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Volatility Can Be Risk, At Rare Times

Friday, September 19th, 2014
Photo Credit: Matt Cavanagh

Photo Credit: Matt Cavanagh

There is a saying in the markets that volatility is not risk. In general this is true, and helps to explain why measures like beta and standard deviation of returns do not measure risk, and are not priced by the market. After all, risk is the probability of losing money, and the severity thereof.

It’s not all that different from the way that insurance underwriters think of risk, or any rational businessman for that matter. But just to keep things interesting, I’d like to give you one place where volatility is risk.

When overall economic conditions are serene, many people draw the conclusion that it will stay that way for a long time. That’s a mistake, but that’s human nature. As a result, those concluding that economic conditions will remain serene for a long time decide to take advantage of the situation and borrow money.

When volatility is low, typically credit spreads are low. Why not take advantage of cheap capital? Well, I would simply argue that interest rates are for a time, and if you don’t overdo it, paying interest can be managed. But what happens if you have to refinance the principal of the loan at an inopportune time?

When volatility and interest spreads are low for you, they are low for a lot of other people also. Debt builds up not just for you, but for society as a whole. This can have the impact of pushing up prices of the assets purchased using debt. In some cases, the rising asset prices can attract momentum buyers who also borrow money in order to own the rising assets.

This game can continue until the economic yield of the assets is less than the yield on the debt used to finance the assets. Asset bubbles reach their breaking point when people have to feed cash to the asset beyond the ordinary financing cost in order to hold onto it.

In a situation like this, volatility becomes risk. Too many people have entered into too many fixed commitments and paid too much for a group of assets. This is one reason why debt crises seem to appear out of the blue. The group of assets with too much debt looks like they are in good shape if one views it through the rearview mirror. The loan-to-value ratios on recent loans based on current asset values look healthy.

But with little volatility in some subsegment of the overly levered assets, all of a sudden a small group of the assets gets their solvency called into question. Because of the increasing level of cash flows necessary to service the debt relative to the economic yield on the assets, it doesn’t take much fluctuation to make the most marginal borrowers question whether they can hold onto the assets.

Using an example from the recent financial crisis, you might recall how many economists, Fed governors, etc. commented on how subprime lending was a trivial part of the market, was well-contained, and did not need to be worried about. Indeed, if subprime mortgages were the only weak financing in the market, it would’ve been self-contained. But many people borrowed too much chasing inflated values of residential housing.  As asset values fell, more and more people lost willingness to pay for the depreciating assets.

We’ve had other situations like this in our markets. Here are some examples:

  • Commercial mortgage loans went through a similar set of issues in the late 80s.
  • Lending to lesser developed countries went through similar set of issues in the early 80s.
  • The collateralized debt obligation markets seem to have their little panics every now and then. (late 90s, early 2000s, mid 2000s, late 2000s)
  • During the dot-com bubble, too much trade finance was extended to marginal companies that were burning cash rapidly.
  • The roaring 20s were that way in part due to increased debt finance for corporations and individuals.

At the peak some say, “Nobody rings a bell.” This is true. But think of the market peak as being like the place where the avalanche happened 10 minutes before it happened. What set off the avalanche? Was it the little kid at the bottom of the valley who decided to yodel? Maybe, but the result was disproportionate to the final cause. The far more amazing thing was the development of the snow into the configuration that could allow for the avalanche.

This is the way things are in a heavily indebted financial system. At its end, it is unstable, and at its initial unwinding the proximate cause of trouble seems incapable of doing much harm. But to give you another analogy ask yourself this: what is more amazing, the kid who knocks over the first domino, or the team of people spending all day lining up the huge field of dominoes? It is the latter, and so it is amazing to watch large groups of people engaging in synchronized speculation not realizing that they are heading for a significant disaster.

As for today, I don’t see the same debt buildup has we had growing from 2003 to 2007. The exceptions maybe student loans, parts of the energy sector, parts of the financial sector, and governments. That doesn’t mean that there is a debt crisis forming, but it does mean we should keep our eyes open.

The FSOC is Full of Hot Air

Saturday, September 6th, 2014

I’ve written about this before, but if the FSOC wants to prove that they don’t know what they are doing, they should define a large life insurer to be a systemic threat.

It is rich, really rich, to look at the rantings of a bunch of bureaucrats and banking regulators who could not properly regulate banks for solvency from 2003-2008, and have them suggest solvency regulation for a class of businesses that they understand even less.

And, this is regarding an industry that posed little systemic threat during the financial crisis.  Yes, there were the life subsidiaries of AIG that were rescued by the Fed, and a few medium-large life insurers like Hartford and Lincoln National that took TARP money that they didn’t need.  Even if all of these companies failed, it would have had little impact on the industry as a whole, much less the financial sector of the US.

Life insurance companies have much longer liability structures than banks.  They don’t have to refresh their financing frequently to stay solvent.  It is difficult to have a “run on the company” during a time of financial weakness.  Existing solvency regulation done by actuaries and filed with the state regulators considers risks that the banks often do not do in their asset-liability analyses.

Systemic risk comes from short-dated financing of long-dated assets, which is often done by banks, but rarely by life insurers.  I’ve written about this many times, and here are two of the better ones:

MetLife and other insurers should not have to live with the folly of “Big == Systemic Risk.”  Rather, let the FSOC focus on all lending financials that borrow short and lend long, particularly those that use the repurchase markets, or fund their asset inventories via short-term lending agreements.  That is the threat — let them regulate banks and pseudo-banks right before they dare to regulate something they clearly do not understand.

Peddling the Credit Cycle

Monday, August 25th, 2014

9142514184_9c85b423ae_z Starting again with another letter from a reader, but I will just post his questions in response to this article:

1) How much emphasis do you put on the credit cycle? I guess given your background rather a great deal, although as a fundamentals guy, I imagine you don’t try and make macro calls.

2)  What sources do you look at to make estimates of the credit cycle? Do you look at individual issues, personal models, or are there people like Grant’s you follow?

3) Do you expect the next credit meltdown to come from within the US (as your article suggests is possible) or externally?

4) How do you position yourself to avoid loss / gain from a credit cycle turn? Do you put more emphasis on avoiding loss or looking for profitable speculation (shorts or quality)

1) I put a lot of emphasis on the credit cycle.  I think it is the governing cycle in the overall economic cycle.  When some sector of the economy finds itself under credit stress, it has a large impact on stocks in that sector and related areas.

The problem is magnified when that sector is banks, S&Ls and other lending enterprises.  When that happens, all of the lending-dependent areas of the economy tend to slump, especially those that have had the greatest percentage increase in debt.

There’s a saying among bond managers to avoid the area with the greatest increase in debt.  That would have kept you out of autos in the early 2000s, Telecoms after that, and Banks/Finance heading into the Financial Crisis.  Some suggest that it is telling us to avoid the junior energy names now — those taking on a lot of debt to do fracking… but that’s too small to be a significant crisis.  Question to readers: where do you see debt rising?  I would add the US Government, other governments, and student loans, but where else?

2) I just read.  I look for elements of bad underwriting: loosening credit standards, poor collateral, financial entities focused on growth at all costs.  I try to look at credit spread relationships relative to risks undertaken.  I try to find risks that are under- and over-priced.  If I can’t find any underpriced risks, that tells me that we are in trouble… but it doesn’t tell me when the trouble will hit.

I also try to think through what the Fed is doing, and think what might be harmed in the next tightening cycle.  This is only a guess, but I suspect that emerging markets will get hit again, just not immediately once the FOMC starts tightening.  It may take six months before the pain is felt.  Think of nations that have to float short-term debt to keep things going, particularly if it is dollar-denominated.

I would read Grant’s… I love his writing, but it costs too much for me.  I would rather sit down with my software and try to ferret out what industries are financing with too much debt (putting it on my project list…).

3) At present, I think that an emerging markets crisis is closer than a US-centered crisis.  Maybe the EU, Japan, or China will have a crisis first… the debt levels have certainly been increasing in each of those places.  I think the US is the “least dirty shirt,” but I don’t hold that view strongly, and am willing to be challenged on that.

That last piece on the US was written about the point of the start of the last “bitty panic,” as I called it.  For a full-fledged crisis in US corporates, we need the current high issuance of  corporates to mature for 2-3 years, such that the cash is gone, but the debts remain, which will be hard amid high profit margins.  Unless profit margins fall, a crisis in US corporates will be remote.

4) My goal is not to make money off of the bear phase of the credit cycle, but to lose less.  I do this because this is very hard to time, and I am not good with Tactical Asset Allocation or shorting.  There are a lot of people that wait a long time for the cycle to turn, and lose quite a bit in the process.

Thus, I tend to shift to higher quality companies that can easily survive the credit cycle.  I also avoid industries that have recently taken on a lot of debt.  I also raise cash to a small degree — on stock portfolios, no more than 20%.  On bond portfolios, stay short- to intermediate-term, and high to medium high quality.

In short, that’s how I view the situation, and what I would do.  I am always open to suggestions, particularly in a confusing environment like this.  If you’re not puzzled about the current environment, you’re not thinking hard enough. ;)

Till next time.

A Few Investment Notes

Saturday, August 9th, 2014

Just a few notes for this evening:

1) I’ve been a bull on the long end of the Treasury curve for a while.  It’s been a winning bet, and the drumbeat of “interest rates have nowhere to go but up” continues.  Here’s an argument from Jeffrey Gundlach on why long rates should remain low, and maybe go lower:

Gundlach, however, was one of the very few people who believed rates would stay low, especially with the Federal Reserve committed to keeping rates low with its loose monetary policy.

It’s important to note that U.S. Treasuries don’t have the lowest yields in the world. French and German government bonds have yields that are about 100 basis points lower than those of Treasuries. In other words, those European bonds actually make U.S. bonds look cheap, meaning that yields have room to go lower.

This will trend toward lower rates will eventually have to end, but neither GDP growth, inflation, or business lending justifies it at present.

2) From Josh Brown, he notes that correlations went up considerably with all risk assets in the last bitty panic.  Worth a read.  My two cents on the matter comes from my recent article, On the Recent Anxiety in High Yield Bonds, where I noted how much yieldy stocks got hit — much more than expected.  I suspect that some asset allocators with short-dated or small stop-loss trading rules began selling into the bitty panic, but that is just a guess.

3) That would help to explain the loss of liquidity in the bond market during the bitty panic.  This article from Tracy Alloway at the FT explores that topic.  One commenter asked:

Isn’t it a bit odd to say lots of people sold quickly *and* that there isn’t enough liquidity? 

Liquidity means a number of things.  In this situation, spreads widened enough that parties that wanted to sell had to give up price to do so, allowing the brokers more room to sell them to skittish buyers willing to commit funds.  Sellers were able to get trades done at unfavorable levels, but they were determined to get the trades done, and so they were done, and a lot of them.  Buyers probably had some spread target that they could easily achieve during the bitty panic, and so were willing to take on the bonds.  Having a balance sheet with slack is a great thing when others need liquidity now.

One other thing to note from the article is that it mentioned that retail investors now own 37% of credit, versus 29% in 2007, according to RBS. Also that investment funds has been able to buy all of the new corporate debt sold since 2008.

There’s more good stuff in the article including how “matrix pricing” may have influenced the selloff.  When spreads were so tight, it may not have taken a very large initial sale to make the estimated prices of other bonds trade down, particularly if the sales were of lower-rated, less-traded bonds.  Again, worth a read.

4) Regarding credit scores, three articles:

From the WSJ article:

Fair Isaac Corp. said Thursday that it will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency.

I think there is less here than meets the eye.  This only affects those borrowing from lenders using the particular FICO scores that were modified.  Not all lenders use that particular score, and many use FICO data disaggregated to create their own score, or ask FICO to give them a custom score that they use.  Again, from the WSJ article:

Fair Isaac releases new scoring models every few years, and it is up to lenders to choose which ones to use. The new score will likely be adopted by credit-card and auto lenders first, says John Ulzheimer, president of consumer education at CreditSesame.com and a former Fair Isaac manager.

Mortgages are likely to lag, since the FICO scores used by most mortgage lenders are two versions old.

The impact of the changes on borrowers is likely to be significant. Accounts that are sent to collections, including credit-card debts and utility bills, can stay on borrowers’ credit reports for as long as seven years, even when their balance drops to zero, and can lower their scores by up to 100 points, said Mr. Ulzheimer.

The lower weight given to unpaid medical debt could increase some affected borrowers’ FICO scores by 25 points, said Mr. Sprauve.

