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« March 2006 | Main | May 2006 » April 30, 2006Junior Wall Street Wannabes The NYT weighs in on the Plotkin/Pajcin case: Wall Street has often been plagued by insider trading scandals in the past, most spectacularly in 1980's, when it ensnared some of the most powerful titans of finance. But the scheme that Mr. Pajcin and Mr. Plotkin are accused of involves the most junior of Wall Street wannabes. Posted by edelfenbein at 11:57 AM John Kenneth Galbraith, 1908-2006 From the New York Times: He wrote two more major books in the 50's dealing with economics, but both were aimed at a large general audience. Both were best sellers. Posted by edelfenbein at 7:43 AM April 29, 2006On Top of the World The Economist looks at Goldman Sachs (GS): By any measure, Goldman Sachs is a formidable company. The bank knocks the spots off its competitors, whether in pure “investment banking”, the traditional craft of underwriting and mergers and acquisitions in which it made its name, or in its new focus, trading for customers and its own account. Even compared with leaders in other industries, Goldman makes spectacular returns. Among its latest record-busting yardsticks was a 40% quarterly return on equity. The average pay-packet of its 24,000 staff last year was $520,000—and that includes a lot of assistants and secretaries. Posted by edelfenbein at 3:42 PM April 28, 2006Dell and Microsoft In less than a decade, Dell (DELL) and Microsoft (MSFT) have gone from growth stocks to value stocks. Shares of MSFT are getting ripped today in the wake of the company's third-quarter earnings report. The company earned 28.6 cents a share, which rounds up to 29 cents, but that includes a 2.6-cent charge for stock options. The Street consensus was for 33 cents a share. The stock is currently down over 11%, its worst day since 2000. As bad as Microsoft is, Dell just don't make no sense. The stock is down to $26 a share! One of the things I've learned about investing is that trends can go on longer than you think. Everytime you wonder, "how much more can this go on?" it will. Dell was at this price eight years ago, yet the company's sales and income have tripled since then. Posted by edelfenbein at 2:20 PM Supply and Demand Charles Krauthammer is today's Washington Post. His theory for higher oil prices: something about supply and demand. China has come from nowhere to pass Japan as the number No. 2 oil consumer in the world. China and India -- between them home to eight times the U.S. population -- are industrializing and gobbling huge amounts of energy. Posted by edelfenbein at 9:07 AM Economy Grew By 4.8% in First Quarter The government just reported that the economy grew by 4.8% in the first quarter. That's a pretty good number. Inflation actually slowed down some. I expect the economy to cool off as the year goes on, but for now, the business outlook is very strong. Posted by edelfenbein at 8:51 AM April 27, 2006Divergence Look at this divergence between the cyclicals (blue line) and the consumer stocks (red line).
These indexes normall track each other fairly closely. Combined with the turnaround in the bond market, this may indicate a weaker-than-expected GDP report. Posted by edelfenbein at 2:37 PM UNH Changes Governance Policy UnitedHealth (UNH) is in much more trouble than I realized. The stock dipped below $47 a share this morning. The company is in crisis-management mode. The WSJ reports: UnitedHealth Group Inc.'s board, under fire for past stock-option granting practices, said it would adopt several changes to its corporate-governance policies. Too many corporate boards are little more than rubber stamps for whatever senior management wants. How does someone get $1.6 billion stock options. That’s more than $1 a share. These policy changes are nice too see, but I think they’re a first step in a major overhaul. Posted by edelfenbein at 2:24 PM The Hard-Hitting Questions From TheStreet.com's earnings call courtesy of Seeking Alpha. Michael Moncroft - MRM Capital I have a follow-up: How are your eyes so blue? Posted by edelfenbein at 11:12 AM Earnings from Respironics and Fair Isaac The market has flipped-flopped today. The cyclicals, particularly the oil stocks, are feeling the pain. But the consumer and defensive stocks are holding onto some gains. The bond market continues to get beaten up. The five year Treasury is now well over 5%. I’ll be honest. I don’t like the look of this market. I’m not pulling out, but higher long-term rates are like Kryptonite to any bull market. From our Buy List, Respironics (RESP) reported earnings of 38 cents a share, which was a penny below estimates. However, that included three cents a share in stock-option expenses. This is the first quarter that firms have to report earnings after stock options. Wall Street seems to be a bit confused about which number to follow for which company. Since Respironics is up this morning, I’m going to assume they beat estimates. The company also reiterated earnings for this year of $1.46 to $1.48 a share. Fair Isaacs’s (FIC) earnings weren’t so good. The company earned 40 cents a share, which was 12 cents below Wall Street’s forecast. Fair Isaac said it expects earnings of 44 cents a share for this quarter, and $1.75 for this year. This was below the company’s earlier projections. The stock is down about 7% today. The market is waiting for tomorrow’s GDP report. This will be our first look at how well the economy did for the first quarter. The report for the fourth quarter was a dud. I’m inclined to think it was a temporary blip as a result of Katrina and Rita. I think the first quarter number could be very strong. The bond market seems to be thinking the same thing. Posted by edelfenbein at 10:44 AM April 26, 2006Fiserv Shares Up Despite Analysts' Worries Fiserv (FISV) is doing well today, but the AP notes that some analysts are worried: Analysts said the company, which caters to the financial services and health benefits industry, benefited from a surge in flood claims, and a larger-than-expected stock buyback program. AFLAC (AFL) is aslo higher today, and SEI Investments (SEIC) is at a new high. Fair Isaac (FIC) reports after the close. Posted by edelfenbein at 11:29 AM April 25, 2006Other Enron Scams From The Onion: Posted by edelfenbein at 7:31 PM Today Never Happened Yuck. Not a good day for our Buy List. Let’s just pretend today didn’t happen. What I love about Wall Street is that a new opening bell is never too far away. On days like this, I try not to get discouraged. Everything, it seems, is working against us. Still, I’m determined to stick with our strategy of buying great companies at great prices. First, let’s look at the bad news. Brown & Brown (BRO) got creamed in today’s session. The stock lost 7.7%. Frankly, I thought the stock was getting a bit ahead if itself, but still, today’s selling surprised me. The company reported earnings that were inline with estimates, but the market is concerned that too much of BRO’s growth came from acquisitions. (That’s what Brown & Brown always does!) I could see the stock pulling back some more before we’re done. But there is good news! After the bell, we had some decent earnings reports. First up is Fiserv (FISV). The company reported earnings of 64 cents a share, five cents ahead of estimates. Not bad at all! Plus, this stock continues to look cheap. Over the past few years, Fiserv’s P/E ratio has collapsed even though its earnings continue to grow. AFLAC (AFL) reported earnings of 72 cents a share, two pennies more than estimates. Few stocks are more reliable than AFLAC. The company also reiterated its growth forecast for this year and next. I always like to see my stocks do that. And finally, Varian Medical Systems (VAR) reported earnings of 46 cents a share, which was inline with forecasts. Varian doesn’t tend to surprise too much so I don’t expect a lot of fallout from the stock. The bond market got hammered today. The five-year note (^FVX) came very close to 5% today. Posted by edelfenbein at 5:40 PM UnitedHealth Under Fire Today is a big day for earnings. AFLAC (AFL), Varian Medical (VAR) and Fiserv (FISV) all report today. The Wall Street Journal reported that the Attorney General of Minnesota is turning up the heat on the company. The stock has been under attack ever since the news of CEO William McGuire’s $1.6 billion in options became know. Plus, it appears that many of these options were “back-priced” to be more favorable for UNH execs. Here’s what the WSJ reported: Minnesota Attorney General Mike Hatch, stepping up his campaign against UnitedHealth Group Inc., urged around 135 public and private pension funds to withhold votes for four directors seeking re-election to the health insurer's board next month. The stock has slid from over $64 in December to $50.16 for yesterday’s close. Posted by edelfenbein at 9:46 AM April 24, 2006Brown & Brown's Earnings BRO earned 36 cents a share for the first quarter, inline with forecasts.
