I am currently a Senior in college and have grown sick of reading dull finance textbooks (diminishing returns are in full effect). As a result I have ventured into the global equity markets and the "blogosphere" to learn about current and future profitable investment trends (think of me as a "blog of blogs" site). I figure that reasearching and writing about investment trends will help solidify them in my mind and maybe help some people.
The auction-rate fiasco is not over for banks. Having bought back about $55 billion of the paper, they are now faced with the reality that the bonds are only worth about $.80 on a dollar. The means the firms who were forced to take them off shareholder hands will probably have to account for $10 billion in losses. According to Reuters, "The timing is not ideal given the balance sheets of a lot of these companies," said Walter Todd, portfolio manager at Greenwood Capital.
Even with this set of news, I still think that we will experience a major head fake coming from the financials and this overall market (ie we will rally from here). It is very obvious that this market is COMPLETELY ignoring the impending ALT-A POA debacle; Cramer just said the bottom in housing will come in Q3 of 2009, the exact time POA resets will be at their worst. My assumption is that "The Street" is looking at stabilizing subprime defaults and assuming that the worst is behind us.
"From 2015 onwards," the document says, "deaths would outnumber births and hence population growth due to natural increase would cease. From this point onwards positive net migration would be the only population growth factor. However from 2035 this positive net migration would no longer counterbalance the negative natural change and the population is projected to begin to fall."
Now with a combined total of 495 million people, the 27 nations that make up the EU would increase their population to a total of 521 million in 2035 before falling back to 506 million in 2060.
Population growth obviously has serious socio-economic implications for Europe as well as the global economy (remember the world is flat)
The document did not spell out these likely shifts, but they could include reduced funding for schools, heavy burdens on welfare and social security systems, and perhaps even a political push for much larger immigration, which is currently deeply out of favor with most European voters.
In case you're wondering how the U.S. stacks up:
The document deals only with population trends in Europe. According to another report published last year, the United States population will increase from 301 million to 468 million in 2060, including 105 million new immigrants.
No shrinkage in the U.S., well except for this guy...
don't matter. As Brian Shannon over at Alphatrends says: "The market doesn't care what you think." I know that's an obvious statement but it's important to stay humble and recognize that the market acts differently than you. The market is an irrational entity trading 99.99% of the time on fear and greed (markets are only efficient in the long run).
So with that said, I abdicate my thoughts on the market to who else but the market makers (aka the big funds and institutions that push stocks/commodities up and down). Are they right all the time? Of course not; but if you read enough research reports and stick with the most successfull groups you'll be right more often than you'll be wrong. Remember, even the best baseball players connect 30% of the time when they hit (I go with the baseball metaphor, because that's what Buffett chooses).
So here are some oil thoughts from Goldman Sachs. Why Goldman? Because they are one of the few market makers who have actually been right lately. It seems like all the other big players got too fat and happy and forgot that groupthink is bad for business. That's a $500 billion dollar psychology lesson.
Synopsis:
Goldman Sachs reiterates their call for $149 by years end.
"Although the recent correlation in dollar and oil prices is clear, it is important to emphasise that each of these assets are driven by multiple, varying factors ... Put differently, there is more to oil than the U.S. dollar and vice versa."
Let's not forget that China also took several million cars off the road for their Olympic preparations these past few weeks. Is it a coincidence that oil prices collapsed around the same time? I think not.
Ok so Thompson Creek (the most respectable pure moly play out there) missed Q2earnings as their production costs soared 32% yoy (from $5.66 to $7.49 a pound). I am venturing that most of this cost spike had to do with surging oil prices (those big ass trucks that carry the moly from the mines basically run 24-7). However, now with oil apparently peaking (at least for the next 6 months), I am going back to Moly.
This decision isn't just because of oil prices, but because the industry fundamentals in moly are too good to ignore (shortages in 2008, 2009 and 2010 - that's what CPM Group says). Apparently, I am not the only one who has noticed moly's positive outlook as smart ass hedge fund manager Daniel Loeb holds a stake in TC with more than 4 million shares.
