James Moore: Livestrong or Livewrong?
September 30th, 2010 | Posted by Global InvestorsAnd now there is Contador.
The Tour de France winner has apparently failed a drug test that was conducted during one of the days he was riding to victory in July. Contador is reported to have tested positive for a minute amount of a substance named clenbuterol, which is said to reduce fat, increase muscle mass, and assist breathing. (Where does one apply for a prescription?)
Everything this drug does would be an advantage to someone trying to not only survive but also win the most difficult endurance contest humans have ever devised. Clenbuterol, given to cattle, also improves the quality of beef. In a news conference, that’s actually how Contador said he got the banned substance in his blood. He claims a friend brought steaks over from Spain when the team chef complained about meat at the hotel where the riders were staying. According to Contador, the clenbuterol must have been in his food.
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QQQQ Price Action Suggests a Correction Is Incoming
September 30th, 2010 | Posted by Global InvestorsThe QQQQ violated its one-month lower trend line today (Thursday, September 30, 2010 at 8:00 a.m. PST) suggesting that it may be on the verge of another correction. For the past 18-months, a violation of the lower trend line has led to at least a correction in the vast majority of cases and a bigger pull-back in the other cases. Yet, how far this correction can actually go in light of the 10 hefty POMO injections by the fed since August is anyone’s guess. What we do know is that the last 3 times the fed initiated 9 POMO injections, the market was up 10% over the next 3-month period.
So while we may be in for a correction, I don’t think this correction will be that big. We’ll probably bottom out near the 50% retracement of the September rally in equities. Tread carefully right here. Bulls now have to place their hopes on the employment report and the bears need at least one more day of confirmation.
Click to enlarge:
Disclosure: Short the QQQQ.
Frank Sharry: Meg Whitman’s Lack of Truthiness on Immigration
September 30th, 2010 | Posted by Global InvestorsMany are having a difficult time believing Meg Whitman now that she’s embroiled in a “nanny scandal.” Given her blatant hypocrisy and deception as a candidate on where she stands on the issue of illegal immigration, is it any wonder?
As for the scandal, Whitman says she followed the law in hiring nanny Nicky Diaz Santillan, didn’t know she was here illegally and had to fire her when she found out. Diaz Santillan says Whitman employed her for nine years, knew she was here illegally since 2003, then threw her to the curb when Whitman was gearing up for the California governor’s race.
However the facts shake out in this drama, the facts are already in on Whitman’s truthiness regarding the larger issue at play here. Take a look this new America’s Voice fact sheet entitled “Whitman vs. Whitman on Immigration.” We report, you decide:
Read More…
More on Immigration
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Michael Roth: Virtuous Circle of Teaching and Research
September 30th, 2010 | Posted by Global InvestorsOver the last thirty to forty years, higher education in America has viewed contributions to research as an essential part of its mission. Professors are expected to participate in shaping their scholarly fields, and students are expected to learn not just the wisdom of the past, but how to produce knowledge in the present. At large universities, though, the research function often seems to dwarf the dedication to undergraduate education. At several of the Ivies and other schools that compete for academic prestige, senior faculty often have little to do with teaching those preparing bachelor degrees, and graduate students or other part-time instructors wind up taking on the bulk of college teaching. The tenured professors work mostly with graduate students, preparing them for careers that, too, are expected to center on research.
In recent years the folly of this system has become increasingly evident: there are few tenure-track jobs for the graduate students being trained to work in the most specialized domains, and undergraduates are often left to wonder how courses taught by these narrowly trained specialists are supposed to connect to their lives after college. As smaller institutions emulated the research universities, the publish-or-perish mentality became a core part of faculty culture, with specialized journals publishing for small groups of colleagues offering the most professional prestige.
