Archive for February, 2007

  • Patrick Byrne and Movie References
    , February 28th, 2007 at 4:00 pm

    Overstock’s CEO, Patrick Byrne has already refered to one short-seller as the “Sith Lord.” Apparently, he’s working his way through his NetFlix queue. Here is complaining about Utah overturning its law designed to curb stock manipulation:

    Tuesday night, Overstock Chief Executive Patrick Byrne compared Bramble’s about-face on the issue to a betrayal, using a reference to the movie Jerry Maguire to make his point. “It’s like that scene where Jerry McGuire figures out that a prospect’s father has sold him out by signing with a competitor. McGuire says, ‘Now. Wait. Tell me you didn’t sign. Because I’m still sort of moved by your “my word is stronger’n oak” thing,’ ” Bryne wrote in an e-mail.

    The Salt Lake Tribune reports:

    During the increasingly angry banter that followed, Ostermiller and Byrne began talking about which side of the debate had more “guts.” At some point – accounts differ who first uttered the phrase – the words “take it outside” came up. According to Jonathan Johnson, Overstock’s senior vice president for legal and corporate affairs, it was Byrne who responded: “Is that an offer?”

    I really wish he had said, “You talkin’ to me?

  • Gold Drops $14.70 an Ounce
    , February 28th, 2007 at 2:31 pm

    April gold futures dropped $14.70 an ounce today. At one point, gold was down over $23 an ounce.
    This is good news that money is leaving gold and going into stocks.

  • Goldman’s Hybrid Limousines
    , February 28th, 2007 at 1:49 pm

    From a New York Times article on the TXU deal:

    People involved in the negotiations said that Goldman Sachs, an adviser and lender to the buyers, helped broker peace with environmental groups and sought their support for the transaction. Goldman Sachs has been one of the most aggressive firms on Wall Street about taking action on climate change; the company sends its bankers home at night in hybrid limousines.

    Unfortunately, I walk so I don’t get a chance to save the environment.

  • The Mortgage Lender Implode-O-Meter
    , February 28th, 2007 at 12:33 pm

    What a great idea for a Web site:

    Latest count of major US mortgage lenders that have croaked since late 2006: 27

  • U.S. Dollar Drops Against Counterfeit U.S. Dollar
    , February 28th, 2007 at 12:22 pm

    The Onion is on the scene:

    NEW YORK—At the close of trading Monday, the U.S. dollar dipped to a record low of $.60 against the counterfeit U.S. dollar, which also outpaced the dollar against the euro and the yen.
    “We don’t even accept regular U.S. dollars anymore,” said Union, NJ 7-Eleven manager Rick Grove, echoing the sentiments of merchants nationwide. “We’ve gotten stung a few times taking in the real ones. I always tell my cashiers, if it feels fake to the touch, and you can’t see both sides when you hold it up to the light, it’s fine.”
    Concerned about further devalutation of standard U.S. currency, Federal Reserve Chairman Ben Bernanke has suggested that Congress outlaw counterfeit bills entirely.

    As funny as this sounds, there is a real life parallel. In 1869, Jay Gould and Jim Fisk tried to corner the gold market. The price of gold, expressed as a premium to dollars, went to 160. On September 24, Black Friday, the government dumped gold on the market, and the premium instantly fell to 130. Here’s a cartoon.

  • Wall Street Through the Looking Glass
    , February 28th, 2007 at 11:49 am

    One more word about yesterday: The sell-off was not caused by a computer glitch.
    The sell-off was already happening. The glitch was in the accurate reporting of what was happening. This is Wall Street going through the looking glass. If stocks are going down, and no one reports it, are they really going down?
    When the computers finally caught up with the trades (see video), some traders thought it was an obvious misprint. No, everything until that point was incorrect. Only when they learned what they really had been doing did they start to panic. At which point, stocks started to rise.

  • What’s Happening to Goldman’s China Goldmine?
    , February 28th, 2007 at 11:06 am

    Shares of Goldman Sachs (GS) were whacked especially hard yesterday. I noted that it was the eighth-worst performing stock in the entire S&P 500.
    The reason may have to do with the Industrial & Commercial Bank of China, or ICBC (1398.HK). Last year, Goldman put up $2.6 billion for 5% of the bank. Hank Paulson made several trips to China to secure a role in the IPO. In the end, Goldman lost out to Merrill, Credit Suisse and Deutsche Bank.
    Despite the snub, when the shares went public last year, Goldman made a huge profit. In fact, it was probably the largest profit for any trade anywhere. In less than nine months, Goldman made $4 billion. The investment was made with Goldman’s GS Capital Partners V fund, which is heavily owned by Goldman’s top execs.
    But look at ICBC lately:

