Thread: Dave Landry's Market in a Minute - Monday, 12/2/13

Results 21 to 30 of 55

  1. #21

    Default Beware the Coming Equity Famine

    The world is about to suffer an acute shortage of equity capital over the next eight years, which could total $12.3 trillion. That is the conclusion of the McKinsey Global Institute, an affiliate of McKinsey &Co., a great well of long-term economic thinking which I have been drawing from for the last 40 years.

    The cause of the coming debacle is quite simple. Investable assets in the emerging world with minimal experience in equity investment are growing four times faster than those in the developed world. While developed countries own 80% of the world?s $196 trillion in assets today, that share is expected to decline to 64% by 2020. This means that, by far, the greatest growth in assets will be in countries where managers have the least experience in equity investment.

    Aging populations wind down equity investment as they get older, shifting an ever-larger share of their assets into bonds and cash. The rise of defined contribution plans shifts a greater focus on fixed income investments. More money is going into hedge funds and private equities. The regulatory burden of Dodd-Frank is scaring many banks out of the stock brokerage into safer managed alternatives. When stocks aren?t being ?sold?, no one buys them.

    Anyone who has ever tried to sell equities to emerging market investors, like myself, can tell you the challenges they run up against. Much of the region?s assets are controlled by quasi-governmental institutions with a much greater debt orientation. Equity issuance is very expensive and tightly regulated. Corporate transparency and government oversight is a joke. No one believes the figures that are coming out of China.

    Minority shareholders have no say and few rights, with annual meetings often over in an hour. There also is a long cultural tradition of keeping your wealth tied up in gold and silver instead of paper assets. No surprise then, that most emerging market investors view equities as riskier and more speculative than they are in the West and would rather keep their money elsewhere.

    A long-term shortage of equity capital will force companies to use more leverage, which will create greater volatility in earnings and share prices. A smaller equity cushion will lead to a higher frequency of bankruptcies during hard times. High growth companies, such as in technology, will have a particularly hard time raising capital, and IPO markets could dry up from the lack of money.

    The net result of these anti-equity trends is that yields will have to rise substantially to become more competitive with bonds. Companies can achieve this by either raising dividends or buying back shares. This, they seem to be doing in spades these days.

    This may be the reason behind soaring dividend yields globally over the last several years. The price of admission for equity capital hungry corporations is going up, big time. The $1 trillion plus equity requirements of troubled European banks only exacerbate this situation.

    The only way around this crisis is for investment banks to greatly step up their marketing efforts in the emerging markets, especially in China. The Middle Kingdom?s investable assets are expected to soar 328% from $19.8 trillion to $65 trillion by 2020. That will make it one of the world?s largest markets for investment products in a very short time. Major firms, like Morgan Stanley, Goldman Sachs, JP Morgan, Sogen, and UBS have already made massive investments in the region to boost business there.

    To read the McKinsey piece in full, please click here.

    Better start learning Mandarin if you want to stay in the brokerage business.
  2. #22

    Default Up 300% Since June, This Russian Stock Still Has 35% Upside

    Sometimes, great investments are found in the most unusual places. Regions that most investors avoid -- due to fear, misinformation or a general lack of knowledge -- can harbor overlooked stock gems.

    One such location is Russia. This former Soviet state is home to an extremely successful company that investors everywhere should know about.

    There is no question that the transition to a capitalistic society has been difficult for Russia. However, there are signs of improvement. According to research by Deloitte, private consumption expanded by over 6% in each of this year's first two quarters. A strong summer harvest has eased food prices, providing consumers greater discretionary income, and inflation has been slipping lower this year. In addition, retail sales climbed more than 4% in July from the same month last year.

    Most interesting is the fact that the Bank of Russia is expected to continue a policy of interest rate cuts through 2014. Lower borrowing costs are one key factor in economic growth, and the Bank of Russia is on the right track in this regard.

    Not only is the central bank staying with the policy of lowering interest rates, it's also clamping down on unfettered consumer lending policies. Annual interest rates as high as 60% for unsecured consumer loans are common in Russia. The Central

    Bank is combating this practice by requiring banks to set aside 300% of the loan's principal in a reserve fund. There is also talk of the Bank of Russia potentially setting a maximum rate for consumer loans and credit cards.

    This increasingly consumer-friendly environment is what triggered my search for a consumer-oriented investment. I was amazed by the investment potential of one Moscow-based company in particular. This company operates electronic payment services and kiosks in the Russian Federation, Kazakhstan, Moldova, Belarus, Romania, the United Arab Emirates and even the United States. The share price has soared over 300% since June, and the uptrend shows no signs of ending.

