Category: Articles

Jim Rogers on Fox this am talking commodities.

For those who want to follow rogers, The Rogers Van Eck Hard Assets Producers Index (RVEI) gives investors a chance to ride the commodities bull by accessing a universe of producers from all over the world. Most of the index’s components are producers of raw materials for agriculture, alternative energy, base and industrial metals, energy, forest products and precious metals.

To invest with it, Market Vectors-RVE Hard Asset Producers ETF (HAP) seeks to replicate as closely as possible the price and yield performance of the Rogers-Van Eck Hard Assets Producers Index (RVEI of the Index) by investing in a portfolio of securities that generally replicates the RVEI. RVEI, calculated and maintained by S-Network Global Indexes LLC, is a rules-based index intended to give investors a means of tracking the overall performance of a global universe of listed companies engaged in the production and distribution of hard assets and related products and services. RVEI comprises a global group of companies involved in six hard assets sectors: agriculture, energy, base metals, precious metals, forest products and water/renewable energy sources (solar and wind). The Fund’s investment advisor is Van Eck Associates Corporation

Disclosure (“none” means no position):None

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I am troubled by Mr. Dremen in this one…

First watch today’s video from FOX.

Now, back in October 2007 Dremen wrote:

Since coming to Wall Street in the late 1960s, I have been through seven such crises. Somehow, the market survived them and thrived. Look back even further to the period following the end of World War II, and sure enough, you’ll find that pattern holding in four more market spills. Beginning with the first postwar panic, resulting from the 1948–49 Berlin blockade, stocks have tumbled only to come roaring back to new highs. The worst market break came in 1973–74, during a nasty recession and the Arab oil embargo. The most recent was the dot-com slide, which began in March 2000 and ended in late 2002. The Nasdaq Composite, heavy with tech names, still has not regained the ground lost in that crash, but the broad indexes have.

During each crisis investors felt confused, uncertain and panicky. They believed nothing in their previous experience could help them cope with the ominous new world they faced. “Sell, sell, sell,” their inner worrywarts advised. “Save your capital before it’s too late.”

This almost always turned out to be a bad move. Selling in a crisis is foolish. Yes, if you had sold the S&P 500, say, a year into the bear market, in March 2001, you would have avoided another 28% decline before it hit bottom. But would you have had the wisdom to get back into stocks a year and a half later? I don’t know of anyone advising an exit in March 2001 who also switched to a bullish stance in fall 2002. And if you had sold in March 2001, and stayed out, you would have missed an opportunity. Since then the stock market has returned 46% (including dividends). On average, for each of the dozen crises, the market was up 36% one year after the low point, 44% after two years.

Today’s stock market remains solid with good fundamentals and many cheap stocks at hand. The ongoing liquidity crisis must be handled gingerly, of course. Commit your capital slowly as several more shocks must be absorbed before a broad market rally begins. Here are several stocks to look at:

CIT Group (CIT) is one of the nation’s most diversified finance companies. Because of its small subprime business, CIT has dropped 34% from its June high. CIT presents good value at seven times trailing earnings, with a dividend yielding 1.4%.

One of my longtime favorite stocks is Fannie Mae (nyse: FNM, which I recommended last year and in my 2006 assessment column last winter and suggested that you keep it. If you don’t own Fannie now, buy it. The company has taken its lumps in recent years, yet it should benefit from the subprime mortgage debacle. Fannie, along with sister entity Freddie Mac (nyse: FRE ), has the industry’s best mortgage acquisition standards, and a bucketful of cash.

In February of this year he wrote:

Most of the 49 stocks I recommended in this column in 2008 were unable to escape the damage. If you had bought them all, you’d be down 26%, after subtracting a 1% transaction cost on new purchases. Similarly timed investments in the S&P 500 would have lost you 16%. (None of the figures here include dividends.) My mistake: being heavily weighted in financials, and being unable to predict which ones (like Citi and AIG) would get help from the federal government and which would be allowed to sink beneath the waves. I suffered big declines in Fannie Mae (nyse: FNM), Freddie Mac (nyse: FRE) and Washington Mutual (nyse: WM).