An interesting article here. The running theme seems to be that America's lifestyle is nothing more than an illusion feuled on massive mountains of debt (shocking right). Whether this illusion is perpetuated by stocks, houses or credit cards, the point is that we always fall from our respective highs and when we do it's not pretty.
Synopsis:
Real Wages (inflation adjusted wages) haven't grown, so Americans have been using debt (ie negative savings rate) to fuel their ever growing consumption habits.
Since the market sucks, and housing has tanked (meaning no more HELOCs) Americans have turned to the last (most expensive) cash machine left: credit cards.
Credit card debt has been growing much faster than the economy - more than 8% in last year's third and fourth quarters and over 7% in May (the most recent month reported)- people are apparently using it as a substitute for income. Thus, for the past year or so we have still maintained the standard-of-living illusion.
But now even that cash machine looks like it's about to break down as the appetite for securitized credit card debt has been cut in half in the last 5 months.
But a big crunch is coming - and here's why. Credit card debt, like mortgage debt, gets bundled, securitized, and sold off by banks. Citigroup (C, Fortune 500), one of America's largest credit card lenders, just reported that it lost $176 million in the second quarter through securitizing such debt. That happens when the buyers of those securities observe rising delinquency rates and rising interest rates, and decide the debt is worth less than Citi thought. More generally, the amount of credit card debt that is securitized nationwide has plunged by more than half in the past five months because it's getting riskier. That means credit card issuers will be charging customers higher interest rates, and since the banks can't offload as much of the debt as before, they'll have less money to lend to cardholders.
However, Congress isn't going to let credit card companies just hike up interest rates on cards, nevertheless, the end result of this legislation is that it will tighten lending/underwriting standards even more (this is actually good for the long run but VERY PAINFUL in the short run). Interestingly, Meredith Whitney spoke about this legislation a few months back - credit cards come up around at the 2 minute mark):
So what does all this mean? We are going to have to consume less and recognize.
I get bailing out the debt holders in the GSE's. Have you seen the list? China, Russia, Japan, etc...a lot of foreign creditors that we don't want to piss off. But the what is this shit about helping the equity holders???
I don't want part of my paycheck buying stock in either Fannie or Freddy (can't we build a school or something with that money instead?). Also, I sure as hell don't want to bailout assholes like Bill Miller, who made dumb ass bets and deserve to be dragged through the streets and laughed at by third rate bloggers like myself.
And apparently Sam Zell (another person you want to listen closely to) has noticed.
Synopsis:
Billionaire Real Estate Mogul Sam Zell is expecting a wave of consolidation in Brazil's publicly traded real estate sector (mid 2009 and 2010)
Sam Zell's Equity Int., which owns a lot of Gafisa, expects Gafisa to snap up a bunch of recent housing IPO's at distressed levels (oversupply and cheap shares)
"We've actually received calls, it's fascinating, from two or three founder CEOs, who are -- I don't want to say waving the white flag -- but are pulling the white flag out of their pocket," he said. "I don't know how long it will take for them; I don't know how big the flag is."
Why so many struggling homebuilders? Housing surplus? Lack of demand? Nope. Poor investor relations departments are the cause...
Many of the founders behind the new public realty companies, while highly entrepreneurial, were ill-prepared to deal with the level of disclosure investors demand, he said
"As they get punished, they are now deprived of equity and debt capital. And that freezing out is now sweeping, call it the bottom third," he said.
This bottom third is trading 40% off their highs, talk about easy pickings
Brazilian Housing Market fundies are as follow: 185 million people with a housing shortage of 7-8 million. in fact the fundies are so good that:
Investors believe Brazil will outstrip Mexico in size, demand and investor return. Mexico has been the poster child this decade for investing in emerging market home-building.
There are hurdles including lack of a strong securitization market, and uncertainty about who will be left standing in this fledgling market. My money is with Sam Zell and Gafisa.
Senior attending Cal Poly University in San Luis Obispo, CA. Majoring in Finance and Accounting.
I was born and raised in the Bay Area (San Jose) and hope to use my degree to work in the world of corporate finance.
In my free time I enjoy sports, hanging out with friends, and of course learning about the global financial markets.
