Wednesday, October 31, 2007

Happy Halloween!

It's Halloween. So kick back and watch the time-honored Peanuts Halloween special, "It's the Great Pumpkin, Charlie Brown". Enjoy.

Monday, October 29, 2007

Volatility in the commodities market

Update (9/3/08): the latest news on the Ospraie Fund closure.

Found an interesting story over at Bloomberg.com which details the high levels of volatility in the commodities markets.

What's remarkable about this piece is that they've managed to interweave the subject with an inner look at the workings of Dwight Anderson's Ospraie Fund. According to Bloomberg, Ospraie Management LLC is the world's biggest commodity-focused hedge fund, with $7 billion under management.

Most of the commentary on Ospraie and Anderson's vision seems to be pieced together from indirect sources and relayed quotes (from the likes of Marc Rich), but it is still surprising to see the players behind this prominent hedge fund placed in center focus. Lots of background info on the fund and Dwight Anderson's career are found here.

Which leads me to the following question: are hedgies slowly warming to the media spotlight? Or is it just that reporters are piecing together more info on their dealings and personalities, knowing that we want to read about them?

Here's an excerpt from Bloomberg's story, "Ospraie's Anderson Dives Into Commodities, Survives Swoon".

The Ospraie Fund makes long and short investments -- that is, it bets values will rise or fall -- on the prices of commodities such as oil, copper and corn and on the shares of companies in basic industries such as energy, mining and agriculture. What hurt Ospraie and other commodity hedge funds in mid-2007 were the wide, sometimes unpredictable, swings in prices in all markets.

``Commodities are more volatile compared with stocks and bonds,'' Banque SYZ's Friche says. ``So the stakes are higher, which means that while there are great profits to be made, there are great losses too. It's a dangerous game.''

Enjoy the piece. For more background on Ospraie and commodity focused hedge funds, click the link to view our previous posts.

Sunday, October 28, 2007

Jukebox

Some rock videos for your Sunday evening enjoyment.

Small Faces - Song of a Baker.

Rolling Stones - We Love You.

Cream - I'm So Glad.

Jimi Hendrix - Hear My Train a Comin'.

The Doors - When The Music's Over.

Cheers.

Friday, October 26, 2007

Features of the week

Oil at record (nominal) highs, Warren Buffett on Chinese stocks, Citigroup accounting, and an interactive view of the recent credit market squeeze.

All this and more in today's edition of our, "Features of the week".

1. The $360bn question. Do we really need a superfund?

2. The credit squeeze explained. An FT.com interactive graphic, narrated by Gillian Tett.

3. Argentine bonds devasted by rigged government data suspicion.

Welcome to the world of hidden inflation and false government statistics.

4. Remembering Black Monday: A Q&A with Robert Prechter. As always, Prechter has some interesting thoughts on how mood influences market movements.

5. "Hey Warren, what's your view on...". Warren Buffett talks Chinese stocks and investing philosophy in this audio clip from a news conference in Dalian, China.

6. Marc Faber sits down with Bloomberg TV for a lengthy and informative interview.

7. Jim Rogers tells Bloomberg viewers that he's serious about getting out of the dollar and into "sounder currencies".

8. CFTC signals radical changes to OTC markets. New regulations on OTC commodity and energy derivatives.

9. Oil breaches $92 on inventory concerns. I checked out Reuters' story this morning and they were kind of pushing the opposite "low demand/bubble" angle.

10. Attention Allocation. Kent Thune (The Financial Philosopher) tells us how to apply portfolio investment strategy to the problems of information overload.

11. Citigroup SIV Accounting Looks Tough to Defend. Remember last week when we mentioned Mish's post on Citigroup's SIV accounting? It seems others have caught on.

12. Video of Michael Badnarik's Constitution class. An eye opener on many levels (hat tip to Dollar Collapse).

Thanks for reading Finance Trends Matter. Be sure to visit over the weekend, we might have some video entertainment lined up for you. See you then, gang.

Wednesday, October 24, 2007

Goodbye dollar, hello inflation

The dollar is no longer the world's reserve currency. This is the statement you heard twice in one day if you were checking out the news on Bloomberg over the past 24 hours.

First, we heard it from economist Clifford Bennett of Sonray Capital, who said the Euro was the world's new reserve currency and that this idea was now universally recognized.

Next we heard it from investor Jim Rogers, who has been bearish on the dollar and the state of the US economy/fiscal outlook for quite some time.

What's notable about Rogers' latest call on the dollar is that he's once again backed his convictions with his actions; yesterday, Rogers announced that he is shifting his personal assets out of the dollar and into the Chinese renminbi.

Here's an excerpt from, "Jim Rogers Shifts Assets Out of Dollars to Buy Yuan".

"Jim Rogers, chairman of Beeland Interests Inc., said he is shifting all his assets out of the dollar and buying Chinese yuan because the Federal Reserve has eroded the value of the U.S. currency.

``I'm in the process of -- I hope in the next few months -- getting all of my assets out of U.S. dollars,'' said Rogers, 65, who correctly predicted the commodities rally in 1999. ``I'm that pessimistic about what's happening in the U.S.''

