Alan Pasnik - Seeking Value Around the World – and Ending Up in Canada

Wednesday, March 3rd, 2010

Alan Pasnik, Portfolio Manager for Mackenzie Saxon Global Explorer Fund, discusses looking for value around the world and ending up in Canada with Dan Richards of Clientinsights.

Pasnik likes Sun Life Financial - Great Canadian and US Insurance operations, plus it distributes mutual funds via MFS - says its trading about 30% below its NAV. In the small-cap area he likes Cangene Corp. which he says is trading at about 5-6X this year’s earnings, “and should trade considerably higher than that.”

Pasnik has half of his holdings in energy and financial services. Pasnik comments that global growth in energy production has been flat for about 4 years, so he anticipates that oil prices will go higher. As for financials, they have always been a good business with a high return on capital, and a high return on equity.

Pasnik says, the growth in oil demand is probably going to come from Brazil, India, and China, which are growing in leaps and bounds. More and more people are buying cars. Pasnik prefers to invest in Canada and the U.S. rather than directly in China if he can. Another financial Pasnik likes is Reinsurance Group of America, trading at about 6 times this years earnings and slightly below book value, and tremendous growth potential.

Pasnik hedges against the Canadian dollar when investing abroad to reduce the dampening effects the rising loonie can have on investment returns.

His outlook for 2010: Reasonably optimistic, but as we’ve seen, things could get bumpy. He thinks the global economy should do well over the next 5 years.

Date: 2010-02-22

Tags: Buying Cars, Canada, Cangene Corp, Compendium, Dan Videos, Energy Production, Global Economy, Global Explorer, Global Growth, Good Business, Hedges, Insurance Operations, Leaps And Bounds, Loonie, Mackenzie Financial, Mfs, Oil Demand, Oil Prices, Portfolio Manager, Reinsurance Group Of America, Return On Capital, Return On Equity, Sun Life, Target
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Energy and Natural Resources Markets Highlights

Saturday, February 20th, 2010

Energy and Natural Resources Market

Strengths

• Despite a severe recession in 2009, the World Bureau of Metals Statistics estimates that global copper consumption grew 1.8 percent to 18.43 million metric tons.
• U.S. coal stockpiles at utilities declined 2.3 percent this past week, according to Genscape Inc. Inventories are currently at 153.3 million tons versus 156.8 million tons the prior week and up 6.5 percent from a year ago.
• North American potash inventories at the manufacturer level fell sharply in January on strong seasonal dealer re-stocking and growing overseas sales momentum. Inventories have now fallen for a third straight month and are now only 6 percent above the prior 5-year average.
• Severstal is increasing its price for flat-rolled steel by $30 per short ton, in line with moves by AK Steel and Nucor earlier in the week. This increase takes Severstal’s price for hot-rolled coil to $640 per short ton.
• Japan’s crude steel output rose 37 percent to 8.72 million metric tons in January from a year earlier, the Japan Iron and Steel Federation said this week.
• China’s iron ore imports from Australia rose 42.9 percent in 2009 to 260 million tons and imports from Brazil rose 41.5 percent to 140 million tons from a year earlier, the official Xinhua News Agency reported, citing Chinese customs figures.
• China’s power consumption was strong in January, rising 2.7 percent month-over-month and 40 percent year-over-year.

Weaknesses

• Coal exports from Newcastle port in Australia fell 9 percent in the second week of February, with outbound loading for the month thus far running at 103.4 million metric tons on an annualized basis, slightly below the target of 104.7 million metric tons.
• Macquarie reports that thermal coal stocks at Chinese power stations appear to have returned to non-critical levels, with average days of usage rising to 12 days as of February 10 compared to eight days in mid-January.
• Estimates by the Energy Information Administration (EIA) of the U.S. Department of Energy showed Saudi Arabia’s crude exports to the U.S. plummeted to about 837,000 barrels per day in November, the lowest level in 21 years.

