Here are some picks from famed value investor Bruce Berkowitz of the Fairholme Fund for the summer.
“Value today is in the oil % gas sector”
“We want mangers who have a significant portion of their families wealth in the business”
He gave two quick picks on CNBC:
1- Canadian Natural Resources (CNQ)
2- Berkshire Hathaway (BRK.A)
In early February I posted on Caterpillar (CAT) “If you absolutely must own this stock and plan to hold it for years go ahead and buy it now. Selling at $67, shares are fairly priced but not priced great. Cat at this level is not a value, at $58 it was but that was before the buyback was announced (causing the run). If my middle of the road estimate is too high then shares fall from here, if it is low they go up. The risk / reward is evenly balanced. To minimize this risk and tilt the balance in my favor I will wait for a great price, one that prices in the potential for an earnings miss. “What price is that” you ask?
Cat is currently another high fastball. Shares are priced fairly for 2007’s growth after the recent run. I need to have shares at about $62 (7% lower) before I pull the trigger. I will add it to the watch list and we will see what happens. Let’s this fastball come down in the strike zone before we swing… “
Cat came close to $62 ($63 and change) but never hit it. I think I may have placed too much emphasis on the US market and set the buy point too low. Management then came out a reiterated their earnings view and the stock has run with the market recently to $78. Today they again reiterated: “Inside the U.S., business is a little weaker than we thought and it looks like outside the U.S. is a little stronger than we thought,” said Mike Dewalt, director of investor relations, at JPMorgan’s Basics and Industrials conference.
Management said it expects 2007 earnings per share of $5.30 to $5.80 on revenue of $42 billion to $44 billion. Looking forward to 2010, earnings are expected to reach roughly $8 to $10 a share on revenue of $45 billion to $60 billion.
Oh well, did not make any money, did not lose any. The good news is the methodology for picking winners is working. I guess in this scenario, I would rather have picked a company and not bought only to watch the stock rise than to pick it and watch it drop like a stone. That would mean there was a problem with the evaluation of the business, here I was just too picky on price. I can live with that.
The USDA released the weekly crop progress yesterday. The results to date look very good for a banner corn crop this year.
Crop Condition
Good to Excellent 2007 = 77%
Good To Excellent 2006 = 70%
Percent Emerged
June 10th 2007 = 99%
June 10th 20006 = 97%
2002-2006 Average = 95%
The news is very good as we have a record crop planted that is ahead of both last year and historical levels in it’s progress.
I do not really know where to go with this. I had to read it a couple of times because I thought I was missing something
Goldman Sachs (GS) today reiterated it’s “buy” rating on shares of Starbucks (SBUX) but removed it from it’s “conviction buy” list. They replaced it on the list with McDonald’s (MCD). Now is Starbucks CEO Jim Donald finally “considering the competition”? I am not sure if this means shares of Starbucks are definitely a buy or not. It sounds like they are saying “we are pretty sure you should buy this, but not really sure.”
This is on the heals of Deutsche Bank’s call last Friday essentially saying the same thing. At least DB has Starbucks rated a “hold” and is not telling people to go buy shares.
Here is where the Goldman call gets odd (as if it is not already). In their note, they say that that they maintain a price target of $43 (almost 60% higher than they are now) based on a multiple of 36 times 2008 earnings (year end October). 36 times 2008 earnings? Even if Starbucks hits it’s goal of 18% earnings growth this year, which is looking less likely everyday, and would be the third consecutive year of earnings growth decline, what make then think investors will pay such a high multiple? That multiple also assumes Starbucks grows earnings 25% next year, a number they have not hit since 2005. What impetus is there for this turnaround?
When you consider coffee prices are increasing, milk prices are at all time highs (and the real reason for the switch to 2% milk) and it is clear to everyone except folks in Seattle McDonald’s is taking customers from them left and right, how could any reasonable person think they are going to report anything but “challenging conditions” in August when they release earnings and give future guidance? If they do manage to meet the earnings estimates, will it be be due to another $500 million share buyback like the one they did in Q1? Again, I will reiterate, I love share buybacks, but Starbucks just cannot afford that much each quarter.
