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Cyprus Bailout and possible volatile days ahead...
Cyprus is being bailed out by EU and IMF. Cyprus is itself 0.2% of the EU economy so it should not make us concerned a lot.
However, in the bailout EU/IMF introduced a bank deposit tax ranging from 6.75% to 9.9%. Apparently, wealthy Russians have a lot of money in tiny Cyprus banks... On the surface it looks like they are sticking it to the Russians. However, this may create unintended consequence of "bank runs" in other European countries that are not that small such as Spain. So, we might have turbulence next week because of this not so well thought action.
This could be the pullback that everyone was looking for.
It'll send money into physical metals without question and it will send money out of the EU and into foreign countries (which does nothing to help the Eurozone.) There still seems to be some question of whether this will actually go through and happen (http://www.reuters.com/article/2013/03/17/us-cyprus-parliament-idUSBRE92G03I20130317), but even if it doesn't, you're still seeing the effects already.
Will probably cause a pullback, but I don't know if it will cause the pullback everyone is looking for. Screwing the people instead of the banks and bondholders should not be a surprise, really (although if the banks in Cyprus were screwed before, having depositors pull all their money will not exactly help, either.)
The grand experiment continues; ala the ECB, IMF, and the other 27,000 committees and groups of central planners. Cyprus is the current experiment; and although small in monetary size, will reach out and touch into many other places. Cyprus is another of the economic thorns in place; and appears to continue to help cause the Euro area to be in and to remain feeling trapped without a good exit in sight. This continues to cause poor thinking and judgment with EU related areas. The private meetings (ECB, etc.) would be a most interesting adventure; and right out of a grand novel with the words and thoughts. I have been following the news reports for several weeks; with some news from the below linked newspaper and ex-pat forum. I was reading more with an interest towards the Russian monetary side of this and other outlier affects that could be possible.
So, the $US has been very strong for several weeks/months; GLD and GDX (as broad measures) have smacked down hard for several months and have just attempted to form bottom numbers in the past week.
If the "confiscation" upon deposit accounts is put in place for the Cypriot bank accounts, electronic money transfers remain blocked and the Monday bank holiday remains in place; it is not difficult for me to find 5% market swings coming into view.
The Cyprus message could be just another Ho-Hum event, but that is not my feeling today. I suspect the U.S. big money kids better get their sleep on Sunday and be ready to play hard ball beginning with the Asian markets open(s), come Sunday evening. If this all plays out in favor of the traders, much money stands to be gained and lost during the come week for the big houses. What better excuse in the short term to take some profits, eh?
Considerations: $US index up more/again, $Euro down ($1.27), GLD and GDX (+5%, first day), U.S. Treasuries strong and broad commodities down as well as most other equity indexes. In theory, the U.S. equity market could find more cash flows to continue from international areas; but the U.S. equity market also lends to the best place to harvest profits from the run since last November.
On the other hand, I could just be barking up the wrong tree.
Reply to @scott: re: Hitler video...too much! Can't stop laughing...thanks Scott. This situation is terrible really...not sure what EU leadership is thinking...they're about to make US legislators look stellar in comparison!
Reply to @Charles: It will be interesting to see how Asia plays out. As for "gulp", tomorrow is either a Big Gulp 7-11 style, or - in this bizarro world - it may be relatively minor. I tend to think that the potential of runs on banks would cause considerable stress and currency volatility, but they'll just walk it back or intervene somehow.
Reply to @scott: I moved my list of buys to the other thread on buys. In terms of holding companies/conglomerates, I am thinking about firms like L, IEP, LUK, BIP. May also look at farmland holding companies in the US e.g., BWEL and LMNR. May add to GLRE as (i) the underlying fund can short and (ii) it is currently trading at a modest premium to book value.
IEP will result in a K-1 at tax time, as it is an MLP. There is also a large spread between bid and ask. The ability to invest with Icahn is compelling, but do keep in mind the K-1 (not a huge deal, but it is more paperwork) and the fact that IEP is potentially volatile, especially given the manner it trades. OAK also results in a k-1, as does BIP.
