Television interviews, or any interviews for that matter, are not exactly market moving events in most cases.  What is so unusual here is that Eddie Lampert almost never gives interviews and he really avoids the media spotlight in most cases.

So the speculation here is rather simple from the trader logic… Lampert is likely set to report some more big news between now and tomorrow’s interview that will be good for shareholders.  If Lampert shuns the media, chances would seem to be low that he would be coming on live for the opportunity to talk down the Sears hopeful story.

Keep in mind that Sears shares have also more than doubled since the start of 2012.  Shares are up 2% at $68.05 and the 52-week trading range is $28.89 to $87.66.

JON C. OGG

An interview with the CEO on Reuters signals that the company is open to selling all or part of the company.  More importantly it was noted that it is expected to have data ready for potential buyers fairly soon. Reuters quoted the CEO as saying, “At a certain price, anything’s for sale.”  FULL REUTERS REPORT

Monster shares are not exactly screaming higher because many investors believe private equity may not be interested and because social media is hurting job search websites just like websites of this sort killed the “Classifieds” business of the newspapers.

The stock is only up 1.5% at $9.44 and the 52-week range is $6.34 to $18.47.  Unfortunately this stock trades at about 35-times expected 2012 earnings estimates, sales are expected to decline, and investors are not certain at all as to whether the company can hit its earnings estimates.  The company’s market value is $1.1 billion, which was also its total shareholder equity value at the end of 2011.  Unfortunately, its net tangible assets after backing out liabilities was in the red by almost $20 million.

As far as what analysts think this is worth on a per share basis, Thomson Reuters lists the consensus target price from analysts as $11.38 on this stock.

JON C. OGG

This may be good for Starbucks Corporation (NASDAQ: SBUX) as Einhorn believes that the deal is not as positive as the bulls believe and that Starbucks looks to be getting the better end of the profits.  Einhorn did disclose having a position (obviously a short-sell position).  What investors need to know is that this observation is crushing the stock and it is having more of an impact (on the flip-side) than if Warren Buffett had disclosed a position.

Einhorn often challenges companies.  He went against The St. Joe Company (NYSE: JOE) and Bruce Berkowitz of Fairholme Capital earlier this year saying that St. Joe was too aggressive in acquiring property and called it very overvalued.  It turns out that this one did fall and it sits very close to 52-week lows and trades at half the peak of the last year or so.

It looks as though Einhorn was probably caught long and wrong in Sprint Nextel Corporation (NYSE: S) from when he called it an undervalued real estate play due to vast spectrum assets.

Einhorn had also made decent sized bets disclosed in May of this year in Best Buy Co. Inc. (NYSE: BBY) at about 6 million shares worth over $172 million (down to around $150 million today on a static basis) and General Motors Co. (NYSE: GM) with a new position of more than 3.5 million shares worth more than $100 million (down close to $80 million today on a static basis). 

Betting against companies and being vocal about them is one thing.  It certainly does not assure success.  What is funny is that Green Mountain was just featured as a very expensive stock by us due to the market valuations but also as one of the dozen or so companies which are expected to outperform the fanboy holders of Apple Inc. (NASDAQ: AAPL).  

Green Mountain shares are down 11% at $81.76 and now the implied upside would be closer to 50% if the analysts are correct in their price targets.  If…  Einhorn is having a sharp impact today and now the battle will be known in time over whether or not he was right or if the bullish analysts were right for remaining so positive.

JON C. OGG

If you invest in companies with high exposure to China, this might matter.  If you invest in key ETFs like iShares FTSE/Xinhua China 25 Index (NYSE: FXI), SPDR S&P China (NYSE: GXC), and Guggenheim China Real Estate (NYSE: TAO) or if you prefer closed-end funds like The China Fund, Inc. (NYSE: CHN) or Templeton Dragon Fund Inc. (NYSE: TDF) then this really matters.  Keep in mind that Jim Chanos has been bearish on China for some time.  The problem is that with things slowing elsewhere the issues at hand could be coming to a real head.  These funds and ETFs are generally down about 25% from year highs and most are closer to their lows of the last year.

