Dividends Are the New Thing
Posted by Eddy Elfenbein on September 7th, 2010 at 1:42 pm

At the end of last year, I was invited to participate in Bespoke’s Roundtable Q&A to discuss investing in 2010. For the question of what the major themes I saw, I said that investors would return to dividends.

Not a major theme, but I expect a new-found love for dividends. A company like GE could easily raise its dividend by 50%. I doubt many money managers will beat the SDY in 2010.

I think I stretched the point about GE’s dividend, although it could use some increasing. But my call on the SDY ETF (SDY) has held up fairly well. That ETF tries to match the S&P High Yield Dividend Aristocrats Index.
Here’s how it’s done versus the S&P 500 this year:

Through Friday, the SDY is up 4.80% for the year, and 5.71% including dividends.
In contract, the SPY is down -0.49% for the year, and down -0.02% including dividends.
Don’t dismiss buy-and-hold so easily. It depends what you buy…and what you hold.

This Just In….
Posted by Eddy Elfenbein on September 7th, 2010 at 11:18 am

Reuters reports:

The disparity in the numbers could either mean the market is due for a correction or the recent stock rally will keep going, analysts say.

I particularly like the “analysts say” part.

The Guardian Thinks There’s a Chicago Red Sox
Posted by Eddy Elfenbein on September 7th, 2010 at 10:31 am

This is from the Guardian‘s profile of Bob Diamond, the new head of Barclays:

When not at work, Diamond is a fanatical sports fan, supporting Chelsea (football), the Chicago Red Sox (baseball) and the New England Patriots (American football).

I’m guessing they’re inbox is filling up. But who’s more offended; Chicago or Red Sox fans?
(HT: 1440 Wall Street)

How Much Is a CEO Truly Worth?
Posted by Eddy Elfenbein on September 7th, 2010 at 10:02 am

Oracle (ORCL) announced that it’s hiring Mark Hurd, formerly of Hewlett-Packard (HPQ). First, I’m glad to see wealthy and powerful people finally land on their feet after a few weeks of unemployment.
But an interesting question is, how much does a CEO really add to a company’s business? When you get right down to it, I don’t believe it’s that much. Steve Jobs, sure. But others, I’m not so sure. I think culture and where the firm and industry are in their life-cycle can also be very important.
By my judgment isn’t what counts, it’s the market’s and Oracle’s market value has increased by $8 billion today. Henry Blodget notes that that’s about half of the $14 billion that HPQ lost when they fired Hurd.

Russian Finance Minister: People Should Smoke and Drink More
Posted by Eddy Elfenbein on September 7th, 2010 at 9:40 am

Can anyone imagine Tim Geithner saying this?

Speaking as the Russian government announces plan to raise duty on alcohol and cigarettes, Alexei Kudrin said that by smoking a pack, “you are giving more to help solve social problems such as boosting demographics, developing other social services and upholding birth rates”.
“People should understand: Those who drink, those who smoke are doing more to help the state,” he told the Interfax news agency.
Alcohol and cigarette consumption are already extremely high in Russia, where 65 per cent of men smoke and the average Russian consumes 18 litres of alcoholic beverages per year, mainly vodka, according to official statistics.

If I were cynical, I would say that in America, such a policy would greatly aid our entitlements financing.
Also, I’m not so sure that telling people that something will help the state will urge them to do it. I’ll give the Russian government credit for finally trying to kill its citizens by second-hand means. That’s actually an improvement.