But lowering the FICO score by itself doesn’t do anything.  Some lenders don’t adjust their hurdles to reflect the scores, if they think the score is a better measure of credit for their time-horizon, and they want more loan volume.  Others adjust their hurdles up, because they want only a certain volume of loans to be made, and they want better quality loans at existing pricing.

Megan McArdle at Bloomberg View asks a different question as to whether it is good to extend more credit to marginal borrowers?  Didn’t things go wrong doing that before?  Her conclusion:

That in itself [DM: pushing for more loans to marginal borrowers as a matter of policy] is an interesting development. Ten years ago, politicians were pressing hard for banks to extend the precious boon of homeownership to every man, woman and shell corporation in America. Five years ago, when people were pushing for something like the CFPB, the focus of the public debate had dramatically shifted toward protecting people from credit. Oh, there were complaints about the cost of subprime loans, but ultimately, on most of those loans, the problem wasn’t the interest rate but the principal: Too many people had taken out loans that they could not realistically afford to pay, especially if anything at all went wrong in their lives, from a job loss to a divorce to an unexpected illness. And so you heard a lot of complaints about predatory lenders who gave people more credit than they could handle.

Credit has tightened considerably since then, and now, it appears, we’re unhappy with that. We want cheaper, easier credit for everyone, and particularly for the kind of financially struggling people who have seen their credit scores pummeled over the last decade. And so we see the CFPB pressing FICO to go easier on people with satisfied collections.

That’s not to say that the CFPB is wrong; I don’t know what the ideal amount of credit is in a society, or whether we are undershooting the mark. What I do think is that the U.S. political system — and, for that matter, the U.S. financial system — seems to have a pretty heavy bias toward credit expansion. Which explains a lot about the last 10 years.

Personally, I look at this, and I think we don’t learn.  Credit pulls demand into the present, which is fine if it doesn’t push losses and heartache into the future.  We are better off with a slower, less indebted economy for a time, and in the end, the economy as a whole will be better off, with people saving to buy in the future, rather than running the risk of defaults, and a very punk economy while we work through the financial losses.

A Different Look at Neglect

Friday, August 1st, 2014

It’s good to look at stocks that not everyone else is looking at.  A little neglect can be a good thing.

  • Companies that are a little illiquid.
  • Companies with a dedicated shareholder base; they don’t sell at the drop of a hat.
  • Companies with control investors that don’t give outside passive minority investors the short end of the stick.
  • Companies that have odd business models that have most investors ignore them
  • Companies in boring businesses.

Let’s look at this top down, looking at neglect by market sector.  Days to turn over indicates how rapidly stocks are traded.  A high number means they trade more slowly.

SectorMarket Cap ($M)Dollar Volume ($K)Days to turn over
05 – Consumer Non-Cyclical1,536,8077,274,592211
07 – Financial3,511,04116,767,713209
12 – Utilities1,051,8115,348,267197
06 – Energy2,425,78714,781,550164
02 – Capital Goods1,253,3617,882,012159
08 – Health Care2,428,96916,080,916151
Grand Total23,817,027161,861,109147
01 – Basic Materials947,8306,770,631140
11 – Transportation594,9894,279,380139
03 – Conglomerates15,805116,462136
09 – Services4,936,83537,308,869132
10 – Technology4,368,57538,382,921114
04 – Consumer Cyclical745,2176,867,798109

In general, colder sectors attract more long-term holders.  Sectors where competitive conditions change more rapidly turn over faster.

An aside before we go on — I excluded from this analysis:

  • Foreign stocks trading on US exchanges
  • Over the counter stocks
  • Stocks with less than $10 million in market cap
  • Exchange traded products

That left me with around 3900 stocks.  As an aside, stock turnover seems have to increased, and I wonder if high frequency trading and ETP creation/liquidation might be driving that.  147 days for an average holding period means stocks trade their entire market capitalization  around 2.5x per year.  Cue up the commentary from Buffett and Munger about how most trading in the stock market is wasted effort.

But now let’s look at industries:

IndustryMarket Cap ($M)Dollar Volume ($K)Days to turn over
0715 – Insurance (Property & Casualty)632,4491,730,968365
0112 – Fabricated Plastic & Rubber3,29810,484315
1206 – Natural Gas Utilities435,1061,407,846309
0506 – Beverages (Non-Alcoholic)354,7101,217,841291
1103 – Air Courier139,858505,601277
0521 – Personal & Household Products434,0081,574,389276
1209 – Water Utilities17,10364,198266
0724 – Money Center Banks223,336877,033255
0524 – Tobacco272,3851,170,334233
0606 – Oil & Gas – Integrated438,1811,900,557231
0957 – Retail (Grocery)398,9811,740,963229
0712 – Insurance (Miscellaneous)51,749227,575227
0218 – Misc. Capital Goods417,8911,859,649225
0975 – Waste Management Services59,927283,562211
0730 – S&Ls/Savings Banks1,8879,013209
1112 – Railroads186,397902,219207
0809 – Major Drugs227,4191,135,147200
0915 – Communications Services692,3733,519,894197
0503 – Beverages (Alcoholic)52,692273,645193
0727 – Regional Banks1,227,8136,422,106191
1030 – Scientific & Technical Instruments265,5951,393,898191
0706 – Insurance (Accident & Health)247,6221,310,785189
0718 – Investment Services554,2252,934,362189
0418 – Footwear80,706428,470188
0512 – Fish/Livestock1,91710,383185
0703 – Consumer Financial Services405,6972,203,610184
0203 – Aerospace and Defense402,2232,254,100178
0960 – Retail (Home Improvement)169,283956,876177
0127 – Misc. Fabricated Products77,222439,594176
0221 – Mobile Homes & RVs5,29731,414169
0612 – Oil Well Services & Equipment574,2923,407,144169
0106 – Chemicals – Plastics and Rubbers173,0531,038,370167
0954 – Retail (Drugs)230,4951,417,370163
1109 – Misc. Transportation73,963456,181162
0103 – Chemical Manufacturing353,3602,227,847159
0709 – Insurance (Life)166,2631,052,261158
0803 – Biotechnology & Drugs1,613,67510,424,895155
1203 – Electric Utilities599,6033,876,223155
0415 – Auto & Truck Parts203,5961,324,773154
0509 – Crops4,88931,874153
0918 – Hotels & Motels94,044616,953152
0609 – Oil & Gas Operations1,386,1759,141,482152
0209 – Construction – Supplies and Fixtures140,270934,529150
1006 – Computer Hardware72,374487,123149
1036 – Software & Programming1,152,9447,816,781147
Grand Total23,817,027161,861,109147
0921 – Motion Pictures159,5681,105,864144
1024 – Electronic Instruments & Controls182,5691,279,912143
0515 – Food Processing403,5982,854,143141
0909 – Business Services446,0843,157,933141
0812 – Medical Equipment & Supplies436,7333,130,033140
0930 – Printing Services7,17051,557139
0109 – Containters & Packaging81,869590,633139
0933 – Real Estate Operations594,2864,295,888138
0206 – Construction & Agricultural Machinery137,131991,809138
0303 – Conglomerates15,805116,462136
0969 – Schools21,108160,274132
1115 – Trucking44,104336,398131
0939 – Rental & Leasing238,5641,828,936130
0130 – Non-Metallic Mining4,78937,031129
0942 – Restaurants219,6611,709,208129
1118 – Water Transportation32,241255,920126
0406 – Appliances & Tools55,182456,389121
0927 – Printing & Publishing91,943760,613121
0133 – Paper & Paper Products30,855256,597120
0936 – Recreational Activities75,698643,463118
0124 – Metal Mining98,839864,894114
0430 – Recreational Products54,015474,019114
0421 – Furniture & Fixtures31,741279,508114
0948 – Retail (Catalog & Mail Order)266,9042,421,091110
0806 – Healthcare Facilities151,1421,390,841109
0121 – Iron & Steel76,186704,432108
0924 – Personal Services41,546386,447108
0403 – Apparel/Accessories89,378848,477105
1018 – Computer Services1,023,2389,989,880102
1003 – Communications Equipment837,8018,227,385102
0972 – Security Systems & Services8,89288,979100
1021 – Computer Storage Devices124,1361,290,69696
0963 – Retail (Specialty Non-Apparel)216,2232,271,38695
0945 – Retail (Apparel)160,3901,696,87995
0906 – Broadcasting & Cable TV471,3875,029,75894
0433 – Textiles – Non-Apparel11,455123,78993
1033 – Semiconductors670,9807,309,56392
0951 – Retail (Department & Discount)102,8491,133,64091
1012 – Computer Networks14,378159,28890
0903 – Advertising39,473442,18089
0409 – Audio & Video Equipment11,660130,67689
0518 – Office Supplies12,608141,98189
0215 – Construction Services119,7821,361,92288
0912 – Casinos & Gaming109,7031,259,52087
0424 – Jewelry & Silverware6,52778,56883
0603 – Coal27,139332,36682
0118 – Gold & Silver20,871256,84281
0115 – Forestry & Wood Products27,489343,90780
1027 – Office Equipment4,01051,06479
0412 – Auto & Truck Manufacturers189,0922,548,45474
0436 – Tires8,943126,83871
0212 – Construction – Raw Materials30,768448,58969
1106 – Airline118,4261,823,06165
0966 – Retail (Technology)20,283329,63762
0427 – Photography2,92347,83761
1015 – Computer Peripherals20,549377,33054

Again, the pattern is more volatile and controversial industries trade more frequently than the more stable industries.  One one sense, this is obvious, because the stock market can be used for two purposes — investing and gambling.  Gambling is much more attractive when prices are volatile, and the prospects for making a big win are significant. (Even if the possibility of big losses is high as well.  Oh well, profits tend to flow to those  who eliminate the downside.)

Finally, let’s look at individual stocks, segmented by market capitalization.

Behemoth Stocks

CompanyTickerSectorIndustryDays
Berkshire Hathaway Inc.BRK.A07 – Financial0715 – Insurance (Property & Casualty)6,579
Wal-Mart Stores, Inc.WMT09 – Services0957 – Retail (Grocery)542
Exxon Mobil CorporationXOM06 – Energy0609 – Oil & Gas Operations453
Johnson & JohnsonJNJ08 – Health Care0803 – Biotechnology & Drugs427
PepsiCo, Inc.PEP05 – Consumer Non-Cyclical0506 – Beverages (Non-Alcoholic)365
Procter & Gamble Company, ThePG05 – Consumer Non-Cyclical0521 – Personal & Household Products362
General Electric CompanyGE02 – Capital Goods0218 – Misc. Capital Goods353
Wells Fargo & CoWFC07 – Financial0727 – Regional Banks345
Coca-Cola Company, TheKO05 – Consumer Non-Cyclical0506 – Beverages (Non-Alcoholic)341
Chevron CorporationCVX06 – Energy0606 – Oil & Gas – Integrated339
     
Comcast CorporationCMCSA09 – Services0915 – Communications Services196
QUALCOMM, Inc.QCOM10 – Technology1033 – Semiconductors193
Citigroup IncC07 – Financial0727 – Regional Banks175
Cisco Systems, Inc.CSCO10 – Technology1003 – Communications Equipment161
Intel CorporationINTC10 – Technology1033 – Semiconductors146
Bank of America CorpBAC07 – Financial0727 – Regional Banks138
Gilead Sciences, Inc.GILD08 – Health Care0803 – Biotechnology & Drugs123
Amazon.com, Inc.AMZN09 – Services0948 – Retail (Catalog & Mail Order)105
Apple Inc.AAPL10 – Technology1003 – Communications Equipment93
Facebook IncFB10 – Technology1018 – Computer Services50

The table above lists the biggest stocks — the top ten that are less traded, and the top ten that are most traded.  No surprises, those that are most traded are more controversial than those that are traded less.  Also, some companies have investors with control positions, which further slows down trading as most control investors rarely trade.

