“Who Put This Dick on My Back?”
Posted by Eddy Elfenbein on October 17th, 2008 at 2:29 pm

You gotta love traders. This is also something you can pull out to anyone defending efficient markets.
(Via: The Danza Tap)

Sentences I Never Thought I’d Write
Posted by Eddy Elfenbein on October 17th, 2008 at 1:20 pm

Good news, the VIX is down to 67!

A Former Lehmaner Tries to Make Do
Posted by Eddy Elfenbein on October 17th, 2008 at 12:56 pm

(Hat Tip: B-Riz)

Debt: The Good and the Bad
Posted by Eddy Elfenbein on October 17th, 2008 at 12:33 pm

Felix comes to the defense of Suze Orman. I think he makes a good case for her. Orman’s advice probably helps more people in more important ways that almost anyone you see on CNBC.
The only curious thing I would add is that when you get right down to it, how hard is it to say, “don’t buy things you can’t afford?” It’s not really about finances, it’s just basic discipline. Don’t buy stupid stuff you don’t need, and save what you can. Repeat. I guess I shouldn’t be too harsh. For many people, this lesson may come as a revelation.
Warren Buffett has often said that the biggest problem that consumers have is credit card debt. I think he’s right. I’m afraid to find out how many people have bought pizzas that turned out to cost them $200.
Speaking about debt. Virginia Postrel has a great column in Forbes decrying the endless hand-wringing of debt-phobes. Yes, debt can be a good thing.

When credit is cheaper to use and easier to arrange, people do use more of it. Hence those big, scary numbers, which grow along with the economy and the population. Contrary to a common perception, however, the people driving up the totals aren’t primarily the financially strapped. They’re “high-wealth consumers in their prime earning years,” observes Andrew Kish, an economist at the Philadelphia Federal Reserve. Almost half the growth in debt between 1989 and 2004 (the most recent year for which data are available) came from the highest-income 20 percent of American households. (By contrast, the bottom 20 percent held about 3 percent of consumer debt—an increase from 1.9 percent—and accounted for a bare 4.5 percent of the growth.) If the rich are getting richer, it makes sense that they’re also running up more debt. They can reasonably expect to pay it.
These affluent families also account for half of the outstanding consumer debt. So the $10,000 average that Obama cited isn’t in fact owed by the “typical” family with an average income. That figure is calculated by spreading the much larger debts of the rich over the population as a whole. All by herself, Cindy McCain owed at least $200,000 on two American Express cards, according to her husband’s campaign disclosure documents. That sounds terrifying until you realize that this wealthy woman pays her monthly AmEx bills in full.

Remember What I said About Greed Being Good. Um…Maybe Not.
Posted by Eddy Elfenbein on October 17th, 2008 at 10:35 am

A sequel to Wall Street is moving ahead. According to the Telegraph, the film will be very timely:

The story, which will be set during the current credit crisis, will see Gordon Gekko released from prison into a Wall Street which is in meltdown.

Ideally, Gekko would have his own show on CNBC.
(Via: WSF).

Finally
Posted by Eddy Elfenbein on October 17th, 2008 at 10:29 am

Alea notes that the TED Spread finally falls below 400.

Those Crazy Hand Signals Traders Use
Posted by Eddy Elfenbein on October 17th, 2008 at 10:16 am

Ever wonder what those crazy hand signals are that traders use? Here’s a primer from Britain:

With the introduction of electronic trading, hand signals have disappeared from the London Stock Exchange. But traders on some exchange floors around the world still like to wave their hands and fingers about to strike a deal.
Hands out in front but pulling towards you: I’m buying
Hands out in front, palms out, pushing away: I’m selling
Combination of finger signals indicates the buying/selling price (a closed fist indicates a zero). Then,
Touch the face: signals the amount to buy/sell
Finger to chin: multiples of 1
Finger to forehead: multiples of 10
Fist to forehead: multiples of 100

I’m afraid I’d accidentally buying 10 billion shares of something.

Buy American. I Am.
Posted by Eddy Elfenbein on October 17th, 2008 at 10:13 am

The Oracle makes the case for stocks:

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.
You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.
Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

-733.08
Posted by Eddy Elfenbein on October 15th, 2008 at 9:06 pm

The Dow dropped today by 733.08 points to close at 8577.91. That’s a loss of 7.87%. By percentage, this was worse than both October 9 (-7.33%) and September 29 (-6.98%). This was the worst day for the Dow since October 26, 1987, and it was the ninth-worst day ever. Three of the 19 worst days have come in the last 13 sessions.
The S&P 500 fell by 9.03% today which was much worse than the Dow. The Dow has outperformed the S&P 500 on all three big plunges. It also performed on October 7, which was only a drop of 5.11%.
The Dow has been steadily outperforming the S&P for nearly three years. In fact, last week the Dow-to-S&P ratio hit a 5-1/2 year high. The ratio hasn’t broken 9.5 yet, but it seems as if it’s about to. The ratio hasn’t been over 10 since 1966.

Unitedhealth Group Moves Up Earnings Data
Posted by Eddy Elfenbein on October 15th, 2008 at 4:34 pm

Unitedhealth Group (UNH) just said that it will report earnings tomorrow, instead of next week as originally planned. Something could be up, but I’ve lost a lot of faith in this company. Previously, the company said it expects 2008 EPS of $2.95 to $3.05. Since that translates to a P/E ratio of about 7, I don’t the market trusts them either.