Archive for April, 2007

  • The Stalwart Is Back
    , April 24th, 2007 at 9:43 am

    One of my favorite financial blogs, The Stalwart, is back from its hiatus. The site is consistently thought-provoking and never dull. Check it out.

  • Hedge Fund Compensation
    , April 24th, 2007 at 9:33 am

    Alpha Magazine found that the top 25 hedge fund managers were paid a total of $15 billion last year. The highest-paid was Jim Simons of Renaissance Technologies at $1.7 billion. Second place went to Ken Griffin of Citadel at $1.4 billion. Then Eddie Lampert with only $1.3 billion.

  • Earnings Preview: AFLAC
    , April 23rd, 2007 at 2:23 pm

    AFLAC (AFL) reports tomorrow. Here’s a preview from AP:

    OVERVIEW: Once one of only two life insurers in Japan, Aflac now faces a very competitive market in that country, racked by intensifying regulatory scrutiny and lagging consumer confidence.
    Because more than two-thirds of Aflac’s $13.2 billion in insurance policies in force are in Japan, the Columbus, Ga.-based supplemental insurer is heavily exposed to what happens there.
    Last quarter, Japanese regulators summoned data on how much Japanese insurers paid out in claims. While Aflac wasn’t as bad as most other insurers, regulators found insurers underpaid clients when they submitted claims.
    Even though the financial effect on Aflac from the study is minimal, Goldman Sachs analyst Joan H. Zief said the issue underscores how regulatory scrutiny is affecting the market for insurance in Japan.
    Aflac sells supplemental insurance, or policies that cover perils not insured under typical coverage. This is an important product in Japan because the national health care system is under pressure so people are turning to private insurers for supplemental coverage.
    This market is weakening as new competitors enter the industry. Sales in Japan fell 8.8 percent last year, and Aflac predicted sales will continue declining in the first half of the year.
    EXPECTATIONS: Analysts polled by Thomson Financial expect profit of 79 cents per share in the first quarter. They forecast revenue to rise 5 percent to $3.73 billion.
    ANALYST TAKE: Wachovia Securities analyst John Hall expects Aflac to report higher profit margin in Japan despite lower sales. He predicts Aflac will say lower spending on information technology and marketing initiatives will offset sales weakness.
    Nevertheless, he’s skeptical of Aflac’s forecast that sales in Japan will turn around in the second half.
    Banc of America Securities analyst Tamara K. Kravec said any commentary on the overcrowded health and life insurance market in Japan will be crucial.
    “The market environment in Japan is not smooth sailing,” she said. “Investors will continue to focus on assessing the competitive environment in Japan and what the first quarter will reveal about sales trends and the competitive environment.”

    The stock is going for 13 times next year’s earnings.

  • The Grey Lady and Sides of Beef
    , April 23rd, 2007 at 10:40 am

    At this week’s New York Times’ (NYT) shareholder meeting, there will be an effort, led by Morgan Stanley, to eliminate the company’s two-tiered share voting system. One class for the family, another for everyone else. These systems are common with newspapers because it allows the founding families to retain control.
    In today’s Wall Street Journal, Donald Graham, the CEO of the Washington Post, comes to the defense of the Times’ not-quite-so-democratic share structure.

    (I)f the stock structure were eliminated, a line of buyers eager to purchase the company would form within minutes. No one could say no. The line would include private equity firms, high-ego billionaires, international media companies lacking a famous property and lots more.
    Who would bid the highest? Perhaps a principled owner, dedicated to the welfare of the Times and the Boston Globe; willing to anger its friends on a regular basis, as good newspapers do; and prepared to spend money and run other risks to sustain the paper like the Sulzbergers. Or maybe the bidder would be someone quite different.

