Category: Value Investing

It Works, But It Doesn’t Work All The Time

It Works, But It Doesn’t Work All The Time

Posted on by David Merkel

One of the constants in investing is that investment theories are disbelieved, prosper, bloom, overshoot,? die, and repeat.? So is the only constant change?? That’s not my view.

There are valid theories on investing, and they work on average.? If you pursue them consistently, you will do well.? If you pursue them after failure, you can do better still.

How many times have you seen articles on investing entitled “The Death of ____.” (fill in the blank)? Strategies trend.? There is an underlying kernel of validity; it makes economic sense, and has worked in the past.? But any strategy can be overplayed, even my favorite strategy, value investing.? My style of value investing tries to adjust for that, but it is not perfect there.? (And to tell the truth, September has been a bad month for me, though 2013 has been a very good year.)

So what are valid strategies?

  • Value
  • Price Momentum
  • Long-term mean reversion
  • Insider Buying
  • Neglect (Low volume relative to market cap)
  • Accounting Quality (Net Operating Accruals)
  • Low Equity Price Volatility (which isn’t working now, because it became too popular)
  • Shrinking Assets
  • Shrinking Shares (Buybacks)
  • High Gross Margins as a Fraction of Assets (“Quality,” a quantitative measure of moats.)

This list is not exhaustive, but it is what I use.? The main idea here is to be aware of what is out of fashion, and to be ready to invest when that which drives a strategy to be out of fashion stops getting worse.

So, don’t lose confidence in winning strategies.? Rather, trade out of winning strategies when they are too good, and revisit them when you see the “The Death of ____” articles, or things like them.? This can apply to sectors and industries as well.? Be willing to pick over industries that have underperformed, and buy strong companies that can survive the downturn.? As I have said before, failures occur in weak industries, and after they do, the remaining companies gain pricing power, and thus you invest in survivors.

Value investing is emotionally hard.? You have to be willing to take short-term pain in the interests of long-term gain, if there is a sufficient margin of safety.? No strategy works every month or year.? Returns from valid strategies are most often lumpy.? The markets are almost always lumpy.

Prepare yourself for volatility.? It is the norm of the market.? Focus on what you can control — margin of safety.? By doing that you will be ready for most of the vicissitudes of the market, which stem from companies taking too much credit or operating risk.

Finally, don’t give up.? Most people who give up do so at a time where stock investments are about to turn.? It’s one of those informal indicators to me, when I hear people giving up on an asset class.? It makes me want to look at the despised asset class, and see what bargains might be available.

Remember, valid strategies work on average, but they don’t work every month or year.? Drawdowns shake out the weak-minded, and boost the performance of value investors willing to buy stocks when times are pessimistic.

On Big Corporate Bond Deals

On Big Corporate Bond Deals

Posted on by David Merkel

We are going to see the biggest corporate bond deal price tomorrow.? Verizon is raising money to buy out Vodaphone’s 45% stake in Verizon Wireless.? The amount sold will be at least $20 billion, and could be as? high as $50 billion.? They are going to have to pay up to do so, because:

  • Verizon already has almost $50 billion in debt
  • Large deals run into the position limits of institutional bond investors.

Institutional bond investors? typically have holdings limits based on:

  • Percentage of exposure to a sector
  • Percentage of exposure to an industry
  • Percentage of exposure to a ratings category

There will be other limits tailored to the needs of the client, which frequently stem from the length of their explicit or implicit liabilities.? Explicit liabilities are simple — you know when cash will be demanded.? Implicit liabilities estimate when cash will come or leave depending upon performance.

With respect to bond ratings, Verizon is in a tough spot, because it will be the largest nonfinancial bond issuer, with nearly $100B in debt, versus AT&T, with $76B in debt.? That presents its own challenge, because the US telecom sector is dominated by two companies, Verizon and AT&T.? How much do you want to buy when two companies dominate the sector?? One failure would be huge to the bond market, but then again, duopolies tend to be profitable, so long as they don’t overleverage, like Fannie and Freddie.

Big bond deals are tough, because many bond managers will say, “I am already full on the name,” or “I can only take $XX million more of the name, and then I am full.”? This is especially true for Verizon, since they are rated Baa1/BBB+/A- from Moody’s, S&P, and Fitch.? That’s a high BBB rating, but far better to have a low single-A rating.

Thus the pricing has to be attractive, so that buyers that are not dedicated to corporates have interest — balanced funds, income funds, endowments and pension funds.

My Advice

Unless the yields are similar to those for BB junk bonds, I would pass on this deal.? The reasons are simple:

  • Typically the results on large corporate deals are bad in the short-run.
  • You will not have a large audience to re-sell your bonds to.? Most parties will be stuffed full.
  • Technology is sufficiently dynamic that Verizon Wireless could lose its protected boundaries much as landlines have.