GLRE is a very compelling investment in theory, but it does not always work in practice. It seems to move with the reinsurance industry more than it does with Einhorn performance. It is a reinsurance company, but I wish it was a little more focused on the Einhorn aspect.
L seems to be the continual value play year-after-year, and it still trades under book - I'd love to see some sort of catalyst or a dividend instead of continual buybacks. It's a great company with solid leadership, but I'd love to see a catalyst.
If you want a play on farmland, Sprott Resource Corp (SCPZF.pk) owns and leases farmland in Canada and has investment in farmland in South America. It has a number of other things, though, such as physical gold and public/private resource companies. There is also a hedge fund like fee structure and the stock is very volatile. They recently started a dividend policy (which works out to something like 10%), although I think it was unnecessary and more to gain attention from dividend seekers. The main farm investment has its own website (http://www.oneearthfarms.ca/ - see also http://berettafamilyfarms.ca/) I don't own it currently (just too volatile) but I have in the past. http://www.sprottresource.com/ Not a perfect play, but they own or lease a few different farmland investments.
The other farmland option outside the country is Adecoagro (AGRO), but the exposure to Argentina has held the stock back. Volatile. George Soros remains the largest shareholder.
Reply to @TSP_Transfer: Thanks to you and Scott for your comments and suggestions.
I am hesitant about CRESY and AGRO precisely because of the Argentinian link. For me, the country risk is real. And it is not just Argentina -- look at how Petrobras (PBR) has been impacted by Brazilian government policy.
Sprott Resource Corp's farmland investment is very interesting, but too small a part of the overall company to move the needle. I wish they would spin it off as a separate entity.
BWEL is thinly traded and on the pink sheets. It works better as a buy it and put it away investment. The company has a very interesting history..see http://www.amazon.com/King-California-Boswell-Making-American/dp/1586482815. It will move up if the company decides to list on a major exchange -- as was the case with Limoneira.
There are a few other small, thinly traded farmland companies. There is a real opportunity for someone to put together a solid farmland REIT. While the recently IPOed Gladstone Land Corporation (LAND) is along these lines, there are some red flags about this company.
Reply to @scott: Thanks for your comments and suggestions.
I have come to accept the K-1 as one additional cost. IEP has an issue of being volatile and thinly traded. It has traded at substantial discounts to the sum of the parts valuation (as noted in Barrons). So, I will look at it only when it drops substantially from where it is now.
Good points on L. As long as the fundamentals of the business are sound, I believe the value will ultimately realized.
GLRE's performance has been impacted by snafus on the reinsurance side. However, Einhorn's fund has also not done that well for the last year or so. I am optimistic that the hedge fund's performance will be better going forward, given its long term record. I look at it more as a long biased L/S fund. There seem to only be a couple of insurers/holding companies that fit this profile -- the other being Fairfax.
If it happens in Cyprus it can and probably will happen here. How about a tax on IRAs and 401Ks? Brokerage accts? Hey, we've got to balance the budget and that's where all the money is? Sleep tight boys and girls. Hope your bed buddy is made out of gold.
Scott like the footage from "Downfall" a German language movie that can be found on Netflix--great movie. Don't know what to think of the tax--let them fail, have German taxpayers bail them out, or punish the depositors who happen to be mostly Russian.
Reply to @BWG: Gladstone is kinda interesting is that it's a triple net lease situation with the farms, apparently. They aren't the ones doing the farming, they are just entering into sale-leaseback transactions with farms. (although with triple net, the "tenant" pays core costs, such as taxes.) I actually quite like the triple net lease REITs (I own WP Carey, but have looked at Reality Income), but I guess with farmland I'd like more of a pure/ownership play.
Reply to @Mark: Nice site. I bookmarked it. Thanks Mark. BTW. Back in 2007, I remember arguing that sub-prime mortgages represented the smallest fraction of all home loans. Unfortunately, pulling on that small thread unraveled the whole ball. With the fragility of the EU and even US recoveries, I'll remain sensitive to any destabilizing events, like a Cyprus bank run.
