Archive for November, 2006

• These Strange Employment Numbers
  Eddy Elfenbein, November 3rd, 2006 at 10:56 am

  Each month’s employment report grows increasingly bizarre. First, the government suddenly discovered 800,000 Americans who were employed yet the Feds somehow missed them. The details on that still haven’t been released.
  Today we’re told that the nonfarm payroll number for August was revised higher by 42,000. The number for September was adjusted higher by 139,000. Plus, the economy added 132,000 new jobs last month. Add it all up, and the unemployment rate for October is now down to 4.415% which is lower than it was eight years ago.
  I’m not sure why anyone pays attention to these numbers. I don’t see any value in them.

• Reader Quiz: Gay Sex or Investing?
  Eddy Elfenbein, November 2nd, 2006 at 2:16 pm

  Today’s reader quiz: Are the following phrases associated with gay sex or investing? Good luck!
  1. Working for a bulge bracket
  2. Doing a mon back
  3. Buying a naked straddle
  4. Hanging with the odd lots
  5. Looking for a double bottom
  6. Going deep in-the-money
  7. Sliding under the pink sheets
  8. Front running the hedges
  9. Hunting for bears
  10. David Faber
  11. Getting fined by Cox
  Results next week.

• Random Run Down Wall Street
  Eddy Elfenbein, November 2nd, 2006 at 11:14 am

  At DealBreaker, Bess Levin looks at Wall Street’s obsession with marathoning. Frankly, I’d think any sport where defecating oneself is acceptable would be popular on the Street. (Look, I’ve partied with bondtraders.) In today’s NYT, Daniel Gross examines another angle: they give away lots of free stuff (the marathons, not Wall Street).

• Dell Hits $25
  Eddy Elfenbein, November 2nd, 2006 at 10:19 am

  Breifly. That’s the highest price in four-and-a-half months. Goldman upgraded the stock to neutral.

  That said, in the absence of Dell restructuring — which we are not modeling into our assessment since there has been no inclination that Dell wants to do that — we think Dell’s choice is ultimately between growth and margins which in our model tops out at 7 percent normalized growth, 17 percent gross margin, and 6 percent operating margin, meaning that this is not the ‘Dell of old.’

• Fair Isaac and Biomet
  Eddy Elfenbein, November 2nd, 2006 at 9:18 am

  After the bell yesterday, Fair Isaac (FIC) reported earnings of 60 cents a share. That was three cents higher than the Street was expecting. Charges related to stock-based compensation and one-time expenses pushed FIC’s net income down to 35 cents a share.

  For the full fiscal year, net income fell to $103.5 million, or $1.59 per share, from $134.5 million, or $1.86 per share. Revenue rose to $825.4 million from $798.7 million.
  Looking ahead, Fair Isaac said it expects first fiscal-quarter earnings per share of about 48 cents on revenue of about $210 million. The outlook includes stock-based compensation charges.
  Analysts forecast quarterly profit of 59 cents per share on sales of $211.9 million.
  For the full fiscal year, Fair Isaac said it expects earnings per share of about $2.10, including stock-based compensation expenses, on sales of about $870 million.
  Wall Street expects full-year earnings of $2.44 per share on sales of $873.1 million.
  Fair Isaac also said its board authorized a stock buyback program of up to $500 million.

  The company also announced that its CEO, Thomas G. Grudnowski, has resigned.
  The other big story is that Smith & Nephew has said that it’s in preliminary talks with Biomet (BMET) about a possible merger. Both companies have very similar market values. Interestingly, what may have lead Biomet down this path was then Dane Miller, the CEO, suddenly resigned earlier this year.

• Atlas Shrugged
  Eddy Elfenbein, November 1st, 2006 at 8:16 pm

  
  toothpastefordinner.com
  Did you know it’s pronounced EYE-n? I did…just wanted to make sure you knew that.

• Gimmicks and the Housing Bubble
  Eddy Elfenbein, November 1st, 2006 at 2:23 pm

  The Washington Post looks at sellers are dealing with the fizzling NYC housing market:

  “I count 40-plus construction projects in my neighborhood alone,” says Nouriel Roubini, a professor of economics at New York University’s Stern School of Business who lives in Tribeca. “There’s going to be a huge glut in six months here in New York, well above the national average. And unless you see a huge increase in hiring in the financial industry — and that is not going to happen — you have to wonder, who is going to buy all these units?”
  One apparent answer: fans of Jade Jagger. Mick’s daughter, a designer and pioneer of something called “pod living,” created the combination kitchen-bathroom modules that sit in the center of the apartments on sale at Jade, a building in Chelsea. To the uninitiated, the pods look like something from the motor home of the future. But the owners calls them “jewel-like lacquered boxes that seem to float in each residence.”
  One-bedrooms start at $945,000.

• Economic Puzzle
  Eddy Elfenbein, November 1st, 2006 at 1:14 pm

  Here’s a puzzle I’ll throw open to the house. I’d welcome any feedback you might have.
  The U.S. economy has grown at a remarkably stable rate for the past several decades. You wouldn’t know it from our political rhetoric, but the economy grows by an average of about 3.1% a year after inflation (or 3.08% to be more exact). Sometime we do better, sometimes worse. But we always come back to that 3.08% trend line.
  Remember, the nasty recession of 1981-82, and the Reagan Recovery of 1983-84. From beginning to end…yep, 3.08%. Summer, spring, fall and winter, we always go back to 3.08%.
  Except for once. Call it a brief shining moment. In the early-to-mid 1960s, the economy vaulted dramatically upward, and started to revert to a new and higher mean. Why? What happened? And most importantly, can we do it again?
  I like this kind of puzzle because it makes you focus on data series and how to analyze them properly.
  My first guess would be that it was something like the Fed or perhaps spending on the war in Vietnam. But then, how come we didn’t revert back to the old mean when those went away? Could they have had a one-time up boost, with no downside? Doesn’t seem likely.
  The question we have to ask is, what changed for good that could have given us a one-time permanent economic boost. The best answer I can think of is that it’s due to the end of segregation. While I certainly believe that socialist race relations are immoral, I’d be partial to believing that it’s economic retardant. But here, I can’t fully trust myself. I know the world doesn’t work the way I would prefer.
  But still, it’s intuitively makes sense. Using state power to hold people back isn’t just evil, it’s got to be costly. Unfortunately, I don’t have the GDP data broken down by each state. My other concern is Zodiacing. Perhaps, I’m looking to see a pattern that just isn’t there.
  Here’s the data so you can judge for yourself.
  This is GDP from 1951 to 2001. The yellow is GDP. The black is the trend line. The trend line increases at the same rate before and after the 1963-1966 “gap up.”
  
  Here are the two lines divided by each other: