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The Dividend Aristocrats

S&P tracks its list of "Dividend Aristocrats," these are S&P 500 stocks that have increased their dividend every year for the last 25 years.

Here's the list ranked by current dividend yield:

FHN 5.51%
BAC 5.34%
ED 5.29%
USB 5.21%
PFE 4.92%
BBT 4.81%
CMA 4.73%
RF 4.68%
FITB 4.43%
MO 4.09%
KEY 4.09%
CINF 3.55%
LEG 3.44%
GCI 3.24%
LLY 3.12%
KMB 3.10%
SNV 2.85%
GE 2.83%
JNJ 2.72%
BUD 2.69%
PPG 2.68%
CLX 2.61%
MTB 2.60%
KO 2.59%
ROH 2.58%
ABT 2.57%
AVY 2.56%
VFC 2.51%
CBSS 2.47%
CB 2.27%
PEP 2.27%
PG 2.24%
SWK 2.21%
EMR 2.20%
MMM 2.15%
MCD 2.05%
SLM 2.01%
WWY 2.01%
ADP 1.96%
WMT 1.90%
SHW 1.77%
GWW 1.57%
SVU 1.54%
FDO 1.50%
DOV 1.43%
MHP 1.34%
ADM 1.34%
STT 1.28%
BDX 1.25%
JCI 1.17%
LOW 1.14%
SIAL 1.01%
STR 0.95%
TGT 0.90%
WAG 0.85%
NUE 0.84%
BCR 0.75%
CTL 0.56%
PGR 0.19%

Posted by edelfenbein at 11:02 AM

Quote of the Day

Private equity firms are draining the capital out of our communities, and draining the lifeblood of our country.

From John Edwards' campaign blog

Posted by edelfenbein at 12:30 AM

RIP: Chet Currier

Long-time financial writer, Chet Currier, died on Sunday. This is from his final Bloomberg column:

For one long-standing indicator of shifting moods in the stock market, a now-or-never moment is at hand.

The gauge in question, which focuses on cash reserves held by managers of stock-mutual funds, has been emitting increasingly bearish signals about the market outlook.

But nobody has been paying much attention. The indicator's once-stellar record of accuracy has been less than compelling lately. What's more, the whole premise behind it may be out of date.

Posted by edelfenbein at 12:14 AM

GDP Revisions

One of my constant complaints about the government’s economic data is that it’s subject to endless revisions. Then the revisions are updated and the updates are subsequently revised. Geez, folks. Just wait till you get a final number and give it to me.

In Friday’s GDP report, the government revised all the GDP numbers going back to 2004. It turns out that the economy was a bit weaker than it originally said. They were only off by about $120 billion. Unless, of course, that gets revised.

Funny, I don’t feel any different.

Anyway, here’s a look at GDP, new numbers and old:

Eleven of the 13 quarters were revised lower. Here’s a look at the quarterly growth numbers:

…………......…….Old…….....…..New
Q1-04………..3.85%.............2.96%
Q2-04………..4.04%.............3.48%
Q3-04………..3.10%.............3.60%
Q4-04………..2.61%.............2.55%
Q1-05………..3.40%.............3.07%
Q2-05………..3.26%.............2.81%
Q3-05………..4.18%.............4.46%
Q4-05………..1.76%.............1.19%
Q1-06………..5.58%.............4.82%
Q2-06………..2.56%.............2.44%
Q3-06………..1.96%.............1.07%
Q4-06………..2.45%.............2.09%
Q1-07………..0.69%.............0.60%
Q2-07…………….....…......…….3.38%

(We pass the graphics savings on to you.)

Posted by edelfenbein at 2:02 PM

Dow 14000

From The Onion:

The Dow Jones closed at over 14,000 for the first time last week. What are the contributing factors?

Certain knowledge that crashes like those of 1819, 1837, 1869, 1873, 1929, 1987, 1989, 2000, and 2001 will absolutely never happen again

Record number of contributions during annual Dow Jones telethon

Federal Reserve Chairman Ben Bernanke showing a little more hustle

Market theorist Harry S. Dent's forecast that people in the fourth quarter of 2007 will like having lots of money

Traders trying to impress cute girl who works at Wall Street Blimpie's

Dow Jones' takeover of Marianne's and other mom-and-pop indexes

Someone forgot to ring the closing bell, resulting in 17 additional hours of trading

Less selling, more buying

Posted by edelfenbein at 9:13 PM

Economy Grew By 3.4% in Q2

From Bloomberg:

The 3.4 percent annual pace of expansion, the most in more than a year, followed a revised gain of 0.6 percent in January to March, the Commerce Department reported today in Washington. The Federal Reserve's preferred inflation gauge rose at the slowest pace in four years.

Spending on commercial construction projects rose at the fastest pace in 13 years, helping to overcome another drop in homebuilding. Factories ramped up production to fill orders from Europe and Asia that made up for a slowdown in consumer spending. Treasury securities erased gains, stock-index futures trimmed losses and the dollar remained higher.

"The good news is that capital spending and exports are growing," said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts. Still, "the economy is plodding along. We're very vulnerable to a shock."

Posted by edelfenbein at 10:20 AM

Radio Silence

I apologize for the lack of posting earlier. I'm at the Money Show investor conference in San Francisco.

There's not much I have to add to today's news except to say that it was very ugly out there. The Buy List, however, was down -1.32%, which was 101 basis points better than the S&P 500. I guess that's sorta good news.

Also, I'm not buying that this is about valuations. The Value Index (^SVX) was down more than the Growth Index (^SGX). Actually, the Value Index has beaten the Growth Index for seven straight days. That seems a bit odd of a sell-off.

Posted by edelfenbein at 11:59 PM

Possible Headline

From the AP:

Amazon Soars on Strong 2Q, Upgrades

Or my suggestion:

Amazon Now Down 20% Instead of 35%

Posted by edelfenbein at 2:01 PM

Guess This Stock?

Give up?

Answer: The Dow in 1929.

Posted by edelfenbein at 7:31 AM

Behold the Power of Wednesdays

Since I got so many e-mails on this subject, I wanted to revisit my post on how good Wednesdays have been for Wall Street.

Going back exactly six years, the days of the week for the S&P 500 break down like this:

Monday 1.31%
Tuesday -9.96%
Wednesday 37.19%
Thursday 4.99%
Friday -1.85%

That’s capital gains only. For all five days, the S&P 500 is up 28.97%. So except for Wednesday, the rest of the week is net down.

So what’s the deal on Hump Day?

A few emails suggested it could be due to Fed meetings, or possibly when the oil stats are released. Personally, I think it’s due to Lost which broadcasts on Wednesday. For the next six days, everyone on the Street says “What the fuck was that about?” It’s just a theory.

Let’s get some grad students on it.

Posted by edelfenbein at 6:23 AM

What's Up 551% in San Diego?

Foreclosures.

Home foreclosures in San Diego County continued their troublesome upward climb in June, but analysts say the number has yet to reach a threshold that creates a drag on real estate prices or the economy at large.

