Author Archive

  • Whole Foods Hits New Low
    , August 6th, 2008 at 12:00 pm

    Whole Foods Market (WFMI) just reported a rotten quarter. The company’s fiscal Q3 net dropped 31% to 24 cents a share. The Street was looking for 31 cents a share. The company also said that Q4 earnings will be 15 cents a share, which was far below the 27 cents Wall Street was expecting. The shares are down about 16% today and are now at a six-year low.
    Nearly three years ago, I called out Whole Foods and its overpriced stock:

    I’m a big fan of Whole Food Market (WFMI), but this stock is way, WAY over-priced. Last quarter, the company missed earnings by a penny a share. In the past few weeks, Wall Street has lowered this fiscal year’s consensus earnings estimate to $2.86 a share, and the stock is still trading at 53 times that. That’s almost as much as Google (GOOG)!
    Look, I like organic kumquats as much as the next guy, but let’s be reasonable. Whole Foods’ earnings will probably grow by about 17%-20%. Not bad at all. The stock, however, is already up over 60% this year.
    A stock can’t go up faster than its earnings indefinitely. At some point, something’s gotta give. That’s not finance, it’s physics. Right now, the stock is going up because it’s going up. The price and fundamentals have politely parted company. On Friday, shares of Whole Foods closed at another all-time high.

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  • Oh Dear Lord
    , August 6th, 2008 at 10:00 am

    Icahn Hires Reporter to Write for His Blog

    According to sources, Mr. Elfenbein described this as “wicked lame.”

  • Who Needs Diebold
    , August 6th, 2008 at 9:57 am

    Wonderful:

    Yahoo has updated the results of recent voting by shareholders, revealing that support for the Internet firm’s board is far weaker than it appeared.
    Some 200 million votes were mistakenly cast in favor of the re-election of Yahoo chief executive Jerry Yang and board chairman Roy Bostock by an outside company used by a major stockholder.
    A revised tally released on Tuesday shows Bostock got the least support, with 60.4 percent of votes in favor of his re-election instead of the 79.5 percent originally reported after the August 1 shareholders meeting.
    Yang did not fare much better, winning 66.3 percent of the votes cast as opposed to the 85.6 percent figure in the miscount. Two other Yahoo board members were erroneously given the support of 100 million votes each.

  • Inflation and the Markets
    , August 5th, 2008 at 2:24 pm

    According to monthly data from Ibbotson Associates, all of the stock market’s inflation-adjusted gains have come when monthly inflation is below 3.5%.
    From 1926 through 2007, there were 984 months. Of those 984 months, 436 months showed an annualized inflation increase of over 3.5%, while the other 548 came in less than 3.5%.
    The combined increase of the 436 months with inflation greater than 3.5% is -1.25%. That’s over 36 years worth of data and it’s given investors an inflation-adjusted loss. However, the combined total of the 548 months with inflation under 3.5% is 27,957%. That’s quite a difference. Annualized, that works out to 13.14%.

  • The Fed Chills
    , August 5th, 2008 at 2:16 pm

    Still at 2% and still one dissent:

    The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
    Economic activity expanded in the second quarter, partly reflecting growth in consumer spending and exports. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and elevated energy prices are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
    Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities, and some indicators of inflation expectations have been elevated. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
    Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the Committee. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Elizabeth A. Duke; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.

  • Great Moments in Business: A Five-Act Play
    , August 5th, 2008 at 11:22 am

    November 14, 2006

    Icahn Joins WCI Communities

    March 13, 2007

    Icahn to launch $22-per-share offer for WCI

    April 6, 2007

    WCI Board Rejects Icahn Bid

    May 12, 2007

    WCI Twists Icahn’s Arm For More Cash

    August 4, 2008

    WCI files for Chapter 11

  • The Law of Supply and Demand Finally Catches Up to Oil
    , August 5th, 2008 at 10:42 am

