Where the Pros Are Putting Their Money

On the Street by Rob Wherry (Author Archive)

The stock market finished another decent month -- so why are investors so gloomy?

That's the sense from a major gathering of fund managers and financial advisors in Chicago last week. At the Morningstar Investment Conference, SmartMoney cornered some of the investing world's most influential personalities. The takeaway: Despite the recent run-up in equities, many professional investors think government policies, economic data and corporate earnings reveal the U.S. is still in store for some troubled times.

If you missed any of our extended coverage you can click here to see our Morningstar blog, complete with stories and video interviews. Or, take in these seven highlights:

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http://www.smartmoney.com/Investing/Mutual-Funds/Where-The-Pros-Are-Putting-Their-Money/

3 Huge Value Traps You Must Avoid Today

By Ilan Moscovitz

If you talk to the most successful value investors on the planet these days, you'll notice a common refrain:

"We're … finding bargains galore"
That's Whitney Tilson, whose T2 Partners has earned 7% annually since inception in 1999 versus negative 3% for the S&P 500.

Not to be outdone, superinvestor Warren Buffett penned an op-ed in The New York Times comparing the present to troubled periods like 1932, 1942, and the early 1980s -- all fantastic times to buy stocks.

And I never thought we would see the day when GMO's notorious perma-bear Jeremy Grantham would say, "You are looking at the best prices in 20 years."

The last time that guy was actually optimistic about stocks was in 1982.

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http://www.fool.com/investing/value/2009/05/29/3-huge-value-traps-you-must-avoid-today.aspx

Stock market: 'We're in the yin phase'

According to Chinese philosophy, yin (shadow) and yang (light) are complementary energies that form a universe. It is a convenient mythology that has, over time, been used to help smooth the many paradoxes associated with modern life.

By Carl Stick

In recent years the mythology of yin and yang has been applied to the economic and business cycles

In recent years, it has been applied to understanding of the nature of economic and business cycles. The conclusions may have implications for how we, as investors, steer through torrid times.

The main proponent of this theory is Richard Koo, chief economist of the Nomura Research Institute, and well known for his examination of "Japan's Great Recession", from 1990 to 2005.

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http://www.telegraph.co.uk/finance/personalfinance/investing/shares/5403059/Stock-market-Were-in-the-yin-phase.html

Dreadful Stocks to Avoid

By Richard Gibbons

Warren Buffett's first rule of investing is: "Never lose money." To this, he often adds rule No. 2: "Never forget rule No. 1." Of course, following these rules is easier said than done. But Buffett's done pretty well, so it seems unwise to simply dismiss his advice as the semi-coherent ramblings of a man who's read way too many 10-Ks.

I take those rules to heart in my investment strategy. I try to focus my investment dollars on sustainable, undervalued businesses that I can easily understand. Buffett has made more than $40 billion for himself (less, now, with the market crash) using that strategy, and he's made even more for his partners and shareholders over the years. Do you really need to assume a lot of risk to make more than $40 billion? My answer, and the answer of my colleagues at Motley Fool Inside Value, is "Heck, no!" If I make only $40 billion, I'll be perfectly satisfied.

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http://www.fool.com/investing/value/2009/05/24/dreadful-stocks-to-avoid.aspx

DEEP WALL STREET: The Obama-Geithner Plan Will Work Fine –So Long As The Chinese Do As We Wish

By Deep Wall Street

President Obama met with his august council of outside economic advisors, headed by Paul Volcker, on Wednesday. Thanks to the White House press office, we got our almost daily dose of optimism: POTUS told his advisers that the economy is undergoing a “return to normalcy.” No doubt they felt better and went out and bought some bank stocks, just like every mutual fund manager in the country, further fueling the “stress test rally.”

Is it all–the economic recovery, that is–really just about confidence? Maybe Treasury Secretary Tim Geithner is on to something. His predecessor, Hank Paulson, who supposedly knew a lot about the markets from his decades at Goldman Sachs, nonetheless had an uncanny tin ear when it came to reassuring the financial world.

That is, Paulson’s plan of telling Congress that he needed $700 billion to bail out his Wall Street pals, or the New Great Depression will hit–and then watching cluelessly as Congress voted it down, the first time around–was not a good confidence-building strategy.

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http://foxforum.blogs.foxnews.com/2009/05/23/deep_wall_street_obama_geithner/

3 Stocks on Buffett's Wish List?

Does the Oracle of Omaha want these stocks?

