Archive

Posts Tagged ‘bankruptcy’

Putin’s Friends Are Turning Against Him

August 5th, 2014

russia-usa-warMac Slavo: Last week in the Hague a Dutch court with no jurisdiction over the matter ordered the Russian government to pay $50 billion to shareholders of a company called Yukos. Read more…

Europe, Government, Politics, World News

25 Sad Facts About The Fall of The City of Detroit

July 22nd, 2013

detroit cityIt is so sad to watch one of America’s greatest cities die a horrible death.  Once upon a time, the city of Detroit was a teeming metropolis of 1.8 million people and it had the highest per capita income in the United States.  Now it is a rotting, decaying Read more…

Economy, Government

City of Detroit: A Sign of What’s To Come For The Rest of America?

June 17th, 2013

detroit cityEventually the money runs out.  Much of America was shocked when the city of Detroit defaulted on a$39.7 million debt payment and announced that it was suspending payments on $2.5 billion of unsecured debt, but those who Read more…

Economy, Government

Why College Education In America Is A Giant Money Making Scam

May 8th, 2013

collegeCollege education in the United States has become a cruel joke.  We endlessly push our high school kids to invest tens of thousands of dollars and at least four years of their lives to get a college education because they won’t have any sort of a “future” without it.  Read more…

Economy, Education, Markets, World News

50 Signs That The U.S. Health Care System Is A Gigantic Money Making Scam That Is About To Collapse

February 25th, 2013

health careThe U.S. health care system is a giant money making scam that is designed to drain as much money as possible out of all of us before we die.  In the United States today, the health care industry is completely dominated by government bureaucrats, health insurance companies and pharmaceutical corporations. Read more…

Consumer, Economy, Healthcare

24 Facts About The City Of Detroit That Will Shock You

February 4th, 2013

detroit cityMichael Snyder: If you want to know what the future of America is going to be like, just look at the city of Detroit.  Once upon a time it was a symbol of everything that America was doing right, but today it has been transformed into a rotting, decaying, post-apocalyptic hellhole.  Read more…

Economy

Economic Trend: Lock Your Doors And Prepare To Defend Your Family

December 2nd, 2012

Michael Snyder: Do you think that is an alarmist headline?  Well, I am not the one saying this.  Law enforcement authorities all over the country are telling citizens that they Read more…

Economy

Economy: Hostess Adds To The Massive Tsunami of Post-Election Layoffs

November 18th, 2012

Michael Snyder: Can you hear that sound?  It is the sound of the air being let out of the economy.  Since the election, there has been a massive tsunami of layoffs and business failures.  Read more…

Economy, Government, Markets

Is the US Approaching the End of an Economic Growth Spurt?

May 20th, 2011

As you know, we’ve been wondering about the exhaustion of the Industrial Revolution innovation…and the bankruptcy of the Social Welfare state as a result.

We take for granted that a healthy economy ‘grows.’ Our governments depend on it to pay the bills. Our investments depend on it too; we buy investments that we hope will become more valuable as sales and profits grow along with the economy. But what if all of our assumptions about what is ‘normal’ are wrong? What if the growth spurt we have known for the last 300 years was the exception, not the rule? And what if it were now coming to an end?

We traveled to Switzerland yesterday. What a great town Zurich is! Clean…prosperous…charming. And last night, it seemed like there were more people enjoying the warm May evening than there were townspeople. The sidewalk cafes, restaurants and bars were overflowing. Everyone was outside…strolling…chatting…drinking. The Swiss must have it made.

“Well, yes, it’s a great place to live. But not if you live on a salary,” a banker explained. “There are so many Germans moving here – because it’s a beautiful city…and because people leave you alone here – prices have gone up. An ordinary citizen can hardly afford to live in Zurich anymore. And when I walk down the Bahnhofstrasse I rarely hear our local language spoken. I hear High German, or Russian, or Turkish, or English.”

We can confirm that prices are high. Not by DSK standards, but high for us. Our hotel near the train station was not particularly fancy. But our modest room still cost about $700 a night.

