Thoughts

TBT and Raw Industrial Commodities

Note the strength in raw industrial commodities over the last week.

Reinsurers Getting Jiggy

The reinsurers, a sector of which I am enamored, have started to move.

Another TBT Driver

An enormous amount of financing is now taking place to capitalize on generational lows in interest rates.

Supply represents another tailwind to a TBT long position.

I am optimistic that housing is in the process of stabilizing. Go read what Jeff Matthews wrote about housing (and pattern recognition) yesterday. It is priceless!

Bernstein has an outperform rating on Cisco and a $31 price target.

Sanford Bernstein makes a strong case that Cisco should initiate a dividend now.

We believe now is opportune for Cisco to initiate a dividend as investors flock to coupon-bearing assets. Cisco's net cash balance is in the top five of S&P 500 ex-financials, and it generates above an 8% free cash flow yield, creating ample space for a dividend.

To signal strength to the market and attract new yield-oriented investors, we recommend a 1% to 2% yield dividend, in line with precedents. This would create a new virtuous cycle for Cisco, raising return on invested capital and building confidence in shareholder returns.

Cisco is constrained by onshore cash balances. The historical practice of issuing debt at a higher rate than its cash earned to fund U.S. operations destroys shareholder value. We advocate offshoring and repatriating cash as needed.

Bernstein has an outperform rating on Cisco and a $31 price target.

Nouriel Roubini created an interesting table that favors a below-trend recovery above other GDP outcomes.

I am in his camp on this one.

And I am increasingly more optimistic regarding U.S. equities.

Here is an interesting table prepared by Dr. Nouriel Roubini, which outlines six possible GDP cases:

1. above-trend recovery (5% probability);
2. below-trend recovery (40% probability);
3. stagnation (12.5% probability);
4. double-dip, V-shaped (30% probability);
5. severe double-dip then weak recovery (10% probability); and
6. global financial economic collapse (2.5% probability).

I am in the U (below-trend recovery) camp, which he assigns a 40% probability.

And I am increasingly more optimistic regarding U.S. equities.....