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If seeing the obvious makes me a whiner, wahhhhh / the dollar is a Fannie / Taiwanese values / Wrong on BUD



July 13, 2008 – Comments (12) | RELATED TICKERS: AUO , BUD , FNMA

I’m sure that most of you have seen that one of McCain’s top economic advisors…make that former top economic advisors, Phil Gramm said last week.  For those of you who missed it, he referred to America as “nation of whiners” and said that the problems with our economy are only in our minds.  It’s one thing for someone who is involved in a campaign to be so idiotic as to call the everyone that they are trying to get to vote for their candidate whiners, but to be a Ph.D in economics and be so mind-bogglingly wrong about the state of the economy is even worse.

Here’s a amazing quote from one of my favorite writers, Barron’s Alan Abelson on this subject:

“If the continuing demolition of the housing industry that has already wrought half a million foreclosures and threatens to add several million more to the woeful total; the vicious credit crunch; the humongous bite of $140-plus-a-barrel crude and $4.50-a-gallon gasoline; the remorselessly rising cost of such existential items as food, medical care and education; 5.5% unemployment even by Uncle Sam’s skewed reckoning; rock-bottom consumer confidence; and the trillions that went up in smoke in global stock values in the first half of this year are all figments of our febrile imaginations, we’d just as soon not hear what kind of economic hell would qualify in Gramm & Co.’s eyes as a recession.”

What an absolute moron


Dollar Gains as Paulson Seeks Equity Stakes in Freddie, Fannie 

This headline completely blows my mind.  Can anyone on Earth explain to me how the U.S. government using our tax dollars to buy stakes in those train wrecks Fannie and Freddie is supportive of the dollar?  Our country doesn't have any money!  If we print more to buy garbage like this, it shouldn't strengthen the dollar. Good grief.  It's not like I'm rooting for the dollar to fall, but this makes absolutely no sense. The short-term movements of the markets are often so irrational.  I guess when you're comparing the dollar to currencies like the Euro or Yen when Europe and Japan are pretty messed up themselves this move isn't quite as irrational, but I continue to strongly believe that the dollar will fall versus the Real and the Yuan and that oil and gold will continue to rise.



OK now anyone who has read anything that I have written lately knows that I'm not touching anything remotely related to consumer discretionary spending with a ten foot pole. Having said this, some stocks are getting unbelievably cheap right now. I came across two interesting ones in a recent Forbes article on Taiwan.

AU Optronics (AUO)
AUO is Taiwan's largest maker of liquid crystal displays and it is the third largest LCD maker in the world. It recently rolled out a new screen technology that uses light-emitting diode backlight displays that in short promises amazing things like improved picture quality, thinner panels, energy savings, and mercury-free construction. It currently trades at just over 6 times earnings.

Acer (2353.TW)
I don't believe that I could even buy this stock through my Charles Schwab account if I even wanted to, but it sure looks attractive. We've all seen Acer's stuff before, they make monitors, computers, and other peripherals. Last year it purchased what was left of the once proud Gateway franchise. It also owns the European company Packard Bell and the smart phone maker E-Ten. Acer's sales rose an outstanding 26% last year. This compares with an increase of only 14% at Hewlett Packard. Sure HP's margins are better, coming in at 7% versus Acer's 2.7%, but that just means that Acer has room for improvement. I know that its estimated 2009 forward P/E ratio (which was listed in the article) is 10, but I don't know what it's real, non guestimated ratio is.



Wow, I admit it.  I was completely wrong about BUD.  At least I had an opinion :).  This is why I never play merger arbitrage in real life.  I have closed out my CAPS short of BUD.  At $70 per share Anheuser-Busch shareholders are making out like bandits.  I definitely wouldn't want to be n inBev shareholder right now.  inBev is going to have a reeeeally tough time squeezing enough out of BUD to justify paying this sort of price for it.


No position in any company mentioned 

12 Comments – Post Your Own

#1) On July 14, 2008 at 12:42 AM, hansthered0 (< 20) wrote:

That whiner comment was supposedly taken out of context. If we define a recession as negative GDP for two or more quarters then we actually haven't seen that yet (to my knowledge).

When do the official numbers come out?

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#2) On July 14, 2008 at 5:31 AM, TMFDeej (97.78) wrote:

The country doesn't necessairly have to experience two consecurive quarters of negative growth for the National Bureau of Economic Research to consider this an "official" recession. 
I think that we will ultimately officially be considered in one.  Regardless of what the official decision is, things are a mess.

Take a look at the video.  Gramm comes off looking like a smug idiot.  I've seen the whole thing, it doesn't look much better.


