Wallstrip Unstripped
Posted by Eddy Elfenbein on January 7th, 2009 at 10:04 pm

Wallstrip has come to the end of the road:

Like much of Wall Street, Wallstrip is pulling in its horns.
The finance-focused, comedy video Web site, which CBS’s interactive unit acquired in May 2007, won’t be producing any more episodes, PEhub.com said Wednesday, citing an undisclosed source. CBS plans to “take the DNA from WallStrip and apply it” to Bnet, another CBS property, the source told PEhub.
WallStrip, cheerily hosted by Julie Alexandria, produced three Web episodes a week, usually focusing on a company whose stock was trading at or near an all-time high. These days, few stocks fit that description, thanks to the sharp downturn in the market.
A source confirmed to DealBook on Wednesday that Wallstrip is scrapping its regular schedule, but details of the overhaul haven’t been announced yet. The Web site and the community will remain, the source said.
Howard Lindzon, the manager of a small hedge fund who helped create Wallstrip, told The New York Times in early 2007 that the Web site targets a space “between Jim Cramer and the bottom of the market.”
When it was acquired by CBS, one of Wallstrip’s producers said the Web site had yet to produce any self-sustaining ad revenue. It is unclear if it was ever profitable.

This is sad; I’m a huge WallStrip fan.

The Strange Death of Risk Management
Posted by Eddy Elfenbein on January 7th, 2009 at 4:43 pm

I just got around to reading Joe Nocera’s recent article on the life and death of risk management, and the titanically overrated blowhard Nassim Nicholas Taleb. The media tends to like these “Big Think” articles as it feeds into the Malcolm Gladwell-style of bring Big Ideas to the masses. Gladwell, in fact, was one of the first to highlight Taleb a few years ago in the New Yorker.
If you’re not familiar with Taleb, he has one idea and one idea alone. Actually, it’s not even his idea. The man who really impresses me Benoit Mandelbrot. Anyway, the idea is that stock returns don’t follow the normal distribution (the bell curve). That’s it—that’s the Big Think idea.
Here’s the deal: If stocks don’t follow a bell curve, then a lot of the ways we measure risk are flawed. For Taleb, of course, it’s much more than that. His idea (meaning Mandelbrot’s) is really an impossible to comprehend discourse on the human soul. In short, everyone else is a moron and only Taleb gets it.
He highlighted his idea in his two awful books, Fooled by Randomness and the Black Swan. I’ve actually read both books and I’m curious how many people who bought the books have actually read them. My hunch is that these could be part of the great unread books of the world. The reason is that the books are so bad that they’re barely literate. Taleb goes on and on about how he’s such an aesthete living in a world of philistines, yet he can’t write a single coherent page. Now expand that 400 pages. If people knew just how tedious these books are, I doubt they would receive so much praise.
Taleb and others now claim that Value at Risk, or VaR, played a large role in the credit mess. Sorry, that simply isn’t the case. Risk models are perfectly fine to use as long as you’re aware of the limitations. Every financial ratio or metric is like that. Just because it has some flaw is no reason to blame the movement of the economy on the misuse of math. Nocera points out that once Goldman Sachs saw problems with their VaR numbers, they adjusted. No big deal and Goldman is still in business today. Nocera quote one risk manager, “VaR is a peacetime statistic.” Exactly.
Here’s an excerpt from the article:

“VaR was inevitable,” Gregg Berman of RiskMetrics said when I went to see him a few days later. He didn’t sound like an intellectual charlatan. His explanation of the utility of VaR — and its limitations — made a certain undeniable sense. He did, however, sound like somebody who was completely taken aback by the amount of blame placed on risk modeling since the financial crisis began.
“Obviously, we are big proponents of risk models,” he said. “But a computer does not do risk modeling. People do it. And people got overzealous and they stopped being careful. They took on too much leverage. And whether they had models that missed that, or they weren’t paying enough attention, I don’t know. But I do think that this was much more a failure of management than of risk management. I think blaming models for this would be very unfortunate because you are placing blame on a mathematical equation. You can’t blame math,” he added with some exasperation.

Here’s another good snippet:

And yet, instead of dismissing VaR as worthless, most of the experts I talked to defended it. The issue, it seemed to me, was less what VaR did and did not do, but how you thought about it. Taleb says that because VaR didn’t measure the 1 percent, it was worse than useless — it was downright harmful. But most of the risk experts said there was a great deal to be said for being able to manage risk 99 percent of the time, however imperfectly, even though it meant you couldn’t account for the last 1 percent.

Howard has more. As usual, he’s bang on.

Bed, Bath & Beyond’s Q3 Earnings
Posted by Eddy Elfenbein on January 7th, 2009 at 4:20 pm

For their third-quarter (ending November 29), Bed Bath & Beyond (BBBY) just reported earnings of 34 cents a share. That’s pretty ugly, but honestly, it’s not bad considering the crappy environment they’re in. The earnings were a penny below the Street’s consensus, and the company earned 52 cents a share for last year’s Q3. Sales came in at $1.783 billion which was slightly below last year’s Q3. Same-store sales were just ugly, down 5.6%.
The company sees Q4 EPS coming in at 40 to 46 cents which is less than the 49 cents the Street was expecting.
Here are the earnings results going back a few years:

Here’s their trailing four-quarter earnings-per-share. The two red lines show the upper and lower band of the company’s projection.

It’s not hard to find the squeaky wheel. Take at look at their operating margins:

That’s based on trailing four quarter numbers. This means the company is doing a lot of price-cutting.

The End of Times
Posted by Eddy Elfenbein on January 7th, 2009 at 11:45 am

Michael Hirschorn says the New York Times could go bankrupt, by May.

