• Weekend Link-A-Rama
    Posted by on December 17th, 2005 at 10:26 am

    Here are a few links that you might enjoy this weekend.

    James Surowiecki on the Xbox 360.
    The Economist on the U.S. economy.
    Chet Currier on a renaissance for annuities.
    James Hamilton on the gold standard.
    Barron’s on the Irving Kahn, the Dean of Wall Street. He turns 100 on Monday: “Kahn could be on the job for a while longer because he’s a member of an extraordinarily long-lived clan. His oldest sister, Helen “Happy” Reichert, is 104, and his younger brother, Peter, is 95. Kahn’s other sister, Lee Reichart, died in the past year at 101.”
    The most popular investing books at Amazon.com.
    And lastly, RIP: The The Earl of Kimberley (read it, trust me).

  • The Market Today
    Posted by on December 16th, 2005 at 5:34 pm

    Are the Elliott Wavers onto something? Once again, the Dow couldn’t break through 10940, which is one of those pesky Fibonacci numbers. Today, the Dow got to 10940.34 before backing off. The high for the year is 10950.55, reached back in March. Coincidence? Not bloody likely!
    The overall market dropped for the second straight day. The S&P 500 gave back 0.28% and our Buy List fell 0.15%. However only seven of our stocks were up, 17 were down and one was unchanged. Our big winner today was Frontier Airlines (FRNT) which jumped 46 cents, or 5.6%. The airline sector was particularly strong today. Medtronic (MDT) is another stock that’s been strong recently. The stock is very close to a new 52-week high.
    Volume was heavy for today’s session. Today was a “quadruple witching” day when futures and options on stock indexes and individual stocks expire.
    Oil dropped nearly $2 a barrel today. That’s very good news. I’m still holding to my thesis that we’re in a bear market for risk-taking. The VIX (^VIX) fell to 10.15 today, which is very close to a 12-year low. The index was slightly lower this past summer.
    I’ve also been talking about the “dual market,” energy and everything else. Today was a perfect example. Look at the performance of the sector spyders for today:
    Health Care…………0.25%
    Financials…………….0.25%
    Industrials…………..0.19%
    Utilities……………….0.00%
    Staples………………-0.04%
    Technology…………-0.14%
    Discretionary……….-0.21%
    Materials…………….-0.37%
    Energy………………..-2.43%
    Everyone is not only bunched together, but barely moving, and then there’s energy at the extreme. There’s just so little volatility in this market.
    Outside our Buy List, Oracle (ORCL) fell 1.09%. I expect that next week will be slow. We’ll get another update on third-quarter GDP. I’m rooting for another upward revision. Also, Biomet (BMET) reports earnings, as do two other stocks I like Bed, Bath & Beyond (BBBY) and FactSet Research Systems (FDS).
    Today’s link: The Stock Bandit. Enjoy.

  • WSJ: AOL Nears Deal With Google
    Posted by on December 16th, 2005 at 12:57 pm

    The Wall Street Journal is reporting that Time Warner (TWX) is close to a deal with Google (GOOG) for AOL. Microsoft (MSFT) has apparently been shut out.

    The deal won’t likely be finalized until next week after Time Warner’s board meeting on Wednesday.
    A person close to the situation says the deal being negotiated would allow AOL to sell advertising among the search results provided by Google on its Web properties. Google is also likely to promote AOL’s Web properties among the sponsored links in its search results.
    Microsoft had hoped to convince AOL to use MSN’s search engine instead of Google’s. Time Warner had been in talks with Microsoft throughout the year, but in September began talking to Google as well.
    A Google spokeswoman declined to comment. Time Warner spokesman declined to comment. A Microsoft spokeswoman couldn’t immediately be reached.
    The contest illustrates how far companies are willing to go to secure a chunk of the quickly expanding market for Internet advertising, by far the fastest-growing advertising medium; online sales in the third quarter rose 34% to $3.1 billion from a year earlier, according to PricewaterhouseCoopers LLP. Search ads, which display ads based on queries users enter into search engines, are the biggest segment of that market.
    The deal also comes at a difficult time for Time Warner, as hedge-fund investor Carl Icahn wages a dissident campaign to replace a majority of the media giant’s directors.
    Microsoft has also struggled for a firm foothold in the online ad landscape, where its MSN unit, whose search ads are currently sold by Yahoo, has lagged behind Google in market share and in its ability to woo large Internet advertisers.

