Although we currently have an administration in Washington that is determined to micro-manage the economy the data is already proving that it’s just not possible.  Markets are stronger than governments and going against the market is like building cities below sea level in the path of hurricanes. The water always gets in. (In fact, the Dutch have recently decided to relinquish many of their low lying areas to the sea.) For instance, there are numerous examples of governments ...

• The United States Oil Fund (USO)
• The iPath S&P GSCI Crude Oil Total Return Index ETN (OIL)
• The MacroShares $100 Oil Up Fund (UOY)

• The direction of the stock market on the first few days of the year - the stock market will move in the same direction for the year
• Who wins the superbowl - "a victory by an old NFL team means a gain for the Dow Jones industrial average in the following year."
• Who wins the election - "Since 1901, the ...

• July 2 I bought 960 shares DOY at $14,421 and sold 3 ...

1. Mortgages are not an expense but a form of savings
2. Mortgages are evil and must be minimized at all costs

• Natural gas in the US is considerably cheaper than in other parts of the world. They provided the following graphic that demonstrates the discrepancies.

• Recent technological changes now make it possible to ...

We're going to try this again. If you will recall I made a tidy little profit by arbitraging The Spain Fund (SNF) against the Ishares MSCI Spain Index fund (EWP) a few months ago. Well, the premium on the Spain Fund is baaaack and in a big way. This morning it is probably in excess of 22%. Why would you pay a 22+% premium to invest in a country that you can invest in through an ETF with no premium? I doubt that SNF's stock picking ability is that awesome. And as recently as December 21 the ...

I love it when I get to say "I told you so". In fact, I've requested that my epitaph be inscribed with the words "I was right".

In this case I'm referring to my July 19 article on market timing, where I pointed out just how high the market really was. It turns out that the day of my article coincided exactly with the market peak. I won't take credit for getting the timing perfect. That part was pure luck. But one of the main points of the article was that trimming back one's ...

I've been out of the country for a while, which is why I haven't posted lately. While in Peru we discovered why the Incas sacrificed their children: the kids were always complaining about being in Peru with nothing to do. You won't find this fully covered in the history books.

Upon my return I checked up on my investments and discovered a few opportunities. One of my bigger holdings, The Asia Pacific Fund (APB), had worked it's discount down to 4.6%, probably as a result of a hefty distirbution. ...

Back in July I set up a test of the analysts to see if we could identify situations where their earnings estimates were out of whack (that's a technical term). The idea was to see if stocks with low forward P/E ratios were more likely to have their prices rise or their estimates lowered for next year. At that time I promised to follow up in a few months to see what pattern was emerging. It's been about 4 months so let's check in on our experiment. 

I can't even drive a car without looking for investment opportunities on the road. On the way to Brian's house yesterday morning it took a bit longer than normal because the roads were literally choked with UPS trucks. They were everywhere, 2 or 3 in front of me all the way there. Of course, it's their busy season but I don't remember it being like this last year. With gasoline prices going up, people having less time, and becoming more comfortable with ecommerce I would expect  their ...

The other day I was getting ready to invest some money for my parents in a European ETF when I decided to peruse the closed end funds. I ran across something interesting. The Europe Equity Fund (EEA) is trading around a 13% discount which is historically high for this fund. So if this discount goes down to more typical levels you can pick up a few percentage points right there. But in addition they are due to pay a $.75 distribution, ex-dividend 12/19. Now the current NAV on this fund is $14.69 ...

The Economist ran an interesting story in their November 17 issue that compared the various emerging markets in terms of their valuations and risks. The attached graphic shows both the % increase in the markets since January 2003 and the current forward P/E ratio for those markets. Interestingly, it shows Brazil, Turkey, Russia, Hungary, South Africa, and Thailand with the lowest valuations, while India, China, and Argentina have the highest. Of course, you can't look at these P/E ratios in a ...

