W.R. Berkley’s Earnings
Posted by Eddy Elfenbein on February 11th, 2008 at 12:56 pm

W.R. Berkley (BER) just reported its fourth-quarter earnings. For the last three months of the year, net income dropped to from $198.1 million to $184.1 million. On a per-share basis, that’s a fall from 98 cents to 97 cents. With insurance companies, it’s better to look at operating results. Here, BER saw its number drop from $193.7 million to $183.2 million, which is actually a penny per share increase to 97 cents a share. That beat Wall Street’s estimate by two cents a share.
For the full year, Berkley’s operating income was $3.73 per share which was a nice increase over the $3.46 per share from 2006. Wall Street currently sees BER earnings $3.86 for 2008 which is a pretty small increase. Still, it means that the shares are going for less than eight times this year’s earnings. This is a good company going for a good price.

Changes to the Dow
Posted by Eddy Elfenbein on February 11th, 2008 at 9:09 am

The gatekeepers of the Dow Jones Industrial Average (^DJI) have decided to boot Altria (MO) and Honeywell (HON) from the index. The two new additions will be Bank of America (BAC) and Chevron (CHV).
Chevron was in the index from 1930 to 1999, though for much of the time it was known as Standard Oil of California. Honeywell was first included in the index in 1925. Altria was added in 1985. Personally, I would get rid of Alcoa (AA) and General Motors (GM).
Here’s a look at all the changes to the Dow going back to the original rail index.
The Dow is often criticized for being unrepresentative of the market. That’s true and I prefer to the use the S&P 500 (^GSPC) which is market-weighted. Still, the Dow isn’t that bad. The index that should be ignored is the Nasdaq (^IXIC). That index is dominated by a few big names that are highly correlated to each other and little else.
Being added to the Dow isn’t much of a buy signal. Here’s what happened since AIG (AIG), Pfizer (PFE) and Verizon (VZ) were added in 2004:

Here’s what happened when Microsoft (MSFT), Intel (INTC), SBC (SBC) and Home Depot (HD) were added in 1999:

The Dow is zero for the last seven.

Calling All Technical Analysts
Posted by Eddy Elfenbein on February 8th, 2008 at 2:21 pm

Is this a good chart?

Read more…

Department of Strained Metaphors
Posted by Eddy Elfenbein on February 8th, 2008 at 1:26 pm

The goal of monetary is famously described as taking away the punchbowl once the party gets started. Dallas Fed president Richard Fisher explains his dissenting vote:

In the current financial-market turmoil, credit markets have been cutting back on lending to important segments of the nation’s economy. As a result, “instead of taking the punchbowl away, the Fed is now faced with the task of replenishing the punch,” Dallas Fed president Richard Fisher said Thursday.
Monetary policy acts with a lag, much like “good single malt whisky or perhaps truly great tequila,” Fisher told an audience in Mexico City.
“It takes time before you feel its full effect,” he explained.
“My dissenting vote last week was simply a difference of opinion about how far and how fast we might re-spike the monetary punchbowl,” Fisher said.

Yes, but cutting 125 points in eight days is less like tequila and closer to doing lines of blow off the hooker’s ass.

The $72 Billion Social-Climber
Posted by Eddy Elfenbein on February 7th, 2008 at 12:30 pm

If you get a chance, I recommend Irwin M. Stelzer’s article on Jérôme Kerviel and Société Général. It’s a complex story and there’s more going on than appears. The scandal seems to have taken on a Tom Wolfe-like angle with socio-political dimensions as well.

Trading Is Like Sex and Drugs
Posted by Eddy Elfenbein on February 7th, 2008 at 12:15 pm

It’s official, we’re all trading junkies. The New York Times reports:

It is easy to dismiss Jérôme Kerviel, the rogue trader at Société Générale, as a fluke.
So here is a sobering thought for Wall Street: There may be a bit of Mr. Kerviel in all of us.
A small group of scientists, including some psychologists, say they are starting to discover what many Wall Street professionals have long suspected — that people are hard-wired for money. The human brain, these researchers say, responds to high-stakes trading just as it does to the lure of sex. And the riskier the trades get, the more the brain craves them.

If trading is like sex, then think of Crossing Wall Street as your friend with benefits.