    It had to happen soon or later. The Law of Supply and Demand has finally caught up to the oil market. The price for a barrel of oil has plunged recently from over $147 to under $120. One of the major reasons for the decline is that consumers are changing their behavior. Irwin Kellner notes:

    In March, the yearly decline was a bit over 3%. That was the biggest drop in miles driven since 1942. May’s drop of nearly 4% over last year was the most ever, according to the Transportation Department
    While significant, this drop in miles driven is only the beginning of what appears to be a prolonged reduction in gasoline consumption. Wait until the mix of vehicles on the road changes.
    As you know, people are now shunning SUVs and pickup trucks in favor of small cars. The object, of course, is to improve fuel efficiency.
    As these gas-guzzling behemoths are replaced by small cars, the average vehicle on the road will get better gas mileage, thus further reducing gasoline use even if miles driven levels off.
    To this add a likely increase in the number of vehicles on the road that are hybrids, pure battery powered, use natural gas, hydrogen or solar power and you can see the potential for an even larger drop in gasoline consumption.
    As for lifestyle changes, fewer people are traveling large distances on their vacations.
    Restaurants report less dining out. And while it’s not so easy to sell one’s house these days to move closer to one’s job, many are opting to work at home, while others are taking mass transit to work, bicycling, or even walking.

  • Deconstructing the GDP Data
    , August 5th, 2008 at 9:34 am

    There’s an interesting debate going on regarding the latest GDP report. The government’s initial estimate for second-quarter GDP growth showed that the economy expanding by 1.9%. The part that has that pessimists laughing is that measly 1.1% number for inflation. Inflation, of course, as measured by the CPI is running at a much higher rate, and would most likely push GDP growth into negative territory.
    The issue centers around imports prices. Brian Westbury writes:

    If import prices are added back into inflation, then the total dollar volume of imports must be added back into nominal GDP as well. This is the only way to compare apples to apples. Adding back imports pushes nominal GDP growth to 5.5% at an annual rate in Q2. Then, using the 4% inflation data (that includes import prices) means real GDP growth was still positive by 1.5%, or so.
    A second issue to think about is that unlike the Consumer Price Index (CPI) – which attempts to measure changes in the cost of the things we buy – GDP inflation is designed to measure changes in the prices of the things we produce, regardless of whether the purchasers are foreign or domestic. Due to oil, prices for the items Americans buy have been increasing much more rapidly than the items they produce. As a result, GDP inflation looks artificially low, when in reality it is not comparable to the CPI.

  • Bail Out the Oil Companies
    , August 4th, 2008 at 4:11 pm

    My fellow Americans, the time for action is at hand. In less than three months, we’ve witnessed horrendous losses for major oil stocks. This is deeply destabilizing for the entire economy. We need—no, we insist that the government step in and protect shareholders from these losses. Personally, I blame short-sellers and rumor mongers.
    Just look at some of these losses.
    Stock…………………………May 20……………….August 4………….Loss
    ExxonMobil (XOM)…………$94.56……………..$76.60…………..-19.0%
    Occidental Pete (OXY)……$97.85……………..$74.23…………..-24.1%
    ConocoPhillips (COP)……..$93.55……………..$79.45…………..-15.1%
    Chevron (CVX)……………..$103.09……………..$82.80…………..-19.7%
    Hey, they did it for Bear Stearns plus Phonie and Fraudie, why not the oil stocks? Will someone please think of the children!

  • Trade Debate
    , August 4th, 2008 at 3:34 pm

    This link shows a trade “debate” CNBC just had between Jagdish Bhagwati and Naomi Klein.
    Bhagwati is one of the most distinguished professor on trade in the entire world. He’s written about 38 billion books and articles, and has a roomful of awards and honors. (Although CNBC has a little trouble spelling his name.)
    Naomi Klein, by contrast, is a complete moron.
    For some background, here’s the NYT article they’re discussing, and here’s Jonathan Chait eviscerating Klein.