Rogers, delivering a presentation late yesterday at an investors' meeting organized by ABN Amro Markets in Amsterdam, said he expects the Chinese currency to quadruple in the next decade and that he is holding on to commodities such as platinum, gold, silver and palladium."


If you'd like to listen to an excerpt from Rogers' presentation to investors in Amsterdam, it is reproduced here courtesy of Bloomberg.

What's the rationale behind these calls for the dollar's eventual demise?

As Marc Faber recently noted in a lengthy interview with Bloomberg (and in seperate interviews with CNBC), the recent widespread bearishness might represent a contrarian buy signal for the dollar in the short-term, but this does not exactly cancel out the US currency's long-term problems.

In summary, expect continued deterioration in the dollar's purchasing power and increases in inflation over the longer term. Inflation will not be confined to the US; it has appeared and will continue to appear in countries across the globe.

Every government will try their damnedest to paper over their monetary inflation with ridiculous explanations and reconfigured price indexes which purport to show "low inflation". Still, worldwide inflation is here and it is only a question of which fiat currency will depreciate at the fastest rate against relatively hard currencies and gold.

For more on inflation and government statistics, see FSN Broadcast of October 13, 2007 with guest John Williams of Shadow Government Statistics.

Keep reading Finance Trends Matter for more news and commentary.

Tuesday, October 23, 2007

Quote of the day

"Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can even do much to help it. While it lies there it needs no constitution, no law, no court to save it." - Learned Hand, famed American jurist (1872-1961).

Billings Learned Hand was considered one of the "most influential American judges never to have served on the Supreme Court of the United States" (Wikipedia). In his later years, he was also a good friend and neighbor of author J.D. Salinger, a fellow resident of Cornish, New Hampshire.

The things you learn by reading Wikipedia...

Monday, October 22, 2007

Monday - news in review

Taking it all in, a brief review of the day's news.

The Dow, S&P 500, and Nasdaq are all up slightly on the day, so far. Nasdaq faring the best with a 1 percent gain at midday.

Asian markets have not fared so well this Monday. Major indexes across Asia were down 2-3 percent on the day, continuing the losses that began late last week.

The Nikkei, Hang Seng, Shanghai Composite, Kospi, and Straights Times indexes have all taken a haircut of more than 2 percent on the day, with the Hang Seng falling 3.7 percent.

Bloomberg reports that commodities are falling on worries over economic growth. There is current weakness in copper, oil, gold, corn, and wheat as the UBS-Bloomberg's CMCI Index of 26 commodities has declined 1.2 percent on the day.

Still, for many of these individual commodities, the declines seem to represent more of a retreat and consolidation after reaching recent multi-year and record highs. The same is true of the CMCI index, which "touched a record high of 1,250.7118 on Oct. 19".

For more on the Commodities markets, see this Bloomberg video clip with Sean Corrigan of Diapason Commodities Management, who makes some very interesting and sensible points on the current action in various commodities during a recent TV interview segment.

Trouble in the shipping sector? Bloomberg reports that an influx of newly built crude oil tankers could greatly outpace the increase in oil demand as estimated by the IEA, leading to potential earnings shortfalls and a decline in share prices.

Lower freight rates and higher marine fuel prices are also said to be looming over the supertanker sector. Still, optimists point out that many oil tankers will likely be converted over the near term to haul bulk commodities such as grain, coal, and iron ore. This should ease some of the expected tanker glut.

Emerging markets could be the next bubble, Marketwatch reports. A report by the Institute of International Finance says confidence in emerging markets is high, and money flows into these markets could increase as investors look favorably on their resilience and performance.

"They have almost become a safe haven now and there is the risk of them developing asset bubbles," said IIF Managing Director Charles Dallara.

Quite the shift in sentiment from ten years ago.

Last but not least, Bear Mountain Bull points to a CNBC interview with Marc Faber.

Be sure to also check out the link to last week's CNBC clip with Marc Faber - some interesting comments made on the long-term outlook for the dollar and building US inflation.

Take care, everyone, we'll see you as the week progresses.

Sunday, October 21, 2007

John Mauldin on "SIV Garbage"

In Friday's "Features" post, we included some links to commentary on the widely followed SIV "superfund" scheme. Today, we'll include some more useful background information on this issue, and some added commentary and analysis.

First off, what is the "superfund"? What is its stated purpose? How did the fund get capitalized, and why is it deemed necessary in the first place?

The "superconduit", or superfund, as it has come to be known, is a plan, enacted by the banks and endorsed by the US Treasury, to build a support fund to buy the assets of troubled structured investment vehicles, or SIVs.

Assets held by SIVs tend to be a mix of asset-backed commercial paper, short-term debt typically backed by the assets held by the issuing vehicles. The assets backing this paper tend to be mortgages, credit card receivables, student loans, and corporate loans.

The plan has already drawn a barrage of criticism, causing Treasury Secretary Henry Paulson to hit back at superfund critics, while claiming the plan is misunderstood and that it is a "market driven" solution.