Large Cap Stocks

CompanyTickerSectorIndustryDays
Cheniere Energy Partners LP HoCQH12 – Utilities1206 – Natural Gas Utilities1,709
CNA Financial CorpCNA07 – Financial0715 – Insurance (Property & Casualty)1,647
Icahn Enterprises LPIEP09 – Services0963 – Retail (Specialty Non-Apparel)1,355
Spectra Energy Partners, LPSEP12 – Utilities1206 – Natural Gas Utilities1,190
Enable Midstream Partners LPENBL06 – Energy0606 – Oil & Gas – Integrated1,166
Cheniere Energy Partners LPCQP12 – Utilities1206 – Natural Gas Utilities1,041
Thomson Reuters Corporation (UTRI09 – Services0927 – Printing & Publishing1,012
Western Gas Equity Partners LPWGP06 – Energy0609 – Oil & Gas Operations969
Enterprise Products Partners LEPD12 – Utilities1206 – Natural Gas Utilities956
Plains GP Holdings LPPAGP06 – Energy0612 – Oil Well Services & Equipment953
     
Citrix Systems, Inc.CTXS10 – Technology1036 – Software & Programming54
United Continental Holdings InUAL11 – Transportation1106 – Airline53
LinkedIn CorpLNKD10 – Technology1018 – Computer Services47
Yahoo! Inc.YHOO10 – Technology1018 – Computer Services47
Whole Foods Market, Inc.WFM09 – Services0957 – Retail (Grocery)45
Micron Technology, Inc.MU10 – Technology1033 – Semiconductors39
CBS CorporationCBS09 – Services0906 – Broadcasting & Cable TV37
Tesla Motors IncTSLA04 – Consumer Cyclical0412 – Auto & Truck Manufacturers21
Netflix, Inc.NFLX09 – Services0906 – Broadcasting & Cable TV19
Twitter IncTWTR10 – Technology1018 – Computer Services19

What fascinates me here about the low turnover stocks is the dominance of energy limited partnerships.  Since they are income vehicles, they don’t trade as much stocks used for speculative gains.

Mid-cap Stocks

CompanyTickerSectorIndustryDays
CIM Commercial Trust CorpCMCT09 – Services0939 – Rental & Leasing9,382
Crown Media Holdings, IncCRWN09 – Services0906 – Broadcasting & Cable TV4,333
Clear Channel Outdoor HoldingsCCO09 – Services0903 – Advertising2,258
American National Insurance CoANAT07 – Financial0715 – Insurance (Property & Casualty)1,756
Gamco Investors IncGBL07 – Financial0718 – Investment Services1,627
Valhi, Inc.VHI01 – Basic Materials0103 – Chemical Manufacturing1,385
OCI Partners LPOCIP01 – Basic Materials0103 – Chemical Manufacturing1,205
Summit Midstream Partners LPSMLP12 – Utilities1206 – Natural Gas Utilities1,199
TFS Financial CorporationTFSL07 – Financial0727 – Regional Banks1,193
Global Partners LPGLP06 – Energy0609 – Oil & Gas Operations1,131
     
FireEye IncFEYE10 – Technology1036 – Software & Programming21
AK Steel Holding CorporationAKS01 – Basic Materials0121 – Iron & Steel21
Ariad Pharmaceuticals, Inc.ARIA08 – Health Care0803 – Biotechnology & Drugs21
Zillow IncZ09 – Services0933 – Real Estate Operations20
Trulia IncTRLA09 – Services0909 – Business Services20
Sunedison IncSUNE10 – Technology1033 – Semiconductors19
J C Penney Company IncJCP09 – Services0951 – Retail (Department & Discount)17
SolarCity CorpSCTY10 – Technology1033 – Semiconductors17
GT Advanced Technologies IncGTAT10 – Technology1033 – Semiconductors15
Yelp IncYELP09 – Services0927 – Printing & Publishing12

Again. hot stocks with uncertain returns at the bottom, and stocks with more certain prospects at the top.   Note the income vehicles in the less traded stocks.

Small Cap Stocks

CompanyTickerSectorIndustryDays
PHI Inc.PHII06 – Energy0612 – Oil Well Services & Equipment13,434
First Mid-Illinois Bancshares,FMBH07 – Financial0727 – Regional Banks10,674
QAD Inc.QADB10 – Technology1036 – Software & Programming8,529
Intermountain Community BancorIMCB07 – Financial0727 – Regional Banks8,374
Greene County BancorpGCBC07 – Financial0727 – Regional Banks7,021
Oconee Federal FinancialOFED07 – Financial0727 – Regional Banks6,143
Bel Fuse, Inc.BELFA10 – Technology1024 – Electronic Instruments & Controls5,131
PrimeEnergy CorporationPNRG06 – Energy0609 – Oil & Gas Operations4,303
Community Financial CorpTCFC07 – Financial0727 – Regional Banks3,608
Transcontinental Realty InvestTCI09 – Services0933 – Real Estate Operations3,168
     
PowerSecure International, IncPOWR12 – Utilities1203 – Electric Utilities20
Penn Virginia CorporationPVA06 – Energy0609 – Oil & Gas Operations20
Pixelworks, Inc.PXLW10 – Technology1033 – Semiconductors20
IsoRay, Inc.ISR08 – Health Care0812 – Medical Equipment & Supplies18
Quantum Fuel Systems Tech WorlQTWW04 – Consumer Cyclical0415 – Auto & Truck Parts17
Pacific Ethanol IncPEIX01 – Basic Materials0103 – Chemical Manufacturing17
Glu Mobile Inc.GLUU10 – Technology1036 – Software & Programming15
Achillion Pharmaceuticals, IncACHN08 – Health Care0809 – Major Drugs14
Walter Energy, Inc.WLT06 – Energy0603 – Coal14
Plug Power IncPLUG10 – Technology1024 – Electronic Instruments & Controls8

Look at all of the regional banks amid those that turn over less.  Look at all of the controversial stocks amid  those that trade frequently.

Microcap Stocks

CompanyTickerSectorIndustryDays
Bridgford Foods CorporationBRID05 – Consumer Non-Cyclical0515 – Food Processing20,286
Magyar Bancorp, Inc.MGYR07 – Financial0727 – Regional Banks8,948
Bowl America IncorporatedBWL.A09 – Services0936 – Recreational Activities8,599
MSB Financial Corp.MSBF07 – Financial0727 – Regional Banks5,562
Siebert Financial Corp.SIEB07 – Financial0718 – Investment Services5,136
Pathfinder Bancorp, Inc.PBHC07 – Financial0727 – Regional Banks4,764
Jacksonville Bancorp IncJXSB07 – Financial0727 – Regional Banks4,567
Oak Valley Bancorp(NDA)OVLY07 – Financial0727 – Regional Banks4,363
Howard Bancorp IncHBMD07 – Financial0727 – Regional Banks4,308
Bay Bancorp IncBYBK07 – Financial0727 – Regional Banks4,240
     
Hyperdynamics CorporationHDY06 – Energy0609 – Oil & Gas Operations16
InterCloud Systems IncICLD09 – Services0909 – Business Services14
BioFuel Energy Corp.BIOF01 – Basic Materials0103 – Chemical Manufacturing10
India Globalization Capital, IIGC02 – Capital Goods0215 – Construction Services8
LiveDeal IncLIVE10 – Technology1018 – Computer Services8
Giga-tronics, IncorporatedGIGA10 – Technology1024 – Electronic Instruments & Controls7
Digital Ally, Inc.DGLY04 – Consumer Cyclical0409 – Audio & Video Equipment5
DARA Biosciences IncDARA08 – Health Care0803 – Biotechnology & Drugs4
Spherix IncSPEX09 – Services0909 – Business Services4
USEC Inc.USU12 – Utilities1203 – Electric Utilities3

Look at all of the bitty banks that don’t get traded.  Perfect for some of my friends who buy and hold such banks, if they can get the trade on.  And then, look at all of the controversial companies whose stocks trade trade like a spinning top.

I encourage all of my readers to analyze situations where there are fewer eyeballs looking.  Analyze situations where control investors limit the trading relative to the size of the firm.  Go where others don’t go, because it is dull.  Look for advantage where few others do.  And after that, be willing to hold for a while — years, not months.  Pay attention as to whether the company has a defensible business model — strong balance sheet, moat versus competition, etc.  Then look for a reasonable to low price.  There is the making of a good investment.

Full disclosure: long CVX & BRK/B

On Current Credit Conditions

Friday, July 18th, 2014

This should be short.  Remember that credit and equity volatility are strongly related.

I am dubious about conditions in the bank loan market because Collateralized Loan Obligations [CLOs] are hot now and there are many that want to take the highest level of risk there.  I realize that I am usually early on credit issues, but there are many piling into CLOs, and willing to take the first loss in exchange for a high yield.  Intermediate-term, this is not a good sign.

Note that corporations take 0n more debt when rates are low.  They overestimate how much debt they can service, because if rates rise, they are not prepared for the effect on earnings per share, should the cost of the debt reprice.

It’s a different issue, but consider China with all of the bad loans its banks have made.  They are facing another significant default, and the Chinese Government looks like it will let the default happen.  That will not likely be true if the solvency of one of their banks is threatened, so keep aware as the risks unfold.

Finally, look at the peace and calm of low implied volatilities of the equity markets.  It feels like 2006, when parties were willing to sell volatility with abandon because the central banks of our world had everything under control.  Ah, remember that?  Maybe it is time to buy volatility when it is cheap.  Now here is my question to readers: aside from buying long Treasury bonds, what investments can you think of that benefit from rising implied volatility and credit spreads, aside from options and derivatives?  Leave you answers in the comments or email me.

This will sound weird, but I am not as much worried about government bond rates rising, as I am with credit spreads rising.  Again, remember, I am likely early here, so don’t go nuts applying my logic.

PS — weakly related, also consider the pervasiveness of BlackRock’s risk control model.  Dominant risk control models may not truly control risk, because who will they sell to?  Just another imbalance of which to be wary.

But They are not Actuaries, nor CFAs

Friday, June 27th, 2014

I am grateful that risk managers inside banks have more clout these days.  That said, I want it to persist, and the best way to do it is to have risk managers beholden to an ethics code, like actuaries or CFAs.

This is valuable, because the risk manager can point to a body of ethics that says to his manager, “I am sorry, but those of my discipline say that this action is unethical,” when line managers complain that the risk manager is killing business by insisting that certain risk standards should be maintained.

Actuarial risk models cover the life of the business, unlike Wall Street models that measured risk in terms of days.  Cash flows mater, and the ability to meet the demand for cash matters.  Long-term risk models tend to surface risks better than short-term models because an intelligent businessman can ask what are the odds that we will have a crisis over the duration of our existing business?

Once on a task force of the Society of Actuaries, when discussing non-traditional actuaries going to Wall Street, I said, “Great idea, but the line managers will eventually kill anyone that gets in their way.  They don’t want people who have an ethics code.  It inhibits business.”  After that, there were some nervous chuckles on the phone, and the conversation moved on.

Ethics codes are needed when the disparity of knowledge between the designers and ultimate consumers/investors/regulators is so great that there are many ways that the consumers/investors/regulators could be cheated.

My view is controversial but simple.  Every professional in investing and finance needs to have an ethics code, making them more sensitive to their clients.  The easy solution is that every investment/finance professional needs to hold a CFA charter.  The three exams are pretty minimal, and can be passed by most people with some study.  Give the actuaries a pass, their exams are far harder — far, far, far harder.

But set some boundary for ethics and examinations of competence, to clean up finance and send the flim-flam men to the edges of the market, where they belong.

