Option Traders Fear a Crash
Posted by Eddy Elfenbein on October 8th, 2007 at 12:14 pm

In the stock pits, traders are bullish but not so in the options arena:

Investors are paying the most ever to protect against a drop in the Standard & Poor’s 500 Index, data compiled by Morgan Stanley show. The gap between the price of so-called put options on the benchmark for U.S. equity and the cost to wager on further gains has averaged about 8 percentage points since August. That’s more than the previous high in July 2001, before the index dropped 34 percent and fell to the lowest this decade.

Business Deals Gone Bad
Posted by Eddy Elfenbein on October 4th, 2007 at 11:11 am

Business Week has an interesting article on bad business deals. This problem is far more common than most people realize. My particular concern is the mega-merger. Time and time again, these deals never seem to work out. They’re always greeted with great fanfare. You see the new CEOs smiling and shaking hands. Everyone is talking about synergy this and new markets that.
My hunch is that mega-mergers flatter the vanities of the executives who make the deal. Shareholder value, on the other, is probably more do to innovation and execution where executive decisions play a much smaller role.
So how come the mergers rarely seem to work out? I think the problem is that there are a million steps that can go wrong. You have to merge two different cultures. Your clients need to realize that. There are ego and turf wars. Shareholders must be pleased. Lawyers need to be pleased. Plus, there’s always the issue of anti-trust battles.

The wreckage of deals gone bad litters the business landscape these days. On Oct. 4, shareholders of German automaker DaimlerChrysler (DAI) are expected to approve renaming the company Daimler, jettisoning the last vestiges of the disastrous 1998 acquisition of Chrysler, for which it paid some $40 billion. While retaining a 19.9% stake in the Michigan company, Daimler’s shareholders will be more than happy to forget the whole episode, which saw litigation over the deal, a dearth of hit models, cultural and operational snags between U.S. and German managers, and heavy financial losses. In May, Daimler agreed to sell the bulk of the company to private equity firm Cerberus Capital Management for a mere $6 billion.
On Oct. 1, online auction house eBay (EBAY) conceded that it had overpaid in its $2.6 billion acquisition of Internet telephone service Skype Technologies in 2005. EBay took a writedown of $1.4 billion, and Skype founders Niklas Zennström and Janus Friis departed from their former suitor.

Here’s Business Week‘s list of the Worst Deals of All-Time.

The Buy List Today
Posted by Eddy Elfenbein on October 3rd, 2007 at 5:00 pm

I shouldn’t toot my own horn, but the Buy List has been doing pretty well lately. Since September 21, we’re up 2.91% a full two points ahead of the S&P 500. For the year, however, we’re still trailing the S&P 500, 8.55% to 3.74%.
Today we were up 0.19% while the S&P was down -0.46%. That’s a nice spread for one day. Today’s big winners were Harley-Davidson (HOG) and Fiserv (FISV). Harley’s been a disaster this year, but to be honest, I still like the stock. For the year, HOG is down over 30% but the company recently raised its dividend.
Respironics (RESP) is still kicking ass and it’s another 52-week high today. FactSet Research Systems (FDS) is also doing well and it nearly made a new high yesterday.

Date Of Apple Backlash Set For March 21, 2008
Posted by Eddy Elfenbein on October 3rd, 2007 at 3:09 pm

The Onion:

In the face of Apple, Inc.’s 3-billionth iTunes sale and soaring stock price, some Wall Street forecasters are predicting that consumers will finally get fed up with the computer manufacturer’s high retail prices and various product bugs sometime between March 20 and 22 of next year.
“At the current rate, we believe that at this time a sea change will occur in which people will look down at their glossy white or black devices and feel a sense of embarrassment and gullibility,” Goldman Sachs analyst Steven Shore said. “They will realize that, despite all the sleek design, they got caught up in a wave of hype that made them shell out additional hundreds of dollars for options and features they didn’t need. Until then, I would like to point out that my iPhone is awesome.”
Apple has responded to the backlash rumors by announcing the late-October release of a mint green iPod in time for the holiday shopping season, a strategy that appears to have silenced naysayers at least temporarily.