Posted by edelfenbein at 9:12 PM Could a computer be the next Buffett? Money Magazine asks the question: A recent study by Goldman Sachs Asset Management concluded that while over 15 years a human manager can beat a quant fund in absolute terms, once you adjust for the extra risk the human manager had to take to get that result, the quant fund comes out ahead. I'm a little skeptical. Computers are only as smart as the people doing the programming. My guess is that computers do well because they don't have emotions. Vulcans, I'm sure, would make kick-ass money managers. Still, I'll go with us humans, imperfections and all. Posted by edelfenbein at 4:00 PM The Penny Bull Market Thanks to the bull market in copper, the penny is about to worth more than one cent. Wow! Our money will be worth something. This is actually a serious problem for the government. Seigniorage—printing money for profit—is a nice little business our government has all for itself. In fact, it’s a felony if you or I try it. This is one the few purely socialized industries in the United States. You know those new “state series” of quarters? They’ve been a huge moneymaker for the Feds. But it was not always so. From the 1830s to the 1860s, the U.S. practiced “free banking.” Most of the currency in circulation came from privately issued bank notes. The amount of Federal currency wasn’t very significant. The old idea was that free banking was a disaster because the economy was dominated by lousy currency. But new research has shown that free banking was more effective than previously believed. Posted by edelfenbein at 11:55 AM April 22, 2006Get Ready for the Largest IPO in History Coming this summer, the largest IPO in history, and it's not a tech stock. It's not even American. Rosneft, the Russian oil company, is set to go public in July. The company bought Yukos after the Kremlin forced Yukos into bankruptcy. Rosneft now has more crude oil in the ground than ExxonMobil. Posted by edelfenbein at 10:48 PM April 21, 2006Dell Is Below $27 The bears have it out for Dell (DELL). The stock is down to $26.91 a share. I think this is a good time to remind everyone that Dell beat earnings last quarter. You don't often find stocks this good going for 16 times earnings. Posted by edelfenbein at 1:36 PM Yankees 1st Team to Top $1 Billion in Value According to Forbes, the New York Yankees are the first baseball team to be worth over $1 billion. Forbes estimated the Yankees had $50 million operating loss. The Boston Red Sox were pegged with the second-highest value at $617 million, followed by the New York Mets ($604 million), Los Angeles Dodgers ($482 million), Chicago Cubs ($448 million) and Washington Nationals ($440 million). The Yankees are 7-7, tied for last with Tampa Bay.
Posted by edelfenbein at 9:17 AM Citigroup Cuts Dell to Sell From TheStreet: The pricing advantage enjoyed by Dell is eroding as competitors adapt its inventory and supply-chain innovations, and the company needs to contemplate lower margins to preserve its franchise, Citigroup said in downgrading the stock to sell Friday. Posted by edelfenbein at 9:14 AM April 20, 2006Danaher Earns 67 Cents a Share A few weeks ago, Danaher (DHR) raised the lower end of its guidance. It turns out, the company was right! Today, Danaher reported earnings of 67 cents a share, two cent more than Wall Street estimates. Danaher earned $216 million, or 67 cents per share, compared with $188 million, or 58 cents per share, a year earlier. The company is trading lower today due to its conservative forecast for the rest of 2006. Danaher said that it expects to earn between 73 and 78 cents a share for the second quarter, and $3.07 per share to $3.17 a share for the year. Wall Street was expecting 77 cents for the second quarter, and $3.13 for the year. I think the company is simply being cautious. Posted by edelfenbein at 12:36 PM Imagine Imagine no possesions, John Lennon's Schoolbook Fetches $226,150 in London April 20 (Bloomberg) -- John Lennon's schoolbook, entitled "My Anthology," fetched 126,500 pounds ($226,150) at a London sale of rock memorabilia last night. Auction house Cooper Owen Plc had set a minimum price of 100,000 pounds for the 12-year-old's scribbles and drawings. Posted by edelfenbein at 10:05 AM Golden West's Earnings Golden West Financial (GDW) reported first-quarter earnings of $1.25 a share, one penny below expectations. Golden West Financial Corp., the nation's second-largest savings and loan, reported Thursday that strong performance from its adjustable-rate mortgage lending products helped push up first-quarter profit by 12 percent. Posted by edelfenbein at 9:49 AM April 19, 2006The Late Cyclicals Surge Higher Here’s another sign of an overheated market. The late-stage cyclical stocks are starting to outperform early-stage cyclicals. Here’s a graph of the Merrill Lynch Late Cyclical Index (^XT), the gold line, with the Merrill Lynch Early Cyclical Index (^XE), the black. Notice how closely this indexes tend to track each other. But recently, the late-stage cyclical stocks have jumped higher while the early-stage stocks are bouncing along.
