What is going on at Goldman Sachs? It seems that financial minds are not seeing Goldman in the same light as they used to. Today, three of Goldman Sachs Asset Management's heads departed from the firm. Furthermore, yesterday, the Oracle of Omaha's favorite investment banker, Byron D. Trott, left the firm to open up shop. Are these departures simply a sign that the executives have gotten bored of Goldman and are feeling rather entrepreneurial? Are paychecks no longer that great? Or, is there another reason for the departures from 85 Broad? One thing remains: if Goldman is hiring, I'll be in line waiting for an interview...
Read about the hedge fund managers here: http://dealbook.blogs.nytimes.com/2009/03/31/hedge-fund-managers-leave-goldman-sachs/
Read about Mr. Trott here:
http://dealbook.blogs.nytimes.com/2009/03/31/goldman-loses-but-hold-the-pity/
Tuesday, March 31, 2009
Oil in the Long-Run
Crude prices have been on a roller coaster ride in the past year. Although oil is up 54% from its low of $33.87 on February 12, it is certainly well below its all time high of $147.27 since the summer.
However, the current financial crisis and the corresponding economic downturn may have caused the market to undervalue oil - similar to the run up in 2008 - despite the fact that oil is already up 17% this year.
In consideration of dismal demand, here are a few convincing arguments why oil is poised for another bull run in the coming years:
1. Falling oil supply: recent data from the Cambridge Energy Research Associates confirms prevalent industry and market opinions that a considerable proportion of supply growth is at risk, representing a fundamental catalyst for an increase in crude prices in the future. The report claims that nearly 7.6 million barrels of oil a day, or 8.04% of current total world oil production per day, is threatened due to low or canceled investments in oil and gas production.
2. Anticipation of inflation: money flooding into the system due to federal stimulus programs will eventually lead to a flight to commodities in fear of inflation following economic recovery.
3. Persistent and unabated demand from China and India, possibly with no feasible alternative for the next 3 to 5 years.
However, the current financial crisis and the corresponding economic downturn may have caused the market to undervalue oil - similar to the run up in 2008 - despite the fact that oil is already up 17% this year.
In consideration of dismal demand, here are a few convincing arguments why oil is poised for another bull run in the coming years:
1. Falling oil supply: recent data from the Cambridge Energy Research Associates confirms prevalent industry and market opinions that a considerable proportion of supply growth is at risk, representing a fundamental catalyst for an increase in crude prices in the future. The report claims that nearly 7.6 million barrels of oil a day, or 8.04% of current total world oil production per day, is threatened due to low or canceled investments in oil and gas production.
2. Anticipation of inflation: money flooding into the system due to federal stimulus programs will eventually lead to a flight to commodities in fear of inflation following economic recovery.
3. Persistent and unabated demand from China and India, possibly with no feasible alternative for the next 3 to 5 years.
Sunday, March 29, 2009
Madoff: A breakdown
Assume that ol' Bernie started his ponzi in the 1980s, and he pilfered $10 bn (very conservative estimate) straight into his pockets...
He would have earned:
$1.6 million / workday
$200,000 / hour
$60 / second
and they said that banking was the place to be in during the bull market...
He would have earned:
$1.6 million / workday
$200,000 / hour
$60 / second
and they said that banking was the place to be in during the bull market...
Saturday, March 28, 2009
Is Obamanomics the answer?
Government aid in the past has been an injection of capital into an area of the economy that does not necessarily constitute as an efficient use of that capital. The question is whether Barack Obama can change the way we view federal aid in times of economic duress. Robert Reich certainly supports the president's actions thus far:
Obamanomics Isn't About Big Government
Obamanomics Isn't About Big Government
Strength in China
The recent rally has bears labeling it as a bear market rally and bulls screaming that the bottom has arrived and we are in the midst of a fierce bull market. If you are still skeptical about the shape of the US economy, maybe it's time to look at some actions taken by China, a country actually serious about stimulating its economy and actually creating jobs.
On Thursday, Solar stocks had the best day in a long time, as large Chinese Solar names like LDK and STP rallied over 40% on the news that China would launch a new government subsidy for clean power systems. Solar projects larger than 50 Kilowatts would be eligible for a subsidy of $2.90 per watt. This would go towards covering the actual cost of installation of the panels, thereby attempting to boost demand, which is the main plague on the solar names, despite the attempt by some analysts to blame oil prices. This action can be seen as a real stimulus for the solar names and affirms the Chinese government's desire and ability to help its economy.