There has recently been plenty of strong criticism of the cultivation of esoteric research in higher education. Andrew Hacker and Claudia Dreifus have argued that universities are wasting resources and failing students, in part because of the premium put on faculty research rather than teaching. Hacker and Dreifus have been teaching in New York for decades, and they have also been prolific authors. But in their recent book, Higher Education?, they argue that schools have been distracted from their core educational mission by adding on the obligation to contribute to scholarly fields.
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John Paulson Says to Buy Dividend Stocks and Houses, Sell Bonds
September 30th, 2010 | Posted by Global InvestorsAt the end of last week, the market ripped higher presumably from hedge fund manager David Tepper’s comments when he said he likes equities here. Now add to the mix another well known manager in John Paulson. His hedge fund Paulson & Co of course made billions from his bet against subprime as detailed in the book, The Greatest Trade Ever. Given his success, everyone now latches onto his every word, hoping for advice.
Paulson did divulge some of his latest views at a lecture for New York’s University Club. Simply put, he said to buy stocks and sell bonds. His favorite stocks are blue-chips with dividends such as: Johnson and Johnson (JNJ) and Coca Cola (KO). Playing on his ‘recovery’ theme, he also continues to like Bank of America (BAC), Suntrust Banks (STI), and Regions Financial (RF).
Equities
Paulson says to simply replace low yielding bonds with higher yielding stocks. A 10 year Treasury yields around 2.6% and so stocks with earnings yields of 7-8% are much better options. While Paulson did not mention these names, a quick scan pulls up companies with even higher earnings yields such as Medtronic (MDT) at 9.43%, ConocoPhillips (COP) at 10.52%, and Microsoft (MSFT) at 8.53%.
Gold
We’ve examined John Paulson’s gold fund in-depth in the past, and so it should come as no surprise that the hedge fund manager thinks the precious metal is headed higher. He says that gold (currently around $1,200) could hit $2,400 on monetary expansion alone and even $4,000 with significant inflation. His hedge funds offer a fund share class denominated in gold and Paulson himself has 80% of his assets in this class. Additionally, given his inflationist bent, Paulson thinks the U.S. Dollar will fall and that yields on Treasuries will rise. He has been buying 5 and 7 year calls on the 30-year bond yield. We’ve seen numerous hedge funds put on this type of trade before.
Housing
Lastly, Paulson thinks this is the best time to buy a home in fifty years, exclaiming that, "If you don’t own a home, buy one. If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home." Great, isn’t that just the type of mentality that created the housing bubble in the first place? We realize he is using hyperbole to illustrate his point, but still. Given his prominence in the investing world these days, some people might actually take him literally. For more notes on Paulson’s talk, head to Zero Hedge and to Forbes.
In terms of recent position movement from hedge fund Paulson & Co, we detailed its activist position in NovaGold Resources (NG) and sale of Centamin Egypt position.
Family Dollar Underscores Improving Retail Landscape
September 30th, 2010 | Posted by Global Investors
It’s been a good week of sorts for the retail industry after Wal-Mart (WMT) become the first major retail giant to jump in the African market with a $4 billion bid for South African wholesaler Massmart.
And now Family Dollar Stores (FDO) has forecast profits for the current fiscal year that are bound to beat the estimates of even the most skeptical of analysts. The forecast not only sent the shares up 1.6%, but also paved the way for the company to announce plans to open 300 new stores during fiscal 2011, up 50% from fiscal 2010. With retail giant Wall Mart looking at overseas destinations to churn out profits in a sluggish US economy, Family Dollar Stores, which prices most of its goods under $10, has attracted consumers struggling in a weak economy.
The company also posted a fourth-quarter profit that beat analysts’ estimates and said it had authorized a new $750 million share repurchase plan while it’s expecting to reap sales benefit of longer store hours, and an overhaul to give more room to fast-moving items like food introduced earlier in the year.
Retail analysts across the board have been impressed by the recent work-ethic of the company and are of the opinion that Family Dollar can continue to be dollar store of choice, given the significant opportunities the company has to narrow its productivity gap compared to rival Dollar General (DG).