The Dow’s Annual Trend
Posted by Eddy Elfenbein on October 3rd, 2007 at 11:59 am

Here’s a look at how the Dow has performed, on average, throughout the year. I used all the daily closings since 1896.
Looking at the annual trend, there are two basic surges. The biggie is from October 29 to May 6, when the Dow rises 7.79%, which is about 93% of the annual gain. The rest of the time, the Dow gains just 0.49%. The other big surge is from May 25 to September 6 when the Dow rises an average of 4.72%.
The average sell-off from May 6 to May 25 is -1.25%, and the one from September 6 to October 29 is -2.82%.
The most impressive short-term gain is from December 21 to January 7 when the Dow averages a gain of 3.39%.

Right on Walgreen
Posted by Eddy Elfenbein on October 2nd, 2007 at 11:40 am

Last year, I wrote that Walgreen was too expensive at $44 a share. Let’s just say that it wasn’t one of my more popular posts. One commenter at Seeking Alpha was abusive that the editors there had to rewrite his comment.
Today, the company announced a 4% profit decline. The shares are now down to $39. It doesn’t look like things will get better soon:

Net income was $396.5 million, or 40 cents a share, compared with $412.3 million, or 41 cents, in the quarter a year earlier.
It was the first decline in quarterly profit since early in the 1998 fiscal year, and executives warned that trouble could persist.
Revenue in the period, which ended Aug. 31, rose more than 10 percent, to $13.4 billion from $12.2 billion.
Analysts expected earnings of 47 cents a share and revenue of $13.5 billion.
“Many of the challenges we faced in this quarter will continue, including comparisons to last year’s blockbuster generics,” said Rick Hans, the company’s director of finance.

GorillaTrades Unmasked
Posted by Eddy Elfenbein on October 2nd, 2007 at 11:14 am

Business Week looks at GorillaTrades:

But does the gorilla deliver for investors? A BusinessWeek analysis of the service’s picks found they performed far worse than the stock market as a whole.
The company has attracted attention thanks to its quirky approach and heavy advertising. It has refused to divulge the identity of the firm’s founder and chief spokesman, who calls himself “the gorilla.” Nor does it give out results on the overall performance of his picks. However, BusinessWeek has learned that the gorilla is a former stockbroker named Ken Berman, in Jupiter, Fla., who has confirmed that fact in an interview.

The Write-Off
Posted by Eddy Elfenbein on October 1st, 2007 at 3:02 pm

UBS to write off $3.4 billion

UBS AG, the world’s largest wealth manager, unveiled $3.4 billion in losses, swept out senior managers and slashed jobs in one of the biggest casualties yet worldwide from the credit crunch.
UBS said on Monday it would write down 4 billion Swiss francs ($3.42 billion) in losses in its fixed income portfolio and elsewhere, resulting in a third-quarter loss of 600-800 million Swiss francs, its first quarterly loss in nine years.
UBS said it would shed 1,500 jobs in its investment bank.

Can they do that?

Jerry : So were going to make the Post Office pay for my new stereo?
Kramer : It’s just a write off for them.
Jerry : How is it a write off?
Kramer : They just write it off.
Jerry : Write it off what?
Kramer : Jerry all these big companies they write off everything
Jerry : You don’t even know what a write off is.
Kramer : Do you?
Jerry : No. I don’t.
Kramer : But they do and they are the ones writing it off.
Jerry : I wish I just had the last twenty seconds of my life back.

Fox Business News Is Coming
Posted by Eddy Elfenbein on October 1st, 2007 at 2:23 pm

Fox Business News is coming October 15. The Web site is now live.

Buy List Update
Posted by Eddy Elfenbein on October 1st, 2007 at 11:19 am

Now that we have three quarters under our belt, let’s look at the Crossing Wall Street Buy List. For the year, the Buy List is up 1.88% compared with 7.65% for the S&P 500 (dividends not included). The Buy List has been about 7% less volatile than the S&P 500.