I guess the question we need to ask is not why doesn’t Starbucks deserve a multiple of 36 times earnings, but what justification can anyone give for claiming they do?
Every since my Berkshire (BRK.A) post last month, I have been seeing posts pop up around the internet about it. Most are incredulous that I could possibly for a second doubt Mr. Buffett. To a person their replies recite his track record despite my saying in my opening “No one will will argue or dispute his past success and what he has done for shareholders. Nor will anyone attempt to belittle the atmosphere and honesty in which he runs the organization and the culture he created.” Yet all the replies documented a history I praised. Odd. Yet almost none addressed the actual substance of my post and when they did, they unknowingly reinforced my thesis.
After almost a month of begging those who commented and emailed to give me a rebuttal, only Andy Kern at Berkshire Ruminations took me up on my offer and I thought did an excellent job. I disagree with him, but he did an excellent job none the less. Most folks chose to hide behind a car and throw snowballs. OK.
Let’s address one of those today. I tried to do it on their site but it seems they do not allow comments (at least I could not see where to place one) so it seems to be a bit of a soapbox rather than a blog (at least as I know them). I will preprint the entire post here: Title: Fear vs. Greed in Berkshire Hathaway Their comments are italicized
Every few years someone has the myopic hubris to write an article bashing Buffett’s capital allocation ability and that’s usually a decent sign that there’s a good deal of irrationality in the air:
From ValuePlays: “In the past Buffett has said, “Wait for a fat pitch and then swing for the fences.” Why isn’t he doing that? Considering the investment possibilities Berkshire has, his recent investing record is one of bunts, not big swings. He has also said in the past “if you would not buy the whole company, why would you buy a single share”? Using his own logic, I have to ask, “Warren, if you are going to invest $160 million in Home Depot, why not $1 billion?” The theory still holds, if you would not buy 100 shares why buy one share and if you would buy one share, why not a hundred of them? An investment of less than 1% of his available cash is not “swinging for the fences.”
Why isn’t he swinging for the fences, Mr. Sullivan? Maybe…because he’s actually waiting for a fat pitch before swinging!
The full context of Mr. Buffett’s “fat pitch” analogy, excerpted from the November 1, 1974 Forbes interview is particularly interesting:
“I call investing the greatest business in the world,” he says, “because you never have to swing. You stand at the plate, the pitcher throws you General Motors at 47! U.S. Steel at 39! and nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it.”
But pity the pros at the investment institutions. They’re the victims of impossible “performance” measurements. Says Buffett, continuing his baseball imagery, “It’s like Babe Ruth at bat with 50,000 fans and the club owner yelling, ‘Swing, you bum!’ and some guy is trying to pitch him an intentional walk. They know if they don’t take a swing at the next pitch, the guy will say, ‘Turn in your uniform.'” Buffett claims he set up his partnership to avoid these pressures.
Mr. Sullivan, respectfully, it looks like you’re the owner Mr. Buffett predicted a few decades ago would be saying “Turn in your uniform.”
Posted by Shai Dardashti at 12:01 PM
Now, Mr. Dardashti unwittingly proved my very point. No, I would not be the owner saying “turn in your uniform”. I would be the owner saying “Warren, if you are going to swing, swing for the fences!”
Far from “bashing Mr. Buffett’s capital allocation” I instead begged him to return to the very style that he has trumpeted and made shareholders unbelievably wealthy.
Let’s take his “waiting for a fat pitch” comment. If this is so, then how do we explain his recent investments in Wal-Mart (WMT), Sanofi-Aventis (SNY), Johnson & Johnson (JNJ) and Anheuser Busch (BUD) and Target (TGT)? There are more but this will suffice as he buys and sell securities in Berkshire’s portfolio regularly now so is is not like he cannot “find value” out there. None of them made a dent in Berkshire’s cash position or were substantial investments in the numbers of shares outstanding in any of the companies. All these are recent purchases (last few years), yet none of them follow the tenants both Buffett and Mr. Dardashti espouse above.
