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  • Martin Sosnoff

My AIG Shows Up In 13F Quarterlies

When I looked at Third Point’s condensed portfolio, I was shocked, then amused to find it so similar to my own. Big positions in a few mega stocks like Amazon and a major play in AIG, American International Group which has been making successive new highs. 


Management has taken homeowners' policies through the roof on rates. I considered self insurance, but the numbers for me are formidable. Same goes for coverage on our art collection. 


Sooo… as a “get even” play with these SOB’s I bought AIG stock. Like its faceless name, management ducks publicity on its operating outlook and rate structure. This is the same AIG that dropped billions on insuring home mortgages in banks with fictitious asset backing. Our U.S. Treasury bailed ‘em out with tens of billions in aid packages. 



Money managers need ice water in their veins and should never give in to their hot-headed nonsense. When I review portfolios run by mathematicians and others, they trade daily in-and-out hundreds of stocks looking to catch quarters and half point fluctuations. 


This ain’t money management by the text-book. Neither is Buffettt’s tendency to inventory a handful of big cap stocks like Apple. Then, hold 'em for decades unless they turn very sour on fundamentals. 


I never dreamed that Third Point, and I would produce closely conforming portfolios, but it happens. Both of us could be wrong on our picks. There’s no secret society here-in. For me, the more I find myself standing alone, the more comfortable I feel. 

   


The market anticipated big macro action, but the Fed still keeps hands-in- pockets. Apple notched just a moderate quarter, but its impressive share buyback drew nods.

 

Financials, namely big banks, pressed higher without Fed action. Pressure on mega caps eased for Tesla, and Meta.  Microsoft, Nvidia and Netflix traded at new highs. Big cap paper like ExxonMobil and JP Morgan show great charts, taking out old historic highs. A few years ago JPM traded at $80 but now ticks at double par.

 

Big point here. So much depends upon buying a stock at a good entry point. Same goes for the market itself. Money managers should be judged on not just stock picking, but sector concentration and their portfolio turnover ratio. Rarely does a high turnover ratio for a portfolio lead to above average performance. There are managers who are really mathematicians who fight for eighths and quarters during a day's trading. 


Renaissance Partners is a good example. Match them against Berkshire Hathaway’s portfolio. Positions there-in carry  longevity of 50 years or so like American Express. This year alone, AXP shows over a 100 point range up some 70% from its low. AXP traded under par three years ago. How many stocks in your portfolio show such buoyancy? 


Some 50 years ago, I researched American Express, same time as Buffett. Took my profits after a couple of years. Buffett hangs in. No good reason to sell out. He has much more money than I do. Goldman Sachs sold me a huge block of Geico insurance stock at 4 bucks. Likewise, I traded out my Geico after a triple. Buffett went on to buy up the whole thing. I got bored with it. Happy currently not owning BRK for its Apple position. Probably wrong again, Charlie. 


Speculators do make or lose spectacular sums of money. Whereas money managers normally die slow deaths.  Major banks run trillions of client capital in a 60/40 spread. Such pie charts deliver mediocre results. Pie chart asset allocation is considered the prime test of money management prowess. But,  when stocks and bonds decline in tandem they will cost you 20% of asset value.  Nobody blinks because their investment ratios are blessed as appropriate. 


When I examine the chart on 10-year Treasuries trading at a 4.35% yield, down from 5% past September, the players in this sector can be in for a major bull move, three years ago, this paper traded under a 1% yield. Finally.



10 Year Treasury Bond Yield Performance



The market musta been thinking deep recession can be our way of life with commoddity quotes like oil going lower on weak worldwide demand. The Fed must be construing something like this today. That the problem is likely to be deflation, not inflation.  Two-year Treasuries presently yielding 4.7% are a gift. So is GM selling under 10 times earnings power. 


Is it time now to be more proactive? Probably so. If commodity inflation particularly oil is quiescent the FRB throws us a bone. Could be 50 basis points. Growth stocks already are stretched.  Lower multiple industrials like GM and oils could gather steam. 


Financials act irrepressibly. I’m heavy in Goldman Sachs. No Apple, but plenty of Alphabet and Microsoft, MLP’s like Enterprise Product Partners, EPD,  yielding 7% should levitate to a 6%. Spread between 2-year and 10-year Treasuries remain too wide at 42 basis points. Two-year paper should be selling at a discount to 10-Year notes, not its present premium. 


Where are all the spread players?


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