Archive
Oct 18, 2008
Timber! Look Who's Loading up on Lumber
By Andrew Mickey, Q1 Publishing
We have been concerned for some time about the risks in asset-backed bonds, particularly bonds that are backed by home equity loans, automobile loans or credit card debt (we own no asset-backed bonds). – Prem Watsa, 2004 Letter to Shareholders
By now it all seems so obvious. All the warning signs were there. The “Bad Credit, No Problem” slogan at car dealerships, banks’ no-standard lending practices, etc. We all knew the good times had to come to an end; it was only a matter of when.
That “when” is now and the good times have come to a fairly quick end. A sustained bear market has set in, banks are afraid to even lend to each other, and a harsh recession that I don’t believe the “recessionless” generation is prepared for is on the horizon.
Regretfully, a lot of investors weren’t prepared. One man was not only prepared, he made a killing in this downturn. Now, he’s taking his winnings from a big bet on risky loans going bad and pouring the cash into timber land at rock bottom prices. I know what you’re thinking…“Trees…now!?!”
That’s right. I’ll explain...
We have been concerned for some time about the risks in asset-backed bonds, particularly bonds that are backed by home equity loans, automobile loans or credit card debt (we own no asset-backed bonds). – Prem Watsa, 2004 Letter to Shareholders
By now it all seems so obvious. All the warning signs were there. The “Bad Credit, No Problem” slogan at car dealerships, banks’ no-standard lending practices, etc. We all knew the good times had to come to an end; it was only a matter of when.
That “when” is now and the good times have come to a fairly quick end. A sustained bear market has set in, banks are afraid to even lend to each other, and a harsh recession that I don’t believe the “recessionless” generation is prepared for is on the horizon.
Regretfully, a lot of investors weren’t prepared. One man was not only prepared, he made a killing in this downturn. Now, he’s taking his winnings from a big bet on risky loans going bad and pouring the cash into timber land at rock bottom prices. I know what you’re thinking…“Trees…now!?!”
That’s right. I’ll explain...
Oct 16, 2008
Where the Safe Money is Going
By Guy Bennett, Q1 Publishing
After the recent wild fluctuations in the Dow, many investors have lost faith in the market and the banks. Bank deposits have decreased an average of $500 million a day over the last 90 days. Meanwhile the stock market has shed around $8 trillion in value. Those are difficult numbers to wrap your head around.
One thing is for sure, people are sick of losing money. In the current climate, many investors have given up trying to make their capital grow. They are solely focussed on keeping it safe. As it turns out, spooked investors are taking the notion of “safe” literally.
SentrySafe, the nation's top safe manufacturer, reported that sales have surged 50 percent in the past three weeks. Home Depot reported a big spike in the sales of safes and some stores are running low.
“People are looking to gain control,” explains Doug Brush, SentrySafe's business manager, “They are bringing things that are valuable and important to them home.
The paranoia isn’t just about the markets and the financial institutions anymore.
Some high-end safe buyers have requested 2 a.m. deliveries to keep neighbors (or domestic staff?) from knowing that their homes are storage facilities for gold and cash.
But money will only stay hidden so long. When the storm passes money will return to the markets. Once we get the first whiff of an upturn in the economy (which could be a year or so away) the markets will slowly come back to life some will surely head into...
After the recent wild fluctuations in the Dow, many investors have lost faith in the market and the banks. Bank deposits have decreased an average of $500 million a day over the last 90 days. Meanwhile the stock market has shed around $8 trillion in value. Those are difficult numbers to wrap your head around.
One thing is for sure, people are sick of losing money. In the current climate, many investors have given up trying to make their capital grow. They are solely focussed on keeping it safe. As it turns out, spooked investors are taking the notion of “safe” literally.
SentrySafe, the nation's top safe manufacturer, reported that sales have surged 50 percent in the past three weeks. Home Depot reported a big spike in the sales of safes and some stores are running low.
“People are looking to gain control,” explains Doug Brush, SentrySafe's business manager, “They are bringing things that are valuable and important to them home.
The paranoia isn’t just about the markets and the financial institutions anymore.
Some high-end safe buyers have requested 2 a.m. deliveries to keep neighbors (or domestic staff?) from knowing that their homes are storage facilities for gold and cash.
But money will only stay hidden so long. When the storm passes money will return to the markets. Once we get the first whiff of an upturn in the economy (which could be a year or so away) the markets will slowly come back to life some will surely head into...
Oct 14, 2008
Stock Market Rally: 3 Reasons Why it Won't Last
By Andrew Mickey, Q1 Publishing
It’s all over. Stocks are back. The Dow roared back to life in record fashion yesterday. After the worst sell-off in decades, it’s time for a tremendous rally.
Will it last? Is it time to buy?
It’s a tough time to be an investor. Frankly, there is still a lot of uncertainty in the market despite yesterday’s rally.
