Amazon announced mixed numbers in Q4 - revenue below consensus, but earnings above (38 US-cents vs. consensus of 17 US-cents).
I think this is a great company, the one I shop most with. Even if the whole Kindle-Fire project will be a total failure, i love to get their shares at a 10 % discount vs. some hours ago. I will take this as an entry opportunity. Conference call will follow in 30 minutes, but I will open a position now.
1/29/2012
Investment Ideas
2 US-headlines of last week I consider most noteworthy: FED extends the zero interest policy to 2014 (keeping the target rate from 0 to 0.25 % and initiating an inflation target at 2 %) and 2.8 % US GDP-growth in Q4 '11.
The Q4 '11 numbers did not really impress, stocks started to slide after a good start into 2012. Reasoning for that slide was that inventory build up accounted for 1 % of the growth. Sure you cannot build-up inventories for ever, so this cannot be a growth driver in every quarter. CFOs do their utmost to keep inventory levels low at year end, thus improving their yearly cash-flow performance. Either companies overestimated Q4 demand and ended up with to much inventory or their inventories had been unsustainable low to accompany the demand growth they see in 2012. Other US-numbers look still good (declining job-less number, raising capital goods investment, 2 % consumer spending growth - all despite a drop in government spending). Overall growth outlook is 2.5 % for 2012 - well above European numbers.
The FEDs announcements: For the first time they set an inflation target - thus following the policy of most central banks. Argument for the prolonged almost-zero-interest-policy was Bernanke's expectation that unemployment will remain high during the next years. Thus, we will remain in an environment with artificially low interest rates, as the FED does not expect the economy to recover enough to allow for the old normals here. One of their most powerful tools is planned to be used to full extend. I guess, they can accomplish that, but whether the inflation will really be around 2 % remains to be seen.
(Alternative read: Gold will earn you 2 % real numbers in the following years if the FED is successful and the price of the metal does not change.)
On comparison the news from the Europe: interest rates on Portuguese debt rise, Greek 'voluntary' debt cut above 60 % required, Germany wants EU to control Greek budget (I see new Merkel comics with Adi's beard), and Germany requires Greek to pay 'debt first' after refinancing. I guess, this initiates a new round of 'negotiations'. Merkel - already under pressure on the Davos summit - starts to make demands that no Greek politician can fulfill. Citing the political squeeze she feels in her home-country - making it impossible to give more money to the Greek or any additional money at all if they fail to honor their austerity commitments - both sides start to entrench at positions, the other side cannot accept. This is the start of politicians to accept that Greek is doomed and to prepare the exit from the rescue plans. (Unfortunately 2 years too late and after banks and money-nobility had plenty of ability to unload their Greek papers on European institutions backed by the (German) tax-payer. Shame on the politicians colluding with those special interest groups.)
On of the playing flied this still suggests US equities (and Chinese ones - I will address them in an upcoming post) over European ones, though the DAX had a nice rally during the last weeks. I took some time to go through the charts of S&P100 providing me with an interesting list of 12 stocks at or near their ten-year-high.
Caterpillar (CAT), Chevron (CVX), Coca-Cola (KO), Colgate (CL), Costco (COST), Heinz (HNZ), IBM, Kraft (KFT), McDonalds (McD), Nike (NKE), Union Pacific (UNP), and VISA (V).
Scratching every-one with an expected dividend rate below 2 % we are down to 5 stocks: CVX (3.1), KO (3.0), CL (2.6), HNZ (3.7), KFT (3.1), and MCD (2.8). The most sound plays here seem to be Chevron (if you have no oil-stocks so far), Coke and McDonalds. All of them are huge companies not going to disappear, have a high equity share, no or below 1x net debt to EBITDA, and a history of increasing dividends. For the moment, MCD would be my favorite, as the stock came back a little after recent earnings release. (This also provides an excuse for 'fact-finding-missions' to one of their restaurants in the next weeks.)