I am usually a skeptic of big bond deals.? It is usually a sign of weak thinking among buyers.? I avoided big deals during 2001-3, and ended up the better for it.

So be wary, and avoid Verizon bonds for a time, until the market normalizes.? It looks like the syndicate will stuff the market full, but good.

Full disclosure: long VOD, and as a result will probably receive shares of VZ

The Rules, Part LIII

The Rules, Part LIII

Posted on by David Merkel

The tech market washes out about every eight years or so.? The broad market, which is a more robust beast, washes out far less frequently.? My question: are these variants of the same phenomenon?

I wrote this back in early 2003.? I can now answer my own question: No.

I’ve looked at this question many times, and debated the answer, but there are a few things that have made me decide “No.”

  • Sectors often move independently of the market as a whole, particularly growthy sectors that lose their growth.
  • The big moves of the market as a whole have usually been correlated with credit crises, which are part of the financial sector, not the tech sector.
  • The tech sector grows more slowly as a whole now, and hasn’t washed out for a while.
  • The financial sector fails because of financial leverage, the firms are too levered, and take too much credit risk.? The tech sector fails because market players bid up the prices of stock assuming permanently high rates of growth.? These are fundamentally different reasons for over-valuation, because most tech stocks have little debt.

Credit crises lead to big overall declines in market values, particularly with financial stocks, but affecting all other stocks, because when credit conditions are tight, things slow for all firms.

When tech stocks are overbid, it is more of a local mania where market players overestimate the degree of growth the sector can achieve.? There is little collateral damage to the market.? A seeming exception to this is 2000-2002, where the market went down with tech, but financials were less affected. In that drawdown, tight Fed policy drew everything down, and tech more than everything else.? Remember the NASDAQ over 5000?? Still hasn’t returned there, while the Dow, S&P 500, and Russell 2000 have hit new highs.

Here’s the summary: financial stress tends to be pervasive, affecting everything.? Stress from growth expectations that disappoint tend to be sector-specific, and don’t drag down the market as a whole.

And so the answer to my question that I asked 10+ years ago is “no.”

Should You Buy Shares of Stock or Not?

Should You Buy Shares of Stock or Not?

Posted on by David Merkel

Well, I was honored to be tweeted to by Mark Cuban.? Here it is:

@howardlindzon @AlephBlog the real question is why would an individual buy a share of stock? It no longer reps ownership in company

Now let me try to answer the question.? Yes, average people buying stocks with the small amount of money that they have, have no control over their investments.? What is worse is that those who invest through mutual funds have less control, because the mutual funds don’t care much about governance except when something critical comes to them: an acquisition, a spinoff, a merger, etc.

Small investors need to realize that they are riding on the bus of the company (ies) that they own.? They have little ability to affect the board of the company, much less management.

So why buy, if you don’t get control?

Well, let’s talk about institutional investing in alternatives.? Many institutions ride on the buses of general partners with expertise, while they are limited partners.? They have little to no control, and they invest because they think their LP interests will be worth more by the time the partnership matures.? The partnership must raise liquidity by the end of the term, and players get paid, even if they are rolling into the next deal.

The key here is a liquidity event, or the threat of one.? Something that forces the investment to interact with the cash world.? It can be a spinoff, selling a subsidiary, an outright sale of the company, etc.

But liquidity events are rare with publicly traded equities.?? Maybe not *so* rare, when you consider dividends and buybacks.? But full acquisitions happen rarely, and individuals play a small role in M&A.

So here is the answer, which only makes sense if you are a value investor: we buy stocks that we think will compound value.? We may not have control, but we look for situations where management honors the investments of outside passive minority shareholders.

We may be aided by larger investors that seek control, or not.? When you own an undervalued company, catalysts appear. It may take time, but the effort to make value emerge will work more than half of the time.

My view is to focus on companies that are growing value and own them.? That will result in increases in the underlying value of the companies held, which will result in high market values.

Yes, we may not have control.? But if we focus on undervalued equities, we may own companies that those large enough to buy whole companies will buy out, rewarding our patience in holding neglected companies.

And so, Mr. Cuban, though I am nowhere as successful as you, I regularly do better than the S&P 500 by picking stocks with my value discipline, buying stuff that few want to own, and profiting when the stocks exceed expectations.

That is why I own individual stocks, for myself and my clients.? I note that you on rare occasion buy common stocks, including this purchase of Apollo Group.? Guess what?? I own that as well.

I buy the stocks of companies that are out of favor, but have a margin of safety — if I am wrong, I won’t get killed.

That’s why I buy shares of common stock even though I know my ability to control is limited.? (That said, at least in the insurance industry, if I call they will listen to me, at least among the midcap and smallcap firms.)