The XE is comprised of stocks that do well once the economy starts to show some life. These tend to be more consumer-oriented stocks. In fact, Wal-Mart is about 30% of the index. The index also inlcudes names like Lowe's, Home Depot, Costco and Target. The XT is made up of stocks that do well when the economic cycle starts to show its age. These are mostly heavy-industry and commodity stocks like Dupont, Dow Chemical, Alcoa, Phelps Dodge and Nucor. Bloomberg News polled 41 economists and all of them agreed that the Federal Reserve will raise rates to 5% on May 10. Posted by edelfenbein at 3:06 PM Cash Is King Today is a huge day for earnings. Six Dow components report today. Thanks to yesterday’s big move, the market is again close to five-year highs. The government reported that consumer inflation rose by 0.4% last month. The core rate, which excludes food and energy prices, rose 0.3%. Although bonds rallied on Monday and Tuesday, yields are headed higher this morning. I’ve been looking at a lot of balance sheets lately, and I’m surprised at the level of cash that many corporations are holding. Microsoft (MSFT), for example, has $35 billion in the bank. Think about that. Their bank account is larger than most banks. In fact, by itself, Microsoft's bank account would be the 70th largest stock in the S&P 500. ExxonMobil (XOM) isn’t far behind with $29 billion in cash, and Pfizer (PFE) has $22 billion. What is everyone waiting for? Perhaps Microsoft will pay another special dividend. I think it’s interesting that a software company is one of the largest lenders in the country, and it isn't even part of the Federal Reserve System. On my first job as a broker, I remember how we were trained in our “pitches” to say things like “best of all, this company has a mountain of cash” or “don’t forget, cash is king.” I didn't know what the hell I was talking about. Holding a lot of cash isn’t in and of itself a great thing. Cash doesn’t do much besides earn interest, and I don’t need to buy a stock to do that. The whole idea of investing is exchanging cash for assets that are (hopefully) more productive. While I’d prefer to own a company that has little debt and a nice wad of cash, it’s not imperative. It can even be a slight negative. This is what’s known as the Bladder Theory of corporate finance. The odds that you’ll do something intelligent with your cash stash is inversely proportional to the amount of cash you have. Given the past few years, I don't think the Bladder Theory is just a theory anymore. Google (GOOG) is sitting on $8 billion. That’s $27.13 a share. We all know they’re great at technology, but now we have to see how good they are at investing. I hope they’re better at investing than they are at PR. I know they’re going to buy somebody soon, but dear lord, I’m afraid to guess. The reason why I like to see how much cash a company has is that it can distort how much a stock is worth. Let’s look at Microsoft again. The company is going for $27.13 a share, which is about 17.7 times next year’s earnings of $1.53 a share (their fiscal year ends in June). But! The company has no debt and $3.35 a share in cash. So let’s remove the cash and look at the valuation. Minus the bank account, Microsoft is trading at $23.78 a share. Let’s estimate that the cash will generate earnings of 15 cents a share (that’s about 4.5%). This means that Microsoft’s business will generate earnings of $1.38 a share. So Microsoft’s business operations are really going for 17.2 times earnings. That’s a slightly different picture. While Microsoft is trading at 8.1 times cash, Dell is going for just 7.3 times its cash. Other cash-rich stocks on our Buy List include Fair Isaac at 8.3, Golden West at 11.8, Harley-Davidson at 13.4, Medtronic at 12.1, Respironics at 10.4 and UnitedHealth at 11.2. Posted by edelfenbein at 9:58 AM April 18, 2006J&J Beat by a Penny Johnson & Johnson (JNJ) earned 99 cents a share, one penny more than the Street was specting. The company reiterated its forecast of $3.65 to $3.72 for this year. Johnson & Johnson's first-quarter profit jumped 17 percent, mainly due to a big termination fee from its failed attempt to acquire heart device maker Guidant Corp., while revenues were hurt by exchange rates and generic competition to some former blockbuster drugs. The world's most diversified health products maker on Tuesday reported net income grew to $3.31 billion, or $1.10 per share, from $2.84 billion, or 94 cents per share, a year ago. Posted by edelfenbein at 12:56 PM UnitedHealth Earned 68 Cents a Share This was a good quarter for UnitedHealth (UNH): U.S. health insurer UnitedHealth Group Inc. on Tuesday posted higher-than-expected quarterly profit as it benefited from the acquisition of PacifiCare Health Systems, and boosted its full-year profit forecast. The WSJ has more: UnitedHealth Group Inc. Chairman and Chief Executive William W. McGuire said Tuesday he is recommending that the insurer, which is under scrutiny for the timing of past stock-options awards, forgo equity-based payments and grants for most senior executives. Posted by edelfenbein at 9:21 AM The Great Quake At 5:12 a.m., one hundred years ago today, San Francisco was destroyed by a massive earthquake. Of a population of 400,000, an estimated 225,000 to 300,000 were made homeless. The official death toll was 478, but it was probably closer 3,000. That day, the Dow dropped from 96.84 to 95.67. Two weeks later, the Dow closed at 86.45. In today’s terms, that would be equivalent to a loss of 1,200 points. The market recovered but crashed again in March 1907, then again in October 1907 after two brothers tried to corner United Copper. They failed (sound familiar), and it led to a huge bank run. The financial system was bailed out thanks to a loan from J.P. Morgan. The crisis led to the passage of the Federal Reserve Act in 1913. Posted by edelfenbein at 6:00 AM April 17, 2006Johnson & Johnson's Earnings Johnson & Johnson (JNJ) isn't on our Buy List, but I like the stock a lot. I'm amazed at how poorly health care stock have been doing lately. One of the best ways to find great stocks is to pick the best names out of the weakest sectors. Studies have shown that much of a stock's daily movement is due to what industry it's in. As the health care sector has stumbled, the good and the bad have fallen. One year ago, Johnson & Johnson was closing in on $70 a share. Today, shares of J&J are hovering just above its 52-week low of $56.70. If J&J beats earnings and fails to rally, we'll really have an example of poor investor confidence. Here's an earnings preview: OVERVIEW: The company started the quarter losing out to Boston Scientific Corp. in a bidding war for heart device maker Guidant Corp. In February, the company's Ortho Evra birth control patch was in the spotlight after the Food and Drug Administration released a study reporting double the risk of blood clots in women compared with those using the pill. Posted by edelfenbein at 5:55 PM Oil at $70 Ugh. Today’s not looking so good. Thanks to the moonbats running Iran, oil broke $70 a barrel again, bringing it close to a new all-time record. The energy stocks are soaring, while the health care and consumer stocks continue to be left behind. Expeditors (EXPD) is also lower on an analyst downgrade. First, it was the 30-year bond that broke 5%, then the 10-year. Now, the five-year