• Looking at the Dow Jones Industrials
    Posted by on November 9th, 2007 at 8:10 am

    Eight years ago, Dow Jones decided to do a big shake up to the Dow Jones Industrial Average (^DJI). The gatekeepers of the index knocked out four stocks — Sears, Chevron, Goodyear and Union Carbide. The four new stocks they added were Microsoft, Intel, SBC and Home Depot. SBC is now AT&T.
    The new additions made a lot of news at the time because it was the first time that the Dow included stocks from that new-fangled Nasdaq. Also, this was the first time the “industrial index” made such a big nod to the New Economy.
    The new stocks started trading on November 1, 1999. The brave new world lasted exactly six days. On November 6, 1999, Microsoft was ruled a monopoly. Over time, Microsoft did better in court than in the trading pits.
    Here’s a look at how Microsoft and Intel have done since they were added to the index:
    image549.png
    As you can see, both stocks have lagged the index as have Home Depot and AT&T.
    As far as the old stocks go, Sears Roebuck is now Sears Holdings (SHLD). Union Carbide is no longer part of the Dow but it is part of Dow Chemical (DOW). Goodyear (GT) and Chevron (CVX) are still going strong but only Chevron has beaten the Dow over the past eight years.
    Interestingly, IBM was tossed from the index in 1939 and put back in in 1979 and it’s still there today. During those 40 years, IBM went up 22,000%. If it had been there the whole time, the Dow would be far higher today (by my rough estimate, about 35%). The Dow would have cracked 1,000 in 1961 instead of twelve years later. Behold the power of one really good stock.
    The other day, Barry Ritholtz said it’s time to purge GM from the Dow. I agree, and they can fire Alcoa too. He suggests Cisco as a replacement. That’s a good idea, but I’d lean more towards a stock like UPS.

  • Growth/Value Divergence
    Posted by on November 8th, 2007 at 8:33 pm

    Here’s an interesting aspect of today’s market. The S&P Value Index (^SVX) was up 0.38% while the S&P Growth Index (^SGX) was down -0.49%. That’s an unsually large divergence for one day.
    trigppfndb.png

  • Michael Lewis on Stan O’Neal
    Posted by on November 8th, 2007 at 1:54 pm

    Michael Lewis looks at Stan O’Neal’s “scorecards:”

    Aug. 12: Purchase Country Club.
    ALL ALONE ON THE COURSE. NO ONE TO TALK TO SO TALKED TO MYSELF. HAD A THOUGHT: NO ONE KNOWS WHERE I AM! REALLY! TURNED OFF CELL PHONE. FIVE HOURS LATER I WONDERED: WHERE DID THE TIME GO? A PERFECT DAY.
    Aug. 18: Purchase Country Club.
    BIRDIE ON 11 WAS A THING OF BEAUTY. IT WOULDN’T HAVE BEEN POSSIBLE IF I’D ALLOWED MYSELF TO BE DISTRACTED. DETAILS ARE THE ENEMY OF GOLFING EXCELLENCE. GAVE ME ANOTHER THOUGHT: GOLF IS LIKE RUNNING MERRILL LYNCH! THE TRICK IS TO KEEP IT SIMPLE. BE A BIG PICTURE PERSON. NOTE TO SELF: SMARTEST THING YOU EVER DID WAS TO TAKE FIRM AWAY FROM THE DAY-TO-DAY DRUDGERY AND MAKE JUST A FEW BIG BETS. FREES UP TIME.
    Aug. 26: Vineyard Country Club.
    FIVE BIRDIES AGAINST THREE BOGEYS. ALL THESE UPS AND DOWNS! MOODS SWINGS ARE TREMENDOUS AND EXHILARATING BUT CAN’T LET ANYONE AROUND ME KNOW WHAT I’M FEELING. NOT THAT THERE’S ANYONE AROUND ME — BUT YOU NEVER KNOW WHO’S ON THE NEXT TEE. GOLF IS SO MUCH LIKE RUNNING MERRILL LYNCH! WHEN I PLAY I FEEL I MIGHT AS WELL BE AT MERRILL LYNCH. IN A WAY, I AM.

