Archive for September, 2005

  • Too Cute
    , September 30th, 2005 at 10:07 pm

    Washington’s newest panda cub. Wook at dat face.
    Watch out for the claws…

  • Google Watch
    , September 30th, 2005 at 1:05 pm

    The Google Dolls never tire of telling us how they’re not focused on share price. Apparently, some one is taking notice. Larry Page has filed to dump another batch of shares.

    Google Inc. co-founder Larry Page filed this week to sell 1.2 million shares, setting him up to collect $370 million and pushing his sales to more than $1 billion since the company went public last year.
    The stock sales by Page, and similar sales by partner Sergey Brin, have helped drive Google insider stock trades to almost $3 billion this year, the most for any U.S. company, according to the Washington Service, a research firm that keeps track of sales by company executives.
    Page and Brin, both 32, benefited as the stock surged to a record $320.95 this week from an $85 initial public offering price in August 2004. The two, each with a net worth of about $11 billion, raised more money on insider sales this year than any corporate executive except Microsoft Corp. Chairman Bill Gates, who has sold $1.58 billion in Microsoft stock. Mountain View, California-based Google raised $1.67 billion at its IPO and this month sold an additional $4.18 billion of stock.
    I’m not aware of any other companies that have had massive insider selling like this,” said Richard Howe, a lawyer at Sullivan & Cromwell LLP in New York, who advises on insider stock sales. “This is amazing for the people who started the company from nothing and turned it into this amazing profit-making machine.

  • The Last Day of the Third Quarter
    , September 30th, 2005 at 11:59 am

    Today is the final day of the third quarter, which is also the end of the fiscal year for many companies, plus the federal government. Today is also the last day at Disney for Michael Eisner. After 21 years at the helm, Eisner is moving on. I’m curious if Roy Disney will make it over to the retirement party. After looking over his resignation letter, I’d lean towards the doubtful camp.
    Also, GM will end its employee-pricing discount today. Considering the state of GM’s pension plan, I’m a little worried that a GM employee would even consider buying a GM car. As a taxpayer, I might have to bail those folks out pretty soon. If this is going to involve me, I’d much rather have them buy a reliable car. Rich Aristotle Munarriz at the Motley Fool has more.

    GM’s Employee Discount pitch is seen by many as a rousing success. I think history will reveal the move as a colossal failure. The marketing resonated with car owners right away. June deliveries were up 41%, the company’s strongest showing since September of 1986. It bled into July, where GM saw a 20% spike. By August, the public had already had their fill. US deliveries were off by 16%.
    However, I don’t think the promotion was a mistake based on how it grew stale last month. No, I think it was a failure because it was a success. Let me explain: The “employee pricing” approach was so effective because it gave the perception that consumers were getting a great insider deal. GM started. Ford followed. DaimlerChrysler’s Chrysler tweaked the marketing with its Employee Pricing Plus approach, which offered smaller discounts but padded them with more conventional rebates.
    The end result is the same in all three cases. How are these companies going to move their 2006 models? Some have already turned to offering lower prices on the 2006 models, but consumers now expect employee pricing. They were trained to forget the fluctuating cash rebates of the past. This one, they remember.

  • E*Trade to Buy BrownCo
    , September 30th, 2005 at 11:17 am

    E*Trade Financial said that it’s going to buy BrownCo from J.P. Morgan Chase. This is good news, and I expect to see more mergers in the future. This comes on the heels of E*Trade buying Harrisdirect. Also, Ameritrade is merging with TD Waterhouse.
    BrownCo is famous for its rock-bottom fees. The company’s average account size is $146,247, compared with $31,663 for E*Trade. I think we’ll see more of the big boys on Wall Street pick up niche brokers.

  • Google May Be Bad for You?
    , September 29th, 2005 at 3:47 pm

    John Battelle, one of the founders of Wired, has a warning for avid Googleholics:

    Next time you tap a phrase into the Google toolbar on your Internet browser, think about what you’re revealing to one of the America’s biggest corporations.
    Whether you “googled” for Paris Hilton, a stock tip or a gift for Mom, you’ve opened a window on your life to a company with a market value of $92 billion, the 22nd largest in the U.S.

    He takes a close look at the search engine in his new book, “The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture.”

  • Bayou’s Marino and Israel Plead Guilty to Fraud
    , September 29th, 2005 at 3:35 pm

    This is hardly a surprise. Samuel Israel and Daniel Marino have pleaded guilty to fraud charges in relation to the Bayous hedge fund. The fund has, or at least had, $300 million.