The Q4 '11 numbers did not really impress, stocks started to slide after a good start into 2012. Reasoning for that slide was that inventory build up accounted for 1 % of the growth. Sure you cannot build-up inventories for ever, so this cannot be a growth driver in every quarter. CFOs do their utmost to keep inventory levels low at year end, thus improving their yearly cash-flow performance. Either companies overestimated Q4 demand and ended up with to much inventory or their inventories had been unsustainable low to accompany the demand growth they see in 2012. Other US-numbers look still good (declining job-less number, raising capital goods investment, 2 % consumer spending growth - all despite a drop in government spending). Overall growth outlook is 2.5 % for 2012 - well above European numbers.
The FEDs announcements: For the first time they set an inflation target - thus following the policy of most central banks. Argument for the prolonged almost-zero-interest-policy was Bernanke's expectation that unemployment will remain high during the next years. Thus, we will remain in an environment with artificially low interest rates, as the FED does not expect the economy to recover enough to allow for the old normals here. One of their most powerful tools is planned to be used to full extend. I guess, they can accomplish that, but whether the inflation will really be around 2 % remains to be seen.
(Alternative read: Gold will earn you 2 % real numbers in the following years if the FED is successful and the price of the metal does not change.)
On comparison the news from the Europe: interest rates on Portuguese debt rise, Greek 'voluntary' debt cut above 60 % required, Germany wants EU to control Greek budget (I see new Merkel comics with Adi's beard), and Germany requires Greek to pay 'debt first' after refinancing. I guess, this initiates a new round of 'negotiations'. Merkel - already under pressure on the Davos summit - starts to make demands that no Greek politician can fulfill. Citing the political squeeze she feels in her home-country - making it impossible to give more money to the Greek or any additional money at all if they fail to honor their austerity commitments - both sides start to entrench at positions, the other side cannot accept. This is the start of politicians to accept that Greek is doomed and to prepare the exit from the rescue plans. (Unfortunately 2 years too late and after banks and money-nobility had plenty of ability to unload their Greek papers on European institutions backed by the (German) tax-payer. Shame on the politicians colluding with those special interest groups.)
On of the playing flied this still suggests US equities (and Chinese ones - I will address them in an upcoming post) over European ones, though the DAX had a nice rally during the last weeks. I took some time to go through the charts of S&P100 providing me with an interesting list of 12 stocks at or near their ten-year-high.
Caterpillar (CAT), Chevron (CVX), Coca-Cola (KO), Colgate (CL), Costco (COST), Heinz (HNZ), IBM, Kraft (KFT), McDonalds (McD), Nike (NKE), Union Pacific (UNP), and VISA (V).
Scratching every-one with an expected dividend rate below 2 % we are down to 5 stocks: CVX (3.1), KO (3.0), CL (2.6), HNZ (3.7), KFT (3.1), and MCD (2.8). The most sound plays here seem to be Chevron (if you have no oil-stocks so far), Coke and McDonalds. All of them are huge companies not going to disappear, have a high equity share, no or below 1x net debt to EBITDA, and a history of increasing dividends. For the moment, MCD would be my favorite, as the stock came back a little after recent earnings release. (This also provides an excuse for 'fact-finding-missions' to one of their restaurants in the next weeks.)
1/23/2012
Minfinders (MFN)
OOOOOOOOOOOOoooooops ! One of my core holdings - insanely over-weighted constituting 20 % of my stock/cash portfolio - will be taken out. Pan American will acquire Minefinders, both boards being in favor of the transactions. The stock jumped 22 % today - and i guess the current price will be a floor level for the next weeks until the issue is resolved.
Unfortunately this puts me into a situation not so comfortable. I was quite positive on MFN - why else should it be 22 % of my depot. Though being very speculative, it was easy to analyze as it was a very small company. I have heard about Pan American, yes, but I am in no position to evaluate the value of that stock. Take the cash offered? Take shares of Pan American only? Or a mix thereof?
But hey: lets worry tomorrow! Bring the champagne!!!!
Unfortunately this puts me into a situation not so comfortable. I was quite positive on MFN - why else should it be 22 % of my depot. Though being very speculative, it was easy to analyze as it was a very small company. I have heard about Pan American, yes, but I am in no position to evaluate the value of that stock. Take the cash offered? Take shares of Pan American only? Or a mix thereof?
