Aa’s Weekend Reading (November 6, 2009)

Friday, November 6th, 2009

Here are this weekend’s selection for your reading pleasure:

Eating Animals: Jonathan Safran Foer Talks To Ellen About His New Book (VIDEO)

November-06-09, 12:18 PM

He explained his mission writing the book, and how becoming a new father drove him to action. He also challenged environmentalists to step up to the plate — factory farming, he said, contributes to global warming more than any other factor. What little steps can we take to changing the way we eat? Foer says the most important thing is to inform yourself, and learn as much as you can about what’s going on.

7 Food Groups That Will Help Boost Your Mood

November-03-09, 9:38 AM

This gloominess hits us all pretty hard. In fact, if you’ve ever believed that you had a case of the Winter Blues, this is what we’re talking about. Seasonal Affective Disorder (SAD) is no laughing matter because these dark-gray-rainy days have a huge impact on your mood and energy level. The good news is that we can all partially escape this mental zapping

Make a deal! 5 surprising bargain-hunting tips - Clear Your Cookies!

November-03-09, 11:23 AM

Looking for some great bargains for the holiday shopping season? Before you pay full price, “ShopSmart” magazine shares smart advice on how you can save a significant amount of money with your cell phone, online coupon codes and more:

Holiday Dos and Don’ts for the Family

November-06-09, 11:45 AM

Once someone invents time travel, many of us will line up right after Halloween for the first ticket to January-blip past Seasons Greetings and all things holiday. For now, however, we scuttle on through, worrying about how to seat divorcees and spouse-number-twos around the family turkey. Take a look at these dos and don’ts for the holidays.

Source: Dumb Little Man |  MSNBC |  Oprah.com |  Eating Animals, Jonathan Safran Foer

Tags: Amount Of Money, Divorcees, Dumblittleman, Energy Level, Environmentalists, ETF, Factory Farming, Food Groups, Holiday Shopping, Html Source, Jonathan Safran Foer, Laughing Matter, Little Man, Little Steps, Money Source, Msnbc, Number Twos, Rainy Days, Reading Pleasure, Seasonal Affective Disorder, Seasons Greetings, Smart Advice, Some Great Bargains, Winter Blues
Posted in Markets | No Comments »

Prechter: Commodities, Stocks Topping - USD Set for Rally

Friday, November 6th, 2009

Robert Prechter tells Yahoo TechTicker that the USD is set for a rally, and Commodities and Stocks are topping.

Prechter also makes the seemingly counterintuitive argument that the dollar will rally because there’s so much debt, rather than being doomed because of it. If the economy turns sour again in 2010, as he predicts, Prechter says the dollar will benefit as more dollar-denominated IOUs get called by creditors seeking to shore up their own balance sheets, as was the case in 2008.

This goes hand in hand with Hugh Hendry’s (and others) call that because there is so much deleveraging yet to be accomplished, the dollar will be in high demand as big borrowers retire debt, and creditors end up long cash for the sake of balance sheets. A strengthening dollar will mean falling prices relative to the rise, and is therefore deflationary, by definition, as we have experienced in Canada with the strengthening loonie. If Prechter, Hendry and others are right, the CAD will pull back from its recent highs.

Tags: Advertisement, Balance Sheets, Borrowers, Cad, Canada, Commodities, Creditors, Dollar, Economy, Hugh Hendry, Ious, Loonie, Rally, Robert Prechter, Sake, Stocks, Yahoo
Posted in Commodities, Markets | 1 Comment »

Prechter: Wall St. Setting Investors Up

Friday, November 6th, 2009

Robert Prechter, Elliott Wave Theorist, tells Yahoo TechTicker:

“Everybody who’s saying ‘buy stocks’ today or ‘buy real estate’ is, I think, setting up people to get really hurt,” says Prechter, who believes the bear market rally is reaching a major top.

“We had a great opportunity at [S&P] 667 - that was the big opportunity,” says Prechter, who did make a bullish call last February. “The market is up 60% [from the March lows]. There’s no way the S&P is going up 60% from here.”

Watch the video here:

Source: Yahoo TechTicker

Tags: Bear Market, Buy Stocks, Commodities, Elliott Wave Theorist, Investors, Lows, Market Rally, Opportunity, People, Real Estate, Robert Prechter, Yahoo
Posted in Markets | No Comments »

Michael Milken On The Five Biggest Systemic Threats

Friday, November 6th, 2009

Michael Milken, Jedi of Junk Bonds and Vader-esque 80’s boom fall-guy, weighs in on systemic threats to the US financial system. Milken is the sort of genius who would know where the bodies are buried.

This article is a guest contribution from Tyler Durden, of the Zero Hedge Blog.

Time to start loading up on those sovereign CDS. Today Michael Milken provided some insight into what the five key reasons for our current predicament are, which, courtesy of absolutely no real reform, double as even greater future risks for the global financial system. These include: i) that corporate credit is not the same as leverage, especially not 100x debt/EBITDA, ii) mortgages in real estate are never an investment-grade asset, iii) interest rates are volatile and unpredictable [the JPM-GS IR swap complex will not be too happy to hear this], iv) The US AAA rating is misleading and, and most important, v) sovereign debt is a big, if not the biggest, risk.

Full highlights of Milken’s presentation, courtesy of Deal Journal:

Credit rather than leverage

When I was on Wall Street , I rarely had ratio higher than 3:1 or 4:1, I have never heard of any leverage ratios higher than 10:1. But in the United States of America, there were companies that leveraged 100:1. To me, it is not a business.

Mortgages in real estate are never an investment-grade asset

Real estate values go up 70 years and in certain period of time, it has been going down for five years in a row. If you are an investor that buying real estate assets that are backed by mortgages, assuming the only way to get your money back is hoping the price keeps to go up, then it is hard to understand what the asset category is. The debt depends on the asset value that the company who sells the debt doesn’t guarantee.

