• Buy List Update
    Posted by 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.
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  • Predatory Lenders Are Now Murdering Little Girls
    Posted by on October 1st, 2007 at 11:09 am

    With today’s announcement from Citigroup, the subprime may still have a ways to go, but the political issue is just getting started.
    Yesterday’s Washington Post had an absolutely wretched article by Jim Rokakis, the treasurer of Cuyahoga County, Ohio. It’s almost something out of the The Onion. He basically blames the death of a little girl and an elderly man on predatory lenders. I’m not exaggerating:

    Twenty years ago, the Slavic Village neighborhood of Cleveland was a tightly knit community of first- and second-generation Polish and Czech immigrants. Today, it’s in danger of becoming a ghost town, largely because a swarm of speculators, real estate agents, mortgage brokers and lenders saw an opportunity to make a buck there.
    You could say it was because of them that 12-year-old Asteve’ “Cookie” Thomas lost her life on Sept. 1, shot in Slavic Village when she stumbled into the crossfire of suspected drug dealers.

    No, you can’t. You could, however, blame her death on the suspected drug dealers who fired at her. I’m going to take a wild guess and say that they’re probably actual drug dealers as well.
    It gets worse:

    The Federal Reserve’s recent decision to cut interest rates may calm the nerves of Wall Street bankers, but it won’t bring back Cookie Thomas or Joe Krasucki.

    Vile.
    I think another Sarbanes-Oxley is on the way.

  • Can We Turn Off Our Emotions When Investing?
    Posted by on October 1st, 2007 at 10:49 am

    Joe Nocera has an interesting story about investing and emotions (via Mankiw).

    “There is a story in the book about Harry Markowitz,” Mr. Zweig said the other day. He was referring to Harry M. Markowitz, the renowned economist who shared a Nobel for helping found modern portfolio theory — and proving the importance of diversification. It’s a story that says everything about how most of us act when it comes to investing. Mr. Markowitz was then working at the RAND Corporation and trying to figure out how to allocate his retirement account. He knew what he should do: “I should have computed the historical co-variances of the asset classes and drawn an efficient frontier.” (That’s efficient-market talk for draining as much risk as possible out of his portfolio.)
    But, he said, “I visualized my grief if the stock market went way up and I wasn’t in it — or if it went way down and I was completely in it. So I split my contributions 50/50 between stocks and bonds.” As Mr. Zweig notes dryly, Mr. Markowitz had proved “incapable of applying” his breakthrough theory to his own money. Economists in his day believed powerfully in the concept of “economic man”— the theory that people always acted in their own best self-interest. Yet Mr. Markowitz, famous economist though he was, was clearly not an example of economic man.

  • West Side Story at 50
    Posted by on September 28th, 2007 at 7:36 pm

    West Side Story opened 50 years ago this week.

  • Bed Bath & Beyond’s Earnings
    Posted by on September 28th, 2007 at 12:55 pm

    I didn’t have a chance to write about this before but Bed Bath & Beyond (BBBY) earned 55 cents a share for its fiscal second quarter.
    Here are the earnings results going back a few years:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-99 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-00 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-01 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-02 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-03 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-04 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-05 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-06 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55

  • Stocks and Bonds Unite
    Posted by on September 28th, 2007 at 10:29 am

    Here’s an unusual recent development.
    From July 3 to September 19, the stock and bond markets moved in opposite directions 80% of the time (I’m using the SPX & TLT).
    But in the six trading days since, they’ve moved in different directions just once.
    Obviously, it’s too early to read any major significance into this, but it’s something worth watching. There’s also the question of what the consequences are.
    If the stock and bond markets are indeed, converging, I’m inclined to think it’s a healthy sign for both markets.

  • Paul Kedrosky on Wall Strip
    Posted by on September 28th, 2007 at 9:23 am

    Paul Kedrosky runs Infectious Greed, one of my favorite blogs. Here he is on Wall Strip.

