Monday, May 28, 2007

The Cloud in Every Silver Lining

One would be challenged in the current epoch to find an asset or asset class outside of Zimbabwean bonds (do they even exist?)and the US Dollar, that has not left the fixed-orbit of earthly price action towards some higher interstellar plane. Even troubled Lebanon and its equity market is appreciating nearly 1% per month.

Only in Venezuela where a populist elected leader is nationalizing assets at a prodigious clip driving the nation's equity index down well into double digits are investors seemingly cautious in their enthusiam. The other oddity in this unprecedented bull-run for assets is the Japanese flotsam and jetsam represented by the MOTHERS (-24% ytd), Osaka Hercules (-19.7% ytd), and to a lesser but no means happy extent, the JASDAQ (-8.4% ytd). , from the perspective of the USD investor, which is the financial benchmark equivalent of the No Child Left Behind Act.

And just as the asset bull has been dramatically accelerating its rampage since 2005, so too has the carnage here been inversely accelerating! The pictures speak for themselves. Now running the risk of being immodest, I was rather vocal to my warnings to investors to insure they scrutinize their allocations accordingly, for the peak of the TSE Mothers and Osaka Hercules coincided with the trough in large cap relative performance, and the denoument of Daiko Henjo, and was based on the flimsiest of growth stories, and all manner of "weight of money" market shenannigans. Now, at a trailing prc/sls of 0.81x and less than 8x trailing p/ebitda and p/cf, and 22x nominal earnings, the excesses are gone. And there are a number of interesting, growing enterprises that Monhanram could ferret out, and some value situations that Piotroski too would find interesting.

So while no bottom has been printed, the time has come to begin to search through the rubble more closely, for when general interest (and money, for which at present there is no shortage) returns, the first 50% will disappear in the blink of an eye.

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