bearfund

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+5 / -1

497 Comments

    • Sun Jul 20th 12:51 PM | Rating: 0 0
      Commented on:
      Barron's Goes Bullish on Banks, Again
      There are only a handful of really good banks out there, WFC and USB among them. But those are not the companies available below book and 8x earnings. In fact both are expensive again. They were good buys at 21 on Tuesday but the upside is gone now. As we've seen time and again, once Buffett is in a name you can forget making any money investing in it; investors make all their money when they buy and "Buffett stocks" are always expensive. The best we get now are a few great trading opportunities like we had last week.

      As for the rest of the banks, go ahead and take this "once in a generation" opportunity. Be sure to get the certificates and frame them; that stuff might fetch a decent price on eBay later on.
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    • Sat Jul 19th 12:40 PM | Rating: 0 0
      Commented on:
      Invest and Stop Working
      The reasons most people can't retire at 34 has nothing to do with their investment strategy, the companies they choose, or the performance of the market. There are two main pitfalls. First, most people can't do so because they spend too much money. Even those who set aside a few hundred a month for investment are usually taking on debt elsewhere - a mortgage, a car loan or two, credit cards. Even the cheapest debt is going to cost more than any company pays in dividends (this is a tautology in a perfect market and only rarely violated in reality), so retiring on that income stream with debt is just not going to be possible.

      Those with no debt and modest spending habits, however ("the wealthy", or what we used to call the middle class, when we had a middle class, as distinguished from "the rich" who have myriad ways of avoiding taxes altogether and are usually so leveraged that inflation works for rather than against them) face the second pitfall, the draining away of their wealth by the twin pillars of modern government finance: inflation and taxation. Favourable tax structures in Canada are under assault already, and soon Americans will have to contend with the expiration of the dividend tax break, higher cap gains rates, and most likely higher marginal rates on anyone earning enough to contemplate retiring (ever). And of course everyone knows about the perils of today's ultra-loose monetary policy. It's easy to poo-poo these drains on wealth when you're drawing a salary that grows by maybe 4% every year, but let's take an example: suppose you're 50 and plan to live until 90 on dividends, interest, and the occasional sale of stock. You have a modest lifestyle - small rent-controlled apartment, no car, minimal travel - and need only $30k a year in today's dollars to support it. At a 15% tax rate and 2% annual loss of purchasing power, your portfolio needs to generate a total before-tax stream of cash equal to $2.61m. Increase inflation from 2% to 5% and tax rates from 15% to 25% and that jumps to $5.46m. You've effectively lost 52% of your income. In theory, you will get some of it back as the dividends and market values grow with inflation, but inflation is also a killer of real growth so they are unlikely to entirely keep pace with it. And of course you'll never get the tax back.

      I agree with your assessment that there must have been some large leveraged bets somewhere along the line. And $400k is simply too small a portfolio to last very long at current inflation and tax rates. The dividend stock approach definitely has advantages over the more widely recommended strategy using bonds, but it's really just not enough, even with free medical care, and you're at the mercy of the market. Still, most people won't even get to this point as they have no control or even understanding of their spending, much less an investment strategy. The ones who are "ahead of the curve" might be putting 200 bucks a month into a Vanguard index fund. They have no idea how tiny their nest egg really is or how little real income it will produce when they retire. The adjustment from a lifetime of wild spending on credit to barely scraping by at 67 years old is not going to be pleasant for them. Expect more raids on the Treasury, exacerbating the problem for those with better plans. Mr. Foster might do a bit better given Canada's brighter future, but I still expect to see him back at work in a decade or two - unless the books were a part of his financial strategy all along...
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    • Sat Jul 19th 02:13 AM | Rating: 0 0
      Commented on:
      The SEC's Campaign Against Naked Shorting: Misguided or Right On?
      I'll take (C). We were extremely oversold and a lot of good companies had taken beatings that were not justified by fundamentals. Of course, a lot of companies whose shares are short to zero candidates were doing better than they should, but that's neither here nor there. The SEC's guidelines are BS; naked shorting has always been illegal in any issue and it would not hurt the market a bit to enforce that rule. Shorts have a legitimate place in the market and everyone needs to acknowledge that. But they also need to borrow the shares they sell. Failure to deliver should result in an automatic loss of one's seat on the exchange. That would put an immediate stop to naked shorting. And this should apply to all issues, not just the chosen 19.
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    • Sat Jul 19th 01:52 AM | Rating: 0 0
      Commented on:
      Free the Frozen Fed!
      Who cares why they buy it? They're wrong. Take advantage.
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    • Sat Jul 19th 01:39 AM | Rating: 0 0
      Commented on:
      Why I'm Restarting Kinross Gold
      Gold is neither undervalued nor overvalued. It is what it is. All the value in an ounce of gold has been put there by the time you own it. Its value does not depend on anyone's promises. If you like that sort of thing, hold the physical metal and forget the rest. The only reason to buy KGC or any other miner is that you like their business - mining is like any other business in that it has its solid executors and its utter failures. But don't buy it to hedge "the market". Miners are not metal.
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    • Sat Jul 19th 01:34 AM | Rating: 0 0
      Commented on:
      Gold vs. Oil
      The MacroShares products simply do not track the price of oil well at all. If you want to be short oil, you've got a couple options: use the futures market, or buy a car. It's pretty much the same damn thing.
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    • Sat Jul 19th 01:21 AM | Rating: 0 0
      Commented on:
      How the U.S. Financial Crisis Resembles Japan’s 'Lost Decade' - And How to Play it
      ozzy, To hell with the exit tax. When I go, my money is going with me - on my back, in the form of gold. The only way anyone is getting it is to kill me, which is just as well since I wouldn't want to live without it. Good luck trying to stop me. It would cost more than GDP to adequately seal all the borders.
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    • Fri Jul 18th 10:24 AM | Rating: 0 0
      Commented on:
      No Atheists in Foxholes - No Libertarians in Financial Crises
      There is only one libertarian in Washington, and he hasn't been involved in any of this madness. So of course there are "no libertarians in financial crises" - there aren't any in power, period.
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    • Fri Jul 18th 00:00 AM | Rating: 0 0
      Commented on:
      Top 10 Ways to Spot a Run on Your Bank
      Remember: if you're going to panic, panic early. Would it be so terrible to spend the next 12 months with most of your money in 3-month T-bills, gold, and Swiss francs? Beats worrying, that's for sure.
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    • Thu Jul 17th 23:52 PM | Rating: 0 0
      Commented on:
      When Trading Stops Being Fun: Riots at the Pakistani Exchange
      brn1087, oh, the old "it can't happen here" thing. Right. I've heard that one before. Rule 1: you are not special. And what dleuwer said. The bigger the returns elsewhere and the longer they go on, the better gold looks. Central banks, regulators, the government, and even the markets can and will lie, lie, lie. But gold cannot be fooled.
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    • Thu Jul 17th 03:03 AM | Rating: 0 0
      Commented on:
      Will the Fed Intervene to Prop Up the Dollar?
      Less obvious is how the Fed would intervene. Unlike most other central banks, it doesn't have much in the way of forex reserves - the NY Fed's latest quarterly report shows just $25b in actual foreign holdings plus another $21b in swaps with the ECB. That's puny; plenty of banana republics have beefier reserves. For example, Nigeria has $62b and Vietnam recently revealed that it has $21b. Maybe they'll use more swap agreements and other funny money? Certainly they can't sell anything real; they don't have anything to sell.

