“It beats the heck out of any certificate of deposit”
Posted by Eddy Elfenbein on August 19th, 2009 at 10:14 am

Where are some investors placing their money?
Tax liens.

Private investors step in and buy tax liens, paying governments upfront all or part of the value of the taxes. The investors then get the right to foreclose on the properties, taking priority over mortgage lenders, and to charge interest rates as high as 18 percent on the unpaid taxes.
“It beats the heck out of any certificate of deposit,” said Howard Liggett, executive director of the National Tax Lien Association.
Because the sales occur in a patchwork of cities and counties across more than two dozen states, there are no figures tracking the number of tax-lien sales nationwide. The liens that are sold come from cases in which homeowners pay taxes to the local government, not through their lenders. But Mr. Liggett, whose group represents tax-lien investors, said they generated about $10 billion every year.
In 2006, Lucas County began selling off its overdue tax certificates to a New Jersey company named Plymouth Park Tax Services, a subsidiary of JPMorgan Chase. It also operates under the name Xspand.
The company, once run by the former governor of New Jersey, James J. Florio, was sold to Bear Stearns and then absorbed into JPMorgan after Bear’s collapse last year. Today, Plymouth Park is one of the largest players in the tax-lien business.
Plymouth Park has filed more than 1,000 foreclosure actions against delinquent taxpayers, more than any single mortgage lender in the county. But it says that it has only foreclosed on 56 of those filings.

Eaton Vance’s Earnings Fall But Top Expectations
Posted by Eddy Elfenbein on August 19th, 2009 at 9:57 am

It’s still been a good year for the asset management stocks. Eaton Vance (EV) is up over 40% for us. Reuters reports:

Asset manager Eaton Vance Corp said fiscal third-quarter net income fell 37 percent compared with a year ago as fees decreased.
For the three months that ended July 31, Boston-based Eaton Vance reported net income of $31.2 million, or 26 cents per share, down from $49.6 million, or 40 cents a share in the same period a year ago. Revenue fell 19 percent to $228 million.
Analysts surveyed by Thomson Reuters on average had expected the company to earn 28 cents per share, and revenue of $224.5 million for the quarter.
Revenue and net income rose compared with the quarter that ended April 30, 2009, however, as did assets under management. Eaton Vance managed $143.7 billion in assets as of July 31, up from $127.2 billion in the previous quarter. The increases were similar to those at other asset managers that have benefited from rising stock markets.

Investor Quiz
Posted by Eddy Elfenbein on August 18th, 2009 at 2:46 pm

Guess what company went from concept to $1 billion in sales in three years?

Read more…

How Bad Is Inflation in Zimbabwe?
Posted by Eddy Elfenbein on August 18th, 2009 at 2:39 pm

At one point last year, prices were doubling.
Every day.

RIP: Rose Friedman
Posted by Eddy Elfenbein on August 18th, 2009 at 1:19 pm

Rose Friedman passed away yesterday at the age of 98.
“The only person known to have ever won an argument with Milton.” – President George W. Bush

PPI Is Lowest on Record
Posted by Eddy Elfenbein on August 18th, 2009 at 10:35 am

Today’s PPI report shows that wholesale prices have dropped by 6.8% over the last year. That’s the lowest on record.

So is deflation a threat? Matthew Lynn says that fears of deflation are vastly overblown.

In other words, there were plenty of deflationary years. Yet over that period, the U.K. became the greatest economic power in the world: Its relative decline only started once inflation took hold. Deflation didn’t stop the Industrial Revolution, one of the most sustained times of economic creativity ever seen.
Likewise, a 2004 study by the Federal Reserve Bank of Minneapolis looked at the data on deflation across 17 countries over 100 years. It found that although the Great Depression of the 1930s was linked with falling prices, that wasn’t true of any other historical period. There was, it said, “virtually no evidence” that deflation caused a depression.
Why should it? We are constantly told that deflation is bad because it makes consumers hold off from buying things, thinking they will be cheaper tomorrow. But that is just silly.