But hey: lets worry tomorrow! Bring the champagne!!!!
1/15/2012
Wirtschaftswoche "Große Ökonomen und ihre Ideen"
In the last months of 2011 the German Wirtschaftswoche released a series of articles on important economists and their ideas. This is a great starting point for readers with some background in economics, eg. folks like me who had some lessons decades ago but are not really involved in the topic day by day. Even without any background the material provides valuable insight on different views on our economic system.
I actually think the series was not planned to be 12 articles long. The weekly magazine got impressive positive feedback from readers and I believe this is the reason for more articles than originally intended. I recommend to start with the article on Adam Smith. This was the last article originally, but it is the best starting point in logical order. Being the last article you can also find links to the other eleven there (bottom left). I suggest the following order:
Smith - Ricardo - Marx - Schumpeter
Keynes - von Hayek - Friedmann - Samuelson
Solow - Eucken - Selten - Schiller
Happy Reading (and maybe you want to print a pdf version of those for later reference as long as they are available for free; wiwo online-shop already sells them for EUR 4.50 each)!
I actually think the series was not planned to be 12 articles long. The weekly magazine got impressive positive feedback from readers and I believe this is the reason for more articles than originally intended. I recommend to start with the article on Adam Smith. This was the last article originally, but it is the best starting point in logical order. Being the last article you can also find links to the other eleven there (bottom left). I suggest the following order:
Smith - Ricardo - Marx - Schumpeter
Keynes - von Hayek - Friedmann - Samuelson
Solow - Eucken - Selten - Schiller
Happy Reading (and maybe you want to print a pdf version of those for later reference as long as they are available for free; wiwo online-shop already sells them for EUR 4.50 each)!
1/09/2012
Keynes vs. Hayek
Yesterday I finished reading my Christmas present to myself:
The book was a real page-turner I could finish in 3 days. It describes the ideas of both Keynes and Hayek, their life, how their ideas clashed, how deeply they influenced economic policies all over the world, and how controversial one might look at the latest crisis developments from 2008 onwards.
I took my share of economics lessons in Graz and was surprised that the Austrian School did play little to no rule in my education there. Its not that I cannot remember - I even checked some of the scripts from that time. It just was not part of the program.
As a teaser you might give this great rap song a chance. (The authors are with university background, professors - this video was done as educational material.)
By now I second very much the Austrian ideas: balanced budgets, tight monetary policy, small state, no messing with interest rates and prices by politics, ensuring free markets, no banks too big to fail, ... All this makes so much sense in the long run.
Applying these politics today, on the verge of a European debt collapse, would lead to a huge debt contraction followed by a worldwide recession. It would be the same policy - maybe stricter - that IWF and EZB are forcing on the Greeks. And as in Greece it would lead to a shrinking economy, a huge contraction, high unemployment, ... And with a truly free market falling prices, even faster falling wages, collapsing of many companies, would take place.
I can feel for myself how much easier it is to hope for the other solution, the Keynesian one: "Let us only this time muddle through. Let us print enough money to get away without the high unemployment, the collapse of corporations and banks, ... Let us do it just one more time. Let us stabilize the system and get balanced afterwards step by step. Just not feel all the pain now and at once ... "
I am just afraid, its the cry of a drug addict, sensing how cold turkey feels. He would promise everything to get the next shot. "Just give me that one shot I need so much. And once I feel better I promise to cut back on the dose I take every day a little." Who believes its gonna happen?
The book was a real page-turner I could finish in 3 days. It describes the ideas of both Keynes and Hayek, their life, how their ideas clashed, how deeply they influenced economic policies all over the world, and how controversial one might look at the latest crisis developments from 2008 onwards.
I took my share of economics lessons in Graz and was surprised that the Austrian School did play little to no rule in my education there. Its not that I cannot remember - I even checked some of the scripts from that time. It just was not part of the program.
As a teaser you might give this great rap song a chance. (The authors are with university background, professors - this video was done as educational material.)