Still, many of the critics are just not buying it, noting that the plan essentially allows banks to profit from the very mess which they helped bring about in the first place.

For a detailed overview of the SIV bailout proposals, let's go to John Mauldin, who recently wrote about these issues in a piece called, "Taking Out the SIV Garbage".

"This week we learned that Structured Investment Vehicles or SIVs should more properly be termed SIGs or Structured Investment Garbage. Several SIVs worth over $20 billion are closing shop, and investors will lose money. More SIVs are selling assets to meet loan demands. SIVs had issued at the peak about $400 billion worth of asset-backed commercial paper. The total of asset-backed commercial paper was $1.2 trillion. Since July, that has plummeted, nose-dived, crashed to $888 billion, and is on its way to a small fraction of that.

In effect, we are taking a trillion dollars of financing for a wide variety of things we need, like credit cards, autos, homes, and corporate loans out of the credit market. That is going to have an impact.

But I don't want to get ahead of myself. Let's start at the beginning. What is an SIV and where do they come from? Who owns them? Why do they exist?"

For more info on SIVs and their asset mix, as well as the "Superfund solution" and the impact this will have on the economy, read on at the link above.

Friday, October 19, 2007

Features of the week

Inflation, furor over oil prices, '87 crash reminiscences, and a lot more. That's what we have in store for you in this week's edition of, "Features of the week".

1. From the Economist, "How the Fed made the subprime mess worse".

2. A crude oil super-spike. We're seeing a lot of drivel this week about a crude oil price bubble as prices have shot well past the $80 mark towards the $90 level.

As of today, some "experts" are even appearing on TV to decry the speculative price move and declare oil prices to be "not appropriate". That settles it; close the markets, we now have an expert to set prices for us at the "appropriate" level!

Sorry to repeat this information so quickly, but for anyone who would like to revisit the fundamentals that have been driving the crude oil and energy markets for the past several years, please see our recent post, "The path to $80 oil".

3. "When Crash Means 'Buy'". WSJ revisits the 1987 crash and the advent of the "buy on the dip" credo.

See also, FT's "The anatomy of a crash: What the market upheavals of 1987 say about today".

4. Enron accounting at Citigroup. Mish on the shady accounting put in place by Citi in the big SIV superfund mop-up plan. Please see the following links (item 1) (item 2) at Bear Mountain Bull's blog for more backgound on the whole SIV and M-LEC bailout fund issue.

5. Greenspan questions 'superfund'. Though he'd probably come out for it were he still in the Fed's employ.

6. Anatomy of the Ron Paul Nation. Cyd Malone comments on his involvement with the Ron Paul campaign.

7. FT.com has launched a new video segment called "View from the Markets". Investor Mark Mobius, their first guest, speaks on emerging markets.

8. Buffett sells entire PetroChina stake. Got sick of hippies yelling at him about Darfur. Just kidding.

9. "I Am Not a Number - I Am a Free Man". James Wisdom writes at Daily Speculations.

10. Hyperinflation Across the Globe. Fabulous rundown of past hyperinflations from Mike Hewitt's Dollar Daze blog.

11. An interview with Charles Kirk, of The Kirk Report.

12. A Stoner's Guide to Making Egg Fried Rice. Follow the handout.

That's it, gang. Enjoy your weekend and thanks for reading Finance Trends Matter.

Thursday, October 18, 2007

Dying of Money

This is something I wanted to post ahead of tomorrow's "Features of the week" update. If you're interested in understanding the true nature of inflation and how it originates, read on.

Over the past few weeks, Jim Puplava and the rest of the Financial Sense Newshour team have devoted an hour long segment of their program to a discussion of the causes and effects of inflation.

In a multi-part program segment called "Dying of Money" (a nod to the Jens O. Parsson book of the same title), Jim and his co-host, John Loeffler, take a look at the current global inflation and try to put things into perspective by examining the historical patterns of past inflationary eras.

What is the cause of inflation? Throughout history, we've seen that inflation has been brought about as a result of undisciplined money creation. No matter what excuse or rationalization lies behind the running of the money printing press, experience shows us that the results are almost always the same.

A surplus of money and credit leads to rising prices in commodities, goods and services, and assets. Wealth and savings are transferred or lost as a result of the inflation, and in some instances we see unrest and upheaval in the society. Some inflations have even coincided with an ensuing decline of the host nation, empire, or civilization.

But I will let host Jim Puplava sum it up for you:

Most people, John, I think, understand inflation as rising prices. In other words, they understand it from the perspective of its symptoms – which is rising prices – versus its cause which is the expansion of money. And if you go back throughout history, going back to the days that money was created as a medium of change, once we invented money as a way to conduct commerce, the next consequence of that was inflation. That was the very next thing that came after money as you try to create more of it above what was created through commerce or through productive hard work. Essentially, what you need to understand is inflation is a disease of money.

To better understand inflation, and why Puplava and friends are discussing potential outcomes for our economic future, please see the audio broadcasts and transcripts of the "Dying of Money" program series.

Click here for Part one, Part two, Part three, and Part four.

