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Senior Cameron Priester receives prestigious research grant
Cameron Priester, a senior biology major at Missouri Southern, has received a $1,200 grant from Prairie Biotic Research – funding which will allow him to present the results from a research project at scientific conferences.
Priester is studying former mining areas in Joplin and Webb City, using snails to determine if the remediation process has produced a healthier ecosystem.
It's a project that has developed into a unique collaboration with two of his instructors.
"This is my second semester at Missouri Southern," says Dr. Kyle Gustafson, assistant professor of biology and environmental health. "I wanted to get some research up and running when I got here and I asked my classes if anyone had any interest and to come talk to me about it. Cameron took me up on it, and we devised a project based on his interests."
Those interests include land reclamation and habitat management. Priester currently works for a habitat management effort underway in Webb City. Gustafson's idea to sample aquatic invertebrates for effects of the ecosystem also aligned with his student's love for wildlife.
"I've always enjoyed wildlife and nature," says Priester. "I maybe watched a little too much 'Crocodile Hunter' growing up … Steve Erwin inspired me as far as caring for and handling wildlife."
After spending last semester reviewing studies and other literature, he began identifying locations that had been affected by heavy metals from the area's long mining history. The idea was to use snails – and, more specifically, their shells – to see if cleanup projects by the EPA and other conservation groups have improved the ecosystem.
"I would think that remediated areas would show that snails take up less heavy metals than in non-remediated areas," says Priester. "But in these kinds of projects, you never know what will happen."
Creating a process to test this theory required the assistance of another one of his professors – Dr. Lynell Gilbert-Saunders, associate professor of chemistry.
"I began working with her to create a procedure for testing and chemical analysis," says Priester.
New equipment in the recently renovated Reynolds Hall is proving to be essential to studying the chemistry that impacts snails, says Gilbert-Saunders.
After grinding down and ashing the shells – burning off any remaining carbon materials – the goal is to study what's left.
"The only thing left is the rock part of the shell, and the goal is to look at the mineral composition," she says. "Just like people with their teeth and bones, if you're in an environment that has high concentrations of metals, the thinking is that metals will be deposited in the shell."
In the Reynolds Hall instrument lab, Priester is using new, high-tech instrumentation to aid his research. The Agilent MP-AES (Microwave Plasma-Atomic Emission Spectrometer) incinerates samples using nitrogen-fueled microwave plasma and identifies the elements that are present. In this case, he is looking for lead, iron, cadmium, zinc and other residual metals from the early mining days.
Gustafson encouraged his student to apply for the prestigious Prairie Biotic Research grant.
"They're an all-volunteer, nonprofit company," says Gustafson. "Their whole goal is to fund research … specifically research focusing on the conservation of prairies. Cameron is pretty much exclusively looking at the prairie wetlands."
Having been accepted for the full $1,200 grant, Priester will use the funds to present his findings at conferences, including the Ozark-Prairie Society of Environmental Toxicology and Chemistry gathering in May.
"I worked hard on the grant application, but I didn't know how significant it really was," he says. "It will be my first time going to a conference like this. I'm hoping to have some tangible results by the middle of April."
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The British Oceanographic Data Centre (BODC) announce the launch of a SPARQL Protocol and RDF Query Language (pronounced 'sparkle') end-point for the NERC Vocabulary Server (NVS2.0). This new service allows the retrieval and manipulation of data stored in Resource Description Framework (RDF) triples.
Imagine a simple vocabulary that describes flower colour. Its contents could include: 'A buttercup has the colour yellow', A daffodil has the colour yellow', 'A tulip has the colour yellow','A tulip has the colour red', 'A tulip has the colour orange', 'A tulip has the colour pink'.
Where 'A buttercup has the colour yellow' in RDF is the triple; 'A buttercup', 'has the colour', 'yellow'.
Using SPARQL, you could easily identify those flowers that have the colour yellow or all the tulip colours. This could be federated to collate information from any 'flower colour' vocabulary with a SPARQL end-point.
To ensure consistent metadata and data descriptions, the NERC Vocabulary Server (NVS2.0) provides access to the controlled vocabularies used by both BODC and the wider environmental science community. The vocabulary concepts are linked by mappings to provide RDF triples.


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Q: See app changes in real time on real device I have Eclipse with Android Development Kit (ADT) installed, and also SDK. I have connected my Venue7 tabled and enabled USB Debugging.
I've created a simple Hello World app and ran it on my Venue7.
Now is it possible to update the app via Eclipse and see the result @Venue7 in real time? Or do you I have to stop the app and start it again after each change?

A: When you install your program on your device you are doing just that - installing it. The .apk file you have there is an installation package (apk stands for android package) not an executable file. So yes you have to reinstall it each time you have made changes to the program.
On eclipse I believe you just click the run as android program as the other poster said.

A: If you are using for the first time, Just see the left side, in  package explorer, right click on your package- Select Run As Android application.
You dont need to stop an app. Just Run it from eclipse

A: If you have made changes in source code and you want to see the effects, you no need to stop the app/device or emulator. But you need to re-run the package again.
You can do this by 2 ways:

*

*Right-click project, run as Android application

*CTRL+F11 is to run the application. But for this you have to apply pre-settings as below.
Windows>Preferences>Run/debug > Launching : Launch Operation; "Always launch the previously launched application"

redpajama_set_name: RedPajamaStackExchange


text:
Q: What type of probability distribution does the given scenario follow? (Answer only one of the four options) An ATM PIN of a bank account is four digits long. A person tries various combinations successively( sampling at random without replacement). Let X denote the number of trials required to correctly guess the PIN. Which of the following statements are true? (Assume that the account is never blocked)

*

*X is uniformly distributed.

*X follows geometric distribution.

*The distribution of X depends on the value of the PIN.

*X follows binomial distribution.

A: The answer, oddly, is "uniform".
Example: take the case of $2$ possible numbers.  It is clear, in this case, that you have equal probability of getting the right one on the first or second trial.
In your case, for instance, the probability of success on the first trial is clearly $\frac {1}{10^4}$ while the probability of success on the third trial is $$\frac {10^4-1}{10^4}\,\frac {10^4-2}{10^4-1}\,\frac 1{10^4-2}=\frac {1}{10^4}$$
For general $n$:  Suppose, to generalize, that you had $n$ boxes exactly one of which contained a prize.  You search the boxes randomly, without replacement, and ask for the distribution of the number of trials you need. The probability of success on the $k^{th}$ trial is $$p_k=\frac {n-1}{n}\,\frac {n-2}{n-1}\,\dots\,\frac {n-(k-1)}{n-(k-2)}\,\frac {1}{n-(k-1)}=\frac 1n$$
Intuitively:  number your boxes $1$ to $n$.  The winner is in any given box with equal probability. Say it is in box $k$  You do your trials starting at $1$ and working systematically, so it is guaranteed that you find it in exactly $k$ trials.


text:
Legal Information: Colorado
» Colorado
What is the difference between federal and state gun laws?
I am a victim of domestic violence and the abuser has a gun. Is that legal?
What crimes are considered domestic violence misdemeanors?
What is the definition of a felony?
Guns and Protection Orders
I have a temporary order against the abuser. Can the abuser have a gun?
I have a final protection order against the abuser. Can his/her gun be taken away?
How does an abuser give up his/her guns and ammunition?
Is there anything I can do to make it more likely that the abuser's gun is taken away when I get a protection order?
The abuser did not show up for the protection order hearing. Can his/her gun still be taken away?
Guns and Criminal Convictions
If the abuser has been convicted of a crime, can s/he keep or buy a gun?
If a law enforcement officer or other government employee is convicted of a domestic violence misdemeanor or felony, can s/he have or buy a gun?
How can I find out if the abuser has been convicted of a crime?
The Abuser Isn't Supposed to Have a Gun…Now What?
Who do I notify if I think the abuser should not have a gun?
What is the penalty for violating state or federal firearm laws?
What will happen if the abuser tries to purchase a gun?
More Information and Where to Get Help
If the abuser's gun is taken away, what will happen to it?
The abuser uses a gun for his/her job. Does the law still apply?
I read through all of this information and I'm still confused. What can I do?
According to Colorado state law, a person who has been convicted of certain crimes cannot get a permit to carry a concealed handgun. The permit will be denied if:
s/he has been convicted of a felony, attempt to commit a felony, or conspiracy to commit a felony; or
s/he has been convicted of perjury related to information provided on a concealed handgun permit application.1
In addition, it is illegal for anyone to possess a firearm if s/he is on probation after being convicted of a crime that involved domestic violence. An exception can be made, however, for a defendant whose job requires the use of a firearm if the judge believes that the victim and his/her child would not be endangered and the gun is not stored in the defendant's home.2
Also, federal laws, which apply to all states, restrict an abuser's right to have a gun if s/he was convicted of a felony or a domestic violence misdemeanor. Go to the Federal Gun Laws page to get more information.
1 Colo. Rev. Stat. §§ 18-12-203(1)(c),(d); 18-12-108
2 Colo. Rev. Stat. § 18-1.3-204(2)(b)(IV)
Selected Colorado Statutes

