Saturday, May 28, 2005

For Hedge Funds, Is the Party Over?

Closely related to the great post by Rawat. Hey, thanks for letting me know about IHT. Did not know that before. Looks like everyone is unloading on the Hedgefunds, or is it merely a screen for something more dangerous?
For Hedge Funds, Is the Party Over?

Friday, May 27, 2005

Chicago Boys

The Chicago boys were basically some 30 odd Chillians who studied Economics from Chicago school and had a chance to apply the free market theory they learnt in school to their country with a free rein. First I heard about them on NPR and later found more information on the web. Its interesting how the same experiment is interpreted so differently by both conservatives and liberals. While conservative touted it as a success story, liberals saw it as a total disaster.

Here is one of the articles that I found insightful and, based on my bias, close to reality: CHILE: THE LABORATORY TEST
Many people have often wondered what it would be like to create a nation based solely on their political and economic beliefs. Imagine: no opposition, no political rivals, no compromise of morals. Only a "benevolent dictator," if you will, setting up society according to your ideals.

The Chicago School of Economics got that chance for 16 years in Chile, under near-laboratory conditions. Between 1973 and 1989, a government team of economists trained at the University of Chicago dismantled or decentralized the Chilean state as far as was humanly possible. Their program included privatizing welfare and social programs, deregulating the market, liberalizing trade, rolling back trade unions, and rewriting its constitution and laws. And they did all this in the absence of the far-right's most hated institution: democracy.


This site also gives a good overview of when and how the different economic theories evolved with the main focus on Chicago's theory. The quotes are quite interesting too. Obviously they are written with a strong liberal bias.

Thursday, May 26, 2005

Hedge Funds

Dead, or just resting? :

The prevalence of funds of funds is one danger. Because they are often leveraged themselves (almost half can use borrowed money), if a fund in which they invest gets into trouble its losses are magnified at the fund-of-fund level, forcing it to pull money out of other, perhaps better managed, hedge funds in compensation. This could create a domino effect.

Another risk lies in the importance of hedge funds to the banks that serve them. Though hedge funds' assets account for only a tiny portion of global capital under management, their trading amounts to a high percentage of investment banks' revenues in some areas of business, especially convertible bonds and distressed debt, for example. They are also the banks' counterparties in transactions such as credit-default swaps. So any big troubles among hedge funds are likely to be felt by investment banks and prime brokerages. Small wonder that many analysts are downgrading the sector.

Tuesday, May 24, 2005

The Fed is all wrong about inflation

Jubak's Journal. Excellent text on inflation. I especially liked the way he starts out the article explaining increasing prices.

MSN Money - The Fed is all wrong about inflation

Limiting Risk on a Stock Position with no Cash Outlay

Another options strategy from the same site...

CBOE - Weekly Strategy Discussion

Monday, May 23, 2005

S&P 500 Report on CSCO - 5/19/2005

Excerpts:

Overall Recommendation

We have a strong buy recommendation on the shares. In our view, CSCO is maintaining its dominant market position in the large network routing and switching markets, while successfully positioning itself in attractive subsegments. Its balance sheet is one of the best in the industry, in our opinion, with over $16 billion in cash and no long-term debt, and we see strong cash flow generation of roughly $600 million per month. We view CSCO as a core holding for investors seeking exposure to what we see as an improving networking equipment environment.

Risks

Risks to our opinion and target price include a slowing of momentum in the recovery of the data networking industry, potential market share losses as peers increasingly target CSCO's dominant share in the enterprise market, and narrowing margins, due to intensifying pricing pressures.

Valuation

The stock recently traded at a P/E of about 21X our $0.85 FY 06 (Jul.) EPS estimate, below the peer mean. Using our five-year earnings growth rate projection of 13%, the shares are trading at a forward P/E to growth (PEG) ratio of 1.6X, below the industry average of 2X. We believe these discounts are unwarranted, given the company's proven market leadership and product shift towards faster-growing advanced technology markets. Our discounted cash flow model, which assumes a weighted average cost of capital of 11.9%, indicates intrinsic value over $23. Applying a blend of relative and intrinsic analyses, our 12-month target price is $23.

Profit Margins

We expect gross margins to narrow slightly to 66.7% in FY 06, from our FY 05 estimate of 67%, as cost saving efforts will likely be outweighed by the impact of pricing pressures and a less favorable product mix. Product gross margins are being restricted, in our view, by an growing proportion of lower-margin advanced technology products. We think service gross margins will continue to fluctuate, due to a shift in mix between technical and advanced services.