I will reiterate Buffett, “If you would not buy the whole company, why would you buy a single share?” It is clear Buffett sees or saw value in these companies when he bought shares. As a value investor, that is the reason he acts. If that is so, then these had to have been “fat pitches” or he would not have bought them, correct? According to his own words, that is the only reason to “swing”, when you get a fat pitch. Now if they were fat pitches, why didn’t he “swing for the fences”? Why? It is not a function of the number of shares available to buy as these all trade millions of shares a day. It is not a function of him running up against company induced limits like he did with his huge purchases of Coke (KO) and American Express (AXP) which make up over 30% of Berkshire’s portfolio. It is just a function of him taking “half swings” at shares. This was my complaint in my original post. Why not buy 5% or 10% of WalMart? That would have been a move from the Buffet of old and he easily could have done it.
Maybe these were not “fat pitches”? Well then why would be buy them? That is the antithesis of everything he has ever said!!
Currently Berkshire holds almost 40 positions in publicly traded companies and it’s main holdings have essentially been that way for almost 2 decades now and most new positions, despite the ability to purchase far more almost always amount to less than a 3% of Berkshire’s portfolio, again, a BUNT. I am not saying to sell the core holdings, for tax reason alone that would be a unwise move, I am saying “if you are going to swing, swing for the fences”. He has the ability but chooses not to.
Both Munger and Buffett have said their favorite holding period “is forever” yet again, recent actions contradict that as positions are trimmed every quarter.
I will conclude by letting Warren make my point. In his own words:
“Our policy is to concentrate holdings. We try to avoid buying a little of this or that when we are only lukewarm about the business or its price. When we are convinced as to attractiveness, we believe in buying worthwhile amounts.” Warren Buffett, 1978 Berkshire Hathaway Letter to Shareholders
“…if you know how to value businesses, it’s crazy to own 50 stocks or 40 stocks or 30 stocks, probably because there aren’t that many wonderful businesses understandable to a single human being in all likelihood. To forego buying more of some super-wonderful business and instead put your money into #30 or #35 on your list of attractiveness just strikes Charlie and me as madness.” Warren Buffett’s comments at the 1996 Berkshire Hathaway Annual Meeting
“The strategy we’ve adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it. In stating this opinion, we define risk, using dictionary terms, as ‘the possibility of loss or injury.” Warren Buffett, 1993 Berkshire Hathaway Letter to Shareholders
That is the Warren Buffett I invested in and made wonderful amounts of money with. Warren today is contradicting Warren, it is not me saying it, it is him.
So, if you are attempting to become the world’s leading bio-products company, who would you hire? How about the guy who coordinated all these programs for the Department Of energy?
Todd A. Werpy joins Archer Daniels Midland Company (ADM) in the newly created position of VP, Biofuels & Biochemical Research, effective June 11, 2007.
Werpy comes to ADM from the U.S. Department of Energy’s (DOE) Pacific Northwest National Laboratory, one of the DOE’s nine multi-program national laboratories,where he has served as relationship manager since 2005.
As vice president, biofuels; biochemical research, Werpy will be responsible for leading ADM’s new research into second generation biofuels and biochemicals. He will report to Tom Binder, president, Research.
“Todd Werpy brings additional expertise to our BioEnergy research and development team,” said ADM vice president and chief technology officer Michael Pacheco. “He has exceptional knowledge of developing technologies for the conversion of renewable feedstocks to value-added chemicals, including biofuels, gasification, enzymes and fermentation. We are confident he will make a strong addition to our team.”
As relationship manager at the Northwest National Laboratory, Werpy coordinated the DOE’s relationships with the Office of Biomass Programs and various industry clients, as well as leading the development of proposals and acquisition of funding for the biobased products program.
From 1998-2005, he served as senior program manager where he directed and managed all research programs in the biobased products area. He is the co-author of several patents in the area of chemical conversion for creating value-added products from renewable resources.
From 1995-1998, Werpy served as director, research and business development for
the National Corn Growers Association where he developed the organization’s research and business development strategy. In this role, he worked with the DOE to establish the first formal program in renewable chemicals from alternative feedstocks.
