• Top Industry Groups This Year
    Posted by on October 24th, 2006 at 2:21 pm

    Steel………………………57.28%
    Fixed-Line Telecom…..39.99%
    Autos……………………..35.47%
    Nonferrous Metals……30.51%
    Brokers…………………..26.32%
    REITs……………………..24.66%
    Gaming…………………..24.38%
    Restaurants…………….21.16%
    Broadcasting……………20.80%
    Aerospace……………….20.73%

  • Gold Vs. Stocks
    Posted by on October 24th, 2006 at 1:53 pm

    I get the most mail whenever I write about gold. The point I try to stress is how poorly gold has performed relative to common stocks. What’s interesting is how little gold has to move for gold bugs to claim victory.
    If there’s one thing I can get across to investors it’s that gold is an asset, but stocks are equity. This is a huge point. By it, I mean that gold only has value for what people can do with it. Stocks, on the other hand, represent claims on real assets. It’s people taking assets, like gold, and using them to create wealth. It’s people actually doing something. Gold is merely the tool, and it has very limited industrial applications.
    The price of gold has historically been defined by brief and dramatic price spikes, followed by periods of long declines. I think we’re going through a spike now. In fact, it may already be over.
    A few days ago, Barry Ritholtz posted a chart from Chart of the Day showing the Dow-to-Gold ratio. For 20 years, the ratio had dramatically expanded, although it’s fallen in half during this decade.
    Of course, gold doesn’t pay a dividend so I was curious how dividends would have changed this relationship. Dividends don’t pay much these days, but the effect over 30-odd years can be pretty big. Also, small-cap stocks have done very well over the past few years so I wanted to compared Gold against the Wilshire 5000 Total Return Index (^DWCT). Here’s what the chart looks like:
    image277.bmp
    That’s a logarithmic chart, so you can see that the ratio has grown very dramatically over the years. In 20 years (1980-2000), stocks beat gold by an amazing 72 fold. Gold’s advantage over stocks during the past few years is truly just a small dip in a long-term rise.

  • Not Dead Yet
    Posted by on October 23rd, 2006 at 6:06 pm

    matador.jpg
    Today was another good day for the good guys. The Dow jumped 114.54 points to close at 12,116.91. The S&P 500 is up to 1,377.02. Adjusted for dividends, the S&P isn’t too far from an all-time high.
    The Buy List was up 0.90% today. The big winners included Bed Bath & Beyond (BBBY) which closed a penny shy of $40. Fiserv (FISV) also did very well and hit a new 52-week high, as did Harley-Davidson (HOG). Harley is now up 33% for the year! Boo-yah!
    Honestly. I’m a little concerned that Treasury yields are creepy higher. That will always kill a rally. Whenever bonds and stocks part company, you know something is up. Frankly, we need some time to take a rest about now.
    After the bell, Brown & Brown (BRO) reported earnings of 29 cents a share, one penny better than expectations. Revenues were in line with estimates. The earnings parade continues! Tomorrow we’ll get earnings from AFLAC (AFL) and Fiserv (FISV). On Wednesday, Varian (VAR) reports, and on Thursday, Respironics (RESP) reports.

  • Ford’s Earnings
    Posted by on October 23rd, 2006 at 9:55 am

    Ugh, the news continues to be grim for American car companies. Today, Ford (F) announced that it lost $5.8 billion in the third quarter. That’s not all–it plans to restate earnings going back to 2001. On an earnings-per-share basis, the loss for Q3 comes to $3.08 compared with a loss of 15 cents a share last year. Sales dropped 10% to $36.7 billion. Two years ago, the stock was at $15 a share, while today it’s below $8. And that’s after a rally!

  • More Earnings News
    Posted by on October 19th, 2006 at 10:07 am

    This is a strange day for earnings. Danaher (DHR) is currently down despite beating estimates by a penny, and raising its full-year guidance. For the third quarter, the company earned 83 cents a share compared with 70 cents last year.
    UnitedHealth (UNH), on the other hand, beat estimates by three cents a share, also raised its guidance but said it will delay its filing. That stock is currently up over 4%.
    Also, Dell (DELL) is sharply lower after creeping up slowly for the past few weeks. A research firm said that HP is now the world’s #1 PC-maker.