In addition, actual citizens in China are benefiting from the new government plan to sell "spending tickets", which can be used to purchase certain domestic goods. For example, a $100 "spending ticket" may only cost a citizen $80 to purchase. This plan actually increases consumer spending and will stimulate the economy, probably more effectively than building bike trails. The idea was first implemented in Taiwan, where the government handed out free "spending tickets" to every citizen. The China plan is a slight modification, requiring citizens to contribute as well. The best part is that the Chinese government can actually afford the stimulus.
On Thursday, Solar stocks had the best day in a long time, as large Chinese Solar names like LDK and STP rallied over 40% on the news that China would launch a new government subsidy for clean power systems. Solar projects larger than 50 Kilowatts would be eligible for a subsidy of $2.90 per watt. This would go towards covering the actual cost of installation of the panels, thereby attempting to boost demand, which is the main plague on the solar names, despite the attempt by some analysts to blame oil prices. This action can be seen as a real stimulus for the solar names and affirms the Chinese government's desire and ability to help its economy.
In addition, actual citizens in China are benefiting from the new government plan to sell "spending tickets", which can be used to purchase certain domestic goods. For example, a $100 "spending ticket" may only cost a citizen $80 to purchase. This plan actually increases consumer spending and will stimulate the economy, probably more effectively than building bike trails. The idea was first implemented in Taiwan, where the government handed out free "spending tickets" to every citizen. The China plan is a slight modification, requiring citizens to contribute as well. The best part is that the Chinese government can actually afford the stimulus.
Thursday, March 26, 2009
Bears Beware
While fundamental problems will likely persist for some time, regulators have a few options left that could put serious upward pressure on the markets. A revision in the Uptick Rule or the mark-to-market accounting policy could send the markets soaring higher, making a directional play in the current environment difficult.
Monday, March 23, 2009
Sunday, March 22, 2009
A Relatively Bright Spot in a Sea of Darkness
Despite GDP revisions and export reductions, China has and continues to fare relatively well in comparison to the rest of the world. The Shanghai Composite Index is already up 21.29% YTD, along with a host of indicators that suggest China's resilience.
With the World Bank currently projecting China's 2009 GDP estimate to be 6.5% - although the government itself estimates 8% - China may have to settle with single-digit growth rates, but domestic market strength, effective government stimulus, and overall healthy economic indicators such as recently low inflation prove Chinese strength in the current financial crisis.
The implications of this is highlighted in the most recent editorial of The Economist, How China sees the world
With the World Bank currently projecting China's 2009 GDP estimate to be 6.5% - although the government itself estimates 8% - China may have to settle with single-digit growth rates, but domestic market strength, effective government stimulus, and overall healthy economic indicators such as recently low inflation prove Chinese strength in the current financial crisis.
The implications of this is highlighted in the most recent editorial of The Economist, How China sees the world
Time For A New PE Strategy?
A common scapegoat for many PE titans these days is simply that credit markets have not thawed enough for them to gain the appropriate leverage needed to make return-maximizing deals. The titans also use the following claim to assure investors: "we are in better shape than our competitors with $XX billion AUM." Well, how about thinking about this: why not employ a different strategy for deploying capital? PE executives boast about their abilities to pick out businesses and turn them around with their business acumen. Why not use this business acumen and less leverage to actually get some deals done? Although this would reduce ROIs for these businesses, it would increase some revenues (which would be great for public companies such as BX and FIG). An activist stance may also make some nice gains, although this may call for a change in fund prospectuses. Nonetheless, it may be time for PE titans to find alternative ways to go to work...
Ishares for Sale
"Private-equity giant Hellman & Friedman has formed a consortium to gobble up Barclays' iShares business for about $5 billion, according to a media report"
A report showed that after Barclay's recent announcement to sell its ishares business, private equity group Hellman & Friedman, Carlyle, and two other P.E. shops have offered 5 billion for the business. The company is selling the unit to raise cash and possibly avoid the British bailout program, and has offered to finance 80% of the deal.
