Hottest Links: JCP Dump; Global Risk; Defensive Value Investing

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Hottest links for Monday September 25th, 2013 (see prior edition of hottest links here). Lots of news today and because of this being the last one of the week we wanted to include a lot of stories, so here are among our favorites… Top stories for today include; The value case for buying Tom Gayner’s Markel; Global systemic risk can you guess which countries top the list? Hint they are both in Asia; A look at the value case for this French company; The expert on auditing is out with a new article on how the big four are trying to avoid liabilities; Bloomberg hosted a great conference yesterday, Jim Chanos, Jack Lew, Marc Lasry, and many other famous people in the finance world were there check it out below; A really interesting behind the scenes look at the Twitter IPO; Precious metal CEFs are now trading at a rare discount a look at some of them; JCP shares are tanking after Goldman’s fixed income issued a scating report about the struggling retailer; The Ray Dalio video has been seen around the world, but check out the full transcript (in English), which should save you about 25 minutes; Economists win prize for noting traders are idiots; What is exactly is defensive value investing?; That and much more in today’s hottest links.

Programming note: This is the last hottest links for this week, starting next week we hope to be back on full schedule 6x a week. Please sign up by email to get this delivered to you everyday so you never miss an issue.

Hottest Links: JCP Dump; Global Risk; Defensive Value Investing

Hottest Links: Stories

Why I’m Buying Markel

For copycat capitalism’s prevalence, Markel Corporation (NYSE:MKL) a self-styled baby Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) stands apart. [Michael Olsen, The Motley Fool]

Trilogiq SA – Another of Those Hidden French Champions?

As many readers might have figured out, I am currently looking a lot at French stocks. Well: here is the company: Trilogiq SA (EPA:ALTRI). [ ValueAndOpportunity]

Peaking Plants will Provide a Jolt to TransAlta’s Flagging Performance

TransAlta Corporation (USA) (NYSE:TAC) (TSE:TA) is one of the largest power companies in Alberta, owning over 6000 MW of generation in the province – roughly two-thirds of which is coal-fired generation. [Andrew Cornhill, Ivey Business Review]

The Forward Earnings Outlook with Brian Gilmartin

FedEx Corporation (NYSE:FDX) and Oracle Corporation (NYSE:ORCL) were two notable companies reporting financial results for the August quarter last week. Rockwell Collins, Inc. (NYSE:COL)’s revenues for the quarter are expected to fall 2%, EPS at least 10%, which implies margin pressure. Lockheed Martin Corporation (NYSE:LMT) is up 39% this year. Our two primary defense holdings are United Technologies Corporation (NYSE:UTX) and The Boeing Company (NYSE:BA), and Boeing is really held more for Boeing Commercial Airline than Boeing Defense. (Long UTX, BA). [Brian Gilmartin, The Reformed Broker]

Home Gold Rush is Over

The news that Oaktree Capital Group LLC (NYSE:OAK) and Carrington Mortgage Services are putting the 500 homes they’ve acquired and leased out up for bid may well be an indication of more to come. shares of Silver Bay Realty Trust Corp (NYSE:SBY) and American Residential Properties Inc (NYSE:ARPI), far smaller firms, are trading below their IPO prices. And Colony American Homes Inc (NYSE:CAHS), which planned an IPO of up to $1.25 billion but postponed the offering in July, has yet to set a date for coming back to the market. The Blackstone Group L.P. (NYSE:BX), the big kahuna with 32,000 homes, still has not moved to file for an IPO. [Matthew Goldstein, Reuters]

New Measure of System Risk

SRISK combines information on size, leverage, and risk to indicate how serious a default would be. Lehman was not the only one who had engaged in too much risk taking. Indeed, they were not even the worst offender. And as the table below shows, JPMorgan Chase & Co (NYSE:JPM) now represents the greatest risk to the financial system. [Barry Ritholtz, Ritholtz]

Global Systemic Risk


You can drill down by region or even country to see how much risk is in the system. Note that this is a function of both size and riskiness, i.e., a very small reckless country presents less of a risk than a very large moderately risk-taking nation. [Barry Ritholtz, Ritholtz]

361 Capital Weekly Research Briefing

Clearly, the numbers didn’t meet the Fed’s preconditions for tapering. And while the jobless rate has fallen to 7.3% (from 8.1% when QE3, the current round of quantitative easing began), Bernanke had to acknowledge what’s been obvious to all. [Blaine Rollins, The Reformed Broker]

Herbalife Leveraged Recap Likely, MLM Controversy Over: Tim Ramey

Timothy Ramey, CFA  just cannot get enough of MLM companies. As noted in a prior article, the food, beverage, and nutrition industries analyst at DA Davidson seems to find ways to create news regarding Herbalife Ltd. (NYSE:HLF) even when there is seemingly little (or no) news on the topic. [ValueWalk]

Ray Dalio on How The Economic Machine Works: Full Transcript

Ray Dalio released a 30 minute video in English (and russian) about how the economic machine works. We have transcribed the entire video (in English) for your reading pleasure. Below, both the video and full transcript can be found. [ValueWalk]

Hedge Fund Administration Assets Jump 13.3%

State Street Corporation (NYSE:STT)’s alternative investment solutions group had the highest total hedge fund assets under administration for the first six months of the year among the 38 single-manager administrators surveyed. Morgan Stanley (NYSE:MS) Fund Services, Northern Trust Hedge Fund Services LLC, HedgeServ, SEI Investments Company (NASDAQ:SEIC) and J.P. Morgan Global Fund Services rounded out the top 10. [Rick Baert, PIOnline]

