• Citi Gave Back One-Third of Profits to Financial, Legal or Regulatory Costs
    Posted by on October 4th, 2010 at 2:47 pm

    Mike Mayo, an analyst at CLSA, raised his price target on Citigroup (C) from $3.50 to $4 and maintained his underperform rating. (Nope, I don’t get it either.) But this caught my eye.

    For every $3 of profit the last decade, Citi gave back a dollar because of regulatory, legal, financial or accounting losses, observes Mayo. That means Citi’s main problem is how not to “mess up,” in Mayo’s view.

    Sandler O’Neill notes that the Treasury’s stake in Citigroup — meaning the taxpayers — has fallen from 27% to 12%.

  • Abby Joseph Cohen: Stocks Are Still Atttractive
    Posted by on October 4th, 2010 at 12:56 pm

  • Beware Friday’s Jobs Report
    Posted by on October 4th, 2010 at 11:14 am

    This is the first full week of the fourth quarter. The big economic news will come on Friday with the September jobs report. This will also be the last jobs report before the election. The bad news is that the labor market is still in very rough shape. Wall Street expects that unemployment will tick up from 9.6% in August to 9.7% in September. This means that despite impressive growth in profits, it’s not trickling down to new jobs.

    Fed Chairman Ben Bernanke will speak later today and Wall Street will be paying even closer attention than usual. The reason is that the Fed is expected to announce another round of “quantitative easing” which is a fancy name for a money dump. Bernanke, of course, won’t say this explicitly. Instead, he’ll imply his actions under a blizzard of econo-speak. Any clue we can find will be a big deal. Personally, I don’t think a QE announcement will come until after the election. Bear in mind that the two-year Treasury just hit an all-time low of 0.375%. Ouch!

    The other big news for this week is the start of earnings season. Alcoa (AA) is set to report this Thursday. Wall Street expects to see Alcoa report earnings of six cents per share which is a big bust from the 28 cents per share they earned a year ago. Earnings season won’t kick into high gear for the rest of Wall Street until next week and the week after.

    Interestingly, Wall Street analysts are beginning to pare back some of their earnings estimates. It’s not big but it’s noticeable because the analyst community hasn’t done this in a long time. Almost continuously since the world exploded, analysts have raised and raised their forecasts. More than 70% of S&P 500 companies have topped Wall Street’s forecast for four-straight quarters. That’s the longest streak since 1993.

    Last month, Wall Street’s consensus earnings forecast for S&P 500 earnings for 2011 got as high as $96.16. Now it’s down to $95.17. Like I said, it’s not a major change but it’s the first move lower in a long time. I’d also point out that eight of the 22 worst days ever have come in October.

    Finally, here’s a look at how many Americans have been unemployed for 15 weeks or longer. This shows you how different this (former??) recession is from previous ones.

  • Morning News: October 4, 2010
    Posted by on October 4th, 2010 at 7:31 am

    Unconventional Wisdom: Stocks Do Beat Funds

    6 Things You Think Add Value to Your Home — But Really Don’t

    Cheap Debt for Corporations Fails to Spur Economy

    Fed Bond Buying’s Unintended Consequences May Mean Higher Rates

    Verizon Wireless to Pay Millions in Refunds

    Sanofi Launches Hostile $18.5 Billion Bid for Genzyme

    Kuwait Commits $1 Billion to AIA IPO

    Flawed Paperwork Aggravates a Foreclosure Crisis

    Americans Sour on Trade

    Structured Notes: The Retail Broker’s Own Little Synthetic CDO

  • About that Tiger Picture
    Posted by on October 3rd, 2010 at 9:01 pm

    If you haven’t seen it yet, this amazing picture of Tiger Woods at the Ryder Cup will soon reach iconic status.

