Buffett Is Now World’s Richest
Posted by Eddy Elfenbein on March 6th, 2008 at 11:05 am

Buffett is #1.

Berkshire Hathaway Inc. Chairman Warren Buffett beat out Bill Gates for the top spot on Forbes magazine’s annual list of billionaires worldwide, ending a 13-year reign for Microsoft Corp.’s co-founder.
Buffett’s wealth increased $10 billion to about $62 billion in the 12 months through Feb. 11, mostly from a gain in his company’s shares, Forbes said in a statement released yesterday.
“He is the iconoclastic investor of his generation,” said Ken Murray, who runs Blue Planet Investment Management in Edinburgh, which oversees about $250 million in financial stocks. He doesn’t hold Berkshire. “The fantastic amount of wealth he has accumulated puts him up there with Carnegie and Morgan.”
The fortune of Gates, 52, rose $2 billion to $58 billion. The Microsoft chairman fell to third on the list behind Mexican telecommunications mogul Carlos Slim, 68, who has an estimated net worth of $60 billion.

Poor Bill, if he had only graduated from Harvard.

P/E Ratios By S&P 500 Sectors
Posted by Eddy Elfenbein on March 6th, 2008 at 8:24 am

Notice how the P/E ratios across the ten S&P 500 industry groups seem to be converging.

I apologize for the teeny legend, but I couldn’t think of a better way to squeeze it on the graph. Here’s a look at the same data (no legend), but by relative P/E ratio. That simply divides each sector P/E ratio by the S&P 500’s P/E ratio.

Fidelity Fined By SEC
Posted by Eddy Elfenbein on March 6th, 2008 at 7:56 am

You know it’s coming…

The Securities and Exchange Commission’s order settles a long-running case against the nation’s largest mutual fund manager, which was found to have accepted more than $1.6 million in perks from 2002 to 2004.

Perks? But what kind of perks?

The gifts included tickets to the Super Bowl…

closer…

…and Rolling Stones concerts,

I can feel it…

private jet trips to exotic destinations,

almost there…

and fine wine and cigars, the SEC said.

just a little bit more

The agency said some Fidelity traders accepted…

Bingo!

illegal drugs and trips to strip clubs paid for by brokers, and one trader’s illegal gambling was facilitated by a broker.

Remember, past performance is not a guarantee of future results. The SEC even nailed Peter Lynch.

Bond Yields Premiums
Posted by Eddy Elfenbein on March 6th, 2008 at 6:59 am

Since mid-October, the spread between low-risk bond yields and higher-risk bond yields has widened dramatically. Here’s a look at the difference between BAA bond yields and AAA bond yields.

The ratio is the AAA yield divided by the BAA yield. The ratio is now at its lowest level in nearly five years.
Since 1986, the market is net down when the ratio is below 0.85.

75 Years Ago
Posted by Eddy Elfenbein on March 5th, 2008 at 9:39 pm

We have nothing to Fe’AH…

Here’s part 2.
Money quotes:

So first of all let me assert my firm belief that the only thing we have to fear. . .is fear itself. . . nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.
In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days. In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels: taxes have risen, our ability to pay has fallen, government of all kinds is faced by serious curtailment of income, the means of exchange are frozen in the currents of trade, the withered leaves of industrial enterprise lie on every side, farmers find no markets for their produce, the savings of many years in thousands of families are gone.
More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.
Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply.
Primarily, this is because the rulers of the exchange of mankind’s goods have failed through their own stubbornness and their own incompetence, have admitted their failures and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

The Buy List YTD
Posted by Eddy Elfenbein on March 5th, 2008 at 4:49 pm

The Buy List had a very good day today. We gained 1.05% compared with 0.52% for the S&P 500. Over the last four days, the S&P 500 is off 2.48% while we’re only down 1.02%.

For the year, our Buy List is down 8.81% compared with a loss of 9.17% for the S&P 500.

WaMu protects exec bonuses from subprime fallout
Posted by Eddy Elfenbein on March 5th, 2008 at 12:15 pm

So few corporate boards are willing to stand up for incompetent executives. Thank you, WaMu!

The board’s committee said in light of the challenging business environment and the need to evaluate performance across a wide range of factors it will take a three-step approach to rewarding its executives including subjectively evaluating company performance in credit risk management.
In January, Seattle-based Washington Mutual said it awarded Killinger 3.2 million stock options for 2008 to provide a “strong incentive to restore shareholder value”.
WaMu’s share price sank 70 percent in 2007 as mortgage losses soared.

Danaher Reaffirms Q1 Forecast
Posted by Eddy Elfenbein on March 5th, 2008 at 12:04 pm

Good news from Danaher (DHR). The company reaffirmed its first-quarter earnings estimate of 84 to 89 cents a share. That doesn’t include a five-cent charge related to its acquisition of Tektronix. Wall Street’s consensus is for 88 cents a share.
The stock has pulled back sharply this year, but the shares had a pretty good run over the past few years, so some consolidation isn’t a big surprise. Management has been pretty good about controlling Wall Street’s expectations. For the past few years, Danaher usually meets or just barely beats expectations.
Danaher has been a pretty shrewd dealmaker. Larry Culp, the CEO, said that the company may take advantage of the lower prices that the stock market is offering.

CEO Larry Culp told the Citigroup Global Industrial Manufacturing conference the company’s portfolio transformation toward higher-margin global businesses such as medical instruments is continuing, and deals are set to play a prominent role.
“We’re optimistic about M&A in this environment,” Culp said. “You go back to the last time we saw a slowdown, we were very active in ’02.”
“But I wouldn’t say our pipeline has changed materially,” he added. “Valuations in the public markets have come down … (but) it may be a little early to really see the things in the pipeline come into the zone where they’re actionable.”

The Dow/Nasdaq Ratio Hits a 3-1/2 Year High
Posted by Eddy Elfenbein on March 4th, 2008 at 3:44 pm

The Dow/Nasdaq ratio closed yesterday at 5.428, which just barely passed the peak from August 8, 2006. The ratio is now at its highest level in 3-1/2 years.

I should add that the ratio has been very steady over the past few years. Here’s a chart of the ratio going back to 1980:

Over the last 15 years, that ratio has been between 4.5 and 5.5 for 74% of the time.

The S&P 500 Is Close to a New Low
Posted by Eddy Elfenbein on March 4th, 2008 at 2:45 pm

Another rough day has pushed the S&P 500 below 1310. The lowest close since the October 9 high (1,565.15) came on January 22 when the S&P 500 closed at 1310.5. In other words, the bear market may not be over. Of course, it’s hard to tell when it truly is over.