Today’s Daily Angle comes from Wikinvest Wire member Kathy Lien of KathyLien.com and FX360.com. You can read the full article on her blog.

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Bernanke’s support for the U.S. dollar and Federal Reserve President Lacker’s comment this week that the central bank is paying close attention to the value of the greenback has driven the buck higher against all major currencies. The last time Bernanke surprised the market with a comment on currencies was back in June. According to the following chart, the EUR/USD fell 4 percent in the 2 weeks following Bernanke’s comment. However after a month of consolidation, the uptrend resumed. I am a long term USD bear (see my artice Why The Dollar Could Fall Another 5-7 Percent) but as a trader first and analyst second, I know that uptrends do move in straight lines. Shaking out the shorts are needed to get some fresh blood into the markets. Interestingly enough, a 4 percent drop in the EUR/USD would take the currency to 1.44, the former breakout zone. I think any drop will be limited to 1.4650-1.47.

Technical chart of the EUR/USD with Bernanke’s comments highlighted

Take a look at the chart and make your own judgement.

Just something to keep your eye on as your politicians promise you that the US will be the world leader in green tech jobs. In fact they will have to layer countless more debt on your children and grandchildren for temporary “green jobs”, to make this mirage come true - for a while. Most likely this promise will come next spring as the next massive stimulus is pumped to the masses to create “green jobs” retrofitting buildings and such. Meanwhile, ask where the production is and what work we will be left with after we borrow money from China to create temporary jobs. (Nov 2, 2009: Lack of Green Energy Manufacturing Capability in US Means 84% of Stimulus Goes to Foreign Firms.)

Remember, Japan and Germany are a decade ahead of us as we decided daytrading homes was the real way to prosperity as a nation… and China is subsidizing every form of green energy.

1. Aug 25, 2009: UK Telegraph - China Powers Ahead as it Seizes the Green Energy Crown from Europe
2. Aug 28, 2008: China to Subsidize Wind Turbines
3. Jun 19, 2009: Reuters - Incentives Add Shine to China’s Solar Drive

Just this week I saw two separate Chinese firms (both of which we’ve owned in the past) pledging to build plants in the US as “political” cover… Suntech Power (STP) in solar and A-Power Energy (APWR) in wind.

Gov. Jan Brewer on Monday announced plans for a Chinese-owned solar panel maker to build its U.S. headquarters and a manufacturing plant in the Phoenix area, propelling one of the nation’s sunniest states toward a bigger global presence in the renewable energy industry. Suntech Power Holdings Co. said it expects to start building photovoltaic panels at the facility by the third quarter of 2010. The company, which has more than 9,000 employees, expects to eventually employ 250 or more people at the plant.

By doing so, they can clap their hands that they are creating jobs (hundreds!) in the US - collect money from the federal government (which in reality is their own government’s money, just passing through the US government after we borrow it) while 99% of the production is back in the home country. But hey we get some assembly jobs here, and some great photo opportunities for some governors.

Today’s Daily Angle comes from Wikinvest Wire member Richard Wilson of HedgeFundBlogger.com. You can read the full article on Richard’s blog.

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John Paulson’s hedge fund trades attract a lot of attention because of his ability to profit in downturns. Last year, Paulson made about $2 billion largely by betting that the housing market would crash and this year he has been taking big stakes in struggling banks. In Q2 2009, it was revealed that Paulson was purchasing significant shares of Bank of America and his fund’s latest filing shows that he has bought 300 million shares of Citigroup.

In addition to his investment in partly government-owned banks, it’s also interesting to see the stocks that Paulson has sold. Last quarter, Paulson sold his entire stake in Goldman Sachs and also sold shares in JPMorgan Chase & Co.

“If you are guided by what happened to these companies, you would have to think Citigroup is the most problematical of the major banks,” said Warren Marcus, who ran the bank research department at Salomon Brothers Inc. during the 1970s. “Maybe there is a perception that Citi over time has got a better upside than some of the others.”

Armel Leslie, a spokesman for Paulson & Co., declined to comment on the holdings. The firm has about $29 billion under management that it invests in four strategies: merger arbitrage, event-driven trading, credit and financial services.

