pushing the graphics envelope.

One SNE bull I know talks of how PS3 is really intended to be the hub of the next generation home entertainment center. If SE thinks that way, good luck to them. I sal #$%$*. It's a game player and I won;thave it in the iving room; games are for the kid's room. I don't need that sort of entertainment center.

Frankly, when it comes to SNE, I'd be mor einterested in bulls forgetting about stock analysis and writing s consumer/parents. That's the kind of defense I'm interested in hearing, but so far haven't heard.

What is a Stock Worth? Part 4 – Discounted Cash Flow Models

This formula, the Gordon Dividend Discount Model, is the bedrock of theoretical stock analysis. Bear in mind,though, it's unusable in the real world. Assuming we could negotiate the difficulties of estimating r (diffcult, but do-able), estimating g reliably is out of the question. This is not the sort of growth-rate expectation investors are used to seeing. It must be low (to avoid having a negative denominator and, hence, a negative fair value), so the logic is tortured to present g as a "normal" "mature" growth rate a company can be expected to sustain through infinity. Unless you really get serious about ivory-tower stuff like that (as if you could!), the valuations you'll see from this formula are going to be very whacky!