Archive for November, 2007

• The Buy List Today
  Eddy Elfenbein, November 7th, 2007 at 4:54 pm

  With the S&P 500 plunging 2.94% today, this may not sound like much, but the Buy List had its best day of the year relative to the S&P 500.
  The S&P was down 2.94% while the Buy List was down “only” 1.89%. This is just the third time that the Buy List has beaten the market by over 1%.
  Of the 19 stocks on the Buy List (remember Biomet was bought out), 17 beat the market today. Only SEI Investments (SEIC) and WR Berkley (BER) did worse than the broader market.

• A Little Perspective
  Eddy Elfenbein, November 7th, 2007 at 3:30 pm

  I know gold is going through the roof and oil is about to hit $100, but would you mind if I added a little perspective to the latest bout of higher commodity prices?
  I didn’t think so. Here’s a look at the CRB-Spot Index adjusted for inflation over the last 60 years.
  
  Kind of a different story, ain’t it?

• Boiler room rings up the wrong target
  Eddy Elfenbein, November 7th, 2007 at 12:01 pm

  This is rich.
  Bad:
  Being a boiler room scammer and promising to make people 300% in three months.
  Worse:
  Calling the home of the head of enforcement for the New Brunswick Securities Commission.
  (Via Kirk.)

• Pathetic!
  Eddy Elfenbein, November 7th, 2007 at 11:15 am

  This is pathetic. The WSJ has printed a series of emails among members of the moronic Bancroft family. They had thirty days to choose a family member to serve on the DJ board. Not very hard, right? Well, for these folks, it is. This family is so incompetent, they couldn’t even manage this basic task. Check out some of these emails:

  Tom Hill
  Thursday, Sept. 20, 2007
  Thanks Chris for the follow up.
  You will recall I inquired about the selection process in an email to Mike Elefante and copied to the family on August 7. It has taken the family more than six weeks to get this most basic information.
  At this rate I’m confident we’ll have a nominee by the end of the year. I’m just not sure which year.
  Tom Hill
  Back to top
  * * *
  Crawford Hill
  Thursday, Sept. 20, 2007
  Hi all,
  I can only say what a joke this episode has become. To learn only just now what Chris kindly just passed along to us is both disgraceful and egregious and reflects poorly on those who should have guided this to a satisfactory conclusion.
  None of this however is to reflect on the integrity, smarts or work ethic of Mike Hill ( and Liz [Elisabeth Chelberg], for that matter) who has (have) all of those and more. I just wonder, given the very bizarre nature of this process ( or, really, Non-Process) and the Board position itself as we now know it, why anyone in the family would want to do this.
  This entire, sad and pathetic, final episode is a fiasco. No wonder we lost Dow Jones!!
  I will call John Carroll and pass along the news. To those responsible- Thanks so much for placing me in this awkward position… on the other hand as I have pointed out elsewhere, getting these things right requires more than our designated representatives were capable of executing. The pattern holds to the end. What a shame. I had high hopes that we could get this right and worked hard to that end. Finding all this out now, after the fact is stranger than fiction.
  My Best to you all- may your future endeavours be more successful than what transpired here today (not saying much) and may you carry on with your interesting and diverse lives.
  I am done with this matter.
  Thanks for listening and thanks to those of you who spoke up and supported me when you were so moved. I appreciate your efforts and value our relationships.
  As ever,
  Crawford

  Once the thirty days expired, it then became Murdoch’s choice. He chose Natalie Bancroft, a 27-year-old opera singer who lives in England.
  Well played, Rupert. Well played.
  In a completely unrelated note, shares of The New York Times (NYT) hit $18 yesterday, a ten-year low.

• Productivity Soars
  Eddy Elfenbein, November 7th, 2007 at 11:03 am

  Productivity grew 4.9% last quarter, the most in four years. Basically, people are producing more and working less. The good news is the higher productivity can help keep inflation down.
  

