Sunday, June 28, 2009

Sunday



Steaming ahead despite the recession, Acer is about to overtake Dell as the number 2 PC seller.

Farrah, MJ, and now Billy Mays, all in a 3day period?!?!

MJ and private equity...

Barrons' Michael Santoli brings up a point that AlphaNinja often comments on. Take a cue from the bond market - when companies like Microsoft can borrow money for 3-5%, the stock should not yield 10% on a free cash flow basis, or have a 6-7% dividend yield like AT&T.

As Andrew Bary noted Wednesday in a timely Barrons.com piece, debt buyers flocked to Merck 's (ticker: MRK) $4.25 billion bond issuance, happy to pick up a 10-year tranche at a yield just over 5%. Meanwhile, Merck's common shares are shunned, despite a 6% dividend yield and depressed valuation.

A clever friend asks: How many companies through history with a stock trading below eight times current-year profits -- a level usually associated with risky, cyclically sensitive businesses -- have been able to issue 10-year paper around 5%? Consider, too, AT&T (T), whose 6.7% stock dividend yield is comparable to the rate on some of its longer-term debt. And Microsoft (MSFT), which in May sold debt for the first time, paying 3% to 5.24% for money it doesn't need. So, this means Microsoft sold bonds valued between 33 and 19 times the bonds' promised "earnings," while its shares sell for 13 times

Barrons interview with CALPERS head Joe Dear. Pasted below are his thoughts on equity markets going forward. Note that he's excited about the pension board's recent "reaffirmation" of its investment expectations, and his belief in equity returns of 8% going forward -->> with absolutely no rationale to back it up. This guy manages $174billion, by the way. Troubling....

"I think we've seen a real turn with respect to growth and prices. But I would expect to see lower returns in equities over the long term. The significant thing that the Calpers board did was [not so much about] allocations, but the fundamental reaffirmation of expected returns in asset classes. We looked very hard at what happened in 2008 and reviewed our capital-market assumptions. We made some tweaks, but reaffirmed our belief in returns in equities versus fixed income versus cash, and the fundamental relationships between asset classes.

So as a long-term investor, we think the markets are going to produce good returns that will enable us to make our assumed rate of return of 7.75%. I think that's a big statement, because you could have looked at what happened last year and ask: Can your returns show cash as the highest returning asset class? We decided that cash isn't [the highest-returning asset class], and that returns are going to revert to the historical relationships."

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