 

 

Sorted Weekly Tweets

Saturday, May 10th, 2014

Market Dynamics

 

  • Yellen Comments Boost Demand for Treasury Bonds http://t.co/2lzFhL97br Carry trade rescued, grows larger 4a later day of reckoning $$ $TLT May 10, 2014
  • One of the Best Retirement Deals 9 of 10 People Ignore http://t.co/oYw4xRjEdc Contribute 2a Roth 401(k) & save big on future taxes $$ $TROW May 10, 2014
  • NYSE to Curtail Order Types Amid Debate Over Their Fairness http://t.co/JOlTvX7sie Will b interesting 2c what they curtail $$ Affects my biz May 10, 2014
  • What Baby Boomers’ Retirement Means For the US Economy http://t.co/GuECsqqWHA Cheer up, the US is in better shape than rest of the world $$ May 10, 2014
  • I’m worried about a crisis bigger than 2008: Faber http://t.co/JwpcvxA53o “For the next six months, maybe cash is the most attractive.” $$ May 10, 2014
  • When Stocks and Bonds Disagree http://t.co/BGbY9Y0C2L @reformedbroker points out anomaly. Bond mkt bigger than stock mkt, should b right $$ May 07, 2014
  • research puzzle pix by tom brakke http://t.co/xtPUCU7PDj Bloat, which I would measure by number of days to trade away the portfolio $$ $SPY May 07, 2014
  • Ten Surefire Trading Rules To Make You Rich http://t.co/fHqVJkaVuj @reformedbroker tongue-in-cheek way of telling you what not to do $$ $SPY May 06, 2014
  • Early Tap of 401(k) Replaces Homes as American Piggy Bank http://t.co/x16yXooOSx If you don’t have an “out” door 4 $$, less will go “in” May 06, 2014
  • The bond market is giving the stock market angst http://t.co/rfuGqyaPTK 2 many long bond shorts, economic weakness, low govt-measured inf $$ May 06, 2014
  • Free Life-Insurance Offer Scrutinized http://t.co/EZz4zbJsXS Nothing is free; this will come out of the life insurer dumb enough 2sell it $$ May 06, 2014
  • Bond Returns Post Global Records as Warnings Go Unheeded http://t.co/t0aXCtsu8T Long bond buyers need to fund long liabilities & momentum $$ May 06, 2014
  • Borrowing Cash to Buy Complex Assets Is In Vogue Again http://t.co/8urmZjge1i Borrowed $$ is mostly being used 2buy AAA CLOs; 10x lev ~ 8%yd May 06, 2014
  • Can’t Find Enough 30-Year Treasuries to Buy? Here’s Why http://t.co/tmFjBQ4emS Fed buying, also pensions, life insurers & speculators $$ May 05, 2014

 

Banks

 

  • Covered Bond Talks Intensify as Bank Liquidity Rules in Play http://t.co/aM7LuzeXIK Denmark needs bank capital concessions 4covered bonds $$ May 10, 2014
  • Bitcoin Breakthroughs Studied by Banks the Currency Is Out to Replace http://t.co/Frls6s04am May not be a currency, but a payment system $$ May 10, 2014
  • JPMorgan Joins Wells Fargo in Rolling Out Jumbo Offerings http://t.co/9mJFfYArs2 High end of residential housing market is hot $$ $JPM $WFC May 10, 2014
  • Fed 2 Bank Giants: Don’t Get Bigger Via Mergers http://t.co/fjw4dDAAIZ Have >10% of total financial system liabs can’t merge $$ $BAC $C $JPM May 10, 2014
  • The Real Reason Big Banks Stay Big http://t.co/GRvSHhDAUx The larger the bank, the larger the management pay packets $$ $C $BAC $WFC $JPM May 06, 2014

 

Rest of the World

 

  • Russian Aggression Prompts Finnish-Swedish Military Pact http://t.co/K9amWYRP0F It’s not an expansion of NATO yet, but reaction 2 Russia $$ May 10, 2014
  • China Property Slump Adds Danger to Local Finances http://t.co/WXdGmStbU5 Local govts rely on selling property 4 revenue; now what to do? $$ May 10, 2014
  • Ukraine’s Arms Industry Is Both Prize and Problem for Putin http://t.co/1RNJMzBvQ6 Has many arms joint ventures w/ Ukraine $$ #irony $MACRO May 10, 2014
  • Panama Can School US on Immigration http://t.co/2UYhldzlPJ “Panama is the kind of country the US once was: quick to embrace workers.” $$ May 10, 2014
  • Draghi’s Euro Angst Rising as Rally to $1.40 Pummels http://t.co/nLzHP74nYE What will he do? Sell Euros & buy Dollars? Has 2 many $$ now. May 10, 2014
  • Accident Leads to Scrutiny of Oil Sand Production http://t.co/DHVJukJNVR Little damage, but made regulators think of other bad scenarios $$ May 06, 2014
  • British Coins Pass Test in 800-Year-Old Ritual http://t.co/GKfA1KhXKO Trial of the Pyx, 1 of Britain’s oldest&strangest legal procedures $$ May 06, 2014

 

Global Economy

 

  • US Ready to Join 6-Nation Tax Alliance http://t.co/PVRpUJ1ShZ Members Will Share Information 2Fight Multinational Corporate Tax Avoidance $$ May 10, 2014
  • Ron Wyden: We Must Stop Driving Businesses Out of the Country http://t.co/ypwwGbrWlM Cutting corporate taxes to 24% would be a start $$ $SPY May 10, 2014
  • Corporate Tax Planners Vexed by New International Tax Guidelines http://t.co/LcCyHgfDc7 If elites agree, can limit tax leakages 2 havens $$ May 10, 2014
  • Decoding Dollar Turns Into Wall Street’s Parlor Game http://t.co/PeI1wrlq4v Bad speculation on strengthening $$ fails, trade gets reversed May 10, 2014
  • World Economy Stabilizes in Great Moderation 2.0 http://t.co/yCIRqXpF9h Really seems 2 early 2b trotting out an idea like this $$ $SPY $TLT May 10, 2014
  • How Russia Inc. Moves Billions Offshore & a Handful of Tax Havens May Hold Key to Sanctions http://t.co/ylIL6w66EF Expropriation risk $$ May 05, 2014
  • Tax Break ‘Blarney’: U.S. Companies Beat the System With Irish Addresses http://t.co/Ia2cM1brCS Maybe a “Value Added Tax” could fix this $$ May 05, 2014

 

Companies & Industries

 

  • Fat-Destroying Machine Doubted by Stock Traders http://t.co/2Klv4c4ozG $ELOS uses ultrasound 2 heat up & destroy fat cells. Does it work? $$ May 10, 2014
  • Son Makes $58B on Alibaba With Buffett-Type Return http://t.co/uywgbnCaxg Masayoshi Son had insight into Alibaba when invested $20M $$ May 10, 2014
  • US Shale Boom Keeps Global Oil Prices From Soaring http://t.co/ipDZdMke1o Oil Majors have 2 invest more 2 get less http://t.co/9u5lRnolmh $$ May 10, 2014
  • Lenovo Targets Mobile as Tech Empire Grows on Castoff Businesses http://t.co/sXSytLozjV Squeezing good $$ out of mature tech businesses May 10, 2014
  • Pitney Bowes changing stripes: Cramer http://t.co/QzDuxGLZjT Talks about their partnership w/ $EBAY to seamlessly estimate shipping $$ $PBI May 10, 2014
  • 5 quality stocks that are missing out on the bull run http://t.co/8GTmjMt46J Quality often misses out when credit spreads r tight $$ 2005-7? May 10, 2014
  • Alibaba Partners Keep Control After Shunning Hong Kong for US http://t.co/4XvRaqoUM5 A partnership will govern, limiting takeover efforts $$ May 10, 2014
  • Wal-Mart Notches Web Win Against Rival Amazon http://t.co/3f9chtgyME Still $AMZN is 6x larger than $WMT in online sales, long way to go $$ May 06, 2014
  • IBM’s Watson supercomputer can help settle your debates http://t.co/cFmXZXmEV6 Ask Watson a question, will give top 3 args for & against $$ May 06, 2014
  • Symantec Develops New Attack on Cyberhacking http://t.co/xbeAQgcnab Declaring Antivirus Dead, Firm Turns2Minimizing Damage From Breaches $$ May 06, 2014
  • Buffett Phase Two Means Seeking Deals More Enduring Than Stocks http://t.co/FyERjB7YO5 Trying to build the best long-term conglomerate $$ May 05, 2014

 

US Politics & Policies

 

  • Benghazi Isn’t Iran-Contra http://t.co/otSpoLR38P But the comparison reflects poorly on the Obama administration $$ May 10, 2014
  • SEC Finds Illegal or Bogus Fees Majority of Buyout Firms http://t.co/TwU954gwzm Who pays what expenses? How r fees & returns calculated? $$ May 10, 2014
  • What Timothy Geithner Really Thinks http://t.co/CxMmqJF18b Just don’t blame him, didn’t want the job & wanted 2 leave it sooner, Really? $$ May 10, 2014
  • Railroad: Federal order won’t affect oil shipments http://t.co/9nFXjxRTcP BNSF carries most of the oil coming from Bakken FD: + $BRK.B $$ May 10, 2014
  • Why Nonbank SIFI Designations Put the Cart Before the Horse http://t.co/oRQCv7r5jf FSOC & Fed don’t get systemic risk & designating SIFIs $$ May 10, 2014
  • Massachusetts Scraps Its Health Insurance Exchange http://t.co/nVB3C17iVg Fascinating how many states had to scrap their healthcare sites $$ May 06, 2014
  • Why Weather Could Determine Who Wins a Race To Measure Inflation http://t.co/2PTidHexu6 Billion Prices Project inflation measure 1%>CPI $$ May 06, 2014
  • The End of the Permissionless Web http://t.co/MWyAraGxUT Regulators want 2 become the gatekeepers for Internet innovation. It ain’t broke $$ May 06, 2014
  • Toilet Bowl Kills Fan in Violence at World Cup Host Brazil http://t.co/Qx0HSiv0dB Soccer hooliganism hits a new low, death by toilet $$ $EWZ May 05, 2014

 

 

Other

 

  • Woman With Printer Shows the Digital Ease of Bogus Cash http://t.co/kN4Ua9zZl0 Fascinating 2c how easy it is to convert $5s into $100s $$ May 10, 2014
  • Career Advice for Managers: Learn to Execute Strategy http://t.co/jI85DW4Itj Strategy should come b4 reaction to the problems of the day $$ May 10, 2014
  • Growing Number of Hispanics in US Leave Catholic Church http://t.co/0jXt2caYjl Most of those leaving go evangelical protestant $$ #readbible May 10, 2014
  • Economics students call for shakeup of the way their subject is taught http://t.co/vv8OL1xq9m Right diagnosis, wrong cure, need Austrian $$ May 07, 2014
  • Rethink The Word ‘Cancer,’ Panel Says http://t.co/jiuSNLF4JM Cancer comes in many different forms; with some, early treatment is needed $$ May 06, 2014
  • Virtual reality preps 4 impact in healthcare, manufacturing, finance http://t.co/taBVd2dFy1 Retirement planning, worker safety, training $$ May 06, 2014
  • MLB: The Year That No One Got Caught Stealing http://t.co/Pn3itlbi36 Catchers now spend more time practicing hitting than throwing $$ $SPY May 06, 2014
  • Elite Colleges Don’t Buy Happiness for Graduates http://t.co/H2S5hTml6g Happiness stems more from personal attitudes than college type $$ May 06, 2014

 

US Economy

 

  • Cancer Doctors Join Insurers in US Drug-Cost Revolt http://t.co/OrqflkeN32 Drug costs reflect price 4 successes but paying 4 failures $$ May 10, 2014
  • Later Easter Drives Retail Sales in April http://t.co/VAuXPhVGR7 Never thought Easter was that big of an economic factor $$ May 10, 2014
  • Record Meat Costs Mean Pricey Barbecues http://t.co/tNr7vcb11K Herds r smaller, as ranchers shake off past water & feed problems $$ $TSN May 10, 2014

 

Wrong

 

  • Wrong: Happy Hedge Fund Managers Earn Money for Nothing http://t.co/pOSYH3SSXO Wrong benchmark S&P 500 4 hedgie comparison s/b t-bills $$ May 10, 2014
  • Wrong: Blackstone’s Schwarzman Says Individuals Need More Alternatives http://t.co/Mnp0cjlXZ5 He’s just trolling 4 dumb $$ folks. Ignore him May 10, 2014

 

 

Comments, Replies & Retweets

 

  • If the treatment is cheap enough, & has no harmful side-effects, investors will benefit from fat returns ;) http://t.co/ROAQUU6Rpu $$ $ELOS May 07, 2014
  • “He might be comparing IRRs on PE to total returns on stocks. Trouble with that one is that capital…” — D. Merkel http://t.co/MhXU9vLCvG $$ May 07, 2014

 