• The Good Side of the Subprime Mess
  Eddy Elfenbein, November 7th, 2007 at 7:25 am

  I don’t agree with everything here, but George Schultz and John Taylor make some interesting points about the silver lining in the subprime cloud:

  Including both the direct investment effect and the personal saving effect, about three-quarters of the reduction in the current account deficit can be attributed to the housing market turmoil. So while the agreed economic policies have begun to improve the current account, and will continue to do so, they have had important assistance. The housing market correction has been an important factor in the current account correction; as a result we are seeing a dramatic beginning of a welcome rebalancing of the world’s investment and saving flows.

• GM Takes $39 Billion Charge
  Eddy Elfenbein, November 7th, 2007 at 7:01 am

  I think GM’s restructuring needs restructuring. The company announced that it’s taking a $39 billion noncash charge in the third quarter to remove net deferred tax assets from its books.
  The NYT:

  G.M. said the charge, which affects the automaker’s businesses in the United States, Germany and Canada, would have no impact on operations and would not interfere with efforts to restructure.
  But analysts said the step reflected the likelihood that G.M. would not earn significant profits on its automotive or finance operations in the near future. The deferred assets could have been used to offset taxes on future profits.
  “What this says right now is that, at least according to an accounting interpretation, the outlook for earnings in their U.S. business has diminished from where it was,” said John Casesa, an industry analyst with the Casesa Shapiro Group.
  The charge is among the largest by the auto company and is the latest in a series of accounting steps at G.M. The company has revised its financial results often over the last few years as it has worked through a restructuring that began in 2005.

  Let’s run the numbers: $39 billion and GM has 565.9 million shares outstanding. The current Dow divisor is 0.123017848. So 39,000,000,000 divided by 565,900,000 divided by 0.123017848 equals roughly 560.
  GM’s charge is worth 560 Dow points.
  Think about that.

• Cramer Eats Skin Cream
  Eddy Elfenbein, November 7th, 2007 at 6:41 am

  If TV didn’t exist, I think he’d go door to door.
  

• ValleyWag: Why Apple Will Be Bigger Than Google
  Eddy Elfenbein, November 6th, 2007 at 4:14 pm

  Behold:

  The nonrelease of the Googlephone just highlights what Apple gets about consumers, and what Google doesn’t. Apple knows how to design not just gadgets, but the businesses that go around them. And as a result, I wouldn’t be surprised if Apple is worth more than Google within two years.

  Google has a market cap of $230 billion and Apple checks in at $167 billion, so it’s really not that outrageous a claim.
  ValleyWag lists the reasons:

  First, Apple makes a profit when the phone is sold — about $200. Second, it takes a hefty chunk of subscription revenue from the carrier — $18 a month, or $432 over two years. Third, Apple takes a cut from music and television shows sold through the iTunes Store — and, possibly, it will take a cut of sales of third-party software applications as well.
  The hardware profits are likely here to stay. Apple has been hugely successful in driving down costs and keeping margins up. For the most part, Apple doesn’t really lower prices. Its top of the line laptop has been in the $2,000-$2,500 range for years. Those $500 pieces of crap at Wal-Mart? Those are last year’s computers being sold as new. Apple doesn’t do that, so they keep their margins fat and juicy.
  The same thing happened with the iPod. When it debuted in October 2001, the iPod was $399. For years the top of the line iPod remained around that price. Only more recently, with the advent of cheap flash drives — Apple spent $1.2 billion to snatch a huge percentage of the worldwide supply of it — has it been able to drive down the average cost of iPods. As a result, Apple has sold millions upon millions of the music players, taking a huge market share and laughing all the way to the bank.

• Not All Financial Stocks Are Getting Clobbered
  Eddy Elfenbein, November 6th, 2007 at 2:56 pm

  Here’s 25 years of Aflac (AFL):
  
  The duck stock has returned over 21% for a quarter of a century. What’s most impressive is how consistent the stock has been. That’s a total return of more than 130-fold!