Our friend Rolf Dobelli of getAbstract interviewed us. He challenged our ‘end of progress’ theory.

“It’s hardly a theory,” we covered our tracks. “It’s just an idea. We don’t know if we believe it. Or like it. We’re just trying it on to see how it fits.”

“Yes, but people take ideas seriously. They might have come to the same conclusion in 1979,” he said. “They might have thought that the boom years were over then. But as it turned out, there were still huge growth dividends to be paid – principally from electronic communications and the efficiency gains they bring.”

“Maybe,” we replied. “But most of the above-trend, real growth since 1979 has been in the energy economies, that are still increasing their energy use per person. The mature economies have realized incremental improvements since then, but much of that was phony – driven by increases in debt and government spending. And it’s not clear that advances in communications bring real wealth improvements. Think of the television. It’s been around for more than half a century. It has probably actually depressed wealth since then. Now, with all those emails to answer…and Facebook and Twitter to keep up with…it could be that they are more of a nuisance than a wealth-producer.

“It’s like anything else. You get the big gains in the beginning. You invent a bow and arrow, for example. You hunt more effectively. Then, you can improve it. But there are only so many improvements you can make. After the bow and arrow, humans waited a long time – with little or no progress – until the firearm was invented. And note that guns, like every other major forward move in human history, were effectively a way of using more energy. You sent a projectile further, faster by drawing on condensed energy sources. Broadly, energy is wealth. The more you use, the richer you are.”

“But what about conservation measures…efficiency gains? Most European nations have stabilized or even reduced their use of energy in recent years.”

“That’s my point. You get big productivity and wealth gains from the first increments of oil-based energy. Then, you eventually reach a point of diminishing returns, where gains are few. You become more efficient. You become better at using it. But your ‘growth’ levels off too.

“We’re seeing a reflection of this in population figures. Fertility rates are high in the emerging economies – where energy use is increasing rapidly. They are low in countries where energy use is topping out. In Germany and Japan – probably among the world’s most efficient energy users – there has been zero population growth for the last 10 years. And now, the population in Japan is actually falling. The Japanese economy is collapsing too. It’s gone nowhere for 20 years, and now – in the first quarter of this year – it’s shrinking at a 3.7% rate.

“As countries use more energy their birth rates decline. I’m not sure there is a cause and effect link, but that’s what happens. It is as if people knew, subconsciously, that they are reaching the limits of their new, oil-fired habitat. The latest population estimates show world population still rising…but at a slower and slower rate…until growth comes to an end in about 2050 with about 9 million people on the planet. Most likely, that is about when gains from additional energy inputs level off too.”

Meanwhile, the news yesterday brought nothing special. US stocks rose a bit. Oil remained below $100 – still three times what it was 5 years ago. Gold fell to $1,492.

The Fed pumps in more and more money. Stocks float. But key parts of the US economy are made of lead. Housing and unemployment, mainly. The New York Times tells us today that debt-burdened college graduates are having a much harder time finding suitable work. And when they do find a job, the starting salary will be an average of 10% lower than it was 5 years ago – not including inflation.

Even when new jobs are created, they’re rarely the ‘middle class’ jobs that can support the housing market. So more than 1 out of every 4 homeowners is underwater…with more sinking every day.

Curiously, many of these drowning homeowners are actually helping to support the consumer economy. More than 4 million of them aren’t making regular mortgage payments. The typical foreclosed mortgage hasn’t been serviced in more than 17 months. That leaves millions of people in houses they aren’t paying for…giving them more money to spend.

Bill Bonner
for The Daily Reckoning

Is the US Approaching the End of an Economic Growth Spurt? originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

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Is the US Approaching the End of an Economic Growth Spurt?




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

What Is Silver Screaming About?

April 16th, 2011

The current surge in bids to buy silver might seem dramatic, but it’s more measured by far – to date, at least – than the true silver bubble of September 1979 to January 1980.

