Author Archive

  • The Yield Curve
    , January 25th, 2008 at 10:46 am

    Here’s a colorful chart:
    image599.png
    This is the point I’m trying to get across. I believe the Fed’s rate cut was NOT a cut to prop up equity prices, but a response to the turmoil in the bond market. If anything, it was to pop the bond bubble–and as you can see from the post below, the Fed’s job includes promoting “moderate long-term interest rates.”
    I’m not saying I agree with it, but try to look at this from the Fed’s point of view. In just a few months, a flat yield curve completely unraveled.

  • French Trader Surrenders $7.14 Billion
    , January 24th, 2008 at 11:44 am

    Ever heard of Jerome Kerviel? Me neither, but he’s apparently the rogue trader behind Société Générale’s $7.4 billion trading loss. That’s more than Amaranth ($6.6 billion) and Nick Leeson ($1.4 billion).

    The trades first came to management’s attention on the evening of Jan. 18, when a compliance officer found a trade that exceeded the bank’s limits, Mustier said. When Societe Generale called the counterparty, they were told the trade didn’t exist.
    The employee, who moved to the trading floor from the back office in 2006, helped with the investigations throughout the weekend, said Mustier. He said he doesn’t know where the trader is now.
    “He is in his thirties, very quiet and a loner,” said Yves Messarovitch, an external spokesman for Societe Generale. “He had made his dream of becoming a trader come true.”

    Great, he sounds like a serial murderer. According to Bess Levin, he’s hot (w/pic). I report, you decide.

  • The Fed’s Charter
    , January 24th, 2008 at 10:41 am

    Just in case anyone’s curious, here’s what it says:

    FEDERAL RESERVE ACT
    SECTION 2A—Monetary Policy Objectives
    The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.
    [12 USC 225a. As added by act of November 16, 1977 (91 Stat. 1387) and amended by acts of October 27, 1978 (92 Stat. 1897); Aug. 23, 1988 (102 Stat. 1375); and Dec. 27, 2000 (114 Stat. 3028).]

  • Soros “The worst market crisis in 60 years”
    , January 24th, 2008 at 10:15 am

    Now celebrating 10 years of predicting the end of the world, George Soros takes a huge dive into the pool of confirmation bias:

    Everything that could go wrong did. What started with subprime mortgages spread to all collateralised debt obligations, endangered municipal and mortgage insurance and reinsurance companies and threatened to unravel the multi-trillion-dollar credit default swap market. Investment banks’ commitments to leveraged buyouts became liabilities. Market-neutral hedge funds turned out not to be market-neutral and had to be unwound. The asset-backed commercial paper market came to a standstill and the special investment vehicles set up by banks to get mortgages off their balance sheets could no longer get outside financing. The final blow came when interbank lending, which is at the heart of the financial system, was disrupted because banks had to husband their resources and could not trust their counterparties. The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. That made the crisis more severe than any since the second world war.

  • Earnings from Stryker and Danaher
    , January 24th, 2008 at 9:39 am

    After the close yesterday, Stryker (SYK) reported earnings of 66 cents a share, which was a 20% jump over last year. For 2008, the company forecasts earnings-per-share of $2.88. That means the stock is going for a P/E of 23.2. Stryker finished its seventh straight year of double-digit sales growth.
    Danaher (DHR) reported earnings of $1.12 a share (excluding charges), which also matched expectations. The company expects Q1 EPS of 84 cents to 89 cents, and $4.30 to $4.40 for all 2008. That gives them a P/E of about 17.

  • Editors at MarketWatch Keeping It Real
    , January 24th, 2008 at 9:35 am

    You can already see Murdoch’s influence.
    (Via ValleyWag)

  • Bullpen IPO
    , January 23rd, 2008 at 3:49 pm

    Randy Newson, a rookie relief pitcher with the Cleveland Indians, is having an IPO.
    Of himself.
    He’s selling 4% of his future earnings. There are 2,500 shares so you can buy 1/62,500th of Newson’s future earnings for $20.
    (Via Marginal Revolution)

  • Buy at 10, Sell at 3
    , January 23rd, 2008 at 3:44 pm

    I have to admit that this is getting fun. The bears are getting smushed.
    The saying “buy on rumors, sell on news” should be replaced with “buy at 10, sell at 3.” These intra-day moves are huge. Would you believe the Dow is now positive for the week?
    Both Harley-Davidson (HOG) and Bed Bath & Beyond (BBBY) are doing well today. I’ll have more in a bit, but the Buy List is again ahead of the broader market. Stryker (SYK) reports after the close. Danaher (DHR) reports tomorrow and Harley-Davidson (HOG) follows on Friday.
    I’m still amazed at the surge in the bond market. The five-year got to 2.4%. The 10-year note bounced off 3.3%. Wow, even after yesterday, the Fed is still above the 10-year.

  • Another Rough Day
    , January 23rd, 2008 at 9:43 am

    The market opened much lower again today, but the real action is in the bond market. Rates are plunging. The three-month T-bill just broke below 2% and the 10-year is below 3.5%.
    The Fed’s 17 interest rate hikes are being undone in front of our eyes.

  • Good Day for Us
    , January 22nd, 2008 at 4:37 pm

    Our Buy List was down -0.21% for the day compared with a -1.11% drop for the S&P 500. Until late in the day, we were in the black. The Buy List has again outperformed the S&P 500 for the year. And like last year, we’ve done it with less volatility.
    Here’s how the S&P 500 did today.