Werpy also served as a senior research scientist at Michigan Biotechnology Institute where he worked with a team of scientists and engineers to develop new processes for converting biomass. Werpy received a Ph.D. in chemistry from Michigan State University and a Bachelor of Science degree in chemistry from Southwest State University.
Archer Daniels Midland Company (ADM) is the world leader in BioEnergy and has a premier position in the agricultural processing value chain. ADM is one of the world’s largest processors of soybeans, corn, wheat and cocoa. ADM is a leading
manufacturer of biodiesel, ethanol, soybean oil and meal, corn sweeteners, flour and other value-added food and feed ingredients. Headquartered in Decatur, Illinois, ADM has over 26,000 employees, more than 240 processing plants and sales for the fiscal year ended June 30, 2006 of $37 billion. Additional information can be found on ADM’s Web site at http://www.admworld.com/.
SOURCE Archer Daniels Midland Company
This will not get much press but is quite possibly the most important thing ADM has done this year. This guy knows what everyone is doing in the biomass industry, who is working on what, what is or is not working and do you think ADM will have trouble getting any gov’t funding for it’s efforts? Already the world’s leader in ethanol, biodiesel and biodegradable plastic production ADM is now taking step to assure that lead will only increase. In the past ADM has alluded to cellulose ethanol being economically viable in a couple of years. They recently received DOE funding for a project in conjunction with Purdue University for cellulose research and we have the hire of Werpy. This guy was not hired to “start” something but to get ADM to the finish line.
In all fairness to the Apple (AAPL) lover’s out there whose feeling I may have hurt, here is a pro-apple article from Frank Lara Jr. at the Stockmasters
The iPhone. I could end the article right there, you’ve all seen those commercials, and they are nothing
short of amazing. As consumers, we all know that the first new releases of the iPhone might be buggy, they’ll figure out the quirks, then on about the third release it’s going to be a stellar product. But let’s face it, this is Apple (AAPL) we are talking about and everything from their MacBooks to iPods are great performing inventions. Those commercials for Macs vs. PC’s really hit home and it’s true, how often do you hear about people complaining about their Macs or the blue screen of death?
Last week UBS reiterated Apple Inc. (AAPL) with a “buy” rating while Piper Jaffray raised its price target on the stock to $160 per share. Joseph Hargett at SchaeffersResearch.com pointed out that the Dow Jones Newswire listed several (14 to be exact) large blocks of AAPL shares crossing the tape last week and all of the blocks numbered 100,000 shares or more. Everyone is getting excited about the iPhone launching at the end of the month, and I’m betting the powers that be send Apple’s stock to $160 sooner than we all think.
Personally I think buying Apple’s stock is ridiculous at this point, but just when you think the stock is going to fall they release another product, get an upgrade, or Steve Jobs parts the Red Sea and everyone cheers and throws money at him. I like the plays from the iPhone that include AT&T (T) and Research in Motion (RIMM), everyone on Wall Street has mentioned those picks including Todd Sullivan who wrapped it up beautifully with a ribbon on top (read Todd’s reasoning).
AT&T (T) is the exclusive carrier of the iPhone and will gain wireless subscribers hand over foot. Just wait until AT&T starts selling more services from the iPhone and we will all watch AT&T morph into the largest corporation on the planet that eventually builds the Death Star. So that would make AT&T’s CEO Randall Stephenson the Emperor and CFO Richard Linder be Darth Vader – I knew they had it in them.
If AT&T is the “Dark Side”, sign me up for Sith training school (along with Overstock.com’s Patrick Byrne) because it’s going to be a galactic-kegger (thank you Rip Torn from MIB) this year and next at AT&T thanks to the iPhone partnership.
Research in Motion’s (RIMM) products will serve as an alternative to customers not on AT&T’s (T) wireless network. The devices also sell for less than $200, versus iPhone’s incredible $500 to $600 price tag. RIMM could also benefit from any disappointment or delays with the iPhone. Let me add the mighty Jim Cramer (the true Sith Lord) has given his blessing on AT&T and Research in Motion as iPhone plays, so believe me America, it’s on.