Even so, you may as well call this a record price. In real terms, as Matt Turner at Mitsubishi told me this week, one ounce of silver briefly rose above 40 of today’s US dollars per ounce in 1864, when the American Civil War neared its climax. In nominal dollars, the Hunt brothers’ multi-billion-dollar corner only saw it more highly priced on 5 trading days in January 1980. And while US investors waiting to buy silver are also still waiting for it to record a new intra-day high, it’s already broken new ground against the British pound and for most of the Eurozone, too.

The cause? Gold investors have long tried to explain how the metal is “telling us” something. “First warning” of the looming financial crisis, said Marc Faber in his Gloom, Boom & Doom Report of September ’07, was when “the price of gold more than doubled in nominal terms and against the Dow Jones Industrial Average [because of] ultra-expansionary US monetary policies with artificially low interest rates.”

In which case, and with global interest rates further below zero today after inflation than at any time since 1980, what in the hell is silver telling us now?

Gold vs. Silver vs. TIPS

“TIPS pay a lower rate of interest than regular Treasuries,” explained Bloomberg News when the yield offered by 5-year Treasury Inflation Protected Securities briefly dipped below zero (and $20 silver broke a 28-year high) back in March 2008.

“[That’s] because their principal rises in tandem with a version of the consumer price index which includes food and energy prices. Rising demand for TIPS [which pushes up prices and so pushes down the nominal yield] indicates investors expect the inflation adjustment to make up the difference.”

What great expectations TIPS buyers must have of Uncle Sam’s “inflation adjustment” today! They’re buying 5-year index-linked bonds with a nominal yield of minus 0.6%, anticipating a full 2.8% per year fillip from Washington when compared with the annual yield now offered by conventional 5-year bonds. And what greater hopes still must the new rush of silver investment hold…rejecting TIPS in favor of metal, and breaking silver’s tight connection with both gold prices and TIPS yields as our chart above shows.

Note the point at which silver breaks higher – right when Fed chairman Bernanke vowed to begin QE2 in summer last year. That a fast-growing nugget of the world’s private wealth is fearful of the result is clear. That silver looks a turbo-charged play is clearer still. Because as an industrial as well as monetary metal, silver is exposed to strong economic growth – as well as loose central-bank policy – in a way that its cousin, gold bullion, isn’t. You could point to 2010’s record levels of Indian and Chinese gold demand coming off their continued economic booms, but Asia’s silver investment demand is surging faster still. And the aim of all this easy money, remember, is to keep GDP stoked, whether in Beijing, Washington, Frankfurt or London.

Little wonder then that Chinese, US, Eurozone and UK inflation is rising sharply. And so no wonder either then that…

  • By value, London’s wholesale bullion market last month saw silver volumes jump to one-sixth the daily turnover of gold plus silver, according to the LBMA’s new stats, released to members today. That’s a 13-year high. In raw dollars, silver turnover set new all-time records for the second month running.
  • By number, New York’s Comex saw the volume of silver futures contracts overtake the volume of gold futures on Monday and Tuesday this week. By value, silver trading rose to one-seventh of total gold and silver volumes, up from a seventeenth just a month ago.
  • ETF Securities say their silver exchange-traded products saw “more flows than any other individual commodity ETP” in the first quarter
  • Here at BullionVault – the world’s largest gold ownership service online – our customers have pushed silver trading up from 22% of daily volumes by value in January to 27% in both March and so far in April.

There’s no bull market like a silver bull market, in short – just ask the Hunt brothers ahead of their bankruptcy, eight years after their corner blew up with the big inflation-fueled 1970s’ bull market. Double-digit Fed interest rates popped the bubble back then (plus a good dose of anti-speculative action by regulators and the exchanges, otherwise known as “saving the system” of course. It was sparked in turn by the Hunt brothers’ own naked greed, otherwise known to them as “inflation protection”). The most recent time silver got hot, however, it took oil at $150 and then the Lehman Brothers’ collapse to do to GDP growth and commodity prices what central bankers wouldn’t dare. Because raising interest rates to double digits to kill a “speculative frenzy” wasn’t politically possible.

Silver’s bull run, unlike gold’s, is all about inflation. Which is worth bearing in mind whether you’re quitting, holding, ignoring or looking to buy silver today.