It was the early 90s when I was sitting in a business development staff meeting at General Electric watching everyone's heads nod in agreement with the speaker who was extolling the virtues of the Japanese management style. Why, the Japanese were conquering the world with their focus on market share! After all, they had recently purchased Rockefeller Center. If only Americans could learn from the Japanese that profitability was not the most important thing!

As I watched this incredible display ...

• Is it real?
• Why does it exist? You need to understand this in order to know whether or not the weirdness will go away.
• How do I make money off of it?

I was fortunate enough to own a few shares of Rio Tinto since August and as of today, when BHP Billiton made an offer to buy them, my position was up around 70%. Not bad for 3 months. Since at that price I no longer believed that it was a great value I sold it at 9:32 this morning for $452.81/share. However, I was perplexed by the fact that with my constant monitoring of the bid during this time period I never saw it go below 453 and change. So I had to call Fidelity to find out what happened. ...

Gary's theorem: Some people just don't deserve the jobs they have. Actually, quite a few people don't deserve the jobs they have. Just look at all the management teams that make stupid moves.

Corollary to Gary's theorem: Some people don't deserve to be stockholders. Alternatively, some stockholders deserve what they get. Just look at how often stockholders reject the dumb ideas of management or reject dumb managers.

The latest case in point is First Defiance Financial (FDEF), a small bank stock ...

Back in August I wrote about my concern for the safety of my cash invested in money market accounts. If you will recall, because a substantial portion of my net worth is tied up in a single fund, I actually moved money out of that money funds into a muni money market fund after realizing that my fund was too exposed to mortgage backed securities.

After a couple of months I felt things had calmed down enough, and the exposure had been sufficiently reduced, that I moved my money back into ...

I'm baffled by the market reaction to the Yahoo earnings release Tuesday evening. Wednesday morning the stock opened up 9%.

Now, don't get me wrong. I own this stock and think it's been undervalued. I should probably explain that statement. It's undervalued based upon the potential of the company but God knows the company has not been realizing that potential. So, it's not really a bargain at 56 times trailing earnings. We need to see some evidence that management has their act together. ...

I feel a need to publicly flagellate myself one more time for an error in judgment back in June. Well, "error in judgment" may be a bit strong. You can't blame someone for making the right decision based upon the information available at the time just because that decision turns out to be less than optimal based upon new information that subsequently materializes.

What I'm talking about is the Biogen Idec tender offer, where I tendered my shares for $53 after watching them idle for 7 ...

On July 8 I wrote about my attempt to arbitrage the considerable premium at which The Spain Fund was trading. At the time I was under the impression that the cost of borrowing shares of The Spain Fund was only 2.5%. However, after a few statements came in from Fidelity I realized that I was being charged a bit more than that. I called them the other day and was told that these shares carried a higher borrowing cost of 7%. Since they had told me 2.5% they agreed to credit me the difference (Have ...

As pointed out in my September 19 post we’re going to incur indirect costs from the Fed’s interest rate cut that bails out investors and borrowers from the subprime fiasco. But as pointed out in a September 22 WSJ article it’s worse than I thought. It looks like you and I (taxpayers) are going to be buying free lunches for a few folks. The government has decided to go into the subprime lending business themselves, insuring the refinancing of subprime loans at lower ...

My favorite nuclear power play, USEC, just had its stock price nuked over the last few weeks. From a high of almost $25/share back in late May the stock has recently traded below $10, which corresponds to about 12 X earnings. The only explanation that I’ve seen is in a Forbes Article that points a finger at their recently announced public offering of additional shares that will be used to build a new uranium enrichment plant. The article, which references an effective offering price of ...

Well, I have to agree with Brian's latest blog post about the Fed's rate action and the market reaction. Frankly, I was disappointed in the Fed's action - especially since they didn't even consult with me first. It looks like Bernanke has reinstituted the Greenspan put, which some people believe was responsible for many of the excesses of the last decade - e.g. the tech boom, followed by the housing boom. 

