Archive for August, 2007

  • Buy List Update
    , August 30th, 2007 at 5:06 pm

    Now that 2007 is nearly two-thirds over, let’s have a look at how our Buy List is doing.
    So far, the 20 stocks on the Buy List are down 2.95% (not including dividends) while the S&P 500 is up 2.78%. The Buy List has been 8.7% less than volatile than the S&P 500.
    Here’s how the Buy List has performed:
    image519.png

  • Dell’s Earnings
    , August 30th, 2007 at 4:36 pm

    Dell (DELL) just reported surprisingly good earnings of 32 cents a share.

    Dell, like competitors Hewlett-Packard and Apple, profited from lower costs for computer components amid a supply glut. But profit was reduced by payments to its former CEO and 400 employees for stock options that could not be exercised during the company’s internal audit, which found that executives adjusted accounts to meet financial targets.

    The big problem is that these aren’t official results. Dell hasn’t filed with the SEC for over a year. Here are the numbers, but bear in mind that they’ll be changed.

    Quarter…..Sales….Oper. Income…..EPS
    1-97………$2,588………$198………..$0.0675
    2-97………$2,814………$296………..$0.0725
    3-97………$3,188………$346………..$0.085
    4-97………$3,737………$397………..$0.10
    1-98………$3,920………$429………..$0.11
    2-98………$4,331………$483………..$0.12
    3-98………$4,818………$539………..$0.14
    4-98………$5,173………$595………..$0.15
    1-99………$5,537………$600………..$0.16
    2-99………$6,142………$694………..$0.19
    3-99………$6,784………$650………..$0.18
    4-99………$6,801………$513………..$0.16
    1-00………$7,280………$625………..$0.19
    2-00………$7,670………$736………..$0.22
    3-00………$8,264………$818………..$0.25
    4-00………$8,674………$589………..$0.18
    1-01………$8,028………$588………..$0.17
    2-01………$7,611………$545………..$0.16
    3-01………$7,468………$544………..$0.16
    4-01………$8,061………$594………..$0.17
    1-02………$8,066………$590………..$0.17
    2-02………$8,459………$677………..$0.19
    3-02………$9,144………$758………..$0.21
    4-02………$9,735………$809………..$0.23
    1-03………$9,532………$811………..$0.23
    2-03………$9,778………$840………..$0.24
    3-03………$10,622…….$912………..$0.26
    4-03………$11,512…….$981………..$0.29
    1-04………$11,540…….$966………..$0.28
    2-04………$11,706…….$1,006……..$0.31
    3-04………$12,502…….$1,089……..$0.33
    4-04………$13,457…….$1,187……..$0.37
    1-05………$13,386…….$1,174……..$0.37
    2-05………$13,428…….$1,173……..$0.38
    3-05………$13,911…….$944………..$0.39
    4-05………$15,183…….$1,246……..$0.43
    1-06………$14,216…….$949………..$0.33
    2-06………$14,094…….$605………..$0.22
    3-06………$14,383…….$824………..$0.30
    4-06………$14,402…….$801………..$0.30
    1-07………$14,622…….$947………..$0.34
    2-07………$14,771…….$896………..$0.32

  • The Bin Laden Trade
    , August 30th, 2007 at 9:32 am

    Steven Smith and Aaron Task at TheStreet report on unusual options trades:

    The first area of focus is that open interest on September 700 S&P puts is 116,000 contracts, an unusually high number for such a low-probability trade. A put is a defensive bet that gives the holder the right to sell a security at a specified price, in this case more than 50% below the S&P 500’s current level of 1463 as of Wednesday’s close.
    For comparison’s sake, according to the Option Clearing Corp., the open interest in the July 700 strike some three weeks prior to expiration on July 20 was 790 calls and 7,300 puts, and the August 700 strike showed 1,250 calls and 14,800 puts prior to Aug. 17 expiration.
    And the volume completely outstrips anything seen last September, when the S&P was around 1300, some 20% below current levels. In September 2006, the 700 strike had 600 calls and 7,500 puts, and no strike below 1000 had open interest surpassing 42,000 contracts, and that was the 900 puts.
    The bulk of the September SPX trades in question have been put on since June 1. Similar bets have also been placed on the DJ Eurostoxx 50 index, which won’t pay off unless the index tumbles nearly 25% to 2800, or below, by expiration on the third Friday of September.

  • GDP Revised Higher
    , August 30th, 2007 at 9:18 am

    Second-quarter GDP growth was revised higher this morning from 3.38% to 3.96%. The WSJ runs through some of the numbers.

