Archive for December, 2008

  • The Santa Rally
    , December 29th, 2008 at 12:27 pm

    Several months ago, I took the entire history of the Dow Jones and broke down its performance by days of the year (btw, what the hell was I thinking??). As it turns out, the Santa Claus Rally is quite real.
    By far, the Dow’s best time of the year is the 17-day period from December 21 to January 7. Over that period, the Dow has gained 3.39%—that’s more than 40% of the Dow’s annual capital gain, even though we’re talking about a period that’s less than 5% of the year.
    The worst time of the year is from September 6 to October 29. Eighty years later, we still feel the effects of 1929.

  • The Weekend That Wall Street Died
    , December 29th, 2008 at 10:54 am

    Today’s Wall Street Journal has an excellent 4,000-word article on the weekend that Wall Street “died.” Personally, I think that’s a bit strong. A certain crucial aspect of Wall Street is no more, but Wall Street is far from dead.
    The other issue I have with the article is that it sees the collapse of Lehman as a battle of big personalities. That’s a favorite media take on things, especially when the personalities are big, which is also a Wall Street specialty.
    Unfortunately, the Panic of 2008 had causes that are far deeper and more complex. In fact, deeper and more complex than we probably understand right now. There’s no economic theory to explain what happened and why. Some day, there will be, but until then, some ideological humility is needed.
    Here’s a snippet from the article:

    Mr. Fuld had faced challenges to his firm before. Since taking Lehman’s reins in 1994, he expanded the 158-year-old bond house into lucrative areas such as investment banking and stock trading. Over the years, he had tamped unfounded rumors about the firm’s health and vowed to remain independent. “As long as I am alive this firm will never be sold,” Mr. Fuld said in December 2007, according to a person who spoke with him then. “And if it is sold after I die, I will reach back from the grave and prevent it.”
    In the summer of 2008, Mr. Fuld remained confident, particularly given the security of the Fed’s discount window. “We have access to Fed funds,” Mr. Fuld told executives at the time. “We can’t fail now.”

  • Department of Poetic Justice
    , December 29th, 2008 at 10:24 am

    Looks like Bernie got robbed.

    Swindler extraordinaire Bernard Madoff got a taste of his own medicine last weekend when a burglar stole a $10,000 statue from his posh, $9.4 million Palm Beach estate, according to a police report.
    The theft occurred sometime between 3 p.m. on Dec. 19 and 11:30 a.m. last Sunday, a week after Madoff confessed to ripping off $50 billion from investors in a decades-long Ponzi scheme.
    The five-foot, copper artwork overlooked the Madoffs’ inground pool, and portrays two young lifeguards sitting on a raised stand.

    From the looks of it, the real criminal was the artist. Oh, snap!

  • The 2009 Buy List
    , December 28th, 2008 at 2:12 am

    Here’s the Crossing Wall Street Buy List for 2009:
    Amphenol (APH)
    Baxter International (BAX)
    Becton, Dickinson (BDX)
    Bed Bath & Beyond (BBBY)
    Cognizant Technology Solutions (CTSH)
    Donaldson (DCI)
    Danaher (DHR)
    Eaton Vance (EV)
    Eli Lilly (LLY)
    FactSet Research Systems (FDS)
    Fiserv (FISV)
    Jos. A Bank Clothiers (JOSB)
    Leucadia National (LUK)
    Medtronic (MDT)
    Moog (MOG-A)
    Nicholas Financial (NICK)
    SEI Investments (SEIC)
    Stryker (SYK)
    Sysco (SYY)
    Once again, I’m only making five changes to the Buy List. The five new buys are:
    Baxter International (BAX)
    Becton, Dickinson (BDX)
    Cognizant Technology Solutions (CTSH)
    Eaton Vance (EV)
    Eli Lilly (LLY)
    Three of the new buys are in health care.
    The five sells are:
    Clarcor (CLC)
    Harley-Davidson (HOG)
    Lincare (LNCR)
    WR Berkley (WRB)
    Unitedhealth (UNH)
    I’ll start tracking the new list this Friday, January 2, 2009, the first day of trading of the new year. I’ll assume that all of the stocks are equally weighted with the closing price as of December 31 as the buy price. As usual, the rules state that I’m not allowed to make any changes to the Buy List throughout the year.
    My purpose is to show investors that by buying and holding a well-diversified portfolio of high-quality stocks, you can do well in the market. With only a few days left in 2008, we’re heading toward our second straight year of beating the S&P 500 while using less risk. Plus, our turnover is only 25% which is far less than most professional money managers.
    You can assume that I own any of the stocks on the Buy List. I won’t buy any of the new names until the new year.