redpajama_set_name: RedPajamaCommonCrawl


hi im Jill! ummm im in 7th grade...im 13 ummm o im not a people person..hmmm o duh i luuuv animals dogs r my passion not my obbsession. o i luv pit bulls umm i have 7 dogs 3 cats 1 rabbit and a lizerd and the occasional stray dog lol. idk so ne questions?? thanks for reading!!!!!!!
what kind(s) of dogs do you have?
That's so cool. =] I have a lab/greyhound, a husky/shepard, and a min pin/pitt bull. We rescued two of them, and got the other one from an accidental litter that would have ended up at the shelter.
^^he's afraid of the camera, so these are the best pictures I have.
awww taylor your dogs are so cute ! ... that is your name right ?!?!
hey jill...miss talking 2 u!
i luv ur dogs taylor..they r SOO cute!
I just wanted to point out that a really great friend of mine has 2 greyhounds too!
yes well, I think greyhounds are just amazing...they run so fast..and they're pretty uncommon too, you don't see a lot of them.
I don't have one myself.
my name is becca,I'm 18 19 in june..I have a babygirl who is 2 months old.I'm married and i like to just take care of my baby AND chill with freinds and family.I'm also a senior of pacyber.CLASS OF 07 here we come!!!
hi becca! aww cool i have many friends with baby they all seem to get attached to me haha. congratz good luck in collage if ur going. and do i no u from somewhere??


