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The Buy List's Performance for the First Half

We're halfway done with 2007 (and three-fourths done with this decade), so let's look at how the Buy List is doing.

The Buy List is up 3.05% for the year while the S&P 500 is up 6.00%. Obviously, I'm not happy to lose to the overall market, but we're in the black and we've closed the gap recently. Also, the Buy List is somewhat conservative. The daily volatility is 4.7% less than the S&P 500.

Adding in dividends, the Buy List is up 3.33% and the S&P 500 is up 6.96%. The annual yield of the Buy List is 0.53%.

Here's a chart:

As you can see, I totally missed the S&P's cyclical surge in April and May. I purposely underweighted cyclicals at the beginning of the year (though we have a few good ones like Graco and Donaldson), and I'm even more leery of those sectors today.

Ten stocks are up, ten stocks are down. The best is Jos. A Banks (JOSB) which is up 41.29%. The worst is Harley-Davidson (HOG) down -15.41%.

Posted by edelfenbein at 4:56 PM

Shareholder Urges Fair Isaac to Explore Possible Sale

MarketWatch reports:

Investment management firm Sandell Asset Management Corp. on Friday disclosed a 5% stake in Fair Isaac Corp., and urged the company to hire a financial adviser to review alternatives, including a possible sale. In a letter to Fair Isaac Chief Executive Mark Greene, Sandell also urged the Minneapolis-based provider of analytic software and data management products to "continue to aggressively repurchase shares at the current depressed valuation levels." Fair Isaac shares rose 5.8% to $39.60 in Friday afternoon trade.

This stock needs something to shake it up. Earnings were lousy last quarter and the shares haven't done much all year.

Posted by edelfenbein at 10:25 AM

The Fed Holds Again

No change on rates. Here's the Fed's statement.

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.

Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. (This is a slight change from the previous statement which said that growth had slowed.) The economy seems likely to continue to expand at a moderate pace over coming quarters. (Same.)

Readings on core inflation have improved modestly (new! used to be elevated) in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. (Huh? What the hell does that mean??) Moreover, the high level of resource utilization has the potential to sustain those pressures.

In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. (Same.) Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

I'm taking this as good news. I think the Fed sees that inflation is becoming less of an issue.

Posted by edelfenbein at 2:15 PM

Ditch Quarterly Guidance?

The Committee for Economic Development says it's time to drop quarterly guidance.

"Quarterly guidance is at best a waste of resources and, more likely, a self-fulfilling exercise that attracts short-term traders," says the report by the group, which was brought together by the Committee for Economic Development, a Washington think-tank.

"The pressure associated with quarterly earnings guidance has been cited as one of the factors fuelling the boom in private equity buy-outs," adds the report by the CED, whose members include influential figures such as Pete Peterson, co-founder of the private equity group Blackstone and William McDonough, former head of the New York Federal Reserve.

More than half of US listed companies provide their own forecasts of quarterly results – a practice that is illegal in most other countries.

Posted by edelfenbein at 1:27 PM

Biomet: First Horseman of the Apocalypse?

A reader pointed out this item at FT's Alphaville about how the market could get spooked if a major private equity deal fell apart:

In the light of which, the first apocalyptic horseman to worry about is Biomet, the buyout of which is backed by Blackstone, Goldman Sachs, KKR and TPG, looking to raise $7bn in loans and bonds for the deal, including a $2.6bn cov-lite loan.

One Deal Journal reader commented: "Biomet....Tender offer deadline 7/11/07. Anyone quoting odds?"

Personally, I would cheer if the deal fell apart.

Posted by edelfenbein at 10:18 AM

The New World of Recruiting

Bloomberg looks at how business recruiting is done today:

"Recruiting is absolutely critical right now," Dimon says. "I send senior people to campuses now, and they have to show up."

They're also trying soft-sell approaches. Merrill sponsored a dress-for-success night for women at the Wharton School in Philadelphia, with stylists from Prada. (Tips: Avoid bright red nail polish. And wear closed-toe shoes -- no flip-flops.) Merrill also hands out video games, including "Cyber IPO," in which players score when they correctly order the steps for a fictitious company's initial public offering.

Do you really have to tell Whartoners not to wear flip-flops? Wait, don't answer that. If it's yes, then I don't want to know.

Posted by edelfenbein at 9:47 AM

Q1 GDP Grew By 0.7%

The government revised first-quarter GDP growth up to 0.7% from 0.6%. For the last four quarters, the economy grew by just 1.91%.

In the report, personal consumption spending that fuels two-thirds of national economic activity rose at a 4.2 percent rate, slightly lower than the 4.4 percent rate estimated a month ago but still a strong underpinning to keep the economy growing.

Here's the key bit:

A prices measure favored by Federal Reserve policy-makers -- personal consumption spending excluding food and energy -- was revised up during the quarter to a 2.4 percent rate from the prior 2.2 percent estimate. This will likely be weighed by Fed officials as they meet on Thursday for a second day of a policy meeting at which they are expected to keep interest rates unchanged while reaffirming concerns over the risks of inflation.

Posted by edelfenbein at 8:52 AM

But Then Again

The New York Times
June 25, 2007

So much for the argument often made by managers of hedge funds and mavens of private equity that higher taxes would cripple their business.

The prospect of higher taxes did not dent, in the least, the initial public offering on Friday of the Blackstone Group, the giant private equity firm.

The New York Times
June 27, 2007

Shares in Blackstone closed at $30.75, down 5.2 percent, or $1.69, on the day, and slipping below the $31 price set for its initial offering on Friday. The slide poses an embarrassing setback for Blackstone, whose debut was among the most widely anticipated of the year, drawing armies of television cameras to the New York Stock Exchange.

(Hat Tip: New York Sun)

Posted by edelfenbein at 6:34 AM

Five Homebuilding Stocks

It hasn't been a good two years.

Posted by edelfenbein at 5:34 PM

Carly Fiorina on CNBC

This is strange. Maria asks Carly Fiorina about the behavior of corporate boards. Yet every single part of her answer was a not-so-hidden dig at HP.

Maria: Do you think the corporate governance environment has improved in the last five years? Meaning, are directors more independent today?

Carly: Well, first I think that anything that increases the transparency and the accountability of a group’s actions is a good thing, and I think that applies to a board as well. Secondly, I think there are some common themes that define good corporate governance.

I’ve sat on many, many boards as you know. I think good boards keep their deliberations confidential (unlike what I had) but are transparent about their decisions. I think good boards deliberate in an atmosphere of calm (unlike what I had) and consider all of the points of view (unlike what I had), and strive always for unanimity (unlike what I had).

And finally, I think good boards have board members with judgment (unlike what I had) and perspective (unlike what I had) and ethics (unlike what I had), and if those three things sound kind of sound old-fashioned (ugh!), it’s because they are. There’s no silver bullet for good corporate governance. But I think in general, transparency about decisions and accountability for decisions is a good thing.

Aw, poor widdle Carly. So how's HP's stock doing since she left?

Posted by edelfenbein at 4:39 PM

Bed Bath & Beyond Earns 38 Cents a Share

Bed Bath & Beyond (BBBY) just reported earnings of 38 cents a share (technically, 37.6 cents). Sales were up 11.3% to $1.553 billion.

