Archive for 2007

  • It’s Not Over Over There
    , March 14th, 2007 at 10:07 am

    More selling in Asia. Once again, the Indian market bore the brunt of the selling:
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    Here’s a roundup of the Asian markets.

  • Cranky Octogenarian Opens Mouth
    , March 14th, 2007 at 8:33 am

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    From the AP:

    Two weeks ago, Greenspan’s comments about the possibility of a recession occurring at the end of this year contributed to a 416-point fall in the Dow Jones industrial average.
    The Dow had another big losing day on Tuesday, falling by 242.66 points, the second biggest drop of the year. But this decline was not driven by anything Greenspan said but rather investors worries about the subprime mortgage market.
    During his appearance Tuesday, Greenspan talked about past market crises but not the most recent turmoil and he made no forecasts about the possibility of a recession.
    Greenspan did put forward a proposal on how to reduce the growing inequality of incomes in the United States – admit more skilled immigrants into the country.

  • From the Goldman Sachs Conference Call
    , March 13th, 2007 at 10:09 pm

    I thought this was an interesting answer from CFO David Viniar:

    Michael Hecht – Banc of America
    I just wanted to follow up on FICC. You guys noted the record results in credit and mortgages. I was just wondering if you could talk a little bit more about the traction there in terms of it being more environmental versus share gains? Particularly in mortgages, are you seeing the best traction in sub-prime versus prime versus commercial or non-U.S.?
    David A. Viniar
    I think we have handled the turmoil in the market pretty well. Again, in mortgages, you have to remember to size it, and I’ve talked about this, so with sub-prime first. Sub-prime is part of mortgages, which is part of FICC, which is part of trading, which is part of Goldman Sachs. So the size of mortgages in all of Goldman Sachs is modest, while the business is important, like all of our businesses. Credit businesses are a little bit bigger than the mortgage business, but we really haven’t seen any contagion to the credit markets. The credit markets continue to be quite robust. Credit spreads continue to be tight. There continues to be a lot of liquidity in those markets.

    Courtesy of Seeking Alpha.

  • 100 Years Ago Today
    , March 13th, 2007 at 11:34 am

    Think your portfolio is having a tough time. Well, buck up. Today marks the 100th anniversary of the beginning of the Panic of 1907.
    On March 13, 1907, the Dow CRASHED from 86.53 to 83.12. That may not sound like a lot, but it was a fall of 3.94%, which beats our wimpy 3.29% drop from two weeks ago. The next day, March 14, saw the really big action. The Dow plunged to 76.23, a drop of 8.29%. That’s a two-day drop of 11.9%. Today, that would be like the Dow losing 1,500 points in 48 hours. The drop of March 14 still ranks as the seventh-worst day in the Dow’s history.
    The index shot up 6.69% on March 15, but all was not safe. The Dow fell 6.23% on March 25. Here’s a look at Dow during March 1907:
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    That was only part of it. In 22 months, the Dow fell by half. Here’s how the market did in 1906 and 1907:
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    J.P. Morgan helped end the panic by providing a loan to the U.S. government. This led people to think that it really might not be a good idea to have the government dependent on one guy’s terms. Soooo, in 1913 Congress passed the Federal Reserve Act.
    And we haven’t had any trouble since.

  • Goldman’s Earnings
    , March 13th, 2007 at 10:00 am

    Goldman Sachs (GS) was supposed to report lower earnings today. This was supposed to be the quarter when the party ended for the big Wall Street houses. Well, it didn’t happen. Or at least, it hasn’t happened yet.
    Goldman’s earnings blew away the Street’s estimates. The company earned $6.67 a share compared with $5.08 a share last year. That’s just amazing. Let me put that into context for you. Wall Street was looking for a decline to $4.89 a share. In fact, the highest estimate of any analyst was for $5.60 a share. Goldman still beat that by more than a dollar. This is the seventh straight quarter that Goldman has beaten earnings.
    After the company reported earnings two quarters ago, the stock rose for 12 straight days. On the 13th day, it fell by a penny a share. Then it continued to rise for 12 of the next fourteen days.
    Here’s a look at how the Big Five firms on Wall Street have done over the past four years:
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    Notice how all the stocks started to take a hit recently. Investors were clearly bracing themselves for bad news. Also, Guy Moszkowski, a high-profile analyst at Merrill Lynch, recently downgraded several stocks in the sector.
    (You can also see why investors were so unhappy with Phil Purcell at Morgan.)
    Goldman is now going for about 10 times next year’s earnings. Lehman (LEH) reports tomorrow.

