Posted by Davy Bui on July 2nd, 2009 in Worth Reading (links to articles, etc.)
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This one comes to us courtesy of Reuters’ Business News RSS feed:

Bleak payrolls report mauls Wall St; volume thin

I don’t think I’ve ever read a headline that said “Stock Markets Surge On Low Volume” — they usually save the low volume part for the fifth or sixth paragraph in the story. But on a down day, Reuters feels the need to silver-line their headline.

Just another trivial example of the embedded bias that comes with most of the mainstream media. I know I have hit on this theme many times in the past but it bears repeating: the best path to take is usually the contrarian one, the one less travelled. I have found this axiom applies pretty well to just about everything, not just stocks, but of course, your mileage may vary.

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Posted by Davy Bui on June 29th, 2009 in Gurus, Worth Reading (links to articles, etc.)
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James Grant of Grant’s Interest Rate Observer put in an extended appearance on Bloomberg’s Taking Stock program this afternoon. You can find the clip here.

With the recent recovery in credit markets, Grant is pulling back some from his “supercredit” portfolio, recommended in December 2008. He also sees currency debasement as an inevitability, due to the Fed’s actions to stave off another depression.

But I found his remarks concerning the concept of risk and safety to be the most prescient. As I quoted in the title, Grant sees risk in everything, including Treasuries, which dovetails with my view on markets. There is no such thing as a risk-free investment. Even choosing to leave your money in a FDIC-guaranteed bank account exposes the saver to inflation and currency risk.

For some reason, they touched upon the Bernie Madoff sentence in the interview as well. I have studiously avoided following the Madoff scandal, both on this blog and in my personal reading, because frankly, it doesn’t pertain to me at all. In the large scheme of things, Madoff’s fraud affected relatively few people, especially in light of all the events of the last two years.

With that said, 150 years seems patently absurd. If rapists or child molesters don’t deserve 150 years (they do and more), then why would Madoff? Why is Madoff “extraordinarily evil” but the whole system that incentivized Wall Street to turn mortgages into Russian roulette allowed to stand?

Once again, the system works to preserve itself. Much like the preceding Wall Street scandals in the early part of the decade, it is far easier to make examples of the Ken Lays, Martha Stewarts and Enrons than to implement substantive changes. In the same way, the authorities send away Madoff for life while largely leaving in place the same system that not only made his fraud possible but led to an economic crisis of the highest order.

Once again, the blame now rests with President Obama, who finds it more convenient to cave in to the status quo than to fix the system. I leave you with two broad and well-deserved attacks from the Financial Times against our “weak” President:

• Nicholas Brady Says Obama Wasted Reform Chances
• Clive Crook: Obama Is Choosing To Be Weak

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Posted by Davy Bui on June 28th, 2009 in stock screen
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In dedication to my recent posts on value investing vs. trading strategies, I decided to focus this week’s screen to the market’s favorite word: growth. Specifically, the criteria used was positive revenue growth for the next fiscal year. Of course, this does not translate to earnings growth but management teams should have figured out there’s a recession and cut the cost side.

In addition to revenue growth, we are looking for companies that can thrive in this recession and take market share. These qualities are hard to quantify but I used ROE and ROA as measures of company quality, with the added kicker of a low debt-to-capital ratio so the company theoretically will have resources to pounce on opportunities. Finally, my frugal nature will not allow me to overpay so I looked for stocks with PE ratios below 15 and PEG ratios under 1.

The screen turned up 74 stocks:

Continue reading this post…

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Posted by Davy Bui on June 25th, 2009 in Worth Reading (links to articles, etc.)
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Michael “Mish” Shedlock writes a widely followed blog on macro economic and market trends called Mish’s Global Economic Trend Analysis (that’s a mouthful). You’ll find it in my blogroll, which means I read it regularly. Well, Mish weighs in with his thoughts on long-term buy-and-hold:

Long-term Buy-and-Hold Is Still Bad

Obviously, Mish has a different viewpoint than the one I expressed in a recent post. But I think it is important make a distinction between long-term buy-and-hold, say, as advocated by Jeremy Siegel of Stocks for the Long Run fame, versus value investing, which is usually also associated with buy-and-hold.

In any case, regular readers know I give credence to both trading and investing strategies — I simply choose a value-oriented philosophy because it suits my temperament. I present Mish’s opinion to flesh out the issue more fully and leave it to readers to find their own path to investment success.

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Posted by Davy Bui on June 24th, 2009 in Market Commentary
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Apparently, the propaganda has begun to build around our current Fed Chairman, Ben Bernanke, as evidenced by this small blurb in the morning’s Financial Times:

Challenges Mount For ‘National Hero’ Bernanke

Of course, the gushing comments come from two prominent figures of the short-sighted, slash-and-burn corporate America that rules over our country: Jack Welch and Abby Joseph Cohen. Only in America could we forget the disastrous outcome of the immediate past to repeat the same mistakes in the present.

Until 2007, when the American housing bubble popped, former Fed Chairman Alan Greenspan was considered an economic maestro and the greatest Fed Chairman of all-time. Keep in mind, this was a few years after he handed the reins to Bernanke. The infamous “Greenspan put” had staved off many disasters:

Continue reading this post…

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Posted by Davy Bui on June 22nd, 2009 in Politics, Worth Reading (links to articles, etc.)
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That’s what Barry Ritholtz over at the Big Picture is calling our President: Barack W. Obama. Ritholtz sees little difference between Obama’s financial sector polices and those of his predecessor. Speaking as a supporter of Obama during the election campaign, I must agree with Ritholtz.

The Obama administration has neutered every attempt at serious reform of the financial sector and continues to feed Wall Street with a silver spoon. Calculated Risk ran this interesting post on Goldman Sachs and the record bonuses expected for 2009, not one year removed from the various bail-out programs (TARP, FDIC-backed debt, etc). Even as he rails about the plight of the middle-class, his administration funnels most of the government largesse to Wall Street with a nice kickback to an antiquated autoworkers union. Obama’s harsh words are always followed by conciliatory and appeasing actions but we knew that about the man coming into this administration.

His political calculus is that he can maintain his popular support base while also nursing his finance infrastructure via the large corporate interests but he had better watch out. His supporters, having witnessed him water down or walk back nearly every campaign promise, is less fervent and if we experience a bad economic event before the midterms, the electorate may send him a very strong message.

Even as I endorsed Obama, I never bought into the change rhetoric. The powers of the status quo are simply too strong for one person to overcome — that will take a crisis of monumental proportions (and apparently one bigger than the crash of 2008). But I did not expect him to further execute the Bush financial policy. As far as I can tell, the only difference between Hank Paulson and Tim Geithner is that Paulson had more spine!

New President but the open spigot for Wall Street continues. Disgusting. Obama seems partial to copping union chants for his own use (”Yes We Can!”) so here’s another labor chant for him: Shame on you, Obama. Shame on you.

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