Steven H. Temares, Chief Executive Officer and Member of the Board of Directors of Bed Bath & Beyond Inc. stated, "While we continue to see that the overall retailing environment, especially sales of merchandise related to the home, is challenging, we have taken a long-term approach to our business and work to continue to distance ourselves from our competitors by remaining focused on being our customers' first choice for the products we offer, domestically, interactively, and over the long-term, internationally. Consistent with this, we were very pleased to have recently executed a lease for our first international store, located in Richmond Hill, Ontario, north of Toronto."

This is a decent report. Without the warning, the company barely missed previous expectations. Think of it this way, BBBY came in 1.4 cents below the Street's expectations, yet the market chopped off 291 cents in share. So that miss in effect has a price/earnings ratio of 207.

Fine, I'll take the other side of that trade.

Posted by edelfenbein at 4:18 PM

Georgetown Photo Gallery

I'll take a quick break from stock talk. On Sunday, I strolled down to Georgetown with my camera. Here are a few shots.

It was a beautiful day. This is a boat making its way through the canal. The canal was a marvelous feat of engineering. Interestingly, it wasn’t economical for long since trains weren’t far behind.

This is the canal looking west. If you have Google Earth, I was at 38 54’15.56” N, 77 03’46.27”W.

Exorcist steps. (Take meeee!)

I think this is the bridge where Chris MacNeil first meets Father Damien.

It's hard to believe this spot is about three miles from the White House. You almost expect Tom and Huck to walk by.

Posted by edelfenbein at 11:59 AM

BBBY Below $37

C'mon!

Earnings for Bed Bath & Beyond (BBBY) are due later today and the Street obviously expects lousy news. The company already said to expect 36 cents to 38 cents a share. But a $37 share price seems to be discounting really lousy news.

Posted by edelfenbein at 10:47 AM

The Put Write Index

I learned something interesting from Roger Nusbaum’s site, as I usually do.

The CBOE has created a Put Write Index, which you can see quoted at Yahoo Finance under ^PUT.

Here’s S&P’s description:

The new index, called the CBOE S&P 500 PutWrite Index (PUT) tracks the performance of a hypothetical investment strategy (PUT strategy) that overlays short S&P 500 puts over a money market account. The number of puts is set to collateralize the exposure to S&P 500 downturns. This design provides higher leverage than the BXM strategy, and it can also capture the potentially “rich” premia of S&P 500 put options documented in several academic studies. These studies have found that short option strategies, and especially short put strategies, appear to generate high risk-adjusted returns.

The ^BXM index is for Buy Write Index. Roger thinks this is another development in a larger trend that allows individual investors to use sophisticated investment products that were previously reserved for professionals. I think he’s exactly right. This is what the future will look like.

Posted by edelfenbein at 10:09 AM

Quote of the Day

Bill Gross from the PIMCO Web site:

Well prudence and rating agency standards change with the times, I suppose. What was chaste and AAA years ago may no longer be the case today. Our prim remembrance of Gidget going to Hawaii and hanging out with the beach boys seems to have been replaced in this case with an image of Heidi Fleiss setting up a floating brothel in Beverly Hills. AAA? You were wooed Mr. Moody’s and Mr. Poor’s by the makeup, those six-inch hooker heels, and a “tramp stamp.” Many of these good looking girls are not high-class assets worth 100 cents on the dollar. And sorry Ben, but derivatives are a two-edged sword. Yes, they diversify risk and direct it away from the banking system into the eventual hands of unknown buyers, but they multiply leverage like the Andromeda strain. When interest rates go up, the Petri dish turns from a benign experiment in financial engineering to a destructive virus because the cost of that leverage ultimately reduces the price of assets. Houses anyone?

Bess Levin has more.

Posted by edelfenbein at 4:21 PM

U.S. Home Prices Fell for the 17th Month in a Row

Wow.

U.S. home prices fell for the 17th month in a row with all regions showing the effect of the housing slowdown, according to a housing index released Tuesday by Standard & Poor's.

For April, the S&P/Case-Shiller index that covers 10 U.S. cities fell 2.7 percent from a year ago. It was the steepest decline since 1991.

The S&P's 20-city index showed a 2.1 percent drop in the price for sales of existing single-family homes across the U.S.

The April sales figures show that 14 of 20 cities reported prices had dropped or remained flat compared to 2006, S&P said.

"No region is immune to the weakening price returns," MacroMarkets Chief Economist Robert Shiller said in a statement.

Posted by edelfenbein at 12:24 PM

Lennar's Earnings

This morning, Lennar (LEN) reported earnings (or lack thereof). The company lost 22 cents a share and that doesn't include a huge $1.33 a share charge. Sales dropped 37%.

Here's a look at Lennar's sales and earnings for the past few years. The last number is my estimate for this year.

Posted by edelfenbein at 11:09 AM

The Fed Should Cut Rates By 0.25%

The Federal Reserve is meeting this week, as it’s almost universally expected that nothing will happen. I agree, the Fed won’t raise or lower rates, but I think it’s time that the Fed should lower interest rates. I’m not pushing for a big cut, just a small 25-basis-point cut for now, and we can see where that leads us.

Historically, there have been “fine tuning” measures from the Fed. Ten years ago, the Fed bumped up rates from 5.25% to 5.5%. That was the only move in nearly two-and-half years.

The main reason for my outlook is the sudden drop in short-term interest rates. The 90-day T-bill and the Fed Funds rates almost always track each, but not lately. Last week, the yield on short-term Treasuries dropped below 4.4%. That’s a difference of over 85 basis points from the Fed, and it’s the widest such spread in six years.

Clearly, the market wants a cut. I think the Fed has been most effective when it has given the market what it wants instead of trying to push it where it doesn’t want to go.

The other reason is that inflation seems to be cooling off. Last October, the core rate of inflation got to 2.9% and now it’s backed off to just 2.2%. Most surprisingly, that's exactly what the Fed said will happen (here's my exclusive coverage of Bernanke's testimony from last July).

I know there are many concerns about the government’s measure of inflation, and the use of the core rate. I think these arguments are correct, however, my concern here isn’t the level of inflation but the direction. Inflation maybe higher than they’re telling us, but it’s lower than where it was. This means that the “real” Fed Funds rate, meaning the difference between the Fed’s target rate and inflation, has been increasing. So in effect, as inflation has cooled off, it’s been as if the Fed has continued to raise rates.

The real Fed Funds rate is now slightly over 3%. Historically, anything more than that is trouble for the economy. I also don’t get how gold can be around $650. With 3% real rates, that seems massively overpriced.

Here’s a chart of 90-day T-bills (yellow), the Fed Funds rate (blue), core inflation (black) and the real Fed Funds rate (red) going back to 1991.

Posted by edelfenbein at 10:00 AM

That Was Quick

Blackstone (BX) is about 10% below today's open.

Posted by edelfenbein at 3:14 PM

News Items

Here are a few news items over the past few days:

I'll start with a positive article on Jos. A. Bank (JOSB). JOSB has been, by far, our best stock this year.

Medtronic (MDT) raised its dividend from 11 cents a share to 12.5 cents a share. The company has increased its dividend every year since 1978. Medtronic also increased its stock buyback plan by 50 million shares, which is about 4.4 % of the outstanding shares.

Shares of Harley-Davidson (HOG) got a boost on Friday due to rumors of a buyout from Honda. Please. There’s no way that would have happened. Honda officially squashed the rumor, and HOG is lower today.