  • Oracle’s Earnings
    Posted by on December 16th, 2005 at 5:52 am

    Oracle (ORCL) reported its earnings after yesterday’s close. Let’s start with the good news. No one was seriously injured or maimed. That’s not always a given when your CEO owns his own jet fighter.
    The bad news is that Oracle’s profits skidded 2%. All told, the company netted 15 cents a share but charges for its acquisition binge shaved off four cents a share.
    At this price, I think Oracle’s stock is a bit cheap but I’m not a buyer. No way. The company faces several major problems. Obviously, the most important is that its core business simply isn’t growing that fast. Last quarter, database license sales grow by just 5%. I’m sorry but that’s pretty dismal. That stock has been stuck in neutral for the last few years and I’m not sure things will get better any time soon.
    The thing about Oracle is that it’s still overwhelmingly a database stock. If anything, the database market has become even more competitive. You have Microsoft and IBM closing in. I’ll give Larry & Crew credit for realizing the trouble they’re in. They understand that something must be done, and quick. Hence, the acquisition boom. Let’s just say that Oracle has made a lot of investment bankers happy this year. And it’s not just Siebel and PeopleSoft. Oracle has spent $16 billion this year on over a dozen acquisitions. That’s almost as much as Steinbrenner.
    But it’s the buying spree that makes me nervous. The three most terrifying words on Wall Street are growth, acquisition and by. At the high-end of enterprise software, there’s nobody left. It’s just SAP and Oracle—that’s it. Look at what happened to Siebel earlier this year. It’s almost as if Larry saw the ghost of Christmas Future. The Siebel board fired their CEO after less than a year, and was able to get Oracle to take the bait for a buyout. OK, even I’m not that cynical, but still…it happened.
    The shareholders want action. If Oracle’s stock continues to go nowhere, Larry may need his fighter for self-defense. (Although I’m partial to the idea of Redwood being declare a no-fly zone.) If not air or land, there’s always the sea. Ellison also owns the world second-largest yacht, a 450-footer. I’m guessing that’s a par three.
    Don’t get me wrong. I love Larry. He’s a genius. If anybody can pull off a swarm of blockbuster deals, he can. I’d love to be his wingman (or first mate), but Oracle has to start putting up better numbers. Then it’ll be worth a serious look.
    orcl.bmp
    Addendum: Wall Street Folly has the transcript of Oracle’s conference call.

  • The Market Today
    Posted by on December 15th, 2005 at 6:35 pm

    Slow day today. The S&P 500 barely budged and ultimately closed lower by 0.14%. Our Buy List was just behind it, falling 0.22%. As usual, energy was the most extreme group. This time it was the poorest sector.
    CACI International (CAI) was our laggard today, which isn’t much of a surprise after yesterday’s big rally. The stock was also downgraded by Morgan Stanley. Our auto insurer, Progressive (PGR) reported results for November. They were down slightly but nothing to worry about. Zimmer Holdings (ZMH) announced a big $1 billion share repurchase program. For me, I’d rather get the money. Danaher (DHR) raised the low end of its 2005 earnings guidance. That’s such a neat little stock. Tim Hanson, at the Motley Fool, has more on “The Best $17 Billion Company You Don’t Know.”
    Outside the Buy List, I’ve been trying to find a reason why Health Management Associates (HMA) is below $23 a share. It might be there but I haven’t found it yet. Still, hospital stocks scare me.