“California is better off than the nation and San Diego County is better off than California,” said researcher John Karevoll of DataQuick Information Systems. “It still is not a major factor in the real estate market, but if there is a recession, it could become a huge factor.”

Posted by edelfenbein at 6:15 AM

The Bond Market Says No

I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone.

--James Carville

Last week, I mentioned that KKR had canceled a loan deal for Maxeda, a Dutch department store.

Now comes another story. Expedia (EXPE) had this great idea to buy back a gazillion shares of their stock. Not with money, but with “future money” otherwise known as debt.

The bond market looked at the plan and said, “no dice.” Bloomberg reports:

At least 20 companies have canceled or postponed debt offerings since June 26 as credit markets grow tighter.

The extra yield investors demand to own high-risk, high- yield, or junk-rated corporate bonds has jumped 0.85 percentage points to 3.37 percentage points since the day before Expedia announced its share buyback, according to Merrill Lynch & Co. index data.

EXPE dropped 9% yesterday.

Posted by edelfenbein at 10:09 AM

Earnings, Earnings and Earnings

After the close yesterday, W.R. Berkley (BER) reported operating earnings of 92 cents a share, 10 cents more than last year. The stock is going for less than nine times earnings.

The other insurance stock on the Buy List, AFLAC (AFL), reports later today.

I also noticed that Dell (DELL) closed at a 15-month high yesterday.

Posted by edelfenbein at 9:36 AM

Corus Bankshares

Ever heard of Corus Bankshares (CORS)?

Don’t worry, you’re not alone. Corus is a pee-wee-cap bank that specializes in making condo loans in markets where people like to overpay for condos. Without anyone noticing, CORS has become one the top-performing stocks of the last generation.

Over the last 30 years, shares of Corus are up about 45,000%. That’s amazing. Put it this way, Corus has lapped the S&P 500 about 30 times in 30 years and more than doubled Intel (and I bet you heard of that one). Still, few people know about little Corus.

The reason I bring this up isn’t to tout Corus’ long-term record, but to draw your attention to today’s earnings report. For Q2, Corus netted 74 cents a share, which is a big drop off from the 82 cents a share it made last year. The culprit, naturally, was the real estate market in places like Florida. But here’s the interesting part: Wall Street was expecting much worse. The average of the three analysts was for 61 cents a share.

I don’t mean this as any hyper-sophisticated analysis of the real estate market. It’s just interesting to note that even experts are having difficulty seeing the magnitude of the housing mess. Perhaps it’s not as bad as it looks.

Meanwhile, shares of Corus are up about 6.4% today.

Posted by edelfenbein at 1:41 PM

Lindsay Campbell for Seasonique

I could've sworn I've seen this girl somewhere before.

Oh right! It's WallStrip's Lindsay Campbell promoting Barr Pharmaceuticals's (BRL) Seasonique.

I wasn't really paying attention to what the product is used for. (I think it's girl's stuff.) But I'm amazed at Lindsay's footwork. I've watched it a few times and she stops the ball without looking. See for yourself.

Let's see David Beckham do that.

Posted by edelfenbein at 4:56 PM

The Strangest Market Stat You’ll Read All Day

Since the beginning of the 2006, here are the cumulative S&P 500 returns by days of the week:

Monday 1.40%
Tuesday -0.36%
Wednesday 18.72%
Thursday 4.36%
Friday -0.61%

So what’s the deal with Hump Day? It’s responsible for over three-quarters of the S&P 500’s return. And today’s data point will make it even more.

Told ya it was a strange stat.

Posted by edelfenbein at 2:49 PM

Bond Rally

Stocks may be down, but bonds are taking off. That tells us where all the money is going. The yield on the 10-year (^TNX) is below 5%. The cylicals are getting slammed.

Posted by edelfenbein at 1:18 PM

Looking at Gold

Here's an interesting chart. This is gold priced in dollars (black line) and euros (gold line):

You can see how the two lines have drifted farther apart, meaning the euro has gained against the dollar. But in euro terms, the price of gold has been fairly stable in the past few months. If I were a technical analyst, I might want to call that a trading range.

Posted by edelfenbein at 9:22 AM

BambiTV

Lindsay chats with Bambi Francisco, formerly of MarketWatch, about Vator.tv.

Posted by edelfenbein at 9:13 AM

Three Buy List Earnings Reports

Harley-Davidson (HOG) reported earnings of $1.14 a share this morning which is a penny better than expectations and a 25.3% increase over last year. The company said that it expects full-year growth of 4% to 6%. For 2008 and 2009, the company expects growth of 11% to 17%. Hmmm, those numbers strike me as unusually exact.

These are decent results but I was expecting more from HOG. Last quarter, Harley beat by two cents, the stock jumped from $61 to $66, then slipped back to the low $60s for much of the last three months. The stock is down sharply this morning.

After excluding some charges, Danaher (DHR) beat by a penny a share. This is a very solid stock. The company made 94 cents a share compared with 80 cents last year. The company now expects Q3 EPS of 92 cents to 97 cents. DHR also bumped up its full-year range from $3.70-$3.80 to $3.74-$3.82.

The stock had been in a trading range for several months, but finally broke out a few weeks ago. Shares of DHR are down a bit today.

UnitedHealth (UNH) is getting smacked around this morning. The company earned 87 cents a share, six cents better than estimates. That’s a big jump from the 70 cents a share it made last year.

I’m not really sure why the market is so unhappy with UNH. The company’s projections are basically in line with Street’s forecast. UNH expects Q3 EPS of 91 to 93 cents, the Street expects 92 cents. For the year, UNH is looking for $3.43 to $3.48, the Street expects $3.45.

Posted by edelfenbein at 10:33 AM

The Stock Market Adjusted For Inflation

Here's a look at the S&P 500 including dividends and adjusted for inflation. You can see that we're just shy of the market's peak from a few years ago.

Posted by edelfenbein at 5:48 PM

Associated Banc-Corp

Here's another example of a stock with a great long-term track record that no one has ever heard of. Associated Banc-Corp (ASBC) is a mid-cap bank based in Green Bay, WI.

What's interesting is that ASBC pays a generous dividend and it often has 10% or 20% stock dividends, so the stock's true long-term record is a bit hidden.

Here's a chart going back to the beginning of 1985. Since then, ASBC has had a total return of over 2,140%. The S&P 500 is up about 1,506%.

The stock is currently going for less than 14 times earnings and it's yielding 3.8%.

Posted by edelfenbein at 11:32 AM

Amphenol Beats Earnings and Raises Guidance

This morning, Amphenol (APH) reported earnings of 46 cents a share, one penny more than expectations. Net income rose 58% over last year. Sales rose 14% to $688.8 million which was also above expectations.

The company boosted its full-year EPS guidance to $1.79 to $1.83, up from earlier guidance of $1.75 to $1.80. APH also expects full-year sales in the range of $2.71 billion to $2.75 billion, up from its previous range of $2.67 billion to $2.72 billion.