Wednesday, October 17, 2007

Market data, quotes & charts

In an attempt to add some value to last week's rant over changes to Yahoo Finance, I've decided to compile a brief list of alternative sites offering free finance and investing content and market data.

Now, let me preface this by saying that I'm not exactly sure what most people are currently using for the latest in market data. You could be onto something that we haven't seen or heard of yet, in which case, tell us about it!

If you are currently relying on broker supplied data or a subscription market data service for your investing data needs, you probably won't need the quotes and charts offered by the free investing websites.

On the other hand, you may find some useful feature or service at one of the free sites that is not offered by your regular data service. Be sure to take a look; some of the websites here have some rather unique tools and attractions that you may find useful.

Without further ado, here's our list of the best free investment websites.

1. Yahoo! Finance US & Singapore. Wait, this list was supposed to provide an alternative to the dreaded, new and "improved" Yahoo! Finance, right?

You're right, but in spite of Yahoo's terrible site changes, many of the features we long-time users count on still remain.

For features that currently don't work as they should at the redesigned site (symbol lookup), we've included a link to the far saner Yahoo! Finance Singapore site.

Update: (November 20, 2007) The symbol lookup at Yahoo! Finance US is now working fine, and we're glad to see that it has been fixed. The new stock charts are a nice improvement, as well.

2. Quote.com. Stock and futures quotes, charts, news, portfolios, and a link to the online community, Raging Bull.

3. MSN Money. Home to the best free stock screener (MSN Deluxe Screener) in the business, at least as far as I'm concerned. Plus the usual assortment of quotes, charts, and personal finance features.

4. FT Markets Data. I have updated this slot to include FT.com's newly revamped "Markets Data" feature. I'm currently exploring, so go on over to the site and check this one out.

Financial data appears to be Reuters supplied, and I don't know that they have all the kinks worked out yet (company/symbol search appears to need some work), but it does seem like an attractive, useful site so far. The company profiles, charts, and snapshots all look good, but as always, check for accuracy.

Portfolio tracking available upon site registration, and there is an archive of market data from FT covering equities, global indexes, bonds, and commodities. Let's familiarize ourselves with this site's features and uncover more.

5. INO.com. This site centers around the futures market, but it also covers equities. You'll find quotes and charts of various exchange traded commodities, stocks, and world indices. The site also has a portfolio feature and an email news alert service.

6. Futuresource.com. You'll find this site in our sidebar links section. Another great source for forex and futures contract information and quotes. Data is from eSignal and quotes are delayed.

7. Bigcharts. A great site for charting US and Canadian shares. You can also chart international symbols as well, if you are able to translate the country code and symbol correctly.

Bigcharts' symbol lookup tool can be a little iffy however, so you may have to rely on another symbol lookup to find what you're after. Also note that Bigcharts/Marketwatch has its own prefix codes for foreign stock symbols ("CA:" for Canada, "AU:" for Australia, etc.), so be sure to look up a foreign company to get the correct exchange prefix.

8. CNNMoney.com. Quotes, news, market data, and personalized portfolio tools.

9. Bloomberg.com. Market Data and Investment Tools sections provide market index data, stock movers by index, earnings announcements, and a variety of financial calculators.

The site also has a very good international stock symbol search tool, and is, of course, a great source for business and market news.

10. Shibui Markets. This global markets site offers a company screener which searches companies by country, industry, or by several available fundamental fields.

There are financial summaries and some fundamental data/key ratios available for some of these international companies. Also, a currency converter tool and discussion on international shares.

11. SEC Info. Go to the source for company filings and reports. You can also search companies by industry or run a search on your favorite investment funds and see what holdings they've recently added or dropped.

12. Stockpickr. Another great place to go to research the holdings and strategies of noted investors. Share and discuss your stock picks with this network of social investors.

13. Seeking Alpha. Daily coverage of ETFs, US and global markets, market sectors, housing, bonds, and options markets. Plus, lots of market news and commentary from investment bloggers and guest writers.

14. Reuters Investing, Google Finance, and AOL Money & Finance. One more spot on the list to round things out. Here are three more options for investment news, watch lists/portfolios, and market quotes. Plus, personal finance tools and AOL's Blogging Stocks feature.

And just added to Google Finance, real-time quotes from China.

Update: Quick update, I wanted to include this link on the best stock screeners, as picked by readers of The Kirk Report. You'll also find more info on stock screeners in this Elitetrader forum thread.

You're all set. Enjoy! Remember to bookmark this page for future reference (hit the bookmark button in the footer of this post) and share it with a couple of friends.

Keep reading Finance Trends Matter for more news and updated posts. Got any picks that we've overlooked? Let us know. Thanks!

Monday, October 15, 2007

Monday - Global view

Let's start off this week's updates with a look at some of the more important news on the global scene. Here are a few of the big items we noticed over the weekend. These stories will have continuing importance as we head into the week and the months ahead.

1. China puts together new leadership team. FT highlights the changes with an interactive chart of the Politburo members.

2. Sovereign funds warning. People are increasingly worried over the impact that these national investment funds might have on world markets in the future.