note is closing in on 5%. We’re up to 4.95%. Wanna see the impact of a flat yield curve? Citigroup (C) reported good earnings today. For the first three months of this year, the company made $1.11 a share (from continuing ops), nine cents more that estimates. Yet the stock is trading at 11 times this years’ earnings. Plus, the dividend yield is over 4%, which isn’t too far from long-term bond yields. Banks don’t make much money when the yield curve is so narrow. Over the weekend, Barron’s had an article on Patterson (PDCO), the dental supply company. Danaher (DHR) recently announced that it’s moving into this sector by buying Sybron Dental (SYD). The Barron’s article is a paid link, but here’s an article from Reuters. Posted by edelfenbein at 11:54 AM April 14, 2006Worst. Day. Ever. Six years ago today, the government reported that consumer prices rose 0.7% in March 2000. This totally freaked out the market, especially the tech sector. The Nasdaq Composite plunged 355.49 points, its largest drop ever. But that was only the beginning. Before it was all done, the index dropped by another two-thirds. Six years on, the Naz is still down 30%. If I had to pick the most absurd moment of the Internet craze, it would have to be November 13, 1998. That’s the day TheGlobe.com went public. The company tried to go public once before, but there wasn’t enough interest. The second time, however, worked. The shares were priced at $9. The stock opened at $87, climbed to $97 and finished the day at $63.50. Six years ago today, the stock dropped 19% to $3, and by April 2001, the shares were delisted. Thanks to the magic of the pink sheets, the stock lives on. TheGlobe.com (TGLO.OB) closed yesterday at 24 cents a share. (The stock split 2-for-1 in 1999). Here’s what the chart looks like. This is what’s called “significant net capital migration.” (FYI: I have an MBA). Since the market is close today, I thought I'd pass on a few links. The Food and Drug Administration approved a new drug to treat alcoholism. Michelle Leder, of Footnoted, has an article in Slate on "2005’s Most Appalling Tax Giveaway." The Indian post office will now invest in the stock market. That can’t be a good sign. The Saudi stock market continues to get pummeled. And finally, here’s the 1986 World Series on RBI Baseball. Posted by edelfenbein at 11:08 AM April 13, 2006First-Quarter Earnings Harley-Davidson (HDI) was our first Buy List stock to report earnings. There are 12 other Buy List stocks that finished their quarters at the end of March. Here are those stocks with their earnings date and Wall Street's esimate: Stock.....................Date...............EPS Posted by edelfenbein at 5:12 PM A Rally for Rocks Daniel Gross has a good article in Slate on the gold rally. Over the past five years, the yellow metal has been on a tear. I’m not a fan of investing in gold. Remember that gold is simply a rock (or element, I suppose). It doesn’t do anything. In 10,000 years, gold will still be a rock. Stocks, on the other hand, are part ownership of a corporation. They really do something—they create wealth. A company is individuals coming together to use things, like rocks, to make things that people need. This is a huge difference, and it's why stocks always outperform any other asset class given enough time. It’s the same thing with real estate. A house doesn’t do anything by itself. It just sits there. To be sure, there are periods when "hard assets" do better than "paper assets." The 1970’s is probably the best example. Unfortunately, I’ve never been able to predict when these times come (or go). Traditionally, gold does well during turbulent times. Sure, gold will become very valuable in some post-Apocalyptic future. If we’re all going to be riding around the Australian outback with Mohawks ala Mad Max, I wouldn’t mind having a few ounces on me. But even in its role as "traditional store of value," gold has still been a flop. Despite gold’s climb, the price is still below its high of $850 an ounce reached on January 21, 1980. (Like the Nasdaq and the Japanese Nikkei, markets like to peak around new decades.) As a long-term investment, gold has been rotten. Some people are saying that gold will soon make a new all-time high. It could, but keep in mind that inflation has increased by over 150% since 1980. Just to keep pace with the stock market’s total return, gold would have to reach $20,000 an ounce. Commodity spikes are really suite common, but it’s a mistake to read anything larger into it. If investors are willing to dump good stocks to buy a bunch of rocks, I’m more than happy to help them.
Posted by edelfenbein at 3:29 PM The Goldman/Merrill Insider Trading Scandal Wall Street Folly and Deal Breaker own the Goldman Sachs/Merrill Lynch insider trading story. Wall Street Folly even scooped the New York Post. It turns out that Gene Plotkin, the 26-year-old (alleged) criminal mastermind, is also a novelist, filmmaker and competitive ballroom dancer. Well...Plotkin isn't the only dancer involved. According to today’s New York Times: A dancer, Monika Vujovic, 23, of New York, allowed the defendants to set up an account for her in which illegal trades were made, according to the S.E.C. complaint, which charges her. Her lawyer, Mel A. Sachs, said he was confident that the accusations against his client would be favorably resolved in court. The Times being the Times, of course, calls her a "dancer." The Times of London, however, is a little less delicate and calls her "a stripper." Apparently, strippers were to be a key element of insider trading scheme. According to the SEC: Plotkin and Pajcin also contemplated various schemes involving exotic dancers, including having them garner information from bankers while dancing, and using them to induce investment bankers to provide Plotkin and Pajcin with information. I did a little searching and here’s a picture I found from the Tesla Memorial Society of New York's Web site.
Monika Vujovic is, as you may have guessed, the one in the center. To her right is the ambassador from Serbia-Montenegro. Come to think of it, the Balkans may be the key to this whole case. According to the NYT: (I)t was $2 million in profits made by a 63-year-old retired seamstress in Croatia that tipped off the Securities and Exchange Commission about an ambitious and unusually creative insider trading ring, investigators say. That lead culminated in the arrests yesterday of two junior-level employees at Goldman Sachs and Merrill Lynch.
Posted by edelfenbein at 12:01 PM The 10-Year Yield is Over 5% One of the classic warning signs of an overheated market is rising bond yields alongside higher stock prices led by gold stocks. Here’s what happened from July 1986 to December 1987:
The blue line is the S&P 500. The gold line is the Philadelphia Gold/Silver Index (^XAU). To make the chart easier to read, both indexes have been adjusted to 100 as of July 1, 1986. The black line is the yield on the 10-year bond and it follows the scale on the right. It's hard to believe that yields used to be that high. Notice how the rise in gold stocks is highly correlated with higher bond yields. This means that investors were selling conservative assets (the bonds) to buy riskier assets (the gold stocks). Many market observers watch these two to get a feel of the market's optimism. Here's the same chart since the beginning of 2005.
