SNS Reaal Corporate Bond

SNS Reaal (SNREF.PK) is a company operating in Insurance, Banking and Property. The company is listed at the AMX (AEX MidCap). The stock has lost a lot of its value over the years and is on the brink of becoming a penny stock. They had to do a lot of depreciation on their property division which brought them in trouble. The Bank will fall unless the Dutch government will support them and give the company a capital injection. Most investors are worried it will fall. I will give my reasons why it will not fall and how you (as an investor) can profit from it.

SNS Reaal is one of the four system banks in the Netherlands and therefore it may not fall or go bankrupt. In case of bankruptcy the Dutch government has to step in and nationalize the bank and sell the good subsidiaries. This operation will cost the government billions of euros and can be prevented with a capital injection. De Nederlandsche Bank (The Dutch Federal Reserve) made a statement to SNS Reaal where it has promised to come with a solution before mid February. Mid February does not come as a surprise because the annual report will be presented (intern) during that period. The statement was not made public and sources within SNS Reaal have said this. It’s still trustworthy though because SNS Reaal had talks with the Dutch Ministry of Finance about selling the property division and their problems with their equity.

The company is in a really bad shape (al because of the property division). The company has billions of euros in commercial property. Even if the company sells all their good subsidiaries they will still have a negative equity. It can be described as a huge elephant that does not fit though the door and has to be cut in pieces to get though. It has depreciated 1,1 billion euros over the last 3 years on the property division. The company already had a financial injection during the crisis and still has to redeem most of it. The other subsidiaries and their core activities are all healthy and are recovering well from the crisis. They only have to get rid of the Property finance division.

Now comes the part where you can make money from all of this. First of all forget about the stock it’s dangerous to invest in and it is unpredictable. On the other hand you can make a lot of money on their corporate bond. I’m talking about the 11.25% SNS Bank Perpetual 2009 (NSCNL0SNSTR1), now at 71% (and gaining daily) of its payout it can make you a lot of money if the Dutch government is going to inject capital into the Bank. That will mean that the bank will not fall and that all bond holders would get their money almost 100% guaranteed. This means that it would jump near the 100% and add the 11,25% interest on top of that and it will make you a wealthier person.(click to enlarge) Volume is really picking up after the news came out (1 month chart)Volume is really picking up after the news (1 month chart)

Are Alternative Investments Still Attractive?

Alternative investments, what does it mean and what makes an investment ‘Alternative’? Alternative Investments are all the investments that are not made in stocks or bonds. The term is pretty vague and you can see them like tangible assets. This contrast with other financial investments like stocks or bonds which are not physical. Some like to hold them for their own enjoyment and others like to keep them as preserved as possible to sell it later on with profit. Since I’m writing this for investors I would like to pay attention to the second option. Selling with profit.

Since the depression Alternative investments lost a lot of their value(expect for Noble Metals), but still it is a good investment. The Merrill Lynch/Cap Gemini Ernst & Young World Wealth Report 2003, based on 2002 data, showed high net worth individuals, as defined in the report, to have 10% of their financial assets in alternative investments. In 2008 it was still 7%. The value most alternative investments lost is not as great as the loss on stocks. In times like these Alternative investments would make a safe haven for your wealth.

The emerging markets are definitely into Alternative investments. Here is a quote from The Merrill Lynch/Cap Gemini Ernst & Young World Wealth Report 2012. ‘Art and antiques investments among emerging market HNWIs has driven up prices for regional and cultural historical art from China and Latin America. China (including Hong Kong) has overtaken the U.S. as the world’s largest market for art and antiques, representing 30% of the global art market in 2011 versus 29% for the U.S.’ Rich people in emerging markets like to show their wealth. I think it is a good thing because it will encourage other people to work just as hard to reach the same level. I personally think this will not stop despite the global economy slowing down. Noble Metals are still extremely attractive and I’m not talking about gold but about diamonds. ‘Jewelry, gems, and watches experienced a rise in value in 2011 with diamonds outperforming the market again in 2011 with a 20% price increase from the previous year’. It has increased a lot in value but it still has room to go even higher. Again the emerging markets are buying a lot of Jewelry and diamonds to show their wealth and on the long term this will continue to grow.