Sorted Weekly Tweets

Saturday, May 3rd, 2014

US Politics & Policy

  • The Potential Bubble the Federal Reserve Cares Most About http://t.co/tp1Ug7YcaR Worrying about a bubble in the bond mkt $$ May 03, 2014
  • The Weekend Interview: The Investors at War With Political Power http://t.co/MuEvV0DQcC Courts protect our liberties from bureaucracies $$ May 03, 2014
  • Detroit Homeowners Gun Down Burglars as Police Wait for Cars http://t.co/Dkg7YEct4g This is the future of many US cities w/tight budgets $$ May 03, 2014
  • Railway exec: Keystone debate not about rail versus pipes http://t.co/bVKjkcvnq0 Aiming 4 safer tank cars & separating out natgas liquids $$ May 02, 2014
  • Xerox CIO Fixing Nevada Health Exchange, as Tough Decisions Loom http://t.co/brbP5LD0Ru Bad job by $XRX but at least they trying 2 fix it $$ May 02, 2014
  • For Now, Justice Ginsburg’s ‘Pathmarking’ Doesn’t Include Retirement http://t.co/xduXEt5OUV Interesting piece on liberal SCOTUS leader $$ May 02, 2014
  • The Supreme Court’s EPA Ruling Dims Lights on Coal Power Plants http://t.co/eAIlagHyqe This will eventually be reversed when shale fails $$ May 02, 2014
  • The Coming Two-Tier Health System http://t.co/xpIMjPnvhc The longer PPACA goes on the more people will c benefits limited & costs rise $$ May 02, 2014
  • California City of Torrance Grapples With Toyota Relocation to Texas http://t.co/OljCzROHlq Despite denials this happened b/c hi CA taxes $$ May 01, 2014
  • The Missing Benghazi Email http://t.co/amNnz6KAWT New evidence that Ben Rhodes told Susan Rice and Hillary Clinton to blame the video $$ May 01, 2014
  • Shifting Demographics Tilt Presidential Races in US Burbs $$ http://t.co/Ut6WAHwu91 Demographic effect politics will shift when OASDI chokes May 01, 2014
  • Half of people living in Illinois and Connecticut want to get out http://t.co/ewsu2wu8HT Maryland #3 b/c of high taxes $$ $SPY $TLT May 01, 2014
  • Yellen Concerned Fed Model Fails to Predict Price Moves http://t.co/P1NXGaHY6w Been true 4 a long time; Neoclassical Macroeconomics fails $$ May 01, 2014
  • U.S. on Highway to Flunking Out http://t.co/yvRybDP3Bp @Ritholtz Maybe US gasoline taxes could b dedicated to infrastructure & fix this $$ May 01, 2014
  • Property-Tax Collections Rising at Fastest Pace Since US Crash http://t.co/GoC12zZltE My, but that was a short respite from hi prop taxes $$ May 01, 2014
  • Student-Debt Forgiveness Plans Skyrocket, Raising Fears Over Higher Tuition http://t.co/ZaHVqZG6ft Forgiveness programs abused 2milk Govt $$ May 01, 2014
  • Lawyers Sue Stock Market for Being Rigged http://t.co/ntCxkptCw8 @matt_levine tells us about a plaintiff suing every broker & exchange $$ Apr 30, 2014
  • Will the Fed s Capital Rules Interfere with Monetary Policy? http://t.co/UpWnLNwIff Leverage affects banks short-run-> margins adjust up $$ Apr 30, 2014
  • The Economic and Environmental Costs of Wasted Food http://t.co/3YqsPbZzJv Difficult to avoid; need for inventories, transport costs high $$ Apr 23, 2014

 

Financials

  • Treasuries Irresistible to America’s Banks Awash in Cash http://t.co/wHjk3cRPn2 Clip a small interest margin, take little risk $$ May 03, 2014
  • Big US Banks Make Swaps a Foreign Affair http://t.co/5DD7en8pBG 5 banks intermediate 95% of derivatives $$ May 03, 2014
  • Fidelity Reaps Rewards as Banks Lose Bond Muscle http://t.co/mSTelgwh0d If the sell side does not provide liquidity, the buy side will $$ May 03, 2014
  • Bank of America Lost $2.7B in a Maze of Accounting http://t.co/K05aIQBhQE Acctg gets screwy when you mix fair value & book value elements $$ May 02, 2014
  • Traders Join Exodus as Forex Probes Add Pressure on Costs http://t.co/Aqlsb6vElW Difficult to dominate such a big mkt, but maybe they did $$ May 02, 2014
  • Warren Buffett Does Not Understand the J.P. Morgan Derivatives Positions http://t.co/poMfOnAhOS He acts to protect Berkshire vs bad debts $$ May 02, 2014
  • Fed Citing Wall Street Lapses Leads Drive on Bonds as Pay http://t.co/Ad2DOnjZYl Light version of the old “double liability” regime $$ $XLF May 02, 2014
  • Stress Tests Forecast $190B in Losses at $FNMA, $FMCC in Severe Downturn http://t.co/UA9S5Jj13a also this article http://t.co/Wh2QlFzqZh $$ May 02, 2014
  • Traders Denied M&A Payday as Firms Use Cash http://t.co/hSw2BGNjWh Global firms buy assets in native currency, thus don’t need FX traders $$ May 01, 2014
  • Fixed-income houses double down http://t.co/1rm6QHbjgc Less yield to fight over makes the fight all the tougher $$ $TLT May 01, 2014
  • Easier Homeowner Credit Compelling $WFC http://t.co/AzcGHepiJJ Cut min credit score 4borrowers of $FNMA & $FMCC loans 660->620 $$ FD: + $WFC May 01, 2014
  • Wall Street Bond Dealers Whipsawed on Bearish Treasuries Bet http://t.co/S6X2QhUgRV Caught leaning the wrong way as US economy weakens $$ Apr 30, 2014

 

China

  • Chinese Bad-Loan Ratio Rises ‘Significantly,’ Huarong Says http://t.co/Eu5AAeyGp5 Costs of prior malinvestment weigh on China $$ May 03, 2014
  • Xi’s Squeeze Leaves China’s Heartland Missing Boom http://t.co/Bt0L96guqH Efforts to constrain bad bank loans slows Chinese economy $$ $FXI May 03, 2014
  • Wealthy Chinese replace Russians as top apartment buyers http://t.co/zEWVg7dOOC Better to buy in NYC than Shanghai, Hong Kong, Singapore? $$ May 02, 2014
  • How Women Lost as Out China’s Property Market Boomed http://t.co/MXkG2udq0t China lacks law protecting married women’s property interests $$ May 02, 2014
  • Green Batteries’ Graphite Adds to China Pollution http://t.co/rxZufzpj9H Buy a $TSLA or a $HMC Prius, send polluted rain to China $$ $SPY May 01, 2014

 

Rest of the World

  • Poland’s Tusk Proposes Energy Union 2 Break Russian Hold on Gas http://t.co/CzDr3evIhe Wishful thinking as infrastructure 2 deliver lacks $$ May 03, 2014
  • More Italian Women Are Choosing to Have No Children http://t.co/fSghk0oKwP A nation that does not have children is irrelevant $$ May 03, 2014
  • Portugal Grabs Cheap Bond Deal With Eye on Bailout Exit http://t.co/9gEDWEIuYh Debt problems r not resolved, but mkts feel better 4 now $$ May 03, 2014
  • German Ship Captain Swamped in Debt Underscores Bank Risk http://t.co/eP7Xhvj67X Current EU economic policies hide bad debt risks $$ May 03, 2014
  • GoldenTree Goes Bold in Buying Russian Corporate Bonds http://t.co/d0nvYJ7Ah2 “Russia, it’s a strong credit in a difficult environment,” $$ May 03, 2014
  • One Missing Jet, One Sunken Ferry, Two Responses http://t.co/I1ZgkwQyLo @WilliamPesek compares Malaysia & S. Korea & responses 2 disaster $$ May 02, 2014
  • Turkey’s Erdogan: 1 of the World’s Most Determined Internet Censors http://t.co/12ALhoW2i3 #twitterisblockedinTurkey $$ #internetchangesall May 02, 2014
  • German Businesses Urge Halt on Sanctions Against Russia http://t.co/bJho1CvvIP Is business so global that major wars can’t be fought? $$ May 02, 2014
  • How Canada’s Flirtation w/a China Oil Market Soured http://t.co/h5HPS7pnM8 Why Canada will NEVER ship crude to China via a Pacific port $$ May 02, 2014
  • Georgia Pushes for Fast Path 2 NATO on Russian Threat http://t.co/bYY8LK1pla Is Georgia worth annoying Russia? Avoid entangling alliances $$ May 02, 2014
  • US sanctions raise concerns for foreign investors http://t.co/XWbwvPXyir Or, maybe not: http://t.co/rhsqIHCafl $$ May 02, 2014
  • Google Warning on Russia Prescient as Putin Squeezes Web http://t.co/pVedAtqcAx Social Media has its downsides if Govt uses it against u $$ May 02, 2014
  • Liquidity Trap Hitting AAA Bonds Has ATP CEO Sounding Alarm http://t.co/bhWlb1EjxQ Curbing speculation has led 2 decreased bond liquidity $$ May 02, 2014
  • Israelis Without ABCs Unready2Power Startup Nation’s Economy http://t.co/q2V1IwGrIZ He that doesn’t teach his son a trade teaches him2rob $$ May 01, 2014
  • Tokyo Inflation Quickens to Fastest Since 1992 http://t.co/khjhBvHgWT Worth watching, as inflation is not the friend of Japan ultimately $$ May 01, 2014

 

US Economy 

  • Colleges, Employers Rethink Internship Policies http://t.co/RMievOB82U Unpaid internships often don’t lead to jobs, just use your time $$ May 03, 2014
  • Apprenticeships Help Close the Skills Gap. So Why Are They in Decline? http://t.co/pCnZCgXqAr If they weren’t tied 2 labor unions… $$ May 03, 2014
  • Calculated Risk: Ranking Economic Data http://t.co/l4X9wcjrEw) Bill McBride gives his opinions on what economic data is most important $$ May 03, 2014
  • Union Blasts Staples-Run Postal Outlets http://t.co/qmmc4iXhIS Of course, they don’t want the competition $$ May 03, 2014

 

Energy

  • Energy Future Junior Creditors Test Bid for Fast Bankruptcy Deal http://t.co/ZFgWCteuh0 A warning to those doing big LBO deals in a boom $$ May 03, 2014
  • Shale Drillers Feast on Junk Debt to Stay on Treadmill http://t.co/qG9WwN63V0 Fascinating look many junk-rated E&P companies paying 5.4% $$ May 02, 2014
  • Valero to Suncor Shun Overseas Imports in Eastern Canada http://t.co/dco5QQdox4 Oil imports falling in Eastern N.America, Brent spd eases $$ May 02, 2014
  • Berkshire Hathaway Energy Buys AltaLink Power-Transmission Company http://t.co/K95RDCbYM8 Buffett wants long-lived infrastructure assets $$ May 02, 2014
  • Shale Revolution Lures Trading Houses 2US Energy Assets http://t.co/6WTGDZNLzl If u can understand physical flows, there’s a value chain $$ May 01, 2014
  • Drones Are Becoming Energy’s New Roustabouts http://t.co/e2OBYmeV48 Can cover more area and c things that a person could not c & record $$ May 01, 2014
  • Challenges Lie Ahead for North American Oil Production http://t.co/m7vvemlw6m We’re running out of cheap crude oil $$ Apr 22, 2014


Market Impact

  • Defensive Value ETF Races to New Highs http://t.co/KOKo14nkDk This isn’t defense; many people throw $$ at stocks that offer dividends May 03, 2014
  • Chile CEF’s Premium a Case of Yield Lover’s Mirage http://t.co/blhZjCHLzN Be wary: not all distributions indicate recurring yield $$ May 03, 2014
  • Hedge Funds Short Small Caps Most Since ’04 http://t.co/2hLYbzM521 Dangerous trade, b/c mkt can b insane longer than u remain solvent $$ May 03, 2014
  • Howard Marks’ Brilliant Observation On What It Takes To Be A Great Investor http://t.co/yeJnpION8s Be different, & right often enough $$ May 02, 2014
  • Junk Loans Pulled as Buyers Say No After Fed Voices Worry http://t.co/lCDRdfFvV6 Junk-loan MFs had their 1st outflow in week ended 4/16 $$ May 02, 2014
  • Why This Bull Market Feels Familiar http://t.co/8JXl7JGwMe Low earnings in tech IPOs, momentum & loose monetary policy $$ $SPY May 01, 2014
  • Why Investors Love Hedge Funds http://t.co/uFjN76R9KT @Ritholtz teaches us about high fees, & decrasing effectiveness as they grow large $$ Apr 30, 2014

 

Companies

  • Ballmer Becomes Largest Individual Microsoft Shareholder http://t.co/DvWSRZAb1Z Bill Gates always had an exit strategy from $MSFT $$ May 03, 2014
  • Apple Sells $12B of Bonds to Keep Cash Overseas http://t.co/FiSK8eJS5C Avoiding the tax hit is more important leverage across borders $$ May 03, 2014
  • Berkshire Meeting, Now ‘Woodstock for Capitalists,’ Had Humble Start http://t.co/wbYCcKc8yr Nobody goes there anymore; it’s too crowded $$ May 02, 2014
  • Buffett Wants Tough Questions? How About These? http://t.co/m36vBV6VIe Ask him about the Harney Investment Trust, his shadowy creation $$ May 02, 2014
  • Verizon Loses Cellphone Customers for First Time http://t.co/6DbXOm993W Interesting, wonder if it is a trend… $$ $VZ May 01, 2014
  • IBM End to Buyback Splurge Pressures CEO to Boost Revenue http://t.co/D657Dc27mX Buybacks can only do so much; organic growth needed $$ $IBM May 01, 2014
  • FM Global CFO: Know Your Supply Chain http://t.co/dBTc6MYXXY Real disasters happen when multiple things go wrong at the same time $$ $SPY May 01, 2014
  • ‘I Think Google’s Pretty Dangerous and Thuggish. I’ve Always Said That.’ http://t.co/jYZBaewNjZ Trying 2 defend yourself; not saying much $$ Apr 28, 2014