It’s certainly plausible. Earnings reports released by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400million in debt. With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company’s debt was recently reduced to junk status), the paper’s future doesn’t look good.
“As part of our analysis of our uses of cash, we are evaluating future financing arrangements,” the Times Company announced blandly in October, referring to the crunch it will face in May. “Based on the conversations we have had with lenders, we expect that we will be able to manage our debt and credit obligations as they mature.” This prompted Henry Blodget, whose Web site, Silicon Alley Insider, has offered the smartest ongoing analysis of the company’s travails, to write: “‘We expect that we will be able to manage’? Translation: There’s a possibility that we won’t be able to manage.”

Mean Automakers Dash Nation’s Hope For Flying Cars
Posted by Eddy Elfenbein on January 6th, 2009 at 4:56 pm

Mean Automakers Dash Nation’s Hope For Flying Cars

Earnings Preview: Bed Bath & Beyond
Posted by Eddy Elfenbein on January 6th, 2009 at 1:20 pm

From AP:

Bed Bath & Beyond Inc. reports results for its fiscal third quarter on Wednesday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: In early December, Bed Bath & Beyond pre-released results for the third quarter, saying same-store sales slipped amid a tough economic climate and liquidation sales by a major competitor.
The Union, N.J.-based housewares retailer it expects earnings to range between 31 cents and 35 cents per share for the quarter ended Nov. 29. That’s down from previous guidance of 41 cents to 47 cents a share the company gave in September. It also represents a drop from 2007, when the company earned 52 cents a share in the same period.
The company said its net sales for the quarter fell 0.7 percent from the same period the previous year, when it reported sales of $1.79 billion.
Same-store sales for the quarter declined about 5.6 percent. Same-store sales, or sales at stores open at least a year, are a key indicator of a retailer’s health because they measure revenue at existing locations rather than newly opened ones.
During the quarter, the retail chain saw shares sink to an eight-year intraday low as government figures show home furnishing sales fell.
BY THE NUMBERS: Analysts polled by Thomson Reuters estimate a profit of 33 cents per share on revenue of $1.79 billion for the quarter.
ANALYST TAKE: After the retailer pre-released lower-than-expected third quarter figures in early December, analysts said the company was facing increasing pressure from a difficult sales environment and the ongoing bankruptcy liquidation sales of items by competitor Linens ‘N Things.
“While we expect consumer spending will likely remain weak, Bed Bath & Beyond may well be one of the few retailers to show earnings growth next year,” SunTrust Robinson Humphrey analyst David Magee told investors in early December. “Moreover, once the macro environment improves, Bed Bath & Beyond should emerge stronger than most and could benefit from some ongoing consolidation in the space along the way.”
WHAT’S AHEAD: Investors will be looking for an update on how the company’s holiday sales fared and more details about what executives expects business trends to be in the coming year.
STOCK PERFORMANCE: During the quarter, which ended Nov. 29, shares fell about 34 percent to end the period at $20.29.

Where Do You Place Johnny Cash?
Posted by Eddy Elfenbein on January 6th, 2009 at 12:11 pm

Tyler Cowen asks: “Where is the geographic center of Johnny Cash’s moral and musical universe?”
I’m particularly pleased with my answer. Johnny Cash walks the line.

More Financial History
Posted by Eddy Elfenbein on January 6th, 2009 at 12:06 pm

The Economist opens its vault:

Having fully admitted the disappointments, we find some justification for regarding 1928 as a year of no small promise for the future. Quite possibly it will be remembered in history as a year in which the foundations of recovery were laboriously laid.

Iceland to Sue Britain
Posted by Eddy Elfenbein on January 6th, 2009 at 11:05 am

From the 1950s through much of the 1970s, Britain and Iceland were involved in the Cod Wars, which was an overgrown fishing dispute. Now the financial mess has brought these two rivals back to confrontation.

Iceland’s state-run Kaupthing bank will sue the British government for its decision to force the bank’s British subsidiary into a form of bankruptcy, the Icelandic Prime Minister’s office said Tuesday.
The committee appointed to run Kaupthing — which collapsed last autumn — is taking Britain to court because it forced the unit Kaupthing Singer & Friedlander into administration at the height of Iceland’s financial crisis, according to the prime minister’s press secretary, Kristjan Kristjansson.
”They are suing on the grounds of the actions taken by the Financial Services Authority,” Mr. Kristjansson told The Associated Press.
The F.S.A., Britain’s financial regulator, swooped in to protect British depositors shortly after Iceland’s banking sector fell under the weight of its bad debts, removing savings accounts from Kaupthing Singer & Friedlander and seizing assets from another Landsbanki, another Icelandic bank.
Britain said the moves were necessary to safeguard British savers’ deposits, but the actions strained relations between the north Atlantic neighbors. Iceland has repeatedly threatened to sue over the matter.
It was not clear whether damages would be sought in the Icelandic suit. The F.S.A. and Britain’s treasury did not immediately return requests for comment.
Prime Minister Geir Haarde said Monday that his government supported the lawsuit and could help fund it.
”We think that it is very important that we ascertain if U.K. laws were misused against Icelandic interests,” he said.

Honestly, it’s hard for me to read that last sentence without laughing.

The Price of Forecasts
Posted by Eddy Elfenbein on January 6th, 2009 at 12:28 am

Here’s Paul Farrel highlighting absurdly bullish forecasts from 10 years ago. Let me again make my claim that overly bullish forecasts are routinely held to account, but absurdly bearish ones are rarely held accountable.
Here’s some advice: If you ever go in the econ-predictions biz, be pessimistic and vague. Then claim anything that goes wrong as something you predicted.
By the way, are we allowed to start making fun of this?