Archive for January, 2009

  • It Was 40 Years Ago Today….
    , January 30th, 2009 at 8:04 pm

  • Peter Schiff Responds
    , January 30th, 2009 at 7:51 pm

    Since I posted Mish’s take down of Peter Schiff, I feel obliged to posts Schiff’s response. The Wall Street Journal also weighs in.

  • Two More Earnings
    , January 30th, 2009 at 4:49 pm

    Yesterday, Eli Lilly (LLY) reported fourth-quarter earnings, after charges, of $1.07 a share, two cents more than expectations. That’s 19% growth although revenue growth was flat. The company sees 2009 earnings coming between $4.00 and $4.25 a share. That means the stock is going for less than 10 times this year’s earnings, plus it currently yields over 5%.
    SEI Investments (SEIC) reported Q4 earnings of 25 cents a share, three pennies below estimates. This will be a difficult year for SEIC, but I still think it’s a solid company.

  • Today’s GDP Report
    , January 30th, 2009 at 12:21 pm

    The GDP report for the fourth quarter was pretty ugly, though not as ugly as it could have been. Let’s also wait for the subsequent revisions, and revisions of those revisions. The initial report showed real growth of -3.8%.
    Since inflation has been so tame, I was curious to look at nominal growth which was -4.05%. That’s the first down quarter in 25 years and the worst quarter in 50 years.

  • Poll: Super Bowl XLIII
    , January 29th, 2009 at 6:26 pm

    Let’s see how good my readers are.

  • Oh Charlie You Can’t Say That
    , January 29th, 2009 at 3:38 pm

    35 second mark.

  • Davos Love Fest
    , January 29th, 2009 at 3:30 pm

    Michael Dell asked Putin how we can help Russia expand its IT.
    Putin: “We don’t need help. We are not invalids.
    Alrighty then….

  • The Case for Profits
    , January 29th, 2009 at 3:23 pm

    Arnold Kling argues that what really need right now is profits:

    A stimulus will work if and when it serves to increase profits, because profits are at the core of a free market system. The economy will recover if and when profits recover.
    Wages and salaries rose by 3%, while corporate profits fell by 9%, from the third quarter of 2007 through the third quarter of 2008, according to Commerce Department data. Fourth-quarter figures, which will be available in late February, are expected to show weakening in both types of income, with wages and salaries showing almost no increase, and profits falling by more than 15% relative to last year’s fourth quarter.
    The economy is in trouble today because of, pardon the pun, false profits. The financial sector reported as much as 40% of all profits in recent years. However, the reported profits on instruments such as mortgage-backed securities and the sale of credit default swaps did not reflect the long-term risks of those instruments. That is, the return on capital in the financial sector was artificially high because the amount of capital used to protect against risk was artificially low. Losses at many financial firms are inevitable. It is the market’s way of telling the bloated industry to contract, releasing capital and talent for use elsewhere in the economy.

  • Nicholas Financial’s Q3 Earnings
    , January 29th, 2009 at 3:20 pm

    NICK just came out with its third-quarter earnings and I thought they were pretty good. Or rather, not nearly as horrible as they could have been. For the last three months of 2008, NICK earned $1,266,809 or 12 cents a share. That’s way down from the 22 cents they made a year ago, but it’s an increase from the 8 cents it made in the second quarter. Bottom line, you’re not going out of business when you’re making money.
    There are a few items to highlight. First, the company changed its financing option which altered how they account for their use of interest rate swaps. This means that that swaps are now recorded on the income statement. For the third quarter, that’s about $1 million or 10 cents a share. As I see, this is merely an accounting issue and it doesn’t impact the company’s business.
    Well, there is one important impact on NICK’s business and that is they were able to cut their financing expenses in the third quarter. Interest expense dropped to $1.27 million from $1.43 million in the second quarter. Under the company’s line for “Average Cost of Borrowed Funds,” the decrease is from 5.45% to 4.87%. That’s good to see. Personally, I hate dealing in GAAP/non-GAAP jazz, but I’ll do it if there’s a real benefit.

    According to Peter L. Vosotas, Chairman and CEO, “the business climate remains challenging, auto sales are still well below historical levels and the employment outlook continues to weaken. We expect to see some seasonal improvement in our business during the fourth quarter but remain very cautious about the coming year, as we believe the recessionary pressures embedded in the economy will not subside in the near-term. During the last two quarters we have been tightening our credit underwriting guidelines in response to market conditions. We continue to evaluate markets in which we operate in and we do not anticipate any significant change from our branch-based methodology. Due to a combination of tighter underwriting guidelines and a significant slow down in auto sales during the three months ended December 31, 2008, we have reduced the size of our loan portfolio by approximately $2.6 million and also decreased our credit line outstanding by approximately $4.6 million.”

    The key line to watch is provision for credit losses. That dropped from $5.1 million last quarter to 4.6 million this quarter. That’s high but moving in the right direction. As a percentage of “average finance receivables, net of unearned interest” credit losses dropped from 9.66% last quarter to 8.77% in the third quarter.
    This was a decent quarter and if NICK keeps it up, they could be in great shape by next year.

  • The Stimulus Bill Clears the House
    , January 28th, 2009 at 6:43 pm

    The vote was 244 to 188. Eleven Democrats crossed the aisle. No Republicans crossed.
    So much for the president’s urge for bi-partisan support.
    The Democrats voted 244 to 11. The GOP voted 0 to 177. One GOP member didn’t vote.
    The “nay” Democrats were:
    Bright (AL)
    Griffith (AL)
    Taylor (MS)
    Shuler (NC)
    Cooper (TN)
    Boyd (FL)
    Ellsworth (IN)
    Kanjorski (PA)
    Kratovil (MD)
    Minnick (ID)
    Peterson (MN)
    Now…it’s off to the Senate. (Here’s some help if you need a reminder of how the system works).