Gasparino Vs. Taibbi
Posted by Eddy Elfenbein on August 3rd, 2009 at 9:21 am

I’m glad to see that Matt Taibbi’s famous article on Goldman Sachs (GS) is losing credibility. Charlie Gasparino is the latest to criticize it.

That storyline isn’t just wrong, it’s pretty naïve. But it’s gaining credibility following Taibbi’s Rolling Stone piece, first in the blogosphere and now with a growing number of what is commonly referred to as the mainstream media. It’s one thing to watch half-literate bloggers in desperate need of attention jump on the Goldman is the root of all evil story; it’s quite another to see respected news organizations with experienced reporters and presumably more experienced editors do it and in the process obscure the fact that Goldman, for all of its sins during the bubble years, was probably the least culpable for the system’s eventual collapse. And maybe more importantly, that Goldman and all the other banks are now overtly protected by the federal government and can still roll the dice and take risk only this time under the explicit protection of the American taxpayer.
All of which brings me back to Taibbi, who is usually a really good reporter, and a provocative storyteller. In addition to his Rolling Stone piece on Goldman, I watched his performance on WNYC. What’s interesting to me is (particularly after the WNYC appearance) is how much of what Taibbi is stating as fact or suggesting is probably true, is actually wrong.

As they say, read the whole thing.

Guess What Investment Class Is Up 10-Fold in the Past Five Years?
Posted by Eddy Elfenbein on August 3rd, 2009 at 9:04 am

Old movie posters.

When actor Nicholas Cage auctioned a rare Dracula poster in April, Ralph DeLuca knew he would outbid whomever dared raise their auction paddles against him in an effort to capture a piece of movie history.
The 1931 poster, one of only three remaining from the movie’s original run, sold for a stunning $310,700 (U.S.). Mr. DeLuca, who lives in New Jersey, insists that he landed himself a dependable investment.
“I got out of investment banking a couple of years ago and started investing in posters,” he says. “The prices keep going up for the really rare things, and I’d rather put my money in something tangible than in stocks.”
Mr. Cage likely agrees – he bought the poster 10 years ago for $77,000. His 303-per-cent gain easily outpaced the minus-10-per-cent total return he would have earned on the S&P 500 over the same time period. British insurance broker Stackhouse Poland said posters have multiplied in value by up to 10 times over the past five years.

More U.S. Banks Put on Probation
Posted by Eddy Elfenbein on July 31st, 2009 at 12:21 pm

From Reuters:

U.S. federal regulators have raised the number of struggling banks which they have essentially put on probation, forcing them to fix their problems to avoid potential failures, the Wall Street Journal said.
Citing data obtained under the Freedom of Information Act requests, the paper said The Office of the Comptroller of the Currency (OCC), along with the Federal Reserve, have issued more memorandums of understanding so far this year than in all of 2008.
At the current rate of at least 285, the Fed, OCC and Federal Deposit Insurance Corp are in line to issue nearly 600 of these secret agreements this year, the paper said, compared with last year when 399 such agreements were issued.

So that’s secret probation, but what about double-secret probation?

The Government Revises GDP Growth for the last 70 Years
Posted by Eddy Elfenbein on July 31st, 2009 at 11:16 am

Congratulations, we all just got wealthier today! Or I should say that according to the government, we got wealthier—not only today, but in the past as well.
The Commerce Department released its second-quarter GDP report this report and along with it, they revised ALL the GDP numbers going back to 1929.

Today, BEA is releasing revised statistics of gross domestic product (GDP) and other national income and product accounts (NIPAs) series from 1929 through the first quarter of 2009. Comprehensive revisions, which are carried out about every 5 years, are an important part of BEA’s regular process for improving and modernizing its accounts to keep pace with the ever-changing U.S. economy.

Paging Mr. Orwell, to the yellow courtesy phone.
These weren’t small changes either. Here’s a look at the old and new quarterly series which begins in 1947 (in trillions of dollars chained at 2000 prices):

Be sure to tell your grandparents that things weren’t as rough as we thought back in the day. Here’s a look at the percentage difference between the old and new series:

Here are the recent old and new quarterly growth numbers. There are some significant changes. For example, the fourth quarter of 2007 was -0.17%, now it’s positive 2.12%. According to NBER, the recession began in December 2007.

