Brian Hunter Crying Foul
Posted by Eddy Elfenbein on August 8th, 2007 at 10:29 am

From today’s WSJ:

Brian Hunter, whose bad bets triggered the collapse of hedge fund Amaranth Advisors LLC, says a federal investigation into his possible involvement in an alleged multibillion-dollar manipulation of the natural-gas markets is hurting the start-up of his new fund venture.
Mr. Hunter said Solengo Capital Advisors has been pushed to “the brink of complete disintegration” by a probe by the Federal Energy Regulatory Commission and resulting civil charges against him and his previous employer, Amaranth. The statement was made in documents filed late last week in the federal District of Columbia court as part of a suit against FERC that Mr. Hunter filed in late July.

I wonder if the fact that he lost $6 billion in one week is hurting him as well.

Graco Hits New High
Posted by Eddy Elfenbein on August 7th, 2007 at 5:46 pm

I added Graco (GGG) to the Buy List at the start of this year. So far, it hasn’t been that impressive a stock. The earnings have been blah, and the stock has mostly been stuck in a trading range.
Until today. The shares vaulted past $43 and nearly hit $45. I honestly have no idea what the catalyst was. The next earnings report won’t come for another two months.
Sometimes on Wall Street, you just don’t know what moves a stock.

Fedipus Rex
Posted by Eddy Elfenbein on August 7th, 2007 at 2:33 pm

The great thing about reading the Wall Street Journal is you never know on what page you’ll find the front page story.

Today’s edition contains an excellent article by Greg Ip and Jon Hilsenrath on the birth and untimely death of the credit boom. Most impressively, the pair got Alan Greenspan to go on the record. This question for any discerning reader (or investor) is, “what’s Mr. Greenspan motive for doing so?“

Well, let’s take a look at what he has to say. Here the maestro defends himself against the charge of bring interest rates too low:

Mr. Greenspan raised vague fears with colleagues over the possibility this policy could create distortions in the economy, but he says today that such risks were an acceptable price for insuring against deflation. “Central banks cannot avoid taking risks. Such trade-offs are an integral part of policy. We were always confronted with choices.”

Oh dear lord. This is a completely meaningless answer. We know you face choices, Alan, so does everybody else. The question is, “were those choices correct?” As usual, he refuses to acknowledge his mistake.

But that’s not all—and this is the most maddening part. Greenspan now admits that he was the one who was really concerned about a real estate bubble all along. Honest he was.

Looking back, he says today: “We tried in 2004 to move long-term rates higher in order to get mortgage interest rates up and take some of the fizz out of the housing market. But we failed.”

This is a stunning statement. Did it ever occur to him that he failed in large measure to his initial non-mistake? His answer is equal parts disingenuous and disgraceful. First, the Fed has no business managing mortgage interest rates. Yet in 2004, it was Greenspan who urged investors to get adjustable-rate mortgages.

Fed Statement
Posted by Eddy Elfenbein on August 7th, 2007 at 2:15 pm

No rate change.
Here’s the statement:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.
Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.
Although the downside risks to growth have increased somewhat, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.

Stockbroker Charged With Trying to Kill Canadian Finance Minister
Posted by Eddy Elfenbein on August 7th, 2007 at 2:05 pm

Wow, I didn’t know Canada even had a finance minister.
Here’s the 411:

A stockbroker from Louisiana has been charged with threatening to kill Finance Minister Jim Flaherty and his family.
The U.S. Attorney’s Office alleges that 59-year-old Lloyd Dewitt Tiller, Jr., of Shreveport, La., sent threatening e-mails to the Canadian official late last year and early this year.
Mr. Tiller allegedly claimed he and his clients lost almost $6-million after Mr. Flaherty’s decision to tax income trusts last fall.
In the first e-mail, sent on Nov. 13, he threatened to hurt Mr. Flaherty.
In the second, sent Jan. 18, he “threatened to injure both Mr. Flaherty and members of his family,” the U.S. Attorney for the Western District of Louisiana, Donald Washington, wrote in a statement.
In February, a plainclothes guard was assigned to Mr. Flaherty after investor anger over the Conservatives’ income-trust tax. The minister’s office at the time refused to discuss whether a death threat prompted the extra security measures.
Global News reported Monday night that Mr. Tiller allegedly wrote that “I am going to cut your … throat … you can’t hide, I will find you,” and “You have killed my business as a stockbroker … you have ruined my life and many of my clients life (sic) and I hear you think it is funny.”

