Archive for 2009

• The Savings Glut
  Eddy Elfenbein, July 2nd, 2009 at 1:27 pm

  Brad Setser looks at the role of the savings glut. I think this topic has been beaten up unfairly:

  In a global economy, a rise in savings relative to investment in one part of the world necessarily implies a fall in savings relative to investment in the rest of the world; sorting out why key macroeconomic variables change is always difficult.
  Maybe this equilibrium was a function of excessive demand stimulus by the advanced economies in the aftermath of the last recession – and lax financial regulation that allowed households to over-borrow. High US and European demand allowed the emerging world to save more. Maybe it was a function of policies in the emerging economies, policies sometimes put in place to support undervalued exchange rates. That would explain why the growing US savings deficit didn’t put upward pressure on global interest rates and why the rise in the US external deficit didn’t lead to a rise in US real interest rates — something would have short-circuited the housing boom. Probably it was a mix of both. Emerging market savers (really their governments, as private savers weren’t exactly seeking out depreciating dollars) helped to provide Wall Street and the City the rope they (almost) used to hang themselves.

  If you ever want to punish another country, don’t send in tanks — just lend them too much money.

• If You Were Concerned About Death Threats Against You, Would You Go on TV and Talk About the Death Threats Against You?
  Eddy Elfenbein, July 2nd, 2009 at 11:17 am

  Me neither.

• The June Jobs Report Majorly Sucked
  Eddy Elfenbein, July 2nd, 2009 at 10:41 am

  The Labor Department released its jobs report this morning and the results were pretty lousy. Employers slashed 467,000 which was far more than forecasts. The unemployment rate is now up to 9.5%.
  Since the recession started, we’ve lost 6.5 million jobs.
  

• Time Looks at BBBY
  Eddy Elfenbein, July 2nd, 2009 at 10:24 am

  Time‘s Sean Gregory looks at Bed Bath & Beyond (BBBY):

  Call it the Bed Bath & Beyond barometer. Some recent data indicate that as consumers prepare to open up their wallets, they’ll be very likely to spruce up their homes. According to a survey from WSL Strategic Retail, of shoppers who say they want to splurge, 44% want to do so on their digs. NPD Group, a market-research firm, also found that when shoppers are asked where they are most likely to spend money, a majority point to their homes. “The nest is where we’ll likely see the early signs of a recovery,” says Marshal Cohen, a retail analyst at NPD Group.
  On a June evening at a sprawling Bed Bath & Beyond store in New York City, a checkout line snaked around the corner as consumers hoarded pots, soaps and Cuisinarts. “Your home is your place of comfort, the only thing you can count on,” says Tina Genitti, 21, while carrying a featherbed, a pillow and body creams to the checkout line. “A few months ago, I would have gone for the cheap featherbed. But I spent the extra $5 here because it’s time for a treat.”

• Kudos to Cramer
  Eddy Elfenbein, July 2nd, 2009 at 7:16 am

  I can believe I’m saying this but Jim Cramer’s show last night was…pretty good.
  As someone who hasn’t exactly been shy about criticizing CNBC or Jim Cramer, I feel an obligation to praise them when they do a job, and I think Cramer did a good job last night. Perhaps he’s taking Jon Stewart’s criticisms to heart.
  In any event, it’s not perfect but it’s a lot better than the “buy, buy, buy” antics of two or three years ago. Instead, he does a good job of explaining what makes a stock a buy or a sell. There’s needs to be more of this on TV (and in the blogosphere).
  Some clips of the show are after the jump. (See, we’re not all cranks all the time on the Internet.)

  (more…)

• Albert Pujols and the Triple Crown
  Eddy Elfenbein, July 1st, 2009 at 11:14 pm

  Now that it’s July I think we can say that the Triple Crown is now in play for Albert Pujols. It’s a long short, but it can happen.
  No one has won the Triple Crown in 42 year, but Pujols currently leads the NL in home runs and rbi’s, plus he’s sixth in batting. He’s just .013 behind David Wright.
  Pujols also leads the league in runs and he’s tied for second in walks. Unfortunately, the Cardinal’s line-up is pretty thin outside of Phat Albert.

• The S&P 500 and Dividends
  Eddy Elfenbein, July 1st, 2009 at 9:45 am

  Here’s a look at the growth of the S&P 500 along with its dividends over the past 20 years. The S&P 500 is the black line and it follows the left scale, the dividends are the blue line and follow the right scale. The two scales are matched up at a ratio of 50-to-1, meaning the dividend yield is exactly 2% when the lines cross.
  
  That’s actually a very lenient standard. To be a better reflection of valuation, I should have set the scales at a ratio of 30-to-1, but I’m not presenting this as an outlook on stock valuations. The point I want to get across is how stable dividends are over time compared with stock prices. The average swing in stock prices is almost exactly five times the average swing in dividends.
  It’s interesting to see that dividends never bought into the late 90’s rally although they were more impressed by the tepid recovery of the middle of this decade (the dividend tax cut surely helped).
  As an investor, sometimes it’s to your benefit to ignore stock prices and focus solely on your dividends. That’s money they can’t take back from you. The other nice thing about dividends is that you pretty much know what you’re going to get. The line doesn’t jump around too much.
  Stock investing in the 19th century was really about the dividend. Sometimes I think they were a lot smarter than us. The idea of continuously rising capital gains really dates from the 1920s.
  One other point about the table: It goes up to the first quarter of 2009. We’ve seen a lot of dividend cuts this year. I’ll update the chart once the latest numbers are in.

