|
||||||||
|
|
|
|
|
|
|
|
|
|
« November 2009 | Main | January 2010 » December 31, 2009The 2010 Buy List Here’s my 2010 Buy List. For tracking purposes, I assume it’s a $1,000,000 portfolio and each position is worth $50,000. Here’s each stock, ticker, starting price and number of shares. This is what I'm referring to when I discuss how well the Buy List is doing.
Also as in previous years, I’ve only changed five stocks to the Buy List. The five stocks I’m taking out are Amphenol (APH), Cognizant Technology Solutions (CTSH), Donaldson (DCI), Danaher (DHR) and FactSet Research Systems (FDS). The five new stocks are Gilead Sciences (GILD), Intel (INTC), Johnson & Johnson (JNJ), Reynolds American (RAI) and Wright Express (WXS). The average stock on the Buy List is a bit larger than in previous years. The total market cap of the 20 stocks is $580 billion. The average dividend yield is 1.70% which is also higher than in previous years. Only six stocks have remained on for all five years; AFLAC (AFL), Bed, Bath & Beyond (BBBY), Fiserv (FISV), Medtronic (MDT), SEI Investments (SEIC) and Sysco (SYY). The list is now locked in and I can’t make any changes for the next 12 month. I’ll start tracking the new list on Monday, January 4, 2010. Posted by edelfenbein at 8:40 PM The 2009 Buy List Trading for the year 2009 is now over. Overall, we had a very good year. The 20 stocks on the Crossing Wall Street Buy List were up an average of 43.97%. This beat the overall market by a good margin. For the year, the S&P 500 was up 23.45%. Including dividends, the Buy List was up 45.83% compared with 26.46% for the S&P 500. The Buy List’s dividend yield works out 1.29% compared with 2.44% for the S&P 500. This was our best year by far and it was the third straight year that we’ve beaten the S&P 500. For the entire four-year history of the Buy List, we’ve made 14.93% compared with -2.68% for the S&P 500 (including dividends). Best of all, our annual turnover has been just 25% which means we change just five stocks a year. Our four-year "beta" is 0.9396. I’ll restate the Buy List rules. Each year, the Buy List consists of 20 stocks that I’m not allowed to change throughout the year. Once the list is set, it’s locked in place until the following December 31. I announce the change each year around the middle of December. Each year, I only have five new buys and sells. For tracking purposes, I assume the Buy List is equally weighted among the 20 positions in a hypothetical $1 million portfolio. You can check the performance of the Buy List anytime 24/7 at our Buy List page. My goal is to show investors that by choosing stocks wisely and sticking with high-quality stocks, you can beat the market—and that’s exactly what we’ve done. I try to beat the market by a few percentage points and to do it with less risk. For 2009, our daily volatility was slightly greater than the S&P 500 coming in at 4.44% more volatile. The last two years, we were less volatile than the market. For 2009, our beta was 0.9834. Eighteen of our 20 stocks closed higher for the year. Only Moog (MOG-A) and Eli Lilly (LLY) lost money. The big winner was Nicholas Financial (NICK) which gained 222% for us. NICK was our biggest loser in 2008 (I’m glad I stuck with it). Our other big winners were Cognizant Technology Solutions (CTSH) which gained 151% and Amphenol (APH) which gained 92%. I’m dropping both stocks for 2010. Just in case anyone doubts my math, this spreadsheet has all the numbers for the Buy List. There was (thankfully) one only accounting item this year when Nicholas Financial had a 10% stock dividend.
Posted by edelfenbein at 7:31 PM Kudlow on Dow 50,000 On CNBC, Arianna Huffington accused Larry Kudlow of predicting the Dow will hit 50,000. Kudlow denied the charge. Well, Arianna is right. Here's Larry from October 1999. In "American Abundance", which was published nearly two years ago, I predicted an over 50,000 Dow. Naturally, we all like to hang out with our friends. I believe my friends and I will be proven right. Again from August 1999: Think of the Internet as an economic freedom metaphor for our time. The Internet empowers ordinary people and disempowers government. The Internet creates wealth, expands growth, produces jobs and spreads prosperity. Standing behind the Net is the political power of well over 100 million investors and asset owners. Larry's prediction was that Dow 50K will come by 2020. Posted by edelfenbein at 11:38 AM December 30, 2009From 1999: Smart Money's "Ten Stocks for the Next Decade" Not looking so good. Inktomi (INKT) Posted by edelfenbein at 2:00 PM What the Steep Yield Curve Means for Stocks Bespoke Investment Research notes the unusually steep yield curve. In fact, it's close to the steepest curve on record. The only other time the curve was wider was in August 1982 when the stock market took off. A few years ago, I looked at the impact of the yield curve on stock prices. The effect is pretty dramatic. Over a 45-year period, all of the S&P 500's capital gain took place when the the 10-year note was higher than the 3-month T-bill by 65 or more basis points. That's about 70% of the time. For the other 30% of the time, the market was flat. Today, the spread is about 380 points. Posted by edelfenbein at 10:52 AM December 29, 2009This Is the Last Time I'll Wear My Niners' Jersey in Philly Posted by edelfenbein at 11:40 AM December 28, 2009The 10 Interception Limit What is it about 11 interceptions? Since 1981, no defensive back has made it to 11 inceptions in one season even though 11 different players have made it to 10. Another 28 players have made it to nine, including three this year. You can add another 45 players who have made it to eight. Talk about thin tails, this data set seems to have no tail at all. Posted by edelfenbein at 7:20 PM Tiger Woods Destroyed $12 Billion in Market Value If academics say it, then it must be true: More difficult to determine, though, is how the scandal would hit his corporate sponsors. So Victor Stango and Christopher Knittel, two economic professors at University of California, Davis, decided to take a stab at quantifyiung the effect–performing what is called an “event study.” To do this, the professors looked at the nine sponsors for which stock price data was available and compared stock returns for those companies for the 13 days after the accident, both to the entire stock market and a group of competitors. The market value of the sponsors fell 2.3%. Posted by edelfenbein at 2:51 PM The Perils of Economic Stats Coming on the heels of Robert Shiller's idea for securities based on national GDP, consider the problem of constant revisions. GDP growth for the third quarter of 1983 has been revised ten times, including once this year. Posted by edelfenbein at 1:25 PM CEO Pay Is Negatively Correlated to Share Performance I can't say this is much of a surprise: It turns out that the bigger the CEO's slice of the pie, the lower the company's future profitability and market valuation. "These CEOs," says Prof. Bebchuk, "seem to be trying to grab more than they should." Posted by edelfenbein at 10:48 AM The Decade In One Graph Here's the decade version of the chart I posted last week.