    Boasting the unusual name Qiwi (Nasdaq: QIWI), this company is among the largest providers of non-bank self-service payment locations in the former Soviet Republic.

    Qiwi just reported third-quarter results, crushing estimates and adding fuel to the already sharp uptrend in price. In the third quarter, Qiwi's revenue was reported at more than $50 million, which beat the $40 million consensus estimate and was up nearly 50% from a year ago. Earnings per share jumped 39%, to $0.35, excluding certain items.
  3. #23

    Default Hot Links: Keep Your Head Down

    Stuff I?m Reading this Morning?

    Supposedly the Fed is done moving the goal posts, will seek to normalize policy sooner rather than later. (Reuters)

    Gold is dropping again, because the market is open. (BuisnessInsider)

    The National Retail Federation is talking down Black Friday sales estimates. (FT) and (Bloomberg)

    Goldman trading idea for 2014: short copper / long Chinese equities. (ZeroHedge)

    Morgan Stanley?s big macro themes for next year. (BusinessInsider)

    ICYMI: Bank of America Merrill?s quants say The Street is still not bullish enough for this to be a top. (TRB)

    Citigroup?s new CEO sets the tone for a quieter, more anonymous Wall Street. (DealBook)

    Lil Weezy flips bullish on Bitcoin. (BusinessInsider)

    Gawker?s king of viral content shares his traffic secrets. (WSJ)

    Jeff Bezos wants to send helicopter drones out into the world as Amazon deliverymen. Keep your head down. (BusinessInsider)

    My book, Backstage Wall Street, available at Amazon
  4. #24

    Default Wall Street Still Hates Stocks?just not as much

    Savita Subramanian (BofA Merrill Quant Strategy) is out with her latest look at the Sell Side Indicator, which is a measure of how bullish or bearish Wall Street firms are on the stock market.

    Historically, it?s been an incredibly good contrarian indicator. While it does not catch every bottom or top, the indicator has a higher r-squared (28%) than just about any other you can think of in terms of predicting subsequent 12-month returns for the S&P 500. Anecdotally, this pessimism-as-base-case on Wall Street has been one of the best tells to stay long (here?s me in the summer of 2012 highlighting it).

    And here?s how the Sell Side Indicator stacks up versus the other tricks and treats your favorite Chief Strategist likes to pepper his monthly outlook pieces with:



    So where are we on the sentiment scale relative to the past? Subramanian notes that, while the Sell Side Sentiment index now sits at a 19-month high (up 12 of the last 15 months), we are still in ?Buy? territory with stocks still way too forsaken and close to their 2009 sentiment lows. The strategist says ?Historically, when our indicator has been this low or lower, total returns over the subsequent 12 months have been positive more than 95% of the time, with median 12-month returns of +27%.? The indicator?s current level would indicate an expected return for the S&P 500 of 18% in the next 12 months, based on the report.

    Here?s what it looks like:
  5. #25

    Default Profiting In The Third Dimension With Makism 3D Corp (MDDD)

    When it comes to a brand new industry or invention, it?s common to hear pundits hype them as ?paradigm-shifting? or ?category killers.? In the case of 3-D printing, it may not be possible to hype this new technology enough, as it?s already proving to be a game-changer across a surprisingly wide variety of industries. That?s why I want to bring your attention to a new company in the 3-D printing game?Makism 3D Corp.?trading over-the-counter under the symbol MDDD (Get it? Three D?s!)

    First of all, if you?re not familiar with 3-D printing, it?s important to understand both its current applications and why it holds out so much promise. Also known as ?additive manufacturing,? 3-D printing refers to the process of making a solid three-dimensional object from a digital model. The object is created using an additive process in which successive layers of material are laid down in different shapes to form the final product.

    Although the technology has been available since the 1980?s, it wasn?t until earlier this decade, around 2010, that 3D printers started to become widely available commercially, gaining the attention of the financial markets in the process. According to Wohlers Associates, a consultancy firm, the market for 3D printers and services was worth $2.2 billion worldwide in 2012, up 29% from 2011. Because the technology has such a wide-range of applications?including industrial design and production of all stripes, engineering and healthcare, just to name a few?the size of the 3-D printing market could continue to grow exponentially going forward.

