Archive for 2006

  • Implied Tradesports Markets
    , November 3rd, 2006 at 3:13 pm

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    This is a favorite topic of mine. In investing, we can look at two markets and imply a third. That’s basically how options work. Well…we can do the same for predictions markets.
    At Tradesports, they offer futures contracts for how many seats they Democrats will pickup in the house. They offer contract for several different scenarios (i.e., greater than 14.5 seats, or greater than 19.5 seats). Assuming a logonormal distribution, we can find an implied mean and standard devation.
    The chart above shows the mean number seats the Democrats looks to gain (black line) with plus and minus one standard deviation bands (red lines).
    As of the last trade, the market believes the Democrats have a 60.2% chance of gaining at least 19.5 seats, and a 46.9% of gaining 24.5 seats. A 60.2% chance is +0.258 standard deviations, and a 46.9% chance is -0.078 standard deviations. So those 5 seats are worth 0.336 standard deviation. Therefore, one standard deviation is nearly 15 seats. The Democrats are now projected to gain over 23 seats, but the market still believes its wide open.

  • Whole Foods Crashes
    , November 3rd, 2006 at 11:33 am

    Whole Foods Market (WFMI) is down over 23% in today’s session. I wonder if anyone saw this coming.

  • A Story of Two Bulls
    , November 3rd, 2006 at 11:20 am

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    Not all Bull Markets look the same. The chart above shows the Morgan Stanley Cyclical Index (^CYC) and the Morgan Stanley Consumer Index (^CMR) since March 2003. While cyclical stocks have been highly volatile, especially in recent months, the conumser stocks have quietly rallied.

  • These Strange Employment Numbers
    , 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?
    , 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
    , 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
    , 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
    , 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
    , November 1st, 2006 at 8:16 pm

    toothpaste for dinner
    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
    , 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.