Josh Stern

70 Comments

    • Oppose the Treasury's Bailout Plan [view article]
      I largely agree with the editorial, especially with regard to opposing the unchecked expansion of powers, opposing the insufficient haircuts for the sinners, and skepticism about the govts. ability to avoid getting fleeced. But as an alternative to insisting that the govt. could only buy assets from firms in liquidation, I think it would be worth exploring whether the govt. could use its powers to establish whether the assets in question are really being incorrectly priced by the trading markets, with the idea of buying them at some haircut to the "objective fair price". But how to do that? One idea is that the objective fair price is what a buyer would pay in a private sale if they had enough capital and enough information. So perhaps the govt. could create some kind of a huge private bazaar where adequate info on each security was available and private buyers could bid to establish what they would pay for fractions of the securities. With those prices established, the govt. could then set a final price so that they buy 95% at a haircut to the private buyers price and the private buyer gets their 5%.
       Sep 21 02:48 PM
    • Fund Manager Peter Siris Spots Gold in China [view article]
      In the case of CPHI, they have the following comment on late payments from their 10Q, also echoed on conference calls:

      "As to the peculiarity of the Chinese pharmaceutical environment, defaults in payments to pharmaceutical companies by state owned hospitals are a normal phenomenon. Over 90% of our drugs are sold to state owned hospitals, the greater our business with the hospital, the more payments are defaulted, although in actual fact, all the defaulted payments are eventually paid, it is only a matter of time."

       Sep 11 08:53 AM
    • A Closer Look at the Treasury's GSE Preferred Stock Purchase Plan [view article]
      deadwood, I believe we are "bailing out" the GSEs primarily to keep the spread between 10yr. T-bonds and mortgage backed securities from further widening, possibly by a lot, which would result in higher mortgage rates and even larger declines in home prices than what will otherwise occur, resulting in even more homeowner defaults and bankrupt financial institutions.

      What you point to I believe is a risk of doing this, that T-bond yields will rise and the U.S. currency will decline

       Sep 07 06:46 PM
    • A Closer Look at the Treasury's GSE Preferred Stock Purchase Plan [view article]
      Oops, typo. I meant to write above that it always seemed obvious to me that the govt's implicit guarantee for the GSE's would apply to the debt and *not* the shares, or at least the debt in preference to the shares.


       Sep 07 04:38 PM
    • A Closer Look at the Treasury's GSE Preferred Stock Purchase Plan [view article]
      Where I can find estimates of the absolute and relative amounts of GSE preferred, common, and debt that is held by various financial institutions?

      I'm a little surprised by Patsy's suggestion above that U.S. banks hold a lot of preferred stock relative to the size of their GSE debt holdings, and I'd like some pointers to research on this topic.

      Beyond that, I'll offer that it always seemed obvious to me that the govt's implicit guarantee for the GSE's would apply to the debt and the shares. I'd have a hard time imaging it otherwise no matter who were the holders of each type. But if it was actually true that banks currently hold a lot of preferred relative to their debt offerings that would be worrisome.


       Sep 07 04:16 PM
    • Obama Is Bad for the Economy - Barron's [view article]
      The current issue of Barron's includes a much better article on tax policy by Gene Epstein entitled "When Is a Tax Cut Really a Tax Hike? Usually" which points out that since all Federal expenditures must eventually be matched with revenues from somewhere or else devaluation of the currency, low tax advocates would do better to focus on controlling spending. Epstein says that Democrats and Republicans alike have failed to do that, but the graphs in the article showing the growth of spending as a percentage of GDP over time make it clear that percentage based Federal spending has generally declined under Democratic administrations (going back to the early 1960s) and generally risen under Republican administrations.
      s.wsj.net/public/resou...

       Aug 24 11:40 PM
    • Why Every Investor Needs To Have a China Investment Strategy [view article]
      We all know that when an entire index drops by more than 20%, there are often a lot of small fry that get anonymously crushed. Not surprisingly then, there are a whole bunch of Chinese micro-cap ADRs with low to zero debt and trailing or forward PEs (among those with analyst coverage) in the 3X-8X range. For example:

      CAGC CHCG CNOA CPHI CYXI FUQI GFRE LTUS QXM SORL SUTR XIN XING

      In the case of these companies, the question of when China will slow and by how much is somewhat moot since they are already selling at distressed prices.

       Aug 09 11:32 PM
    • Bond Expert: Monday Wrap [view article]
      Beyond the sanctuary aspect, the dollar is doing better than expected vs. the Euro because Trichet is humming a happy tune while he drives Europe over the cliff.
       Jul 14 11:08 PM
    • Is the Equities Party Over? [view article]

      Congratulations. It really takes some big balls to make a predictions based on a trendline where you show the data that was used to fit the trend and the reader can clearly see from your graph that the fitted slope is much lower than it would be without data from 1800-1850.

       Jun 26 10:18 AM
    • Why the E*Trade Shorts Have It Wrong [view article]
      The ETrade model of combining a fully web-enabled electronic bank and discount brokerage in one entity offers a lot money management time convenience and cost/interest savings. Highly recommended even to traders who place most of their transactions at another brokerage.
       Apr 26 04:22 PM
    • Morgan Stanley: What's Behind Mexico's Extraordinary Resilience? [view article]
      Nice column. Does your name have a middle initial that could distinguish it from Gary B. Smith and Gary D. Smith, who have both published a lot about equity related topics on the web?
       Apr 24 01:11 PM
    • CALM Longs Walking on Eggshells [view article]
      Here is an article on the factors driving egg costs: www.infozine.com/news/.../

      I believe the parent article makes a good negative point that in the long term one would expect egg production to rise to meet demand at some sort of average agricultural profit margin, but it misses several factors that have caused production to lag demand including export demand, changes in de facto chicken care standards, changes in the health view of eggs in the diet, and the general environment of rising food costs where eggs are still very competitive as a convenient protein source.
       Apr 21 10:16 AM
    • Signs That Foreclosures May Be Peaking [view article]
      I believe people have done research to see whether (negative) home equity levels or resets were more important to predicting defaults and foreclosures, and they all found that equity levels were much more important.
       Apr 09 06:01 PM
    • China's Agriculture Sector Is Ripe for Investment [view article]
      Just to follow up...the biggest valuation differences show up when one looks at price to sales ratios. Of course it all depends on what one expects for future profit margins, but I'm a lot more comfortable with P/S near 1 than P/S in the 6-9 range.
       Apr 08 02:45 PM
    • China's Agriculture Sector Is Ripe for Investment [view article]
      I agree with the theme, but I like the fundamentals of CAGC and HOGS better than the ones you mentioned. CAGC is current OTCBB, but working on moving to a major index.
       Apr 08 11:58 AM
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