    Enter Makism Corp., a 3D printing start-up based in the United Kingdom whose goal is to bring 3D printing to the mass consumer marketplace?part of what?s called the ?Maker Movement.? In late-November, the company announced that it was about to launch its flagship line of home and office 3D printers, which the company has dubbed the ?Wideboy.? Ready to use out of the box, the Wideboy is being designed to ?empower organizations and individuals to affordably create high quality individually manufactured prototypes, parts, and objects, rapidly and with a high degree of precision,? the company said.

    The flagship model Wideboy is a large A4 format dual extruder 3D printer optimized for the reliable utilization of common PLA and PVA support material. Its features include large A4 format build areas, multiple extruders, a 3 year parts warranty, and pre-calibrated functionality in an attractively designed package. The Wideboy provides many of the features of the larger printers in the company?s product line-up, which include the Wideboy Pro and Mega models. The projected price for the Wideboy is $1,499.

    According to Makism management, the larger Wideboy Pro and Mega models offer the same high quality components as the Wideboy, but with advanced professional features such as temperature controlled enclosures, heated build platforms, and carbon filtration which enables users to safely and reliably employ a wider range of fabrication materials. All printers come with USB and Wi-Fi connectivity, dual extruders (the Mega offers up to four extruders as an option), high-precision 2 and 5 phase stepper motors, a user-friendly interface, and 3 year parts warranty.

    In reference to the launch announcement, Makism CEO Luke Ruffell stated, ?We anticipate that the first Wideboy will be available in February and we are aiming for the Pro and Mega models to respectively roll out in March and April. We are currently taking email addresses at our website (www.makism3d.com) from consumers who wish to get on our pre-order advisory list, and will be in touch with further information including purchasing options as soon as they can be made available. The interest to-date has been exceptional.?

    As you might imagine given the recent concentration of attention on 3-D printing, and investors? enthusiasm for the shares of industry-leader 3-D Systems (DDD), MDDD shares have begun to attract a fair share of interest themselves
  6. #26

    Default A Short-Selling Lesson from SAC

    Dasan was one of the original members of the financial Twitter gang and had also been one of the better early investment bloggers. He doesn?t write very often these days but when he does it?s typically because he has something insightful to pass along.

    Back in the day, Dasan had spent a bunch of time with portfolio managers from SAC Capital during the interview process. While he didn?t end up joining the firm, he did come away with several important notions about running money like a hedge fund.

    Here is one of those lessons, on the right and wrong ways to utilize the short-selling toolkit:

    4. SHORTING INDICES. Many fund managers think they are great stock pickers. Actually, we all do, by definition, because we are charging people for our great skills- otherwise they could cheaply invest in an unmanaged index. But these same managers decide they will pick the longs in the fund and then use an ETF to short against the longs, as a ?hedge.? WTF kind of backward thinking is this? So you can pick what stocks will go up, and not the stocks that can go down? Does this make any sense? Then the clever among this group will argue with you that because the market goes up over time, it?s important to spend time on longs and ?hedges always lose money.? NONSENSE. Even in a bull market there are stocks that are going down. (Do you need examples? IBM, ?Big Blue,? the bluest of the blue chip techs, is down 8.5% as I write this, versus the NASDAQ up 33% for the year.) I?ll tell you what- if you want to play with indices, and you tell me the market goes up most of the time, I will suggest that you LONG the index and spend all your time finding individual name shorts instead. Did your brain just blow a fuse? Let me suggest the best approach and that is pick longs and shorts and never short an index. If you don?t have enough shorts, because ?Shorting is hard? and all that, then go re-read RULE NUMBER ONE.

    The above-referenced RULE NUMBER ONE and the rest of his takeaways can be found at the author?s blog, linked below.

    Source:
    Idea Velocity, what I learned from SAC (Dasan)
  7. #27

    Default Sunday links: high yield dichotomy

    Now is the time to check out cool stuff for the holidays including: Chris Hadfield?s An Astronaut?s Guide to Life on Earth.

    Quote of the day

    Jeffrey Gundlach, ?Look at the dichotomy this year between high-yield bonds and emerging-market bonds. High-yield bonds are up 6% or 7%, but emerging-market bonds are down 6% or 7%. That?s a pretty large swing in the value proposition.? (Barron?s)

    Chart of the day
  8. #28

    Default Top clicks this week on Abnormal Returns Thanks for checking in with us this wee

    Top clicks this week on Abnormal Returns

    Thanks for checking in with us this weekend. Here are the items our readers clicked most frequently on Abnormal Returns for the week ended Saturday, November 30th, 2013. The description reads as it does in the relevant linkfest:

    Another bear throws in the towel. (The Reformed Broker)
    Big TV wants to get even bigger. (AllThingsD)
    The case for REITs. (John Authers)
    Retail investors are back. What next? (The Reformed Broker)
    Why it is hard to beat the market?s own asset allocation. (Capital Spectator)
    William Bernstein, ?When the intelligent investor does some trimming back, he usually feels like a dummy for the next year or two.? (IndexUniverse)
    At least someone is making money on the short side. (Zero Hedge)
    A long-term positive signal for equities. (Charts etc.)
    How to buy gold and silver at a discount. (The Short Side of Long)
    Howard Marks says markets are rich but not bubbly. (Pragmatic Capitalism)


    Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.



