• One-Month Treasury Bill Is a Blutarsky
    Posted by on December 8th, 2009 at 11:52 pm

    Here’s an arresting stat: The latest Treasury auction for one-month T-bills went off at a Blutarsky—0.0%.
    In other words, the government can borrow money for free for the next month. For now, this fact helps the spending brigades in Congress. Just about any spending short of burning money or filling the money hole will likely be a cost benefit for taxpayers. However, I don’t see any chance for second stimulus, plus Bernanke came down against it as well. (By the way, Paul Krugman argues that the very fact that the stimulus has failed is precisely why we need another. This is why more professors don’t get elected.)
    The zero-rate auction was incredibly popular. The bid-to-cover was 5.33 which is very high. There’s a technical reason why this bill was so popular. It will be the first one to expire in the new year. This means the institutional guys just want a safe place to park their money until 2010 begins.

  • Amazon’s Skyhigh Valuation
    Posted by on December 8th, 2009 at 12:40 pm

    I’ve been bashing Amazon.com (AMZN) for the past few months (and have been dead wrong). Still, I wanted to show you just how crazy the share price has gotten.
    Here’s a chart of Amazon and its earnings-per-share.
    image878.png
    The blue line is Amazon’s share price and it follows the left scale. The black and red line shows Amazon’s earnings-per-share and it follows the right scale. The black shows the trailing figures and the red is Wall Street’s projection.
    The two axises are scaled at a ratio of 50-to-1 which means that Amazon’s P/E Ratio is exactly 50 whenever the lines cross.
    A 50 P/E Ratio is very high, but even if we use that as a valuation, the stock is more than a year ahead of itself — even taking into account the tremendous growth forecast.

  • Rogue Trader Executed
    Posted by on December 8th, 2009 at 10:48 am

    Yikes:

    China on Tuesday executed a former securities trader for embezzlement, the first person in the industry to be put to death, but millions of yuan are still missing, a state newspaper said.
    Yang Yanming was sentenced to death in late 2005 and took the secret of the whereabouts of 65 million yuan ($9.52 million) of the misappropriated funds to his grave, the Beijing Evening News said.
    The report added that Yang was the first person working in China’s securities sector to be executed.
    “Preserve your moral integrity and don’t set too much store by business results,” Yang told the newspaper before the sentence was carried out.
    He was the general manager of the Beijing securities trading department of the China Great Wall Trust and Investment Corp., which became Galaxy Securities, from 1997 to 2003.
    Conscious that the growing gap between rich and poor could generate resentment, China is battling corruption and stock trading abuses. It has used the death penalty as a deterrent in serious cases.

    (Via: TBI)

  • What Will the Fed Do at Its Next Three Meetings?
    Posted by on December 7th, 2009 at 2:09 pm

    According to the futures market, nothing.
    The FOMC meets next week, then in January and again in March. The Cleveland Fed tracks what the futures market thinks will happen and the overwhelming view is that the Fed will keep rates at its current band between 0% and 0.25%.

  • The 90s Are Officially Over
    Posted by on December 7th, 2009 at 11:28 am

    You’ve Got Freedom: AOL ends ties with Time Warner

    AOL is shaking loose from Time Warner Inc. and heading into the next decade the way it began this one, as an independent company. Unlike the 1990s, though, when AOL got rich selling dial-up Internet access, it starts the 2010s as an underdog, trying to beef up its Web sites and grab more advertising revenue.
    Despite a few bright spots in its portfolio of sites, such as tech blog Engadget, AOL has a long way to go until Web advertising can replace the revenue it still gets from selling dial-up Internet access. One especially popular property, entertainment site TMZ, is a joint venture with a Time Warner unit that will keep TMZ and its revenue after AOL splits off.
    Now investors are getting a chance to place bets on AOL. On Wednesday, Time Warner shareholders as of Nov. 27 will get one share of AOL for every 11 of their Time Warner shares. The next morning, AOL CEO Tim Armstrong is set to ring the opening bell at the New York Stock Exchange, and AOL will begin trading under the ticker symbol of the same name — the one it had when it was known as America Online and used $147 billion worth of its inflated stock to buy Time Warner in 2001.