Earnings Estimates

We believe that CSCO, aided by anticipated higher sales volume, can meet its target of reducing operating expenses to 35% of total revenue by the beginning of FY 06. After anticipated higher interest income and a stable tax rate of 28%, we forecast FY 06 operating EPS of $0.85 (including $0.24 of option expense), versus the $0.91 estimated in FY 05. Our FY 05 S&P Core EPS forecast of $0.70 reflects estimated stock option expense of $0.21.

Thursday, May 19, 2005

A New India

A New India : An article by Manmohan Singh. Quite impressive!

Indian global oil scene. Kajal's uncle is MD of ONGC Videsh and he spends most of his time visiting different coutries making deals....obviously trying to outdo China. Indian Tortoise Aims to Be Hare ...nice summary of challenges India faces in dealing with oil economy:
Still, critics note that ONGC has been beaten on several deals by Chinese oil companies during the past few years, and Mr. Raha acknowledges that three contracts have been lost to China . Energy analysts say China has invested as much as $40 billion during the past few years on energy supplies abroad, about 10 times as much as India.

Others wonder if that will be enough. "The point is, does ONGC have the killer instinct needed to take on the Chinese?" says Madhu Nainan, editor of Petrowatch, an online industry newsletter in New Delhi. "It hasn't had any real competition for years."

Currency news

Couple of interesting articles in WSJ on currency and the politics that's going with it:

More 'Distorted' Comments Roil Markets :
At the same time, speculation as to when and how China will alter its currency regime has become a market obsession. Any action by Beijing, which pegs the yuan to the dollar, is expected to reverberate throughout the globe -- especially in Asian markets. With Asian financial officials pledging closer coordination, traders have become highly attuned to any potential clues that a Chinese move is nearing. A number of other disparate events this week seemed to magnify the impact of the Korean article for many traders.



U.S. Is Caught In China Balancing Act :
"If we push too hard, this could cool China's ardor for helping us" on a number of issues, says David M. Lampton, director of China studies at the Nixon Center in Washington. Mr. Lampton says China also could potentially retaliate, for example, by shifting investments from U.S. dollar-denominated assets.

Wednesday, May 18, 2005

Saudi's say: "Let there be oil..."

"I stand here to tell you that Saudi Arabian reserves are plentiful, and we stand ready to raise output as the market dictates," Ali Naimi (Saudi Oil Minister)

http://tinyurl.com/angad

Tuesday, May 17, 2005

Buying Puts vs Shorting Stock...

CBOE - Weekly Strategy Discussion

I subscribe to this stuff and they have one a week.

Buying Puts Vs. Shorting Stock

Foreign stocks

Fool article recommending 3 foreign picks and why investing outside is a good idea right now.

"... there are some really smart people who think that the dollar will continue to fall over the next few years. Warren Buffett's company, Berkshire Hathaway (NYSE: BRKa), has bet billions that the U.S. dollar will continue falling. Buffett tends to be right about such things..."

Read more.

Monday, May 16, 2005

La'te Hain, Lekin Hum Bhi Haazir Hain...

Yo! Guys

newsletter for options trading...

Sharing this bi-weekly newsletter as we discussed. The link below takes you to a site where you click on "Sign On" to login. The username and password will be in your Quaestors email. When you visit, please download and save a copy to your pc and log out. That way others can log in too.

Hope you all find it useful.

Pankaj

Newsletter Link: http://tinyurl.com/9kyaw

Sunday, May 15, 2005

Value investors pile into Level 3 (Fool.com)

"...These are people willing to take risks but demanding that those risks are fully compensated. Two of the companies, Legg Mason and Southeastern, invested in Level 3 convertible debt in 2003, along with Warren Buffett at Berkshire Hathaway (NYSE: BRKa)(NYSE: BRKb), and are back at the trough again."

Read more

Saturday, May 14, 2005

HG: Mid Month update - May 05

Dear fellow Hidden Gems member,

For your mid-month update, we try to put some historical context around the recent market volatility, and encourage you to keep longer-term financial goals in the forefront of your investment thinking. As Tom Gardner explains, not having any long-term financial plan could leave you in as precarious a situation as he found himself in during a recent cab ride. Enjoy his story.

Cheers,
Bill Barker
Hidden Gems Analyst



Get Update (login required)
http://www.hiddengems.fool.com/

Quaestors Performance (Dec'04 - Apr'05)
Go to: Financial Statement 2005 (yahoogroups redirect, login reqd.)