But I agree with you.? Small investors ride on the backs of larger control investors.? Thus small investors should ask, “What will the large control investors like?? And that is why clever small investors should buy shares of stock, despite the lack of control.

Full Disclosure: Long APOL

It’s Not What You Earn, It’s What You Keep

It’s Not What You Earn, It’s What You Keep

Posted on by David Merkel

I like questions from readers, if they are general enough for a blog post.? Here’s one for tonight:

Mr. Merkel,

Following reading your blog here:

http://alephblog.com/2013/01/30/how-to-become-super-rich/

It occurs to me that attaining money in the first place is only half the battle.? A well known fellow among engineers; Nicolai Tesla was great at this.? He made many millions in his life.? He also constantly reinvested most of his income into new inventions and new ideas.? When he died, he was pretty much destitute.

Starting a gas station requires about $300,000 ($150-200k to buy the store/land, 40k to furnish the store, 40k to buy the gas) in startup capital.? In technology, and in software; you can start making money with a good idea and next to no start-up capital… assuming you don’t get crushed by a larger company in the process.

How do the super rich store their massive income?? How do they invest it?? Buying up ever more companies and taking their profits off the top?? What is a minimum threshold amount of money that you need to start to do this?? Can you recommend any good books?

There are several classes of assets that the wealthy like to preserve their wealth.? Here are some examples:

  • Real Estate
  • Municipal Bonds
  • Businesses in necessary industries that throw off a lot of cash flow.
  • Businesses in which they have significant inside knowledge, and can continue to benefit from the knowledge.
  • Occasional equity investments in private ventures that seem promising.

After a certain amount of wealth is acquired, intelligent wealthy people tend to turn to things that have predictable cash flows, rather than take a large amount of business risk.? They’ve made their fortune.? Now it is time to conserve it, and receive what some consider to be rents — passive income that comes with little volatility.

Even Goldman Sachs did this with excess profits, buying safe securities, and throwing them into the BONY box. [BONY == Bank of New York, now BNY Mellon]

In essence, the wealth is converted to ownership in what is likely to be a growing income stream.? What is not used is reinvested.? That is how wealth is preserved during the life of the wealthy.

As for books, you can look at “The Millionaire Next Door,” and its series. Also, Rich Like Them.

But remember, not all rich try to preserve their wealth.? Some lose it through over-consumption, and others through bad investments.? The investments that I list above require a degree of humility, and thus, only wise rich people will follow such a strategy.

On Trading Illiquid Stocks

On Trading Illiquid Stocks

Posted on by David Merkel

Before I start for the evening, I would like to mention that Aleph Blog ranked #120 on Onalytica Indexes? Top 200 Influential Economics Blogs.? The post doesn’t mention it, but Aleph Blog was tied for #86 in terms of popularity.? More people read me than cite me or link to me.

This is more of a finance & investing blog than an economics blog, largely because I am a dissident in the land of neoclassical economics.? This blog is a melange of my varied interests, and is a bit of an acquired taste.? This will be true tonight as well, because tonight’s topic is trading illiquid stocks.

I regard a stock or bond as illiquid if dollar volume traded is low relative to the market capitalization of the security.? Why would I want to own such a security?? Neglect.? There are few eyes analyzing a security that cannot be sourced in size.? Thus, if you have a strong opinion on the security, and it is neglected, you have the opportunity for some strong returns.

In the portfolios I manage for clients, roughly 10% of the assets are illiquid, as I define it.? I have generally had good results with neglected stocks, but many stocks are neglected for a reason, typically a management team that is unfair to outside passive minority shareholders.? Who wants to put cash into a “roach motel?”

In dealing with illiquid stocks, I typically use discretionary reserve orders.? A discretionary order displays the price at which you want to buy or sell, and what degree of latitude you are willing to compromise on the price.? Here’s an example:

Bid: 10.40 Ask: 10.50

A discretionary order might say, “Buy 1000 shares @ 10.39, with 0.06 latitude.”? Any sell order flashing through at 10.45 or lower would trigger the discretionary buy order.

A reserve order says, “I want to sell a large number of shares, but I only want to display a small number, to avoid scaring the market.”? It could be “Buy 1000 shares, show 100 @ 10.40.”? If someone comes in with a larger order than 100 @ 10.40, it will execute up to 1000 shares.? Makes you look small to everyone but the market makers and specialists, who know how much you really want to do.

And that is a difficulty, and I learned it the hard way — I tried a trade where? was offering 20,000 shares and showing 100 on a NASDAQ stock, and the market for the stock went down on what was an otherwise calm day.? Other retail investors couldn’t see my size, but the market maker could, and he adjusted his bid down considerably.? So now I break up my trades, and don’t exceed a certain normal size for the liquidity of a given stock.

