Archive for December, 2009

  • Altucher’s 10 Predictions for 2010
    , December 22nd, 2009 at 12:55 pm

    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.
    2.) Unemployment goes down to 8%.
    3.) GDP hits an annualized 6% by Q2 as inventories get restocked.
    4.) Dendreon (DNDN) is acquired.
    5.) AOL gets bought by Microsoft.
    6.) B will the best letter in the BRIC countries: Brazil, Russia, India, China.
    7.) Health care will greatly outperform the S&P in 2010.
    8.) Banks start lending money again.
    9.) Either Apple or Amazon will develop the killer tablet computing product (or be close to it for 2011).
    10.) The world will not end.
    I like #7 as you can tell from my new Buy List.

  • Treasury Memo
    , December 22nd, 2009 at 11:13 am

    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!”)

  • The S&P 500 Breaks 1,120; VIX Below 20
    , December 22nd, 2009 at 10:20 am

    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.

  • Third-Quarter GDP Revised Down…Again
    , December 22nd, 2009 at 9:43 am

    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.
    image881.png
    Notice that this chart shows how meager the recover was from 2003 to 2007.

  • Invest in Faith
    , December 21st, 2009 at 3:50 pm

    Felix Salmon spots the FaithShares market which has a few faith-based ETF.
    Here’s a rundown:
    Baptist (FZB)
    Catholic (FCV)
    Christian (FOC)
    Lutheran (FKL)
    Methodist (FMV)
    I suggest a counter-Reformation trade: long FCV/short FKL. The possibilities are endless.

  • The S&P 500 Passes Gold
    , December 21st, 2009 at 1:44 pm

    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.

  • Tepper’s Hedge Fund Scores $7 Billion Year
    , December 21st, 2009 at 10:53 am

    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.
    “I felt like I was alone,” Mr. Tepper recalls. On some days, he says, “no one was even bidding.”
    The bets paid off. A resurgent market has helped Mr. Tepper’s firm, Appaloosa Management, gain about 120% after the firm’s fees, through early December. Thanks to those gains, Mr. Tepper, who specializes in the stocks and bonds of troubled companies, manages about $12 billion, a sum that makes Appaloosa one of the largest hedge funds in the world.

  • The Short-Selling Conspiracy
    , December 21st, 2009 at 9:57 am

    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.

  • Worst Decade Ever
    , December 21st, 2009 at 9:40 am

    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.
    The past decade also well underperformed other decades with major financial panics, such as in 1907 and 1893.
    “The last 10 years have been a nightmare, really poor,” for U.S. stocks, said Michele Gambera, chief economist at Ibbotson Associates.
    While the overall market trend has been a steady march upward, the last decade is a reminder that stocks can decline over long periods of time, he said.
    “It’s not frequent, but it can happen,” Mr. Gambera said.
    To some degree these statistics are a quirk of the calendar, based on when the 10-year period starts and finishes. The 10-year periods ending in 1937 and 1938 were worse than the most recent calendar decade because they capture the full effect of stocks hitting their peak in 1929 and the October crash of that year.
    From 2000 through November 2009, investors would have been far better off owning bonds, which posted gains ranging from 5.6% to more than 8% depending on the sector, according to Ibbotson. Gold was the best-performing asset, up 15% a year this decade after losing 3% each year during the 1990s.
    This past decade looks even worse when the impact of inflation is considered.
    Since the end of 1999, the Standard & Poor’s 500-stock index has lost an average of 3.3% a year on an inflation-adjusted basis, compared with a 1.8% average annual gain during the 1930s when deflation afflicted the economy, according to data compiled by Charles Jones, finance professor at North Carolina State University. His data use dividend estimates for 2009 and the consumer price index for the 12 months through November.
    Even the 1970s, when a bear market was coupled with inflation, wasn’t as bad as the most recent period. The S&P 500 lost 1.4% after inflation during that decade.
    That is especially disappointing news for investors, considering that a key goal of investing in stocks is to increase money faster than inflation.
    “This decade is the big loser,” said Mr. Jones.

    Here’s a cool graphic.

  • The 2010 Buy List
    , December 17th, 2009 at 7:41 pm

    Here’s the Crossing Wall Street Buy List for 2010:
    AFLAC (AFL)
    Baxter International (BAX)
    Becton, Dickinson (BDX)
    Bed Bath & Beyond (BBBY)
    Eaton Vance (EV)
    Eli Lilly (LLY)
    Fiserv (FISV)
    Gilead Sciences (GILD)
    Intel (INTC)
    Johnson & Johnson (JNJ)
    Jos. A Bank Clothiers (JOSB)
    Leucadia National (LUK)
    Medtronic (MDT)
    Moog (MOG-A)
    Nicholas Financial (NICK)
    Reynolds American (RAI)
    SEI Investments (SEIC)
    Stryker (SYK)
    Sysco (SYY)
    Wright Express (WXS)
    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).