Same thing. Money is leaving bonds for gold. It's not so much that gold is rising, but it's that gold is rising at the expense of bonds. That tells us that investors are chasing higher returns and they're willing to take on more risk to do it. At the same time, more conservative stocks are being left by the wayside. Note what I said yesterday about health care stocks lagging the market. I'm not predicting a crash, or even a bear market, but I'm taking notice that the market's attitude is shifting. The yield on the 10-year Treasury broke 5% this morning, and gold is at $600 an ounce. I thought the market's reaction to General Electric's (GE) earnings report was interesting. GE is the bluest of all blue chips. The company posted earnings of 41 cents a share, two cents more than Wall Street was execting. Yet, the stock fell. The stock is trading at 17 times this year's earnings, and that's still too much for some investors. Posted by edelfenbein at 9:41 AM April 12, 2006The Election Cycle Wall Street likes to think of itself as hi-tech and forward-looking, but in reality, the Street is nearly impervious to change. Remember decimal pricing? We adopted the base-10 numbering system some nine centuries after the Visigoths. That’s how fast this place moves. Only twenty years ago, the Nasdaq didn’t allow margin. And thirty years ago, Wall Street ran on fixed commissions. Can you imagine if any industry was run like that today? Think of what would happen if the price of every new car was fixed. America would make lousy cars that no one would buy, and Detroit would lose billions of dollars. Pretty scary. One of Wall Street’s oldest and oddest traditions is taking off for Good Friday. Bear in mind that Wall Street hates to take off any day. Trading on Saturdays lasted into the 1950’s. Almost no other business takes Good Friday off. Even the Feds are open. But every year, Wall Street shuts down for Good Friday. Strangely, the stock exchange was open for Good Friday in 1898, 1906 and 1907. I’m not sure where Holy Week stands in the canon of seasonal trading rules. I’m generally not a big fan of these bits of wisdom. You’ve probably heard the ones like “sell in May and go away.” I’ve always wanted to start my own. The best I got was “buy at Michaelmas and sell at Tet.” It hasn’t caught on. Despite my misgivings, there does seem to be a weak four-year pattern to stock prices. The market has made several important bottoms during mid-term election years. I would never base an investment decision off this fact, but the history is there. The difference between the four-year cycle and the other seasonal trading rules is that this one is based on some logic. The idea is that the incumbent president pushes up the economy for Election Day, then everything falls apart afterward. I ran through the Ibbotson numbers and this is what I got.
The year before the election, the market is up an average of 18.2%. In fact, the market goes on a very smooth upward climb through the election year as well, averaging another 12.6%. The problems begin about mid-way through the post-election year. Even discounting 1929, the pattern is still there. The market hits a brick wall during the summer of the post-election year, and it stays flat for the next 14 months. Then, right before the mid-term elections, the market starts to rally and the cycle starts over again. Until recently, it looked like the market was following its traditional pattern. In 2002, the S&P 500 bottomed on October 9, just a few weeks for the mid-term elections. The market then rallied strongly before stalling last summer. But in October, the index ignored history and turned higher, and it’s being doing well ever since. Posted by edelfenbein at 4:38 PM Danaher to Buy Sybron Dental Wow. I didn't see this one coming. Sybron Dental (SYD) is a great company. As the name suggests, they make products for the dental profession. I always knew this was a profitable sector, but the stock I prefered to track was Patterson (PDCO). Of course, if Patterson could make dental supplies and pet supplies, I supposed Danaher, a tool company, can buy a dental supplier. Here are Sybron's sales and EPS for the past few years. Year..........Sales.............EPS Danaher (DHR) is paying $47 a share, which is a 12% premium. It's also about 26 times this year's estimate of $1.82 a share. Danaher also said that first-quarter earnings will be slightly above the high-end of its forecast of 61 to 64 cents a share. The company said that sales for the first quarter were $2.14 billion, which was above the Street's estimate of $2.08 billion. Shares of DHR are up this morning to a new 52-week high. I love it when a plan comes together. Posted by edelfenbein at 9:46 AM Harley Earns 86 Cents a Share I was a bit too optimistic. Harley earned 86 cents a share. Before the opening bell, the Milwaukee-based company reported first-quarter earnings of $234.6 million, or 86 cents a share, up from a year-ago profit of $227.2 million, or 77 cents a share. Posted by edelfenbein at 9:34 AM April 11, 2006Harley's Earnings Preview Harley-Davidson (HDI) reports tomorrow morning. This stock could easily go for $60 a share. I wouldn't be surprised to see HDI earn 88 cents a share. EXPECTATIONS: Analysts polled by Thomson Financial expect the Milwaukee-based company to earn 86 cents per share in sales of $1.29 billion. Posted by edelfenbein at 5:50 PM Medtronic to Offer $4 Billion in Debt to Buy Back Stock Medtronic (MDT) hit a new 52-week low today. Apparrently, the company thinks the stock is a good value. They're going to the debt market to raise funds to buy back the stock. Posted by edelfenbein at 4:36 PM Health Care Stocks Plunge The jury in Atlantic City awarded John McDarby $9 million in punitive damages in the Vioxx trial. The entire health care sector is feeling the pain. Since mid-March, the health care sector has sold off sharply, and today is really bad. Here's the Dow Health Care Index (^DJUSHC) versus the S&P 500 over the last 12 months.
Over the last three years, the S&P 500 is up about 50% while the drug index is off 10%. Of the majors, Johnson & Johnson (JNJ), Merck (MRK) and Bristol-Myers (BMY) have the lowest P/E ratios. They each trade at roughly 16 times earnings. Posted by edelfenbein at 3:37 PM Muhammad Ali Sells Rights to His Name, Image for $50 Mln Muhammad Ali, ranked by sports experts as the greatest athlete of the 20th century, won his biggest purse 25 years after retiring from the boxing ring. Chuck Wepner couldn't be reached for comment. Posted by edelfenbein at 1:57 PM Ken Lay’s #1 Fan Although the world may hate Ken Lay, he has a big fan in Lee Perry. Mr. Perry can regularly be found outside the courthouse in Houston with his handmade signs cheering on the smartest guy in the defendant's chair. Here's Perry with Lay on April 3.
And again on March 9.