Regards,

Adrian Ash
for The Daily Reckoning

What Is Silver Screaming About? originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
What Is Silver Screaming About?




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, ETF, Uncategorized

Betting Against the Fed: A Guaranteed Investment Strategy

February 24th, 2011

We were quoted in The Wall Street Journal last week. “Gold is a bet against the Fed,” we said.

Gold is now firmly over $1,400 an ounce. The correction seems to be over.

Frankly, we were disappointed. We were hoping for a deep correction that would shake out the speculators and discourage the Johnny-come-lately investors.

Didn’t happen. Instead, the price barely went down at all. Less than 10% (from vague memory). Hardly a correction.

We wanted lower prices so we could buy more. Because, if there were ever a sure-fire, under-priced wager here’s one: betting that the Fed will err.

You can understand the power of that bet just by taking the other side for a moment. Who, in his right mind, would bet that the Fed won’t err? Thanks largely to the Fed and other central banks, the crisis that began 4 years ago with the bankruptcy of subprime lender Countrywide Financial was never resolved. Instead, the problems were largely increased. The private sector still has far too much debt. Now, the public sector is headed for bankruptcy too. It is only a matter of time before new crises arise and intensify.

Ben Bernanke has never given the slightest indication, hint or wink to suggest that he has any idea of what is really going on or that he understands how an economy really works. At every point over the last 5 years, his analysis has been incorrect. His predictions have been wrong. And his policies have made things worse.

You want to bet on Ben Bernanke? Yes, thanks…we’ll take that bet. We’ll take your money!

Was there ever a problem so intractable…or a situation so awful…that government planning couldn’t make worse? Here’s the latest. With food prices soaring, the feds move into the market.

They need to go back and read the Old Testament. An ancient Mubarak in the land of the pyramids was faced with famine. But he had the good sense to save up grain when it was cheap…and release it to the people when it was dear. These morons are doing the opposite. A pox on their houses! May their beer be always flat!

Feb. 21 (Bloomberg) – Governments worldwide will increase their role in global food markets and may boost stockpiles and subsidies or impose trade curbs to head off the protests that have rippled through the Middle East, commodity traders said.

“Greater political intervention in food matters is only to be expected,” Alan Winney, chairman of Emerald Group Australia Pty Ltd., said in an interview at a sugar-industry conference in Dubai. “Governments will be careful to take preemptive measures to prevent increases in food prices,” said Winney.

The higher costs of wheat, sugar and dairy products sent the United Nations’ World Food Price Index to an all-time high last month. The jump has contributed to democratic revolts in Tunisia and Egypt, as well as other Arab nations. Saif al-Islam Qaddafi said in a televised address Libya is “not Tunisia and Egypt” after thousands demonstrated in the city of Benghazi.

Regards,

Bill Bonner
for The Daily Reckoning

Betting Against the Fed: A Guaranteed Investment Strategy originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

Read more here:
Betting Against the Fed: A Guaranteed Investment Strategy




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

OPTIONS, Uncategorized

4 Surging Small Caps That Could Go Higher

November 16th, 2010

4 Surging Small Caps That Could Go Higher

We're now in a “stock picker's market.” The major averages are now moving sideways after a sustained two-month upward move, which means that stock selection becomes ever more crucial.

In this kind of trading environment, it pays to see what's working. Insights into why certain stocks are sharply rising while most stocks stay in a range can help sharpen your understanding of investor psychology and sector catalysts. [Read our free course: "Catalyst Investing Secrets"]

With that in mind, here's a look at four small cap stocks (members of the Russell 2000 Index) that have risen at least +50% in the past month.

iStar Financial (NYSE: SFI)
When you're carrying more than $8 billion in debt, it's crucial that your cash flow stays strong to cover principal and interest payments. So when iStar, a major lender to commercial real estate developers, noted this summer that more than 40% of its clients had stopped making payments, short sellers started to smell trouble. By September, iStar conceded that it may need to seek bankruptcy protection. That's like manna from heaven for short sellers. But they'd soon be disappointed: iStar announced in late October that it was able to raise cash by selling some major loans it held, and that in turn would keep its own lenders at bay for a while longer.

