• Are Cyclicals Leaving Orbit?
    Posted by on May 9th, 2007 at 11:06 am

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    I’ve written about the surge in cyclical stocks before, but now the trend is starting to leave orbit.
    The Morgan Stanley Cyclical Index (^CYC) is up for 15 of the last 19 trading sessions. Not only that, it’s beaten the S&P 500 for the last six sessions, and 13 of the last 14.
    As I write this, the index is up again today while the S&P 500 is down. The ratio of the CYC against the S&P 500 is at its highest in 30 years of data.
    As a general rule, cyclical stocks outperform the market when long-term interest rates rise. But lately, that hasn’t been the case. The yield on the 30-year T-bond (^TYX) is down a bit over the past few weeks, and it’s been locked between 4.5% and 5% for nearly nine months.

  • The Blair Market
    Posted by on May 8th, 2007 at 10:01 am

    Later this week, Tony Blair will pack his bags and leave 10 Downing Street after 10 years in office.
    It’s worth reflecting on how much Blair has changed Britain. He had the Labor Party drop its controversial Clause IV, which called for the “common ownership of the means of production.” I don’t think you could get elected dogcatcher in America if you believed that.
    So how has the British Dow, the FTSE 100 (^FTSE), done under Blair?
    May 2, 1997: 4,455.60
    May 4, 2007: 6,603.70 (the British market was closed yesterday)
    That’s 48% in 10 years, although the FTSE gained 37% in his first ten months in office. Since April 6, 1998, the British market is up just 8.2%.
    In that same time, the British pound has increased from $1.62 to $1.99.

  • Hewlett Packard Hikes 2Q Outlook
    Posted by on May 8th, 2007 at 9:43 am

    I didn’t see this coming.

    The company now expects second-quarter net income of 64 cents to 65 cents per share — or 69 cents to 70 cents excluding amortization costs.
    HP projects sales for the second quarter will range from $25.5 billion to $25.55 billion.
    Analysts expect earnings, on average, of 65 cents per share on $24.58 billion in revenue, according to a Thomson Financial survey.
    The company projected in February second-quarter earnings of 57 cents to 58 cents on roughly $24.5 billion in revenue. Excluding one-time costs, the company had forecast profit of between 63 cents and 64 cents per share for the quarter.

    That’s great news, but why are they announcing it now?

    HP said it decided to update its guidance after an internal e-mail with financial details of the quarter was accidentally sent to someone outside the company.

    Oh.

  • Investing in Intellectual Property
    Posted by on May 7th, 2007 at 2:57 pm

    The Washington Post has an interesting article on the Ocean Tomo 300 patent index, which tracks the leading stocks of the “knowledge economy.” There’s even an ETF.

  • eBay from its High
    Posted by on May 7th, 2007 at 2:51 pm

    I’m always curious what exactly constitutes an investment bubble. Even though shares of eBay (EBAY) got a super-atomic wedgie following its March 2000 high, the stock has still slightly outperformed the S&P 500.
    True, it wasn’t a smooth path getting there, but it did do it.
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  • Economist of the Empire
    Posted by on May 6th, 2007 at 5:12 pm

    Angus Burgin reviews Prophet of Innovation, Thomas McCraw’s biography of Joseph Schumpeter:

    As with many such stories, Schumpeter’s begins with a rapid ascent. Born into a bourgeois family that had resided in the Moravian hamlet of Triesch for four centuries, he gained entrance — via his mother’s remarriage to a much older three-star general — into Viennese society and the most prestigious schools in the empire. His precocious academic abilities led him through the two great centers of economic thought in continental Europe: the University of Vienna, home to the great second generation of the Austrian School; and Berlin, the academic center of the Austrians’ bitter rivals, Gustav von Schmoller and the German historical economists. Through a combination of work and fortune, he became the youngest tenured professor of political economy in the empire at age 28, secretary of state for finance in Austria’s First Republic at 36, and a prosperous bank chairman four years later.
    Schumpeter remained a mess of contradictions, however, and his personal triumphs were quickly matched by stunning reversals. Soon after receiving tenure, his harsh classroom discipline inspired a crushing, and largely unprecedented, student boycott of his lectures. He lost his fortune in the Viennese stock market crash of 1924, and spent the next decade laboring to repay the ensuing debt. And in a forever devastating setback, he lost his beloved second wife and son in childbirth just two years later. Following his financial and familial ruin, Schumpeter structured his remaining life around two competing sentiments: a retrospective pessimism that gradually permeated his worldview and a relentless desire to produce academic works worthy of his youthful ambitions. The Schumpeter who arrived at Harvard in 1927, where he would serve as a central influence for a generation of graduate students, was at once intensely passionate and socially removed. His subsequent works, from the seminal popular work “Capitalism, Socialism and Democracy” (1942) to his encyclopedic and still unparalleled “History of Economic Analysis” (1954), remain suspended between cool objectivity and moments of fiery, often cynical, judgment.