3. Burma seizes top democracy activist. The military government is looking to stamp out the opposition.

4. Thai King hospitalized. Stability of the country is called in to question ahead of December elections.

5. Yuan, Rupee rise at record pace in fight on inflation. China and India are now trying to strengthen their currencies in an attempt to reduce the cost of importing much needed commodities. Will this signal a meaningful pause in the "competitive devaluations" scenario?

6. Oil rises to record high on increased Iraq-Turkey tensions. Well done, everyone.

7. Global share returns over 5 year period. The Big Picture looks at a recent NY Times article which shows U.S. share index returns were #79 out of 83 major global share markets.

8. Biggest companies by market cap - China and US dominate. Bespoke Investment Group lists the world's largest publicly held corporations. PetroChina is now bigger than GE, in terms of market capitalization.

That should give you all something to chew on. We'll see you soon, lots more stuff to share as the week progresses. Till then, have a good one.

Friday, October 12, 2007

Features of the week

Hey gang, hope you're ready for this latest edition of, "Features of the week".

We've got a lot of links and information to wrap up for you, but we're going to do it in a nice, compressed package. All you need in one easy place. So grab a chair, kick back, and enjoy.

1. Fitch, S&P cut Beazer deeper into junk territory. If the ratings agencies are on the case, you know the situation must be bad.

See also, Moody's cuts 3 homebuilders to junk.

2. Och-Ziff eyes $1 billion IPO. Yep, going public is now the option for large US hedge fund and private equity businesses. Note that Fortress and Blackstone share prices have rebounded a bit recently.

3. Oil hits record $84 on supply concerns. Wait, I thought the whole Iraq liberation was supposed to result in a freeflowing gusher of oil revenues and $25 a barrel oil. At least that's what they told us at the time - ad nauseum.

4. Timing of genocide resolution questioned. Why are they having this political debate? Maybe these clowns should be looking at America's current actions (at home and abroad)instead. Maybe we all should.

5. Wall St. Journal - The United States of Subprime.

6. Will SWFs (sovereign wealth funds) change the world? FT Alphaville comments.

7. Brics: coherent strategy or catchy name? Good question.

8. Carl Icahn says the market might be reaching a peak, citing major concerns.

9. Mark Mobius says some interesting things about emerging markets in this Bloomberg interview.

10. Who benefits from inflation? The people who get the money first, and debtors.

11. Keynes and the Totalitarian State. He didn't invent the policies; he provided the rationalizations.

12. Check out The Kirk Report's latest link post for more great stories and features!

Have a great weekend, gang. Thanks for reading & bookmarking Finance Trends Matter.

Thursday, October 11, 2007

What's up with Yahoo Finance?

Has anybody tried using the Yahoo! Finance site lately? It flat out sucks.

I used to visit the site all the time, as it was a convenient location for basic stock market info and quotes.

Yes, the fundamental information in the stock profiles was notoriously unreliable, but it was a good place to go for quotes, company news, and creating and storing personalized stock watch lists.

I started visiting the site less frequently a couple years ago, so I was only mildly disturbed by the site's increased suckiness and its change-for-the-sake-of-change site redesigns. I figured that as long as my Watch Lists (now renamed, "My Portfolios") and other basic market data were there, I'd use those features and ignore the rest.

The problem is that the whole site is now totally unappealing to many of the original users (myself included, obviously), as it's been transformed from a dominant user portal for stock market information into a ghetto of cutesy personal finance claptrap.

Apparently, many new users like the "new" Yahoo! Finance. I guess this reveals their taste for self-promoting personal finance gurus who take the seminar stage and preach personal "empowerment" and enlightenment (audio books and DVDs help), a la Wayne Dyer, Tony Robbins, and Matt Foley. They're certainly in abundance on the "new and improved" site. But I digress...

Back to the site features. As I came to find out the other day, even the very basic (and previously useful) stock symbol lookup tool no longer works! Thankfully, I was able to find a working version of the previous symbol lookup over at Yahoo! Finance Singapore. Save this link, you may need it.

In the meantime, I'll have to revisit some of my other options for quotes, watch lists, and market data. I used to be familiar with a number of sites serving this area, but so much has changed in the last couple of years, I'm not quite sure what's out there now.

I've seen Google Finance, and use it for a few simple features, but I think they still have a way to go with developing that site into something more powerful and useful.

In the meantime, if you have any recommendations for some good market data websites, we'll be glad to hear them.

Update: (November 20, 2007). Symbol lookup at Yahoo! Finance's US site is now working fine. Glad to see this fixed as it is a much needed, and frequently used, feature.

Tuesday, October 09, 2007

Commodities for every portfolio

If you didn't catch the latest edition of the Financial Sense Newshour, you might want to go back and check out last weekend's interview with Emanuel Balarie, author of the new book, Commodities for Every Portfolio: How You Can Profit from the Long Term Commodity Boom.

Now, as you can tell from the title, the book seems to be basing its advice around the implicit notion that the current commodity boom is, in fact, a long-term, secular move.

