Archive for 2009

• CNBC Follows Up Its Special Report on Weed with One on Hookers and Another on Porn. Trend?
  Eddy Elfenbein, July 10th, 2009 at 10:15 am

  Is it me or does there seem to be a trend with CNBC’s special reports? First David Faber did an excellent job with “Marijuana Inc: Inside America’s Pot Industry.” Tonight is the premiere of “Dirty Money: The Business of High-End Prostitution.” And next Wednesday, they air “Porn: Business of Pleasure.”
  And they employ Dennis Kneale.
  Don’t get wrong, I’m all for this vice stuff. But some of their sponsors aren’t too thrilled with the idea. Mediaite notes that Charles Schwab pulled it sponsorship of Fast Money—though not from CNBC entirely.

• Same-Stores Sales for June
  Eddy Elfenbein, July 9th, 2009 at 3:18 pm

  Here are the mostly ugly totals for June:

  DISCOUNT
  BJ’s Wholesale Club -7.5 pct
  Costco -6 pct
  Target -6.2 pct
  DEPARTMENT STORES
  Bon-Ton Stores -8 pct
  Dillard’s -14 pct
  Fred’s 0.2 pct
  J.C. Penney -8.2 pct
  Kohl’s -5.6 pct
  Neiman Marcus -20.8 pct
  Nordstrom -10 pct
  Macy’s -8.9 pct
  Saks -4.4 pct
  Stage Stores -12.6 pct
  CLOTHING AND TEEN-ORIENTED
  Abercrombie & Fitch -32 pct
  Aeropostale 12 pct
  American Apparel -13 pct
  American Eagle Outfitters -11 pct
  The Buckle 9.6 pct
  Cato Corp. -3 pct
  The Children’s Place Retail Stores -12 pct
  Destination Maternity -10.7 pct
  Gap Inc. -10 pct
  Hot Topic -7.9 pct
  Limited Brands -12 pct
  Ross Stores 1 pct
  Stein Mart -8 pct
  TJX Cos. 4 pct
  Wet Seal -11.1
  Zumiez -19.3 pct
  DRUG
  Rite Aid Corp. -0.6 pct
  Walgreen Co. 3.4 pct

• The Fed Strikes Back
  Eddy Elfenbein, July 9th, 2009 at 1:49 pm

  Despite have a ton of cosponsors, Ron Paul’s bid to get a full audit of the Fed seems have died in the Senate. Vice Chairman Donald Kohn took on the issue today on Capitol Hill:

