• Reversify
    Posted by on January 3rd, 2007 at 4:48 pm

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    After an early rally, the market reversed course this afternoon to close down 0.12%. The new Buy List lost 0.19%. Ironically, I just threw Home Depot (HD) overboard and it was up over 2.2% today thanks to Bob Nardelli’s resignation. Oh well, I told you I’m not much of a market timer.
    The good news is that two of my new buys, Amphenol (APH) and Jos. A Bank (JOSB), had good days. APH was up 2.7 and JOSB was up 2.9%. Sysco (SYY), which is one of the most stable stocks on the Buy List, was hurt by a downgrade from JP Morgan. The stock dropped 1.3%. Also, Fiserv (FISV) was downgraded by AG Edwards. FISV lost 1.6%.
    The most surprising activity came from the energy sector. The Dow Energy Index (^DJUSEN) closed down 3.8%. For the record, I’ve been expecting energy stocks to crack for over a year. Yesterday, oil had its biggest fall in 20 months.

  • The S&P 500 Total Return Index
    Posted by on January 3rd, 2007 at 1:43 pm

    The market is starting 2007 just how it finished 2006. For the year, the S&P 500 was up 15.80% including dividends. How’s how the Total Return Index has done since 1996:
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    Here’s the sector breakdown for 2006:
    Telecom………………………………32.13%
    Energy………………………………..22.22%
    Consumer Discretionary………..17.23%
    Utilities……………………………….16.87%
    Financials……………………………16.16%
    Materials…………………………….15.73%
    Consumer Staples………………..11.76%
    Industrials…………………………..11.02%
    Technology……………………………7.70%
    Health Care……………………………5.78%

  • Mark Cuban: The Stock Market Is for Suckers
    Posted by on January 3rd, 2007 at 10:31 am

    Exactly one year ago, Mark Cuban wrote on his blog that the stock market is for suckers:

    The concept that you own “your share” of the company is a joke. You are completely at the whim of the CEO and board who will dilute you on a daily basis with stock options, then try to buy back stock to cover it up and push up the price, rewarding the shareholders who get out, rather than those that continue to hold the shares. Meaning you.

    Cuban’s post was a response to a comment from Thomas Hawk. Yesterday, Hawk followed up:

    So here we are a year later (much too short a time horizon to matter by the way) — where would you be if you took $100,000 and followed Mark Cuban’s advice vs. mine?
    For comparison purposes, I’m going to assume that two investors both had $100,000 to invest on January 3, 2006. Had you followed Cuban’s advice (and I’m using the Vanguard Prime Money Market Fund) you would have today approximately $104,882.60.
    Had you taken that same $100,000 and put it into the Vanguard Total Stock Market Index (a low cost basket of stocks that tries to roughly equate to the U.S. Market) today you would have approximately $113,890.00.

  • Nardelli Quits Home Depot
    Posted by on January 3rd, 2007 at 10:03 am

    And he’s taking his money with him.

    Vice Chairman Frank Blake, 57, will replace Nardelli, effective immediately, Home Depot said in a statement today. Nardelli, 58, will receive $210 million in severance payments, the company said.
    Home Depot has lost market share to Lowe’s Cos. during Nardelli’s six-year tenure, its shares have declined 7.9 percent and the company is headed for its smallest annual gain in profit in at least nine years.
    “Ultimately the board felt the negativity associated with Nardelli was an impediment to his and the company’s success,” said Daniel Popowics, an analyst with Fifth Third Asset Management. “This is a surprise. I thought Nardelli carved out some time for himself to turn things around.” The Cincinnati firm manages $21 billion, including Home Depot stock.
    Nardelli, who joined Home Depot from General Electric, became a lightning rod for critics of excessive executive pay. Nardelli was the only board member to appear at the company’s annual meeting last year, where the size of his pay package was questioned.

    In the press release, the company stated exactly what Nardelli is going to get.

