Check out the latest research piece my the Lee Munson and Patrick Kirts Experience on MOVE. You can go to Seeking Alpha.com or link to it here.
Here are some of the best parts:
In looking for a long-term opportunity, there are a few things we want. First, an illiquidity premium is a must since you are not looking to sell tomorrow. Second, find something with hidden assets, maybe something the average stock screener won’t identify. Third, make sure there are the typical Buffett things like a moat, good management, and a cheap valuation. After that you are alone in the dark.
So, let’s get into our housing comeback play. Like many of our positions, this one is indirect (internet marketing of homes), has some problems, and some hidden features that could give it an edge over the long haul.
Enjoy the report. You can also check out my other independent research at Portfolio, LLC.
Reading Jason Goepfert this morning brought to light the fact that the S&P 500 crossed under the 200-day moving average after only having been above it for 15 days and hitting aYTD high, which historically is a big red flag. The numbers he provided showed that after the first few days of having crossed under, the S&P was always in the red by a minimum of -3.4% with an average loss of -6.6%. “Perhaps most disturbing of all, in every case but one, the S&P ultimately went on to violate the low that preceded the rally above the 200-day average.” Which of course in this case was the March 9th low of 676. Another thing to keep in mind, brought to our attention by Helene Meisler, is that the March 9th low has been out of the 50 day moving average for a while now and that the market must be going higher for us to be able to cross over it, which is looking less likely now as the S&P has also recently passed under ther 20 day moving average and gains on the S&P futures for the past 3 months have been on diminishing volume. Technically speaking, we’re not doing so hot and may be on track for a serious retesting of the market low over the next few months.
The bottom line is that we expect a short term rally for mark ups, but would be selling into that rally and heading for the hills.
You can get the link here. Here are the key points:
Yeah, I got a sure thing for you, all right. Can’t lose a dime (mostly) and anyone can do it. The catch: It will never get you anywhere. Bank CDs and money market funds (MMFs) promise a secure return of capital, but only because they are not designed to do much other than trail inflation (yes, not even beat it!).
Let me know if you have suggestions for my future articles for ‘Money 101′. You can just comment at the bottom of this page.
At Portfolio Asset Management we see the current short-term deflation leading to longer-term inflation. While we think inflation is inevitable, let’s drill down on the argument that long term deflationists are making and extrapolate from there. For inflation bulls, it is good to know what the other side’s arguments are, and for deflation bulls, we’re going to tell you what you want to hear! Of course we won’t know for sure who is right for another couple years.
The bottom line is that you need to have the long and short game.
A Lee Munson and Patrick Kirts special! Read the new report from SeekingAlpha.com here.
My favorite part:
By now the cat is out of the bag on Linn Energy, LLC (LINE). This was a top holding of Seth Klarman, from whom I ripped off the idea (I do mean that in a good way!). Warren Buffett has always supported copying the great investors.
Our firm has been out of LINE for a few weeks, but we are on the lookout to buy it back.
Here is a heartbreaking work of staggering genius from thestreet.com. Ok, I admit I am quoted in the story so my first comment is not exactly unbiased. However, I did want to point out what stocks people are focused on and how to pair trade them using simple devices.
“A lot of traders are starting to identify BAC as a bellwether stock,” says Lee Munson, chief investment officer of Portfolio Asset Management.
Last Wednesday Munson’s biggest position was in Bank of America, while he was shorting the broader sector by using the ETF UltraShort Financials ProShares (SKF Quote). While the play seems counterintuitive to some degree, Munson says it’s a popular one because BofA is “safer and purer” than other banks that are overexposed to a particular geographic area, rely on proprietary trading for profits, or shore up confidence with “big personalities” like JPMorgan Chase’s (JPM Quote) Jamie Dimon.
Bank of America is the nation’s largest bank, serving one half of the country’s households through mortgages, credit cards, small business loans, corporate relationships and portfolio management. It has received a huge amount of taxpayer support with $45 billion in bailout funds. It acquired two deeply troubled firms at the crux of the crisis, Countrywide and Merrill Lynch.
In effect, Bank of America is the economy.