While this idea now seems to represent the prevailing wisdom, I don't think you necessarily have to believe this thesis to benefit from the author's discussion of this topic.

There are plenty of options now available for the investment manager or individual investor who would like to have some exposure to commodities, and author Balarie does a fine job of summarizing these strategies for the listeners.

If you have any interest in this topic at all, I think you'll find this a worthwhile interview. Enjoy!

Advisor turnover roils investors

Article from todays Wall St. Journal on choosing a financial planner. Plus, what to do in the event that your current financial planner retires or sells his business to a larger company.

From , "Advisor turnover roils investors".

When Jerry Roberts got news that his longtime financial planner was retiring and selling his practice to a larger company, "it was very unnerving."

"I very carefully chose my original planner," a sole practitioner in the Robertses' hometown of Indianapolis. "I was cognizant of his investment philosophy, his range of capabilities, and his past experience. I didn't know anything about the new firm coming on," says Mr. Roberts, a 64-year-old retired bank officer.

Like the Robertses, a growing number of people who have spent years building a relationship with a trusted financial adviser are having to start over again with someone new. Planners are getting older -- the average age is 55, and nearly a third are over 60 -- and they are retiring at an accelerating pace, often without a specific succession plan in place. That in turn is helping to fuel a wave of consolidation in the industry, as big financial-advisory firms and banks, including Wachovia Corp., Pennsylvania's Susquehanna Bancshares Inc. and Alabama's Compass Bancshares Inc., seek to control a larger share of Americans' retirement assets.

Read the whole article at the link above. Not just for those whose planners are moving on; there are tips in there for anyone who's shopping around for a financial planner.

Monday, October 08, 2007

Market notes 10/8/07

Reading through recent remarks in Richard Russell's Dow Theory Letters over the weekend, I saw that the strength in the leading averages is still evident.

The S&P 500 and the Dow Industrials are still working higher from their August lows, and in fact both the Dow and S&P 500 have made record highs in recent days.

Today's action seems to be worrying investors (see Bloomberg link above on option market signalling a stumble), but so far the uptrend in the major averages is intact.

Russell noted that the bullish percentage of shares on NYSE and the S&P are above 60%, and that the BP for the Dow was recently above 86%. He notes that there is nothing bearish about those statistics; if anything they've improved in recent weeks. Got Diamonds (DIA)? Russell and DTL subscribers are watching the action in the DJIA closely.

By the way, if you'd like more of Russell's view of the market, check out his newsletter. He has a very loyal following, and I'm one of his loyal readers myself. Great stuff.

In other market news and views, I'm starting to wonder if leading indices and shares will continue to move higher, or will things fall apart (at least here in the U.S.) and confirm Marc Faber's gloomy view on the U.S. market?

Marc recently forecast a possible 20-30% or greater correction in the leading averages, and said he expects to see a significant correction in leading U.S. tech names, such as AAPL, GOOG, and RIMM in the event of such a drop.

Currently, these leading names are anything but weak, with many of them rocketing to all-time highs. But if weakness starts to show up in these names, perhaps this will signal a coming correction for the U.S. stock market. Or maybe it will signal a pause and a shift in leadership with a rotation to other names? We'll see...

Sunday, October 07, 2007

Homebuilders in desperation

If you've been keeping an eye on the news in the U.S. at all these past few months, you know that the situation in housing has continued to deteriorate, despite the much too early bottom calling from industry spokespeople, vapid "economists", and the media's talking heads.

We've reached the "bust" portion of this particular boom-bust cycle, and with each passing week there are new stories to fill in the picture of the real estate market's decline.

Which is where this next story comes in. From Bloomberg, "Homebuilders Liquidate Assets in Desperation Sales".

D.R. Horton, with annual revenue of about $11 billion, and Hovnanian Enterprises Inc. now face the worst choice in the worst residential real estate slump since the 1930s. They're selling homes at any price they can get.

``It's desperation time and some companies may not make it,'' said Alex Barron, an industry analyst at Agency Trading Group Inc. in Wayzata, Minnesota. ``At this point in the housing cycle, if you have too much debt, it's hard to get out from under it.''

Homebuilder profits depend on the cost of land, said John Burns, president of John Burns Real Estate Consulting in Irvine, California. Companies can still make money building on land purchased before the 2005 peak of the five-year U.S. housing boom, though price declines of as little as 10 percent might wipe out those profits, he said.

``They are all losing money,'' Burns said. ``They'll talk in terms of gross margin and it sounds like they made money, but they actually lost money because they didn't make their costs.''


As the article points out, many of the largest homebuilders are saddled with significant debt and are generating cash from one-time deals, like selling mortgages, discounting, and cutting back on land purchases. According to data from the credit-default swap market, the companies' bonds currently trade "as if they were junk".

Why are conditions so bad? Here's a bit of an economic backdrop to this market drama, courtesy of an earlier Bloomberg piece on sluggish home sales:

Real-estate sales and prices are likely to keep falling after borrowing costs rose and mortgages became more difficult to get last month as defaults on subprime loans increased. Lower home values and slower job growth have the potential to undermine consumer sentiment and spending, economists said.