Chanos recently spoke to Carol Massar on Bloomberg TV in this video.

On the debt issue… “The Chinese government’s balance sheet directly does not have a lot of debt. The state-owned enterprises of the local governments and all the other ancillary borrowing vehicles have lots of debt and its growing at a very fast rate. The assumption is that the state stands behind all this debt. We see that the debt in China, implicitly backed by the Chinese government, probably has gone from about 100% of GDP to about 200% of GDP recently. Those are numbers that are staggering. Those are European kind of numbers if not worse.”

The property bubble… “I think that will be the surprise going into this year, and into 2012 – that it is not so strong. The property market is hitting the wall right now and things are decelerating. The CEO of Komatsu said last week that he is having trouble getting paid for his excavator sales in China. Developers are being squeezed. They’re turning to the black market for lending, this shadow banking system that is growing by leaps and bounds like everything in China.

“Regulators over there are really trying to get their hands around the problem. In the meantime, local governments have every incentive to just keep the game going. So they will continue with these projects, continuing to borrow as the central government tries to rein it in.”

What Chanos is shorting… “We are short Chinese banks, the property developers, commodity companies that sell into China, anything related to property there is still a short.”  Oddly enough, Melco Crown Entertainment Ltd. (NASDAQ: MPEL) might be an indirect winner as Chanos is long the Macau casinos which are growing at a faster rate even than the property developers.

Chanos also outlined an IMF downgrade to China’s growth he outlined tha the write-offs make China’s 9% growth really about zero.

Chanos has been shorting China for some time and a recent CNBC video shows more on the matter.  Oddly enough, in August the Asian sector funds netted in a half-billion dollars in inflows.

JON C. OGG

No money was injured while filming

The American Jobs Act is a bill which is supposed to be “fully paid for.”  It isn’t.  In the attack on wealth at all costs, the measure to tax municipal bond interest for the wealthy ($200K individuals and $250K households) is already coming under fire.  When Obama made his speech last week, we noted that the line in the sand was just drawn much deeper.  Including the muni-tax is something that his the bond sector of investors a bit up in the air.  The good news is that most of what we have found and most of what we have been told directly by market participants indicates that this tax is probably a bit of an over-reach.

We have been reviewing many comments on this matter and have some serious questions about the effort to tax muni-bonds for the wealthy.  Are the sub-$250K households about to pick up all the slack in the Municipal bond market?  Highly unlikely.  Meredith Whitney has already scared the non-investor class away from munis with her predictions of impending waves of default from cities, counties, and other municipalities.  Sadly, Mr. Obama’s tax ambitions may only make that possibility come closer to the truth.

If there is one asset manager that matters when it comes to municipal bonds, it is Nuveen Asset Management.  Nuveen has more municipal bond funds than anyone else that we have seen. The firm had more than $210 billion of assets under management as of June 30, 2011 and it has published a fairly scathing report called ‘Obama’s Jobs Bill Proposal to Restrict Municipal Tax Exemption: Likely a Non-Starter’

Nuveen noted, “The bill proposes to prevent individuals with incomes of $200,000 or more, and married couples with incomes of $250,000 or more, from deriving more tax savings from the use of tax-exempt bonds and other tax benefits than they would have if they were in the 28% tax bracket.”  It goes on to note, “Nuveen Asset Management believes that the proposal to modify the tax treatment of municipal bonds will ultimately be scrapped. In our opinion, the proposal lacks a broad constituency to support it and likely faces strong and coordinated opposition…”

24/7 Wall St. was forwarded some data from the public relations for the Glenmede fixed income team, a firm with over $20 billion in assets under management.  The team noted, “Their particular focus is on the tax-exempt income aspect. Despite their comments, it’s important to note that their assessment says this has a low probability of passing, but a high probability of stirring passionate investor discussion.” Glenmede’s figures on taxing munis:

• Punitive to high tax bracket investors and all issuers;
• Existing bond prices would fall modestly;
• Future issuance costs would increase;
• Under current tax rates, 10-year municipal yields would increase approximately 32 bps and 60 bps if top marginal rates increased to 40%.