Good Morning!
Posted by Eddy Elfenbein on September 7th, 2010 at 9:30 am

I hope everyone had a great long three-day weekend. The weather was perfect here in DC, lots of sun and not too hot.
On Saturday, I was walking through DuPont Circle and I came across one of the most bizarre protests I’ve ever seen. Living in DC, you get used to seeing people protest some off-beat cause or another, but this one was strange even by DC standards.
I’ll try to present their gripe as best as I can, and I’m using the groups leaflet as my guide. My apologies if I get this wrong, but the document isn’t a great example of clarity. Apparently, a group called Huntington Life Sciences allegedly does horrible things with animal testing. So the group is protesting them? No.
Huntington allegedly got a loan from Fortress Investment Group. So they’re protesting Fortress? No, that’s not it either.
Goldman Sachs allegedly owns a large stake in Fortress. So they’re protest Goldman? Yes…well, sort of.
They’re not protesting at Goldman’s HQ. Nor are they protesting at Goldman’s Government Affairs office in DC, which I’m assuming is their lobbying arm. Instead, they were protesting at the private home of the director of the Government Affairs office.
How this man, or his neighbors, is supposed to stop Huntington’s animal testing isn’t clear. This is the most degrees of separation I’ve ever heard of. I’m now curious if Kevin Bacon ever worked for Goldman Sachs’ Government Affairs unit.
I guess some people will protest anything.

McDonald’s Hits New All-Time High
Posted by Eddy Elfenbein on September 3rd, 2010 at 11:25 am

Congratulations to McDonald’s (MCD). The stock just made a new all-time high today of $75.35. That’s not just a 52-week high, or a post-crash high; that’s an all-time high.
Forty years ago you could have picked up the shares for just 29 cents a piece. That’s adjusted for nine stock splits; four 2-for-1s and five 3-for-2s which equals 121.5-for-1. That’s a gain of close to 26,000% or nearly 15% a year, and it doesn’t include dividends.

McDonald’s has done a great job in turning itself around. In 2003, the shares fell to less than $13. Who would have been brave enough to buy MCD then? I sure didn’t!
Check out this numbers: Yearly EPS has jumped from $2.04 in 2005, to $2.45 in 2006 to $2.89 in 2007 to $3.67 in 2008 to $3.97 last year. EPS will probably hit $4.50 this year and the Street is looking for $4.87 next year.

The CWS Buy List YTD
Posted by Eddy Elfenbein on September 3rd, 2010 at 10:44 am

Thanks to this morning’s push, the Crossing Wall Street Buy List has crept back into the black for the year.
Through yesterday’s close, we were down -0.79% for the year compared with -2.24% for the S&P 500. That doesn’t include dividends.
Here’s a look at the chart:

By early April, we ran to a big lead of more than 600 basis points. Since then, our lead has steadily eroded but we’re still ahead of the market.

The Good News Is that the Bad News Wasn’t as Bad as Expected!
Posted by Eddy Elfenbein on September 3rd, 2010 at 9:46 am

Today’s jobs report is being celebrated as “better-than-expected” which probably comes as a surprise to most non-Wall Streeters. After all, the unemployment rate ticked up from 9.5% in July to 9.6% for August, and there are now close to 15 million unemployed people in the country. That also doesn’t count the people who have left the job market entirely.
The “good” part of the news is that the private sector added 107,000 jobs in August while Wall Street was expecting just 40,000. Overall employment fell by 54,000 which was the same amount lost during July.

Employment at service-providers decreased 54,000. Construction companies added 19,000 workers, the first gain in four months, and retailers cut 4,900 workers.
Average hourly earnings rose 0.3 percent to $22.66 from $22.60 in the prior month, today’s report showed.
Government payrolls decreased by 121,000. State and local governments reduced employment by 10,000, while the federal government lost 111,000 jobs.
The average work week for all workers held at 34.2 hours.

As I mentioned, the overall unemployment rate rose from 9.5% to 9.6%, if we break down the decimals, it really rose from 9.51% to 9.64%. Only 12,000 more job losses and the number would round up to 9.7%.
One of the bright spots is that the civilian labor force increased by 550,000. This means that more people are looking for work. All I can say is that it could have been worse.

$4 Trillion a Day
Posted by Eddy Elfenbein on September 2nd, 2010 at 2:28 pm

Guess what market has daily volume of $4 trillion?
Give up? I’ll give you a hint: The currency markets.
Look at the table on the link. What’s interesting is how much the U.S. dollar dominates the currency markets. In fact, if you were to place a non-dollar trade — say, British pounds to Mexican peso — it would probably go pounds to dollars and then dollars to pesos.