Archive for October, 2007

  • Bernanke Warns
    , October 24th, 2007 at 12:21 pm

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    Bernanke Warns on US Housing, Economy
    Bernanke warns stock investors
    Bernanke warns against ad hoc regulation of derivatives
    Bernanke warns of economic ‘drag’
    Bernanke Warns of Possible ‘Crisis’ From Budget Gap
    Bernanke warns of worse to come in subprime fallout
    Bernanke Warns Inflation Remains A Significant Risk
    Bernanke warns of ‘vicious cycle’ in deficits
    Bernanke warns about economic isolationism
    Bernanke warns of falling economy
    Bernanke warns action needed soon on budget
    Bernanke warns US about burden of ageing population
    Bernanke Warns Of Growing Inequality
    Bernanke warns against protectionism
    Greenspan home robbed

  • Aflac’s Earnings Report
    , October 24th, 2007 at 12:05 pm

    Aflac (AFL) has been a great stock for us this year. At one point, it hit $60 a share today making it about a 30% winner for us. Yesterday, the company reported earnings of 85 cents a share, three cents more than estimates. Last year, AFL made 73 cents a share. That’s a decent growth rate.
    For the fourth quarter, Aflac sees earnings of 75 cents to 70 cents a share.
    This is a busy day for earnings. Later we’ll have Graco (GGG), Fiserv (FISV) and Varian (VAR).

  • XLK or QQQQ?
    , October 24th, 2007 at 10:51 am

    I was recently asked what’s the difference, in trading terms, between the Nasdaq 100 (QQQQ) and the S&P 500 Tech Spyders (XLK).
    The short answer is nothing. For most circumstances, both ETFs will behave very similarly. As a proxy for the tech sector, I prefer using the XLK.
    The longer answer is that there are some differences and if you use these ETFs for trading you might want to be aware of them
    First, let me explain that the Nasdaq 100 is an index of the 100 largest nonfinancial stocks on the Nasdaq. For many years, this has been used as a proxy for large-cap tech stocks. The S&P 500 Tech index is simply a grouping of all the tech stocks in the S&P 500.
    The important thing to keep in mind about the Nasdaq is that it’s very oligarchic, meaning there are a small number of very, very big stocks, and tons of teeny, weeny stocks. The NYSE is like that as well, but it’s much more pronounced on the Nasdaq. I don’t think most investors realize how important this is. Outside of the big tech names, the NYSE still has a huge advantage over the Nasdaq.
    Not only do a few very large tech stocks have a large say in what the Nasdaq 100 does, but they tend to be strongly correlated with one another so their influence is even greater.
    Of the 500 stocks on the S&P 500, only 73 are from the Nasdaq and more than half of those are in the tech sector. Ironically, of the 500 S&P stocks, they categorize 73 as being in the tech sector.
    So for most practical uses, the QQQ and XLK will behave the same. The big difference is that the Nasdaq 100 also had a modest weighting in consumer discretionary stocks. This would be stocks like Starbucks (SBUX) or Bed Bath & Beyond (BBBY). The ETF for this sector is XLY. So while the XLK is highly correlated to the QQQ, you can improve the correlation some by holding a ratio of about 4-to-1, XLK to XLY. You can improve it some more by using a small amount of margin.
    By correlation, I mean that the daily changes are correlated by over 95%. (Note: I got my numbers using the data from the indexes, not the ETFs.) Even with that it’s still a perfect match. The big tech winners this year have come from the Nasdaq (stocks like Google or Apple), so there pushing the QQQQ more than what you might normally expect.
    Let me also add that the Rydex Inverse OTC 2x mutual fund (RYVTX) is designed to do twice what the Nasdaq 100 does each day.

  • The First Day of the Month
    , October 23rd, 2007 at 2:59 pm

    Here’s a surprising stat. Since the beginning of this decade, all of the market’s gain have come on the first day of the month. The rest of the time, the S&P 500 is down.
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    The blue line represents the first day of the month, the black line is the S&P 500. For the decade, the S&P 500 is up 2.52% and the first day is up 33%.
    The last seven first days have all been up. In the decade, there have only been 94 first days out of nearly 2,000 trading days, or about 4.8% of the time.

  • WR Berkley Down on Earnings News
    , October 23rd, 2007 at 1:34 pm

    Shares of WR Berkley (BER) are down on what I thought were decent earnings. The company earned 93 cents a share compared with 87 cents last year. This is operating earnings as that’s the more important number to follow with insurance stocks. Wall Street was looking for 91 cents a share.
    The stock is going for less than eight times trailing earnings.

  • Does Apple Ever Go Down?
    , October 22nd, 2007 at 1:00 pm

    Seriously, it can’t go up every day.
    Can it?

  • Old School Grimace
    , October 20th, 2007 at 3:07 pm

  • Twenty Years Ago Today
    , October 19th, 2007 at 10:21 am

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    On Monday, October 19, the Dow dropped 508 points, or 22.6%, in its worst crash in history.
    Of course, stocks came right back and the economy continued to plow ahead but that wasn’t clear at the time.
    Here’s the cover of the New York Times for the following day.
    (Doncha just love how the NYT asks “Who Gets Hurts?”)
    Here’s their lead article
    Here’s how the Washington Post covered the news.
    I also noticed this article on local reactions. What caught my eye is that at the very end. Malcolm Gladwell’s name is listed.
    What’s interesting is that the articles from two of the most important newspapers in the world don’t mention either the Alan Greenspan or the Nasdaq. It’s hard to imagine a world like that, but the Fed wasn’t considered that important not too long ago. Also, the Nasdaq was a small exchange that wasn’t widely followed.
    How things have changed.

  • Torre Out as Yankee Skipper
    , October 18th, 2007 at 4:14 pm

    Breaking news: Joe Torre is out as Yankee skipper.
    Is there a market effect? Could be. Twenty years ago tomorrow, Steinbrenner hired Billy Martin for the fifth time. That may have led to the unpleasantness of that day.

  • Odd Stat of the Day
    , October 18th, 2007 at 3:35 pm

    If you got shares of Google (GOOG) at the IPO price you would have made an average of 5% every four weeks for the last 38 months.

    At this price, if Google goes up $1 a day, that’s a decrease in its growth rate.