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#3) On July 14, 2008 at 8:24 AM, XMFSinchiruna (26.49) wrote:

Deej... you're absolutely right about the ridiculousness of that dollar headline.  The writers of these headlines are either woefully uninformed on basic economic principles, or they are party to the spin machine that is trying to chant its way to a strong dollar through mass hypnosis.  Take your pick.  :)

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#4) On July 14, 2008 at 11:08 AM, Schmacko (92.93) wrote:

"but I continue to strongly believe that the dollar will fall versus the Real and the Yuan"

I was under the impression the chinese government still trys to keep the Yuan's value artificially depressed vs. the value of the dollar to keep their export driven economy humming.  Has this changed?  I really have no idea.


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#5) On July 14, 2008 at 11:24 AM, TMFDeej (97.78) wrote:

Yes, Schmacko, while the Yuan is kept artifically low in relation to the U.S. dollar, it has still been slowly appreciating.  The Yuan is up just under 7% versus the U.S. dollar YTD after rising that much in all of 2007.


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#6) On July 14, 2008 at 12:57 PM, GS751 (26.83) wrote:

I always love your posts.  I've given you something like 50 rec's (just a number off the top of my head).  Hey at least you had an opinion.  Take a look at interactive brokers, and Nobel trading, I use both of them, the fee's are soo low.  I pay 0.08 per share for trading, and can trader anything on like 80 exchanges.   Plus the data is much better.



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#7) On July 14, 2008 at 2:14 PM, zygnoda (< 20) wrote:

Used, I know you've got uranium stock and you're all for nuclear power. The political protest group my wife and I are active with thinks otherwise. 
Uranium mining is a dirty business, which leaves mountains of radon-gas-spewing waste rock behind it. Refining the ore takes megalitres of water and sulfuric acid, so it results in acid rivers flowing across this land. More uranium in world society eventually means more nuclear weapons. And if Oz digs the stuff out of the ground, Oz is going to wind up taking the waste back. (It's a wasteland here anyway, but still...) Every dollar spent on building nuke plants is a dollar that won't be spent on sensible energy like solar and geothermal. I won't even get into tree-hugger reasons like destruction of Aboriginal lands. 
Shorter version -- I hope the uranium stays in the ground.

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#8) On July 14, 2008 at 2:37 PM, TMFDeej (97.78) wrote:

Thanks for the recs and the info on Interactive Brokers, GS751.  I've never used them before, but if I continue become more involved in trading international I have been for the past several years...I may have to take a serious look at them.


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#9) On July 14, 2008 at 4:26 PM, leohaas (30.09) wrote:

"Can anyone on Earth explain to me how the U.S. government using our tax dollars to buy stakes in those train wrecks Fannie and Freddie is supportive of the dollar?"

Well, let me try. Not that I believe it myself, but the argument for helping FNM and FRE goes something like this:
 - If we don't bail out FNM and FRE, they will go under
 - If they go under, banks can no longer sell mortgages they have written.
 - If banks can no longer sell mortgages they have written, they will be forced to stop writing new mortgages (to everyone, including people like you and me--not much debt, good job, credit score around 800).
 - If banks can no longer write new mortgages, demand for houses will disappear almost completely.
 - If demand for houses disappears, home prices will collapse (you ain't seen nothing yet...)
 - If home prices collapse, the US economy will collapse.
 - If the US economy collpases, so does the dollar.
Conclusion: we need to bail out FRE and FNM to prevent the dollar form collapsing.

"At $70 per share Anheuser-Busch shareholders are making out like bandits.  I definitely wouldn't want to be n inBev shareholder right now."

Have you tried converting that into Euros lately? Isn't that something like 2 Euros and 17 cents? Just kidding. It is not that bad, but with the falling dollar any US asset becomes attractive to European investors. And supposedly, Anheuser-Busch is a tremendous asset (I don't like their products, but boatloads of my fellow Americans disagree with me...)

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#10) On July 14, 2008 at 5:43 PM, zygnoda (< 20) wrote:

Dang leo.  You always come around and sound so good.  Congrats on being right once again.  :)

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#11) On August 09, 2008 at 12:34 AM, nuf2bdangrus (< 20) wrote:

THe closest any of these isolated country clubber elites ever get to a real American family is to watch a Hollywood skewed one on TV.  Or look out the window of their passing limousine.


And that's why they are so clueless. 

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#12) On October 30, 2008 at 3:05 PM, mollykat (35.60) wrote:

Subject: BUD    What am I missing? Seems like $70 share for my BUD is like low hanging fruit. However I can not explain BUD dropping to $57 if $70 is waiting for us in Jan. Are the experts suspecting InBev can't arrange the $52 mil financing?

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