FT.com / Columnists / Lunch with the FT - Lunch with the FT: David Swensen
Posted using ShareThis
Saturday, 24 October 2009
THE MARKET IS OVERVALUED BY 40% (Re-post from 2:1 blogs I follow)
This excellent post from Neil Hume at Ft Alphaville points out some analysis from Andrew Smithers at Smithers & Co. Smithers believes the market is grossly overvalued:
As we have remarked before, valid approaches to value are disliked by many practitioners as they get in the way of business. As is inherently likely, and as a glance at Chart 1 will confirm, the stock market has been underpriced around 50% of the time. Those who sell shares would rather it were cheap 100% of the time and therefore prefer invalid metrics. The ones used vary from time to time, as those employed are restricted to those which currently give the desired answer that “stocks are cheap”.
As the valid measures of the US market show that it is currently around 40% overvalued, some ingenuity is needed to claim otherwise. The EPS for the past 12 months on the S&P 500 is $7.51 so, with the index at 1071, it is selling at a trailing PE of 142. This is far higher than it has ever been before, as the previous end month record is a PE of 47. But current multiples are no guide to value; when depressed, or elevated, they need to be adjusted to their cyclical norm
Hedge fund sees robust MENA growth
One of the few hedge funds focused on the Middle East and North Africa (MENA) has taken heavy exposure in Qatar, the UAE, Saudi Arabia and Egypt, expecting that international investment in the region is about to pick up.
Khalid Abdul Majeed, managing partner of MENA Capital which runs the MENA Admiral Fund, said he has some 30 per cent in Qatar and the UAE, 25 per cent in Saudi Arabia and 18 per cent in Egypt.
"Our country allocations have been influenced by conversations we have had with the big banks who are reporting a significant increase in interest by international investors," he said on the sidelines of the CFA Institute's European Investment Conference in Frankfurt on Thursday.
Khalid Abdul Majeed, managing partner of MENA Capital which runs the MENA Admiral Fund, said he has some 30 per cent in Qatar and the UAE, 25 per cent in Saudi Arabia and 18 per cent in Egypt.
"Our country allocations have been influenced by conversations we have had with the big banks who are reporting a significant increase in interest by international investors," he said on the sidelines of the CFA Institute's European Investment Conference in Frankfurt on Thursday.
Dubai Holding official questioned in Dh200m fraud
A senior official of a government-owned company is the latest high-profile business executive to face charges of corruption involving almost Dh200 million, Gulf News has learnt.
The senior Emirati executive, H.D., of Dubai Holding, has been in detention for nearly six days.
Law enforcement officers are questioning him over alleged irregularities amounting to almost Dh200 million involving suspicious property deals in Dubai, sources close to the investigation said.
The senior Emirati executive, H.D., of Dubai Holding, has been in detention for nearly six days.
Law enforcement officers are questioning him over alleged irregularities amounting to almost Dh200 million involving suspicious property deals in Dubai, sources close to the investigation said.
Potential IPOs again become the talk of Dubai
IPOs are once again the flavour of the month in Dubai – or at least, rumours of impending IPOs are.
At an informal gathering last week of some of the emirate’s leading financial news practitioners, forthcoming flotations were on everybody’s lips. The spin doctors present were keen to nab upcoming IPOs as cash-generating clients, and the financial journalists were straining to write the headline “X Corporation set to float”.
It made for some intriguing conversation – the hacks trying to pin down exactly who had been “beauty paraded” (the term for a PR firm offering its services to a potential floater), while the flaks attempted to prise as much information out of their rivals as possible without giving too much away themselves.
At an informal gathering last week of some of the emirate’s leading financial news practitioners, forthcoming flotations were on everybody’s lips. The spin doctors present were keen to nab upcoming IPOs as cash-generating clients, and the financial journalists were straining to write the headline “X Corporation set to float”.
It made for some intriguing conversation – the hacks trying to pin down exactly who had been “beauty paraded” (the term for a PR firm offering its services to a potential floater), while the flaks attempted to prise as much information out of their rivals as possible without giving too much away themselves.
Almatis lender stand-off risks debt deal-sources
A battle between lenders to debt-laden German metals processor Almatis has led to a standoff that threatens a $1 billion debt restructuring deal, three sources close to the situation said on Friday.
