• Pfizer and the Dow
    Posted by on December 4th, 2006 at 3:02 pm

    Well, it turns out that Pfizer‘s (PFE) turnaround, isn’t quite turning around. The company’s blockbuster new drug to replace Lipitor apparently has some problems.
    Here’s something interesting: Even though Pfizer is getting slammed by over 11% today, because the Dow is weighted by price, the sell-off isn’t having a very big impact. By market value, Pfizer is the ninth-largest Dow stock (true, it was higher last week). The company makes up about 4.4% of the Dow’s total value, which is about $4 trillion. However, Pfizer’s low price means that it makes up just 1.6% of the Dow.
    GM is by far the biggest moocher in the Dow. It has a larger weighting in the Dow than Microsoft even though MSFT’s market value is 17 times larger! This is why I follow the S&P 500.

  • Two Huge Buyouts This Morning
    Posted by on December 4th, 2006 at 9:18 am

    It turns out that the Home Depot (HD) buyouts rumors were completely unfounded, but the mergers are still coming. This morning, Bank of New York (BK) announced that it’s hitching up with Mellon Financial (MEL).
    Here’s a weird twist. Both banks have been led by Secretaries of the Treasury. No, really!
    Mellon Financial dates back to 1869 when it was started by Thomas Mellon, the father of the future Treasury Secretary, Andrew Mellon.
    The Bank of New York is one of the oldest companies in America. It was founded by Alexander Hamilton, our first SecTreas. (He was also the guy who…um..lost the duel.) BNY was the first stock ever traded on the NYSE.
    The other news is LSI Logic (LSI) is buying up Agere (AGR) for $4 billion. I can’t prove this, but I’ve always believed that a secret part of the government’s breakup plan for AT&T was to have each spinoff have a worse and worse name (Lucent, Avaya). Just a hunch.

  • The New CNBC.com is Live
    Posted by on December 4th, 2006 at 8:44 am

    CNBC.com is now live. Quick, sign up before all the good usernames are taken.
    The site’s design seems a bit….busy. Also, it’s somewhat clunky to navigate, but I’m happy to see some blogs listed under the News & Analysis tab. The site lists seven featured blogs, along with another seven program blogs.
    Here’s something very cool. Under the Investing Tools section, enter a stock symbol and click on earnings history. The company’s EPS pops up for the past several quarters. I like it!

  • First They Came for the Reindeer….
    Posted by on December 2nd, 2006 at 12:48 pm

    Peepen.jpg
    Yikes! The War Against Christmas is much worse than I thought.
    (Hat Tip: Agatha.)

  • A Look at the Very Long Term
    Posted by on December 1st, 2006 at 12:27 pm

    Through yesterday, the S&P 500 is up 12.2% for the year, and 14.2% including dividends.
    Going back to 1925, the stock market is up over 300,000% (I’m using numbers from Ibbotson Associates, plus I’ve added my own to fill in the gaps). Over the last 80 years and 11 months, the stock market has gained an average of 10.24% a year, that’s including dividends. Inflation has averaged just over 3% a year, and the after-inflation return of equities works out to 7.16% a year. That means that, on average, stocks double their value, in real terms, every ten years.
    Here’s a graph of the after-inflation total return of stocks going back to 1925. It’s a logarithmic chart, and I’ve included a 7% trend line for perspective:
    image301.png
    I think it’s interesting that the market soared above its trend line in the mid-50s, and stayed there for about twenty years. It then sank below it for the next several years. In fact, hugging the trend line, as we have recently, seems to the unusual pattern. It’s also interesting that 1987 now only appears as a little blip.
    Here’s the chart again, but this time I divided the stock market line by the trend line:
    image303.png
    We’re still smack in the middle of the long-term trend.

  • A Buyout of Home Depot
    Posted by on December 1st, 2006 at 10:14 am

    It’s official. Private equity has officially gone bonkers.
    The big news today is that some investors are interested in buying Home Depot (HD).
    That’s right, Home Freakin Depot. Private investors are thinking of buying a Dow component. Dear lord! And it’s one of the real ones, not Alcoa.
    In my mind, Home Depot is still cheap. The earnings have been disappointing, but nothing horrible. HD is going to make about $6 billion this year. It pays a good dividend (raised by 50% twice this year), and the company is working to alter its business model.
    The question we have to ask is if HD can change from a company that grew 18% a year to a company that will grow by 10%-12% a year. I think Nardelli realizes the problems HD faces.
    The Home Depot expects 12% sales growth next year, and EPS growth of 4%-5%. But then what?

  • The 10-Year Yield is Below 4.5%
    Posted by on November 30th, 2006 at 1:52 pm

    I don’t know how much longer this bond rally can go on. The 10-year yield (^TNX) is now below 4.5%. It hasn’t closed below 4.5% in ten months.

  • The Dollar’s Effect on the Stock Market
    Posted by on November 30th, 2006 at 11:30 am

    The stock market has been freaked out lately due to the falling dollar, and the evidence shows that stocks prefer a strong greenback.
    Since 1973, the dollar has risen on 4,189 days, fallen on 4,130 and stayed the same on 130. On the days of the higher dollar, the S&P 500 has risen a collective 2,356%, which is about 21.3% on an annualized basis.
    On days of a falling dollar, the S&P 500 dropped over 55%, which works out to 4.8% on an annualized basis.
    For the 130 days when the dollar is unchanged, the market is up 6.7%, or about 14.1% annualized.
    Think of it this way, a weak dollar is basically the equivalent of a bear market for stocks.

  • GDP Growth Revised Higher
    Posted by on November 29th, 2006 at 10:52 am

    The government revised GDP higher for the third quarter. The economy grew by 2.2% instead of the 1.6% the government said last month. Economists were expecting a revision to 1.8%.
    This begins my quarterly rant against government revisions. I don’t understand why the Commerce Department continually releases data that everyone knows will be altered in a few weeks. I’d much rather wait to get data, then to have data that’s always changing.
    Over the summer, the Commerce Department revised all the GDP numbers going back to 2003. So even after the monthly revisions, the government can step in and revise data going back a few years.

  • Donaldson -7.4%!
    Posted by on November 28th, 2006 at 2:14 pm

    Here’s a quick lesson on investing: Today’s move in Donaldson makes no sense whatsoever. The company did exactly what was expected. In fact, sales came in a little better than expected. I don’t care how anyone runs the numbers, this move just doesn’t make sense.
    Don’t get me wrong. I never get mad at the market. Your stocks don’t know you own them. Even if they did know, they still wouldn’t care. But sometimes, the daily moves in the market are simply beyond any analysis.
    It’s perfectly understandably that people need reasons. If the stock is down, there must be a why. But sometimes, there isn’t. It just happens.
    I’ll give you a good example. In July 2002, Wrigley‘s (WWY) plunged. There was no news at all. I remember watching the stock. Every day, it just fell and fell. Sometimes the market does things that don’t add up.
    The odd thing about Donaldson is that the stock was trading higher after hours yesterday, and it even gapped higher at today’s open. I’m not worried at all. This is still an excellent stock.