Even on Alternative investments you can speculate. For example look at Twinkies, the price increased dramatically when the news came out of their bankruptcy. You can also invest in young artist and film makers for example. This risk is high but the possible reward is even greater. Post stamps and so on are still good investment according to the wealth report. ‘Rare stamps continued to be an attractive option for investors with all stamp indices growing impressively in 2011.’ You still have to be careful though because stamps and wine can lose a lot of their value if another global recession will occur.

All by all I think there are still some great opportunities out there for you to buy. You got to have a lot of knowledge about what you are going to buy. Don’t buy paintings if you don’t know their value and you don’t have a lot of expertise in the subject. Be careful when you buy things online and always ask for a certificate of authenticity. The best Alternative Investments for people with minimal knowledge about wine and so on can always go into Noble Metals. Which will always keep stable in value in some way.

The Bearish Bull

Strategized Hedge Funds: By Fund Managers

Hedge Fund and Its strategies

Long and Short Equity Funds: In this strategy hedge fund managers can buy or sell stocks that they feel are over or undervalued. The equity funds have a positive exposure in the market if the fund manager invest 80% in long and 20% in shorting of stocks, then the stocks would have a 60% net exposure in equity market (80%-20%). The fund will not borrow capital, that is margin to increase prospecting ROI. The gross exposure in the equity market would be 100%. If the fund manager increases long position funds to 90% and shorting remaining 20% then the estimated gross exposure is 110% leveraging 10%

Fund Of Funds: The other strategy that hedge fund managers adopt is mixing of hedge funds New York and other invested capital. This blend of different funds and capital proves to be more beneficial in improving long term ROI than the individual funds. Fund managers need to be pro in adopting various unique techniques of investment. The amount of investment risk and volatility can be moderated with this blending of funds. Investment comes with only one factor, returns and preserving capital is the other factor of consideration. The volatility of funds depend on the blend of strategies adopted.

Market Neutral: To reduce marketing risk managers adopt the strategy of offsetting positions of the issure in case of different securities. One implemented strategy includes converting long bonds and shorting equity funds. To reduce interest rate risks and enhance returns futures also can be used.

Correlation of equity and bond markets are reduced to concentrate on returns. Fund managers come up with various strategies to enhance returns. The strategies include arbitraging fixed income, mortgage securities, capital or close end funds.

Investment globally: One of the high risk fund strategy is global macro but it ensures higher returns. Global investment includes pooling in of capital in stocks, bonds, futures and other derivative securities. They are termed as global funds because of their reach globally, diverse investment and the market size of investment, that is comparitively huge. The global fund has the capacity to grow large because of its global reach before facing challenge from capacity issues.

Striking Opportunity: Fund managers use this strategy of cashing in from changing the investment themes accordingly. Revamping the stategies in accordance with arising profitable situations from events such as IPOs, dissapointmets caused due to interim earnings with sudden fluctuating price changes and other events. Managers do not hesitate to take a certain amount of risk and change their investment strategy and do not limit to one investment approach.

These are some of the strategies that fund managers adopt their are other techniques as well. The mentioned strategy are evaluated based on returns and on micro-macro economic factors. Hedge fund service providers specialize in derivative documentation, financial accounting, legal compliance and audit reporting.

–  Liza Brown, a marketing manager at HF solutions LLC

Gold Price 10 y

Bearish on Gold

I would like to talk about the gold price. Is it a good projection of the real value? People tend to go in Gold because it is stable in value, but I think the have gone to far.

Let me sum up some reasons why I am bearish.

  • When we have low economic activity people tend to sell their gold for cash.
  • In times with low economic activity people buy less gold.
  •  Basel III turns gold to a tier 1 from tier 3 capital

The most significant change is moving gold from its tier 3 status to tier 1 capital as 100% loan-backing reserves, the same as cash and bonds. For the first time in 42 years, gold is being brought back into our financial system as money. All the world’s banks are now storing this metal, not as some 3rd rate “asset”, but as all the world’s working capital – its money. This means banks are going to sell some of their gold reserves. Look what happened to oil it was topping at $100 and from there it went back down to $85. Why because there is low economic activity and gold is stable in value but what is it worth when there is low demand for it. Especially when the price is so high.
The gold reserves of countries is in an up trend the last years but how long will it last. Governments are likely to sell some of their reserves now because of the price. The would trigger a chain reaction and would bring gold back to a more realistic price around 1200$-1400$

Investors are afraid of this high prices, they think it’s a bubble that is about to pop again. And did we reach the bottom of the recession yet? I think we almost have so that would be another reason to sell it.

