Zorrofan

Mark Twain said it best: There are three types of lies - lies, damn lies and statistics. Here are few links to counter recent press about how things are getting better! Cardboard, on a recent thread, started me thinking about how we get "headline" reports on the improving economy but the subsequent, usually less positive revisions always seem to be reported on the back page. Here are a few links that go against the current mainstream media view of everything getting better...... US corp debt at record levels? For what it is worth, we have heard that corporations are sitting with massive amounts of cash, waiting to be deployed except for uncertainty about the economy. Or are they? Here is an alternative view.... http://www.marketwatch.com/story/the-biggest-lie-about-us-companies-2010-08-03 Another banking crisis? http://www.telegraph.co.uk/finance/newsbysector/epic/barc/7923014/Banking-system-on-verge-of-new-crisis-hedge-fund-Noster-Capital-warns.html Euro-banks need to refinance over $122 billion this year alone? http://noir.bloomberg.com/apps/news?pid=20601087&sid=a9S.Zzc96QGY&pos=5 Plenty of "meat" for the bears. No wonder Pren, Seth Klarman and others are worried.... cheers Zorro

I am wondering if Prem & FFH added to their holdings. Volume was over 40 million shares yesterday so it would have been easy for FFH to buy a large chunk of shares. Does anyone know how quickly FFH has to file? thanks Zorro

If you refer to the earnings press release (link up top) it states that excluding gains on derivative contracts SD earned $0.23 per share in Q2. Market expectations were $0.12 per share. What impresses me, listening to the conference call yesterday, is that management seems to be acting in a rational manner, reducing gas production when prices are low and maximizing oil production instead. Many other companies are drilling because they need to, either to keep their leases or they need the cashflow. ward seems to be working hard to postion SD to capitalize long-term.... cheers Zorro

http://finance.yahoo.com/news/SandRidge-Energy-posts-2Q-apf-672819752.html?x=0&.v=1 "After the markets closed on Wednesday, SandRidge said it turned a profit of $44.9 million, or 20 cents per share. A year ago, SandRidge posted a loss of $91.2 million, or 52 cents per share, because of write-downs on the fair value of commodity contracts, and losses related to asset sales. Revenue grew 36 percent, to $182.4 million from $134.1 million. Excluding one-time items the company said it earned 22 cents per share. On that basis, analysts were expecting a profit of 12 cents per share and revenue of $242.8 million, according to a Thomson Reuters survey." Let me see - the company made more money than expected, but because management is not going to simply produce more natural gas (at little or no profit) in order to hit an arbitrary revenue target the stock price falls. Gosh, makes sense to me.... (sarcasm off) thanks Mr. Market! cheers Zorro

I think Prem & FFH invested in SD because: Tom Ward has a fairly smart management team in place, SD has good assets - better now with the Arena merger bringing more oil into the production mix, a focus on building value not production for productions sake and given Wards holdings of 25 million shares (approx) a vested interest in building SD for the long-term. Not sure why the market is selling.... cheers Zorro going to listen to conf call replay now....

Not sure if many on the board are following this one, but I do as both Prem & FFH hold it.... http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTY0OTV8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 cheers Zorro

Yes, thanks for posting. Its always interesting to get Prem's view on things. cheers Zorro

I wonder if FFH could make as much off these swaps as they did with the credit default swaps......another round of billion dollar quarterly earnings reports anyone! On the other hand, how bad do they expect things to get? cheers Zorro

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the seventh consecutive week, coming in at -10.7 and Prem is much more bearish now given that FFH is 93% hedged. Things could start to get interesting! cheers Zorro

thanks Zorro

thanks for posting this - can anyone clarify the comment from the Q & A section about buying a runoff portfolio? I never heard about this?? thanks Zorro

I think you just nailed it! cheers Zorro

I don't disagree with what Sanj has said in the least - but Cardboard's point has merit as well. If the US and indeed the entire world is headed into a second slowdown while the market is busy projecting 15 to 20% earnings growth for next year, then the market is going to be disappointed isn't it when reality sets in. And when that happens stocks are going to get cheaper, much cheaper..... cheers Zorro

thanks - I look forward to givng it a read! cheers Zorro

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTM5NDR8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 Next piece is in place for SD. Oil prices are still strong, hopefully the company can take advantage and boost cashflow. cheers Zorro

