10-Year T-Bond Hits 2008 High
Posted by Eddy Elfenbein on June 12th, 2008 at 10:25 am

I know we’re supposed to be in the worst economy since the Great Depression, but no one told retail shoppers.

Retail sales climbed 1 percent last month, from a 0.2 percent drop in April, the Commerce Department said. Excluding autos, retail sales increased 1.2 percent in May, after a 0.5 percent rise in April. The median forecast in a Bloomberg News survey was for an increase of 0.5 percent in retail sales and 0.7 percent in sales excluding autos.
Sales at retailers may have been boosted by Americans spending their tax-rebate checks and by higher receipts at service stations, Bloomberg News surveys of economists show. The data helped fuel speculation accelerating inflation will make investors reluctant to bid at today’s auction of 10-year notes.

The yield on the 10-year Treasury (^TNX) bumped up to 4.18% this morning which is the highest yield all year. Still, by the standard of the past few years, the yield is quite modest:

In the retail sector, Ross Stores (ROST) has been doing very well. The stock is up over 45% this year and the shares hit another new high today. Last week, the company reported that its same-store sales rose 7% in May.

Bear’s Lacrosse Team Beats Lehman’s
Posted by Eddy Elfenbein on June 11th, 2008 at 3:36 pm

From Bloomberg:

Bear Stearns Cos.’ lacrosse team beat Lehman Brothers Holdings Inc. 11-4 last night, a rare piece of good news for workers at the now-defunct Wall Street firm.
Peter LeSueur, 25, scored four of Bear Stearns’s goals, leading the team to victory at Baker Field in Manhattan three months after the firm collapsed and was forced to sell itself to JPMorgan Chase & Co.
“It’s been something that we’ve been able to look forward to,” said LeSueur, a former fixed-income analyst at Bear Stearns who played lacrosse at Johns Hopkins University from 2002 to 2005. “There were a lot of question marks surrounding the firm in the last couple of months, and just for fun we were able to keep our focus on this and know that we’d be able to play together and maintain our friendships.”

The T-Bill Rate Catches Up to the Fed’s Rate
Posted by Eddy Elfenbein on June 11th, 2008 at 12:14 pm

Although the stock market may be headed back to where it was in March, there’s a major difference between now and three months ago–the short-term credit market isn’t nearly as chaotic as it was. This doesn’t suggest that the stock market shouldn’t be falling, but it could mean that the worst of the credit crunch has passed.
The yield on the three-month T-bill is usually pretty close to the Fed Funds target rate, but that relationship went kabluey last year. Yesterday, for the first time in over two years, the T-bill rate nearly exceeded the Fed Funds target rate.
Last August, the T-bill rate plunged all the way to 2.95% (and an intra-day low of 2.4%) while the Fed was still at 5.25%. That’s a huge gap.
Here’s a look at the difference between the Fed Funds target rate and the yield on the three-month Treasury:

The Fed responded by cutting and cutting, but the T-bill rate continued to head lower. By mid-March, the spread was still close to 200 basis points. On March 20, the intra-day low for the three-month T-bill was just 0.2%. That’s a panic price.
Since the Fed last cut in late April, the T-bill rate has slowly crept higher. Now of course, there’s talk of the Fed raising rates soon.

Market Orders Vs. Limit Orders
Posted by Eddy Elfenbein on June 11th, 2008 at 11:29 am

Tim Sykes has a good article at TradingMarkets on the advantages of limit orders over market orders. I always enjoy hearing what Tim has to say because his approach to investing is almost the polar opposite of mine. Plus, any article that says, “90% of traders are known losers,” has got to win a place in your heart. (BTW, how many are unknown losers?)
Tim is a frenetic trader whereas I change one-quarter of my Buy List just once a year. There’s no one right way to invest—it often comes down to personality and temperament. Tim says that he hasn’t once used a market order; I can’t remember the last time I didn’t.
Tim’s point is that so much of strategy comes down to simple execution:

By using limit orders, I ensure a satisfactory execution. And, if none or only some of my order executes – as often times stocks run too hard and too fast, blowing past my limit price – then it’s probably for the best because experience has taught me not to chase stocks. Obviously buying to cover into a short squeeze is an altogether different animal – on those you need to get out as soon as possible – so I just place my limit far above the current price, still cautious not to wildly overpay or open myself up to getting taken advantage of by many of Wall Street’s nefarious players.

That’s an interesting angle because one of the frustrations I’ve found in limit orders is only getting partially filled. That would drive me nuts because I felt half dressed. With stop-losses, I found myself canceling far more than any there were ever triggered.
Tim concludes:

So, demand more from yourself whenever you place a trade. Be disciplined, be cautious, and be wary. Thinking this way will surely cost you a few missed opportunities, but the money saved over time from minimizing poor executions and emotionally charged trades will make it well worth your while.