    Oh dear! Not just a billionaire, but a high-ego one at that. Personally, I’ve never met a billionaire with a low ego. Or a newspaper publisher, for that matter.
    Graham writes that if the new rule is adopted, it “would lead to the New York Times Co. being auctioned off like a side of beef.”
    Well, what’s so bad about that? We sell lots of things in a manner very similar to how a side of beef is sold. That’s capitalism. Ever been to an art auction? Or rather, what’s so wrong with a side of beef being sold off just like a media company? It’s a two-way street. I’m stunned at how little faith Graham has in the free market.
    These two-tiered systems are manifestly undemocratic, and will eventually lead to sclerotic companies. Graham believes there’s a difference between public spiritedness and the values of the free market. That’s a false symmetry. If the Times’ values are profit-enhancing, as Graham suggests, then the free market will find them. Plus, there’s no guarantee that a family-controlled business will adhere to those values.
    I’m not against different share classes per se. I don’t think they’re a great idea, but I can understand why some families would want to maintain control of their businesses. What I object to is the Graham’s argument that it’s based on some high-minded principle. It’s not. When any organization isn’t held fully accountable, it will eventually suffer.
    The divine right of kings died out a long time ago. It’s about time newspapers followed.

  • ABN Amro and Barclays to Merge
    , April 23rd, 2007 at 8:39 am

    This is a gigantic dea. ABN Amro, the Dutch mega-bank, and Barclays of Britain are going to merge in a deal worth over $90 billion. As part of the deal, ABN Amro is going to sell its LaSalle Bank unit to Bank America for $21 billion.
    The story gets a little more complicated because the Royal Bank of Scotland seems interested in ABN Amro, but it needs partners to make a deal. But what the rivals probably want is Amro’s American business. In other words, LaSalle. Selling it to BofA could be a brilliant move to crush any potential partner for RBS.
    Here’s the slap in the face. Amro was scheduled to meet with RBS today, but it already announced the deal with Barclays. They’re still going to meet, but Amro asked to have the meeting bumped back.
    I have a feeling this isn’t over.

  • “GOOG is Godzilla and YHOO is Japan. It’s that simple.”
    , April 22nd, 2007 at 5:35 pm

    The Fly on Wall Street sums it succinctly.
    (H/T: Howard “Dr. Funk” Lindzon)

  • High Voltage Cable Inspection
    , April 22nd, 2007 at 10:54 am

    Yikes.

  • Moonlight Sonata
    , April 21st, 2007 at 4:55 pm

    The great Wilhelm Kempff.

  • The Business Of Baseball
    , April 20th, 2007 at 12:21 pm

    Here’s an interesting article from Forbes on the financial numbers behind baseball. As a kid, I used to think that baseball was big business. It’s big, but not nearly close to the titans of Wall Street.
    According to Forbes, the New York Yankees are the most valuable team in the majors at $1.2 billion (Steinbrenner bought the team for $10 million in 1973, so that’s about a 15.1% annual return). The Yankees would be considered a small-cap stock. Most teams, however, are in the $300 million to $500 million range. The Florida Marlins come in last at $158 million, which isn’t far from our favorite micro-cap, Nicholas Financial (NICK), at $114 million.
    Our local Washington Nationals are the tenth most valuable team at $447 million, which is a lot to pay for 60 wins. (This is going to be a long summer.)

  • AMD: “It hasn’t even hit them yet”
    , April 20th, 2007 at 7:32 am

    Here’s a short case study:
    Advanced Micro Devices close on April 19, 1985: $15.
    Advanced Micro Devices close on April 19, 2007: $14.28.
    From Bloomberg:

    Advanced Micro Devices Inc., the second-largest maker of personal-computer processors, reported a first-quarter loss of $611 million after it lost market share to new products from Intel Corp.
    The net loss was $1.11 a share, compared with a profit of $185 million, or 38 cents a share, in the same period a year earlier, the Sunnyvale, California-based company said in a statement. Sales fell 7.4 percent to $1.23 billion.
    After taking market share from Intel over the past two years, Advanced Micro is now on the defensive. Intel, the biggest maker of PC processors, has introduced new products to win back customers and has more chips planned for later this year. That means the worst isn’t over for Advanced Micro, said analyst Doug Freedman at American Technology Research in San Francisco.
    “They’re just seeing the headlight of the train. It hasn’t even hit them yet,” said Freedman who has a “sell” rating on the stock and says he doesn’t own it. Advanced Micro is suffering because it “tried to get too big too quick.”