ValuePlays Has Moved (new link corrected)!!!

THE NEW ADDRESS FOR VALUEPLAYS IS NOW VALUEPLAYS.NET (CLICK LINK TO BE DIRECTED)

SEC Report on Madoff.....Stunning

Don't know whether to laugh, cry or become a criminal after reading this as the chance of the SEC catching me is virtually nothing...


SEC Madoff Report


Disclosure ("none" means no position):

Sears Holdings Websites Take 3 of Top 25 Spots In Consumer Survey

I just love good information coming in from readers, thanks "bhall" for the email.....

Online– Yesterday STORES Magazine released the list of its 50 Favorite Online Retailers of 2009 and we’re happy to announce that www.Sears.com - #10, www.LandsEnd.com - #15 and www.Kmart.com - #23, all made the top 25!

Kmart.com showed the biggest improvement moving from #34 to #23. STORES commented, “Living paycheck to paycheck is a sobering reminder of the need to stretch every dollar. With improved assortments and an easy-to-navigate Web site, Kmart.com provides a value-oriented option.”

STORES Favorite 50 Online Retailers is a list of e-Commerce Web sites as ranked by the consumers who use them. The survey polled 8,635 consumers and asked two open-ended questions: “What Web site do you shop most often for apparel items?” and “What Web site do you shop most often for non-apparel items?” No merchants’ names were listed or suggested. The final list was assembled by ranking online companies in order of total mentions.

This recognition joins Online’s earlier recognition by Acquity Group as the Overall Best-in-Class company for adaptation of mobile e-commerce initiatives in its mobile study of the 2008 Internet Retailer 500 and e-Tailing Group's Annual e-Commerce Gauge Top Customer Experience Web Site where www.sears.com received the top score of 88.25.

Read report here:

Full chart:
09FAV50chart

Now we have posted here a bit lately both about Sears Corporate online strategy and our thoughts on where we think it is going and the changes made. Throughout is all we have said that none of it matters unless it resonates with customers. Survey like this give us insight that it just may be.

The key now is to watch and see where it goes. Again, month to month variations need to be discounted but large moves up, like the one Kmart.com made are worth noting.

We'll keep an eye on this...

Disclosure ("none" means no position):

Dow Chemical Confims Loans To Be Repaid Early

Still no whiff of a Dow Ag sale from Dow Chemical (DOW)

The Detroit Free Press Reports:

Dow Chemical Co., the largest U.S. chemical maker, said it is ahead of schedule on its plan to repay by year-end a $9.2-billion bridge loan that helped finance the April acquisition of Rohm & Haas Co.

The sale originally announced in May, to reflect inventory values, Bob Plishka, a spokesman at Midland-based Dow, said Tuesday in an interview.

Proceeds will be used to repay the bridge loan, which had a balance of $4.1 billion at the end of June, he said.

CEO Andrew Liveris secured agreements to sell $3.3 billion of assets, including the refining stake, which were among a dozen units valued at as much as $26 billion that the company considered divesting.

The company spent most of a $2.75-billion debt issue in August on payments, trimming the loan's balance to about $2.1 billion, Plishka said.

"We have more gross proceeds due us from definitive divestiture agreements already in place than the outstanding balance of the bridge loan," Plishka said. "We are way ahead of schedule."

The sales of Morton Salt for $1.68 billion and a stake in the Optimal Group of Companies for $660 million are expected to be approved by regulators and close this year, Plishka said.

Disclosure ("none" means no position):Long DOW

"Davidson" Makes A Case for International REIT's

Davidson" submits:

With the 2007’s Total Mortgage level over $14.5Trillion of which more than $11.1Trillion were home mortgages it would be hard to find a stronger connection to the financial system than this. Data from US Census Bureau most current information.


Equity REITs are publicly traded investment vehicles which use mortgage debt in the purchase of investment properties and form the REIT asset class that is used as part of your balanced portfolio. The market capitalization of the Equity NAREIT holdings has grown from 1972’s year end $332Mil to 2007’s year end $288.7Bil. This ~870 fold increase results from a combination of growth and increasing holdings from 12 REITs at inception and to 118 REITs at the end of 2007. Data from http://www.reit.com. At the end of 2008 the Equity NAREIT market capitalization had fallen to $176.2Bil. A comparison of the NAREIT Total Return vs Equity Indices in Chart 1 makes clear that ~94% of returns are derived from dividends which in turn by law are 90% of FFO(Funds From Operations).