  • It was 19 Years Ago Today…
    Posted by on October 19th, 2006 at 7:18 am

    …Sgt. Pepper taught the band to play.
    Well, not exactly. But it was the day that the stock market crashed. On October 19, 1987, the Dow dropped 508 points. In just a few hours, the index lost of 22.6%.
    How have things gone since then?
    The Dow is up 590%. Add in dividends, the Dow is up 1,010%. (That should teach you to reinvest your dividends!)
    Inflation has increased by 76%.
    And for all you gold bugs out there, the yellow metal is up 23%.
    To match the Dow, gold needs to get up to nearly $6,600 an ounce.
    The Dow has also outperformed the Wilshire 5000 which is up 493%, and 785% with dividends.

  • Larry Ellison and the Art of War
    Posted by on October 19th, 2006 at 6:51 am

    In the movie Wall Street, Gordon Gekko tells Bud Fox to bone up on Sun-tzu’s The Art of War (you remember, “every battle is won before it is ever fought,” crap like that). Sure, this stuff is nice for the films, but it turns out Larry Ellison takes it seriously. I’m not making this up.
    First some background. Larry has what you might call a troubled relationship with Hasso Plattner, the top dog at SAP.

    Not since SAP AG founder Hasso Plattner dropped his pants in front of Larry Ellison’s support vessel in a 1996 yacht race have tensions between the rival software makers been so high.

    Of course, that would depend on what he dropped his pants for. But as the sports announcers say, “these two just don’t like each other.”

    A normal relationship between SAP and Redwood City, California-based Oracle these days includes dueling press releases amid claims that stretch reality, SAP and analysts said. During Oracle’s first-quarter conference call Sept. 19, Ellison said SAP was delaying its next major product until 2010 while abandoning its strategy of internal growth helped by small acquisitions.

    Oh, no he dint! No he dint!

    Ellison’s comments were “a complete misrepresentation” of SAP’s products and strategy, Walldorf, Germany-based SAP said the same day. Only once before, in 2000 when Oracle said it was first in sales of business-management software, had SAP issued a statement responding to Oracle claims.
    “Both times the distortion of facts about SAP were so significant we had to clear the record,” SAP spokesman William Wohl said in an interview. SAP said no senior-level executive would talk about the company’s current jousting with Oracle.

    But wherever did Larry get this idea from?

    The tactics are classic Ellison, famous for his admiration of “The Art of War,” the treatise on battle tactics written by the sixth-century BC Chinese general Sun Tzu.

    Ah, yes. It’s coming back to me now.

    Bud Fox: All warfare is based on deception. If your enemy is superior, evade him. If angry, irritate him. If equally matched, fight and if not: split and re-evaluate.”

  • WallStrip.com
    Posted by on October 18th, 2006 at 4:02 pm

    If you haven’t seen it yet, check out WallStrip by Howard Lindzon. It’s sort of a Rocketboom for Wall Street.
    Herre are the first three shows:
    October 16
    October 17
    October 18

  • Burying the Lede
    Posted by on October 18th, 2006 at 11:53 am

    Here’s a perfect example of Old Media missing the real story. This is from a WSJ article about Wal-Mart holding its analyst meeting in New York instead of Arkansas.

    Coinciding with the two-day event is a dinner on Monday hosted by film moguls Bob Weinstein and Harvey Weinstein to honor Wal-Mart Chief Executive Lee Scott “for his commitment to environmental sustainability,” according to an invitation for the event. Also slated to attend the event are 18 heavyweights of entertainment and finance, including Cablevision Systems Corp. CEO James Dolan, hedge-fund billionaire Paul Tudor Jones, Robert Wright, chairman of General Electric Co.’s NBC Universal unit, and television host Charlie Rose. The event is closed to the public, as is the rest of the two-day meeting.
    The Eagles will perform at the dinner. Also performing during the meeting will be country singer Garth Brooks, a regular fixture at Wal-Mart events now that his CDs and DVDs are sold exclusively by the retailer.

    The Eagles! You lead off with that. The rest of the story writes itself. The only question left is, who’s selling out here, Wal-Mart or the Eagles.

  • Inflationpalooza!
    Posted by on October 18th, 2006 at 9:27 am

    The idea of Core CPI comes in for a lot of ribbing, but today’s report shows why it can be more valuable than the headline number. Thanks to the big drop in oil, headline inlfation dropped 0.5% last month, but the core rate rose 0.2%.
    What’s more, the data from one year ago included a big jump in energy prices, this was just after Hurricane Katrina. So the year-over-year number for headline inflation dropped from 3.8% in August to 2.1% in September.
    By looking at the core rate, it also seems that the Fed still might be going too easy on inflation. Real rates are currently running at around 2.3%, which is less than where they were during much of the 1990s.
    image276.bmp
    Note that this is an imperfect data set because it compares trailing inflation to today’s Fed funds rate.