  • First Marblehead
    Posted by on December 15th, 2005 at 2:25 pm

    Is First Marblehead (FMD) a screaming buy?
    Tom Brown, of BankStock.com, is one of my favorite banking analysts. He’s been a super bull on shares of First Marblehead for a long time. The company is a servicer of student loans. In June, the stock plunged after one of its clients, Collegiate Funding Services (CFSI), said it was going to offer its own private student-loans product.
    Shares of FMD are being hit again today as JPMorgan Chase (JPM) said it’s going to buy out Collegiate Funding. What does Brown have to say? “In all, this deal makes me more positive than ever on First Marblehead.” You can read the rest of his commentary here.

  • Charles Schwab Jumps to NASDAQ
    Posted by on December 15th, 2005 at 12:51 pm

    Charles Schwab (SCH) has decided to abandon the NYSE for the NASDAQ. That’s a nice victory for the Naz to get one of Wall Street’s own. The new symbol will be SCHW.

  • Not Satire But French
    Posted by on December 15th, 2005 at 12:46 pm

    A dumb French law is upsetting a dumber European Commission.

    France warned over ban on stock market listing for sports clubs
    The European Commission has decided to ask France formally to modify its legislation preventing football and other sports clubs from being listed on stock markets. It sees this as an unjustified barrier to the free movement of capital, in breach of the EC Treaty (Article 56).
    The Commission’s request is in the form of a reasoned opinion, the second stage of the infringement procedure under Article 226 of the Treaty. If France does not respond satisfactorily within two months, the Commission may decide to refer the case to the Court. Contacts with the French authorities will continue to see if a solution can be found, compatible with Community law.
    According to Le Monde, the French minister for sport reacted by saying that discussions would be taking place in the coming weeks to find a solution in line with both EU law and the “specificity of French sport”.

  • “I wait for the blowup, then invest”
    Posted by on December 15th, 2005 at 12:40 pm

    Fortune talks with Richard Rainwater.

    Rainwater is no crackpot. But you don’t get to be a multibillionaire investor—one who’s more than doubled his net worth in a decade—through incremental gains on little stock trades. You have to push way past conventional thinking, test the boundaries of chaos, see events in a bigger context. You have to look at all the scenarios, from “A to friggin’ Z,” as he says, and not be afraid to focus on Z. Only when you’ve vacuumed up as much information as possible and you know the world is at a major inflection point do you put a hell of a lot of money behind your conviction.
    Such insights have allowed Rainwater to turn moments of cataclysm into gigantic paydays before. In the mid-1990s he saw panic selling in Houston real estate and bought some 15 million square feet; now the properties are selling for three times his purchase price. In the late ’90s, when oil seemed plentiful and its price had fallen to the low teens, he bet hundreds of millions—by investing in oil stocks and futures—that it would rise. A billion dollars later, that move is still paying off. “Most people invest and then sit around worrying what the next blowup will be,” he says. “I do the opposite. I wait for the blowup, then invest.”
    The next blowup, however, looms so large that it scares and confuses him. For the past few months he’s been holed up in hard-core research mode—reading books, academic studies, and, yes, blogs. Every morning he rises before dawn at one of his houses in Texas or South Carolina or California (he actually owns a piece of Pebble Beach Resorts) and spends four or five hours reading sites like LifeAftertheOilCrash.net or DieOff.org, obsessively following links and sifting through data. How worried is he? He has some $500 million of his $2.5 billion fortune in cash, more than ever before. “I’m long oil and I’m liquid,” he says. “I’ve put myself in a position that if the end of the world came tomorrow I’d kind of be prepared.” He’s also ready to move fast if he spots an opening.

  • Today’s Inflation Report
    Posted by on December 15th, 2005 at 12:34 pm

    The government reported that inflation last month was the lowest since the Truman administration. I don’t get too worked up over the monthly inflation reports. I think too many market watchers overrate the threat of inflation.
    The fact is that we haven’t had a serious inflation problem in over 20 years. Some prices will rise and fall, but in general inflation isn’t a problem. When you look at the “core rate” of inflation, which excludes food and energy prices, inflation has been well-contained for a long time.
    Don’t get me wrong. Inflation is bad news. What Kryptonite is to Superman, inflation is to stocks. But as for now, there’s no real threat of inflation on the horizon.