Now I will list some things what could increase the gold price.

  • A global recession
  • Production problems with gold
  • Banks and governments buying lots of gold for reserves  and holding on to it for a long time.

These are all things that could happen, so that is why it is so hard to predict the price of gold. Investors find all kind of reason what would get them bullish on gold.

In their May 31 Market Alert, the researchers at CPM bravely expose certain myths and misconceptions surrounding gold and banks -central or otherwise- as follows:

There is an aura of desperation in the internet gold press, as those who still expect gold prices to rise grasp for any-thing that could be interpreted as being potentially bullish for gold. The collapse of the euro, a stock market crash, a Chinese ‘recession,’ and other potential catastrophes are pointed to with glee. Other potential developments within the gold market are being trotted forth by gold marketing groups as reasons to believe gold prices inexorably must rise sharply…

I hope you can use this article for a better view on the gold price and its pros and cons. Don’t forget to subscribe to my blog and share this site with friends!

–   The Bearish Bull 


All the wal-mart stores in the USA

Bullish : Wal-Mart (WMT)

On 15 November this year Wal-Mart Inc reported their earning for the third quarter.

Let me list some highlights from their own press release:

Q3 Highlights:

  • Wal-Mart Stores, Inc. (Walmart) reported third quarter diluted earnings per share from continuing operations of $1.08, within guidance of $1.04 to $1.09. This was an 11.3 percent increase from the $0.97 per share reported for the third quarter last year.
  • The company updated its full year earnings guidance, narrowing the range by five cents to $4.88 to $4.93. The top of the range remains unchanged from the guidance provided last quarter, when the company tightened the range and increased it by a penny.
  • Net sales were $113.2 billion, a 3.4 percent increase over last year. Currency exchange rate fluctuations negatively impacted net sales by approximately $1.7 billion. Without the currency impact1, net sales would have been $114.9 billion, a 4.9 percent increase.
  • Walmart U.S. comparable (“comp”) store sales increased 1.5 percent in the 13-week period ended Oct. 26, 2012.
  • Sam’s Club comp sales, without fuel, increased 2.7 percent for the same 13-week period.
  • Walmart International grew net sales 2.4 percent to $33.2 billion; on a constant currency1 basis, net sales would have increased 7.6 percent to $34.8 billion.
  • The company leveraged operating expenses for the quarter.
  • Consolidated operating income was $6.1 billion, up 4.0 percent from last year, and grew faster than sales.
  • Walmart generated free cash flow1 of $7.0 billion for the nine months ended Oct. 31, 2012.
  • Return on investment1 (ROI) for the trailing 12 months ended Oct. 31, 2012 was 18.0 percent.
  • Year to date, the company returned $8.7 billion to shareholders through dividends and share repurchases.

Their earnings were $0,01 better than expected at $1,08 their revenue on the other hand fell a bit short at. Revenue improved to $113.93 billion from $110.23 billion a year ago.Wall Street had expected Wal-Mart to report $114.96 billion in revenue, according to Thomson Reuters consensus estimates.Wal-Mart narrowed its full-year earnings guidance to $4.88 to $4.93 a share.

Why am I still bullish on this stock: It’s a great company with a stable basis in the USA and has a dominant position. Their P/E is still low at 14.00 at $68,03 per share. Compared to their peers they still have the lowest P/E. They are still growing in a steady pace. In bad times its better to invest in stable companies with a growth of 5% to 10%than in a company with 50% growth a year. Consumer goods are always needed and Wal-Mart has a dominant position and can hold even better during crisis because the competitors will have to cut on growth and set up protection and hold more reserves ( Dollar General Corp etc).

So go out there and buy Wal-Mart. It could be down for a few weeks but for the long-term its perfect. Even if the market gets a correction Wal-Mart will hold because investors will go into defensive stock and Wal-Mart lends itself perfectly for that.

–  The Bearish Bull