Archive for February, 2010

  • Tobin Smith on ChinaTel Group (CHTL)
    , February 28th, 2010 at 10:46 pm

    Tobin Smith, formerly of ChangeWave Research, now of NBT Equity Research has a new reseach piece on ChinaTel Group (CHTL). Full disclosure: I own 1,000 shares of CHTL:
    Strong Buy $7-$8 target 2011 (with new deployment schedule/pro-forma TBD)
    PIPE Funding: $3.01 price per share, $640M total, $1.33 billion private market value
    Tobin Smith, Chief Research Officer
    With no indication from ANY of the funding parties or CHTL of a change in the equity funding schedule, I want to change the focus of the CHTL discussion to the POST-funding scenario.
    I can report my conversations with The Isaac Organization that indicate a willingness on their part to accelerate their equity contribution amount prior to March 30/$10M schedule.
    Reports from those close to the Excel Era group indicate ZERO funding issues or delays. Minor correction: the founder and Chairman of Excel Era and its holding company is Charles WANG, not Li. The Wang family is a very old, very prosperous and very private group. I will have the pleasure of interviewing Mr. Wang in the very near future and will bring what I can to light about their company and its relationship with ChinaTel Group, Inc.
    The Isaac Group move is important in that WITH the $240M of new stock purchased by Excel Era and say $40-$50M from the Isaac Group before March 30, CHTL (by OUR estimates) will have MORE than enough capital in the bank to complete up to a 15 city simultaneous deployment over the next 12-18 months.


  • Ford Motor: My Stock of the Decade
    , February 26th, 2010 at 12:00 pm

    With two months already under our belt this decade, I decided to get a jump on things and announce that Ford Motor (F) is my Stock of the Decade. You heard it here first.
    Now you may be thinking this is a bit pre-mature. I understand, but lets it’s never too early to get on a good story.
    While every business journalist writes a new column every time someone at Goldman Sachs hiccups, they’re ignoring one of the most remarkable business turnarounds in recent history. Just 15 months ago, shares of Ford reached a low of $1.01. The stock is currently close to $12 today.
    Most impressive of all, despite a nasty recession Ford is actually making a profit. Not a big profit, but a profit nonetheless. More money is coming in then going out. These days, that’s something to notice. Also, Ford hasn’t taken a dime in bailout money.
    Not only has Ford made a profit in its last two quarters, but the company has beaten Wall Street’s earnings forecast for the last four quarters in a row. In November, Wall Street was expecting a loss of 12 cents a share. Instead, Ford posted a profit of 26 cents a share. That impressed Wall Street so much that they expected 26 cents a gain when Ford reported earnings again a month ago. This time, Ford said it made 43 cents a share.
    In 2006, the company unveiled its “The Way Forward” strategy designed to get the company moving again. Later that year, Bill Ford stepped down as CEO and Alan Mulally came in. Shortly after he joined, he bet everything—and I mean everything—on a gigantic $23 billion loan. They even had to put up Ford’s name as collateral. So far, it’s working. The company has slashed its workforce in half and shut down plants. Mulally sold off brands like Jaguar, Land Rover and Aston Martin and concentrated on smaller cars.
    Ford’s 7.45% bond due in 2031 had a yield to a maturity of 33.2%. Now it’s down below 9%. Still, Ford has a long way to go. Mulally said they won’t be solidly profitable until next year. But if all goes well, Ford could easily be a $20 stock.

  • Krugman on Core Inflation
    , February 26th, 2010 at 10:09 am

    Core inflation is one of those topics that people love to get angry about. I recently had a post mentioning that core inflation had its first substantial fall since 1982. When this was picked up by Seeking Alpha, several commentors wrote to say that of course prices are rising as anyone in the real world can plainly see.
    Paul Krugman writes that this misses the point of what core inflation tells us:

    First, let me clear up a couple of misconceptions. Core inflation is not used for things like calculating cost-of-living adjustments for Social Security; those use the regular CPI.
    And people who say things like “That’s a stupid concept — people have to spend money on food and gas, so they should be in your inflation measures” are missing the point. Core inflation isn’t supposed to measure the cost of living, it’s supposed to measure something else: inflation inertia.
    Think about it this way. Some prices in the economy fluctuate all the time in the face of supply and demand; food and fuel are the obvious examples. Many prices, however, don’t fluctuate this way — they’re set by oligopolistic firms, or negotiated in long-term contracts, so they’re only revised at intervals ranging from months to years. Many wages are set the same way.

  • Maxine Waters Attempts Monetary Policy
    , February 25th, 2010 at 11:57 am

  • David Weidner’s About-Face
    , February 25th, 2010 at 10:18 am

    There’s a very nice article in today’s WSJ by David Weidner on some of the leading financial blog sites.

    These homespun sites break news, offer wit and insight that wasn’t even available a few years ago. Some have risen to the point of being must-reads on a daily basis.

    Unfortunately for Mr. Weidner, Abnormal Returns remembered what he wrote four years ago:

    By now you’ve heard just about all you can take about blogs. You know, the amateurish web sites that the media keeps yabbering on about, but no one actually reads.
    Put your fingers in your eyes because here comes more yabber.
    Wall Street blogs are sprouting up everywhere. Some are good. Some are funny. Some are boring and some, by comparison, make the stock tables in the back of the newspaper read like poetry.
    When someone creates editing software that keeps bloggers from spewing what you wouldn’t bother telling your dog, that, folks, is going to be a revolution.