By now I second very much the Austrian ideas: balanced budgets, tight monetary policy, small state, no messing with interest rates and prices by politics, ensuring free markets, no banks too big to fail, ... All this makes so much sense in the long run.
Applying these politics today, on the verge of a European debt collapse, would lead to a huge debt contraction followed by a worldwide recession. It would be the same policy - maybe stricter - that IWF and EZB are forcing on the Greeks. And as in Greece it would lead to a shrinking economy, a huge contraction, high unemployment, ... And with a truly free market falling prices, even faster falling wages, collapsing of many companies, would take place.
I can feel for myself how much easier it is to hope for the other solution, the Keynesian one: "Let us only this time muddle through. Let us print enough money to get away without the high unemployment, the collapse of corporations and banks, ... Let us do it just one more time. Let us stabilize the system and get balanced afterwards step by step. Just not feel all the pain now and at once ... "
I am just afraid, its the cry of a drug addict, sensing how cold turkey feels. He would promise everything to get the next shot. "Just give me that one shot I need so much. And once I feel better I promise to cut back on the dose I take every day a little." Who believes its gonna happen?
1/07/2012
2012 Prognosis
Having written about some macro trends, let us take a closer look on 2012. I will try to make some prognosis. In this high volatile times this is no easy play. Well, at the end of the year we can look back and assess how wrong I have been:
1) The US economy is the best looking house in a bad neighborhood, showing some growth in 2012.
2) China engineers a 'soft landing' and remains on a growth path, though less fast then in previous years.
3) The Europeans struggle a lot in the first months of 2012. Only after serious problems to refinance, they get their act together and the EZB floods the markets with EUR. Germans resistance to a weaker EUR will be overcome by the doves in the EZB.
4) As such, the EUR gets weaker vs. the USD at least for the first 6 months ...
5) ... and interest rates remain artificially low, as central banks world wide keep pressure on them.
6) Oil prices remain high, as supply is tight. This would only change if the economy crashes.
7) Gold will raise again in USD, for the 12th year in a row - and even more so in EUR.
8) US will not trigger a crisis with Iran as Obama tries to cut spending on military (but others might ...)
And some of the wilder ideas - not really that likely but thought-provoking:
9) Europe sees a bank holiday as the EURO-crisis forces governments to recapitalize quite a number of banks.
10) Several European governments will fall apart (candidates: Hungary, Czech, Germany, Greece, Spain, ...)
11) The Swiss Central Bank exits the tie to the EUR in order to keep a hard currency.
Thinking about low-risk short-term trades there come hardly any to my mind.
- One idea could be to go long US indices and short European ones (S&P500 vs. Eurostoxx50 or DAX30).
- An unhedged long position in USD is something I can hardly enter, though it seems to make sense short term. I does go against my gut feeling as the USD is doomed too, in the long run.
Bill Gross, the head of PIMCO, sees 2012 outlook 'as a bell-shaped curve' with not many investment opportunities in the middle, so that one could prefer to keep his money in a mattress. The fat, left and right tails are a collapse as everybody de-leverages or hyperinflation.
1) The US economy is the best looking house in a bad neighborhood, showing some growth in 2012.
2) China engineers a 'soft landing' and remains on a growth path, though less fast then in previous years.
3) The Europeans struggle a lot in the first months of 2012. Only after serious problems to refinance, they get their act together and the EZB floods the markets with EUR. Germans resistance to a weaker EUR will be overcome by the doves in the EZB.
4) As such, the EUR gets weaker vs. the USD at least for the first 6 months ...
5) ... and interest rates remain artificially low, as central banks world wide keep pressure on them.
6) Oil prices remain high, as supply is tight. This would only change if the economy crashes.
7) Gold will raise again in USD, for the 12th year in a row - and even more so in EUR.
8) US will not trigger a crisis with Iran as Obama tries to cut spending on military (but others might ...)
And some of the wilder ideas - not really that likely but thought-provoking:
9) Europe sees a bank holiday as the EURO-crisis forces governments to recapitalize quite a number of banks.
