Can Turtles Fly?

I bought Monsanto (MON) as a risk arbitrage position a few days ago. Potential return is pretty good if you believe the risk is low (spread of about 9%, my expected return of around 7.7%). Deal expected to close by end of this year (maybe worst case Q1 2018). I find it really hard to invest in this environment. Everything just looks highly valued and there aren't too many areas that are beaten down or appears cheap. I have been researching some out-of-favour industries (like retail, radio broadcasting, oil & gas) but they are not good industries in the long run. I hope my impatience doesn't end up hurting me but I took a really large position in this deal. I was researching the position for almost an year when the merger spread was much higher (18% as recently as January of 2017). In fact, it looked like an attractive position ever since Berkshire Hathaway took a small position late last year (likely as a risk arbitrage position but with spreads likely more than 20% at ...

Long-time blog readers, if there are any ;) , probably know that one of my favourite investors is Jim Rogers. I first came to understand the commodity supercycle and the global trade boom and ascent of China from Jim Rogers (and also Marc Faber). Both of them are contrarians and way out of the mainstream so not many will agree with them, but if you are macro-oriented like I am, they can be insightful. I have been catching up on investing after being absent for several years so I'm going through some older stuff. I came across the following two excellent interviews with Jim Rogers. These cover more about Rogers' life and are interesting to hear. LondonReal's Interview: " Jim Rogers - Follow the Money $$$ " (published to YouTube June 1, 2014) Jesus Sierra's Jim Rogers Interview: " Jim ROGERS - Dollar and commodities for 2017, interest rates, inflation and why books. " (published to YouTube January 11, 2017) Some though...

Global Agriculture Some important agricultural graphics I extracted from Syngenta's " Our Industry 2016 " report ( PDF direct link )... (As with most graphics posted on this blog, you can click on the image for a larger one) (Image source: Syngenta, " Our Industry 2016 "; PDF direct link )

Since getting back into investing, here are some articles I found interesting/worthwhile. Since I'm catching up, some are really old so you may have seen them already (if it is stock ideas or macro themes, pay attention to date it was written). Hope you find them useful. I'm also trying to rebuild my blog and website list. Quite a number of blogs I used to read are gone or don't really cover what I find useful. If anyone has blogs that are worth following (especially anything new started in the last 3 or 4 years), let me know (email me or leave a comment at the bottom). (Recommended) " Should You Buy Net-Nets or 'Desert Island' Stocks? " (Geoff Gannon for GuruFocus ): Good to see Geoff Gannon writing articles again. I probably learn more from Gannon than anyone else on the Internet. Lately, I have been reading through his past articles at GuruFocus and there is always a nugget I pick up from each one. The linked article is one that touches on the in...

After pondering this for a couple of months, I decided to take a risk arbitrage position in the Syngenta (NYSE: SYT) takeover by ChemChina, a large Chinese company. I was vaguely familiar with Syngenta because I did some very preliminary, limited, research on it about 5 years ago when I was looking at non-commodity agricultural businesses such as Bunge. This is one of those deals where the expected return (based on my assumptions) is quite low (5%), which is below my usual target (I like to aim for 10%+, preferably 12%+). The raw return is 9% so if everything goes as planned on time, it is a good return; but I am attaching high negative downside so the expected return isn't as good. I wasn't too keen on a 5% return for risk arbitrage. In the end, I decided to take a position. The underlying business is great--there are only 3 or 4 other businesses like this at this scale in the world--so even if the deal fails, I would rather own this than many other companies out there. If...

Sorry about the lack of posts. Hopefully the linked articles will keep you busy :) (Recommended) Top-down look at Microsoft (Bronte Capital): John Hampton of Bronte Capital takes a detailed industry-level look at Microsoft. The comments by readers is also worth reading IMO. I haven't looked closely at Microsoft but my feeling is that it is probably an investment that will produce market(or maybe 1% or 2% more than market) returns. The problem for companies like these is that they are very large and its hard to see a big upside. As for the downside, it is probably exaggerated. As long as Microsoft produces high profits and reinvests a lot in R&D, its downside won't be that large. Microsoft's historical strength is in turning products, often after competitors get first-mover advantage, into relatively lower cost, mass-market, products... Investing in Microsoft is kind of like inesting in Coca-Cola in the 70's or 80's. That is, you really need some high growth m...

