Portfolio Breakdown:
APP - 3.4%
BAC - 16.1%
PRGN - 5.1%
TBT - 5.4%
ITUB - 12.5%
AOB - 15.1%
COIN - 1.7%
HOGS - 37.8%
SDX - 5.2%
OCNF - 3.5%
PFE - 6.0%
MBI - 19.2%
TRLG - 11.2%
ES - 4.8%
CAD Cash - 17.3%
USD Cash - (64.3%)
USD/CAD - 1.0535
Portfolio Performance:
Return Since Last Update - (5.12%)
Return Since Inception (June 30, 2009) - 169.32
S&P 500 - 1104.49
S&P 500 Return (June 30, 2009) - 20.20%
Friday, February 26, 2010
Sunday, February 21, 2010
Washington is the Biggest Impediment to US Growth
Portfolio Breakdown:
APP - 3.2%
BAC - 14.4%
PRGN - 2.5%
TBT - 5.3%
ITUB - 12.2%
AOB - 14.5%
COIN - 1.5%
TAMB - 30.1%
HOGS - 35.62%
SDX - 5.3%
OCNF - 3.6%
MBI - 18.7%
TRLG - 8.8%
ES - 2.7%
COIN Warrants (C024064) - 0.5%
CAD Cash - 2.9%
USD Cash - (64.2%)
Portfolio Performance:
Return Since Last Update - 5.24%
Return Since Inception (June 30, 2009) - 183.84%
S&P 500 - 1109.17
S&P 500 Return (June 30, 2009) - 20.71%
The Prior Week of Trading:
Both the heart and the substance of the policies coming out of Washington continue to amaze me, and not in a good way. The populist rhetoric coming from President Obama seems to be never ending; I was particularly struck by a recent comment he made at a News Conference when describing his vision for health care, stating that he ran for President "Not to do what was popular, but what was right". This chilling statement would be enough to give any proponent of democracy pause. The office of the President of the United States is not given through divine mandate, it is held by an elected official as the head of State and representative of the county. When speaking on health care reform, a topic that most agree needs attention, he uses that opportunity to denounce the notion of proportional representation of ideals through government (albeit, tongue in cheek) to attempt to assume a higher moral standard. In contrast, when speaking on issues of financial market reform, he bows to current populist pressure and completely ignores sound and proven economic principles. The duopolistic nature of the policies projected by the President are outrageous and are the biggest threat to growth in the US. The words of David Hume are as poignant today as they were 4 centuries ago when he said that it is a just political maxim to assume all politicians as knaves and that constitutions should be drawn upon that assumption.
More clarity was given on TAMB's earnings (or lack thereof) last week, which have caused me to substantially alter my target price for the stock. Net charge offs for the company was 35.8 million for the quarter causing them to set aside an additional 50.8 million in new provisions for loan losses; this was the main source of losses which were enough to erase the book value of the company. I am mainly concerned that given the loss of shareholder equity and pressure from the FDIC to raise its regulatory capital ratios TAMB will most likely have to initiate a secondary common or preferred equity offering. I would conservatively estimate that given the order to atain a Tier 1 capital ratio of 9%, TAMB would have to issue around 30 million dollars worth of new equity; this would dilute the current share base by about 10 times. At this point I should stress the unavailability of raw information from which I can derive accurate conclusions, the numbers I have listed are only an estimation. To effectively place a large secondary offering, TAMB would most likely reverse split the stock before the offering to maintain its status on the NASDAQ. This action would undoubtedly bring out the shorts to force a short term loss in price to much more than the dilution would warrant. The risk to the downside given these circumstances that I see as both necessary and inevitable is large while the upside normalized earnings scenario now effectively is cut by a factor of 10. I will be looking for opportunities to dispose of my share position daily while being mindful of the market impact I may face in the process given the stock's very low volume.
I added a small position to an old favorite PRGN last week and will look to accumulate in the low to mid $4 range. I believe that earnings for this company will continue its positive trend and see the possibility for a reinstitution of the dividend under a normal operating scenario. I last disposed of this position when the stock traded over $5; given the lower price and my continued positive outlook I believe it is time to add this back into the portfolio. Energy Solutions, ES is a company I have been watching for a while; the stock has been hit recently because of the resignation of the company's CEO (for personal reasons) and I believe this is a good entry point into an attractive stock in an attractive industry. COINU was delisted from the NASDAQ and the security's stock and warrant components were split up, which explains how they are now accounted for in my portfolio breakdown.