The course is still tricky. A June 2012 bond was recently paid off, but iStar still needs to come up with roughly $3 billion more to pay off debts in 2011. Alternatively, the company could seek to extend the expiration of its 2011 obligations, a task that is now much easier in light of a somewhat stronger balance sheet. That move appears increasingly likely, so the bankruptcy risk should go away. But is the stock undervalued after the recent rebound? Yes — with caveats.

iStar's real estate loans were worth more than $11 billion a few years ago, but the company has had to write off roughly $5 billion of that amount. If the commercial real estate sector starts to rebound (a real possibility if employment picks up and companies need more office space), then much of those write-downs could be written back up. iStar's equity is now worth just $500 million, and a $2 billion to $3 billion write-up in the next few years could push the company's equity value back up to $1 billion or even $2 billion (iStar's equity was worth $4.5 billion before the economy tanked). Any fruitful discussions about loan extensions could push shares up +50% toward $8, and a materially stronger economy could push this stock to $15 or $20.

Broadsoft (Nasdaq: BSFT)
Start with a fairly unknown company, toss in a fairly limited trading float, and then sprinkle in an impressive quarter. Those ingredients are the recipe for a very strong stock surge for Broadsoft, which helps standardize data streams across a range of hardware platforms. The company is now on track to boost sales +30% this year, and at least another +20% next year, as major network operators are currently investing in data flow improvements.

Trouble is, this stock is now in the hands of momentum investors who have pushed up shares for six straight sessions for a tidy gain of about +66%. Daily trading volume has surged, but as soon as it cools, momentum investors are likely to book profits, especially since shares now trade for more than 30 times upwardly-revised 2011 profit forecasts. If you like Broadsoft's business model, you need to wait for a pullback.

Motricity (Nasdaq: MOTR)
When I looked at this wireless software vendor company back in August when shares traded for less than $8, I thought they looked undervalued. Now with shares approaching $30, they clearly look overvalued. And we have stock cheerleader Jim Cramer to thank for that. He's been talking up the stock recently, even though it now trades for more nearly seven times projected 2011 sales and more than 30 times next year's profits. Needham's Mark May, who has been a booster of the stock since its June, 2010 IPO, thinks it's worth only $23 — roughly -20% below current levels.

Cheniere Energy (AMEX: LNG)
Back in 2006 and 2007, this company was a key member of many energy-focused portfolios. Cheniere was building specialized energy terminals that could receive and house imported liquefied natural gas (LNG) in the Gulf of Mexico to help the United States address a looming shortage of natural gas. But by 2008, dozens of untapped new gas fields were found, creating a sudden glut and removing the need for natural gas imports. Shares subsequently lost -90% of their value.

Yet Cheniere is turning lemons into lemonade by repositioning its energy depots to export LNG. The move makes sense. The U.S. is now the world's largest producer of natural gas, exceeding output in places such as Russia, Iran and Australia. And the price of natural gas in Asia is 150% higher than here in the U.S.

Cheniere initially planned to build three LNG terminals but was stopped in its tracks after the first one was built. Those stalled second and third plants may get the green light — if the company can secure a range of long-term supply agreements. China has already signed on, and other Asian nations may follow suit. Despite the recent pop, this could quickly become an even hotter stock if new contract agreements are announced.

Action to Take –> Both iStar and Cheniere are high-risk/high-reward plays that could merit a small speculative position. It would be nice to see a pullback (which should be a rule of thumb with any hot momentum plays), but a clear case can be made for significant further upside. Motricity and Broadsoft surged last month for justifiable reasons, but they've gone too far, too fast.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
4 Surging Small Caps That Could Go Higher

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4 Surging Small Caps That Could Go Higher

Real Estate, Uncategorized

A Historical Perspective of the Social Security Nightmare

September 27th, 2010

“The arrogance of officialdom should be tempered and controlled, and assistance to foreign hands should be curtailed, lest Rome fall.”

– Marcus Tullius Cicero, 55 B.C.

