Archive for December, 2007

• NICK Under $7 a Share
  Eddy Elfenbein, December 27th, 2007 at 1:43 pm

  I hope to have more about this sometime soon, but gosh darn it—Nicholas Financial (NICK) is cheap. The stock is priced as if it’s going out of business. NICK is currently priced well below book value which is $7.30 a share. Last quarter, NICK made 25 cents a share, and it made 27 cents in the quarter before that.
  We’ll find out more when the company reports its third-quarter earnings next month. I think it’s very reasonable to assume that NICK will make $1 a share for this fiscal year. That means the P/E ratio is under 7.

• 10-Year-Old Cramer
  Eddy Elfenbein, December 26th, 2007 at 9:06 pm

  Watch out, Jim. He’s got your game.
  

• Apocalypse When?
  Eddy Elfenbein, December 26th, 2007 at 8:42 pm

  As long-time readers of this site know, one of my pet peeves is the lack of balance in accountability between overly bearish and overly bullish predictions.
  Simply put: You can say that the sky is about to fall until your blue in the face, and be completely wrong, and few people will hold you accountable. As long as you’re vague about time and stress the “about to” part.
  On the other hand, if you’re bullish and wrong, you’ll be mocked until the cows come home. Or the bears, whichever comes first.
  Nouriel Roubini is probably the most prominent bear on Wall Street. I like his analysis even if I don’t always agree with it. Of course, I don’t read people to have my views confirmed. I want them challenged.
  I do want to point out that Roubini’s predictions haven’t exactly been spot on. In June 2006, he wrote:

  So, this Q2 GDP report is as bad as it could be. I thus stick with my prediction that, by Q4, the growth rate will be close to zero and by early 2007 the U.S. will be in a recession. Panglossian optimists have been proven wrong again. They’d better start adjusting their wishful-thinking forecasts of H2 growth (still close to a 3% consensus) to a reality of an economy rapidly slipping into an nasty recession.

  A wee bit off, no? To be fair, his views are more complicated than this bit suggests. I’m not trying to pick on him. Instead, my point is to show that it’s easy to get carried away with your hypothesis, and suffer from confirmation bias.
  One of the problems is that even if you’re right, you still can be wrong. The U.S. economy is titanically complex. There are millions of consumers making several economic decisions every day. Still, the real economic growth rate for the past 40 years has been about 3%. To be a bit more refined, it’s about 3.07%. What’s truly surprising it how little it varies.
  Here’s a look at GDP growth (blue) compared with a 3.07% trend line (red). I apologize that the table is lame but that’s my point.
  
  So even when these “crisis” do come along, the overall economy is incredibly resilient. My prediction is that at some point, a recession will come along. It will be short and unpleasant, but after it, a recovery will follow.

• Amazon’s Best Holiday Ever
  Eddy Elfenbein, December 26th, 2007 at 10:39 am

  Amazon.com just celebrated its best Holiday EVER. Jeff Mathews isn’t impressed. He finds that today’s press release kinda looks familiar:

  12/26/2007 “Amazon Wraps Up Its 13th Holiday With Best Season Ever”
  12/26/2006 “Amazon.com’s 12th Holiday Season is Best Ever”
  12/26/2005 “Amazon.com, Inc. today announced that the 2005 holiday season finished as its best ever…”
  12/27/2004 “Amazon.com’s Tenth Holiday Season is Best Ever…”
  12/26/2003 “Amazon.com Wraps Up Its Ninth Holiday With Busiest Season Ever.”
  12/26/2002 “Amazon.com today announced it has finished its busiest holiday season ever…”

• Merry Everything!
  Eddy Elfenbein, December 25th, 2007 at 12:08 pm

  
  I want to wish everyone a Happy Holiday, and a healthy and profitable New Year.
  I also want to thank all my readers for their support. Everyday, I get e-mail from readers all over the world. I try to respond to as much as I can, but unfortunately, I can’t get to it all. But I assure you that every e-mail is read and the correspondence helps me with my posts.
  I don’t charge a dime to use Crossing Wall Street and I don’t run any ads. It’s all a labor of love. In fact, not only is this site free, but I give away market-beating advice. Through Monday, the Buy List is up 6.12%, and there were zero transaction costs throughout the year. So if you started with, say, $100 million to invest, then I made you $6.12 million. If you started with $100 billion, then I made you $6.12 billion.
  Since I’m so generous, I’ll give you one more thing. This.