For this quarter, the company is expecting EPS of 44 to 46 cents. The Street is expecting 45 cents.

The stock is currently down this morning, but it's really giving back its gain from late yesterday.

Posted by edelfenbein at 11:10 AM

Bernanke's Testimony

Here's the key part of Bernanke's testimony today:

Overall, the U.S. economy appears likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy’s underlying trend. Such an assessment was made around the time of the June meeting of the Federal Open Market Committee (FOMC) by the members of the Board of Governors and the presidents of the Reserve Banks, all of whom participate in deliberations on monetary policy. The central tendency of the growth forecasts, which are conditioned on the assumption of appropriate monetary policy, is for real GDP to expand roughly 2-1/4 to 2-1/2 percent this year and 2-1/2 to 2-3/4 percent in 2008. The forecasted performance for this year is about 1/4 percentage point below that projected in February, the difference being largely the result of weaker-than-expected residential construction activity this year. The unemployment rate is anticipated to edge up to between 4-1/2 and 4-3/4 percent over the balance of this year and about 4-3/4 percent in 2008, a trajectory about the same as the one expected in February.

I turn now to the inflation situation. Sizable increases in food and energy prices have boosted overall inflation and eroded real incomes in recent months--both unwelcome developments. As measured by changes in the price index for personal consumption expenditures (PCE inflation), inflation ran at an annual rate of 4.4 percent over the first five months of this year, a rate that, if maintained, would clearly be inconsistent with the objective of price stability. Because monetary policy works with a lag, however, policymakers must focus on the economic outlook. Food and energy prices tend to be quite volatile, so that, looking forward, core inflation (which excludes food and energy prices) may be a better gauge than overall inflation of underlying inflation trends. (I'm glad Bernanke said this. There's a myth that the Fed ignores food and energy. That's simply not true. - Eddy) Core inflation has moderated slightly over the past few months, with core PCE inflation coming in at an annual rate of about 2 percent so far this year.

Although the most recent readings on core inflation have been favorable, month-to-month movements in inflation are subject to considerable noise, and some of the recent improvement could also be the result of transitory influences. However, with long-term inflation expectations contained, futures prices suggesting that investors expect energy and other commodity prices to flatten out, and pressures in both labor and product markets likely to ease modestly, core inflation should edge a bit lower, on net, over the remainder of this year and next year. The central tendency of FOMC participants’ forecasts for core PCE inflation--2 to 2-1/4 percent for 2007 and 1-3/4 to 2 percent in 2008--is unchanged from February. If energy prices level off as currently anticipated, overall inflation should slow to a pace close to that of core inflation in coming quarters.

At each of its four meetings so far this year, the FOMC maintained its target for the federal funds rate at 5-1/4 percent, judging that the existing stance of policy was likely to be consistent with growth running near trend and inflation staying on a moderating path. As always, in determining the appropriate stance of policy, we will be alert to the possibility that the economy is not evolving in the way we currently judge to be the most likely. One risk to the outlook is that the ongoing housing correction might prove larger than anticipated, with possible spillovers onto consumer spending. Alternatively, consumer spending, which has advanced relatively vigorously, on balance, in recent quarters, might expand more quickly than expected; in that case, economic growth could rebound to a pace above its trend. With the level of resource utilization already elevated, the resulting pressures in labor and product markets could lead to increased inflation over time. Yet another risk is that energy and commodity prices could continue to rise sharply, leading to further increases in headline inflation and, if those costs passed through to the prices of non-energy goods and services, to higher core inflation as well. Moreover, if inflation were to move higher for an extended period and that increase became embedded in longer-term inflation expectations, the re-establishment of price stability would become more difficult and costly to achieve. With the level of resource utilization relatively high and with a sustained moderation in inflation pressures yet to be convincingly demonstrated, the FOMC has consistently stated that upside risks to inflation are its predominant policy concern.

Posted by edelfenbein at 10:51 AM

Today's CPI Report

The government reported that headline consumer inflation rose by 0.2% last month. The core rate rose by 0.2%.

Posted by edelfenbein at 10:35 AM

Buy List Earnings This Week

The earnings parade will start for our stocks this week. Tomorrow, Amphenol (APH) reports. Then on Thursday, Danaher (DHR), Unitedhealth (UNH) and Harley-Davidson (HOG) report.

Except for Harley, none of the earnings should be a big surprise. The only surprise will be how the market reacts. For Harley, I think the current expectations are too low.

Posted by edelfenbein at 4:49 PM

Crashing DealBreaker

I was in New York last week and while riding in a cab, the driver spotted a printer left on the curb. He pulled over, hopped out, grabbed the printer, tossed it in the trunk, then hopped back in and kept driving. You had to see it—it was all one fluid motion. See, this is why I love NYC.

My destination was the offices of one of my favorite blogs, DealBreaker. I won't bore you with the details, but after passing the reception area and security checkpoints (including retinal scan), I finally arrived at their palatial offices. I had no idea blogging was so profitable.

Naturally, I brought my camera to record to the events.

Here’s DealBreaker’s very talented Editor-In-Chief John Carney. Note the whiteboard in the background. They never use it. Instead, it serves as ironic symbolism of John’s alienation and disaffection from the mainstream media. (Plus, it’s cheap.) Here’s John quietly reflecting on the eloquence and understated humor of his previous post.

More John. Here he is on the phone. Probably putting the screws to some Wall Street bigshot. (You can see why CNBC loves him!)

John’s a wonderful guy and he even treated me to lunch. At one point, I tried to take a picture of Bess Levin, DealBreaker’s heartbreaker. But before I could, several large men wrestled me to the ground. Then Bess crushed my camera under the heel of her four inch leather stilettos. So in lieu of any Bess photos, I give you that mental image.

I did manage to get one shot of her messy desk. Naturally, dear reader, I’m as appalled as you are. And yes, that is a shuttlecock just under the screen.

Anyway, if you haven’t read DealBreaker, I highly recommend it. It’s one of the best and funniest sites on the Internets.

Posted by edelfenbein at 1:28 PM

GE's Balance Sheet

How big is General Electric (GE)? This should give you an idea.

I was scanning the earnings press release. Under "Assets" the company list $124.4 billion in the category of "Other."

Posted by edelfenbein at 11:44 AM

Wall Street Loves Obama

(Via Yglesias) Senator Obama's top contributors are Lehman Brothers, $160,760; Citadel Investment Group, $152,150; Goldman Sachs, $103,550; JP Morgan Chase, $101,950 and Citigroup $61,125.

Here's an old post looking at his investment portfolio.

Posted by edelfenbein at 11:32 AM

The Exchange Rate’s Impact on the Stock Market

The U.S. dollar has been in freefall lately, but it seems to have little or no impact on the stock market’s rally. In fact, it seems to be helping.

I decided to do a little analysis and see how much the exchange rate, the dollar/euro in particular, impacts equity prices.