What rhymes with Cicero? Not much. But if, as the saying goes, history itself rhymes, today’s welfare-warfare state has plenty worth holding up against the soft, fading light of that long-fallen empire: Corrupt politicians…predatory bankers…ruinous military misadventures to faraway lands…a gluttonous citizenry feeding at the trough of public monies and, of course, the insidious, ridiculous illusion that any single participant could have made one jot of difference to the great charade as it unfolded before their very eyes.

The charade to which we refer is the very same phenomenon the Roman poet Juvenal referred to as “bread and circuses” in the tenth of his Satires. It is the superficial appeasement of the masses by the political class who, seeking to prevent massive uprising and revolt against their rule, doll out meager alms in the form of mass distraction. The success of this grand dupe depends on, and excels because of, the widespread assumption that the political class is working for the benefit of their employers, the taxpaying populace, rather than, as is the stark, impassionate reality, their merely effecting to do so. Nothing, not a sunrise at midnight, not a man immortal, could be further from reality. Far from serving their masters on bended knee, elected officials behave more like dogs than public servants, entirely dependent on their keepers for food and forever assuming they will be around with a doggy bag to clean up their mess.

“Government,” as Frédéric Bastiat, writing some 1,800 years after Juvenal, expressed it, “is the great fiction through which everybody endeavors to live at the expense of everybody else.”

And so we come to better understand our own predicament today. When a lending institution lends too much and is repaid too little, the poisoned olive branch of government extends. When a profligate spender – with sufficient influence in the public sphere, mind you – falters under the weight of its own obligations, the state appears with a bottomless cup. Multi-trillion dollar bailouts, and more still to come. Schemes, scams and stratagems that, we are told, are all for our own good. From the floor of Congress to the evening news, a trumpet calls all “men and women of reason” to fight against “total collapse of our system”…to lead us back from the “edge of the abyss.”

Bread and circuses…

What then, when the Treasury is spent and the Fed’s arsenal deployed? When debts sold off to once willing foreigners inevitably come due? When the children to whom this legacy of larceny is left realize the hand they were dealt and demand, with clenched fists of their own, a fair and equal opportunity, the chance to ruin or succeed based on their own generation’s cowardice or courage? What comes after the determined destruction of the nation’s currency…again?

Nowhere is Bastiat’s observation better reflected than when the looking glass is held up to Social Security. The ruse, sold to American’s under the same old banners, fraught with “safety net” misnomers and “falling through the cracks” platitudes, is up. On September 30, this Thursday, six years ahead of schedule, the “fund” officially goes into the red. What will they tell us next? What price must we pay in order that the grand charade is allowed to go on? What story must we now swallow?

Don’t fret, Fellow Reckoner. They’ll surely think of something. And that’s precisely the problem.

Joel Bowman
for The Daily Reckoning

A Historical Perspective of the Social Security Nightmare originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

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A Historical Perspective of the Social Security Nightmare




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

5 Picks from a Wealthy Hedge Fund Guru

September 9th, 2010

5 Picks from a Wealthy Hedge Fund Guru

Investors mine ideas from many different sources, but many investors overlook a resource that provides some of the best ideas from the greatest minds. Most people believe that the world of hedge funds is not within their grasp. In truth, some of the best stock-pickers make their choices widely available, if you know where to look.

There is benefit to mining for opportunity by checking out the portfolio holdings of top mutual fund managers, but the problem with this approach is the fund literature rarely provides detailed analysis about selected stocks.

However, over at websites such as Gurufocus.com and MarketFolly.com, hedge fund presentations provide exquisite detail about stock investments and are available free of charge.

One of the great hedges operating today is the man who pried open the credit market scheme run by MBIA, Inc. (NYSE: MBI). William Ackman of Pershing Square Capital Management provides rigorous fundamental analysis that every investor should read.

No matter how much research the average investor does regarding a company, he simply cannot match the depth of analysis of a guy like Ackman. If you examine some of his firm's presentations, you'll understand why.