  • UnitedHealth to buy Sierra Health
    , March 12th, 2007 at 3:11 pm

    UnitedHealth (UNH) is making a move:

    Health insurer UnitedHealth Group Inc. said on Monday it will acquire Sierra Health Services Inc. for more than $2.4 billion to expand in the fast-growing Las Vegas area and boost its Medicare business.
    The deal shows UnitedHealth, the largest U.S. health insurer by market value, is continuing to broaden its reach by gobbling up rivals — and could signal a renewed round of consolidation throughout the sector.
    Piper Jaffray analyst Melissa Mullikin said Sierra would help UnitedHealth fill a gap in Nevada.
    “We definitely think it’s a positive for (UnitedHealth),” Mullikin said. “That’s a really desirable geography.”
    The $43.50 per share deal represents a 21 percent premium over Sierra’s closing price of $35.90 on Friday. As of Feb. 23, Sierra had 55.76 million shares outstanding, giving the deal a value of about $2.43 billion.

    Best of all, the deal is all cash.

  • Dollar General Goes Private Equity
    , March 12th, 2007 at 1:51 pm

    Yet another company is leaving the stock. Kohlberg Kravis Roberts said it’s going to buy Dollar General (DG) for $6.9 billion.
    Up until a few years ago, the stock had been a terrific long-term winner. Thirty-two years ago, the stock was going for about three cents a share (adjusted for many, many splits). In 1999, DG got to $26 a share but had a rough go of it after that. Last year, the shares got down to $12. KKR’s offer is for $22 a share.
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  • FactSet Research Systems Hits New High
    , March 12th, 2007 at 10:19 am

    Please don’t tell FactSet Research Systems (FDS) that we’re in a bear market. The stock just hit a new 52-week high. I’m not sure if it’s a “healthy” new high though.
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  • WWTDRWD
    , March 12th, 2007 at 7:26 am

    As soon as the stock market started to break, the first question on my mind was “what would the Detroit Red Wings Do”? Fortunately, we have the Detroit Free:

    Chris Osgood
    What’s your approach to investing? Pretty passive. I don’t take too many risks. So (the market) going down 400 wouldn’t affect me as much as someone else. I don’t really take that many risks.
    Why are you so conservative? I don’t want to lose my money unnecessarily. Not do anything I would jeopardize losing money for a stupid reason when I don’t need to.
    Is anyone in the locker room a big Wall Street Journal kind of guy? Not really. We used to have Brent Gilchrist. Mike Vernon was, Steve Yzerman knew quite a bit about it. There used to be a lot of guys in the ’90s that knew quite a bit. I haven’t seen the Wall Street Journal all year.

  • Surowiecki on the Correction
    , March 11th, 2007 at 7:17 pm

    In the New Yorker, James Surowiecki looks at the stock market’s recent unpleasantness. He agrees that faulting China is a weak excuse. But he raises an interesting point in that investors aren’t very good at assessing the impact of new information:

    In one famous experiment by the psychologist Paul Andreassen, investors who selected a portfolio of stocks and then saw nothing but the stocks’ changing prices managed their portfolios significantly better than investors who were also given a stream of news about the companies they’d invested in. The reason, Andreassen suggested, was that the media’s tendency to overplay stories led investors to place too much weight on news that turned out to be of only transient importance.

    Sometimes asking why the market falls is a fruitless task. It’s not a comforting thought, but the stock market can fall suddenly for little or no reason.