10) Several European governments will fall apart (candidates: Hungary, Czech, Germany, Greece, Spain, ...)
11) The Swiss Central Bank exits the tie to the EUR in order to keep a hard currency.
Thinking about low-risk short-term trades there come hardly any to my mind.
- One idea could be to go long US indices and short European ones (S&P500 vs. Eurostoxx50 or DAX30).
- An unhedged long position in USD is something I can hardly enter, though it seems to make sense short term. I does go against my gut feeling as the USD is doomed too, in the long run.
Bill Gross, the head of PIMCO, sees 2012 outlook 'as a bell-shaped curve' with not many investment opportunities in the middle, so that one could prefer to keep his money in a mattress. The fat, left and right tails are a collapse as everybody de-leverages or hyperinflation.
1/02/2012
As a side note ...
... the 'Einlagensicherungsfonds des Bundesverbands deutscher Banken' is reducing the level of coverage for bank accounts:
Der Einlagensicherungsfonds sichert alle Verbindlichkeiten, die in der Bilanzposition "Verbindlichkeiten gegenüber Kunden" auszuweisen sind. Hierzu zählen Sicht-, Termin- und Spareinlagen einschließlich der auf den Namen lautenden Sparbriefe. Die Sicherungsgrenze je Gläubiger beträgt bis zum 31. Dezember 2014 30 %, bis zum 31. Dezember 2019 20 %, bis zum 31. Dezember 2024 15 % und ab dem 1. Januar 2025 8,75 % des für die Einlagensicherung maßgeblichen haftenden Eigenkapitals der Bank. Für Einlagen, die nach dem 31. Dezember 2011 begründet oder prolongiert werden, gelten, unabhängig vom Zeitpunkt der Begründung der Einlage, die jeweils neuen Sicherungsgrenzen ab den vorgenannten Stichtagen. Für Einlagen, die vor dem 31. Dezember 2011 begründet wurden, gelten die alten Sicherungsgrenzen bis zur Fälligkeit der Einlage oder bis zum nächstmöglichen Kündigungstermin.
Diese Sicherungsgrenze wird dem Kunden von der Bank auf Verlangen bekannt gegeben. Sie kann auch im Internet unter www.bankenverband.de abgefragt werden.
The coverage level is more like a political statement then a real safety net, as the Bundesverband would never be able to really pay those huge numbers per account (10s and 100s of millions of EUR) should one of the larger institutions fail. Question arises, why correct such irrelevant numbers just now? Even the new numbers cannot really be covered.
Der Einlagensicherungsfonds sichert alle Verbindlichkeiten, die in der Bilanzposition "Verbindlichkeiten gegenüber Kunden" auszuweisen sind. Hierzu zählen Sicht-, Termin- und Spareinlagen einschließlich der auf den Namen lautenden Sparbriefe. Die Sicherungsgrenze je Gläubiger beträgt bis zum 31. Dezember 2014 30 %, bis zum 31. Dezember 2019 20 %, bis zum 31. Dezember 2024 15 % und ab dem 1. Januar 2025 8,75 % des für die Einlagensicherung maßgeblichen haftenden Eigenkapitals der Bank. Für Einlagen, die nach dem 31. Dezember 2011 begründet oder prolongiert werden, gelten, unabhängig vom Zeitpunkt der Begründung der Einlage, die jeweils neuen Sicherungsgrenzen ab den vorgenannten Stichtagen. Für Einlagen, die vor dem 31. Dezember 2011 begründet wurden, gelten die alten Sicherungsgrenzen bis zur Fälligkeit der Einlage oder bis zum nächstmöglichen Kündigungstermin.
Diese Sicherungsgrenze wird dem Kunden von der Bank auf Verlangen bekannt gegeben. Sie kann auch im Internet unter www.bankenverband.de abgefragt werden.
The coverage level is more like a political statement then a real safety net, as the Bundesverband would never be able to really pay those huge numbers per account (10s and 100s of millions of EUR) should one of the larger institutions fail. Question arises, why correct such irrelevant numbers just now? Even the new numbers cannot really be covered.
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