• Inefficient Markets
  Eddy Elfenbein, December 23rd, 2007 at 2:16 pm

  More proof.

• Pats-Dolphins
  Eddy Elfenbein, December 23rd, 2007 at 8:23 am

  The New England Patriots are set to play the Miami Dolphins, which is a match-up between the best team in the league and the worst. How do you set a point spread for such an extreme event?
  Vegas has decided on 21-1/2 points. Just like the stock market, this is the collective judgment of many, many um…investors. The New York Times notes that the Pats have failed to cover in four of their last six games.

  The possibility of the Patriots’ becoming the N.F.L.’s second unbeaten champion has captured the nation’s fascination. At the same time, they seem to have rewritten the rule book when it comes to sports gambling. Not only are the Patriots close to setting several N.F.L. records, including most points and touchdowns, but their march to perfection has also set bank-breaking numbers that have astounded the sports-gambling culture.
  “We try to come up with a line that at least gives the perception that either team has an equal chance to cover, and for his backer to win,” said Jeff Sherman, assistant race and sports book manager at the Las Vegas Hilton. “We just want to split the action — it sounds like it’s pretty simple. But this year with the Patriots, things are way out of whack.”

  Out of whack? So the Pats are a market dislocation.

• Abbey Road Webcam
  Eddy Elfenbein, December 22nd, 2007 at 11:01 pm

  See what’s happening live at the spot where the Beatles walked across the street.
  Strangely, I kept watching for something to happen but it never did. Although, two double-decker buses passed by.

• Anti-Anti-Contrarian
  Eddy Elfenbein, December 22nd, 2007 at 11:54 am

  James Altucher coins a new word: Antidisestablishmentcontrarianism.

  Don’t try to disassemble it with the prefixes and suffixes. I’ll tell you what it means because I coined it. It means the people against the people against the markets. In other words, I hate people who consider themselves contrarian investors.
  Think about it. You hate them, too. They are on television, in newspapers and finance websites, they call you up with their smug advice. “I make my money going against the crowds,” they say. As if they are above the mindless masses, the one-eyed cyclopses running amok in mad mobs all over Wall Street. To be a contrarian investor, you have to assume people are stupid. You also have to assume that the masses, in general, lose money. Furthermore, you have to assume that you have the ability to rise up above this state of retardation and be a beacon of intelligence that knows more than everyone else.
  The thing about contrarian investors, though, is that they are insecure. They want to point out that they are contrarian.
  The reality is the masses are usually right. Let’s say you were a contrarian on internet stocks. Well the masses were buying internet stocks in 1995. If you were a contrarian, you would’ve been wiped out five times over or more every time you dived in. Heck, even if you were a so-called contrarian in January 2000, you probably would’ve been wiped out by February when most internet high-flyers had their last surge. No problem, contrarian pundits now say, “I was a little early then. No big deal. Just like I am now.”

  I wholeheartedly agree. I can’t stand to hear contrarians congratulate themselves for their “bravery.” The more I look at momentum stocks, the more it appears that running with the crowd is a better strategy.
  We need a better word, though. Momentumtarians?

• The Way You Look Tonight
  Eddy Elfenbein, December 21st, 2007 at 9:25 pm

  Nope, Sinatra wasn’t the first. It was Fred Astaire who was the first to sing “The Way You Look Tonight.” This clip is from the 1936 movie Swing Time. It always sounds a bit strange to here an early version of a song that’s so identified with another singer.
  
  The song was between collaboration of Jerome Kern and Dorothy Fields (he music, she lyrics). Personally, I think Fields is one of the great underrated lyricists. Consider how touching, yet simple, these words are. Read them as if you’ve never read them before:

  Some day, when I’m awfully low,
  When the world is cold,
  I will feel a glow just thinking of you…
  And the way you look tonight.

  Perfect. Just perfect. The “awfully” is especially brilliant. I can’t imagine how Fields thought of that, yet I can’t imagine the song without it.
  He’s an odd bit of trivia: Before working with Fields one of Kerns’ earliest collaborators was the great P.G. Wodehouse. (More trivia. That shampoo in Ginger Rogers’ hair? Whipped cream.)
  The thing about writing lyrics is that it’s hard, and writing timeless lyrics is damn near impossible. It seems like every thought has been captured, every feeling has been expressed and every rhyme has been made. But then, suddenly, you come across words that make the world young again:
  

  Lovely … Never, ever change.
  Keep that breathless charm.
  Won’t you please arrange it?
  ‘Cause I love you … Just the way you look tonight.