Thanks in part to Paulson’s desperate and unpredictable actions, common stocks of good banks and brokers went into death spirals. For the full year the S&P 500 financials index was down 55%, versus a 38.5% drop for the S&P 500 index.

Now we are in a recession which I think will be our worst since World War II. I expect the price of crude oil and other commodities to go LOWer and unemployment to hit 10% by year-end.

Obama’s economic team faces a Herculean task in turning the economy around. Central bankers around the globe are printing money in an attempt to prevent a deflationary recession. If the bankers are successful, deflation will be contained and the recession abated, but we’ll pay for this rescue with higher inflation for years to come.

Amidst this Dickensian darkness in our economy I also believe that it is the best of times if you happen to be a value investor like me. I am now seeing buying opportunities that I have rarely seen in my 32 years managing money

So, we know he was wrong in 2007.That is not an indictment, most folks were, including me (I was fortunate enough to miss the worst of it). My problem is with him still clinging to the same names for investors today as if the fundamentals of financial firms are not permanently changed AND if anyone has watched Congress the past month, are going to change even further. Also, blaming Paulson for the collapse of financial firms is erroneous. It smacks of blaming someone else for his investing mistakes. They collapsed not because of Paulson’s actions but because of the garbage they held (and many still do). It seems as though Dremen has not learned from his past mistakes.

I think it isn’t very responsible to reccomned investors buy banks now when:

1- The government is the majority shareholder in most

2- Increased regulation and restriction are coming down the road

3- We do not know how detrimental to earnings going forwsrd these news regulations will be

4- The government is dictating terms for compensation all but assuring the best talent will not be working there.

How can we recommend people buy shares in a company when we really have no idea what its business environment will look like in 6 or 12 months? If we do, aren’t we are gamblimg and telling people to do the same? Now, I am not saying Dremen is wrong in his outlook. Banks may very well recover and be fine. What I am saying is that nobody knows what rules the financial services industry will be playing under a year from now. How can we tell people to buy shares in the participants knowing that? I can’t.

For the record, I am long Wells Fargo (WFC) and holding it. I will not be buying more.

Disclosure (“none” means no position):None



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Am I the only one who longs for this type of rhetoric in Washington? Face to face rather than the snide snippets in hearings or to the TV camera we see?

thanks to Alex at Contrarian Value Investing for the heads up on it.
Best line “you cannot spend your way out of recession or borrow your way out of debt”. Anyone listening?

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It recently came to my attention that many of you were not able to, for a while, add comments to posts. Don’t know why it happened, I believe it happened about the same time I changed the layout. It has been fixed so please comment away..

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This is great. Our irresponsible Congress has declared war on innocent workers trying to fix the mess created by others and in part, by Congress itself. Nothing to do with investing but tried to ignore this on the blog as long as possible. Have to say something.

Dear AIG, I Quit!!

Here is a good post on the current “Financial McCarthysim” currently being exhibited. Another one by Fred Wilson is here

Another interesting point. The resent legislation to tax AIG bonuses above $250k at 90%. This is a retroactive tax legislation akin to Congress deciding driving a SUV is illegal and fining everyone who currently owns one. No different.

The height or the lunacy was the admission from Congress that member voted for it even though they assumed and realized it “would not pass a Court challenge”. In other words, the succumbed to the angry mob they themselves incited. Let’s not forget, these bonuses were not a secret and Treasury Secretary Tim Geithner knew about them months ago, as did many members of Congress.

In an effort to extort those who received the bonuses to give them back, the NY AG Cuomo demanded the names of those who received one. The implied threat here was the names would be made available to a then frenzied public. One must not forget these folk were already being subjected to death threats, had armed security at the building and patrolling parking areas. This was no idle concern on their part.