  The Congress, however, has purposefully–and for good reason–excluded from the scope of potential GAO audits monetary policy deliberations and operations, including open market and discount window operations, and transactions with or for foreign central banks, foreign governments, and public international financing organizations. By excluding these areas, the Congress has carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining the independence of the central bank’s monetary policy functions and avoiding disruption to the nation’s foreign and international relationships.
  The same public policy reasons that supported the creation of these exclusions in 1978 remain valid today. The Federal Reserve strongly believes that removing the statutory limits on GAO audits of monetary policy matters would be contrary to the public interest by tending to undermine the independence and efficacy of monetary policy in several ways. First, the GAO serves as the investigative arm of the Congress and, by law, must conduct an investigation and prepare a report whenever requested by the House or Senate or a committee with jurisdiction of either body. Through its investigations and audits, the GAO typically makes its own judgments about policy actions and the manner in which they are implemented, as well as recommendations to the audited agency and to the Congress for changes or future actions. Accordingly, financial markets likely would see the grant of audit authority with respect to monetary policy to the GAO as undermining monetary independence–with the adverse consequences discussed previously–particularly because GAO audits, or the threat of a GAO audit, could be used to try to influence monetary policy decisions.
  Permitting GAO audits of monetary policy also could cast a chill on monetary policy deliberations through another channel. Although Federal Reserve officials regularly explain the rationale for their policy decisions in public venues, the process of vetting ideas and proposals, many of which are never incorporated into policy decisions, could suffer from the threat of public disclosure. If policymakers believed that GAO audits would result in published analyses of their policy discussions, they might be less willing to engage in the unfettered and wide-ranging internal debates that are essential to identifying the best possible policy options. Moreover, the publication of the results of GAO audits related to monetary policy actions and deliberations could complicate and interfere with the communication of the FOMC’s intentions regarding monetary policy to financial markets and the public more broadly. Households, firms, and financial market participants might be uncertain about the implications of the GAO’s findings for future decisions of the FOMC, thereby increasing market volatility and weakening the ability of monetary policy actions to achieve their desired effects.
  These concerns extend to the policy decisions to implement the discount window and broadly available credit facilities. These facilities are extensions of our responsibility for promoting financial stability, maximum employment and price stability. Indeed, unlike the institution-specific loans that the Federal Reserve has made that now are subject to GAO audit, these broader market facilities are designed to unfreeze financial markets and lower interest rate spreads in concert with our other monetary policy actions. It is important that, like other monetary policy decisions, the Federal Reserve remain independent in making policy decisions regarding these facilities.
  An additional concern is that permitting GAO audits of the broad liquidity facilities the Federal Reserve uses to affect credit conditions could reduce the effectiveness of these facilities in helping promote financial stability, maximum employment, and price stability. For example, even if strong confidentiality restrictions were established, individual banks might be more reluctant to borrow from the discount window if they knew that their identity and other sensitive information about their borrowings could be disclosed to the GAO. Rumors that a bank may have used the discount window can cause a damaging loss of confidence even to a fundamentally sound institution. Experience, including experience in the current financial crisis, shows that banks’ unwillingness to use the discount window can result in high and volatile short-term interest rates and limit the effectiveness of the discount window as a tool to enhance financial stability.
  Overall, the Federal Reserve believes that removing the remaining statutory limits on GAO audits of monetary policy and discount window functions would tend to undermine public and investor confidence in monetary policy by raising concerns that monetary policy judgments in pursuit of our legislated objectives would become subject to political considerations. As a result, such an action would increase inflation fears and market interest rates and, ultimately, damage economic stability and job creation.

• Earnings Calendar
  Eddy Elfenbein, July 9th, 2009 at 12:06 pm

  Earnings season is approaching and 13 of the 20 stocks on the Buy List have a quarter ending in June. Here’s a calendar of report dates. A few haven’t said when they’ll report so I’m estimating by what they’ve done in previous years:
  Amphenol (APH) July 16
  Baxter (BAX) July 16
  Stryker (SYK) July 21
  Eli Lilly (LLY) July 22
  SEI Investments (SEIC) July 22 est
  Danaher (DHR) July 23
  Aflac (AFL) July 29
  Fiserv (FISV) July 29
  Becton, Dickinson (BDX) July 30
  Nicholas Financial (NICK) July 30 est.
  Moog (MOG-A) July 31 est.
  Cognizant Technology Solutions (CTSH) August 5 est.
  Sysco (SYY) August 6 est.

• Altria Is Still Cheap
  Eddy Elfenbein, July 9th, 2009 at 11:03 am

  Just another quick note on Altria (MO). The stock is still very attractive at this price. MO is going for less than 10 times this year’s estimate. The dividend currently yields 7.8% and it could be raised soon. Earnings are due two weeks from yesterday.

• Meep! Meep! Meep! Meep! Meep!
  Eddy Elfenbein, July 8th, 2009 at 2:52 pm

  Apparently, someone hurt Beaker’s feelings.
  

• One From the Time Machine
  Eddy Elfenbein, July 8th, 2009 at 1:17 pm

  Less than nine years ago:

  President Clinton: The United States on Track to Pay Off the Debt by End of the Decade
  Today, President Clinton will announce that The United States is on course to eliminate its public debt within the next decade. The Administration also announced that we are projected to pay down $237 billion in debt in 2001. Due in part to a strong economy and the President’s commitment to fiscal discipline, the federal fiscal condition has improved for an unprecedented nine consecutive years.

  Clinton wasn’t talking about balancing the budget or even reducing the debt, he meant paying off the debt. The only time the government has been debt free was in 1835 and 1836.