Well...who is this guy? The Houston Chronicle made an early attempt in January: A man who identified himself as Lee Perry held up a homemade sign proclaiming Lay's innocence. Perry said he did independent auditing of the company in its heyday and that everything was on the up and up. A man who identified himself as?? Yeesh, that’s not a confidence builder. Come to think of it, neither is "independent auditing of the company." Perry has said that doesn’t know Lay personally, but as the trial has gone on you'd think he's become Lay’s consigliere. Here they are yesterday:
And again on March 27:
These photos were taken two weeks apart, and Lay has the same suit, tie and BFF. The good news for Perry is that in that caption for the above photo, he's been upgraded to "author and former Enron auditor." So not only does Ken Lay have 18 homes, but he also has his own personal author and cheering section. See, these are the parts of the New Economy I like best. Posted by edelfenbein at 11:39 AM Some Stocks Worth Watching Here are a few stocks that have caught my attention recently. I’m not adding them to the Buy List (I only do that once a year), but I think these stocks are good values right now. First up is Mylan Labs (MYL). Mylan is one of the best generic drug stocks around. Generics tend to be counter-cyclical, meaning they do well when times are rough. Mylan’s sales have been flat recently and the stock got pounded. Shares of Mylan dropped from $28 to $15, but they’ve been steadily recovering since then. The shares still look pretty inexpensive. In February, the company said that it’s expects to earn between $1.20 and $1.40 a share for Fiscal ’07 (ending in March 2007). That means that the stock is currently going for 16 to 19 times next year’s earnings. Another interesting stock is Lowe’s (LOW). Frankly, this one surprises me. Although I decided to put Home Depot on this year’s Buy List, I can’t help but notice how good its main competitor looks. Make no mistake: Lowe’s is an earnings machine. Also, I don’t buy the idea that Lowe’s or Home Depot should follow the housing market. Both companies have clearly shown that they can thrive in all types of environments. For the fourth quarter, Lowe’s earned 87 cents a share, seven cents more than Wall Street was expecting. The company also announced that it expects earnings for this year of $4.03 to $4.13 a share. I think it’s interesting that some investors will comb through all this crazy research on a stock, when sometime all you need to do is listen to what the company is saying. That’s also how I feel about Dell (DELL). I’ve been reading all these articles about how Dell’s business model is broken and out-of-date, yet the folks running the business keep telling us not to worry. Guess who I’m going to listen to? Another good stock is Cintas (CTAS). This may be the best stock you’ve never heard of. They make workplace uniforms. No, I’m not making this one up. It’s hugely profitable. They’re even in the S&P 500. Cintas was a big stock during the 1990’s, but it’s been flat for most of this decade. The company missed earnings a few times recently, which has weighed on the stock. But in January, Cintas raised its dividend by 9%. The company said that it expects to earn $1.92 to $1.96 a share this year, which is a nice improvement over the $1.74 it made last year. There are also a few small banks and savings & loans I like to watch. These are great stocks to follow. There are lots of wonderful companies out there that almost no one knows about. Four of my favorites are Northern Empire Bancshares (NREB), Harleysville National (HNBC), NewMil Bancorp (NMIL) and Coastal Financial (CFCP). The first two are banks, the latter two are thrifts. Best of all, not a single analyst on Wall Street covers any of them. To give you an example, here are Northern Empires’ EPS for the last few years. 2001 $0.77 Northern Empire is the holding company for Sonoma National Bank and is based in Santa Rosa, CA. The bank has eleven branches and 150 employees. Posted by edelfenbein at 10:40 AM April 10, 2006$5 a Gallon for Gasoline Scary stories are usually signs that a market has topped. Probable $3-a-gallon gasoline, possibly going up to $5 a gallon, painted a bleak picture Monday for lovers of the open road. Here's a chart of gas prices for the last nine months (from GasBuddy.com):
Posted by edelfenbein at 2:32 PM The Morning Market The market is slightly higher this morning. This is another good day for energy stocks. What I find interesting is that while oil is up to $68 a barrel, the Dow Oil & Gas Index is still below its January high, even though the broader market has been making new highs. I’m curious if there’s a message in that. Today is also another good day for commodities. Copper and Zinc are at all-time highs. In the past year, the Goldman Sachs Commodity Index is up 20%, twice that of the S&P 500. Copper continues to be the gold standard. A strike at a Mexican producer has aided the rally. Aloca (AA), the world’s largest aluminum producer, will report earnings later today. On our Buy List, Biomet (BMET) was downgraded by Banc America Securities. Harley-Davidson (HDI) will report its earnings on Wednesday. The Street’s current estimate is for 86 cents a share, which I think Harley will easily beat. UnitedHealth (UNH) said that a committee of independent directors would look at how it has granted stock options. Many of the option were granted right before the stock rose, which may indicate that the options were "backdated." In France, Jacques Chirac announced that he's caving in to the protestors and he's ditching the youth labor law. Also, the market will be closed on Friday for Good Friday. Finally, here are some very cool pictures from the Mars Reconnaissance Orbiter. Posted by edelfenbein at 11:01 AM Dell's Growth in Foreign Markets I think I must be the last person who hasn't given up on Dell (DELL). Here's an article highlighting the company's growth in foreign markets. Sales in Brazil, for example, almost doubled in Dell's 2006 fiscal year ended February 3, Parra said. Michael Dell, 41, last month announced plans to double the company's Indian staff to about 20,000 in the next three years. I can't believe this stock isn't $35, much less $30. Posted by edelfenbein at 8:45 AM Cramer on Google From Mad Money's Web site, here's Jim Cramer’s incoherent advice for Google (GOOG). December 20.....Hold.....$429.74 (sell at $446) Did anyone else's head just explode? Posted by edelfenbein at 7:13 AM April 8, 2006The Carbohydrate Economy Here’s a fascinating article by David Morris on "The Once and Future Carbohydrate Economy." Up until the end of World War II, some companies were still hedging their bets on the material base of the future chemical industry. In 1945, the large British chemical manufacturer ICI still maintained three divisions: one based on coal, one on petroleum, and one on molasses. Read the whole thing. Posted by edelfenbein at 3:24 PM April 7, 2006The Hemline Theory