So Apple shares sit at around $125 a share, it’s hard to believe isn’t it? But they are unlike any company in their field, their technology, innovation and products have us all screaming for more. If they build a Mac compatible blender I bet they could take out the Juiceman overnight (wouldn’t the infomercial’s be fun for that?) Come June 29th, we all know shares of Apple will not be falling on that day, oh no, they’ll be screaming. I would love to short Apple right now, but it’s a losing battle, maybe a year from now, but Apple Inc. is a hard hitting technology machine that is going to push its stock to new levels come July and August.
Using the power of the Force, Piper Jaffray’s Gene Munster predicted Apple will sell 45 million iPhones by 2009. Sound a bit much? I don’t think Pet Rocks sold that fast back in the 70’s but I could be wrong. Steve Jobs has projected sales of 10 million iPhones in its first year, so it’s reasonable to say the iPhone is going to do well, even if sales come in below expectations. Then again, iPhone sales may blow everyone away like the superlaser from the Death Star, it could happen — do you think Steve Jobs has plans for the iDeathStar?
Better trademark that name ASAP. As much as I hate to say it, Apple is on fire, and will continue to be for months to come. But just like any fire, all it takes is a little water to cool the blaze, and you can bet Microsoft (MSFT) is standing in the corner with a big bucket of water.
CNBC reports that Eddie Lampert, Chairman of Sears Holdings (SHLD) is raising money through his former firm Goldman Sachs (GS)for a hedge fund. For folks looking for him to begin to spend Sears’ cash hoard, this is real good news.
It clearly means he sees investments he wants to make out there. I my opinion it smells of him wanting to do a mega deal and is adding dollars to his coffers. Between the money he raises, the $4 billion in Sears cash he has available and multiples of that in potential additional debt, he will now be able to do a much larger deal. It was not clear if this was a new fund or more cash for ESL Investments, the fund he has racked up 29% annual return for over a decade with. No matter either way. It does give Lampert the ability between the various entities he controls to take a controlling stake or buy completely a much larger company now. I would love to see him get his hands on the Gap (GPS) now. Still no new CEO there, sales have stabilized and great value in both cash on hand and real estate. He could do wonders there.
Coming off the heals of his recent Citi (C) purchase and the revelation he is back buying Sears shares, it is clear he is in a buying mood.
The fund requires a $25 million minimum investment, a 5 year lock up and a 6 month notice to withdraw. I am thinking about investing but can’t seem to find that $25 million I had laying around this weekend.
As a Sears shareholder, it does make thing very interesting.
Upgrading it’s rating on McDonald’s (MCD) shares to “buy” from “hold,” and bumping it’s price target to $61 from $45 (20%) saying the company “is poised to capitalize on global economic growth and key consumer trends in the United States”, Deutsche Bank enlightened clients to the obvious in a note Friday. Yeah. If I was a “client” I would be asking, “You are just only getting this now?”
Just in case “clients” were not mystified enough, the firm cut its price target on Starbucks Corp. (SBUX) shares to $32 from $37, saying “The downside of McDonald’s getting coffee right is material to both same-store sales and the global growth opportunity,” they said. “We see several obstacles to higher returns and valuation for Starbucks.”
The timing of this for investors is nice as Starbucks shares now sit at multi-year lows and McDonald’s sits at multi-year highs.
“McDonald’s sits at the crux of key positive trends in the U.S. restaurant industry, including Quick Service Restaurant resurgence, an expanding beverages opportunity, and a health/wellness slant (with a focus on women and kids), Deutsche Bank said. No kidding!?!
I have been stumping this very line of thinking since January here, here and here and other times but I think you get the point. In the meantime Starbucks shares have fallen over 20% to levels not seen since October 2005 (they will fall further) and McDonald’s shares are up by some 20%. If you are a Deutsche Bank client, you may want to be asking them what happened.
Apparently the only person who is farther behind the curve here is Starbucks CEO Jim Donald
Now that we are nearing the 1/2 way point in 2006, let’s take a look at the stocks that make up the Dow Jones Industrial Average (DJIA) and see who has not benefited from the record breaking run so far this year.
