• Two Days in 2009 and We’re Kicking Butt
    Posted by on January 5th, 2009 at 11:16 pm

    With two days under our belt, the Buy List already has a lead over the S&P 500, 4.12% to 2.68%. Obviously, a two-day lead doesn’t mean much, but I mention it because the Buy List was helped out enormously today by the 27.7% jump in Nicholas Financial (NICK).
    Since NICK is such a low-priced stock, the bid/ask spread can make a big difference on how well the Buy List does each day. Some days we’re punished, but some days, like today, it’s a big, big help.

  • Meg Whitman for Governor?
    Posted by on January 5th, 2009 at 3:28 pm

    Apparently so.

    Meg Whitman stepped down from the boards of Procter & Gamble Co., eBay Inc. and Dreamworks Animation SKG Inc. effective Dec. 31, her spokesman said.
    The move is another signal that Ms. Whitman is seriously considering a run for governor of California, a person familiar with the matter said, adding that an announcement could come in the next four to six weeks.
    Ms. Whitman’s spokesman, Henry Gomez, declined to comment on her political ambitions, saying she stepped down “for personal reasons.”
    A spokesman for P&G said, “We deeply valued the contribution Meg made to our board over the last five years.” EBay and Dreamworks couldn’t be reached for comment.

  • The Gold-to-Silver Ratio
    Posted by on January 5th, 2009 at 11:29 am

    In 1792, the U.S. Congress, at the advice of Alexander Hamilton, passed the Coinage Act of 1792. This was the government’s first attempt at price-fixing. The act defined a U.S. dollar as 371.25 grams of silver or 24.75 grams of gold. In other words, gold was worth 15 times as much as silver.
    So how did they do?
    Well, not too well. The guys at Bespoke posted a chart looking at the ratio of gold to silver over the past few years. The ratio has exploded in the past year, rising from under 50 to nearly 80 today. They conclude: “Based on the ratio of gold to silver over the last ten years, a reversion of the mean trade would be to go long silver and short gold.”

  • Best Paragraph of the Day
    Posted by on January 5th, 2009 at 11:16 am

    James Surowiecki on Wall Street con games:

    In David Mamet’s movie “House of Games,” the grifter played by Joe Mantegna explains to a former mark, “It’s called a confidence game. Why? Because you give me your confidence? No. Because I give you mine.” So the bankers gave us their confidence, in the form of mortgages and other forms of credit, and we gave them ours. This culture of credulity did plenty of damage to the economy, but now it has given way to something even more corrosive; namely, endemic mistrust. Because if there’s one thing worse than too much confidence it’s not enough. Fraud impoverishes a few; fear impoverishes the many. As long as mistrust prevails, people will keeping pulling money out of the system—sometimes even at gunpoint.

  • Renaissance Waives Fees
    Posted by on January 5th, 2009 at 10:45 am

    James Simons, the Grand Poobah of Renaissance Technologies, said he’s going to waive the fees on his futures fund which was down 12% last year, or as Simons called his performance, “less than stellar.”
    The break in fees for this year adds up to $30 million for his $3 billion futures fund. In light of Simons move, I’d also like to announce that I’m waiving all user fees for this blog due to the Buy List‘s less-than-stellar performance.
    Simons’ Medallion Fund, I should add, was up 80% last year.

  • The Frank Pentangeli Defense
    Posted by on January 5th, 2009 at 2:03 am

    Harry Markopolos won’t testify in front of Congress today due to illness. This is strangely similar to The Godfather Part 2.
    (H/T: Naked Shorts).

  • Down with Financial History
    Posted by on January 5th, 2009 at 1:36 am

    Paul Kedrosky has a very good post on the uselessness of financial history. I think he’s exactly right. Finance people tend to be very loose with historical comparisons. I’ll often hear that some situation is “eerily similar” to some year. I don’t buy it—all these historical scenarios are incredibly different. That’s also why I don’t buy the “madness of crowds” explanations about speculative bubbles (there’s another overrated book).
    Paul writes:

    I’m torn on the subject, but I’m also increasing skeptical of any and all comparisons to prior historical periods. I don’t buy trough P/E, or recession length, or relative valuation, or interest rate, or sectoral rotation arguments, or… you get the picture. I love data, but I’m increasingly close to being an outright nihilist when it comes to over-reliance on historical financial data without any truly coherent supporting rationale. We are in a grand experiment with no real history to draw on, and anyone who pretends otherwise is deluded or selling something, or both.

    My view is all these models and comparisons are useful fictions. To put it succinctly: Some are more useful than others. The danger is thinking they’re overly determinant. All comparisons need to be put in context, and context changes constantly. The more I study investing, the more I admire a truly independent mind.
    David Merkel has more.

  • Dubai, Do Sell
    Posted by on January 5th, 2009 at 1:14 am

    Paradise is going bust.

  • Lewis and Einhorn in the NYT
    Posted by on January 5th, 2009 at 1:09 am

    The must-read article from yesterday is Michael Lewis and David Einhorn’s two-parter (here and here) in the New York Times. For the most part, I think they describe the problems fairly well. My issue is that I’m not entirely satisfied when a highly complex issue is reduced to the long-term good being sacrificed for short-term gain. Whenever I hear problems put in a neat package like that, I’m suspicious. It’s like hearing that a problem is due to “a lack of communication.” Call me skeptical. The more I look at the credit mess, the more bewildering I find it.
    For proposed solutions, Lewis and Einhorn have some good ideas and some not-so-good ideas. For example, when firms get into trouble, let them fail. However, they don’t go all they way and instead suggest nationalizing a failed firm. Well, that’s not letting it fail. When I think of letting a company fail, I mean the real thing. I think the supposed “chaos of bankruptcy” is overrated. Going into bankruptcy protection is a very well-defined area of our legal system. Airlines can exist for a long time in Chapter fill-in-the-blank.
    The question I have is can the FDIC come up with a way to protect counter-party risk in a failed firm ala deposit insurance. Plus, an off-with-their-head strategy, as Lewis and Einhorn propose, could cause even more mischief from execs who have nothing left to lose.
    Lewis and Einhorn also suggest regulating credit-default swaps but they’re a little thin on the details. More specifically, there are no details.
    They also propose breaking up “any institution that becomes too big to fail.” Hmmm. Again, that’s a lot easier said than done. Particularly when you consider that firms often (though not always) become large through success. Therefore the government has to effectively punish success. I have some issues with that.

  • Ed Reed
    Posted by on January 4th, 2009 at 11:50 pm

    In today’s playoff game, Raven’s safety Ed Reed had two interceptions, including one he returned for 64 yards and a touchdown.

    What’s remarkable about Reed is his ability to return inceptions for big yardage. He has 43 career regular season inceptions, which ties him for 58th place all-time. For yardage, however, Reed has 1,144 yards which ranks him sixth all-time.

    In week 12 of this season, Reed returned a pick 107 yards for a touchdown to set an all-time record for the longest interception return in the history of the NFL. The previous record was 106 yards.

    Set by Ed Reed in four years ago.