This is the relative strength of ten S&P industry groups set to 100 ten years ago. The big winner has been energy. Interestingly, financials were in the lead until mid-2004. Posted by edelfenbein at 12:24 AM December 27, 2009Did the Immigration Protests Burst the Housing Bubble? Steve Sailer has often called the recession the "diversity recession" due to the concentration of the subprime mortgage market within minority homeowners. The numbers are hard to come by, but the figures that do exist support much of what Steve has said. I was curious to see what happened at the peak of the housing market and it seems to have coincided with many of the immigration reform protests in the spring of 2006. The largest events were the mass rallies on April 10 and the Day Without An Immigrant on May 1. There were also many other rallies in March and April (here's a rundown). Here's a look at peak price dates for the 20 different metro areas in the Case-Shiller Index. These are the seasonally adjusted numbers. I also included how much the index is down from the peak price to the most recent data point. Metro..................................Peak................................Decline Eleven of the 20 markets peaked between February and May 2006. I'm not saying that the immigration protests caused the housing bubble. That was forming for a long time. The bursting of the bubble's was long overdue and perhaps the dislocation in the housing sector brought on by the protests impacted the markets. Then, once the slide started, it couldn't be stopped. This evidence is very circumstantial but I think the hypothesis has merit. As they say, more research is needed. Posted by edelfenbein at 10:47 PM Sunday Links Here are a few items I'm reading. William Voegeli on the disaster that is California Phil Birnbaum on the performance of pitchers. Dave Barry's brilliant take on the year 2009. James Altucher comes out against homeownership. Kid Dynamite on mean-reversion and momentum investing. Finally, here's the 2010 Bespoke Roundtable which I participated in. Posted by edelfenbein at 5:54 PM December 26, 2009The Trill Is Gone Professor Robert Shiller floats the idea of national governments using equity financing. The idea would be to issue equity shares called trills, a one-trillionth equity stake in a national economy, that pay quarterly dividends that are tied to the gross national product. Equity, however, is quite different from debt in that equity represents a legal claim on real assets. Debt is simply renting capital. When the renting is done, so is the cash flow. But equity is forever and with it comes a having a say in how the enterprise is run. So would trill holders get to vote in how the country is run? I’m not so sure if that’s constitutional (but I could be persuaded that we need a new electorate). Or possibly these would represent a form of non-voting shares. Could the Iranians buy them on the open market? Shiller doesn’t say. Bear in mind that we would never let China buy, say, one of our major aerospace companies. Shiller thinks that one trill could go for around $1,400 which would represent a yield of 1% based on its $14 dividend. This is, of course, completely insane. It would value the entire United States at $1.4 quadrillion. That comes to about $4.7 million for every person in the United States, including children. How does that stack up against other studies? In the book, From Poverty to Prosperity, authors Arnold Kling and Nick Schultz include a chart on page 38 which lists per-capita wealth of different countries. For 2006, the U.S. is listed at $512,612 (the data is from the World Bank). Shiller writes: The Standard & Poor’s 500-stock index now has a dividend yield of 2.3 percent. The dividend yield on trills might be much lower, reflecting the substantially higher long-term growth rate of G.D.P. relative to S.& P. dividends — in real terms, 3.1 percent versus 1.1 percent a year, respectively, since 1957. Shiller makes a few mistakes here. First, dividends are paid out of earnings. They’re not the whole thing. GDP is basically equivalent to national earnings. In other words, he’s saying that America’s P/E ratio could be around 100. Secondly, there’s no economic reason why dividends need to continue to grow slower than GDP. That’s simply a preference of corporation’s payout ratio, which is often tied to tax policy. It all comes out of the same source. Corporate profits usually make about 10% of GDP. It fluctuates +/-2% or so but 10% seems to be the mean. Plus, Shiller’s numbers are misleading. Dividends are unusually low right now thanks to the TARP restrictions and the recession. Looking at Shiller’s website we can see that real dividends grew by 2.23% annualized from 1945 to 2007 which encompasses a drop in payout ratios from about 80% to 40%. The trill idea is basically to have a payout ratio of 100%, but simply calling this a dividend doesn’t mean it will be valued like a dividend. If the cash flow necessary for dividends grew by just 1.1%, then the dividend yield would be much higher than the S&P 500 not lower. Shiller gets it backward. Finally, even if these trills were possible, they’re a terribly idea. The struggle in corporate financing is between equity and debt. The game isn't hard to understand. You issue debt when yields are low and you sell stock when shares prices are high. It’s that simple. The U.S. benefits enormously by being the reserve currency of the world. Short-term yields are microscopic. Put it this way: If you lend Uncle Sam $100 right now, at the current rates, you’ll make a profit of one penny in three months’ time. That’s a great deal for us. Once people stop lending us money, then we can sell off the Liberty Bell. Until then, we have no use for trills. David Merkel and Robert Wenzel have more. Posted by edelfenbein at 11:40 PM The Talented Mr. Buffett Felix Salmon highlights