Madoff Statue Returned!
Posted by Eddy Elfenbein on January 2nd, 2009 at 12:04 pm

The thieves brought it back. And attached a note: “Bernie the Swindler, Lesson: Return Stolen Property to rightful owners. Signed by – The Educators.”

The copper statue was reported stolen from Madoff’s $9.2 million mansion on Dec. 22 – about a week after the Wall Street money man was accused of scamming investors in a $50 billion Ponzi scheme.
The statue does not appear to have any damage, and police are continuing to investigate the incident.
Frick said he was not aware of the 2004 German movie The Edukators, in which anti-capitalist activists break into the homes of rich people, move furniture around and leave notes that say “the days of plenty are over.”
The activists kidnap a rich businessman, have ideological discussions about money and politics, and then let him go, possibly teaching him a lesson on ethics and morality.
“Interesting,” Frick said when told of the film.

What’s the Difference Between a Recession and a Depression?
Posted by Eddy Elfenbein on January 2nd, 2009 at 11:16 am

Hebert Hoover used the word “depression” instead of “panic” to describe the events of his administration. Since then, there’s been a battle to define what’s a recession and what’s a depression. Most seem to define a depression as a 10% drop in GDP. The Economist says that it’s “a decline in real GDP that exceeds 10%, or one that lasts more than three years.”

America’s Great Depression qualifies on both counts, with GDP falling by around 30% between 1929 and 1933. Output also fell by 13% during 1937 and 1938. The Great Depression was America’s deepest economic slump (excluding those related to wars), but at 43 months it was not the longest: that dubious honour goes to the one in 1873-79, which lasted 65 months.
Japan’s “lost decade” in the 1990s was not a depression, according to these criteria, because the largest peak-to-trough decline in real GDP was only 3.4%, over the two years to March 1999. Since the second world war, only one developed economy has suffered a drop in GDP of more than 10%: Finland’s contracted by 11% during the three years to 1993, mainly thanks to the collapse of the Soviet Union, then its biggest trading partner.
Emerging economies, however, have been much more depression-prone. Among the 25 emerging economies covered each week in the back pages of The Economist, there have been no fewer than 13 instances in the past 30 years of a decline in real GDP of more than 10%. Argentina and Poland were afflicted twice. Indonesia, Malaysia and Thailand all suffered double-digit drops in output during the Asian crisis of 1997-98, and Russia’s GDP shrank by a shocking 45% between 1990 and 1998.
The left-hand chart shows The Economist’s ranking of slumps in developed and emerging economies over the past century. It excludes those during wartime (both Germany and Japan, for example, saw output plunge by 50% or more after 1944). The depressions in Germany and France in the 1930s make it into the top 12, but not that in Britain, where GDP fell by a relatively modest 6%.

Belarus Ruble Plunges 20%
Posted by Eddy Elfenbein on January 2nd, 2009 at 10:56 am

Think you’re having a tough day? Check out Belarus.

Belarus’ central bank sharply devalued the Belarusian ruble Friday, allowing the currency to plunge 20 percent in a move that will stop the hemorrhaging of its reserves.
The National Bank said the devaluation was aimed at raising the competitiveness of the Belarusian economy, which has been battered by the global financial crisis. It also was a condition of a $2.5 billion loan from the IMF announced Wednesday.
In the past six months the National Bank has spent about a quarter of its gold and hard-currency reserves keeping the Belarusian ruble stable against the dollar, euro and Russian ruble. The bank has refused to release the amount of its reserves.
The Belarusian ruble is now trading at 2,650 to the dollar, 3,703 to the euro and 90.6 to the Russian ruble.

A Look Back at 2008
Posted by Eddy Elfenbein on January 1st, 2009 at 10:40 pm

Here’s how the S&P 500 industry groups performed in 2008:

It almost looks like the Financials served as an early warning signal.

