Reading List - April 17, 2011

I know I have not done a reading list for a few weeks, but I feel most of the news in the markets have been continuation of trends that have been highlighted before.  So, below are some of the more interesting articles of the past week or so.

Market disruptions

As I have tried to highlight in previous posts, there is plenty of uncertainty around the market's reaction of QE2.  Below is a link to a video from CNBC of two strategists debating this very point.  Bob Phillips, senior partner at Spectrum Management Group, highlighted a few key points:

• Prudential (ticker: PRU) is trading at around 10x earnings.  Company previously made some acquisitions, some in Japan.  Firm has strong management and is undervalued at current multiple.
• Disruption when QE2 ends.  Investors should raise approximately 20% of their portfolios in cash as part of the uncertainty.

Market Looks 'Worrisome' - Disruptions Ahead: Stock Picker (click here)

JPMorgan's Earnings

JPMorgan (ticker: JPM) had a good first quarter as actual earnings beat analyst estimates.  What is alarming is that total loans at JPMorgan actually went down.  Federal Reserve statistics point to a similar trend, but JPMorgan's earnings point to this actually being the case.  As a result of the contraction in credit, are we headed towards a double dip?

JPMorgan's Earnings Point to Double Dip (click here) 

Michael Burry from The Big Short

Michael Burry, the hedge fund manager who betted against subprime mortgages, recently made a speech at Vanderbilt.  Below are some links to another blog, Distressed Debt Investing, that covered the highlights of the Burry speech:

He was attracted to investing because he was evaluated on performance not whether or not he looked people in the eye or was socially adept

QE “seems” to be working but is really just a big gamble

Don’t tolerate blind faith, figure things for yourself

Doesn’t think large caps are as cheap as others do

Michael Burry: Notes from Vanderbilt Speech (click here)

Pension funds

Jim Leech, president and chief executive at the Ontario Teachers' Pension Plan.  Highlights included:

• Whatever you do, you need to have conviction.
• One has to look far and wide to find opportunities in this uncertain environment.  This plan is leaning to towards commodities.  Key holdings include Toronto Dominion, Transocean, and JPMorgan.
• Worried about commodities, but prepare for uncertainty by having a diversified portfolio.  Need to be part of a run, but cannot put too much risk in your portfolio.
• View on the US: still having housing issues, but long-term you cannot bet against the biggest economy.  Concerns include state debt levels and administrations will come to grips with the issue.  Federal Reserve (i.e. QE2) is in a tough position, but correctly chose there is no deflation.  Issue is now does QE2 fuel inflation and it is too early to tell if it has.
• One of the early adopters of hedge funds and investment has worked out.  Fund is a large private equity investor, but through direct positions rather than fund of funds.

View from a Pension Fund (click here)

The Tale of the Swiss Bank Account

Its something that just needs to be seen...

The Secret World of Swiss Banks (click here)