Warren Buffett's ability to be the good guy even when his companies' practices are rather ruthless. Berkshire Hathaway has eliminated 21,000 jobs and it won't impact Buffett's nice guy image one bit. Felix quotes Alice Schroeder that Buffett is good at hiring bad cops to do the dirty work and protect him from any blowback. It's hard to imagine but Buffett wasn't always seen as the good guy. In the 1970s, before they were well known, Buffett and Munger bought the Buffalo Evening News. The Buffalo Courier-Express, a rival newspaper, did everything they could to make them seem like an evil out-of-town heartless capitalists. Buffett was beat up hard in the press and I think that episode has stayed with him ever since. Posted by edelfenbein at 8:08 PM 2009 In One Graph I apologize for the crowdedness of this chart, but it shows the relative strength of the ten S&P 500 industry groups for this year.
Here are a few items I noticed. I’m surprised to see the continued strength of tech stocks this year. The trend hasn’t let up. Financial stocks had a huge turnaround since the March bottom, but peaked in mid-October and have been trending lowering ever since. I’m surprised how weak utility stocks have been this year. Posted by edelfenbein at 1:29 PM December 25, 2009Merry Everything!
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 4-1/2 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 2010 brings us more profits—in all our endeavors. Posted by edelfenbein at 9:47 AM December 23, 2009Beware Santa’s Secret Legislation Crossing Wall Street contributor Gary Alexander notes that this time of year has become famous for secret legislation: It’s no secret this time around, but once again we see the unseemly prospect of a select group of key legislators staying up all night and delaying their Christmas break long enough to muscle-through some controversial legislation before the close of the year. In doing so, they are continuing a grand tradition. December 23 or 24 has been a great time to pass controversial laws, while nobody’s watching too closely. Here are a few examples of what skullduggery the President and/or a few loyal Congressmen have enacted on December 23 or 24 in history: • On December 23, 1975: President Ford signed the Metric Conversion Act, still a controversial law, and still widely ignored 34 years later. While those items might seem trivial and harmless in the rear-view mirror, some of the worst legislation in American history was also hatched on Christmas Eve: • On December 24, 1827, a group of Congressmen under the control of Andrew Jackson drafted a tariff bill so outrageously protectionist that it was later dubbed “The Tariff of Abominations.” It didn’t pass until the next Spring, but it had the intended outcome of helping Jackson oust John Q. Adams in the 1828 election – and alienating the South. Posted by edelfenbein at 1:10 AM December 22, 2009It Was Only a Matter of Time The Empire takes over Wall Street. (HT: Carney) Posted by edelfenbein at 2:51 PM Where’s the Priciest Real Estate? With the help of Zillow, I looked at the number of homes on the market going for $5 million or more. I found 5,028 homes. These homes are overwhelming skewed to a few areas. For example, more than half the homes are in three states—New York, Florida and California. At the other end, many states only have a handful and five have none. On this spreadsheet, I broke out the numbers into states, then prominent counties and also a few select towns and neighborhoods. Let me stress that this is far from a scientific survey. I don’t fully trust every listing on Zillow, but I think this gives you a good idea of where the pricey homes are. I also looked at the number of homes per 100,000 people. Be aware that just a few homes in a small community can really jack up the rate. Also, the rate is artificially high in resort communities because the pricey may not be owned by full-time residents. Posted by edelfenbein at 2:42 PM Altucher's 10 Predictions for 2010 James Altucher, one of my favorite financial writers, has his ten predictions for 2010. Here's a summary: 1.) The S&P 500 will touch 1300 at some point during the year. I like #7 as you can tell from my new Buy List. Posted by edelfenbein at 12:55 PM Treasury Memo This is brutal. It's funny, as they say, because it's true. (I love the idea of 82-year-old Paul Volcker giving the memo a frowny face and writing "H8 it!") Posted by edelfenbein at 11:13 AM The S&P 500 Breaks 1,120; VIX Below 20 Stocks are rallying after the poor GDP report. The S&P 500 briefly broke 1,120 for the first time in nearly 15 months. The VIX also dipped below 20 for the first time since August 2008. Posted by edelfenbein at 10:20 AM Third-Quarter GDP Revised Down...Again The final report on third-quarter GDP showed that the economy grew by a lackluster 2.2% during July, August and September. The original report said 3.5%, then it was lowered to 2.8% and now we're at 2.2%. That's just not very good at all. The economy will have to grow at 3% or more to create new jobs to the empty the ranks of the 15 million unemployed. Four percent or more would be even better. The good news is that the third quarter was a long time ago and we're about to close out the fourth quarter. Usually whenever a recession ends, we see a "boom quarter," where GDP jumps by 5% or 6%. Hopefully, one will be coming soon. Here’s a chart I like to look at every so often. This is real GDP divided by a trend line of about 3.08% a year. That’s been about the historic growth rate over the last 40 years. I then set the average value to 1.0. In other words, I’m trying a quick-and-dirty way to see where we are compared with GDP potential. Bear in mind, this method is very dangerous because it assumes past GDP performance will continue. Still, I think it’s interesting to see where we stand today compared with the past few decades.
