Archive for 2009

  • Happy 75th Birthday SEC
    , June 4th, 2009 at 11:50 am

    On June 6, 1934, FDR signed into law the Securities Exchange Act of 1934 which bright the Securities and Exchange Commission to Life. Roosevelt then appointed Joseph P. Kennedy to be its first head which caused some to think this was “setting a wolf to guard a flock of sheep.” (Incidentally, Georgetown hosts the poorly named Joseph P. and Rose F. Kennedy Institute of Ethics).
    This hasn’t been a good year for the SEC. Regulators continue their war against efficient markets. Last year’s shorting ban in financial stocks was a bust (financials underperformed the broader market). The SEC completely missed the Madoff scandal after being told what was happening. The agency’s own inspector general said they bungled the Pequot Capital thing (“raised serious questions about the impartiality and fairness”).
    It gets even worse. Check out this Dow wire story from earlier this week:

    The internal watchdog at the Securities and Exchange Commission revealed Monday his office is investigating several employees, including one top SEC official, after receiving complaints alleging they improperly disclosed non-public information.
    One pending investigation by SEC Inspector General H. David Kotz comes in response to an allegation that a top SEC official improperly disclosed non-public information to a large investment bank.
    In another case, Kotz reported that his office is investigating two enforcement attorneys for possibly disclosing non-public information from an internal SEC database to a corrupt FBI agent and short seller who was later convicted of fraud, racketeering and conspiracy.
    Then, in yet a third case, the inspector general said he’s looking into whether a former SEC attorney may have revealed confidential investigative information in a book he wrote. Kotz said the attorney may have provided the privileged information to a company where he worked as a lobbyist after leaving the SEC.
    Separately, his office is also trying to determine if non-public information may have been disclosed to a national news outlet.
    Kotz, who is leading the internal investigation into the agency’s failure to detect Bernard Madoff’s Ponzi scheme, disclosed some details about his pending investigations in his newly published semi-annual report to Congress on Monday.
    In it, he said he has 19 pending investigations, one of which is tied to the Madoff failings.

    Here’s to 75 more years!

  • Fantasy Football Lawsuit
    , June 4th, 2009 at 11:34 am

    The AP reports:

    Yahoo Inc. has sued the NFL Players Association, claiming it shouldn’t have to pay royalties to use players’ statistics, photos and other data in its popular online fantasy football game because the information is already publicly available.

    Let’s see if I have this right: A company is bringing a real lawsuit against a group of adult men who play a children’s game for their statistics which are used by other adult men who merely pretend they’re in charge of the first group of adult men while they play the children’s game.
    There are the parts of the New Economy I like best.

  • Odd Lots
    , June 4th, 2009 at 7:50 am

    Here are some assorted links I wanted to pass on:
    Why having the Penguins win the Stanley Cup is good for the stock market.
    Here’s an investment beating stocks and gold this year.
    Actual academic report: The economics of Dr. Seuss.
    Jeremy Siegel “virtually sure” it’s not going to be a long wait for a good return on stocks.
    The rally is being led by junk stocks.
    Ukraine’s economy drops 21% in Q1.
    Iceland central bank slashes rates to 12%. In other news, Iceland has a central bank?

  • Way Ahead of You
    , June 3rd, 2009 at 5:28 pm

    The Economist:

    Search your underpants for signs of a recovery

  • Good Story on DirectEdge
    , June 3rd, 2009 at 4:43 pm

  • Rep. Alan Grayson at Ritholtz-Palooza
    , June 3rd, 2009 at 4:17 pm

    Congressman Alan Grayson had some interesting comments at Barry Ritholtz’s conference today:

    Grayson appeared on a panel with Nassim Taleb, best known as the author of The Black Swan. Their exchange about the proper role of government regulation of the financial system was entertaining, if a bit meandering. Grayson, who grew up in the Bronx and holds three Harvard degrees, has a rare ability to say relatively radical things without coming off as a rabid populist. Moderator Barry Ritholtz, author of the just-published Bailout Nation, asked a straightforward question: The U.S. government does a reasonably good job of regulating things like the safety of airplanes and foods. Why, then, does it do such a lousy job of regulating the financial system?
    Grayson’s answer was immediate and succinct: “Capture.” For those not up on regulatory theory, this refers to the notion that regulators become captive of the industries they regulate. Noting that Fannie Mae and Freddie Mac spent $100 million on campaign contributions over the last 10 years, Grayson said: “The system is in some sense corrupt. A senator said the other day that Wall Street owns Washington, and while I might not go that far, you don’t have the airlines ‘owning’ the [airline regulators]. There is a lot of influence that Wall Street has on the government, even the judicial branch.” Indeed, Grayson could have cited the front-page story in today’s Wall Street Journal, documenting the remarkable efficiency with which banking campaign contributions appear to have helped ease accounting rules that in turn helped the banks.

  • Ode to Becky
    , June 3rd, 2009 at 11:08 am


    (HT: WSF)

  • Oh Dear Lord
    , June 3rd, 2009 at 11:01 am

    A fund for investing in lawsuits:

    Richard W. Fields says he has come up with a win-win financial strategy for the downturn. He is investing in lawsuits.
    Not in trip-and-fall cases, mind you, but in disputes that are far larger, more costly and potentially more lucrative, often pitting major corporations against each other.
    Mr. Fields is chief executive of Juridica Capital Management, which runs a fund that invests in one side of a lawsuit in exchange for a share of any winnings, The New York Times’s Jonathan D. Glater writes.
    “It’s always a good time to invest in litigation,” Mr. Fields told The Times, though he added that the weak economy helped. “When the recession started to bite, the phones started ringing off the hook. Last year, we looked at 122 cases and we made 17 investments.”
    A small but growing number of investors are exploring this idea, helping companies avoid some of the risks and costs of litigation in exchange for part of any money paid out when the case is settled or resolved by a court. After all, it can be costly to hire lawyers, who may charge close to $1,000 an hour at elite firms.

  • A Closer Look at the 200-Day Moving Average
    , June 2nd, 2009 at 2:17 pm

    One of the quick-and-dirty tools used to technical analysts is to see where a stock or index is compared with its average price over the past 200 days. This is an easy way to get a read of a stock’s momentum.

    Yesterday was a big day for the 200-DMA world. The S&P 500 closed above its 200-DMA for the first time since December 26, 2007. That closed out the index’s longest run below its 200-DMA according to my records which go back to 1932.

    That streak, however, is still well short of the longest run above the 200-DMA which ran from November 1953 all the way to May 1956. Since the index has gone up over the time, the “above” streaks tend to be longer than the “below” streaks.

    On November 20, 2008, the S&P was a stunning 39.6% below its 200-DMA. That’s the biggest discount on my records. The only thing that comes close is the reading from this past March.

    So does the 200-DMA work? The evidence suggests that it’s a pretty good indicator of future price performance. When the S&P 500 has been below the 200-DMA, it’s dropped a total of about 20% over the equivalent of 27 years. In other words, the S&P 500 has been below its 200-DMA about one-third of the time.

    Historically, the best time to invest has been when the S&P is less than 1.7% below the 200-DMA.

    When the index is above the 200-DMA, well, then everything looks much brighter. All of the market’s gain and then some have happen when we’re above the 200-DMA which occurs about two-thirds of the time.

    The market seems to like nearly every point of being above the 200-DMA. Danger only clicks in when the S&P 500 is over 17.5% above the 200-DMA which is a very high reading.

  • Peter Lynch on Bottom Fishing
    , June 2nd, 2009 at 10:55 am


    You can also see Phil Carret, the legendary money manager. In 1924, he wrote “The Art of Speculation.” Carret died in 1998 at 101.