Enterprising Investor Forum

His track record speaks for itself and it is always a treat to listen to his thoughts.

Having averaged double digit growth since inception, he is not only scooping up great value plays but also senior credit in selected companies that will easily allow him to continue with the stellar performance:

As usual, words of wisdom and worth taking notes!

Following on from our previous post:

Enjoy!

She’s back and she keeps on making the right calls on banks. She warned us at the beginning, then she told us that they were oversold and now she is telling investors to keep their eyes open:

Bottom line, she would not want to own bank stocks!

Enjoy!

Here is a discussion with Soros on his investment fund, coming out of semi-retirement in 2007 and how he had to actively manage his investments and  shift strategies in order to come out with a profit.

Soros, who is one of the ultimate global marco investors is always worth listening to.  He is still worried about the risk of a deeper contraction if the system falls apart.

He stresses the importance of a global and co-ordinated approach to tackle this crisis. He then goes on to talk about the beginning of what he calls ‘financial protectionism’… and how it will be very important for the stronger countries to not only worry about themselves but make sure they help the weaker ones in order to guarantee the global co-ordinate approach and avoid a much deeper melt-down.

He then discusses about the outlook for Brazil, India and China where he thinks the time to invest is approaching but he is still in no hurry in looking at Russia again….

In fine, he talk about his theory of reflexivity.

Despite a lot of suffering in the past years, Corporate Credit is starting to look attractive.  Most market commentators have been talking about this and that it is time to pick up some bargains with pretty good yields. However, as usual, the key question is how to do this and minimize risk exposure?

As most of our readers know, we still feel that we are probably only halfway out of the tunnel and that is why we would prefer to gain exposure through an ETF. One option could be the iShares iBoxx $ Invest Grade Corp Bond (LQD).

The important thing is to focus on Investment Grade companies and to make sure you have a margin of safety as, even the best companies, are being downgraded in this uncertain market environment. In any case, even though default risk is there also for these companies, the default rate on >BBB/Baa is quite low… currently around 5%. Therefore, there should be some room for exposure to this segment in most portfolios.

Fund summary from Yahoo!Finance:

The investment seeks investment results that correspond generally to the price and yield performance of a segment of the U.S. investment-grade corporate bond market as defined by the iBoxx $ Liquid Investment-Grade index. The fund typically invests at least 90% of assets in the bonds of the underlying index, and at least 95% of assets in investment grade corporate bonds. It may also invest in bonds not included in the underlying index. The fund may also invest up to 5% of assets in repurchase agreements collateralized by U.S. government obligations, and in cash and cash equivalents. It is nondiversified.

Please read our disclaimer.

We were discussing this with one of our readers and thought that it might be a good idea to post it for the benefit of all:

After another 7.1% gain in the S&P yesterday, it looks like the markets may be ready for a little pause. But the big question is if we have indeed reached the bottom or if this is just a bear market rally?

Even though the market actually broke above its 50-day moving average, we are still struggling to understand all this optimism.. we may be wrong but we can’t help the feeling that this is just a speculative push to the 850 area and that we will then have to wake up and smell the coffee, probably whilst looking at an S&P back below the 600 level.

There are too many unanswered questions on the current situation and on the way forwards for the bulls to solidly take control here and if they do, we feel that, it would be sad proof that we haven’t learned anything from these past years….

As someone just said on CNBC, no one becomes rich by buying on the 4th up day! Despite the fact that it looks like some risk appetite is returning to the market, the Enterprising Investor should have already made his purchases (if the analysis justified to do so), not dive in now!

Most of the buying so far has been due to short covering and most of the fundamental issues affecting the economy and financial markets have not changed this week. Are some of the banks all of a sudden worth almost double the price they were trading for last Friday? Is there less risk? Do we have more clarity on their balance sheets and their exposures? Hmmm…

Keep on doing your homework but we are extremely skeptical of all those market commentators that are saying to get back in and that the time has come to put money back in the markets. We are still adopting a wait and see attitude and would ideally be ready to take some positions we like but unless something fundamental changes in the state of the economy, we are looking to do so at or below 52-week lows.

Have a nice weekend!

Rest assured that the commodity boom is not over, we believe that prices will probably start to pick up again in late 2009, most probably coinciding with the start of a long and difficult economic recovery process.

As we all know, the sharp decline has been quite spectacular – notice the July 2008 peak – as you can see hereafter in the 2 year DB Commodity Index ETF (DBC):

It is no surprise that in the current economic climate, demand has softened significantly but this does not mean that we will never see growth again! Demand will remain under pressure but not indefinitely.

The next months will be very important to try and understand what shape this recovery could take but in any case, the Value Investor should closely monitor developments in the overall commodity spectrum.

In his book ‘Traders Guns & Money’ Satyajit Das takes readers through the knowns and unknowns in the world of derivatives.  He offers a very cynical and witty account of life in the financial markets and especially in the trading rooms, where wealth is transfered everyday risking other people’s money!

He also offers an insightful explanation of ‘Fund Managers Investment Styles’, that we thought you might find interesting:

• Index Funds = The fund manager invests to match some index like the S&P500 > The fund manager has given up trying to beat the market.

• Active Management = The fund manager tries to pick stocks that will do better than the market > The triumph of hope over experience. You, the investor, are paying for the experiment.

• Momentum Investing = The fund manager chases whatever is going up > The lemming or crowd theory of investing; the investment equivalent of a Finnish proverb: ‘Shit must be good, millions of flies can’t be wrong.’

• Value Investing = The fund manager invests in undervalued gems that he has uncovered through research > Pure luck or you hope that the fund manger has inside information.

• Yield Enhancement = The fund manager invest to generate above market income > You are taking on a whole lot of risk. You will be lucky to get your money back intact.

• Portfolio Insurance = The fund manager guarantees that you investment, at least 90%, is safe > Hang on, wasn’t a return of principal the least you are entitled to?

• Structured Investment = the fund manager will specifically design investment  strategies to fit your exact risk and return parameters using sophisticated investment tools and financial products > A pure con job to charge you more fees.

• Alternative Investment Strategies = the fund manager will invest in hitherto unknown assets – weather derivatives, catastrophe bonds, art, stamps, etc > You are an investment pioneer, good luck!

We will review his book shortly.