The CBOE Volatility Index (VIX), which is a good indicator of the level of fear in the markets, still sits well above its previous decade highs.
On top of that, closed-end funds tell an equally bearish story. A closed-end fund trades like a stock and holds a group of securities that are tough for individual investors to buy. For instance, some hold distressed debt, municipal debt, or China’s “A” shares which only Chinese citizens are able to buy. They will also trade at a premium or discount to relative shares.
Almost every closed-end fund is selling at a very steep discount to Net Asset Value. There are about 654 closed-end funds traded on major exchanges. As of Friday, 636 of them are selling at a discount. Only 18 are fetching a premium.
I've got to warn you, we haven't hit bottom yet because...
It’s all over. Stocks are back. The Dow roared back to life in record fashion yesterday. After the worst sell-off in decades, it’s time for a tremendous rally.
Will it last? Is it time to buy?
It’s a tough time to be an investor. Frankly, there is still a lot of uncertainty in the market despite yesterday’s rally.
The CBOE Volatility Index (VIX), which is a good indicator of the level of fear in the markets, still sits well above its previous decade highs.
On top of that, closed-end funds tell an equally bearish story. A closed-end fund trades like a stock and holds a group of securities that are tough for individual investors to buy. For instance, some hold distressed debt, municipal debt, or China’s “A” shares which only Chinese citizens are able to buy. They will also trade at a premium or discount to relative shares.
Almost every closed-end fund is selling at a very steep discount to Net Asset Value. There are about 654 closed-end funds traded on major exchanges. As of Friday, 636 of them are selling at a discount. Only 18 are fetching a premium.
I've got to warn you, we haven't hit bottom yet because...
Oct 11, 2008
How to Take Advantage of a Bull Market in Volatility
By Andrew Mickey, Q1 Publishing
“VIX hit 46, you buying anything?”
That was what one of my brokers e-mailed on September 29th.
The “VIX” is the nickname for the CBOE Volatility Index. It’s often called the Fear Index. In the past, it has been a good indicator of when fear has peaked.
The VIX tracks the amount of premium someone is willing to pay for S&P 500 option contracts. It is a basically a measure what it costs to insure against a market collapse. It’s basically the cost of portfolio insurance.
When the index hit the mid-40’s in 2003, it was the bottom. When it surged to the mid-50’s (the previous all-time high) in 1998 when Russia defaulted on its debt, it was a fantastic time to buy. So this time, when it hitting new 5-year highs in late September, a lot of hopeful people were expecting a bottom.
Those who did probably didn’t fare too well. Since it hit 46 in late September, the Dow has fallen more than 2000 points, an additional $2 trillion dollars of wealth was wiped away, and a lot of stocks have fallen even more. Take advantage of it all by simply...
“VIX hit 46, you buying anything?”
That was what one of my brokers e-mailed on September 29th.
The “VIX” is the nickname for the CBOE Volatility Index. It’s often called the Fear Index. In the past, it has been a good indicator of when fear has peaked.
The VIX tracks the amount of premium someone is willing to pay for S&P 500 option contracts. It is a basically a measure what it costs to insure against a market collapse. It’s basically the cost of portfolio insurance.
When the index hit the mid-40’s in 2003, it was the bottom. When it surged to the mid-50’s (the previous all-time high) in 1998 when Russia defaulted on its debt, it was a fantastic time to buy. So this time, when it hitting new 5-year highs in late September, a lot of hopeful people were expecting a bottom.
Those who did probably didn’t fare too well. Since it hit 46 in late September, the Dow has fallen more than 2000 points, an additional $2 trillion dollars of wealth was wiped away, and a lot of stocks have fallen even more. Take advantage of it all by simply...
Oct 09, 2008
Markets R.I.P: The Great Unwind
By Andrew Mickey, Q1 Publishing
Pensions & Investments magazine warn, “Bloodbath Ahead.”
Reuters predicts, “D-Day for Hedge Funds as Redemptions Roll In.”
CNN cautions, “Hedge Fund Blues are Just Beginning.”
The markets sit perilously on the edge of disaster. A downward spiral is getting stronger and there’s not much that can be done about it. And one of the leading has been and will be hedge funds.
Frankly, the consequences can be dire if you’re holding the same stocks as the funds. The news isn’t all bad. As you’ll see in a few moments, the mass sell-off will create a few stellar short-term and long-term opportunities in...
Pensions & Investments magazine warn, “Bloodbath Ahead.”
Reuters predicts, “D-Day for Hedge Funds as Redemptions Roll In.”
CNN cautions, “Hedge Fund Blues are Just Beginning.”
The markets sit perilously on the edge of disaster. A downward spiral is getting stronger and there’s not much that can be done about it. And one of the leading has been and will be hedge funds.
Frankly, the consequences can be dire if you’re holding the same stocks as the funds. The news isn’t all bad. As you’ll see in a few moments, the mass sell-off will create a few stellar short-term and long-term opportunities in...