    Trade gave the economy a bigger push than first estimated — because U.S. exports were revised up, rising by a rate of 7.6% instead of the originally reported 6.4%. Imports fell 3.2%; originally, the decrease was seen at 2.6%.
    The revised data showed trade added 1.42 percentage points to GDP in the second quarter. Originally, trade was seen contributing just 1.18 percentage points to GDP.
    Businesses elevated spending more than previously thought. Outlays rose by 11.1% in April through June; originally, spending was estimated rising 8.1%. Business spending climbed 2.1% in the first quarter. Second-quarter investment in structures by business surged by 27.7%. Equipment and software increased 4.3%.
    Consumer spending advanced by 1.4%, up from a previously reported 1.3% increase but below the first quarter’s 3.7% climb. Consumer spending accounts for about 70% of economic activity. It contributed 1.03 percentage points to GDP in the second quarter; the original estimate was a contribution of 0.89 percentage point.
    Durable-goods purchases increased 1.7% in April through June, above the previously reported 1.6% increase but below an 8.8% climb in the first quarter. Durable goods are expensive items designed to last at least three years, such as refrigerators.
    Second-quarter nondurables spending fell by 0.3%. Services spending went 2.3% higher.
    Residential fixed investment, which includes spending on housing, tumbled by 11.6% in the second quarter, a drop bigger than the previously reported 9.3% plunge. Housing fell 16.3% in the first quarter.

  • Hump Day Redux
    , August 30th, 2007 at 9:16 am

    Yesterday was the 14th time in the last 19 Wednesdays that the S&P has rallied.
    The numbers here are truly remarkable. The market is up for 35 of the last 50 Wednesdays. That’s better a better winning percentage than both the Red Sox and Yankees.
    Going back to September 28, 2005–that’s an even 100 Wednesdays, the S&P rose 68 times including a run of 13 straight in early 2006. Combined, the other four days of the week are slightly negative.

  • It felt like `Apocalypse Now,
    , August 30th, 2007 at 8:46 am

    The latest problem with the Hamptons–a surge in helicopter traffic:

    “It felt like ‘Apocalypse Now,'” East Hampton resident Kathi Goldman said at a recent public hearing, describing choppers over her house in the northwest woods. Goldman, a retired science teacher at Grace H. Dodge High School in the Bronx, said choppers were so noisy on July 3 that she fled to her apartment on Manhattan’s Upper West Side.

  • How Much Would You Pay?
    , August 29th, 2007 at 11:03 am

    Let’s say some kids in your neighborhood have a lemonade stand. You’re impressed by their entrepreneurial spirit so you order a glass and ask them how business is going.
    “Great! We sold $20 worth of lemonade.”
    “Wow! That’s really good. How much profit did you make?”
    “Well, our costs were $17 so we made a $3 profit.”
    You come back in a year (let’s suspend reality for a bit) and you want to see how the biz is going.
    “We had a great year! We sold $55 worth of lemonade and our cost was just $35, so we made $20.”
    This impresses you a lot. After a lengthy discussion of just-in-time inventory, first-mover advantage and Nassim Taleb’s latest, you decide to make the kids an offer for the lemonade stand.
    How much would you pay? Say, $400?
    Remember, it’s growing fast. How about $700? Maybe $1,000??
    Well, it turns out, the kids have hired Goldman and they inform you that the price of the stand is $3,500 and not one penny less.
    That’s about the current valuation for Baidu.com.

  • ‘Subprime Chuck’ Schumer Plays the Fool
    , August 29th, 2007 at 9:36 am

    The subprime mess has ushered in a new level of clueless political grandstanding. Naturally, Chuck Schumer is around to take first prize.

    The chairman of Congress’s Joint Economic Committee then called on the firms to “assist this country’s mortgage crisis” and “urge your clients to do their part to keep our housing markets afloat, by modifying subprime loans that are at risk of default.”
    In so doing, Subprime Chuck made a blithering fool of himself, though he probably doesn’t realize why. So far, none of the four firms — PricewaterhouseCoopers, Deloitte & Touche, Ernst & Young, and KPMG — has responded publicly to his plea for lobbying help.
    You see, management’s job is to manage, and the auditor’s job is to audit. There’s also the decades-old requirement under U.S. securities laws that accounting firms must be independent of the companies they audit, both in appearance and in fact.
    Under the Securities and Exchange Commission’s rules, that means the auditors, among other things, “must act in an unbiased and objective manner.” Lobbying audit clients to change their business practices is the mark of a biased auditor, not a disinterested one.

  • Major Investment Banks
    , August 29th, 2007 at 9:31 am

    Here’s a look at how the major investment banks have fared:
    Top%20Brokers.gif

  • Great Moments In Aviation History
    , August 29th, 2007 at 9:16 am

    Two passengers on Spirit Airlines wrote the company to complain about their delayed flight which caused them to miss a concert.

    Baldanza (Spirit’s CEO) supposedly told one of his staff in an email to handle the complaint and said, “we owe him nothing as far as I’m concerned. Let him tell the world how bad we are. He’s never flown us before anyway and will be back when we save him a penny.”

    He then hit “reply to all” which included the couple’s email address as well.