From the beginning of 1999 to the end of June, the euro and the stock market were traded on about 2100 days. On days when the euro rose against the dollar, the S&P 500 lost a combined 66%. Annualized, that works out to a loss of -22.88% a year. When the euro fell against the dollar, the S&P 500 gained an annualized 35.30%.

Here are the annualized rates for the S&P 500 sector groups:

.................................Euro Up....................Euro Down
Energy........................9.28%.......................17.58%
Discretionary............-28.57%.......................47.76%
Staples.......................-5.07%........................8.21%
Financials..................-27.26%.......................51.23%
Healthcare.................-12.84%......................17.39%
Industrials.................-21.50%.......................40.90%
Tech..........................-44.04%.......................69.80%
Materials.......................0.32%.......................16.17%
Telecom......................-24.73%.......................19.24%
Utilities........................-2.40%........................7.43%

Posted by edelfenbein at 10:59 AM

Dow Jones & News Corp. Reach Possible Deal

It could really be happening. The Dow Jones (DJ) board will be meeting tonight to decide on Rupert Murdoch’s $5 billion offer.

This deal should have happened three months, but it’s been needlessly held up by members of the Bancroft family. Murdoch offered them a 67% premium for a stock that has done nothing for years. No, that wasn’t good enough for them.

The problem is these super voting shares of stock give unfair say to family members. These shares, which have ten times the voting power of regular shares, are perfectly legal, but I don’t see how much good comes from them.

Christopher Bancroft is trying to sink the deal by running to every hedge fund manager so he can buy more super-voting shares. Time is running out and I hope the board approves Murdoch’s offer. Ultimately, a company should be run by its shareholders.

Posted by edelfenbein at 7:36 AM

KKR Cancels Loan Deal for Maxeda

Here’s a small story that could be the start of a much larger story (cue scary music).

Kohlberg Kravis Roberts just canceled plans to sell $1.4 billion in loans for Maxeda, a Dutch department store. The reason is that investors are turning away from risky debt. This could snowball as risk-averse investors gradually turn away marginal borrowers. People who were burned on subprime don’t want it to happen again.

Bloomberg reports:

The deal is the third to be postponed or restructured by KKR in as many weeks as losses from the U.S. subprime mortgage rout make investors wary of financing leveraged buyouts. New York-based KKR is trying to raise 9 billion pounds ($18 billion) this week to finance its takeover of Nottingham, England-based drugstore chain Alliance Boots Plc.

KKR abandoned the debt sale for Amsterdam-based Maxeda after failing to entice investors by reducing prices for the debt and introducing covenants to restrict future borrowing. Citigroup Inc. and ABN Amro Holding NV have guaranteed to provide the financing.

“Due to current volatility of the credit markets, Citigroup and ABN Amro have decided to postpone syndication to a later stage when they expect markets to have stabilized,” Maxeda spokesman Arnold Drijver said today. The company's financing “is in place,” he said.

I wish them well. The sad part is that they’re being punished for the lousy decisions of others.

Posted by edelfenbein at 10:49 AM

Waitress Wins CNBC Stock-Picking Contest

Congratulations to Mary Sue Williams of St. Clairsville, OH.

The waitress and former welder (no really) won CNBC's Million Dollar Portfolio Contest. Williams said she's never watched the network or bought a stock in her life. Somehow, she overcame this to win the contest (that's sarcasm).

By the way, several contestants were disqualified for cheating. I'm guessing they have bought stocks and watch CNBC all the time.

Posted by edelfenbein at 7:08 AM

Robert M. Solow on Joseph Schumpeter

From the New Republic:

In my view -- and that of most contemporary economists, I believe -- Schumpeter's most original and most lastingly significant book was Theory of Economic Development, which appeared in 1911 (and was translated into English in 1934). It was at the University of Czernowitz, not far from the beginning of his career as an economist, that he worked out his conception of the entrepreneur, the maker of "new combinations," as the driving force and characteristic figure of the fits-and-starts evolution of the capitalist economy. He was explicit that, while technological innovation was in the long run the most important function of the entrepreneur, organizational innovation in governance, finance, and management was comparable in significance.

Posted by edelfenbein at 11:51 PM

The Stock Market Moves Closer to Fairly Valued

According to the "Fed Model," the stock market is still undervalued but a lot less than it was a few weeks ago.

Thanks to yesterday's big market move and the recent uptick in long-term rates, the stock market is currently 12.5% undervalued according to the Fed Model compared with over 30% just four months ago.

There are many variations on the Fed Model. For our purposes, I use the trailing twelve months of smoothed operating earnings and the 10-year Treasury bond. The current yield on the T-bond is 5.116% so the inverse works out to a P/E ratio of 19.55, and the market's P/E ratio is 17.09.

Here's a look at the S&P 500 and the Fed Model.

The market has been undervalued for five straight years.

Preemptive Strike on Critics: No, I'm not saying this is the perfect measure of the market. It's simply one measure (a good one) and should always be seen in context of other measures of valuation.

Obviously, it can also be saying that the bond market is overpriced. Also, "overpriced" doesn't have a big impact on what the market actually does. In fact, only when the market is 41% or more overpriced does history suggest that it's worth selling.

Posted by edelfenbein at 6:19 AM

Rahodeb Greatest Hits

Earlier, it was reported that Whole Foods CEO John Mackey was posting under the name "rahodeb" on Yahoo Finance message boards.

If you think I have so little to do but find his most obnoxious posts...you know me too well.

Pull up a chair and an organic kumquat, here we go:

#1:

Thanks for your pity. I don't need it though. If I told you how many shares in Whole Foods I actually own you wouldn't believe me.

#2:

I like Mackey's haircut. I think he looks cute! If his hair bothers you now you should have seen what it looked like 10 years ago! The guy was/is clearly into alternative lifestyles and is one of Paul Ray's Cultural Creatives I outlined in my 2 posts to Hedge.

You must not patronize any of WFMI's stores. Tatoos, piercings, unusual dress, and interesting haircuts are everywhere in the stores. In comparison, Mackey looks like a model for Brooks Brothers!

#3:

Oh yes, "the John Mackey identity theory". I've heard it a few times before on this Board. Believe it if you wish since it enhances the value of what I write.

#4:

Surgeon Genrl,

I've stated my identity on this board before, but no one apparently believed me. I am George W. Bush and a long-time customer of Whole Foods Market. I own quite a bit of stock in the company and have owned it since the IPO back in 1992. HOG152 is my father, George H.W. Bush.

Ideas are ideas, facts are facts, and arguments are arguments. They all stand (or fall) on their own regardless of their source. At the end of the day it doesn't matter what my non-screen identity really is or what yours is or who anyone else's is on this board. dcc7 has claimed that my true identity is John Mackey. You can believe that one or not. Doesn't matter to me. If I really am Mackey then I'm the ultimate insider at Whole Foods and you would be well served to pay attention to what I have to say on this board. If you don't believe I'm Mackey (admittedly the idea seems pretty far fetched) then you should still pay attention to what I have to say on this board if my ideas and arguments make sense. If they don't make sense or you disagree with me--well that's what bulletin boards like this are all about.