The Biggest Thing Since E-mail
Posted by Eddy Elfenbein on August 18th, 2009 at 10:17 am

Jim Cramer pounds the table for Smart Phones:

As big and as game-changing as the personal computer and the Internet were, I believe the mobile Internet—the integration of voice, data, video, and storage in one handheld device—will be more lucrative than both. Maybe both put together. That may sound far-fetched now, but these devices, chock-full of applications and hardware that have begun to rival those of personal computers, have finally realized the elusive holy grail. As any twentysomething, or even middle-schooler, knows, once you procure a smartphone, you can throw away pretty much every publication, every guide, every television, every camera, every music device, heck, every gizmo you have, save your toaster oven. You just don’t need ’em anymore.
It’s not just the dazzling technology that’s driving things. It’s the size of the market and the speed at which companies and consumers are getting onboard. It took a half-dozen years and a host of competitors like Dell, Gateway, and Compaq to produce personal computers cheap enough to entice the masses. Thanks to the substantial subsidies offered by Verizon, Sprint, AT&T, and T-Mobile in their endless battles for market share, Americans are buying up smartphones and calling plans much faster than they bought PCs.
And the U.S. market is tiny versus the overseas arena. Beijing alone just committed $40 billion to build a smartphone network that will cover the whole nation, and the big telephone companies in China plan on subsidizing the phones with the same zeal as the American firms—obviously with millions more customers. Currently, there are as many as 4 billion cell-phone users worldwide, but only 12 percent use smartphones. Given the superiority of the product and the aggressive pricing, I expect we will see a total replacement of dumb phones with smart ones rather quickly. You’re talking about a market that could grow eightfold in just a few years.

The 10 stupidest tech company blunders
Posted by Eddy Elfenbein on August 18th, 2009 at 9:52 am

InfoWorld runs down the 10 stupidest blunders from tech companies. Here’s a sample and it’s one I never knew about:

2. Real Networks Punts on the iPod
People think Steve Jobs invented the iPod. He didn’t, of course. Jobs merely said yes to engineer Tony Fadell after the folks at Real Networks rejected Fadell’s idea for a new kind of music player in the fall of 2000. (Fadell’s former employer Philips also turned him down.)
By then MP3 players had been around for years, but Fadell’s concept was slightly different: smaller, sleeker, and focused on a content-delivery system that would give music lovers an easy way to fill up their “pods.” (Jobs is famous for driving the design of the iPod.)
Today that content-delivery system is known as iTunes, and Apple controls some 80 percent of the digital music market. Fadell worked at, and eventually ran, Apple’s iPod division until November 2008. Real Networks is still a player in the streaming-media world, but its revenues are a fraction of what Apple makes from iTunes alone.

Um…sorry.

S&P 500 Stocks Above Pre-Lehman Levels
Posted by Eddy Elfenbein on August 18th, 2009 at 9:41 am

Bespoke finds the very small list of stocks that are above their level prior to Lehman Brothers going kablooey. Only 55 stocks are up and just 27 are up by more than 10%.

Insiders Are Dumping Stock
Posted by Eddy Elfenbein on August 18th, 2009 at 8:51 am

From Reuters:

A massive rally in U.S. stocks since March has reawakened bullish spirits, but insiders are jumping out of the market in a sign the run up is getting stretched.
Company executives are selling stock at a rate not seen in two years after a near 50 percent rise in the S&P 500 from a March 9 low. That suggests directors and managers may think stock prices are nearing the top end of their range in the current economic climate.
There has been a decline in short interest — borrowed shares sold but not yet repurchased — which some analysts see as a warning. Some investors sell short to profit from price declines, and some say the recent rally has been supported by the reversing of short positions.

After a 50% rally, I think a sharp pullback is necessary. When it will happen and by how much is still a question. However, I don’t think the market really experienced a rally as much as we saw an unwinding of a vicious bear market.
The rally has been led by junk stocks which is really due to investors fleeing all investments which held any type of risk. The low-quality rally is mirrored by what’s been happening in the bond market with the closing of the gigantic spreads between corporates and Treasuries.