Finally, Bed Bath & Beyond (BBBY) reports earnings on Wednesday. Earlier this month, the company issued its first-ever profit warning. The Street was expecting 39 cents a share, but BBBY said it will be between 36 and 38 cents a share. The stock is down over 8% since then. Historically, earnings for the first quarter make up about 15% of the full-year earnings. I wouldn't be surprised to see EPS of 39 cents.

Posted by edelfenbein at 1:17 PM

Greenspan Comes Out Of Retirement For One More Interest Rate Hike

The Onion scoops Wall Street:

Confirming a rumor that first appeared in March on the FDIC Fan Forum message board, former Federal Reserve chairman Alan Greenspan came out of retirement Tuesday to raise interest rates on federal funds by a quarter of a point.

"You may remember this one from 1989," said Greenspan, barely audible above the roar of an estimated crowd of 20,000 gathered in front of the Marriner S. Eccles Building. "But before I start, I think I'm gonna need [current Federal Reserve chairman] Ben [Bernanke]'s help with this. C'mon up here, Ben."

Greenspan refused to comment on buzz that he was planning a five-nation comeback tour to stabilize international housing markets.

There really is a Fed meeting this week and I wouldn't mind seeing a 0.25% cut.

Posted by edelfenbein at 9:00 AM

Just Another Friday

Tom Wolfe:

We may be witnessing the end of capitalism as we know it.

Paris Hilton:

I'm much more grateful for everything that I have, even just to have a pillow at night or food.

Here are the 10 largest IPOs:

Stock.......................................................Value..............Date
AT&T Wireless Group............................$10,620.0.......26-Apr-00
Kraft Foods Inc.....................................$8,680.0.........12-Jun-01
UPS......................................................$5,470.0.........9-Nov-99
KKR Private Equity Investors................$5,048.8.........3-May-06
CIT Group Inc.......................................$4,866.2.........1-Jul-02
Conoco.................................................$4,403.5.........21-Oct-98
Travelers Ppty Casualty Corp................$4,273.5........21-Mar-02
Agere Systems Inc................................$4,140.0.........27-Mar-01
Blackstone Group LP...........................$4,133.3........21-Jun-07
Charter Communications Inc..................$3,714.5.........8-Nov-99

Posted by edelfenbein at 1:58 PM

SEI Investments Splits 2-for-1

One of our Buy List stocks, SEI Investments (SEIC), split 2-for-1 this morning.

For tracking purposes, the number of shares will double from 839.4896 to 1678.9792 and the initial price falls from $59.56 to $29.78.

For more details on how I track the Buy List, see here.

Posted by edelfenbein at 10:03 AM

Blackstone is LIVE

Blackstone (BX) opened at $36.45 at $17 million shares. That's 17% higher than the offer price.

Interestingly, Stephen Schwarzman is not on the floor, but guess who is? Tom Wolfe!

Posted by edelfenbein at 9:53 AM

Firefox

I just downloaded Firefox—oh my god! OMG! It’s waaay better than IE. I mean WAY better.

C’mon people...how come no one told me? Why am I always the last person to know about these things?

If you’ve read this blog for any amount of time, you ought to know that I can’t be trusted with anything technomological.

Now if you’ll excuse, I have to get back to an exciting game of Parsec on my T1-99.

Posted by edelfenbein at 8:54 PM

Blackstone Priced at $31 a Share

Hold on, folks. Trading in BX will begin tomorrow. At $31 a share, Stephen Schwarzman's stake is worth about $7.7 billion. The entire company is worth about $30 billion. Impressive, but it's still about one-fifth the size of Berkshire Hathaway (BRKA).

Posted by edelfenbein at 5:52 PM

The Cyclical-Stock Party Is Ending

My latest at RealMoney on the last gasp of the cyclical rally. It's a paid link, but here's a sample:

The CYC is up over 22% this year and up over 40% in the past 11 months. Going back to the March 2003 low, the CYC has jumped 180%, which doubles the S&P 500. Not too shabby.

But the best has come recently.

This year, the CYC has already set an amazing 40 new highs. In April it burst through 1000, and it's quickly closing in on 1100. Like all good rallies, however, this must come to an end, and I'm afraid it won't be pretty.

Posted by edelfenbein at 12:59 PM

Novo Nordisk

While American drug companies Merck (MRK) and Pfizer (PFE) aren't doing well (or at least Merck has bounced off its deep lows rather nicely), check out the performance of Denmark's Novo Nordisk (NVO):

The stock is up about $5 a share today to $106. I had to cut off the top part of the chart because it's a logarithmic scale, but you get the idea.

Posted by edelfenbein at 11:47 AM

Stephen Schwarzman's Foolish Antics

Slate's Daniel Gross looks at the recent behavior of Blackstone's Stephen Schwarzman:

First, he threw himself a (much-covered) 60th-birthday party at the Park Avenue Armory in February. It featured, among others, Martin Short, Rod Stewart, Marvin Hamlisch, and Patti LaBelle leading the Abyssinian Baptist Church choir singing, according to a great article in the Wall Street Journal, "a tune about Mr. Schwarzman." ("He's Got the Whole World in His Hands"?) The best bit: "A huge portrait of Mr. Schwarzman, which usually hangs in his living room, was shipped in for the occasion." (I wasn't invited, but my gift would have been a first edition of Christopher Lasch's Culture of Narcissism.)

Next came a cover story in the March 5 Fortune declaring Schwarzman, who had just completed the gigantic acquisition of Equity Office Properties, "The New King of Wall Street." Then, only a few months after saying that Sarbanes-Oxley was deterring companies from going public, he filed a huge IPO for the Blackstone Group. If it goes through as planned, according to the Wall Street Journal, Schwarzman's sale will be worth $7.5 billion. This offering included several wrinkles that solidified Schwarzman's smartest-guy-in-the-room reputation but also seemed designed to elicit scrutiny. As the Financial Times reported ($ required), the preliminary prospectus said the firm planned to "book profits from private equity at the time an asset is bought"—not when the assets are sold, as most businesses do. More significantly, the offering was structured as a "publicly traded partnership" to take advantage of an absurd wrinkle in the tax code. Under current rules, the asset-management fees that private-equity partnerships like Blackstone reap are taxed not at the 35 percent corporate income-tax rate, but at the 15 percent long-term capital-gains rate, allowing Blackstone to save tens of millions of dollars annually on its tax bill. Finally, in May, at a time when concerns about China's role in the global economy and its influence on the United States were at a fever pitch, Schwarzman agreed to sell a 10 percent stake in Blackstone to an entity controlled by China's government.

The stock is expected to hit the world tomorrow. But now some people are wondering if the share price is too high.

If Blackstone goes public at $30, its price-earnings ratio (share price divided by earnings per share) would be about 14, based on the company's 2006 results. By comparison, premier investment bank Goldman Sachs Group Inc., which has a large private equity operation, trades at about 11 times profit.

Shares of Fortress Investment Group had a price-earnings ratio of about 15 when the company went public in February at $18.50 a share. With the shares now at $26.52, the ratio has risen to about 22.

