A picture is worth a thousand words ... uh I mean points

VIA MINYANVILLE

Sept. 23 (Bloomberg) -- The U.S. slowdown may be shorter than expected and private equity investors should start searching for bargains after valuations tumbled this year, said Mark Mobius, executive chairman of Templeton Asset Management Ltd.

``I just don't see a long, protracted recession,'' Mobius, who manages about $40 billion in emerging market stocks, told the Super Return Asia conference in Hong Kong today. ``There is an opportunity to buy low right now and sell high in the next cycle.''


Nov. 17 (Bloomberg) -- Mark Mobius said he’s “aggressively” buying consumer stocks, including cell-phone companies, retailers, banks and furniture makers, as faster economic growth in China, India, South Africa and Turkey offsets sagging demand from developed nations.

“We see a consumer boom in all of those countries,” Mobius, who oversaw more than $24 billion in emerging-market stocks on Sept. 30 as executive chairman at Templeton Asset Management Ltd., said in a Bloomberg Television interview from Johannesburg. “Per-capita income is growing at a very rapid pace in these countries.”

The slowdown “will be rather short-lived and, of course, the markets will anticipate this,” Singapore-based Mobius said. “There will be some deceleration, but these are still fast- growing countries.”

Jan. 17 (Bloomberg) -- Mark Mobius, who oversees about $26 billion in emerging-market stocks at Templeton Asset Management Ltd., said he plans to buy more shares of consumer and commodities companies in emerging markets.

“Valuations are attractive,” Mobius, Templeton’s executive chairman, said at a briefing in Kuala Lumpur today. “We feel that this year would be a year of recovery of the stock markets in the emerging markets.”

“There is an incredible build-up of foreign reserves in the emerging markets, and the increase in money supply is quite dramatic,” the executive chairman said. “We’ve seen a very big increase of money coming into markets.”

March 23 (Bloomberg) -- The next “bull-market” rally has begun and there are bargains in every emerging market following a record slump in stocks, Templeton Asset Management Ltd.’s Mark Mobius said.

“You have to be careful not to miss the opportunity,” said Mobius, who helps oversee about $20 billion of emerging- market assets as executive chairman at San Mateo, California- based Templeton. “With all the negative news, there is a tendency to hold back.”

(Hey eventually the dude is going to get it right!-AM)

That rifle hanging on the wall of the working-class flat or labourer's cottage is the symbol of democracy. It is our job to see that it stays there.

By JOHN CHRISTOFFERSEN,
Associated Press – 1 hr 25 mins ago

FAIRFIELD, Conn. – A busload of activists representing working- and middle-class families paid visits Saturday to the lavish homes of American International Group executives to protest the tens of millions of dollars in bonuses awarded by the struggling insurance company after it received a massive federal bailout.

About 40 protesters — outnumbered by reporters and photographers from as far away as Germany — sought to urge AIG executives who received a portion of the $165 million in bonuses to do more to help families.

"We think $165 million could be used in a more appropriate way to keep people in their homes, create more jobs and health care," said Emeline Bravo-Blackport, a gardener.

She marveled at AIG executive James Haas' colonial house, which has stunning views of a golf course and the Long Island Sound. The Fairfield house is "another part of the world" from her life in nearby Bridgeport, which flirted with bankruptcy in the 1990s and still struggles with foreclosures and unemployment."

"Lord, I wonder what it's like to live in a house that size," she said.

Another protester, Claire Jeffery, of Bloomfield, said she's on the verge of foreclosure. She works as a housekeeper; her husband, a truck driver, can't find work.

"I love my home," she said. "I really want people to help us."

News of the bonuses last week ignited a firestorm of controversy and even death threats against AIG employees. The company, which is based in New York, has received $182.5 billion in federal aid and now is about 80 percent government-owned, while the national housing and job markets have collapsed as the country spirals into a crippling recession.

American International Group Inc. has said it was contractually obligated to give the retention bonuses, payments designed to keep valued employees from quitting, to people in its financial products unit, based in Wilton, Conn. Congress began action on a bill that would tax 90 percent of the bonuses, and the company's chief executive urged anyone who received more than $100,000 to return at least half.

AIG has argued that retention bonuses are crucial to pulling the company out of its crisis. Without the bonuses, the company says, top employees who best understand AIG's business would leave.

Besides Haas' home, protesters on Saturday also visited the Fairfield home of AIG executive Douglas Poling. They were met both times by security guards. They left letters that acknowledged some executives, including Haas and Poling, are giving up the money but that asked them to support higher taxes on families earning more than $500,000 a year.

"You have a wonderful opportunity to help your neighbors in Connecticut," the letters said. "We ask you to consider the experiences of families struggling in this economy."

Afterward, the group protested at the office of AIG's financial products division in Wilton, where they waved signs and chanted, "Money for the needy, not for the greedy!"

There were no arrests.

Mary Huguley, of Hartford, said AIG executives should share their wealth with people like her sister, who is facing foreclosure.

"You ought to share it, and God will bless you for doing it," she said.