Glenmede’s team further noted, “While we do feel as though tax-exempt bonds are under attack and the probability of a significant change at some point in the future has materially increased during the past two years, we don’t believe this proposal has a high probability of passage.”

We were also given a direct comment from Bryon Townsend, a Certified Financial Planner for W.R. Anderson & Co, LLC in Houston, Texas.  Townsend noted, “President Obama’s attempt to put caps on the “tax-free” status of muni bond income is another attempt to throw something against the wall without thinking about the actual impact in the real world.  This attempt to tax the wealthy, will put even more financial pressure on already struggling State and City governments by increasing the amount they will have to pay to issue debt.  It is seems careless that, in his jobs bill, Obama will risk crippling the one sector of our economy that is already having largest job losses.”

SGI is the institutional name under investment manager Rydex|SGI, which manages about $23 billion in assets under management.  The SGI Mid Cap Value strategy offers access to the same investment team, and while nearing capacity, is currently open to new investors.

On the retail side, Schier also manages an equally notable fund, Rydex Small Cap Value, which is open to new investors and recently attained a 3-year track record Rydex Small Cap Value Fund is rated 5-Stars by Morningstar; the Rydex Mid-Cap Value Fund (SEVAX) is rated 4-stars.

The explanation behind “nearing capacity” is rather simple.  The strategy is currently about $3 billion at SGI. The trick is to avoid owning a fund that is too large compared to its investment targets.  Since the fund has roughly 85 holdings, it is conceivable that the fund could have a real impact down the road on a stock simply by getting in and out of positions or when inflows or if redemptions hit in the future. The fund generally holds 65 to 100 positions.

Schier likes to play his cards close to the vest as he does not like to give away his investment strategy to outside managers and he does not want shadow trading around his entrance and exits of positions.  That being said, Schier did note that three areas offering great opportunity are property and casualty (P&C) insurance and energy, with a surprise sector interest in companies with significant public market exposure in various industries.  The surprise is that in the age of austerity, many companies selling to and servicing the federal government expect caution in orders.

In the realm of property and casualty insurance, or P&C, Schier likes The Hannover Insurance Group Inc. (NYSE: THG).  Despite being down about 30% from its highs in the last year, this one trades at a wide discount to peers.  It also pays a 3.2% dividend for you income seekers out there.  Schier credited them by saying, “They are effective operators.  They are gaining market share and their underwriting results are usually above peers.”  A recent acquisition of Chaucer in the United Kingdom is something the Schier expects will only add to earnings and profitability ahead.

Question: What is your investment process and how do you derive value today?

Our process seeks to uncover value stocks in virtually any market, including the volatile markets of today. The process includes three steps:

• 1. Screen for financially sound large cap companies with rising revenues, rising earnings, low debt to equity, favorable price to earnings, and favorable price to book ratios.
• 2. From that group, select only dividend paying stocks.
• 3. Add a covered call strategy on all stocks in the portfolio, to supplement cash from dividends.

Question: How does covered call strategy help in volatile market?

Our covered call strategy is more art than science. What it does is protect the downside somewhat at the expense of full participation in a large upside. We write calls on about a third of each of the stocks in our portfolio. We track our stocks to see if their movements reflect what the wider market is doing or if a stock is really going down on its own. In the latter case, we may dump the stock, but our loss is buffered by the covered calls we have issued in the past.

Question: When you screen for value, which two sectors are you finding to be the best?

The insurance sector and the consumer products sector present good value today. The energy sector is also displaying several stocks with good value.

Question: What are three of your top value stock picks and why?

We like Chevron Corp. (NYSE: CVX), Public Service Enterprise Group Inc. (NYSE: PEG), and Raytheon Co. (NYSE: RTN). Each of these stocks meets all our criteria (rising revenues, rising profits, low debt-to-equity, favorable P/E ratio and favorable price/book ratio) and each pays a nice dividend. Chevron’s dividend yield is 3.0%, Public Service Enterprise’s yield is 4.2%, and Raytheon’s is 3.4%.

Question: Raytheon seems like a risky recommendation, given the proposed cut of $400 billion in defense spending over the next 12 years.