Without an agreement on the restructuring, the company may face a disorderly work-out of the debt, two of the sources said, which could further harm the value of the company.
Almatis declined to comment.
Without an agreement on the restructuring, the company may face a disorderly work-out of the debt, two of the sources said, which could further harm the value of the company.
Almatis declined to comment.
Crisis-hit Middle East sees recovery signs
The Middle East faces its biggest challenge in years, with the worst financial crisis since the 1930s threatening oil exporters, but investor appetite is returning after state intervention and recovering crude prices.
"The Gulf not only looks to have braved the downturn but also to have been well placed to catch early the tail wind of recovery," said Simon Williams, chief economist at HSBC Middle East.
But the impact of the crisis continues to be felt.
"The Gulf not only looks to have braved the downturn but also to have been well placed to catch early the tail wind of recovery," said Simon Williams, chief economist at HSBC Middle East.
But the impact of the crisis continues to be felt.
United Arab Emirates seen awarding $21 billion in energy contracts
The United Arab Emirates was expected to award $21 billion worth of engineering and construction projects, many of which linked to the energy sector.
A senior French executive told a conference in Abu Dhabi that the UAE was preparing to launch tens of billions of dollars worth of projects by early 2010.
Technip senior vice president Arturo Grimaldi said around $25 billion worth of engineering, procurement and construction, or EPC, projects have already been awarded in Saudi Arabia and the UAE over the last nine months.
A senior French executive told a conference in Abu Dhabi that the UAE was preparing to launch tens of billions of dollars worth of projects by early 2010.
Technip senior vice president Arturo Grimaldi said around $25 billion worth of engineering, procurement and construction, or EPC, projects have already been awarded in Saudi Arabia and the UAE over the last nine months.
Yes, Virginia, There is a Mideast Nuke Deal
On Friday, the world awaited Iran's decision on a proposal by Western powers that the country outsource its uranium enrichment. Enriching uranium is the key step to making a bomb, so, the thinking went, if Iran is indeed sincere about wanting a peaceful nuclear-power program, a perfect fix would be to unload the supersensitive process to one of the big nuclear states, such as Russia. Iran would build its own power plants, and everyone would be happy. No such agreement was reached, however. Iran's counteroffer remains private, but what's known is that Iran offered to buy fuel abroad but made no commitment to halt enrichment.
Iran's intentions seem all the more suspect when you consider the 800-pound nuclear gorilla in the room: a striking behind-the-scenes deal that has garnered very little attention but could have huge ramifications across the region. Iran's neighbor, the United Arab Emirates, has decided to skip the shadow games and enter the nuclear club through the front door, as it is now finalizing plans to spend $40 billion to build an estimated eight nuclear plants over the next several decades and become the first openly nuclear-powered state in the Middle East. And it is doing so with the blessing of the United States.
What's groundbreaking is that the U.A.E. has promised not to construct its own uranium-enrichment facilities. Instead, it will outsource the entire fuel cycle—from enrichment to reprocessing—to an established nuclear country, probably France. The program will also be subject to strict inspections from the International Atomic Energy Agency. The fact is that roughly three quarters of the countries around the world with nuclear-power plants today rely on the international market for fuel from the major producers in France, Europe, Russia, and the U.S. Only a minority actually do their own uranium enrichment and reprocessing.
Iran's intentions seem all the more suspect when you consider the 800-pound nuclear gorilla in the room: a striking behind-the-scenes deal that has garnered very little attention but could have huge ramifications across the region. Iran's neighbor, the United Arab Emirates, has decided to skip the shadow games and enter the nuclear club through the front door, as it is now finalizing plans to spend $40 billion to build an estimated eight nuclear plants over the next several decades and become the first openly nuclear-powered state in the Middle East. And it is doing so with the blessing of the United States.
What's groundbreaking is that the U.A.E. has promised not to construct its own uranium-enrichment facilities. Instead, it will outsource the entire fuel cycle—from enrichment to reprocessing—to an established nuclear country, probably France. The program will also be subject to strict inspections from the International Atomic Energy Agency. The fact is that roughly three quarters of the countries around the world with nuclear-power plants today rely on the international market for fuel from the major producers in France, Europe, Russia, and the U.S. Only a minority actually do their own uranium enrichment and reprocessing.
Subscribe to:
Posts (Atom)