Archive for May, 2006

  • Eat Up
    , May 30th, 2006 at 11:36 am

    From Daniel Gross’ Slate column “Snow’s Job:
    Why no Wall Street CEO wants to be the new Treasury secretary    .”

    John Snow will have a replacement, and he may very well come from the corporate world. But if it’s an A-list Wall Street CEO, I’ll buy a copy of Dow 36,000 and eat the first chapter.

    This is why journalists shouldn’t make predictions. Come to think of it, so is Dow 36,000.

  • Private Equity Strikes Again
    , May 30th, 2006 at 11:19 am

    Kinder Morgan (KMI) is buying bought out by…Kinder Morgan. Who needs a stock market anyway?
    If this goes off, the buyers will assume about $14.5 billion in debt. This is a huge deal. In 17 years, no one has ever topped KKR’s buyout of RJR Nabisco.
    Doesn’t stuff like this usually happen at market peaks?

  • Bill Gross: Admitted Philatelist
    , May 30th, 2006 at 10:49 am

    Not only is Bill Gross, the “Buffett of Bonds,” but he’s also an admitted philetelist. Gross’ stamp collection is worth tens of millions of dollars. He owns every stamp made by the U.S. from 1847 to 1869.
    Ever wonder what it’s like to be a Master of the Universe? Here’s how Gross describes a typical day (scroll down a bit):

  • Michael Dell Buys $70 Million in Stock
    , May 30th, 2006 at 9:41 am

    Last week, Michael Dell bought nearly three million shares of Dell (DELL) at 23.99 a piece. He’s already made a nice profit. The stock is over $25 this morning.

  • Bush Taps Paulson to be Treasury Secretary
    , May 30th, 2006 at 9:28 am

    From the Washington Post:

    The White House named Henry Paulson, Chief Executive Officer of Goldman Sachs, as the new Treasury Secretary this morning to replace John W. Snow.
    President Bush made the announcement at 9:15 this morning from the Rose Garden.
    Snow informed the White House last week that he wouldl resign after three years as the nation’s chief economic officer. The secretary’s decision was intended to bring finality to a process that has played out awkwardly in public over months as Snow’s job security has been a regular source of Washington speculation.
    The new appointee would be Bush’s third treasury secretary. Paul H. O’Neill, his first, left in December, 2002.

    It looks like Lloyd Blankfein will take over as Goldman’s new CEO. Here’s a Business Week profile of Blankfein.
    Wall Street Folly finds Blankfein’s 1983 wedding announcement.

  • Thanks Vets
    , May 27th, 2006 at 6:08 am

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  • Are We There Yet?
    , May 26th, 2006 at 2:33 pm

    Yawn!
    Trading is very quiet today ahead of the three-day weekend. Here are a few random thoughts in no particular order.
    TickerSense points out that the time around Memorial Day has historically been quite good for the market. Since 1960, the market is up an average of 0.11% on the Friday before Memorial Day, and 0.60% for the week after. So far, we’re keeping we tradition.
    Many defensive stocks have been surprisingly strong lately. This includes stocks like Anheuser-Busch (BUD), Colgate (CL), Coke (KO) and Pepsi (PEP), Disney (DIS), General Mills (GIS) and Kellogg (K).
    FactSet (FDS) has also been doing well for the past few days. David Jackson, the Grand Poobah at Seeking Alpha, pointed me to this bearish research report on FDS done by some graduate students at Yale.
    Francois Trahan, the chief investment strategist at Bear Stearns, found that the number of analysts covering tech stocks has increased since the top of the tech bubble.

    The average number of analysts per tech stock in the S&P 500 nearly doubled to 23.53 by the end of April from 12.36 in January 1996 and was still 22% higher than the 2000-2001 average of 19.25 analysts per tech stock, according to Mr. Trahan’s report. By the first quarter of 2000 — near the height of the Internet bubble — the total stock market value of S&P 500 tech stocks peaked at well over $4 trillion. Today it is about $2 trillion.

    Jay Walker comments on a recent study showing similar irrational decision-making between humans and capuchin monkeys. Those silly monkeys.
    Barry Ritholtz defends his remark that Ben Bernanke is the Neville Chamberlain of central bankers. So I guess we know who inflation is. Keeping the metaphor alive, today we learned what Poland is.
    Chico’s FAS (CHS) is rallying today on a good earnings report. The stock has beaten the S&P 500 for the last eight straight years. But the streak is in serious danger. The shares are down 30% YTD.
    That’s it for me. Have a great weekend, everybody!

  • The S&P 500’s P/E Ratio is at a 10-Year Low
    , May 26th, 2006 at 10:29 am

    Despite all the 1987 Redux talk on Wall Street, the market’s P/E dipped to a 10-year low this week.
    The S&P 500 is now trading at just under 16 times trailing operating earnings. The P/E ratio hasn’t been this low since October 1995.
    Here’s a chart of the S&P 500 (black line, left scale) with its earnings (blue line, right scale). Whenever the two lines cross, the P/E ratio is at 20.
    image742.png
    The market often anticipates the flow of earnings (meaning, the black line moves before the blue). You can see that’s what happened in 2000. As a result, the P/E ratio often decreases in the initial stage of a bear market, and increases at the beginning of bull run.
    What was unusual about the rally that began in March 2003 is that it came well after the bottom in earnings. I think that indicates how much investor confidence had been rattled by Enron and 9/11, and the coming showdown with Saddam.
    Here’s the market’s P/E ratio:
    imagepe.png

  • Status of High-Profile Corporate Scandals
    , May 26th, 2006 at 8:22 am

    The AP has a rundown of prominent corporate scandals.

  • Happy 110th Birthday to the Dow
    , May 26th, 2006 at 6:20 am

    The Dow Jones Industrial Average (^DJI) debuted on May 26, 1896. The first close was at 40.94.
    Over the last 110 years, the Dow is up 39,017.41%, or 5.58% a year.
    Here’s an odd fact: In 1939, the keepers of the index decided to kick out IBM. The company didn’t return for 40 years, and it’s still there today. But those were 40 amazing years for the company. If the stock had been left in the index, the Dow would be thousands of points higher today. In fact, the index would have broken 1,000 in 1961 instead of 1972.
    Here’s every single weekly close.