Send an Email
Favourite Sites
  • Whitney Tilson
  • Recommended Booklist

  • Favourite Blogs
  • Calculated Risk
  • Reflections on Value Investing
  • "The market can remain irrational longer than you can remain solvent" - John Maynard Keynes

    Saturday, May 01, 2004

    In the most recent edition of Barrons they released results of their money managers survey. There were many implications for the positions that I hold in AES, Canadian Oil Sands (COSWF) and Rising Rates Opportunity Fund (RRPIX).

    Barrons said "The Big Money managers, on average, think oil prices will retreat to $35.83 a barrel by year end from a current $37.46. They see crude sliding further, to $34.45 a barrel, by 2005." Interestingly the consensus is still that oil is going lower. I generally like to be on the other side from common wisdom because that's where money is to be made. There is little point in being correct if everyone else is on the same side of the trade (unless you're early, but in that case you were taking the opposite side). Even if their view is correct there is 50+% upside in Canadian oil sands. If they are wrong and oil goes higher....

    Next they mentioned Latin America. AES has significant leverage to Latin America. Only 32% of managers are bullish on LA. AES is going to do very well regardless of a recovery in LA but if things go well there they will do even better (Like Host Marriot, during the property bear market, was a great buy because it was highly leveraged to a recovery in property prices which eventually happened). Analyzing AES strictly based on cashflow under values the upside potential in their assets if prices recover in LA. Most of the LA assets have been written down to zero on their balance sheet. I don't necessarily know how Latin American will do but it's good to know that if they participate in the "Globally Synchronized Boom" AES may have more than the 50% upside that they have right now.

    Now it seems that I'm on the same side as everyone in terms of bonds. "...few poll participants had a kind word for bonds. Seventy-three percent declared themselves bearish on Treasury bonds, and even more -- 77% -- disdain corporates at this juncture." and "....Similarly, rates on 10-year notes are heading higher and will top 5% in 2005, according to the managers' consensus view.". Though I expect the 30 year (which generally trades with a yield about 1% point, ten basis points, higher than the 10 year) to return closer to its long term average of above 8%. The Rising Rates Opportunity Fund (RRPIX) offers 125% of the inverse of the price movement in bonds (explained fully here and here--make sure you read the second link as it has an update on the first). This is somewhat contrarian because no one is talking about such a big move. It could take a few years though. This has the potential for 75% upside or even higher if inflation becomes a problem and bond prices fall (yields rise) significantly.

    << Home


    April 2003   May 2003   June 2003   July 2003   August 2003   September 2003   November 2003   January 2004   February 2004   March 2004   April 2004   May 2004   June 2004   July 2004   September 2004   October 2004   February 2005   March 2005   April 2005   May 2005   June 2005   July 2005   August 2005   September 2005   December 2005   April 2006   May 2006   June 2006   January 2007   December 2007   February 2008   April 2008   May 2008   June 2008   July 2008   August 2008   September 2008   October 2008   November 2008   December 2008   January 2009   April 2009   May 2009   July 2009   August 2009   September 2009   October 2009   January 2010   February 2010   April 2010   July 2010   August 2010   October 2010   November 2010   January 2011   February 2011   April 2011   June 2011  

    Disclaimer and Disclosure Analyses are prepared from sources and data believed to be reliable, but no representation is made as to their accuracy or completeness. I am not paid by covered companies. Strategies or ideas are presented for informational purposes and should not be used as a basis for any financial decisions.
    To reduce Spam click here for my email address.

    This page is powered by Blogger. Isn't yours?