Sam needs You to want Him

(Here's a strange thought experiment. Is Barry's reluctance to liquidate insolvent banks in part because he can't apply the 'only Nixon could go to China' rationale? Would there in fact have been a higher probability that tougher measures would have been taken faster under a McCain Administration? Conversely though, he should be in a better position to mitigate the 'bonus outrage.' Of course if McCain had become President the 9 scariest words -'I'm from the government and I'm here to help.' would have been transmogrified into 'Hi, I'm Sarah Palin , where are the launch codes?' -AM)

Reuters
March 21, 2009
By Jennifer Ablan and Kristina Cooke

The lack of big investor interest in the debut of the Federal Reserve’s consumer lending program is heightening fears private capital will also shun the government’s toxic-asset plan amid public outrage over outsized executive bonuses.

The Fed’s new program to resuscitate consumer credit, the Term Asset-Backed Securities Loan Facility, or TALF, received only $4.7 billion in requests for loans out of $200 billion on offer.

What’s more, big money stayed away. Applications came from just 19 hedge funds and firms that manage between $3 billion and $5 billion, fewer and smaller than expected.

The lack of investor appetite could also be a problem for the U.S. Treasury’s public-private investment fund plan, which will aim to buy up to $1 trillion in assets by leveraging taxpayer and investor capital with government loans.

“If populist furor over bonuses and related issues fades in coming days, TALF may yet achieve its potential,” said Dino Kos, who ran the New York Federal Reserve Bank’s markets desk before William Dudley, now the New York Fed’s president, and is now at research firm Portales Partners.

Many big private investors are getting cold feet over the government funding plans in the wake of the public and political outrage surrounding American International Group (AIG.P), fearing that an irate U.S. Congress is more likely than ever to change the rules of engagement — possibly retroactively.

“If that furor continues to rise, TALF and for that matter, the nascent private-public investment program will prove to be white elephants,” Kos said.

One high-level private equity investor who asked not to be named said private capital was more cautious and wary about investing in the Treasury public-private investment fund because of what has unfolded with AIG.

Another private equity official said the government hasn’t consulted much with the private-equity industry. That official cited concern that details of private equity firms’ proposals and future returns could be made public.

“The climate is rather treacherous as investors do not necessarily trust that the government will not change the rules or create retroactive measures — particularly as it relates to clawbacks,” said Greg Peters, head of global credit strategy at Morgan Stanley in New York.

Potential investors in the public-private investment fund “worry about getting involved with the government and then having congress try to dictate how to run your business,” Peters said

Black Diamond ETF

Commodity head fake

By Javier Blas
Published: March 20 2009 19:55
Financial Times

It has been a great week for commodities. But has the price rally got ahead of itself? Although demand has improved relative to the dismal conditions of late last year, analysts and traders warn that conditions have yet to perk up sufficiently to warrant an across the board price rally beyond current levels.

“The market is ignoring near-term bearish fundamentals,” says Adam Robinson, director of commodities at Armored Wolf, a California hedge fund.

The poor prospects have not discouraged investors, fearful that the Federal Reserve’s action to buy US government debt will stoke growth at the cost of higher inflation.

Most analysts are less enthusiastic than investors.

James Steel, a commodities analyst at HSBC in New York, says given that the genesis of the wider commodity rally appears to be the shift in policy by the Federal Reserve and not a sudden change in underlying supply and demand balances, “it is unclear whether higher commodity prices can be sustained.”

Barclays Capital says that a fall in freight costs, a steep decline in Chinese domestic steel prices – both good indicators of industrial activity and commodities demand – and the steady increase in inventories in some raw materials “all suggest fundamental conditions in several markets are still very weak and price recoveries [would] likely prove fragile.”

Goldman warns that it would need to “see demand stabilise before going overweight” in commodities.

Some analysts, such as Daniel P. Ahn, director of macroeconomic research at Louis Capital Markets in New York, question how much central bank quantitative easing, in which central banks inject large amounts of cash into the system in an attempt to bring down long-term interest rates, by itself will help stimulate demand.

“Japan’s example in the 1990s, though not a perfect analogy, shows how massive quantitative easing can co-exist with continued deflation in the absence of structural reforms and proper fiscal stimuli,” Mr Ahn says.

Even if the world’s central banks are successful in quick-starting the economy, it will be months, probably a year, before a pick-up in activity lifts demand for commodities and drags inventories down.

There are some bright spots. Commodities producers’ output cuts, such as by Opec in the oil market, have been in place for long enough and represent a sufficient amount of production to begin to offset demand destruction. This is supporting prices. Merrill Lynch and JPMorgan on Friday raised their oil forecasts for the second half of the year.(My expectation is we'll see $30 in the next two months.-AM)

“Against our initial expectations, Opec production cutbacks have been very significant,” says Francisco Blanch, commodities strategist at Merrill Lynch.

Other supportive factors for commodities are the Chinese and US fiscal stimulus programmes, which involve large outlays on infrastructure. (Sure as heck wouldn't put chips down on that!-AM) There are limiting factors. Oddly the pick up in prices is the critical one.

Higher prices could lure some producers, from Opec countries to miners, to bring back output capacity even if final demand has yet to recover, opening the door for oversupply and lower prices.

