Saturday, June 9, 2007
This is a whole new level of lunacy...
William Ackman, a well-known "activist" investor who runs Pershing Square (a hedge fund), raised $2 billion simply by promising investors he'd invest in one, single, blue-chip, iconic American company. Ackman is charging 2% up front and then 20% of whatever capital gains accrue. So... in effect... Ackman is getting $40 million for a single stock tip, plus 20% of whatever money it makes. Word on the street is the stock he's buying is Anheuser-Busch (BUD).
In March 2006, I told PSIA subscribers to buy BUD. It was the single most aggressive recommendation I've ever made:
My fear this month is that you won't recognize the significance and the scope of the opportunity and you won't buy enough... You can go as high as 25% of your equity portfolio with my blessing. Sell whatever it takes to free up the capital you need. Buy that new car next year. Turn down the heat. Whatever it takes: make sure you act on this month's recommendation. Don't wait.
We're up 32% so far. And if BUD really is the stock that Ackman is buying with his new $2 billion fund, we're going to make a whole lot more. Now... how can I get our subscribers to send me 2% of their BUD stake and 20% of the gains they've made?
More than 46% of the 89 IPOs this year came from companies that were unprofitable at the time of the offering. This is the highest percentage since the 71% in 2000.
Speaking of IPOs... Buying them is a fool's errand, if you don't get the broker price – which you can't get unless you've got tens of millions of dollars in your account or you're plugged in. Market studies show that, on average, buying IPOs on their first day of trading is one of the worst ways of investing.
Big Oil company British Petroleum (BP) may lose its $18 billion Russian oil field, which has enough natural gas to supply Asia for five years, as President Vladimir Putin extends state control over foreign projects. BP depends on Russia, the world's biggest oil producer, for a quarter of its production and 18% of its proven oil and gas reserves.
As stock markets continue to climb, hedge funds are having a harder time finding individual stocks to short. In order to maintain their short positions, the funds are turning to ETFs – baskets of stocks traded on stock exchanges. The number of short positions in ETFs has risen 85% since the end of 2006. Currently, eight ETFs have short interest greater than 100%. What tops the list? Regional banks.
You're not going to believe this... A sequel to the 1987 film Wall Street titled Money Never Sleeps is in preproduction. Michael Douglas will again star as greedy investment banker Gordon Gecko. You can think of this movie as a personal warning from Hollywood: This bull market is getting very long in the tooth. "Greed is good..." especially when it's tempered by experience and caution.
China will gain an estimated $40 billion a year from the tax increase on stock trading announced last week if trading remains at current levels. The extra tax revenue would equal nearly 7% of the government's annual budget.
Here's a good sign for Detroit. All 10 of the shareholder-initiated proposals aimed at reforming GM's corporate governance and accounting standards failed to win a majority vote and will not be implemented. Meanwhile, the management team's four proposals passed by a huge margin. One of the new policies is... a big annual bonus for management! Says CEO Rick Wagoner about the company's progress, "We're moving very well on a path that our shareholders should feel good about." GM lost $2 billion after two years of restructuring.
Why is more evidence of the astounding arrogance and incompetence of GM's management team good news? Because the sooner GM goes bankrupt, the sooner the city of Detroit will come back to life. Until GM's more than $30 billion debt is retired, no new funds will be available for capital investment, new jobs, better cars, etc.
Date Range:5/31/2007 to 6/7/2007
Date Range:5/31/2007 to 6/7/2007