Mr Tom

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    • Fri May 30th 10:12 AM
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      Commented on:
      Idearc: Cheapest Stock in the Phone Book
      Benjamin mentions that since most of the companies debt is floating it will benefit from today’s low short term rates without talking about what will happen when rates start to increase. The company’s interest coverage may be fine with the Fed funds rate at 2%, but what does it look like at 5%. The safe way to play this company is through their Sr. notes not there Common as the bond holders will own the company at some point in the future, its just a matter of time, and you get a nice interest payment that the company cannot cut until that time comes. Finally, who buys a company with -8.6 billion in shareholder equity, no CFO and can’t find a permanent CEO give me a break.
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    • Mon May 19th 14:33 PM
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      Commented on:
      Reviewing Media Pundits: Two Views of the Fed
      I think Jeff has hit the nail on the head with is article. Any one who cries about the cost of to the tax payer of the feds current actions is either disingenuous or not too bright. What would the costs have been of a large run on the banks? This would have been a very likely scenario had the fed sat idly by and watched.

      Take back the fed indeed!
      In order to take back something you had to have had it to begin with. The fed is still being controlled by the same group of elites who set it up. Nothing has changed there, and nothing will. Instead of butting your head against a brick wall, why not try to profit from its predictable moves to bail them out.
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    • Mon May 19th 13:58 PM
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      Commented on:
      Bernanke's Fed: Fox in the Henhouse
      I think that as we become more of a global economy, the fed no longer has as much control as it once did to inflate or deflate bubbles. Remember Greenspan’s conundrum. This was when long term rates did not follow short term rates up. This was due to many global trends that the fed does not directly control (yen carry trade, China buying long bonds to suppress their currency …). The most important being the general lack of risk taking. The CDO’s which turned out to be so toxic were created as a way of getting more AAA paper for people worldwide to buy. As it turned out you can’t take a bunch of crap, stir it up, and produce gold. You can debate all you want about giving the fed more or less power. The reality is that as the rest of the world grows, the US becomes weaker. Therefore, it’s central bank will have less ability to impose its will on the world economy. I am not arguing whether this is good or bad; I’m just saying that it is a fact, so you better get used to it.
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    • Mon Mar 24th 09:29 AM
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      Commented on:
      Buying in the Crisis
      Stocks, especially Large Banks are cheap here.

      The two main arguments against this that I am reading here are:

      1) Look at what happened in 2000

      In 2000 Stocks were in a severe asset bubble. The PE of the S&P 500 was above 40 and remained above 30 through most of the crash (It was around 25 in 2003). The PE of the S&P 500 today sits at 16.6. If you look at the large banks here they are much cheaper with most selling at or below a PEG Ratio of 1, at or below a P/B of 1, and dividend yields at or above 5%.

      Wachovia for instance has a PEG of 1.03 a price/book of .74 and a dividend yield of 9.0%. The CEO has come out on more than one occasion saying he sees no need to cut the dividend. While their revenue will be hit by the slowdown, their profits will be boosted by the rate cuts. The average Fed funds rate for 2007 was just above 5%. It sits at 2.25 with more to come if it gets worse. Wachovia had 11 Billion in interest expense in 2007. The cuts so far would add about 6 Billion to its bottom line. If you bring the rate down to 1% over the remainder of the year with another .75 cut then a .5 cut you would have an average for 2008 of about 1.5%. That would add about 8 billion to Wachovia’s bottom line (I say about here because I am assuming that the spreads between what they lend at and what they pay stay the same. It has actually been widening as you have not seen mortgages drop by nearly the amount as the short term rate.). Wachovia by the way earned right at 6 Billion last year and paid a dividend of around 4.6 Billion. Why would they cut their dividend when the fed will be paying for it this year? If Wachovia does not cut its dividend then it is only a matter of time before it reverts to normal through stock price appreciation. It may take awhile but what the hell, you are getting paid 9% to wait!

      2) Look what happened at Bear with no warning.

      No Warning, whose hedge funds blew up over a half a year ago, leaving many investors loosing everything? Did you think the companies’ owners (the common stock holders) would stay whole while the companies’ customers lost everything? Every financial blow up needs a sacrificial cow and this time it was Bear. The reason for the deal was to transfer the liability for the hedge fund losses to a company with the balance sheet to pay them (JPM a large bank I might add who made out like a bandit on the whole transaction).

      I think if you are in a large bank you are safe from a complete melt down. The shock to the system will be too big for the fed (and other central banks around the world) to allow that to happen. And with the full faith and credit of the Uninted states tax payer they certainly can keep any of them afloat. I wouldn’t go too far down the food chain to the smaller banks here though because some of them probably will fail, and you don’t need to. The big guys have potential for huge capital gains here being so beat up.

      To tradersystemguru who posted

      “Those who followed this advice and bought in January are now down 5-7%. Those who turned bearish while you were turning bullish and bought contra ETFs that go up while stocks are dropping are up anywhere from 10 to 50% for the contra double bear funds. with the double short financial ETF.”

      Your math does not make sense. If the bull call is down 5-7% wouldn't the double bear call be up 10-14% minus the huge expences you pay to sit in these guys. Also, Do you really need to double the volatility in the financial sector right now with stocks moving 3-10% per day as it is?

      If someone had took your advise and bought SKF when you posted they would be down 11.5% in one day. It opened at 119.41 and closed at 106.66 on the 20th. We will see in three months how your recommendation pans out.
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