The cycle of higher prices leading to more output and eventually to lower prices is exactly what has happened in the steel sector in China, where a rebound in prices in January, due to traders stockpiling, prompted steel makers to bring back production capacity. As soon as the stockpiling ended, it became clear that final demand was not there and prices fell sharply again.

The influence of speculative money is also likely to be smaller than last year, potentially capping the rally. Hedge funds, for example, have far less firepower than last year as the credit crunch has reduced their capacity to leverage.

The question for investors is whether the economy is strong enough in the short-term to justify the gains. The International Monetary Fund, which forecast that economic growth would fall this year for the first time in 60 years, has a clear view. “Commodity prices are unlikely to recover while global activity is slowing,” it says.

Day of the Divi-DEAD

(MMMMMM yield must eat yield...-AM)
Barron's
March 21, 2009
By Michael Santoli

Most of the noise about the S&P 500 dividend yield exceeding that of the 10-year Treasury yield for the first time in half a century has died down.

Partly this is because we're becoming accustomed to Treasury yields forcibly anchored at low levels. And pointing to epochal shifts in equity valuation has lost its ability to raise eyebrows. (Did you know the free-cash-flow yield on the S&P based on 2008 results and 2009 forecasts is 7.5%, according to Morgan Stanley?)

Yet the fact that dividend payouts will surely continue falling must also be squelching the breathless talk of stocks' yield bounty. Few recognize that a market exists in dividend swaps, in which large institutions effectively buy and sell income streams based on their view of dividends to be paid by large companies a decade into the future.

This market is pricing in a bleak outlook for income from common stocks many years hence. This month the swaps market is implying that dividends for the S&P 500 companies would fall to $20.28 per share in 2009 from the $28.39 paid in '08. Then the market is foretelling a further 24% 2010 drop.

If the swaps market is remotely correct, then next year the S&P 500 will yield something close to 2% of today's index value, versus the current stated yield of 3.6%. This is alarming given that more than a third of total equity-market returns since the late 1920s has come from dividends rather than share-price gains.

David Kostin, strategist at Goldman Sachs, concurs that dividend streams are destined to become scarcer, but his forecasts for the decreases isn't nearly as dire as those of the swaps market. He figures 2009 dividends will total $22.17 a share, then ebb by a few more cents in 2010 before beginning to rise, slowly, thereafter.

The discrepancy between strategists' outlook for dividends and that of the swaps market can be partly explained by hedge funds' deleveraging and risk-reducing habits these days. These are the players that would come in and "buy" the dividend curve when it got out of whack.

But no matter the degree of payout reductions, it's clear that yield-seeking investors need to take care in selecting stocks for that purpose. (Beware the yield-eating zombies!-AM)

Ponzimonium

(Ponzimonium(PZ)is a new entry into the periodic table of financial elements formed by removing deep-captured hypocrisy from reality. It is a very rare element and has an extremely short shelf-life. Ponzimonium should not be confused with Governmentium as described on charmingjustcharming blog(9-24-08):

Research has led to the discovery of the heaviest element yet known to science. The new element, Governmentium (Gv), has one neuron, 25 assistant neurons, 88 deputy neurons, and 198 assistant deputy neurons, giving it an atomic mass of 312.

These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons. Since Governmentium has no electrons, it is inert; however, it can be detected, because it impedes every reaction with which it comes into contact.

A minute amount of Governmentium can cause a reaction that would normally take less than a second to take from four days to four years to complete. Governmentium has a normal half-life of 2-6 years; it does not decay, but instead undergoes a reorganization in which a portion of the assistant neurons and deputy neurons exchange places. In fact, Governmentium's mass will actually increase over time,since each reorganization will cause more morons to become neurons, forming isodopes.

This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as critical morass. When catalyzed with money, Governmentium becomes Administratium, an element that radiates just as much energy as Governmentium since it has half as many peons but twice as many morons."-AM)

By Javier Blas, Commodities Correspondent
Published: March 20 2009 19:35
Financial Times

US federal regulators have warned of a “rampant Ponzimonium” as they disclosed they are investigating “hundreds” of possible scams in the aftermath of the $50bn fraud allegedly perpetrated by Bernard Madoff.

Bart Chilton, a commissioner at the Commodities Futures Trading Commission, the US regulator, said the watchdog was “seeing more of these scams than ever before” in commodities and other futures markets.

Mr Chilton said the CFTC, which patrol commodities and financial futures markets such as derivatives on stocks and foreign exchange, was investigating “hundreds of individuals and entities, many of which were related to Ponzi scams”.

The CFTC has filed charges against 15 alleged Ponzi schemes so far this year, compared with 13 during the whole of 2008. If the rate were sustained, the regulator could end the year filling more than 60 cases, officials said.

US regulators have said they are detecting more scams than before as the publicity surrounding Mr Madoff‘s case prompts some investors to question the credibility of returns.

But this is the first time a senior regulator has publicly put the number of investigation in the “hundreds”.

“The floundering economy has unearthed many of these house-of-card scams,” said Mr Chilton. “In the last month alone we’ve gone after crooks in Pennsylvania, New York, North Carolina, Iowa, Idaho, Texas and Hawaii.”