  • Madoff Relative Changes Name
    , February 25th, 2010 at 10:14 am

    Bernie Madoff’s daughter-in-law, Stephanie Madoff, wants to change her name. I certainly understand her reasons, but I as a student of market history I find it ironic what she wants to change it to — Morgan.

  • SEC Votes to Limit Short Sales
    , February 25th, 2010 at 9:26 am

    The uptick rule is gone, but it’s bizarre logic will live on:

    The rule applies to stocks that decline at least 10% in a single day. For such stocks, the SEC will allow short selling only if the price of the sale is above the highest bid price nationally. In other words, the short seller is blocked from dumping the shares at a cut-rate price.
    The curbs will apply for the remainder of the day the stock falls 10% and the following trading day.

    On any given day, only about 1.3% of stocks are down 10% or more, but those are the stocks where price discovery is most important. On October 10, 2008, 68% of stocks were down over 10%.

  • EV’s Earnings
    , February 24th, 2010 at 3:15 pm

    Eaton Vance’s (EV) quarterly earnings jumped 87%.

    For the three months ended Jan 31, the company posted profit of $46.2 million, or 37 cents per share, compared with profit of $24.7 million, or 21 cents per share, in the year-ago quarter.
    Results for the 2010 period were reduced by 2 cents per share by adjustments required to comply with new accounting standards.
    Revenue rose 30 percent to $272 million, from $209.5 million in the 2009 first quarter. That included a 31 percent jump in investment advisory fees to $210.4 million, a 19 percent gain in distribution and underwriter fees to $25 million and a 23 percent increase in service fees to $34 million.
    Analysts polled by Thomson Reuters, on average, expected profit of 36 cents per share, on revenue of $212.2 million.

    Thirty-five years ago, you could have picked up a share of EV for about 1.7 cents. Since then, the stock is up more than 1700 fold.

  • RIP: Peter Calvocoressi
    , February 24th, 2010 at 2:09 pm

    Here’s an obituary of Peter Calvocoressi, one of the major figures at Bletchley Park, the famous British code-breaking effort during World War II:

    His account of his wartime work at Bletchley Park, Top Secret Ultra, appeared in 1980. In it Calvocoressi emphasised the decisive role played by Ultra in intercepting communications: “Ultra took the blindfold off our eyes so that we could see the enemy in detail in a way in which he could not see us.”
    The breaking of the Enigma machine ciphers gave Britain’s outnumbered fighter pilots a critical head start in intercepting German bombing raids. It also helped to end the Nazi wolfpack menace during the Battle of the Atlantic when, in December 1942, Bletchley Park experts cracked the U-boat cipher known as Triton.
    In his book Calvocoressi also highlighted the contribution of the intercepts to countering the surface raiders which had inflicted such damage on Atlantic shipping. The best-known was the German battleship Bismarck, which had sailed from the Baltic in May 1941 on what would be her first and last voyage. Six days out from Gdynia she sank the veteran British cruiser Hood, but three days later she herself was sunk with the loss of some 2,000 hands, just short of the safety zone for which she was making off the western coast of France.

    I love how the Brits do their obituaries. The second-to-last paragraph is brilliant:

    The range of jobs that he undertook was wide, and his habit of leaving them was partly due to the breadth of his interests and partly perhaps to a conviction that he knew best: although in theory he respected independent and individual attitudes, he also felt an obligation to guide others along the paths he selected for them. This cannot always have made him an easy colleague.

  • Bernanke’s Testimony
    , February 24th, 2010 at 10:07 am

    Here’s today’s Semiannual Monetary Policy Report:
    Chairman Frank, Ranking Member Bachus, and other members of the Committee, I am pleased to present the Federal Reserve’s semiannual Monetary Policy Report to the Congress. I will begin today with some comments on the outlook for the economy and for monetary policy, then touch briefly on several other important issues.
    The Economic Outlook
    Although the recession officially began more than two years ago, U.S. economic activity contracted particularly sharply following the intensification of the global financial crisis in the fall of 2008. Concerted efforts by the Federal Reserve, the Treasury Department, and other U.S. authorities to stabilize the financial system, together with highly stimulative monetary and fiscal policies, helped arrest the decline and are supporting a nascent economic recovery. Indeed, the U.S. economy expanded at about a 4 percent annual rate during the second half of last year. A significant portion of that growth, however, can be attributed to the progress firms made in working down unwanted inventories of unsold goods, which left them more willing to increase production. As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services.
    Private final demand does seem to be growing at a moderate pace, buoyed in part by a general improvement in financial conditions. In particular, consumer spending has recently picked up, reflecting gains in real disposable income and household wealth and tentative signs of stabilization in the labor market. Business investment in equipment and software has risen significantly. And international trade–supported by a recovery in the economies of many of our trading partners–is rebounding from its deep contraction of a year ago. However, starts of single-family homes, which rose noticeably this past spring, have recently been roughly flat, and commercial construction is declining sharply, reflecting poor fundamentals and continued difficulty in obtaining financing.