Opportunities

• Oil services firm Smith International Inc. is said to be in advanced talks to be acquired by Schlumberger Ltd., the world’s largest oilfield-services provider, in a $9 billion transaction.
• Brazil’s state controlled oil company Petrobras said it is importing gasoline to ensure ample supply to the domestic market after a spike in the demand for motor fuel. This is due in part to falling production of sugar cane ethanol, which is used in Brazil as an alternative fuel for cars.
• China, which has the world’s second-largest power capacity after the U.S., plans to add 85 million kilowatts (kW) of new capacity this year, boosting its total capacity to about 950 million kW, according to the latest report by the China Electricity Council. The council said that the newly added capacity this year would include 55 million kW for coal-fired power, 15 million kW for hydropower, 13 million kW for wind power and 1.08 million kW for nuclear power. Power consumption in China is expected to grow 9 percent to 3.97 trillion kWh in 2010, thanks to the economic recovery, according to the report.
• UC Rusal is expected to restart 100,000 metric tons of idled aluminum capacity. The company is in the preparatory stages of restarting the production, based upon strength in the company’s backlog, with Rusal indicating that its order book is 150 percent above its 2009 production level.
• Steel prices are expected to jump a further 15 percent to 20 percent after the Chinese New Year as governments in East Asia restart spending on major infrastructure-related projects and restocking activities increase, according to Malaysia Steel Works.
• The U.S. government committed to $8.3 billion of loan guarantees to Southern Co. and its partners in order to commission the construction of the first new nuclear power plant in three decades. Southern plans to add two reactors near Waynesboro, Georgia, in 2016 and 2017.

Threats

• In Niger, a coup attempt is underway against President Mamadou Tandja, according to AFP. Niger is one of the world’s top six uranium mining countries, producing 7 percent of the world total in 2008, according to the World Nuclear Association.
• Zimbabwe will reconsider legislation aimed at forcing companies to sell more than half of their assets to black investors after the law frightened off investors, according to the acting prime minister. Under the law, companies operating in the country with assets worth more than $500,000, among them Anglo American Plc and Old Mutual Plc, must sell 51 percent of their local units to black investors within five years. Zimbabwe has the world’s second-largest reserves of platinum and chrome after South Africa, and also has deposits of gold, coal, diamonds and nickel.

Tags: Ak Steel, China, Chinese Customs, Chinese Power, Coal Exports, Coal Stocks, Copper Consumption, Critical Levels, Crude Steel, Emerging Markets, Genscape, Gold, Hot Rolled Coil, Market Strengths, Million Metric Tons, Power Consumption, Sales Momentum, Severstal, Short Ton, Steel Output, Target, Thermal Coal, Xinhua News Agency
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China: Social Stability Through Economic Prosperity

Sunday, February 14th, 2010

By Frank Holmes
CEO and Chief Investment Officer

China sees a bubble ahead and is trying to avoid it – is that such a bad thing?

Isn’t this what we expect Ben Bernanke and the Federal Reserve to do here at home – take clear and decisive action to drain off excess liquidity in the economy before inflation takes hold?

The People’s Bank of China did just that after it saw that 1.4 trillion yuan ($204 billion) worth of bank loans were issued in January, more than the total loaned in the three previous months combined.

For all of 2010, the target loan amount is 7.5 trillion yuan, so it’s easy to see why the government might want to slow the pace a bit.

Forbes’ online headline was “China Tightens the Screws,” but let’s have a little perspective.

Barclays Capital predicts that the 0.5 percent increase in bank reserve rates (from 16.5 percent of deposits to 17 percent) will remove 300 billion yuan from the Chinese economy. That’s only 20 percent or so of the amount loaned in January.

And it’s not like cash is going to dry up – the People’s Bank plans to increase the nation’s M2 money supply by 17 percent this year. January’s M1 money supply report showed a 39 percent increase (chart above). Not exactly a screw-tightening.

China’s CPI rose 1.5 percent in January, which is not extreme, and the chart above from BCA Research shows that real estate prices in terms of per-capita income had not entered a bubble phase as of year-end. But perhaps the more telling number was wholesale prices – up 4.3 percent year-over-year and more than double the increase seen in December. This signals that higher inflation at the consumer level could be around the corner.

