Long term trend watch: In today’s WSJ, Judy Shelton writes an interesting opinion piece [subscription requred] about the perils of a fluctuating value of the dollar. She basically endorses Robert Mundell’s call for the world to get together and create a global currency system, likely based on gold. As I suspect that near the end of this decade the currency-manipulation, inflation and trade chickens will come home to roost, I can see the US taking the lead on creating a new Bretton Woods-type currency system.
Of course, I believe there is no true panacea out there, and that we will end up trading one set of issues for another. But that is just the way the cycle turns…
Investment Watch: Today I bought Akamai (AKAM) for $29.44 and Comcast (CMCSA) for $24.45. I don’t typically buy TMT stocks in my PA (no need to over-correlate my savings and my career), but I think these two beaten-down names offer pretty compelling value at these levels. AKAM is trading with a forward PE of 17 and a projected revenue growth rate of 30%. It may suffer from some mild margin compression due to CDN competition from Limelight and Level3, but I believe that Akamai offers a more complete toolset than those other companies and has a dominant market position. I don’t need to tell you about the growth in broadband video…
I sold out of my long-suffering Newmont Mining (NEM). Every other gold stock I own and have owned has done really well since I started buying them in 2003, but NEM has been dead money for a while. Yesterday the management team basically told us to sell. I still own FCX and GG in my slowly dwindling mining stock portfolio, both of which have done very well for me.
Full disclosure: I own, or have owned, all of the stock mentioned here. In addition, my firm holds a small stub of AKAM stock in an escrow from the sale of a portfolio company, Nine Systems, to AKAM last year.
I AM NOT AN INVESTMENT ADVISOR, NOR OFFERING INVESTMENT ADVICE…I AM JUST SHARING MY THOUGHTS. PLEASE RELY ON YOUR OWN INVESTMENT RESEARCH.
Technology Watch: Interesting play by Echostar in buying Sling Media, but I don’t think it makes up for the fact that they don’t have a broadband pipe. They will need to step up big in the 700 MHz auction to remain relevant IMHO.
Business Cycle Watch: In this week’s Outside the Box from John Mauldin, he gives us a report from GaveKal on how those betting on renewed inflation after the Fed rate cut may be thrown off guard by declining velocity of money. This makes sense given the collapse of the CLO market and the billions of hung LBO financings. It is also something that no economist focuses on or even understands, as far as I can tell.
I am torn. My suspicion is that we will see something similar to what we got in the last cycle: a falling dollar and rising commodity prices (although probably not as much as in the last 5 years), but mild headline inflation due to increasing manufacturing productivity and globalizaiton. The big difference will be dealing with housing deflation instead of inflation. The balance of risks supports the Fed’s move for now, since the cuts can always be taken back.
By the way, I recommend reading Our Brave New World from the guys at GaveKal. Very interesting take on how our economic world has evolved in the information age. Its a short book and well worth the time.
the Dynamist is launched. My investment philosophy is to use my understanding of business cycles and technological progress to identify opportunities where growth prospects are under- or over-appreciated. Of course, I am always learning more, and will chronicle the evolution of both my investment philosophy and the actual economy, markets and technology. I target opportunities that are generally based on a 3-5 year target window, but sometimes will venture to make predictions of a longer- or shorter-term nature. I will also write book reviews on books that I feel add to my knowledge base or that I just enjoy.
Dynamism is a philosophy that acknowledges the role of risk and shifting (dis)equilibrium in the economy. By using my understanding of the evolution of technology, markets, political movements, etc. I try to spot opportunities where I think the odds are favorable to bet against the conventional wisdom.