Archive for 2008

  • Markets In Everything
    , April 29th, 2008 at 8:57 am

    From Bloomberg:

    A pair of dinosaur turds, about 140 million years old, will go on the block tomorrow at Bonhams in New York. The rusty-brown mounds, known in scientific circles as “coprolite,” are estimated to fetch more than $350.
    Coprolite comes cheaper than other dinosaur fossils.
    “Most people think of dino dung and think, ‘Why would I want to have that on my shelf?'” said Thomas Lindgren, the Bonhams specialist in charge of the natural history sale. On the plus side, Lindgren said, the dung “no longer smells.”
    The seller is a Utah private collector who found the 5- and 7-inch, 2-pound specimens in the Morrison Formation, a layer of sedimentary rock dating back 150 million years, spanning several Western states and known for dinosaur fossils. To the untrained eye, coprolite resembles an ordinary rock.
    “The appeal is that it’s from a dinosaur,” Lindgren said. “This is one of those items that strikes a curious nerve. It’s just a great conversation piece.”

    I’m not sure if that’s a good investment. It took 140 million years just to get to $350. Of course, that’s starting from a low base.

  • Making Millions in Milliseconds
    , April 29th, 2008 at 12:22 am

    This seems pretty cool, which probably means that I’m not all that cool. At UVA, Professor Stefano Grazioli has an investing tournament at the end of “Financial Systems Engineering” class.

    A team wins the tournament by minimizing their ‘tracking error’ – the difference, measured weekly (i.e. every seven minutes of tournament time), between the value of their portfolio and a portfolio value target that would reflect an ‘ideal’ rate of return (2.5 percent).
    Many of the 15 teams spent 40 hours or more preparing for the event, said Grazioli. “Virtually everybody that I ask tells me that this is the most complex problem that they have solved in their entire academic career. Not necessarily the hardest, but certainly the most complex — the most data, most moving parts, fastest moving, and so on.”

    If you run a hedge fund and you return 12% a year, you’ll be a millionaire. But if you can return 1% a month, every month with very little deviation, then you’ll be a billionaire. Many times over.
    Read the whole article. Best line: “About 10 percent of them in the anonymous class comments tell me this is the best class they have taken.”

