• Arnold Kling on the Bond Bubble
    Posted by on November 2nd, 2009 at 10:28 am

    Arnold debates the marekt:

    Markets: With so much unemployment and excess capacity, we cannot possibly have inflation.
    Kling: Do you not remember the 1970’s? Furthermore, you may be over-estimating the excess capacity. An excess capacity to sell houses and trade securitized debt may not help absorb demand in other sectors.
    Markets: The Fed has no plan to raise interest rates. Therefore, interest rates cannot rise.
    Kling: The Fed merely determines the composition of government debt. The amount of government debt is determined by fiscal policy, which the Fed does not control. At some point, the huge supply of government debt has to matter. If the public loses its appetite for government bonds, then the only way the Fed can absorb the supply is to print gobs and gobs of money. Prices will rise, and bond-holders will suffer a partial default in terms of purchasing power. Even if the Fed is relatively passive, I think that the high-inflation scenario is plausible.
    Markets: I can hold bonds for now. If inflation threatens to come back, I will see it in plenty of time to get out.
    Kling: That is how bubbles work. Everyone thinks that they have more protection from the bubble than they really have. Personally, in spite of the inflation bets in my portfolio, my big worry is that I do not have protection from the political risk and financial chaos that could come from a sovereign debt crisis.

  • I Liked Czar Better
    Posted by on October 30th, 2009 at 10:58 am

    Ken Feinberg’s official title is “The Special Master for TARP Executive Compensation.”

  • Disturbing Stat of the Day
    Posted by on October 30th, 2009 at 10:42 am

    I wasn’t aware of this: “Reinhart cited Robert Shiller to the effect that house prices rose more from 2000 to 2006 than in the previous 100 years put together.” Yikes!

  • NICK Earned 22 Cents a Share
    Posted by on October 29th, 2009 at 12:35 pm

    Nicholas Financial (NICK) just came out with earnings and it was another good quarter. The company earned 22 cents a share compared with just eight cents a year ago.
    It really is remarkable how cheap this stock is. For the first six months of their fiscal year, NICK earned 43 cents a share. For Q4 of last year’s fiscal quarter, they made 20 cents a share, so that’s 63 cents for the last three quarters. The big issue to watch for NICK is percentage for credit losses and that fell to 5.84% from 9.86% a year ago. This is the second quarter in a row of declining year-over-year numbers. In other words, things are most likely to get better for them.
    Whoever sold out last week was probably expecting some bad news. Well, it didn’t come. NICK’s book value is now $8.54 a share.

  • Aflac Keeps Its Real
    Posted by on October 29th, 2009 at 10:44 am

    I like this stock. I really do:

    Aflac Inc., the world’s largest seller of supplemental health insurance, said third-quarter profit more than tripled as investment losses narrowed and a stronger yen magnified revenue from Japan.
    Net income rose to $363 million, or 77 cents a share, from $100 million, or 21 cents, in the same period a year earlier, the Columbus, Georgia-based insurer said today in a statement. Operating income, which excludes some investment results, was $1.25 a share, beating the $1.20 average estimate of 17 analysts surveyed by Bloomberg. The stronger yen boosted quarterly profit by 9 cents a share, Aflac said.
    Aflac, which gets most of its revenue from Japan, is counting on earnings there and in the U.S. to support capital as the recession pressures the value of investments held to back policies. Chief Executive Officer Daniel Amos is diversifying holdings to reduce potential losses from defaults. Realized investment losses in the third quarter shrank 42 percent to $226 million from a year earlier, Aflac said today.
    “They’re still working through some of their issues, but the results look pretty impressive,” said Bill Smead, who helps manage $160 million, including Aflac shares, as chief investment officer of Seattle-based Smead Capital Management. “It’s the beginning of a long process” of improving earnings.

    So I guess the world wasn’t really going to end for them a few months ago. My only concern is that I didn’t load up when the shares were at $11.
    The CEO said they’re on track to make $4.75 to $4.83 a share for this year and their objective is to grow earnings 9% to 12% next year. That’s roughly $5.20 to $5.40 a share. Not bad for a stock going for $42.

  • Defending EMH
    Posted by on October 28th, 2009 at 9:39 am

    In today’s Wall Street Journal, Jeremy J. Siegel comes to the defense of the Efficient Market Hypothesis. I agree that blaming EMH for the credit crisis a stretch. There’s a lot wrong with EMH, but I don’t think we can hang our current mess on it.
    I’m still skeptical that the government can and should act to break investment bubbles. My issue isn’t EMH-centered, that prices are always right. Instead, I just don’t trust the government nor am I convinced that a burst bubble is for the general good. As Daniel Gross has pointed out, bubbles can be very good things.
    This one time, let’s leave EMH alone. To me, the real mystery around EMH isn’t whether it’s true or not, but how could anyone have ever believed it?

  • CNBC Debuts!
    Posted by on October 28th, 2009 at 8:15 am

    This is a little painful to watch. It almost looks like a high school AV club.

  • Fiserv Narrows Guidance
    Posted by on October 27th, 2009 at 6:49 pm

    Simply put: Fiserv (FISV) is a great company. Every quarter, this company delivers. Fiserv just reported Q3 EPS of 92 cents which was in line with the Street’s forecast. For last year’s Q3, they made 81 cents so that’s pretty good growth.
    For all of last year, Fiserv made $3.29. In July, they said to expect 2009’s EPS to range between $3.61 and $3.75. Today, the company narrowed the range to $3.63 to $3.68. The market seems a bit freaked out by that (the shares are off about 4% after hours), but I’m not concerned at all. That’s a very small adjustment and we’re still talking about a stock that’s going for about 12 times next year’s earnings.
    Fiserv is a very good buy here.

  • Eight-Year Trailing GDP Growth
    Posted by on October 27th, 2009 at 1:47 pm

    The third-quarter GDP report comes out on Thursday and it might not be completely horrible. In fact, it could be quite good.
    Here’s a look at the real annualized GDP growth rate for the trailing eight years.
    image867.png
    Man, George W. Bush does not look good here.

  • No, Earnings Estimates Haven’t Been Lowered
    Posted by on October 25th, 2009 at 8:58 pm

    This is an interesting earnings season because so many companies have been topping expectations. Doug Kass writes that the companies are beating expectations because expectations have been lowered. But Bespoke has the numbers and they show that expectations have actually been rising.

    Just prior to the market lows in March, however, the net earnings revisions ratio began to tick higher. Earlier this summer, the earnings revisions ratio actually moved into positive territory, which meant anaysts were raising estimates for companies more than they were lowering them. Leading up to this earnings season, the percentage of companies raising estimates hit a two-year high.