text:
About Scott Cleland
About Search & Destroy
Subscribe to The Precursor Blog
Debunking Edge Competition Premises in FCC 2015 Title II Broadband Order – FCC Comments
Submitted by Scott Cleland on Mon, 2017-07-17 09:31
FCC Restoring Internet Freedom WC No. 17-108
Submission by Scott Cleland, Chairman, NetCompetition (An e-forum supported by broadband interests.)
In 2015, the FCC's Title II Open Internet broadband order implicitly was based on three core competitive premises about "edge" competition and competitors, that are demonstrably false, which undermines the factual legitimacy and legal justification of the FCC's 2015 Open Internet order, and which supports the current FCC's Restoring Internet Freedom NPRM to overturn it.
Summary: The 2015 FCC's three demonstrably false core competitive premises are:
1. "Edge" providers are competitive and not concentrated, warranting exclusion from net neutrality obligations. False. The evidence below shows the opposite to be true. The main edge providers are exceptionally concentrated and not competitive.
2. The most powerful companies in the Internet ecosystem are AT&T, Verizon and Comcast. False. The evidence shows Google, Amazon and Facebook are the most powerful companies in the Internet ecosystem.
3. Edge providers do not engage in non-neutral, discriminatory behavior, like broadband providers are alleged to have the market incentive to do. False. The evidence below shows that the three most powerful edge providers, Google, Amazon, and Facebook, operate non-neutral networks and discriminate against competitors.
"Edge" providers are competitive and not concentrated warranting exclusion from net neutrality consideration. False. The evidence shows the opposite to be true.
The Internet Association estimated the Internet sector comprised 6% of US GDP in 2014. Given that the Internet Associations members are growing revenues at a collective 20%, the Internet sector's share may soon be approaching 7% of US GDP.
We know these four WTAPs are growing revenues substantially faster than others – Google +23%; Amazon +22%; Facebook +49%; and Microsoft +8% -- and thus are taking substantial market share overall. And anyone watching the market this last year knows these four WTAPs enjoyed the lion's share of market gains in market capitalization.
Now we can roughly measure how extremely concentrated the U.S. Internet sector has become, thanks to the Internet Association, the professed "voice of the Internet economy." Their membership comprises the "world's leading Internet companies" based in the U.S., and thus it offers us the best proxy universe of the most significant revenue-producing and highly-valued public and private Internet companies based in the U.S.
If we research all the key public-available data, on revenues, revenue growth, market capitalization and other comparable data, what does this group of 39 elite, U.S. Internet Association, companies tell us?
The companies alphabetically are: Airbnb, Amazon, Coinbase, Doordash, Dropbox, eBay, Etsy, Expedia, Facebook, Google, Groupon, Handy, IAC, Intuit, Linkedin, Lyft, Matchgroup, Microsoft, Monster, Netflix, Pandora, Paypal, Pinterest, Rackspace, Reddit, Salesforce, Snap, Spotify, Survey Monkey, Ten-x, TransferWise, Tripadvisor, Turo, Twitter, Uber, Upwork, Yelp, Zenefits, and Zynga.
Of the 39 companies, 22 are public, and two are subsidiaries of members: Microsoft's Linkedin, and IAC's Matchgroup. 39% were founded in the 1990s, 39% from 2000-2009, and 22% from 2010-present.
Overall, these 39 Internet companies collectively generated $434b in revenues; $75b in absolute new annual revenues (at a collective 20.5% revenue growth rate); an overall market capitalization of $2.545t; and 699,000 employees. Collectively that's $621k in revenue per employee and $3.6m in market capitalization per employee.
The top 10% of this Internet Association proxy market are the four winner-take-all platforms: Google in search/advertising; Amazon in retail/cloud computing; Facebook in social/advertising; and Microsoft in software/hardware.
These top four/10% of Internet Association companies generate:
80% or $347b of $434b in total Internet market annual revenues;
77% or $58b of $75b in total new absolute Internet market annual revenues;
77% or 538k of 699k in total Internet market employees; and
81% or $2.059t of $2.545t in public & private Internet market, market capitalization.
Going forward if this Internet market were to continue to generate ~20% annual growth over the next 5 years, it would grow from $434b today to $1.08t in 2021, a cumulative revenue increase of 149% or +$646b that would come largely from cannibalizing offline-economy revenues.
If we do this exercise for just the three most dominating Internet platforms, Google, Amazon and Facebook, five years of 20% annual growth would grow their $260b in collective annual revenues to $647b, a revenue increase of 149% and +$387b – that predictably would largely come from cannibalizing other forms of offline-based advertising and offline-based retail revenues.
In short, the Internet sector is far from a competitive market. It has become extremely concentrated, more than any other sector by far.
[Note: this research was first published on Precursorblog.com 7-11-17.]
The most powerful companies in the Internet ecosystem are AT&T, Verizon and Comcast. False. The evidence shows the opposite to be true because Google, Amazon and Facebook are the most powerful companies in the Internet ecosystem.
Market value: Financial markets value Google, Amazon, and Facebook at $1.558 trillion, which is 165% more than the $587 billion market value of AT&T, Verizon, and Comcast per Yahoo Finance. Google, Amazon and Facebook have a brand value of $297b or 343% higher than AT&T, Verizon and Comcast's $67b brand value per Forbes.
Revenue Growth: Over the last twelve months, Google, Amazon, and Facebook increased their revenues +25% or +$52b; in stark contrast, AT&T, Verizon, and Comcast together decreased their revenues -2% or -$7b, per Yahoo Finance data.
Users: Google, Amazon, and Facebook have roughly 1,000% more users than AT&T, Verizon and Comcast have, because the netopolies are global and the ISPs are overwhelmingly U.S. driven. Specifically, Google and Facebook each have ~2b users and Amazon over 300m customer accounts. In contrast, AT&T and Verizon serve around 100m users each and Comcast substantially less than that.
Market Shares: FCC ownership rules effectively limit AT&T, Verizon and Comcast video subscription share to 30% nationally and 39% nationally for broadcasting – and they all are well below those limits. In contrast, online services have no FCC ownership limits or any apparent antitrust market share limits.
Consequently, Amazon Prime's video service has 80m U.S. subscribers, which is 89% of all households that use cable or satellite TV subscription services combined. And Amazon is on pace to surpass the entire industry by next year, per Recode. (And Netflix, which netstreams on Amazon's AWS' dominant cloud platform, has 51m subscribers, twice the subscribers of AT&T, the largest cable/satellite provider nationally, and more than all U.S. cable providers, per NCTA stats and Leichtman Research.)
In its core business, Amazon already has captured 43% of all U.S. online retail sales and 53% of U.S. retail ecommerce growth last year per Business Insider. That makes Amazon's 43% of online share of U.S. retail, an amazing four times greater than Walmart's 11% share of the total offline U.S. retail market per Supply Chain Digest. With Amazon's consistent 20+% annual revenue growth rate, it will likely command more than half of the U.S. online retail market in the next two years.
Google and YouTube are used by over 90% of Americans online and are the #1 and #2 most visited websites in the U.S. per Alexa. Google-YouTube claims to reach more of TV's prime demographic than any U.S. cable network. Google's mobile search share is 96% in the U.S. per Statista. Google Chrome is the dominant Internet browser with 52% of both desktop and mobile per Statista. Since Apple's iOS, is unavailable for license by non-Apple devices, Google-Android has 98% of the U.S. mobile operating system licensing market.
Facebook'suser statistics indicate 85% of all Americans online use Facebook monthly and video is among its fastest growing services. The Google-Facebook ad cartel is capturing 85% of all U.S. digital ad revenue growth per Morgan Stanley. In contrast, AT&T, Verizon, and Comcast digital ad share is a few percentage points at best.
By most every objective measure, Google, Amazon and Facebook operate vastly more powerful corporate networks than those of AT&T, Verizon, and Comcast.
Edge providers do not engage in non-neutral, discriminatory behavior, like broadband providers are alleged to have the market incentive to do. False. The evidence below shows that the three most powerful edge providers, Google, Amazon, and Facebook, operate non-neutral networks and discriminate against competitors.
Do Google, Facebook and Amazon block, throttle, and engage in paid prioritization? Yes.
For context, let's start with Google, Amazon, and Facebook's effective pledge in its 1 min. Google-YouTube video touting its staunch support of net neutrality.
It clearly stated: "Net neutrality is the principle that allows consumers to choose which websites and Apps are the best. … Take action; tell the FCC why you care about the open Internet and competition online and demand access to the whole Internet free of paid prioritization, blocking, and throttling."
Google: Let's start with Google search and see if it's really consumers that choose which sites/apps are best. Its search head, Mr. Amit Singhal, described Google search as "the biggest kingmaker on this earth" to the UK Telegraph, because over 30% of people click on the top ranked result and ~50% click on the top two results. Google SVP Jonathan Rosenberg on Google's blog said: "We won't (and shouldn't) try to stop the faceless scribes of drivel, but we can move them to the back of the arena."
The EU recently convicted Google of abusing its search dominance by ensuring Google, not consumers, chose what websites are best. This occurred after Google promised on its website for over a decade that: "We never manipulate rankings to put our partners higher in our search results and no one can buy better PageRank." That was proven untrue and still is, Google's shopping results in fact are sold to the highest bidder.
Let's look at Google's dominant Chrome browser which is effectively a virtual network Google completely controls. As recently as last month, Google-Chrome has increased how it throttles and blocks advertising display traffic by 15-40% on its dominant virtual browsing network to create a faster lane for some websites over others per Android Headlines. Last month, Ad Age reported "Google Chrome will automatically block annoying ads."
Let's look at Google's Android 85+% dominant smartphone operating system which is the world's largest single network connecting people and devices, and which is inherently and necessarily non-neutral, because something must decide what app and what data will go first or fastest, otherwise the devices will jam and not function.
How did Android become the dominant licensable operating system? Non-neutrally. By not letting consumers decide what apps are on their device, but by forcing smartphone manufacturers and carriers to pre-install over a dozen of Google's apps in tying contracts that ensure Google and not the consumer chooses the websites and apps on their smartphones. (See here about the Android contracts and here about how it is anti-consumer.)
Very recently, the International Business Times reported: "Google Triangle App will Save Data by Cutting Background Data Usage, Closing Idle Apps." How is it neutral for Google to decide to block and throttle a consumer's apps without a consumer's knowledge?
Finally, let's not forget Google's blocking, throttling, and paid prioritization trifecta in 2015-2016 which the media dubbed "Mobilegeddon," where its Accelerated Mobile Pages (AMP) Project created a de facto Internet wide Google "paid prioritization" "fast lane" for websites to reach consumers.
Google forced a huge change in most all users' mobile access to the web's content to increase and accelerate Google's mobile ad revenue potential by forcing all websites to pay for costly mobile upgrades to their websites so that Google could more easily search, index and monetize them – or else.
If sites did not pay to upgrade their websites to Google's AMP expectations, Google would demote a website's search ranking so that effectively it would not be found by consumers. Not surprising, most all websites paid for this prioritization and Google AMP's "fast lane" so that their smaller businesses would not be competitively disadvantaged by Google's non-neutral network practices.
Facebook: Facebook's Instant articles service that makes only some news faster for publishers who pay more is a clear form of "paid prioritization" that delivers content to Facebook's world-leading two billion social users non-neutrally via a Facebook instant "fast lane" that puts smaller publishers at a relative commercial disadvantage to larger publishers, which net neutrality supporters supposedly oppose.
Facebook in supporting net neutrality, supposedly opposes discrimination too. However, Pro Publica last year exposed that Facebook was illegally discriminating against minorities systemically for years in targeting advertising by ethnic/race for housing, in violation of The Fair Housing Act of 1964 and the Civil Rights Act of 1968.
Last month, Pro Publica exposed that "Facebook's Secret Censorship Rules Protect White Men from Hate Speech But Not Black Children." It appears the world's largest social network that connects more people around the globe than any other, has a network with an inherent discrimination problem.
Amazon: Maybe the most egregious and hypocritical example of these most powerful corporations not being net neutral is the report that: "Amazon has a patent to keep you from comparison shopping while you are in their stores" per the Washington Post.
A company that supports strong network neutrality is also for blocking a consumer's WiFi signal in a specific place from doing what is in the consumer's best interest, i.e. comparison shopping to find the best price, and by doing what the FCC ruled was illegal in January 2015, i.e. blocking WiFi traffic for commercial advantage.
We also learned recently from Consumer Watchdog that Amazon is involved in deceptive pricing, in displaying fraudulently high list prices so Amazon's prices can imply more savings.
Now it is more clear why Amazon would want a patent to block consumers in their stores from accessing the Internet to comparison shop to check if Amazon's displayed prices and savings are true or not.
Making this an even more severe problem is that a recent survey of Amazon Prime subscribers indicates that 99% do not check other site's prices per ILSR's "Amazon Stranglehold" report.
That same ILSR report also documents that Amazon uses its dominant Amazon Prime subscribership of 80m U.S. subscribers to force retailers to join their Marketplace, where Amazon treats them non-neutrally and anti-competitively in multiple ways.
Comments filed by:
Scott Cleland
NetCompetition
Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of "Search & Destroy: Why You Can't Trust Google Inc." Cleland has testified before both the Senate and House antitrust subcommittees on Google and before the relevant House oversight subcommittee on Google's privacy problems.
COPYRIGHT © 2006-2019 · Precursor LLC · DISCLAIMER & PRIVACY POLICY


text:
The Sinuiju North Korean Leader's Residence (), which may locally be known as the Central Luxury House or Central Luxury Residence, is one of the many official residences of North Korean leader and Workers' Party of Korea's general secretary Kim Jong-Un.  He reportedly took over the residence from his father, Kim Jong-il  after the elder Kim's death in 2011.  The residence is located near Sinuiju, in the North P'yŏngan province of North Korea.  Public knowledge about the residence came to light through the North Korea Uncovered project.