But there's no free lunch. What's the harm? Well, it's twofold:

First, there's the ...

In the past I’ve written about the difference between the Chinese A shares and H shares. Due to government-imposed restrictions the A shares have traded at much higher multiples of earnings.

Well, recently the Chinese government has indicated that they are willing to lift these restrictions and allow their citizens to invest in the H shares. This should bleed off some of the pressure on the A shares and pump up the price of the H shares. In anticipation of this move the H shares ...

As I’ve mentioned before Nuclear Energy is currently the only practical alternative to carbon based energy generation. With all the concern about global warming it is sure to take off. And I understand that the economics are quite favorable now. To paraphrase Einstein, you get a lot of E with a little bit of m when you multiply it by the speed of light squared (trust me…that’s a really big number).

Therefore, it’s no surprise that this week’s Economist has a ...

A few days ago I wrote about my brilliant analysis of the Home Depot Dutch auction that was going to save me from the mistake I had made with the Biogen Dutch Auction (that stock continues to hit new highs after I sold it at the high end of the offer range). This time around I decided not to sell after determining that the stock was worth more than the high end of the range and the repurchase could only help the stock price.

Well, it appears that I got it wrong again! The company repurchased the ...

We've all read about how terrible the credit market is. Lenders can't sell their loans. Investors are taking huge losses on their mortgage backed bonds. Private equity deals are at risk of not getting funded. The government needs to save us all.

Well, something is not adding up. I got to thinking that there might be an opportunity investing in depressed mortgage mutual funds so I did some research. Turns out that things don't look that bad at all. For instance, the Ishares junk bond ...

A while ago I shared my misadventure with a Dutch auction for Biogen when I sold my shares at the high end of the offer range only to discover that the price of the stock moved beyond my sell price. It hasn't looked back since, hitting new highs every few days.

So now I get a chance to redeem myself with the Dutch auction for Home Depot stock. This time I'm taking the opposite tack and not tendering my shares. Of course, I have very logical reasons for my decision and those reasons seem ...

I've always been mystified by analyst ratings: buy, sell, hold. For one, what the heck is this hold thing? Either a stock is worth owning or it's not. If it's worth owning then it's a buy and if not it's a sell. I've spoken to people before that are confused by this concept so let me try this from a different angle. In this age of $8 trades there is no point in holding onto a stock that you wouldn't buy if you didn't already own it. For $8 you could get out of ...

Occasionally you hear about people who lived through the depression keeping money under the mattress. The reason is that these people don't trust banks, having lost money in the bank runs that occurred back then. Of course, since then the government has introduced the FDIC which insures deposits up to $100,000. So there's no reason to worry today unless you have more than $100,000 in a single account at a single bank, correct?

Not exactly. Most of us now hold "cash" in money ...

There is a lot of talk about how the Federal Reserve, and central banks around the globe, pumped money into the markets this week in light of all the mortgage market problems. The Federal Reserve was attempting to keep the fed funds rate at their target 5.25%. Apparently, it jumped up to 6% until they intervened.

But here's what confuses me. Everyone is talking about how the Fed is now more likely to "reduce interest rates" at their September meeting. Everyone acts as though the ...

You would think that in this day and age you would be able to compare the performance of one stock with another stock or some popular index like the S&P 500. In fact Yahoo! Finance even has a cute little graphic tool that allows you to graph two or more stocks/indices on the same graph and compare their percent return.

Not so! It turns out that they're graphing apples and oranges. I think there is a conspiracy to lull you into thinking you have access to better information than you ...

40 minutes! That's how long it just took me to untangle the mess that Tyco created with their recent restructuring. Why do I have to worry about what Tyco does? Because we own the stock (my wife's idea originally but I added to the position when I learned that they were spinning companies off - that's usually a good investment) and for tax purposes you have to allocate your original tax basis between the remaining company and the spinoffs. A lot of people don't account for this ...

