Yes, Virginia…I mean No, Virginia…I mean…
Posted by Eddy Elfenbein on March 3rd, 2008 at 10:40 am

From page 18 of Buffett’s Chairman’s Letter:

(Yes, Virginia, you can occasionally find markets that are ridiculously inefficient – or at least you can find them anywhere except at the finance departments of some leading business schools.)

From Megan McArdle’s Asymmetrical Information:

Yes, Virginia, markets are efficient.

Buffett’s Letter
Posted by Eddy Elfenbein on March 1st, 2008 at 12:09 am

Here’s the yearly Chairman’s Letter to Berkshire shareholders. It’s always worth a read.
Here are the letters going back 30 years.

A Look at Government Spending
Posted by Eddy Elfenbein on February 29th, 2008 at 11:52 pm

Each year, the Congressional Budget Office releases its report on the federal budget which also includes historical stats. What I find interesting is that over the past 30 year, non-defense spending by the federal government, as a percent of GDP, hasn’t varied that much.
I don’t mean to say that it hasn’t varied at all—it certainly has. But the stats are much more stable than you would think if you went by political rhetoric.
Since 1976, the amount of federal spending, except for defense, has averaged about one-sixth of GDP. The numbers haven’t strayed too far from the average. About two-thirds of the time, spending has been between 15.9% and 17.1%.

I think it’s worth considering that if we had repealed all the laws regarding our budget process, and instead applied very strict mechanistic rules, the outcome would have been surprisingly similar.
Interestingly, the amount of federal debt held by the public as a percent of GDP has declined slightly over the past two year.

Here’s the data.

After Hours: Mississippi John Hurt
Posted by Eddy Elfenbein on February 29th, 2008 at 6:04 pm

Proxy Battle at the NYT
Posted by Eddy Elfenbein on February 29th, 2008 at 1:27 pm

Get ready folks. Looks like there’s some ol fashioned proxy wrastlin’ brewing down yonder at the NYT:

A dissident investor stepped up pressure on The New York Times Co. Friday, formally proposing its own slate of four directors and saying the company needs to take more drastic action to compete online.
Harbinger Capital, an investment firm that now owns about 19 percent of the company, filed its own proxy statement with the Securities and Exchange Commission listing its nominees for directors to be elected at the Times’ annual meeting April 22.
The Times has already filed its own full slate of director nominees, but has said it was still considering whether to accept Harbinger’s candidates.
Times spokeswoman Catherine Mathis said the company’s board was interviewing the Harbinger nominees. She declined to comment further on their proxy filing.
The looming proxy battle comes as the Times and other U.S. newspapers are facing huge challenges in adapting to the steady migration of readers and advertising dollars to the Internet. An economic slowdown coupled with a deep slump in the housing market is worsening the situation.

Good for them; we need to see more of this. The stock is about were it was 11 years ago.

Natural Born Presidents
Posted by Eddy Elfenbein on February 29th, 2008 at 11:07 am

One of the sillier parts of our Constitution is that only natural born citizens can become president. The New York Times reports that this could raise questions for John McCain, who was born in the Panama Canal Zone (McCain’s father and grandfather were Admirals).
Most experts agree that as a legal challenge, this issue won’t go very far. One lawyer said that if she were on the Supreme Court, she’d rule in McCain’s favor, “But it is certainly not a frivolous issue.”
Interestingly, Barack Obama was to an American mother and a Kenyan father. Again, there’s no doubt that he’s an American citizen. He was born in Hawaii on August 4, 1961, so this could be the first election were the two major candidates were not born in the continental U.S.
That’s less than two years after Hawaii was granted statehood. So if he was just slightly older, then we’d have the first election were the two major candidates weren’t born on American soil.

California Housing Market
Posted by Eddy Elfenbein on February 29th, 2008 at 10:47 am

I have some bad news for California homeowners. The median price of a home in the San Fernando Valley has fallen 25%, from $655,000 to $500,000. The good news is that the median value is $500,000.

Leap Day
Posted by Eddy Elfenbein on February 29th, 2008 at 10:39 am

The market is having a lousy day today, but historically, Leap Day has been one of the better market days. A few months ago, I looked at how well the Dow did every day of the year.
On average, the Dow has risen 0.1256% on Leap Day. In terms of the Presidential Election Cycle, we’re still in a flat period. The Dow has historically been fairly quiet from August of the Pre-Election year through July of the Election year. After that, the market shoots ahead for another twelve months.

Indexed
Posted by Eddy Elfenbein on February 28th, 2008 at 4:35 pm

Jessica Hagy’s Indexed blog is very cute. She has a book out as well.
(Hat Tip: Barry Ritholtz)

More Lousy GDP Numbers
Posted by Eddy Elfenbein on February 28th, 2008 at 11:15 am

The revised GDP report came out today and it showed 0.6% growth for the fourth quarter, which was the same as the initial report.

“The first quarter will be ugly,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “The strength of exports is what would keep us out of a recession if we don’t go into one.”
The report, combined with figures today showing claims for unemployment insurance jumped last week, reinforced traders’ expectations that the Federal Reserve will cut interest rates again. Investors see a 100 percent chance of at least a half- point reduction in the benchmark rate to 2.5 percent by the end of the next meeting on March 18. Odds of a three-quarter point cut rose to 36 percent, from 10 percent.
Fed Chairman Ben S. Bernanke, testifying to the Senate Banking Committee today, signaled he’s ready to lower interest rates again to sustain the expansion.
The median estimate in a Bloomberg News survey of 74 economists was for a 0.8 percent increase in GDP.

This was one of the smallest revisions I’m aware of. The GDP number was revised lower by 0.0025%.
Here’s a look at GDP growth based on a trailing three-quarter basis. I don’t know why, but that often seems to be useful time frame.