Russia Cuts Gas to Ukraine
Posted by Eddy Elfenbein on January 1st, 2009 at 4:08 pm

This looks ugly:

Russia halted gas supplies to Ukraine today for the second time in three years in a payments dispute, raising the threat of disruption to natural-gas shipments to Europe, as both sides said they wanted talks to resume.
Negotiations broke down shortly before midnight after Ukraine rejected an offer from OAO Gazprom, Russia’s state gas exporter, to sell it the fuel this year at $250 per 1,000 cubic meters, and insisted that Russia also pay higher transit fees. Ukraine said today it is seeking a price of $201.
The repeat of an energy standoff between the former Soviet neighbors risks further souring Russia’s ties with the West, months after its war with U.S. ally Georgia. Gazprom, which supplies a quarter of Europe’s natural gas, mostly through Ukraine, cut Ukrainian deliveries in January 2006 amid a similar pricing dispute. The shutdown reduced gas flows to Europe and led to questions over both countries’ reliability as suppliers.

The global economic meltdown will have geopolitical effects. We may already be seeing it.

A Year to Forget
Posted by Eddy Elfenbein on January 1st, 2009 at 4:03 pm

The Mercury News has the details on the Wall Street’s annus horribilis:

The Russell 3000, which covers 98 percent of investable equities, shed $6.7 trillion or 39.7 percent of its value during 2008.
The S&P 500 was down 38.5 percent, its worst performance since 1937.
The Dow Jones industrial average was off 33.8 percent — the worst return since 1931.
The five worst-performing stocks in Silicon Valley all lost more than 90 percent of their value.
Every single technology index fell this year. Biotech did the “best,” with a 17.7 percent drop; Internet, computer, networking and semiconductor stocks all were down more than 40 percent, and disk-drive stocks were off nearly 61 percent.

The 2009 Buy List
Posted by Eddy Elfenbein on December 31st, 2008 at 6:22 pm

Here’s my 2009 Buy List. For tracking purposes, I assume it’s a $1,000,000 portfolio and each position is worth $50,000. Here’s each stock, ticker, starting price and number of shares. This is what I’m referring to when I discuss how well the Buy List is doing.

Fifteen stocks return from 2008. The five new stocks are Baxter, Becton Dickinson, Cognizant, Eaton Vance and Eli Lilly. The sells are Clarcor, Harley-Davidson, Lincare, WR Berkley and UnitedHealth Group. We turnover one-fourth of the Buy List each year, however, nine stocks return to the Buy List for the fourth straight year.
The total market cap of all the companies is $238 billion. Eli Lilly is the largest at $45 billion. Nicholas Financial is by far the smallest at $24 million. The average dividend yield is 1.29%, which is much higher than we’ve had in previous years.
That’s it. The list is now “lock and sealed,” and I can’t touch it until next year.

The 2008 Buy List
Posted by Eddy Elfenbein on December 31st, 2008 at 5:33 pm

The 2008 trading year has come to a close. Overall, it was an awful year for stocks. The S&P 500 lost 38.49%, making it the worst year for stocks in 71 years. The Crossing Wall Street Buy List lost 33.60% which, once again, beat the market. Including dividends, the S&P 500 lost 37.00% while the Crossing Wall Street Buy List lost 33.01%.

For the year, 19 of our 20 stocks lost money. The only winner was a small 3.99% gain in WR Berkeley (WRB). The biggest loser was Nicholas Financial (NICK) which dropped 67.5%, although I’m sticking with in 2009. The second-biggest loser was Harley-Davidson (HOG) which dropped 63.67%.

The Crossing Wall Street Buy List again had less risk than the rest of the market. The daily volatility was 2.45% less than the S&P 500.

Here’s a spreadsheet detailing how the Buy List did in 2008. For tracking purposes, I assume it’s a $1 million portfolio and all the stocks are equally weighted at the beginning of the year. The rules state that once the Buy List is set, I can’t touch it for the entire year. Here’s how the Buy List did throughout the year.

Dow to S&P 500 Ratio
Posted by Eddy Elfenbein on December 31st, 2008 at 2:24 pm

After breaking 10 for the first time in decades, the Dow to S&P 500 ratio has backed off slightly. I wonder if that could have been a signal of a bottom. The low point in 2000 looks like the signal for a top.

Is the Storm Passing?
Posted by Eddy Elfenbein on December 31st, 2008 at 12:03 pm

It’s too early to say but if all holds up, the VIX will close below 40 for the first time in three months.