  • How to Make a lot of Money in Five Easy Steps
    Posted by on September 27th, 2007 at 7:04 am

    Step #1: Sell everything you own. Sell it all. Stocks, bonds, real estate. eBay your couch, you dog. Everything.
    Step #2: Then convert it all into pre-1982 copper pennies.
    Step #3: Meltdown the pennies.
    Step #4: Sell the copper.
    Step #5: Now use your proceeds to buy back all the stuff you sold. You’ll have more than enough left over.
    The material in a pre-1982 penny is currently worth about 2-1/2 cents.
    Update: It’s not exactly legal.

  • Integrity Boosts Returns
    Posted by on September 26th, 2007 at 10:28 am

    Hmmm.

    People know that integrity will help them in the business world. It can also boost their investment results. That’s the finding of a recent survey of advisers at Ameriprise Financial Services. The study sought to find out the impact of various adviser traits on their investment results.
    It studied 12 emotional and moral competencies, such as client service and self-confidence.
    The results showed that the adviser’s level of integrity played the biggest part in posting strong investment returns.
    “Most people we deal with are high performers,” said Rick Aberman, a founding partner of consulting firm Lennick Aberman Group, which like Ameriprise is based in Minneapolis and assisted with the survey. “We wanted to look at what differentiated those who are successful from those who are really successful.”
    Ameriprise paid for the study. It sought to find out whether emotional competency and integrity led to better performance, says Kris Petersen, the firm’s general manager of financial planning and advice.
    “I assumed the results would be better (for those who had more integrity), but not by as much as it was,” she said.
    Integrity showed up in advisers’ ability to act the way they believe and to do what they say they will, Aberman says.

    During my career, I’ve worked for three different brokerage firms and there I met some of the most dishonest people I’ve ever met in my life.

  • Biomet Trades No More
    Posted by on September 26th, 2007 at 9:58 am

    Biomet was taken off the market yesterday for $46 a share. Here’s a look at the stock’s amazing run. In 23 years, the stock went up by more than 200-fold.
    image530.png
    I have to do a little housekeeping for my Buy List. This will be a dull post, but since we now know how important integrity is to our returns, I want to be as thorough as possible.
    I’ll go over the rules again. At the start of each year, I pick 20 stocks for the Buy List. I’m not allowed to make any changes during the entire year. I assume a portfolio of $1 million, with $50,000 invested in each position.
    For track record purposes, I’m going to take the Biomet proceeds and invest them equally in the 19 other stocks. I thought about keeping the proceeds in cash until the end of the year, but that doesn’t seem right.
    At the start of the year, the Buy List had 1211.5338 shares of Biomet at $41.27. With the $46 buy-out price, that gives us a total of $55,730.5548. Divided 19 ways, that means we invest $2,933.1871 in each stock.
    Here’s how I calculated the new number of shares:
    Stock……..9/25 Close……..New Shares…….Starting Shares……..New Total
    AFL………….$55.94………….52.4345………….1086.9565………….1139.3910
    APH…………$39.22………….74.7880………….1610.8248………….1685.6128
    BBBY………..$33.20………….88.3490………….1312.3360………….1400.6850
    DCI………….$41.52………….70.6452………….1440.5071………….1511.1523
    DHR…………$83.82………….34.9939……………690.2264…………..725.2203
    FDS………….$66.10………….44.3750……………885.2691…………..929.6441
    FIC…………..$36.11………….81.2292………….1230.0123………….1311.2415
    FISV………….$50.46………….58.1290…………..953.8344………….1011.9634
    GGG………….$38.10………….76.9865…………1261.9889………….1338.9754
    HOG………….$46.51………….63.0657………….709.5218……………772.5875
    JOSB………….$35.08………….83.6142………..1703.5775………….1787.1917
    MDT…………..$56.26………….52.1363………….934.4048……………986.5411
    NICK………….$8.93………….328.4644…………4237.2881………….4565.7525
    RESP………….$48.74…………60.1803………….1324.5033………….1384.6836
    SEIC………….$25.92………..113.1631………….1678.9792………….1792.1423
    SYY…………..$34.70………….84.5299………….1360.1741………….1444.7040
    UNH………….$49.48………….59.2803…………..930.5788……………989.8591
    VAR…………..$39.09………….75.0368………….1051.0826………….1126.1194
    BER…………..$28.99…………101.1793…………1448.8554………….1550.0347