Markets are taking a hit based on this news – this shows how important China has become to the world economy. It surpassed Germany as the top exporting country by value at $1.2 trillion, and in January its exports were up 20 percent compared to a year earlier. Even better, its imports were up 85 percent year-over-year.

What we may actually have is a classic bull market in the making – one that climbs the proverbial wall of worry, which suggests that investors buy on corrections. The table below shows the standard deviation (sigma) over 10 years for the main stock markets in mainland China and Hong Kong. The weekly sigma for the Shanghai A-share market is plus or minus 5 percent, while its normal quarterly swings can be nearly 25 percent up or down.

It’s nearly impossible to pick exact tops and bottoms – adding to core positions after any correction greater than one sigma is a safer and more prudent way to invest.

Beijing is tending to its economy so it performs over the long term. This is central to its goal of social stability through economic prosperity, and it seems to be working – millions of households join China’s middle class every year.

We all know what can happen when an asset bubble grows huge and then bursts – we’re still recovering from 2007-08.

China is a long-term growth story, and how well it manages that growth will have an impact on all of us. A little caution now should be seen as preventative maintenance, and we all know that when we’re talking about cars or economies, that’s a good thing.

Tags: Bank Loans, Bank Of China, Barclays, Barclays Capital, Ben Bernanke, Chief Investment Officer, China, Chinese Economy, CPI, Decisive Action, Economic Prosperity, Emerging Markets, Excess Liquidity, Federal Reserve, Frank Holmes, Money Supply, Per Capita Income, Social Stability, Target, Wholesale Prices, World Economy, Yuan
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Emerging Markets Highlights

Sunday, January 24th, 2010

Emerging Markets
Strengths

• China’s fourth quarter GDP came in better than expected at 10.7 percent year-over-year versus expectations of 10.5 percent. For the full year of 2009, GDP grew 8.7 percent, well above the government’s target of 8 percent.
• China’s innovation in its capital markets continues as stock index futures, shorting, margin financing and REITs are expected to be introduced in the first half of 2010.
• Investor confidence in Eastern Europe rose to new highs in January based on improving economic conditions and expected increasing export demand.
• Fitch raised its credit rating outlook for Russia to stable from negative, citing greater economic and financial stability.

Weaknesses

• China’s Consumer Price Index (CPI) for December came in stronger than expected at 1.9 percent versus expectations of 1.4 percent. Much of this was driven by higher food prices. It is estimated that 92 percent of the increase of the CPI rise was due to food.
• The People’s Bank of China (China’s central bank) set an additional 0.5 percent reserve requirement for those banks that issued too much in loans in January.
• Hungarian credit default swap spreads rose to the highest levels since September on concerns that upcoming elections may prompt the new government to increase the budget deficit.

Opportunities

• China is looking to move up the value chain in manufacturing as the State Council approved a report by the National Development and Reform Commission on accelerating the development of new strategic industries. These industries would include aerospace, biotechnology and new energy initiatives.
• The South African public utility Eskom announced it will need to increase prices by 35 percent over the next three years. While this is a negative for South African economic growth it is positive for infrastructure providers as capacity needs to be expanded.

Threats

• Rising input prices are a threat due to the overcapacity and competition in almost all manufacturing sectors. This means price increases cannot be passed onto the buyer and is a negative for already thin margins.
• If investors are concerned about a potential slowing of global growth as the global stimulus removal process appears to have started, risk aversion will likely rise, negatively impacting emerging markets.

Tags: Bank Of China, Budget Deficit, China, China China, Consumer Price Index, Credit Default Swap, Credit Default Swap Spreads, Emerging Markets, Energy Initiatives, Export Demand, Food prices, Index Cpi, Infrastructure Providers, Input Prices, Investor Confidence, Manufacturing Sectors, New Highs, Overcapacity, Quarter Gdp, S Central, Stock Index Futures, Strategic Industries, Target, Upcoming Elections
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Byron Wien’s Ten Surprises for 2010

Tuesday, January 5th, 2010

Dead on target at the beginning of the new year, 76-year-old Byron Wien again published his annual list of surprises to expect in 2010. Wien, Vice Chairman of Blackstone Advisory Services and one of Wall Street’s best known veterans, has been publishing his list of economic, market and political surprises since 1986.

