Thursday, November 29, 2007
This is bizarre, as a borrower, you decide how much money you want, and the max you're going to pay for it. You write a semi plausible excuse as to why you can't/won't get money from the bank and punters bid to give you money at a rate up to the maximum the borrower specified, which they promise to pay back. It works a bit like pricing a bond issue at a bank. You call up all the investors and fill the book with their bids and shift the debt to the lowest bidders.
Monday, November 26, 2007
Thursday, November 22, 2007
Wednesday, November 21, 2007
Suppose you have a portfolio with an expected annual return of 15% above the risk free rate (very good), 10% volatility (very low). This is a high return, low volatility portfolio. The one we'd all like to have. It should be almost painless as it grinds its way higher with little or no large unexpected deviations, but the results of putting this portfolio through a monte-carlo simulation are very interesting. We'll see that only 1 year in 20 is a down year. The interesting thing is to look at a shorter and shorter time periods and see what the probability of success becomes;
1 year = 93%
1 quarter = 77%
1 month =67%
1 day = 54%
1 hour = 51.3%
1 minute = 50.17%
1 second = 50.02%
in a given day in front of the screen (8 hours) that's 241 happy minutes and 239 sad ones. So the moral of the story is that if the pain of a loss exceeds the joy of a victory (which believe me it does) then don't watch the stocks you own (and plan on owning for a long time) all day. It's an easy way to get stressed and sell too early and miss out on making money.
Tuesday, November 13, 2007
"I'm hoping to get all my assets out of U.S. dollars in the next few weeks or months"
Not exactly bullish sentiment from the co-founders of the Quantum fund.
The US economy is heading for recession and all the smart money has/is moving their cash out of USD assets. The recent dip in the AUD against the USD represented a great buying opportunity, and at 8900 it's still a buy. The US is due for a decent sized leg down, so it makes a lot of sense to position yourself for this. I am long AUD against the USD and I'm shorting the Dow. Don't forget that there are 3 Billion people in the sub continent and south east Asia and they are becoming a lot more independent of the US.
- More write downs from banks are on the way
- Several large companies (AMBAC, MBIA?) will be downgraded by rating agencies (S&P, Moodys, Fitch)
- Bernanke will get sick of dropping rates to spur the economy because it has a damaging inflationary effect. It can't keep happening. Inflation is much scarier than a dud economy, just ask Zimbabwe.
- Global investors will get sick of losing money to the devaluing USD and will pull their cash out and invest somewhere a little more compelling (at home.)
Friday, November 9, 2007
If you want a bit of safety I like Babcock and Brown Power (BBP.AX). Has a div yield of 9% (not bad for just turning up).
Very much exposed to peak electricity prices.
- People use more electricity through Plasma TV's and A/C (these things use heaps of elec)
- Going to be more black outs in Sydney this summer
- Going to be hotter, more A/C used
- These guys can charge whatever price they want cause their electricity isn't contracted. When there is a black out they can just choose what price they charge
- There hasn't been any money spent on electricity generation in Aus in 25years, yet the population has bee growing circa 3% and we are all using more electricity
Get on board at low $3!!
Thursday, November 8, 2007
Don't be long MBL.AX or BNB.AX, seriously, they've been good, great even, just not right now.
Have a look at the way all the Investment Banks have been getting smashed offshore. Night after night we read about it. This is just last night's action;
- Washington Mutual down more than 16% after management warned mortgage lending would decline to an 8-year low next year. Adding to woes, a further admission that as much as $1.3bln would need to set aside this quarter to cover bad loans.
- Morgan Stanley down around 5%
- Lehmans off 4.4%
- Goldmans down 3%
- Merrills both down 3%
- and JP Morgan 2.4% lower
- Fannie Mae down 10%
- and Freddie Mac more than 7% lower
- Capital One down 12%
If you are adding to your portfolio, don't add banks right now, there's more pain to come.
Tuesday, November 6, 2007
H.O.T's "dark horse" for the cup is Tungsten Strike. According to trainers, Tungsten is in the same form as when he romped home to a six-length win in the Listed March Stakes in England in August. At odds of Around $30 to $40, this seems to be one horse that has been overlooked by the betting public. Worth a punt.
Good Luck to All
Monday, November 5, 2007
PetroChina's Value Tops $1 Trillion. This is crazy valuation. It is bigger than;
- The entire Russian stock market
- Exxon Mobil Corp and General Electric Co combined and
- The entire Chinese stock market in 2006!!!
The trade I suggest above is high risk, but you hedge out your oil price risk by being long short. You've just got to wait for the rug to be pulled out from under China.
Early Learning Services (ELS.AX) the soon-to-list child-care provider will follow in the footsteps of larger rival, ABC Learning
Sixteen contracts for difference (CFDs) products, listed over Australia’s top companies, will debut on the Australian Securities Exchange (ASX.AX) today. Later in the month, the ASX will also launch two index CFDs, seven foreign exchange CFDs and one commodity CFD. These will include a product based on the Dow Jones Industrial Average. This will provide more unneeded leverage for the average punter. With so many of these products already available. (CFDs, Warrants, Minis, Options, Margin Lending etc etc.) The only people likely to be impacted by this are people like CMC Markets, with investors taking it easier option of purchasing ASX listed CFDs instead of the bespoke ones from third party providers.
Emerging market equities have out-performed major markets in recent months. It is as if emerging markets are the new safe haven from the US and other developed nations. This makes some sense , given the strong external accounts of many emerging countries. It is hard to imagine that emerging market growth could diverge from developed market growth for a long period of time.
Fiscal policies in China and other emerging Asian countries, have resulted in accelerating FX reserves growth. The result is a world that sees the glass half-full, and problems in the US as a local problem. However, as the diversion in market performance becomes clearer, the risk grows that something gives, and that may be a global equity market rout and global risk aversion trading. If the USD continues to fall out of bed, the risks that it falls dramatically in a single session continue to stack up. I would not be trading USD from the long side at any point, the risks are simply too great. A friend of mine recently predicted the USD to be buying 50 Euro cents within 18 months, and while he's mad, he might be right.
Friday, November 2, 2007
Thursday, November 1, 2007
Emperor Mines (EMP.AX) is a company that has undergone an amazing transformation in recent times. Not more than 6 months ago, the company was laden with debt and underperforming assets. Since then it has managed to sell it's Vatokoula mine, it's Porgera mine, and is soon to announce the sale of it's Tolukuma mine, leaving it debt free, with cash and investments of around $68m and a very valuable exploration program. Furthermore, it has now announced a friendly merger with Intrepid Mines, which has the Paulsens gold mine and the Casposo gold-silver development project.
The merger is the merchant banker's ideal "1+1=3" story. The combination of Emperor's cash and strong management team, plus Intrepid's quality assets in desperate need of cash and management, has the potential to really create value. Furthermore, being a laregley unhedged gold producer (at low cash costs), MergeCo will be very exposed to any upward movement in the gold price.
At a share price of around $0.07 to $0.09, the stock represents a real bargain. In addition to this the sale of Tolukuma will add another $0.015 to the share price, as this will be distibuted to shareholders before the merger.
Maurice's Rating (Take a swing)