  • Intrade on the Electoral College
    , April 28th, 2008 at 10:47 pm

    I went to Intrade to see the latest results on outcome for each state’s vote in the electoral college. The table below shows each state, the latest price for Democratic and GOP candidate to win the state, the number electoral votes and the projected number for the GOP candidate (sorry Dems, it just seemed easier that way).
    The projected number is the GOP contract times the number of electoral votes. The total comes to 251.65, which indicates a Democratic victory. Let me add the usual caveats that this is far from scientific, and the trading volume is very light.
    State…DEM…….GOP…….EV……Proj. GOP
    AL……..7.5……….92.5……..9……..8.33
    AK……..10.0……..90.0……..3……..2.70
    AZ……..6.2……….93.8…….10…….9.38
    AR……..26.0……..74.0……..6……..4.44
    CA……..91.5……..8.5………55…….4.68
    CO……..60.5……..39.5…….9………3.56
    CT……..93.0……..7.0………7………0.49
    DE……..90.0……..10.0……..3……..0.30
    DC……..96.3……..3.7……..3……….0.11
    FL………20.0……..80.0……27……..21.60
    GA……..12.0……..88.0……15……..13.20
    HI……..93.0……..7.0……….4……..0.28
    ID……..5.0……….95.0……..4……..3.80
    IL……..92.2……..7.8……..21……..1.64
    IN……..24.0……..76.0……..11……..8.36
    IA……..66.0……..34.0……..7………2.38
    KN……..12.0……..88.0……..6……..5.28
    KY……..8.7……….91.3……..8……..7.30
    LA……..13.2……..86.8……..9……..7.81
    ME……..80.0……..20.0……..4……..0.80
    MD……..92.3 ……..7.7……..10……..0.77
    MA……..92.0……..8.0……..12……..0.96
    MI……..78.0……..22.0……..17……..3.74
    MN……..79.0……..21.0……..10…….2.10
    MS……..10.5……..89.5……..6………5.37
    MO……..42.5……..57.5…….11…….6.33
    MT……..10.2……..89.8……..3……..2.69
    NE……..15.0……..85.0……..5……..4.25
    NV……..50.0……..45.0……..5……..2.25
    NH……..53.5……..43.0……..4……..1.72
    NJ……..81.0……..19.0……..15……..2.85
    NM……..64.0……..36.0……..5……..1.80
    NY……..92.5……..7.5……..31……..2.33
    NC……..24.0……..76.0……..15……11.40
    ND……..15.0……..90.0……..3……..2.70
    OH……..61.9……..38.1……..20……7.62
    OK……..10.0……..90.0……..7……..6.30
    OR……..85.0……..20.0……..7……..1.40
    PA……..70.0…….. 33.5……..21……7.04
    RI……..94.0……..6.0……….4………0.24
    SC……..19.5……..85.0……..8……..6.80
    SD……..15.0……..85.0……..3……..2.55
    TN……..10.0……..90.0……..11…….9.90
    TX……..14.0……..86.0……..34…….29.24
    UT……..7.5……..92.5……..5……….4.63
    VT……..89.5……..10.5……..3……..0.32
    VA……..44.5……..55.5……..13……..7.22
    WA……..90.0……..10.0……..11…….1.10
    WV……..18.0…….. 82.0……..5……..4.10
    WI……..72.5……..27.5……..10………2.75
    WY……..7.5……..92.5……..3………..2.78
    A few observations. Once again, Ohio is the Middle C State. The states that are more in the GOP column than Ohio added up to 258 electoral votes, the states that are more Democratic add up to 260. You need 270 to win, so as goes Ohio, so goes the nation. At least, according to Intrade.
    Currently, five Bush states are in the Democratic column; Nevada, Colorado, Ohio, New Mexico and Iowa.
    It seems like there are just few battleground states: Nevade, New Hampshire, Colorado, New Mexico, and most importantly, Ohio. So if you don’t live in one of those states, you really don’t need to vote.

  • Looking at High-Yield Bonds
    , April 28th, 2008 at 3:30 pm

    Thanks to the credit crunch, the market for high-yield bonds is in the toilet. For example, I called Vanguard to see what the yield is on its Vanguard High-Yield Corporate (VWEHX) fund is. The fund is currently yielding 8.3%, and it has rallied a good ways off its mid-March low.
    image645.png
    Please note that I’m not recommending this fund, I’m just using it to show you the state of the high-yield market.

  • Golman Sachs’ Top 10 Stocks to Benefit from Rebate Checks
    , April 28th, 2008 at 12:50 pm

    Drum roll please:

    Cheesecake Factory
    Best Buy
    Darden Restaurants
    Home Depot
    JC Penney
    Kroger
    Kohls
    Royal Caribbean
    Safeway
    Wal-Mart

    Eh, call me unconvinced. I think it’s a mistake to over conceptualize investing ideas. (By the way, investing in something due to demographics is another good example.) There really aren’t many better ideas than to find great companies going for decent prices.

  • The Crash Of Zoe Cruz
    , April 28th, 2008 at 12:06 pm

    NY Mag has a long article on the career of Morgan Stanley’s Zoe Cruz. At one point, it looked as if she would be Wall Street’s first female CEO. But she was fired in November. Here’s a sample:

    If that meeting in Mack’s office had been the meeting she was hoping for, Cruz would have made history: No woman has ever been CEO of a Wall Street firm. Now it looks like that won’t change for a very long time—there are no other high-ranking women in serious contention for a top job. If women across Wall Street viewed Cruz’s firing as a blow, there were men at Morgan Stanley who seemed almost gleeful about it. The woman they had nicknamed the “Czarina,” the “Wicked Witch,” and, most famously, “Cruz Missile” was out of the picture. They joked that it was worth the $9 billion loss to have her gone. In her rise through the company, Cruz had become not just one of the most powerful women on Wall Street but also the most loathed. It’s a matter of opinion whether those two things are inextricably linked, but for Cruz the same qualities that propelled her almost to the top also prevented her from reaching it.