We think that Raytheon is a good solid value, though perhaps more a tortoise than a hare. Its P/E is around 10 and its price-to-book is less than 2. We’re comfortable with those numbers.

Question: The fund also invests heavily in oil field services stock, which had a blowout year in 2010. This year the sector is doing considerably less well. Do you see some changes to the portfolio because of that?

Because we do a bottom-up analysis of our stocks, we don’t consciously try to overload on one sector or another. We hope for diversity, but we don’t push it. The oil field services sector is still a bread and butter area for us and we’ll stay with the stocks as long as they continue to pay dividends and as long as we don’t feel that they’re hurting our investors.

Question: With second quarter’s earnings season due to start next week, we’d like to know where you stand on second-quarter earnings and what’s your outlook on guidance?

We believe that corporate earnings will continue to show strength as a result of belt tightening, cost cutting, and debt reduction by many well-managed companies. Earnings will not reach record levels, but steady improvement will gradually lead us out toward full recovery — although we still have a long way to go.

Question: Value stocks fell victim to the recession just like the growth stocks, but do you expect them to hold up better than growth stocks and broader indexes (DJIA and S&P500) if the market rolls over again?

Value stocks will definitely hold up better in downside markets and volatile markets, especially stocks in those companies that pay dividends. When full recovery comes, growth stocks will probably be leaders on the upside. But as I said, we still have a long way to go before full recovery occurs.

Question: . Are there any special situations (M&A, spin-off, reorganization, etc.) out there that the market is either discounting entirely or has overlooked?

We assume continued market volatility for the forseeable future. We don’t know what will by the next Greek economic crisis, the next Japan earthquake disaster, the next Egypt or Libya political unrest, or how the politicians in our own country are going to handle the debt ceiling crisis, as well as the continued need for economic stimulus.

Therefore, we choose to stay the course and find good financially sound companies, who pay dividends and control their own debt. Special situations worry us because they involve too many unknown factors, which could be adversely impacted by the volatility flowing from whatever might be the next crisis.

Question: What do you mean when you say that more economic stimulus is needed?

I don’t necessarily mean a third round of quantitative easing. That’s a political question, and I don’t have a crystal ball that gives me any special insight into how that kind of question will be resolved.  But I will say that the future of the US economy depends on creating new jobs in the private sector. That will require capital investment on the part of US companies, and that will create more jobs and more spending.

Interview by Paul Ausick

24/7 Wall St. was given a chance to ask Tim Keating some questions in an interview about Keating Capital, as well as regarding industry trends and some recent deals that have been seen.  He has roughly 26 years of history in the capital markets and investing and his Denver, Colorado-based Keating Investments was founded in 1997.  Its site can be accessed here.

Keating has raised roughly $53 million through the end of May and that figure is expected to be roughly $70 to $75 million upon completion.  It is also expected to have about 3,500 shareholders by the time it is said and done.  Keating’s specialty is making pre-IPO investments in innovative and high growth private companies that are committed to becoming public within roughly eighteen months of the investment coming about.  Each investment is expected to be about 5% of the fund’s capital, implying up to $3 million to $4 million per investment.

The firm has already enjoyed some success even before being truly public on the markets.  Two of its investments have already made it to come public: Solazyme, Inc. (NASDAQ: SZYM) is a renewable oil and green bioproducts company; and  NeoPhotonics Corporation (NYSE: NPTN) a developer and manufacturer of photonic integrated circuit based components for use in telecommunications networks.  The group has also recently been involved in several other capital transactions and investments:

• Xtime, a service provider of Web scheduling and CRM solutions for automotive service departments;
• BrightSource, a developer solar energy generating facilities for utility and industrial companies;
• MBA Polymers, a company engaged in plastics recycling;
• Harvest Power which acquires and operates organic waste facilities.

We asked Tim Keating about this week’s news that GSV Capital Corporation (NASDAQ: GSVC) had announced a tentative transaction to buy shares in Facebook that reportedly assigned a $70 billion valuation.  On this front Keating noted the successes of Michael Moe, GSV’s chairman and CEO.  As far as the valuation, Keating noted that the Facebook valuation is dependent upon its real financial situation and we all know that the internal finances of that social media giant are under lock and key.