I've always wanted to do this but just never got around to it. I think it will be entertaining - of course, most people would find this idea of entertaining a bit strange.

The efficient market hypothesis maintains that market prices reflect almost all of the available information about a company. I don't totally buy that but I do believe that market prices quite often better reflect the information about a company than the analysts. I also believe that you can identify those cases where ...

I have invested in mutual savings bank conversions for well over 10 years, ever since Peter Lynch wrote about them in the early 90s. I've made a lot of money on them - sometimes as much as 30 - 40% instantaneously. Someday soon I'll write an article explaining how these deals work - and sometimes don't work. In the meantime, suffice it to say that I recently had an opportunity to invest in one of these conversions - Beneficial Mutual Bancorp( BNCL) - at $10 per share.

Unfortunately, ...

Presumably you are very familiar with the admonition that you need to be a long term investor. For a day trader long term would be several months and for most people long term would be a few years.

Well, for me long term is 10 years. That's how long I've owned a South Korean steel producer that is now named Posco (PKX) - the third largest steel producer in the world. I've owned the ADRs of this company since June 11, 1997 because I was convinced of two things:

• Asia was going to grow ...

I’ve read a few articles recently that suggest that there might be some opportunities in foreign currencies. I think it’s a good idea to have some money in foreign currencies as a hedge against the dollar so I maintain some foreign currency deposits at Everbank. Let’s face it… we import a lot of stuff and as the dollar drops in value the cost of those imports go up. Also, if you’re planning a vacation overseas any time soon you will be hit by any depreciation of ...

Back in June I received notice of a tender offer from Biogen Idec (BIIB). Through a modified Dutch Auction they were offering to buy up to 57 MM shares at a price between $47 and $53 per share, depending upon the result of the auction.

Now, this stock has gone nowhere for 7 years. So, on June 18 I checked the current price of the stock, which was $51.63. Being the math genius that I am I quickly determined that $53 was higher than $51.63 and placed my instructions to tender all my shares at ...

I wrote about misleading articles on fund performance in my first blog post but thought it would make sense to revisit this now with a bit more detail since Barron's committed another sin on Friday.

On Friday Barron's ran an online exclusive story about the Heartland Select Value Fund, bragging about their performance vs. the S&P 500: "over the past decade, the fund has generated a 13.7% annualized return, besting the Standard & Poor's 500 by almost six percentage ...

One of my favorite strategies is to arbitrage international closed end funds when they start selling at too steep of a discount or a premium. I will either buy or short the closed end fund and take the opposite position with a similar ETF. Every time I've done this I've made money. The only problem with this strategy in the past is that the broker often can't provide the shares for shorting a fund that is not widely held. However, while researching my article on shorting I found out ...

A lot has been written lately about the bubble in Chinese stocks. A June 11 Barron's article puts the issue in perspective. As the article points out Shanghai's stocks have tripled in the last 18 months and the Chinese government has been so concerned about a bubble that they recently tripled their stamp duty on stock trades in an effort to let some of the air out of the bubble. It turns out that in typical communist fashion they are attempting to fix a problem caused by one form of ...

So I placed my order to sell MVC yesterday and it executed at the open this morning. However, shortly before the market opened a news story came out on MVC:

"Business development company MVC Capital Inc. said Monday it will sell two Latvian auto companies to a British automotive distributor for a combined $120 million."

MVC is expected to book a gain of $47 million on the sale of Baltic and a gain of $23 million on the sale of BM Auto.

"MVC's combined realized gain of about $70 ...

MVC Capital (MVC) is a closed end fund that provides debt and equity financing to small and middle market companies to fund their growth, acquisitions, and recapitalization. The investments consist of common and preferred stock and warrants or rights to acquire equity interests, senior and subordinated loans, or convertible securities.

The appeal of this fund for me has always been that it essentially gives me access to venture or private equity investments in a liquid vehicle. I made two ...