Bloomberg reports that the Blackstone underwriting group is being forced to accept a lower in return for more business in the future:

Morgan Stanley, Citigroup Inc. and the 15 other investment banks that Blackstone hired to distribute shares in today's IPO will get a 3.6 percent commission, or as much as $170 million, according to regulatory filings. That's slightly more than half the 6.2 percent average rate banks charged U.S. companies to go public this year.

The securities firms are accepting the lower fee because they expect to make a lot more arranging and financing takeovers when New York-based Blackstone invests its $19.6 billion buyout fund, the second-biggest ever raised. Schwarzman's firm paid $571.4 million for those services last year and $248.1 million in the first quarter of 2007 alone, according to estimates by industry consultants at New York-based Freeman & Co.

Posted by edelfenbein at 9:12 AM

This is NOT Happening

From the AP:

Rupert Murdoch's News Corp. is discussing...

Me running in slow motion

...swapping social networking Web site...

waving my arms

...MySpace...

screaming

...for a 25 percent stake...

Nooooooo...

...in Yahoo.

...ooooooooooo!!!!

Posted by edelfenbein at 3:51 PM

Paul Krugman Four Years Ago Today

The big rise in the stock market is definitely telling us something. Bulls think it says the economy is about to take off. But I think it's a sign that America is still blowing bubbles — that a three-year bear market and the biggest corporate scandals in history haven't cured investors of irrational exuberance yet.

And.

In short, the current surge in stocks looks like another bubble, one that will eventually burst.

June 20, 2003

From a reader:

He lied! Krugman knew there was disagreement among investment consultants as to whether the market was a bubble or for real, and he intentionally massaged the indicators, and hyped the financial intelligence to make everyone believe there was a link between the current bull market and the bubble of 2000.

How many people sold their stocks on Krugman's intentionally misleading misrepresentation and failed to realize the gain that came with the continuing bull market?

Krugman lied, profits died!

Posted by edelfenbein at 1:24 PM

This Just In

Bernanke: Banks still important

Posted by edelfenbein at 9:57 AM

A Good Run Doesn't Mean a Stock is Too Expensive

A quick note on FactSet (FDS). This is a good reminder that just because a stock is up doesn’t mean it’s too expensive. FactSet was on last year’s Buy List and it rose 37.2% making it our second-best performer. I decided to keep it on this year’s Buy List and it’s up 20.6% so far, again our second-best performer.

Also, just because a stock is down doesn’t mean it’s cheap. I’ve often heard people say, “how much lower can it go?” The answer is, a lot. A whole lot. I remember my finance professor explaining how low zero is. A $100 stock can drop 90%, then another 90%, then another 90% and it’s still not at zero. In fact, it can drop 90% infinitely and still not be at zero. Zero is really, really, really, REALLY small, and that’s how low it can go.

Posted by edelfenbein at 9:53 AM

Oh Dear Lord

Posted by edelfenbein at 5:08 PM

The Vietnam War Is Officially Over

We won.

Mr. Carter added that he was looking forward to the day the first Vietnamese company lists on the NYSE.

Suck on that, hippies.

Posted by edelfenbein at 4:04 PM

Guess the Stock

Here's a 12-year chart:

Give up? Answer is after the jump.

Apple (AAPL) from 1987 through 1998.

Posted by edelfenbein at 3:27 PM

When Wall Street Couples Cash Out

From the LA Times:

The flood of cash into so-called hedge fund communities in New York, Connecticut and California has proved fatal to many marriages — and a windfall for lawyers, psychiatrists and forensic accountants who specialize in the superrich.

"There is no question that a huge infusion of wealth to relatively young people has a disastrous effect on the marriage's stability," says Bern Clare, a Manhattan divorce lawyer.

Divorce hedge fund-style often means the judges involved must cope with pre- and post-nuptial agreements, years of fights over access to hedge fund accounts and monetary demands well into eight and nine figures.

"When you are dealing with the uber-wealthy, you are dealing with the uber-lawyers," says Kevin Tierney, the presiding judge of the family division in the Stamford-Norwalk district of Connecticut, where many hedge fund families live. "They have accountants and paralegals and dueling experts."

Further complicating matters is that the value of the assets involved, unlike real estate or jewelry, is highly variable, depending on the gyrations of the stock market and other investments.

"You can have an asset change by $1 million while a witness is on the stand," Tierney says.

Posted by edelfenbein at 11:38 AM

FactSet Beats Estimates

FactSet Research Systems (FDS) just reported very good earnings. After charges, the company earned 52 cents a share, a penny higher than forecasts. Sales rose 23% to $121.1 million. FDS also said it expects sales this quarter of $126 million to $130 million while analysts were expecting sales $125 million.

Posted by edelfenbein at 8:58 AM

Town Has Its Own Currency

Not only is the dollar losing support overseas, it's not even doing well in Massachusetts.

"I just love the feel of using a local currency," said Trice Atchison, 43, a teacher who used BerkShares to buy a snack at a cafe in Great Barrington, a town of about 7,400 people. "It keeps the profit within the community."

There are about 844,000 BerkShares in circulation, worth $759,600 at the fixed exchange rate of 1 BerkShare to 90 U.S. cents, according to program organizers. The paper scrip is available in denominations of one, five, 10, 20 and 50.

In their 10 months of circulation, they've become a regular feature of the local economy. Businesses that accept BerkShares treat them interchangeably with dollars: a $1 cup of coffee sells for 1 BerkShare, a 10 percent discount for people paying in BerkShares.

Interesting idea. My only problem is the fixed exchange rate. No exchange rate is truly fixed, as the users of BerkShares will one day learn.

Posted by edelfenbein at 8:44 AM

Breaking: Terry Semel Resigns

Terry Semel is out at Yahoo (YHOO). The stock is up in the after-hours market. Susan Decker has been named president.

Two months ago, I wrote:

I say that Decker will replace Terry Semel before the summer is over.

Even I was too optimistic since summer doesn't start for a few more days.

Posted by edelfenbein at 4:42 PM

The Lula Rally

Yale's Robert Shiller looks at the Brazilian stock market. Since Lula took over in 2002, the stock market is up over 300%.

Stock-market movements are certainly hard to explain, but there are reasons to believe that Brazilians might be rationally exuberant. Corporate earnings in Brazil have gone up roughly as fast as stock prices. With the price/earnings ratio remaining stable and moderate, the stock-market boom does not appear to reflect mere investor psychology.

On the contrary, the real question is why the increase in stock prices has not outpaced growth in corporate earnings.

Apparently, leftists are having a love affair with the stock market. Or at least, a good stock market.

Well, maybe not all leftists. Hillary's gone 100% cash:

Given her history -- recall her preposterous cattle future windfall -- Mrs. Clinton is bound to be sensitive about her financial dealings. But in recent history, few candidates have felt compelled to go to an all-cash asset allocation to avoid potential conflicts. Al Gore, who in 2000 made a point of saying he avoided all stock-market investments, is a notable exception, if not one Mrs. Clinton should be eager to emulate. His populist campaign riff was a bust.

But in retrospect, wasn't Gore's timing pretty good? (Also, going by the numbers, I'm not sure his campaign was a bust.)

Posted by edelfenbein at 6:53 AM

The Cyclicals Continue to Soar

The market is up this morning and again it's being led by cyclical stocks. The Morgan Stanley Cyclical Index (^CYC) is up over 22% this year and it's closing in on 1,100.

Here's a look at the CYC divided by the S&P 500. The ratio hit another all-time high today.

