Hello Caranza2
I am starting this message again at 30k feet above planet surface. I just polished off my chocolate wafer. The flight from Shanghai to HK is 2 hours, too long for newspaper, too short for nap.
I continue to be astounded by what is taking place in Shanghai, nothing less than total transformation within the blink of a few months, every few months.
I had dinner with a bunch of Spaniards last night at Vebene, an Italian restaurant in a city block of renovated buildings of the foreign concession era (1910-1939). The atmosphere within the large city block was indistinguishable from Europe.
The Spaniards represented a famous soccer club. Yes, soon, soccer schools, franchised cafes, branded replikits, fan clubs, TV programs, and the excitement of the world outside.
I am working with the son of a Spanish Morrocan Jewish family trading company on a China deal. The family has the effective monopoly on import of cement to Israel and occupied territories, as well as the Palestinian territories, dealing with both the state of Israel and Mr. Arafat. The world operates so very strangely, but perhaps not very surprisingly. In any case, their business should improve given the reconstruction needs of one warrior state and the perimeter fencing needs of the other combatant nation.
Enough chit chat, and let us now focus on several threads of thought.
(a) I believe market = random money making opportunities; opportunity = preparation/position + luck/chance.
The riskier way to take advantage of chance is to buy naked calls and exposed puts, as in the case of the hedge fund you mentioned. The fund is gambling.
The less risky way to exploit chance and mine miscalculation of above gimmicky gambler hedge fund is to be positioned high cash, low debt, wait for panic in any particular but real industry (as opposed to Maurice's telecosmic nothingness), sell puts, collect shares, and turn right around to sell more puts and covered calls. This is gaming.
The two opposing strategies, of gambling and gaming, are affected by the nature of options' time value premium, negatively and positively, respectively.
The gimmicky gambler hedge fund you mentioned should be out of business pretty soon, mathematically speaking, because chance is not with it over the long run.
(b) A good friend recently spammed some of our mutual cronies with the following e-mail:
Subject: Market timing
Hi all,
Just getting a funny feeling. Have been worried sick about earnings, accounting, Middle East, consumer debt loads, etc etc etc for the last six months. However, used to be when I read "Prudent Bear" or Mac's favorite "Fleckenstein" that I was learning something new to be worried about - they had some great insights despite their bent. Now ....I read the same bad stories everywhere. Whether its Morgan, Lehman, CSFB or the talking heads on TV --all seem to be reporting the consumer debt binge, earnings issues, Bill Gross's short term debt issues vis a vis the Fed's ability to cut, the eminent demise of the housing market (Barron's)...
So I think it may be high time to go contrarian and buy buy buy. None of these issues are going away soon, but I think all the shorts may get sqeezed very tightly here. Not going to hold too long, but it smells very interesting. Can you smell what the "Rock" be cookin ?
Now the question is : what should I (we) buy ? Vivendi and AOL are
looking very tempting; HK as a high vol US proxy does too. Caught a little of the Indonesian pop, but want to take a careful look at Thailand banks. What about the blowout in fiber/cable companies - (Jay saw this one coming) - has it gone far enough ? any burnt out money earners. Do we hedge the whole bet with gold company play's ?
Gentlemen your thoughts...
Pete
(c) Another friend replied so:
Subject: Re: Market timing
I'm off to the US and Bali for Honeymoon, part 2. However, my quick thoughts and picks.
Telco - Equinix. Risky play, but trading at 70 cents, has that much in cash, and if they make it, could be a $5 stock in the next two years
Rite Aid - Insiders have said "buy, buy, buy!!!" Tremendous inside buying by CEO, CFO, etc. in January & February at $2.50 range. I bought 1/2 position at $3.25. Now at $4.15. Will double position if we get back down to the $3.80 range. Same store sales are healthy, less than .2 times sales. No debt refinancing for a couple of years. Highly, highly leveraged, but the insiders seem to be saying that its a survivor rather than a bankruptcy candidate.
Annaly Mortgage - 15% yield. Leveraged fund on AAA Fannie's, Freddie's, Ginnie's, etc. James Grant has recommended this stock and if a perma-bear can recommend a stock, then it's worth a look. Betting big on the management getting the yield curve right over time. High yield payout reduces risk with every quarterly payment as you're basically taking money back out.
Boykin (BOY) - Just looking at the moment, but this small cap REIT looks cheap.
Denway - people are bearish on China car manufacturers, but Denway has no debt, high ROE, good product (Honda), growing market, and a waiting list to buy their cars. Even with WTO, there will still be a 20% import tariff after 2005.
Tungtex - On my radar screen. Has moved up a lot, but still looks cheap at less than 6 times earnings, high ROE. Not a big grower, but spitting out free cash. Haven't bought yet, but would probably be a buyer at the $1.75 area. (currently $1.82)
Still not bullish. Waiting for SPX, Nasdaq, HSI to cross the 1 year moving avgs. It's been a pretty good trend indicator. Bring it up yourselves. You don't catch the bottom, but you're getting in when the techs confirm that its safe to buy. Sell signal is when we close below on a weekly basis. Waiting, waiting, waiting. Toe in the water with "cheap" value stocks that admitidly have some risk. Still more cash than I'd like, but I'm trying to be disciplined rather than trying to read the tea leaves. ( I always sucked at that).