Reviewing Wien’s 2009 list, he was very accurate with the direction of most of his predictions.

He foresaw a second-half recovery in the US economy, and the S&P 500 Index rising to 1,200 (up from 903 at the end of 2008 to 1,115 by December 31, 2009). He also predicted: “The ten-year US Treasury yield climbs to 4% [up from 2.24% to 3.84%]. Later in the year, as the economy shows signs of recovery, economists and investors shift their mood from concern about deflation to worries about inflation. A weak dollar, rapid growth in money supply and record-setting deficits (over $1 trillion) are behind the change.” Spot on.

Wien also expected the gold and oil prices to climb to $1,200 and $80 respectively - a feat accomplised in December.

He believes his ten surprises have at least a 50% chance of occurring at some point during the year. Although this is not a very high probability, his predictions nevertheless make for stimulating reading. His list for 2010 follows below.

1. The United States economy grows at a stronger than expected 5% real rate during the year and the unemployment level drops below 9%. Exports, inventory building and technology spending lead the way. Standard and Poor’s 500 operating earnings come in above $80.

2. The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end.

3. Heavy borrowing by the US Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, “The suits are finally listening”.

4. In a roller coaster year the Standard and Poor’s 500 rallies to 1,300 in the first half and then runs out of steam and declines to 1,000, ending where it started at 1115.10. Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem. Concern about longer term growth and obligations to reduce leverage at both the public and private level unsettle investors.

5. Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain.

6. Japan stands out as the best performing major industrialized market in the world as its currency weakens and its exports improve. Investors focus on the attractive valuations of dozens of medium sized companies in a market selling at one quarter of its 1989 high. The Nikkei 225 rises above 12,000.

7. Believing he must be a leader in climate control initiatives, President Obama endorses legislation favorable for nuclear power development. Arguing that going nuclear is essential for the environment, will create jobs and reduce costs, Congress passes bills providing loans and subsidies for new plants, the first since 1979. Coal accounts for about 50% of electrical power generation, and Obama wants to reduce that to 25% by 2020.

8. The improvement in the US economy energizes the Obama administration. The White House undergoes some reorganization and regains its momentum. In the November Congressional election the Democrats only lose 20 seats, much less than expected.

9. When it finally passes, financial service legislation, like the health care bill, proves to be softer on the industry than originally feared. There is greater consumer protection, more transparency, tighter restriction of leverage and increased scrutiny of derivatives, but the regulatory changes for investment bankers and hedge funds are not onerous. Trading volume and merger activity increases; financial service stocks become exceptional performers in the US market.

10. Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides. Talks with the US and Europe begin but the country remains a nuclear threat. Pakistan becomes the hotspot in the region because of the weak government there, anti-American sentiment, active terrorist groups and concerns about the security of the country’s nuclear arsenal.

Source: PR-inside.com, January 4, 2009.

Tags: 10 Year Treasury, Advisory Services, Blackstone, Byron Wien, Central Banks, Deflation, Economic Market, Federal Funds Rate, Federal Reserve, Gold, Interest Rate Policy, Money Supply, oil, Oil Prices, Rapid Growth, Reluctance, S 500, Target, Unemployment Level, United States Economy, Us Treasury, Vice Chairman, Weak Dollar
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Roundup: Gold Market

Monday, January 4th, 2010

Gold Market

For the week, spot gold closed at $1,096.65 per ounce down $8.75 or 0.79 percent. Gold equities, as measured by the XAU Gold & Silver Index, fell 2.19 percent for the week. The U.S. Trade-Weighted Dollar Index gained 0.28 percent.

Strengths

• According to a report in the China Daily, Chinese citizens have been rushing to buy gold after major department stores cut the price of jewelry by around 3 percent in year-end promotions for the Chinese holiday season. Gold jewelry sales increased by about 30 percent or more over the previous weekend.
   
• The International Monetary Fund has said the dollar’s share of global currency reserves fell in the third quarter to the lowest level in a decade. The currency’s portion fell at the end of the third quarter of 2009 to 61.6 percent from 62.8 percent in the previous quarter. Data collected by the World Gold Council showed that central banks collectively bought $28 billion of gold at an average price of $978 ounce.
   