APP - 3.2%
BAC - 14.4%
PRGN - 2.5%
TBT - 5.3%
ITUB - 12.2%
AOB - 14.5%
COIN - 1.5%
TAMB - 30.1%
HOGS - 35.62%
SDX - 5.3%
OCNF - 3.6%
MBI - 18.7%
TRLG - 8.8%
ES - 2.7%
COIN Warrants (C024064) - 0.5%
CAD Cash - 2.9%
USD Cash - (64.2%)
Portfolio Performance:
Return Since Last Update - 5.24%
Return Since Inception (June 30, 2009) - 183.84%
S&P 500 - 1109.17
S&P 500 Return (June 30, 2009) - 20.71%
The Prior Week of Trading:
Both the heart and the substance of the policies coming out of Washington continue to amaze me, and not in a good way. The populist rhetoric coming from President Obama seems to be never ending; I was particularly struck by a recent comment he made at a News Conference when describing his vision for health care, stating that he ran for President "Not to do what was popular, but what was right". This chilling statement would be enough to give any proponent of democracy pause. The office of the President of the United States is not given through divine mandate, it is held by an elected official as the head of State and representative of the county. When speaking on health care reform, a topic that most agree needs attention, he uses that opportunity to denounce the notion of proportional representation of ideals through government (albeit, tongue in cheek) to attempt to assume a higher moral standard. In contrast, when speaking on issues of financial market reform, he bows to current populist pressure and completely ignores sound and proven economic principles. The duopolistic nature of the policies projected by the President are outrageous and are the biggest threat to growth in the US. The words of David Hume are as poignant today as they were 4 centuries ago when he said that it is a just political maxim to assume all politicians as knaves and that constitutions should be drawn upon that assumption.
More clarity was given on TAMB's earnings (or lack thereof) last week, which have caused me to substantially alter my target price for the stock. Net charge offs for the company was 35.8 million for the quarter causing them to set aside an additional 50.8 million in new provisions for loan losses; this was the main source of losses which were enough to erase the book value of the company. I am mainly concerned that given the loss of shareholder equity and pressure from the FDIC to raise its regulatory capital ratios TAMB will most likely have to initiate a secondary common or preferred equity offering. I would conservatively estimate that given the order to atain a Tier 1 capital ratio of 9%, TAMB would have to issue around 30 million dollars worth of new equity; this would dilute the current share base by about 10 times. At this point I should stress the unavailability of raw information from which I can derive accurate conclusions, the numbers I have listed are only an estimation. To effectively place a large secondary offering, TAMB would most likely reverse split the stock before the offering to maintain its status on the NASDAQ. This action would undoubtedly bring out the shorts to force a short term loss in price to much more than the dilution would warrant. The risk to the downside given these circumstances that I see as both necessary and inevitable is large while the upside normalized earnings scenario now effectively is cut by a factor of 10. I will be looking for opportunities to dispose of my share position daily while being mindful of the market impact I may face in the process given the stock's very low volume.
I added a small position to an old favorite PRGN last week and will look to accumulate in the low to mid $4 range. I believe that earnings for this company will continue its positive trend and see the possibility for a reinstitution of the dividend under a normal operating scenario. I last disposed of this position when the stock traded over $5; given the lower price and my continued positive outlook I believe it is time to add this back into the portfolio. Energy Solutions, ES is a company I have been watching for a while; the stock has been hit recently because of the resignation of the company's CEO (for personal reasons) and I believe this is a good entry point into an attractive stock in an attractive industry. COINU was delisted from the NASDAQ and the security's stock and warrant components were split up, which explains how they are now accounted for in my portfolio breakdown.
Monday, February 15, 2010
Euro vs USD... $USD$ wins in first round knockout
Portfolio Breakdown:
APP - 3.3%
BAC - 13.9%
TBT - 5.5%
ITUB - 12.5%
AOB - 15.3%
COINU - 2.1%
TAMB - 32.0%
HOGS - 35.5%
SDX - 5.8%
OCNF - 3.6%
MBI - 19.0%
TRLG - 8.7%
CAD Cash - 3.1%
USD Cash - (60.3%)
Portfolio Performance:
Return Since Last Update - 5.61%
Return Since Inception (June 30, 2009) - 169.72%
S&P 500 - 1075.51
S&P 500 Return (June 30, 2009) - 17.04%
The Prior Week of Trading:
Greece and China seem to be a sore spot for the market, albeit for different reasons. It looks as though Greece may have used swap arrangements to hide its poor fiscal position to help it join the EU initially; Greece's deficit of 12.7% to GDP last year is well above the 3% limit for Euro zone member countries. As the government debates various measures to bring down the budget gap, public union workers are protesting in the streets and threatening to close facilities such as schools and hospitals. Greece may have to drop out or the Euro zone because of an unsustainable fiscal deficit and unions are refusing to take concessions... sound familiar UAW? The EU treaties do not allow for an ECB bailout of the country through sovereign debt purchases which means that if a bailout comes it would have to be in the form of loans from other member countries. Either option is undesirable and would most certainly continue to pressure the EURO; the only way to remedy this problem is for the Greek government and it's people to do what is necessary to institute fiscal responsibility... necessary, but unlikely.
