Thursday, November 27, 2008

Mark-to-Market

As I posted here weeks ago - general agreement is emerging that the FASB/SEC's stuborn insistence on mark-to-market accounting, even if there is no market. (The FAS mandarins refused to consider the possibility that there could be a market freeze and no prices as they built their mathematical models.)

Well, widespread criticism now has a chance to get them to at least modify their position.

Sunday, November 23, 2008

Louise Yamada

Louise Yamada is the doyenne of technical sotck analysts. She was recently on Bloomberg (available on the Bloomberg site) and fundamentally (ok - it is a pun) said that we are in a 13-16 year bear market. If I had followed Ms. Yamada's advice a few years ago, I would be a much richer man today.

I recommend that you watch the video.

I'm switching my 401(k) contributions to cash and near-cash investments until she declares the sructural bear market over.

Tuesday, November 11, 2008

So Who Wins?

Every recession plants the seeds for economic advantage in the future recovery.

In the very tough 1973-1974 recession, prices fell so low that it enabled the creation of the leveraged buyout industry. With many manufacturing companies in particular trading at 3-4 times cash flow, new market entrants like KKR, Forstmann Little and Dyson Kisner Moran came in and created gigantic wealth for themselves and early investors.

In the 1991-1992 downturn, engendered in part by the massive office space overbuilding funded by Savings and Loans (Resolution Trust Co, anyone?) made it possible for telcom and internet start-ups in Austin, San Jose, Northern VA, Boston's Route 128, Dallas, etc. to rent offices at a fraction of the cost had those communities not been overbuilt.

And the 2001-02 downturn gave us cheap fiber and bandwidth, and bargain-priced software to feed productivity gains in corporations everywhere.

So, where is the upside? At this moment, all that I can project with some confidence is lowered home prices. For those consumers who don't ruin their credit with defaults and save up a healthy down payment, there will be a once in a generation opportunity to acquire a home. Prices like these (i.e., whenever the bottom is put in) won't be seen for a long time.

If we get real leadership and we really develop some energy independence, that will be the real payoff. But, until we see nuclear plants being built, I remain skeptical that there will be a serious attempt to stop transferring our wealth to foreigners....

Saturday, November 08, 2008

Microsoft Stock Buyback

MSFT has announced a significant stock buyback - $40 billion as I recall.

In this economy, I view that as a big mistake. As stock prices plunge everywhere, the opportunity and flexibility afforded by a cash horde can't be overestimated.

Steve Ballmer - hold the cash buddy.