 

Personal Finance

  • Does Anyone Play It Straight in Markets? http://t.co/MRZY1ro2as @ritholtz warns u that many in the mkts r trying to separate u & your $$ May 03, 2014
  • Feeling Cool About A Hot Personal Finance Book http://t.co/hwFULepE8v When someone tries to sell u insurance 4 a savings need, go away $$ May 03, 2014
  • 4 Alternatives to Reverse Mortgages http://t.co/6Wmd2kYQmz Refinance, Home Equity Loan, Sell the Home (maybe to your kids) $$ #sell May 02, 2014
  • Work and Live, Retire and Die @Ritholtz http://t.co/t1YWHoG6NO People plan to retire later than they actually do & life interferes $$ $SPY May 02, 2014
  • How to Choose the Right Mutual Fund http://t.co/4kvyh8rZZK Omits active share, good mutual funds typically look un-indexlike $$ May 01, 2014
  • If You’re Not Saving, You’re Losing Out http://t.co/QtG87rNHPF It’s not the money u make, it’s the money u keep that counts $$ $SPY $TLT May 01, 2014

 

Other

  • The Questionable Link Between Saturated Fat and Heart Disease http://t.co/32pwYj4Z6i There has never been more disagreement over food $$ May 03, 2014
  • Will That Golfer Choke? New Field of Mental Analytics Tees Up Answer http://t.co/B8dxIYL1Jf Can analytics make u think better in sports $$ May 03, 2014
  • Cyber security: business is in the front line http://t.co/RXkfEDaPu0 This isn’t a soft cost anymore; the need to secure IT is vital $$ May 03, 2014
  • Remember Life Before Antibiotics? No? Wait, It’ll Come to You http://t.co/g9uQajBJJL Antibiotic resistance grows, obsoleting some drugs $$ May 02, 2014
  • How the ‘Jesus’ Wife’ Hoax Fell Apart http://t.co/Kdswi39oZr Hoaxes & apochrypha have circulated since the Apostles. They always crumble $$ May 02, 2014
  • Why Some MBAs Are Reading Plato http://t.co/ltj9Y8QYyV Schools Try Philosophy to Get B-School Students Thinking Beyond the Bottom Line $$ May 01, 2014
  • Does Baseball Have to Be So Slow? http://t.co/8PRcoei9Ua Dawdling by batters & pitchers, & an increase in strikeouts makes games drag $$ May 01, 2014
  • The world’s smallest magazine cover is 2,000 times smaller than a grain of salt http://t.co/o4H7mfHCDE Nanotech: we do it because we can $$ May 01, 2014
  • Why Militaries Mess Up So Often http://t.co/39NKx6YPUn Officers trained during peacetime tend not to take the risks necessary in wartime $$ May 01, 2014

 

Wrong 

  • Wrong:Nontraded REIT returns: Where to put cash now? http://t.co/EPykRK8e7S Avoid illiquidity unless u r paid 4 it. Avoid big commissions $$ May 03, 2014
  • Wrong: China’s Century Starts Now @BloombergView http://t.co/UUziinXlqJ Wait until after the banking crash & recovery, then write this $$ May 01, 2014
  • Wrong: Money-Market Funds As Safe as Banks, Except When They’re Not http://t.co/7S2TEDpk7Q Banks fail more often & losses r more severe $$ May 01, 2014

 

Retweets, Replies, and Comments 

  • “Ask Buffett about the Harney Investment Trust:http://t.co/KUHnslWBFv…” — David_Merkel http://t.co/bLVAj6OY7O $$ May 02, 2014
  • Commented on StockTwits: Whoops, and I should have gotten that one right http://t.co/nB9lRK14kb May 01, 2014
  • “Paul, try valuing BRK off of increase in book value per share, and the metric comes out to a more…” — DavidMerkel http://t.co/cm2Rdhkzfn $$ May 01, 2014
  • “Now try to explain how long yields fell the last time the Fed tightened.” — David_Merkel http://t.co/MwJL3d6KQX $$ FD: + $TLT May 01, 2014
  • “If citizens are not created/educated by 18, you won’t have good citizens.” — David_Merkel http://t.co/TzfQsJULED $$ http://t.co/eiOLPqNuub Apr 29, 2014
  • “This may be a game of “Who has the stronger balance sheet?” $HLF or Ackman?” — David_Merkel http://t.co/2QCjheaJjd $$ Apr 29, 2014
  • @Peter_Atwater @Minyanville @Socionomics Thanks, Peter. Means a lot coming from you. Apr 28, 2014
  • @ReformedBroker @ritholtz feel free to repost it (w/credit to me) if you like Apr 28, 2014
  • RT @felixsalmon: For the record, I never said, nor do I believe, that text is over. I’m still going to be writing lots of text! Apr 28, 2014
  • RT @victorricciardi: @researchpuzzler @AlephBlog @jciesielski @tobyshute Tom Great meeting you Thanks for your ideas for promoting my new b… Apr 25, 2014
  • RT @researchpuzzler: thanks to CFA Society Baltimore @AlephBlog @victorricciardi @jciesielski @tobyshute for the great exchange of ideas Apr 25, 2014
  • RT @ppearlman: summer must read – “@reformedbroker: CLASH OF THE FINANCIAL PUNDITS: COUNTDOWN BEGINS NOW! http://t.co/iZqYTs8OFt” Apr 25, 2014
  • RT @abnormalreturns: Had to Google ‘cable network Fusion’…RT @felixsalmon: It’s out: I’m going to Fusion http://t.co/B1EK0eJmc8 Apr 24, 2014
  • RT @ChemistryVines: Mercury(II) thiocyanate (Hg(SCN)2) https://t.co/Ar2yhIlOwo Apr 23, 2014
  • @Calvinn_Hobbes I don’t know. We all want to grow up, until we do grow up. Only the foolish regret growing up. Apr 22, 2014

An Idea for When the Market is High

Tuesday, April 22nd, 2014

Last night I was at the Towson University International Markets Summit.  I’m grateful to the students for inviting me, as it is an honor.  During the presentation, I mentioned the book “Accounting for Value” by Stephen Penman.  I reviewed the book two years ago.  A great book, and one that should lead readers to modify their views on value investing.

But one aspect of the book was easy to implement, he cited his paper that you can read here, Returns to Buying Earnings and Book Value: Accounting for Growth and Risk.  Buy the stocks that are the cheapest as measured by the highest quintiles of book value to price, and trailing twelve month earnings per share to price.

I ran this analysis for all US-traded stocks with over $100 million of market capitalization.  Here are the results:

CompanyTickerIndustryCountryB/PE/P
Petrobras Argentina SA ADRPZE0606 – Oil & Gas – IntegratedArgentina

1.26

7.95

Pampa Energia S.A. (ADR)PAM1203 – Electric UtilitiesArgentina

0.83

11.41

OMV AG (ADR)OMVKY0609 – Oil & Gas OperationsAustria

1.13

11.33

Validus Holdings, Ltd.VR0709 – Insurance (Life)Bermuda

1

13.3

Everest Re Group LtdRE0715 – Insurance (Property & Casualty)Bermuda

0.88

15.35

Maiden Holdings, Ltd.MHLD0715 – Insurance (Property & Casualty)Bermuda

0.93

10.11

Montpelier Re Holdings Ltd.MRH0715 – Insurance (Property & Casualty)Bermuda

0.99

11.83

Axis Capital Holdings LimitedAXS0715 – Insurance (Property & Casualty)Bermuda

1.01

13.2

Platinum Underwriters HoldingsPTP0715 – Insurance (Property & Casualty)Bermuda

1.02

11.25

White Mountains Insurance GrouWTM0715 – Insurance (Property & Casualty)Bermuda

1.07

8.49

Aspen Insurance Holdings LimitAHL0715 – Insurance (Property & Casualty)Bermuda

1.12

9.61

Assured Guaranty Ltd.AGO0715 – Insurance (Property & Casualty)Bermuda

1.18

18.59

Partnerre LtdPRE0715 – Insurance (Property & Casualty)Bermuda

1.23

10.75

Argo Group International HoldiAGII0715 – Insurance (Property & Casualty)Bermuda

1.27

11.55

Endurance Specialty Holdings LENH0715 – Insurance (Property & Casualty)Bermuda

1.31

12.55

Gerdau SA (ADR)GGB0121 – Iron & SteelBrazil

1.32

6.84

Gafisa SA (ADR)GFA0215 – Construction ServicesBrazil

2.04

15.52

Petroleo Brasileiro PetrobrasPBR0606 – Oil & Gas – IntegratedBrazil

1.67

13.2

Telefonica Brasil SA (ADR)VIV0915 – Communications ServicesBrazil

0.85

7.58

Companhia de Saneamento BasicoSBS1209 – Water UtilitiesBrazil

0.89

8.57

Endeavour Silver CorpEXK0118 – Gold & SilverCanada

0.89

9.9

Teck Resources Ltd (USA)TCK0124 – Metal MiningCanada

1.33

6.84

TransGlobe Energy CorporationTGA0609 – Oil & Gas OperationsCanada

0.85

10.03

Granite Real Estate InvestmentGRP.U0933 – Real Estate OperationsCanada

0.87

7.53

Brookfield Office Properties IBPO0933 – Real Estate OperationsCanada

1.08

10.08

Boardwalk REIT (USA)BOWFF0933 – Real Estate OperationsCanada

1.14

11.54

Greenlight Capital Re, Ltd.GLRE0715 – Insurance (Property & Casualty)Cayman Islands