Notice that this chart shows how meager the recover was from 2003 to 2007. Posted by edelfenbein at 9:43 AM December 21, 2009Invest in Faith Felix Salmon spots the FaithShares market which has a few faith-based ETF. Here's a rundown: Baptist (FZB) I suggest a counter-Reformation trade: long FCV/short FKL. The possibilities are endless. Posted by edelfenbein at 3:50 PM The S&P 500 Passes Gold The S&P 500 is currently up 11.65 today to 1,114.12 while gold is down $17.80 to $1093.70. I have no idea what this means but I'm passing it along anyway. Posted by edelfenbein at 1:44 PM Tepper’s Hedge Fund Scores $7 Billion Year Ever heard of David Tepper? His hedge fund made $7 billion this year, of which Mr. Tepper will keep about $2.5 billion for himself. The funds secret was to beat against American falling into a second Great Depression. Through February and March, Mr. Tepper scooped up beaten-down bank shares as many investors were running for the exits. Day after day, Mr. Tepper bought Bank of America Corp. shares, then trading below $3, and Citigroup Inc. preferred shares, when that stock was under $1. One of his investors insisted more carnage loomed. Friends who shared his bullish beliefs were wary of aping his moves amid speculation that the government was about to nationalize the big banks. Posted by edelfenbein at 10:53 AM The Short-Selling Conspiracy I'm honored to be named a Sith Lord -- a member of the short-selling conspiracy. If anyone needs me, I'll be meeting with the Rothschilds by the grassy knoll. Posted by edelfenbein at 9:57 AM Worst Decade Ever The Wall Street Journal tallies up how bad this decade has been: With two weeks to go in 2009, the declines since the end of 1999 make the last 10 years the worst calendar decade for stocks going back to the 1820s, when reliable stock market records begin, according to data compiled by Yale University finance professor William Goetzmann. He estimates it would take a 3.6% rise between now and year end for the decade to come in better than the 0.2% decline suffered by stocks during the Depression years of the 1930s. Here's a cool graphic. Posted by edelfenbein at 9:40 AM December 17, 2009The 2010 Buy List Here’s the Crossing Wall Street Buy List for 2010: AFLAC (AFL) The list is now locked in and I can’t make any changes for the next 12 month. I’ll start tracking the new list on Monday, January 4, 2010. As in previous years, I assume the Buy List to be a $1 million portfolio that’s equally divided among the 20 stocks going by the closing price of December 31, 2009. Also as in previous years, I’ve only changed five stocks to the Buy List. The five stocks I’m taking out are Amphenol (APH), Cognizant Technology Solutions (CTSH), Donaldson (DCI), Danaher (DHR) and FactSet Research Systems (FDS). The five new stocks are Gilead Sciences (GILD), Intel (INTC), Johnson & Johnson (JNJ), Reynolds American (RAI) and Wright Express (WXS). Posted by edelfenbein at 7:41 PM Bernanke Passes Senate Banking Committee The vote was 16 to 7. Posted by edelfenbein at 11:23 AM December 16, 2009Danaher Guides Higher Some good news from Danaher (DHR). The company is raising its Q4 guidance to a range of 99 cents to $1.09 a share. The Street was at 97 cents a share (and had been rising). Still, Danaher has had a rough year. It looks like EPS will be down about 17% or so from last year. Posted by edelfenbein at 11:30 PM The Best Time of Year for Stocks We're soon coming up on the famous Santa Claus rally. I crunch all the numbers for the Dow from 1896 through 2007. Historically, the best stretch for the market has come between December 21 and January 7. Of the 15 best days of the year for the market, six are in this period. Over 111 years, the Dow has gained an average of 3.39% during that 17-day period. To put that in some perspective, the Dow’s annual gain is 8.32%. This means that more than 40% of the Dow’s yearly gain has come during this brief stretch which is less than 1/20 of the entire year.