The following address provides an article of how the exchange traded fund landscape may change as a result.
http://www.marketwatch.com/news/story/Sale-iShares-business-suggests-bigger/story.aspx?guid={57DD45F5-2C78-4917-95DE-278523C13788}&dist=hplatest
A report showed that after Barclay's recent announcement to sell its ishares business, private equity group Hellman & Friedman, Carlyle, and two other P.E. shops have offered 5 billion for the business. The company is selling the unit to raise cash and possibly avoid the British bailout program, and has offered to finance 80% of the deal.
The following address provides an article of how the exchange traded fund landscape may change as a result.
http://www.marketwatch.com/news/story/Sale-iShares-business-suggests-bigger/story.aspx?guid={57DD45F5-2C78-4917-95DE-278523C13788}&dist=hplatest
Bottom? Bear Market Rally?
So the stock market posts a two week gain... the S&P is way above its low of 666 (nice number btw).
And again... people are calling an "absolute bottom". How many times have they done this in the past only to have their words thrown back in their faces? Pull up a chart of the S&P. Stick on a 21 day Moving Average. See that the slope is negative.
See that price has to cross, and settle over that downward sloping line for at least 15 days before the probability of a head fake substantially decreases. Then start thinking for yourself if you see a bottom or a relief in selling pressure.
Saturday, March 21, 2009
Oversold Solar
Solar stocks have gotten beaten to the ground, to put it nicely. The global solar index TAN is trading around $5, down from a 52 week high of 30. The gloomy economic outlook seems to have hit solar companies especially hard, as recent reports reveal that about 80% of solar companies in China have gone bankrupt in the last year. Tumbling oil prices really don't help the situation either, as solar is generally positively correlated with the price of oil. With solar names sinking to new lows and having a RSI in the twenties, it's no doubt people are dumping solar. However, assuming the economy eventually recovers and the global demand for oil resumes, the prospect for solar has never been brighter.
Tuesday, March 17, 2009
A Citi of Pain
Not only can Vikram Pandit not run a large-cap bank, he apparently couldn't run a hedge fund either.
"Mr. Vikram"...I hear AT&T is hiring sales people?
Vikram's Path of Destruction
"Mr. Vikram"...I hear AT&T is hiring sales people?
Vikram's Path of Destruction
Monday, March 16, 2009
Ackman Misses the Target...
William Ackman (head of has tried to obtain board seats at Target, the struggling retailer (and WMT wannabe).
Hopefully, this works out for him as his fund that invests purely in Target lost 33.33% last year!
However, this move by Ackman seems to be a step in the right direction to reviving his investment in Target.
Only time will tell...
Hopefully, this works out for him as his fund that invests purely in Target lost 33.33% last year!
However, this move by Ackman seems to be a step in the right direction to reviving his investment in Target.
Only time will tell...
Saturday, March 14, 2009
The Drawbacks of a World Stimulus
I read an interesting article on a counterpoint to world scale economic stimulus- pretty interesting...
It goes like this: Many people are calling for an increase in the World Monetary Fund, through contributions from wealthy nations intended to help the rest of the world. Some now believe that the positives of massive stimulus could be outweighed by government borrowing on international capital flows. That is, excessive spending in places like the US and other developed nations will slow down capital flows to emerging markets and other nearly broke countries. An increased WMF would help nations that cannot borrow easily, but it may not be enough. Something to consider if one is planning to put money to work overseas and at the same time believes that more large-scale stimulus may be coming.
It goes like this: Many people are calling for an increase in the World Monetary Fund, through contributions from wealthy nations intended to help the rest of the world. Some now believe that the positives of massive stimulus could be outweighed by government borrowing on international capital flows. That is, excessive spending in places like the US and other developed nations will slow down capital flows to emerging markets and other nearly broke countries. An increased WMF would help nations that cannot borrow easily, but it may not be enough. Something to consider if one is planning to put money to work overseas and at the same time believes that more large-scale stimulus may be coming.
Thursday, March 12, 2009
Sunday, March 8, 2009
Why I Buy Bonds.
This picture from Crossing Wall Street says it all.
"This doesn't include dividends.
From February 9, 1966 to yesterday’s close, the Dow gained 562.7%. The CPI from February 1966 to January 2009 (we'll get February's report on March 18) rose 559.8%.
That works out to a real gain of 43 basis points stretched out over 43 years."
Wow.
Subscribe to:
Posts (Atom)
Posts