  • Today’s GDP Revision
    , February 28th, 2007 at 10:19 am

    The government updated its fourth-quarter GDP report today. Instead of growing by 3.5%, it turns out that the economy only grew by 2.2%. That’s the biggest revision in ten years. Still, if you look at it in the larger context, it’s not that big of a change.
    Here, if you squint real hard, you might be able to make it out:
    What’s interesting is that this is the third straight quarter of below-trend GDP growth. But it’s not that far below trend. From September 2003 to March 2006, the economy grew at annualized rate of 3.4%. For the last three quarters, it has averaged 2.2% growth. That’s slower growth, but there’s still no evidence of a recession.

  • Boo Hoo!
    , February 28th, 2007 at 7:36 am

    Oh, boo hoo, people! You think this is crash? Please, this ain’t no crash.
    We’ve become so used to no volatility, we forgot what a normal market acts like. I’m sorry, but this was nothing compared to the olden days, say 1999. Yesterday may have been the worst day in four years, but going back ten years, it was ranks just twelfth. Twelfth, people!
    Back then, we would have laughed at this. Four hundred points? Please, that was a lunch break. There were three days worse than this in August ‘98 alone.
    Let’s see how bad the big bad bear is. For the year, the S&P 500 is now down 1.36%. OMG! Throw in dividends, and it’s down 1.05%. Are you heading for the hills now?
    So what went wrong? I dunno. When in doubt, I blame the Fed. It’s easy to do, and there’s always a chance someone accidentally told the truth. But this time, we have two Fed chairmen in play, old and new, Benilocks and the Maestro.
    The former Fed chair is the more likely suspect. He was in the Far East, and according to the AP, Greenspeak was in top form:

    Former U.S. Federal Reserve Chairman Alan Greenspan warned Monday that the American economy might slip into recession by year’s end. . . .
    “While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 . . . with some slowdown,” he said.
    Greenspan said that while it would be “very precarious” to try to forecast that far into the future, he could not rule out the possibility of a recession late this year.

    Perhaps there’s a chance that the media could possibly use what some might believe is possibly the most provocative headline: “Greenspan Warns of Likely U.S. Recession.”
    (H/T: BOTW)
    All observers agreed that the trouble started in China. The market there fell by nearly 9%, which was the worst day there in a decade. OK, so what caused China to wobble?
    According to Bloomberg:

    Stocks fell yesterday after the State Council, China’s highest ruling body, approved a special task force to clamp down on illegal activities in the market. Investors were concerned the Chinese government would impose further measures as the National People’s Congress, China’s legislature, meets next week.

    Let me get this right. My portfolio took a hit because of the Chinese National People’s Congress? Talk about globalization. First, the bird flue, now a special task force of the State Council. Now there’s a winning combo, discarded 19th century economic theory and 21st century securities regulation!
    I’m sorry, but I can’t accept that some Communist bureaucrat is the reason for the loss of half-a-trillion dollars. What kind of connection does a company like Graco (GGG) have to Shanghai margin requirements? Outside the occasional takeout, I’m guessing it’s pretty slim.
    Let’s look at the indexes for some clues. It wasn’t a size issue. The S&P 500 and Small-Cap 600 (^SML) were down nearly identical amounts (3.47% and 3.50%). But the Mid-Cap 400 (^MID) was only down 3.08%.
    Nor was it a valuation issue. The Growth Index (^SGX) was down 3.49% and the Value Index (^SVX) was down 3.45%.
    Here’s the most telling fact about yesterday: There were 4.24 billion shares traded on the NYSE; 4.19 billion was down volume, just 45 million was up volume. That wasn’t a typo, 45 million. Declining volume led advancing volume by more than 93-to-1. Declining issues led advancers by more than six-to-one.
    This was no boat accident. And it wasn’t China either. It was a broad-based sell-off.

  • Today’s S&P 500
    , February 27th, 2007 at 11:18 pm

    Here’s a spreadsheet detailing the performance of every stock in the S&P 500 today.
    Goldman Sachs (GS) fell 6.65%, making it the eighth-worst performing stock in the index today.
    Pfizer‘s (PFE) dividend yield is now 4.61%, which is roughly equal to the 30-year Treasury bond (^TYX). Seven years ago, Pfizer yielded 1.4% while the 30-year T-bond yielded 6.2%.