• The First Global Bubble?
    Posted by on April 24th, 2007 at 9:25 pm

    I don’t necessarily agree with Jeremy Grantham, but here’s an interesting take on the markets.

    For the last 5 years to this March, in dollar terms, the S&P 500 was up 35 per cent compared with 192 per cent for non-US small cap and 221 per cent for emerging markets. After these moves most diversifying and exotic assets are badly overpriced and the risk premium is the lowest it has ever been.
    In fact, the new global money flows have probably created the first truly global bubble, almost everywhere in almost everything. Particularly noteworthy and the beneficiary of our twin forces are small caps everywhere which on our data are more overpriced, driven by private equity deals, than an overpriced market.

  • Dow Flirts With 13000, Gets Number, Never Calls
    Posted by on April 24th, 2007 at 4:32 pm

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    Close. Oh so close.

  • SEI Investments Hits New High
    Posted by on April 24th, 2007 at 3:24 pm

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    Can’t keep a good stock down. Last year, SEI Investments (SEIC) was the top-performing stock on the Buy List (up 61%).
    I decided to keep it on this year’s Buy List. The stock got slammed last month, but has regained all the lost ground and is now at an all-time high. Earnings come out tomorrow.

  • W.R. Berkley’s Earnings
    Posted by on April 24th, 2007 at 11:12 am

    WR Berkley (BER) had a decent earnings. For insurance companies, the key stat you want to see is operating earnings. For BER, operating income came in at 91 cents per share, two cents more than expectations.
    The stock hasn’t done very well over the past year, but the earnings have been good. At one point, BER was over $40 a share (post-split). It’s down again today. The P/E ratio is now under 10.

  • The Stalwart Is Back
    Posted by on April 24th, 2007 at 9:43 am

    One of my favorite financial blogs, The Stalwart, is back from its hiatus. The site is consistently thought-provoking and never dull. Check it out.

  • Hedge Fund Compensation
    Posted by on April 24th, 2007 at 9:33 am

    Alpha Magazine found that the top 25 hedge fund managers were paid a total of $15 billion last year. The highest-paid was Jim Simons of Renaissance Technologies at $1.7 billion. Second place went to Ken Griffin of Citadel at $1.4 billion. Then Eddie Lampert with only $1.3 billion.

  • Earnings Preview: AFLAC
    Posted by on April 23rd, 2007 at 2:23 pm

    AFLAC (AFL) reports tomorrow. Here’s a preview from AP:

    OVERVIEW: Once one of only two life insurers in Japan, Aflac now faces a very competitive market in that country, racked by intensifying regulatory scrutiny and lagging consumer confidence.
    Because more than two-thirds of Aflac’s $13.2 billion in insurance policies in force are in Japan, the Columbus, Ga.-based supplemental insurer is heavily exposed to what happens there.
    Last quarter, Japanese regulators summoned data on how much Japanese insurers paid out in claims. While Aflac wasn’t as bad as most other insurers, regulators found insurers underpaid clients when they submitted claims.
    Even though the financial effect on Aflac from the study is minimal, Goldman Sachs analyst Joan H. Zief said the issue underscores how regulatory scrutiny is affecting the market for insurance in Japan.
    Aflac sells supplemental insurance, or policies that cover perils not insured under typical coverage. This is an important product in Japan because the national health care system is under pressure so people are turning to private insurers for supplemental coverage.
    This market is weakening as new competitors enter the industry. Sales in Japan fell 8.8 percent last year, and Aflac predicted sales will continue declining in the first half of the year.
    EXPECTATIONS: Analysts polled by Thomson Financial expect profit of 79 cents per share in the first quarter. They forecast revenue to rise 5 percent to $3.73 billion.
    ANALYST TAKE: Wachovia Securities analyst John Hall expects Aflac to report higher profit margin in Japan despite lower sales. He predicts Aflac will say lower spending on information technology and marketing initiatives will offset sales weakness.
    Nevertheless, he’s skeptical of Aflac’s forecast that sales in Japan will turn around in the second half.
    Banc of America Securities analyst Tamara K. Kravec said any commentary on the overcrowded health and life insurance market in Japan will be crucial.
    “The market environment in Japan is not smooth sailing,” she said. “Investors will continue to focus on assessing the competitive environment in Japan and what the first quarter will reveal about sales trends and the competitive environment.”

    The stock is going for 13 times next year’s earnings.

  • The Grey Lady and Sides of Beef
    Posted by on April 23rd, 2007 at 10:40 am

    At this week’s New York Times’ (NYT) shareholder meeting, there will be an effort, led by Morgan Stanley, to eliminate the company’s two-tiered share voting system. One class for the family, another for everyone else. These systems are common with newspapers because it allows the founding families to retain control.
    In today’s Wall Street Journal, Donald Graham, the CEO of the Washington Post, comes to the defense of the Times’ not-quite-so-democratic share structure.

    (I)f the stock structure were eliminated, a line of buyers eager to purchase the company would form within minutes. No one could say no. The line would include private equity firms, high-ego billionaires, international media companies lacking a famous property and lots more.
    Who would bid the highest? Perhaps a principled owner, dedicated to the welfare of the Times and the Boston Globe; willing to anger its friends on a regular basis, as good newspapers do; and prepared to spend money and run other risks to sustain the paper like the Sulzbergers. Or maybe the bidder would be someone quite different.

    Oh dear! Not just a billionaire, but a high-ego one at that. Personally, I’ve never met a billionaire with a low ego. Or a newspaper publisher, for that matter.
    Graham writes that if the new rule is adopted, it “would lead to the New York Times Co. being auctioned off like a side of beef.”
    Well, what’s so bad about that? We sell lots of things in a manner very similar to how a side of beef is sold. That’s capitalism. Ever been to an art auction? Or rather, what’s so wrong with a side of beef being sold off just like a media company? It’s a two-way street. I’m stunned at how little faith Graham has in the free market.
    These two-tiered systems are manifestly undemocratic, and will eventually lead to sclerotic companies. Graham believes there’s a difference between public spiritedness and the values of the free market. That’s a false symmetry. If the Times’ values are profit-enhancing, as Graham suggests, then the free market will find them. Plus, there’s no guarantee that a family-controlled business will adhere to those values.
    I’m not against different share classes per se. I don’t think they’re a great idea, but I can understand why some families would want to maintain control of their businesses. What I object to is the Graham’s argument that it’s based on some high-minded principle. It’s not. When any organization isn’t held fully accountable, it will eventually suffer.
    The divine right of kings died out a long time ago. It’s about time newspapers followed.

  • ABN Amro and Barclays to Merge
    Posted by on April 23rd, 2007 at 8:39 am

    This is a gigantic dea. ABN Amro, the Dutch mega-bank, and Barclays of Britain are going to merge in a deal worth over $90 billion. As part of the deal, ABN Amro is going to sell its LaSalle Bank unit to Bank America for $21 billion.
    The story gets a little more complicated because the Royal Bank of Scotland seems interested in ABN Amro, but it needs partners to make a deal. But what the rivals probably want is Amro’s American business. In other words, LaSalle. Selling it to BofA could be a brilliant move to crush any potential partner for RBS.
    Here’s the slap in the face. Amro was scheduled to meet with RBS today, but it already announced the deal with Barclays. They’re still going to meet, but Amro asked to have the meeting bumped back.
    I have a feeling this isn’t over.

  • “GOOG is Godzilla and YHOO is Japan. It’s that simple.”
    Posted by on April 22nd, 2007 at 5:35 pm

    The Fly on Wall Street sums it succinctly.
    (H/T: Howard “Dr. Funk” Lindzon)