(Wall St Journal-MarketBeat Blog) Crude $200″ could be to 2008 what “Dow 14000″ (or “Dow 36000,” if you will) was to the year 2000 — the target that distracted Wall Street while a speculative bubble was getting ready to pop.
During the boom, energy and materials stocks became arguably the most important sectors in the market. Charts of commodity stocks show that the bull market in the sector, which dates to 2002, has reversed,lending credence to the idea that a speculative bubble is bursting. As Tobias Levkovich, chief equity strategist at Citi said recently: “Just because (commodity) stocks have fallen 30% doesn’t mean they can’t fall another 30%.”
“We don’t know where the floor is,” said Michael Darda, an economist with MKM Partners. Given the popularity of commodities with hedge funds and other “fast money,” there could be more “explosive” selloffs to come, he added.
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Thursday, September 4, 2008
Wednesday, September 3, 2008
U.S. Stocks at 25.8 Times Profit Means Rally May End
(Bloomberg) The best already may be over for the U.S. stock market this year.
The Standard & Poor's 500 Index, which had the worst first half since 2002, added 0.2 percent this quarter, the only gain among the world's 10 biggest markets in dollar terms. Shares in the benchmark index for American equity climbed to an average 25.8 times reported profits, the highest valuation in five years. The last time that happened, the S&P 500 fell 38 percent.
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The Standard & Poor's 500 Index, which had the worst first half since 2002, added 0.2 percent this quarter, the only gain among the world's 10 biggest markets in dollar terms. Shares in the benchmark index for American equity climbed to an average 25.8 times reported profits, the highest valuation in five years. The last time that happened, the S&P 500 fell 38 percent.
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Value Talk: Buffett’s Partner, Charlie Munger
(Guru Focus-Charles Mizrahi) A graduate of Harvard Law School, Charlie Munger was given some solid advice by Warren Buffett, who said that law was fine as a hobby, but he could do better. A few years later, Munger left his law firm and started investing. Today he works with Buffett as vice chairman of Berkshire Hathaway. His net worth is about $1.6 billion. He guided Buffett from a pure Graham style of investing, which looked only at the financials of a company, to focus more on the quality of the business. Buffett gives him the credit for much of the enormous success of Berkshire Hathaway and always refers to Munger as “my partner.”
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Warren Buffett's Best Man
(Smart Money) WHILE JASMINE AND wisteria scent the air on Caltech's Pasadena campus, a spillover crowd buzzes in anticipation in a roomy auditorium. Most of the people here are seasoned money managers, and they've come from all over the world to catch sight of something rarer than a Berkshire Hathaway stock split: Charlie Munger, without his famous partner, Warren Buffett.
Munger, 84 and blind in one eye, walks stiffly to the stage. A prestigious physics professor waits to interview him, but once the lanky, thick-bespectacled guest starts blaspheming some favorite targets, the prof rarely gets a word in edgewise. Munger's topic du jour is the spiraling credit crisis: He flings vitriol at bankers, saying they've been selling investors "a hapless mess of super-complexity." The accounting profession has "disgraced itself" with its lax standards, and so has academia. "The idea that we need derivatives is just so much twaddle," he says. Yet despite all this inanity and skullduggery, Munger still sees the investing world as a place where common sense can triumph -- if only because "it isn't so common."
Read the entire Smart Money article
Munger, 84 and blind in one eye, walks stiffly to the stage. A prestigious physics professor waits to interview him, but once the lanky, thick-bespectacled guest starts blaspheming some favorite targets, the prof rarely gets a word in edgewise. Munger's topic du jour is the spiraling credit crisis: He flings vitriol at bankers, saying they've been selling investors "a hapless mess of super-complexity." The accounting profession has "disgraced itself" with its lax standards, and so has academia. "The idea that we need derivatives is just so much twaddle," he says. Yet despite all this inanity and skullduggery, Munger still sees the investing world as a place where common sense can triumph -- if only because "it isn't so common."
Read the entire Smart Money article
Ospraie to Close Flagship Hedge Fund After 27% Tumble
(NY Times-Dealbook/Reuters) The hedge fund manager Ospraie Management will close its flagship fund after it fell 27 percent in August on losses in energy, mining and natural resources equity holdings, in one of the biggest ever closures of a commodities-focused hedge fund.
The closure of the fund, announced Tuesday by the firm’s founder, Dwight Anderson, in a letter to investors, could be more bad news for Lehman Brothers Holdings, which took a 20 percent stake in the hedge fund manager in 2005.
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The closure of the fund, announced Tuesday by the firm’s founder, Dwight Anderson, in a letter to investors, could be more bad news for Lehman Brothers Holdings, which took a 20 percent stake in the hedge fund manager in 2005.
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Monday, September 1, 2008
Some Funds Pull Back on Bank Shorts, for Now
(NY Times-Deal Book blog) The trade of the moment in the hedge fund industry - betting on falling financial stocks and rising commodities - is offering further profit despite a setback in July, but fund managers may have to alter their tactics.
Hedge funds could well benefit from betting that the bounce in battered financial stocks and the decline in commodities in July were only blips in a longer-term trend, since the fundamental reasons for selling bank stocks and holding commodities remained intact.
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Hedge funds could well benefit from betting that the bounce in battered financial stocks and the decline in commodities in July were only blips in a longer-term trend, since the fundamental reasons for selling bank stocks and holding commodities remained intact.
Read entire article
A Nightmare on Wall Street
(Economist.com) Why the credit crunch has lasted so long
LIKE a Hollywood monster that is impervious to bullets, the credit crisis refuses to lie down and die. The authorities have bombarded it with interest-rate reductions, tax cuts, special liquidity schemes and bank bail-outs, but still the creature lumbers forward, threatening new victims with every step. Global stockmarkets are suffering double-digit losses this year, and credit markets are once again gummed up.
For investors who cut their teeth in the 1980s and 1990s, the persistence of the crisis must be a surprise. Prompt action by central banks, after Black Monday in 1987 (when America’s stockmarket fell by almost 23%), or following the collapse of Long-Term Capital Management, a hedge fund, in 1998, suggested it was always worthwhile to “buy on the dips”.
Read the entire article
LIKE a Hollywood monster that is impervious to bullets, the credit crisis refuses to lie down and die. The authorities have bombarded it with interest-rate reductions, tax cuts, special liquidity schemes and bank bail-outs, but still the creature lumbers forward, threatening new victims with every step. Global stockmarkets are suffering double-digit losses this year, and credit markets are once again gummed up.
For investors who cut their teeth in the 1980s and 1990s, the persistence of the crisis must be a surprise. Prompt action by central banks, after Black Monday in 1987 (when America’s stockmarket fell by almost 23%), or following the collapse of Long-Term Capital Management, a hedge fund, in 1998, suggested it was always worthwhile to “buy on the dips”.
Read the entire article
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