Posted by edelfenbein at 11:40 AM

Core CPI = 0.14978486314%

The futures are pointing sharply higher because the core CPI for May came in at 0.1% compared with Wall Street's forecast of 0.2%.

The seasonally-adjusted core CPI Index for April was 209.634. For May, it was 209.948.

So the inflation rate is 0.314 divided by 209.634 or 0.14978486314%.

All Hail the Gods of Rounding!

Posted by edelfenbein at 9:09 AM

Signs of a Bubble

Mark Gilbert looks at signs of a bubble. Here's a wee sample:

If Hirst designed a vegetable display, it would look like the shop window at the just-opened Whole Foods Market Inc. branch in Kensington, one of London's ritziest shopping areas. Analysts at JPMorgan Chase & Co. calculate that Kensington could contribute as much as 1.8 percent of the food retailer's total sales. Whole Foods said last month that second-quarter revenue was $1.46 billion.

It's a food-porn cathedral dedicated to organic this, natural that and locally produced the other. On a Monday afternoon, the place was packed with gym-buffed yummy mummies driving designer pushchairs and doing battle in the produce- crammed aisles with trolley-dragging wealthy retirees.

The zeitgeist-defining product among the free-range bananas, organic spring water and corn-fed soup is a 60-year-old Vecchia Dispensa balsamic vinegar, costing almost $200 for a triangular 100 milliliter bottle stoppered with red wax seals.

You know there's a bubble when an overgrown U.S. chain store can sell antique vinegar to Britons at 32 times the price of Nicolas Feuillatte champagne.

Posted by edelfenbein at 10:41 AM

Best Day in Nearly a Year

Today was the market's best day since last July. And it really didn't get going until after 1 p.m.

Posted by edelfenbein at 4:22 PM

Morgan Stanley Two Years On

Remember Phil Purcell? Me neither.

Apparently he used to be head of Morgan Stanley (MS) until the firm mutinied and drove him out. It was two years ago today that he announced his resignation.

Let's look at the results:

Morgan Stanley's stock on June 13, 2005: $49.20

Morgan Stanley's stock on June 13, 2007: $88.75

Posted by edelfenbein at 2:52 PM

The WSJ on Schwarzman

The WSJ has a long article on Blackstone's Stephen Schwarzman this morning. It's a paid link, but Bess Levin has the highlights at DealBreaker.

The article covers such details as Schwarzman's height (5'6") and the size of his house (big), but out of 2,100 words, neither "skull" nor "bones" appears (though "Rod" and "Stewart" do).

These folks need Murdoch. Now.

Posted by edelfenbein at 1:13 PM

Lincare Holdings

Since the beginning of 2006, the market value of the S&P 500 has increased by $2 trillion, but the health care sector has been warming the bench. Health care has chipped in just $66 billion, or about 3.3%, which is well below its sector weighting of 12%. Fortunately, lagging sectors are often good places to spot bargains.

One mid-cap health care stock that I’ve got on my radar is Clearwater, FL-based Lincare Holdings (LNCR). Lincare is in the oxygen and respiratory therapy biz. You may have seen their portable oxygen tanks which, in Florida, are sorta like iPods for the retiree set.

I’m not claiming to have any special insight here. I’ve just run the numbers on LNCR and it looks like a good stock at a good price. The shares are currently going for 13.6 times next year’s estimate, which is about a 13% discount to the market. EPS jumped 24% last quarter and is expected to rise 16% this year.

I don’t own it, but in a market where Yahoo (YHOO) can fetch $27, Lincare at $39 ain’t bad.

Posted by edelfenbein at 1:06 PM

Guess What's Up 90% in the Past Year?

Nope, I'm not talking about a stock.

The answer: Foreclosures.

Posted by edelfenbein at 11:41 AM

The Return of Volatility

The stock market could be heading towards its fifth 100-point day move in the last six sessions. To add some perspective, there were five 100-point days in the entire fourth quarter.

Of course, I remember when 100 points used to mean something....

Posted by edelfenbein at 10:59 AM

Warren Buffett Talks to MBA Students

YouTube comes through again. I found this 10-part video of Warren Buffett speaking to MBA students.

I don't know the date, but it seems to be a few years old. Nevertheless, it's a great talk. Buffett has a way of making complicated topics easy to understand.

If you have a chance, I urge you to see the whole thing (about 90 minutes). Here's part 1:

Here's the rest:

Part 2

Part 3

Part 4

Part 5

Part 6

Part 7

Part 8

Part 9

Part 10

Posted by edelfenbein at 10:34 AM

Quotes at Yahoo Finance

Just in case you're using Yahoo Finance this morning, Fiserv (FISV) is not up 150% today.

They have yesterday's close listed at $22.29, instead of $56.49. The stock is really down a few pennies. I think this is all part of Terry Semel's masterplan to take down Google -- build ad revenue through wrong stock quotes. Still, it's better than Panama.

Posted by edelfenbein at 9:57 AM

Quit Following Me

The stocks of Lehman (LEH) and Bear Stearns (BSC) for the past year:

Posted by edelfenbein at 1:54 PM

Hold Off Selling Stock

Mark C. Leeds in today's New York Post reminds investors in the 10% and 15% tax brackets -- which includes many retirees -- to hold off on selling stocks this year. On January 1, the capital gains tax will fall to 0% for both brackets. As of now, the tax cut will last through 2011.

Posted by edelfenbein at 6:52 AM

Rule Change Could Boost Wall Street's Profits

Wall Street firms could see a big boost to their bottom lines this year thanks to a rule change. An SEC regulation passed in 2004 will allowed firms to set aside less money in reserve so Wall Street can better compete with financial firms in other countries.

Investors are underestimating the benefits of "alternative net capital requirements," a regulation passed by the Securities and Exchange Commission in 2004 to keep Wall Street firms competitive with their counterparts in the European Union, said Brad Hintz, an analyst at New York-based Sanford C. Bernstein & Co. Profits will get a boost in the second half of 2007, depending on how fast the five firms shift their capital, he said. U.S. commercial banks are receiving a similar break from the Basel II agreement, set to take effect as early as next year.

"They're all increasing capital at risk because the new capital requirements allow it," said Hintz, a former chief financial officer at Lehman. "As the transition to the new capital rules is completed, they'll have more room to do so, and that will help their profit."

Posted by edelfenbein at 6:30 AM

Just in Case You're Feeling Sorry for Paris

According to the chart, she's doing just fine.

Hilton's (HLT) stock fell in half after 9/11. I remember how people said that it will hurt travel companies. In retrospective, it had almost no impact and the sell-off was really a great time to buy.

Posted by edelfenbein at 3:12 PM

Chinese Stocks 65% Overvalued

Bloomberg notes that the Chinese stock market's benchmarket CSI 300 "would have to drop 65 percent to match the average multiple for Chinese shares traded in Singapore."

On the mainland, investors pay 147 times earnings to own Fortune Ng Fung Food (Hebei) Co. Hong Kong-listed China Yurun Food Group Ltd. trades at 26.7 times profit. And in Singapore, People's Food Holdings Ltd. is valued at 11.7 times earnings.

"There is not that big a difference in their businesses, so there shouldn't be such a difference in their prospects and valuations," says Greg Lesko, who helps manage $900 million at New York-based hedge fund Deltec Asset Management.