Chart 2 of the NAREIT Equity Index vs. Ttm(Trailing12mos) Dividend Yield shows that the dividend yield which had held in the 6%-9% for much of the period fell almost to ~3% in 2007 during a period of low cost mtg funding. The subsequent correction of 2008-2009 forced dividend yields to 10.08% in Feb09 which was at a historically high level and was a signal that the Return/Risk had become attractive. The recent fall in dividend yield to July ‘09’s 4.92% is a function of recent changes in the tax law that currently permit REITs to issue stock in lieu of cash which increases their financial flexibility. This change is expected to be a temporary forbearance, a bridge during the current economic period. Most expect regular 90% dividends to be paid in cash once this difficult environment has moderated.




My view is that these dividends will return although it is difficult to predict their timing and their magnitude till there is greater clarity. I continue to recommend REITs as an attractive allocation in balanced portfolios with a strong preference for Global REIT exposure.

Disclosure ("none" means no position):

Philadelphia Fed's Bullish Report

"Davidson" submits:

The Philadelphia Fed report on the business outlook survey has startled Wall Street and set abuzz chatter regarding the long forecasted V-Shaped Recovery by Wesbury. This report was so far better than expected 4.2 vs. an expected -0.2 that Treasuries fell in value as investors sold to buy stocks. The report can be accessed at the URL here and I have presented the relevant chart below.

The market is if anything anticipatory. On CNBC @4:30PM yesterday John Herrmann of Herrmann Forecast LLP commented that he expected the Sept. Purchasing Managers Index(PMI) to show new orders up dramatically to ~59% level.



It would be convenient if investing could be so simple that we could take these pieces of information and invest with confidence into just the right sectors and asset classes. But, the markets are anything if convenient and predictable. While the Return/Risk appears to favor many asset classes, approaching the market with a balanced portfolio has always proven in the long run to have been a prudent strategy. There is always present no matter how bullish the news seems to be developing the significant uncertainty of unseen events. We always know what we would like to have as a return, but we can never know when an unpredicted event will spook the market confidence and implode our short term needs.

Disclosure ("none" means no position):

Brookfield Properties CEO: CRE Death Fears Exaggerated

Key quote regarding the sate of the CRE market: "On the fundamental side, today is not as bad as the 90's"



Here is my original investing thesis for Brookfield Properties (BPO). Brookfield is being priced as though it has problems and it doesn't. When the rest of the market wakes up to that fact, money will be made....in bunches..


Disclosure ("none" means no position):

Dallas Fed Releases Updated 12mo Trimmed Mean PCE Inflation Benchmark.

"Davidson" Submits:

Subject: Dallas Fed Releases Updated 12mo Trimmed mean PCE Inflation benchmark.

The Dallas Fed released their 12mo Trimmed mean PCE inflation benchmark this morning. This includes the Jun09 and July09 values and was delayed while they went through a periodic review. It should be no surprise that the values are lower as this indicator carries an estimate for cost of housing as well as energy and food. This index “trims” monthly spikes, but includes all relevant expenditures as opposed to earlier “Core Inflation” which simply excludes food and energy components.

This is in a favorable direction for market valuations. My analysis uses the long-term Real GDP trend of 3.15% and adds the 12mo Trimmed mean PCE to produce the Market Capitalization Rate(MCR). This value then is calculated with today’s release to be 4.85%. This then becomes the means of valuing whether the market is over/under priced all things being equal and the same can be said of individual stocks and bonds.

For Treasuries this becomes a simple calculation. One simply takes the 10yr Treasury Yield which today is ~3.46% and by comparison it is simple to see that the general economy should produce a higher return than 10yr Treasuries. The lower 10yr Treasury Yield is because of the risk investors perceive in alternative choices.

There is not enough space this email to detail the analysis of the SP500, but mean estimated earnings are currently $64.50(3Q09) and as I write this the SP500 is priced at 1030. The Earnings Yield of the SP500 is calculated simply by dividing est. earnings by the current price or $64.50/1030 = 6.26%. This is a simple methodology and all the inputs can change over time, but the process produces a relative return comparison that is simple to use. To convert this into a estimate for the SP500 price target one divides the SP500 Earnings Yield by the MCR, 6.26%/4.85% = 1.291 or 29.1% higher. This means that all things remaining equal the SP500 has the capacity to rise to ~1330 IF earnings were to be at median level today and IF investor psychology normalized. Note: If inflation changes so does this number which can dramatically change market pricing. Lots of “IF’s” here but this is how the market works. We can only make estimates and can never make guarantees.

The calculation uses a normalized or mean earnings estimate because the basic assumption is that the companies in the SP500 are expected to recover as they have since 1930(79yrs of economic and investment history). There is nothing that I can see in our current situation that would suggest that a recovery would be impossible. If something should suddenly become apparent that our Free Market Economy had been injured by unthinking government action, then we would have to revisit all assumptions. But, even with all the issues being discussed today which seem potentially injurious to our economy, history shows that sparring political parties generally compromise without major damage to our economy.

This Dallas Fed release makes allocation to stocks and corporate bonds quite favorable at this time.

Disclosure ("none" means no position):