Your Efficient Market Data Point of the Day
Posted by Eddy Elfenbein on February 3rd, 2011 at 1:52 pm

According to Sportsbook.com, the odds for both heads and tails for Sunday’s big coin toss is -101. That means that you have to put up $101 to win $100.

Since something has to go to the house, you can’t even get 50-50 odds on a coin toss. However, the house’s take on this bet is extremely small so I’m guessing they’re just using it to entice customers to wager on bets with wider spreads.

Still, that’s better than betting on which team will win the coin toss which is -105 for both teams.

For the winner of the game, Sportsbook.com has the Steelers at +120 and the Packers at -140.

That’s like saying the Packers have a 58.3% chance of winning and the Steelers have a 45.5% chance of winning. You may have noticed that those add up to more than 100%, and that excess is the house’s cut.

I think it’s interesting that on the biggest bet of the year, the vig is still—in my eyes—pretty sizeable.

According to Brian Burke, one of the top football number crunchers around, the Steelers and Packers are almost perfectly matched. He has the Steelers at 50.07% and the Packers at 49.93%.

Burke thinks the public’s turn toward the Packers is due to their strong playoff run which he places under the cognitive bias known as the recency effect.

Reynolds American Earns 60 Cents Per Share
Posted by Eddy Elfenbein on February 3rd, 2011 at 10:41 am

For Q4, Reynolds American (RAI) earned 60 cents per share which was a penny below the Street. The company sees full-year 2011 earnings-per-share coming in between $2.60 and $2.70.

The number of cigarettes sold fell by 5.1% but the total revenue in dollars fell just by less than 1%. In other words, RAI was able to raise prices. I was very impressed by RAI’s gross margins which rose from 45.2% to 46.8%.

The shares pulled back below $32, but don’t be alarmed, Reynolds is still a very good buy. The stock pays a quarterly dividend of 49 cents per share which works out to a yield of 6.1% at the current share price.

Time To Fine The SEC
Posted by Eddy Elfenbein on February 3rd, 2011 at 7:52 am

Guess what company has screwed up its accounting for the past seven years in a row? Actually it’s even worse than that. They’ve screwed up basic tasks like tracking income.

You’d probably think the SEC would be all over them. Yeah…about that.

“A reasonable possibility exists that a material misstatement of S.E.C.’s financial statements would not be prevented, or detected and corrected on a timely basis,” the auditor concluded.

The auditor did not accuse the S.E.C. of cooking its books, and the mistakes were corrected before its latest financial statements were completed. But the fact that basic accounting continually bedevils the agency responsible for guaranteeing the soundness of American financial markets could prove especially awkward just as the S.E.C. is saying it desperately needs money to increase its regulatory power.

Like the rest of the federal government, the S.E.C. is operating without an increase in its budget, which was $1.1 billion last year. With President Obama talking about extending the freeze and lawmakers continuing their criticism of its embarrassing performance before the financial crisis, the agency’s prospects for more money appear bleak.

That has ominous implications for investors. The S.E.C.’s technology systems, for example, lack the ability to perform sophisticated analysis of large batches of financial material. As a result, a Congressional report says, S.E.C. analysts sometimes resort to printouts, calculators and pencils. While investigating the “flash crash” of May 6, 2010, S.E.C. computers were so strained by the crush of data from just one day of trading that it took three months to figure out what had happened.

TARP Nearly Even
Posted by Eddy Elfenbein on February 3rd, 2011 at 7:31 am

Promise not to tell anyone…the TARP program is nearly in the money:

The U.S. Department of Treasury on Wednesday said the government’s bank bailout program has recouped nearly everything it issued in loans two years ago.

The Troubled Asset Relief Program lent out about $245 billion and has received repayments of $243 billion with the latest repayment of $3.4 billion from Fifth Third Bank. The Cincinnati bank took $1.7 billion from existing capital and generated the other $1.7 billion by creating shares of stock to sell.

The TARP loan program is expected to ultimately yield a $20 billion profit to taxpayers, Treasury said in a release.

Including money provided to banks, automakers and AIG, as well as programs to improve lending and prevent foreclosure, the government provided $410 billion. About $274 billion has been received in repayments and income.