#5:

Hey, we aren't a first name basis!

I'm glad you've got a category for me! Gosh, so I'm a New Ager! I wondered what I was. Now that you've got a category for me I guess my ideas and arguments don't need to really be taken seriously. FYI--I don't think of myself as a "New Ager". Where I live I will keep private. While I'm not a "Mackey groupie", I do admire
what the man has accomplished--building a $1.6 billion business from scratch is quite an achievement. What have you accomplished in comparison whtmewrry 99? If you want to understand WFMI's past, current, and
future success you will need to understand that there are about 50 million adults in the United States who share very similar lifestyles and values to myself. Paul Ray's research strongly supports this proposition. Who is Paul Ray? He has a Ph.D in sociology and is
the executive vice president of American LIVES, a research firm in Oakland, CA. His 160 page study on the Integral Cultural Survey can be found at the Institute of Noetic Sciences--415-331-5650. His summary of this study was written in the February 1997 issue of American Demographics. Two recent articles by Ray can be found in the Natural Business LOHAS Journal--303-442-8983. He has a book on his research due to be published sometime in
2000.

Posted by edelfenbein at 8:36 PM

Charge!

I defended the bull market on October 25 when the S&P 500 was at 1382. I did it again on February 22 when the S&P was at 1456.

Today, the S&P 500 closed at 1547.70.

Here's how the entire S&P 500 did today.

Posted by edelfenbein at 7:28 PM

Nice Turnaround

Just 28 hours ago, the S&P 500 looked like it was going to fall below 1,500, and now we're close to a new all-time high. The previous high was 1539.18 reached on June 4.

Posted by edelfenbein at 2:24 PM

It's Over: Biomet Shareholders Accept $46 Offer

They needed 75% and they got 83%.

Biomet Inc. shareholders accepted a $11.4 billion buyout offer from a private equity consortium attempting to acquire the medical device maker.

The consortium, LVB Acquisition LLC, announced Thursday that nearly 83 percent of Biomet's shares were tendered. The company needed at least 75 percent for the deal to go forward. The offer expired midnight Wednesday.

In June, LVB Acquisition offered $46 a share to buy the Warsaw, Ind.-based company, which closed the day prior at $45.48 per share. Biomet shares traded up 13 cents midday Wednesday to $45.92.

The private equity group includes Biomet founder and former chief executive Dane A. Miller and affiliates of the Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and TPG.

Biomet spokesman Greg Sasso said the deal would close by the end of the calendar year, but he declined to give a more specific time frame.

Posted by edelfenbein at 12:50 PM

John Mackey Channels Patrick Byrne

From DealBook:

John P. Mackey, the co-founder of Whole Foods Market, has never lacked for personality. As it turns out, that was only the half of it. For seven years, Mr. Mackey had an online alter ego.

Using the pseudonym Rahodeb — a variation of Deborah, his wife’s name — Mr. Mackey typed out more than 1,100 entries on Yahoo Finance’s bulletin board over a seven-year period, championing his company’s stock and occasionally blasting a rival, Wild Oats Markets, that his company later went on to buy. The story was first disclosed on The Wall Street Journal’s Web site last night.

Responding to a posting on March 28, 2006, Rahodeb wrote: “OATS has lost their way and no longer has a sense of mission or even a well-thought-out theory of the business. They lack a viable business model that they can replicate. They are floundering around hoping to find a viable strategy that may stop their erosion. Problem is that they lack the time and the capital now.”

Mr. Mackey apparently did not fool participants on the forum, who occasionally tried to out Rahodeb. In one instance, he responded by saying that he was in fact George W. Bush.

The attacks were made on Yahoo! financial forums, under the name “Rahodeb,” and included such postings as “Would Whole Foods buy OATS? Almost surely not at current prices…What would they gain? OATS locations are too small.” Rahodeb also said Wild Oats’ management “clearly doesn’t know what it is doing.” The company, he wrote, “has no value and no future.”

In February, Whole Foods announced it would buy Wild Oats for about $565 million, or $18.50 per share.

Mr. Mackey declined an interview request from The Wall Street Journal but did post on the company Website saying that the F.T.C. was quoting Rahodeb “to embarrass both me and Whole Foods.” He also said: “I posted on Yahoo! under a pseudonym because I had fun doing it. Many people post on bulletin boards using pseudonyms…I never intended any of those postings to be identified with me.”

Mr. Mackey’s post continued: “The views articulated by rahodeb sometimes represent what I actually believed and sometimes they didn’t. Sometimes I simply played ‘devil’s advocate’ for the sheer fun of arguing. Anyone who knows me realizes that I frequently do this in person, too.”

Posted by edelfenbein at 11:14 AM

Fox Business Network To Launch October 15

From Variety via DealBreaker:

Fox News Channel's long-planned business net spinoff has an official name and a launch date.

New web will be called Fox Business Network, or FBN, and launch Oct. 15, announced Neil Cavuto, managing editor of business news.

News Corp. is proceeding with plans for the business network, an extension of its successful and profitable Fox News franchise, without regard to the status of chairman Rupert Murdoch's bid for Dow Jones. Sale appears close but could drag out for a few more weeks.

The use of the Wall Street Journal brand in conjunction with the nascent business channel is one of the major synergies touted in News Corp.'s $5 billion bid for Dow Jones.

News Corp. sources indicated that if Murdoch's bid for Dow Jones is successful, the Fox Business Network branding could change.

Posted by edelfenbein at 9:33 AM

China's Foreign Reserves hit $1.33 trillion

From Reuters:

China's foreign exchange reserves, the world's largest, swelled to $1.33 trillion by the end of the first half on the back of massive trade flows that contributed to an acceleration in money supply growth in June.

The central bank said on Wednesday that reserves had grown by $266.3 billion to $1.3326 trillion between January and June, in excess of the $247.3 billion reserves accumulation for the whole of 2006.

Wow!

I mean it. Wow!

Posted by edelfenbein at 12:17 PM

The iPhone Surrender

Michelle Leder of Footnoted.org gives up on the iPhone:

Now I’ve been an Apple customer since 1998 when I bought my first Imac and I’ve been generally pretty happy with all of their products. But when a device that’s supposed to make your life easier (or at the very least cooler) starts to take up large chunks of your time, that’s when it’s time to raise the white flag. Which is what I did last night when I returned it. The woman at the Apple store looked as if I had insulted her personally when I said I had had enough with the Iphone and just wanted a full refund (read: no $59.99 restocking fee).

Posted by edelfenbein at 12:11 PM

WallStrip on Focus Media

Posted by edelfenbein at 12:07 PM

The Fall of REITs

I'm not a technical analyst, but that chart isn't not looking good. The Dow REIT Index (^DJR) is down 17% in the last five months. I don't think it's over yet.

