I’ve wanted to post on a bunch of little things for a while, and while it won’t make for organized reading, maybe we can have some fun with it? Here goes.
1) If Prudential drops much further, I am buying some. With an estimated 2009 PE below 8, it would be hard to go wrong on such a high quality company. I am also hoping that Assurant drops below $53, where I will buy more. The industry fundamentals are generally favorable. Honestly, I could get juiced about Stancorp below $50, Principal, Protective, Lincoln National, Delphi Financial, Metlife… There are quality companies going on sale, and my only limit is how much I am willing to overweight the industry. Going into the energy wave in 2002, I was quadruple-weight energy. Insurance stocks are 16% of my portfolio now, which is quadruple-weight or so. This is a defensive group, with reasonable upside. I’ll keep you apprised as I make moves here.
2) Reader Steve brought this to my attention: Mark Gilbert at Bloomberg brought attention to a monetary policy game at the San Francisco Fed’s website. So did the estimable Marketbeat blog at the WSJ. The game used to be found at this link. Alas, no more. Maybe all of the attention crashed the site, after all, the SF Fed can’t afford a heavy-duty website like mine. Okay, sorry, they get 10x the traffic that I do, more like The Kirk Report.
Perhaps the game was removed over the embarrassment from Gilbert playing the game and applying the current Fed strategy to the game, and finding inflation going through the roof. Now, for those that want to play a monetary policy game, my current favorite is this one from the Bank of Finland. In a true American version of the game, we would replace the manic announcer with clips of who else, Jim Cramer. Nobody does it better. Oh and for true junkies looking for monetary policy games, here is a list of some of them.
3) Dig the falling long bond. Worst day since 2004. Echoing what I said yesterday, there’s a lot of fear in that part of the market, and a lot of foreign interest. Well, at the 30-year auction, foreign interest was light at the lowest yield since regular auctions began in 1977. A few strong economic numbers can make fear temporarily dissipate.
4) Here’s what I posted at RealMoney today:
When the main rating agencies begin downgrading the lesser guarantors, the big guarantors are likely not far behind. Moody’s just downgraded XL Capital Assurance from Aaa to A3, and Security Capital Assurance From Aa3 to Baa3 (barely investment grade). Psychologically, the major rating agencies, Moody’s and S&P, have been taking baby steps toward downgrading Ambac, MBIA and FGIC. But first they have to do the lesser guarantors that are in trouble. As I have pointed out before, the major rating agencies are co-dependent with the major guarantors, and that will only throw the guarantors over the edge if hurts them more to leave the guarantors at AAA. That will cost them future revenues to cut the ratings of the major guarantors, but it might save their larger franchises.