  • Where We Stand with TARP
    Posted by on December 7th, 2009 at 11:07 am

    It looks like Uncle Sam will only take a $42 billion bath from the TARP program. Only a few months ago, it looked like it would cost a lot more. Overall, that’s a return on equity of about -11%. That’s really not so bad. I have to confess that I’d be almost as worried if the Feds made money on TARP since it might give them confidence to try it again.
    Of the money lent to banks, TARP has worked fairly well with a profit of $19 billion on $245 billion lent out. The problem is that nonbank borrowers like General Motors have bled out the rest of the borrowing. Citigroup is the only major bank left that hasn’t paid back all of its TARP money.
    This was an ugly government policy but it was the right thing to do. Now all we need is a clear exit strategy.

  • The Buy List YTD
    Posted by on December 7th, 2009 at 9:08 am

    With just a few days left in 2009, the Buy List continues to do well. Through Friday, the Buy List is up 42.36% for the year versus 22.44% for the S&P 500 (that doesn’t include dividends). The Buy List is just a hair below its November 17th high. Since March 9, we’re up 88.37% to 63.48% for the S&P 500. But of course, that’s just a suckers rally.

  • Gold Is Down Again Today
    Posted by on December 7th, 2009 at 9:05 am

    After taking a bath on Friday, gold is down again today.

    Gold for February delivery slipped $26, or 2.22%, to $1,143.50 a troy ounce early Monday. Gold prices fell sharply Friday after after a much better-than-expected jobs report from the government showed employers trimming a mere 11,000 jobs in November as the unemployment rate ticked down to 10% from 10.2% in the prior month.
    “We’ve had a substantial turn in the dollar,” said Mark Hansen, director of trading at CPM Group. “People are taking a second look at their commodity exposure, especially precious metals, which have been investor favorites in the past couple of month.”
    Gold prices were pressured by a stronger dollar, as the greenback hit a five-week high against a basket of currencies Monday and also rose against the euro.

    We’ve become very used to a script lately—dollar down, gold and stocks up. Could that be coming to an end?
    Bloomberg notes that since 1980, gold has been an awful investment:

    Gold’s best year in three decades has yet to match the returns of an interest-bearing checking account for anyone who bought the most malleable of metals coveted for at least 5,000 years during the last peak in January, 1980.
    Investors who paid $850 an ounce back then earned 44 percent as gold reached a record $1,226.56 on Dec. 3 in London. The Standard & Poor’s 500 stock index produced a 22-fold return with dividends reinvested, Treasuries rose 11-fold and cash in the average U.S. checking account rose at least 92 percent. On an inflation-adjusted basis, gold investors are still 79 percent away from getting their money back.
    “You give up a lot of return for the privilege of sleeping well at night,” said James Paulsen, who oversees about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “If the world falls into an abyss, gold could be a store of value. There is some merit in that, but you can end up holding too much gold waiting for the world to end. From my experience, the world has not ended yet.”

  • The $1 Million Gold Bet
    Posted by on December 4th, 2009 at 2:43 pm

    I noticed this on Barry Ritholtz’s site more than two years ago (via Prieur du Plessis). Jim Sinclair offered a $1 million bet to anyone that gold will reach $1,650 an ounce by the second week of January 2011. We’re a little over a year away.
    At the time of the bet in April 2008, gold was going for about $900 an ounce. It recently jumped over $1,200 an ounce (although it pulled back sharply today to around $1,160). So gold has had a good run. But it still needs a good surge over the next thirteen months to hit Sinclair’s target.
    Will it make it? I have no idea. This one may come down to the wire.

  • The World Cup Draw
    Posted by on December 4th, 2009 at 1:56 pm

    We’re in Group C:
    Group A
    South Africa
    Mexico
    Uruguay
    France
    Group B
    Argentina
    Nigeria
    South Korea
    Greece
    Group C
    England
    United States
    Algeria
    Slovenia
    Group D
    Germany
    Australia
    Serbia
    Ghana
    Group E
    The Netherlands
    Denmark
    Japan
    Cameroon
    Group F
    Italy
    Paraguay
    New Zealand
    Slovakia
    Group G
    Brazil
    North Korea
    Ivory Coast
    Portugal
    Group H
    Spain
    Switzerland
    Honduras
    Chile
    They always talk about one group being the Group of Death. I’m not sure if there is one this time. In 2006, our group was considered by some (though not all) to be the GOD. We were up against Italy, the Czechs and Ghana. We tied Italy and lost the other two.
    The U.S. will play England on June 12. We play Slovenia on June 18 and Algeria on June 23.