    Israel, who rents a Tudor house with enclosed grounds in Westchester County, north of New York City, said in July that he would shut Bayou’s four hedge funds, which he managed, and return investors’ money in August. That didn’t happen, triggering investigations by Connecticut banking regulators, the U.S. Securities and Exchange Commission and the Federal Bureau of Investigation.
    Marino wrote a six-page suicide note with details of the alleged fraud that was recovered by police at Bayou’s office in Stamford, Connecticut, police said. Marino, who didn’t take his life, grew up in Staten Island, New York, before relocating to Westport, Connecticut. He earned a Certified Public Accountant’s license in 1990, according to New York records.

    And now for the understatement of the year:

    The confession in the suicide note may have made a defense by Marino and Israel difficult had they gone to trial.

    Yes, that would hurt your defense a tad.

  • Today’s GDP Report
    , September 29th, 2005 at 10:29 am

    The government revised the GDP report for the second quarter. Before, the government said that the economy grew by 3.285% for April to June quarter. Now it turns out the economy really grew by 3.307%.
    To some people what I have to say will be heresy, but economic growth is surprisingly stable. By listening to political rhetoric, you’d think the economy gyrates wildly, usually corresponding to policy changes in Washington. But the facts say otherwise.
    Since March 1966, the economy has grown by 3.0792% a year.
    Since December 1997, the economy has grown by 3.0798% a year.
    Since June 1986, the economy has grown by 3.0795% a year.
    Since December 1997, the economy has grown by 3.0710% a year.
    Looks like a trend to me.

  • Europe’s Economy
    , September 28th, 2005 at 1:17 pm

    Daimler Chrysler just announced that it will cut 8,500 jobs in Germany over the next year.

    The world’s fifth-biggest carmaker said the move would cost 950 million euros, to be offset by extraordinary income and efficiency gains.
    It reiterated its forecast for a slight rise in 2005 operating profit excluding charges to restructure its Smart minicar business.
    The Mercedes division employed around 105,000 staff at the end of last year, of which some 94,000 were in Germany.
    “These headcount reductions are indispensable. They will contribute to significant improvements in the competitiveness of Mercedes-Benz through an increase in productivity,” it said in a statement. “The measures will also contribute to the sustained safeguarding of production (in) Germany.”

    So if all lost for Europe’s economy? Matthew Lynn says, “Don’t Blame Oil for Europe’s Economic Slowdown.”

    If oil is so deadly to Europe’s economic prospects, then why is it that Japan appears to be emerging from a recession, when Europe is still stuck with miserable growth? Japan isn’t exactly famous for its oil wells.
    Likewise, the U.S. Because taxes on pump prices are so much lower there than they are in Europe, the impact that an increase in oil prices has on consumers is proportionately much greater. And yet, U.S. growth rates remain significantly higher than Europe’s. The U.S. economy expanded an annual 3.3 percent in the second quarter, compared with 1.1 percent for the euro area.

    Lynn concludes:

    The reasons why Europe’s economy is growing so slowly are familiar: high taxes, dysfunctional labor markets, and restrictive monetary policy. The first step toward fixing those is honesty. Right now, that appears to be a commodity in shorter supply than oil.

  • Fair Isaac Hits New All-Time High
    , September 28th, 2005 at 12:55 pm

    Fair Isaac finally hit a new all-time high today. It took nearly two years for the company to break into record territory.

    J.P. Morgan upgraded Fair Isaac today to overweight from neutral. I’m not a big fan of following analyst upgrades or downgrades, but this one is nice to see. Fair Isaac has a very strong business. I especially like the fact that its gross margins come to about 70% of sales. That’s the sign of a well-run business.

    The company will report its fiscal fourth-quarter earnings in late-October. The current estimate is for 49 cents a share. This means that although FIC’s stock is roughly where it was two years ago, its profits are nearly 30% higher. This is a solid stock to own.

    You can see my complete Buy List here.

  • Warren Buffett’s Shareholder Letters
    , September 27th, 2005 at 8:35 pm

    If you’re new to the world of investing, I recommend reading some of Warren Buffett’s annual shareholder letters. You can find a complete collection here.
    The letters have a folksy style and Buffett always makes a good point. This is the best way to get a nice summary of Buffett’s investing philosophy, and you can see how little it has changed over the years.