Let’s look back shall we? Remember a little event called 9/11? What would have happened if the President and Congress attacked “Arabs” the way they currently are attacking “Wall St.” and “Bankers”. If we decided to pass retroactive legislation stripping Arab mosques of their tax free status as houses of worship and refund monies would that have been accepted or cheered by the public? Would the ACLU have remained silent?

We are a nation of rights and laws. The willing suspension of those for any group, no matter how distasteful it may be cannot be tolerated. Why? Someday you may be in the group targeted.

In the Federalist Papers #35, Alexander Hamilton wrote “There is no part of the administration of government that requires extensive information and a thorough knowledge of the principles of political economy, so much as the business of taxation. The man who understands those principles best will be least likely to resort to oppressive expedients, or sacrifice any particular class of citizens to the procurement of revenue. It might be demonstrated that the most productive system of finance will always be the least burdensome.”

Yet, this is exactly what this Congress did….it is shameful.

Congress in its infinitesimal childness held hearings to publicly eviscerate those NOT RESPONSIBLE for the problems at AIG. Now, they are leaving. Who will replace them? Who will try to assure the US taxpayers gets repaid? Would anyone in their right mind go work there now?

This was a pyrrhic victory for Congress. The theologian, Reinhold Niebuhr writing of the need for coercion in the cause of justice warned that: “Moral reason must learn how to make a coercion its ally without running the risk of a Pyrrhic victory in which the ally exploits and negates the triumph”

Guess Congress did not get the memo…

Disclosure (“none” means no position):

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Friedman, MTM, Oil, Oil

– I do not always agree with him, but do this time

– More on the debate

– From the demand side

– Did you know oil was essentially free right now?

Disclosure (“none” means no position):

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This is a nice piece on Chanos saying them that executives at AIG (AIG) did not really know what they had on the books then. He also comments are Treasury’s new plan for “toxic assets”.

He makes the sobering point that “the only things are getting done are those with government assistance”. That is not good news as government cannot continue to make all markets.

Chanos also had an op-ed in the WSJ today:

In it he defends mark-to-market accounting but does admit some alterations to it are necessary.

Unfortunately, the FASB proposal on March 16 represents capitulation. It calls for “significant judgment” by banks in determining if a market or an asset is “inactive” and if a transaction is “distressed.” This would give banks more discretion to throw out “quotes” and use valuation alternatives, including cash-flow estimates, to determine value in illiquid markets. In other words, it allows banks to substitute their own wishful-thinking judgments of value for market prices.

The FASB is also changing the criteria used to determine impairment, giving companies more flexibility to not recognize impairments if they don’t have “the intent to sell.” Banks will only need to state that they are more likely than not to be able to hold onto an underwater asset until its price “recovers.” CFOs will also have a choice to divide impairments into “credit losses” and “other losses,” which means fewer of these charges will be counted against income. If approved, companies could start this quarter to report net income that ignores sharp declines in securities they own. The FASB is taking comments until April 1, but its vote is a fait accompli.

Obfuscating sound accounting rules by gutting MTM rules will only further reduce investors’ trust in the financial statements of all companies, causing private capital — desperately needed in securities markets — to become even scarcer. Worse, obfuscation will further erode confidence in the American economy, with dire consequences for the very financial institutions who are calling for MTM changes. If need be, temporarily relax the arbitrary levels of regulatory capital, rather than compromise the integrity of all financial statements.

Regarding mark-to-market, I do not see too many market participants backing it 100%. All those I have seen favor some modifications to it, the argument seems to rest of what or how much.

Disclosure (“none” means no position):none



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Katrina, Ross, Banks, Pay

– The current mess is Obama’s Katrina

– Wilbur Ross is the best at this stuff

– The bank rally?

– This is a huge mistake
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AIG, GE, Oil, Inflation

– Sues the government

– Inside the black box

– This is a real problem down the road people

– With the printing presses running full speed, you cannot discount this
Disclosure (“none” means no position):

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