  • The Christmas Bust
    , December 26th, 2008 at 10:27 am

    Despite huge discounts, many retailers had a lousy Christmas:

    “It’s been difficult, much more difficult than anyone expected,” Gilbert Harrison, chairman and chief executive officer of retail advisory firm Financo Inc., said today in a Bloomberg Television interview from West Palm Beach, Florida. Consumers “will spend on necessities, they’ll spend on what they need, but they’re being very particular in what they’ll buy.”
    Discounts of 70 percent off or more by Macy’s Inc., AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Including fuel, sales tumbled as much as 8 percent.
    More than a dozen retailers, including Circuit City Stores Inc., have sought bankruptcy protection this year as the credit squeeze and the U.S. recession dried up funding. The holiday results indicate further filings are possible, along with consolidation among similar companies, said Harrison.

  • Peter Schiff on Alex Jones
    , December 25th, 2008 at 2:22 pm

    Peter Schiff is not widely considered to be the crank that he is. Here’s a video of him with crackpot Alex Jones who believes, among other things, that 9/11 was a planned and carried out by the Bush administration.

  • Merry Everything
    , December 25th, 2008 at 11:40 am

    I want to wish everyone a Merry Christmas and a happy, healthy and profitable new year.
    I’d also like to thank all of my readers over the past twelve months. I’ve had this site going for 3-1/2 years now and it’s truly a labor of a love. I enjoy getting emails and questions from folks all over the world. I really don’t think I could do it without all the feedback I get. I’d also like to thank all of the folks who have linked to this site over the past year, which has brought Crossing Wall Street to an even larger audience.
    Let’s hope 2009 is a big change from 2008!
    Oh, one more thing. This.

  • The Decline and Fall of Oil
    , December 23rd, 2008 at 3:28 pm

    The January contract, which expired last week, got to a low of $32.40. On July, 11, oil reached $147.27.

  • How Best to Describe California
    , December 23rd, 2008 at 3:16 pm

    Imagine if Lehman Brothers had been allowed to issue license plates:

    In fact, there has been very little interest among institutional investors in municipal bonds since the financial markets began to collapse this fall, and states have had to rely on individual investors — far less plentiful and reliable than institutional investors — to buy bonds.
    Right after Washington cobbled together its plan to bail out banks, California, which uses bonds to pay for projects as well as to cover its short-term cash needs, sold $5 billion in notes, and 80 percent of the buyers, rather than the typical 30 percent, were individuals.
    Last month, when the state tried to restructure existing debt with an additional $523 million offering, it had to reduce the offering by two-thirds, said Tom Dresslar, the spokesman for Bill Lockyer, the California treasurer.
    “The institutional investor interest was nil,” Mr. Dresslar said.
    Further, the State Legislature’s inability, with the governor, to figure out a way to deal with the state’s $15 billion budget gap has weakened the market’s confidence in California, something other states could face if the fiscal situation deteriorates.
    This month, Standard & Poor’s downgraded the $5 billion in revenue bonds issued by California last month and put more than $50 billion of debt on watch for a downgrade.
    “The bottom line is we are not viewed as a quality investment,” Mr. Dresslar said, adding that California is not in position to offer the sort of fat interest rates needed to get offerings off the ground.

  • Ouch
    , December 23rd, 2008 at 3:03 pm

    One year ago, Business Week looked at what the pros were staying:

    Garzarelli is advising investors to buy some of the most beaten-down stocks, including those of giant financial institutions such as Lehman Brothers (LEH), Bear Stearns (BSC), and Merrill Lynch (MER). What would cause her to turn bearish? Not much. “Our indicators are extremely bullish.”

    Of course, there are six stocks on my Buy List that are down by over 50% this year, and I’m still beating the market by a fe point.