• MasterCard released a report showing jewelry sales in the U.S. rose 5.6 percent for November and December. Luxury retail, excluding jewelry, increased slightly by 0.8 percent during the holiday season compared to last year, due to an extra day of holiday shopping and a spike in online shopping.

Weaknesses

• According to Reuter’s calculations, the value of the U.S. dollar’s net long position was around $700 million in the week ending Dec. 22, up from a net short position of $1.98 billion the prior week, and ended 32 straight weeks of short dollar positions.
   
• Data from the Mines and Geosciences Bureau of the Philippines showed that investments in the mining industry fell short of an already downscaled $650 million full year target from its original target of $1 billion. The latest actual investment figure is $375 million this year, a fraction of the downscaled target due to tight credit for developing projects in emerging markets.
   
• The New York Times has reported that New York State’s courts are feeling the legal fallout of the recession as they are closing the year with 4.7 million cases, the highest tally ever, with cases ranging from contract disputes to home foreclosures.

Opportunities

• Philip Klapwijk, chairman of Gold Fields Mineral Services, has stated gold will probably extend its longest winning streak in at least six decades next year on inflation concerns and dollar weakness. Klapwijk most accurately forecasted the average gold price for 2009 among his peers, being only 0.2 percent from the actual average.
   
• Esteemed hedge fund manager Eric Sprott has said the S&P 500 Index will collapse below its March lows when an expected rebound in economic activity fails to materialize. Sprott has said the market’s rally is attributable to the misinterpretation of economic data and forecasts a 40 percent correction.
   
• Similarly, Jim Sinclair, a much respected and followed bull on the gold price, disagrees with analysts predicting a stock market rally in 2010, and instead remains confident in gold, looking for new highs above $1,224 then moving on to $1,274 before reaching $1,650.

Threats

• Research from Sprott Asset Management indicates that out of three of the largest Treasury buying groups, including the Federal Reserve itself, households bought the most in government debt in 2009 which totaled $528.7 billion as opposed to only $15 billion in 2008, a 35-fold increase. The issue going forward is who will pick up the demand of Treasury auctions if the household sector has been tapped out and foreign buyers are reluctant to add more dollars to their reserves.
   
• The U.S. government has bailed out GMAC, the ailing former finance arm of General Motors, for the third time by injecting $3.8 billion in capital, increasing the U.S. Treasury’s stake in the lender to 56 percent from 35 percent.
   
• Morgan Stanley is forecasting yields on benchmark 10-year notes will climb about 40 percent to 5.5 percent, the largest annual increase since 1999, also pushing interest rates higher on 30-year fixed mortgages to 7.5 percent to 8 percent, the highest in a decade.

Tags: Central Banks, China, Chinese Citizens, Chinese Holiday, Currency Reserves, Dollar Index, Emerging Markets, Global Currency, Gold, Gold Equities, Gold Jewelry, Gold Market, Holiday Shopping, International Monetary Fund, Jewelry Sales, Quarter Data, Short Position, Silver Index, Spot Gold, Straight Weeks, Target, Tight Credit, World Gold Council
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Griffiths – almost halfway through dollar rally

Thursday, December 24th, 2009

“We are almost halfway through the dollar rally,” said Robin Griffiths from Cazenove Capital. His target for the US Dollar Index is 81 (currently 77.9). Griffiths also sees stock markets “topping” in March next year and suggests investors look at high yield sectors like oils, pharmas, telecoms and tobacco.

Source: CNBC, December 21, 2009.

Considering the short-term technical picture of the US Dollar Index, Adam Hewison (INO.com) also chipped in a few days ago with a short analysis of the outlook for the greenback, concluding that the rally may have more legs, but the primary trend was still down. Click here to access the presentation.

Tags: Advertisement, Cnbc, Few Days, Greenback, Investors, Legs, oil, Outlook, Rally, Robin Griffiths, Sectors, Stock Markets, Target, Telecoms, Tobacco Source, Us Dollar Index
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Doug Kass’ Top 20 Surprises for 2010

Tuesday, December 22nd, 2009

Doug Kass of Seabreeze Partners has just published his customary 20 surprises for the year ahead. Like him or not, the list below, courtesy of Barron’s, makes for stimulating reading.

