Archive for November, 2006

• Stock Picking Goes Bionic
  Eddy Elfenbein, November 26th, 2006 at 10:56 am

  The New York Times reports that on Wall Street, the days are numbered for humans.

  Software in development could potentially respond automatically to almost anything; changes in weather forecasts on television news, shifting analyst sentiments or what a particular movie critic said about the new blockbuster.
  “Right now, everyone basically has access to the same data,” said John Bates, a Progress Software executive. “To get an edge, we want to give investors the ability to immediately turn news into numbers. We want to automate what before required human analysis.”
  But as these new techniques proliferate, some worry that promotion is outpacing reality. These techniques may be better for marketing than stock picking.
  “Investment firms fall over themselves advertising their latest, most esoteric systems,” said Mr. Lo of M.I.T., who was asked by a $20 billion pension fund to design a neural network. He declined after discovering the investors had no real idea how such networks work.
  “There are some pretty substantial misconceptions about what these things can and cannot do,” he said. “As with any black box, if you don’t know why it works, you won’t realize when it’s stopped working. Even a broken watch is right twice a day.”

• Happy Black Friday!
  Eddy Elfenbein, November 24th, 2006 at 11:40 am

  Ugh…waaay too much tryptophan!
  I’m going to to take a nap, but in the meantime, you can read James Surowiecki on the American sugar industry.

• Update on the Buy List
  Eddy Elfenbein, November 23rd, 2006 at 12:49 pm

  Over the last 15 weeks, the Buy List is up 15.7% to 11.1% for the S&P 500.
  
  For the year, the Buy List is trailing the S&P 500, 12.64% to 11.37%.

• The VIX Falls Below 10
  Eddy Elfenbein, November 23rd, 2006 at 10:14 am

  On Monday, the VIX closed below 10 for the first time in nearly 13 years..
  

• Evil Hedge Fund Manager of Day Award Goes To…
  Eddy Elfenbein, November 22nd, 2006 at 1:02 pm

  …Spiro Germenis!
  Congratulations, Sprio. Here’s a wee sample of the SEC’s complaint against you:

  31. Several clients gave Germenis their retirement accounts to manage. For example, a married couple gave Germenis and Oracle Services more than $177,000 from a retirement account to manage in 1998. The agreement the clients signed with Oracle provided that, with respect to fees, the clients would pay, on a quarterly basis, “.0025% of the net assets invested in the mutual funds” and “.00625 of the net assets invested in individual securities.” Oracle Services and Germenis began looting the account by charging monthly management fees of up to $9,500, without the clients’ consent and contrary to the terms of the agreement between Oracle Services and.the clients. Under the agreement, the clients should have been charged a quarterly fee that would have been a small fraction of the monthly fee Germenis extracted for himself. Germenis gave the clients phony account statements reflecting growth in the account but not mentioning the exorbitant, unauthorized fees.
  32. The couple also periodically received statements in the mail fi-om the brokerage house at which the account was maintained reflecting a much lower balance. On numerous occasions, the wife asked Germenis about the statements reflecting a low balance. Each time, Germenis assured her that the account statement reflecting a low balance was a mistake and offered a reason. For example, in February 2006, the couple received a Fidelity statement in the mail showing a balance of about $45,619.39. The wife called Germenis, who came to her house and handed her an account statement that he had fabricated for the same period showing an account balance of $25 1,566.29. Germenis assured her that the Fidelity statement they had received was wrong. In fact, the Fidelity statement was correct. The clients’ account currently has just over $40,000.

  Yikes, I never thought a guy named Spiro could be a criminal.
  Unfortunately, Mr. Germenis won’t be able to accept the award in person as he has fled the country:

  According to civil charges filed last week against the president and founder of a raft of related investment funds under the Oracle Services and Oracle Evolution names, the Dix Hills resident fled to Athens last month after “misappropriating millions of dollars of investor funds.” His car was found at Kennedy Airport, and more than $6 million in client investments, including money belonging to his father-in-law, is missing, according to the complaint filed in U.S. District Court in Brooklyn by the Securities and Exchange Commission. People familiar with the case said Germenis, 34, is believed to be on the Greek island of Kefalonia, where his parents have a house.

  Yep, this isn’t going to end well.