See also
 North Korean leader's residences
 Official residence
 Ryongsong Residence

References

Government buildings in North Korea
Sinuiju
Official residences
Residential buildings in North Korea
Buildings and structures in North Pyongan Province

redpajama_set_name: RedPajamaWikipedia


the stuff the region's factories make. Commodities appear to be infected with a strain of the same ebullience; how else to explain why oil has more than doubled in price in the past four months, to $72 a barrel?
it won't take the Dow Jones industrials, the S&P and other market measures back to the March lows. That's because the economy could get a much-needed boost in coming months from the massive fiscal and monetary stimulus unleashed to support it.
Down the road many of our 10 investment experts fear there will be a bitter price to pay for today's spending, in the form of hyperinflation and a run on the dollar. Hence, their fondness for that great inflation hedge, gold. In the near term, alas, the only other corrective for the debt-fueled binge of the past decade would be a great cleansing of the economy and the markets, and that's not something politicians -- or the folks who elect them -- want to bear.
So, where does that leave us? With POSP, or plain-old stockpicking, as Mario Gabelli likes to call it. And in that, our panelists don't disappoint. The pages that follow are filled with their best investment ideas for the back half of 2009, including some energy and technology stocks, a few financial shares, several emerging-market funds and much, much more. You'll also find a statistical update on their January picks, for which they should take a collective bow. For the details, please read on.
Barron's: You really nailed it in January, Fred, when you predicted a 40%-50% rally like the "little bull market" that followed the Crash of 1929. Please tell us history won't keep rhyming.
Hickey: The parallels are eerie so far, but what happens next is complicated. The market has rallied about 40% off its lows, led by the riskiest stuff. A selloff is coming because the fundamentals don't match Wall Street's perception. Retail sales were terrible in May; two-thirds of companies reporting came in below forecasts. The rebound in stocks has been based on inventory restocking, but end markets haven't improved.
That's because consumers are afraid to spend.
The savings rate rose to 5.7% in May, a 14-year high. Gasoline is up in recent weeks by about 40 cents a gallon. People are losing their jobs. Housing prices haven't stopped falling. Mortgage delinquencies and foreclosures are up. One of every 10 homeowners is in trouble. A year ago we were handing out $90 billion of rebate checks; that's over, too.
If things were to follow the "little bull market" pattern, stocks would fall to single-digit price/earnings multiples. That would mean 4,000 or 5,000 on the Dow, versus 8,800 now. But that won't happen; the variables are different today.
That's a relief. Isn't it?
In the 1930s the money supply was falling even as the Federal Reserve cut interest rates. Now not just the Fed but other central banks are pumping money into the system like madmen. China's money supply has grown by 25%. The money isn't going into the economy; it's going into asset prices. Oil has doubled from a $32-a-barrel intraday low. Copper is up 80%. Russian stocks have rallied 80%. The situation is reminiscent of the past 14 years, when the Fed primed the pump and created bubbles everywhere.
Recently there have been some signs the insanity might be ending: The dollar has fallen, and yields on U.S. Treasuries have risen dramatically. But to short assets in the next six months would be suicidal. I haven't been short since October, even though the long-term direction is down. How much longer will the Chinese be willing to sit on $800 billion of Treasuries and $2 trillion of mostly dollar reserves and watch our currency drop and our government spend $2 for every $1 it takes in?
At the moment, the alternative might be worse.
Not printing money and letting the system cleanse itself would be very painful. It would mean a great recession -- not something politicians like. Therefore, the discipline will have to come from an external source -- the Chinese. Ultimately, the dollar will collapse and we will be forced to defend it, as happened in the 1930s. Or, we will have horrific inflation. But we have put off the day of reckoning.
In that case, tell us what to buy in the next six months.
Buy value, and protect yourself against the threat of the dollar's collapse and the return of inflation. I've been riding the gold wave for a decade, and the major secular bull market in gold isn't over. I'm twice as adamant now as in January about the need to own gold. I continue to like the mining companies. The GDX, or Market Vectors Gold Miners ETF [exchange-traded fund], is a diversified fund of some 30 mining stocks. I still like Agnico-Eagle Mines , and bullion, which you can own through the GLD, or SPDR Gold Shares ETF. My favorite gold miner is Yamana Gold . It is based in Canada but operates in Brazil, Mexico and Chile. It trades on the New York Stock Exchange. It rallied to 11 a share from 4, but is down from a year-ago peak of 19, even though the price of gold has recovered to almost $1,000 an ounce. The P/E is reasonable. The company has new mines coming on, and it is benefiting from lower costs.
Which tech stocks do you like?
Microsoft is unloved at 22, because of competitive threats from Google [ticker: GOOG] and an antitrust problem with the European Union. It is the best play in the tech world right now. It trades for 12 times earnings, something you don't ever see. The catalyst for the stock is Microsoft's best upgrade cycle ever. In the next 12 months the company will introduce about a dozen new products or upgrades. Windows 7 will ship on Oct. 22. It will kick off an upgrade cycle for the whole computer industry.
The other safe way to play tech is Verizon Communications . It will offer the Palm Pre in about six months, and new Nokia phones, and probably the iPhone. Just as eyeballs excited everyone in 2000, earlobes should excite them today. Verizon has 87 million wireless-communications customers. It has the biggest network in the country, and the best. The company has mostly built out FiOS, its fiber-optic telecom service. It yields 6.3%. Microsoft and Verizon are a lot safer than trying to catch Apple [AAPL] at $150 a share.
Thanks for the update, Fred.
Barron's: How does the rest of the year look to you?
Gabelli: The U.S. consumer remains hamstrung by his balance sheet, the stock market and housing. He's two-thirds of the U.S. economy. About 11% of Americans are unemployed, going to 12% or 13%. The consumer sector isn't providing the necessary ballast in the short term.
The economy is benefiting from the absence of a drag from inventory reduction. Once the stimulus package kicks in, the recovery will have legs. The remaining drags are oil is up to $71 a barrel, and interest rates are starting to rise because of the bond vigilantes. But, on balance, the economic stimulus is coordinated and global, and powerful. The U.S. economy will continue to improve in 2010, helped by an uptick in auto spending and improvements in housing and capital investment. Exports could improve as the dollar weakens. There is upside leverage in earnings, partly due to cost cuts. In January I said the stock market would end the year up zero to 5%, and I'm sticking with that forecast.
We won't try to dissuade you.
The secular themes are the U.S. deleverages and transfers its wealth to China. As a result, the strong get stronger. That is true in the auto sector, where General Motors [GMGMQ] and Chrysler now will follow the Toyota [TM] model in supporting one strong dealer in a given market. As capital is reduced in the industry, the remaining, entrenched capital will produce above-average returns. Another example, in markets like Las Vegas, is Wynn Resorts [WYNN], which delivers a quality product and has an OK balance sheet. It will gain a share of the upper-end customer.
Is that a recommendation or an observation?
It's a comment. You see it on Wall Street with the strength of Goldman Sachs [GS] and Morgan Stanley [MS]. In a flat stock market, the emphasis is on POSP, or plain-old stock picking. Other themes include eco-friendly energy, and more deal activity. The fifth wave of transactions is starting. Deals were done in the 1960s to offset economic cycles. In the 1980s it was to energize lazy assets. The 1990s had serial acquirers and technology mergers. More recently, private-equity deals dominated. This time, the impetus will be global growth. Companies will buy growth on Wall Street. NetApp [NTAP] and EMC [EMC] are engaged in a bidding war for Data Domain [DDUP]. Pepsico [PEP] is buying its major publicly traded bottlers.
So you're buying shares of takeover candidates?
In some cases. I still like the stocks I recommended in January. Among new names, Legg Mason sold its brokerage to Citigroup [C] in 2005, and bought Citi's money-management arm. Legg is selling at 24. There are 143 million shares outstanding, and the company has to issue another 23 million in connection with an equity instrument that matures in 2011. Assuming 166 million shares, the company has an enterprise value of $3.7 billion. It has about $2 billion of cash and $2 billion of debt.
CEO Mark Fetting is doing a terrific job of overseeing the different businesses, which include Legg Mason Capital Management, run by Bill Miller, and other fund groups run by Chuck Royce, Buzz Zaino, Whitney George and others. The biggest, based on assets under management, is Western Asset Management, the fixed-income specialist. The businesses have benefited from coordinated marketing.
What is the outlook for earnings?
Ebitda [earnings before interest, taxes, depreciation and amortization] will be $800 million to $1 billion in three or four years. Legg could earn 80 cents for the year ending March 2010 and $2 the following year. You have focused management, an improved balance sheet, the elimination of problems that were bogging the company down, and products that could enjoy significant growth. You could get a double in the stock.
I recommended O'Reilly Automotive , an auto-parts retailer, in January, and nothing has changed except the stock, which is up to around 37.50 from 31. The integration of CSK Auto, which it bought last year, is going well. In real estate, O'Reilly is getting better locations at more reasonable prices, to buy or lease. The company could earn $2 a share this year. There are 250 million cars on the road. The guy who owns a 14-year-old car trades it for a nine-year-old car, and that guy trades his car for a six-year-old car. That is good for O'Reilly, the leader in the business.
Sumner Redstone controls Viacom through the A shares, which we own. We also own the B shares, which are more liquid but have fewer votes. There are 610 million shares, and the B shares trade for 23. I have been following this company for 36 years. Sumner took control in the mid-1980s. Viacom owns cable networks such as MTV, and Paramount Pictures. Today there are seven or eight motion-picture studios. A round of consolidation will occur in the next six to 12 months because of the costs of financing, prints and advertising, the benefits of globalization and such. We hear talk of something going on. Paramount will merge with someone -- maybe Sony Pictures or Universal Studios. This year Viacom could earn about $2 a share, going to $2.40 next year. It could be a 20% grower for three or four years. It sells for 6.5 times Ebitda, and capital spending is de minimis. The company is a terrific cash generator and the balance sheet will improve. They might buy back stock.
