Barron's Review
In reading this week's Barron's, it was clear that most of the authors were taken back by the drop in commodities. From Abelson's opening remarks to Steven Sear's Option column. Now here is a hint for you fluffy blind folded casino monkeys. When Barron's has about a baker's dozen of articles talking about the drop in commodities, they are due for a bounce back. We took a flyer early this morning on a sizeable lot of Silver and it paid off today. Unfortunately, we did not play this in all the portfolios because no one in their right mind should time the market. But nearly every other article in the magazine this week talked about the brutal sell off in commodities but especially silver.
While telling everyone about the sizeable sell off in commodities, Abelson gave a good dissection of Friday's impressive job report. He pointed out the gains in private sector jobs was the largest since March 2006. To his credit, this week Abelson was fact based clear and not so esoteric as he has been in weeks passed.
Michael Santoli's article, Of Hawks And Bulls, suggests that too much credence has been placed that the market will see a big sell off post QE II. Even yours truly has suggested that a good portion of the climb in the S & P 500 multiple is probably inflated by the easy money strategy of QE II and when it ends a correction is probable. Santoli reminds us (Not quite as well as the great economic news out of Germany regarding industrial production.) that the overall economic news continues to improve and the biggest threat to a high Dow or S & P is probably a retraction in the overall economy. Now at the Millennium Fund lunch last Monday, I voiced my concern about a correction post QE II and was questioned by someone at the table as to how could the end of QE II impact the market. It seemed like a silly question so I rolled over and let the challenge go without a proper discussion. Here is my understanding of the concern about life after QE II. QE II was designed and eventually did bring drown Treasuary Interest Rates. All other interest rates (Business loans, mortgages, equity lines of credit) are somewhat "pegged" to Treasury interest rates. If interest rates are low people and business can borrow cheaper and put that cash to work in the economy. (Friday's Consumer credit numbers indicate that people are borrowing again. That means two things they are confident and they are buying something.) When QE II ends, in June, it mgitht ake a couple of months, but we could see Treasury rates go up 1-2%. That could stall the fragile recovery. Not ending QE II could and most probably would continue to exacerbate the inflation now seeping into the economy.
There was a provocative article about a local company done good. The bullish article about Anaheim CA based QCOR Questor Pharmaceuticals is worth the read.
Chris Williams puts together another good article about M & A activity in the coal sector and suggest a stock that might be in play in the next 12 months. PCX, DO YOUR HOMEWORK. WE DO NOT OWN.
Dimitra DeFotis writes a great piece about 10 value stocks for under $5.00. Now remember the price of a stock has nothing to do with whether a stock is cheap or not. Although not a strong fundamental value meteric the P/E Ratio of a stock be it trailing or forward looking is one of the best comparative value tools we have to see if the market hinks one stock is better valued than another. For example Which stock is cheaper BRK-A Berkshire Hathaway selling for 121,000 dollars a share or CitiGroup Selling for 5.00 a share. Well when you look at the multiple or P/E ratio (which is the share price divided by the earnings) it turns out BRK-A is cheaper. Anyway it is a great article and while we can't tell all the stocks, here is one of the best valued CMRG Casual Male Retail Group, Inc., together with its subsidiaries, operates as a specialty retailer of men's apparel in the United States, Canada, and Europe. DO YOUR HOMEWORK. WDNO
Speaking of a low multiple, Miriam Gottfried write a very bullish article on PFE Pfizer. If you have been following Salve Lucrum you know we have made money of the stock a few times over the years with this medicine. It looks as though there might yet another chance. Despite loosing the monopoly on Lipitor, the cholesterol stain there are good things coming down the The Pike for Pfizer. Definitely worth another look.
Shirley Lazo writes about some nice dividend plays with the rail industry, Good article Hutch you would like it. UNP and CSX are noteworthy.
Andrew Bary, one of our Favs has a very bullish article about X US Steel. His well researched article explains that they have a distinct market advantage because their ore is home grown and not imported giving them an 50% margin advantage over the likes of VALE, BHP, and CLF. DO YOUR HOME WORK. WDNO
Now it is really late so thankfully there were no major economic news today (Monday since I now realize it is Tuesday) and except for an import/export price report, there is little on the calendar for tomorrow. With that, we bid you a good night.
Salve Lucrum
