• Dell? Or No Dell?
    Posted by on May 11th, 2006 at 12:45 pm

    The market is not in a happy place today. Tech stocks are getting hit especially hard. Dell (DELL) just hit a new three-year low.
    Dell’s closing price on May 13, 1998: $24.56.
    Dell’s price midday May 11, 2006: $24.50.
    Dell’s profit for FY1998: $1.46 billion.
    Dell’s estimated profit for FY2006: $3.4 billion.
    Gold is soaring, and bonds are falling. Interestingly, the short-end of the yield curve is doing well (meaning, yields are lower).

  • Danaher Hits New High
    Posted by on May 11th, 2006 at 10:17 am

    Here’s how strange Wall Street can be. Three weeks ago, Danaher (DHR) reported good first-quarter earnings. The company made 67 cents a share, two cents more than Wall Street’s consensus. The company’s forecast for the second quarter and the rest of 2006 was a bit conservative, but the range still included Wall Street’s forecast.
    The stock reacted by falling. Then, all of a sudden, somebody concluded that this might be a good stock after all. The stock rallied to a new all-time high yesterday. It was almost a delayed reaction to a good earnings report.
    DHR.bmp

  • Let Us Hear From You
    Posted by on May 11th, 2006 at 10:04 am

    The marketing department high atop the Crossing Wall Street Tower has noticed a growing number of visitors to our Web site. We’re curious as to the geographic makeup of our readership. So…let us hear from you! Just send us an e-mail telling us what city or country you call home. Thanks!

  • UnitedHealth Confirms SEC Probe
    Posted by on May 11th, 2006 at 9:53 am

    From the Wall Street Journal:

    UnitedHealth Group Inc., becoming the latest company to acknowledge problems with the way it administered its stock-option grants, warned that it might have to restate past results, lose some valuable tax deductions and take charges that could reduce the past three years’ net earnings by $286 million.
    The giant health-care company also disclosed in its first-quarter filing with the Securities and Exchange Commission that is the subject of an “informal” SEC inquiry into its stock option granting practices.
    UnitedHealth said option related matters could reduce operating earnings by up to $393 million in the past three years, and net income by up to $286 million. It didn’t detail the potential effect on earlier years’ results, though the review goes back to 1994. The biggest impact of the past three years, the company said, would be in 2005 when the company said it could take a 4.5% hit on net earnings, which would drop by $150 million, or 11 cents a share.
    UnitedHealth, which previously maintained that its option grant practices were “appropriate”, stressed that the reviews were ongoing and that neither the special committee nor the company had reached final decisions.

    After a strong day yesterday, the stock is lower at the open.

  • Richard Parsons’ Family Crest
    Posted by on May 11th, 2006 at 9:42 am

    A reader found Richard Parsons’ family crest. Yuck. It looks likes a renaissance festival collided with a Gay Pride march. Still, he’s probably one of the few graduates of the University of Hawaii to have his own crest. I’ll give him that.

  • Understanding Options
    Posted by on May 11th, 2006 at 8:32 am

    Are you confused about options? Sure, who isn’t. Heck, even AIG got slammed on its derivatives.
    Fortunately, Alexander Chong at DailyIndia.com gives us an easy-to-read primer on options.

    There are abundant of money in the stock market. However, not everybody can get the money out from there. Some people can gain a lot from the stock market but some has lost a lot of money there. It is very indecisive. Sometime at that moment, you loss money but after a few days, you may earn a profit and sometime is reverse. So, how should we do to get the money out from the stock market? Usually, there are two ways to get the money out from the stock market; that are investing and trading. The difference between trading and investing is trading involves buying and selling share, future or option within a short period of time; whereas investing is buying share, future or option and hold it for quite a long time, usually one year or more before selling it.

    Dear lord, this more painful than reading Business Week.