Next, U.S. Cellular has 87 million shares, and 71 million are owned by Telephone & Data Systems [TDS]. U.S. Cellular has 6.2 million wireless customers, in contrast with Verizon and AT&T [T], which have 80 million-plus each. Sprint Nextel [S] has about 50 million, and T-Mobile 30 million. A next-generation technology is LTE, or long-term evolution. Smaller companies like U.S. Cellular have to take advantage of it or sell out. U.S. Cellular will earn $2.50 a share in 2009 and grow by 15% a year for the next three or four years. It has a hidden asset in that margins are well below the industry average. Capital spending is flattening, and the balance sheet is in good shape. The stock is 43, and the value of the company is close to $100 a share. TDS elected two directors that we proposed.
So you could influence the sale of U.S. Cellular?
The Carlson family has been running TDS for almost 30 years. They have a strong economic interest, but an even bigger voting interest. There was speculation that U.S. Cellular had a buyer a year ago, but the company still doesn't acknowledge that. At some point Telephone & Data will have to harvest this asset.
Barron's: What is the view from Europe, Felix?
Zulauf: The structural forces in the global economy are unchanged from the past few quarters. A long-term imbalance remains between overspending in the U.S. and over-producing in China. The financial crisis was the start of a move to greater balance that implies lower growth for both sides. The deleveraging process also continues in many economies, with the exception of the U.K.. This process has only started. It will run for several years. We are shifting debt from the private sector to the government sector, which will lever up. These structural forces will continue to be a major restrictive factor in the world economy. In the cyclical arena, things look a little better, but not as good as you might think from the media reports.
The green shoots are primarily the result of inventory restocking. Inventories have been cut around the world, and in Asia they have been cut to the bone. Now production is ramping up to get in line with demand. Inventories are being restocked in many industries. The process is far along in technology, but way behind in capital goods. The U.S. economy will look a little better in the next two to three quarters, due to inventory restocking and fiscal stimulus. But the improvement won't continue after mid-2010, when the economy turns bumpy again.
In Europe, Germany has structural problems, but virtually no cyclical imbalances. It is one-third of the European economy. The weaker parts of the Eurozone -- Portugal, Ireland, Greece and Spain -- are trapped in a Euro-denominated system and should devalue their currencies to help their economies. They can't, and therefore will deflate. They'll be the poor guys for the next 12 months. The U.K. hasn't even started to adjust. Consumers there continue to borrow and spend. In the next year they will go through the same thing U.S. consumers have gone through.
*Buy after 15% correction from current prices.
**Buy when price drops back to around $850.
Asia is the major beneficiary of the inventory-restocking cycle here. It will have the best production numbers, much as it had the worst declines before. The pick-up will run into the middle of next year. China is the big exception. It decided to breach the global economic slump by subsidizing production and employment. It is playing a dangerous game.
The real danger comes from mid-2010 through 2011. This won't be a conventional business-cycle expansion, but a bumpy road. The economy will look like a square-root sign followed by corrugated sheet iron. The good news is the potential collapse of the system has been avoided. It was an open question for a while.
What does a corrugated-sheet-iron economy mean for the markets?
Governments and central banks will continue to support the economy. Short-term interest rates will stay low. Government-bond yields are rising for cyclical reasons. Around the start of this year, 10-year Treasuries were yielding 2.25%. Now yields have risen to 3.94% and could go to 4.5%. They won't go beyond that because the economy won't be robust. The bond market is normalizing after the threat of systemic collapse. Bonds aren't attractive.
Investors are underinvested in equities. Money-market funds are bigger than ever when expressed as a percentage of global equity capitalization. That money is yielding virtually nothing, and a lot of it is in the hands of professional portfolio managers who have to perform. Eventually it will get redeployed into equities, which means economic and market developments for a time will move far apart. The market undershot into March, and will probably overshoot in the first half of next year. The first rally is just about done. The market might climb into July, but it will correct in the fall, with stocks retracing maybe 50% of the recent advance. That will provide an opportunity to buy for a rally next spring or summer. That's the whole mini-bull market. Economic conditions won't support more than that.
Are you still looking for a low in 2011 or 2012?
Yes. We'll enter another bear-market cycle. I don't know how low it will go. In March the market made a cyclical low in valuation, but it wasn't a secular low. When the market makes a secular low, lack of interest in equities will be high.
Previously I advised buying financials and metals. Now the financials are done, perhaps for a couple of years. Bank balance sheets aren't repaired. It's just camouflage. Today I like emerging markets and natural resources -- after a correction of 15%. Investors believe in the long-term prospects for emerging markets, due to demographics and structural issues. That's where the money will go that is on the sidelines. Among ETFs I like the iShares MSCI Emerging Markets Index, the iShares MSCI Hong Kong Index and the iShares MSCI Singapore Index. In energy I like the SPDR S&P Metals and Mining Index, and in oil services, the Oil Services HOLDRs and the Energy Select Sector SPDR . Again, buy on corrections. Also, you have to own gold because governments have no solution but to reflate. Currencies will be debased, and gold will go higher. But don't buy bullion until it drops to around $850 an ounce. It is $950 now.
Barron's: What do you make of this market, Oscar?
Schafer: I'm surprised the S&P 500 is up 40% from its March low, because the companies we speak to have seen their business go down and stay down. In many cases, April was even worse than March. In addition, there has been a huge increase in bond issuance. The government has done a great job of liquefying the system, but that hasn't led to a lot of lending.
How, then, do you explain such a powerful rally?
We've removed a depression risk and are dealing with a recession. A huge amount of money on the sidelines has gone into stocks and other assets. Many people think the stock market is a discounting mechanism, and the recovery in the economy will be like past recoveries. But I don't see it, given the leverage around the world and continued declines in home prices in the U.S. and other developed nations. You could make a bullish case for 1% to 1.5% growth and 3% or 4% inflation, but that may not justify a 40% increase in stock prices.
So you're expecting a correction?
There may be a setback as interest rates rise and housing refinancings slow. The maximum impact of tax rebates probably has been seen. The economy will grow slower than anticipated, which will surprise people, and therefore the discounting-mechanism aspect of the stock market will have to be rethought.
Nevertheless, we still find good ideas on the long and short sides of the market. Whereas [veteran hedge-fund managers] George Noble, Art Samberg and Jim Pallotta are leaving the business, I'm just beginning to enjoy it.
Glad to hear that. What are you finding?
Metavante Technologies [MV] recently announced it will be acquired by a larger competitor, Fidelity National Information Services [FIS], in an all-stock deal. The combined company will trade as Fidelity Information Services. It will have a pro forma market capitalization of $7.5 billion and will be the largest provider of transaction and processing services to financial institutions.
The transaction preempts industry and customer consolidation and could generate significant shareholder returns. Management expects to realize about $260 million in annual synergies, creating $1.7 billion in shareholder value. The transaction also will allow both companies to cross-sell to each other's customers. The combined company is in a much better position to take advantage of secular growth trends in process-outsourcing by banks, as well as the global shift to card-based payments from cash.
Just to clarify, you're buying the combined company through Metavante, the seller, not FIS, the buyer.
Yes. One share of Metavante trades as if it is 1.34 shares of Fidelity. After the transaction, the combined company should trade higher. The new FIS could trade for more than the current seven times Ebitda and command a higher free-cash-flow yield than today's 11%. Historically, payment processors have traded for 18 to 22 times free cash flow. Eighty-six percent of Fidelity's revenue is contractual and recurring and should grow by 6% to 8% a year. You're also getting a free call option on an eventual sale to a large software provider such as IBM [IBM], Oracle [ORCL] or Hewlett-Packard .
Plum Creek Timber is overpriced. This REIT [real-estate investment trust] is the largest private owner of timberland in the U.S., with about 7.4 million acres in 19 states. The stock is trading for around 30 times consensus 2010 earnings estimates, and nearly 20 times estimated Ebitda.
At 35 a share, the market is valuing Plum Creek at more than $1,100 per acre. The company has tremendous assets and a high-quality management team, but investors are mispricing timberland as an asset class and Plum Creek as a stock. Our target price is $10 to $15 per share, or $600 an acre. Investors have bid up timberland prices to irrational levels. In the past decade pension funds and endowments flooded into this very small market as they sought to be like Harvard and Yale, early and successful investors in timber. Accordingly, timberland values have doubled in five years and nearly tripled in 10. Buyers are getting a long-term, illiquid asset at a 2% yield, with the hope that some land will be more valuable to a real-estate developer down the road.
It could be long road.
Timber has a seductive investment pitch. It grows organically. It grows while you sleep. It's an inflation hedge, and it's uncorrelated with other asset classes. The reality is the underlying cash flow is highly dependent on cyclical industries like housing, paper and newspapers. It is also tough to hedge inflation when you are a buying at an inflated price. This is the greater-fool theory at work.
Historical returns are excellent, however.
Timberland returned 18.5% in 2007 and 9.5% in 2008, when other asset classes were down more than 40%. When investors attempt to monetize the great returns they saw on their statements, it will create a race to the exits. Plum Creek has done a phenomenal job of recognizing and taking advantage of this asset bubble. It has been a net seller of timberland for the past three years. But the company's earnings quality is low, and its capital-allocation policy is aggressive.
The core business of harvesting timber has been operating at break-even levels, while all the free cash flow is generated by selling assets. Liquidating your productive asset isn't a sustainable strategy. Many Wall Street analysts ignore the fact that timberland sales run through the income statement while timberland purchases run through the cash-flow statement.
If you put a 10 to 15 multiple on mid-cycle cash flow of 65 cents a share, you're looking at single-digit equity valuations. It would take unprecedented demand from real-estate developers to make up the difference. In six of the past seven years, Plum Creek paid out more cash in dividends and share buybacks than it has generated. Management achieved this in part by adding leverage. This isn't a sustainable strategy, either.
Barron's: What's ahead , Scott?