Thursday, May 12, 2005

Market Statistics 05/12/2005

Total Put/Call Ratio : 1.10
Index Put/Call Ratio : 1.81
Equity Put/Call Ratio: 0.74

BXM : 677.81

VIX OPENING VALUE: 14.43
VIX HIGH VALUE : 16.23
VIX LOW VALUE : 14.16
VIX CLOSING VALUE: 16.12

VoIP investments

Since I work in the VoIP industry, I am going to recommend the following two stocks as long term investments in the VoIP sector:

  1. CSCO : Cisco systems
  2. LVLT : Level 3 Communications.

Click here to read my arguments articulated for investing in the VoIP industry now and why these two companies. (no this is not a shameless attempt to draw traffic, i just felt lazy to type it all over again! "lazy > shameless").

Wednesday, May 11, 2005

Stock Market Lies

Lowest Deficit

How should we read this news?

Lowest Deficit in 6 months

Monday, May 09, 2005

Market Statistics 05/09/2005

Total Put/Call Ratio : 0.84
Index Put/Call Ratio : 1.40
Equity Put/Call Ratio: 0.63

BXM : 683.16

VIX OPENING VALUE: 14.11
VIX HIGH VALUE : 14.56
VIX LOW VALUE : 13.53
VIX CLOSING VALUE: 13.75

George Soros on Democracy, Elections, etc.

Soros was on morning edition today talking about his efforts ($27 mill worth) to defeat Bush last year and other goals. Some snippets:

"...I think the world very much needs a conscience, not me personally, but I want my foundation network to be the conscience of the world - to support civil society that is critical of the state and of the government."

When asked on whether to expect he will play a role in the next election:
"Yes, but you see I would like to get away from party politics."...
"Because, one of the troubles with ... this US against THEM, [is that] THEY are not right, but it doesn't make US right"

You can find the complete interview audio clip on NPR's Morning Edition.

Millionares in the making

You can be them! Gadda write an email to millionare@money.com to be featured.



Florida couple studies, travels and still saves a hefty sum - May. 3, 2005

Sunday, May 08, 2005

US Economy is bigger and stronger than GM

Krekorian or not...

Good info!

Friday, May 06, 2005

Market Statistics 05/06/2005

Total Put/Call Ratio : 1.07
Index Put/Call Ratio : 1.67
Equity Put/Call Ratio: 0.80

BXM : 680.75

VIX OPENING VALUE: 13.29
VIX HIGH VALUE : 14.06
VIX LOW VALUE : 13.11
VIX CLOSING VALUE: 14.05

Gems from the Berkshire Hathaway Meeting

Spreading my love for the Buffet-Munger combo!

Gems from the Berkshire Hathaway Meeting

Thursday, May 05, 2005

Strategy Lab Update

Global investor Vivian Lewis is winning so far. She has a nice article on her picks.Tenaris S.A. (ADR) one fo her picks looks quite interesting with solid fundamentals.

John Reese, the Guru investor,has picked up UFCS, one of the hidden gems. He is not doing bad either.

Jamie Dlugosch, the Rational Investor, also has a nice journal going long and short into a volatile market . His strategy of shorting IBM looks risky but interesting and so is the buying of the inverse small cap fund RYSHX(I had no idea that such funds existed).

Slowdown in Asian economies

As Developed World Slows, So Slows Asia
Not surprising that US slowdown will affect everyone. We need some role reversals: Americans should learn to save while Asians and to some extent European's too should start spending.

Market Statistics 05/05/2005

Total Put/Call Ratio : 1.13
Index Put/Call Ratio : 2.14
Equity Put/Call Ratio: 0.74

BXM : 680.49

VIX OPENING VALUE: 13.48
VIX HIGH VALUE : 15.82
VIX LOW VALUE : 13.43
VIX CLOSING VALUE: 13.98

Greenspan warns Congress on FMAC and FNMA

He sayeth - "The rapid proliferation of derivatives products inevitably means that some will not have been adequately tested by market stress," Greenspan said. Financial players, he said, "must be aware of the risk-management challenges associated with the use of derivatives ... and they must take steps to ensure that those challenges are addressed."

Full article can be found here

Wednesday, May 04, 2005

Market Statistics 05/04/2005

Total Put/Call Ratio : 0.99
Index Put/Call Ratio : 1.32
Equity Put/Call Ratio: 0.84

BXM : 681.24

VIX OPENING VALUE: 14.44
VIX HIGH VALUE : 15.38
VIX LOW VALUE : 13.70
VIX CLOSING VALUE: 13.85

Read everything, and start young.

Found this on gurufocus.com, thought I'd share it with you all - kinda cute. I love grandpa Buffett.