1. There is a glaring upside to first-quarter 2010 corporate profits (up 100% year over year) and first-quarter 2010 GDP (up 4.5%). It grows clear that, owing to continued draconian cost cuts, coupled with a series of positive economic releases and a long list of company profit guidance increases in mid to late January and early February, there is a very large upside to first-quarter GDP (up 4.5%) and, even more important, to S&P profit growth (which doubles!). The upside on both counts is in sharp contrast to more muted growth expectations. While corporate managers, economists and strategists raise earnings per share, full-year growth and S&P target estimates, surprisingly, the U.S. equity market fails to respond positively to the much better growth dynamic, and the S&P 500 remains tightly range-bound (between 1,050 and 1,150) into spring 2010.

2. Housing and jobs fail to revive. An outsized first-quarter 2010 GDP (up 4.5.%) print is achieved despite a still moribund housing market and without any meaningful improvement in the labor market (excluding the increase in census workers) as corporations continue to cut costs and show little commitment to adding permanent employees.

3. The U.S. dollar explodes higher. After dropping by over 40% from 2001 to 2008, the U.S. dollar continued to spiral lower in the last nine months of 2009. Our currency’s recent strength will persist, however, surprising most market participants by continuing to rally into first quarter 2010. In fact, the U.S. dollar will be the strongest major world currency during the first three or four months of the new year.

4. The price of gold topples. Gold’s price plummets to $900 an ounce by the beginning of second quarter 2010. Unhedged, publicly held gold companies report large losses, and the gold sector lies at the bottom of all major sector performers. Hedge fund manager John Paulson abandons his plan to bring a new dedicated gold hedge fund to market.

5. Central banks tighten earlier than expected. China, facing reported inflation approaching 5%, tightens monetary and fiscal policy in March, a month ahead of a Fed tightening of 50 basis points, which, with the benefit of hindsight, is a policy mistake.

6. A Middle East peace is upended due to an attack by Israel on Iran. Israel attacks Iran’s nuclear facilities before midyear. An already comatose U.S. consumer falls back on its heels, retail spending plummets, and the personal savings rate approaches 10%. The first-quarter spike in domestic growth is short-lived as GDP abruptly stalls.

7. Stocks drop by 10% in the first half of next year. In the face of renewed geopolitical tensions and reduced worldwide growth expectations, stocks drop as the threat of an economic double-dip grows. Surprisingly, though, the drop in the major indices is contained, and the U.S. stock market retreats by less than 10% from year-end 2009 levels.

8. Goldman Sachs goes private. Goldman Sachs stock drops back to $125 to $130 a share, within $15 of the warrant exercise price that Warren Buffett received in Berkshire Hathaway’s (BRKA) late 2008 investment in Goldman Sachs. Sick of the unrelenting compensation outcry, government jawboning and associated populist pressures, Warren Buffett teams up with Goldman Sachs to take the investment firm private. The deal is completed by year-end.

9. Second-half 2010 GDP growth turns flat. The Goldman Sachs transaction stabilizes the markets, which are stunned by an extended Mideast conflict that continues throughout the summer and into the early fall. While a diplomatic initiative led by the U.S. serves to calm Mideast tensions, flat second-half U.S. GDP growth and a still high 9.5% to 10.0% unemployment rate caps the U.S. stock market’s upside and leads to a very dull second half, during which share prices have virtually flatlined (with surprisingly limited rallies and corrections throughout the entire six-month period). For the full year, the S&P 500 exhibits a 10% decline vs. the general consensus of leading strategists for about a 10% rise in the major indices.

10. Rate-sensitive stocks outperform; metals underperform. Utilities are the best performing sector in the U.S. stock market in 2010; gold stocks are the worst performing group, with consumer discretionary coming in as a close second.