Plus, Ackman's track record is extraordinary. His fund has returned +24% annually since 2002, and that includes the horrible crash the market endured in 2008. That's why I buy some of his holdings for my own portfolio. Here are a few of his current picks and why he thinks (and I agree) that they are profitable opportunities.

Target Corp. (NYSE: TGT). Ackman started a proxy war to get Target to become a more responsive company and to get rid of its risky credit card operation. Although he lost, Target management got the message. They've made a lot of changes and the stock is on the move. With +13% projected long-term growth and a P/E of 14.5, the stock is primed to return about +15% compounded annually, which would mean a double in the next five to six years.

Kraft Foods (NYSE: KFT). Ackman loved Kraft's purchase of Cadbury. He believes Cadbury's multitude of brand names will bolster Kraft's own portfolio, leading to higher organic growth. The company expects $750 million in synergy savings and Ackman believes margins, which had been declining every year, will make a comeback from 12.6% to 15%. He also expects Cadbury to generate 40% of its sales from emerging markets. Kraft could return +12% to +14% annually during the next several years, and it also pays a solid 4% dividend.

Yum! Brands (NYSE: YUM) includes the iconic restaurants of Kentucky Fried Chicken, Taco Bell and Pizza Hut, among others. Ackman sees consistent +10% to +13% earnings growth during the next five years, as the economy drives people to lower cost restaurant choices. The company generates mid-nine-figure free cash flow each year. [More on Yum]

General Growth Properties (NYSE: GGP). This is an impressive success for Ackman. The company, which owns and develops shopping centers, was on the verge of bankruptcy when Ackman bought in at $1. Correctly predicting that there would be shareholder value after the bankruptcy filing, he has seen a 13-fold increase in his investment. Ackman thinks the company is worth $20, which is about +35% higher than its current price.

Corrections Corporation of America (NYSE: CXW). Ackman thinks the nation's largest private prison operator (48% market share) has growth ahead of it. State and federal prisons are overcrowded, crime increases during a recession, prison populations are therefore increasing, and the company has more than enough capital to take on expansion. Ackman thinks the company is worth as much as $54, which is about +135% above current prices.

Action to Take –> William Ackman doesn't just make little bets on stocks — he makes massive ones. He holds between 10 million and 30 million shares of each of these stocks, representing billions of dollars of faith in each company. If his track record was questionable, I wouldn't bother, but Ackman is a proven winner.

Ackman has other holdings, but these are the ones I find most compelling and worthy of further research. Any of these stocks would make fine core portfolio components.

– Melvin Halcomb
Contributor
StreetAuthority

P.S. There's another analyst with a track record you need to see. She has an 89% win rate — remarkable for this market. And she just keeps picking winners. One of her recent picks shot up +18.2% in just 13 days. Go here for the details…

Disclosure: Melvin Halcomb and/or StreetAuthority, LLC hold a position in TGT, KFT, MBI, GGP, CXW, YUM.

This article originally appeared on StreetAuthority
Author: Melvin Halcomb
5 Picks from a Wealthy Hedge Fund Guru

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5 Picks from a Wealthy Hedge Fund Guru

ETF, Mutual Fund, Uncategorized

Government Defaults and Inflation Are the Norm, Not the Exception

September 1st, 2010

Claus Vogt

The past 15 years have certainly been exciting for investors. During the second half of the 1990s we experienced one of the largest stock market bubbles of all times … and its bursting. Then, only a few years later, one of the biggest real estate bubbles … and its bursting.

In the aftermath of these events the world stumbled into the most severe economic downturn since the Great Depression of the 1930s. And the banking system came to the brink of a total collapse.

Unprecedented government interventions in the U.S., the UK, and continental Europe were implemented to prevent the breakdown of the financial system. Naturally these interventions came with a price: Ballooning budget deficits.

Now we’re witnessing a veritable debt explosion in the developed world …

Never before, aside from times of major war efforts, have governments amassed as much debt as during the past years. And this debt binge comes atop a decades-long trend of ever higher indebtedness.

Then, seemingly out of the blue, interest rates for Greek government bonds started to rise drastically. Suddenly the Greek state was at the brink of default, and other European countries like Spain, Ireland, Portugal, and Italy were also in jeopardy.