Posted by edelfenbein at 3:39 PM The Dump Bernanke Bandwagon There are now three senators who say they will vote "nay" on Time's Person of the Year: Jeff Merkley, John McCain and Bernie Sanders. More may be coming. Posted by edelfenbein at 3:25 PM Bernanke Named Time's Person of the Year
This will drive the conspiracy folks nuts. Or rather, even nuttier. Posted by edelfenbein at 9:50 AM December 15, 2009FactSet Drops on Earnings Shares of FactSet (FDS) are down sharply today after posting earnings that were in line with expectations, which makes you wonder what the expectations really were. For their fiscal first quarter, FactSet made 74 cents a share and revenues were down a trivial amount. For the second quarter, which ends in January, the company sees EPS ranging between 73 and 75 cents a share. That’s a narrow range. The Street was at 75 cents a share. The stock is currently down about 7.6% today. I can’t say I’m complaining since the stock has traveled almost consistently upward all year. Posted by edelfenbein at 10:51 AM December 14, 2009The Buy List's Four-Year Gain of 14.31% The Buy List just hit another new high for the year, plus we’re at another new relative strength high. Through today, our Buy List is up 43.61% compared with 23.34% for the S&P 500. That doesn’t include dividends. Since our Buy List has an overall dividend yield that’s a bit lower than the overall market, the dividend-adjusted return is slightly closer. Through today, the Buy List is up 45.04% compared with 26.26% for the S&P 500. For our total record of nearly four years, the Buy List has returned 14.31% compared with a loss of -2.83% for the S&P 500. Posted by edelfenbein at 5:16 PM "Naked Access" now 38% of U.S. Trading From Reuters: A report says that 38 percent of all U.S. stock trading is now done by firms that have "naked sponsored access" to markets, the controversial trading practice said to imperil the marketplace, and which faces a regulatory crackdown. Posted by edelfenbein at 2:40 PM Oooh…Burn Cadbury (CBY) is again not interested in being bought out by Kraft. Still, you have to admire Cadbury for calling Kraft’s (KFT) offer “derisory.” I couldn’t imagine an American company saying that. “Kraft is trying to buy Cadbury on the cheap to provide much needed growth to their unattractive low-growth conglomerate business model,” Cadbury’s chairman, Roger Carr, said in a statement. “Don’t let Kraft steal your company with its derisory offer.” Posted by edelfenbein at 10:59 AM December 11, 2009Women Are Better Money Managers Than Men From DealBook: It seems that in the hedge fund industry, female fund managers come out on top — at least according to a new study from Bloomberg L.P. and the National Council for Research on Women. So Would Lehman Sisters still be around? Posted by edelfenbein at 9:32 AM December 10, 2009The Sunshine Effect: When financial markets respond to the weather From Fordham University: Market reactions to earnings surprises are higher when earnings are announced on very sunny days in New York City, according to a recent study by two accounting professors. Posted by edelfenbein at 2:12 PM The Range-Bound Market It appears that the Humpy Pattern has given way to a sideways market. For the last month, the S&P 500 has been locked in a range of less than 2.2%.
Posted by edelfenbein at 11:09 AM Eli Lilly Confirms 2010 Outlook There’s good news from Lilly (LLY), although the market isn’t taking it that way. The company said it expects to earn $4.65 to $4.85 next year. That’s pretty good considering the stock is currently under $35. The problem for Lily is that several of their top drugs come off patent over the next few years. They’ve said that they plan to introduce two new drugs a year starting in 2013. Bloomberg reports: “Lilly said it has more than 60 drugs in clinical development and expects in 2011 to have 10 medicines in the final stage of trials generally required for U.S. approval.” Posted by edelfenbein at 10:36 AM December 9, 2009Bunning Vs. Bunning This clip of Senator Jim Bunning has received a great deal of praise across the Internet. In my opinion, it’s cheap demagoguery. Bunning congratulates himself for opposing Bernanke’s nomination four years ago. He also criticizes Bernanke for his loose monetary policy. Yet one of the reasons he opposed Bernanke’s nomination four years ago was for his tight money policy. But Bunning has been a critic of the Fed course of "measured" hikes in short-term interest rates in order to fight inflation, saying that there is not sufficient inflationary pressures to justify the 11 quarter-percentage point hikes since June 2004.Incidentally, Bunning closes by calling the Fed “the Creature from Jekyll Island.” This is a reference to a crackpot Bircher conspiracy screed of the same name by G. Edward Griffin. Even for nutter stuff, this one is off the deep end. Here’s part of one review: G. Edward Griffin lays out this conspiratorial version of history in his book The Creature from Jekyll Island. His amateurish take on history is highly suspect, however. Gerry Rough, in a series of well- researched essays on U.S. banking history, reveals many historical inaccuracies, inconsistencies, and even contradictions in Griffin's book and others of its genre. As to the conspiracy: Also in 1910, Senator Nelson Aldrich, Frank Vanderlip of National City (today know as Citibank), Henry Davison of Morgan Bank, and Paul Warburg of the Kuhn, Loeb Investment House met secretly at Jeckyll Island, a resort island off the coast of Georgia, to discuss and formulate banking reform, including plans for a form of central banking. The meeting was held in secret because the participants knew that any plan they generated would be rejected automatically in the House of Representatives if it were associated with Wall Street. Because it was secret and because it involved Wall Street, the Jekyll Island affair has always been a favorite source of conspiracy theories. However, the movement toward significant banking and monetary reform was well-known. It is hardly surprising that given the real possibility of substantial reform, the banking industry would want some sort of input into the nature of the reforms. The Aldrich Plan which the secret meeting produced was even defeated in the House, so even if the Jekyll Island affair was a genuine conspiracy, it clearly failed. So there, I’ve done Rachel Maddow’s work for her today “GOP senator references crackpot Bircher conspiracy!!” As you might expect, Griffin believes in more conspiracies:
Posted by edelfenbein at 10:43 AM Nicholas Financial’s Stock Dividend I had additional shares of Nicholas Financial (NICK) credited to my account on Monday due to the 10% stock dividend. This is in effect an 11-for-10 split. The share price, however, showed no evidence of splitting which means that the stock actually gapped up. Normally, I would have expected to see NICK pull back around 10%. Perhaps no one noticed. In any event, I’m adjusting the Buy List records to account for the split. At the beginning of the year, the Buy List “bought” 21,276.595 shares of NICK at $2.35 for a position of $50,000. The Buy List assumes all 20 positions are equally weighted at the beginning of the year for a total portfolio of $1 million. We now have 23,404.2545 shares of NICK and the cost basis is $2.136364. Posted by edelfenbein at 10:21 AM After 63 Years, Eisenstadt Is Out at Value Line For 63 years, Samuel Eisenstadt was probably Value Line Inc.’s most valued employee. The statistician created an investment strategy that proved successful for decades and was endorsed by none other than Warren Buffett. But today he embarks on something new—unemployment. (Via Salmon) Posted by edelfenbein at 12:49 AM December 8, 2009One-Month Treasury Bill Is a Blutarsky Here’s an arresting stat: The latest Treasury auction for one-month T-bills went off at a Blutarsky—0.0%. In other words, the government can borrow money for free for the next month. For now, this fact helps the spending brigades in Congress. Just about any spending short of burning money or filling the money hole will likely be a cost benefit for taxpayers. However, I don’t see any chance for second stimulus, plus Bernanke came down against it as well. (By the way, Paul Krugman argues that the very fact that the stimulus has failed is precisely why we need another. This is why more professors don’t get elected.) The zero-rate auction was incredibly popular. The bid-to-cover was 5.33 which is very high. There’s a technical reason why this bill was so popular. It will be the first one to expire in the new year. This means the institutional guys just want a safe place to park their money until 2010 begins. Posted by edelfenbein at 11:52 PM Amazon's Skyhigh Valuation I've been bashing Amazon.com (AMZN) for the past few months (and have been dead wrong). Still, I wanted to show you just how crazy the share price has gotten. Here's a chart of Amazon and its earnings-per-share.
The blue line is Amazon's share price and it follows the left scale. The black and red line shows Amazon's earnings-per-share and it follows the right scale. The black shows the trailing figures and the red is Wall Street's projection. The two axises are scaled at a ratio of 50-to-1 which means that Amazon's P/E Ratio is exactly 50 whenever the lines cross. A 50 P/E Ratio is very high, but even if we use that as a valuation, the stock is more than a year ahead of itself -- even taking into account the tremendous growth forecast. Posted by edelfenbein at 12:40 PM Rogue Trader Executed China on Tuesday executed a former securities trader for embezzlement, the first person in the industry to be put to death, but millions of yuan are still missing, a state newspaper said. (Via: TBI) Posted by edelfenbein at 10:48 AM December 7, 2009What Will the Fed Do at Its Next Three Meetings? According to the futures market, nothing. The FOMC meets next week, then in January and again in March. The Cleveland Fed tracks what the futures market thinks will happen and the overwhelming view is that the Fed will keep rates at its current band between 0% and 0.25%. Posted by edelfenbein at 2:09 PM The 90s Are Officially Over You've Got Freedom: AOL ends ties with Time Warner AOL is shaking loose from Time Warner Inc. and heading into the next decade the way it began this one, as an independent company. Unlike the 1990s, though, when AOL got rich selling dial-up Internet access, it starts the 2010s as an underdog, trying to beef up its Web sites and grab more advertising revenue. Posted by edelfenbein at 11:28 AM Where We Stand with TARP It looks like Uncle Sam will only take a $42 billion bath from the TARP program. Only a few months ago, it looked like it would cost a lot more. Overall, that’s a return on equity of about -11%. That’s really not so bad. I have to confess that I’d be almost as worried if the Feds made money on TARP since it might give them confidence to try it again. Of the money lent to banks, TARP has worked fairly well with a profit of $19 billion on $245 billion lent out. The problem is that nonbank borrowers like General Motors have bled out the rest of the borrowing. Citigroup is the only major bank left that hasn’t paid back all of its TARP money. This was an ugly government policy but it was the right thing to do. Now all we need is a clear exit strategy. Posted by edelfenbein at 11:07 AM The Buy List YTD