Agora Financial’s Rude Awakening

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Baltimore, Maryland

• Sourcing opportunity from adversity,
• Picking up some bargains with Mayer’s discount shopping list,
• Head you win, tails you win: A double-edged market strategy and more…

Joel Bowman, from the Arabian Gulf…

Two-up is an old game the ANZACs (Australian New Zealand Army Corps.) used to
play in the trenches back in WWI. It probably evolved from the “pitch and
toss” that poor Irish and Englishmen played the previous century.

The main gist of the game is to bet on the toss of two coins, “heads,”
“tails” or “odds.”

I bring this rather obscure “digger’s” pastime up for two reasons:

1. This week may have felt a little like trench warfare for many investors
and,
2. There’s always a flipside to the bet, especially in investing.

Markets have been bathed in blood in recent days. Even with yesterday’s
rally, investor sentiment has been badly bruised. Monday and Tuesday’s
clashes and crashes resulted in many a casualty. Even the most “crash-
resistant” stocks and indexes copped a shellacking. (The “liquidity-
insulated” Saudi exchange, the Arab world’s largest, was down a record 9.3%
on Monday, for example.)

In conditions like this, it’s hardly surprising then that four of the five
top performing funds so far this year carry the conspicuous “UltraShort”
name. The best of these is up 55%…the “worst” a whopping 34%. These
“shorts” have been having a wonderful time this week, looking on as everyone
else’s portfolio comes under fire.

So, what’s your strategy for times when your portfolio is caught in the
market’s crossfire? If you don’t have good plan for when things turn bad,
they’re likely to turn ugly.

Fortunately, our own Dan Amoss has just released his Strategic Short Report.
It’s already raked in 102% in beta testing and, with more carnage bound for
the markets, much larger gains are likely in the future. If you would like to
add a little extra armor to your portfolio, and avail yourself to some huge
upside potential, Dan’s service could be just what you’re after. For more
information, read on here. Dan Amoss’ Strategic Short Report.

And now, Rude regular Chris Mayer gives us a little insight into what’s on
his discount shopping list. Enjoy…

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Make a Shopping List
By Chris Mayer

Adversity breeds opportunity. That’s how financial markets work. I’m not sure
if the global stock markets have suffered enough adversity lately to create
really great opportunities, but I’m keeping a close eye on the situation. And
I’d advise you to do the same. It’s time to make a shopping list.

Back in 1986-1987, Bank of America wrote off $1.5 billion in bad loans,
wiping out its reported earnings. Analysts asked Sam Armacost, the bank’s
president, where the problem areas were. Sam’s classic response: “Have you
got a globe?”

That’s how it feels with today’s mortgage bubble finally popping. Problems
seem to crop up everywhere, with a long list of financial firms taking a
beating from subprime losses. It’s so bad out there that central banks around
the world have been pumping tens of billions of dollars into the short-term
credit markets.

Okay, so we know it’s bad “out there”…and so does the stock market. That’s
why the S&P 500 has tumbled more than 10% during the first three weeks of
2008…and that’s why the stock market might continue floundering for months.
But are financial conditions so bad that there is not one single stock to
buy?

In the stock market carnage of 2000, for example, you could’ve picked up any
number of oil and gas companies on the cheap. You could’ve bought REITs (real
estate investment trusts), homebuilders and gold. These are just some
examples. You didn’t even have to be particularly smart about which ones you
bought. You just had to have the guts to put the money down and the patience
to hang on.

Sometimes it’s best not to try to predict where the market is going to go. My
favorite investor of all-time is Marty Whitman, who runs the Third Avenue
Fund. I looked back and read what Whitman wrote to his shareholders back in
2000. In April 2000, near the peak of the bubble, Whitman told his
shareholders that the overall market wasn’t important. He criticized Tiger
Robertson, a successful fund manager, for closing his fund. Tiger wrote to
his shareholders: “There is no point in subjecting our investors to risk in a
market, which I frankly do not understand.”

Whitman responded: “If understanding a market means, as it obviously means
for Robertson, understanding fluctuations in securities prices, then I can
safely state that I’ve been in the investment business for almost 50 years
and I still don’t understand markets – never did, never will. Understanding
the market belongs to the realm of abnormal psychology.”

Instead, Whitman advises focusing on understanding companies and specific
investment opportunities. The rest would take care of itself over time. And
even though the overall market appeared to be in nosebleed territory, Whitman
wrote that many common stocks were “dirt cheap.”

So where are those pockets of opportunity today? While the market trades at
18 times earnings, you can pick up Loews Corp. (NYSE: LTR) today for only 11
times earnings – less than 10 times the estimate for 2008. This is a company
loaded with cash. It trades at a discount to NAV. Plus, you get the Tisch
family, which has a great track record of creating wealth for shareholders.
Over the last 25 years, the average annual return on Loews stock is 17%,
versus only 11% for the S&P 500. So you tell me, does this stock really
deserve to trade at only 60% of the market multiple?

Down in South America, the shares of Argentinean property developer, IRSA
(NYSE: IRS), also seem very cheap. This owner/operator of commercial real
estate sells for about 17 times earnings and 1.2 times book value. IRSA is
also in good financial shape, with little debt and ample cash. But the real
sex appeal of the stock is the fact that its real estate portfolio is worth
much more than the current share price. Additionally, rental rates continue
to increase as older leases expire.

Therefore, as I mentioned in the October 27, 2006 edition of the Rude
Awakening, “IRSA has many things I like: tangible assets that sweat (or that
throw off cash and increase in value over time), a strong financial condition
and a cheap share price. What we have here is an asset story…with a high-
growth kicker.”

Another real estate-focused company, Cohen & Steers (NYSE: CNS), also looks
like a great value at it current quote of $22.69 a share. The stock price has
been nearly cut in half since hitting $41 a share last October. The good news
is that the company’s real estate hasn’t gone away. It sits right where it
did last October and earns the same rental income. The only thing that has
changed is the share price.

Cohen & Steers is primarily a money manager of funds that invest in real
estate. The company’s tumbling share price reflects the widespread anxiety
that the credit crunch will cause a global economic slowdown, which could
reduce the company’s cash flow. But I doubt Cohen & Steers will suffer a
serious decline in earnings, if any at all. Besides, the company’s debt-free
balance sheet provides a great deal of protection against bad times.
Additionally, the two principals own 60% of the stock. If it gets too cheap,
they could buy back the other 40% and go private.

Check in tomorrow, as we examine Cohen & Steers in much finer detail.

— Mayer’s Special Services Resource Report —

“The Biggest Resource Breakthrough Since the ‘Beaumont Miracle’ of 1901″

64 publicly traded companies are already deeply invested… insiders are
already raking in as much as $205,421 per day on the shares…

But only one of these cutting-edge companies offers you the “secret wealth
advantage” I reveal below…Read on Here.

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Rude Endnote: Please send any horror stories, tales of victory and other
assorted commentary from the week gone to the address below.

Cheers,

Joel Bowman
Rude Awakening

aussiejoel@the-rude-awakening.com

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