A few ideas from J. Altucher's hedge fund buddies

(from WSJ)
I was procrastinating writing this article at 5 a.m., so I pinged every hedge fund manager on my IM list to see if anyone could force-feed me investing ideas.
Hedge fund manager No. 1: Small manager, less than $100 million in assets under management. His biggest macro belief is that inventory rebuilding is going to drive economic growth for the next several years. He pointed out that Caterpillar (CAT) announced on a recent call that even if its sales are flat over the next year it would have to buy steel nonstop to rebuild inventory. This, in turn, will drive jobs, housing, growth into 2011 and beyond. This is not a “new normal” but “enormous growth.”
“So what are your favorite ‘green shoots’ stocks?” I asked.
Any of the basic-materials stocks that are going to be fueling this inventory rebuilding, he answered: Reliance Steel (RS) (Disclosure: I own it), Valspar (VAL), Cliff (CLF), Vulcan Materials (VMC). These stocks have a long way to go in this rally. And the rally is not going to stop. There’s an enormous pile of cash on the sidelines that’s just now coming into this rally.
Hedge fund manager No. 2: At his previous fund, hedge fund manager #2 handled all the short-selling. He had enormous years in 2007-2009 shorting and then going long financials and then left to start his own fund. Now he’s focused on media stocks.
I shorted BIDU yesterday afternoon and wanted to know what he thought before he gave me his brain dump on the media stocks. (Here’s an argument from Sean Udall at Minyanville as to why BIDU might be a short and SOHU might be a buy.)
“Its just going straight up,” he said. “It’s like the opposite of catching a falling knife. I wouldn’t get in the way of that.”
“But what about the rumor that SOHU might be snagging the GOOG business in China?”
But he ignored me and started telling me about the top positions in their portfolio:
Virgin Media (VMED): 20% free cash-flow yield, we are expecting 30% free cash flow growth, and VMED is steadily improving its balance sheet, improving its video offerings, and we expect BSkyB to begin carrying VMED shoon.
Liberty Starz (LSTZA): It’s the Encore and Starz cable channels. 30% EBITDA margins. Trades for a multiple of 4.5x EBITDA. Long term contracts with movie studios and cable companies so earnings are very stable but there is upside to these estimates in any economic recovery. Most media companies trade at multiples double to what LSTZA trades at.
Hedge fund manager No. 3: Specializes in small biotechs.
“My number one position by far is Sunesis Pharmaceuticals (SNSS),” he told me. SNSS makes Vorolexin, a drug for treating AML leukemia. Phase II results showed that they increased the survivability of AML patients.
Hedge fund manager No. 3 gave me three atalysts on SNSS:
“1.) 1Q10 regulatory update on Voreloxin from the FDA
2.) Several presentations at ASCO, showing Voreloxin in mature data sets; including cytarabine combination data
3) Finalization of a partner for ph. III testing in AML.
I expect this to be a $3-$5 stock in a few months,” he concluded.

VRX buys back $500 million

Yahoo finance)
ALISO VIEJO, Calif., March 30 -- Valeant Pharmaceuticals International (NYSE:VRX - News) announced today that its board of directors has authorized the repurchase of up to an additional $500 million of its securities, including its outstanding senior notes, convertible debt or common stock under the securities repurchase program approved in October 2008 and increased in May 2009. This repurchase authorization raises the aggregate repurchase authorization to $1.0 billion from $500 million over a period ending in March 2013. To date, the Company has repurchased approximately $415 million in total of its convertible debt and its common stock out of the $1.0 billionnow authorized under the securities repurchase program.

Music is medicine, music is sanity

Robert Gupta, violinist with the LA Philharmonic, talks about a violin lesson he once gave to a brilliant, schizophrenic musician -- and what he learned. Called back onstage later, Gupta plays his own transcription of the prelude from Bach's Cello Suite No. 1.