  • On the Other Hand…
    Posted by on November 8th, 2007 at 11:10 am

    Baltimore Sun:

    Bernanke: Rates cuts, recession unlikely

    MarketWatch:

    Fed chief fears a downturn

    But my favorite headline of the day goes to the Sydney Morning Herald:

    GM sees bright side despite $42b loss

  • The Buy List Today
    Posted by on November 7th, 2007 at 4:54 pm

    With the S&P 500 plunging 2.94% today, this may not sound like much, but the Buy List had its best day of the year relative to the S&P 500.
    The S&P was down 2.94% while the Buy List was down “only” 1.89%. This is just the third time that the Buy List has beaten the market by over 1%.
    Of the 19 stocks on the Buy List (remember Biomet was bought out), 17 beat the market today. Only SEI Investments (SEIC) and WR Berkley (BER) did worse than the broader market.

  • A Little Perspective
    Posted by on November 7th, 2007 at 3:30 pm

    I know gold is going through the roof and oil is about to hit $100, but would you mind if I added a little perspective to the latest bout of higher commodity prices?
    I didn’t think so. Here’s a look at the CRB-Spot Index adjusted for inflation over the last 60 years.
    image547.png
    Kind of a different story, ain’t it?

  • Boiler room rings up the wrong target
    Posted by on November 7th, 2007 at 12:01 pm

    This is rich.
    Bad:
    Being a boiler room scammer and promising to make people 300% in three months.
    Worse:
    Calling the home of the head of enforcement for the New Brunswick Securities Commission.
    (Via Kirk.)

  • Pathetic!
    Posted by on November 7th, 2007 at 11:15 am

    This is pathetic. The WSJ has printed a series of emails among members of the moronic Bancroft family. They had thirty days to choose a family member to serve on the DJ board. Not very hard, right? Well, for these folks, it is. This family is so incompetent, they couldn’t even manage this basic task. Check out some of these emails:

    Tom Hill
    Thursday, Sept. 20, 2007
    Thanks Chris for the follow up.
    You will recall I inquired about the selection process in an email to Mike Elefante and copied to the family on August 7. It has taken the family more than six weeks to get this most basic information.
    At this rate I’m confident we’ll have a nominee by the end of the year. I’m just not sure which year.
    Tom Hill
    Back to top
    * * *
    Crawford Hill
    Thursday, Sept. 20, 2007
    Hi all,
    I can only say what a joke this episode has become. To learn only just now what Chris kindly just passed along to us is both disgraceful and egregious and reflects poorly on those who should have guided this to a satisfactory conclusion.
    None of this however is to reflect on the integrity, smarts or work ethic of Mike Hill ( and Liz [Elisabeth Chelberg], for that matter) who has (have) all of those and more. I just wonder, given the very bizarre nature of this process ( or, really, Non-Process) and the Board position itself as we now know it, why anyone in the family would want to do this.
    This entire, sad and pathetic, final episode is a fiasco. No wonder we lost Dow Jones!!
    I will call John Carroll and pass along the news. To those responsible- Thanks so much for placing me in this awkward position… on the other hand as I have pointed out elsewhere, getting these things right requires more than our designated representatives were capable of executing. The pattern holds to the end. What a shame. I had high hopes that we could get this right and worked hard to that end. Finding all this out now, after the fact is stranger than fiction.
    My Best to you all- may your future endeavours be more successful than what transpired here today (not saying much) and may you carry on with your interesting and diverse lives.
    I am done with this matter.
    Thanks for listening and thanks to those of you who spoke up and supported me when you were so moved. I appreciate your efforts and value our relationships.
    As ever,
    Crawford

    Once the thirty days expired, it then became Murdoch’s choice. He chose Natalie Bancroft, a 27-year-old opera singer who lives in England.
    Well played, Rupert. Well played.
    In a completely unrelated note, shares of The New York Times (NYT) hit $18 yesterday, a ten-year low.

  • Productivity Soars
    Posted by on November 7th, 2007 at 11:03 am

    Productivity grew 4.9% last quarter, the most in four years. Basically, people are producing more and working less. The good news is the higher productivity can help keep inflation down.
    image548.png

  • The Good Side of the Subprime Mess
    Posted by on November 7th, 2007 at 7:25 am

    I don’t agree with everything here, but George Schultz and John Taylor make some interesting points about the silver lining in the subprime cloud:

    Including both the direct investment effect and the personal saving effect, about three-quarters of the reduction in the current account deficit can be attributed to the housing market turmoil. So while the agreed economic policies have begun to improve the current account, and will continue to do so, they have had important assistance. The housing market correction has been an important factor in the current account correction; as a result we are seeing a dramatic beginning of a welcome rebalancing of the world’s investment and saving flows.