• The Dow Oil & Gas Index
  Eddy Elfenbein, November 22nd, 2006 at 10:45 am

  I’ll be the first to admit that I’m not a technician, but the Dow Oil & Gas Index (^DJUSEN) clearly has commitment issues with 500. Since April, the energy sector has made several attempts to break out above 500, but it’s failed each time. Yesterday, the index closed at 501.09, its third-highest close ever. But sure enough, it’s back down again today.
  
  As I wrote before, the energy sector is the least-correlated sector with the rest of the market. While the rest of the market has fairly low volatility, the energy stocks continue to move around a lot. What’s interesting about this latest move up is that it’s happened as oil has moved lower.

• Hot Stock Tips from Budweiser
  Eddy Elfenbein, November 22nd, 2006 at 10:10 am

  Yes, it’s the Wednesday before Thanksgiving, so I give you hot stocks tips from Budweiser (hat tip: Howard Lindzon and the Rad Report).

• For Whom the Dell Tolls
  Eddy Elfenbein, November 22nd, 2006 at 9:53 am

  Dell (DELL) is trading much higher this morning. The shares are up to $27.50. Dell hasn’t been this high in six months.
  I also have to throw down a big fat mea culpa this morning. Last week, I teased Charlie Gasparino for not updating CNBC’s SquawkBlog. Well, it turns out there’s a good reason for that. The folks at CNBC are overhauling their Web site, and are getting ready to roll out a new-and-improved site on December 4. Sorry, Charlie! I’m looking forward to seeing the new site.

• Dell Earns 30 Cents a Share
  Eddy Elfenbein, November 21st, 2006 at 4:15 pm

  Wow! I mean…wow!
  Here are some of Dell’s recent numbers:

  Quarter…..Sales….Oper. Income…..EPS
  1-97………$2,588………$198………..$0.0675
  2-97………$2,814………$296………..$0.0725
  3-97………$3,188………$346………..$0.085
  4-97………$3,737………$397………..$0.10
  1-98………$3,920………$429………..$0.11
  2-98………$4,331………$483………..$0.12
  3-98………$4,818………$539………..$0.14
  4-98………$5,173………$595………..$0.15
  1-99………$5,537………$600………..$0.16
  2-99………$6,142………$694………..$0.19
  3-99………$6,784………$650………..$0.18
  4-99………$6,801………$513………..$0.16
  1-00………$7,280………$625………..$0.19
  2-00………$7,670………$736………..$0.22
  3-00………$8,264………$818………..$0.25
  4-00………$8,674………$589………..$0.18
  1-01………$8,028………$588………..$0.17
  2-01………$7,611………$545………..$0.16
  3-01………$7,468………$544………..$0.16
  4-01………$8,061………$594………..$0.17
  1-02………$8,066………$590………..$0.17
  2-02………$8,459………$677………..$0.19
  3-02………$9,144………$758………..$0.21
  4-02………$9,735………$809………..$0.23
  1-03………$9,532………$811………..$0.23
  2-03………$9,778………$840………..$0.24
  3-03………$10,622…….$912………..$0.26
  4-03………$11,512…….$981………..$0.29
  1-04………$11,540…….$966………..$0.28
  2-04………$11,706…….$1,006……..$0.31
  3-04………$12,502…….$1,089……..$0.33
  4-04………$13,457…….$1,187……..$0.37
  1-05………$13,386…….$1,174……..$0.37
  2-05………$13,428…….$1,173……..$0.38
  3-05………$13,911…….$944………..$0.39
  4-05………$15,183…….$1,246……..$0.43
  1-06………$14,216…….$949………..$0.33
  2-06………$14,094…….$605………..$0.22
  3-06………$14,383…….$824………..$0.30

  I’m still working through the numbers (at least, what we have). The big surprise is the increase in Dell’s operating margin. It jumped from an awful 4.29% last quarter to a blah 5.73% this quarter. At this point, I think the market will like blah.
  
  Here’s Dell’s trailing four-quarter earnings-per-share:
  
  Dell’s stock went from $60 in 2000 to under $19 a few weeks ago.

• Eaton Vance
  Eddy Elfenbein, November 21st, 2006 at 1:31 pm

  Does Eaton Vance (EV) ever go down?
  
  The company just reported another solid quarter.