Sunday, February 12, 2012

Review of Barron's, Dated 13 February 2012

This review is late because "they" did not get Barron's even here until today (Sunday).  A "Service Failure", something I am afraid we are going to see lots more of...

The Cover Story ("Dow 15,000 -- Enter the Bull") by Gene Epstein makes a good case for the Dow rising to 15,000 within two years and a 50-50 chance that it rises to 17,000.  While these numbers look dramatic, Epstein says not really.  He looks at history of under-performance in the stock markets, and finds that over-performance typically happens next.  The past five years have NOT been good ones.

After outlining his thesis, he brings in the work of famed Wharton finance professor Jeremy Siegel who has been researching stock market performance (with good data all the way back to 1871).   Siegel, who wrote the book Stocks for the Long Run (now in its 4th edition), looks at stock market data and finds that CYCLES can be identified...  Things go down, things go up.Siegel sees a recovery happening, and so goes on to present historical data to build his case that the Dow could indeed go to 15,000 - 17,000 based on the present being typical of the past.

My take?  Well, maybe so.  If we are in a relatively "normal" environment, then yes, it is quite possible (maybe probable) that the Dow goes that high.  If we are not in a "normal" environment (my hunch), then it will surprise me if the market gets that high.

***

Alan Abelson rides back into town this weekend ("Right on the Money") with an understated critique of our Congress!  Seems that 86% of us disapprove, that ties the old record.  He goes on to write that REPUBLICANS tried to spike a recent effort to eliminate a provision that would require practitioners of "political intelligence" to register as lobbyists.  Said practitioners use their contacts and skills with Congress to learn about upcoming changes on behalf of their (well-paying) customers.  He writes that many of these customers (investment banks, hedge funds, private-equity outfits and lobbyists -- a motley crew as labels them) often contribute to said Congress-critters...  The Deal is not done yet, the Senate and House have to work out the differences, I guess we will just have to wait and see if there is any reform or no...

Abelson goes on to write about Greece (how could he not?) and of the very high levels of bullishness found among investors .  Typically, high levels of bullishness precede a market fall...

He finishes with First Global's analyst Kavita Thomas making the case for unloved Pfizer (ticker PFE).  Their big revenue producer Lipitor now faces generic competition, but apparently Pfizer has a pretty good pipeline of new drugs on the way.  PFE has not moved anywhere lately, and apparently is unloved.  It also has a 4% dividend.  Hey, maybe!

***

He Said:

"This is about as serious and difficult an environment as I have experienced in my career...  At times like this, it is more important to survive than to get rich."

-- George Soros

That's the second time Barron's has quoted Soros recently...

***

In the "Follow-Up" column, Beverly Goodman writes that the money market funds may come under alarming new regulation and having to have reserves...  This does not look good to me, what with money market funds offering almost nothing, and yet many of them came close to "breaking the buck" (value of $1.00 there being less...).  Hmm.

***

Robin Goldwyn Blumenthal writes a bullish piece on Dana (DAN) a supplier of axles, drive shafts and similar parts to both the car and truck manufacturers.   Dana re-emerged from bankruptcy four years ago.  Mario Gabelli liked this company in the Roundtable a few weeks ago.  Also in its favor is the fact that age of cars and light trucks is now over 10 years old in this country...

***

Florida fans (I have a fair number of readers from Florida, look at the map widget, hey they're not all MY clicks!) may appreciate Mike Morgan's article "Time to Buy in Florida...Carefully".  Because of the BIG declines in housing prices as well as foreign buying (South Americans, Europeans, Canadians and Russians), he thinks now is an OK time to jump and buy.  But, he does NOT like Miami.  He does NOT like single-family homes in the interior parts of the state.  He does like the area of Atlantic oceanfront homes from north of Palm Beach County all the way up to the Space Coast.