One of the classic bits of market wisdom is the Hemline Theory. Financial analysts have loosely used it to determine where the economy is headed. So far it’s been pretty accurate. In the '20s and '60s, hemlines were at a high and so was the stock market. And in the '30s and '40s, the stock market was so low that women were almost tripping on their skirts. The hemline theory was also on the ball in 1987. Miniskirts were all the rage, and the stock market was at a matching high. But then the market quickly crashed in October, right when designers such as Bill Blass decided that miniskirts looked ridiculous. Hemlines dropped and so did the market. Coincidence? I think not! I just learned from CNBC that USA Today reports that "Short shorts are sexier, and totally hip." This also means that I'm only two media degrees of separation away from knowing what's totally hip. Inseams are inching up this spring. Capris begat gauchos, which crept up to become bermudas. Now, short shorts — thigh grazers with 2½- and 3-inch leg lengths — are emerging as the top bottom. The market closed lower today. Daisy Duke, I blame thee. Posted by edelfenbein at 4:28 PM Defending Buy-and-Hold The most e-mail I get is whenever I defend buy-and-hold investing. Despite all the evidence in its favor, too many investors dismiss this simple, proven strategy. The complaint I hear most often is that buy-and-hold has been a flop for the past several years. My defense is that I don’t favor buy-and-hold per se. More accurately, I favor buy-and-buy-and-buy-and-hold. This is much closer to reality for investors as they usually add to their portfolios each month. Let’s assume an investor put $200 in the S&P 500 at the beginning of each month starting in January 2000. That’s an investment of $15,000 (75 X $200). Today, that portfolio would be worth about $18,100 even though the market is down about 2% over that same time. More good news for the Buy List today. We’ve finally pulled ahead of the S&P 500 for the year. Harley-Davidson (HDI) is our next stock to report earnings. The announcement is scheduled for Wednesday. The current estimate is for 86 cents a share. Reuters notes that some investors are nervous before the announcement. I’m not one of them. Harley is cheap at this price. Also, the Oil ETF (USO) will debut on the Amex Monday. Hopefully, there will be a silver one soon. Posted by edelfenbein at 2:52 PM Biomet's Future The New York Times has an article this morning on Biomet (Biomet Won't Say So, but Investors Expect a Sale). Well, I don't expect one. It's hard to say, but I don't think Biomet will be sold any time soon. Sure, it could happen, but let's look at the facts. The company is in a very strong position. Unlike many companies in similar situations, Biomet can easily afford to walk away from a deal it doesn't like. Many analysts project that a successful takeover bid would have to top $10 billion. And industry experts say that Biomet, which is nearly debt-free, will be under no pressure to accept a low bid. Biomet reported net income of $307.6 million on revenues of $1.49 billion in the nine months that ended Feb. 28. There's also the question of who the buyer would be. The management shake-up and CNBC report sparked speculation about who might acquire Biomet. Those prominently mentioned included Medtronic, which is a broad-based medical device maker and a leader in spinal implants that has historically denied interest in the rest of the orthopedics business, and Abbott Laboratories, a drug maker that has been diversifying into orthopedic devices as part of a strategy to develop a broad portfolio of medical products. Let's round up the usual suspects. I think Medtronic (MDT) is at the top of the list, followed by Johnson & Johnson (JNJ). Posted by edelfenbein at 10:06 AM Today’s Jobs Report This morning, the government reported that the unemployment rate fell to 4.7% last month, the lowest in 4-1/2 years. The economy added 211,000 new jobs in March. This was stronger than the Street was expecting. The yield on the 30-year Treasury broke 5% this morning, and the 10-year yield isn’t far behind. I guess those worries of an invested yield curve are gone. (For now.) For all you data nerds, here's a spreadsheet of the unemployment rate going back to 1948, and here are non-farm payrolls going back to 1939. Enjoy. Posted by edelfenbein at 10:05 AM April 6, 2006Biomet's Press Release Biomet (BMET) confirms that it has hired Morgan Stanley. Biomet, Inc. confirmed today that Morgan Stanley & Co. Incorporated is assisting it in exploring strategic alternatives focused on enhancing shareholder value. The Company stated that no decisions have been made and there is no assurance that this exploration will result in any specific action. Daniel P. Hann, interim President and Chief Executive Officer, said, "We believe that this review is a prudent exercise and is consistent with management's commitment to our shareholders and Team Members." Or in the event the story is leaked to CNBC. Posted by edelfenbein at 3:02 PM Link-A-Rama If you haven’t had a chance, please check out my fantabulous blogroll. It features some of the interweb's most bestest and brightest. Here are a few items I’ve been reading. At 10Q Detective, David Phillips has a self-help column. Jeff Matthews looks at the labor shortage in China. Wall Street Folly can’t wait for Overstock’s next earnings. My advice is to ignore the stock and go long tinfoil. Tim Iacono looks at the recently released Fed transcripts. Jay Walker has some wise words from Warren Buffett. Mark Mahorney looks at exchange outsourcing. I think we're going to see more of this. At Deal Breaker, MBP writes on being an ambassador for the firm. Enjoy. I'll be here when you get back. Posted by edelfenbein at 2:49 PM The Midday Market It’s a down day so far as oil is looking to make a run at $68 a barrel. The 30-year Treasury has been as high as 4.98% today. The S&P 500 is currently at 1303, which is a loss of about 0.6%. The Buy List is holding up well mostly thanks to Bed Bath & Beyond (BBBY). The stock is trading about 6% higher after the company reported strong earnings yesterday. The stock is getting a slew of upgrades today. Also, two economists look at why beautiful people earn more money. Posted by edelfenbein at 12:40 PM "As Long as It's a Commodity." The commodity markets are soaring again. Gold is over $600 an ounce, the highest since 1981. In London, oil made a new high. Silver is over $12 an ounce. Interestingly, the gold/silver ratio is still pretty high at 50-to-1. The Mint Act of 1792 pegged the ratio at 15.1-to-1. From Bloomberg this morning: "Commodities are the flavor of the month," David Gornall, head of foreign exchange and bullion at Natexis Commodity Markets Ltd. in London, said in an interview today. "Gold, silver, zinc or copper, it doesn't really matter what it is, as long as it's a commodity." From Karl Marx in 1867: A commodity appears at first sight an extremely obvious, trivial thing. But its analysis brings out that it is a very strange thing, abounding in metaphysical subtleties and theological niceties. Heck, even Harvard is investing in timber. Posted by edelfenbein at 9:25 AM Merck Gets Split Decision in Vioxx Trial Yesterday, a jury awarded a man $4.5 million after finding that Vioxx contributed to his heart attack, but two plaintiffs received almost nothing. Today, the punitive phase of the trial begins. Bed Bath & Beyond (BBBY) looks to open at $41 a share. Lehman Brothers (LEH) finally announced a 2-for-1 stock split. Bonds are lower this morning, especially the long-end of the yield curve. The 30-year yield is up to 4.94%. In Slate, Daniel Gross looks at the stock market and presidential approving ratings: "Stocks did better when presidents were doing poorly, and they did worse when presidents were more popular." Strange. Posted by edelfenbein at 9:16 AM Bad Stock Tip Leads to Classroom Brawl From Saudi Arabia: A bad stock tip led to a fistfight in a classroom, reported Al-Madinah recently. The fighters weren’t the students, but rather the teachers. The fight broke out when two teachers entered the classroom of another teacher to confront him on a bad stock tip that resulted in financial losses. The argument escalated into a fight. The Ministry of Education is investigating the incident and has pledged to punish the behavior. Education officials have been confronting a problem in recent months of teachers skipping class to invest in the stock market. Now, it seems, some teachers think they’re not only qualified to give stock tips, but also to engage in violent behavior when the tips turn out to be bad. Probably a Catholic school. I hear those places are rough. Posted by edelfenbein at 8:21 AM April 5, 2006Bed Bath & Beyond Earns 67 Cents a Share Hey Linens 'n Things, STFU! Home goods retailer Bed Bath & Beyond Inc. on Wednesday reported a 9 percent rise in quarterly earnings, beating both its own and Wall Street's expectations, due in part to strong sales at established stores. Up to $40.37 after-hours. Posted by edelfenbein at 4:21 PM Got My Mind on My Lawyer's Money, My Money on My Lawyer's Mind