``Bloated inventories, declining prices and sluggish demand continue to overshadow the housing market,'' said Christopher Low, chief economist at FTN Financial in New York. The current situation ``can be very unsettling to consumers.''

That's why many of the leading homebuilders have jumped in and started slashing prices on their already built "product". This merchandise has got to go, preferably before the suckers start seeing new, lowered home prices printed out in black and white.

I'm reminded of a video I watched a couple of weeks ago, in which Hovnanian CEO, Ara Hovnanian was spinning away at a Bloomberg interviewer's suggestions that the company's fire-sale of newly built homes was an act of desperation. "Oh, not at all", he said. It's simply a matter of cutting down the price of a little excess merchandise.

He also added that the housing market was "very near" a bottom. What a salesman.

But what was really going on was that Ara Hovnanian's company wanted to be the first to the door when it came to cutting prices, because they knew the industry as a whole would have to follow. It's just common sense, as pointed out by Jim Rogers when the same Bloomberg interviewer put the question of Hovnanian's discount strategy to him.

Keep your head on straight during all of this. If you're letting the media turn your head and influence your thinking on this topic, then you're probably not thinking at all. Here's a quick story to illustrate my point.

I have a friend who recently sold his condo and is now looking to buy a house (he is living in a rental house for the time being). The only problem is that asking prices are still quite high for many of the homes he is looking at (he is a young professional, and is not looking at anything extravagant for his area at all).

He told me this week (as we drove around looking at some of these homes) that he had recently attended a gathering, where he had a conversation with someone about the housing market.

When the guy he was speaking with found out that my friend was patiently trying to wait out the almost-inevitable further decline in house prices, he reacted with a kind of shocked indignation. "How much better do you think these prices are gonna get for you?", he asked my friend, as though he was personally aggrieved by this stance.

Shock, anger, and denial is what we are seeing with regard to falling home prices and the average person's slowly eroding standard of living. Thank inflation and a sort of negative "wealth effect" arising from lower home prices.

Friday, October 05, 2007

Features of the week

We have some articles and web features of special interest in our latest edition of "Features of the week". Kick back, read, watch, and enjoy.

1. Expectations for further Fed eases and a rally in U.S. Treasuries.

2. Talk of return to normality in credit markets is premature, says Willem Sels.

3. Cash becomes king in post-crunch buyouts.

4. Greed and fear in Asia's emerging bubble. CLSA's Christopher Wood makes some interesting predictions regarding the impacts that Fed easing will have on Asian markets and on US infrastructure spending.

5. Credit squeeze: what's next? Q&A with Mohamed El-Erian at FT.com.

6. Oil sands leave Alberta a cratered mess, and more in The Oil Drum's Energy and Environment Round Up (October 4th edition).

7. Wall St. Journal explains why London has become an international enclave for billionaires, many of them foreign-born. (Hat tip to Paul at Infectious Greed).

8. Sell half to drink half. FT Wealth on investing in wine.

9. The Secrets of 50 Years of Political Diaries. Arthur Sleshinger Jr.'s diaries contain a wealth of "juicy morsels".

10. Ron Paul raises $5 million and talks liberty and policy with the Google gang.

11. Pakistan: A shadow over Musharraf. Pakistan's Supreme Court confronts General Pervez Musharraf on the eve of the country's presidential election.

12. Caught a great documentary on tv the other night, and tracked it down for posting here. Check out American Hardcore for a look back at the rise of the American punk rock and hardcore scene, and an illuminating look at America's Reagan-era youth culture.

13. Wall $treet Folly gives us the run down on Barron's Best 50 Hedge Funds.

14. $1000 Gold? Barron's interview with John Hathaway of Toqueville Asset Management.

15. Out of the dollar. Bear Mountain Bull covers inflation in China and Vietnam, and Qatar's move out of US currency.

16. Whither the dollar? Financial Sense Newshour hosts a dollar roundtable featuring Axel Merk, James Turk, John Rubino, and Peter Schiff.

Thanks for stopping by. If you like what you see, share this post with a friend (see email post icon), bookmark us, and come again. Have a great weekend, gang!

Thursday, October 04, 2007

Ron Paul raises $5 million

The Wall St. Journal reports that Ron Paul has raised over $5 million this quarter in the quest for his 2008 presidential bid.

WASHINGTON -- Rep. Ron Paul disclosed more than $5 million in third-quarter fund raising for his insurgent Republican presidential bid, the only Republican in the field so far to report increased donations.

While the Texas lawmaker remains a second-tier candidate in a party field dominated by the likes of Rudy Giuliani and Mitt Romney, his grass-roots campaign continues to build steam, thanks to thousands of small donors over the Internet.

Campaign spokesman Jesse Benton estimates that as much as 80% of the campaign's donations are received online. In the final week of the third quarter, Dr. Paul, a licensed obstetrician, raised $1.2 million in Internet donations alone. The $5 million haul more than doubles his $2.4 million showing in the second quarter.


