• CWS Named One of Five Favorite Financial Blogs
    Posted by on June 1st, 2009 at 2:49 pm

    David Berman at the Globe and Mail named Crossing Wall Street one of his favorite financial blogs.*

    For four years, a long time in this business, Eddy Elfenbein has been treating readers with a mix of charts and sharp observation.

    The others are Bespoke Investment Group, Stocks To Watch Today, Humble Student of the Markets and Footnoted.org.
    * He actually wrote “favourite.” When are Canadians and Brits going to learn English?

  • AMZN@$83
    Posted by on June 1st, 2009 at 2:09 pm

    Did Amazon (AMZN) start trading in pesos today?
    $83! Really?
    This won’t end well.

  • S&P Nears Seven-Month High
    Posted by on June 1st, 2009 at 12:55 pm

    The S&P 500 is currently over 945. If it holds up, this will be the highest close since November 5, the day after election day.
    image812.png
    Also, if today’s gains hold up, the S&P 500 will be above its 200-day moving average for the first time in 18 months.
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  • “What’s Good for General Motors Is Good for America”
    Posted by on June 1st, 2009 at 11:02 am

    One of great urban myths of American business history is that the head of GM once said “what’s good for General Motors is good for America.”
    That line is once again getting a lot of press today. There’s one problem — it’s not true.
    Here’s what happened. In 1953, President Eisenhower nominated GM’s CEO Charles “Engine Charlie” Wilson to be Secretary of Defense. I’ll turn it over to Wikipedia:

    During the hearings, when asked if as secretary of defense he could make a decision adverse to the interests of General Motors, Wilson answered affirmatively but added that he could not conceive of such a situation “because for years I thought what was good for the country was good for General Motors and vice versa.”

    Gee, that’s kinda different. So what’s often portrayed as the ultimate in corporate arrogance that defined the atavistic nature of American capitalism was instead a humble statement of public spiritedness.

  • After 84 Years, GM is Booted from the Dow
    Posted by on June 1st, 2009 at 9:37 am

    GM (GM) and Citigroup (C) are out, Travelers (TRV) and Cisco (CSCO) are in.

  • GM Goes Bust
    Posted by on June 1st, 2009 at 9:03 am

    What used to be the largest corporation in the world is now bankrupt.
    This isn’t exactly a surprise. Here’s what I wrote in 2006:

    Whither GM?

    In 1979, the British economy was in free fall. Inflation was spiraling out of control. The unions were demanding commensurate pay increases, and when they didn’t get them, they struck. The country that had stood up to the Luftwaffe was failing apart. The garbage men went on strike and soon piles of “rubbish” dotted the countryside. Even the gravediggers went on strike and corpses were gruesomely left unburied.
    The winter of 1978-79 was called the Winter of Discontent, echoing the opening lines of Richard III. The situation was so bad that Her Majesty’s government had to apply for a loan from the IMF. This was back in the days when that had some sense of shame to it. You were even expected to pay it back.
    A reporter asked the Prime Minister, James, Callaghan, his opinion of the “the mounting chaos in the country.” Callaghan said: “Well, that’s a judgment that you are making. I promise you that if you look at it from outside, and perhaps you’re taking rather a parochial view at the moment, I don’t think that other people in the world would share the view that there is mounting chaos.”
    That was it. British socialism died right there. The commanding heights were nothing more than a literal heap of trash. The next day, The Sun’s headline read: “Crisis? What Crisis?”
    I can’t help but think of the similarities between British socialism and General Motors (GM). Once upon a time, GM ruled the world. Today, it’s an embarrassment. What’s good for GM, is largely irrelevant to America.
    For reasons unclear, billionaire Kirk Kerkorian sunk a good part of his fortune in GM’s stock. His investment has been a disaster. Now’s he’s sent his aide, another son of York, Jerome York to be exact, to Detroit to tell the automaker everything they’re doing wrong. The New York Times quotes York as saying: “The time has come to go into crisis mode and act accordingly.”
    No, the time to go into crisis mode has long since past. GM is a fiscal black hole. The company burns through $24 million a day. That’s more than the Yankees. Yet the company still pays out $566 million a year in its dividend. Crisis? What Crisis?
    Talk about unburied corpses. I honestly don’t think GM will survive this decade. Even if it does, it will hardly be recognizable. Any future GM will merely be a Commonwealth living in the shadow of a by-gone Empire. York’s plan is to get rid of the dividend and reduce the pay of senior management. Well…that’s a nice start, but I think GM will have to go a lot further; perhaps ditching some of its key brands like Hummer.
    The New York Times quoted Frederick A. Henderson, GM’s new CFO:

    “To be honest, I am in crisis mode. So I agree with him,” Mr. Henderson said. In December, he succeeded John M. Devine, now a G.M. vice chairman, who accompanied him to Mr. York’s speech. Like Mr. Devine, Mr. Henderson watched impassively while Mr. York spoke.

