• Look Out Below!
    Posted by on June 8th, 2006 at 11:39 am

    The market is plunging this morning. The S&P 500 just lost all of its gains for the year. The index fell below 1240 to reach its lowest point in six months.

  • Abu Musab al-Zarqawi Is No More
    Posted by on June 8th, 2006 at 9:37 am

    We got him.
    This probably won’t be enough to lift the stock market. Ticker Sense notes that the blip the market got from Saddam’s capture was very short-lived.
    Here’s something interesting I noticed. Look at how strongly the Oil Services HOLDRs ETF (OIH) is correlated with the iShares Brazil ETF (EWZ):
    oihewz.bmp

  • From 1999
    Posted by on June 8th, 2006 at 8:29 am

    Smart Money‘s Ten Stocks for the Next Decade:
    Inktomi (INKT)
    Red Hat (RHAT)
    Scientific-Atlanta (SFA)
    America Online (AOL)
    Broadcom (BRCM)
    Nokia (NOK)
    Nortel Networks (NT)
    MCI WorldCom (WCOM)
    Monsanto (PHA)
    Citigroup (C)

  • Soccer and the Stock Market
    Posted by on June 8th, 2006 at 7:16 am

    The key to being a graduate student in finance is to compare any variable you can think of to the stock market. Since the World Cup starts tomorrow, I thought I’d show you results of a Dartmouth study comparing soccer matches to a nation’s stock market:

    Stock markets move with soccer scores because they have a “decisive impact” on the mood of a nation, according to a study by Dartmouth College.
    Match results may “have an important effect” on share prices, Professor Diego Garcia said, commenting on a report released by Tuck School of Business at Dartmouth this week. “There are forces influencing our economies that have little to do with rational thought.”
    Stock markets decline 0.39 percent on average after the national team loses in a World Cup game and 0.29 percent in any international match, according to the study, co-written by Massachusetts Institute of Technology’s Alex Edmans and Norwegian School of Management’s Oyvind Norli.
    The correlation is the highest in countries with the biggest public support for soccer such as England, France, Germany, Italy and Spain, the report said. In South American nations, the phenomenon is similar, it said.

    Here’s the entire paper.

  • Survey: iPods More Popular Than Beer
    Posted by on June 7th, 2006 at 8:47 pm

    Damn.

    SAN JOSE, Calif. – Move over Bud. College life isn’t just about drinking beer.
    In a rare instance, Apple Computer Inc.’s iconic iPod music player surpassed beer drinking as the most “in” thing among undergraduate college students, according to the latest biannual market research study by Ridgewood, N.J.-based Student Monitor.
    Nearly three quarters, or 73 percent, of 1,200 students surveyed said iPods were “in” – more than any other item in a list that also included text messaging, bar hopping and downloading music. In the year-ago study, only 59 percent of students named the iPod as “in,” putting the gadget well below alcohol-related activities.
    This year, drinking beer and Facebook.com, a social networking Web site, were tied for second most popular, with 71 percent of the students identifying them as being “in.”

  • Harley-Davidson Shares Rise on Note
    Posted by on June 7th, 2006 at 4:12 pm

    From AP:

    NEW YORK (AP) – Shares of Harley-Davidson Inc. rose Wednesday after an analyst issued a report saying the motorcycle manufacturer’s spring sales may be up more than expected.
    In afternoon trading, Harley-Davidson shares were up $1.59, or 3.3 percent, to $49.55 on the New York Stock Exchange. Over the past year, the company’s shares have traded between $44.40 and $55.93.
    Robin M. Farley of UBS Investment Research maintained his “Neutral” rating of the company, but said Harley-Davidson could post a 6 percent to 7 percent increase in U.S. retail sales at the dealer level for the period of April through May.
    “Solid numbers so far in the second quarter seem to show Harley-Davidson consumer is intact,” Farley wrote in a note to investors.
    “Unless we see a decline in June (we don’t think likely), second-quarter retail sales should meet Harley-Davidson’s target of plus 5 percent to 9 percent, and well ahead of Harley-Davidson’s planned increase in shipments of plus 1 percent in the second.”
    But Farley cautioned that despite a year-to-date increase in retail sales of about 5 percent, the company’s shipments are back-end loaded and demand is not growing as much as Harley-Davidson’s planned production rate.

  • Free Money!
    Posted by on June 7th, 2006 at 11:36 am

    image133.png
    One of the cases often made by market bears is that the economic recovery, such as it is, is largely illusionary, thanks to lots of cheap money and inflated real estate prices. There’s certainly a lot of truth to that, although I think too many bears overstate the case.
    But they’re exactly rights about loose money. The chart above shows a good historical perspective. It charts the growth of an investment in Treasury Bills, adjusted for inflation, since 1953. In other words, real short-term interest rates. Over the long-term, real rates are rather puny–about 1.2% to 1.4% a year.
    The problem with inflation is “some” begets “more,” and it can easily spiral out of control. If the cost of borrowing falls below inflation, then borrowers are being paid to borrow money. That’s what happened in the 70’s and you can see that the blue line headed down. In other words, real rates were less than 0%.
    What’s interesting about this chart is that in the 80’s, the line appeared to revert to its long-term trend. But the trend was snapped again four years ago. I was shocked to see how much of a departure from history the last four years have been. Real short rates have been running about -1% a year since 2002.
    The chart (based on Ibbotson numbers) runs through December 2005, although it looks like rates have stayed negative this year as well. For the first four months of 2006, the CPI (which may be understated) is up about 2.4%, or 7.3% annualized. Since January, the three-month Treasury yield has climbed from 4% to 4.7%.

  • A Response to StockLemon.com
    Posted by on June 7th, 2006 at 10:21 am

    It certainly took them long enough. Here’s American Renaissance Homes’ response to yesterday’s allegations. Home Solutions of America (HOM) is rallying today.

  • Save the Penny
    Posted by on June 7th, 2006 at 10:02 am

    Greg Mankiw and Tyler Cowen think we ought to get rid of the penny. I’m not so sure. Despite any economic rationalizations, people are weirdly loyal to their currencies.
    Proper British gentlemen would never dream of conducting their racehorse business in anything but guineas. (I mean…really.) Did I mention that the last guinea was minted 193 years ago?
    See here for an example.

  • Jim Stack: Recession Dead Ahead
    Posted by on June 7th, 2006 at 8:32 am

    I don’t always agree with Jim Stack, but he’s certainly someone worth listening to. Here’s his bearish outlook in the latest Forbes:

    Slowly and methodically, the forces have been moving us toward an imminent recession. These cyclical forces include commodity inflation, which on a long-term basis is at the highest level since the 1970s. But they also extend deeper– into the monetary forces and even consumer psychology behind the economic expansion.
    The yield curve has changed dramatically in the past 24 months, and is as “flat” as we can ever remember seeing it. The danger is the 88% historical probability of a recession that this represents. And if pressures preclude the Fed from easing later this year, one might say the odds of recession are closer to 100%.
    In the past 40 years, there have been eight instances where the yield curve (10-year T-bond minus 3-month T-bill) has flattened to this extent. In four of those instances, the yield curve temporarily widened, only to flatten again: 1973, 1989, 1998 and 2000. But in only one of those eight instances was the economy able to avoid a recession.