Value if $1,000 Invested at the end of 2006 (largest loser first):
1- Johnson & Johnson (JNJ)= $953
2- Home Depot (HD)= $956
3- Citigroup (C) = $977
4- Proctor & Gamble (PG) = $992
5- Disney (DIS)= $988
Not bad. 5 out of 30 stocks in the red. The big winners? Caterpillar (CAT) at $1,292 and Alcoa (AA) at $1,355
The FCC announced it is “seeking comment ” on the proposed merger between the only two satellite radio companies in existence. Am I the only one who wonders they are even bothering?
Based on recent decisions like the one in which the FTC contested the Whole Foods (WFMI) and Wild Oats (OATS) $560 million buyout, I cannot fathom a scenario in which the only two companies in an industry are allowed to form only one. While I feel the Whole Foods opposition is nonsensical, the fact there is opposition to it is what it is. The merger between XM (XMSR) and Sirius (SIRI), valued at $4.7 billion is currently being opposed by both consumer groups and the National Association of Broadcasters and really, I cannot find anyone who favors the merger except folks and shareholders of XM and Sirius.
For a little history we only need go back to the attempted Direct TV (DTV), Echostar (DISH) merger a few years ago. There we had two companies attempting to merge to create more competition against other pay TV companies (cable) like Time Warner (TWC) and Comcast (CMCSA). . The FCC opposed and squashed it because they said the merger would eliminate competition in rural areas and the same scenario holds true in this instance. Also hurting this attempt is that we have no pay radio competition at all for the combined entity to argue they need to merge to help combat in other areas. The profitability with the two companies is not due to lack of consumer interest, it is due to moves like giving Howard Stern hundreds of millions of dollars to essentially do what he did for for a fraction of the price on free radio. Heck, if they had just waited the guy probably would have pulled an Imus soon enough and got himself tossed off the air anyway, then they could have picked him up on the cheap. The only difference now is that without the specter of the FTC coming down on him at any minute, the cache and risk is gone and so all you have is a middle aged guy swearing on the radio, it’s get boring after about 3 minutes. There is a reason he has not been in the news the last 2 years, nobody longer cares.
This attempt will be squashed and consumers will win in the long run. Short term, shareholders will get hit.
Well, it is finished, my interview on Wall St. Radio. Click on this link to hear it..
I have put a permanent link on the blog to hear the other ones.
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The Philip Morris USA unit of Altria Group (MO) has decided to launch a smokeless product under the Marlboro name. In some corners this is being called “a substantial risk”. Not only is it not a risk, it is the closest thing to a slam dunk. Here is why.
Almost forty percent of the cigarettes sold in the U.S. are Marlboros. In order to truly appreciate the dominance Marlboro has on the industry, one had to consider #2, is only at 6%!! Now you also have to consider that it has been this way for almost 1/2 a century.
Let’s talk about smokers. There isn’t a more brand loyal lot out there than tobacco users, except for possibly scotch drinkers. Having both smoked and chewed (many years ago), I am speaking from experience. If you smoke or chew a brand, that is your brand, period, end of story. Only under the most extreme circumstances will you switch and it is doesn’t have anything to do with price, it has to do only with availability. If you cannot get your brand, you will use another and that is the only reason. This is the why Altria has been the single best investment in the history of the US stock market.
Now the new product. Smoking rates have decreased steadily for some time now while smokeless tobacco use is increasing 3%-4% a year and up until this point, Altria has not been in this market. The new product can be used in offices and restaurants since it does not violate any of the smoking bans enacted in recent years and it is not “wet” like other forms of smokeless tobacco so users do not have to spit juice. In April I posted about the product not then labeled under the Marlboro brand name and now that it is, I am more excited that ever. Chew users will gravitate to this brand as they can use it anywhere and not have to carry a plastic Coca Cola bottle around filled with spit. But that is not the best part. The kicker is: Since it is a dry product, smokers will use it when they are inside and do not want to have to go to the “smoking area” and be looked down upon like lepers. They can now sit at their desk’s and get their fix, no one will be any wiser and there will be no lost work time. There will also be the added bonus of not smelling like an ashtray all day (it’s the little things). What does all this mean? More tobacco sales for Altria. Simply put, you have the number one brand of tobacco giving it’s users the ability to now use their product in places they now cannot. Perhaps this is why the tag line “Flavor Anytime” is being tossed around. Ka-Ching..