  • Extensible Business Reporting Language
    Posted by on May 11th, 2006 at 7:17 am

    Here’s another chapter in the long-running series of Wall Street being completely taken over by machines. The Denver Post reports:

    A relatively new software code known as XBRL will soon give investors, stock analysts and regulators a better way to evaluate and compare the financial statements of public companies, a finance expert said Tuesday during a luncheon in Denver.
    The software, short for extensible business reporting language, is already being adopted by a handful of companies. Widespread use, however, is still at least a few years away, industry experts said.

    I wouldn’t be surprised if the SEC soon mandates XBRL.

    XBRL software is similar to a bar code that tracks any consumer product. It affixes specific “tags” to financial data. Each line item on a company’s balance sheet or earnings report – sales, liabilities and profits – would receive a tag that makes the information easy to access and read.

    Update: Jack Ciesielski has more on XBRL.

  • The Fed Goes 16-for-16
    Posted by on May 10th, 2006 at 3:04 pm

    The Fed raises rate to 5%. Here’s the statement (key changes in bold):

    The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5 percent.
    Economic growth has been quite strong so far this year. The Committee sees growth as likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.
    As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures.
    The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.
    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.
    In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco.

  • What is Gold’s Effect on Stocks?
    Posted by on May 10th, 2006 at 7:17 am

    Yesterday, gold cracked $700 an ounce for the first time in 25 years. The Dow Jones, however, didn’t seem to mind. The index is now less than 100 points away from an all-time high.
    I looked at the correlation between the price of gold, using the StreetTRACKS Gold Shares ETF (GLD), and the S&P 500.
    Over the last 369 trading days, gold has risen on 208 days and fallen on 157 days (four days were unchanged).
    If you total up all the days when gold rallied, the S&P 500 climbed 12.51%. On days when gold fell, the S&P 500 dropped a measly -0.46%.
    So is higher gold good for stocks? Well, not exactly. We don’t have enough evidence to say that. Sometimes you can have your facts right, and still draw the wrong conclusions. Of course, we could easily turn this around and ask if higher stocks are good for gold.
    I looked at the data a little more closely, and I was surprised to see that the positive relationship between higher gold and higher stocks is very recent.
    In fact, before October 27, 2005, the relationship was the opposite, although very slight. On the 128 days when gold rose, the S&P 500 lost 3.07%. On the 107 days of higher gold, the S&P 500 added a small gain of 2.66%.
    But on October 28, everything changed. Since then, on the 80 days of rising gold, the S&P 500 is up 16.06%. That’s over 60% annualized. On the 50 days of lower gold, the S&P 500 has lost 3.04% (over 14% annualized).
    The cause and effect picture is still fuzzy, but one thing seems clear. The two markets have become more aligned.

  • The Jet Set
    Posted by on May 10th, 2006 at 6:50 am

    Today’s New York Times wags its finger at top executives who use corporate jets for their personal use.

    Richard D. Parsons, chairman and chief executive of Time Warner, owns a small vineyard in Tuscany that produces a Brunello di Montalcino selling for $80 a bottle, adorned with a crest of the Parsons family.
    Twice a year, he boards one of his company’s four jets to visit his 20 acres in Italy. When he does, Time Warner shareholders pick up the bill.

    Personally, if I were a Time Warner (TWX) shareholder, I’d gladly pay to get Parsons out of the country.
    (Am I the only one dying to know what’s on his family crest? A laughing Steve Case? Someone’s gotta look into this.)
    Some companies claim that the jets are needed for security.

    Rollins Inc., a pest control company with a market value of $1.4 billion, has its chief executive, Gary W. Rollins, travel on company planes for security reasons. The company paid his taxes of $7,214, bringing his travel income to $116,988 last year.
    Michelle Leder, who tracks corporate compensation on her Web site, Footnoted.org, wrote that the only rationale for security needs at Rollins could be if “one day cockroaches decide to start fighting back.”

    Congrats to Michelle on making it into the Times! Woo!
    My favorite corporate jet story is about (who else) Larry Ellison. The Oracle CEO tried to buy his own MIG-29 Soviet fighter but the wimps at customs wouldn’t allow it. See, that’s why I love Larry. He spends his own money.