0.9

19.45

Sinopec Shanghai PetrochemicalSHI0103 – Chemical ManufacturingChina

1.52

11

Yongye International, IncYONG0103 – Chemical ManufacturingChina

1.65

43.36

China XD Plastics Co LtdCXDC0109 – Containters & PackagingChina

1.13

22.71

Lihua International IncLIWA0127 – Misc. Fabricated ProductsChina

2.31

41.21

Xinyuan Real Estate Co., Ltd.XIN0215 – Construction ServicesChina

5.22

42.83

China Automotive Systems, Inc.CAAS0415 – Auto & Truck PartsChina

0.99

11.04

China Petroleum & Chemical CorSNP0609 – Oil & Gas OperationsChina

0.87

10.11

Concord Medical Services HldgCCM0806 – Healthcare FacilitiesChina

3.06

12.45

China Telecom Corporation LimiCHA0915 – Communications ServicesChina

1.17

7.03

Xueda Education Group (ADR)XUE0969 – SchoolsChina

0.84

6.63

Changyou.Com Ltd (ADR)CYOU1018 – Computer ServicesChina

1.23

20.92

Nam Tai Electronics, Inc.NTE1024 – Electronic Instruments & ControlsChina

1.11

21.58

Jinpan International LimitedJST1024 – Electronic Instruments & ControlsChina

1.7

13.36

Semiconductor Manufacturing InSMI1033 – SemiconductorsChina

0.96

8.06

China Eastern Airlines Corp. LCEA1106 – AirlineChina

1.05

12.11

China Southern Airlines Co LtdZNH1106 – AirlineChina

1.7

13.19

Guangshen Railway Co. Ltd (ADRGSH1112 – RailroadsChina

1.34

6.64

Axa SA (ADR)AXAHY0709 – Insurance (Life)France

1.19

9.46

Volkswagen AG (ADR)VLKAY0412 – Auto & Truck ManufacturersGermany

0.94

9.73

Allianz SE (ADR)AZSEY0715 – Insurance (Property & Casualty)Germany

0.92

11.08

E.ON SE (ADR)EONGY1203 – Electric UtilitiesGermany

1.28

8.17

National Bank of Greece (ADR)NBG0727 – Regional BanksGreece

2

131.03

Capital Product Partners L.P.CPLP1118 – Water TransportationGreece

0.83

10.36

Safe Bulkers, Inc.SB1118 – Water TransportationGreece

0.83

11.99

StealthGas Inc.GASS1118 – Water TransportationGreece

1.32

9.08

Navios Maritime Holdings Inc.NM1118 – Water TransportationGreece

1.32

13.4

Sun Hung Kai Properties LimiteSUHJY0215 – Construction ServicesHong Kong

1.44

15.22

Hysan Development Company LimiHYSNY0215 – Construction ServicesHong Kong

1.66

20.18

Tai Cheung Holdings Ltd (ADR)TAICY0215 – Construction ServicesHong Kong

2.11

34.38

Le Gaga Holdings Ltd ADRGAGA0509 – CropsHong Kong

1.55

14.63

Bank of East Asia Ltd. (ADR),BKEAY0727 – Regional BanksHong Kong

0.85

8.78

Iao Kun Group Holding Co LtdIKGH0912 – Casinos & GamingHong Kong

1.36

12.89

Cheung Kong (Holdings) LimitedCHEUY0933 – Real Estate OperationsHong Kong

1.16

11.07

Seaspan CorporationSSW1118 – Water TransportationHong Kong

1.05

15.2

Magyar Telekom Tavkozlesi NyrtMYTAY0915 – Communications ServicesHungary

1.34

6.66

XL Group plcXL0715 – Insurance (Property & Casualty)Ireland

1.12

11.72

Fly Leasing Ltd(ADR)FLY0939 – Rental & LeasingIreland

1.3

17.39

Ellomay Capital Ltd.ELLO1033 – SemiconductorsIsrael

0.93

10.95

FUJIFILM Holdings Corp. (ADR)FUJIY0112 – Fabricated Plastic & RubberJapan

1.55

6.64

Kobe Steel, Ltd. (ADR)KBSTY0121 – Iron & SteelJapan

1.47

14.7

Mitsui & Co Ltd (ADR)MITSY0218 – Misc. Capital GoodsJapan

1.33

13.26

Wacoal Holdings Corporation (AWACLY0403 – Apparel/AccessoriesJapan

1.45

7.14

Toyota Motor Corp (ADR)TM0412 – Auto & Truck ManufacturersJapan

0.82

10.5

Honda Motor Co Ltd (ADR)HMC0412 – Auto & Truck ManufacturersJapan

0.92

7.61

Nissan Motor Co., Ltd. (ADR)NSANY0412 – Auto & Truck ManufacturersJapan

1.11

10.04

Nomura Holdings, Inc. (ADR)NMR0718 – Investment ServicesJapan

1.09

10.18

Mizuho Financial Group Inc. (AMFG0727 – Regional BanksJapan

1.13

14.9

Sumitomo Mitsui Financial Grp,SMFG0727 – Regional BanksJapan

1.28

16.67

Mitsubishi UFJ Financial GroupMTU0727 – Regional BanksJapan

1.53

13.67

Nippon Telegraph & Telephone CNTT0915 – Communications ServicesJapan

1.39

8.93

ORIX Corporation (ADR)IX0939 – Rental & LeasingJapan

0.98

7.59

Ternium S.A. (ADR)TX0121 – Iron & SteelLuxembourg

0.89

7.61

ING Groep NV (ADR)ING0709 – Insurance (Life)Netherlands

1.14

9.46

VimpelCom Ltd (ADR)VIP0915 – Communications ServicesNetherlands

0.93

13.67

ASM International NV (ADR)ASMI1033 – SemiconductorsNetherlands

1.01

74.95

Petroleum Geo-Services ASA (ADPGSVY0612 – Oil Well Services & EquipmentNorway

0.81

9.85

Banco Latinoamericano Comerc EBLX0727 – Regional BanksPanama

0.85

8.39

Compania de Minas BuenaventuraBVN0118 – Gold & SilverPeru

1.18

10.05

OFG BancorpOFG0727 – Regional BanksPuerto Rico

0.93

11.04

Popular IncBPOP0727 – Regional BanksPuerto Rico

1.52

19.77

Triple-S Management Corp.GTS0806 – Healthcare FacilitiesPuerto Rico

1.79

12.52

LUKOIL (ADR)LUKOY0606 – Oil & Gas – IntegratedRussian Federation

1.91

19.08

China Yuchai International LimCYD0218 – Misc. Capital GoodsSingapore

1.2

15.34

Net 1 UEPS Technologies IncUEPS0703 – Consumer Financial ServicesSouth Africa

0.91

6.79

POSCO (ADR)PKX0121 – Iron & SteelSouth Korea

1.72

6.97

Shinhan Financial Group Co., LSHG0727 – Regional BanksSouth Korea

1.24

8.42

Woori Finance Holdings Co., LtWF0727 – Regional BanksSouth Korea

1.91

9.86

SK Telecom Co., Ltd. (ADR)SKM0915 – Communications ServicesSouth Korea

0.89

11.87

Repsol SA (ADR)REPYY0606 – Oil & Gas – IntegratedSpain

1.06

7.93

Transocean LTDRIG0612 – Oil Well Services & EquipmentSwitzerland

1.14

9.54

ACE LimitedACE0715 – Insurance (Property & Casualty)Switzerland

0.84

10.92

Allied World Assurance Co HoldAWH0715 – Insurance (Property & Casualty)Switzerland

1

11.73

United Microelectronics Corp (UMC1033 – SemiconductorsTaiwan

1.3

8.02

Silicon Motion Technology CorpSIMO1033 – SemiconductorsTaiwan

1.96

19.74

BP plc (ADR)BP0606 – Oil & Gas – IntegratedUnited Kingdom

0.85

15.1

Noble Corporation PLCNE0612 – Oil Well Services & EquipmentUnited Kingdom

1.08

10.05

Subsea 7 SA (ADR)SUBCY0612 – Oil Well Services & EquipmentUnited Kingdom

1.09

7.02

ENSCO PLCESV0612 – Oil Well Services & EquipmentUnited Kingdom

1.11

12.2

Rowan Companies PLCRDC0612 – Oil Well Services & EquipmentUnited Kingdom

1.3

6.71

HSBC Holdings plc (ADR)HSBC0727 – Regional BanksUnited Kingdom

0.94

8.09

Vodafone Group Plc (ADR)VOD0915 – Communications ServicesUnited Kingdom

1.47

31.68

J Sainsbury plc (ADR)JSAIY0957 – Retail (Grocery)United Kingdom

0.96

10.57

Global Ship Lease, Inc.GSL1118 – Water TransportationUnited Kingdom

2.11

16.62

Cliffs Natural Resources IncCLF0124 – Metal MiningUnited States

1.87

12.76

M.D.C. Holdings, Inc.MDC0215 – Construction ServicesUnited States

0.91

23.28

M/I Homes IncMHO0215 – Construction ServicesUnited States

0.92

27.21

URS CorpURS0215 – Construction ServicesUnited States

1.16

7.02

Mestek, Inc.MCCK0218 – Misc. Capital GoodsUnited States

0.98

11.53

General Motors CompanyGM0412 – Auto & Truck ManufacturersUnited States

0.83

7.98

Rocky Brands IncRCKY0418 – FootwearUnited States

1.21

6.82

Johnson Outdoors Inc.JOUT0430 – Recreational ProductsUnited States

0.87

7.83

LeapFrog Enterprises, Inc.LF0430 – Recreational ProductsUnited States

0.89

17.58

Yasheng GroupHERB0509 – CropsUnited States

11.77

70.4

Seaboard CorporationSEB0515 – Food ProcessingUnited States

0.82

6.77

John B. Sanfilippo & Son, Inc.JBSS0515 – Food ProcessingUnited States

0.84

8.55

Omega Protein CorporationOME0515 – Food ProcessingUnited States

1.01

12.24

Ennis, Inc.EBF0518 – Office SuppliesUnited States

0.92

8.43

ACCO Brands CorporationACCO0518 – Office SuppliesUnited States

1.01

11.07

Universal CorpUVV0524 – TobaccoUnited States

0.93

10.8

Hess Corp.HES0609 – Oil & Gas OperationsUnited States

0.86

12.86

Approach Resources Inc.AREX0609 – Oil & Gas OperationsUnited States

0.93

9.48

Equal Energy Ltd. (USA)EQU0609 – Oil & Gas OperationsUnited States

0.96

9.38

Sandridge Mississippian TrustSDT0609 – Oil & Gas OperationsUnited States

1.49

63.59

PHI Inc.PHII0612 – Oil Well Services & EquipmentUnited States

0.85

8.96

Medallion Financial CorpTAXI0703 – Consumer Financial ServicesUnited States

0.94

9.13

CIT Group Inc.CIT0703 – Consumer Financial ServicesUnited States

0.96

7.26

Goldman Sachs Group IncGS0703 – Consumer Financial ServicesUnited States

0.97

10.16

Ellington Financial LLCEFC0703 – Consumer Financial ServicesUnited States

1.04

13.7

Walter Investment Management CWAC0703 – Consumer Financial ServicesUnited States

1.11

23.94

Chimera Investment CorporationCIM0703 – Consumer Financial ServicesUnited States

1.12

11.58

PHH CorporationPHH0703 – Consumer Financial ServicesUnited States

1.19

9.68

EZCORP IncEZPW0703 – Consumer Financial ServicesUnited States

1.58

7.55

WellPoint IncWLP0706 – Insurance (Accident & Health)United States

0.89

9.52

Employers Holdings, Inc.EIG0706 – Insurance (Accident & Health)United States

0.93

10.46

Reinsurance Group of America IRGA0706 – Insurance (Accident & Health)United States

1.08

7.49

American Equity Investment LifAEL0709 – Insurance (Life)United States

0.86

16.77

Protective Life Corp.PL0709 – Insurance (Life)United States

0.92

9.76

FBL Financial GroupFFG0709 – Insurance (Life)United States

0.96

9.73

Unum GroupUNM0709 – Insurance (Life)United States

0.98

9.55

Assurant, Inc.AIZ0709 – Insurance (Life)United States

1

9.67

Lincoln National CorporationLNC0709 – Insurance (Life)United States

1.07

9.76

Symetra Financial CorporationSYA0709 – Insurance (Life)United States

1.23

8.64

CNO Financial Group IncCNO0709 – Insurance (Life)United States

1.29

12.39

Imperial Holdings, Inc.IFT0709 – Insurance (Life)United States

1.38

37.03

National Western Life InsurancNWLI0709 – Insurance (Life)United States

1.63

10.85

Genworth Financial IncGNW0709 – Insurance (Life)United States

1.72

6.87

Fortegra Financial CorpFRF0712 – Insurance (Miscellaneous)United States

1.28

8.18

Allstate Corporation, TheALL0715 – Insurance (Property & Casualty)United States

0.82

8.75

HCC Insurance Holdings, Inc.HCC0715 – Insurance (Property & Casualty)United States

0.82

8.92

State Auto Financial CorpSTFC0715 – Insurance (Property & Casualty)United States

0.83

6.92

Stewart Information Services CSTC0715 – Insurance (Property & Casualty)United States

0.83

7.96

Safety Insurance Group, Inc.SAFT0715 – Insurance (Property & Casualty)United States

0.84

7.39

Investors Title CompanyITIC0715 – Insurance (Property & Casualty)United States

0.86

9.85

First American Financial CorpFAF0715 – Insurance (Property & Casualty)United States

0.87

6.75

American Financial Group IncAFG0715 – Insurance (Property & Casualty)United States

0.87

9.15

ProAssurance CorporationPRA0715 – Insurance (Property & Casualty)United States

0.87

10.86

Old Republic International CorORI0715 – Insurance (Property & Casualty)United States

0.88

10.53

Selective Insurance GroupSIGI0715 – Insurance (Property & Casualty)United States

0.9

8.51

Horace Mann Educators CorporatHMN0715 – Insurance (Property & Casualty)United States

0.91

9.6

Kemper CorpKMPR0715 – Insurance (Property & Casualty)United States

0.95

9.64

Baldwin & Lyons IncBWINB0715 – Insurance (Property & Casualty)United States

0.98

9.42

Hanover Insurance Group, Inc.,THG0715 – Insurance (Property & Casualty)United States

0.99

9.44

Alleghany CorporationY0715 – Insurance (Property & Casualty)United States

1.01

9.15

EMC Insurance Group Inc.EMCI0715 – Insurance (Property & Casualty)United States

1.02

9.88

United Fire Group, Inc.UFCS0715 – Insurance (Property & Casualty)United States

1.05

10.3

Navigators Group, Inc, TheNAVG0715 – Insurance (Property & Casualty)United States

1.09

7.68

Cna Financial CorpCNA0715 – Insurance (Property & Casualty)United States

1.1

8.15

American International Group IAIG0715 – Insurance (Property & Casualty)United States

