July 2006

Conventional wisdom has it that bonds are the safe haven investment and that they are the alternative to stocks. When stocks are drifting downward, the logical place to put your money is into bonds. Your biggest investment decision is to decide how much asset allocation to put into bonds versus stocks.

Unfortunately, this conventional wisdom came to prominence in the last 20 years which happens to coincide with a rather large bull market in bonds. (more…)

With all the talk around about “If stock are down, go bonds”, I suggest that a savy investor might want to first calculate the probability of stagflation occuring (rising inflation combined with economic slowdown like in the ’70s).? If we hit something like that, the both stocks and bonds go down.? I’d appreciate any input into this concept as I could be missing something but I don’t want to see any body jumping out of the pan into the fire without considering the possibility.

I wrote an email to a friend to give him a quick primer on how to get exposure to Gold and the precious metals sector. Here it is for the Tasgall audience as well…

If you?re looking to invest in Gold, there are basically 5 different ways:

  • Mutual Funds
  • Gold Stocks (majors, minors, exploration stage)
  • Gold ETF (GLD)
  • Futures – full contracts (100 oz per contract), minis (33 oz per contract)
  • Options on Futures (only on full size contracts)


Every once in a while, I get this wierd urge to check the latest mortgage rates. For me, it’s not enough to just look at Bankrate.com or to hear the nuggets that show up on the evening news

Instead, I actually go and plop in my credit score, loan amount, etc. over at E-Loan. I got my mortgage from E-Loan when I first bought my house, and their website is probably the easiest to use and has the most reasonable rates of any that I have seen.

So, despite the fact that everyone is saying that we have the highest rates since 2002, the rate for my loan would be a whopping 7/8% higher than 1.5 years ago when I locked in my rate. The monthly payment would be an incredible $86 more.

Yes, rates for ARMs have gone up much more than the rates for fixed mortgages, but they also went down a lot more in 2002 as the FOMC was inflating the housing bubble er… lowering rates. ARMs are not as rate competetive as they used to be, i.e., the situation is returning to normal.

I just saw this quote:

Jim Rogers, the co-founder of George Soros’s Quantum hedge fund, says oil prices will reach $100 a barrel, possibly this year.

Rogers said declining supplies from existing fields and a lack of new oil discoveries will drive prices higher.

?The bull market has about 10 or 15 years to run,? he said. ?How high it’s going to go I don’t have a clue during that time, certainly over $100 a barrel or over $150 a barrel before it’s over.?


Yes, Jim Rogers is “da man” when it comes to identifying fundamental conditions. But he’s horrible at timing and not a good trader (both by his own accounts). As he thinks we could hit $100 this year, I would take that as a contrarian signal that the price of crude is going lower.

Of course, that’s not enough of a signal for me to risk my own money on…

I’m a little concerned about all the gap-down moves that I’m seeing in the last few days…

  • YHOO – down 18% on 7/18
  • AMZN – down 21% on 7/26
  • GWW – down 12% on 7/17
  • NSC – down 9% on 7/26
  • GLW – down 14% on 7/26
  • ROK – down 10% on 7/26
  • NFLX – down 20% on 7/25

These are not small companies either… all of them withe the exception of NFLX belongs to the NDX, SPX, and/or DJIA and has a market cap over $5 billion.

Yukos, the former Russian energy giant, is now dead. Vladimir Putin has added “company killer” to his resume as he and his KGB cronies successfully stole the company from Michael Khodorkovsky and private shareholders (Khodorkovsky initially stole the company from the Russian people, so he’s not an innocent babe).

Truth be told, the Yukos saga was really over 3 years ago when Khodorkovsky was imprisioned in a Siberian Labor Prison for providing political opposition to Putin and the Kremlin. (Yes, politicians in Russia still imprision political opponents in prisons in Siberia.)

This should be a reminder to any of us that governments can and will take anything they want at the barrel of a gun. In Russia specifically, few care about the protection of private property. The theft is quite bold in Russia, but we can see similar, smaller theft attempts everywhere (like the “windfall profits” taxes here in the US, Venezuela’s Chavez renegotiating the ownership of oil production, etc.).

I just looked over at Scottish Re’s fundamentals (SCT) and was surprised. The company is trading right now with a market cap of $817m in market cap and has $690m in cash (as of their last quarterly report). If you buy SCT today at $15, you’re getting $12 in cash. Many value investors will back out cash like that to calculate the P/E ratio — which becomes ridiculously low if you do that with SCT.

What’s the downside or the risk? Scottish Re is a re-insurer, which means they write insurance policies for insurance companies. If State Farm or Allstate gets hit hard by hurricane season, they actually have an upper limit to the losses they can take — because they buy insurance from SCT or other re-insurers (not so much with hurricanes, SCT focuses on life insurance, but it’s the same concept). Last year’s Hurricane Katrina cause a couple of insurers in the same business to face significant problems. Insurance companies have large cash positions so they can respond to claims as they occur.

SCT looks like it has a very solid balance sheet and might be worth buying when the price starts to trend up again.

Not to be confused with the 1957 film of a similar name, this post describes some of the analysis I’ve done?on the cash S&P 500 which I’ve been ignoring for no good reason other than it’s fun to say “Dow”.? Dow.? Dow Dow Dow.? HEHEHEHE.? But you might find the plot of that movie to be right on target.

Anyway, it became clear in a density analysis that the S&P 500 has really had 3 “real” prices or values since the recent 2003+ bull market started.? These prices are, approximately and in order of occurance, 1125, 1189 and 1261.? (more…)

I just noticed that Caribou Coffee (CBOU) is a public company.? It’s actually tiny compared to the behemout Starbucks (SBUX)…? The market cap for CBOU is under $120m right now (compared to $25 billion for SBUX), and it’s foundering at the lowest price since its IPO 10 months ago.? The fundamentals aren’t strong enough to get me to bite, and the chart pattern does nothing to bolster confidence…? but I’ll drink their coffee any day.? There’s a difference between a good product and a good investment (see TiVo or NetFlix for similar products I recommend but would find difficult to invest in — ouch, Netflix is down 20% today).

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