Stocks and Dollars

Kendall J. Anderson submits:

Sitting on my book shelf you will find a copy of Seth Klarman’s book “Margin of Safety”. A few of you may recognize this book published back in 1991, but not necessarily for what is in the book. Instead you may know it for what others are willing to pay for a copy. You can obtain your own used copy from Amazon (AMZN) for $799.00. One collectible copy is currently available for $1499.00. My copy was special ordered in 1991 from “The Bookworm” at the cost of $25.00 plus tax. A few years ago, when money was easy and hedge fund managers were the anointed ones, this $25.00 book was selling for two to three times its current $799.00 bid.

Maybe I should sell my copy to cut my losses? Maybe I should buy another copy because they sold three times the current price a couple of years ago and it will surely return to that price? Maybe, just maybe, I should do nothing at all and see what happens; what do you think?

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Andrew Wilkinson submits:

The end of August is here and that may well mean that the battle lines are redrawn tomorrow. But for now it means that the Japanese yen remains higher against all 16 of its major trading partners and the dollar’s rebound continues as investors continue to fret over the health of the U.S. economy. The fact that the dollar index is marginally lower masks a bigger move in which riskier currencies are falling hard and fast against the greenback, making for a possible explosive finale to this month’s trading.

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Andrew Wilkinson submits:

The end of August is here and that may well mean that the battle lines are redrawn tomorrow. But for now it means that the Japanese yen remains higher against all 16 of its major trading partners and the dollar’s rebound continues as investors continue to fret over the health of the U.S. economy. The fact that the dollar index is marginally lower masks a bigger move in which riskier currencies are falling hard and fast against the greenback, making for a possible explosive finale to this month’s trading.

Complete Story »

Andrew Wilkinson submits:

Demand for Japanese bonds has driven a fifth consecutive monthly gain, while U.S. notes have performed the best since the end of 2008 when the economy went belly up. German yields are gouging out fresh lows almost daily as the summer starts to end. Yields have fallen so far that investors should really be considering impending crisis. So today’s revival in a gauge of U.S. consumer confidence suddenly looks misplaced. Despite strong domestic data released overnight Australian short-end futures moved to discount an end to the monetary tightening process and while the market stands short of predicting that the next move will be lower. But that’s the direction traders are pushing the market today.

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Andrew Wilkinson submits:

Demand for Japanese bonds has driven a fifth consecutive monthly gain, while U.S. notes have performed the best since the end of 2008 when the economy went belly up. German yields are gouging out fresh lows almost daily as the summer starts to end. Yields have fallen so far that investors should really be considering impending crisis. So today’s revival in a gauge of U.S. consumer confidence suddenly looks misplaced. Despite strong domestic data released overnight Australian short-end futures moved to discount an end to the monetary tightening process and while the market stands short of predicting that the next move will be lower. But that’s the direction traders are pushing the market today.

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Saj Karsan submits:

Value investors are generally agreed that managements of going concerns should make their decisions based on long-term cash flow implications. Unfortunately, the pressures on managements to perform on a short-term earnings basis can push them to make decisions that are not in the best interests of shareholders. Consider Sterling Construction (STRL), a company that builds and repairs roads, highways and water infrastructure.

Due to the recession, the amount of work available for the company has declined, leaving it operating at a lower capacity. Idled equipment generates no revenue, but accrues charges for depreciation. This charge shows up on the income statement, but note that no actual cash charges occur (apart from any maintenance that is required).

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Saj Karsan submits:

Value investors are generally agreed that managements of going concerns should make their decisions based on long-term cash flow implications. Unfortunately, the pressures on managements to perform on a short-term earnings basis can push them to make decisions that are not in the best interests of shareholders. Consider Sterling Construction (STRL), a company that builds and repairs roads, highways and water infrastructure.

Due to the recession, the amount of work available for the company has declined, leaving it operating at a lower capacity. Idled equipment generates no revenue, but accrues charges for depreciation. This charge shows up on the income statement, but note that no actual cash charges occur (apart from any maintenance that is required).

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Steve Alexander submits:

Business Summary

Motorcar Parts of America (MPAA) remanufactures vehicle alternators and starters ("cores") for the auto repair market, focusing primarily on the "do-it-yourself" (DIY) segment. MPAA sells over 90% of its remanufactured units through auto parts retail chains such as AutoZone (AZO) and Pep Boys (PBY), where they are sold under private labels. The remainder of sales come from professional installation warehouses, sold under the brand names Quality-Built, Talon, Xtreme, and Reliance. MPAA takes used, non-working cores that are turned in by customers for a credit, dis-assembles them for parts, and then re-assembles a new, working core using those parts and new ones. 96% of remanufactured cores in 2010 were replaced by used cores, and MPAA can usually produce 100 remanufactured cores from 120 used ones. Unusable leftover parts are sold to scrap yards.

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