Archive for November, 2006

• Cisco’s Cash
  Eddy Elfenbein, November 9th, 2006 at 10:12 am

  I’m looking at Cisco’s (CSCO) earnings report and I have to say it’s pretty impressive. The shares are up smartly this morning.
  But here’s something I don’t get. Why is the company sitting on $20 billion in cash? What’s the purpose? Maybe I’m just missing something but that’s about $3.15 a share. Given all the bad money that Cisco has tossed into share repurchases, why don’t they just give shareholders a big-ass one-time dividend? Giving profits to the owners; isn’t that what business is about?

• Keeping It Real
  Eddy Elfenbein, November 9th, 2006 at 6:37 am

  
  This from a recent Investor’s Business Daily story on the coming IPO of KBW, Inc.

  The boutique investment bank, better known as Keefe, Bruyette & Woods, first filed to go public in the heady market of 1999. It withdrew its plans after its then-chief executive was arrested for passing inside information to his girlfriend.

  Girlfriend? Oh, please. Like this was Joanie and Chachi. This is why I get pissed off at the mainstream media. They’re such frickin wimps.
  The story would also be correct if it were written like this:

  It withdrew its plans after its then-chief executive was arrested for passing inside information to his girlfriend, the stripper and porn star Kathryn B. Gannon (aka Marylin Star), pictured above, and star of such titles as Marilyn Whips Wallstreet, Strap-on Sally 11,12, 13 & 14, Marylin Does Miami 1 & 2, Titman and Size Matters. Ms. Gannon also shared her inside information with yet another (let’s say) boyfriend. She then became a fugitive from justice as she fled to her native Canada. Gannon was later arrested, extradited and served three months in prison. One can only imagine it was a steamy, scantily-clad and sexually promiscuous all-female prison.

  Now that’s journalism.

• Guess Where the Hottest Market in the World Is?
  Eddy Elfenbein, November 8th, 2006 at 10:12 pm

  (I’ll give you a hint: Spain).
  Give up?
  Check the Spanish ETF (EWP):
  

• Voter Turnout Reaches All-Time Low Of 17
  Eddy Elfenbein, November 8th, 2006 at 3:03 pm

  From The Onion:

  NEW YORK—Poll data indicates the 2006 mid-term elections were marked by the lowest turnout ever, with only 17 total votes cast. “Some 24 percent of those who showed up were registered Independents between the ages of 39, 54, 71, and 73, while, surprisingly, less than six percent appeared to be soccer moms driving a green 2000 Plymouth Voyager,” said Harrison Cullers of the Advance Logistics Research Group. “This really shows how much impact a get-out-the-vote campaign that averages $2.5 million per voter can have on the important Milwaukee-resident-Dave-Anderson demographic.” Critics say the low voter turnout was only exacerbated by problems with Diebold electronic voting machines, citing one Ohio district in which a local Democrat received negative 12 votes.

• The Pelosi Portfolio
  Eddy Elfenbein, November 8th, 2006 at 11:06 am

  Check out Madame Speaker’s financial disclosure form. It goes on for 20 pages.

• The Britney/K-Fed Rally
  Eddy Elfenbein, November 8th, 2006 at 10:03 am

  September 24, 2004: Britney Spears marries Kevin Federline. The S&P 500 is at 1110.11.
  November 7, 2006: Spears and Federline file for divorce. The S&P 500 is at 1382.84.
  Overall, the market gained nearly 25% during their two-year marriage. Thanks kids!

• Gridilocks!
  Eddy Elfenbein, November 8th, 2006 at 9:45 am

  Last night, CNN took over my favorite cybercafe, Tryst in Adams Morgan, to host a gathering of political bloggers. I was just looking for something to drink, but I was barred entry. Here’s what it looked like from the outside.
  
  I did get a chance to meet Scott Johnson of Powerline.
  Update: If I told you a big election had taken place in the last five days, could you tell which day it was from this chart?
  

