Housing Investments – The WSJ ran a cover story today highlighting investors that are piling in housing, this time as landlords. Of course, this isn’t news, but one has to wonder if it is a little bit late at this point and how this will all end up. The investments are probably putting an artificial floor on the housing market and making the market seems healthier than it really is. The returns were much higher a year to two and three years ago, not sure how the math is adding up now, unless they are counting on more capital appreciation later and less rental income in the interim. We will see how this all ends up.
The markets continued its relentless tear last week, making us wonder, when will this advance stall or even decline? Which got us to thinking about 1995, a year that began with a p/e of about 14 (just like the beginning of this year) and a year in which there really wasn’t a decline of any substance the entire year. The market advanced 34% in 1995.
(the year begins and ends at the blue up arrows)
The Death of a Dictator and a Currency
The death of Hugo Chavez might be followed by his currency, the Venezuelan bolivia fuerte. The currency has lost 21% of its value in the last month. Check out Steve Hanke’s post at the Cato Institute.
The most interesting story of the day was when Jim Chanos announced on CNBC this morning that he is short Dell. So while just about everyone is arguing that Dell is undervalued and the buy-out price should be much higher, Chanos, perhaps the best short seller out there, is short.
Chanos said, “I’m puzzled here. Are people looking at the balance sheet and the cash flow statement of this company?”
“Looking at the balance sheet at the end of January, Dell had positive working capital plus receivables and long-term investments of about $8 billion,” he said. “They had long-term liabilities of $13 billion. So it’s a negative number before we get to the equity.”
To add to the mix, Carl Icahn has built up a 6% stake in Dell. He values the Company at $22.81 per shares and wants Dell to pay out a $9 special dividend and for shareholders to keep their shares.
For a Company that needs major change to prosper, I don’t see how stripping the Company of cash would be optimal for anyone with any kind of long term interest in Dell.
BYRON WEIN -Check out Byron Wein’s March 5th Market Commentary.
INTERVIEW OF THE DAY – Chris Verrone, from Strategas Research Partners, is interviewed on Bloomberg this morning, on technical analysis.
Here is our daily peak at some news/observations that caught our attention today:
1. Rich Bernstein compares the current bull run to the 1982-1987 bull market. Check out the chart posted by Dave Wilson from Bloomberg.
2. There is a chart posted on Stocktwits by James Bartelloni that compares stocks that have had parabolic moves in the past. Displayed are AAPL (before the fall), Green Mountain Coffee, Centex Homes and Nasdaq. A clear warning of the danger of these kinds of moves. Of course, optimism was probably greatest at the peaks.
3. Of interest, I am keeping an eye on some of the precious metals and miners (GLD, AUY, PAAS) for a hint of a possible bottom.