    Impassively? Ha! I bet they were ready to toss him out the window. I’d actually feel much better if GM were really in crisis mode. They’re not. They’re sleepwalking. Perhaps now, they’re sleeprunning. This is a company that plainly refuses to see reality. They’d be plenty happy to go on ignoring the mess they’ve made, but high oil prices forced the issue. The long-run was much shorter than any of us expected.
    The idea that GM can discount its way home is a foolish illusion. The facts are clear. Every GM car carries about $1,500 in health care costs. The employees’ health care trust has over $20 billion, and GM had to tap it twice recently. For $1 billion each time. Retirees outnumber current U.S. employees 2.5 to 1. The company has stopped providing earnings guidance.
    GM’s problem isn’t cars or legacy costs. Companies can deal with those. What GM has is a leadership crisis. They need to make major changes soon. If not, the Winter of Discontent will last a very long time..

  • Very Cool Interactive Map of GM Fallout
    Posted by on May 31st, 2009 at 11:54 pm

    Check it out.
    (HT: ZH)

  • GQ quotes Nassim Nicholas Taleb as saying that in the falling market he “made $20 billion for our clients, half a billion for the Black Swan fund.” Yeah…about that.
    Posted by on May 31st, 2009 at 10:45 pm

    Janet Tavakoli does some great legwork:

    A recent GQ article quoted Nassim Nicholas Taleb as saying that in the falling market he “made $20 billion for our clients, half a billion for the Black Swan fund.”
    I checked with Nassim Taleb regarding the $20 billion in gains and asked if he were misquoted. He responded via email: “The quote is inaccurate. THe [sic] 20 billion might correspond to the face value of positions.” This response is both vague and different in character from the mythical $20 billion in gains inaccurately quoted in GQ’s article. The total gains could be a tiny fraction of what Taleb loosely describes as “face value.”
    Why is GQ’s mistake important? In my opinion, public claims of enormous private hedge fund gains require credible back up, and one would think that GQ would have known that before it inaccurately quoted Taleb as having made a bell ringing gain of $20 billion for clients. Presumably, the error referred to outside clients, not the black swan fund itself, but it could have the side effect of attracting investors to the black swan fund, similar to advertising or salesmanship.
    The black swan fund’s strategy is purportedly to buy out-of-the-money put options on stocks and broad market indices and hedge tail risk for clients. The strategy may produce long periods of mediocre—or even negative—returns followed by a large gain and vice versa. No one can tell you for certain exactly when (or for how long) large gains are possible. Initial success in a newly created fund may not be replicated in the future, and there is always the problem of scaling. Scaling refers to the fact that an individual fund may make a high return on an initial investment, say 100% on $100 million, but lose 10% on $1 billion.

    Read the whole thing.

  • Jack Welch’s Challenge
    Posted by on May 31st, 2009 at 12:23 pm

    Dealbook:

    It was Jack Welch’s night to reign supreme once more.
    That’s the assessment of Vanity Fair magazine, which along with Bloomberg News staged a panel discussion in Manhattan on Thursday evening on how the economy got into its current mess and how to get out of it. Vanity Fair said Mr. Welch, the former longtime chief executive of General Electric, was the audience favorite as he gave what it called “an unapologetic defense of old-school capitalism in a room teeming with past and future Masters of the Universe.”
    Mr. Welch went head to head with the other panelists and the moderator, DealBook’s Andrew Ross Sorkin. At one point, he challenged the Nobel Prize-winning economist Joseph Stiglitz on the role of unions, saying, “Give me a highly successful, unionized American industry.”

    Hollywood.
    Want another? Pro Sports.

  • Corporate Dividends Are Drying Up According to Bankrupt Newspaper
    Posted by on May 31st, 2009 at 12:13 pm

    The Minneapolis Star Tribune reports:

    In February, General Electric Co. — the classic widows-and-orphans stock — cut its dividend for the first time since 1938, a move that will save the company about $9 billion a year.
    The January to March period marked the first quarter since Standard & Poor’s started recording dividend data in 1955 that the number of dividend cuts was greater than the number of dividend increases. A record low 283 companies announced dividend increases in the first quarter of 2009.
    “While the number of dividend decreases is at a record high, the number of increases has set a new record low,” said S&P senior index analyst Howard Silverblatt in April. “Since 1955, the average has been 15 increases for every decrease. Now its three increases for every four decreases.”