China has the opposite problem of having too hot an economy and is in the midst of a self described real estate bubble. By continuing to increase the reserve requirements for the nations banks, less money is available in the system for loans; the government is hoping to cap excessive loan creation and money supply expansion before it becomes too much of an issue. The concern here for the global economy is that if growth in China moderates it wont be enough to help propel global demand and spending. I think a better move for the Chinese and the global economy would be to allow their currency, the renminbi, to float freely; this would help stabilize trade imbalances and foster an environment for domestic growth and a better standard of living.
With continuing problems in the EU, the USD should be a beneficiary in the short-medium term. I would expect both the USD and treasuries to perform well as the stock market moves more or less sideways. As economic growth improves, money should shift out of treasuries and into stocks, providing the catalyst for an extension of the current bull market. Jobs seem to be the only missing piece to the economic puzzle; capacity utilization and employment hours worked are moving up, setting the stage job growth and the next inventory restocking cycle. The one concern I have is where sustained job growth will come from; the pending bubble in the housing industry provided jobs after the 2001 recession, but where will the jobs come from this time?
As for my portfolio, the biggest event that happened last week was the earnings release by TAMB; much to my dismay, they reported a loss of 7.37 for the quarter (ouch). The full report is still pending, but I was able to discern a few things from the press release. In a nutshell, it appears as though provisions for loan losses were only increased slightly while their portfolio of loans was reduced by about 15% and assets by about 10%; by selling off OREO and their nonperforming loans the bank has shrunk the balance sheet significantly. I have calculated the majority of the firm's book value to be erased and now there exists little upside for them to capitalize on a turn in real estate values or loan defaults. The only good news I see here is if after these moves they are in a position to report positive earnings growth in future quarters. I am hoping the full earnings report provides more clarity. The only significant change I made this week was to shift funds from TBT to improve my margin and buy more AOB.
APP - 3.3%
BAC - 13.9%
TBT - 5.5%
ITUB - 12.5%
AOB - 15.3%
COINU - 2.1%
TAMB - 32.0%
HOGS - 35.5%
SDX - 5.8%
OCNF - 3.6%
MBI - 19.0%
TRLG - 8.7%
CAD Cash - 3.1%
USD Cash - (60.3%)
Portfolio Performance:
Return Since Last Update - 5.61%
Return Since Inception (June 30, 2009) - 169.72%
S&P 500 - 1075.51
S&P 500 Return (June 30, 2009) - 17.04%
The Prior Week of Trading:
Greece and China seem to be a sore spot for the market, albeit for different reasons. It looks as though Greece may have used swap arrangements to hide its poor fiscal position to help it join the EU initially; Greece's deficit of 12.7% to GDP last year is well above the 3% limit for Euro zone member countries. As the government debates various measures to bring down the budget gap, public union workers are protesting in the streets and threatening to close facilities such as schools and hospitals. Greece may have to drop out or the Euro zone because of an unsustainable fiscal deficit and unions are refusing to take concessions... sound familiar UAW? The EU treaties do not allow for an ECB bailout of the country through sovereign debt purchases which means that if a bailout comes it would have to be in the form of loans from other member countries. Either option is undesirable and would most certainly continue to pressure the EURO; the only way to remedy this problem is for the Greek government and it's people to do what is necessary to institute fiscal responsibility... necessary, but unlikely.
China has the opposite problem of having too hot an economy and is in the midst of a self described real estate bubble. By continuing to increase the reserve requirements for the nations banks, less money is available in the system for loans; the government is hoping to cap excessive loan creation and money supply expansion before it becomes too much of an issue. The concern here for the global economy is that if growth in China moderates it wont be enough to help propel global demand and spending. I think a better move for the Chinese and the global economy would be to allow their currency, the renminbi, to float freely; this would help stabilize trade imbalances and foster an environment for domestic growth and a better standard of living.
With continuing problems in the EU, the USD should be a beneficiary in the short-medium term. I would expect both the USD and treasuries to perform well as the stock market moves more or less sideways. As economic growth improves, money should shift out of treasuries and into stocks, providing the catalyst for an extension of the current bull market. Jobs seem to be the only missing piece to the economic puzzle; capacity utilization and employment hours worked are moving up, setting the stage job growth and the next inventory restocking cycle. The one concern I have is where sustained job growth will come from; the pending bubble in the housing industry provided jobs after the 2001 recession, but where will the jobs come from this time?
As for my portfolio, the biggest event that happened last week was the earnings release by TAMB; much to my dismay, they reported a loss of 7.37 for the quarter (ouch). The full report is still pending, but I was able to discern a few things from the press release. In a nutshell, it appears as though provisions for loan losses were only increased slightly while their portfolio of loans was reduced by about 15% and assets by about 10%; by selling off OREO and their nonperforming loans the bank has shrunk the balance sheet significantly. I have calculated the majority of the firm's book value to be erased and now there exists little upside for them to capitalize on a turn in real estate values or loan defaults. The only good news I see here is if after these moves they are in a position to report positive earnings growth in future quarters. I am hoping the full earnings report provides more clarity. The only significant change I made this week was to shift funds from TBT to improve my margin and buy more AOB.