11. Treasury yields fall. The yield of the 10-year U.S. note drops from 4% at the end of the first quarter to under 3% by the summer and ends the year at approximately the same level (3%). Despite the current consensus that higher inflation and interest rates will weigh on the fixed-income markets, bonds surprisingly outperform stocks in 2010. A plethora of specialized domestic and non-U.S. fixed-income exchange-traded funds are introduced throughout the year, setting the stage for a vast speculative top in bond prices, but that is a late 2011 issue.

12. Warren Buffett steps down. Warren Buffett announces that he is handing over the investment reins to a Berkshire outsider and that he plans to also announce his in-house successor as chief operating officer by Berkshire Hathaway annual meeting in 2011.

13. Insider trading charges expand. The SEC alleges, in a broad-ranging sting, the existence of extensive exchange of information that goes well beyond Galleon’s Silicon Valley executive connections. Several well-known long-only mutual funds are implicated in the sting, which reveals that they have consistently received privileged information from some of the largest public companies over the past decade.

14. The SEC launches an assault on mutual fund expenses. The SEC restricts 12b-1 mutual fund fees. In response to the proposal, asset management stocks crater.

15. The SEC restricts short-selling. The SEC announces major short-selling bans after stocks sag in the second quarter.

16. More hedge fund tumult emerges. Two of the most successful hedge fund managers extant announce their retirement and fund closures. One exits based on performance problems, the other based on legal problems.

17. Pandit is out and Cohen is in at Citigroup (C). Citigroup’s Vikram Pandit is replaced by former Shearson Lehman Brothers Chairman Peter Cohen. Cohen replaces a number of senior Citigroup executives with Ramius Partners colleagues. Sandy Weill rejoins Citigroup as a senior consultant.

18. A weakened Republican party is in disarray. Sarah Palin announces that she has separated from her husband, leaving the Republican party firmly in the hands of former Massachusetts Governor Mitt Romney. An improving economy in early 2010 elevates President Obama’s popularity back to pre-inauguration levels, and, despite the market’s second-quarter decline, the country comes together after the Middle East conflict, producing a tidal wave of populism that moves ever more dramatically in legislation and spirit. With the Democratic tsunami (part deux) revived, the party wins November midterm elections by a landslide.

19. Tiger Woods makes a comeback. Tiger Woods and his wife reconcile in early 2010, and he returns earlier than expected to the PGA Tour. After announcing that his wife is pregnant with their third child, both the PGA Tour’s and Tiger Woods’ popularity rise to record levels, and the golfer signs a series of new commercial contracts that insure him a record $150 million of endorsement income in 2011.

20. The New York Yankees are sold to a Jack Welch-led investor group. The Steinbrenner family decides, for estate purposes, to sell the New York Yankees to a group headed by former General Electric (GE) Chairman Jack Welch.

Source: Randall Forsyth, Barron’s, December 21, 2009.

Tags: Census Workers, China, Company Profit, Corporate Managers, Corporate Profits, Doug Kass, Earnings Per Share, Economic Releases, Emerging Markets, Gold, Gold Companies, Growth Expectations, Market Participants, Meaningful Improvement, Plummets, Price Of Gold, Profit Growth, Quarter Gdp, Reading 1, Seabreeze Partners, Strategists, Target, World Currency
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Barry Ritholtz – still bullish on stocks, but not for the long term

Sunday, December 20th, 2009

“The market’s bias is still to the upside. We’re giving the rally the benefit of the doubt. Innocent until proven guilty,” said Barry Ritholtz, CEO of Fusion IQ in an interview on Yahoo Finance - Tech Ticker.

Ritholtz expects the market to continue to go higher in the first part of 2010, suggesting 1,250-1,300 as an upside target for the S&P 500, but still thinks we are in a cyclical (short-term) bull market within a secular (long-term) bear market, which began in 2000.

“The goal from now until let’s call it 2015 is to preserve capital - see if you can make a little money here or there - but be ready for the next 15-to-20 year bull market,” he said.

Source: Yahoo Finance - Tech Ticker, December 18, 2009.

Tags: Amp, Barry Ritholtz, Bear Market, Benefit Of The Doubt, Bias, Bull Market, Ceo, Fusion, Innocent, Iq, Money, Rally, Stocks, Target, Ticker, Yahoo, Yahoo Finance
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