BTW - I sold two stocks, Meristar Hospitality and US Express after they both went up approximately 80% from when I bought them in late September. So probably no new net money added as of late. Only 10-20 pct. long stocks. Still having a hard time finding good value stocks to buy - at least in the US. I admit that Asia looks attractive in spots.
Hope this helps,
Mac
(d) I responded thus:
Hi guys, I do agree with Pete that AOL is worth a look, and gold is worth a hedge.
Bottom line, I believe the USD will eventually come down, either in controlled decline, or more likely in explosive spiral, against what I do not know, nor do I particularly care, and I believe the answer to be ultimately academic.
USD strength is fundamentally undeserved, held up by the weakness of its competitors, as opposed to its inate strength.
No, the US economy is not more flexible, and no, it is not more productive. Oops, I meant to say it is not more flexible and productive as its currency would lead one to believe. The economy is merely first amongst many, with hardware, software, et cetera, ad infinitum, ad nauseaum, so on and so forth. And all of that technical innovation, as each wave, is now past. And no, there was no profit before and less now. Oops, I meant to say not as much as was reported, and far less then believed.
The US is more financially ingenious, and this is not necessarily a good thing.
When the USD does go kaboom, other pieces of the global asset/liability puzzle will be set in motion once again. I do not believe I understand how the various pieces will move, and therefore I am conservative in my approach, until such time the wheel stops turning and dice stops tumbling, and then I will bet, wager, speculate, or invest as I did before.
If the USD fails to go kaboom, it will only set up the USD to go kaboom with a capital B, and if not, then with a capital B triple underlined, bolded, and shadowed. Why? because it is a mania, a bubble, surrounded by fizz, jizz and foam. What is my evidence? Only that the sickest of large economies, Japan, with the most diseased of banking systems, still sports a strong currency, relative to history, even at zero percent interest rate, after enough time to see a toddler through 10% of his life.
If Japan's weak currency is so 'historically strong', then the USD is not as strong as it looks.
The US asset and currency market is being held up by the trembling and steadily weakening hands of Joe6Packs (J6P), with the twin catheters of trade and fiscal deficit pumping oxygen-poor artificial liquids through a body that is in fact already dying. J6P will have to start saving soon, or will have to be bailed out and destroyed by inflation. Some choice.
It is true that the media is full of dire words and horrible warnings these days, but we have really just started on our journey through the valley of gloom, on way to the kingdom of doom. We simply cannot expect the telecosmic bubble big bang's foam and fizz to be cleaned up and wrapped in the thin pancake of discount rate decreases. If the Greensputin's magic of rate decrease works its sustained magic, again and once more, then all of economic history is no more and the world can indeed print itself to wealth.
We are following a script, and the script is the same each and every time, every so often, with spectacular bubbles followed by agonizing cleanup.
I am also worried that all the noise is disguising an abracadabra inflection point, from silicon glory to I do not know what, as the abra and cadabra that transformed steel foundries to silicon fabrication. The transformations, when they happen, is always, without exception, as painful as pain can be.
Lerverage folks typically do not stand pain very well.
I will put my comments in the full context of my allocation shown here:
Cash 44% (38% Euro, 11% CHF, 9% AUSD, 3% HKD, 39% USD)
Bonds 22% (staggered treasury strips; Asian and Euro bond funds)
Physical gold and platinum metals 6% (80/20 respectively)
Real Estate 23% (value at lower of cost and market, including 2 warehouse/commercial units next to old HK airport, US rental property, proportional equity in Thai beach resort land, and HK street-level shops surrounding large real estate project off Nathan Road)
Equity 5% (AAPTY, AMGN, AOL, AU, AWK, BP, CHL, CMCSK, CWT, DROOY, HGMCY, NEM, SNE, SWC, XOM, Furukawa Electric, Hongkong & Shanghai Banking Corp, CNOOC, Petro China, Sinopec, )
I have these outstanding option positions:
Short NEM June Call 20 covered
Short SWC July Put 15
Long RDN August Put 40
Short NEM Sept Call 30 covered
Shot NEM Sept Put 25
Short SWC Oct Call 20 covered
Short HGMCY Nov Call 15 covered
I do not have debt.
My NAV YTD appreciation @ 1.35%, well on track to an absolute wopper of 5% for 2002.
So you see, yes, I am still irrationally fearful of what I do not understand, as I have been since sometime between November 1999 and March 2000, and more so since the time of these positively dark postings on www.siliconinvestor.com postings:
Message 15113604
Message 15421566
and no, I am not in a hurry to step out from my shadowy crawl space and buy any shares in quantities that matter, with the exception of resource shares.
My latest non-substantive comments are these …
Message 17325809
Message 17325811
Message 17325813
... And here are my thoughts on gold:
Message 16898478
Chugs, Jay |
