Archive for March, 2005

Hedge funds a bad place to be

Tuesday, March 29th, 2005

This article from the New York Times but republished in the International Herald Tribune forecasts bad times ahead for hedge funds, similar to the tech bubble of a few years back. This is because of the huge amounts of capital heading toward hedge funds.

“It is completely obvious that this will end badly – for the firms, investors, everyone,” said Seth Klarman, founder of Baupost Group, which manages $5 billion. “No area of financial endeavor is immune from the effects of competition.”

Real Estate investing: timing and planning

Friday, March 25th, 2005

Predicting that the Real Estate market has to cool off at some point (perhaps when foreigners stop seeing such good echange rates), Money Magazine has some interesting tips on how to plan for future real estate investments and how to time the market.

One thing you should do is start networking with small local banks because:

If a slowdown develops and banks start foreclosing, the smaller ones are likely to end up holding title to homes directly. Believe me, landlording is not a business these guys want to be in. They’ll sell their foreclosed properties as quickly as possible to a responsible owner.

There is also advice on how to track the real estate market by paying attnetion to how long it’s taking homes to sell, home builders throwing in freebies in an effort to sell new homes, and tracking real estate in neighborhoods you like. When you finally get a deal through your friends at the bank on a foreclosed home, be patient:

It’s highly unlikely that home prices will permanently fall off a cliff, Pets.com-style. But real estate markets that go down have been known to stay down for years. Ask anyone who owned a home in Texas in the late 1980s, or Southern California in the early 1990s.

So don’t bid on a property unless you are prepared to be the landlord for at least five years. Because you might have to be.

Visit my new web directory for real estate sites.

Good deals for foreign investors in the US

Friday, March 25th, 2005

Here’s an interesting article that describes why foreigners are investing in US real estate:

Most notably, real estate agents and home builders from many of the more popular destinations are reporting foreigners showing an increasing interest in U.S. property. And at the accelerated rate that home-price appreciation has been running, particularly in those coastal areas that tend to draw foreign tourists, you get the idea that the currency differential must be a major inducement indeed.

And, while it’s true that Americans investing abroad don’t have strong currency reasons to invest, why US citizens should consider foreign real estate:

The key is to do it through a real estate mutual fund or other investment vehicle in which you can take advantage of professional managers who are capable of sorting out the maze that foreign real estate investing can be.

Be sure to check out the real estate sites listed in my new directory of web sites and web pages to find more inofrmation on buying/selling/investing in real estate.

Oil prices expected to decline slightly

Wednesday, March 16th, 2005

The International Herlad Tribune published an article about OPEC’s decision to increase oil output. Prices are not expected to change much:

“The effect on the market will be negligible,” said Gal Luft, executive director of the Institute for the Analysis of Global Security, a Washington-based company that advises clients on energy policy. “Prices will come down but not dramatically. They will stay within the range of the high $40s and low $50s.”

The stock market won’t rally around a token increase so the bad news from GM (falling way way short of earnings expectations) will drag the market down.

Samsung vs. Sony

Sunday, March 13th, 2005

James Brooke and Saul Hansell from the New York Times write that Samsung has a competitive advantage over Sony due to innovation. Sony is too slow to bring new products to the market:

When Sony was caught flat-footed with a late introduction of an Internet version of its 25-year-old Walkman, its profits from world audio sales fell a cataclysmic 48 percent in the final quarter of last year. Once again, Sony had coasted on an old technology, while competitors invested in new ones.

“Samsung is like the old Sony,” said Gilder, who edits the Gilder Technology Report. “Samsung has much of the spirit of Sony 10 years ago.”

Samsung recently unveiled a cell phone with a 7.0 megapixel digital camera built in. I predict that this will be a hot item; my wife wants one because it’s better than our real digital camera (which happens to be a Sony).

Korea trying to stabilize won

Sunday, March 13th, 2005

The Korean Central Bank is likely to lose money over the next few years as it tries to prevent the won from getting even stronger than it is currently (around 1,000 won to the dollar):

The sharp rise in monetary stabilization bonds will weaken the bank’s capability of effectively fighting speculative funds attacking the Korean currency. The more bonds it issues, the larger the losses will be.

Warren Buffet and Berkshire Hathaway

Tuesday, March 8th, 2005

Warren Buffet is looking for companies to buy, possibly because he doesn’t see many good stocks to invest in:

Berkshire ended the year with $43 billion of cash equivalents, something Buffett called “not a happy position.” In 2003, Berkshire had nearly $36 billion and the year before that, about $12.7 billion.

Forbes takes a look at Warren Buffet’s recent history and gives him a passing grade. The grade is based on overall performance of Berkshire Hathaway and indivicual stock picks. As Forbes notes there aren’t many stocks worth picking these days:

Buffett also says that he has been unable to find companies or stocks worth buying, and warns that the large and growing U.S. current-account deficit will lead to further pressure on the dollar, and to other countries owning a substantial share of U.S. assets. As a result, Buffett has $43 billion in cash on the sidelines and has increased his currency bets (something relatively new for him) against the dollar.

If you’re looking for a fairly safe investment, why not consider Berkshire Hathaway as Motley Fool suggests? Past performance has been strong:

Give it a rest, Buffett. Few investors are going to abandon Berkshire for the vanilla comforts of an index fund, and you have no reason to be ashamed. Over the past 40 years, Berkshire has grown its book value per share at an annualized rate of 21.9%. That’s more than twice the S&P 500’s 10.4% annualized return in that time, but thanks to the magic of compounding, Berkshire’s overall gain in book value per share is actually more than 50 times better than the industry’s leading market gauge.