Black: The S&P 500 is trading for about 940. Analysts expect it to earn $54 this year. Strategists are using $43. On a bottom-up basis the market trades for 17.5 times earnings; top-down, it trades for 22 times. Either way, it is pretty expensive. Investors are chasing any glimmer of hope, such as fewer jobs lost in May, even though the unemployment rate climbed to 9.4%. There was a lot of cash on the sidelines. The train started pulling out of the station in April, and a lot of people missed the passenger cars, so they jumped on the caboose.
Are they about to fall off?
The market is ripe for a pullback, though it won't retest the 666 low. We screen 11,000 U.S. equities. With the exception of special situations, the market is picked over. The economy hasn't bottomed. Most of the $787 billion in stimulus money went to transfer payments and tax rebates, and hasn't found its way into job creation. The savings rate has climbed to about 5.7%. That's good for America in the long term, but not in the short.
On the positive side, Fed Chairman Ben Bernanke has done a good job. He got the federal-funds rate down to 25 basis points [a fourth of a percentage point]. He is probably the most valuable player on the American executive team. Public policy under the Bush and Obama administrations isn't good. The money should have gone to restructure the mortgages of people underwater on their homes -- 21.8% of the nation's 93 million homeowners. Instead the government threw too many freebies to AIG [American International Group], Goldman Sachs and such. It had no business saving AIG. It should have isolated the toxic assets and put them in a Resolution Trust-type entity.
What's done is done. Let's look ahead.
The economy will recover in the fourth quarter because there has been so much fiscal and monetary stimulus. But the recovery won't be strong because of our structural problems. Given the unfunded liabilities of Medicaid and Medicare, and ongoing deficits, the U.S. is going broke. In the short term I'm not worried about inflation. Nor do I see a run on the dollar because it is still the reserve currency for the world. There will be a run on the dollar in the long term, however, if we keep printing money. The Fed has expanded its balance sheet to $2.12 trillion of obligations, up from $930 billion a year ago.
It had to rescue the patient.
The patient was on life support last fall. The Fed and Treasury have done a good job of restoring confidence to the markets.
I've got two stocks, both dividend-oriented, because you ought to have some protection if the market pulls back. Boardwalk Pipeline Partners is about 73%-owned by Loews Corp. [L], which is controlled by the Tisch family. It sells for about 21, there are 177.8 million shares outstanding, and the market cap is $3.77 billion.
Isn't this a master limited partnership?
Exactly. It pays a dividend of $1.94 a share and yields about 9.2%. Historically, MLPs have yielded about three percentage points above the 10-year Treasury yield, which is now 3.94%. Book value, excluding goodwill, is $17.12. The stock sells for 1.2 times tangible book, which isn't expensive. The company has all new plant and equipment. It operates three major pipelines running more than 14,200 miles in the Southwest and Southeast.
My earnings forecast is lower than the Street's. Revenue will rise 20% this year, to $942 million. Margins of 35.2% get you to $332 million in operating income. Interest expense is $137 million, and profit before taxes, $195 million. Earnings, fully diluted, will be $1.10 a share. The debt-coverage ratio is excellent at about 3.9 times. In the past few years revenue has grown by 11.9%, compounded, while the dividend has risen about 10.5% a year. Plus, Boardwalk has good bank lines of credit.
What sort of return are you expecting?
The stock could rally to 28. That's 33% appreciation plus a 9% yield -- or an expected total return of 42%.
My next pick is Cal-Maine Foods . The stock is 24.81, there are 23.8 million shares and the market cap is about $590 million. Cal-Maine is the No.1 egg producer in the U.S., with a 15.8% market share. In the May 2008 fiscal year, it sold about 678 million dozen eggs -- 535 million dozen were produced in-house. They have 22 million hens, whose laying life cycle is about two years. The stock fluctuates with the price of feed -- corn. In the past year it has been as high as 48.80 and as low as 17. Earnings fluctuate, too. The company earned $6.40 a share in fiscal 2008, and we estimate they did $4.15 in fiscal '09.
Take us through your model.
I see revenue of $1 billion in the coming year, up about 4%. Gross margins are 27.5%, or $275 million, and SG&A [selling, general and administrative expenses] is $95 million. The net debt-to-equity ratio is only 16% and interest expense is $6 million. Add it up and you get pretax profits of $174 million. Taxed at 35%, that's net income of $114 million, or $4.80 a share. The stock sells for 5.2 times earnings. That's ridiculous. Return on equity is 31%, and they will generate about $120 million in free cash. The company pays out a third of income as dividends. The current dividend is $1.72, the yield, 7%.
About 85% of Cal-Maine's customers are retailers; the biggest is Wal-Mart Stores [WMT]. If Cal-Maine earns $4.80 a share in fiscal 2010 and trades for just eight times earnings, you've got a $38.50 stock, plus the yield.
You've been a buyer of energy and financial stocks. What is the outlook for both?
In energy, you have to separate oil from natural gas. There are so many gas-producing shale plays in the U.S. that we have a gas glut here. Gas is about $3.70 per million Btu and hasn't rallied with oil. I don't expect gas prices to spike, but XTO Energy [XTO] recently noted the forward strip [forward price curve] is north of $6 for next year and $7 two years out on expectations the economy will revive. When that happens, oil supplies will tighten. Crude could trade above $100 a barrel in 12 months, versus $71 now. It is better to own pure energy-and-production companies such as XTO, Whiting Petroleum [WLL] and Apache [APA] than the ExxonMobil s [XOM] of the world, which have refining assets. We own offshore drillers such as Diamond Offshore [DO], Atwood Oceanics [ATW] and Ensco International [ESV].
In financials, regional banks have run up. Most are selling at or near book value and are under-reserved. They own lots of residential mortgages and the housing market is getting worse. A few look attractive, such as Prosperity Bancshares [PRSP] in Houston and Bank of the Ozarks [OZRK] in Arkansas. The earnings power of the bigger banks was based for a long time on proprietary trading. With less leverage and deal activity, earnings power will be diminished. Also, many super-regionals are under-reserved. That tells me S&P 500 earnings are overstated.
Barron's: The S&P 500 has hit Goldman Sachs' year-end target of 940 with seven months to spare. Now what?
Cohen: The concept of fair value can change based on assumptions about the market's fundamentals. In January, even with a gloomy outlook for the economy and corporate profits, stocks were too cheap. In March, using an economic and profit forecast not too different from January's, our models suggested the S&P was undervalued by 40% or more.
At this point people should stop worrying about what letter of the alphabet the recovery resembles. Is it going to be a V-shaped recovery, or U-shaped, or the dreaded W? The pattern to think about is a staircase. When you look at the recovery phases from real bear markets -- those associated with real recessions -- they look like a staircase. First there is an upward step, a sigh-of-relief rally, which we've just had. Then you're stuck on the step awhile. Think of these steps as trading ranges.
You can also fall down the stairs.
The likelihood of that happening has declined as the possibility recedes of the system going down a "black hole." Both the actions taken by the Federal Reserve and the stimulus package have gained traction. Also, market volatility has declined. Investors feel more comfortable. Equity issuance is up dramatically, as well, and demand is good.
In November, December and January, almost all the issuance in the fixed-income market had some sort of federal-government guarantee. In the past few months there has been a significant increase in issuance by entities without guarantees. Yield spreads have declined from record levels, another sign of diminished anxiety. At the turn of the year Treasuries and gold were viewed as the only safe havens. As nervousness recedes, investors have come back into equities and commodities, and out of Treasuries.
What is fair value for the S&P 500 now?
Our economics department is forecasting a sluggish recovery in GDP. It will turn positive in the third quarter but grow by only 1% or 2%. Given lackluster profit expectations, our six-to-12-month S&P outlook is 950 to 1,050. Goldman is forecasting S&P 500 earnings before provisions of $63 in 2009 and $71 in 2010. Regardless of the number, there is a discontinuity in the data. Some S&P 500 companies have disappeared, and recent quarters have seen extraordinary write-offs. There will be a major inflection point for earnings in the third or fourth quarter. Our analysts believe risk may be to the upside -- that is, profits may grow faster than previously forecast.
Are you upbeat about the bond market, too?
The picture is mixed. In the past two years the normal relationships between issuers of different quality were torn asunder. Between 2004 and 2007, lower-quality issuers were able to borrow money for not much more than higher-quality issuers, and it wasn't just in corporates. Last year the relationships flipped, and yield spreads over Treasuries widened to unprecedented levels in low-quality corporates and municipal bonds. Recently there has been a move toward more normalcy. Corporate bonds are still appealing, but are no longer as attractive as they were early in the year, as they have had good returns, and Treasury yields no longer look so low.
How about some investment ideas for the second half?
Our energy team recently raised its price forecasts for crude oil and other energy commodities. This lifted the earnings prospects for integrated oil and refining companies. Crude is expected to reach $80 per barrel next year and $100 in 2011 due to demand recovery in the face of non-OPEC supply contraction. Hess benefits from the rise in prices and its ability to deliver growth in production while others are supply-constrained. The shares are down about 50% from year-ago levels. This year the company could earn $1.03 a share. Next year earnings could surge to $5.30, suggesting a P/E ratio of about 11 at current prices.
Lenovo Group , known for personal computers including the Thinkpad, originally an IBM product, is expected to benefit from recovering global demand. Lenovo's market share is about 27% in China, where growth is expected to rebound due to economic stimulus, demand for 3G netbooks and subsidy programs. Our analysts expect a global PC-upgrade cycle in 2010, bolstered by aging corporate PCs and Microsoft's introduction of Windows 7. Lenovo had large losses early this year and has restructured. It could break even in fiscal 2010, which began in March, and earn three cents in fiscal '11. The P/E is about 13. The stock has doubled since March to 3.02 Hong Kong dollars, but is 45% below year-ago levels.
Barron's: Treasuries have entered a bear market and other bonds look rich. What's an investor to do?
Gross: Treasuries offer paltry returns relative not only to other types of bonds, but also other asset categories such as stocks, commodities or real estate. The 10-year is yielding 3.88%, and even the 30-year bond, at 4.68%, doesn't offer much relative to the potential for greater inflation in 2012, '13 and '14. Treasuries have had an enormous problem this year in terms of supply: There will be $3 trillion of gross issuance and $2 trillion of net issuance, four times last year's number. That's one reason yields have gone up.
Did the government have a choice but to issue this debt?
None at all. But the danger in injecting so much money to support the financial system is that the hangover, when it comes, could be worse than the original problem. The Fed is buying $400 billion of Treasuries. That leaves $1.6 trillion of the net $2 trillion to be purchased by you, me and the Chinese.
