I just don't get it. I don't get this data. So many things just don't add up. Just got an email from a friend asking how Fannie and Freddie can be losing billions and the banks be profitable? Valid question. I have another question. In Great Britian how can sales be booming, housing prices be going up, and jobless claims be growing at the fastest levels since 1981? Those are paradoxes. Something can't be right. From Marketwatch:
Two U.K. economic indicators on Tuesday hit multiyear highs, registering improvements that fed into a growing perception that the British economy could end its recession as early as this summer.
and
Same-store sales rose 4.6% in April, the fastest rate of growth in three years, the British Retail Consortium said.
and
Meanwhile, the Royal Institution of Chartered Surveyors said a net balance of 41% more surveyors saw house prices rise in April, compared to 32% in March.
but
The April labor report showed the number of persons claiming jobless benefits rose 57,100 in April.
That pushed the total number of claimants to 1.51 million, the highest since August 1997. The rise was smaller than the 87,500 rise forecast by economists and was less than the downwardly revised increase of 65,500 seen in March.
And other labor-market figures underlined the weak state of the jobs market. When measured by International Labor Organization standards, unemployment rose by 244,000 to 2.2 million in the three months to March, bringing the unemployment rate for the period to 7.1%, up from 6.3% in the previous three months. The quarterly increases in the total number of unemployed and the unemployment rate were largest since 1981, the ONS said.
Am I just completely missing something. I don't get it. On the housing prices front I did read in the UK Guardian that there are two organizations that collect house prices. One is reporting losses one slight gains but even the losses are nowhere near say what Ireland has experienced.
The world is beyond me.
Tuesday, May 12, 2009
Monday, May 11, 2009
Dying Gardens
So maybe the garden of those pretty little green shoots is already dying. In April the early buzz was China export decline was slowing. Well not so again this month. I had to do a google search but I found my data.
Xinhua reports from a month ago:
China's exports fell for the fifth month in a row to 90.29 billion U.S. dollars in March, down 17.1 percent from a year earlier, the General Administration of Customs said Friday.
Imports slumped 25.1 percent year on year last month to 71.73 billion U.S. dollars, compared with a 24.1-percent decline in February.
In February the decline was 25.7% So there was a nice little increase in March from the big decline in February.
Well according to Bloomberg the decline is picking back up.
China’s export slump worsened in April, making it harder for the government to revive the world’s third-biggest economy.
Overseas sales declined 22.6 percent from a year earlier, the official Xinhua News Agency said. Imports fell 23 percent.
Ouch. And the garden of green that is out there:
“The export outlook remains highly uncertain and downbeat,” said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong.
and this was really interesting:
China’s biggest trade fair, in the southern city of Guangzhou, said this month that the value of export orders at the event fell 16.9 percent to $26.23 billion from six months earlier.
Six months earlier was November. Crises was already in full blown mode. So from six months ago orders fell 16.9%???
Ouch. So maybe we have started our corrective rally with numbers like these. 900 is a good bogey. If we get below that stay below that, the momentum guys will start selling.
Xinhua reports from a month ago:
China's exports fell for the fifth month in a row to 90.29 billion U.S. dollars in March, down 17.1 percent from a year earlier, the General Administration of Customs said Friday.
Imports slumped 25.1 percent year on year last month to 71.73 billion U.S. dollars, compared with a 24.1-percent decline in February.
In February the decline was 25.7% So there was a nice little increase in March from the big decline in February.
Well according to Bloomberg the decline is picking back up.
China’s export slump worsened in April, making it harder for the government to revive the world’s third-biggest economy.
Overseas sales declined 22.6 percent from a year earlier, the official Xinhua News Agency said. Imports fell 23 percent.
Ouch. And the garden of green that is out there:
“The export outlook remains highly uncertain and downbeat,” said Tao Dong, chief Asia economist at Credit Suisse in Hong Kong.
and this was really interesting:
China’s biggest trade fair, in the southern city of Guangzhou, said this month that the value of export orders at the event fell 16.9 percent to $26.23 billion from six months earlier.
Six months earlier was November. Crises was already in full blown mode. So from six months ago orders fell 16.9%???
Ouch. So maybe we have started our corrective rally with numbers like these. 900 is a good bogey. If we get below that stay below that, the momentum guys will start selling.
Microsoft Debt Sell
For the first time in Microsoft's history, Bloomberg is reporting that the company is planning to sell debt. Supposedly the debt is to help fund the repurchase of its equity. I am not sure I totally buy that argument. They have over 25 billion in cash. Now, I am sure that is not all accessible because it is spread all over the world and there would be big tax bills to move back to the U.S. but I wonder if Steve Ballmer and Bill Gates are not making another statement. If this isn't more a global macro call where they think over the next few years interest rates are going to surge and so they are locking in cheap cash now. I have no idea, it could simply be to fund stock repurchases, but Bill Gates is good friends with Warren Buffett and a large capital allocation decision like this shouldn't go unnoticed.
