Monday, June 29, 2009

Is Global Warming a Swindle?

I watched this video (on DVD) about a year ago and found it pretty interesting. However, I just found a link to the YouTube video on The Humble Libertarian's site. Basically, The Great Global Warming Swindle suggests that man made global warming is a lie. Personally, I am not gonna throw out my views on climate change since about everything that could be said, has been. This post is meant to share an interesting video series and to expand horizons (regardless of if there is truth contained or not).

I will say these 3 tongue in cheek things:

1) If climate change is as bad as predicted, then I will be a few hours closer to the beach when I am on the verge of being senile... which wouldn't be bad at all.

2) If climate change is a myth, then I guess the world won't be going to hell in a hand basket and my gas guzzling truck will skyrocket in price since we are quickly approaching a time when it will be impossible to buy a new vehicle that has any real amount of power (due to fuel efficiency standards). I'd be pretty happy with having a vehicle that wouldn't be depreciating in value anymore!

3) My brother is convinced that the flock to green energy is going to create and be the next big bubble... and I'm not convinced that he isn't right. For example, FSLR has tanked in the past bit; though, the effects of any said energy bubble may be lessened by tightening credit. After all, the alternative energy markets have tanked and it is getting even harder to build power plants without tons of money to be lent.

Regardless, in any of the 3 scenarios, I should do pretty well. :-)

The whole thing is 8 parts and is well worth your while (particularly to serve as a balance to An Inconvenient Truth)... crack open a beer, prop up your feet, and get ready for the epitome of contrary thinking.

Thursday, June 11, 2009

Jim Cramer = Mr. Market

Jim Cramer just announced that housing has bottomed. Now, while I personally hope that he is correct, my gut instinct is to say 'look out below!'... at least when it comes to real dollar stabilization. Though, as I just said, nothing would thrill me more than to have real estate prices shoot though the roof.

Historically, our 'friendemy' Jim (who I love to hate), has been really good at... well, not timing the markets very well. For example, in the edition of The Intelligent Investor with commentary by Jason Zwieg, Cramer trumpets that the 'old economy' stocks and 'value metrics' are dead. Later, he says that you should be fully invested in tech (and pokes fun at Buffett over not drinking the tech kool-aid). A person that would have taken his advice would have seen their holdings precipitously fall by well over 90% in price. As I have said before, who can blame them for getting caught up in the bubble if they had no understanding of price and value?

Cramer also was good at saying 'Bear Sterns is fine', while he may now say that it was in reference to deposits (which, I still think him twisting some vague wording); Jon Stewart, of all people, did a good job of schooling him. I enjoy how Cramer said towards the end of the video 'anytime that you recommend a stock that goes down, you've made a mistake...' well, maybe not. Practically speaking, market fluctuations have nothing to do with the underlying value of a company. Let alone what the market will send the price of the security to, after it has fallen.

Certainly, Cramer may be right in his housing prediction in nominal dollars, but, where I have my doubts are in real dollars; I have long said that I think the Federal Reserve is trying to print enough money to raise the price of everything, so that prices as a whole can catch up with the inflated cost of housing.

While I certainly hope that olde' Jimmy boy is right (both in real and nominal dollars), I generally feel safer doing the opposite of what he says. To me, Jim Cramer is the epitome of Mr. Market. Don't get me wrong, this truly is a great thing for us. While I have little regard for the guy, I certainly appreciate that he has attempted to make the masses feel like they can invest on their own and trade their way to financial independence. In addition, we get to see him on TV after he drinks a few to many red bulls, goes nuts on the air, and adds to the manic depressive sentiment of the markets... making securities more attractive to buy/sell for us value investors.

Now that I think of it, maybe I should support the guy, by buying his books. I certainly don't want to see him go away.

Book Review of Distress Investing: Principles and Technique

In the book "Distress Investing: Principles and Technique", Martin Whitman and Fernando Diz successfully outline many of the issues surrounding the complicated world of investing in the bonds of companies that are in bankruptcy. If you want my opinion in 5 words here it is: 'go buy the damn book'.

If you are sick and tired of buying/reading books on investment that are watered down, this would be a good way to step it up. If you read 'One Up on Wall Street' or 'Rich Dad, Poor Dad' and they changed your life, I suggest that you take a pass on Distress Investing. It is certainly not for the faint of heart and will definitely be picked up for college level finance classes.

Throughout various passages, Whitman and Diz outline the many different intricacies of US bankruptcy laws; not only that, but they do a great job of showing how they are applied in real life scenarios. Honestly, I think that the only way that you could learn more about the details of bankruptcy law would be to read all the pertinent legislation... the only problem being, you wouldn't know how it would be applied in various cases, such as Kmart.

The case studies on K-Mart and Home Goods International were excellent and certainly shed light on the practical application of theory, which value investors desperately need in this time of uncertainty. It was rereshing to see what sort of payments the companies were actually able to collect and/or distribute off of the balance sheet in the filings. Often times, as value investors, we are forced to guess at what we think a company's inventory is really worth in the event of a liquidation... remember Buffett talking about liquidating the textiles and the equipment going for pennies on the dollar?

Another great segment of the bond industry that was illustrated were the debentures of Ambac and MBIA. These are investments that Third Avenue (headed up by Whitman) presently have positions in; it was refreshing to get their opinion/thesis of the position. As you know, it is rare that managers go into great detail as to why they have a position in a company (generally, it is limited to 'well, it is pretty obvious that the company is significantly undervalued')... Whitman goes so far as to tell you what he thinks the likelihood of a default on the debt is!

One of the most important points made in the writing, is that it is safe to say that professionals and management make out like bandits in bankruptcy filings, due to restructuring proceedures and fees. There are also other problems with bankruptcy law that are outlined; though, the authors are quick to say (in that Winston Churchill sort of way) that America's bankruptcy laws would be the worst, if it weren't for all of the rest!

The bottom line is this: Distress Investing is one of the few books that I have read recently which has provoked a great deal of thought on my part. Without a doubt, this is the best book that I have read since The Black Swan. You should do yourself a favor and pick up a copy; you'd be crazy not to.

Disclosure: I did get a free copy of the book, though, don't receive any sort of compensation if you purchase a copy (even through the link that I provide). Also, if you want me to review your book, email me and we can work something out. :-)

Wednesday, June 10, 2009

God Bless The Fed.

Here is a good article on the Federal Reserve allegedly threatening oust Ken Lewis if he didn't go through with the Merrill acquisition. This is about as ridiculous as TARP, the bail out of the autos (and subsequent forced sale to Fiat), and the government propping up AIG. It is like we are living in China.

On a related note, I am reading the book Gold by Nathan Lewis. It, combined with the devaluation of our currency and articles such as the one I just posted, are making me more in favor of a non-fiat currency. Given that I am reviewing the book, I will be doing a pretty detailed post on it in the coming weeks-along with several others.

On that note, if anyone reading this wants me to review their books, I will be more than willing to (just email me)!