Archive for 2008

  • Fire Sale at the Times?
    , March 12th, 2008 at 7:18 am

    The Wall Street Journal reports that the New York Times is considering selling some assets. Well…it’s about time. This move is clearly in response to pressure from hedge funds that are pushing for seats on the company’s board. The funds now own as much stock as the Sulzberger family.
    In the media, pressure from hedge funds is often portrayed in a negative light, as if some slick-haired Gordon Gekko types are bullying a loveable family run enterprise. In the case of the New York Times, the funds are the only ones willing to hold the company accountable. The current management has run the company into the ground, and an asset sale should have happened a long time ago. Jack Welch, for example, wanted to buy the Boston Globe, but the Times shot him down. Now, I doubt the Times could sell the Globe even if they wanted to.
    Here’s what sclerotic companies like the Times don’t get: Even if shareholders don’t control the board, they still have a vote. They can vote by selling and that’s exactly what has happened. Shares of NYT are basically where they were 12 years ago. How could anyone think that’s serving shareholders well?
    There’s also an interesting wrinkle. One of the NYT’s non-core assets is a stake in the Boston Red Sox. You read that right. That’s like Sauron owning a stake in the Hobbit’s favorite pub. Given the Bosox recent World Series wins, I would think that the franchise could go for a nice sum. Speaking of Sauron, maybe Steinbrenner is interested?
    The Times could also let go of the IHT and even About.com. Some analysts have floated ideas of the Times being bought out by fill-in-the-blank (Buffett, Google, Bloomberg). Interesting, but I doubt it. Even if a major deal came to pass, it doesn’t avoid the major issue that the Times can’t survive in its present form. It will exist, but I don’t think it will be a New York-focused general news publication. The future lies in smaller, niche pubs.

  • Best Day Ever
    , March 12th, 2008 at 7:17 am

    Yesterday was the best day for the stock market in five years, but this week, we’re celebrating the 75th anniversary of the best day ever.
    Well, technically it wasn’t a one-day gain. When FDR became president on March 4, 1933, there was a national bank holiday. The stock exchange shut down at didn’t reopen until March 15. When trading resumed, stocks soared. The Dow closed at 62.1 which was a 15.34% gain over the close from 12 days before.
    The Dow has never done better. By contrast, yesterday’s move doesn’t rank in the top 150. The rally of March 1933 was so strong that the Dow doubled by July.
    image634.png
    In March 1933, the U.S. effectively ended the gold standard. It’s interesting that yesterday’s rally was sparked, in part, by the Fed’s securities-lending program.

  • Today’s S&P 500
    , March 11th, 2008 at 9:26 pm

    Here’s how every stock in the S&P 500 did today.

  • Things that Sound Like Chewbacca
    , March 11th, 2008 at 4:57 pm

    Vacuum Cleaner
    Nightstand
    Dog
    Cat
    Boxer
    Baby
    Dude Getting Tasered
    Hatchback
    Trash Can
    Hippie Chick

  • The Best Day in Five Years
    , March 11th, 2008 at 3:46 pm

    Today was the best day for the S&P 500 in five years.
    Date……………Gain
    11-Mar-08…….3.71%
    17-Mar-03…….3.54%
    13-Mar-03…….3.45%
    18-Sep-07…….2.92%
    13-Nov-07…….2.91%
    28-Nov-07…….2.86%
    2-Apr-03……….2.61%
    17-Aug-07…….2.46%
    6-Aug-07………2.42%
    21-Mar-03…….2.30%
    16-Jun-03……..2.24%
    1-Oct-03……….2.23%
    The last time the S&P 500 was up this much was October 15, 2002.