Getting tasered by a shotgun

The bullets can go up to 100 ft!
Each battery is crammed with enough juice to dole out a full 20-second cycle of pure "non-violent" punishment. 20 seconds! Good lord, that's a long time to be gettin' Tasered. It also has such neat features as three "torsion spring fins" which help the XREP stay straight and fly right into the fleshy part of that guy trying to steal an air conditioner.

Time to Take Profit on Long Polish Zloty Positions

In 2009 Poland’s economy outperformed regional peers and the EU as a whole, growing 1.7%. However, signs point to a negative growth surprise in Q1 2010. Consumers proved resilient throughout last year’s downturn, but recent indicators suggest they are tightening their belts. Given the dimmer private consumption outlook, RGE believes the National Bank of Poland (NBP) has no scope for rate hikes in 2010. Moreover, the chances of a rate cut have risen. We now assign a 30% probability to this scenario. This change in the rate outlook should provide additional support for short-rate receivers in Poland.

So Many Booby Traps In Trading And Investing (part 1)

To do well in the stock market in the long run, there is a number of issues you must address in order to gain meaningful annualized returns.

If you're going to participate in the stock market, your goal is to build up your assets in a big way as the years go by -- to make the endeavor worthwhile.

So, you cannot afford to be monkeying around or chasing your own tail year in and year out. An example is day trading, where over 85% of traders eventually blow up their accounts and only 1-2% have any consistency in making money. And even if you do make money, your funds have to continuously compound to make it worthwhile.

Let's say you have $100,000 in your account and you make $75,000 per year as a full time trader. But you take out $75,000 for taxes and personal expenses each year. You net account value is still $100,000 by the end of the year. This scenario offers no compounding for all your effort and stress.

True, you have more freedom than working at a corporation because you're your own boss. But, assuming median income is around $75,000 where you live, you're probably much better off to go work for a corporation. At least you get better health coverage, virtually guaranteed salary, possible year end bonus, and potential promotion and raise. You get no guarantees in trading.

In the above example, to build up your account you would need to either increase your returns, add additional funds to your initial capital base, or decrease the amount that you withdraw for personal spending. As a full time trader, adding additional funds from other sources besides trading is generally not an option -- especially when your only source of income comes from trading. Cutting back on personal spending/expenses is a possibility but generally very tough because most of us are accustomed to a certain lifestyle for many years. So that leaves the last route to increase funds is by generating a higher return on your investment.

I got news for you. A 75% annual return is already very difficult, if not impossible, to achieve even for the seasoned pros. Remember, Warren Buffett has an average annualized 23% returns for the last 45-50 years. Most traders and investors will earn significantly less than 23% average per year in a 30-year period. Most can't even get an annualized 10% return measured in decades. Thus, it is generally much easier to get funds from outside sources and to force yourself to be frugal, than it is to increase your annual stock market returns.

With such a delicate balance, such as the example above, your principle and returns must be preserved at all costs. You absolutely cannot afford to "monkey around" with your trading or investing. For instance, once your account takes a big hit, it may already be game over for you, sometimes without you being aware of it at the time.
Why do so many traders act like monkeys?

Altucher rips the bears with SPX 1300

As the market continues its climb of 70 percent-plus off the lows, and the gap widens between the housing and stock markets, the bears are convinced of a downturn -- any day now. But our guest James Altucher, managing partner of Formula Capital, disagrees.

"The bears have been consistently wrong throughout this whole rally," Altucher tells Aaron in the accompanying clip. "If you followed the bears' advice at the bottom you'd be dead broke right now." For full disclosure, Altucher did not call the market crash in 2008. "Better to be consistently bullish than consistently bearish."

Altucher points to the common arguments the bears make -- and why they're wrong:

Lots of homes are in foreclosure or under water: That's true but there are bright spots in housing data including the Case-Shiller reports, Altucher notes. That housing index has been up the past six months, suggesting prices are stabilizing, he adds.

