Saturday, February 9, 2008
Warren Buffett is still bullish on the economy. He sees the destruction of CDOs as "poetic justice" for the bankers who created them. Buffett believes the dollar will continue to fall unless the U.S. lessens its trade deficit. However, the U.S. economy should "do well over time."
Buffett also believes the credit crunch is overplayed... "I wouldn't quite call it a credit crunch... Money is available, and it's really quite cheap because of the lowering of rates that has taken place... What has happened is a repricing of risk and an unavailability of what I might call 'dumb money,' of which there was plenty around a year ago."
It's easy (and not a little self-serving) for me to agree with Warren Buffett... In the new issue of Extreme Value, which came out yesterday afternoon, I recommend a financial stock controlled by its founder. Shareholder returns have compounded at 15% after tax for more than 30 years, it's selling for a 57% discount to its cash and securities, and it owns nearly 20% of a leveraged financial company founded by a Forbes 400 billionaire. Click here for details on how to access my report.
Good news for those of you in the market for $10 million+ homes. Foreclosures are hitting the Hamptons – the beachy playground for Manhattan's ultra-wealthy...
A $15 million beach home in East Hampton went into the early stages of foreclosure last month due to delinquent payments. The owner paid his outstanding balance, beating back the creditors for now. Currently 40 homes are in various stages of foreclosure in East Hampton and another 40 in Southampton.
Signs of a bottom in the dollar... Stores in New York City now accept euros and other foreign currencies.
Signs of a bottom in housing... The cover of the latest issue of BusinessWeek says, "MELTDOWN: For Housing The Worst Is Yet To Come."
Currency traders are betting Bernanke's rate cuts will spur the U.S. economy as Europe slows, and they're going long the dollar. Of the 31 analysts surveyed by Bloomberg, the median estimate is that the dollar will gain 5.4% against the euro by the end of this year and another 6% in 2009. The dollar fell 10.6% in 2007 and 11.4% in 2006.
Trader Monthly released its Trades of the Year issue today and awarded the "Equity Short of the Year" to Bill Ackman and his persistent short position on MBIA and Ambac. The article quotes a source close to Ackman saying he plans to ride the trade to zero, gaining approximately $3 billion for his Pershing Square hedge fund.
The trade of the year, not surprisingly, went to John Paulson. Paulson's flagship hedge fund gained 590% for the year after taking massive short positions in subprime mortgages. His personal paycheck is rumored to be $4 billion.
In the "Too Little Too Late Department," the International Organization of Securities Commissions (IOSCO), a global regulatory group, says maybe it's a bad idea for ratings agencies to help design structured products they also rate.
U.S. credit markets are trading "like we're in the middle of the worst recession we've seen in a very, very long time. There is a lot of liquidity out there, but people are very hesitant to use it... fear has overwhelmed greed." This according to David Viniar, CFO of Goldman Sachs.
Citigroup says blizzards in China, power outages in South Africa, and floods in Australia will cause coal prices to double this year. In December 2006, I recommended International Coal (ICO), billionaire investor Wilbur Ross' assemblage of coal companies bought in bankruptcy. ICO is up 26% so far, but I imagine it has a ways to go yet.
Billionaire real estate tycoon Sam Zell bought a 7.7% stake in Starwood Hotels & Resorts, becoming the company's second-largest shareholder. Zell is an incredibly prudent investor. He sold his Equity Office Properties real estate portfolio to Blackstone for $39 billion at the exact top of the real estate market.
And he recently bought newspaper conglomerate Tribune at what could well be the bottom in newspapers. If Zell is buying, you probably don't want to be selling.
Zell isn't the only one buying newspapers. Porter recently told his subscribers about a newspaper trade that uses a new strategy he developed – a technique that captures 100% of capital gains while eliminating downside risk. Porter calls it "the perfect setup for long-term investors who are seeking capital gains, but can't afford to lose any money."
Mastering this technique will ensure you never see big losses in your portfolio again. Click here to read Porter's research.
Date Range:1/31/2008 to 2/7/2008
Date Range:1/31/2008 to 2/7/2008