Posted by edelfenbein at 9:37 AM

"They Don’t Have Enough Skill to Make up for Two and Twenty"

This is from last week’s New Yorker. John Cassidy looks at research done by Harry Kat on the returns of hedge funds. It turns out—shocker—they don’t look so good.

With the help of a graduate student, Helder Palaro, Kat also undertook a larger study, in which he examined more than nineteen hundred funds. The results, which Kat and Palaro posted online as a working paper last year, showed that only eighteen per cent of the funds outperformed their benchmarks, and returns even at the most successful funds tended to decline over time. "Our research has shown that in at least eighty per cent of cases the after-fee alpha for hedge funds is negative," Kat told me. "They are charging more than they are adding. I’m not saying they don’t have skill; I’m just saying they don’t have enough skill to make up for two and twenty."

Other economists had been scrutinizing hedge funds closely. In a widely discussed 2005 paper, Burton Malkiel, a Princeton professor, and Atanu Saha, a New York investment analyst, argued that many published estimates of hedge-fund returns are misleading. Malkiel and Saha discovered that funds tend to exaggerate how well they performed in the past, and that those which perform badly often close and disappear from databases, leaving a biased sample. After examining results of now defunct firms, Malkiel and Saha found that between 1996 and 2003 hedge funds made an average return of 9.32 per cent, significantly less than the 13.74-per-cent average return of funds included in the published databases.

Posted by edelfenbein at 3:14 PM

Maybe I'm Being Cynical

After the bell yesterday, Gemstar-TV Guide (GMST) announced that it hired UBS to help it explore strategic alternatives. In other words, the bidding starts now. Rupert Murdoch owns a big stake in Gemstar and I guess he got tired of it going nowhere.

But check this out. Even though the announcement came after yesterday's, doesn't this chart suggest that somebody knew something?

Posted by edelfenbein at 2:19 PM

Dollar-Cost Averaging Is Complete Bullshit

This is from an investing article that appeared a few days ago:

A widely recognized investment strategy known as dollar cost averaging offers a systematic approach to investing. By following this plan, you invest a specific dollar amount at set times, regardless of where the market may be at the time. One of the advantages of this strategy is that it can be applied to a wide variety of investment vehicles.

As you know, the market price of an investment fluctuates. By using dollar cost averaging, you can buy more shares when the price is low, but you buy fewer shares when the price is high. While that seems fairly elementary, the interesting thing is that by spreading out your investment dollars this way, the average cost you pay per share can actually end up being lower than the average price per share over an extended period.

No. Wrong. Incorrect.

I don't mean to pick on this writer in particular. You can find dozens of such articles every month. The problem is that dollar-cost averaging is complete bullshit.

Don't get me wrong: The idea of investing fixed sums each month isn't a bad. That's how many people invest because that's how they're paid.

But there is absolutely no inherent advantage in dollar-cost averaging over lump-sum investing. ZERO. Spreading out your investments over an extended period doesn't decrease your risk one bit. The idea has been thoroughly refuted yet the myth won't die.

The advantage of dollar-cost averaging was blown to smithereens nearly 30 years ago in this article by George Constantinides. Here's another article on the subject by John R. Knight and (my old finance professor) Lewis Mandell.

Lump sum investing is the best. Don't diversify by time, diversify by assets.

Posted by edelfenbein at 1:42 PM

How Did I Miss This One?

I often tell investors not to beat themselves up over the "ones that got away." Naturally, I don't always take this advice myself.

The black line is Oracle's (ORCL) share price and the yellow is the EPS line (right scale). The two lines are scaled at 20 to 1. This stock was an obvious buy in early 2006 and I (ugh!)...let it go.

Update: Here's me in a Q&A from October 2005 saying to stay away from ORCL. Double Ugh!!

Posted by edelfenbein at 12:56 PM

1,000% in Ten Month

David Phillips looks under the hood at Transcend Services (TRCR) and likes what he sees.

Posted by edelfenbein at 12:22 PM

Morgan Stanley Hit By "Sex Pencil" Suit

Can't write...too...many...puns....

From the NY Post:

A Long Island woman says her boss at Morgan Stanley gave a creepy new meaning to the term "pencil pusher."

In papers filed in Manhattan Supreme Court, Lisa LaMacchia claims Richard Dorfman groped her and then tried to "sexually assault her" with a pencil.

When she complained to his bosses at the financial giant's Melville office, she got no help, says the suit, which seeks unspecified money damages from Dorfman and Morgan Stanley.

A rep for Morgan Stanley said the company had not seen the suit and had no comment. Dorfman could not be reached, and LaMacchia, 31, declined comment.

She went to work for Morgan Stanley in 2004, the year the company settled a federal sexual-discrimination suit filed on behalf of more than 300 female employees for $54 million.

Her duties included filing papers and answering phones for Dorfman, a "hostile and aggressive" boss who once stole a pair of underwear from her gym bag, she claims.

In July 2005, the suit says, Dorfman called her "a f- - -ing bitch" and threw a file at her.

Human relations told her to "suck it up," the suit says.

A few months later, when she complained about not getting a raise, Dorfman allegedly "put his right hand up" her skirt and groped her.

She confronted him an hour later, and he "smiled and replied for her to receive what was due, 'f- - -ing him wouldn't be a bad idea,' " the papers say.

When she turned to leave, he put his hand up her skirt again, this time with a pencil in his hand in an attempt to sexually assault her with the object," the suit says.

She eventually went on leave because of "emotional distress," according to the suit.

"Before her leave expired, Ms. LaMacchia was terminated" in April 2006, the papers say.

Posted by edelfenbein at 10:18 AM

Sears Warns

This ain't good:

For the quarter ending Aug. 4, executives at the nation's third-largest retailer said Sears Holdings Corp. expects to post earnings between $160 million and $200 million, or between $1.06 and $1.32 per share. That includes an 8-cent per share gain from bankruptcy-related settlements and investing activities.

Analysts polled by Thomson Financial had expected second-quarter earnings of $2.12 per share for the Hoffman Estates-based company.

"We are disappointed with our recent performance," Chief Executive Aylwin Lewis said in a statement. "Although we believe our business has suffered from many of the same factors that have led other retailers to announce disappointing results and lowered expectations, our recent performance underscores our ongoing need to become more relevant to consumers while improving our discipline around expense management."

They didn't just miss earnings, they weren't in the ballpark.

Posted by edelfenbein at 9:35 AM

The Bard CEO

Here's an interesting article on Shakespeare on Leadership from Wharton@Work, a newsletter from the Wharton School of the University of Pennsylvania.

Shakespeare on Leadership

At the battle of Agincourt on October 25, 1415, the young English King Henry V faced extraordinary odds. To make his claim as ruler of France, Henry had crossed the channel to Calais with 10,000 men. In his first battle at Harfleur, he lost 4,000 men. The French army pursued him, with 30,000 to 60,000 men (or more), well armored, well fed, and well rested, with a strong cavalry. Henry chose to stand his ground with his 6,000 men at Agincourt and prevailed against the odds — primarily through his clever strategy and force of leadership.