Agency mortgages have done so well since January that they don't make much sense, either. They yield around 4.50%. High-yield bonds, corporate bonds and even municipals and TIPS [Treasury inflation-protected securities] have some attraction, but they too have done well in the past five months.
*Will convert within a month to Citigroup stock at $3.35 a share.
The one area that remains attractive is the hybrid-preferred market. These are similar to TARP preferreds -- bank preferred stock the government bought with TARP [Troubled Asset Relief Program] money. The hybrids were issued to the public; they're really subordinated debt.
I like a Citigroup [C] issue with an 8.3% coupon and a maturity of Dec. 21, 2057. The catch is that Citi plans to redeem it in two to three weeks with common stock priced at $3.35 a share. The offer has been outstanding for maybe two months, but the conversion is shifting into high gear. This is more of a stock play than a bond play. It's an arbitrage play. There is 15% appreciation potential relative to the current price of the common stock, which trades around 3.44.
What others appeal to you?
Barclays [BCS] has an attractive subordinated preferred with a 14% coupon and a 2049 maturity. It can be bought around 110, so the current yield is 13%. We have been buying it recently. That's an excellent yield for an A-rated security. So, yes, there are sporadic values, but high-yield and corporate bonds in general, and Treasuries and even mortgage securities, are mediocre investments at the moment. An investor probably should expect 4% to 5% to 6% returns from the genre -- nothing super.
Barron's: Your usual optimism has paid off, Archie, at least since March. Are you still finding what to buy?
MacAllaster: The market was cheap in January, and it is almost the same price now. This is the worst market I have seen in more than 50 years in the business. But a lot of stocks are near a bottom based on multiples of future earnings. Some companies have even started to raise dividends instead of cutting them. The savings rate in the U.S. has risen. A lot of money was extracted from the market as people started losing much of their net worth, so there is a lot available to come back in. What we don't know is how big the deficit will grow, and what kinds of problems that poses for the economy, the dollar and the world itself.
Most people will disagree with me about the financials, but they still are cheap. You'll do well if you can hang on for two or three years. Bank of America [BAC] trades for 12 a share. The 12-month range is 2.50 to 39.50. The bank earned 44 cents a share in the first quarter and probably won't do more than a dollar for the year. The dividend was cut to four cents from $2.56. Bank of America has the largest deposit base of any bank in America: more than 10% of all deposits. It used to make more than $4 a share and sell for 52 to 53, and yield 5%. The whole banking business will have to be run on a different basis, and relative to three or four years ago, Bank of America will be overcapitalized. In two or three years it will earn three bucks a share, and sell around 30. It might pay a dividend of $1.50 a share.
Are you a fan of the CEO, Ken Lewis?
They would be crazy to fire him. The company will have an enormous earnings base, including Countrywide Financial and Merrill Lynch. Bank of America is a good speculation.
My second pick is Protective Life . It has been around at least 100 years. Like other life insurers, it has had problems with its investments; book value was cut in half in the past 18 months. The company sold 13.5 million shares at 9 apiece last month, raising about $120 million of new capital. There are 85 million shares outstanding. In the past five years earnings have varied between $3.37 a share and $4.05. Last year they showed a net loss due to the re-valuation of investments, but operating earnings were $3.37 a share. This year the estimate is about three bucks -- the worst operating results in six years. The company cut its dividend but still pays 12 cents per quarter. The yield is around 4%. The stock trades for about 12.50. That's four to five times earnings, and around book value. In two to three years the stock could be 30 a share.
Financial stocks have had a pretty good rebound, but insurance companies such as Lincoln National [LNC], Hartford Financial Services [HIG] and Protective Life are cheap. If the stock market gets a lot weaker they will have trouble, but they are selling around book value, compared with a traditional valuation of closer to two times book. The other banks I like are Wells Fargo [WFC] and JPMorgan. The big banks will be more heavily capitalized, and make a smaller return on capital, but the returns will be decent.
Barron's: What a rally, Marc. Are stocks due for a rest?
Faber: The S&P 500 has risen more than 40% from its March 6 low of 666. It could correct soon, maybe from higher levels. If it rallies to 1,000-1,050 by July, that could be the high for the year because the index is not inexpensive. But we don't see new lows. The 666 low is likely to hold, as is the Nov. 21, 2008, low of 741. The market won't fall below 800 for the time being.
It is hard to know what happens in the next year because so much economic and financial volatility has been created by huge fiscal deficits and expansionary monetary policies. Governments can support economic activity through fiscal deficits. What concerns me down the line is the likelihood of much greater inflation because of all this stimulus. At some point the Federal Reserve will have to increase interest rates to combat inflation, and it will be very reluctant to do so.
But that's not today's problem.
Today the economy looks to be stabilizing after falling off a cliff. It probably troughed in February or March. Replacement demand is kicking in, but we won't return to the peak activity of 2006 any time soon.
If things deteriorate, the Fed will print more money. Mr. Bernanke talked a few years ago about dropping dollars from helicopters to stimulate the economy. It would be wrong not to take this statement seriously because that is the thinking among policymakers in the U.S. It is a disastrous policy but it can really make stocks go up -- commodities, too. Since the lows in December, oil is up more than 100%. A lot of liquidity has flowed into commodities, which is a sign investors are concerned about the value of paper money.
Emerging markets have been especially strong. Are the gains justified?
The opportunities are far better than in the U.S. When hedge funds and funds of funds had massive liquidations last fall, Asian markets such as Taiwan, South Korea and Japan fell to generational lows. Investors should use setbacks in these markets to accumulate shares. Many stocks are yielding between 6% and 10%. Secondly, the world is undergoing a major shift in consumption. In March car sales in emerging economies began to exceed those in developed countries. China, Brazil and India have become important simply because of the size and growth of their populations.
There has been renewed interest in asset plays of all types. Stocks like Newmont Mining [NEM] and Freeport-McMoRan Copper & Gold [FCX] have soared. Along the same lines, there is renewed interest in Asian real estate, which isn't expensive. Prices are lower than they were in 1997. I like Asian REITs [real-estate investment trusts] such as Parkway Life in Singapore and ARA Asset Management, a Singapore property-management company. Hong Kong and Singapore will benefit from greater regulation of the financial markets in the U.S. and Europe. Also, the U.S. has large and highly sophisticated military installations in Singapore, and it doesn't want to antagonize Singapore.
That should bode well for Singapore-based companies.
Demand for water is a big theme in Asia. Singapore's Hyflux Water Trust pays out income earned from operating water-treatment plants. Education is a growth industry, as well, and Raffles Education should benefit. Also in Singapore, I like Kingsmen Creatives, a marketing and communications-design company. In Thailand I like MCOT, a media conglomerate, and Dynasty Ceramic, which makes floor tile, as well as two airline-related companies -- Airports of Thailand and Thai Airways International. In Japan I like Mitsubishi UFJ Financial and the iShares MSCI Japan fund.
You've been a big fan of resource companies. Are you still?
Mining companies such as Switzerland's Xstrata are good trades. The company got hit hard last year because it operates on leverage, but the concern was overblown. I like NovaGold Resources . Barrick Gold [ABX] tried to buy them for about $15 a share a year ago. There was no deal and NovaGold fell below 2, although it has rebounded to 5.50. NovaGold has enlarged its asset base significantly. Today it is even more valuable than $15. Natural gas is a buy here. It is extremely depressed and at a record low compared to oil.
I would short U.S. Treasury bonds when the yield declines to 2.8% to 3% on 10-year notes.
Barron's: Is this still a good market for stock-pickers?
Witmer: I see some stocks to short, and some decent longs, but a lot of our focus has been in the debt arena recently. The stock market seems about right, but you have to be prepared to buy on the downdrafts and sell on those days when the market goes up dramatically. The volatility is being driven somewhat by the popularity of leveraged exchange-traded funds. On the economy, I spoke with a CEO who met recently with a large group of CEOs. The consensus among this group was that things have stopped going down, but growth is questionable.
The stock market's behavior is suggesting otherwise.
The market went down too much, and now it has retraced much of the downdraft since the beginning of the year. We like Microsoft at 22 a share. The obvious reasons to buy it are its bulletproof balance sheet and lots of earnings. It could have $3 a share of net cash as of June 30, the end of its fiscal year, and earn $1.71. The Street estimates earnings of $1.90 in fiscal 2010. Net of cash, it is trading at 10 times earnings. It is very inexpensive. Three things have gotten my attention beyond the P/E and the cash. Microsoft is in front of a product cycle in its client division, which sells personal-computer operating systems. Microsoft is coming out with Windows 7 for the 2009 holiday season. Win 7, as they call it, has gotten great reviews, and the company has bent over backward to damp expectations about upgrade revenue. It could surprise on the upside, as corporations didn't upgrade en masse to Vista, the prior operating system.
Rumor has it Win 7 is better than Vista.
It is much better. It doesn't take a lot of memory, and can go on an inexpensive PC. Microsoft probably will stop supporting the Windows XP operating system within six months of the release of Win 7, which encourages upgrades at many companies. Second, Microsoft, was never known to focus on costs, but now it has a laser-like focus. This may lead to upside surprises in earnings, return on capital and employee productivity. As further evidence of its newfound respect for capital, it held back on rebidding for Yahoo! [YHOO].
Any chance it'll try again, now that Yahoo! is cheaper?
It doesn't have to, because of the third thing that excites us: a new search engine, Bing. The look is clearer than Google, and you can preview search results by hovering your cursor over the link. It saves you from clicking pages and waiting for them to load. Most important, shopping on Bing is great because of a cash-back rewards program. Rewards tend to run from 5% to 10% of the purchase price of an item, and you get Bing cash, which you can use on many sites. The early results are good; Bing's market share is up to 11% just five days after the launch.
Figure Microsoft earns an adjusted $2.05 a share in fiscal 2010. Unlike Google, it expenses options, so the earnings are real. Say it deserves to trade at 13 times earnings. Add back the $3 in cash, and a dollar or two for the Xbox division, and you get a target price of 31. There is further upside if Bing gains momentum. You could make 40% or more.
That's sweet. Thank you, Meryl.