From the article:
Microsoft Corp., taking advantage of its top credit ratings, plans to sell 5-, 10- and 30-year debt, the world’s largest software maker said in a regulatory filing.
From the article:
Microsoft Corp., taking advantage of its top credit ratings, plans to sell 5-, 10- and 30-year debt, the world’s largest software maker said in a regulatory filing.
Eastern Europe - Problems Still Brewing
The global short squeeze in equity market has casued cds of Eastern European companies to tighten dramatically (in simple Engligh, the cost of insuring against bankruptcy of these countries has collapased). In fact, the price of Czecholoslovakia cds is approximately the same price as China cds. Absolute lunacy. Then of course you get this BBC News report about the ongoing collapse of Latvian. The weak will take down the strong.
Latvia's economy contracted 18% in the first three months of the year, compared with a year earlier, as the country's recession accelerated.
and
Separately on Monday, Latvia gained EU approval to shore up the country's second-largest bank JSC Parex with another state capital injection.
Latvia's economy contracted 18% in the first three months of the year, compared with a year earlier, as the country's recession accelerated.
and
Separately on Monday, Latvia gained EU approval to shore up the country's second-largest bank JSC Parex with another state capital injection.
Sunday, May 10, 2009
Chart of the Day
This is ridiculous.
Look at consumer discretionary. Explain to me how consumer discretionary can be trading at 33 times next twelve months earnings? Does anyone out there really think the consumer is all of sudden going to surge forward in a new wave of all out buying with abandon?
That is what you call the power of a short squeeze.
Look at consumer discretionary. Explain to me how consumer discretionary can be trading at 33 times next twelve months earnings? Does anyone out there really think the consumer is all of sudden going to surge forward in a new wave of all out buying with abandon?
That is what you call the power of a short squeeze.
Friday, May 8, 2009
Clifford Asness of AQR Capital
It is nice to see someone speak out against the destruction of contracts and age old lender principles. Clifford Agness is a found of AQR Capital Management, a 20 billion hedge fund in Greenwich. Apparently he is not part of the lender group involved with Chrysler but was "aghast" at Obama's comments attacking the funds. Deal Book has the full letter.
Unafraid In Greenwich Connecticut
Clifford S. Asness
Managing and Founding Principal
AQR Capital Management, LLC
The President has just harshly castigated hedge fund managers for being unwilling to take his administration’s bid for their Chrysler bonds. He called them “speculators” who were “refusing to sacrifice like everyone else” and who wanted “to hold out for the prospect of an unjustified taxpayer-funded bailout.”
and
Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice,” they are stealing.
and this is my favorite part
Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing.
Unafraid In Greenwich Connecticut
Clifford S. Asness
Managing and Founding Principal
AQR Capital Management, LLC
The President has just harshly castigated hedge fund managers for being unwilling to take his administration’s bid for their Chrysler bonds. He called them “speculators” who were “refusing to sacrifice like everyone else” and who wanted “to hold out for the prospect of an unjustified taxpayer-funded bailout.”
and
Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice,” they are stealing.
and this is my favorite part
Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing.
Jeremy Grantham Letter
Jeremy Grantham over at GMO has his latest quarterly letter out. Registration is required if you haven't before but it is free and I have never received any email or communication from them. It is a must read.
It is funny to hear Jeremy try to be bullish (he is known as a long term great bear). In general I don't really disagree with him. My mistake has been thinking the market would correct in some form or fashion. Jeremy is adding to the growing chorus that thinks the market climbs between 1000 and 1100. I really don't have a problem with that forecast (in my letter I said 1000). He mentions several reasons that I have mentioned. I just keep thinking there has to be a 10% correction in the market someway somehow before we reach it. I continue to be short and wrong surrounding this thought.
Where I do differ with Jeremy is that I think once we get up there, issues will develop that will cause the market to crumble lower setting new lows in the fall or next year. He thinks the markets will be way overvalued and move back down to a more fair value (around 850).
The newest letter is a must read.
It is funny to hear Jeremy try to be bullish (he is known as a long term great bear). In general I don't really disagree with him. My mistake has been thinking the market would correct in some form or fashion. Jeremy is adding to the growing chorus that thinks the market climbs between 1000 and 1100. I really don't have a problem with that forecast (in my letter I said 1000). He mentions several reasons that I have mentioned. I just keep thinking there has to be a 10% correction in the market someway somehow before we reach it. I continue to be short and wrong surrounding this thought.
Where I do differ with Jeremy is that I think once we get up there, issues will develop that will cause the market to crumble lower setting new lows in the fall or next year. He thinks the markets will be way overvalued and move back down to a more fair value (around 850).
The newest letter is a must read.
Thursday, May 7, 2009
Home - Hot and Humid
Compared to the unbelievable weather in Los Angeles and Pasadena the exit off the airplane was to be expected - it was like a damp mop hit me. Of course that is how I know I arrived back in Texas.
