Archive for July, 2007

• Fox Business Network To Launch October 15
  Eddy Elfenbein, July 12th, 2007 at 9:33 am

  From Variety via DealBreaker:

  Fox News Channel’s long-planned business net spinoff has an official name and a launch date.
  New web will be called Fox Business Network, or FBN, and launch Oct. 15, announced Neil Cavuto, managing editor of business news.
  News Corp. is proceeding with plans for the business network, an extension of its successful and profitable Fox News franchise, without regard to the status of chairman Rupert Murdoch’s bid for Dow Jones. Sale appears close but could drag out for a few more weeks.
  The use of the Wall Street Journal brand in conjunction with the nascent business channel is one of the major synergies touted in News Corp.’s $5 billion bid for Dow Jones.
  News Corp. sources indicated that if Murdoch’s bid for Dow Jones is successful, the Fox Business Network branding could change.

• China’s Foreign Reserves hit $1.33 trillion
  Eddy Elfenbein, July 11th, 2007 at 12:17 pm

  From Reuters:

  China’s foreign exchange reserves, the world’s largest, swelled to $1.33 trillion by the end of the first half on the back of massive trade flows that contributed to an acceleration in money supply growth in June.
  The central bank said on Wednesday that reserves had grown by $266.3 billion to $1.3326 trillion between January and June, in excess of the $247.3 billion reserves accumulation for the whole of 2006.

  Wow!
  I mean it. Wow!

• The iPhone Surrender
  Eddy Elfenbein, July 11th, 2007 at 12:11 pm

  Michelle Leder of Footnoted.org gives up on the iPhone:

  Now I’ve been an Apple customer since 1998 when I bought my first Imac and I’ve been generally pretty happy with all of their products. But when a device that’s supposed to make your life easier (or at the very least cooler) starts to take up large chunks of your time, that’s when it’s time to raise the white flag. Which is what I did last night when I returned it. The woman at the Apple store looked as if I had insulted her personally when I said I had had enough with the Iphone and just wanted a full refund (read: no $59.99 restocking fee).

• WallStrip on Focus Media
  Eddy Elfenbein, July 11th, 2007 at 12:07 pm

• The Fall of REITs
  Eddy Elfenbein, July 11th, 2007 at 9:37 am

  
  I’m not a technical analyst, but that chart isn’t not looking good. The Dow REIT Index (^DJR) is down 17% in the last five months. I don’t think it’s over yet.

• “They Don’t Have Enough Skill to Make up for Two and Twenty”
  Eddy Elfenbein, July 10th, 2007 at 3:14 pm

  This is from last week’s New Yorker. John Cassidy looks at research done by Harry Kat on the returns of hedge funds. It turns out—shocker—they don’t look so good.

  With the help of a graduate student, Helder Palaro, Kat also undertook a larger study, in which he examined more than nineteen hundred funds. The results, which Kat and Palaro posted online as a working paper last year, showed that only eighteen per cent of the funds outperformed their benchmarks, and returns even at the most successful funds tended to decline over time. “Our research has shown that in at least eighty per cent of cases the after-fee alpha for hedge funds is negative,” Kat told me. “They are charging more than they are adding. I’m not saying they don’t have skill; I’m just saying they don’t have enough skill to make up for two and twenty.”
  Other economists had been scrutinizing hedge funds closely. In a widely discussed 2005 paper, Burton Malkiel, a Princeton professor, and Atanu Saha, a New York investment analyst, argued that many published estimates of hedge-fund returns are misleading. Malkiel and Saha discovered that funds tend to exaggerate how well they performed in the past, and that those which perform badly often close and disappear from databases, leaving a biased sample. After examining results of now defunct firms, Malkiel and Saha found that between 1996 and 2003 hedge funds made an average return of 9.32 per cent, significantly less than the 13.74-per-cent average return of funds included in the published databases.

• Maybe I’m Being Cynical
  Eddy Elfenbein, July 10th, 2007 at 2:19 pm

  After the bell yesterday, Gemstar-TV Guide (GMST) announced that it hired UBS to help it explore strategic alternatives. In other words, the bidding starts now. Rupert Murdoch owns a big stake in Gemstar and I guess he got tired of it going nowhere.
  But check this out. Even though the announcement came after yesterday’s, doesn’t this chart suggest that somebody knew something?
  

• Dollar-Cost Averaging Is Complete Bullshit
  Eddy Elfenbein, July 10th, 2007 at 1:42 pm

  This is from an investing article that appeared a few days ago:

  A widely recognized investment strategy known as dollar cost averaging offers a systematic approach to investing. By following this plan, you invest a specific dollar amount at set times, regardless of where the market may be at the time. One of the advantages of this strategy is that it can be applied to a wide variety of investment vehicles.
  As you know, the market price of an investment fluctuates. By using dollar cost averaging, you can buy more shares when the price is low, but you buy fewer shares when the price is high. While that seems fairly elementary, the interesting thing is that by spreading out your investment dollars this way, the average cost you pay per share can actually end up being lower than the average price per share over an extended period.

  No. Wrong. Incorrect.
  I don’t mean to pick on this writer in particular. You can find dozens of such articles every month. The problem is that dollar-cost averaging is complete bullshit.
  Don’t get me wrong: The idea of investing fixed sums each month isn’t a bad. That’s how many people invest because that’s how they’re paid.
  But there is absolutely no inherent advantage in dollar-cost averaging over lump-sum investing. ZERO. Spreading out your investments over an extended period doesn’t decrease your risk one bit. The idea has been thoroughly refuted yet the myth won’t die.
  The advantage of dollar-cost averaging was blown to smithereens nearly 30 years ago in this article by George Constantinides. Here’s another article on the subject by John R. Knight and (my old finance professor) Lewis Mandell.
  Lump sum investing is the best. Don’t diversify by time, diversify by assets.

• How Did I Miss This One?
  Eddy Elfenbein, July 10th, 2007 at 12:56 pm

  I often tell investors not to beat themselves up over the “ones that got away.” Naturally, I don’t always take this advice myself.
  
  The black line is Oracle‘s (ORCL) share price and the yellow is the EPS line (right scale). The two lines are scaled at 20 to 1. This stock was an obvious buy in early 2006 and I (ugh!)…let it go.
  Update: Here’s me in a Q&A from October 2005 saying to stay away from ORCL. Double Ugh!!

• 1,000% in Ten Month
  Eddy Elfenbein, July 10th, 2007 at 12:22 pm

  David Phillips looks under the hood at Transcend Services (TRCR) and likes what he sees.