Paulson ranked second in fund-manager earnings last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 through wagers that subprime mortgages would sour. He started the Paulson Recovery Fund in 2008 to invest in financial firms hurt by mortgage writedowns. Source

Today’s Daily Angle comes from Wikinvest Wire member Rob Powell of TelecomRamblings.com. You can read the full article on Rob’s blog.

For many in the telecommunications industry, commercial 100Gbps can’t get here fast enough, but it is coming! Today at the SC09 conference in Seattle, a coalition of made up of Juniper Networks (JNPR), Infinera (INFN), Level 3 Communications (LVLT), Internet2, and ESNet demonstrated a multivendor 100Gbps routing and optical network. This group has been working steadily together since last November. In this case of course, we are talking about the 10×10Gb version of 100G, which requires fewer technical advances and will probably come first.

The test involved a new 10×10GbE physical router card from Juniper which they announced yesterday. A 100G test signal was sent from Seattle to Portland and back via Infinera gear over the Internet2 and Level 3 networks – which of course are the same intercity fiber route, but still. Now, this is not a 100G wavelength solution, it is about delivering a 100GbE product to customers using a network with a whole lot of 10G pipes bundled together. But since it doesn’t have to wait for them to work out the kinks in the 100G native wavelength model, it is probably closer to commercial viability.

So when do we see that commercial product then? Who will be the first to offer a 100GbE intercity connection to someone other than a trade show audience? Perhaps we will see something by springtime?

Today’s Daily Angle comes from Wikinvest Wire member David Hunkar of TopForeignStocks.com. You can read thearticle on David’s blog.

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Earlier this week we looked at the The Top 10 Banks in India based on Assets. In this post, lets review the most profitable banks in India based on 2008 Net Income.

State-owned banking giant State Bank of India is the most profitable bank followed by ICICI Bank (IBN). State Bank of India generates more than three times the profits of ICICI.

India’s 10 Most Profitable Banks/Financial Institutions based on Net Income in 2008:

Source: BankScope

It is interesting to see Citibank (C) in this list. While the Citibank in the U.S. has to be bailed out by US taxpayers from collapse, Citibank subsidiaries in other countries have been performing well such as the Citibank division in India. The other foreign bank in the list is the British-based Standard Chartered Bank. The presence of these two foreign banks in the ranking shows the success of their Indian operations in the difficult environment last year. ]]> http://blogs.wikinvest.com/dailyangle/2009/11/the-10-most-profitable-banks-in-india/feed/ http://blogs.wikinvest.com/dailyangle/2009/11/an-introduction-to-the-balance-sheet-current-assets/ http://blogs.wikinvest.com/dailyangle/2009/11/an-introduction-to-the-balance-sheet-current-assets/#comments Thu, 12 Nov 2009 07:01:29 +0000 admin http://blogs.wikinvest.com/dailyangle/?p=436

Today’s Daily Angle comes from Wikinvest Wire member Benjamin Clark of ModernGraham.com. You can read the full article on the Modern Graham Blog.

This article is the second week’s lesson in the ModernGraham Academy beginner’s course, An Introduction the the Balance Sheet. The ModernGraham Academy is a place to learn about the basics of investing, with an emphasis on the ModernGraham approach.

What are Current Assets?

Current Assets are the assets of a company that can be considered to have short-term liquidity. That is to say, the assets that the company could potentially sell in the very near future and turn into cash. Current assets are very important to consider when evaluating a company. Having a good amount of current assets can help a company handle day to day operations.

Here are some of the main types of current assets, and some things to consider about each type.