Stronger European countries and the International Monetary Fund (IMF) stepped in with a $1 trillion rescue package to prevent this crisis from running its natural course — that is massive government defaults.

Historically, Greece’s De Facto
Bankruptcy Is All too Common

When examining the current predicament, you could easily conclude that we’re living in extraordinary times. But looking through a historical lens immediately shows that what seems to be extraordinary is in effect somewhat normal …

Sovereign debt defaults and sovereign debt crises are nothing new at all, but as old as the government bond market. Financial history is fraught with examples of government bond investors losing big time.

In their book, This Time Is Different, Carmen M. Reinhart and Kenneth S. Rogoff give dozens and dozens of examples from 1802 Austria-Hungary until 2002 Indonesia, including countries like France, Germany, Argentina, Russia, Turkey, Sweden, Mexico, China, India, and Japan.

Government bond defaults are nothing new.
Government bond defaults are nothing new.

Now our leaders have set us up for the same fall by accumulating a debt problem so large …

There Is No
Easy Way Out!

In theory there are six ways out of government debt:

Option #1—
Stimulate economic growth

A growth miracle is highly unlikely here. If anything, history tells us to expect subdued growth in the aftermath of a burst housing bubble.

Option #2—
Cut interest rates

Declining interest rates are already behind us. The Fed is done, interest rates are just about as low as they get.

Option #3—
Bailouts by other governments

Bailouts by other governments are not an option for major economies, and totally impossible for the world’s largest economy and the world’s largest debtor, the U.S.

Since the above three options, let’s call them the easy ones, are not available for the U.S., government officials are left with the remaining three. All of them come with lots of pain …

Option #4—
Implement austerity policies

Higher taxes and reduced government benefits can be a tough pill to swallow.
Higher taxes and reduced government benefits can be a tough pill to swallow.

Austerity policies mean tax hikes and spending cuts. Greece can be seen as a test of this agenda. And its citizens have responded with strikes and social unrest.

Option #5—
Crank up the printing presses

Although time lags are long, money printing is probably the most alluring path for politicians. And there’s always the hope to get away with offering scapegoats, because the mechanics of inflation are difficult to understand.

The Bernanke Fed has often made clear that it strongly prefers an inflationary policy to cope with the effects of the burst bubble and the Great Recession.

That is, however, a very risky undertaking …

In fact, history shows inflation can easily get out of hand and destroy the very fabric of a society. The most prominent example was Germany in 1923 when one U.S. dollar was worth 4 trillion German marks.

And the most recent case was Zimbabwe a few years ago when at one point inflation was estimated at 6.5 quindecillion novemdecillion percent (65 followed by 107 zeros). The country has even issued the world’s first 100-trillion dollar note.

Option #6—
Default

Outright default is what happens if our leaders keep doing what they’ve been doing for the past several years. And for now, they seem determined to continue the very policies that got us into the current mess in the first place.

There are many names or euphemisms for default: Restructuring, rescheduling, repudiation, or moratorium to name just a few. But they all mean the same sad thing: Breaching the terms of debt contracts, such as bonds.

Which One Will They Choose?

So what will it be? Which way will our leaders choose to dig us out of this mountain of debt?

I think we’ll see all three in the coming years: Austerity policies, money printing, and default. It may very well differ from country to country, and it may even come as a succession.

For instance, like was done in Greece, they might first try some tax hikes and spending cuts …

But as soon as the public outcry becomes too loud to bear, politicians will quickly retreat and start money printing instead. Then the bond market could rebel forcing a return to austerity, and so on. Until, in the end, either hyperinflation or outright default terminates the whole cycle.

What Can You Do to
Protect Your Wealth?

Unfortunately there is no easy answer. In my mind, though, one thing is certain: You must be as flexible as never before to act early on initial signs of important policy shifts.

Right now, my cyclical model is giving clear signals of a coming recession or another down leg in a running depression. The right thing to consider doing in this phase of the cycle is avoiding risk, especially stocks and junk bonds.

Best wishes,

Claus


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