  • Introduction to Mamajuana Energy
    , April 28th, 2008 at 11:24 am

    I really don’t know what to say about this, but here’s Mr. Meredith Whitney’s herbal supplement.

    (Via: Timothy Sykes)

  • Yahoo Finance Malfunction
    , April 28th, 2008 at 11:03 am

    If you use Yahoo Finance to track your portfolio, except for a small number of tickers, it doesn’t seem to be listing current articles this morning.
    Update: It looks like it’s back up.

  • Sysco’s Earnings Report
    , April 28th, 2008 at 10:58 am

    Speaking of Wrigley (WWY), a similar stock on our Buy List is Sysco (SYY), which is up nicely today on a strong earnings report. The WSJ reports:

    Food-distribution giant Sysco Corp. posted a 9% rise in fiscal third-quarter net income as strong sales growth more than offset increasing food-cost inflation.
    The supplier of food service and equipment to businesses, schools and health-care institutions reported net income of $240.9 million, or 40 cents a share, for the quarter ended March 29, up from $221 million, or 35 cents a share, a year earlier.
    Sales rose 6.7% to $9.15 billion. A year ago, an accounting-rule reduced sales by 0.9%.
    Analysts polled by Thomson Reuters had expected earnings of 39 cents a share on revenue of $9.21 billion.
    The economic downturn amid rising food costs has spelled trouble for restaurant sales. Sysco said Monday it saw food costs jump 6.2% in the quarter.

    Here’s a look at SYY’s sales and earnings of the past few years.
    Year…………..Sales……………EPS
    1998……..$15,327.54……..$0.47
    1999……..$17,422.82……..$0.54
    2000……..$19,303.27……..$0.68
    2001……..$21,784.50……..$0.88
    2002……..$23,350.50……..$1.01
    2003……..$26,140.34……..$1.18
    2004……..$29,335.40……..$1.37
    2005……..$30,281.91……..$1.47
    2006……..$32,628.44……..$1.35
    2007……..$35,042.08……..$1.60
    If you’re new to investing, those numbers above are very good.
    The fiscal year ends in June, so SYY has already made $1.26 for the first nine months of 2008. The company is on track to make about $1.80 this year, and $2 next year.

  • Mars to Buy Wrigley
    , April 28th, 2008 at 10:32 am

    This is a blockbuster deal in the candy world. Mars, the private candy company, is buying Wrigley (WWY) for $23 billion. Shareholders of WWY will get $80 a share in cash. That’s a nice 28% premium over Friday’s close. Mars is perhaps one of the last, very large privately held companies.
    I’ve been a long-time fan of Wrigley and it’s one of the classic stocks on the market. It has a simple, easy-to-understand business. The company is well run, and the stock has a great long-term track record.
    As I’ve said many times, investors often make a mistake with investing by looking for a stock that’s trying to invent the seventh dimension. You really don’t need to do that. One of the best ways to invest is to find a solid, stable stock that has churned out earnings year after year.
    Twenty-five years ago, shares of WWY were going for about $1 (adjusted for splits). That’s a nice 80-fold return in 25 years, and that doesn’t include a consistently rising dividend. Given Wrigley’s business, it’s probably no surprise that Berkshire Hathaway will be in the deal, providing financing for the purchase.
    Andrew Ross Sorkin writes:

    Mr. Buffett has a history with iconic food and beverage businesses. He was an early investor in Coca-Cola and is already a candy owner in Sees Candies.

    Actually, Buffett didn’t buy Coke (KO) until 1988. I’m not sure if that qualifies as early; it was after the stock had risen a great deal.
    WWY1.gif