***

"D. C. Current" author Jim McTague is about the current round of "stress tests" on the banks.  The value of the stress tests is still being debated, but it seems, SEEMS, that the banks are in better shape than the last round in 2011 (what, better shape so fast???).  Jim provides us with some nice writing (why investors in banks should get more information that the regulators get):

"Investors are agitating for better disclosure because many believe that bankers simply can't be trusted, especially after they helped to blow up the economy in 2008.  There's another reason to broaden disclosure: Regulators can't be trusted, either.  They had detailed information in 2007 and 2008, yet were unable to deduce that the financial system had morphed into a Wild West casino."


Nice!

***

Tiernan Ray writes that maybe Cisco Systems (CSCO) has a shot of growing a bit faster than in recent years in that it is gaining a little market share.  I have not been following the company lately, but apparently it went through some wrenching changes.  This is a company that could increase its dividend should they choose.

***

Wow!  "Our Gadget of the Week" is about an "app" for Apple and Android phones that will tell you the names of stars, planets, constellations, etc. just pointing the device up at the object you wnat to know more about.  Constellations too.  The app is called the SkySafari 3.  Price: $2.95.  Author Nathaniel Wice gave it five stars.  If I get an Android like I am thinking of, I will get this one, as I have always liked astronomy...

***

Jonathan R. Laing writes an interesting piece: "What Happens if Israel Attacks Iran".  He interviews George Friedman (head of recently hacked Stratfor, a private intelligence company).  Friedman doubts that Israel will (nor will we) because it would be almost impossible for Israel to successfully strike and knockout Iran's capabilities AND that the risk of $300 crude oil and massive damage possible against our fleet over there are real risks.

Bottom line: we will reach an accommodation with Iran.  In other words, they will get their nukes.

***

Leslie P. Norton writes up an interesting interview with a China pro (Cheah Cheng Hye, a money manager based in Hong Kong).  Currently, a lot of what I read is China-bearish.  Not here in this article though!  After their government finishes some high level changes (transitions), China should go up as it is under-valued.  But, his fund also holds 9% of its value in GOLD!

***

There is a cartoon (Barron's is kind of famous for their cartoons, many of which are excellent) that I will try to kind-of reproduce here.  I could not read the the cartoonists signature, it might be S. Harris.  Anyway a car is going through the woods and passes this sign:
Hey, I am an amateur at this, OK?

***

CEO Spotlight was again interesting and is about American Express (AXP) CEO Ken Chenault.  Chenault has been at the helm for 11 years there.  Warren Buffett has enough confidence in him that he is allowing AXP management to vote Berkshire's shares as long as it owns 5% or more AND Chenault stays CEO.  Berkshire owns 13% of AXP.

***

Editor Thomas Donlan makes the case that Congress should try doing NOTHING and the Federal deficit will begin to close (because of automatic tax hikes and spending cuts as currently written).

NO WAY that's going to happen though (my observation, not his).

***

In the Market Week section, Jonathan Buck informs us ("European Trader") that Greece is likely to exit the euro.

There ARE people who do not read Zero Hedge and so may not be keeping up with Drama Queen Greece...

***

"Current Yield" columnist Randall W. Forsyth notes that both Warren Buffett and Laurence Fink (CEO of BlackRock) hate bonds...

***

This week's "Commodities Corner" (by Simon Constable) is about the very low Baltic Dry Index shipping rates (for bulk cargoes like coal, iron ore and grains).  And how most of it is due to a large number of new ships hitting the seas now.

Not mentioned is CHINA, which I have seen mentioned at Zero Hedge a a factor (fewer ships taking bulk products there).

I think I would go with ZH on this one...

***

There is a New Listing on the NYSE of interest: Cementos Pacasmayo SA (it's an ADS, ticker: CPAC).  CPAC is a regional producer of cement in Peru...

***

Total Fed Assets went up a smidge to $2.974 trillion.  Only $26 billion to go until it hits $3 trillion.  Bet they try to hide this as much as possible...

-- Monetary Base up 1%
-- M1 down 1%
-- M2 essentially unchanged

The key metric, however, is the relentless rise of the Mighty Peruvian Sol, which after taking a one week vacation of climbing vs. the US$, is up again!  Up about a quarter of 1% last week!  What, with Cementos Pacasmayo hitting the NYSE and the Sol hitting a new record, it is Peru's turn to shine!

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