Dec

4

Abelson:: Not in. We hope he is well. Randall Forsyth writes instead: Various political intrigue around Iraq. Nothing you haven’t read elsewhere. The dollar is declining, tourists are all over NYC. Nobody really wants a weaker dollar since everybody depends on exporting to the US. Foreign Banks furiously buying dollars. Central Banks with large reserves face losing money on all of their dollar investments. Big carry trade in Swiss Francs. people borrowing at 1.75% to invest in other countries … threatens a big blow-up. Kind of like everybody borrowing when the Feds were targeting 1%, now they are paying the piper. Grants says foreclosures are up 42%. The ISM was down, but some guys says that its just a sign of a classic mid-cycle slowdown, and not a hard landing. this is good for stocks once the tightening stops. HD could be the target of a PE buyout. The bond market rallied. The sky is falling.Page 18: Follow-up section: P&C insurers are going to see big earnings gains, you should have listened to us and bought some in July when we told you to. Three years ago we told you to buy Ralph Lauren, it has done well since, and looks like it will continue to do well. Last year we told you to buy Direct TV, you should have, it is up. It’s still undervalued.

Page 20: advertisement by Bristol Myers Squibb: Big photo of Lance Armstrong. If you like him, you should like us.

Page 21: Copycats like to track what the hot hedge funds are doing and copy them. We tell you how to do it. The ones people copy most are Appaloosa, Greenlight Capital, Lone Pine, ESL, and Icahn Partners. You can copy them by looking at their 13-F reports.

Appaloosa’s 3 biggest holdings are Oracle, Micron, and Applied Materials, recent addition AMR, recent sale Mirant.

ESL’s 3 biggest are Sears, AutoZone, and AutoNation. no recent additions, no recent sales.

Greenlight’s 3 biggest are Ameriprise, Microsoft, and Hospira. Recent addition of First Data, recent sale of Live Nation.

Icahn’s 3 biggest are TWX, Imclone, and American Railcar. Recent add of Hilton, recent sale of Symantec.

Lone Pine’s 3 biggest are Brookfied Asset, GOOG, and Comcast. Recent add SLB, recent sale Research in Motion.

M3: In case you were hiking The Sneug last week, the market was all over the place. Stocks went up some, and down some, finishing down, and the ISM came in below 50. The housing market gave contrary signals, and it is weird that Bernanke expressed inflation fears on Tuesday but bond yields fell on Friday. Going forward, the market might go up, but it could also go down. Despite all the press of hordes of shoppers, the retail picture is looking fairly bleak. The dollar was down last week. Will the slide continue? Maybe, maybe not. Some people think this is good news for US multinationals.

M6: The business and political details surrounding Gaz de France and Suez continue. I find it too boring, so that’s it. Peugeot and Renault are having tough competition from Asia, and have seen a rise in their materials costs. Now their suppliers want to more favorable terms.

M7: Everyone thinks, at least superficially, that Vietnam is the hot new place to be. The problem is that there isn’t much liquidity and nobody really knows what will happen with OTC investments. In other words, it’s still very early.

M9: The housing market decline could be big news, as you already know. The CIO of TCW group thinks that the housing decline is still in the early innings, and his gut tells him that 2008 at the earliest will start the rebound.

M16: Oracle shares are up, and the premiums on its options are up, too. This means that traders think there could be some big moves ahead. Lots of option buying in the oil sector last week. The buying of cheap calls in the hops for a post-tax loss rally is over.

M17: Platinum is more expensive than gold. Demand should remain strong, for various reasons.

Page 23: Duke Energy is going to break up. The sum of its parts are worth more than the whole. You should buy Duke now and hole the parts, over time, at least, they will be big winners.

Page 24: IBM hasn’t done much for the past few years, but their new strategy is working. Software now provides the bulk of earnings. Nobody thought the new CEO Sam Palmisano would be very radical since he is an IBM lifer, but he is making big changes. Despite this turn around, the stock isn’t up much, and trades at 15 times earnings. This growth in software is the key to the turnaround because the margins for software are much better than for their other lines of business. IBM is going to try to change Wall Streets perception of IBM by emphasizing that IBM is changed, and how profitable the software is. They key to all this has been IBM’s software acquisitions, which brought in lots of talent. Services is doing a little better, but still not doing all that well.

