Dead Cat Splat
Posted by Eddy Elfenbein on June 12th, 2006 at 3:47 pm

We’ve given it all back. The Nasdaq is now below its low from last week, and is at its lowest point since October. This is the seventh straight down day for the index. Lehman Brothers (LEH) is down 6% today.

S&P Share Buybacks Surge in 1Q
Posted by Eddy Elfenbein on June 12th, 2006 at 1:43 pm

From AP:

NEW YORK — Share buybacks among companies in the Standard & Poor’s 500 climbed over 22 percent in the first three months of this year versus the prior-year period, a trend that boosted their first-quarter earnings per share by roughly 4 percent, Standard & Poor’s said Monday.
S&P 500 companies spent $100.2 billion buying back their own shares in this year’s first quarter, the most they’ve spent on buybacks since the fourth quarter of 2005, when they spent a record $104.3 billion, Standard & Poor’s said. A total of 108 companies reduced their diluted shares outstanding by at least 4 percent.
The recent surge in share buybacks comes as companies have built up hefty cash holdings, yet face a lack of attractive investment opportunities.
Earlier this month, media company Tribune Co. said it would go ahead with a $2 billion buyback, while network gear maker Cisco Systems Inc. said it would buy back up to $5 billion of its own stock.
“Given the current cash reserves and associated short-term rewards, the trend and its impact are expected to continue through the remainder of 2006,” said Howard Silverblatt, senior index analyst at Standard & Poor’s. Over the past 18 months, S&P companies have spent $515 billion to buy back their shares, he said.
Companies buy back their own stock for several reasons, such as to boost shareholder value by reducing the number of shares outstanding, to reissue shares for mergers and acquisitions, and to cover workers who are exercising their stock options.
But Standard & Poor’s said more companies are motivated by a desire to bolster earnings per share, a trend that raises concerns about the quality of earnings and where the company’s profit growth is coming from.
“The most relevant question an investor can ask is what the company will do with the repurchased shares,” adds Standard & Poor’s Silverblatt. Repurchased shares “sit in the corporate treasury, where, subject to regulator timing, (they) can be reissued at the discretion of the company.” Paying a premium for a company’s stock when growth is coming from interest income and reduced share count “is not acceptable,” Silverblatt added.

The Best-Selling Business Books
Posted by Eddy Elfenbein on June 12th, 2006 at 12:17 pm

The top 20 according to Amazon:
Freakonomics : A Rogue Economist Explores the Hidden Side of
Everything
by Steven D. Levitt, Stephen J. Dubner
The Tipping Point: How Little Things Can Make a Big Difference
by Malcolm Gladwell
Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and Middle Class Do Not!
by Robert T. Kiyosaki, Sharon L. Lechter
Blink : The Power of Thinking Without Thinking
by Malcolm Gladwell
Good to Great: Why Some Companies Make the Leap… and Others Don’t
by Jim Collins
Jim Cramer’s Real Money: Sane Investing in an Insane World
by James J. Cramer
Never Cold Call Again : Achieve Sales Greatness Without Cold Calling
by Frank J. Rumbauskas Jr.
How to Win Friends & Influence People
by Dale Carnegie
The Official Guide for GMAT Review, 11th Edition
The Official SAT Study Guide
by The College Board
Now, Discover Your Strengths
by Marcus Buckingham, Donald O. Clifton
Rich Dad’s Advisors: The ABC’s of Real Estate Investing : The Secrets of Finding Hidden Profits Most Investors Miss
by Ken McElroy
Getting Things Done : The Art of Stress-Free Productivity
by David Allen
Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth
by T. Harv Eker
Cashflow Quadrant: Rich Dad’s Guide to Financial Freedom
by Robert T. Kiyosaki, Sharon L. Lechter
Revolutionary Wealth
by Alvin Toffler, Heidi Toffler
Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!
by Robert T. Kiyosaki, Sharon L. Lechter
The Five Dysfunctions of a Team: A Leadership Fable
by Patrick M. Lencioni
Who Moved My Cheese? An Amazing Way to Deal with Change in Your Work and in Your Life
by Spencer Johnson, Kenneth H. Blanchard (Foreword)
The Little Book That Beats the Market
by Joel Greenblatt, Andrew Tobias (Foreword)

The North Korean Fund
Posted by Eddy Elfenbein on June 12th, 2006 at 11:52 am

Thanks, I’ll pass.

London-based Chosun Development & Investment Fund LP is trying to raise US$50 million (euro40 million) to exploit, as it says on its Web site, “opportunities in the Democratic People’s Republic of Korea…one of the last frontiers of global investing.” It claims to be the first such fund dedicated to investing in North Korea.
Nestled in a politically volatile corner of East Asia, North Korea is the world’s lone outpost of totalitarian communism, its dictator Kim Jong Il seen by some as a brutal madman bent on developing nuclear weapons.
Its economy, beset by chronic power shortages and still recovering from a deadly famine in the 1990s, is widely regarded as decades behind the industrialized world. Nearly 20 years ago, North Korea even defaulted on its foreign bank loans.
Such obstacles haven’t deterred Chosun Fund, as it’s known for short. (Chosun is what North Korea calls itself.)