By Ilan Moscovitz

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread."
-- Warren Buffett, Oct. 16, 2008

It was a tough year for the world's richest man -- according to data from Forbes, Warren Buffett's net worth declined in value by a staggering $25 billion in 2008.

So let's not be too hard on ourselves if we, too, owned a few stocks that lost substantial portions of their value last year. Instead, let's pay close attention to what masters like Buffett are doing on the heels of such a dismal market year.

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http://www.msnbc.msn.com/id/30913683/

More Thoughts on the Fake Recovery

A recent post I published on both Credit Writedowns and Naked Capitalism, “Both initial claims and continuing claims now pointing to recovery,” has left the impression that I am a wild-eyed bull – for which I have been duly smacked about the head.

This is far from the case. A recent post by Nouriel Roubini to which Marshall Auerback alerted me is very much in line with my viewpoint.

I would like to share snippets of that post with you along with some quotes from my own past posts and updated commentary to clarify how I see the economy progressing.

But, I also want to reiterate the point of NOT viewing the economy only through the lens of recent events, and of taking a measured, objective view of data.

Roubini’s post has the delightfully long title, “Green shoots or yellow weeds? A trifecta of risks to the early bottoming out of the recession and short-term economic recovery and to the medium-term actual and potential growth prospects of the global economy.”

more in:
http://seekingalpha.com/article/139336-more-thoughts-on-the-fake-recovery

BlackRock: Financials Have Bottomed

By Dan Weil

Robert Doll, chief investment officer for equities at money management giant BlackRock, thinks financial stocks have bottomed, though the industry isn’t out of the woods yet.

“We are less underweight financials than we were,” he tells CNBC.

“We think financials have indeed bottomed. But… on any rally we see of longer term nature, the financials will go up less than the market.”

That’s because “we still have asset question marks,” Doll says.

“Until we get more time, more write-offs, more capital raised, we think there will be bumps along the way in financials.”

Doll says housing will likely bottom in the second half of the year.

“Without that, it will be tough to have a sustained rally in equities because it will be tough to have a recovery in the economy.”

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http://moneynews.newsmax.com/streettalk/black_rock_financials/2009/05/20/216326.html

Low-quality market rally ripe for a reversal, observers say

Staying power of riskier stocks that are leading the rise is in question

By Dan Jamieson

The market's recent rally is likely to be short-lived.

Since the closing low on March 9, the markets have been led higher by lower-quality stocks and riskier asset classes, such as financial stocks and emerging-market equities.

“I don't think the rally can continue forever on the basis of low quality,” said Robert Doll, the global chief investment officer of equities at BlackRock Inc. of New York.

Market watchers say that it is typical for sectors that sold off the most during a downturn to bounce back the strongest during an initial rebound.

But a new, long-term secular bull market would most likely require new leadership from more attractive industries, market observers said.

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http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20090517/REG/305179974

Bear Leuthold Sees Stocks Rising Sharply

By Dan Weil

Steve Leuthold, a star money manager who earned big money shorting stocks last year, is now a raging bull.

In April, he predicted the Standard & Poor’s 500 Index would reach 1,100 by year-end, a 22 percent gain from Wednesday’s close. Now he thinks the index can reach that level sooner.

“When I said 1,100, people thought I was smoking something,” Leuthold told Bloomberg TV.

“Now it seems like a much more rational thing, and we are seeing many … people that have said, ‘Hey, I’m going to wait until next year when the economy is improving,’ that are now saying, ‘Uh oh, I think we maybe better move before that.’”

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http://moneynews.newsmax.com/streettalk/leuthold_sees_stocks_up/2009/05/21/216977.html

Looking For the Next Global Profit Play? Take a Look at These Emerging Market ETFs

By Mike Caggeso
Associate Editor
Money Morning

Like most investors, Harvard University’s billion-dollar endowment fund took a beating during the global financial crisis. Many investors cashed out, opting for the safety of the sidelines.

But Harvard called a new play.

During the first quarter, Harvard engineered a dramatic shift in its endowment-fund investment strategy - boosting its stakes in some of the most prominent emerging market exchange traded funds (ETFs). Indeed, its largest first-quarter investments included:

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http://www.moneymorning.com/2009/05/20/emerging-market-etfs/

BlackRock Wears Multiple Hats

By LIZ RAPPAPORT and SUSANNE CRAIG,

Laurence Fink has parlayed a lifetime of contacts and computer models into a powerful, controversial role for his firm in the financial crisis.

The U.S. has selected BlackRock Inc., a money manager and risk-advisory firm, to manage mortgage assets once owned by Bear Stearns Cos. and American International Group Inc. Separately, the firm also has been tapped to analyze hard-to-price assets of Freddie Mac and Morgan Stanley, among other financial institutions in the crisis.

