iShares Silver Trust (NYSE: SLV) was supposed to be a leveraged move on gold. After all, if you can’t afford to buy gold, silver makes plenty of sense to buy for the common man. Well, it turns out that silver’s nickname of “The Devils’ Metal” was more true than anyone could imagine. Gold’s still turned in gains in 2011 but the chart is broken and for now traders and investors are flocking to dollars rather than endless paying up for gold. S
ilver was about to challenge $50.00 per ounce earlier this year at the peak of the craze and the iShares Silver Trust went briefly above $48… Now shares are under $28.00 and silver itself is around $28.00. Silver steam-rolled more speculators than gold as the April peak went from $48 and change down to under $35 in just a few trading sessions. Another flush down in September went from $40 to about $30 in a few days too. There is an old saying about sleeping with the devil that is not fit for a financial news site to publish, but don’t forget that it is called “The Devil’s Metal.”
K-V Pharmaceutical Company (NYSE: KV-A) needs to allow shareholders to tar and feather the management team. The company secured the exclusive rights to a drug called Makena to prevent premature births and the stock rose exponentially from under $2.00 to above $13.00 in just a couple of months. If this was not corporate greed then what the hell is? I mean, REALLY? Makena used to cost about $15 and then the company decided to charge somewhere around $1,500 for the same thing. What part of gouging did management misinterpret here? We warned of a deep political backlash against the company back in March after this corporate blunder when the stock was at $11.99, and now shares are under $1.50. Honestly, this looks like management got drunk and daring in a poker game and started making bets about how far they could raise prices without anyone taking notice.
Read Also: The Dogs of the Dow in 2012
Market Vectors Egypt Index ETF (NYSE: EGPT) appears to have topped the list of bad country-focused ETFs in 2011. After overthrowing the Egyptian regime, things have not turned around yet. Businesses have remained very reluctant to go back into Egypt and during the revolution this traded like a closed-end fund because the Egyptian markets were closed. Shares closed out 2010 at $19.59 and went above $20.00 in January of 2011. Now the ETF is closing out 2011 under $10.00. Here is what is ironic: you cannot really blame the ETF management team here as they just followed their investment policy and even allowed it to trade when the Egyptian markets were closed entirely.
Molycorp, Inc. (NYSE: MCP) proved to be yet one more bubble, although we cannot truly blame management for the runaway valuations here. This was induced by speculators and Wall Street analysts. If you asked most investors in 2009 what a ‘rare-earth’ was, they might have said it was a round steak that was very pink on the inside. The fortunes of this company ebb and flow with the whims of China’s exports of rare-earths to alternative energy players and manufacturers of electronics in many segments. While the valuations have gone from red-hot to fair, we have determined that the efficient market theory cannot apply here. Take J.P. Morgan’s research calls below:
- In February it raised the rating to Outperform from Neutral and raised the stock target to $65 or so from $36 when shares were about $44… then it raised the price target $74 from $66 at the end of March (when shares were around $55)…a nd then it raised the target to $90 from $74 only two weeks later (when shares were around $67). Shares peaked around $79 in early May and then fell out of bed. Recently J.P. Morgan lowered the target and said it does not see any great prospects ahead. Honestly, this feels like dot-come coverage from 1999 to 2001.
Netflix, Inc. (NASDAQ: NFLX) went from hot to snot in 2011. The major growth story was scuttled by the CEO after changing the pricing structure and also by splitting the online from physical delivery services. Many pundits were just calling it overvalued and a story whose growth was behind it, but Reed Hastings made an extra effort here to derail this one. Can the company go from an earnings growth story to a story trying to sell EBITDA? Unlikely. Any takeover would likely leave the bulk of the shareholders with too great of a loss for them to vote in favor of a deal. Shares peaked at about $300 in the summer, and now shares are around $70 closing out 2011.
Research in Motion Ltd. (NASDAQ: RIMM) has been the poster boy for how to kill a smartphone giant. The loss here was about 75% for holders and the prospects ahead look no better as Samsung, Apple, and Google have put RIM potentially on the same path ahead. Shares are now under $15 and the catalyst for what can drive the shares higher is a pure mystery. It certainly is not that tablet effort. The co-CEO structure has been a disaster and the fact that these two are taking $1 a year in salary lets us say “It is one person and $1 too much!.” It is way overdue in time for one of those CEOs (or maybe both) to lose a RIM job.
Sears Holdings Corporation (NASDAQ: SHLD) has been a disaster in 2011, even if it has been a story about a disaster of decline for years. But the retail sector gains elsewhere could almost be argued as being either at Sears’ expense or even because no one wanted to go to Sears or Kmart. Bringing in CEO Lou D’Ambrosio was a huge mistake because the prior experience was not in retail. For that matter, Eddie Lampert has proven that a highly successful hedge fund managing career does not translate into having a successful retail career. Sears closed out 2010 above $70 and shares have been cut in more than half since then. The only good news here, literally, is that borrowing Sears shares to short sell is very expensive and difficult.
Are there other bluders to consider? Of course. Bond king Bill Gross royally missed the boat in his short-Treasury Bonds call. On the international front, Nokia Corporation (NYSE: NOK), Sony Corporation (NYSE: SNE), and Veolia have all been classic disasters.
JON C. OGG
