Saturday, June 16, 2007
Hedge fund managers tracked by hedgefund.net returned 2.41% in May, the best May performance since 2003. The S&P 500 climbed 3% in May. There's nothing like paying a 2% management fee and 20% of gains to underperform the market.
Signs of a market top... China's savers withdrew $36.5 billion from their bank accounts in May, the most ever. Most of that money is flowing into the stock market.
"IT SOUNDS TOO GOOD TO BE TRUE," says a Barron's story posted online recently. "Pay a reasonable price for an asset that delivers juicy, tax-deferred yields, in a sexy sector, with the possibility of skyrocketing price appreciation." They're talking about MLPs – master limited partnerships – that transport oil and gas across North America. Many have paid out dividends of 6% in the past year and appreciated about 30%. Kinder Morgan Energy Partners (KMP) is one of Barron's favorites... Matt Badiali wrote about it recently in his "American Oil Pension" report.
Former San Antonio Spurs all-star David Robinson is starting a $250 million private-equity fund with a Goldman Sachs investment banker that will focus on "socially conscious" companies.
More signs of a market top... PowerShares, a large player in the ETF market, will launch five foreign ETFs: Global Water Portfolio, Global Clean Energy Portfolio, Dynamic Developed International Opportunities Portfolio, Dynamic Asia-Pacific Portfolio, and Dynamic Europe Portfolio. If you buy these ETFs, just take care to cut your losses. Bankers launch new products in sectors that are wildly popular... like newsletter publishers. Remember: It's best to avoid the crowd.
The Bancroft family, controlling shareholders of Dow Jones (DJ), will send a new set of proposals to News Corp. on how to protect The Wall Street Journal's independence. The family stated that it would continue talks with News Corp. only if Rupert Murdoch agrees to the set of guidelines. Ha! I've been reading The Wall Street Journal daily for more than 12 years. It is a great paper – by far the best newspaper in America. But it is far from independent. It goes to great lengths to protect its major advertisers. I'm sure it always will – it's a newspaper.
Just got off the phone with Steve Sjuggerud. The poor man. He has been living on airplanes for the last six weeks, traveling to Hong Kong, Macau, London, Long Beach, Iceland... and on Saturday he leaves (with me) to go to Ireland. I'd wager that Sjug has seen – up close – more good investment ideas in the last six weeks than just about anyone else in the world. I had to know... what's the best idea you found? He told me two things...
"First, the U.S. dollar is mega, super cheap. The $45 cab ride from JFK to Manhattan seems free compared to what $45 buys in the rest of the world... $45 will only get you a few blocks in London or Iceland. It feels like the bottom for the dollar..."
"Second, the best overlooked asset in the world has to be the Icelandic long bond. Look, I love so many of the things I've seen lately... stamps, coins, Seabridge... but if you're a pension fund in Europe, there are Icelandic bonds that mature in 2044 and that pay a real 4.32% [meaning you add inflation on top of this yield]. If you want to match maturities to your obligations, this is the safest, highest-yielding choice in the world... these bonds are going to soar..."
Private-equity powerhouse Blackstone Group is set to go public the week of June 25. The offering will raise as much as $4.75 billion. New shareholders will hold a 12.2% stake, while the Chinese government will hold a 9.7% stake. Why would a successful business like Blackstone look to sell?
Our thoughts: Chief Executive Stephen Schwarzman and his partner Peter Peterson started this company in 1985 with $400,000. They've worked hard for 22 years. And they're no dummies. They've seen a top in the credit markets before... and this time they're cashing out.
Here we go again... For the last four years, 12% Letter pick McDonald's (MCD) has essentially gone straight up – from below $15 to above $50. But it wasn't until yesterday that Goldman Sachs decided to add the company to its Americas Conviction Buy List. To make room for the burger shop on its "conviction list," the bank removed Starbucks (SBUX), which is trading at 52-week lows – down 25% on the year. We know that investment banks aren't really in the business of providing equity research. Their job is to get the public to buy what their clients want to sell. Nevertheless, we're amazed they do the job with such shameless élan...
Date Range:6/7/2007 to 6/14/2007
Date Range:6/7/2007 to 6/14/2007