Suge Knight files for Chapter 11. On the bright side, personal bankruptcy filings are at a 20-year low. The quarter's filings fell 73 percent to 102,949 compared with 381,743 in the year-ago period, according to data released Tuesday by Lundquist Consulting Inc., a financial research outfit based in Burlingame, Calif. In other bankruptcy news, Bill Ford rules it out. Ford Motor Co. Chairman and CEO Bill Ford said Wednesday that bankruptcy isn't an option for the nation's No. 2 automaker, which is struggling to return its North American division to profitability. Ford said the company has strong liquidity -- with about $20 billion in cash -- and that regions outside North America are performing well. Ford earned $2 billion last year, down 42 percent from a year earlier but still its third consecutive yearly profit. And finally, GM's Wagoner: Now is not time to panic. When asked whether anybody had been disciplined for the new accounting problems, he said, "I've never been a big believer in public executions. Having said that, we have a pretty proactive woodshed." Posted by edelfenbein at 3:18 PM Sorry Florida.... Your homes are too Florida-y. Atlantic Preferred Insurance will cancel coverage for 140,000 homeowners this summer. I blame global warming. Posted by edelfenbein at 3:03 PM Another Good Day Today is shaping up to be another good day. If the S&P 500 (^SPX) holds up, we’ll finish at our highest close since May 21, 2001. The Nasdaq Composite (^IXIC) will close at its highest level in over five years. Of course, the index is less well less than of peak its value of six years ago. Thanks to a big small-cap rally this decade, the Wilshire 5000 Total Return Index (^DWCT) is now only about 2% from a new all-time high. The S&P 400 Mid-Cap Index (^MID) made a new all-time high today, and the S&P 600 Small-Cap Index and Russell 2000 (^RUT) are just short of new all-time highs. From our Buy List, Brown & Brown (BRO), Expeditors (EXPD) and Danaher (DHR) are all at new highs. Over the last 10 weeks, the yield curve has started to widen. In late January, the five-year Treasury was yielding only two basis points more than the 90-day T-Bill Today, it’s about 27 points higher. Two years ago, the 10-year Treasury was over 100 basis points higher than the five-year note. Today, they’re virtually tied. In fact, for a few days in February and March, the five-year yield was higher. The change is that the long-end of the yield curve has been rising faster than the Fed has been lifting the short end. Perhaps the economy is stronger than people think. The Cyclical Index (^CYC) has roughly doubled the S&P 500 over the last six months. Posted by edelfenbein at 2:12 PM The Snarkiness of Crowds Chevrolet thought it had a brilliant marketing idea, or at least, it was going to borrow someone else's brilliant marketing idea. Just turn over the marketing of the Chevy Tahoe to the public. Hey, if viral marketing worked for other companies, why not a powerful multinational corporation trying to sell an SUV? In theory, the company was hoping that visitors to its Web site would e-mail their own videos around the Web, generating interest for the Tahoe through what is known as viral marketing. By the measure of Chevrolet Tahoe videos circulating the blogosphere and the video-hosting Web sites like YouTube, that goal was achieved. But the videos that were circulated most widely like the commercial that attacked the S.U.V. for its gas mileage, may not be what Chevrolet had in mind. NPR has more (audio link). Posted by edelfenbein at 12:44 PM Bed Bath & Beyond Earnings Preview After the close today, Bed Bath and Beyond (BBBY) will report its fourth quarter earnings. Here's a preview from AP: EXPECTATIONS: The company, which, as of the end of November 2005, operated 793 superstores selling better-quality home merchandise, forecast in December fourth-quarter earnings of 64 cents a share, and sales in stores open at least one year -- a key performance gauge called same-store sales -- to rise between 3 percent to 5 percent. Posted by edelfenbein at 10:08 AM The Morning Market It’s a quiet morning so far. The major indexes are up slightly. On CNBC, David Faber followed-up on yesterday’s news that Biomet (BMET) had hired Morgan Stanley. Faber said that the stock's move was perhaps a bit overdone. Many firms are holding to their price targets. The last big deal in the sector was Zimmer’s deal for Centerpulse, which went for 15 times "enterprise value." Just because the Biomet hired Morgan doesn’t guarantee that it will be sold. Perhaps the CEO simply wants to have the company looked over thoroughly. In other news, Apple (AAPL) released a patch that let its Intel-based Macs run Windows. The new software is called "Boot Camp." For the record, my suggestion was "Band Camp." Samsung said that it will sell the thinnest cellphone in the U.S., just 9.8 millimeters wide. Autodesk (ADSK) backed its 2007 view of $1.12 to $1.17 a share. Also, St. Jude Medical (STJ) cut its first-quarter estimate. The company says that Guidant (GDT) is to blame. Monsanto (MON) reported record earnings of $1.60 a share, nine cents more than estimates. Commodities continue to soar. Zinc and Copper are at all-time highs. In China, the yuan made another post-revaluation high. And lastly, Katie Couric is leaving the "Today" show to take over the CBS evening news. Posted by edelfenbein at 9:48 AM April 4, 2006The Wacky FOMC Ever wonder what it's like at a Fed policy meeting? Me neither. Well, we're in luck. Today, the Fed released the transcripts of its meetings from 2000. I never knew these economists were such cut-ups. I'd like to share with you some my favorite moments. (These are all actual quotes taken from the transcripts.) #11 MR. PRELL. It may just be that we are wild and crazy guys here. #10: After being elected unanimously chairman of the FOMC: CHAIRMAN GREENSPAN. I always appreciate the democratic process. #9 MR. KOHN. Actually, I think it could occur if we put the third derivative negative. That is, productivity could still be accelerating but if it were accelerating more slowly over time, the same mechanism would work slowly. #8 CHAIRMAN GREENSPAN. I would not want to be in the position of adopting a hard asymmetric statement of the balance of risks toward rising inflation and then see the economy weaken from under us. That would make us look really unimaginative. #7 MR. MOSKOW. I would like to speak first because those of us in Chicago know how to handle recounts! #6 CHAIRMAN GREENSPAN. Let me indicate that the next meeting is going to be a rather long one because our agenda is quite lengthy. We will be meeting at 9 a.m. on both Tuesday and Wednesday, which is longer than usual, so I'll give you all a heads up. Let's go to lunch. #5 From the meeting on March 21, 2000, right before the Nasdaq went kablooey. MR. BROADDUS…It’s almost as though we have too much credibility, in a sense. #4 CHAIRMAN GREENSPAN. Governor Ferguson. #3: MR. POOLE…I'm reminded that a couple of weeks ago I had the very pleasant experience of touring the Boeing F-18 assembly plant and had about thirty minutes in the simulator for an F-18. I must say I'm a lot happier sitting around this table than I am in an F-18! But in the process of trying to land that plane in the simulator of the aircraft carrier, I ended up producing what the instructor called "pilot-induced oscillation." That means finding oneself wobbling first one way and then the other way. And I think we have some of the same concerns about monetary policy. We don't want to overreact-- #2 MR. BROADDUS. I would recommend and would hope that the press statement that accompanies our announcement includes language making it clear that we are not yet panicking--that it’s not a foregone conclusion that we’re necessarily going to ease further. I guess that comment was predictable. |
