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Guggenheim S&P Global Water ETF Message Board

  • iwantwhatscomingtome iwantwhatscomingtome Dec 3, 2004 11:57 PM Flag

    positioning for consumer fatigue, rates

    IMO this is an excellent article by Vitaliy Katsenelson: His prior articles are excellent as well - e.g., as I recall, his sum of all fears article re: MRK could have got one out around $45 a couple of weeks ahead of Vioxx day and he has a good one about the dangers of "religion" stocks, i.e., falling in love with an investment worshipping it even though it has long stopped working e.g., KO

    my take as to the gist of his recent article and a couple of snippets - signs of consumer fatigue, consumer won't be able to continue to carry the economy; companies that sell food direct to consumers reporting sales get whacked when they attempt to pass thru cost increases; consumer debt service burden relative to income nearing an all time high; < . . . any improvement in the economy will be followed by rising rates. Even in the absence of economic improvement, high inflation in commodity prices is likely to push rates higher because inflation will be eroding the already very small real return in bonds. > [and although i don't recall it as being mentioned in the article, IMO to some extent deficits/ the dollar's weakness also will require higher rates ] many homeowners have reduced their equity to spend via equity lines and are exposed to variable rates

    recalibrating portfolios to mitigate the risk of a weakened consumer, won't drop off overnight but would rather be early rather than late in adjusting

    1. away from consumer discretionary big budget items, reduced home equity and higher rates will weigh, on names like HD LOW BBY FO

    2. shifting focus to industries that have very little exposure to a weakening in consumer discretionary spending, e.g., < health care
    consumer staples (with unique and strong brands)
    defense > [ i am on board with the first two categories]

    3. < identifying beneficiaries of a higher interest rate environment and consumer weakness. . . . . The only company I've found so far that fits the bill is Jefferson Pilot (JP:NYSE - commentary - research), a holding company with substantial life insurance businesses. It should benefit from higher interest rates, and demand for its products is unlikely to decline in a weaker consumer environment. >

    The latter idea as a hedge against rates is one i had been playing earlier thru GNW, but JP looks better as it doesn't have GNW's PMI and long term care exposure. And it pays 3% dividend, sells a bit above 12x est 05 eps.

    I've started a position in JP FWIW

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    • I disagree. $15 plus 10 cents a share is high to me. I pay $10.99 with Ameritrade, which makes it cheaper no matter how many shares you sell.

      The more shares received as dividends that you sell, the worse the fees look. High fixed cost PLUS high variable cost.

      I agree that I would keep reinvesting so long as the stock is below NAV (and even if it is higher than NAV if they keep making investments like the one they made).

    • FWIW, given the absence of a PSEC board there is some discussion from time to time on the ACAS board

    • i bought back a chunk of PFE at the open. That naproxen bad, Celebrex good study by NIH is golden for PFE imo.

      FDA won't force out Celebrex - there will be nothing left but asprin, and PFE won't withdraw. As long as there is no evidence of a MRK-like coverup, and assuming some minimal continuing Celebrex and Bextra income, PFE is looking better to me here.

      MRK on the other hand seems to have floated to an inexplicable premium v. PFE - and the story that MRK ignored test results showing VIOXX to be dangerous because they thought the heightened risk was only relative to a heart "protective" naproxen just went down the tubes. IMO

    • i'm not sure there is anything wierd about the dividend reinvestment program except that it is opt out - but since they payout their income, it is better to retain and plow that money back into investments, hence the opt out. As i understand other reinvestment programs, they all charge a fee, because they want you to leave your money with the firm, but it only looks big as a % if you are looking to cash out just the few shares paid as dividends, v. principal. Try selling a few shares thru a broker - the % transaction cost may be higher

      i intend to leave my dividends in, as long as PSEC is selling at a discount to NAV and probably afterward as well

    • With the article at the top of the front page of the WSJ's Investing section talking about how everybody is running scared from the drug companies and what crummy prospects they have for the future, have we finally reached the contrarian point to go ahead and buy?


    • IWWCTM:
      What is your take on the weird "opt-out" dividend repurchase program. It seems like a real pain as any repurchased dividends are held with an agent, who charges a steep commission to sell them.

      Are you opting out?
      I plan to.

    • <Why does anyone buy these (or AINV) at the IPO? Doesn't the underwriting fee make them simply suicide?>

      Not necessarily. ARCC never went to a discount as i recall and basically ran up 30%. On the other hand, ARCC was fully invested from day one because it closed on a portfolio it acquired from RBC.

      i wouldn't mind paying 1.07x NAV to get the IPO if there was a good reason to believe after ramp up things would work out -- e.g. ARCC.

      After all, fully invested ACAS and GLAD sell at 1.6x and 1.8x as i recall

    • i thought i was being patient in waiting until PSEC was selling at about 91.5 cents on the NAV dollar, but my bids were getting hit today as low as 11.60 -- 82 cents on the NAV dollar - a 17.84% discount

      as much as i can determine, other than what i believe to be misplaced fear re: DGP' suit and refinancing for BDC regulatory compliance, and tax loss selling, there is no reason for this deep a discount.

      as the bid, i can see that some of the wild selling at today's low was odd lots, but i don't assume that the small guy is necessarily less clued-in.

      so, i hope that long term, i am not the greater fool. between the asset discount play, or gas solutions-like private debt/equity deals [that one is yielding 25% income if i read the 8kA correctly, and trailing results at least are maintained], imo this could be a winner [better be because i am very overweighted]

    • Sold PSEC @ 12.39 this morning.

      Bought GMAI @ 11.00. Forward PE of approximately 8. Positive comments at the shareholders meeting a few days ago.

    • I took a small position @ 11.90. Risk/reward look great. Approaching it as a trading opportunity, not a long-term buy and hold.

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