Category: Vince Farrell

Peter Bernstein on the perfect financial storm

Nothing like this has ever happened before. There have been credit crunches and housing crises and dollar crises, but having all the chickens coming home to roost at the same time and interacting with one another is unique. We have historical perspective on the parts, but not the whole, and that makes things both interesting and scary.
~ Peter Bernstein, author of Against the Gods, a classic on risk management

My comment: I just watched talking head Vince Farrell on Bubblevision assure viewers that every financial crisis is a buying opportunity. He has no idea the magnitude of this storm.

Addendum: Speaking of Mr. Farrell, here is a snippet from a March 9, 2007 interview with Susie Gharib on the Nightly Business Report:

Gharib: Let’s go over your list of stock recommendations that you have for us tonight. At the top of your list you have AIG, the insurance company. Why do you like it?

Farrell: AIG had an analyst meeting last week in which they reported a very good quarter. And keep in mind, half their business is life insurance. We think of it as property casualty, but it is life insurance as well. They announced an $8 billion share repurchase and said under normal circumstances they would increase the dividend 20 percent a year. That is an extraordinary statement by management that it is very optimistic about the outlook for the next couple of years.

Gharib: Bank of America is another one of your stock picks. What is the attraction?

Farrell: They had an analyst meeting within the past week and the chairman said they’ll be able to grow earnings organically, meaning from the businesses they have, no acquisitions, 10 percent a year and the stock trades at only 10 times earnings. The market is at 15 times earnings and the dividend yield on Bank America is almost 4.5 percent and the yield on the 10-year Treasury is just above 4.5, so you get a Treasury bond yield and the opportunity for growth at the same time.

All told, Farrell recommended five stocks on NBR: AIG (was $69.07, now $12.14), BofA ($50.95, now $33.74), Transocean ($77.57, now $122.69), GE ($34.32, now $26.75), and ExxonMobil ($71.12, now $77.50). In all fairness, his overall picks fared much better than AIG and BofA, with the average pick -13.57% on a total return basis versus -7.87% for the S&P 500.

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