Impressive Figures: Family Dollar forecast fiscal 2011 earnings of $2.95 to $3.15 a share on a same-store sales increase of 5% to 7%. Analysts on average forecast $2.96 a share. Net income in the June-August quarter was $74 million, or $0.56 a share, beating the analysts average level of $0.51 a share, compared with $60.1 million, or $0.43 a share, a year ago.
As the retail space makes a positive move on account of improving global and domestic economies, here are a few Retail ETFs worth considering.
PowerShares Dynamic Retail (PMR): The index is comprised of stocks of U.S. retail companies. The Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Data as of 2010-09-03
PMR Top Ten Holdings1. Limited Brands, Inc. (LTD): 5.47%
2. Wal-Mart Stores, Inc. (WMT): 5.37%
3. Dollar General Corporation (DG): 5.12%
4. Target Corporation (TGT): 5.00%
5. Bed Bath & Beyond, Inc. (BBBY): 4.48%
6. Home Depot, Inc. (HD): 4.47%
7. Gap, Inc. (GPS): 4.41%
8. Best Buy Co., Inc. (BBY): 4.35%
9. Amerco, Inc. (UHAL): 3.61%
10. Pricesmart, Inc. (PSMT): 3.38%Expense Ratio: 0.60%
SPDR S&P Retail (XRT): The S&P Retail Select Industry Index represents the retail sub-industry portion of the S&P TMI. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Retail Index is an equal weighted market cap index.
Data as of 2010-09-03
XRT Top Ten Holdings1. Priceline.com, Inc. (PCLN): 2.69%
2. Expedia, Inc. (EXPE): 1.89%
3. Family Dollar Stores, Inc. (FDO): 1.88%
4. AutoZone, Inc. (AZO): 1.88%
5. Monro Muffler/Brake, Inc. (MNRO): 1.87%
6. Dollar Tree Stores, Inc. (DLTR): 1.83%
7. Advance Auto Parts, Inc. (AAP): 1.83%
8. Casey’s General Stores, Inc. (CASY): 1.80%
9. AutoNation, Inc. (AN): 1.80%
10. Sally Beauty Holdings, Inc. (SBH): 1.78%Expense Ratio: 0.35%
Disclosure: no positions
September 30th, 2010 | Posted by Global InvestorsAfter some hiccups not too long ago, technology ETFs appear to have shaken off the fever and are once again ready for action.
When it comes to smaller tech players, however, use caution. Sentiment can be fickle, especially when it comes to some of the lesser-known names that dot the sector, says Quint Tatro for Minyanville. ETFs are an easy way to get exposure to the less-established firms without taking on as much risk as a single stock.
If you’re eying the larger players, the industry is in an interesting position. The conservative way that many tech companies handle cash has left them sitting on more than $120 billion. Good thing, because a recent survey has found that venture capitalists are apparently migrating out of the United States and into foreign markets, where regulations and taxes are apparently more favorable, says Michael Comeau for Minyanville. The rainy day savings tech companies have built up should help them weather this shift.
Gary Beach for CIO reports that a recent Economic Impact Survey projected that businesses will increase their technology spending by 8% in the coming year. Also, a year-over-year projected increase for businesses with $1 billion or more in sales is also predicted.
If you’re really bearish on tech, there are some leveraged plays, too:
Tisha Guerrero contributed to this article.
Disclosure: None
Bettina Wulff & Sheikha Mozah Have Fashion Face-Off In Berlin (PHOTOS, POLL)
September 30th, 2010 | Posted by Global InvestorsGermany’s First Lady Bettina Wulff welcomed Qatar’s Sheikha Mozah to Bellevue Palace in Berlin on Wednesday and both women kept it simple, style-wise. Bettina wore a black dress, matching boots and pearls, while Mozah donned a long, white skirt suit with a tied blue belt.
