EUCOM Economic Analysis - Part I

[Firn]

It's tough to go against the grain, buy when everybody is scared, but that is also a time when I do best. Good luck.

Good luck always helps, I hink we will see if it was a wise decision in a couple of years.

I do have some questions for you, if you are up for it. I'll outline my process and would appreciate any tips that you are willing to share?

Data gathering seems to be just about as important as analysis for making profitable decisions. Free is always good and so I regularly use sites such as Marketwatch (http://www.marketwatch.com/investing...countrycode=XE ), Finanzen.ch (http://www.finanzen.ch/aktien/E.ON-Aktie ), Yahoo Finance ( http://finance.yahoo.com/q?s=EONGY&ql=1 ), Google Finance ( http://www.google.com/finance?q=eong...Mi7DsHXqAGnjAE ), Seeking Alpha ( http://seekingalpha.com/symbol/eongy.pk ) and of course the company website (http://www.eon.com/en/investors.html ). Paid and unpaid newspaper subscriptions help with the macro background and trade newspapers and magazines help to further zoom in. Next, I am aware of and sometimes use, paid providers such as the Economist Intelligence Unit and Moody's Investors Service to further zero in on important nuances. In my mind a Bloomberg terminal would be the pinnacle of data gathering capability, but I have never used one (renting is pricey) so perhaps I am being captured by the hype.

What can I do better?

Well of course I'm in no position to know that. In general I follow the framework set up by Graham and Buffet and try to stick to it, which is surprisingly hard. Grahams filters work pretty well to sort get stocks which deserve a closer look, but he is arguably a bit too restrictive on book value.

You are also using pretty much the same ressources as I do, I have completely given up to listen to 'insider' information. Apart from the facts and the experience there is now a little nice story of a friend of mind. He became one of Americas 1% or less and sold a year or two ago part of the stock of the company in which he worked at less then 1/3 of the price I got only a month or so ago. He had of course far far more of it and invested considerable time in getting the decision right (he no longer works regulary) and despite all the odds favoring him luck and a layed back-approach worked this time better.

Krugman had recently an entry on the issue in general. Kahnemann argues in a similar way. Obviously the discussion is about certain complex topics with a lot of uncertainty. In other areas expert knowledge and insider knowhow are golden.

P.S: The German Wiki does have a decent overview of the history of E.ON. Needless to say that the Jahresabschluss is full of info. Maybe we could start a bit more detailed European discussion about it. In general I would say that Europe-wide the utilities are trading for low prices. The big question is of course if the those prices are low enough under their long-term value to give you a good margin of security.

P.P.S: Eurokrise ebnet VW den Weg zur Herrschaft

VW als "sicherer Hafen" in der Krise

"Volkswagen ist ein sicherer Hafen geworden", sagt VW-Finanzvorstand Hans-Dieter Pötsch."

Und es ist nicht nur VW. Die Münchener Siemens AG refinanzierte sich im August am Anleihemarkt so günstig wie nie zuvor. Die Rendite, die Siemens bieten musste, lag sogar unter dem, was gleichzeitig für französische Staatsanleihen mit „AAA"-Rating am Markt bezahlt wurde.

Im Durchschnitt mussten deutsche Unternehmen wie BASF, Linde oder die VW-Nutzfahrzeugtochter MAN zuletzt am Anleihemarkt einen Aufschlag von 1,9 Prozentpunkten auf einen Referenzzinssatz zahlen, der sich an den EZB-Leitzinsen orientiert, zeigen Daten von Dealogic. Bei italienischen Firmen betrug die Prämie 4,2 Prozentpunkte, bei spanischen 4,65.

The 'Kupon' you get on bonds of solid German enterprises is really low indeed. Offers deemed decent to good are snatched up quickly by the big boys. That over 2% more are a problem for Italian companies in competition with German ones is no surprise.