• Pope Proposes New Financial Order Guided By Ethics
  Eddy Elfenbein, July 7th, 2009 at 10:55 am

  The AP reports:

  Pope Benedict XVI called Tuesday for a new world financial order guided by ethics, dignity and the search for the common good in the third encyclical of his pontificate.
  In “Charity in Truth,” Benedict denounced the profit-at-all-cost mentality of the globalized economy and lamented that greed has brought about the worst economic downturn since the Great Depression.
  “Profit is useful if it serves as a means toward an end,” he wrote. “Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.”

  Hmm…sounds interesting, but what exactly are these “ethics.” I think I read about them in a history book.
  Meanwhile, in breaking news from last July: Weak US dollar hits papal profits:

  The Vatican made a loss last year as the weaker dollar reduced the value of donations from the faithful in the United States.
  Almost a quarter of the $79.8m (£40.4m) worth of offerings it received came from collections made in US churches.
  But as the dollar lost 15% of its value against the euro, the Catholic Church’s governing body made a loss of 9.1m euros (£7.3m: $14.3m) in 2007.

  At least there’s one person named Ben who’s long the dollar.

• Pro Golfers and Amateur Investors
  Eddy Elfenbein, July 7th, 2009 at 10:20 am

  After being in this game for a few years, one statement I can make with absolute certainty is that the worst investor in the world is the person who’s down slightly in a lousy stock. I’ve seen this countless times and it’s painful to watch. Maybe you’ve been this person, I know I have.
  The problem with being down slightly in a loser stock is that the investor refuses—absolutely refuses!—to take a loss. Determination, which is normally a good trait, works against you. You wait and wait and wait, but the stock still sucks. The fallacy is that the stock doesn’t know you own it or where you bought it. Your entry point is completely unrelated to the stock’s quality. Many new investors don’t grasp this basic point.
  The reason why this is so dangerous is that it reflects one of our strongest cognitive biases. In this case, it’s mental accounting. In our minds, we maintain a strict balance sheet or wins and losses. We think that selling for a loss is admitting defeat. In a sense, it is but experienced investors know that taking a loss can be a very smart move. It’s often far easier to recoup your losses in a new high-quality stock then waiting for the same old dud to finally turn around. Successful isn’t just managing your winners, it’s also about managing your losers.
  This probably explains why market technicians often see stocks make short-term highs at similar levels because the folks who bought at the previous peak are determined to unload their shares for a gain, no matter how puny.
  A recent study found that pro golfers suffer the same bias. PGA golfers are significantly more likely to make a par putt than an identical birdie putt. In golf, the rules are simple—a shot is shot. But the golfers don’t see it that way. Par is to be expected and birdies are a gift, therefore the pros are more conservative in their birdie putts than in their putts for par. The numbers say this is a bad move, but the pros do it anyway.
  Not surprisingly, the difference comes down to length. The golf pros tend to bring their birdie putts up short. However, the easy tap in for par doesn’t come close to making up for their conservatism. The study’s authors calculate that the average PGA pro could take a full stroke their game for a 72-hole tournament. If a Top 20 player did this, it would improve their yearly haul by over $1 million.
  Remember that a shot is just a shot, and a stock is just a stock. Where you bought it doesn’t matter to where it’s going.

• Deutsche Bank Spied on Board Members and Shareholder
  Eddy Elfenbein, July 7th, 2009 at 8:46 am

  Oh dear lord:

  An investigation commissioned by Deutsche Bank has revealed that Germany’s largest bank spied on several of its management board members, supervisory board members and on at least one shareholder. The 150-page report was prepared by legal firm Cleary Gottlieb Steen & Hamilton.
  Like Deutsche Telekom and Deutsche Bahn, which have also been hit by internal snooping scandals, it seems that Deutsche Bank also succumbed to a mixture of paranoia and megalomania.
  Leading executives at the bank hired external “specialists” to solve their security problems — some of them real, some of them imagined — and those specialists in some cases resorted to dubious methods.

  It’s 2009. Do they really think this will never come to light?