The markets hit an yearly high this week, with the Dow up around 43% off its lows from March. This is a massive rally but not unexpected to anyone with knowledge of history. As usual, it's difficult to say if we have entered a new bull market. The good news for the bulls is that the market is climbing a wall of worry. Although sentiment is very bullish right now, it wasn't so for most of the rally a few months ago. The rally also resembles the 1933 rally, where the market rose 100%+ in a short period of time, after the election of a new President, and with bad news all around. Just like in 1933, the market is rallying strongly while the economic picture is very poor. The bad news is that the market is not cheap anymore. I don't believe it was ever cheap, even near the March/April lows, and it is definitely not cheap right now. The future has to be quite rosy to justify current valuations of some companies (I may be biased but I believe some of the commodity businesses look ...

I remarked recently that I ran across the Scottish CIO of Eclectica Asset Managament, Hugh Hendry, and was quite impressed by him. He reminded me of the first time I encountered Marc Faber, who incidentally had a huge impact on me. Like Faber, he is outspoken, quite controversial, and a bit arrogant (I don't like his arrogance though.) Most importantly, however, Hugh Hendry, like Faber, seems to have a good understanding of investment history. I would say that Faber knows a lot more than Hendry but Hendry seems good as well. Interestingly, Marc Faber and Hugh Hendry are both skeptical of central bank actions but they take completely opposite views: Hendry is a deflationist while Faber is a hyperinflationist (do note that they may change their opinions over time.) I did some research on Hugh Hendry to see if he is actually someone worth listening to. Not being part of the hedge fund world or having access to his hedge fund letters, I am limited to his public writings and appearance...

Some articles that you may find interesting, in no particular order: Which economic indicators are important? (The Globe & Mail): A nice article that speculates on economic indicators that are useful, and those that may not be so. Even though I'm macro-oriented, I don't really pay regular attention to economic indicators. I think they are only useful in developing a rough idea of whether the world, or a country, or an industry is "good", "bad", or whatever. As for timing, or trying to pick sectors or stocks, they confuse me more than anything. David Rosenberg Q & A (The Globe & Mail): David Rosenberg was the senior economist at Merril Lynch who recently moved to a firm in Canada. I used to have access to his reports through my discount broker (HSBC) but not anymore. He was pretty good IMO. He was mildly bearish—but not superbearish like Stephen Roach at Morgan Stanley—throughout the last few years and I'm sure he saved his clients some mone...

“I haven’t lost my enthusiasm for the belief that if there’s a world tomorrow, it’s going to be a world that needs more commodities, and that this still is the overarching theme of our time...the opportunities for investors are going to be really marvellous.” -- Donald Coxe The latest Globe Investor magazine, The Globe & Mail's investing magazine insert, has a detailed interview with Donald Coxe . For those not familiar, Donald Coxe is a former BMO portfolio strategist who was one of the top commodity superbulls from Canada. He is famous for having off-the-wall theories and not towing the consensus view. For liberals like me, reading him, at times, is equivalent to the pain felt by conservatives reading George Soros ;) It is a well written article by Derek DeCloet and it asks the tough questions, including how Coxe could have been so wrong with not seeing the commodities sell-off. One often encounters many investor profiles that praise an individual's correct calls and com...

I have no strong bullish view when it comes to commodities but I do feel that soft commodities (agriculturals) may do better than the industrials or energy in the future. I want to refer you to an article in last month's Globe Investor magazine presenting a bullish argument for agricultural commodities, and highlight a flaw in the thinking. The article is Canadian so it refers to Canadian securities but agricultrual bulls and bears may still want to read it (although nothing earthshattering was discussed.) The biggest flaw commodity bulls can make--and I see them doing this all the time--is the following: No matter how deep or protracted the economic downturn becomes, the world’s population will still need food on the dinner table each night . So, for some, it’s been a bit of a curiosity that grain prices have been halved in recent months as equities tanked and economies contracted. Tight bank credit and a splurge of investor redemptions forced many hedge funds and other speculato...