Note that much of the campaign money has come from small donors from his grass-roots following, and that "as much as 80%" of the donations are received online.

I guess that should finally quell the incessent and ridiculous rumors regarding Paul's supposed online network of "spam" supporters who somehow managed to "rig" major online election polls and news web sites.

Or maybe they'll come up with a story about how all that money was actually donated by two spammers working out of a basement somewhere, trying to fudge the campaign finance figures to make their candidate look more successful than he really is!

You know what, at this point I wouldn't even be that surprised...

Actually, some outlets such as WSJ seem to finally accept as fact Ron Paul's highly dedicated network of supporters, but continue to deem him a "longshot", etc.

Paul, a libertarian and a former medical doctor, has a fervent band of supporters and an active online community in support of his candidacy. Washington Wire readers and Ron Paul supporters, feel free to disagree, but Paul remains a long-shot candidate for the White House.

For more on Congressman Ron Paul and his 2008 Presidential campaign, see Ron Paul 2008, and check out this great Candidates at Google video of Ron Paul speaking to an audience of Google employees earlier this year.

Wednesday, October 03, 2007

How to pick a junior gold stock

Hot on the heels of the "Three rules for buying resource stocks" post, we bring you some more of Rick Rule's insight into resource sector speculation, courtesy of the Daily Reckoning Australia.

In this post, we'll take a look at Rick Rule's guidelines for choosing a junior gold mining stock.

But first, why would anyone want to "invest" in a junior mining company?

For a bit of background on that, please see Jim Puplava's 2002 article, "The Perfect Option". This piece was written in the early days of the current gold and gold mining share bull market; as you can see, Jim's been quite right so far.

Now back to Rick Rule's guidelines. As you'll see, Rick offers up his rules of gold mining speculation as a means of sifting out not just the undesirable companies, but also the unprepared speculators and investors.

In Rick's view, it takes someone who is willing to work for the results to come up with winning results in this area of the market. Success favors the well prepared and strong of mind.

In exploration and speculation, one thing never changes: success favours the trained observer. Luck follows those who use the best tools with consistent discipline. Here are some other tools. The right answers to the following ten questions can help you decide if you even want to bother following, much less buying, a junior gold stock.

Read on for the complete rundown of, "How to Pick a Junior Gold Stock".

You may also wish to look at Keith Barron's, "Practical Advice on Picking Junior Mining Stocks", for more wisdom on this topic.

Be sure to note the risks involved with participating in these sectors, and always look to experienced guides for help and advice when navigating uncharted waters.

Another piece of good advice when dealing with speculative ventures: don't risk money that you can't afford to lose.

Enjoy the articles, and see you tomorrow!

Three rules for buying resource stocks

As promised, we are following up our recent "Profiting from the reflation" post with some more expert commentary on investing in the resource sectors.

We talked about some of the fundamentals behind higher oil prices and energy investing in, "The path to $80 oil". Today, let's slide on over to the Daily Reckoning site for an overview of resource investing and speculation, and a little help from noted resource investor, Rick Rule.

Here's a taste of Rick's investment philosophy:

“The resource business is not a cyclical industry. It is an extremely cyclical business. More cyclical than you can imagine,” says our old friend, Rick Rule.

“In natural resources you only have two choices,” he continues. “You can be a contrarian or you can be a victim. And yet, many people still buy resource companies after they have been run-up. They still sell them when they get disgusted after they have fallen down. That is no way to make money.”

For more of Rick's wisdom, read, "Three Rules for Buying Resource Stocks".

Monday, October 01, 2007

Caution on commodities

I read an interesting piece by John Authers over the weekend, in which the Financial Times columnist urged investors to familiarize themselves with the basics of the commodity markets before jumping in.

Since the start of this decade, performance in a wide range of individual commodities has been hot, prompting many new investors and funds to jump on the resource bull market bandwagon.

Authers reminds prospective investors that there are factors which distinguish the commodities market from other investments long familiar to most professional investors (equities, bonds), and that each individual commodity bears its own unique fundamentals and behavioral patterns.

Take it, John:

The first rule of journalism, some say, is: "Never be afraid to admit ignorance."

In that spirit, I will admit that I took over this column without the faintest idea why aluminium prices might behave differently from nickel, or why corn prices diverge from wheat. I am not embarrassed by this. The world of commodities is huge and complex, governed by the peculiarities of demand and supply in particular markets across the world. Little or nothing you learn covering mainstream financial markets, such as equities and bonds, much helps you when you are looking at a report on copper supply.

What I do know is that the past few years have seen an explosion of interest in commodities, not only from hedge funds but also from mainstream big institutions. That was prompted by the prolonged rally in basic commodity prices that started earlier this decade. The entry of new investors helped push the market still further. But my fear, confirmed at least by anecdotal evidence, is that many of these new investors share my ignorance of commodities.

You can read the entire piece here, "Go back to basics before you buy commodities".

For more info on two very important themes stressed in John's article, the increased correlation of stock and commodity returns and the "non homogeneity" of individual commodities, see, "Double down on commodities?" and, "Stocks and commodities positively correlated".