      The Fed does have a lot of gold, at least in theory (no one knows if it's really there). But I'd like to think that even the Fed governors are smart enough to know that there's a time to sell your gold and that time will not feature working capital markets, basic personal safety, or the posting of financial commentary over the Internet. But I've been disappointed before, and likely will be again.
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    • Wed Jul 16th 10:50 AM | Rating: 0 0
      Commented on:
      Dividends in Danger at Regional Banks?
      Can you provide one good reason either company should cut its dividend? Didn't think so. As you know, knowingly concealing losses from the market is a crime. While I don't doubt that some banks, especially I-banks, have doctored the books a bit and perhaps generously valued their level 3 assets, I see no indication or reason to believe these far more conservative banks have done so. Nor do I see any reason to think they need to. WFC raised its dividend already.

      USB's CEO said he expects to do the same, for the 37th straight year. USB's nonperforming assets are at $1.14b - 0.69% of all loans. Regulatory capital stands at 8.5%. And it made a decent profit even after increasing loss provisions. If you read the transcript, you know that Davis talked about keeping his powder dry and said it was prudent to increase reserves, but also noted opportunities for growth - opportunities management felt were worth suspending share buybacks to pursue. Does this sound like a company that's panicking, on the ropes, or mismanaged? I sure don't think so, and neither does Mr. Market: shares have risen over 15% off their lows. The dividend is well-covered by earnings and leaves enough cash to continue growing the business and adding to reserves as necessary. The shares are now trading under 2x book (one of the key signs I was waiting for) and below 10x earnings, a reasonable valuation for a conservative bank offering a yield north of 7%.

      While downside risk remains, I took the opportunity yesterday to begin building a position in USB. I've already been rewarded, and expect those rewards to continue for many years to come. The next few quarters will not be very good, but banking crises can last only so long, and with minimal exposure to risky business and the Fed running the printing presses at full blast there is a limit to how much USB can realistically lose.

      There's another way to look at this, too: USB is well capitalised and conservative, with high-quality assets. If it fails, it's likely that the entire banking system has collapsed. So I like it as a complement to my long position in gold and my short positions in Treasuries.
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    • Wed Jul 16th 00:02 AM | Rating: 0 0
      Commented on:
      Hot Commodities! The Only Game Left in Town
      sliman, DGP ain't an ETF, it's an ETN. DB goes titsup and your "double long gold" holding is just another senior unsecured note. If you're lucky you'll get back what it was issued at.

      DGP is a great way to play the idea that all the gold longs are fools because really everything in financials is rosy as all get out and I'll just let them bid up my notes and then sell them before the longs get wise. Risky, and probably wrong, but if that's your game you've got the right security.
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    • Mon Jul 14th 22:52 PM | Rating: 0 0
      Commented on:
      U.S. Government Is Heading for a Slippery Slope
      Rabbito, give me a break. I'm not a Republican. I don't like the Republican Party, and I don't agree with much of anything it's spent the last 15 years doing. But for crying out loud, man, both houses of Congress are controlled by Democrats. None of this crap can go down without Congressional approval. Greenspan was reappointed by Clinton. This is not about partisan politics; the politicians from both major parties (except for Ron Paul) are falling all over themselves to socialize losses. If you want to complain about Congress, fine. But spread the blame: there's more than enough for all of them.
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    • Mon Jul 14th 22:39 PM | Rating: 0 0
      Commented on:
      Bond Expert: Monday Wrap
      Dear ex-fellow Treasury shorts: I was on the other side of your covering trades today! Thanks so much for giving me a price I never thought I'd see again at which to extend my position even further. See you at 10%! Love and kisses, bearfund.
      View article »
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