So let’s address the elephant in the room. Cancer. Snus is widely used in Scandinavia, where numerous studies proved that it offers smokers an alternative way to get the nicotine and taste of cigarettes with less risk of cancer. A safer product that can be used everywhere smoking is banned and is spit free. Where is the problem?
Investing morality. When god created man he did so in his own image. This means he gave us “free will”. We are free to drink, smoke, gamble, eat lousy foods, drive like a-holes and smash our hands with hammers so should we choose to. Now there may be ramifications to any of those actions, but we are free to do them. Folks are free to smoke and I choose to watch my kid’s college funds grow from it, guilt free. I stopped, so can they.
Ignoring a great investment on moral grounds is just foolish. Profit from it and do something good with the money if you are so inclined. You will never stop smokers by not buying Altria shares. If you do buy them and profit you may actually be able to stop young smokers by funding programs at local schools. Avoiding shares because they “sell tobacco” is just putting your head in the sand and plain stupid. Poverty never cured society or it’s ills, wealth has cured plenty.
Will it sell? Will Apple (APPL) fans buy iPhones (they would buy a hell of a lot more at a reasonable price)? Will Diageo’s (DEO) Johnny Walker Black users buy Blue? Will Star Wars fans line up around the block for the next installment?
Need I go on?????
Here we go. Is it just me or are the stories here getting better and better?
1- Sell Side Cliches– Market Prognosticator
2- Bestinver’s Paramus: Pitching Tips To Buffett Bloomburg
3- Spinoffs– Forbes
4- Lampert Buying More Sears Shares – ValuePlays
5- SAC Capital Accumulates 5.2% Stake in FreightCar America – Streetinsider style=”text-align: left;”>
You may view the whole list here:
I have receives some requests to not include articles from the MSM (main stream media) and only include those written by bloggers and the like. I go both ways on it as I am partial to bloggers but do recognize any information no matter where it comes from is valuable.
I am open to suggestions
Alan Greenspan was arguably the country’s most powerful financial cop in his 18 years as chairman of the Federal Reserve. But Mr. Greenspan’s regulatory record has received far less scrutiny than his management of the economy.
Article Originally Published in The WSJ
That may be changing. A former colleague says Mr. Greenspan blocked a proposal to increase scrutiny of subprime lenders under the Fed’s broad authority. That added scrutiny might have helped curtail questionable lending practices now blamed for soaring defaults by mostly low-income borrowers. Democrats in Congress are now turning up the heat on regulators, especially the Fed, for failing to do more to stamp out those practices, and the Fed appears increasingly likely to overhaul its approach.
Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr. Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies.
“I would have liked the Fed to be a leader” in cracking down on predatory lending, Mr. Gramlich, now a scholar at the Urban Institute, said in an interview this past week. Knowing it would be controversial with Mr. Greenspan, whose deregulatory philosophy is well known, Mr. Gramlich broached it to him personally rather than take it to the full board.
“He was opposed to it, so I didn’t really pursue it,” says Mr. Gramlich, a Democrat who was one of seven Fed governors.
Greenspan’s Response
Mr. Greenspan, in an interview, says he doesn’t recall a specific discussion of the idea but confirmed his opposition to it.
There is “a very large number of small institutions, some on the margin of scrupulousness and very hard to detect when they are doing something wrong,” says Mr. Greenspan, who retired in February last year. “For us to go in and audit how they act on their mortgage applications would have been a huge effort, and it’s not clear to me we would have found anything that would have been worthwhile without undermining the desired availability of subprime credits.”
Mr. Greenspan adds that borrowers might get a false sense of security from a lender that advertised itself as Fed-inspected.