The first quarter of 2008 used to be positive 0.87%, now it’s -0.73%. Growth for the second quarter of 2008 was nearly cut in half. The contraction for the third quarter of 2008 was more than five times worse than originally thought!
Going back a few years, the third quarter of 2000 was originally -0.46% but now it’s positive 0.33% (that’s a Clinton quarter not a Bush quarter for all you political folks). This is important because journalists often refer to a recession as back-to-back quarters of negative economic growth. It’s technically not, although a NBER recession usually corresponds with back-to-back quarters of negative growth. Well, in 2000, it never happened. According to the old series, we had negative growth in three of five quarters. Now it was just two out of three quarters.
If anyone needs me, I’ll be in East Germany updating some crop reports.

Because Financial New Isn’t Creepy Enough, We Have Fox Business News
Posted by Eddy Elfenbein on July 30th, 2009 at 11:34 pm

Nasdaq-to-S&P 500 Ratio
Posted by Eddy Elfenbein on July 30th, 2009 at 4:10 pm

The Nasdaq has been on fire lately. The ratio of the Nasdaq to the S&P 500 is currently hovering right around 2.0. Two weeks ago, the ratio crossed above 2.0 for the first time since early 2001.

Don’t worry that we’re headed back to the Nasdaq bubble days just yet. We still have a long way to go to match the earlier peak.
Consider these numbers: On March 10, 2000, the ratio hit 3.62. To match that today, either the Nasdaq would have be around 3570, or the S&P 500 would have to be at 548 — a 44% drop from here.
In other words, what the hell were people thinking in 2000?

Dow Flashes Buy Signal
Posted by Eddy Elfenbein on July 30th, 2009 at 11:30 am

The Dow has gone from 10% below its 200-day moving average to 10% above it. That’s happened 21 times since 1921 and it’s been good for stocks 18 times. The average gain over the next year has been 18%.

What’s the Definition of Speculation?
Posted by Eddy Elfenbein on July 30th, 2009 at 11:16 am

A price move Congress doesn’t like.

Stocks Hate Congress
Posted by Eddy Elfenbein on July 30th, 2009 at 11:10 am

The S&P 500 is close to 1,000 this morning. There could be more good news on the way — Congress will soon go on recess.

Believe it or not, the stock market performs much better than average when Congress is not in session.
That at least is the finding of an academic study several years ago by professors Michael Ferguson of the University of Cincinnati and Hugh Douglas Witte of the University of Missouri at Columbia. Specifically, they found that “about 90% of the capital gains over the life of the Dow Jones Industrial Average have come on days when Congress is out of session.”

Nicholas Financial Reports Big Earnings Gain
Posted by Eddy Elfenbein on July 30th, 2009 at 10:34 am

Nicholas Financial (NICK) just reported earnings for the June quarter which is the company’s fiscal first quarter. Net earnings, excluding non-cash unrealized mark-to-market gain on interest rate swaps increased 34% to $2,081,000 as compared to $1,558,000 for the three months ended.
On an earnings-per-share basis, NICK earned 20 cents a share compared with 15 cents a year ago. Revenue increased 4% to $13,694,000 for the three months ended June 30, 2009 as compared to $13,119,000 for the three months ended June 30, 2008.

According to Peter L. Vosotas, Chairman and CEO, “We are pleased with our solid first quarter results. We concentrated on basic careful lending and collecting fundamentals and will continue to do so. Our results were favorably impacted by a reduction in the net charge-off rate, lower operating expenses as a percentage of average net receivables and a reduction in the cost of borrowed funds. While we remain cautious, we are encouraged that the economy is showing some signs of stability and we feel comfortable proceeding with our planned expansion. This expansion will include new branch locations in Akron, Ohio and in Gastonia, North Carolina, which will bring our number of branch locations to 50 in 12 states. The Company remains open to acquisitions should an opportunity present itself,” added Vosotas.

This is a great report. The most important fact is that the provision for credit losses is lower than it was one year ago. This most likely means that worst of the storm has passed for NICK. Bear in mind that this is a stock that’s still trading around 25% below book value. NICK is an outstanding buy.