A discretionary reserve order combines the two.? For less liquid stocks, I use it frequently, because it erases some of the advantages that high frequency traders have.? My example would be: “Buy 1000 shares, show 100 @ 10.39, with 0.06 latitude.”

So for an illiquid stock was buying lately, I was doing the following (using the same market as before):

  • Buy 1000 shares, show 100 @ 10.40, and,
  • Buy 1000 shares, show 100 @ 10.39, with 0.06 latitude

The idea is to be ready to buy the sell orders that flash through the market at 10.45 or less, while being ready to buy shares cheap if someone decides to lift the bid.? The combination allowed me to buy 20% of the volume across two days, and not budge the stock price — it declined until the seller exhausted himself, after which, the stock started to rise, and I could get nothing more done.? I got 80% of the position on and will wait for a better opportunity for the balance.

Moving from Micro to Macro

So I have my own techniques for coping with market complexity.? I don’t complain about high frequency trading [HFT]; I fight back.? I don’t trade much, so trading is not a core way in which I add value.? That said, I do what I can to minimize the total costs of trading, which is a balance between paying up and getting the stock, and not paying up and the stock gets away from you.

As this article points out HFT is the result of squeezing market makers & specialists through decimalization and a few other regulatory changes.? Intermediaries lost margins and large traders lost the ability to do large trades without revealing their intentions to the world.? Thus in a free market, alternative execution sites come into existence.? Providing liquidity deserves some sort of reward, because it is a good.? HFT is one way for a liquidity provider to get paid, even if some of the tactics are questionable.

The competition to trade the same stocks in different venues led to complexity, such that data exchanged across execution venues must all run on the same clock.? If that is not so, it can lead to the “Flash Crash,” or the recent shutdown at NASDAQ, which ostensibly happened to avoid a repeat of the “Flash Crash.”

Complex systems require some degree of cooperation or regulation in order to operate well.? I have suggested that we don’t need microsecond liquidity to make things work.? Liquidity once per second, or even once per minute would do.? Having one central order book for each stock also would do it, together with tiny fees on orders that get cancelled.

Willingness to offer liquidity deserves a reward, and the more so for orders of size and duration.? They act similarly to what market intermediaries do, so let us come to a market system where such offers of liquidity, whether to buy or sell, get properly rewarded.? That might bring stability to the markets, together with a reduction in complexity.

A Different Look at Industry Attractiveness

A Different Look at Industry Attractiveness

Posted on by David Merkel

While doing some work today, I ran across this resource from Morningstar. Morningstar values stocks by projecting the free cash flows of the companies, and discounting those free cash at a rate that reflects the riskiness of the company.? Free cash flows are the amount of cash you can take from a corporation over a period, an leave it equally well off as it was at the beginning of the period.? Some analysts summarize it as:

  • Earnings then add back
  • Interest, Taxation, Depreciation, Amortization, and subtract
  • Maintenance Capital Expenditure

When you see firms talk about their non-GAAP earnings, this is what some are trying to approximate, showing the true earnings power of the assets.

They project the free cash flows in three phases:

  • Phase 1, the analyst projects the next five years
  • Phase 3, every company is the same, growing at the same rate with no competitive advantage
  • Phase 2 grades from Phase 1 to Phase 3, with wide moat companies having a transition period of 20 years, narrow moat companies 15 years, and “no moat” companies a lesser amount.

What does Morningstar use for its free cash flow discount rates?? They started with CAPM, and moved to something more simple, where companies are divided into four buckets, with rates of 8, 10, 12, and 14%.? I’m no fan of CAPM, but it would be a lot smarter to have a system that reflected:

  • the bond yields of the companies, if any, and
  • the relative riskiness of the enterprise without reference to the market as a whole.? The implied volatility of the stock could play a role.

At the end, Morningstar calculates the ratio of the current market price to the discounted value of the free cash flows per share.? If it is greater than one, is is overvalued.? If it less than one, undervalued.

Morningstar does the calculation company by company, but then aggregates the results by super sector, sector, industry, aize of moat, fair value uncertainty, and equity index.

What I particularly found interesting were the aggregations by industry.? I decided to look at the industries that? were overvalued and undervalued by at least 15%.? Here they are:

Undervalued

  • Aluminum
  • Asian Banks
  • Coal
  • Gold
  • Latin American Banks
  • Pollution & Treatment Controls
  • Steel

Overvalued

  • Auto & Truck Dealerships
  • Auto Parts
  • Broadcasting ? Radio
  • Business Services
  • Computer Systems
  • Electronics Distribution
  • Financial Exchanges
  • Footwear & Accessories
  • Home Furnishings & Fixtures
  • Insurance Brokers
  • Internet Content & Information
  • Long-Term Care Facilities
  • Luxury Goods
  • Marketing Services
  • Medical Distribution
  • Regional US Banks
  • Regulated Gas Utilities
  • REIT – Hotel & Motel
  • Scientific & Technical Instruments
  • Semiconductor Memory
  • Solar
  • Trucking

Morningstar as 147 industries, of which only two did not have fair value estimates.? Seven industries were undervalued (5%), 22 industries were undervalued (15%).? The undervalued industries were mostly cyclical in nature, while the overvalued industries were not, supporting the idea of this Wall Street Journal article, which argues that cyclical stocks are looking relatively cheap.? It is possible to overpay for certainty, just as it is possible to overlever companies with reliable cash flow.