A few years ago, the North Koreans had a bond offering which offered zero interest and–I’m not making this up–an “expression of affection” from the government.
I proposed a counter offer of an “expression of affection,” and I raised them “a laurel and hearty handshake.” I never heard back.
When the bonds come due in ten years, there will be a lottery and the winner will get some interest.
By the way, Kim Il-sung is the official President of North Korea despite dying 12 years ago.

Moral Hazard Interruptus
Posted by Eddy Elfenbein on June 12th, 2006 at 11:48 am

Pimco’s Paul McCulley on moral hazards and central banking.

The great Hyman Minsky famously declared that stability is de-stabilizing. The experience of recent years reinforces the truth of that proposition, particularly when stability is bought with moral hazard. A little moral hazard is, to be sure, a necessary lubricant for global capitalism. And a little more than a little is the only path to cutting off fat-tailed deflationary risks. But way too much is not, in the words of Mae West, just about right.

As they say, read the whole thing.

Lehman’s Profits Up 48%
Posted by Eddy Elfenbein on June 12th, 2006 at 9:19 am

The company earned $1.69 a share, nine cents more than estimates.

Carrie Rings the Opening Bell
Posted by Eddy Elfenbein on June 12th, 2006 at 7:10 am

And flees.

The Golden Bear
Posted by Eddy Elfenbein on June 12th, 2006 at 6:38 am

In less than one month, gold has dropped over $110 an ounce. Here’s the contract for June delivery:

The XAU (^XAU), which is an index of 15 miners, is off nearly 24%.

Lehman’s Earnings
Posted by Eddy Elfenbein on June 12th, 2006 at 6:22 am

Tired of being one-upped by Goldman (GS), Lehman Brothers (LEH) is reporting its earnings Monday before the bell. Here’s a preview:

OVERVIEW: The New York-based securities firm has spent the past few years expanding its reach globally, and has since captured a larger share of merger and acquisitions advisory deals. Like others in the industry, Lehman has also seen record profits during the past 12 months _ leaning on a stronger performance of its equity capital markets business in both the U.S. and abroad, and has made inroads in the prime brokerage business.
BY THE NUMBERS: Lehman reported a 25 percent rise in profits during the first quarter, which set a record for quarterly results. The firm is expected to have an equally strong performance this time around.
Wall Street projects a profit of $1.60 per share on $4.19 billion revenue, according to analysts polled by Thomson Financial.
ANALYST TAKE: “We generally expect second quarter broker results to be good,” said Prudential Securities analyst Michael Mayo. “There has been little to no decline in deal activity. International revenues should continue to grow. Volatility has probably helped certain trading activities.”
Lehman isn’t the only broker to report during the week. Also on tap are Goldman Sachs Group Inc. and Bear Stearns Cos.
WHAT’S AHEAD: Analysts will be looking to see how Lehman will continue to expand its M&A business, which has helped fuel all of its rivals on Wall Street to historic results in recent quarters. Moody’s Investors Service on Thursday raised its outlook for Lehman’s long-term debt, citing strides the firm has made to expand that business in the past 18 months.
“Specifically, through a disciplined build-out in select product areas and geographies, Lehman has made steady share gains in primary equities, global advisory, and investment banking, and has been a lead adviser on an increasing number of marquee M&A transactions,” said Moody’s analyst Blaine Frantz in a report.
For 2006, Chief Financial Officer Dave Goldfarb said Lehman will focus on increasing its mortgage business in Asia as well as better serving hedge fund clients and expanding its nascent global energy trading arm. The company will also introduce new private equity funds and increase its small business loans globally.
STOCK PERFORMANCE: Lehman shares closed the quarter at $66.61 on the New York Stock Exchange, down 9 percent for the quarter. The stock — which has traded in a 52-week range of $46.21 to $78.84 — closed Friday at $65.61, remains up about 2.4 percent for the year, after falling from its high hit in April.

Here’s how the Big 5 have done since October 2002:

Not bad. One of the reasons why brokerage firms have been so profitable: Outsourcing.
By looking at the chart, you can see why there was a shareholder revolt at Morgan (MS), aka the blue line. Lehman has definitely been the top-performer, even though its stock is off about 16%.

Fun with the SEC Search Function
Posted by Eddy Elfenbein on June 11th, 2006 at 10:08 pm

I noticed this too but wasn’t going to post it. Since Paul Kedrosky did, I guess that makes it okay (his has a Ph.D, people). It also shows you where our minds are.
In any event, Alex Kintner’s mother makes a rather unexpected appearance in an SEC filing:

RESOLVED, a description of such 6% Non-cumulative Perpetual Preferred Stock, Series E, including the preferences and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions for redemption, all as set by the Board of Direc you fucking new when i asked you liartors of the Corporation, is set forth in the attached Certificate of Designation Establishing the 6% Non-cumulative Perpetual Preferred Stock, Series E and Fixing the Powers, Designations, Preferences and Relative, Participating, Optional and Other Special Rights, and the Qualifications, Limitations and Restrictions, of the 6% Non-cumulative Perpetual Preferred Stock, Series E.

That’s exactly how the text appears. I blame the cut-and-paste fuction. This is why I write all my letters to the editor in longhand. I have to admit that I’m dying to know the back story here.