1.34

12

American National Insurance CoANAT0715 – Insurance (Property & Casualty)United States

1.4

8.99

MBIA Inc.MBI0715 – Insurance (Property & Casualty)United States

1.45

10.86

FBR & CoFBRC0718 – Investment ServicesUnited States

1.03

29.21

KKR Financial Holdings LLCKFN0718 – Investment ServicesUnited States

1.05

11.24

NASDAQ OMX Group, Inc.NDAQ0718 – Investment ServicesUnited States

1.13

6.66

Piper Jaffray CompaniesPJC0718 – Investment ServicesUnited States

1.17

7.42

Primus Guaranty, Ltd.PRSG0718 – Investment ServicesUnited States

1.25

50.12

Arlington Asset Investment CorAI0718 – Investment ServicesUnited States

1.28

11.6

Oppenheimer Holdings Inc. (USAOPY0718 – Investment ServicesUnited States

1.34

6.71

CIFC CorpCIFC0718 – Investment ServicesUnited States

1.73

9.51

JPMorgan Chase & Co.JPM0724 – Money Center BanksUnited States

0.98

7.39

First National Bank AlaskaFBAK0727 – Regional BanksUnited States

0.81

6.61

Old National BancorpONB0727 – Regional BanksUnited States

0.81

7

Sandy Spring Bancorp Inc.SASR0727 – Regional BanksUnited States

0.81

7.28

TowneBankTOWN0727 – Regional BanksUnited States

0.81

7.52

Fidelity Southern CorporationLION0727 – Regional BanksUnited States

0.81

10.35

Central Pacific Financial CorpCPF0727 – Regional BanksUnited States

0.81

21.18

Cascade BancorpCACB0727 – Regional BanksUnited States

0.81

22.18

LCNB Corp.LCNB0727 – Regional BanksUnited States

0.82

6.69

S & T Bancorp IncSTBA0727 – Regional BanksUnited States

0.83

7.38

Great Southern Bancorp, Inc.GSBC0727 – Regional BanksUnited States

0.83

8.55

ESB Financial CorporationESBF0727 – Regional BanksUnited States

0.84

6.88

WesBanco, Inc.WSBC0727 – Regional BanksUnited States

0.84

7.15

Trustmark CorpTRMK0727 – Regional BanksUnited States

0.84

7.28

KeyCorpKEY0727 – Regional BanksUnited States

0.84

7.3

MidWestOne Financial Group, InMOFG0727 – Regional BanksUnited States

0.84

8.77

Bar Harbor BanksharesBHB0727 – Regional BanksUnited States

0.84

9.1

Seacoast Banking Corporation oSBCF0727 – Regional BanksUnited States

0.84

21.31

First Bancorp IncFNLC0727 – Regional BanksUnited States

0.85

7.39

Mercantile Bank Corp.MBWM0727 – Regional BanksUnited States

0.85

9.45

Heritage Financial Group IncHBOS0727 – Regional BanksUnited States

0.86

7.23

MainSource Financial Group IncMSFG0727 – Regional BanksUnited States

0.86

7.33

Norwood Financial CorporationNWFL0727 – Regional BanksUnited States

0.86

7.9

Fulton Financial CorpFULT0727 – Regional BanksUnited States

0.87

6.82

Pulaski Financial CorpPULB0727 – Regional BanksUnited States

0.88

6.85

Washington Federal Inc.WAFD0727 – Regional BanksUnited States

0.88

6.87

International Bancshares CorpIBOC0727 – Regional BanksUnited States

0.89

7.93

Lakeland Bancorp, Inc.LBAI0727 – Regional BanksUnited States

0.9

6.84

Northrim BanCorp, Inc.NRIM0727 – Regional BanksUnited States

0.9

7.67

BCB Bancorp, Inc.BCBP0727 – Regional BanksUnited States

0.9

7.91

ACNB CorporationACNB0727 – Regional BanksUnited States

0.9

8.14

Intermountain Community BancorIMCB0727 – Regional BanksUnited States

0.9

9.74

First Financial CorpTHFF0727 – Regional BanksUnited States

0.91

7.44

Farmers & Merchants Bancorp InFMAO0727 – Regional BanksUnited States

0.91

7.8

Southeastern Bank Financial CoSBFC0727 – Regional BanksUnited States

0.91

11.29

Isabella Bank CorpISBA0727 – Regional BanksUnited States

0.92

6.95

First Merchants CorporationFRME0727 – Regional BanksUnited States

0.93

6.76

Wintrust Financial CorpWTFC0727 – Regional BanksUnited States

0.93

7.12

First Citizens BancShares Inc.FCNCA0727 – Regional BanksUnited States

0.94

7.57

Firstbank CorporationFBMI0727 – Regional BanksUnited States

0.94

8.03

Century Bancorp, Inc.CNBKA0727 – Regional BanksUnited States

0.95

10.72

Central Valley Community BancoCVCY0727 – Regional BanksUnited States

0.96

6.62

PNC Financial Services Group IPNC0727 – Regional BanksUnited States

0.96

8.94

American National BankShares IAMNB0727 – Regional BanksUnited States

0.96

9.01

Capital One Financial Corp.COF0727 – Regional BanksUnited States

0.97

9.95

Provident Financial Services,PFS0727 – Regional BanksUnited States

0.99

6.92

NASB Financial, Inc.NASB0727 – Regional BanksUnited States

0.99

11

Flagstar Bancorp IncFBC0727 – Regional BanksUnited States

1.01

21.87

First Defiance FinancialFDEF0727 – Regional BanksUnited States

1.02

8.35

MidSouth Bancorp, Inc.MSL0727 – Regional BanksUnited States

1.03

6.96

C&F Financial CorpCFFI0727 – Regional BanksUnited States

1.04

13.4

First Community Bancshares IncFCBC0727 – Regional BanksUnited States

1.05

7.25

Provident Financial Holdings,PROV0727 – Regional BanksUnited States

1.05

8.78

Chemung Financial Corp.CHMG0727 – Regional BanksUnited States

1.06

6.7

Territorial Bancorp IncTBNK0727 – Regional BanksUnited States

1.08

7.23

Berkshire Hills Bancorp, Inc.BHLB0727 – Regional BanksUnited States

1.09

6.61

Regions Financial CorporationRF0727 – Regional BanksUnited States

1.09

7.73

Old Second Bancorp Inc.OSBC0727 – Regional BanksUnited States

1.1

113.32

Farmers Capital Bank CorpFFKT0727 – Regional BanksUnited States

1.14

7.7

Premier Financial Bancorp, IncPFBI0727 – Regional BanksUnited States

1.18

10.46

FIRST FINANCIAL NORTHWEST, INCFFNW0727 – Regional BanksUnited States

1.18

14.46

Intervest Bancshares CorpIBCA0727 – Regional BanksUnited States

1.19

8.37

MBT Financial Corp.MBTF0727 – Regional BanksUnited States

1.23

28.89

New Hampshire Thrift BancshareNHTB0727 – Regional BanksUnited States

1.26

7.66

MVB Financial CorpMVBF0727 – Regional BanksUnited States

1.29

10.03

Citigroup IncC0727 – Regional BanksUnited States

1.3

8.73

Susquehanna Bancshares IncSUSQ0727 – Regional BanksUnited States

1.31

8.42

QCR Holdings, Inc.QCRH0727 – Regional BanksUnited States

1.44

12.41

First Niagara Financial GroupFNFG0727 – Regional BanksUnited States

1.45

8.28

First Citizens Bancorporation,FCBN0727 – Regional BanksUnited States

1.5

9.95

Farmers & Merchants Bank (LongFMBL0909 – Business ServicesUnited States

0.98

8.05

Kelly Services, Inc.KELYA0909 – Business ServicesUnited States

1.02

7.21

Lakes Entertainment, Inc.LACO0912 – Casinos & GamingUnited States

1.01

14.29

Black Box CorporationBBOX0915 – Communications ServicesUnited States

1.38

7.36

Iridium Communications Inc.IRDM0915 – Communications ServicesUnited States

1.72

10.16

Courier CorporationCRRC0927 – Printing & PublishingUnited States

0.86

6.72

CSS Industries IncCSS0927 – Printing & PublishingUnited States

1.08

7.53

Blackstone Mortgage Trust IncBXMT0933 – Real Estate OperationsUnited States

0.87

145.18

New York Mortgage Trust IncNYMT0933 – Real Estate OperationsUnited States

0.88

14.44

PennyMac Mortgage Investment TPMT0933 – Real Estate OperationsUnited States

0.89

13.15

Starwood Property Trust, Inc.STWD0933 – Real Estate OperationsUnited States

0.94

7.84

Capstead Mortgage CorporationCMO0933 – Real Estate OperationsUnited States

0.99

7.31

Dynex Capital IncDX0933 – Real Estate OperationsUnited States

1.02

12.82

Two Harbors Investment CorpTWO0933 – Real Estate OperationsUnited States

1.04

16.24

American Capital Agency Corp.AGNC0933 – Real Estate OperationsUnited States

1.05

14.81

Apollo Commercial Real Est. FiARI0933 – Real Estate OperationsUnited States

1.09

7.4

MFA Financial, Inc.MFA0933 – Real Estate OperationsUnited States

1.09

9.89

Anworth Mortgage Asset CorporaANH0933 – Real Estate OperationsUnited States

1.1

9.07

Resource Capital Corp.RSO0933 – Real Estate OperationsUnited States

1.16

9.91

Rent-A-Center IncRCII0939 – Rental & LeasingUnited States

0.97

8.84

Willis Lease Finance CorporatiWLFC0939 – Rental & LeasingUnited States

1.31

9.51

Biglari Holdings IncBH0942 – RestaurantsUnited States

0.83

23.81

Rick’s Cabaret Int’l, IncRICK0942 – RestaurantsUnited States

0.92

8.66

PCM IncPCMI0948 – Retail (Catalog & Mail Order)United States

1.09

7.11

Trans World Entertainment CorpTWMC0963 – Retail (Specialty Non-Apparel)United States

1.68

7.37

TravelCenters of America LLCTA0963 – Retail (Specialty Non-Apparel)United States

1.76

7.55

Tech Data CorpTECD0966 – Retail (Technology)United States

0.87

7.43

hhgregg, Inc.HGG0966 – Retail (Technology)United States

1.32

6.67

Ingram Micro Inc.IM1015 – Computer PeripheralsUnited States

0.84

6.68

Key Tronic CorporationKTCC1015 – Computer PeripheralsUnited States

0.93

9.42

Xerox CorpXRX1018 – Computer ServicesUnited States

0.89

8.31

VOXX International CorpVOXX1024 – Electronic Instruments & ControlsUnited States

1.57

10.96

OmniVision Technologies, Inc.OVTI1033 – SemiconductorsUnited States

0.91

8.46

Benchmark Electronics, Inc.BHE1033 – SemiconductorsUnited States

1

9

JetBlue Airways CorporationJBLU1106 – AirlineUnited States

0.85

6.84

Republic Airways Holdings Inc.RJET1106 – AirlineUnited States

1.42

12.1

SkyWest, Inc.SKYW1106 – AirlineUnited States

2.19

8.93

Atlas Air Worldwide Holdings,AAWW1109 – Misc. TransportationUnited States

1.49

10.44

International Shipholding CorpISH1118 – Water TransportationUnited States

1.67

7.41

Gas Natural IncEGAS1206 – Natural Gas UtilitiesUnited States

0.89

6.75

What are my surprises here?

  • My but there are a lot of foreign companies in this list, far more as a percentage than the 3575 total companies I started with.  It seems that foreign companies are cheap.
  • Now, that said, accounting standards are tighter in the US than elsewhere, and particularly, be careful on Chinese companies.  Many of them are scams.
  • There are a lot of financial companies listed.  I would note that earnings quality for financial companies is often poor, so don’t go “hog wild” buying financial companies.

All that said, this could be a good list for starting due diligence, and I will use at least some of this in my next selection of companies for my clients.

What’s that, you say?  Do I and my clients own any of these firms?  Yes we do.  Of the 38 stocks in my portfolio, 11 of them pass this screen, and here is the summary:

Full Disclosure: Long ENH, SNP, GTS, LUKOY, BP, ESV, RGA, AIZ, NWLI, IM, XRX

Disclaimer


David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.


Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. This blog exists to educate investors, and give something back. It is not intended as advertisement for Aleph Investments; David is not soliciting business through it. When David, or a client of David's has an interest in a security mentioned, full disclosure will be given, as has been past practice for all that David does on the web. Disclosure is the breakfast of champions.


Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.

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