Why aren’t other countries having this problem? Because in most countries, people don’t borrow on their homes. The shocking thing for America is that this occurred before. In 1980s, we went through 5-6 painful years that caused failures or mergers of almost every single financial institution in Texas, Colorado, Oklahoma, Louisiana and Arkansas. In Houston, house prices fell 40% in five years.

Interest rates are volatile and unpredictable

I have never met anyone of significant wealth who made money guessing which way interest rates are going over a long period of time. In 1981, when short-term rates were 20%, almost every single financial institution, including the most conservative, was underwater on their government portfolio, when the U.S. government bond was sold at 50 cents on the dollar.

Rating is misleading

I guess none of the financial crisis would have happened without rating. There are now only four AAA-rated companies left in the America now: Microsoft, ADP, ExxonMobil and Johnson & Johnson.

Yet, S&P alone, in the first eight years of this century, has rated 17,000 securities AAA. How do you lose a 100% on a triple A investment? Well, first, those weren’t AAA companies. Second, you can borrow against it and create a security that is against the mortgage portfolio that is still rated as triple A. That is nothing new. If you read the rating history you will see that a double-A railroad has a 200% higher default rate than a B-rated industrials.

Sometimes, companies were not getting downgraded after they actually defaulted. Even for GM, there was an uptick in its ratings in last May from B- to B.

So if you are relying on rating, then I am not sure why, as a money manager, you should be paid a fee because there isn’t too much value-added you are providing. Besides, people who provide ratings are just human beings. Maybe if they are the most talented in the world, you would have already hired them.

Sovereign Debt is a big risk

It isn’t a major issue in the market today and was not a main reason that caused this crisis , but historically, it is among the worst credit assets in the world.

In 1980s, people constantly told investors “No one ever lost money by loaning money to a country.” But the U.S. only got 30 cents on the dollar from a sovereign loan to Poland. The loss in sovereign loan totaled $1 trillion in those years, but investors continued to believe these assets aren’t risky. This dramatic example tells us that people in senior positions, such as those in the Fed and run major banks, make statements that are just 100% false.

One extreme example is Argentina. The country, in the past century, has issued loans that borrowed at 100 cents on the dollar and paid 30 cents on the dollar back. In 1980s, Bank of America lent almost all its capital, $700 billion, to Argentina. Eventually, that debt was restructured at 30 cents a dollar.

American investors vowed not to loan money to Argentina ever again . Years later, the U.S. loaned $100 billion to Argentina. History repeats itself. That is why investors need to base their work on research, not on conventional thinking.

Source: Zero Hedge

Tags: 1980s, Aaa, Asset Category, Asset Real Estate, Asset Value, Business Mortgages, Darth Vader, Estate Assets, Global Financial System, Investment Grade, Jedi, Jpm, Junk Bonds, Key Reasons, Leverage Ratios, Mergers, Michael Milken, Predicament, Real Estate Values, Sovereign Debt, Tyler Durden, United States Of America, Vader
Posted in Markets | No Comments »

Jim Chanos: Ten lessons from the financial crisis

Friday, November 6th, 2009

Jim Chanos is a legendary American hedge fund manager and president and founder of Kynikos Associates, a New York City investment company focused on short selling. He rose to fame in the 1980s as a short seller who had a knack for spotting stocks what he thought to be overvalued. After working as an analyst in several firms, he founded Kynikos (Greek for “cynic”) as a firm specializing in short selling.

This post, courtesy of Clusterstock, features a slideshow Chanos presented at the annual Virginia Value Investing Conference. The slides highlight in an easy-to-read format ten lessons from the financial crisis - lesson investors might already have forgotten.

Source: John Carney, Clusterstock, November 3, 2009.

Tags: 1980s, American President, Fame, Financial Crisis, Hedge Fund Manager, Investment Company, Investors, Jim Chanos, John Carney, Knack, Kynikos Associates, New York City, Rose, Slides, Slideshow, Stocks, Value Investing
Posted in Markets | No Comments »

Longer Term Bond Indicators Flash Sell

Friday, November 6th, 2009

The yield of ten-year US Treasury Notes has surged by 34 basis points since the middle of October as market participants started adopting a more upbeat outlook on the economy and shied away from safe-haven assets.

Unsurprisingly, the following comes from the minutes of the meeting of November 4 of the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association: “Several members noted the graph discussing net fixed income supply in 2009 and 2010, and how issuance will ramp up dramatically in 2010. Federal Reserve purchases have taken an enormous amount of supply out of the market this past year across fixed income markets, but next year, financial markets should expect even greater issuance with no support. Such an outcome could pressure rates.” With quantitative easing set to expire during Q1, it is difficult not to see long-term rates rising, unless the economy falls back into the morass.

Turning to technical analysis, the chart below shows monthly data for the ten-year Treasury Note yield since 1998 and conveys an important message when considering the two momentum-type oscillators at the bottom (ROC and MACD). The ROC has just reversed course (crossing the zero line) for the first time since a buy signal was given at the beginning of 2007 and now indicates a primary sell signal. The MACD provided a similar indication six months ago.

Source: StockCharts.com

In conclusion, I concur with Bill King (The King Report) who said: “There is a very good chance that 2010 will see a horrid global bond market.”

Tags: Basis Points, Bill King, Bond Market, Chart Below Shows, Financial Markets Association, Fixed Income Markets, Global Bond, Good Chance, Macd, Market Participants, Minutes Of The Meeting, Morass, Oscillators, Safe Haven, Securities Industry And Financial Markets Association, Term Bond, Upbeat Outlook, Us Treasury Notes, Year Treasury Note, Zero Line
Posted in Markets | No Comments »