  • Ichiro’s Hit Distribution
    Posted by on October 1st, 2010 at 11:06 pm

    Ichiro Suzuki is finishing up his tenth-straight season of collecting 200 hits. For his career, Ichiro has 2,240 hits out of 6,766 at bats. That’s remarkable for just ten years in the league.

    Here’s a look at the distribution of his hits and at bats:

    At Bats Hits # of Games
    0 0 2
    1 0 11
    1 1 1
    2 0 8
    2 1 14
    2 2 2
    3 0 55
    3 1 73
    3 2 39
    3 3 8
    4 0 166
    4 1 304
    4 2 231
    4 3 57
    4 4 6
    5 0 49
    5 1 186
    5 2 185
    5 3 88
    5 4 19
    5 5 5
    6 0 7
    6 1 17
    6 2 18
    6 3 15
    6 4 10
    6 5 1
    7 1 2
    7 2 2
    7 3 1
    7 4 1
    7 5 1
    8 3 1

  • Homemade Spacecraft
    Posted by on October 1st, 2010 at 10:19 pm

    Homemade Spacecraft (textless version) from Luke Geissbuhler on Vimeo.

  • Why Is Facebook Splitting Its Stock?
    Posted by on October 1st, 2010 at 4:03 pm

    The news today is that Facebook is splitting its (privately held) stock 5-to-1. Felix Salmon wonders why:

    If Facebook stock was trading at thousands of dollars per share, the split might still make sense — if you’re handing out stock or stock options to relatively junior employees, for instance, a single extra share can make a substantial difference. But it’s not: the highest reported figure for Facebook stock is just $76 per share. A 5-for-1 split would bring that down to just $15 per share: there seems to be no particular reason to have a share price that low.

    It’s possible that the $76 figure is wrong by an order of magnitude or so: that might explain the split. But absent that explanation, I can’t think of any good reason for this split, unless an IPO is much more imminent than anybody currently thinks. Can you?

    I wouldn’t be so quick to dismiss pressure from junior employees about the share price. When you deal with investing at the retail level, price level is perhaps the strongest cognitive bias there is.

    People just don’t like buying stocks over $70 per share no matter what the quality is. The average retail investor just loves to find stocks in the teens. I know it makes no sense, but I’ve seen it again and again.

    One of the reasons Microsoft went public, and Bill Gates was in no hurry, was that junior-level employees were becoming rich on paper but there was no place for them to sell their shares. The point is that even non-public companies can come under pressure about their share price.

    My advice is to never worry about the nominal price of a stock. Pay far more attention to the company’s business and financial ratios.

  • The S&P 500 Total Return Index
    Posted by on October 1st, 2010 at 1:37 pm

    Here’s a look at how the S&P 500 has performed since 1970 with dividends included:

    The total return index is up 3.89% this year. Over the last 10 years, it’s down 4.23%.

    If you had invested $100 in the market each month since 1970, you’d have about $640,000 today.

  • ISM Drops (!) to 54.4
    Posted by on October 1st, 2010 at 10:56 am

    The market got slightly rattled this morning on the news that the ISM Index dropped from 56.3 to 54.4.

    I need to point out that this doesn’t mean the economy contracted last month. Any ISM reading over 50 means the economy is expanding. Today’s ISM report is good news.

    Bloomberg has a rundown of the other ISM indexes:

    The ISM’s U.S. new orders measure declined to 51.1 from 53.1, while the production index dropped to 56.5 from 59.9.

    The employment gauge fell to 56.5 in September, the lowest in six months, from 60.4, and the index of export orders dropped to 54.5, the lowest this year.

    The measure of orders waiting to be filled fell to 46.5 from 51.5 and the index of prices paid jumped to 70.5 from 61.5.

    The inventory index increased to 55.6 in September, the highest since July 1984. A figure higher than 50 means manufacturers increased stockpiles.

    The other good news is that the Commerce Department said that consumer spending rose by 0.4% in August which matches the increase for July. Income, however, did a little better, rising 0.5% compared with a 0.2% rise in July.