Posts from — December 2006
WR Grace – Time to Buy
Want to cost a lawyer $20?
Google the term, “mesothelioma” and click on one of the ads and you’ve just cost a lawyer around $17.
A rash of abusive asbestos suits across the country made these terms valuable as leech-like trial lawyers drooled over the idea over shaking down productive firms. The bottom feeders may have to adopt a new strategy.
A favourable court ruling today sent shares of WR Grace & Co up 9% since court said the asbestos in the chemicals maker’s attic-insulation product did not pose “an unreasonable risk of harm.” This stock is already on a tear going up over 100% this year, but with this court ruling this firm and others facing the same litigation will have room to run – its not too late to get in.
And even though the price of a click “mesothelioma” has fallen from over $100 this September to around $20 today, its still not to late to bang them for a few clicks either.
December 15, 2006 No Comments
Buy CUBA – Rumors Fidel Is Dead
“Barring any unforeseen actions such as, say, breathing, for all intents and purposes, fidel castro is dead.”
Our pick is up 70% since we posted about investing in CUBA: Investing in CUBA
December 13, 2006 No Comments
The Future of Air Travel – Embraer Jets
Picture your average TSA employee: annoying, incompetent, with a room temperature IQ. This obese creature emerges from his HUD project every day with the goal of making your life miserable.
Now imagine you don’t have to deal with that anymore.
For fractional jet owners, avoiding the TSA is a reality. By owning part of a jet (or renting it by the hour) the privileged can avoid the lines and hassle of commercial travel. Demand is surging, and even with the number of private jets flying up 40% in the past five years, firms like NetJets can barely keep up.
The trend is expected to continue. The market is not just growing for private jets but carriers are adding more regional routes as well. Prices will continue to decline, pushing the demand for very small jets and regional planes higher.
A good play in this market is Embraer, a Brazilian based company.
The firm has a strong order book and is in an ideal position to meet the future of the industry with products currently in its pipeline. Embraer has good management and a strong balance sheet. Currently Embraer’s Return on Capital isn’t great because several new products are still in the startup phase, but once they pan out ROC should improve.
December 13, 2006 No Comments
Real Estate Bubble
December 13, 2006 No Comments
Bombay Ruby – India’s BSE gets Hammered Again
Red ink by the barrel is a good bet at the BSE for the past week. India got hammered again. Could this portend a fall for China?
Here is a longer term chart of the same index, notice the uptrend clearly broken.
December 12, 2006 No Comments
More Bad Real Estate News – “Pay Option” Loans
The LA Times describes a home owner using this toxic waste:
One of his options is to pay $2,513 a month. That would cover the principal and interest as if it were a traditional 30-year loan.
A second possibility is to pay $2,279, which would cover only the interest.
But each month he always takes the cheapest option: paying $1,106 and promising to make up the shortfall later.
Obviously that cannot continue indefinitely. The article estimates about 1 in 5 loan applications in California got one last year, this year is on pace for 1 in 3 to use them.
Washington Mutual Inc., which has one of the nation’s largest portfolios of pay option loans, said 47% of its borrowers in this category last December took the minimum option.
This only pushes out the day when the whole system blows up. For the profiled home owner it occurs when his loan amount hits 115% of the original loan. This day is still two years away. When it does occur his monthly payment will go from $1,106 to a staggering $2,848 per month.
The bleak picture finishes off with what ones hopes is a lame joke attempt: Hertzberg always looks at these fliers, hopeful in spite of himself. “I’m waiting for a 100-year loan,” he said. “My heirs can worry about paying it off.“
December 11, 2006 No Comments
The more stable and predictable the system seems—the less likely it is.
This short excerpt is from Forbes Nanotech Insider. The writing is always good, but this passage stood out for its apt description of trading psychology:
And too often still we forget: dominance in life isn’t a birthright. Nor an entitlement (whether you’re a company, an industry, a country or its leader). It must be earned—and can be easily and unexpectedly lost. The more stable and predictable the system seems—the less likely it is.
…Pretend you’re a turkey born on January 1st, 2006. For the next 11 months, up through Thanksgiving, life is good. Actually, life is great. You (the turkey) wake up, get fed and walk around all day. Just in time to go to sleep and do it all over again the next day. And with each new day you become conditioned to assume that the next day will be just like the one before it. And this logic works all the way up till Thanksgiving. When suddenly—boom! Off with your head! The irony is that the closer the turkey is to death, the more confident it becomes. And so it is with many investors. The turkey gets fatter and feels safer. But at the very time he should be trying to evade the blade.
December 8, 2006 No Comments
How the UK Housing Bubble Hurts the US Dollar
From the pink FT:
With house price inflation on this scale, the Bank of England can surely not ease rates any time soon. This strengthens sterling against the dollar, which is weakened by the widespread belief that the housing downturn will force the Federal Reserve to cut rates. UK housing is pushing up sterling, while US housing is pushing down the dollar.
The trade is continue to long the GBP/USD (which is the same as shorting the US Dollar) while UK housing remains strong.
December 7, 2006 1 Comment
Phillips Curve Fails in Iraq – Keynesian Quagmire
The Keynesian quacks are shown to be wrong again.
From the Iraq Study Group Report, “inflation is above 50 percent. Unemployment estimates range widely from 20 to 60 percent.”
See the chart below:
Thanks to Jeff Tucker at mises.org for the pointer.
December 7, 2006 No Comments
Good Looking Short – Harley Davidson
Bold traders will want to take a look at shorting cult stock, Harley Davidson.
1. HOG is showing slowing revenue growth going into an over all poor economic picture. Without the benefit of home equity withdrawals (due to falling home prices) US consumers have run out of credit. Yesterdays post went into detail about this. Luxury purchases will be scaled back. The really rich can weather severe declines without it affecting their lifestyle but the upper/middle class cannot.
2. Massive insider selling. This one speaks for itself. The stock peaked at $76 and is now on its way down. the insiders are falling over each other to sell. If they don’t want to hold the stock why should you?
December 6, 2006 1 Comment
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