You realize that sending a death threat by email would make the shortest Law & Order episode ever.

Curious Merger Math
Posted by Eddy Elfenbein on August 7th, 2007 at 9:53 am

This is an interesting article from Business Week on the unusual math that surrounds corporate mergers:

For six years private equity firm Thomas H. Lee Partners tapped the credit markets to buy one consumer-products brand after another and roll them all up into United Industries Corp. But even though United’s total debt jumped from $375 million to $860 million by 2005, its leverage—one measure of a deal’s riskiness—didn’t move much.
How could that be? Part of it was the magic of merger math, a naturally occurring phenomenon that has helped drive $1 trillion in buyouts since the boom began in 2004. It’s a pretty simple illusion that happens when a company with a lot of leverage buys one with less. That combined debt load is then spread across all the assets of the new corporate entity. So some key measures of leverage often remain the same or even drop, making it appear from one angle as though there were no additional risk. That can be true even if the acquirer pays the seller a premium, which is usually the case.

Hilary Kramer on Danaher
Posted by Eddy Elfenbein on August 7th, 2007 at 9:10 am

(Via Altucher). I’m often surprised that Danaher (DHR) isn’t better known. Here’s Hilary Kramer’s view:

A leader in the industrial sector, Danaher Corp. (NYSE:DHR) designs, makes and markets brand name products, services and tech across three categories: Professional Instrumentation (electronic testing, environmental, and medical technologies); Industrial Technologies (motion and product Identification; aerospace and defense, power quality, and sensors and controls); and Tools & Components (which include mechanics’ tools and general tools under brand names such as Craftsman.)
It is a leader in many of its classes, with names like Fluke (handheld electronic and network test equipment), Gilbarco Veeder-Root (retail petroleum dispenser market), and Hach/Lange (water analytics). A huge company in the industrial sector can sometimes seem overwhelming (what ARE all of these things, after all? you might ask…), but the thing to know first is that Danaher is solid as they get, with great margins, good management, and is well positioned for continuing growth, particularly through acquisitions.
On July 19, after DHR’s excellent second quarter earnings report, Goldman Sachs wrote that Danaher was “well-positioned” for the 2H2007 upside. Time to get in now, its report suggested, and I agree. It set a nice price target of $90. With low operating risk, and consistent growth of revenue, Danaher is a safer pick. Plus, as the Goldman report points out, it is “a leader in defensive growth markets like water, electronic test, and medical,” making its price less susceptible to the recent jitters in the market.
Type of Stock: An industrial designer, manufacturer, and marketer, Danaher is a leader in its class in many areas, and has demonstrated solid growth in areas less likely to suffer by market instability.
Price Target: Trading now at $75.80, I agree with the Goldman target of $90 and feel Danaher is well positioned to even exceed this.

“He Has No Idea How Bad It Is Out There”
Posted by Eddy Elfenbein on August 6th, 2007 at 9:09 am

Via B-Riz: Jim Cramer pleads for a Fed rate cut.

Barry’s site has more complete with remix.

Financial Stocks Sink
Posted by Eddy Elfenbein on August 3rd, 2007 at 11:27 am

Here’s an interesting chart. This shows the performance of the S&P 500 Spyders (black line, left scale) compared with the Financial Spyders (blue line, right scale). These include dividends.

This is an interesting chart because it shows two things. First, you can see how closely the financial sector tracked the overall market for the last five years. It never really overperformed or underperformed.
The second part is that you can see how much that relationship has broken down in the past few weeks. Financial stocks have been getting clobbered far worse than the market.

The Global Economy
Posted by Eddy Elfenbein on August 3rd, 2007 at 9:53 am

Here’s one way of looking at it:

At the start of July, Tunisia hired Daiwa Securities SMBC Co. and Nikko Citigroup Ltd. to help its central bank sell yen- denominated bonds. By the time the fund raising finished this week, Tunisia’s borrowing costs had risen by almost a quarter of a percentage point.
So the taxpayers of an African nation suffer because Joe Blow in Detroit can’t pay his mortgage.