I’m Back!
Posted by Eddy Elfenbein on June 29th, 2009 at 8:31 am

I’m back in the office after a very relaxing week in Maine. Here’s an interesting investing lesson: I didn’t pay attention at all to the stock market last week and the Buy List still outperformed the market. The S&P 500 dropped 0.3% last week while the 20 stocks on my Buy List gained an average of 2.2%. By doing nothing, I still beat most money managers.
The Buy List has been locked in place since the start of the year and we’re beating the S&P 500, 15.2% to 1.7% (not including dividends).
The best news last week came from Bed Bath & Beyond (BBBY). The earnings report was outstanding. Not only did the company cream Wall Street’s estimate by nine cents a share (34 cents to 25 cents), but earnings were also higher than the same quarter one year ago. So in BBBY’s case, things are actually improving instead of saying that the rate of worsening is slowing.
Here are the earnings results going back a few years:

Here’s a look at the trailing four-quarter earnings-per-share:

Note the last bump up in the line. It may not look terribly impressive right now but consider how poorly the economy has done, especially in the housing sector. Bed Bath & Beyond is an excellent long-term stock.

Greetings from Maine
Posted by Eddy Elfenbein on June 24th, 2009 at 4:07 pm

I just wanted to pop my head in and say hi from the beautiful state of Maine. Unfortunately, it has rained every singe day. The forecast is for still more rain the rest of the week. (The rain in Maine is driving me insane.)
Still, I’m having a great time just relaxing and not worrying about stocks bouncing up and down. The lake house is really nice. Also, I won’t say that I’m having a large-scale remote control naval/sea war complete with nerf dart guns. But I won’t say that I’m not having one either.
Bed Bath & Beyond (BBBY) is due to report today but I haven’t seen anything yet. The last earnings report was great and the stock has pulled back since then. Anything below $30 is a good buy, and below $28 is very good.
Tomorrow will be the GDP report. We’re now at the stage where the first quarter is a long time ago so the report won’t be too important. I’m curious if there will be an upward revision to a horrible quarter.
If you’ll excuse me, I have to get back to my battle station (ie, deck chair).
Elfenbein out.

Weekend Poll
Posted by Eddy Elfenbein on June 19th, 2009 at 1:49 pm

Vacation
Posted by Eddy Elfenbein on June 19th, 2009 at 11:25 am

It’s time to head out on vacation. I’m off to a wonderful lakeside cottage in Maine. Best of all, the laptop is staying behind.
It’s good to take some time off every once in a while so you can recharge your batteries.
While I’m gone please check out of the folks on my blogroll. I’ll be back in the office on June 28. Have a great week!

A New York Times Editorial on 2009 — Written in 1909
Posted by Eddy Elfenbein on June 18th, 2009 at 11:47 am

Enjoy.

Wall Street Is Close to Fully Bionic
Posted by Eddy Elfenbein on June 18th, 2009 at 9:28 am

I, for one, welcome our new computer overlords:

Investors and pundits are left clutching at straws to explain big moves in the stock market, such as attributing a June 8 bounce to rehashed comments from Nobel Prize-winning economist Paul Krugman. The difficulty in divining a fundamental explanation stems from a structural change in the U.S. stock market: The majority of stock trades now originate with fully automated “high frequency” funds, a phenomenon that has accelerated during the market turbulence of recent years because of the relative success of the strategy.
These funds employ no traders in the conventional sense. They employ no economists or chart trackers. Rather, programmers at funds such as those operated by Citadel Investment Group and Renaissance Technologies outfit computers with strategies based on obscure mathematical correlations. Then the machines trade in and out of stocks at light speed without human intervention, a departure from the “fundamental” investing model that dominated trading for the last century.
The growth of these funds is such that institutions whose names have never appeared in the newspaper are now trading hundreds of millions of shares a day. Major hedge funds that have put other strategies on ice are opening new funds devoted to high-frequency strategies and hiring the mathematicians and computer programmers that run them. Some of the fastest-growing market makers, such as Global Electronic Trading Company, or Getco, also use the automated strategies.
With the rise of these automated funds, the stock market is more prone than ever to large intraday moves with little or no fundamental catalyst. Computers don’t analyze the news (although some strategies use headlines as triggers) or seek to justify their buying and selling. Even in the relative quiet of the last three months, investors have often watched individual stocks or sectors move by 10% or more without explanation.

I Really Like this Story
Posted by Eddy Elfenbein on June 18th, 2009 at 9:21 am

The BBC reports, Rats play odds in gambling task.
(HT: Alea.)

Pew Center Poll
Posted by Eddy Elfenbein on June 18th, 2009 at 12:58 am

Americans are saying that they’re hearing more good news about the economy. Not mostly good news, but not all bad news as it was a few months ago.

Rainforest Discovered Through Google Earth
Posted by Eddy Elfenbein on June 17th, 2009 at 7:59 pm

This is a cool story. Scientists found a rainforest in Mozambique with the help of Google Earth.

Here’s a similar story where Google Earth helped uncovered an ancient fish trap:

Looking at the Iranian Elections
Posted by Eddy Elfenbein on June 17th, 2009 at 2:16 pm

Whoever made up numbers apparently forgot about Benford’s Law:

The results of the 2009 Iranian presidential election presented by the Iranian Ministry of the Interior (MOI) are analysed based on Benford’s Law and an empirical variant of Benford’s Law. The null hypothesis that the vote count distributions satisfy these distributions is rejected at a significance of $p e 0.007$, based on the presence of 41 vote counts for candidate K that start with the digit 7, compared to an expected 21.2–22 occurrences expected for the null hypothesis. A less significant anomaly suggested by Benford’s Law could be interpreted as an overestimate of candidate A’s total vote count by several million votes. Possible signs of further anomalies are that the logarithmic vote count distributions of A, R, and K are positively skewed by 4.6, 5.8, and 2.5 standard errors in the skewness respectively, i.e. they are inconsistent with a log-normal distribution with $ p sim 4 imes 10^{-6}, 7 imes 10^{-9},$ and $1.2 imes 10^{-2}$ respectively. M’s distribution is not significantly skewed.

For those unfamiliar, here’s wikipedia on Benford’s law.
Three years ago, I looked at the decimals in the Dow’s daily close. I didn’t test them but it looks like they could follow Benford’s law.