• S&P 500 and Earnings
    Posted by on April 28th, 2009 at 3:28 pm

    Here’s a look at the S&P 500 (black line, left scale) over the last few years with its earnings (gold line, right scale).
    image799.png
    The two lines are scaled at 16 to 1, meaning when the lines cross the market’s P/E ratio is 16. I used 16 because it seems that the market has tracked that fairly well for the past few years. This market top wasn’t marked by outrageous earnings multiples. The values were fine it was the fundamentals that were shaky.
    Two points to note. I used to operating earnings. That seems to get some people bent out of shape but it’s a much better tool for looking at the market as a whole. Also, AIG’s massive loss took out $5.13 from earnings in Q4, so that distorts the picture a little.

  • Poll Update
    Posted by on April 28th, 2009 at 1:44 pm

    Thanks to everyone who participated in our last poll.
    With over 200 votes cast, the median seems to be squarely in the 20% to 25% bracket. There’s almost exactly the same number of votes above as there is below.
    I realize that the “framing” of brackets answers probably violates every law of polling. Still, I was curious to see what my readers thought.
    I’m surprised by how high the result is. A rate of 22% or 23% is fairly high compared with current law. I would have assumed CWS readers were a strong anti-lot.

  • Early Stress Test Results
    Posted by on April 28th, 2009 at 11:01 am

    I don’t want to sound unappreciative, but if this is what the stress test is about, wouldn’t it have been a lot easier to look at the stock prices? “If you’re stock is down by over 90%, please step forward.” You know, wisdom of crowds and all that.
    They could have asked me to do the stress test. I would have done for a lot less money.
    PS I’ll give you one for free. GM is in bad shape.

  • Great News! Rate of Plunge In Home Value Slowing
    Posted by on April 28th, 2009 at 10:59 am

    I feel richer already:

    Home Prices in 20 U.S. Cities Declined at Slower Pace
    The decline in home prices in 20 major U.S. cities slowed in February for the first time since 2007, amplifying signals that the market may be stabilizing.
    The S&P/Case-Shiller index’s 18.6 percent decrease compares with a record 19 percent decline the month before. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
    Declining prices, Federal Reserve efforts to bring mortgage rates down, and government tax credits for first-time buyers may continue to support sales after an almost four-year slide. Still, mounting unemployment means purchases are unlikely to rebound quickly.
    “We’re probably getting close to an inflection point,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who correctly forecast the drop in the index. Still, he said, “if we are indeed going to see a recovery in the second half,” the double-digit price drops will need to abate in the next few months.

  • Super-rich ravaged by recession
    Posted by on April 28th, 2009 at 10:51 am

    Here’s an interesting story I think we’re going to see more of:

    Britain’s richest people lost 155 billion pounds in the past year because of a deep recession and the global financial crisis, a survey showed on Sunday.
    The Sunday Times newspaper’s 2009 Rich List, featuring the thousand wealthiest people based in Britain, also found the number of billionaires sank from 75 to 43 people in the last 12 months as the credit crunch took its toll.
    The country’s 1,000 richest people have a collective fortune of 258 billion pounds, according to the weekly newspaper. That compared with a record 413 billion pounds in last year’s survey.
    “I am beyond being surprised, except by the scale of the devastation,” said Philip Beresford, who has compiled the annual list since 1989.
    “It is extraordinary how people have seen their fortunes being whittled away. It is devastation all round.”

    Not all recessions are the same. Each has a particular slant to it and I think our current unpleasantness can be described as a Depression for the Ultra-Rich.
    One of the fall outs for this will be on government finances. Our tax code has followed income inequality. As a result, millions of Americans have been removed from the tax rolls while lower marginal rates have been offset growth the rising income of the very wealthy.
    Now we’re at a reckoning because it’s those upper incomes that are feeling the heat and the rest of the country no longer faces much of a tax burden. I believe that half of NYC’s taxes are paid by just 40,000 households. Well, they’re not going to have a good year this year. Just as the tech bust lead to the California recall, I wonder if the implosion of Wall Street will lead to similar political actions.
    Today we learn:

    New York City’s net personal income tax revenues plunged 51 percent in the first 24 days of April, compared with the same period a year ago, the city comptroller’s office said on Monday.

