Your Own Hedge Fund
Think about starting your own hedge fund in the present market. A hedge fund can go both long and short. In this market, you need some short protection.
Remember the old adage: a tree does not grow up to the sky.
A real hedge fund would seek companies in the same sector as our longs and short them. But this is a full-time job for a cast of thousands with Bloomberg screens.
Moreover shorting particular companies has special risks.
The first is that everyone piles into the obvious shorts: sectors out of favor (like Canada oil sands), or the arbitraging possibilities of takeover deals, where you buy the target and sell the acquirer. These deals are "crowded" to use the Wall St. terminology.
So any reversal of outlook risks a run by shorts to cover, which to some extent is what has been happening during the 6-week rise of Wall St. So exchange-traded funds are the way to go. Read more »
Buying and Selling Bill Clinton and Stocks
A mere $5 lottery ticket can get you a full day with ex-Pres. Bill Clinton. Her Excellency the Secretary of State is using this method to pay back debt incurred to run for the Presidency last year. A lottery removes any hint of conflict of interest, something that rather characterized Mr. Clinton's years in the White House.
For the record, I have already spent a day with Bill Clinton last year through the U.S. Oxford Alumni Association which both Clinton and my husband belong to. This counts not as conflict of interest, but as a good deed and is certainly worth $5. He is charming and articulate (Bill Clinton, not my husband.)
Apologies to Jamie Dimon. I left JP Morgan Chase off my list of depositary bank leaders yesterday. What can I have been thinking? I am actually a shareholder of JPM and not of the other depositary bank cartel members. Read more »
Post Tax Tea Party Day News
It was out of concern that readers might try to redo your U.S. tax paperwork that I did not write up the Citigroup American Depositary Receipts Webinar yesterday morning. The main new information I extracted was that fees being charged on level 1 unsponsored ADRs can be added to your basis for calculating your U.S. capital gains.
For a couple of reasons I let the Tax Day Tea Party go ahead without sharing this information. First of all, my accountant only today confirmed that you can offset capital gains in current years and future years for ADR fees. So why redo the tax forms in a rush?
Secondly, who had capital gains in 2008 anyway? So the money will be better applied retroactively against what may be capital gains in future years. You can just take it off 2009 capital gains reporting, my CAP said. Third, I have no idea what the impact of this will be on holders of ADRs outside the U.S., starting with Canada. Read more »
Letter from Phuket
A hard day's start with first a webinar about the changes in the American Depositary Receipts market from Citicorp (in which I asked two of the four questions.) I will report on that tomorrow.
Then a real slog with my Internet Service Provider, roadrunner, about how e-mails to my account from this site are being blocked. There is a similar problem with Yahoo. Until we can get off the blocked list, readers are advised to visit this site every day to read our news. I was 2 1/2 hours on the phone being passed from hand to hand by people who each time sought information about my account and a renewed explanation of the issue. This is a form of customer service unique to the 21st century. We have similar problems with Paypal.
Given the current employment situation, there is a need to hire more competent people to serve the public at many internet businesses. End of rant. Read more »
Macro vs. Micro
It is a sign of how frustrated bears must be now that Prof. Nouriel Roubini took to the air to renounce Jim Cramer of Tout TV as a "clown". For this you do not need a PhD in economics!
Despite the dismal outlook, underscored today by another drop in retail sales, stock markets are buoyant, which is hard to explain amidst the mayhem. Housing prices and real estate are careening downward. Sale of their office blocks by HSBC and their portfolio by Banco Santander (announced this week) will put further pressure on property valuation.
Unemployment is expected to continue to rise to double-digit levels in the U.S. and most developed economies. Bank write-offs clearly are not over yet, even if Wells Fargo and Goldman Sachs are doing better. Mortgage defaults are spreading to new supposedly-safer categories of home loans. The recession is far from ended. Read more »
Pres. Obama will sign H.R. 1105, the appropriations bill greatly increasing SEC funding. This applies retroactively to March 13 new higher fee rates for registering or repurchasing securities, for proxy solicitations, and for statements in corporate control transactions. It also ups fees charged mutual funds for the Annual Notice of Securities Sold (under the 1940 Investment Company Act.)
Moreover, from April 10, 2009, the Section 31 fee rate applicable to securities repurchases (for cancellation) both on exchanges and over-the-counter markets will be nearly quintrupled. Read more »
Paranoia can be healthy
Sometimes paranoia is a healthy response to the political and business situation.
Let’s start with the PIPP, increasingly viewed as “capitalism on the way up, socialism on the way down.” That means as long as a high risk strategy rewarded the bank executives who practiced it, they wanted no part of government help.
Time for a break
A fifth week of stock price increases is widely anticipated as foreshortened market activity often stays with the trend. But in fact the conjunction of Passover and Easter (and the alignment of the sun Wednesday in the precise position it was in on Day 4, according to the calculations of a rabbi who was present at the Creation) I think are more likely to produce a reversal.
I am not taking the advise of Nouriel Roubini, by the way, but that of Roger Altman in today's Financial Times.
Rather than bailing out, you can buy portfolio insurance by using a short-selling (or double- or triple-short selling) exchange-traded fund. You risk losing the investment you make if the market goes up some more, but unlike a normal short sale you potential loss is capped at how much you invest in the ETF. Read more »
Promising companies from unpromising countries
Nouriel Roubini expects the rate of economic contraction to slow from the -6% of Q1 to a figure closer to -2%. But next year he expects the economic recovery will be so weak – growth below 1% and the unemployment rate peaking at 10% - that it will still feel like a recession even if we may be technically out of it.
So, compared to the consensus that sees positive growth at 2% by the latter half of this year, and return to potential growth by 2010, Prof. Roubini remains more bearish.
Still he is a less bearish bear now. He says that compared to the sharp contraction in U.S. and global growth in Q1 of this year (about -6%), the rate of economic contraction will slow towards -2% for the U.S. and other advanced economies by yearend. While mildly better, we still are going to face a severe U-shaped recession with a very weak and tentative recovery predicted for 2010. Read more »
Asia Emergers Best
Citigroup did its usual roundup of index performance by market the end of the month and the quarter which I will share with you. They focus on large stocks, not the smaller fry. While over the past 12 months the market to be in was the U.S.A., mainly because of the rise of the holy (or holey) dollar, March was when you should have been global. Luckily we were.
While the S&P rose 8.54%, not to be sneezed at, other regional indexes did much better, except for Latin America, which went up 8.53% (the precision is remarkable given that the indexes are subject to change at any moment). And the Euro-Pacific index, which covers major companies in the developed world, was up only 6.54%, nowhere as good as the U.S. of A.
The world's stock market average rose 8.88% in March, with Asia Pacific ex-Japan and Asia Pacific Growth Economies up 19.02% and 18.3% respectively. Another bright spot was the CEEMEA (Eastern Europe and Middle-East-Africa) which gained 14.71% in March. Now what? Read more »