At this point you might be asking, “Okay, this is nice, but what companies does this imply I should buy or sell?”? Can’t tell you for sure, but I can show you this.? This table is interesting enough, but what you can get are the companies behind each industry group if you click on them.? Note that Morningstar is global in its orientation, so many of the companies that it uses are not US-domiciled.? Some may have nonsponsored ADRs that trade infrequently.

My main point is that you can look at the underlying companies of each industry for buy or sell ideas of of their own discount or premium to fair value.? Morningstar’s fair value analysis is not perfect, but it is a straw blowing in the? wind, and is adequate for some relative value judgments.

The Rules, Part XLIX

The Rules, Part XLIX

Posted on by David Merkel

In institutional portfolio management, the two hardest things to do are to buy higher than your last buy, and sell lower than your last sale.

I’ll tell you about two former bosses that I had.? They are both good men, and I respect them both.? The first one taught me about bond management.? He had a difficulty though.? Typically, he did not like to trade.? When I stepped into his role, but with far less experience, I traded a lot more than he did.? Because I traded more, and liquidity in the bond market is sporadic, I came up with the rule listed above.

The boss had an interesting insight, though: he suggested when you get to large sizes, stocks and bonds are equally illiquid.? I tend to agree.? In my days, I have traded stocks and bonds where I was a disproportionate holder of them, more so with bonds than with stocks.? If you want to learn the microstructure of markets, there is no better training ground than with illiquid securities.? And if you hold a lot of any security, the position is illiquid.

Once you are big, it is hard to trade in and out of positions rapidly.? You have to scale in and scale out, and do it in such a way that you don’t tip your hand to the market, which would then move against you.? Now, it would be easy if you had a fixed estimate of value for the securities, so that you knew whether a proposed buy or sell made sense, but corporate bonds and stocks improve and deteriorate.

Imagine for a moment that you hold five percent of a company’s bonds, and to your surprise, the situation is deteriorating.? Bid prices are falling.? What do you do?? First question: are the bonds money good?? Will they pay off, with high likelihood?? If so, bide your time, and maybe add some more if you have room.? If not, the second question: so what are the bonds worth?? If less than the current price, start selling, but avoid the appearance that you are desperate.? You have a lot of bonds to sell.? For the market to absorb them all will be a challenge.? I would say to brokers, that I was willing to sell small amounts of bonds at the current market, but if someone wanted to buy my full position, I might be willing to compromise a little.? Then you can have negotiations.

More often, in a deteriorating situation, you sell in dribs and drabs as the price of the asset falls.? There is psychological pain as you sell lower, but a good manager dismisses it, forgetting the past and focusing on the future.

Then there was the other boss.? At the interview he asked me, “What is one of the hardest lessons you have learned?”? I said, “In institutional portfolio management, the two hardest things to do are to buy higher than your last buy, and sell lower than your last sale.”

He appreciated the answer, though he had a hard time applying it personally.? He had a tendency to look to the past more than me.? Over the years I have learned to be forward-looking and try to analyze what securities will do the best, regardless of my cost basis.

I got the largest allocation of the Prudential “C” bonds when the deal was done. but I bought an equal amount 10% higher in price terms when it was a great deal in relative terms.? It was tough to buy more at a higher price, but it was still a great yield on a misunderstood bond.

Regret is native to mankind, but you can’t change the past.? You can try to estimate the future.? Don’t think about your cost bases.? Rather, think about what an asset is truly worth, and its trajectory, and manage your buys and sells relative to that.

Forward-looking management wins.? Look forward, and avoid regret.

PS — On Scottish Re (spit, spit) we went through this process.? We bought and bought more as it went down.? I erred in my judgment.? Had I looked at the taxable income, I would have realized that a lot of the profits weren’t real.

Before the company announced its reorganization plan, we doubled our position at a very low price, but then sold the whole thing into an astounding rally when the company announced its plans.? That cut our losses considerably, and we didn’t buy it back.? Eventually, it was worth nothing.? Focus on the future; ignore the past.