Friday, February 5, 2010
Will Jobs Lead a Recovery?
Portfolio Breakdown:
APP - 3.5%
BAC - 15.6%
TBT - 17.2%
ITUB - 12.5%
AOB - 12.4%
COINU - 1.9%
TAMB - 30.1%
HOGS - 42.3%
SDX - 3.5%
OCNF - 3.7%
MBI - 20.6%
TRLG - 9.2%
CAD Cash - 5.7%
USD Cash - (80.5%)
Portfolio Performance:
Return Since Last Update - (10.49%)
Return Since Inception (June 30, 2009) - 155.39%
S&P 500 - 1073.87
S&P500 Return (June 30, 2009) - 16.86%
The Prior Week of Trading:
Another rough week for my portfolio as my high beta exposure has bitten me in the backside. Continuing concerns over sovereign debt risk in Greece has caused an unwinding of risky trades across the globe. The Euro as well as emerging market currencies have been sold off as investors look for safety in the US dollar, translating to declines in a broad range in commodities. The negative correlation between the US dollar and US Equity prices has been very strong as of late, although it is opposite to what the market has seen historically. I am betting on continuing strength in the US dollar (as I have for many months) as I believe the economic position of the US to be more stable than most other nations. However, I also believe the negative equity-dollar correlation to be an aberation rather than a change in the statistical norm. As the US economic recovery continues to outpace other countries and US corporate profits beat estimates, the equity markets should trend higher. I dont think we will repeat the gains seen since March 2009 in a similar timeframe, but do believe US indices to see a more modest 10-15% price gain in 2010.
Given my expectations and current market weakness, I have consolidated my portfolio to my favorite deep value names. I have significantly added to my HOGS position as factory utilization and production news continues to be positive for this company; as a growth stock poised to exploit favourable structural shifts in their demand base, I do not believe the forward P/E of 7.5 to be justified. I am still waiting for the earnings release from TAMB, but continue to believe in the long term success of the company. TAMB is currently priced for bancruptcy with large upside potential, the risk/reward ratio is too good to ignore. MBI, TBT, ITUB and TRLG continue to be core holdings in my portfolio, but I may considering lightening up on TBT for a short period of time given the current global appetite for an asset flight to quality (TBT is the ETF inverse of the Lehman 20+ yr bond index).
APP - 3.5%
BAC - 15.6%
TBT - 17.2%
ITUB - 12.5%
AOB - 12.4%
COINU - 1.9%
TAMB - 30.1%
HOGS - 42.3%
SDX - 3.5%
OCNF - 3.7%
MBI - 20.6%
TRLG - 9.2%
CAD Cash - 5.7%
USD Cash - (80.5%)
Portfolio Performance:
Return Since Last Update - (10.49%)
Return Since Inception (June 30, 2009) - 155.39%
S&P 500 - 1073.87
S&P500 Return (June 30, 2009) - 16.86%
The Prior Week of Trading:
Another rough week for my portfolio as my high beta exposure has bitten me in the backside. Continuing concerns over sovereign debt risk in Greece has caused an unwinding of risky trades across the globe. The Euro as well as emerging market currencies have been sold off as investors look for safety in the US dollar, translating to declines in a broad range in commodities. The negative correlation between the US dollar and US Equity prices has been very strong as of late, although it is opposite to what the market has seen historically. I am betting on continuing strength in the US dollar (as I have for many months) as I believe the economic position of the US to be more stable than most other nations. However, I also believe the negative equity-dollar correlation to be an aberation rather than a change in the statistical norm. As the US economic recovery continues to outpace other countries and US corporate profits beat estimates, the equity markets should trend higher. I dont think we will repeat the gains seen since March 2009 in a similar timeframe, but do believe US indices to see a more modest 10-15% price gain in 2010.
Given my expectations and current market weakness, I have consolidated my portfolio to my favorite deep value names. I have significantly added to my HOGS position as factory utilization and production news continues to be positive for this company; as a growth stock poised to exploit favourable structural shifts in their demand base, I do not believe the forward P/E of 7.5 to be justified. I am still waiting for the earnings release from TAMB, but continue to believe in the long term success of the company. TAMB is currently priced for bancruptcy with large upside potential, the risk/reward ratio is too good to ignore. MBI, TBT, ITUB and TRLG continue to be core holdings in my portfolio, but I may considering lightening up on TBT for a short period of time given the current global appetite for an asset flight to quality (TBT is the ETF inverse of the Lehman 20+ yr bond index).
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