    Nardelli and the Company have agreed in principle to the terms of a
    separation agreement which would provide for payment of the amounts he is
    entitled to receive under his pre-existing employment contract entered into
    in 2000. Under this agreement, Nardelli will receive consideration
    currently valued at approximately $210 million (including amounts which
    have previously been earned or vested). This consideration will include a
    cash severance payment of $20 million, the acceleration of unvested
    deferred stock awards currently valued at approximately $77 million and
    unvested options with an intrinsic value of approximately $7 million, the
    payment of earned bonuses and long-term incentive awards of approximately
    $9 million, the payment of account balances under the Company’s 401(k) plan
    and other benefit programs currently valued at approximately $2 million,
    the payment of previously earned and vested deferred shares with an
    approximate value of $44 million, the payment of the present value of
    retirement benefits currently valued at approximately $32 million and the
    payment of $18 million for other entitlements under his contract which will
    be paid over a four year period and will be forfeited if he does not honor
    his contractual obligations.

  • World War II Ends
    Posted by on January 2nd, 2007 at 3:32 pm

    The Brits pay off their war debt to us.

    Under the arrangement, the US handed a financial lifeline to Britain, allowing it to secure oil, food, arms and other military equipment on credit to help the war effort. Though other countries also benefited under the programme — a $48 billion project — Britain received the largest chunk of aid.
    When the war finished, the economist Maynard Keynes — by then the government adviser Lord Keynes — led a delegation to the U.S to agree repayment for those materials for which it had been charged and to secure a loan of $4 billion. He warned that Britain had been left facing a “financial Dunkirk”.

    Still, I was kinda hoping we could send over a couple repo guys. Nothing big. Maybe a few castles.

  • The Do Something Congress
    Posted by on January 2nd, 2007 at 1:26 pm

    Andrew Roth of the Club for Growth ran the numbers on 2006. When Congress was in session, the S&P 500 went up 2.25%. On days when it wasn’t it session, it went up 11.56%.

    So you’re probably asking yourself, “Was this just coincidental?” The cynics out there would say no. And the cynics would be right. Long term empirical evidence says that correlation does, in fact, mean causation. According to two economists, Mike Ferguson of the University of Cincinnati and Hugh Douglas Witte of the University of Missouri at Columbia, if you had invested $1 in the Dow Jones Industrial Average back in 1897 when the index first started and conducted the In/Out Session schemes until the year 2000, here’s how much money you would have:
    In Session: $2
    Out Session: $216

  • “Cautiously Optimistic”
    Posted by on January 2nd, 2007 at 11:12 am

    One of my favorite media phrases is “cautiously optimistic.” It means nothing while it sounds important. Can you think of a situation where it wouldn’t apply? (Apocalypse to Strike Earth, Experts Cautiously Optimistic). See! You can’t go wrong.
    A few years ago, Neil Westergaard wrote:

    What a great all-purpose, meaningless qualifier to keep from looking stupid. It’s much better than just saying “I don’t know.” It implies that that the person really does know something important, but is being conservative and careful in the distribution of information, holding back the unverifiable facts for the good of the republic.
    Or covering their behinds.
    “Cautiously optimistic.” If the economy goes into the dumper again, we can say our earlier caution was warranted. If things pick up, we were right to be optimistic and “knew it all along.”

    Which brings me to today’s New York Times:

    Economists Cautiously Optimistic About 2007

    I hope they’re right.

  • How Will the Dow do in 2007?
    Posted by on January 2nd, 2007 at 10:58 am

    The new-and-improved Wall Street Journal asks its reader how will the Dow do in 2007?
    Here are the results as of 11 a.m.:
    Up more than 10%…………………..24%
    Up 5% to 10%………………………..45%
    Up less than 5%……………………..15%
    Down less than 5%…………………..4%
    Down 5% to 10%……………………..5%
    Down more than 10%………………..7%
    This stikes me as somewhat conservative.

  • Happy New Year!
    Posted by on January 1st, 2007 at 12:08 am

    818,304 visitors for 2006.
    Thank you all!

  • Economics Discovers Its Feelings
    Posted by on December 31st, 2006 at 8:10 pm

    Here’s a fascinating article from the Economist:

    If people are bad at recalling their feelings, they are worse at predicting them. They fail to anticipate how a person feels after moving to a new city, losing a limb or winning a jackpot. Prisoners imagine that solitary confinement will be worse than it really is; mothers-to-be think the pain of childbirth will be more bearable than it typically proves to be. And it is not just unusual events that trip people up. According to Mr Kahneman, people struggle to predict how their appetite for ice-cream, low-fat yogurt or music might change in the course of a week of enjoying them. If man is an iron-balance that weigh pains and pleasures, the scales are sadly askew.