Posted by edelfenbein at 1:10 PM

This Just In

YouTube's Chen: Better Content Needed

Posted by edelfenbein at 10:23 AM

NYT Hearts Lloyd

Jenny Anderson in the Sunday NYT writes a 2,500-word love letter to Lloyd Blankfein:

Lloyd Blankfein’s makeover from frumpy gold salesman to chief executive has a bit of a reality-TV feel to it. Less than a decade ago, he could be seen in shorts at a golf outing, tube socks stretched to his knees, 50 pounds heavier, and toting his BlackBerry in the same plastic bag as his bagel with cream cheese. Today, he dons navy pinstripes and a power tie and, having just returned from a business trip to Turkey, enjoys conversing about the Ottoman Empire.

Even with careful grooming, Mr. Blankfein remains a far cry from central casting’s idea of a chief executive.

At 5 foot 8, he is balding, has eyes more mischievous than intense and blankets himself in a shield of one-liners. Why did he shed the weight and shave the beard? “I wasn’t going to make myself taller.” How does he feel about the markets? “I haven’t felt this good since July 1998” (a month before Wall Street went into a tailspin after the Russian ruble collapsed). And to a photographer shooting his portrait? “If I’d known you were coming, I’d have had my hair done.”

Sheesh, get a room!

Posted by edelfenbein at 9:48 AM

JoS. A. Bank's Earnings

I may have gotten a lot of things wrong this year, but I'm happy to say that JoS. A. Bank (JOSB) was a great addition to our Buy List. The company just reported terrific earnings of 45 cents a share.

The stock is already up 45.6% this year and will probably add some more today.

Posted by edelfenbein at 9:34 AM

Sorry Ladies

DealBook's Andrew Ross Sorkin is off the market. My congratulations to the happy couple.

(Hat Tip: DealBreaker)

Posted by edelfenbein at 9:17 AM

Dick Parsons on Wal-Mart

AdAge via Drudge:

"It will be a cold day in hell that I would actually get up from my apartment to go to the video store," Mr. Parsons added. "I've never actually been in a Wal-Mart."

Posted by edelfenbein at 1:45 PM

Defending Bed Bath & Beyond

I'm not the only one who still likes Bed Bath & Beyond (BBBY). Here are some other views:

SunTrust Robinson Humphrey analyst David Magee stood by his "Buy" rating and said the company will be one of the first to gain when the housing market shows signs of a bottom.

Magee also said the lowered expectations, while disappointing, are not that bad and its balance sheet remains strong. Magee also expects the company will use its $1 billion share repurchase program to enhance shareholder value.

"We had actually expected the market reaction to the news might be worse, and while we do believe there could be some additional near-term volatility, (we) don't anticipate significant further declines in the multiple," Magee wrote in a client note.

Meanwhile, CIBC World Markets Corp. Vivian Ma said a decline in the share price presents a buying opportunity. She remained bullish on the company's long-term value.

"We think the sales environment could remain very competitive in the second quarter, but Bed Bath & Beyond may see some rebound sequentially," Ma wrote in a client note. "Bed Bath & Beyond has been a consistent outperformer in other periods of consumer pullback."

Posted by edelfenbein at 10:58 AM

The Yield Curve Widens

Yesterday's real action was in the bond market. The 10-year Treasury had its worst day in over three years. Here's a chart of the 10-year T-bond along with the three-month Treasury bill to show you how much things have changed in the past month.

Posted by edelfenbein at 10:54 AM

Breaking: Bill Gross Is Now a Bond Bear

After 25 years of being a bond bull, Bill Gross has turned bearish:

Long-time bond bull Bill Gross, just one year after declaring the end of the bear market for U.S. Treasuries, on Thursday conceded the snappy pace of global economic growth will likely keep bonds on their heels.

Furthermore, Gross forecast that benchmark Treasury yields will range higher than previously thought, prompting him to acknowledge he is now a "bear market manager" after a quarter century as the global bond market's most powerful bull.

Gross, chief investment officer for Pacific Investment Management Co. and manager of the world's largest bond fund, said solid global growth and a mild acceleration of inflation in the United States and abroad will drive 10-year U.S. Treasury note yields to top out at 6.5 percent over the next three to five years as opposed to the 5.5 percent ceiling previously forecast and 5.1 percent seen on Thursday.

Gross's comments were included in a note summarizing an annual gathering of Pimco investment managers, a copy of which was obtained by Reuters.

Posted by edelfenbein at 3:40 PM

The 10-Year T-Bond Breaks 5%

This is the first time this has happened since last August.

Posted by edelfenbein at 11:44 AM

Victory!

Or something not as close to defeat.

The private equity consortium looking to buy Biomet (BMET) has increased its bid to $46 a share. The vote scheduled for this Friday has been canceled.

Posted by edelfenbein at 9:57 AM

Citi's Top Secret Plan

DealBreaker’s Bess Levin looks at Citigroup’s (C) newest strategy, breaking into the Boston banking market.

Pardon me while I go bang my head against the wall. First off, the Boston banking market is what? Four hundred years old. I’m sorry but this is just plain silliness.

Citigroup’s strategy is that it’s a “financial supermarket.” They figure “hey, we have credit card customers with Boston addresses, so they’ll certainly buy Smith Barney mutual funds!” You can just feel the synergy!

Let’s take a step back and look at this. We’re waiting to see if a company with $2 trillion in assets can make impact its business by impressing Bostonians with having one statement for their credit cards and investments.

Please, this is secret so whatever you do, don’t tell Fidelity (or State Street or Bank of America or Merrill Lynch or anybody else with $30 in deposits).

The financial supermarket idea doesn’t work. Repeat after me, Mr. Prince, it doesn’t work. I know, it sounds good on paper, but people don’t do their finances that way. They never have and they’re not about to now. This was just a nice idea to justify some lousy acquisitions many, many years ago.

Eddy’s rule of business #15,783: No matter who is put in charge to execute a dumb idea, when it starts to fail, people will blame the execution, not the dumb idea. Lots of people are ready to toss Chuck Prince overboard. Fine, but he’s not the problem.

Twenty-five years ago, Sears bought Dean Witter. They had this great idea. Stick brokerage offices in the stores! Well, it didn’t work and Sears eventually sold Dean Witter. Later Dean Witter bought Discover and turned it into a hugely profitable credit card business. Then Morgan merged with Dean Witter, and made a whole lotta money.

Guess what Morgan is spinning off now? Discover!

Think about it, Chuck. Split Citi up.

Posted by edelfenbein at 1:28 PM

The Coolest Water Buffaloes Versus Lions Versus Crocs Video You'll See All Day

Funny, this is oddly familiar to the J&J/Guidant/Boston Scientific fight last year.

Posted by edelfenbein at 11:19 AM

Trophy Stocks

Tom Wolfe coined the phrase “trophy wife.” Now, Michael Lewis says the reason the rich want to own newspapers isn’t for the money, but for the status.

This logic explains what appears to be happening right now inside the two great national newspapers, the New York Times and the Wall Street Journal.

The cachet of the New York Times is worth more to the Sulzberger family than to anyone else. The Sulzbergers' relationship to the Times is the chief source of their status; without it they are mere mortals with a bit of cash; and so the Sulzbergers cling to their control of the Times as tightly as ever.