    The post Top clicks this week on Abnormal Returns appeared first on Abnormal Returns.


    Abnormal Returns
  9. #29

    Default On spinning one?s wheels

    I talked to a friend of mine this past week who?s nailed just about all of the hottest trades and the best-performing stocks of the year so far. But his returns are far below what you would think they?d be given the names he?s involved with (LNKD, FB, TSLA, GMCR, Z, CELG etc). He thinks the main reason for the drag on his performance is because of the mind-boggling amounts of entries and exits. His resolution for 2014 is to react to less inbound information and to be a bit more tolerant of short-term fluctuations.

    After chatting, I was reminded of this Warren Buffett gem from the 2005 Berkshire Hathaway Letter to Shareholders:

    ?Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac?s talents didn?t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ?I can calculate the movement of the stars, but not the madness of men.? If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases.?

    No doubt about it.

    It?s rare to encounter an investment environment in which more is more and an increase in decision-making is of any benefit to the decider.

    Don?t let the sound of your own wheels drive you crazy.
  10. #30

    Default

    A long holiday weekend is a great time to catch up on some items that we passed up on during the week. Also check out this holiday deal on a Google Chromecast including a $6 credit for use on Google Play. Thanks for checking in.

    Investing

    The latest memo from Oaktree Capital ($OAK) chairman Howard Marks. (Oaktree Capital)

    An interesting paper: US Inflation and Returns in Global Stock and Bond Markets. (DFA via IndexUniverse)

    An interview with Jon Stein of online money manager Betterment. (RIABiz)

    Finance

    Does Nanex get it right on the flaws of high frequency trading? (Bloomberg)

    Under what conditions are markets efficient? (China Financial Markets)
    A history of the first real options trade. (Turnkey Analyst)

    Economics

    Joel Mokyr talks with Russ Roberts on the fallacy of economic stagnation. (EconTalk)

    Insight into why the poor tend to make poor choices could lead to a more robust economics. (FT Alphaville)

    Business

    How the Pritzker famliy broke up its vast holdings in an orderly way. (WSJ)

    Italian candy maker Ferrero SpA has no plans to go public any time soon. (WSJ)

    Startups

    What have we learned from 23andMe? (Pando Daily)

    Priceonomics and the business of ?structured data crawling.? (TechCrunch)

    On the great unbundling of venture capital. (Dave Lerner)

    An interview with Marc Andreesssen. (Fortune)

    Technology

    The triumph and tragedy of IBM?s ($IBM) OS/2. (ArsTechnica via @fmanjoo)

    How Yahoo ($YHOO) went from technology-leader to laggard. (GigaOM)

    Meet the Amazon ($AMZN) whisperer. (Fast Company)

    Food

    Skim milk is awful. (The Atlantic)

    The technological search for an egg substitute. (WSJ)

    Booze

    Some surprising innovations in beer can design. (Quartz)

    America loves really expensive bourbon. (Businessweek)

    Young Americans are on the margin drinking less alcohol. (The Atlantic)

    Health

    The power of a daily dose of exercise. (Well)

    Sleep therapy could play a role in helping ease depression. (NYTimes)

    Psychology

    Why are first-person shooter games such ?absorbing experiences?? (New Yorker)

    Good luck if you think you are immune to advertising. (Aeon)

    How to raise thankful kids. (Slate, Motherlode)

    When superstition works. (WSJ)

    Higher education

    College is not just another ?consumer purchase.? (Big Think)

    How academia behaves like a drug cartel. (Slate)

    Sports

    Will Tim Tebow ever play in the NFL again? (SI)

    All hail the new world chess champion. (Time)

    Why top golf recruits are choosing to go to cold-weather universities. (WSJ)

    Grooming secrets of the NBA. (WSJ)

    Now former hockey players are suing the NHL over head injuries. (NYTimes, Grantland)

    Books

    An excerpt from Gregory Zuckerman?s The Frackers: The Outrageous Inside Story of New Billionaire Wildcatters. (WSJ)

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