With just a few days left in 2009, the Buy List continues to do well. Through Friday, the Buy List is up 42.36% for the year versus 22.44% for the S&P 500 (that doesn’t include dividends). The Buy List is just a hair below its November 17th high. Since March 9, we’re up 88.37% to 63.48% for the S&P 500. But of course, that’s just a suckers rally. Posted by edelfenbein at 9:08 AM Gold Is Down Again Today After taking a bath on Friday, gold is down again today. Gold for February delivery slipped $26, or 2.22%, to $1,143.50 a troy ounce early Monday. Gold prices fell sharply Friday after after a much better-than-expected jobs report from the government showed employers trimming a mere 11,000 jobs in November as the unemployment rate ticked down to 10% from 10.2% in the prior month. We’ve become very used to a script lately—dollar down, gold and stocks up. Could that be coming to an end? Bloomberg notes that since 1980, gold has been an awful investment: Gold’s best year in three decades has yet to match the returns of an interest-bearing checking account for anyone who bought the most malleable of metals coveted for at least 5,000 years during the last peak in January, 1980. Posted by edelfenbein at 9:05 AM December 4, 2009The $1 Million Gold Bet I noticed this on Barry Ritholtz’s site more than two years ago (via Prieur du Plessis). Jim Sinclair offered a $1 million bet to anyone that gold will reach $1,650 an ounce by the second week of January 2011. We’re a little over a year away. At the time of the bet in April 2008, gold was going for about $900 an ounce. It recently jumped over $1,200 an ounce (although it pulled back sharply today to around $1,160). So gold has had a good run. But it still needs a good surge over the next thirteen months to hit Sinclair’s target. Will it make it? I have no idea. This one may come down to the wire. Posted by edelfenbein at 2:43 PM The World Cup Draw We're in Group C: Group A Group B Group C Group D Group E Group F Group G Group H They always talk about one group being the Group of Death. I’m not sure if there is one this time. In 2006, our group was considered by some (though not all) to be the GOD. We were up against Italy, the Czechs and Ghana. We tied Italy and lost the other two. The U.S. will play England on June 12. We play Slovenia on June 18 and Algeria on June 23. Posted by edelfenbein at 1:56 PM Finally! Not Completely Awful News for Jobs The unemployment rate dropped to 10% in November from 10.2% in October. To be very precise, the unemployment rate fell to 9.992%. That’s good news but the economy is still losing jobs—only 11,000 jobs were lost last month. That’s a dramatic improvement over the data we’ve seen during the past two years. The Labor Department also revised the data higher for September and October. Here's a look at the unemployment rate:
Here's a look at non-farm payrolls: In less than two years, seven million jobs have been lost. Posted by edelfenbein at 10:07 AM Quote of the Day From Larry Ribstein: "For awhile I carried on an experiment of analyzing closely a mainstream media business commentator to see just how bad it is. The commentator is Gretchen Morgenson, and my findings, as set forth in this archive: very bad." Posted by edelfenbein at 9:48 AM December 3, 2009Tim Sykes Rant I'm glad to see Tim Sykes come out of his shell to tell us what he really thinks. Posted by edelfenbein at 2:27 PM December 2, 2009Sign Up Today! Sign up for the Wilmott-Taleb "Robust Risk Management" course in London just £1,999 (or £1,499 if you're early). Sign Up Today! Posted by edelfenbein at 3:28 PM The Stock Market Fails to Outperform the Stock Market Felix Salmon points to a study by Ken French and Eugene Fama showing that the returns of mutual funds are pretty evenly distributed. The tails are a bit fatter than the bell curve would suggest. The study also shows that fees basically eat up all the alpha. (This leads Matthew Yglesias to call the entire mutual fund industry “an elaborate fraud.”) For the vast majority of actively managed funds, true α is probably negative; that is, the fund managers do not have enough skill to produce risk adjusted expected returns that cover their costs. Personally, I’m happy with some negative alpha out there because it means more for me. However, this study doesn’t impress me much because it looks at the fund industry as a whole. What the study shows is that the stock market doesn’t outperform the stock market. I can live with that. What would be more interesting is to see if the small group of active managers with positive alpha continues to have positive alpha. That’s the key. Posted by edelfenbein at 2:52 PM The World's Tallest Buildings and Market Bubbles
Here's a look at the relationship between the successive tallest buildings in the world and market bubbles. Via Tyler Cowen, I see that Ed Glaeser writes "Dubai now has the tallest building in the world, and 11 skyscrapers that are taller than any European building." Posted by edelfenbein at 12:47 PM The Geeks Have Won This is the kind of story the media loves to write: Traditional floor trading “really is an alpha-male activity,” said Brett Steenbarger, and an associate professor of psychiatry at State University of New York at Syracuse and an expert in the psychology of trading. “You get these highly competitive people taking a good amount of risk ... It's like being in a locker room. In contrast, computer programmers are almost like a think tank.” Posted by edelfenbein at 12:31 PM High-Frequency Trading Surges Across The Globe From Reuters, here's an interesting article on the spread of high-frequency trading: Turf battles between exchanges also sometimes prevent the kind of interconnected