Socialism, Harvard, Cuban, Dasan
– Funny what the NY Times determined was socialism before today
– In financial trouble. Hat tip reader Alex
– Always fighting somebody
– Nice post on an investment thesis
Disclosure (“none” means no position):
A classic win some/lose some scenario unfolded today at the Target (TGT) meeting for investor Bill Ackman.
Here are some past posts on the subject here, here, and here
Here is soke of the press release from Target:
“On behalf of Target’s Board of Directors and management team, we thank our shareholders for their overwhelming support throughout this process,” said Gregg Steinhafel, Target’s Chairman, President and Chief Executive Officer. “Today’s outcome demonstrates the confidence Target shareholders have in our Board’s qualifications, diversity and experience to provide effective and independent oversight and direction to the company, contributing to the creation of one of the most recognized brands in the United States. We remain dedicated to serving the interests of all shareholders by sustaining Target’s competitive advantage, driving continued profitable growth and generating substantial shareholder value over time.”
Analysis From Bloomberg:
Ackman Said:
As an aside, he does have very valid points as to the voting process involved not just at Target but in corporate America in general. It should not be more dificult to vote for a Board of Directors than the President. It also should be a secret vote and a single ballot so as to not be influenced.
Disclosure (“none” means no position):
Note to CNBC: Watch and Learn, this is how to be prepared for an interview. First watch the muddles mess that was CBNC’s effort this am then watch this. Unlike CNBC who had no idea what Bruce has invested in, this interviewer knew and had good questions related to it.
Disclosure (“none” means no position):
The man rumored to be taking over for Berkshire’s (BRK.a) Warren Buffett says 2011 may be the turn….not now or next year.
Disclosure (“none” means no position):
This is disappointing that CNBC has one of the best and honest fund managers on and only gives him 3:50 to talk, a big whiff on their part. Meanwhile, they’ll give Kneale and Gasparino 10 minutes to call each other names. Just when I forget why I stopped watching, they remind me…
Anyway, here is Bruce
Disclosure (“none” means no position):
Hat tip to Zero Hedge for this. Regular readers know we own a bunch of General Growth Properties (GGWPQ) at $.49. It currently trades at $1.60 today and if Ackman is right, it is still a stunning value.
Disclosure (“none” means no position):
Now this chart is either really good news or dark storm clouds on the horizon…
Scott Grannis says of it:
Treasury yields are heading skyward, as the bond market begins to realize that a) the economy is improving, b) monetary policy is incredibly expansionary, and c) fiscal policy is creating massive financing needs. This is a perfect storm for the Treasury market, and it could send yields far higher in short order.
The silver lining to this thunderstorm cloud is that it may cause our politicians to rethink their plans to spend money like a drunken sailor. It would be great if Obama came to have the same respect for the bond market as Bill Clinton did.
“Davidson” says of it all:
This piece by Scott Grannis begs the question: “Would Bernanke reigning in stimulus boost market confidence?” There are many indications that confidence in the credit markets have improved. It is understood that if lender’s confidence levels continued to improve as has been apparent then many of the looming refinance issues for commercial real estate would ease. The effect on lender’s confidence in the auto loan and home loan market could continue to improve which would go a long way towards easing fears of the after-effects of a GM bailout or easing the fears of Alt-A mtg rollovers.
If Bernanke declares that now is the time to reduce the stimulus, would this rein in the fears of pending inflation, boost lender confidence and stimulate economic improvement?
Confidence in our financial system is crucial to our society. It is the lack of confidence which causes deep recessions as everyone retrenches at once. It is the excess confidence that produces bubbles as many over extend themselves.
A boost to confidence would be welcome.
My two cents:
Why is that a problem?
Consider a second chart, this one of 30 year mortgage rates
Look great right? What better to help spur housing except record low rates! But, look at the relationship between the 10yr. Treasury and the 30yr. mortgage. The 30 yr. on average tends to run about 1.7% greater than the 10yr.
So…….why does this matter? Well the 10yr. exploded to 3.5% today and that correlates to an appoximiate 30yr. rate of 5.2% upcoming or over 1/2 a point higher than just a week and a half ago. Nothing, and I mean nothing will throw more cold water on this housing market that rapidly rising interest rates. Folks who were sitting on the fence just a week or two ago are going to be in for quite a shock when they look at the new monthly cost of a house.
Now, here is where “Davidson’s” comment on Bernanke comes in. Should Ben decide it is time to suck some liquidity out of the economy “due to its performance”, we would see a reversal of the the rate jump. That might also have the effect of spurring those folks on the house buying fence out there the rush out and pick one up as they fear additional rate increases. This would be good news.
The huge risk is “what if there really aren’t any buyers on the fence”? Rate increases will only serve in this case to deepen the problem and Bernanke’s withdrawing of liquidity would serve to further tighten lending.
Disclosure (“none” means no position):
TAX, Shorts, Audible, Girlfriends
– Maybe will not raise you income tax, but Obama is considering taxing everything else..
– Money to be made in lightly shorted stocks
– Audible book on the Blackberry
– Another Onion classic
Disclosure (“none” means no position):
As if we did not have enough reasons to like Baupost Group’s Seth Klarman
From the Boston Globe:
Advertising mogul Ed Eskandarian is selling his minority stake in the Boston Red Sox to Seth Klarman, a well known Boston hedge fund manager, according to two people briefed on the transaction.
Eskandarian is one of a group of three Boston businessmen who together invested $25 million in the 2002 purchase of the Red Sox, led by John Henry and Tom Werner. Their stake at the time represented about 3.6 percent of the $700 million deal. Eskandarian, chairman of Arnold Worldwide, a Boston advertising agency, invested about $6 million.
