The Tasgall Group

Back in a previous post, I linked to a web page that will calculate the odds of a recession based on research by the Federal Reserve.

The inputs for the calculation are the yields for the 10 year bond, 3 month bond, and the Fed Overnight rate.? Unfortunately I’m too lazy to want to go plug those things in regularly, so I threw together a little script that would automatically download the rates and do the calculation for me.? I’ve created a new page on this blog that contains the script:? Recession Calculator.? I have also added the page to my Daily News Briefing.

It’s worth noting that this model does underestimate the real odds of a recession.? Also, all three rates are inverted right now.

Back on July 26 I wrote a quick note about Scottish Re (SCT) emphasizing the amount of cash they held relative to the market cap. Apparently the long downtrend was prescient about the prospects of the company at large. On July 31the stock price went into free-fall when they announced revisions to earnings and the CEO resigned.

The stock quickly dropped from $15 to a low of $3.50. Wow. After about two weeks of recovery it seems to have stabilized in the $6 to $8 range. In my previous post I said “wait for an uptrend” and that seems to have been the right approach — simply buying because of fundamentals would have been the equivalent to trying to catch a falling knife.

It’s also interesting to me to look at the technical indicators on the SCT chart. Having RSI below 30 is typically a sign of being over-sold, where SCT had an RSI below 30 for almost 3 months!

After all the carnage the stock was up 15% on Friday on rumors of a buyout. I don’t think Scottish is an Enron or a WorldCom… it is still a strong company and worth watching for a trend change (assuming they’re not bought outright). I might consider it again if it spends some time consolidating at current prices then breaks out above $8.

Ok, so the definition of maudlin is “drunk enough to be emotionally silly”.? Not sure that really applies to John Mauldin but I couldn’t pass up the obvious similarity between the word and his name.? I’m a sucker for puns.? But my general purpose is served to use some sort of adjective with a negative spin.? Do I have negative thoughts about John Mauldin?? The jury is out.? But I wanted to talk about some interesting data collected about his newsletter that does little to shine a positive light on the man’s market opinions.? (more…)

Yes, Virginia, you can time the markets. It begs more careful research but this is an interesting read for the more passive investor. You have to be careful about ever-changing cycles and transaction costs etc. but I like the idea that this is based not just on observed correlations but on a logical explanation for the occurance of this correlation.

Check out the International Networks Archive, a project at Princeton University attempting to “map” globalization in new and creative ways.? I had particular fun with the Infographics (I thought the indication that the IRS?was the only non-police government agency?authorized to carry a firearm was hilarious) and Interactive Maps sections.? There?is plenty of data and links to data also.? While at first glance this doesn’t jump out as investment-related, I think this project might provide some interesting inspiration or clues that could aid in financial outlooks.

If you don’t have too much too look at and think about yet, add the Baltic Dry Index to your list of things to watch. The index is a representation of dry freight rates for ocean going shipments of things like coal, grain, or cement.

The BDI is good to watch because it acts as a leading indicator of economic activity. It can’t be manipulated like official Government statistics, and it isn’t subject to speculative over-buying or selling like the futures markets. We might see “conundrums” regarding the price of bonds or their rates, but it would be very difficult to misunderstand a change in the price of bulk shipping.

Right now you can look at the index and see that it is still climbing since mid-2005. That’s either economic growth or inflation… or both.

They also have the individual Capesize, Supramax, and Panamax rates which are the ingredients of the BDI shipping rates. For example, Panamax rates would be the shipping rates for the largest ships that can still fit through the Panama Canal.

There are good articles on the BDI here, here, and here.

In a fairly odd turn of corporate governance, Horizon Lines (HRZ) has declared its first ever dividend and is also issuing new shares — both announced within two weeks of each other. The news of the new shares has pushed the price down 3.3% today and 11% from its recent high.

Now, if you know you’re going to raise cash by issuing new shares (a 15% dilution, no less!), why would you bother declaring a dividend at all? The point of a dividend is to return cash to shareholders… There is a catch-22 in there somewhere…

HRZ has a nice position as a mid-cap in the transportation sector. It has a strong balance sheet and operates as a Jones Act shipper which basically limits their competition as a shipper to Alaska, Hawaii, Guam and Puerto Rico.

The Bernanke rally yesterday seems to have given REITs a bit of a push (today they gave back a little). They’re now within spitting distance of the highs set back in March. Breaking above the recent high would be a bullish technical indicator, and there are potential fundamental influences at work as well (inflation, rising rents, etc.).

For reference, I look at the Dow Jones REIT Index (DJR), the Real Estate iShares (IYR), and the ING Clarion Global Real Estate Income Fund (IGR) to monitor the REITs broadly. The first two are basically broad indexes, where IGR is a closed-end fund and currently trades at an 8% discount to NAV.

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Whether you use Yahoo Finance or MSN Money, you should know about the SEC’s Edgar website. It allows you to search for official SEC filings for companies including their earnings reports, insider transactions, and material agreements.

A couple of times I have seen the price of a stock move dramatically on no news… a quick check to the Edgar site revealed that there was some insider buying that wasn’t properly reported on Yahoo Finance and wasn’t picked up in any news. Relevant information, but I had to go find it for myself.? This happens most with small and mid-cap stocks that don’t get coverage from Wall Street.

Edgar is the source for many of the data points on Yahoo Finance, such as the insider transactions, balance sheets, cash flow, etc.

Since adding all the blogs from Ticker Sense to Bloglines, I’ve been going through them mostly with a virtual machete, finding most to be irrelevant to my style of investing or simply poor and uninteresting.? There are a few that are making a place in my daily coffee routine.? One that caught my eye this morning as likely to be of interest to you fellas is CXO Advisory, not because it’s the best blog ever but because it has a great cohesive structure and some very interesting research to share.? The perform inflationary and market forecasts based on the RTV and REY models (similar to the Fed Model) and give daily updates on the status of the market relative to these models.? They also have a great section called Guru Grades that attempts to quantify the success of internet investment guru’s predictions.? The current long-time leader of the list is Ken Fischer, and they have a very interesting article of his on the site.? All in all, an interesting bag of goodies to explore and chew on.? You will note that the market is currently moving in relative lockstep with the 2 models (which are, I grant you, lagging) and that, if you look at what the Bubble looked like, we aren’t in any way close to that kind of overvalued situation.? But then again, you know that.? At the very least, the articles at CXO are thoughtful in a quant sort of way.