  • UNH at Three-Year Low
    , March 11th, 2008 at 11:29 am

    UnitedHealth Group (UNH) is plunging today on news that WellPoint (WLP) has cut its earnings forecast. If you recall, UNH is company that does nothing but make huge profits and awful headlines.
    For the record, UnitedHealth has said that it expects 2008 EPS of $3.95 to $4 a share. The company has publicly made this estimate not once, but twice. That would be a yearly increased of 13% to 14% over 2007. Not bad.
    But now the stock is down to $40 a share. Today, it reached its lowest point since 2004. In 2005, the company made $2.48 a share. So the stock is the same price, but profits are about 60% higher.
    image633.png
    In the above chart, the blue line is the stock price and it follows the left scale. The yellow is the EPS and it follows the right. The red part is the estimate. When the lines cross, the P/E ratio is 17.5.

  • The Fed Opens the Spigots
    , March 11th, 2008 at 11:25 am

    Let’s throw money at them until they stop complaining!

    The Federal Reserve, struggling to contain a crisis of confidence in credit markets, plans to lend up to $200 billion in exchange for mortgage-backed securities.
    The Fed coordinated the effort with central banks in Europe and Canada, which plan to inject up to $45 billion into their banking systems. The Fed said in a statement it will hold auctions of Treasuries in exchange for debt including AAA rated mortgage securities sold by Fannie Mae, Freddie Mac and by banks.
    Today’s steps indicate the Fed is increasingly concerned about the investor exodus from mortgage debt, which threatens to deepen the housing contraction and the economic slowdown. While they fall short of the calls by some analysts for the Fed to make outright purchases of mortgage debt, the central bank left the door open to expanding the effort.
    “This is the most significant step the Fed has taken so far,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “This relieves some of the pressure” in the credit markets, he said.

  • The Credit Crisis Subtext of the Spitzer Story
    , March 10th, 2008 at 6:01 pm

    I think this might be ironic, and not the Alanis kind either:

    The members decided that even though Client 9 had a credit of $400 to $500 with the ring, they wouldn’t let him keep the appointment until his latest deposit arrived. Client 9 made the calls himself.
    On Feb. 13, according to the affidavit, Client 9 made a hotel reservation in D.C. under his name and left a key for a woman named “Kristen.”
    Client 9 was eventually told his deposit had arrived and “Kristen” was on her way from New York. Client 9 responded, “Great, OK, wonderful.”
    Client 9 discussed with the prostitution ring a way for him to have credit stored up so that he wouldn’t have to worry about sending in a deposit in the future.
    Then they discussed a way for “Kristen” to get his hotel room key once she arrived.
    “Kristen” was sent to room 871, which Client 9 was leaving ajar; Client 9 wanted to be reminded of what she looked like and was told “American, petite, very pretty brunette, five feet five inches, and 105 pounds.”

    Was Spitzer done in by tougher credit standards? If only some banks were as prudent as whorehouses.
    Check out their rates (conveniently listed in pounds, dollars and euros). You can pay with cash, credit card, wire transfer or money order. I wonder if the rates count as core or non-core inflation.

  • L’Affaire Spitzer
    , March 10th, 2008 at 3:58 pm

    I don’t have much to add about today’s big story, but I’ll simply say that I’ve never been a big fan of Eliot Spitzer. He’s a nasty guy and he ruthlessly pursued a baseless case against Dick Grasso. According to Charlie Gasparino’s book, “King of the Club,” Spitzer’s aides told reporters that Grasso had an affair with his secretary. Charming.

  • Little Tycoons
    , March 10th, 2008 at 2:46 pm

    At the Ariel Community Academy in Chicago, each incoming first-grade class gets $20,000. The children are eventually put in charge of managing it and picking the stocks.

    The concept is simple: Ariel’s experts manage a $20,000 portfolio for each class until sixth grade, briefing them regularly along the way, and then begin turning over the decisions to the children. Upon graduation from eighth grade, each class returns the initial investment amount to the school for another first-grade class and donates, invests or pockets the profits.
    After giving half the gains to community charity programs or school initiatives, each student can then take the rest in cash or invest it in a Section 529 college savings plan, in which case they are given an additional $1,000. Last year, 80 percent of graduates invested their $150 shares in a 529.

    Given the success of stocks like Crocs, Apple and Hansen Natural, I think it might be worth listening to what kids have to say.
    Here’s how Wrigley’s (WWY) has performed over the long haul:
    WWY.gif