• Société Générale Changes the Calendar
    Posted by on March 7th, 2008 at 11:37 am

    If you’re old enough, you may remember seeing pictures of how the Kremlin doctored Russia history to keep up with the latest power struggles within the Politburo. Some comrade who could be seen storming the Winter Palace one year was magically photo-shopped out the next.
    Well, now Société Générale is keeping that practice alive in the 21st century. The company had its huge loss this year, but the firm is magically transferring it to 2007.

    It is not often that a major international bank admits it is violating well-established accounting rules, but that is what Société Générale has done in accounting for the fraud that caused the bank to lose 6.4 billion euros — now worth about $9.7 billion — in January.
    In its financial statements for 2007, the French bank takes the loss in that year, offsetting it against 1.5 billion euros in profit that it says was earned by a trader, Jérôme Kerviel, who concealed from management the fact he was making huge bets in financial futures markets.
    In moving the loss from 2008 — when it actually occurred — to 2007, Société Générale has created a furor in accounting circles and raised questions about whether international accounting standards can be consistently applied in the many countries around the world that are converting to the standards.

  • Hedge Fund Lost 22% Last Month
    Posted by on March 7th, 2008 at 11:31 am

    Think you had a rough February? I bet it wasn’t as bad as the folks at Saracen Energy Partners LP. Thanks to rotten bets on natural gas, the fund lost 22% last month.
    There’s simply no excuse to have that much exposure. One of the most important rules of investing is diversification. And no, diversification does not mean buying Google AND Apple. You need to be well-diversified across industry groups as well. Check out the Buy List for a good example.

  • Another Rotten Jobs Report
    Posted by on March 7th, 2008 at 10:56 am

    The employment outlook is getting worse. The government reported today that the unemployment rate dropped from 4.9% to 4.8% last month, but the numbers behind the numbers show that it wasn’t a good month for payrolls. The report on non-farm payrolls showed a loss of 63,000 jobs. Over the last four months, the economy has created just 16,000 new jobs. The economy needs to create 200,000 new jobs each month just to keep up with population growth.
    The number of jobs as a percent of the civil labor has been declining since the end of 2006. If we had merely kept that pace, then the economy would have over 1.6 million more jobs right now.

  • The Market Makes a New Low
    Posted by on March 6th, 2008 at 4:21 pm

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  • Department of Pathetic
    Posted by on March 6th, 2008 at 1:09 pm

    Ugh.

    Ask.com scales back in makeover
    In a dramatic about-face, Ask.com is abandoning its effort to outshine Internet search leader Google Inc. and will instead focus on a narrower market consisting of married women looking for help managing their lives.
    As part of the new direction outlined Tuesday, Ask will lay off about 40 employees, or 8 percent of its work force.
    With the shift, the Oakland-based company will return to its roots by concentrating on finding answers to basic questions about recipes, hobbies, children’s homework, entertainment and health.
    The decision to cater to married women primarily living in the southern and midwestern United States comes after Ask spent years trying to build a better all-purpose search engine than Google.
    The quest intensified after Internet conglomerate InterActiveCorp bought Ask and its affiliated Web sites for $2.3 billion in 2005. But Ask.com remained an also-ran, despite spending tens of millions of dollars on an advertising blitz about dozens of new products that impressed many industry analysts.
    Through January, Ask ran the Internet’s fifth largest search engine in the United States with a 4.5 percent market share, according to comScore Media Metrix. Google dominates the industry with a 58.5 percent share.
    “No matter what (Ask) did, it just wasn’t enough to get people to leave Google,” said Chris Winfield, who runs a search engine consulting firm, 10e20. “This looks they are raising the white flag.”

    (Hat Tip: Felix)

  • Buffett Is Now World’s Richest
    Posted by 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 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.
    image628.png
    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.
    image629.png

  • Fidelity Fined By SEC
    Posted by 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 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.
    image627.png
    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 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.