Today it’s up. But, so far in this quarter:
Global stock markets posted their worst quarter in four years. Weakness began with China’s “Black Monday” in late August and persisted over the next three months. Of the majors, China’s Shanghai Composite crashed 28.6%, Germany’s DAX tumbled 12.2% and Britain’s FTSE fell 7.7%. In the US, the Dow is down 8.9% with one full trading day (i.e.. today) to go. (source: Business Insider).
My shorts are predictably doing terribly this morning. My remaining longs are up. On balance I’m up, largely this morning because of Vanguard index ETFs. On balance my shorts are up nicely.
My friends are placing buy orders at prices 15% and 20% below where we are today. They figure weak third quarter earnings — beginning next month — might snag them some bargains. It’s worth a shot.
Favorite headline:
Carl Icahn posted a video warning of the dangers of junk (high interest) bonds.
You can watch the video here.
Commenting on Icahn’s video, a talented newsletter writer Porter Stansberry writes:
To really understand Icahn’s message, you need to know who Icahn is, and what he has done for the last 50 years.
You see, Icahn isn’t just a money manager. He isn’t merely Buffett’s closest rival. Icahn is a 79-year-old investing legend. No one else in the entire history of capitalism – not Buffett, not J.P. Morgan, not David Rockefeller – has been involved in buying and fixing more troubled companies.
More important, Icahn is an expert in understanding the credit markets. (We’ll come back to this later.) He knows more about how companies end up in trouble with debt – and how to save them – than anyone else in the world.
In terms of troubled companies and troubled debt markets, Icahn has seen it all. He started investing professionally in 1961. And he started buying entire companies in 1978. He has been deeply involved in every major industry – from media (Netflix) to biotech (ImClone) to real estate (Fairmont Hotels) to energy (Phillips Petroleum) to retail (Marshall Field’s).
But the most important part of Icahn’s career – the thing that makes him unique – is that he has always invested across the entire capital structure of businesses… from stock… to preferred stock… to convertible bonds… to senior bonds… to junk bonds.
This ability to see “vertically” across the markets is his greatest advantage as an investor. As you may have noticed, it’s something we do, too. When we analyze a business, we start with the balance sheet and the market for that company’s debt. We understand its entire capital structure, not just the “trading range” for its stock price.
Right now, this perspective is more important than ever, because the high-yield credit markets, commodity stocks, energy stocks, biotech stocks, and transportation stocks have shown significant weakness. But the real trouble lies within the credit markets…
The U.S. corporate-bond market has a total market size of $39 trillion. That’s about 1.5 times bigger than the stock market. That’s one reason we start our investment process by studying a company’s balance sheet and its debt obligations. That’s where Icahn focuses, too.
Trouble in the credit market is different from trouble in the stock market because credit trouble is “contagious.” Generally speaking, most public companies don’t invest in other companies’ shares – at least, not broadly. But the opposite is true of bonds: Most companies invest widely across a range of debt instruments.
That’s how credit distress can spread… And believe me, because of the Fed-engineered boom in bonds, the trouble is going to spread. Today, for the first time ever, more than half of the cash held by U.S. corporations is invested in other corporate bonds.
Here’s the most important warning I can give: If you own any high-yield bonds through mutual funds or exchange-traded funds (ETFs), sell right now. Do not wait.
Junk bonds are not as easily identifiable as they were a long time ago when they paid 15+%.
Anything that pays “too good to be true” interest probably is. That includes emerging country bonds, energy producer and explorer bonds, etc.
Please check what you own today.
Nice movie. Last night we saw.
It’s a great movie. My problem is I can’t make out quiet dialog. Susan can. She explained all. I can hear TV with the help of my wireless Sennheiser headphones. But movies and theater are hard. Getting old. Yuch.
My favorite iPhone apps:
+ Dark Sky (weather),
+ Waze (traffic),
+ Photostream (grandkids photos and videos) and
+ Facetime (real-time video with grandkids).
Technology of huge interest:
+ Drones for business use. Today’s New York Times has a piece. Click here.
+ Mophie Juice Packs for iPhones. They more than double battery life. Sadly, not yet available for 6s and 6s plus. But soon.
+ PNY Turbo 128GB or 256GB USB 3.0 Flash Drives. Insanely easy way to back up your daily work. Click here.
Unlocked iPhones? Confusion reigns. Reader Cameron Cohen emails:
I wanted to let you know that if you purchase a T-Mobile iPhone and pay full price when you buy from the Apple store they are in fact unlocked. i have read that if you stick a T-Mobile SIM card into the phone before you stick another carrier SIM card in the phone, it will lock to T-Mobile but I don’t have T-Mobile so i don’t know. Once you have put a different carrier’s SIM in the phone and activated it,, it is unlocked for life. I have purchased full price T-Mobile iPhones every time since the iPhone 5 (iPhone 5, 5s, 6 and 6 plus) and can say that each phone has been unlocked. I am an ATT subscriber and have been able to use ATT SIM cards and SIM cards on all the iPhones when I have traveled overseas (tested it with Vodafone in the UK, Vodafone in Italy and BTC Cell in the Bahamas.) Apple seems to be confused and never got his right (search Boy Genius Report (bgr.com), Engadget or Gizmodo and you will see).
T-Mobile and AT&T work on GSM — the standard most common in the rest of the world. All networks have pluses and minuses. T-Mobile works well in cities and has one HUGE benefit: It sends and receives calls via WiFi connected Internet. None of the others do — unless you beg, borrow or buy a super, useful device called a Network Extender.
Neat NYTimes piece on The Donald. Click here. Donald’s taxation ideas are most persuasive.
Harry Newton who received a nice email, “The cost-cutting advice regarding the cell phone—the one phone call-–also worked for us on our LA Times newspaper subscription. They cut their price in half.”
Nice article by Porter Stansberry. Thanks.
COST CUTTING…Our ADT house alarm system was running $49. per month…a competing system offered same service for $33…called ADT they dropped their rate to $34. per month…stayed with ADT.