Can Turtles Fly?

(Update: Here is a detailed article by New York Times on what the FCC is doing) I haven't posted much lately since I didn't find anything worth posting. The markets are selling off, with big time weakness in financials, and I wonder if this is the start of a big correction or not. Oil prices are hitting highs and at some point they should start impacting the economy. Anyway, it looks like Tribune (TRB) is under discussion at the FCC . Commission Chairman Kevin Martin, a Republican, this week said he wants to resolve by December whether to ease restrictions on how many media properties a company can own in a single market... But FCC Commissioner Michael Copps, a Democrat, on Thursday said Chairman Martin "has indicated he won't grant any waivers pending a vote on major revisions of the commission's media ownership rules," the paper said. ""To say we have to change the media ownership rules so we can get the Tribune deal done does not strike me as ....

Paul Price wrote an article titled The BIG MISTAKE Business schools teach their students to make every day that I found insightful. I don't really know if his argument that one should be looking for variables that change with the price is as unique as it seems. The reason people, especially value investors, look at static variable is because they want to pick a value for the firm while comparing the stock price to that. In any case, what I find useful is his emphasis on looking at valuation measures such as P/E and P/BV relative to the normalized values for that company . A lot of people, including me, tend to look at valuations relative to competitors and we don't pay enough attention relative to the company's own valuations in the past. I guess this is a newbie mistake and something I should avoid making. I made this mistake once before* but I need to keep it at the front my head. (* The mistake you can make by looking at valuations relative to competitors is that the m...

A stock dropping 25% isn't necessarily big news but when it happens to a large-cap with a moderate P/E, it is worth paying attention. In this case, it happens to be Ericsson (ERIC), the largest communications equipment provider in the world. (source: stockcharts.com) I don't know much about this company, other than some tidbits when I was looking at companies like Nortel, so I don't know how accurate the numbers in Yahoo Finance are. According to Yahoo Finance, ERIC has a trailing P/E of 11.3 and forward P/E 10.7 (likely to be way off given the recent news), P/Sales of 2.3 and P/Book-Value 3.3, with a a market cap $49.5 billion. Ericsson trades at a lower multiple than most of its competitors, such as Lucent-Alcatel, Nortel, Motorola, and Nokia (not all of these are direct competitors). All the communications equipment providers are running into headwinds but it's worth watching them. Clearly the capex that some of these technology outfits have been expecting haven...

Steven Vannelli has a very good post on the GaveKal forum outlining the abilities of the Federal Reserve. The post provides a simple explanation of what often seems complicated. In essence, the Federal Reserve can: Change bank reserve requirement (rarely done and has the most impact) Control either the discount rate and/or the Federal Funds Rate (Fed Funds rate is the one that really matters most of the time) Use Open Market Operations to control the Fed Funds Rate That's pretty much all that the Federal Reserve does. Nothing fancy; pretty basic. Some believe that the Federal Reserve has immense power and controls the market. Although the Federal Reserve, like central banks in other countries, influences the economy, I, on the other hand, believe that the Federal Reserve is simply a player in the market. My belief is that the Federal Reserve tends to lag the economy and market forces are stronger than any central bank. Unlike many central banks in other countries, the Federal Rese...

I think homebuilders (and related sectors) are a good contrarian area to investigate. I have indicated in the past of my interest in the Pulte Homes bonds (PHA). So I have been researching this sector recently and I came across an amazing short ratio for Beazer homes (BZH). Beazer (BZH) is a struggling homebuilder that is one of the riskiest around. A lot of their customers are in the low-income market--the segment that has been hit hard by subprime problems and a slowing economy--so they are going to have a tough time navigating the waters for the time being. I just noticed that, if Yahoo Finance numbers are to be believed, as of September 11 2007, BZH has a 80% of their float shorted!!! This is an unbelievable number for a company that is not closely held. The short ratio, however, is low at 9.4 since there is heavy volume in this stock (short ratio is the number of days that it would take to cover the short if all the trading volume were used to cover). I have no idea how much of ...

I hate to be beating a dead horse but it's worth revisiting the Chinese equity bubble once again. For anyone that ever wanted to see what a bubble is, they simply need to follow China's stock market. Valuations in the Chinese market may have passed the NASDAQ and Nikkei peaks. As Angela Barnes of The Globe and Mail reports : Last week, UBS Securities noted that the Shanghai composite's P/E of 68 times on trailing earnings was just 12 per cent shy of the average for the last three "bubble highs" - the 68.3 times for the Nasdaq composite, the 73.4 times for the Nikkei and the 86.9 times for the Nasdaq 100. (The Shanghai composite has risen since then, which has pushed its year-to-date advance to 121 per cent.) I don't know what the latest numbers are but I would hazard a guess that the P/E ratio has overtaken the Nikkei. I am not sure one can trust some of the earnings from the Chinese corporations (their accounting is weak) so the P/E value may be understated. ...

(image courtesy: www.amazon.com ) Tomorrow's Gold: Asia's Age of Discovery by Marc Faber Published in 2002 I read this book a few years ago and found it is quite fresh. Marc Faber, aka Dr. Doom, is a superbear who runs his operations from Asia. Like most bears, being bearish means that you are bullish on something. In his case, he happens to be bullish on commodities, gold, and Asian in general. This is what this book is about. I am heavily influenced by Marc Faber. I heard his (along with Jim Rogers) interview by Jim Puplava on financialsense.com broadcast a few years ago and have been interested in his views ever since. I actually became bullish on commodities because of Marc Faber (and Jim Rogers). Unfortunately--or fortunately--I got out last year after becoming concerned with valuations. I have since switched to a more value-oriented focus, and away from sector rotation. Nevertheless, I find Marc Faber's comments unique and well worth listening to. The book presents a...