Financials Fall to 3rd Place in S&P 500
Posted by Eddy Elfenbein on June 11th, 2008 at 8:49 am

Remember when the financials fell to second place in the S&P 500? It seems as if it was only a few days ago, which it, in fact, was. Well, now the financials are in third place.

The market value of IT stocks surpassed financials last month for the first time since the tech bubble imploded at the start of the decade. And now, energy names top financials in the widely followed index for the first time since 1992.
Worries over the health of the financial sector, which has suffered from bad bets on now souring mortgage debt, resulting tightness in the credit markets and a slowdown in corporate dealmaking, have dragged on the stocks of big names on Wall Street like Citigroup Inc. and Lehman Brothers Holdings Inc.
As of Monday’s stock market close, financials had fallen 36.6 percent from their October 2007 highs, according to S&P figures. During the same time, energy stocks have gained 11.79 percent and IT stocks have posted a 9.57 percent decline.

Kinda like Big Brown down the stretch in the Belmont.

Is the Dollar Coming Back to Life?
Posted by Eddy Elfenbein on June 11th, 2008 at 8:11 am

Could be. Here it is against the yen.

The greenback still has a long, long way to go.

The dollar picked up momentum throughout the global session, rising to a three-month high of 107.43 yen while pushing the euro down to a three-session low of $1.5453. The U.S. currency had rallied for the second straight day after Federal Reserve Chairman Ben Bernanke downplayed recession risks in a speech Monday night. He repeated concerns about inflation that had led to a dollar rally last week when Mr. Bernanke tied those price pressures to the weaker U.S. currency.
Foreign-exchange analysts said Mr. Bernanke’s new comments bolster the market view that the specter of dollar-supportive rate increases has now entered the picture.

Hedge Fund Manager Goes Missing
Posted by Eddy Elfenbein on June 11th, 2008 at 7:47 am

The weird story of Bayou hedge fund just got even weirder. Samuel Israel III, the head of the fund that lost $400 million, was supposed to begin his 20-year prison sentence on Monday. Except there was one minor problem—he never showed up.
The police found his car on a bridge spanning the Hudson with a suicide note written on the car’s hood. Except there was one minor problem—no body has been found. According to the police, the bodies of people who jump off the bridge are found pretty quickly.

Mr. Israel’s lawyers had sought a more lenient sentence, saying that he had numerous back operations and was addicted to painkillers. But that didn’t sway federal Judge Colleen McMahon. At his sentencing, she said: “He suffered from these ailments while he did the crime. He can deal with them while he does the time.”

Something this tells me this story isn’t over.

Financial News You Can Use
Posted by Eddy Elfenbein on June 11th, 2008 at 7:39 am

From MP Dunleavey

How to leave your husband

Naturally, you don’t want to do anything rash.

Take the time — two to six months — to plan an exit strategy that will protect your financial security. Surviving divorce is misery enough; you don’t want to suffer unnecessary financial hardship on top of it.

The Single Largest Consumer of Energy in the World
Posted by Eddy Elfenbein on June 10th, 2008 at 12:58 pm

It’s the U.S. military: Here’s a sample:

Since the military’s war machines burns fuel at such intense rates, it becomes impractical to talk about consumption in miles per gallon. That is why fuel use in military applications is shown in “gallons-per-mile,” “gallons-per-hour,” and “barrels-per-hour.”
Here are some examples: Flying gas-guzzling bomber B-52 burns about 3300 gallon per hour, flying gas stations KC-135 and KC-10 (aerial refueling tankers) burn on average 2650 and 2070 gallons per hour respectively. Famous F-15 and F-16 fighter aircrafts burn about 1580 and 800 gallons per hour respectively.
Armored vehicles have very low fuel efficiency. For instance the Abrams tank can travel less than 0.6 mile per gallon of fuel, and Bradley fighting vehicle less than 2 miles on a gallon of fuel.
High Mobility Multi-purpose Wheeled Vehicle (often called Humvee in military circles), which replaced World war II ear Jeep two decades ago, gets as few as 4 miles per gallon in city driving and 8 miles per gallon on the highway. In comparison, Ford’s Model T got 25 miles per gallon, and today a Ford Explorer gets 18 miles per gallon.

I think it’s a bit hard on the military to complain of fuel inefficiency, but the numbers are interesting to consider.

Not Done Yet….
Posted by Eddy Elfenbein on June 10th, 2008 at 10:20 am

According to the futures market, the Fed may raise interest rates one more time. Not at the June meeting, but it could happen at the August meeting. According to the latest numbers, the futures market believes there’s a 40% chance that the Fed will raise rates by 25 points in August. The Fed Funds Target currently stands at 2%.