Ben Bernanke, Mr. Greenspan’s successor, told Congress in March that he has asked his staff for “a complete review of our powers and practices” in examining holding-company units. A Fed spokesman this past week said “that review is under way.” The Fed Thursday will conduct a public meeting on steps it could take to strengthen laws governing subprime lending.
On June 29, the Urban Institute will release a book by Mr. Gramlich, “Subprime Mortgages: America’s Latest Boom and Bust.” It argues, among other points, that all lenders affiliated with banks and thrifts could “be brought under the same supervisory conventions as their parents seemingly without major culture shock.” It wouldn’t be a huge undertaking by policy makers, and it would lead to more uniform, stringent practices.
Mr. Gramlich, who is being treated for cancer, says, “There are certain things that unsupervised lenders do that a Fed supervisor would not let you get away with,” such as not escrowing taxes and insurance, not verifying an applicant’s stated income, or assessing the borrower’s ability to repay based on an introductory “teaser” rate. But he said the proposal’s reach would have been limited by the fact that many lenders would still have no federal supervision.
At the time President Clinton appointed Mr. Gramlich to the Federal Reserve Board, he was a University of Michigan academic who had served on commissions studying Major League Baseball and Social Security. Mr. Greenspan put him in charge of the board’s community and consumer affairs committee.
Mr. Gramlich often pushed the Fed to expand fair-lending and consumer-protection rules, winning the admiration of consumer groups that often accuse the Fed of being too supportive of the financial industry. Despite their differing philosophies, Mr. Gramlich says he got along well with Mr. Greenspan, who supported him on most initiatives, especially those involving increased disclosure.
Nonetheless, his remarks represent a rare insider’s criticism of Mr. Greenspan’s regulatory record. Mr. Greenspan says he didn’t get heavily involved in regulatory matters in part because his laissez-faire philosophy was often at odds with the goals of the laws Congress had tasked the Fed with enforcing.
“I basically listened to the staff and tried as best I could to support the staff’s recommendation,” he says. He notes that with one exception, on a highly technical issue, he always voted with the board majority.
Still, Mr. Greenspan’s views did color the regulatory environment, facilitating growing concentration in banking and a hands-off approach to derivatives and hedge funds. That approach, broadly shared by both the Clinton and Bush administrations, is coming under increased scrutiny.
The Fed has taken heat recently for not more vigorously using its power to write consumer-protection rules for the entire industry, not just the lenders it oversees directly. Before it proposed new standards last month, the Fed hadn’t conducted a broad review of its credit-card disclosure requirements since 1981 — six years before Greenspan took office.
In 2005, 52% of subprime mortgages were originated by companies with no federal supervision, primarily mortgage brokers and stand-alone finance companies; 23% by banks and thrifts; and 25% by finance companies affiliated with banks and thrifts, including units of bank holding companies.
According to Inside Mortgage Finance, an industry publication, in 2006 three of the eight largest subprime mortgage lenders were units of bank holding companies. The Fed is one of four federal regulators that supervises deposit-taking banks and thrifts. It also has oversight over bank holding companies, with the discretion to delegate authority over their operating units to other agencies.
Thus the Fed generally leaves regulation of nationally chartered banks to the Office of the Comptroller of the Currency; of securities-dealer units to the Securities and Exchange Commission; and of consumer-finance companies to the states.
However, state regulation is generally considered inconsistent and usually less rigorous than federal oversight. Moreover, 18 states offer some form of exemption from state regulation to bank holding company units, according to the Conference of State Banking Supervisors.
The Fed periodically examines the finance-company units to ensure that they pose no threat to the “safety and soundness” of their deposit-taking affiliates and to assess their controls for things like money laundering. In special situations, it does scrutinize their practices for compliance with consumer-protection laws. In 2004, it fined Citigroup $70 million for alleged abuses by its CitiFinancial unit.
But Mr. Gramlich fretted that extending those standards to holding-company units would create an unlevel playing field unless stand-alone lenders were subjected to the same thing.
Jim Strother, general counsel for Wells Fargo & Co., said oversight of bank holding company units isn’t “where the need is,” noting the Fed does examine Wells Fargo Financial, a major subprime mortgage lender. “The gap is for companies that aren’t in the banking system at all.”