During a recent session of Wharton's The Leadership Journey: Creating and Developing Your Leadership program, executives considered the lessons from William Shakespeare's play Henry V. Why study Shakespeare? While some managers may be put off by the language of Shakespeare's plays ("It's Greek to me," as the Bard would say), there are three reasons to use Shakespeare to study leadership. First, he offers a window into human nature. Second, he tells the best stories, and stories are critical to leadership. Third, he is a master of language, and leaders need to be effective communicators.

"To be a great leader, you have to understand people," said Carol Adelman, who led the session with her husband Ken, founders of Movers & Shakespeares. After distinguished careers in government service, they have conducted sessions on Shakespeare and leadership in diverse business, educational, and government organizations.

Building Coalitions

The opening scene of the Wharton session could have been a modern business meeting. A bureaucrat drones on about an obscure legal principle while participants in the meeting stare blankly. In a meeting with the king and English noblemen, the archbishop of Canterbury presents the argument for Henry's right to govern France. With little discussion, Henry makes his decision to go into battle.

But before this meeting, Henry astutely had aligned the interests of all the major players. For the nobles, the conquest of France offered access to rich resources and plunder. The clergy, by offering a religious justification for the invasion, gained the king's support to kill a pending bill in Parliament that would have taken half of church lands and imposed heavy fines. The king himself saw the French campaign as a chance to demonstrate his leadership, secure his hold on the English throne, and make his indelible mark on history. None of these issues is discussed during the meeting, but the work in building coalitions was done beforehand. The meeting is a formality that ensures that everyone has bought into the plan. "It can be a very costly mistake if you don't do this kind of consensus building," said Ken Adelman.

Rising to the Challenge of Leadership

Taking up the mantle of leadership changes the leader and all his relationships. Prince Hal was known for his drinking with friends Falstaff and Bardolph. But when he took the crown as King Henry V, he needed to rise to this new role. At his coronation, he brushed aside Falstaff ("Get thee gone, old man.") During his campaign in France, Henry faced a more severe test. Because he hoped to rule France peacefully after the war, Henry had told his soldiers that the penalty for rape and pillaging during the campaign would be death. When his old friend Bardolph was brought to him after taking a pewter goblet from a church, Henry had to choose between his past friendship and his new authority. Henry gave the nod to hang him.

"What we saw here is holding people to certain standards, holding them accountable," said Ken Adelman. "How much should organizations hold people accountable to zero tolerance?"
Attaining a position of senior leadership often changes the leader. US administration leaders expected little change when Anwar Sadat came to power in Egypt. Similarly, Mikhail Gorbachev, a career communist leader in the Soviet Union, and F.W. de Klerk, a proponent of Apartheid in South Africa, were expected to make few changes before they came to power. The world was surprised.

"All three leaders were in their organizations, but when they got to a position of leadership, they changed. They were no longer cogs in the wheel. They were the wheel now," said Carol Adelman. "Henry had to learn to be the boss and handle a supervisory role."

Strategy and Motivation

The triumph at Agincourt was a testament to Henry's strategy and his ability to motivate his followers. Henry's military strategy turned the strengths of his opponents into weaknesses. The size of the French army meant nothing on the narrow battlefield Henry chose at Agincourt, fringed by thick forests on both sides. Only a small portion of the French could face the British at a given time. The superior French horses and armor were a liability on the muddy battlefield, and Henry erected a set of sharpened stakes to drive the horses back. Henry also lengthened his lances and shifted most of his forces to the longbow. These archers, with a range of three football stadiums, could fire tens of thousands of arrows every minute into the advancing French, killing them before they reached the English lines. By the end of the battle, there were 6,000 French dead and only about 475 English casualties. "Henry shaped the battlefield himself," said Ken Adelman.

Even so, before the battle began, Henry's men were overwhelmed by the odds against them. They knew their young king had lost 40 percent of his army at Harfleur. As the king, in disguise, walked through the camp the night before the battle, he heard the grumbling. The next day, on the eve of the battle, Henry made his famous St. Crispin's Day speech. He told the men that they did not want more men here to share the glory of their victory. He said they would all be remembered as heroes on this day. He appealed to their camaraderie, as a "band of brothers." At the end, Henry asked one of the primary doubters if he still wished to have more reinforcements. The nobleman replied, "You and I alone can win this." Henry connected them to a higher mission but also appealed to their own egos and desire for glory.

"He expresses passion, emotion, and total confidence," said Carol Adelman. "He recognizes the people he works with by name and paints a picture of the future, how they will be showing their scars from this battle years later. And he puts himself right there with them as a band of brothers."

Henry V offers many other lessons, including how to win over a new partner after a hostile takeover (as he does with the French princess, Katherine). While the stories and plays are hundreds of years old, the leadership challenges are the same ones that are faced by leaders in every age.

"Shakespeare speaks the language of leadership," said Carol Adelman. "When you have a crisis, you can't just stand behind the podium. You need to think about language to inspire people."

Posted by edelfenbein at 7:54 AM

Jim Mora Really Ought to Be on Wall Street

Posted by edelfenbein at 8:17 PM

Looking at J&J

Johnson & Johnson's (JNJ) stock hasn't done anything in the last five years. What would get me interested in it?

Well, this for starters.

Posted by edelfenbein at 2:01 PM

An Inconvenient Heatwave

I hope you're keeping cool wherever you are. It's 97 here in Washington.

Posted by edelfenbein at 1:40 PM

Pop!: Why Bubbles Are Great For The Economy

This is long overdue but I wanted to recommend Daniel Gross’ excellent book, Pop!: Why Bubbles Are Great For The Economy.

Ever since Charles MacKay’s Extraordinary Popular Delusions and the Madness of Crowds, investment bubbles have gotten a bad rap. Gross comes to their defense and convincingly argues that investment bubbles should be recognized as very positive for the economy. They allocate capital quickly, if not accurately. Plus, when the bubble eventually bursts, prices plunge and there’s tons of excess capacity for the second wave of businesses to make the new technology work. This happened with telegraphs, railroads and now with Web 2.0.

Gross also includes a fascinating observation. Through the years, government has not been an innocent bystander. In fact, its hand has been quite visible. Government has often been a willing participant in the development of new technologies. In 1843, Congress approved $30,000 for telegraph testing and in the 1850s, taxpayers provided one-fourth of all railroad financing.

It’s easy to dismiss bubbles as some kind of mass hysteria, but in reality, they do a lot of good.

Posted by edelfenbein at 1:28 PM

The Quarterly Earnings Myth

Today, Moody’s came out with a report that questions the idea that taking a firm private helps the company because it frees it from quarterly earnings reports.

CNBC just had a segment on the report and they featured the standard debate of a labor guy against a free market think tank guy, but I think this misses the point of the report. Moody’s wasn’t questioning the efficiency of buyouts, but the idea that quarterly earnings reports stifle companies.