• ZeroHedge Vs. Dennis Kneale
  Eddy Elfenbein, July 1st, 2009 at 8:46 am

  Sheesh, I take a week off, come back and everyone in blogland is fighting—even more than usual! First, we have Barry Ritholtz and John Carney debating and possibly betting on the role that the Community Reinvestment Act played in the housing blow-up. Steve Sailer has also joined the fray.
  Now a fight has broken out between ZeroHedge and CNBC’s Dennis Kneale. Actually, as fights go, this one is a pretty pathetic. It’s transparently obvious that Kneale is trying force a confrontation where it’s completely unnecessary.
  
  That’s what galls me about CNBC. They can’t just tell us they news. No, that would be too easy. Instead, they have to trick us into watching fights thinking that’s the only way we’d pay attention.
  I’m not being paranoid here. A few weeks ago, we found a video where Dennis Kneale freely admitted that stories need “conflict, drama and struggle” to fool people into learning good information (the video has since been removed, so you’ll have to trust me that’s what he said). Do they really need to insult us this way?
  Perhaps he’s right.
  Unfortunately, ZeroHedge fell for Kneale’s bait and their readers are in a tizzy. Trust me, I see their point and from the emails Tyler posted, it’s clear that Dennis isn’t being truthful about Tyler’s “dodge.” Well, what did you expect from someone who’s trying to force “conflict, drama and struggle”?
  In my opinion, Tyler’s response is all wrong. The problem is he’s missing Dennis’ agenda. Tyler wants to have a high-minded discussion of the issues and not on Dennis’ home turf. Well, that’s a noble idea but it won’t get you anywhere with Dennis Kneale.
  As usual, Monty Python is way ahead of us. This is from the Argument Sketch where a man pays to have an argument and is disappointed by what he gets:

  M: Oh look, this isn’t an argument.
  A: Yes it is.
  M: No it isn’t. It’s just contradiction.
  A: No it isn’t.
  M: It is!
  A: It is not.
  M: Look, you just contradicted me.
  A: I did not.
  M: Oh you did!!
  A: No, no, no.
  M: You did just then.
  A: Nonsense!
  M: Oh, this is futile!
  A: No it isn’t.
  M: I came here for a good argument.
  A: No you didn’t; no, you came here for an argument.
  M: An argument isn’t just contradiction.
  A: It can be.
  M: No it can’t. An argument is a connected series of statements intended to establish a proposition.
  A: No it isn’t.
  M: Yes it is! It’s not just contradiction.
  A: Look, if I argue with you, I must take up a contrary position.
  M: Yes, but that’s not just saying ‘No it isn’t.
  A: Yes it is!
  M: No it isn’t!
  A: Yes it is!
  M: Argument is an intellectual process. Contradiction is just the automatic gainsaying of any statement the other person makes.
  (short pause)
  A: No it isn’t.
  M: It is.
  A: Not at all.

  I’m all for a good fight. They can illuminate and be great TV. But cramming histrionics down our throats ain’t the right way. It’s bad TV and not very enlightening. Dennis Kneale has dumbed down his own standards and still failed to meet them.
  Yes, Beaker deserves to be mocked, but not for the reasons he wants us to use.

• The CWS Buy List First Half Review
  Eddy Elfenbein, June 30th, 2009 at 10:19 pm

  The first half of 2009 is now behind us and the Buy List is having a pretty good year. To review the rules, the 20 stocks I select at the beginning of the year are locked in place and I’m not allowed to make any changes during the year.
  I assume the portfolio is equally weighted at the beginning of the year. The average of the 20 stocks is currently up 14.53% for the year. Including dividends, we’re up 15.22%. By contrast, the S&P 500 is up 1.78%, and 3.16% with dividends.
  The average daily volatility of the Buy List is 3.18% greater than the market.
  Fourteen of our 20 stocks are up for the year, six are down. The best performer is Nicholas Financial (NICK) with a 123% gain. The second-best is Cognizant Technology Solutions (CTSH), one of our five new stocks this year, which is up 47.8%.
  The worst performer has been Aflac (AFL), which is down 32.2%. That’s bad but it was a lot worse. In fact, Aflac has nearly tripled off its March low. If I didn’t have my frozen-in-place rule, I could have easily sold out at the worst time. The second-worst performer has been Moog (MOG-A) which is now down 29.4% for the year.
  Since the March 9th low, the Buy List is up by over 51%. Let’s hope for a great second-half to 2009!

• Trivia Question: Who’s France’s Largest Private Employer?
  Eddy Elfenbein, June 30th, 2009 at 8:05 pm

  
  I’ll give you a hint: It’s McDonald’s (MCD).
  Mike Steinberger looks at How McDonald’s Conquered France:

  In the battle for France, Jose Bové, the protester who vandalized a McDonald’s in 1999 and was then running for president, proved to be no match for Le Big Mac. The first round of the presidential election was held on April 22, and Bové finished an embarrassing tenth, garnering barely 1 percent of the total vote. By then, McDonald’s had eleven hundred restaurants in France, three hundred more than it had had when Bové gave new meaning to the term “drive-through.” The company was pulling in over a million people per day in France, and annual turnover was growing at twice the rate it was in the United States. Arresting as those numbers were, there was an even more astonishing data point: By 2007, France had become the second-most profitable market in the world for McDonald’s, surpassed only by the land that gave the world fast food. Against McDonald’s, Bové had lost in a landslide.