Asset-Liability Management for Mutual Funds, and Others Like Them

Asset-Liability Management for Mutual Funds, and Others Like Them

Posted on by David Merkel

How much confidence do you have in your investments, mutual fund manager?? How much cash do you hold?? If you are very confident, maybe you should hold more cash.? Confidence comes near market peaks.? Everything seems certain; nothing goes badly wrong.? But the turning point might be near.

Same for bear markets.? Amid weakness, reinvest in companies with weak performance that you know are essential, with good balance sheets. Reduce cash during the crisis, because stocks are on sale.

These are pain trades, because they offend our sensibilities.? My view is that you follow price momentum during the middle of a run, and try to resist it near the end.? This applies to both bull and bear markets.

I try to mitigate risk by holding more cash after the market has run hard, and less cash after the market has cratered.? I resist the market’s movements.

But what if shareholders lose confidence?? What if they pull a disproportionate amount of money?

A lost of that depends on how badly you do.? If you do really badly, there is no hope.? When shareholders leave en masse, there are no good solutions.? Sell your positions with the lowest expected return, should you know what stocks those are.? Maybe your best picks, however concentrated, will turn the tide eventually.

I would encourage all mutual fund managers, and those like them, to take courage.? Make the hard decisions, and stick by your best ideas.? Look to the long term and aim for best total return.? If you can’t do this, find another job, because you are not cut out for money management.

Though money management firms are out to gather fees, money managers are out to outperform.? Have appropriate pride for what you do, and give it your best.? Try to avoid panic moves because investors are adding a lot of money, or redeeming a lot of money.

The main idea is this: know your investments, and what you expect them to return.? Add/subtract from your investments in proportion to their desirability.

The balance sheet of a mutual fund is weak because anyone can ask for their money back immediately.? Now, if you are a good money manager with a strong record, your assets will be more sticky.? Opposite true if you don’t have a good record.

And sad in a way, because good track records do not always maintain.? My view is that they do maintain outperformance on average until they hit their limit of assets that their style can manage.

So, invest with smaller promising managers, until they get too big.? As for the managers, be reasonable about what you can manage, like some hedge fund friends of mine, who shut off flows to their special fund near $100 million of net assets.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Companies & Industries

 

  • Odyssey Hits Wall as Honda Redesigns Minivan to Ace Test http://t.co/6VyK2N2EcO $HMC goes all out to reduce crash injuries 4 2014 Odyssey $$ Aug 16, 2013
  • Fairholme Fund May Increase Bet on Fannie, Freddie http://t.co/EOj8Z9SCzg BB reopens fund 2 get more buying power 4 F&F. Wouldn’t do it $$ Aug 16, 2013
  • Warren Buffett Stake in Suncor Energy, Much More Than It Seems http://t.co/ULDMXqYAnt $SU will be producing high cost oil 4a long time $$ Aug 15, 2013
  • Mall Owners Entice Hispanic Shoppers http://t.co/k42J96Nhxc Temporary stopgap 4 malls being hollowed out by retail over the internet $$ Aug 15, 2013
  • Losing Faith in Gold From Ghana to Vancouver Proves Rout http://t.co/K6VcC7Duyj More high cost mines come out of production as gold falls $$ Aug 15, 2013
  • The iCahn Effect: Apple’s Market Cap Jumps by $17B After Tweets http://t.co/8qb0rUWjCR Don’t c how $1B should move a stock $17B $$ $AAPL Aug 14, 2013
  • Y Food Companies Are Fascinated by the Way We Eat http://t.co/NhIRtprRWj Do u like 2 chew, crunch, smoosh or suck? Food companies study u $$ Aug 14, 2013
  • Financials near to regaining S&P 500’s top spot http://t.co/fgSKGOrfyC We do not learn, we do not learn, we do not learn, we do not learn $$ Aug 13, 2013
  • Endurance Welcomes Fred Cooper 2Head US Financial Institutions Insurance Practice http://t.co/XpQcxwYwJS Picking up nickels… $$ FD: + $ENH Aug 13, 2013
  • Heinz announces layoffs in Pittsburgh and Canada http://t.co/VG3WI8OTfs Now that the merger has closed, the cost rationalization begins $$ Aug 13, 2013
  • Funny in a way: pricing rationality & profits flow to hard disk makers once the industry consolidated down to three players $$ Aug 13, 2013
  • WD? Founds New Storage Association To Promote The Critical Role Of Magnetic Storage Technologies http://t.co/4jKYDyGGb2 FD: + $WDC $$ Aug 13, 2013

 

Rest of the World

 