“Remember in the old days, whatever Intel (INTC Quote) or Cisco (CSCO Quote) did, that was it?” Munson continues. “Well, right here, right now, for the last several weeks, traders are looking at BAC on their screens all the time. Nobody’s looking at the [KBW Bank index] anymore. Everybody’s looking at Bank of America.”
Then my favorite line of the article:
Even Munson, who calls BofA “a winner” and “the most solid choice,” has to concur.
“If it breaks $10,” he says, “all hell breaks loose.”
Right now I won’t trust a rally this early in terms of an end of quarter mark up fiasco. Also, options expire on Friday, so be careful out there and don’t believe the hype – bullish or bearish.
Check out the link here to see the report on my firms website. My favorite lines are below.
Mavericks in exotic theories need to check their guns at the door.
AQR’s Diversified Arbitrage Fund (ADANX, ADAIX) allows an investor to have exposure to hedge fund strategies without the high risk of leveraging. Its objective is to provide long-term positive returns that are uncorrelated with the stock or bond markets. This is what Modern Portfolio Theory is supposed to be about: the non-correlation of assets. Not some sales pitch on how much you have in mid cap domestic value versus small cap international growth.
Check out this short piece from the Lex Column in the FT today.
The main point is this:
It was not meant to be like this. Looking at the various components of GDP, it is now possible that three out of its four main components will be negative this year. The government is spending like crazy, but there is little chance of a meaningful turnround in private consumption and investment. It was hoped, therefore, that like last year, as imports plummeted, trade would make a helpful contribution to growth. But the buying habit of Americans seems as hard to break as the savings habit beyond its shores. Imports only fell 1 per cent in April, resulting in the US trade deficit widening for the second month in a row.
So, when I say on CNBC that we will not be recovering until 2010, this just backs up the point. If people don’t buy stuff from the US, nothing will happen. It is not like the American consumer is going to bail us out. They are dropping like flies. . .
Michael McDonough has been reporting on the shipping industry for thestreet.com Silver (i.e. you need to have a subscription to get it). Let me just get to the heart of the matter and if you have a subscription here is the link.
A week ago I was blogging about how the Chinese government was ‘asking’ companies to reduce excess steel supply by 30% or get fined. Only the Asian press was reporting this news and it was driving me crazy that nobody in the west was talking about it. The implication being that the increase of demand was just digging a hole and filling it back in. However, McDonough’s piece backs up what I was pounding the tables on in May. He has pieced together from multiple sources a theory that once the price of iron ore rises above $70 per ton, the Chinese will stop importing it at breakneck speed. Think of it like this, when beer in on sale at my favorite store (Quarters in Albuquerque!) I ask the guys to fill up my trunk and charge it. Why? Because I have the space in my garage and my checking account is only getting 1%. Once the beer is not on liquidation I buy it as needed. So, right now I have 4 cases in the garage. So does China! Here are brilliant and concise points McDonough outlines:
1. Iron ore inventories at China’s two main ports have nearly reached capacity.
2. Global demand for Chinese goods remains sparse, in spite of record dry bulk imports and inventories.
3. The shipping industry is on the verge of a supply glut due to projected increases in capacity and clearing congestion at Chinese ports.
One of our core positions is Horizon Lines (NYSE: HRZ). Now you know if you have follow our previous research on Horizon that they are an indirect play. They are Jones Act shippers and deal with dry bulk between US territories. Hawaii will always need stuff from the states, but China will lean on the more expensive domestically produced iron ore if the prices continue to rise. Right now the best guess is that the price of importing ore is at the tipping point.
So, while the decision to hold, sell, or add to HRZ is fundamentally dependent on the US and in my opinion a solid defensive play, the technical’s are certainly influenced by the price action of the greater shipping group. One needs to separate the fundamental thesis that HRZ has all the good parts (defensive protection business) with the technical bad parts (the group may sell off). It is not good enough to say HRZ is paying an 8% dividend and you can just hold on. I prefer to work the position AND collect some dividends. My firm is will be watching DRYS in particular as the company has historically had a high correlation to the Baltic Dry Bulk Shipping Index (BDI). Right now, however, we are in the mood to sell out and watch the charts versus buying the weakness. Just make sure your stay afloat.
