Sunday, June 22, 2008

bubblin' crude

June 13 (Bloomberg) -- The rally that drove oil to a record $139.12 a barrel last week surpassed the gains in Internet stocks that preceded the dot-com crash in 2000.

Crude rose 697 percent since trading at $17.45 a barrel on the New York Mercantile Exchange in November 2001, and reached 28 record highs this year. The last time a similar pattern was seen in equities was eight years ago, when Internet-related stocks sent the Nasdaq Composite Index up 640 percent to its highest level ever, according to data compiled by Bloomberg and Bespoke Investment Group LLC.

The Nasdaq tumbled 78 percent from its March 2000 peak, erasing about $6 trillion of market value, as investors concluded that prices weren't supported by profits at companies such as Broadcom Corp. and Amazon.com Inc.

Billionaire investor George Soros and Stephen Schork, president of Schork Group Inc., say oil is ready to tumble because prices aren't justified by supply and demand.

"There's nothing different between this mania, the dot-com mania, the real estate mania, the Dow Jones mania of the 1920s, the South Sea bubble and the Dutch tulip-bulb mania," said Schork, whose Villanova, Pennsylvania-based firm advises the Organization of Petroleum Exporting Countries, Wall Street firms and oil companies on the outlook for energy prices. "History repeats itself over and over and over again."

Thursday, June 19, 2008

A Warning from the Royal Bank of Scotland

The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.

Such a slide on world bourses would amount to one of the worst bear markets over the last century.

[via chucks_angels]

Thursday, June 12, 2008

Why John Montgomery invests

[Austin Edwards] remembers when John Montgomery, founder, CEO, and fund manager of Bridgeway Funds, came to Fool HQ to give us some insight into why -- not how -- he runs his funds.

Granted, I would've loved to learn more about how he invests. His Bridgeway Aggressive Investors 1 Fund (BRAGX) has returned a jaw-dropping 19.1% annualized since he started it in 1994, and currently owns market superstars Intuitive Surgical (Nasdaq: ISRG), Mosaic (NYSE: MOS), and Potash (NYSE: POT).

Nonetheless, it was refreshing to see that Montgomery has never lost sight of why he's investing. See, Bridgeway donates a whopping 50% of its after-tax profits to charities -- most notably to foundations dedicated to stopping genocide in Africa.

Bill Miller Deja Vu?

In 1991, financial markets opened the New Year with significant weakness, weighed down by a lingering recession in the U.S. housing market, soaring oil prices and fallout from war in the Middle East. Markets were also contending with a major crisis in the financial sector that arose from junk bond investments in the savings & loan industry.

Sound familiar? It should, as we face similar challenges today -- only this time, the turmoil in the financial industry stems from the subprime lending collapse.

Reflecting on his [poor] recent performance, Bill Miller noted that 2007 was "the first time since 1990 the Value Trust has lagged the S&P 500 in two consecutive calendar years. Perhaps, not surprisingly, that was also a time of panic due to a housing market recession, soaring oil prices, plus huges losses in the banking and financial sector. We took advantage of lower prices back in the 90s, which ushered in a pretty good period of excess returns.

-- from Legg Mason's empower Magazine, Spring 2008

Monday, June 09, 2008

Consuelo Mack

Consuelo Mack has a TV show called WealthTrack that only now I found out about from a link at gurufocus.

Listening to her show, she sounds like the spiritual successor to Rukeyser (without the bad puns). And in fact, she's actually a real successor to Rukeyser having hosted Rukeyser's Wall Street in its final months.

The latest show (6/6/08) features Bruce Berkowitz.



Some notable (to me) past shows include

Chris Davis (1/18/08)

Jean-Marie Eveillard (12/28/07)

Dan Fuss (12/14/07)

Whitney Tilson (12/7/07)

Robert Hagstom, Steve Leuthold (10/19/07)

Bill Gross, Jean-Marie Eveillard (10/14/07)

Ron Muhlenkamp (9/21/07)

Jason Zweig and Whitney Tilson (9/7/07)

Ben Stein and Jason Zweig (7/6/07)

David Winters and Rob Arnott (5/25/07)

Keith Trauner (3/16/07)

Ben Stein, David Winters (2/23/07)

Saturday, June 07, 2008

is this the bottom?

With stocks down sharply from their bull market peaks, Forbes compiled a group of four prominent analysts and asked them to share their viewpoints on whether the markets had truly reached bottom. Here's what those experts had to say:

"Stocks are down, expectations are down, valuations are down, fear is up and the money supply growth has already started to take off along with the Fed cuts. Those are all positives for the market. The significant volume of selling, or panic selling, over the last few months is commensurate with a bottom."

-- Stuart T. Freeman, A.G. Edwards

"We're in a transitional area, but the trend looks like we're at or near the bottom. We're probably going to move up from here, but the question is how quickly."

-- Holly Gustafson, Legg Mason

"We should see a sustainable upturn from here."

-- Joseph Kalinowski, Thomson Financial/IBES

"In March a bottom occurred."

-- Daniel Peris, Argus Research

Will the experts' predictions prove correct? I wouldn't bet on it.

You see, those quotes were taken from early May. May 2001, that is.

After an extended bull rally, the S&P 500 dropped sharply in late 2000, characterized by sudden price swings and sharp volatility. In the spring of 2001, the market temporarily rebounded, and Forbes' experts all agreed: This was the bottom.

They were wrong.

Over the next four months, the S&P 500 fell 24%. It rebounded briefly, then dropped another 30%.

They weren't just wrong -- they were spectacularly wrong.