Comments on Fund My Mutual Fund: Bond Insurers Becoming More Troublesome

hieunguy, I can make a bearish analysis out of any...

2008-01-20T15:50:00.000-05:00

hieunguy, I can make a bearish analysis out of anything if I work hard enough. For example, infrastructure stocks could see slowdown in work from cancellations in foreign markets and oil goes back to $60 forcing middle eastern countries to have less revenue than they've enjoyed the past year. 2 year backlogs could be reduced to 1 year. The "pace of backlog growth" could slow. Etc etc. The problem is I can make this bear case for anything if I look close enough for warts. For a company like Foster Wheeler I am paying about 20x earnings for a book of business that is already spoken for, for nearly 2 years. Could it go to 15x? 10x? 5x? Yes. Anything can happen. But Procter & Gamble is going for a similar multiple for half the growth. And its tied to the US consumer who is supposed to the root of all this evil. If indeed FWLT should trade at 10x earnings than PG should trade at 8x. Etc. FWLT at 60 would be 10x earnings growing at twice that rate. I suppose anything can happen in a bear market but if that is the analysis we are going to - that companies should trade at 50% of their growth rates, than we should leave the stock market entirely because everything is overvalued.

Zach, those with cash will make out in the end - opportunities will arise - just like when a hedge fund blows up and is forced to liquidate. Or when Citadel buys Etrades mortgage assets for 28 cents on the dollar. I am sure some of it is worth 80 cents, some worth 40 cents, some worth 60 cents, and some worth 0 cents. But if you have cash you can make the bet and even if its really worth 45 cents on the dollar you have a massive gain.

We're finding some interesting opportunities in th...

2008-01-20T10:59:00.000-05:00

We're finding some interesting opportunities in the muni bond area as these names are being liquidated because the pension fund managers who own them are not allowed to hold anything with a lower credit rating. As the insurance policies become worthless, the credit downgrade forces managers to sell even at 70-65-60 cents on the dollar. Just another fallout from this nasty situation.

mark, what do you think this will do to the infras...

2008-01-19T18:26:00.000-05:00

mark, what do you think this will do to the infrastructure stock? As i mention before, i worry about the Oil service stock, since they telegraph that oil may come down to 75 level. DO, RIG, ATW is leader stock but when the sector get turn off, they have a lot to fall. Same thing with infrastructure, it amaze me that FLR can fall that much, after it announce the big contract. In a bear market, usually it retrace the whole advance, so FLR down to 80, sii to 40, fwlt to 60, is not a far fetch thing.