Klarman and Eskandarian both declined to comment. The Red Sox also declined to comment.
However, by yesterday Eskandarian’s name had been removed from the list of owners posted on the team website. Klarman, who runs Baupost Group in Boston, is not listed as an owner. Major League Baseball must approve any change in team ownership.
The New York Times Co., which owns The Boston Globe, is trying to sell its 17.5 percent stake in the Red Sox. According to published reports, the Times Co. believes its stake is worth $200 million, which would value the team at $1.1 billion.
One of Eskandarian’s co-investors, TJX Cos. chairman Ben Cammarata, sold his stake in the team in 2007. The third investor, former textile executive Martin Trust, remains an owner.
It could not be learned yesterday what price Eskandarian is getting for his share. Cammarata, reached by telephone yesterday, said he did not know what a Red Sox stake would fetch today. He would not say how much he sold his $12.5 million stake for: “It was a wonderful time and a very good investment.”
The Red Sox franchise has risen in value, to $833 million, according to rankings created by Forbes magazine each year. The Red Sox are the third most valuable team in baseball, behind the New York Yankees and the New York Mets.
When David D’Alessandro, the former chief executive of John Hancock Financial Services Inc., sold his $5 million stake in the team in 2007, he reaped just over double his original investment, $10.3 million, the Globe reported.
Disclosure (“none” means no position):Long Red Sox
Smaller operating loss, increased cash flows and 45% less debt, all very good things. Shareholders, unfortunately for those who bought shares 2 years ago are still paying for the sins of past management. But, this marks the third consecutive quarter of very good improvement in a dismal operating environment.
Work still needs to be done on Borders.com. The site is sluggish and ordering can be difficult. Customer service is responsive BUT, Borders needs to eliminate the necessity to even need them which seems to be all too frequent. On the positive side, the site is very visually appealing and the Rewards Program and the affiliate relationships do offer tremendous savings. But, to bring it to the next level as a destination purchasing site…..it needs to be faster….much faster and the ordering glitches need to be eliminated.
Disclosure (“none” means no position):Long BGP
Some humor….Hat Tip Reader Jeff for finding & emailing..
Disclosure (“none” means no position):
Interview and discussion with David Rosenberg of the Gluskin Sheff & Associates on both Fox Biz and Bloomberg. He talks about the comments from Krugman and Greenspan.
Rosenberg is one of the few that have nailed everything to date. Whether you agree with him or not, you must take his thoughts with a huge grain of salt. He also boosts his cause in my eyes as not being as dire as either Roubini or Taleb who seem to call for the “end of days” on a regular basis. Rosenberg is far more rational.
Disclosure (“none” means no position):
After having spoken about the “time factor” in housing so much recently, I decided to put some hard data to the words.
Here is my appearance on Wall St. Media yesterday on the subject (housing comes in about 1/2 way though)
Open spreadhseet in another window
Those facts alone, even if we disregard the severity of the price fall in housing would tend to force most folks to push the bottom of the current situation out a bit further. When you add the wealth destruction that has happened to healthy homeowners who may have been looking to scoop a bargain but no longer have equity to roll, we are further suppressing demand.
Disclosure (“none” means no position):
“Davidson” submits:
When you are a value investor you are really an asset buyer with an expectation on ROE on those assets over an anticipated future period. The “science” that Ian Cumming references in his quote, “The science is in the “In”. The poetry is in the “Out”.”, is in the means that a value investor assesses the potential that the expected returns are likely to be realized. It is important to be cognizant of financial history, Hamilton, Fed Reserve history, economic philosophy of Hayek and etc as well as how this has played out since the 1871.
A powerful record of the effect of the Federal Reserve acting as a financial shock absorber has been in effect since 1933-see chart 1 (click to enlarge). 
With all the manipulations of govt., war, high taxation, excess govt. spending leading to inflation and the recovery and disinflation under Reagan and Volcker, one can build a great deal of confidence in US society and the its economic underpinnings that can serve to let one see thru the current fog of issues clouding our economic future.
If one measures BV (the productive assets of public cos) growth of the SP500 (I see this as quite steady at ~6.2%) (see Chart 2, click to enlarge) and then when one examines the ROE on these assets and measures that regression analysis produces a quite steady 14.2%.
Between 1978 to Present, one can produce a forecast for SP500 earnings and convert this to an earnings yield. This earnings yield is compared to the Real US GDP trend which is 3.16% and the current core inflation rate which is 2.3%; the combination of these 2 rates becomes the benchmark against which all investments are compared. The market has priced the SP500 against this benchmark return since 1978 in a fairly close relationship with allowances for market psychology which is an important factor at all times (see Chart 3, click to enlarge).
The current relationship is that the SP500 is priced at an estimated 8.08% earnings yield while the Market Cap Rate (MCR) is 5.4%. For the SP500 to return back to a normalized rate of return, this means that it needs to rise by 49.6% to roughly 1,350 from 900 currently. This is how a value investor converts assets to future returns by assuming that a historical trend with many periods of in which problems like those we fear today will eventually be resumed and return to trend.
Can value investors be wrong? Absulutely!! But, there is a very strong trend of economic history that supports these assumptions and the Fed is easing like it has done in the past. The cry, “But, but, but…it is different this time!!!” has be uttered at every major low in our financial history, i.e. 1974, 1982, 1987, 1990, 1998, 2002-2003 and 2008-2009. The odds greatly favor recovery, strong recovery which few are forecasting.
Our greatest problem today is fear and a complete lack of perspective. Historical perspective is how value investors look across the valley.
Paulson, Gitmo, Home sizes, Taxes
– 49% oppose its closing
– Another state losing millionaires due to increased taxation
Disclosure (“none” means no position):