Take a look and tell us what you think.
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More on First Lady Fashion
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Meet the Next Generation of Top-Tier Silver Miners
September 30th, 2010 | Posted by Global InvestorsThe next generation of top-tier silver miners are in the pipeline and will join the likes of Hecla (HL), Pan-American (PAAS) , etc. in terms of production output and of course profitability. This is the time to jump into these stocks as the companies listed below have "de-risked," making these picks safer than their peers.
What makes Bear Creek’s assets absolute gems are the incredibly high internal rates of return ( in excess of 70%). In other words, the capital requirements to construct these mining operations are very low, allowing Bear Creek to bring these mines on-line without having to do a ridiculous amount of financing. This is especially important to companies not yet generating operating cash flow. The following are some highlights of their projects.
1) Santa Ana – Expected to produce 5M ounces annually starting in 2012. The expected LOM is 12 years. But both these numbers are likely to increase in 2011 as they recently increase M&I resources by 39%.
Corani – Expected to produce 25M silver equivalent ounces, which is a dramatic increase from the original estimate of 15-20M. An increased throughput of 22,500 is being evaluated, but the rhetoric from management has expressed this will be the likely outcome. There is also the possibility they attempt to extract 25,000 Tpd.
Bear Creek has all the qualities one would want in a silver miner, including a great internal exploration program, one of which has already showed great potential.
This South America focused silver producer has already brought one mine online, generating cash flow to help fund bringing their flagship (San Jose) online. This story is unique in the fact production will continue to increase up until San Jose commences production, giving investors exposure to rising silver prices with a great production growth profile, both short and medium term.
I expect Fortuna to become a 6-8M ounce producer excluding acquisitions. If silver prices continue to rise, it would make sense to increase mill throughput at San Jose to 2,000+ tpd.
Home of the Keno Hill. Initial Production will be rather small, but incredible upside throughout the Keno Hill District makes Alexco a compelling story. Their first producing mine, Bellekeno, will come into production in early 2011, while completion and commissioning are only 6 or so weeks away.
Alexco, at its current valuation, is still very attractive given its near term production, high quality pipeline and vast exploration potential
A great valuation story here, although many were lucky enough to grab it in the 50, 60s and 70s. It is also a great story as most miners take 10+ years to bring production online, while they have managed to do it in 6. Mines include Guanajuato (silver-gold) and Topia, both located in Mexico.
Along with a great valuation has been a great drilling result, which so far looks like it will lead to one or two expansion projects and total output.
Some of the following is taken from a previous article. The following is a brief description of thier operations.
The San Martine silver mine, which still has approximately 64 million of reserves remaining (which is significant given the fact it has been in operation since 1983), is expected to produce between 1-2M+ oz. per annum after the expansion project is complete.
Advanced Stage Projects:
Aside from the previously mentioned ramp up in production of its core mining assets, First Majestic’s growth spurt can also be contributed to new operations being brought online. The Del Toro silver mine will commence initial production early in 2010 and is expected to produce 1M in approximately 3 quarters of operations.
Despite cash costs in excess of $8 per ounce in La Parilla and San Martine, La Encantada costs bring down the average rather significantly, from over $7/oz. in 2007, $5.50/oz. in 2008 and around $5/oz. in the current fiscal year. Though costs for the Del Toro mine will likely be near $10/oz. for the coming year, as well as La Parilla (the initial and ramp up stages can be costly), this should not be indicative of their overall operating efficiency as it will likely retreat back to between $5-6 per ounce in 2011. First Majestic will see production growth increase 3-5 fold over the period from 2008-2013, with the added bonus of being able to fund future growth organically through their numerous mine claims in La Parilla.
Out of the aformentioned silver miners, Bear Creek looks like the front runner to become the next 20m+ oz producer in the 3-5 year period, with First Majestic hot on its tail.
