Monday, November 24, 2014

Still a bull market although one should be bit cautious

I think we are still in a Risk-On environment. That doesn't mean its a very stable one. I mean the profits growth has really come from cost cutting, margin 
improvements hasn't been solidly based from revenue growth, top line growth, pricing power, its also been a big PE play. Last year two-thirds of S&P was from PE expansion. 

Its not the kind of stock market you'd say you wanna buy and forget about it. In portfolios we manage we take a very defensive position on stocks, in other words we look at things like Utilities, Consumer Staples, Healthcare, things that people are going to buy regardless and also have above average dividend yields. 

Monday, November 17, 2014

Gary Shilling on Oil Prices and OPEC


We have a chart we use in our monthly newsletter Insight that shows OPEC and Non-OPEC production [of Oil]. In the last ten years OPEC production has been flat and all the growth has been Non-OPEC,.. a lot of it coming from North America with Fracking and Horizontal drilling, etc etc.

But this has left the Saudi's in a tough position because historically they have been the swing producers, they have been the country that's willing to cut back to avoid over-supply at given prices; in other words to keep prices from declining. 

They gotten to a point where they are saying "Hey we are not willing to put up with that. We are going for market share" 

Now at what price are they going to say enough is enough, its probably a lot lower price than other OPEC producers and a probably a lot lower price than the Oil Sands at Alberta would be profitable, its probably a price where there would be a lot of pain before the Saudi's throw in the towel. But you can never really tell, this is a Kingdom, this is not a democracy. But I think they are trying to run it rationally in their own long term sense.



Gary Shilling criticizes big government and Obama


His [President Barrack Obama] got two years to go. You would think he would want to go out having accomplished something and being willing to work with congress. That's what Clinton did. But his an ideologue, he apparently prefers confrontation. 

But one thing important to realize is, if you look at the Constitution, Congress passes the law, and the President enforces them, that's the way. Its come a long way from there and the Federal Government has gotten so big that the President has immense power of his own quite apart from the Congress.

So what you have is a huge bureaucracy, and a huge administration all the agencies and Departments and so on. And the President ,just by being President has huge powers even if can have firm opposition in Congress. I think it tells you about the size and scope of the federal government.


VIA Bloomberg