Can Turtles Fly?

Bloomberg's headline says that China's real estate bubble has burst in the bond market but I'm not so sure. In any case, here is the story : Dollar bonds sold by China real estate companies this year are the worst performers among Asian non-financial corporate debt denominated in the U.S. currency amid concern the nation’s property market is overheating. Yields on the $3.9 billion of bonds issued by Kaisa Group Holdings Ltd., Country Garden Holdings Co. and seven other developers since January widened by an average 2.26 percentage points relative to Treasuries as of last week, according to data compiled by Bloomberg. That’s more than the 2.05 percentage- point increase in spreads for the seven dollar-denominated bonds sold by other companies in Asia outside Japan. Investors are demanding greater yields to lend to China property firms, a sign they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending. ###   The ...

Apple's Market Cap Surpasses Microsoft's (source: " A sour taste - Microsoft loses its top spot to Apple ," The Economist, May 27, 2010.) In what would have been unthinkable 10 years ago, Apple's market cap surpassed Microsoft to become the second most valuable publicly-listed company in the world (behind ExxonMobil.) Apple and Microsoft were major rivals in the past but don't really compete directly anymore. Of course, using other metrics the gap is still fairly large (for instance, as the chart shows, Microsoft's earnings are still over 2x higher.)

There is a long-running debate in the value investing community over whether technology, Internet, and new media companies can be considered as value stocks. Traditionalists tend to believe that these emerging industries cannot generally be considered as value stocks given their uncertain earnings, seemingly high valuations, and the lack of long-term history. There are other value investors, such as Bill Miller—admittedly some don't consider him a value investor—who claim that technology/Internet/etc companies can be value stocks depending on the purchase price. Of course, ultimately a value investment is based on buying at a low valuation and that is in the eye of the beholder. Recently, there has been some debate over Google. Is it really a value stock? GuruFocus recently picked up an opinion by Ockham Research suggesting it was. Vgm , one of the respondents to that story, referenced Glenn Greenberg's thoughts on Google and I thought I would quote it. For those not ...

I ran across an article in Barron's —it should be free—detailing a bullish case for Icahn Enterprises (IEP). I don't usually share the opinion of mainstream publications but this is an interesting opportunity. I don't invest in companies like these but I think some of you may find it worth researching. Here is a snippet from Barron's (bolds are by me): ICAHN ENTERPRISES, A diversified investment company run by Carl Icahn, offers the little guy a good way to play alongside the Wall Street billionaire. Structured as a limited partnership, the company has a $2 billion stake in Icahn's hedge fund, Icahn Partners; $1 billion of real-estate holdings, including two office towers in Atlanta and Dallas; $840 million of cash, and $1.6 billion of investments in other public companies, including a 75% interest in auto-parts maker Federal Mogul (ticker: FDML). Shares of Icahn Enterprises (IEP) trade for 33, far below a 2007 peak of 134. They also sell at a discount to the c...

Unless I'm mistaken, we may be witnessing the first AAA sovereign rating downgrade since the financial crisis erupted in 2007 (I haven't followed the news enough to know if another AAA was cut—anyone know?.) Fitch downgraded Spain from AAA to AA+ today. S&P downgraded Spain a month ago and now with the Fitch downgrade, a majority of the rating agencies have cut their rating. The Globe & Mail reports on the story : Fitch Ratings cut Spain’s credit ratings to double-A-plus from triple-A on Friday, saying its economic recovery would be more muted than the government forecast due to strict austerity measures passed this week. The downgrade follows a cut by another agency, Standard & Poor’s, last month and heaps more pressure on the government, battling to reassure markets its fiscal, political and social woes will not end up in a Greek-style debt crisis. “The downgrade reflects Fitch’s assessment that the process of adjustment to a lower level of private sector ...

Even though bond yields are somewhat low—10-year US bond is yielding a little over 3%—inflation expectations remain quite high IMO. Although not perfect, one of the few market-based measures of inflation expectation is the TIP spread (this is the difference between a "normal" bond and an inflation-indexed bond of same maturity.) The following chart plots the spread as of today (I notice a typo in the title but oh well :| ).

The British have a weird sense of humour—am I the only one who does not find Monty Python and the countless British sitcoms funny?—and I'm all for avant-garde and out-of-the-box designs and styles... but even I can't get over the offiical mascots for the London 2012 Olympics. Yikes. Many children, not to mention athletes, are going to have nightmares after encountering these mascots ;)