Disclosure: Long: FRMSF.PK, FVITF.PK, BCEKF.PK, AXU
Meet the Next Generation of Top-Tier Silver Miners
September 30th, 2010 | Posted by Global InvestorsThe next generation of top-tier silver miners are in the pipeline and will join the likes of Hecla (HL), Pan-American (PAAS) , etc. in terms of production output and of course profitability. This is the time to jump into these stocks as the companies listed below have "de-risked," making these picks safer than their peers.
What makes Bear Creek’s assets absolute gems are the incredibly high internal rates of return ( in excess of 70%). In other words, the capital requirements to construct these mining operations are very low, allowing Bear Creek to bring these mines on-line without having to do a ridiculous amount of financing. This is especially important to companies not yet generating operating cash flow. The following are some highlights of their projects.
1) Santa Ana – Expected to produce 5M ounces annually starting in 2012. The expected LOM is 12 years. But both these numbers are likely to increase in 2011 as they recently increase M&I resources by 39%.
Corani – Expected to produce 25M silver equivalent ounces, which is a dramatic increase from the original estimate of 15-20M. An increased throughput of 22,500 is being evaluated, but the rhetoric from management has expressed this will be the likely outcome. There is also the possibility they attempt to extract 25,000 Tpd.
Bear Creek has all the qualities one would want in a silver miner, including a great internal exploration program, one of which has already showed great potential.
This South America focused silver producer has already brought one mine online, generating cash flow to help fund bringing their flagship (San Jose) online. This story is unique in the fact production will continue to increase up until San Jose commences production, giving investors exposure to rising silver prices with a great production growth profile, both short and medium term.
I expect Fortuna to become a 6-8M ounce producer excluding acquisitions. If silver prices continue to rise, it would make sense to increase mill throughput at San Jose to 2,000+ tpd.
Home of the Keno Hill. Initial Production will be rather small, but incredible upside throughout the Keno Hill District makes Alexco a compelling story. Their first producing mine, Bellekeno, will come into production in early 2011, while completion and commissioning are only 6 or so weeks away.
Alexco, at its current valuation, is still very attractive given its near term production, high quality pipeline and vast exploration potential
A great valuation story here, although many were lucky enough to grab it in the 50, 60s and 70s. It is also a great story as most miners take 10+ years to bring production online, while they have managed to do it in 6. Mines include Guanajuato (silver-gold) and Topia, both located in Mexico.
Along with a great valuation has been a great drilling result, which so far looks like it will lead to one or two expansion projects and total output.
Some of the following is taken from a previous article. The following is a brief description of thier operations.
The San Martine silver mine, which still has approximately 64 million of reserves remaining (which is significant given the fact it has been in operation since 1983), is expected to produce between 1-2M+ oz. per annum after the expansion project is complete.
Advanced Stage Projects:
Aside from the previously mentioned ramp up in production of its core mining assets, First Majestic’s growth spurt can also be contributed to new operations being brought online. The Del Toro silver mine will commence initial production early in 2010 and is expected to produce 1M in approximately 3 quarters of operations.
Despite cash costs in excess of $8 per ounce in La Parilla and San Martine, La Encantada costs bring down the average rather significantly, from over $7/oz. in 2007, $5.50/oz. in 2008 and around $5/oz. in the current fiscal year. Though costs for the Del Toro mine will likely be near $10/oz. for the coming year, as well as La Parilla (the initial and ramp up stages can be costly), this should not be indicative of their overall operating efficiency as it will likely retreat back to between $5-6 per ounce in 2011. First Majestic will see production growth increase 3-5 fold over the period from 2008-2013, with the added bonus of being able to fund future growth organically through their numerous mine claims in La Parilla.
Out of the aformentioned silver miners, Bear Creek looks like the front runner to become the next 20m+ oz producer in the 3-5 year period, with First Majestic hot on its tail.
Disclosure: Long: FRMSF.PK, FVITF.PK, BCEKF.PK, AXU
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