DMK working president M K Stalin on Saturday visited the protesting Tamil Nadu farmers at Jantar Mantar and demanded that the prime minister waive off their loans as he had promised during the Uttar Pradesh polls.
Stalin said Tamil Nadu Chief Minister Edappadi K Palanisamy must come to the national capital and take up the issue with the Centre.
Slamming the BJP for failing to fulfil its promises, Stalin said nothing seemed to have changed even while it was in power.
The farmers have been in the national capital since March 14, demanding that their loans from the nationalised banks be written off.
The Centre released a statement saying an amount of Rs 2,014.45 crore has been given to the state.
The assistance to Tamil Nadu comprises Rs 1,748.28 crore for drought (kharif), Rs 264.11 crore for cyclonic storm Vardha and Rs 2.06 crore under the National Rural Drinking Water Programme, it said.


text:
Liverpool contacts Brighton for Bissouma
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According to the latest press reports received on Friday, the English club Liverpool, which is deeply impressed by the Ivorian midfielder, Yves Bissuma, star of Brighton & Hove Albion, and wants to join him, during the upcoming summer transfer window.
Liverpool wants to include Bissuma, in order to be a substitute for the Dutch international, Georginio Wijnaldum, whose contract expires at the end of the current season and has not reached an agreement with the Reds on the renewal.
According to the British newspaper "Express", the Englishman, Mike Edwards, the sporting director of Liverpool FC, had contacted officials in Brighton to sign Bissouma.
The newspaper pointed out that Edwards's call did not stop only when Brighton's position on his sale to Liverpool was known, but the Reds' sporting director also inquired about the personality of the 24-year-old, in order to understand how his arrival could affect the team and affect their choices in midfield.
Bissouma has a contract with Brighton that expires two years later, on 30 June 2023, and the English club wants 40 million pounds to sell him.
It is noteworthy that this season, Bissouma played 34 matches in various competitions with Brighton and managed to score two goals.


Chile will face Mexico in their second group game of Copa America 2015 later today. The Mexican failed to win their first game against Bolivia and will be eager to get the three points from this game. While Chile are already on top with three points.
The only player for Chile to concern with is Matías Fernández who is suspended for this game as he received a red card in the first game against Ecuador. Jorge Valdívia is likely to start in place of him.
Star players Alexis Sanchez and Artuo Vidal will surely be going to play an important part in this game.
Eduardo Vargas is expected to return to the lineup.
Mexico are likely to start with four man defence after their failure with the back three in the last game against Bolivia.
Javier Aquino who shined from the bench in last game could start today.
In the past six meeting between them, both have won twice, lost twice and drawn twice.
This will be the sixth meeting between them in the Copa America tournament.
Mexico have kept five clean sheets in their last six games against Chile in all competitions (including friendlies).
Chile won by two goals to one in last Copa America which was in 2011.
Chile 1 – 1 Mexico, Alexis Sanchez on the scoresheet.