Warren Buffett (Buys Sells): Read everything, and start young.Posted on 5-3-2005

Q: What advice would you give a young person who’s interested in investing? Answer by Warren Buffett: I got started when I was 7. I wasted my life before that. (That reminds me of what W.C. Fields said when he inherited some money: he spent half on whiskey and wasted the rest of it.). My father worked at Harris, Upham in Omaha. The stock market was open a half day on Saturday then, and I used to go down to his office Saturday mornings. I read a lot—everything I could find on investing and the stock market. When I was 11 I bought three shares of stock. Then I read Ben Graham when I was at Nebraska. My advice is to read everything in sight, and to start young. If you start young and read a lot, you’ll do well. There are no secrets to investing that only some select priesthood knows. Successful investing requires a quality of temperament, not a high IQ. You need an IQ of 125, tops—anything more than that is wasted. But you do need a certain temperament, and must be able to think for yourself. Then constantly look for opportunities. You can learn every day. You can’t act every day, but you can learn every day. It’s like any game, if you enjoy playing it, you’ll do well. But start early, and follow a framework that’s been successful.

Tuesday, May 03, 2005

Globalisation and Poverty

RR you brought up a great topic in one of your comments to the China article from Gadda. Just wanted to share some thoughts.

I seriously doubt if the benefits of "Globalisation" will ever directly affect the poor in any 3rd world country. Globalisation in my opinion serves as a catalyst in many ways - it opens up markets, trading opportunities, sharing of technologies, etc. however it halts at the local government level. Those who understand the benefits of globalization get into the game early but those who are handicapped by their own lack of education, infrastructure and responsible leadership can only but wait for someone more privileged to uplift them. This can happen only at the local level not at the global level. When Vinoba Bhave (even before Gandhi) worked for the upliftment of the Harijans in the Hindu society, there was no globalization; today when thousands of social workers dedicate their own time, effort and money in to help bring electricity or education or freedom of speech/religion/etc. to the poor in various quarters of the third world, there is no globalisation effect that drives it. It is (1) the desire of those who want to move up combined with (2) good willed and benevolent volunteers. Tying it all back together, I think Globalization plays a role in the sense of raising awareness of the poor to a larger audience, thereby theoretically increasing the possibility that more volunteers may come forward to help them. But thats about it. An argument can even be made that it is raising the gap between rich and poor in the world. But we will leave that for a different discussion.

Those are my 2 cents on the off-topic. :)

Hidden Gems Entry Points

I found a nice post on HG boards from Seapickle that details the best entry points for HG stocks for May '05. Here it is:


http://boards.fool.com/Message.asp?mid=22430997

You will have to log in to HG for this.

Pankaj

Market Statistics 05/03/2005

Total Put/Call Ratio : 0.85
Index Put/Call Ratio : 1.71
Equity Put/Call Ratio: 0.62

BXM : 675.84

VIX OPENING VALUE: 15.19
VIX HIGH VALUE : 15.31
VIX LOW VALUE : 14.53
VIX CLOSING VALUE: 14.53

Options Backgrounder

Rajesh,

In response to your request, I have uploaded a really good special report from a subscription service I use. Larry McMillan runs this subscription called The Options Strategist. In this special report he discusses various basics on options, volatility, technicals, etc. A really good read. Another great read I would recommend is the bookby Larry McMillan - Options as a Strategic Investment.

Heres a link to the uploaded file but I dont know if it will work. You can get the file from yahoogroups directly as well.

http://tinyurl.com/dvjnq


Later,
Pankaj

Monday, May 02, 2005

US economy

Day of Deficit Reckoning...Another article on the bleak outlook for the US economy. I liked it because it so eloquently expressed what I've been thinking.

This week's newsweek has an interesting article on China: Does the future belong to China?
I found the following from the article quite funny:
"Intel sponsors a Science and Engineering Fair, which is the world's largest precollege science competition, open to high-school students from around the world. Last year was a good one for Americans: 65,000 participated in the local fairs that are used to select finalists. In China the number was 6 million. Yes, Chinese fairs are not as good as American fairs, the standards are different, and you can't compare apples and oranges. But still, 6 million oranges!"

Based on the Chinese students I've come across here, they are no oranges in fact on average they are much smarter than the rest of the class...obviously it goes without saying that Indians are much smarter:-) That's why China is kicking India's butt for the last 30 years but maybe now its time for India to shine with us all riding Laloo's train.

What will the Fed say about the economy on Tuesday?

Sunday, May 01, 2005

AIG to restate 2.7 billion