First and foremost - I am working through a mountain of emails that got ignored while I was traveling. If you sent me something I am supposed to respond to and you don't hear back from me in the next 24 hours, please email me again.
Outside of the business aspect, while in LA I went to an improv comedy club (it was awesome) and hung out at Hermosa Beach and Manhattan Beach (which was awesome). Very good times.
I thought this Value Investing Congress was one of the best I have ever been to (been to three in NYC before this one, never to the West Coast meeting). I felt like speakers had more diverse overall views than normal. I was also intrigued with every speakers presentation but one. I liked going to one at a hotel versus the AOL center in NYC. In general the conference had an overall bearish tone but it was offset by a couple of mild bulls. Soma Asset Management had a presentation that indicated the end of the world was coming. Passport Capital gave a presentation on serious inflation and how China plays into the next few years. M3 funds (who I had never heard of) also gave a presentation. They invest in only banks - 50% long and 50% short. Last year they made 1.3% on their long banking book. That is incredible!!! Anyway, they know banks. They agreed with alot of what Soma said and in general agreed the banking system is insolvent (regardless of what the government and/or stress tests says). There were 3 presentations and 5 ideas on P&C insurance and reinsurance. Also, three investors talked about gold.
I could talk alot more about the Congress and I may mention stuff here and there over the next few days but I recommend visiting the Manual of Ideas blog. I met Zain who was there from Manual of Ideas and they lived blog the presentations. Some good notes on what was overall discussed.
Hope everyone had a good week. In some ways mine is just starting.
First and foremost - I am working through a mountain of emails that got ignored while I was traveling. If you sent me something I am supposed to respond to and you don't hear back from me in the next 24 hours, please email me again.
Outside of the business aspect, while in LA I went to an improv comedy club (it was awesome) and hung out at Hermosa Beach and Manhattan Beach (which was awesome). Very good times.
I thought this Value Investing Congress was one of the best I have ever been to (been to three in NYC before this one, never to the West Coast meeting). I felt like speakers had more diverse overall views than normal. I was also intrigued with every speakers presentation but one. I liked going to one at a hotel versus the AOL center in NYC. In general the conference had an overall bearish tone but it was offset by a couple of mild bulls. Soma Asset Management had a presentation that indicated the end of the world was coming. Passport Capital gave a presentation on serious inflation and how China plays into the next few years. M3 funds (who I had never heard of) also gave a presentation. They invest in only banks - 50% long and 50% short. Last year they made 1.3% on their long banking book. That is incredible!!! Anyway, they know banks. They agreed with alot of what Soma said and in general agreed the banking system is insolvent (regardless of what the government and/or stress tests says). There were 3 presentations and 5 ideas on P&C insurance and reinsurance. Also, three investors talked about gold.
I could talk alot more about the Congress and I may mention stuff here and there over the next few days but I recommend visiting the Manual of Ideas blog. I met Zain who was there from Manual of Ideas and they lived blog the presentations. Some good notes on what was overall discussed.
Hope everyone had a good week. In some ways mine is just starting.
Saturday, May 2, 2009
LA BABY
Landed in LA a coupe of hours ago. Tuesday starts the Value Investing Congress and then Wednesday afternoon is the Charlie Munger's Wesco meeting. Should be a fascinating few days. Tonight I have tickets to go to an improv comedy club. One of the shows has one of the actors from The Office.
Be interesting to see if the markets take the spike right at the close on Friday as a breakout. Friday was dead dead. One of the lightest volume days in almost two months. The bulls are firmly in control and it is up to the bears to prove something. As hard as it was, I was selling on Friday. Some of my longs have reached what I think are fair value and it is terribly hard to sell in this type of rally but over time discipline will win. Still, when long exposure is limited and the markets do not stop going up, it is hard to do.
The financials still have not broken higher. Two days in a row they have been down. Just something to watch.
Be interesting to see if the markets take the spike right at the close on Friday as a breakout. Friday was dead dead. One of the lightest volume days in almost two months. The bulls are firmly in control and it is up to the bears to prove something. As hard as it was, I was selling on Friday. Some of my longs have reached what I think are fair value and it is terribly hard to sell in this type of rally but over time discipline will win. Still, when long exposure is limited and the markets do not stop going up, it is hard to do.
The financials still have not broken higher. Two days in a row they have been down. Just something to watch.
Friday, May 1, 2009
Quote of the Day
April car sales came in surprisingly light (even I thought they would be better than they were). This had to be the quote of the day especially considering all the chatter about green shoots.
"Industrywide, April felt more like a dust bowl than a spring garden for new car sales." - Jim O'Donnell, president of BMW in North America, May 1, 2009
"Industrywide, April felt more like a dust bowl than a spring garden for new car sales." - Jim O'Donnell, president of BMW in North America, May 1, 2009
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