Dow +103 on BOJ Move
Posted by Eddy Elfenbein on October 5th, 2010 at 10:06 am

The market is moving up this morning thanks to a decision by the Central Bank of Japan to weaken the yen. They’re using some of the same medicine we are: cutting rates to zero and buying back bonds. This will hopefully help Japanese exporters. Right now, all the major indexes are higher and 19 of the 20 stocks on our Buy List are up (NICK is unchanged).

Yesterday evening, Ben Bernanke gave more clues that the Fed is close to a second round of quantitative easing. The yield on the two-year note is still near a record low.

“The additional purchases — although we don’t have precise numbers for how big the effects are — I do think they have the ability to ease financial conditions,” Bernanke said yesterday at a forum with college students in Providence, Rhode Island. He said the first wave that ended in March was an “effective program.”

The Fed snapped up $300 billion of Treasuries last year, and said in August it would reinvest proceeds from maturing mortgage holdings into government debt. The central bank is scheduled today to buy Treasuries due from September 2016 to August 2020, and from March 2013 to August 2014 tomorrow.

Walgreen (WAG) had good news to report. The company said that same-store sales rose 0.4% and the stock was upgraded by Jefferies. There was also a report showing that office vacancies are now at 17.5% which is the highest level in 17 years.

Morning News: October, 5, 2010
Posted by Eddy Elfenbein on October 5th, 2010 at 7:58 am

Bank of Japan Cuts Rates to as Low as Zero Percent

Rogue Trader at Société Générale Gets Jail Term

China’s Snub of Yuan Pleas Fuels Doubts on Europe Growth

Europe Services, Manufacturing Cool as Retail Sales Decline

Stock Futures Rise on Bank of Japan Move, ISM Data Due

Bernanke Says More Fed Asset Purchases Could Help

Moody’s Warns it May Downgrade Ireland’s Debt

Televisa to Buy Stake in Univision

Flash Crash Magnet Syndrome

Citi Gave Back One-Third of Profits to Financial, Legal or Regulatory Costs
Posted by Eddy Elfenbein 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 Eddy Elfenbein on October 4th, 2010 at 12:56 pm

Beware Friday’s Jobs Report
Posted by Eddy Elfenbein 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 Eddy Elfenbein 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 Eddy Elfenbein 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 Eddy Elfenbein 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:

Homemade Spacecraft
Posted by Eddy Elfenbein 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 Eddy Elfenbein 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.