I haven’t seen the report, but I’m not surprised by the findings. The myth of the quarterly earnings ogre is vastly overrated. This is one of those make-believe issues that sweep over Wall Street every few years. Some folks even want to ditch them. My feeling is that if companies find themselves held hostage to quarterly forecasts, then at some level, it’s their fault.

It’s very easy for management to downplay the importance of earnings reports. The trouble comes when they consistently play them up, then suddenly face a bad quarter. Here’s a Business Week article describing how several years ago, employees at Cisco loaded up boxes on trucks before midnight to boost their earnings. They failed and the stock missed by a penny a share. The stock fell 13%. So who’s at fault? Unlike many investment writers, I have no problem blaming the investing public. But I’ll also fault management for relying so heavily on earnings reports before.

The idea that a buyout liberates management is just silly. Also, management still has to answer to their new owners. Does anyone believe that the private equity folks are more patient than the investing public?

Posted by edelfenbein at 11:44 AM

Gold Versus Stocks

Gold bugs like to point out that gold has risen against the major stock indicies. A better comparison, however, is to look at gold versus the Wilshire 5000 Total Return Index (^DWCT), which includes almost all stocks and their dividends.

Here' a look at gold (the gold line, right scale) against the Wilshire 5000 (the blue line, left scale). I made it so both scales match at 12 to 1.

Gold has indeed done well, but stocks have certainly held their own. Plus, you can see how much less volatile stocks are. Gold is down about 10% from its peak of last year. The peak almost perfectly coincided with this New York Times article. I should have known.

Posted by edelfenbein at 10:59 AM

Biomet's Earnings Fall

Since the company is headed to go private, this doesn't matter very much, but Biomet's earnings took a tumble last quarter:

Medical device maker Biomet Inc. (BMET) reported a fall in quarterly earnings, hurt by lower sales in spinal and fixation products segments and a charge related to re-negotiation of some distribution agreements.

The company, which is being taken private by a group of equity firms for $11.4 billion, posted fourth-quarter earnings of $41.5 million, or 17 cents a share, compared with $100.4 million, or 41 cents in the year-ago quarter.

Excluding certain items, the company earned 39 cents a share compared with 46 cents in the year-ago quarter.

Posted by edelfenbein at 9:13 AM

The Original Gilligan's Island Theme Music

Posted by edelfenbein at 3:18 PM

75 Years Ago

This is a big year for market history buffs. In October, we'll celebrate (or at least commemorate) the 20th anniversary of Meltdown Monday. Next Month is the 25th anniversary of the start of the Reagan Bull Market. Earlier this year, we had the 100th anniversary of the beginning of the Panic of 1907.

But this Sunday is the most important one of all. On July 8, 1932, the stock market reached its low. Or more technically, its low, low, LOOOWWW. The Dow bottomed out at 41.22—a stunning 89.2% drop from its peak from three years before. The S&P hit a measly 4.41, and the Nasdaq was still 40 years away.

On Monday, July 11, the Dow rallied to 42.99. That was it, the crash was finally over! But few people knew it. The next few weeks saw a furious rally as the Dow hit 79.93 on September 7. That's a gain of 94% in two months.

Going by yesterday's close, the Dow is up 32,810% over the last 75 years. The S&P 500 is up a little more, 34,390%. Add in dividends and the market is up about 675,000%.

Here's to the next 75 years!

Posted by edelfenbein at 11:29 AM

Today’s Jobs Report

Today’s employment report was another disappointment. The economy created 132,000 jobs last month, which is just about the pace of population growth, perhaps a bit slower.

The unemployment officially stayed the same at 4.5%, but to be very precise, it climbed from 4.46% to 4.53%.

Posted by edelfenbein at 11:22 AM

Nasdaq At 6-Year High

Even though the S&P 500 is off its highs, the Nasdaq keeps moving along.

Posted by edelfenbein at 10:46 AM

Blackstone & Hilton

Steve Schwarzman is reading my blog! Consider the evidence. Just a few days after I highlighted Hilton’s (HLT) performance over the past few years, Blackstone (BX) announces a $20 billion buyout of the hotel chain.

Coincidence? Not likely.

Here are some details:

Blackstone will pay $47.50 for each share, Hilton said in a statement. That's 32 percent more than its closing price yesterday. Barron Hilton, the son of founder Conrad Hilton and co-chairman of the Beverly Hills, California-based company, will get $990 million for his 20.8 million shares.

The purchase is a record for the hotel industry. Blackstone, the owner of the La Quinta lodging chain, joins Apollo Management LP and Texas Pacific Group in targeting hotel companies for their cash flow and real estate. Worldwide, hotel acquisitions more than doubled in the first half of this year, to $81.4 billion.

“It’s a classic Blackstone play: the size, the asset class, the management and the brand,” said Michael Pralle, who ran General Electric Co.’s GE Real Estate unit, with $59 billion in assets, before resigning in June to pursue other interests.

Including the assumption of debt, the transaction totals $26 billion. Hilton, second in the U.S. to Marriott International Inc., has more than 2,800 locations.

What I find interesting is that going forward, the main mover of BX’s stock will probably be merger announcements, not earnings reports. I would also guess that the market will react negatively initially to most merger announcements from BX, not matter how favorable they are. That’s an unusual drive of a share price, but we may need to learn to expect it.

Posted by edelfenbein at 9:46 AM

Early Close

Not much to blog about this week. Volume is very light. Everyone, it seems, is at the beach.

The market closes at 1 p.m. today. You'll have to pardon me, I'm having trouble typing while holding my Mimosa.

Ta!

Posted by edelfenbein at 10:46 AM

Danaher Hits New High

They don't come much steadier than Danaher (DHR). I'll leave the technical stuff for the charting folks, but stock broke out to a new high above $76 this morning.

Posted by edelfenbein at 11:37 AM

The Case for Harley

From the WSJ:

But it isn't hard to see why the company attracts attention. It throws off heaps of cash and has a clean balance sheet. Last year Harley posted $1.8 billion in earnings before interest, taxes, depreciation and amortization on $5.8 billion of sales.

Numbers like that should make potential buyers salivate. But squeezing much additional profit from a company that posts net margins of nearly 18% would be hard for either a strategic acquirer or buyout shop.

Still, there are other reasons to own Harley's stock. Its earnings this year have been hit by a strike in February at its York, Pa., factory. Yet analysts expect profit growth of nearly 12% next year. And international sales, which account for about a fifth of its business, are booming in Europe and Japan. The company has barely scratched the surface in emerging markets such as China.

Moreover, Harley has doubled its dividend in the past two years. With a current valuation roughly in line with the market, solid earnings growth and a healthy balance sheet, Harley could support a share price of $80 -- a third higher than now. There's clearly room for this hog to run.

As I mentioned before, HOG has been the worst-performing stock on the Buy List this year. It was our third-best stock last year. The next earnings report, which is due on July 19, will be very interesting to see. The market currently expects $1.13 a share, which seems low.

Posted by edelfenbein at 12:23 AM