Buy List Updates
Posted by Eddy Elfenbein on February 7th, 2008 at 11:15 am

There are a few news items to pass along for stocks on our Buy List. Danaher (DHR) was upgraded at Deutsche Bank from Hold to Buy.
Joe Banks (JOSB) reported that same-store sales dropped 1.2% in January. The company forecasts earnings growth of 12% to 14% for 2008.
Yesterday, Fiserv (FISV) reported Q4 earnings of 69 cents a share (after charges), two pennies below the Street. The company sees 2008 EPS of $3.33 to $3.47. That seems like low-balling to me. The Street was looking for $3.46.

Dow Jones Channels Emily Litella
Posted by Eddy Elfenbein on February 7th, 2008 at 10:38 am

Do you remember Gilda Radnor’s SNL character Emily Litella? She was the older lady who would do news commentary on an item that she invariably misheard. This led her to discuss topics such as free Soviet jewelry, Presidential erections or making Puerto Rico a steak.
Yesterday, Dow Jones reported that Warren Buffett said that if the current account deficits continue, the dollar will be “worthless.”
One small problem. He actually said it will be “worth less.”
Nevermind.
(Via DealBreaker)

That’s Our Ballmer
Posted by Eddy Elfenbein on February 7th, 2008 at 10:20 am

Here’s a small tidbit on Steve Ballmer I noticed in an article on Microsoft/Yahoo:

Ballmer doesn’t delay when he decides on a purchase. Tellme Networks Inc. CEO Mike McCue held meetings with Ballmer for two days before the Super Bowl professional football championship last year and figured his group would hear back after the game.
That Sunday morning, Ballmer, a math major at Harvard College in Cambridge, Massachusetts, called them back in for what he called “Math Camp,” helping him plug numbers into a spreadsheet to decide whether the combination would work. At one point Ballmer grew so excited he started gesturing wildly while holding an open can of soda, spraying McCue and his executives.

Astrologers offer Year of the Rat stock tips
Posted by Eddy Elfenbein on February 7th, 2008 at 9:47 am

From Reuters:

Forget about graphs, charts and economic forecasts. Wary investors in Asia are turning to feng shui masters to tell them which way the markets will head in the Chinese Year of the Rat.
Perhaps not surprisingly for investors already burnt by recent stock market slides, feng shui experts are predicting a gloomy year for shares, not good news for those hoping for a rebound in global markets hit by worries over the U.S. economy.
“The rat will become aggressive at the tail end of the year and its underlying water element will cool the stock market,” said Vincent Koh, a feng shui master at Singapore Feng Shui Centre.
Feng shui is popular across East Asia, where it is traditionally practiced by ethnic Chinese. It relies on movements of the cosmos as well as placement of furniture and arranging space to generate a “flow of wealth”.
Believers say it can be used to improve wealth, health and personal relationships.
In Hong Kong and Singapore, it’s taken so seriously that corporations consult feng shui experts about everything from business strategy to interior design. Disneyland changed the angle of the main entrance of its Hong Kong theme park after consulting a feng shui expert.
So great is the interest in feng shui, that CLSA, a regional brokerage house, issued a feng shui client note which predicted the stock market would rise from May to August and the U.S. dollar would remain weak.
“Be mindful of your speculations, especially in the third quarter,” said the note, which CLSA described as “topical” rather than a formal investment advisory.
Raymond Lo, a feng shui master in Hong Kong who does readings for corporations, expects industries linked to earth and metal signs to flourish during the Year of the Rat.
“The rat is a symbol of money to the earth industry … Strong water element in the year indicates productivity and strong activity in the metal industries,” said Lo, who suggested investors put their money into property, mining and gold.
He predicts stock markets will be soft this year as the elements of earth and water, which he says are strong in the Year of the Rat, weaken the fire element that influences shares.
“The water element affects the fire of the markets. I can foresee a lot of correction in the stock market,” said Koh.
With stocks markets from Japan to New York cooling since the start of the year on concerns of a global economic slowdown, sceptics may argue that you don’t need to be a feng shui master to make such predictions.
Yet Malaysian feng shui master Yap Boh Chu is optimistic with predictions that Southeast Asian markets will be stable after a tumultuous start.
“The whole concept we have for the year is the image of a seed sprouting from the ground — the beginning is hard,” he said.

The rat is the symbol of money? Not to me. They’re just rats.