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sentinelbrit (58.17)



Is this the end of the commodity super cycle?

October 05, 2011 – Comments (6)

My headline is prompted by three things - the performance of commodities in the last month or so, the gradual acceptance of commodities as an asset class that should form part of one's portfolio and two articles with differing opinions on commodities. Firstly, commodities have provided investors with attractive returns over the last decade, particularly in light of the performance of equities. This is not to say commodities have been without volatility - they have been volatile at times - but it acknowledges that performance has been good enough to raise their stature with investors. I should probably add that the proliferation of commodity ETFs of every variety has probably contributed to the growth in popularity in commodities. Thus, institutional investors, hedge funds etc have raised their allocation to commodities. But September was not good for many commodities  - althought gold rose. .Not too long ago, Jeremy Grantham wrote a paper saying that this time is different and commodities are an asset to have in your portfolio because of global demographics (I've heard that before). Today the WSJ suggested commodities are cyclical in nature and as an investment, have their limitations ie. no income, are susceptible to supply/demand changes and technological innovations.    [more]



Capitulation coming

October 04, 2011 – Comments (0)

I sense that we have started to move into a period of capitulation. We are getting the tell-tale signs: large mutual fund redemptions, share prices dropping like rocks (especially banks - is BAC really worth only $5.50 a share), small cap stocks, which I think have held up remarkably well are finally dropping sharply (witness SBB yesterday), high risk small caps have been hit hard. Insiders, who were big buyers in August/early September, have seemingly dried up. We have probably seen some forced selling - but not enough. I believe we still have to go through one of those periods when share prices are in free-fall to mark the final washing out of those who can't take the pain anymore. Another 10-15% decline probably does it.   [more]



Bloomberg survey - investors are very pessimistic on Europe

September 29, 2011 – Comments (0)

Below are some excerpts from a Bloomberg global poll published today. Investor  pessimism on Europe is high (not surprising). This is reflected not only in the survey but on the valuation of European equities (PER of 11x and dividend yield of 4.4%). As a contrarian it would probably be worthwhile to start adding some European exposure to your portfolio.    [more]



QE3,Treasuries and TBT

July 13, 2011 – Comments (3)

I bought a fairly large holding in TBT at an average price of around $32.50. The price ran up quite nicely but is now at about $31.92. The decline comes amid doubts that QE3 would be implemented. My view is that the Fed and government will do everything in their power to avoid deflation and get the economy going - even if it means opening the printing presses. Bernanke will avoid deflation like the plague. I also don't believe the economy is going to fall off a cliff but rather we are in for much of the same - slow growth punctuated by strength and weakness. There is lots to worry about - lack of jobs growth, debt defaults, etc. I think TBT is discounting a lot of bad news. With 10 year Treasuries yielding 3.9% or thereabouts, bonds represent little value (unless deflation becomes a reality).   [more]



Zynga $15bn to $20bn - you gotta be kidding

June 29, 2011 – Comments (3)

The expectations are for Zynga, a games developer for Facebook and mobile games, to be valued at between $15bn to $20bn. I can't find anything on revenues etc. A quick look indicates it has acquired a few game developers rather than growing organically. This sounds like a classic hype and comes on the back of LinkedIn's IPO. The company may be successful long-term (I have doubts about that) but to pay $15bn is just ridiculous. Yahoo for all its problems is valued at $18bn and has $1.3bn in operating cash flow plus other assets.   [more]

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