It’s time for another installment of the mid-month reading list. Below are some of the articles we’ve been circulating at Fort Pitt Capital.
Can we blame the recent decline in buyer traffic, mortgage applications, and home sales on the weather? Surely it has been a miserable winter, but a ZeroHedge.com article suggests that there is more at work than wind-chill and snow fall. “Housing bubble II: What’s ruining home sales? Not the weather!” examines how the National Association of Home Builders has pushed median home prices beyond the reach of hardworking middle class American households, thanks to the Fed’s “wealth effect,” which has created a major “disconnect between prices and income.”
A Zerohedge.com article originally submitted by David Stockman addresses the “culture of plunder and entitlement in the gambling casinos of Wall Street.” “David Stockman berates Bruce Berkowitz’s bogus bombast” repeatedly refers to Fairholme Capital Management’s founder, Bruce Berkowitz, as one of the capitalist “cronies” that have been gifted with “ill-gotten” windfalls during the Fed’s 5-year money printing spree.
Richard Rubin’s Bloomberg article, “Cash abroad rises $206 billion as Apple to IBM avoid tax,” explains how multinational companies use legal loopholes to park their earnings in low-tax countries. According to the article, multinational companies have accumulated $1.95 trillion outside the US, up 11.8 percent from a year earlier. This is one of the three “financial engineering” techniques that Fort Pitt Capital has emphasized over the past year. Along with share buybacks and debt refinancing, all three are “below the operating line” ways of making fundamentally tepid numbers look better. However, these techniques are not sustainable in the long run.
In a March 11 Zerohedge.com article, the severity of the new dot com bubble is depicted. “Dot-com 2.0 visualized (or peak greater fool)” explains how the bubble has outgrown the private equity world as “the percentage of the firms IPOing with negative earnings soars to its highest since February 2000.” The author suggests that the results for investors in these newly-public firms could be just as disappointing this time around.
Be sure to check back at the end of the month for more informative reads.