Now, the Treasury Department has preliminarily granted BlackRock a coveted second-round interview to become one of a few money managers to buy toxic assets from U.S. banks, using taxpayer money, people familiar with the matter say. Mr. Fink aims to raise as much as $7 billion to invest through the program, which could yield his firm millions of dollars in fees. A Treasury spokesman says it is in negotiations to prequalify several fund managers BlackRock helped shape the government's toxic-asset plan, which critics have said helps vulture investors buy assets on the cheap while exposing taxpayers to the bulk of losses if the investments sour. Meantime, BlackRock continues to manage $132 billion in mortgage assets, some of which have defaulted.

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http://online.wsj.com/article/SB124269131342732625.html

Confessions of a Money Manager: To those who cashed out of the market - there is a way back

by Ray Unger,

Well, this stock market is definitely one for the books. Back in early March, when the Dow Jones Industrial Average was routinely giving up huge hunks of value and investors were panicking in droves, the market suddenly reversed itself and the Dow zoomed 379.44 points, or 5.8 percent. Since then, it's added another 1,370 points, bringing it 26.7 percent above the March 11 low of 6,547.

Now that we're here, what should investors who exited the market do?

If you're a technician -- one who applies arcane formulas using stock prices and transaction volume to construct charts -- the outlook is rosy. According to Stephen Gandel of the Wall Street Journal the "number crunchers are happy." Two prominent technicians in particular were cited in Gandel's article: Mary Ann Bartels of Bank of America/Merrill Lynch, and Lazlo Birinyi, long-time market strategist and regular contributor to Forbes and Bloomberg Personal Finance.

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http://www.madison.com/tct/news/stories/452249

Nobel economics laureate warn of factors affecting recovery

By Channel NewsAsia's Hong Kong correspondent, Leslie Tang

HONG KONG: There may be signs that the global economy is bottoming, but some economists are warning that any recovery will not be quick.

And according to Nobel economics laureate Paul Krugman, domestic demand in Asia may not be strong enough to offset the fall in exports.

He said: "I think we probably have passed the acute phase of the crisis. Most indicators from around the world are now suggesting stabilisation. Not an upturn. We're still heading down, but much more slowly than before."

Speaking at an event to commemorate the 20th anniversary of the Hong Kong's Securities and Futures Commission, Mr Krugman warned that many factors are likely to continue to worsen, which may hinder a quick recovery.

He also noted that unemployment in advanced economies is likely to stay on the rise.

Some analysts have said Asia is well-placed to be the first region to recover from the crisis, but Mr Krugman is not as optimistic.

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http://www.channelnewsasia.com/stories/economicnews/view/431145/1/.html

Two Ways: Will S&P Take a Dive?

by Terry Woo,

Renowned economist David Rosenberg said the S&P 500 could breach the 12-year low it reached in March. Why so glum? Because the economy hasn’t recovered and consumer spending remains weak.

In a Bloomberg television interview, Rosenberg said he’s keeping an open mind and doesn’t know for sure if the index will test a new low. But he isn’t convinced the US is in the midst of an economic recovery, either. He called this latest 9-week rally a “gargantuan short-covering rally.”

Rosenberg, who gained fame as an economist at Merrill Lynch and is now the chief economist and strategist at Gluskin Sheff & Associates in Toronto, said he sees no revival in consumer spending in the second quarter (he isn’t sure where the buying power would come from). He acknowledges there's a large amount of cash on the sidelines, but believes it will be used to pay down debt rather than to chase equities.

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http://www.minyanville.com/articles/spx-sds-fxe/index/a/22777

Joseph Stiglitz: Romania has an edge over other states

Some countries did better than others during the current crisis, with Romania counting to the first category, said Professor Joseph Stiglitz on Thursday, while in Bucharest where he is to deliver an address on the impact of the economic crisis on South-East European countries, at the Central and South-East European Financial Forum organized by Forum Invest.

In the opinion of the winner of the Nobel Prize in economics, Romania was able to resort to regulations on reserve cutting, it had a robust demand before the crisis and a healthy set of banking regulations. Professor Stiglitz believes that the very fact that it is a small state (in comparison with the U.S. - Ed. note) integrated in such a large market like Europe (which however faces problems itself), is yet again an element that benefits our country.

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http://www.actmedia.eu/2009/05/22/top+story/joseph+stiglitz:+romania+has+an+edge+over+other+states+/20840