Heyer Capital, LLC

investment management and timely advice from a local CPA (Fox Valley, Wisc.)

Archive for the ‘Investing/Business/Econ’ Category

Facebook IPO

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I’m sorry that it seems like rather stoogish to post about the Facebook IPO now that it has already started trading.  However, it’s always a good idea to remind folks that the soundest way to “play” IPOs is to wait for them to trade for a while and form a solid base. (“Gee, thanks Brian. What the heck does that mean?”)

Facebook is trading at $39.61 this instant.  For a much-hyped Wall Street IPO, that’s a dud. But by waiting for a base to form over the next few months, we keep a safer edge in our favor.  We let the market sort out what the stock is really worth, what its prospects really are.  (Especially after the IPO lockup expires and insiders and underwriters can start to sell their shares and after the hype has diminished.)  Golly, maybe $39 is a screaming bargain.  Or its all downhill from here.  But if we wait for the supply and demand for shares work itself out, we’ll can be more confident that if it does burst up from a consolidation in a few weeks or months, the odds are more in our favor than blindly buying the first chance we get.

Everything looks rosy when a company IPOs.  (That’s Wall Street’s job: to separate your money from you.)  It’s your job to be patient and let the euphoria run off and use discernment.

(I hasten to add that, following my own advice, I’m not touching this one with a ten foot pole. Yet.)

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Written by heyercapital

May 18, 2012 at 10:07 am

Simple steps for investor protection

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Today, right now, send your stockbroker or mutual fund salesman a letter asking if your account is handled by a fiduciary and in what capacity.  I’ll wait right here for you to return, but I won’t wait for an answer from your salesman.  I’ll bet I know the answer.  

[interlude]

If you work with an “investment advisor” they are a fiduciary to you. They must always act in your best interests and describe when they are not. Period. Full stop. End of story.  Any other investment relationship less than fiduciary is ripe with conflicts of interest. 

A good example is buying a mutual fund.  The mutual fund itself is an investment company that has a pool of assets. Who manages those assets?  An investment advisor to that investment company. There is a fiduciary relationship between those two.  How does that investment company gain assets?  Typically through a sales effort with the public.  The salesmen who sell those mutual funds and collect commissions typically are NOT a fiduciary to their clients.   Good, bad, right, or wrong, I won’t say.  But Wall Street is set up for investor protection for itself, but not necessarily for you, unless you demand it. 

Ask your advisor in writing for a response in writing. 

 

Next important point: where is the money? Literally.  Where is your account held?  Many brokers are “introducing brokers.” You may go in to visit and discuss investments with your broker at his local office, but your actual account may be held at a third party.  This is very common.  You must be aware of the financial health of the firm that actually has your account.  Is it insured? To what amount?  Is there supplemental, private insurance above and beyond SIPC?

Key in on, “Who creates the statements of the account?” If an investment broker has access to your money AND creates the statements themselves, that is a recipe for trouble.  There should be more safeguards for your money and distinct segregations of advice and access to the account. 

For instance, (if you’ll permit a brief commercial) most of my clients’ accounts are held at TD Ameritrade.  I have strictly limited access to the accounts; basically I can place trades for the accounts and instruct Ameritrade to send the clients themselves a disbursement check directly from the account.  TD Ameritrade takes care of everything else.  They send the statements. They send the confirmations.  They take the transfers-in. They handle the securities & checks.  They handle settlements. They send out third party checks.  They change the address on the account.  These distinct segregations of duties protects clients. The custodians take care of the money, which permits me to focus on trading, performance, and talking with clients.

The client owns the account directly. I trade for the client.  Simple. Everyone knows where everything is and in what amounts, so we can all see how the account is doing.

Written by heyercapital

May 22, 2009 at 7:35 am

Public Private Investment Program, a.k.a. Geithner’s Folly

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The best summary of my thoughts on the “toxic bank asset” plan comes from another writer, Tom Fant of Atlantic Advisors Asset Management appearing on Minyanville’s Buzz and Banter. (Minyanville is worth every penny.)

 

PPIP(Public Private Investment Program)-At first glance this makes very little sense to me. Geithner seems to avoid specifics like income tax. But from what I can tell, this is not going to help much. 

Enticing investors to buy loans that the bankruptcy courts can now modify (Home Affordability Act- see law of unintended consequences!) is a tough sell to begin with, but sweetening the pot with cheap financing is almost ridiculous. Aren’t they asking private investors to do what the banks never should’ve done which is buy bad assets and magnify returns with cheap financing? How can anyone be comfortable levering an asset where the underlying cash flows can be changed in a way that is nearly impossible to analyze? And even if I get lucky and make a huge return, I’m going to partner with a government that might take my bonus back? Not so much. 

Here’s the fundamental problem that the government doesn’t get:  The banks CAN’T sell. There is no lack of buyers for these “legacy assets.” After all, there’s no such thing as bad bonds, only bad prices. The problem is where the bonds are marked relative to where investors will buy. If a bank sells a bond at 50 that they have marked at 95, the losses would pile up pretty quick until they are bankrupt.  (emphasis is from Heyercapital)

Written by heyercapital

March 23, 2009 at 9:43 am

AIG bonuses

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Perhaps it’s better to just pay the AIG bonuses. Heck, double the bonuses.

 The last thing we’d want are these corncob AIG managers out of the street looking to infect another company with their financial acumen.

h/t to Kevin Depew, the sharpest pen on Wall Street.

Written by heyercapital

March 16, 2009 at 1:44 pm

Investors Business Daily Meetup notes

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Here are a couple of nuggets from last night’s Meetup:    


These two graphs (link 1    link 2)  are visually persuasive that the stock market doesn’t like recessions. The odd thing about recessions is that it takes the National Economic Bureau several months to look back and affirm that “yep, we were in a recession back then.”  Of course the surest way to figure out you’re out of a recession is to note when the Congress passes their “recovery” legislation.  It always seems to come out after the recession. (But just in time for the election.) 

The NYSE Bullish Percent is below 20% and at its lowest level since Aug 1998. It’s not a timing device, per se, but it provides some context of sentiment. Historically rebounds off these levels offer extremely favorable risk-reward profiles. 
Check out the free Ticker Rain chart that shows which stocks are being charted on Stock Charts.com. What does it mean that Gold and VIX are the most charted at this hour?

Is this an analog to the five year rally from 1932 leading into the 50% crash in 1937? Chart here

If there was a good point to yesterday, it was the action in the big financials.  Perhaps the interest spread is enough (post rate cut) that the big pigs (piggy banks) can earn their way out of their mess.  Plus a decent spread encourages them to lend, which they have been reluctant to do.  
The hammer yesterday (spike downward but closing near the high) parallels the July bottom as well.   Remember that 19 of the 25 biggest single day returns in the S&P500 have occurred between 2001-2003.  IF we get a snap-back rally, expect a doozy.  Personally, I will be selling to that strength. (see 1937, above.) 

Bear markets are for watching, reviewing, learning, and introspection.  Watch lists here should be built up on earnings growth, relative group strength, and stocks that have held up well near their 52 week highs.  Nice tight charts in the face this carnage are golden. 






 

Written by heyercapital

January 23, 2008 at 7:53 am