Reply to @TSP_Transfer: Yeah, I think it's an interesting story and there's a lot to it (water rights, etc), but I'd like to at least have a website of some sort to look at - there's no web site and little (if any) public information.
Comments
Will probably cause a pullback, but I don't know if it will cause the pullback everyone is looking for. Screwing the people instead of the banks and bondholders should not be a surprise, really (although if the banks in Cyprus were screwed before, having depositors pull all their money will not exactly help, either.)
http://www.nytimes.com/2013/03/18/business/global/facing-bailout-tax-cypriots-rush-to-get-their-money-out-of-banks.html?pagewanted=1&ref=business
The grand experiment continues; ala the ECB, IMF, and the other 27,000 committees and groups of central planners. Cyprus is the current experiment; and although small in monetary size, will reach out and touch into many other places. Cyprus is another of the economic thorns in place; and appears to continue to help cause the Euro area to be in and to remain feeling trapped without a good exit in sight. This continues to cause poor thinking and judgment with EU related areas. The private meetings (ECB, etc.) would be a most interesting adventure; and right out of a grand novel with the words and thoughts.
I have been following the news reports for several weeks; with some news from the below linked newspaper and ex-pat forum. I was reading more with an interest towards the Russian monetary side of this and other outlier affects that could be possible.
Cypriot English language newspaper
Ex-Pat forum
Cyprus Anglo forum
Edit 10:30 am Uh-oh, bank holiday extended???
So, the $US has been very strong for several weeks/months; GLD and GDX (as broad measures) have smacked down hard for several months and have just attempted to form bottom numbers in the past week.
If the "confiscation" upon deposit accounts is put in place for the Cypriot bank accounts, electronic money transfers remain blocked and the Monday bank holiday remains in place; it is not difficult for me to find 5% market swings coming into view.
The Cyprus message could be just another Ho-Hum event, but that is not my feeling today.
I suspect the U.S. big money kids better get their sleep on Sunday and be ready to play hard ball beginning with the Asian markets open(s), come Sunday evening.
If this all plays out in favor of the traders, much money stands to be gained and lost during the come week for the big houses. What better excuse in the short term to take some profits, eh?
Considerations: $US index up more/again, $Euro down ($1.27), GLD and GDX (+5%, first day), U.S. Treasuries strong and broad commodities down as well as most other equity indexes. In theory, the U.S. equity market could find more cash flows to continue from international areas; but the U.S. equity market also lends to the best place to harvest profits from the run since last November.
On the other hand, I could just be barking up the wrong tree.
Okay, back to work I am.
Take care,
Catch
Local Cyprus news:
Will be very interesting to see where the FX markets open shortly, and where the futures open this evening.
122.04 -2.36%
EURUSD:CUR
1.29 -0.45%
EURSGD:CUR
1.62 -0.42%
EURHKD:CUR
10.05 -0.39%
EURGBP:CUR
0.86 -0.71%
EURSEK:CUR
8.35 -0.21%
EURNOK:CUR
7.48 -0.73%
http://www.bloomberg.com/news/2013-03-17/euro-declines-against-dollar-swiss-franc-amid-cyprus-turmoil.html
DJIA INDEX Jun13 14,320.00 -119.00 14,389.00 14,389.00 14,310.00 18:26:17
S&P 500 Jun13 1,539.00 -15.30 1,545.30 1,545.30 1,536.80 18:25:44
NASDAQ 100 Jun13 2,764.50 -26.50 2,778.75 2,778.75 2,761.00 18:27:08
Not good, not horrendous.
Gold up a bit over $1600 again.
"So Here We Are; They're All Liars"
http://market-ticker.org/akcs-www?post=218843
Those with dry powder might want to get their ducks lined up.