I needed to place a trade in a thinly traded stock the other day. I get nervous when I do this because I'm afraid that I'm going to be taken advantage of so I usually place the trade as a limit order. However, my order was large relative to the normal trading volume and only a small part of my order executed at my limit and the ask moved up. So I raised the limit but the ask moved up again. I wasn't sure if I was moving the market or if the market was moving away from me on its own. ...

I ran into Brian at the hardware store today as he prepared to stain his deck. While he's working on his deck I'm finding investment opportunities in closed end funds!

As you may know closed end funds often trade at a discount to net asset value. What is interesting is that these discounts can vary significantly over time. I like to move in and out of some of these funds depending upon the discount. Look at the discount history for The Asia Pacific Fund (APB), courtesy of Morningstar:

The ...

This is a great example of why you can't trust the financial press. John Deere reported quarterly earnings today. Here are two articles that appeared on the topic today:

From the Associate Press: Deere & Co. 2Q Earnings Fall 16 Percent

From The Street: Deere Leaps Targets

The Street article goes on to discuss how Deere's earnings were $2.72 a share, up from year-ago continuing operations profit of $2.17 a share.

So which article is correct? Well, technically they both are. The Associated Press ...

I've always been a huge fan of Fidelity Investments. I've had accounts with them for at least 25 years and I don't think they've ever let me down. $8 trades and 24 X 7 X 365 live customer support. What more can you ask for?

Well, they just redid their Web site yesterday and they uncovered a feature that I never knew existed before. Apparently, it's been there for a while but now it shows up in the left rail when you are viewing an individual account. What I'm talking ...

Today's Heard On The Street column in the WSJ discusses the pros and cons of General Electric breaking up. It would appear that investors are lamenting the fact that GE's stock is actually down 7% since Jeff Immelt took over from Jack in September 2001 while the DJIA is actually up 35%. Those facts should not come as a surprise to anyone since GE was irrationally trading at around 35 times trailing earnings back then based upon Jack's celebrity value. Even though earnings have grown ...

I must be naive. I thought the days of the full commission broker were over - or at least they weren't charging outrageous amounts any more. I was wrong.

I received a call from my mother the other day and she was wondering why there was a several hundred dollar commission charge on her monthly statement. She had recently sold some mutual funds and invested the proceeds into some ETFs I had recommended. Since I try to not get too involved in my mother's dealings with her broker I could ...

This week's Barron's article "Nuclear Energy's New Power Trip" reminded me of the potential investment opportunity in Nuclear Energy. I've been thinking about this for quite a while now and finally got serious back in December when I decided that the whole global warming debate was really heating up (sorry for the pun). You see, despite politicians' great interest in "clean burning fuels", the reality is that all economic sources of energy - except ...

Currencies want to float. Not all countries want their currencies to float. Therein lies the problem. Many times many countries have moved heaven and earth to control their exchange rates but if the market doesn't want it controlled guess what? Case in point: China.

For a long time China controlled the Yuan (never could figure out how to pronounce that) or the Renminbi (that I can pronounce though I don't understand why there has to be two names for one currency) at $.1208. However, they ...

Never have seen this before. I was delighted to see that Kohl's (KSS) had opened above my sell limit today. I had a GTC sell in at 78.98 (yeah, I'm that precise) and KSS opened today at 79.02. So I went to Fidelity expecting to see my sell executed but what the...? It had not executed.

So I immediately got on the phone with Fidelity to find out what happened. They put me on hold for a really long time. I figured the story had to be good. When the woman came back to me her numbers ...

I read a WSJ article yesterday in which the author was extolling the virtues of a Goldman Sachs' mutual fund in the large cap value sector. He compared their performance to the S&P 500 and declared them geniuses. Well the author's analysis is wrong and so is his conclusion. Goldman's fund did well vs. the S&P, not because of brilliant stock picking, but because their portfolio strategy just happens to put them in a sector that performed well. I could have just as easily bought the ...