market approach that provides fertile ground for high-frequency trading. Traditional brokers and institutions, whose positions are threatened by upstart trading houses, also help to erect barriers. Posted by edelfenbein at 10:02 AM I Didn't See This One Coming From the killing fields to the trading floors: Cambodia set to build 1st stock market Posted by edelfenbein at 9:56 AM Huge Earnings Beat for Jos A. Bank The men’s clothier earned 63 cents per share for the third quarter which was eight cents better than the Street. Same-store sales rose 3.3%. The stock is the one of the most volatile members of our Buy List. Fortunately, it’s been volatile in a good way this year. Shares of Jos. A. Bank (JOSB) are up 63% this year. Posted by edelfenbein at 9:18 AM Green Mountain Raises Bid to $35 a Share Green Mountain Coffee Roasters Inc. Wednesday raised its bid for Diedrich Coffee Inc. to $35 a share in cash, keeping up a bidding war between Green Mountain and Peet's Coffee & Tea Inc. for the single-serve coffee brand. Posted by edelfenbein at 9:13 AM December 1, 2009Some Odd Football Stats Despite being 40-years-old, Brett Farve is having the best season of his career, at least going by passer rating. Through Sunday, Farve’s passer rating is 112.1 which is the sixth-highest of all-time (although second to Drew Brees for this year). Farve’s previous high came 14 years ago when his rating was 99.5 which is the 49th best of all-time. Chris Johnson of the Titans already has 1,396 yards rushing on just 217 carries. He has touchdown runs of 85, 89 and 91 yards this season. Johnson is averaging 6.43 yards per carry which is the highest for a full-time back in the last 50 years. Thanks to a pick last night, Darren Sharper has eight interceptions for the year including three that he’s returned for touchdowns. Sharper is now the active leader in interceptions with 62 (that’s tied for 7th all-time). He has 11 lifetime touchdowns which is second all-time, just one behind Rod Woodson. On career yardage, he’s also second to Woodson trailing by 92 yards. The odd thing about interceptions is that 10 in one season seems to be like “hitting the wall” in a marathon. Since 1981, 12 different players have had 10 interceptions in one season but no one has gotten to 11. This might be the Nigel Tufnel Theory of Defensive Backs. Posted by edelfenbein at 2:42 PM North Korea Revalues Currency by 100-to-1 Something tells me this isn't going to work: In an alleged bid to curb inflation and suppress its growing black market, North Korea implemented a currency revaluation on Monday, according to Yonhap, the South Korean news agency. It's really shameful that a country has mismanaged its currency so badly. Why are you looking at me like that? Posted by edelfenbein at 1:22 PM How to Value Gold Barry Ritholtz posts a chart from Albert Edwards of SocGen which tries to show if gold is overvalued or undervalued. This chart reiterates the point I've made before that I've never seen a set of variables that closely tracks the price of gold. I don't see how useful a valuation metric is when the price is often one-fifth of where it should be. One of Barry's commentors sums it up well: Let me get this straight… Gold has been ‘inexpensive’ for for roughly 38 out of the past 40 years, and is now near a record low? Posted by edelfenbein at 12:41 PM Blodget Vindicated! Amazon.com (AMZN) is up to $138 a share today which is yet another new high. We’re coming up on the 11th anniversary (December 16th) of Henry Blodget’s famous $400 long-term price target for Amazon. The stock has since split 6-for-1 (a 2-for-1 and a 3-for-1) so the adjusted price target works out to be $66.66 We can debate what long-term means, but if it’s 11 years, then Blodget was pretty much spot on if we assume an average return on equity of around 7%. Posted by edelfenbein at 11:44 AM Peet's Raises Bid to $32.50 Whatever is in that K-Cup license, someone wants its very badly. Peet’s Coffee & Tea Inc. raised its bid to buy Diedrich Coffee Inc., the maker of single-serve coffee packets, for the second time to $32.50 a share, topping the latest offer from Green Mountain Coffee Roasters Inc. This almost reads like a movie. As a business enterprise, Diedrich is pretty much a joke. But they have a license which is very valuable yet no one seems to know what it exactly entails. Let me change that -- someone knows and they're willing to pay a lot for it. Peet's is now willing to pay $32.50 for a stock that was worth 21 cents a few months ago. Who needs gold when there's coffee? (John Hempton has more.) Posted by edelfenbein at 11:23 AM Eaton Vance's Earnings I also neglected to mention Eaton Vance's (EV) earnings report from last week: Investment manager Eaton Vance Corp. said Tuesday its profit jumped 39 percent in the fourth quarter on higher assets under management and lower investment losses. Posted by edelfenbein at 11:08 AM Self-Parody Alert The reappointment of Ben Bernanke has sent Nassim Nicholas Taleb into an existential crisis. I'm not making this up. What I am seeing and hearing on the news -- the reappointment of Bernanke -- is too hard for me to bear. I cannot believe that we, in the 21st century, can accept living in such a society. I am not blaming Bernanke (he doesn't even know he doesn't understand how things work or that the tools he uses are not empirical); it is the Senators appointing him who are totally irresponsible -- as if we promoted every doctor who caused malpractice. The world has never, never been as fragile. Economics make homeopath and alternative healers look empirical and scientific. Take care, Posted by edelfenbein at 1:21 AM |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