As far as the valuation for LinkedIn Corporation (NYSE: LNKD), Tim Keating noted that limited float and high valuation multiples seem sustainable “only if that dramatic growth can remain in place.”

Just yesterday came news that it saw a 33% gain in its adjusted EBITDA to $27.2 million in its first quarter of fiscal 2011 and as its first earnings report as a public company.  The company noted that operating income was up 52% to $19.7 million and its adjusted cash flow rose 60% to $14.3 million.  More importantly, its net loss fell to -$0.27 EPS from -$0.60 EPS a year earlier.

The company’s CEO was just on CNBC and his video presentation talked about growing faster and being larger than most social media including Facebook.  Before banking too much on this, the company said that revenue for the first quarter of 2011 was $83.52 million and there was no comparison to its prior year on that front in its press release.  That is a concern and a flag for us under overly selective disclosure so we went into its quarterly SEC filing and saw why they did not include the data…. Net revenue in the first quarter of 2010 was $86.205 million.  It turns out that the shrinkage was in both service and in product revenues.

The company also noted that it was currently considering several acquisition candidates in its press release, but when asked if it was for sale when it was on CNBC the only real answer given was that anything is for sale at the right price.

Shares hit a post-IPO low of $4.80 this morning but since the CEO was on CNBC touting the ‘Growth’ the shares are up about 17% at $5.82 on more than 1.4 million shares.  The market has barely been open for an hour and today is already the most active trading day since its IPO when 2.7 million shares traded hands.

Before you get too excited, keep in mind that the IPO price of $10.00 lasted for all of about three seconds.

JON C. OGG

This interview came at a very unique time.  It has been impossible to not notice that many key gold stocks have sold off much more than gold.  All you have to do is follow the move in the Market Vectors Gold Miners ETF (NYSE: GDX) with a loss of 15% or so in less than a month.  This was after the rapid cratering of silver seen in the iShares Silver Trust (NYSE: SLV) with roughly a 30% fall in less than a month.  Tom Winmill did not focus on silver in our interview, but this rapid drop after an equally rapid rise has been an influencing event in many shares tracking precious metals.

Winmill sees this latest drop as a buying opportunity for a long-term thesis in many of the key miners, explorers and producers of gold.  He noted, “Equity investors are pricing in much lower gold prices and that doesn’t look to be the case.  The companies involved in gold are now trading at lower valuations and I am getting more excited about gold stocks here now that margin expansion is taking place.” Winmill is looking for a peak of around $1,700.00 per ounce in the coming months and he expects that the year-end price is likely to be around $1,600.00.  As far as a year average for 2011, he expects that the average daily price of gold in 2011 will be closer to 1,500.00 per ounce.

We always try to offer both sides of critical situations, so we could not ignore that the year-to-date performance of the fund has lagged the market.  So far, the drop for 2011 has been about 17.5%.  The difference is that Midas Fund is up more than 26% if you use a one-year performance now and that in turn implies that the return was significantly higher at the end of 2010.  Rather than just buying bullion or derivations of the SPDR Gold Shares (NYSE: GLD), the Midas Fund invests in shares of the miners, explorers, and producers and we already know how much those have been hit so far this year.  24/7 Wall St. even just gave a list of the most sold-off gold stocks of any size in 2011 this week and that will explain more of the severity of the drop.

The caveat to a rise in the price of gold is a rise in the real returns of short-term interest rates, according to Winmill.  The current climate of negative real returns after inflation is helping gold remain high.  With more and more currency being created, the move into hard assets is likely to remain.  We were also given the opportunity to discuss some key stock picks in the gold sector.  We saw the top ten holdings of the Midas Fund and we wanted to know which were among his favorites based upon the current share prices today.

Winmill first noted Eldorado Gold Corp. (NYSE: EGO), even if gold prices were to retreat as he noted it is one of the lowest-cost producers and has a great management team.  After looking at the current price of about $15.50, the 52-week range is $14.45 to $20.23.  Thomson Reuters even has a consensus price target of about $22.73, so even the consensus analyst group is expecting a move of nearly 50% here in Eldorado shares.