Morning News: February 3, 2011
Posted by Eddy Elfenbein on February 3rd, 2011 at 7:30 am

Crude Oil Rises As Violence In Egypt Worsens

France to Present Joint EU Proposal with Germany

ECB’s Trichet Fights to Curb Pay Pressures as Inflation Accelerates

S&P Says No Plans to Cut U.S. Rating in Medium Term

S.E.C. Proposes Rules on Derivative Prices

Bill Gross’s Recent CEF Purchases: Highly Impressive Performance

Sony’s Profit Falls 8.6% in Third Quarter

Unilever Sees Increased Commodity Expenses Dragging on 2011 Profitability

News Corp.’s Net Income More Than Doubles, Led by Its Cable Networks

Starwood Hotels Q4 Profit Tops Wall Street

Nippon Steel, Sumitomo Metal Plan Merger to Form World’s No. 2 Steelmaker

Leigh Drogen: The Absurdity of Making Brokers Into Fiduciaries

Joshua Brown: Three More Yellow Lights

Paul Kedrosky: Visualizing Global Taxes

The Rally By Day of the Week
Posted by Eddy Elfenbein on February 2nd, 2011 at 3:32 pm

The stock market closed at a new 29-month high yesterday. Since the rally began in March 2009, the S&P 500 is up 93.28%. We’re quickly approaching one of the fastest doublings in history.

Here’s the rally broken down by day of the week:

Monday 31.22%
Tuesday 2.60%
Wednesday 24.14%
Thursday 23.47%
Friday -6.34%

Stocks Mirror Bonds
Posted by Eddy Elfenbein on February 2nd, 2011 at 11:47 am

Here’s an interesting chart. This shows the S&P 500 in black along with the long-term Treasury ETF (TLT). Viewed this way you can see that they’re almost perfect mirror images.

Yesterday, the 30-year closed at a yield of 4.61%. That’s the second-highest yield in over nine months while the S&P 500 closed at its highest level since June 25, 2008.

The message over the last few months is clear: stocks have been rising as bonds have been falling. As I wrote earlier, this is exactly what QE2 was supposed to do.

Gas Prices At Two-Year High
Posted by Eddy Elfenbein on February 2nd, 2011 at 11:34 am

Energy stocks have been doing very well lately as oil prices gradually climb higher. Thanks to the political unrest in Egypt, oil is currently around $91 per barrel which is just below a two-year high.

There had been some concern that oil flows through the Suez Canal would be disrupted but it appears that that ain’t gonna happen.

The problem with higher prices at the pump is that they act like an across-the-board tax increase on consumers.

The folks at GasBuddy track prices at the pump and we can see that the actual price paid has nearly doubled in the last two years.

Dissecting AFLAC’s Results
Posted by Eddy Elfenbein on February 2nd, 2011 at 10:34 am

My favorite part was Becky Quick saying that AFLAC has 30 million shares outstanding and Amos replying that it’s close to 500 million.

With a company like AFLAC, I don’t mind a small earnings miss. The earnings were still well within the company’s range. AFLAC had a very strong year.

I was concerned about how much AFLAC’s shares would fall today. So far, they’re down about 3%. Any pullback is a good buying opportunity.

Morning News: February 2, 2011
Posted by Eddy Elfenbein on February 2nd, 2011 at 7:47 am

Oil Trades Near 28-Month High as Egypt Riots Add ‘Risk Premium’

EU Leaders Plan Euro Pledge as Investors Bet on Debt Strategy

Ireland Downgraded One Level to A- By S&P on Bank Bailout Costs

China Is Poised to Raise Rates Again, Bankers Say

Irish, Spanish Bonds Gain on Optimism Debt-Crisis Solution Can Be Struck

Why York Capital Management’s Dinan Worries About Fate of Small Hedge Funds

Dish Network to Buy Satellite Firm DBSD North America Inc. for $1 Billion

Panasonic Profit Up On Japan Sales, But Outlook Unchanged

EMI Taken Over by Citigroup in Deal to Write Off Debts

Earnings Rebound at Nomura but Miss Expectations

Unilever May Post Fastest Annual Growth of Polman’s Reign

Leigh Drogen: The Absurdity of Making Brokers Into Fiduciaries

Howard Lindzon: The Art of Jim Cramer