• Cash – Cash is the most important and easiest to understand type of current asset. Cash is made up of all funds in the company’s bank accounts. Cash is the most liquid asset in the world. A company with a lot of cash has versatility to make large purchases on short notice. As a result, if a company suddenly raises a large amount of cash, intelligent investors will be prepared for the company to make a purchase of some sort.
• Short-term investments (cash equivalents) – In addition to cash, a company often has short-term investments including small equity positions. Assets fall into this category when they are considered very liquid but take at least a little bit of effort in order to fully translate them into cash.
• Receivables – Most companies use the accrual-basis for accounting. As a result, income is recorded as a receivable in the period it is received. These receivables are considered a current asset, because it is likely they will be received and turned into cash in the near future. One consideration for this area is the possibility of baddebts and many companies account for this by reducing the receivables figure by a provision for doubtful accounts.
• Inventory – possibly the most scrutinized of all the current assets, inventory is considered to be current because it is much more liquid than the non-current assets. The problem is that it cannot always be transferred into cash very easily. It is possible that a company would not be able to sell all inventory in a short period of time, or (more likely) would have to sell the inventory at a steep discount to speed the sale, resulting in an actual value lower than what is report on the balance sheet.
• Prepaid expenses – Similar to receivables, prepaid expenses are not an actual asset but rather an asset based on the accrual method of accounting. However, they are considered to be a current asset for the balance sheet because they could potentially be exchanged for cash in the form of a refund of the good or service that was pre-paid.

Today’s Daily Angle comes from Jason Simpkins of Wikinvest Wire members MoneyMorning.com. You can read full article on the Money Morning blog.

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Declining investment and a lack of progress on alternative energy development could lead to sharply higher oil prices in the decades ahead, the International Energy Agency (IEA) said in its 2009 World Energy Outlook.

The IEA for the past year has warned that the financial crisis was undermining investment in energy development. The advisor to 28 developed nations says the financial crisis is already responsible for a $90 billion drop in worldwide oiland natural gas investment, which is 19% below last year’s levels.

“Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty,” said the IEA.

The decline in energy supplies combined with a sharp rise in prices could “undermine the stability of the economic recovery,” it added.

Investment in alternative energy has been particularly hard hit and the failure of governments to make progress on a comprehensive plan to cut global carbon emissions could exacerbate demand for traditional fuels.

Investment in renewable resources has fallen by about one-fifth this year, compared to 2008, the IEA said. Investment would have fallen as much as 30% had it not been propped up by government stimulus plans.

Officials from about 190 countries around the world are scheduled to meet in Copenhagen in December to discuss restrictions on carbon emissions in a deal that will succeed the Kyoto Protocol, which expires in 2012. However, developed and developing nations have routinely clashed over such regulations and little progress was made in last weekend’s Group of 20 (G20) summit leading up to the meeting in Copenhagen.

“The meeting turned out to be a mostly irrelevant sideshow on the way to the Copenhagen talks,” Richard Dixon, a director of environmental group WWF Scotland, told Bloomberg News.

The IEA estimates that $1.1 trillion needs to be invested each year from now until 2030, for a total of $26 trillion, just to meet energy demand on current growth trends. If governments adopt plans to limit greenhouse gas concentrations in the atmosphere to 450 parts per million of carbon dioxide (CO2) equivalent, an additional $10.5 trillion needs to be invested over that time period.

Without that added investment, energy needs won’t be met and energy prices will subsequently rise.

The IEA expects oil prices to average $100 a barrel by 2020 and $115 a barrel by 2030.

Today’s Daily Angle comes from Wikinvest Wire member Saj Karsan of BarelKarsan.com. You can read the full article on Saj’s blog.

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As the market has risen throughout most of this year, many market observers have noted that P/E values are looking rather inflated from a historical standpoint. But of course, earnings are lower than usual this year due to reducedrevenue that was caused by financial shocks. So as investors, should we be willing to pay a higher P/E for now, on the assumption that earnings will soon pick up?

When considering the market in the aggregate, this is a very difficult question to answer. Some companies will havecost structures that prove too rigid, and will therefore be unable to adapt to a lower revenue environment. Other companies, on the other hand, will have flexible cost structures or will see revenue continue to grow, despite the downturn. But to determine which of these forces will exert more pull on the market’s earnings in the coming quarters is not only extremely difficult, but unnecessary: unless you’re trying to value the entire index, you don’t have to answer this question for the market in the aggregate. Instead, you can try to answer this question for individual securities, which are much easier to understand.

