Archive for category Uncategorized
Let´s Talk About “Sector Cycling”
Posted by blodmell in Uncategorized on September 7th, 2010
Many professional investors assess that the best way to invest is to ride in and out of sectors as they fall in and out of seasonal favour. For example, if consumer discretionary stocks are hot at the moment and getting a lot of attention then why sit in financials that are momentarily flat. Our approach is to engage stakeholders in the emerging global economy and stick to them. When they are temporarily out of favor then it is simply an opportunity to expand the position at a cheaper price. Our thinking is that in 3-5 years, we won´t to be holding strong positions at good prices of the titans that will emerge regardless of the whims of quarterly cycles.
Benjamin Reid Lodmell, “China Bears VS China Bulls”
Posted by blodmell in Uncategorized on September 7th, 2010
I still don´t understand why so many investors believe China will implode. The economy has decidely grown like a marching band for decades while economic managers kept doing the right thing to fly the balance of inflation vs growth. Their industrial policy and “hybrid company model” has been blatantly successful. Bloomberg reported this morning, “The worst of China’s economic slowdown has passed and inflation won’t worsen,” Wei Li, economist at Standard Chartered Bank (China) Ltd., said in an interview in Shanghai.Industrial output will slow to about 10 percent in the second half, Xin said. Real-estate curbs and a higher base for comparisons will also contribute to smaller output gains. The nation’s economy, the world’s second biggest after overtaking Japan in the second quarter, is still growing steadily and isn’t at risk of a “second dip,” Xin told reporters.
I read both sides of every argument I can find and there are some pretty deep thinkers whom are questioning the sustainability of the Chinese growth model. Perhaps the believers in China´s long term growth prospects are wrong, but it would be of character for the Chinese economy if they were. Is it practical to bet against proven winners with strong national-sector-company balance sheets?
Risk On, Risk Off, Risk On, Risk Off
Posted by blodmell in Uncategorized on September 7th, 2010
It is almost comical to follow the market “justifications” for why one day is a rally and another a rout. From an economic perspective it is riduculous to imply on Monday the global economy is safe and growing yet on Tuesday we´ve all decided the Armageddon is coming. Again, this is why we have to keep focused on the long term story not only of the global recovery but country, sector and company stories. It looks like today will be comprised of a little profit taking and a breather after a 5% run up in global equity prices in one week. Just keep focused.
Following Vale, SA
Posted by blodmell in Uncategorized on September 7th, 2010
Most of our clients have built significant positions in Vale and we have been buying it all over the map this last quarter, especially when the Preferred shares were below 20. Vale SA of Brazil, the world’s biggest iron-ore miner, is starting a push this week to gain a similar position in production of crop fertilizers, the Wall Street Journal reported. It will consolidate its fertilizers business into a new company called Vale Fertilizantes SA, the newspaper said. The company plans to spend $12 billion on fertilizer projects and acquisitions in the next three years, the Journal said, citing Mario Barbosa, the company’s fertilizers chief. This is a simple but solid diversification. It´s almost a “consumer staples” play, fertilizer. It´s smart.
Good Economic Data Is Pushing Up Equity Markets, Let’s Also Talk About Dividends
Posted by blodmell in Uncategorized on September 3rd, 2010
Let’s patiently watch to see if this rally actually finds its footing or if it is another false start. On another note, clients may wonder why I email them every little dividend payment? It’s because they add up! Buttonwoods noted in the Economist this week that, “DIVIDENDS do not get the respect they deserve. Over the long run they provide the bulk of equity investors’ returns. Work by Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School* found that over the period from 1900 to 2005, the real return from global equities averaged 5%. The mean dividend yield over that period was 4.5%. Despite this, stockmarkets devote a lot more time to forecasting and analysing profits than they do to thinking about payouts. Profits can be easily manipulated and come in a bewildering variety of forms (operating, reported, post-tax, pre-exceptional, etc). Dividends are (mostly) paid in cash and so are hard to fake. ”
I agree.
Benjamin Reid Lodmell, “The Volatility Knife Cuts Down and Up”
Posted by blodmell in Uncategorized on September 2nd, 2010
The markets had a stunning rally yesterday and it looks like they are set to be flat today. The volatility is unpredictable and the talking heads can´t even call anything right. Pessimism followed by optimism followed by confusion and so on. We must stick to the plan or get lost in the daily plot twists of economic data and commentary.
Brasil Foods
Posted by blodmell in Uncategorized on September 2nd, 2010
This company is now officially on our watch list as we look for a promising entry point for our clients to begin considering building positions.
BRF-Brasil Foods SA is a food processor in Latin America. The Company raises chickens to produce poultry products. Brasil Foods also processes frozen pastas, soybeans and their derivatives, and distributes frozen vegetables. The Company’s core business is chilled and frozen food. The Company has offices in the Middle East, Asia, and Europe.
It Was An Awkard Month. It´s An Awkward Moment For Global Equities. Stick To The Plan
Posted by blodmell in Uncategorized on August 31st, 2010
May and June were a sell-off. July was a rally. August was like watching the markets slowly bleed. Now, the world is watching central bankers promise they can save the world again if they have to but there is a lot of skepticism. If September shapes up to take back the summer gains while throwing global indices into bear territory what will we do? Slowly buy. That is why we keep cash on hand folks. We build positions and lower our average price per share. I think an excellent example is Petrobras. This company has a very bright long term story but it continues to be clobbered. The preferred shares are sitting around 28 bucks. We make money in markets not just because the share price grows but we make the volatility work in our favour.
Benjamin Reid Lodmell, “Even High End Retail Investors Are Expecting Another Crisis.”
Posted by blodmell in Uncategorized on August 28th, 2010
I am on the phone all day with high net worth families and they are being bombarded with the notion that another crisis is immiment. “The emerging market boom is going to bust, ” or “China´s books are cooked and they aren´t really doing as well as they say” or “Europe is falling apart.” or, “The USA is too deep in debt and isn´t willing to make the sacrifices to pull out.” Even I suspect that the USA might be the weakest link in the new global production-consumtion change. There are a lot of reasons to be concerned, indeed. Heck, some argue that it is going to be fine until it isn´t…that´its just a matter of when it all falls apart.
I simply disagree. I think we are in a shift. Change is uncomfortable but, for me, a production and demand boom in emerging markets lies in the future. This transformation is awkard given a few rich countries have run the show for the last few centuries. But it takes patience. We need to buy the companies that are well positioned for the long run and build positions while lowering average price per share.
Paul Krugmans Thoughts About What Bernanke Probably Means By Doing “All We Can”
Posted by blodmell in Uncategorized on August 27th, 2010
“So what should officials be doing, aside from telling the truth about the economy?
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.”
Contextualize the US dilemna with that fact that China is purposely trying to slow down double digit GDP growth. India is right behind. Brazil is cooling off inflation they are growing so fast and now have an unemployement rate of 6.9 percent.
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