Notes from the Bloomberg Markets 50 Summit, Morning Session

I’m live from the Bloomberg Markets 50 Summit at the New York Historical society’s gorgeous headquarters on Central Park West. Bloomberg has brought together fifty of the most important, market-moving people on earth for today’s event and I’m taking notes during each of the panels and presentations. [Joshua M Brown, The Reformed Broker]

Nate Silver on Finding a Mentor

Perhaps no one has done more for the cause of data-driven decision-making in the minds of the public than Nate Silver. His book, The Signal and the Noise, explains the power of statistical modeling to improve our predictions about everything from the weather to sports to the stock market. Data science is the hottest field to be in right now, and Silver is its poster child. [Walter Frick, Harvard Busniess Review]

Nearly 10% Off on Precious Metals

A look at some undervalued closed-end funds, including the Central Fund of Canada Limited (NYSEMKT:CEF) (TSE:CEF.A). [Mike Taggart, Morningstar] Taggart sees a similar case for Central GoldTrust (NYSEMKT:GTU) (TSE:GTU.UN). Both funds have lagged the YTD loss of 21% in SPDR Gold Trust (ETF) (NYSEARCA:GLD). [Brendan Conway, Barron’s]

Exclusive: Twitter Picks NYSE for $1.5B IPO

Looking to learn from the past, social media company Twitter will list on the NYSE Euronext (NYSE:NYX) in an IPO estimated to net around $1.5 billion, sources close to the situation have said. Twitter, the San Francisco-based social media company that tweeted out news it had filed its S-1 to the SEC for its planned initial public offering, is looking to avoid the glitches and hoopla that were troublesome when Facebook Inc (NASDAQ:FB) went public last year. [Chris Ciaccia, The Street]

How The Fed Chair Nomination Process Worked The Last 12 Times

Yellen, the current vice chair of the Federal Reserve, is widely considered the frontrunner to replace current Fed chairman Ben Bernanke when his term expires in January. [Matthew Boesler, Business Insider]

Questioning the Efficiency of PE Secondary Buyouts

Private equity firms are increasingly selling their portfolio companies to other private equity firms despite their overall underperformance, according to research. The transactions, more commonly known as secondary buyouts (SBO), now represent more than 40% of all private equity exits, the study found. [Sage Um, aiCIO]

EGIS minority buy out – What’s next ?

Only 4 months after I bought Egis PLC (OTCMKTS:EGPGY) (FRA:EGS) for the portfolio, majority owner Servier has offered (for me totally unexpected) 28.000 HUF per share to minority shareholders. This is roughly a 40% gain in 4 months, so quite oK, although in my opinion, the stock should be worth more especially compared to peers. [memyselfandi007, ValueAndOpportunity]

Does CAPE Work on Stocks?

My buds Wes Gray and Jack Vogel  just put out a killer new paper where they asked the above question.  The simple answer is “yes it does”. Here is a summary of the 20 cheapest S&P500 companies with positive values CAPES all under 10. LyondellBasell Industries NV (NYSE:LYB), Cliffs Natural Resources Inc (NYSE:CLF), Citigroup Inc (NYSE:C), General Motors Company (NYSE:GM), United States Steel Corporation (NYSE:X), J.C. Penney Company, Inc. (NYSE:JCP), Bank of America Corp (NYSE:BAC), Apollo Group Inc (NASDAQ:APOL) and more. [Mebane Faber]

No Strategy Works All The Time

When it comes to investing it is important to remember that no investment strategy works all the time. [Lance Roberts, Pragmatic Capitalism]

Goldman Goes Medieval On J.C. Penney

Specifically, what Goldman Sachs Group Inc (NYSE:GS) just did is write a report (perhaps one of the best bearish cross-asset investment theses we have seen to come out of the firm in a long time) in which it laid out, in a lucid and compelling manner, why J.C. Penney Company, Inc. (NYSE:JCP) is doomed. [Tyler Durden, Zero Hedge]

How Does the All Market Portfolio Perform?

I enjoyed reading Phil DeMuth’s recent book The Affluent Investor.  It’s a good overall read on asset allocation for the individual.  At one point he mentions an all market portfolio (from Picerno) that invests in all of the world asset classes in proportion to their market cap. [Mebane Faber]

Is It Time For The First Non-Human Chair Of The Federal Reserve?

Federal Reserve vice chairwoman Janet Yellen seems poised to receive the White House’s nomination to replace Fed chairman Ben Bernanke in the top spot at the central bank when his term expires in January. [Matthew Boesler, Business Insider]

What is Defensive Value Investing?

Defensive investing at its heart is a simple concept.  [John Kingham, UK Value Investor]

Latest Way Big Four Trying To Dodge Liability

Judge Shira Scheindlin of the Southern District of New York slammed auditors Ernst & Young (EY) and PricewaterhouseCoopers (PwC) who sought to dismiss claims against their firms in a class action lawsuit related to the bankruptcy of OSG. Overseas Shipholding Group Inc. (OTCMKTS:OSGIQ is a tanker company that, on March 24, 2010, conducted a public offering of three hundred million dollars of unsecured notes. [Francine McKenna, re: The Auditors]

An expensive parting at Weis Markets

The press release that Weis Markets, Inc. (NYSE:WMK) issued on Monday, announcing the departure of CEO David J. Hepfinger was short and to the point: Hepfinger had stepped down to “pursue other interests” and Vice Chairman (not to mention son of Chairman Robert Weis) would be filling in on an interim basis. [Footnoted]

Economist Wins Genius Grant

One of the winners is a CalTech economist most famous for calling traders idiots. Rob Wile, Business Insider]

Hottest Links: Not The Onion

Thomas the Tank Engine rescued from drug lab

Goulburn’s missing Thomas the Tank Engine – washed away in floods almost three years ago – has been found by police during a search warrant of a suspected drug lab in the east of the city. [Megan Doherty, The Age]

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