  • India Shares Slump, Rupee Sinks to Fresh Low http://t.co/cfEnRd5EjQ Central Bank tightens credit conditions- Rupee still falls & stocks2 $$ Aug 16, 2013
  • How Mexico Ended Political Gridlock With a Pact http://t.co/GjNEfA0Ela How the PAN & PRI managed to work together & get most mutual goals $$ Aug 16, 2013
  • What Obama Misunderstands About Egypt http://t.co/UAKXAQBOPs No one worthy of support here, as Egypt slides into a situation like Syria’s $$ Aug 16, 2013
  • Cayman to Singapore Gain as Rules Stump Clinics http://t.co/giudbhHATR Medical Tourism looks elsewhere as India makes things hard $$ Aug 14, 2013
  • Petrobras Downgrade Looms as Slump Sinks Rating Outlooks http://t.co/EpRahHggSF Brazilian corporate sector got too aggressive w/debt $$ $PBR Aug 13, 2013
  • Death of 75-Year Monopoly Can?t Come Soon Enough: Mexico Credit http://t.co/wqfnynnYkP PEMEX monopoly lasts 75 yrs, dies in a few weeks? $$ Aug 13, 2013
  • Japan Inc. Profit Doubles to Add Support to Economic Rebound http://t.co/xv5dPxlRHO Sends $$ from consumers 2 exporters 2 invest abroad Aug 13, 2013
  • Mexico Plans Oil Reserve Sweetener to Lure Exxon, Chevron http://t.co/Ol0sGlse9h Will allow companies 2count reserves from profit-sharing $$ Aug 14, 2013
  • Buffett-Style Dinner Auctions Lure Chinese Seeking Just Society http://t.co/7dK9W52Yhe Long article on odd business seeking a freer China $$ Aug 14, 2013
  • What Brazilian Slowdown? Petrobras Maxes Out Refining Capacity&Imports Oil2Meet Demand http://t.co/0FsI0V6V27 $PBR Milked by Brazil govt $$ Aug 13, 2013

?

Bond Markets

?

  • Confident Consumers Step Up Their Borrowing http://t.co/QkD3Xss4NS Auto Loans Post Largest Gain in 7Yrs, as Total Consumer Debt Declines $$ Aug 16, 2013
  • California Sells $5.5B in Bonds http://t.co/TbUGTpmTk7 Better fiscal mgmt, maybe, at least it is not Michigan. Liquidity is abundant $$ Aug 16, 2013
  • Muni Investors Make Michigan Pay http://t.co/zCWMx5Ba2a To get a muni deal done in Michigan, you need extra yield & guarantees/covenants $$ Aug 15, 2013
  • Summer Lull Draws Investors to Riskier Debt http://t.co/08H0vfFj1b Feels like time to begin peeling back credit risk $$ Aug 13, 2013
  • Bond Hubris Overwhelms Fed in Riskiest Credit-Market Sectors http://t.co/WUKgfpse77 No free lunch; Fed’s asset inflation will mean-revert $$ Aug 13, 2013
  • Michigan Safety Net for Boomers Frays on Bankrupt Detroit http://t.co/tTso4JMxTR What happens when u make 2 many promises vs tax base $$ Aug 13, 2013

?

Central Banking

 

  • Fed’s Yellen Says Stance on Banks Hardened http://t.co/KZIfgPncaN Yellen tries 2 differ from Summers, but bank regulation was weak 2003-8 $$ Aug 13, 2013
  • Next Fed Head Should Meet the Bernie Sanders/Elizabeth Warren Standard http://t.co/xM9MF71dvM Questions aren’t realistic about $$ policy Aug 13, 2013
  • Yellen, Fischer Among Participants at Jackson Hole This Year http://t.co/MBui5Hfc3y Bernanke not attending as he slips into the shadows $$ Aug 13, 2013
  • Rand Paul on Republicans’ Voter Appeal and the Federal Reserve http://t.co/oVdaavHWsj Can we find another Reagan, who united the GOP? $$ #no Aug 13, 2013

 

Market Impact

?

  • Hundred-Dollar Stocks Double as US CEOs Dismiss Splits http://t.co/OOmXdpWSrU With trading costs so low, y do we need splits anyway? $$ Aug 15, 2013
  • How to Invest Like Seth Klarman http://t.co/JDxW9VbROs Easier said than done. Who has the conviction 2 sit on $$ when opportunities r poor? Aug 13, 2013
  • Greater &lesser rotations http://t.co/XZ6D4CgIZq “no evidence that retail investors r very overweight bonds or very underweight equities” $$ Aug 13, 2013
  • Will Mom and Pop investors blow it again? http://t.co/95lZYtIZ6u @BrettArends on retail $$ coming back into stocks; time 2b careful Aug 13, 2013

?

Politics & Policy

?

