Author Archive

  • Wednesday Morning News
    , May 19th, 2010 at 9:22 am

    Allen Stanford wants out of prison. He claims he’s been “savagely beaten.” Look dude, you’d get pretty much the same on the outside.
    Protesters Set Fire to Thai Stock Exchange

    Consumer Prices Fell 0.1% Last Month
    Deere Earnings Jump 16%, Raises Forecast
    SEC Proposes 10% Circuit Breaker for Every Stock. If you want to reduce volatility, then encourage larger dividend payments.
    House Passes Beer Resolution

  • Another Defeat for Efficient Markets
    , May 18th, 2010 at 3:19 pm

    It’s happening again. Bloomberg has a great article today about an ugly kick-back scheme involving CDR Financial Products.
    As a result, shares of the ticker symbol CDR are off sharply today. There’s one widdle problem. CDR is the ticker symbol for Cedar Shopping Centers which is a super-market REIT that has nothing at all to do with the Bloomberg article.
    (HT: TBI)

  • Thought for the Day
    , May 18th, 2010 at 1:48 pm

    From John Tierney’s review of “The Rational Optimist” by Matt Ridley:

    “Forget wars, religions, famines and poems for the moment,” Dr. Ridley writes. “This is history’s greatest theme: the metastasis of exchange, specialization and the invention it has called forth, the ‘creation’ of time.”

    (HT: Kedrosky)

  • First in Business Worldwide
    , May 18th, 2010 at 11:30 am

  • Please Join Us for Today’s Strategy Session
    , May 18th, 2010 at 10:17 am

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    Charles Kirk, who runs the invaluable Kirk Report, has graciously invited me to participate in today’s online Strategy Session.
    Beginning at noon, Charles and I will have an online stock chat for about 20 minutes or so. Then we’ll open up the forum to take questions from you. You can access today’s Strategy Session at this site.
    The action starts at noon ET. Hope to see you there!

  • Home Depot Beats By Five Cents a Share
    , May 18th, 2010 at 9:12 am

    Today it was Home Depot’s (HD) turn to report earnings and the company did very well:

    Home Depot reported a profit of $725 million, or 43 cents a share for the May 2nd-ended quarter, up from $514 million, or 30 cents, a year earlier. Excluding items, earnings rose to 45 cents from 35 cents.
    Revenue jumped 4.3% to $16.86 billion, or 5.7% excluding the impact of Expo stores, which Home Depot shut down last year, from the year-earlier results. Same-store sales rose 4.8%, the second consecutive quarterly increase after 14 quarters of declines.
    Analysts polled by Thomson Reuters had most recently forecast earnings of 40 cents on $16.37 billion in revenue.

    That’s an impressive earnings beat. Compared with Lowe’s (LOW), Home Depot has been able to hold the line on margins. The big number in retail is same-store sales. At Lowe’s, same-store sales rose by 2.4% while they were up 3.3% at Home Depot.
    Home Depot also raised its full-year EPS guidance to $1.88. The stock is a bit pricey here. I think the market expects to see more big earnings surprises this year.

  • Buffett Rebalances His Portfolio
    , May 18th, 2010 at 8:58 am

    From Bloomberg:

    Berkshire eliminated its stake in health insurers WellPoint Inc. and UnitedHealth Group Inc., lender SunTrust Banks Inc. and property-casualty carrier Travelers Cos., the Omaha, Nebraska- based company said yesterday in a regulatory filing disclosing U.S. equity investments at the end of the first quarter. Buffett’s firm reduced holdings in Kraft Foods Inc., Johnson & Johnson and Procter & Gamble Co.
    Buffett, 79, has tapped Berkshire’s U.S. equity portfolio to fund the $27 billion acquisition of railroad Burlington Northern Santa Fe and arrange investments in securities that don’t trade on public exchanges. He invested abroad in the first quarter, making Berkshire the biggest shareholder of German reinsurer Munich Re, and told investors this month to expect “modest” returns from stocks.

  • The Bears Are Growling
    , May 17th, 2010 at 5:42 pm

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    CNBC has a poll up asking if the Dow will reach 5,000 this year (by the way, it’s mid-May). An amazing 40% said it will.
    This is obviously highly unscientific, but sometimes I wonder…are there that many extreme bears out there?

  • Overly Bullish Analysts
    , May 17th, 2010 at 4:41 pm

    From the Harvard Business Review:

    For the past quarter century, equity analysts’ earnings-growth estimates have been almost 100% too high. Their overoptimistic projections have generally ranged from 10% to 12% annually, compared with actual growth of 6% (excluding the spike in growth from 1998–2001), according to McKinsey research. Only in strong-growth years such as 2003 to 2006 did forecasts hit the mark.

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  • Time to Legalize Insider Trading?
    , May 17th, 2010 at 3:15 pm

    Matthew Yglesias get his Adam Smith on and questions why insider trading is illegal.

    After all, one important function of financial markets is supposed to aggregate information so as to price assets correctly and thus guide the allocation of investment. Excluding informed participants from trading subverts the main goal of financial markets’ existence.

    Let me back up a second and explain that insider trading is perfectly legal. All that corporate insiders need to do is declare what trades they make with their own stock, how much and when.
    What’s illegal is when corporate insiders trade on “non-public” info. Let’s say the CEO knows that the earnings report is going to be terrible, so she dumps her shares ahead of time.
    It’s actually a very murky subject. Even the movie Wall Street gets insider trading wrong. Hard as it may be to believe, Bud Fox didn’t do anything illegal (well…except for theft when he was dressed as a janitor). But the dirt he gave to Gekko wouldn’t be a legal issue because all that information was publicly observable. That’s the key. It comes down to what the public can see and what it can’t. The problem with enforcement is that it makes the government label information.
    The libertarian argument is that information is information, and it’s a waste of time trying to label what’s known and unknown. Plus, you get Yglesias’ view that it really doesn’t matter since insider trading goes on anyway. (By the way, has anyone mentioned that the SEC’s case against Goldman Sachs was leaked to the New York Times? This is a scandal twice over—once for the deed and again because no one cares.)
    Insider trading reminds of arguments in favor of legalizing black mail. I see their point but, darn it, it just seems…wrong. I would still prefer the companies I own prohibit their executives from trading on non-public information. This, of course, is a non-government solution although it exposes execs to civil lawsuits. The goal should be to make all the non-public information public.