Page 28: There was a conference about the secrets of good giving, where William Bowen, Rita Hauser, William Randolph Hearst and Jeffrey Sachs spoke. Bill Gates Sr. is also talking about this stuff. Bill Gates Sr. thinks that rich Americans are rich just because they were fortunate to be Americans i.e. don’t really deserve it, and therefore have an obligation to spread the wealth. Some people think its ok to give to things like the arts, others think you should give to starving people. Jeffrey Sachs says that if we give enough to Africa, we can keep them from starving.

Page 29:: Microsoft finally launched Vista. Shares are up lately. The Vista launch will probably succeed. There will be stock buybacks. A smart analyst at Friedman Billings & Ramsey figured out that Dell has been using the warranty accruals as a piggy bank for manipulating earnings. Also, the cost of actual warranty claims is steadily rising. He thinks this info isn’t in the consensus earnings estimates. Earnings restatements could be coming.

Page 30: A bunch of neat gadgets you might want to buy for yourself or someone else.

Page 32: Options are priced in 5 cent increments, soon, it will be 1 cent increments. This should be a cost savings for investors, and should help turn profits on smaller price movements. Fidelity launched a trading knowledge center that you can access from their website.

Page 33: Interview with Jeff Mortimer, the CIO of Equities of the Schwab Core Equity Fund: He lost some money in a biotech stock when he was 13, but it taught him a valuable lesson. He says “People think they know what they are doing, but they don’t”. Therefore, he prefers the Schwab Equity Ratings System, which, by the way, Barron’s featured last week. Doing so has resulted in strong performance for the Schwab Core Equity fund. The rest is pretty much a re-hash of last week, yet for some reason Barron’s though you should know about this guy, who apparently doesn’t actually do all that much himself.

Page 35: You might be shocked to learn that publicly traded mutual fund companies do better when their funds are getting inflows, and worse when they are experiencing outflows. This is in part due to the transaction costs that happen due to outflows. To fix this, a company called Reflow has come into being. If a mutual fund has resumptions, Reflow will buy the mutual fund shares, and then sell them back to the mutual fund as money comes back in. The result is that the mutual fund won’t incur transaction costs as money flows in and out. (Sounds like a great idea, but there is no mention what will happen if money just keeps flowing out).

Page 36: Identity theft is on the rise. Companies are losing laptops left and right, with all of their employees info on them. Don’t download stuff you shouldn’t, get virus protection, etc.

Page 37: The PMI has predicted four of the last one recessions. So don’t panic. Lou Dobbs is a fool and a hate-mongering, yet he has two books out, so lets talk about him: He lies about job growth to further his anti-immigration and anti-outsourcing agenda. He also constantly calls China “Communist China”.

Page 38: Interview with Tom Brown of Second Curve Capital: Nobody does as much to look under the hood of companies as he does. His hedge fund invests in financial services stocks. He goes around not making payments and stuff to see how the companies react. He think you should buy Compucredit. He also likes Capital One., and RenaissanceRe. He thinks that the financial conglomerates should all be broken up. He doesn’t like regional banks and is short some of them, but won’t say which. The flat yield curve is hurting them. However, he likes TNCC.

Page 39: There are two books out about emerging markets. One by Antoine van Agtmael, another by David Riedel. Basically, emerging markets stocks have been up big, and should continue to do well. The Riedel book tells you how to invest on an idea that you might have.

Page 40: China is exporting contemporary art like mad. It is so hot, however, that it might be getting out of hand. I didn’t read the whole article because I don’t care.

Page 42: The Wii is a great product, but Nintendo is over-priced at 25.6 times 2008 earnings.

Page 43: When a stock-picker is very good, everyone piles into his mutual fund until all abnormal returns are dissipated into management fees. Most of the article is trying to relate that simple concept to the tragedy of the commons and the fishing industry. You can skip all that and just read the last 4 paragraphs.


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