  • What We Lose if We Give Up Privacy http://t.co/ZOddurR51k When 4th Amendment rights erode, 1st Amendment rights follow, eg, free speech $$ Aug 16, 2013
  • Free Work Entices Businesses to Hire Long-Term Unemployed http://t.co/Lhemn5JIWp Try b4u buy lets employers figure out who they like $$ Aug 15, 2013
  • Problems With Authority http://t.co/JjIgnIJVEh Obama ignores unusual writ of mandamus, which compels the govt 2fulfill a legal obligation $$ Aug 14, 2013
  • Everything you know about immigration is wrong http://t.co/UpHiI0Wwfd Militarizing the border did not stop the flow in, did stop flow out $$ Aug 13, 2013
  • Encryption App Silent Circle Shuts Down E-Mail Service ‘To Prevent Spying’ http://t.co/95KCJt80mH Destroying data 2 preserve secrecy $$ Aug 13, 2013
  • Eric Holder Owes the American People an Apology http://t.co/07JtmV95QA Vastly overstated the efficacy of mortgage relief programs $$ Aug 13, 2013

?

Housing

 

  • Report: Half of All Homes Are Being Purchased With Cash http://t.co/p9GF4dOBUz Good sign. More equity means greater sustainability $$ Aug 15, 2013
  • Baltimore Foreclosures Surge Again as Legal Logjam Breaks http://t.co/xphbxvRXjv Foreclosures take longer 2work out in judicial states $$ Aug 15, 2013
  • Why Home-Price Growth Will Slow http://t.co/IZaE08udfI Prices up, mortgage rates up, fewer distressed homes available 4 sale $$ Aug 13, 2013

 

Other

 

  • Mom, Dad, Sorry I Was So Expensive http://t.co/VakZSkmE3r If u think having children is expensive, imagine the $$ of a society w/out them Aug 15, 2013
  • DNA Sequencing of Tumors Brings Hope of New Lung-Cancer Drugs http://t.co/YRul3Gfiva Costs high, distinguishing between diff cancers worx $$ Aug 13, 2013
  • Companies Ease Up on Non-Compete Agreements http://t.co/iEhtgQ7qjq Restraint of Trade laws also make it difficult to enforce non-competes $$ Aug 13, 2013
  • Overhaul Proposed for Annual Audit Reports http://t.co/8LAgJf5rrU Could b good 2 get past the the present binary pass/fail $$ Aug 13, 2013
  • Stocktwits ? Happy 5th Anniversary http://t.co/AQ8vI1kOsC @howardlindzon extols efforts made as they r the premier social investing site $$ Aug 13, 2013
  • Browser wars: Chrome rules the web http://t.co/QoGqVlVNcI The sun never sets on the Empire of Google’s Chrome; IE dying, Firefox choking $$ Aug 13, 2013

 

On Fiduciaries

  • On brokers as fiduciaries, choose: mixed advice, paid for by commissions, best advice, but u have to pay more 2a fiduciary, or no advice $$ Aug 13, 2013
  • You Can’t Afford Your Broker, at Any Price http://t.co/C46ndiTx6U by @asymmetricinfo on holding brokers 2a fiduciary standard $$ Aug 13, 2013
  • Look Who?s Locking Horns Over Retirement Accounts http://t.co/xSRFtbFndD @jasonzweigwsj tells us 2 act as our own fiduciaries or hire one $$ Aug 13, 2013

?

Wrong

  • Wrong: Don?t Kill Fannie Mae http://t.co/JqDk0kNJM5 People forget the incredible losses on prime mortgages when housing prices fell $$ Aug 15, 2013
  • Dumb: Retirees in Enemy Territory Go Door-to-Door on PPACA http://t.co/4xSgHH2qNL Won’t work unless young & healthy sign up on exchanges $$ Aug 14, 2013
  • Wrong: Your mortgage documents are fake! http://t.co/rErbfMzP7B Mistakes procedural justice 4 real justice. U don’t pay, U get foreclosed $$ Aug 13, 2013
  • Wrong: In defense of the 30-year mortgage http://t.co/cc9kgtRJpM Over-investment in housing & levers up the economy, creating fragility $$ Aug 13, 2013

?

Replies, Retweets, & Comments

  • RT @TheLimerickKing: QE has not led to inflation It’s now a much worse situation Velocity’s low But risk assets grow So now it’s just wealt? Aug 15, 2013
  • Commented on StockTwits: No, I don’t. Ultimately all assets boil down to their cash flows. This doesn’t change th… http://t.co/xjshS62La2 Aug 14, 2013
  • A shout-out to DarkCloud @p0stk0m for being my 8,000th Twitter follower. Thanks a lot, & thanks to all who follow me $$ Aug 14, 2013
  • @marketfolly @EquityNYC That is a very good point, and I internally noted it, but did not comment. I should have. 🙁 $$ Aug 14, 2013
  • “Congratulations, Howard. Well done, particularly the way you survived Twitter’s $ grab.” -Merkel http://t.co/tOlvvEqy0P @howardlindzon $$ Aug 12, 2013

?

Theme: Overlay by Kaira.