Instead of getting out while the getting is good, they flop around looking for new ways to raise money without ceding control, and to make money without leaving the news business. Which is to say, they are working as hard as they possibly can to throw good money after bad -- with the predictable result that they have alienated their outside investors.

When you have nothing else to offer except a gazillion Class A shares, you’ll naturally overvalue your role, which the Bancrofts see as protecting the Journal’s independence. They’re confusing vanity for high-mindedness.

Posted by edelfenbein at 9:13 AM

Morgan: Triple Sell

FT Alphaville reports that Morgan Stanley's three key indicators are flashing SELL.

Since 1980, this has happened only five other times. Six months later, the stock market hasn't don't very well:

Apr 1981 -10.8%
Sep 1987 -25.2%
Feb 1990 -6.8%
May 1992 -7.0%
Apr 2002 -26.2%

Posted by edelfenbein at 9:01 AM

$59.1 Trillion in Liabilities

Guess what company lost $1.3 trillion last year. I'll give you a hint: You're a shareholder.

Of course, that's only $1.3 trillion if it has to follow corporate-style accounting standards, which it doesn't.

Posted by edelfenbein at 8:52 AM

WSJ on Bed Bath & Beyond

The Wall Street Journal looks at Bed Bath & Beyond's (BBBY) first-ever profting warning:

Bed Bath now trades at 16.1 times estimated per-share earnings for the next 12 months, a tad cheaper than the overall market, according to Credit Suisse. While that is well below the 25 price/earnings average of the past five years, Bed Bath doesn't have the growth prospects it once had for its flagship stores, and investors have been frustrated with the slow progress in its other businesses, such as its specialty Christmas Tree Shops.

Bulls point out that Bed Bath's balance sheet is impressive. It holds about $1 billion more cash than debt, according to data company Capital IQ.

And the earnings disappointment was relatively minor: The company said it would earn between 36 cents and 38 cents in the first quarter, which ended June 2, compared with expectations of 39 cents. Bed Bath's same-store sales, or sales at stores open at least a year, are expected to rise 1.6%, besting many peers though below the company's longstanding projection of 3% to 5% growth.

But there are indications that Bed Bath's historically juicy profit margins -- 14% in 2006 -- may be challenged by competitors, such as closely held Linens 'n Things, which has been cutting prices amid its own sales decline.

Another reason for bearishness: The company's stores are getting older and are about at the point where money is needed to update them, argues Stephen Long, a portfolio manager at Hanover Square Capital, a New York hedge fund with less than $50 million in assets, which has been betting against Bed Bath in recent months.

"Growth is falling; that suggests to us that the core concept is very mature," Mr. Long says. "The stock will drift down to $33 as growth investors" bail out of the stock and are replaced by value-oriented investors.

I still don’t see any reason to worry. All of the problems cited are problems that nearly every company in the sector faces. Let’s not forget the basics: BBBY is a very well-managed company, with sold financials going for a reasonable price. The bullish case for BBBY is that simple.

Posted by edelfenbein at 8:27 AM

Think Gasoline is Expensive in Your Area?

Think again:

Amsterdam.........................................$6.48
Oslo...................................................$6.27
Milan .................................................$5.96
Copenhagen .....................................$5.93
Brussels ............................................$5.91
Stockholm ..........................................$5.80
London ...............................................$5.79
Frankfurt ............................................$5.57
Paris ..................................................$5.54
Lisbon ................................................$5.35
Budapest ............................................$4.94
Luxembourg ....................................... $4.82
Zagreb................................................ $4.81
Dublin .................................................$4.78
Geneva............................................... $4.74
Madrid ................................................$4.55
Tokyo .................................................$4.24
Prague ...............................................$4.19
Bucharest ...........................................$4.09
Andorra ..............................................$4.08
Tallinn ................................................$3.62
Sofia ..................................................$3.52
Brasilia ...............................................$3.12
Havana ...............................................$3.03

Posted by edelfenbein at 2:05 PM

The Backlash against Private Equity

When most investors think of risk, they think of stocks going down. Today, I think a big risk investors face is selling out too early.

Last week, I wrote about an emerging backlash against private equity buyouts and, in particular, my opposition to the Biomet (BMET) deal. Basically, these PE guys are getting great deals and I’d like to see more shareholders say “not so fast.”

To quote George Bailey:

Can’t you understand what’s happening here? Don’t you see what’s happening? Potter isn’t selling. Potter’s buying. And why, because we’re panicky and he’s not! He’s picking up some bargains. Now we can get through this thing all right. We’ve got to stick together though; we’ve got to have faith in each other.

As usual, I’m totally ahead of the curve.

The Wall Street Journal noted this backlash in an article yesterday. Some private equity deals are being sweetened, or organized as “stub equity,” meaning shareholders get a stake on the private equity side.

I was happy to see shareholder win a victory when the private equity offer for Laureate Education (LAUR) had to be raised to $62 a share from $60.50 a share due to shareholder opposition. Would it surprise you to learn that the private equity group is being led by the company’s CEO?

This is a nice reminder that management works for shareholders, not vice versa.

Posted by edelfenbein at 1:51 PM

WallStrip on Rick's Cabaret

Posted by edelfenbein at 12:09 PM

Goldman Sachs Runs Italy?

Some Italians aren't pleased that their prime minister, head of the central bank and deputy treasury head are all former Goldman Sachers.

I understand, but look at it this way: Who has a better government track record over the last 100 years, Italy or Goldman?

Posted by edelfenbein at 10:57 AM

Avaya To Be Taken Private

Another stock is leaving the public market. This time, it’s Avaya (AV), which is one of the spin-offs of the spin-offs of AT&T.

It’s been 25 years since Judge Greene ordered AT&T to be broken up, and the pieces are now all over the place. One of the rules of the breakup order is that the new companies had to have worse and worse sounding names. This started with Nynex and continued through with Lucent, Avaya and Agere.

In 2000, Avaya was spun-off from Lucent which isn’t even Lucent anymore, it’s Alcatel-Lucent (ALU). Although I doubt the hyphen will stay around much longer. In 1996, AT&T spun-off Lucent. I remember I sold my shares almost immediately and the stock shot up from there.

If you’re old enough to remember those old-style rotary phones, those phones weren’t owned by customers, they were leased from Ma Bell. Well, that business still exists and Lucent runs it. If you’ve ever wondered why New York City’s area code is 212, it’s because it’s fast on a rotary phone.

According to Lucent, they lease about 750,000 phones today.

Posted by edelfenbein at 10:53 AM

June 5 in History

From Gary Alexander’s “This Day in Market History.”

Adam Smith was born in Scotland on June 5, 1723.

John Maynard Keynes was born in Cambridge on June 5, 1883, exactly 160 years after Smith.

On June 5, 1933, the U.S. Congress officially took America off of the gold standard. Gold’s price was raised by governmental fiat, from $20.67 to $35 per ounce. Gold was forbidden for Americans to own, but the gold mining stocks were fair game and were among the best performers in the 1930s.

Posted by edelfenbein at 10:26 AM

Market Sees 41% Chance of a Rate Hike

Ben Bernanke predicts that the economy will rebound later this year. That's good to hear. Of course, in February he was expecting 2.5% to 3% growth this year -- not the 0.6% we have.