So far, the reaction seems to be measured..at some point, the S&P Futures were down 30. Doug Kass is calling for a 'garden variety' correction but there are others equating this with AHA in 2007
http://www.minyanville.com/businessmarkets/articles/AHM-BSC-GS-UBS-NWS-DJ/8/29/2007/id/13913
BWG
BWG
IEP will result in a K-1 at tax time, as it is an MLP. There is also a large spread between bid and ask. The ability to invest with Icahn is compelling, but do keep in mind the K-1 (not a huge deal, but it is more paperwork) and the fact that IEP is potentially volatile, especially given the manner it trades. OAK also results in a k-1, as does BIP.
GLRE is a very compelling investment in theory, but it does not always work in practice. It seems to move with the reinsurance industry more than it does with Einhorn performance. It is a reinsurance company, but I wish it was a little more focused on the Einhorn aspect.
L seems to be the continual value play year-after-year, and it still trades under book - I'd love to see some sort of catalyst or a dividend instead of continual buybacks. It's a great company with solid leadership, but I'd love to see a catalyst.
If you want a play on farmland, Sprott Resource Corp (SCPZF.pk) owns and leases farmland in Canada and has investment in farmland in South America. It has a number of other things, though, such as physical gold and public/private resource companies. There is also a hedge fund like fee structure and the stock is very volatile. They recently started a dividend policy (which works out to something like 10%), although I think it was unnecessary and more to gain attention from dividend seekers. The main farm investment has its own website (http://www.oneearthfarms.ca/ - see also http://berettafamilyfarms.ca/) I don't own it currently (just too volatile) but I have in the past. http://www.sprottresource.com/ Not a perfect play, but they own or lease a few different farmland investments.
BWEL really remains interesting, although few shares. There's a good article about it here: http://seekingalpha.com/article/190300-a-first-look-at-j-g-boswell
The other farmland option outside the country is Adecoagro (AGRO), but the exposure to Argentina has held the stock back. Volatile. George Soros remains the largest shareholder.
https://www.google.com/finance?q=NASDAQ:CRESY&ei=rm5GUcijFpL-rAGRew&ed=us
http://www.cresud.com.ar/cresud/index_eni.htm
I am hesitant about CRESY and AGRO precisely because of the Argentinian link. For me, the country risk is real. And it is not just Argentina -- look at how Petrobras (PBR) has been impacted by Brazilian government policy.
Sprott Resource Corp's farmland investment is very interesting, but too small a part of the overall company to move the needle. I wish they would spin it off as a separate entity.
BWEL is thinly traded and on the pink sheets. It works better as a buy it and put it away investment. The company has a very interesting history..see http://www.amazon.com/King-California-Boswell-Making-American/dp/1586482815. It will move up if the company decides to list on a major exchange -- as was the case with Limoneira.
There are a few other small, thinly traded farmland companies. There is a real opportunity for someone to put together a solid farmland REIT. While the recently IPOed Gladstone Land Corporation (LAND) is along these lines, there are some red flags about this company.
BWG
I have come to accept the K-1 as one additional cost. IEP has an issue of being volatile and thinly traded. It has traded at substantial discounts to the sum of the parts valuation (as noted in Barrons). So, I will look at it only when it drops substantially from where it is now.
Good points on L. As long as the fundamentals of the business are sound, I believe the value will ultimately realized.
GLRE's performance has been impacted by snafus on the reinsurance side. However, Einhorn's fund has also not done that well for the last year or so. I am optimistic that the hedge fund's performance will be better going forward, given its long term record. I look at it more as a long biased L/S fund. There seem to only be a couple of insurers/holding companies that fit this profile -- the other being Fairfax.
BWG
If it happens in Cyprus it can and probably will happen here. How about a tax on IRAs and 401Ks? Brokerage accts? Hey, we've got to balance the budget and that's where all the money is? Sleep tight boys and girls. Hope your bed buddy is made out of gold.
peace,
rono
http://macromon.wordpress.com/
http://microcapclub.com/2011/10/jg-boswell-the-most-interesting-small-cap-you-never-heard-of/
http://microcapclub.com/2013/03/the-coming-boom-in-microcap-agriculture-stocks/