Thursday, December 07, 2006

Jessica Simpson model of investing / saut+minyanville

ank an jeff saut und minyanville
full story! http://www.raymondjames.com/inv_strat.htm

Almost 2% of the NYSE’s entire market capitalization has been taken private (read: LBO’ed) since the beginning of this year.

So much money is sloshing around in private equity funds that we now have the Jessica Simpson model of investing“I don’t know what it is, but I want it!”

Private equity funds are looking to “lever” corporate America’s under-leveraged balance sheets and exploit them accordingly.

There are now more hedge funds than there are stocks and 60% of those funds are less than 5 years old. This trend will end with mediocre performance by most hedge funds.

Gold is going up against most assets. And, foreign energy stocks are making new all-time highs and “pulling” U.S. energy stocks higher.

The U.S. has the highest “real” (inflation adjusted) interest rates in the developed world, implying capital should continue to flow here. (which is needed to protect the remaining of the $.....)

If current profit margins, and free cash flows, are sustainable, then the equity markets can continue to levitate. However, a “mean reverting” world suggests we are long-of-tooth in this trend.

for scale plus bigger from hussman http://www.hussmanfunds.com/rsi/profitmarginsh.gif

Sam Zell is not stupid! Therefore, the recent sale of his flagship REIT (EOP/$48.30/Underperform) should be viewed as a watershed event. http://tinyurl.com/yhkquq

Bank indices are deteriorating against the S&P 500 Index (SPX). Since the Financials have roughly a 22% weighting in the SPX, this is troublesome.

If the rumors about a Home Depot (HD/$38.97/Outperform) LBO were for real, the long-dated call-options on HD should have collapsed and that just didn’t happen.

Volatility and Risk are currently being WAY under-priced by the markets

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