More importantly, however, is what the market says. The markets' odds for a Fed rate cut has dropped to 29% from 83% since the beginning of May. There's now a 41% chance of a rate increase.

Posted by edelfenbein at 10:04 AM

Bed Bath & Beyond Warns on Q1

After the bell yesterday, Bed Bath & Beyond (BBBY) said its first-quarter earnings will be between 36 cents a share and 38 cents a share. Wall Street was looking for 39 cents a share. Frankly, this is upsetting, but it's not that bad.

As usual, housing is to blame. Steven Temares, the CEO, said "the overall retailing environment, especially sales of merchandise related to the home, has been challenging."

Last year, BBBY reported earnings of 35 cents a share. The company is due to report on June 27. The stock opened trading today at $37.93.

Posted by edelfenbein at 9:44 AM

Executive Fascinated By Electrician's Lunch

The Onion reports on Chuck Prince:

While waiting for an elevator en route to a lunch meeting at Central Park's Tavern on the Green restaurant Monday, Citibank CEO Chuck Prince said he became "spellbound" by the meal being consumed by an electrician working in the area.

"First, he opened some sort of tiny, metal, barn-looking object, and then he took out and ate one of those sandwich things, you know, the kind with bologna and two slices of mushy white bread," said Prince, who was equally amazed that the electrician's snack-cake dessert wasn't set ablaze before consumption. "I had heard of this sort of meal before, but never actually seen it. My goodness, his thermos contained soup!"

Prince added that he was even more stunned when he realized that the electrician must have prepared his meal at home.

Posted by edelfenbein at 1:59 PM

Biomet Trades Over $44

For a company that makes spinal implants, you'd think Biomet's (BMET) board would have a backbone. Apparently not.

The good news is that shares of BMET are now trading above private equity's $44 offer price. I hope this means the market expects a higher bid. Shareholders will vote on the offer this Friday.

Posted by edelfenbein at 10:42 AM

Canadian Dollar Close to Parity of U.S.

This is embarrassing. The U.S. dollar is in such bad shape, it just hit a 30-year low against the Canadian dollar. Who knew Canada even had its own currency? Apparently, it does and if this keeps up, it'll soon reach parity. That means you could exchange one Canadian dollar for one real dollar.

Sheesh, sometimes I think our monetary policy is being run by a bunch of 13th graders....

Posted by edelfenbein at 10:41 AM

Sign of a Top?

There's a shortage of butlers.

Egad! I'll have to pour my own sherry. No!

Posted by edelfenbein at 8:32 AM

News from Last Week

I forgot to mention this last week, but one of our Buy List stocks, Fiserv (FISV), rose nearly 10% in last week's trading.

The company agreed to sell its Fiserv Investment Support Services business in two separate transactions. The stock was also upgraded by Cowen & Co. Shares of FISV are up 12.32% this year.

Also, Donaldson (DCI) got hit despite a good earnings report. I'm still trying to figure this one out. At one point on Wednesday, DCI was down 9%.

Earnings came in at 49 cents a share, four cents ahead of estimates. Sales came in at $484 million which also Wall Street's estimate of $462 million. The company sees full-year EPS of $1.73 to $1.80.

Posted by edelfenbein at 8:07 AM

Job Openings at the Federal Reserve

If you're in the job market, here are the openings at the Federal Reserve Board. They're looking for everything from economists to IT folks and lawyers, even law enforcement.

Also, here's the Web site of Renaissance Technologies. Kinda plain. I guess the best sign of being big and powerful is not caring what your Web site looks like.

Posted by edelfenbein at 7:35 AM

“One of the most interesting and unnoticed developments of recent decades has been the tendency of big enterprise to socialize itself"

Nick Schulz writes on "The Greening of Capitalism." He finds this quote from John Maynard Keynes:

A point arrives in the growth of a big institution...at which the owners of the capital, i.e. the shareholders, are almost entirely dissociated from the management, with the result that the direct personal interest of the latter in the making of great profit becomes quite secondary. When this stage is reached, the general stability and reputation of the institution are more considered by the management than the maximum of profit for the shareholders. The shareholders must be satisfied by conventionally adequate dividends; but once this is secured, the direct interest of the management often consists in avoiding criticism from the public and from the customers of the concern....They are, as time goes on, socializing themselves.

Posted by edelfenbein at 1:27 AM

The Earl of Baltimore

Now that the week is over, I thought you might enjoy this -- the great Earl Weaver in top form. I have to warn you, the language is...Earl Weaver-esque.

Here's the funny part. On the scoreboard, you can see that there's one out in the top of the first. Yep, the game had just started.

By the way, Weaver was right. He's now in the Hall of Fame.

Posted by edelfenbein at 5:30 PM

Today's Jobs Report

The government reported that 157,000 jobs were created last month. That's good, not great, but good. The unemployment rate stayed at 4.5%.

The problem I have is that many Americans have left the job market. The number of employed people as a percent of the civilian population is still not very high.

Allow me to chartify:

Warning: The line is bumpy because it's not seasonally-adjusted. You can see that we're better than where we were, but far from our best.

If the same percent of the population were employed today as we had seven years ago, that would mean 3.2 million more jobs.

Posted by edelfenbein at 2:09 PM

Bancrofts to Meet With Murdoch

Maybe they changed their minds, but the Bancrofts are going to meet with Rupert Murdoch and, we can assume, listen to his bid for Dow Jones (DJ). John Carney* at DealBreaker picked up this quote:

"If they meet, they sell," said a Dow Jones employee familiar with the thinking of the Bancrofts.

They're also considering other potential bids. I really hope Murdoch wins out if for no other reason to see extra-voting-power shares lose.

*I also stole John's HAL 9000 image below. It's what bloggers do.

Posted by edelfenbein at 11:39 AM

Where are the Algorithms' Yachts?

Wall Street slowly goes bionic:

Louis Morgan, managing director of hedge-fund firm HG Trading, has never talked to his best trader. That's because his best trader is a machine.

Morgan's top earner is a computer whose software can monitor thousands of stocks simultaneously, and respond in less than a blink of an eye when opportunities arise.

"Doing what we do by hand would be impossible," said Morgan, who focuses on statistical arbitrage -- taking advantage of sudden and potentially profitable price anomalies between securities that usually trade in correlation.

Morgan uses a computer trading system based on algorithms, complex mathematical formulas that quickly weigh a huge number of possible trades and execute orders in milliseconds (a millisecond is one thousandth of a second).

Best of all, you don't have to pay an algorithm a bonus.

If all goes well, I think Wall Street can entirely displace humans by 2011. Of course, stock blogging can never be replicated by a machine. (They wouldn't dare.)

Posted by edelfenbein at 10:14 AM

Macy's Lands the "M" Ticker

On the NYSE, the most highly prized ticker symbols are the single-letter symbols. That's only for the very elite.

The NYSE has always kept M and I open, and everyone assumed that was for Intel and Microsoft. Well, they apparently think they're not going to win Microsoft over.

Today, Macy's (M) starts trading under M.

Two weeks ago, the company changed its name from Federated Department Stores and it used to trade under FD.

Posted by edelfenbein at 9:58 AM

207% Returns

Since 2001, this asset has increased from $195,000 to $600,000 today. What am I talking about?

New York City cab medallions.

(Hat Tip: Altucher & Stockerblog.)

Posted by edelfenbein at 9:52 AM