Archive for 2013
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Dilbert on Market Manipulation
Eddy Elfenbein, March 5th, 2013 at 12:00 pmScott Adams of Dilbert fame recently said he thought the stock market was due for a 20% slide. Our friends at Business Insider followed up to see why. Here’s Scott’s response:
Rob Wile at Businessinsider.com asked me to clarify my prediction of a 20% stock market correction in 2013. (See my post below.) So I tapped out the following message on my smartphone:
—- Start —-
“I’m glad you had the wisdom to get a cartoonist’s opinion on global financial markets.
The 20% estimate is based on the fact that 20 is a big round number and more likely to happen than 30%. I don’t like to over-think these things.
My reasoning is that the people at the highest levels of finance are brilliant people who chose a profession with the credibility of astrology. And they know it. Then they sell their advice to people who don’t know it. So that’s your cast of characters.
Now consider that the characters – who are literally geniuses in many cases – have an immense financial motive, opportunity, and a near-zero risk of getting caught. How do you think that plays out?
We can only give a guess of the odds that the market is being manipulated. So I ask myself: How often does the fox leave the hen house because he feels that taking an egg would be wrong?
If you have a different answer from mine, I applaud your faith in human nature.”
—– End —–
Personally, I think it’s funny if a bit overly cynical. Remember, of course, that the super geniuses are also battling each other which brings a certain level of accountability to any attempts at manipulation.
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The Dow Blasts to All-Time High
Eddy Elfenbein, March 5th, 2013 at 9:54 amThe Dow just blasted through to an all-time high.
On October 9th, 2007, the Dow closed at 14,164.53. The intra-day high came two days later on October 11th when the Dow touched 14,198.10. This morning, we’ve been as high as 14,233.07. Four years ago today, the Dow had closed at 6,594.44.
The S&P 500, meanwhile, has been as high as 1,537.27 this morning which is a five-year high. The index made its all-time high close on October 9th, 2007 at 1,565, and like the Dow, the intra-day high came two days later at 1,576.09.
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Morning News: March 5, 2013
Eddy Elfenbein, March 5th, 2013 at 6:01 amBOJ Nominee Iwata Adds to Calls for Buying Longer-Term Bonds
Chinese Stocks Plunge on Plan to Tax Home Sales
China Vanke To Issue Its First Dollar Bond
EU Opens Way for Easier Budgets After Austerity Backlash
U.K. Services Unexpectedly Strengthen as Confidence Increases
Yellen Says Fed Should Press on With QE Amid Limited Risk
A Stealth Tax Subsidy for Business Faces New Scrutiny
F.C.C. Backs Consumers in Unlocking of Cellphones
S&P Credibility Seen Eroded by Complicity in Soured Deals
Glencore Sees Sharp Fall In 2012 Earnings
Standard Chartered Posts Full-Year Profit Increase
Hess to Sell Gas Stations as Part of a Shift in Strategy
Buffett Finds His Bear: Doug Kass To Join Berkshire Annual Meeting
Credit Writedowns: The Product is the Promise: Finance and Social Values
Joshua Brown: Winston Churchill for Traders and Analysts
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OMG! Fiscal Cliff! OMG! Debt Ceiling! OMG! Sequester!
Eddy Elfenbein, March 4th, 2013 at 3:55 pmOh…and second-highest Dow close ever.
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Recent March Turning Points
Eddy Elfenbein, March 4th, 2013 at 2:03 pmIn the last few years, the month of March has seen more than its fair share of market turning points. The big closing low from four years ago came on March 9th, 2009. The intra-day low, when the S&P 500 got to 666, came on the previous Friday, March 6th.
Nine years before that, the S&P 500’s closing high came on March 24, 2000 at 1,527.46. The intra-day high was the same day at 1,552.87. The Nasdaq, however, which greatly defined the bull market, hit its peak two weeks earlier, on March 10, 2000 when it closed at 5,048.62. So our lost decade was actually one day shy of nine years.
March 2003 also got into the act. The market technically hit its low in October 2002, but the rally off the low lost its steam and fell again until the second bottom in March 2003. The S&P 500’s closing low was 800.73 on March 11th, and the intra-day low was 788.90 on March 12th.
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The Plunge at Coach
Eddy Elfenbein, March 4th, 2013 at 1:06 pmIn the last year, shares of Coach ($COH) have plunged from a high of $79.70 to a low of $45.87. The stock is currently at $48.43. The dropoff appears to be due to a rather modest decline in the company’s earnings acceleration.
Here’s a chart of Coach stock price in black (left scale) along with its earnings-per-share in gold (right scale) and Wall Street’s estimate in red. The two lines are scaled at a ratio of 16-to-1 so whenever the lines cross, the P/E Ratio is exactly 16.
The stock had a brief rally last week on rumors that Coach was putting itself up for sale. This turned out to be untrue. Coach recently reported weak holiday sales. I can’t say how serious Coach’s problems are but the company is working hard on new strategies. The problem with retail is that Coach is no longer seen as a premium brand especially compared with Michael Kors ($KORS).
If the Street’s outlook is correct, then the stock is pretty cheap. Going by my World’s Simplest Stock Valuation metric, Coach is about 25% undervalued.
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Berkshire’s Stock Positions
Eddy Elfenbein, March 4th, 2013 at 10:53 amFrom page 15 on this year’s Buffett Shareholder Letter, here’s a look at the common stocks held by Berkshire Hathaway.
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His