Archive for January, 2009

  • Anyone Remember What Interest Rates Were?
    , January 21st, 2009 at 1:49 pm

    David Merkel takes a look at the dollar’s role in the banking crisis. Since the dollar is the reserve currency of the world, and by definition there can only be one of those, it’s doing much better than other currencies out there. David cites the British pound which has much in common with the dollar, but since it’s not the global powerhouse, it’s getting left behind.
    The Canadians just lowered rates. The EU is bringing down rates, though they’re still above most everyone else (which may lead to some intra-continental strife). The Bank of England now has rates at 300-year lows.
    In looking at alternatives to the dollar, David asks: “External commodity-based currencies? None that I know of; few governments want to limit their power by tying their hands on monetary policy.”
    He’s right. I do wonder why gold continues to be so strong against the dollar. It made more sense before the global economy fell apart, but I’m not so sure now. Is gold ready to plunge, or do gold investors think inflation is about to come roaring back. I suspect the former, but I’m not willing to make that bet.

  • Arthur Nadel Touted as America’s Top Ranked Money Manager
    , January 21st, 2009 at 11:50 am

    Before Arthur Nadel disappeared, along with $350 million of his clients money, he was touted as “America’s Top Ranked Money Manager” in a 2003 issue of the Wall Street Digest

    The FBI’s Tampa office opened an investigation into Nadel on Tuesday, launching a search for the 76-year-old former New York jazz pianist whose disappearance has drawn parallels to last month’s arrest of former Nasdaq Stock Market chairman Bernard Madoff.
    Like Madoff’s funds, Nadel’s investments generated returns regardless of whether markets rose or fell. Hagar estimates he saw a total return of about 70 percent over seven years.
    Madoff allegedly confessed to his sons that his firm’s investment-advisory business was “basically a giant Ponzi scheme” in which money from new investors is used to pay distributions and redemptions to existing investors.
    A visit to the offices of Nadel’s company, Scoop Management Inc, in Sarasota on Tuesday found the doors locked and lights out. Through a window, the office looked orderly with papers stacked as if it were just closed for the weekend.
    “They’re out of business,” a man said as he walked by.
    At Nadel’s home in a quiet, upscale neighborhood in Sarasota, his daughter Alex came outside to address reporters but would only say, “We can’t say anything now.”
    Sarasota Police Capt. William Spitler said detectives were trying to determine the total amount of money that might be missing, based on calls from investors. “It’s alarming. It’s hundreds of millions of dollars for sure,” Spitler said.

  • The BIX Imploads
    , January 21st, 2009 at 11:40 am

    Good golly. The Bank Index is on life support:
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  • The Irish Banking Crisis
    , January 21st, 2009 at 10:23 am

    Not too long ago, Ireland was hailed as the European economic miracle. The country even got full Gladwell treatment (his explanation was the “dependency ratio,” Irish women were having fewer babies).
    Now we learn that the Irish banking is in a world of trouble.

    The bloodletting may be far from over for Ireland’s banks as the wheels come off what was once Europe’s fastest-moving economy.
    The government said Jan. 16 it would seize control of Anglo Irish Bank Corp. following a scandal that forced the resignations of its chief executive officer and chairman. Three days later, Brian Goggin, CEO of Bank of Ireland Plc, said he will retire a year early following a bailout announced in December that also included Allied Irish Banks Plc. Bank of Ireland fell as much as 33 percent today in Dublin.
    “Nobody can stop what’s happening,” said Ken Murray, CEO of Blue Planet Investment Management in Edinburgh. “It’s going to carry on, and governments are going to have to come up with the capital because the market doesn’t have it.”

    It looks like the country is heading towards nationalizing its banks. The housing market continues to be a mess. Betweeen 1997 and 2007, home prices in Ireland rose by fourfold. In the end, the Celtic Tiger didn’t have much in the way of teeth.

  • Looking at Apple’s Financial Performance
    , January 17th, 2009 at 3:51 pm

    I just wanted to add a quick post on Apple (AAPL). A number of you have asked for Apple’s recent financial numbers, so I’ve added this spreadsheet which contains the quarterly figures going back ten years.
    As you can see, Apple’s performance has been staggering. Sales and earnings growth is through the roof. Gross margins are around 35% and operating margins are near 20%. Most impressively, Apple has zero debt and a gigantic cash horde that comes to $27.55 a share.
    Given Apple’s closing price on Friday of $82.33, that means that the “nuts of bolts” of the company are worth $54.78 a share, which is roughly 10 times trailing earnings.
    Obviously the key factor is future earnings, not trailing. I’ll have more this Wednesday when Apple reports its fiscal Q1 earnings. This will almost certainly be Apple’s first report of lower earnings in over five years. Sales will probably be flat. The first quarter is traditionally Apple’s most important quarter when the company records about one-third of its yearly sales and earnings.

  • Offshore Tax Havens
    , January 17th, 2009 at 12:16 pm

    From the NYT:

    Many of the largest United States corporations, including big banks now receiving federal bailout money, operate scores of subsidiaries in offshore tax havens that may let them evade or defer their tax bills, according to a government study released Friday.
    The study, by the Government Accountability Office, singled out Citigroup as having 427 subsidiaries in offshore havens like the Cayman Islands, British Virgin Islands and Switzerland. Bank of America has 115 subsidiaries in offshore havens, while Morgan Stanley has 273, the report said.
    Bank of America received an additional $20 billion in government aid on Friday, on top of a previous $25 billion, and a federal promise to absorb nearly $98 billion in soured mortgage-related securities. Citigroup is expected to get $50 billion.

  • The Buy List Year to Date
    , January 16th, 2009 at 5:38 pm

    I’ll probably jinx it but even mentioning this, but our Buy List is off to a great start this year. By that, I mean we’re up a whopping 0.62% (woo!). Still, the S&P 500 is down -5.88%. So we’re already 6.5% ahead of the market and we’ve beaten the S&P for nine of the eleven days so far this year.

  • “Cannot be Underestimated”
    , January 16th, 2009 at 2:51 pm

    The New York Review of Books notes:

    Moreover, Iranian paranoia about the US cannot be underestimated. Alerting the Iranian government in advance to the timing and objectives of each of the steps described above would avoid a negative reaction. It would also prepare the way for a major new approach to the issues concerning nuclear enrichment, Iraq, and Afghanistan.

    The authors use “cannot be underestimated” to express the exact opposite of the meaning they wish to convey.
    My favorite such mistake is still Rod Stewart’s, “Just let your inhibitions run wild.”

  • Put Gasparino and Kneale on the Air and Guess What Will Happen
    , January 16th, 2009 at 2:10 pm


    (H/T: MediaBistro)

  • The S&P 500 Banking Index
    , January 16th, 2009 at 1:08 pm

    Banks are getting smacked around again today. The Bank Index (^BIX) is now below 100. Jeez Louise! Eighteen months ago, the index was around 400.
    image760.png
    Now check out the rise in daily volatility:
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