  • Friday Night Jazz: Artie Shaw
    Posted by on May 4th, 2007 at 9:25 pm

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    This week, Barry Ritholtz let me sit in with him at TBP’s Friday Night Jazz. Thanks Barry! Here’s my take on the great Artie Shaw.

    Artie Shaw was cool. Not Elvis cool or Sinatra cool, but a darker, more subdued cool.

    What Shaw did was make things look easy. Check out this clip and notice how, even after six decades, his music hasn’t aged a bit. It’s still fresh and smooth. It’s just…cool. (You gotta love Shaw’s reply to the compliments: “Yeah, yeah. Glass of water.” Pure cool.)

    Artie Shaw was the very last of the big bandleaders. He died a year ago at age 94 and fifty years after his last performance. He wound up outliving all the greats—Goodman, Herman, Miller. Those names may loom larger today, but back then, Shaw’s star was the brightest. He was making $60,000 a week—not bad for the Depression. With America poised to enter World War II, Time magazine reported that Germans’ vision of America was “skyscrapers, Clark Gable and Artie Shaw.”

    Fascists, apparently, have issues with tall buildings.

    When Shaw hired Billie Holiday, he became the first white bandleader to hire a full-time black singer. But Shaw detested the limelight. In fact, Shaw hated the words “jazz” and “swing.” No, he considered himself a musician. He hated the audience. He hated the singers. He hated the dancers. He hated other bandleaders (“Benny Goodman played clarinet. I played music.“)
    By 1951, Shaw walked away from music altogether and became—what else?—a dairy farmer. Crazy, maybe, but cool in its own way. Duke Ellington told him, “Man, you got more guts than any of us.”

    So what did Shaw like? Women. Lots and lots of them. He was married eight times. He nabbed Betty Grable which would have pleased most men. Not Shaw. While they were engaged, he ran off with Lana Turner. (Whoa, Duke was right!) Shaw had an affair with Rita Hayworth. He dumped Judy Garland. He married Ava Gardner before Sinatra. How in earth did he have time enough time for music?

    Ah, the music. Brilliant. Here’s an example: In 1938, Shaw took an obscure and forgotten Cole Porter song and made it a jazz classic. Have a listen to “Begin the Beguine.”

    If you’re keeping score, that’s a Jewish bandleader playing Negro music written by a homosexual.

    Exceedingly trivial trivia: “Begin the Beguine” has been performed a gazillion times since. In the movie, The Rocketeer, it’s performed by Melora Hardin, who’s better known as Jan in The Office. (Told you it was trivial.)

    If you’ve never heard of Shaw and want to get your feet wet, I’d recommend: The Very Best of Artie Shaw.

    That pretty much has it all. Personally, I love “Star Dust” and “Deep Purple.” Wonderful stuff.
    Two others you might enjoy are: The Complete Gramercy Five Sessions (all the big band guys made smaller bands after the war); and Last Recordings: Rare and Unreleased.

    Barry adds: “There is a terrific recording of Shaw at NPR: Performance by Shaw of Shaw’s 1940 Concerto for Clarinet.”

    This post can also be found at Barry’s blog, “The Big Picture.”

  • Nicholas Financial’s Earnings
    Posted by on May 4th, 2007 at 1:28 pm

    Nicholas Financial (NICK) just reported earnings of 29 cents a share versus 28 cents a year ago. Revenue dropped 1% to $12,044,000. The March quarter is the company’s fiscal fourth quarter, so NICK just wrapped up its 18th straight record year for sales and earnings.
    Overall, I think this was a decent earnings report. Not terrific, but decent.

  • The Stock Market in Euros
    Posted by on May 4th, 2007 at 12:46 pm

    In July 2002, the dollar and the euro reached parity. But today, the euro is 35% higher.
    Here’s what the Wilshire 5000 Total Return Index (^DWCT) looks like in dollars (red line) and adjusted for euros (black line).
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  • Microsoft to Buy Yahoo?
    Posted by on May 4th, 2007 at 8:10 am

    The New York Post:

    Stung by the loss of Internet advertising firm DoubleClick to Google last month, Microsoft has intensified its pursuit of a deal with Yahoo!, asking the company to re-enter formal negotiations, The Post has learned.
    While Microsoft and Yahoo! have held informal deal talks over the years, sources say the latest approach signals an urgency on Microsoft’s part that has up until now been lacking.
    The new approach follows an offer Microsoft made to acquire Yahoo! a few months ago, sources said. But Yahoo! spurned the advances of the Redmond, Wash.-based software giant. Wall Street sources put a roughly $50 billion price tag on Yahoo!.

    Fifty billion??
    No. No way. Never.
    By my math, that’s $36 a share, eight bucks above yesterday’s close. It’s eight times next year’s sales and 52 times earnings.
    If Google went for that much, it would be a $1,000 stock.