• Sector Correlation
  Eddy Elfenbein, November 7th, 2006 at 2:42 pm

  I wrote about this yesterday, but I wanted to follow up today. I mentioned how the energy sector has become the most unglued to the rest of the market. I ran the numbers, and I was right.
  Here’s the correlation of each industry group’s daily change to the S&P 500’s daily change:
  Financials………………78.74%
  Discretionary………….76.27%
  Industrials……………..75.75%
  Tech……………………..71.32%
  Materials……………….63.60%
  Staples…………………60.79%
  Healthcare…………….58.84%
  Utilities…………………38.10%
  Telecom………………..38.09%
  Energy………………….31.44%
  This is important because for a lot of institutional money managers, the name of the game is doing what everyone else isn’t (or can’t). These guys are paid on outperformance, so they hone in on ways to avoid what the broader market is doing. In financial theory, this is related to the concept of the alpha coefficient, as in Seeking Alpha.
  Let’s say you run a gazillion dollar hedge fund in Curacao. If everyone is zigging, you want to zag. Face it: Your ability to zag is what you’re all about. Bear in mind, you can own a small number of stocks and closely mimic the market. The number of stocks isn’t that important. You can also own a large number of energy stocks and be completely free of what the averages say.

• Bernanke Warns
  Eddy Elfenbein, November 7th, 2006 at 11:50 am

  
  Bernanke warns against protectionist trade policy
  Bernanke warns on threat to globalization
  Bernanke warns on danger of US deficits
  Bernanke Warns of Baby Boomer Retirement
  Fed Chairman Bernanke Warns Consumers To Carefully Weigh Options For Home Financing
  Greenspan home robbed

• Politics and the Stock Market
  Eddy Elfenbein, November 7th, 2006 at 11:45 am

  Many years ago, Richard Nixon was asked what he’d be doing if he weren’t president. He said that he’d probably be on Wall Street buying stocks. One old-time Wall Streeter chimed in that if Nixon weren’t president, he too would be buying stocks.
  I write this as Americans head off to the polls for Election Day. Despite a lot of the commentary you might hear, the effect of partisan politics on the financial markets is very much overrated. Very much. To be sure, it’s there, but it really isn’t much to worry about, and it certainly shouldn’t affect your financial decisions.
  Barry Ritholtz posted a study by Ned Davis of how the markets have performed under different parties. This is interesting analysis, but in my opinion, I think they have it backwards. The assumption is that the political parties are like players on the field, and the stock market is the scoreboard. I think it’s just the opposite. The markets are the players; how the politicians behave is the scoreboard. That gets you a more interesting story.
  The data shows that the market has done better under Democrats than Republicans. But this is largely due to the influence of the two major crashes happening under Hoover and Nixon. Here’s a though: Maybe it’s not partisan. Perhaps we should just avoid Quaker presidents!
  It’s hard to say exactly how much partisanship influences the market. Of course, there’s the moment in U.S. history that’s indelibly marked on the national consciousness. I speak, of course, of 1948 when whatshisface beat that other guy, but the other guy won. The next day, the Dow fell 3.8%. So there you go.
  Make no mistake, public policy does influence the markets (and vice versa), but it’s usually in unanticipated ways. It’s usually not the typical Republican/Democratic debate. Instead, it’s usually the kind of things that no one really pays attention to. Sarbanes-Oxley, for example, passed the House 423-3, and the Senate 99-0. It’s the unanticipated things that are so scary, because…well, they’re not anticipated.
  Remember that when the new Senate meets in January, only about 10% of the members will be freshman. This isn’t a big change. In fact, our Constitution is designed against big changes. The ratio is the House will go from 8-7 Republican to something like 8-7 Democrat. If your city council did that, no one in town would care.
  I’m not saying that voting isn’t important, or that getting involved is a waste of time. I’m simply saying that this has to be put in proportion. Just because people talk about politics at the office or on the subway, doesn’t mean the market cares. The stock market has its own agenda and it’s not up for election.