  • Becton Dickinson Beats By Two Cents
    Posted by on April 28th, 2009 at 10:11 am

    Profits were down and sales were flat:

    Medical-device maker Becton Dickinson and Co. said Tuesday its fiscal second-quarter profit fell 5.4 percent on a legal charge and lower sales.
    For the quarter ended March 31, Becton Dickinson earned $261.3 million, or $1.06 per share, down from $276.2 million, or $1.09 per share, a year earlier. Revenue fell less than 1 percent to $1.74 billion from $1.75 billion.
    Excluding legal charges to settle an antitrust case, the company said it earned $1.18 per share. Analysts polled by Thomson Reuters expected profit of $1.16 per share on revenue of $1.76 billion.
    Sales in the company’s medical segment fell 3 percent to $897 million while sales in the diagnostics segment rose 2 percent to $540 million. Biosciences unit sales rose 3 percent to $304 million. Overall U.S. sales fell 1 percent and foreign sales were flat as the stronger U.S. dollar cut into those markets.
    The company reaffirmed its full-year outlook for an earnings-per-share boost of 9 percent to 11 percent. Based on the company’s 2008 earnings from continuing operations of $4.46 per share, the guidance projects a 2009 profit of $4.86 to $4.95 per share. Analysts polled expect a 2009 profit of $4.94 per share.

  • Baxter Working on Swine Vax
    Posted by on April 27th, 2009 at 12:11 pm

    The Chicago Tribune reports:

    With world health officials worried about the global outbreak of another deadly virus, Deerfield-based Baxter International Inc. once again finds itself involved in the action.
    Baxter confirmed over the weekend that it is working with the World Health Organization on a potential vaccine to curb the deadly swine flu virus that is blamed for scores of deaths in Mexico and has emerged as a threat in the U.S.
    Baxter, which has an emerging vaccine business, has worked with the U.S. and foreign countries in the past to develop vaccines for the H5N1 virus commonly known as bird flu.
    Baxter has a cell-based technology that allows the company to produce vaccines more rapidly in the event of a pandemic than a decades-old method that uses eggs and can take weeks or months longer. Although the egg-based method has produced safe and effective vaccines, analysts say Baxter’s method can cut production times in half compared with the older process.
    “Upon learning about the swine flu outbreak in Mexico, Baxter requested a virus sample from WHO to do laboratory testing for potentially developing an experimental vaccine,” company spokesman Christopher Bona told the Tribune.

    Shares of Baxter International (BAX) are up nicely today.

  • RIP: Portfolio
    Posted by on April 27th, 2009 at 10:56 am

    After two years:

    Condé Nast will cease publication of Portfolio effective with its May issue and Portfolio.com will close in the second quarter of the year, it was announced today by Charles H. Townsend, President and CEO of Condé Nast.
    “The pressures and realities of the continuous deep economic slump have lowered Portfolio’s revenue projections below what is needed to continue publication,” Mr. Townsend said. “Portfolio was an ambitious and innovative magazine and website, and we were proud to publish them. The challenges facing this launch however proved too great. Joanne Lipman is an extraordinarily skillful editor and William Li is a very talented publisher. We thank them and their staffs for their tremendous efforts. It is unfortunate we were unable to give Portfolio the time needed to fully mature.”
    Portfolio and Portfolio.com were launched in May 2007. The magazine has published 21 issues since its launch. The magazine received a National Magazine Award in 2008 and has been nominated for multiple awards since.

    I feel bad for Ryan Avent, an excellent blogger they had just hired.

  • Foreign Journalists Look at America
    Posted by on April 27th, 2009 at 9:51 am

    Megan McArdle highlights this comically tone deaf article on America.

    The crisis is also making itself felt in posh Georgetown, a historic residential neighborhood in Washington D.C. which is home to many politicians, lobbyists and attorneys. Anyone who forgets to lock his car at night can expect to see unwanted guests sleeping in it by the next morning.

    I guess I missed that part. Time to load up on shares of Soylent Green (PEBL).

  • For Serious Math Geeks
    Posted by on April 25th, 2009 at 11:03 pm

    Greg Mankiw writes that stock prices “are approximately brownian motion.”
    Ironman at Poltical Calculations writes: “Since at least January 2008, stock prices moved away from approximating Brownian motion to instead follow more of a Lévy Flight.”
    Feel the chart love.