For example, consider Key Tronic (KTCC), a manufacturer of electronic devices. The company has a P/E of 23, which makes it appear overvalued. But earnings are down because year-over-year quarterly revenue is down 15%. However, the company has little in the way of debt, and has the vast majority of its operating leases coming due in the near-term, giving it further flexibility in reducing its costs. Operating expenses are down 17% this year, and the company sees sales starting to rebound in January of 2010. In fact, based on KTCC’s past margins and returns on assets (which it should be able to return to by continuing to cut costs and with a modest recovery in revenues in the years to come), it appears to trade at a normalized P/E much, much lower than the 23 that stock screeners currently display. (KTCC is a stock we’ve previously discussed on Barel Karsan.)

Determining whether the market is over- or under-valued is a difficult exercise indeed. But by focusing only on those companies for which it is easier to compute earnings (circle of competence), and ensuring that companies trade at discounts to those earnings (margin of safety), investors put themselves in positions to profit in the long-term whether the aggregate market offers potential or not.

Disclosure: Author has a long position in shares of KTCC

Today’s Daily Angle comes from Wikinvest Wire member Hard Assets Investor. You can read the full article on the Hard Assets Investor Blog.

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You’d think last month’s earnings releases would have given a boost to gold stocks, since four of the five components of the NYSE Arca Gold Miners Index (GDM) reporting posted positive results. Yet, going into the last week of October, miners’ stock prices slumped, only to emerge at the end even lower.

Of course, you could have said virtually the same thing about gold itself, but stock losses were tenfold the slippage in bullion. The exchange-traded fund tracking the miners’ index—the Market Vectors Gold Miners ETF (NYSE:GDX)—gave up 9.3 percent last week, while the value of the metal-holding SPDR Gold Shares Trust (NYSE:GLD) eased only 0.9 percent.

So why should good news produce such bad results?

Well, to a certain extent, there’s truth behind the old adage “buy on the rumor, sell on the fact.” There were whispers on the Street—some good, some not—about the miners’ numbers.

Agnico-Eagle Mines Ltd. (NYSE:AEM), for example, was expected to put up per-share earnings of 20 cents for its third quarter; before its earnings report, the company’s stock traded above $68. Analysts then started talking up a 19-cent figure. When the company posted an 11-cent loss, however, traders marked down Agnico’s shares by more than $15.

Disappointment with poor financial results is understandable, but even the miners’ good news went unrewarded.Newmont Mining Corp. (NYSE:NEM) blew the doors off analysts’ earnings guesses, taking in 79 cents a share after the sell side forecasted earnings of only 57 cents. Newmont’s price reaction? Shares slumped nearly $2.00 before settling halfway up the $43 handle.

A similar scene played out when Barrick Gold Corp. (NYSE:ABX) announced a 54-cent-per-share operating profit. The Street had been eyeing a 47-cent profit before hedging charges, and rewarded company shareholders with a 3 percent haircut.

Likewise, Gold Fields Ltd. (NYSE:GFI) and Eldorado Gold Corp. (NYSE:EGO) both turned in results that met or exceeded Street expectations, only to find sellers anxious to work their share prices lower.

But rumors don’t tell the whole story.

Gold Stocks: The Hybrid Investment

The important thing to remember about gold stocks is that they represent hybrid investments. Like any equity, a portion of their returns will reflect traders’ sentiments about the issuers’ financial prospects, as well as its management team, the general equity market conditions and other idiosyncratic factors. The rest can be attributed to the market’s disposition toward gold. Therefore, gold miners in essence serve two masters: the gold market and the stock market. In the aggregate, 54 percent of the returns chalked up by gold stocks is “passive”; that is, directly ascribable to gold. Of course, the influence of gold upon individual issues varies, but that variance is vitally important in shaping investor expectations.

Gold Miners Index Component Three-Year Relative Share Price Performance

When selecting stocks, investors often look at an issue’s MPT (modern portfolio theory) statistics, such as beta andalpha. Beta measures the variance in a stock’s price history relative to a market benchmark; simply put, beta tells an investor how volatile that stock’s price trajectory is likely to be. Alpha, on the other hand, represents the stock’s return in excess of the market and of the risk-free yield on Treasury securities; alpha informs the investor how much excess return—positive or negative—has resulted from that stock’s volatility differential in the past.

Investors can often find MPT statistics for individual stocks published by market newsletters or on Web-based financial platforms. Investors should know, however, that they’re not getting the whole story about gold miners’ risk from these figures.

Click here to continue reading this article on Hard Assets Investor.