All the growth we're seeing is just inventory rebuild. Businesses cleared their inventory in anticipation of the 2010 Great Depression that never happened. Now businesses are scrambling to restock, spurring growth in the economy that's likely to last for one to two years at least. "People are going to be surprised how fast and furious this inventory rebuild is going to happen," Altucher says.

Unemployment is 9.7%.Yes but other jobs data show a rise in part-time hours, hourly pay, hours per week, and number of temporary workers. And these are all precursors to gains in fulltime jobs, Altucher explains.

"Before this is fully over we're going to see new all-time highs again. And I do think that we're going to see 1,300 by the end of the year on the S&P," Altucher says.
"Better to be consistently bullish than consistently bearish."
But he's still wrong about solars, and had been calling them "scams".

Tech and banks

Undercover SPWRA buying

Firms that have been loading up on SPWRA/SPWRB late 2009-2010:
Fidelity +6.0M
BlackRock +4.3M
Platinum Investments +2.9M
Sound Energy Partners +3.1M

Odesnik plea a dark cloud on tennis

KEY BISCAYNE, Fla. -- It looks like the posse finally caught up with the outlaw, only it was the wrong posse -- a development is bound to lead to endless investigations, discussion and controversy. That, too, is ironic, given how clear-cut the case was against tennis drug policy violator Wayne Odesnik.

It was Australian customs officials -- the same guys who nab chain smokers trying to bring in an extra carton, or boozers going one fifth over the line -- who found eight vials of HGH (human growth hormone) in Odesnik's possession when he entered Australia at the beginning of this year.

HGH is a banned substance used clandestinely (and how widely is a matter of wildly fluctuating speculation) by athletes seeking an illicit edge. Few doping cases in tennis (ref. -- Richard Gasquet) are as clear cut as this one. In fact, Odesnik pleaded guilty, will pay a (relatively minor) fine of $7,000 and will probably be forbidden to swing a racket for two years -- a fairly light sentence, it seems to me, given the brazen nature of Odesnik's actions.

But it will be the entire sport of tennis that goes on trial, because the first question that comes to mind when it comes to this case is, "Where was tennis's vaunted drug-testing program?" Were it not for a (presumably) regular customs agent stumbling across the HGH while sifting through a bunch of jock straps and liniments, Odesnik is unlikely to have been caught.

So, how many other guys are toting around more well-concealed vials of HGH, of the strain that can't be detected through the World Anti-Doping Agency's testing regimen (which is the one used by the ATP and WTA, in accordance with International Olympic Committee regulations)?

Granted, there's a chance that customs had some particular, calculated reason to give Odesnik a special onceover. And it's an uncomfortable fact that the guy is coached by Guillermo Canas, himself a former anti-doping violator (he served about 15 months, four years ago) who coincidentally announced his retirement from tennis on Friday. Canas took a "seen no evil" tack, noting that he did not travel, as some coaches do, with his protégé.

But those eight vials of HGH sure did.

So the real questions in my mind are: Was the Aussie customs agency tipped off? Was this some kind of sting operation, and if so, who was behind it and why was this approach chosen? How often was Odesnik tested in, say, the past 12 months, and what were the results? And lastly, what are the chances that Odesnik will tell all he knows about the shadowy world of HGH abuse (assuming he knows at least a little bit), and what kind of pressure can the ATP or ITF bring to bear on him to convince him to cooperate?

Many other people are thinking these same things, so you can expect the investigations and media attention paid to this case to ramp up. That means an astonishingly high degree of scrutiny on the drug-testing regimen and protocols. Given the formidable obstacles facing any anti-doping effort (in any sport), the only thing that nobody is likely to say is what most people would have said a few days ago, before the Odesnik case made the news: The drug-testing apparatus and methodology in tennis is pretty darned good; it's unlikely that drug cheats can go undetected, at least not for long.

We can take cold comfort in the fact that the posse finally did catch up with Odesnik, and it's bound to create more skepticism about tennis's drug policy than if Odesnik, like Canas, had been caught the old-fashioned way.
Source: ESPN