Packer, If you could clarify a little please as I'm not sure where the inflation comes from? The Fed is trying to "create" money to offset the massive reduction of credit. With the massive deleveraging going on currently (Hoisington said $2.4 Trillion), the M3 shrinking, and the velocity of money being next to zero, can the Fed do anything to prevent deflation? Japan has struggled with this for 20 years with nothing but a massive debt to show for it. The US seems to be following this path to ruin. Throw in a collapsing housing market, high unemployment and the Fed would likely welcome inflation. Much of the trade imbalance to due to the fact we purchase about $1 Billion a day in oil.....thanks for the help cheers Zorro ???

thanks - always an interesting read! cheers Zorro

I don't disagree with you Myth, but I feel that the market went too far too fast, failing to realize that there are a lot of issues to muddle through and that it is going to take time. So while the economy may or may not collapse, I think the market itself will correct significantly when folks realize that it is going to take years to recover.... cheers Zorro

IMHO we've just started - we have a lot of issues to clean up before this is over. There is the ARMs next year, CRE, consumers and government need to delever, high unemployment (16% if you count underemployment), housing.....It seems that the market never really truly got that cheap inspite of all of it. The Fed keeps trying to reinflate the bubble, at some point it has to burst. cheers Zorro :(

I really think the WH is caught between a rock and a hard place - you can try spending your way out of this, and run up a huge debt doing it. But how long before the rest of the world demands higher interest rates as they watch the debt skyrocket towards $20 trillion? Higher rates which lead to another recession. You can try cutting spending and raising taxes, but you risk another recession. darned if you do, darned if you don't! Bad ending either way. Duration on the debt is low because short-term rates are very low, for now. But when TSHTF rates could explode upwards, at a time the government can least afford higher rates. Packer - I blame Bush for this mess, and big time. Bush repealed the Glass Steagall Act, which allowed the banks to levereage up beyond reason, get involved with derivatives, and here we are today.....my $0.02 on politics. cheers Zorro

Myth, why do you say that? What's to stop the Fed (or any other government) from going "We can't afford the current debt load, we are restructuring and everyone gets $0.50 on the $1"? Im not saying it would happen, just that it could, regardless of the currency it is in. The economic fallout of a US default would be huge and I'm sure behind the scences manouvering will ensure it never happens. More likely the government inflates its way out of a problem i.e. you get paid back in dollars worth much less than they used to be. cheers Zorro

That's exactly what I think: it might be way too late and the system might be way too saturated to do anything about it. Lets look at the options available: on one hand the government spends massive amounts of money in the hopes that the stimulus will eventually help generate economic recovery and reduce high unemployment and underemployment. This is done by spending trillions of dollars we don't have, leading to a devalued currency, higher (hyper?) inflation and finally high interest rates after running up the largest total government debt in history. Add to that the matter of funding medicare and social security. On the other hand, our other option is the government stops spending and raises taxes to reduce the deficit, this depresses the economy, leads to higher unemployment and ultimately causes a depression. I don't know what the proper course of action is but I know it is not going to be pretty..... cheers Zorro

I'm a little disappointed FFH can't do better than 7.75% cheers Zorro

Since we have had a nice 10% correction I thought it might be interesting to get some feedback from the board. Recently Eric Sprott, well known bear, said that the S & P could retest the March 2009 lows. Several posted interviews with Seth Klarman show him to be cautious about the current market values and we know that Prem/FFH have started increasing the hedge on the equity portion of the portfolio. What are your thoughts? For the record Zorro is leaning towards a major correction, maybe not as bad as Sprott is predicting but over 20% for sure.... cheers Zorro

He is a major shareholder in US Gold and a few other gold smallcaps. I think he used to run Goldcorp but I'm not sure.... cheers Zorro