Archive for 2007

  • Fear the Yen
    , November 13th, 2007 at 12:27 pm

    Here are some stunning stats from Ken Fisher in yesterday’s Financial Times:

    Forget the falling dollar. What we should fear is a rising yen. The most amazing statistic you never heard is: the year-to-date daily correlation between ups and downs in the global stock market versus spreads between the yen and the euro is 93 per cent. That is beyond eye-popping.

    I had no idea it was that strong:

    The 2007 year-to-date daily correlation coefficient between changes in the yen/euro spread and the MSCI World Index – best reflecting the total developed world stock market – is 0.93. For the S&P 500, it is 0.89, for the FTSE 100, 0.86, and for Germany’s DAX, 0.87. All higher than most people can fathom.
    The correlation of the MSCI World to the yen/sterling spread is lower, at 0.75, but is still sky-high. To the Australian dollar it is 0.86 and to the Canadian dollar 0.81. All breathtakingly high. Only to the U.S. dollar, which everyone fears, is it materially lower at 0.37.

  • Yay Me!
    , November 13th, 2007 at 12:09 pm

    This is a bit scary of me to say, but the Buy List has been doing incredibly well lately. We’ve beaten the S&P 500 for 14 of the last 17 days. Now I promise not to get too cocky because I’m still trailing the market for the year. In fact, just mentioning this makes me think that I’ll jinx it.
    Last week, I noted that the Buy List had its best day relative to the S&P 500 for the year. It was only the third time we’ve beaten the market by over 1% in a day. Well yesterday was the best day ever against the S&P 500. We were up 0.16% while the S&P 500 was down -1.00%.
    I’m stunned that these days are coming so close together. I build the Buy List to roughly conform to the overall market, but just do a little bit better (hopefully). Our daily correlation usually runs about 85%. Since October 18, the S&P 500 has dropped -6.55% while we’ve dropped just -1.54%. For the year, we still trail the S&P 500, 1.47% to 0.20%. But we’ve closed the gap enormously.
    The big story yesterday was the fall in energy and materials stocks. That’s the major missing piece on the Buy List, so whenever those sectors trail, we tend to lead the market. Yesterday was a strange day because the dollar has its best day in over a year. Also, the Dow fell below 13,000 but its fall, in percentage terms, was half of the S&P 500. Outside of a few stocks, the market had a blah day.
    Two small things to pass on. SEI Investments (SEIC) made news when it said it would provide financial guarantees for some of its money market funds. Also, Sysco (SYY) said it will raise its quarterly dividend by 15.8% to 22 cents a share.

  • Still a Bull
    , November 13th, 2007 at 11:13 am

    He’s a chart of why I still like the stock market. The black line is the S&P 500 and it follows the left scale. The yellow line is its earnings and it follows the right scale. I scaled it at 16.66 to 1 which has been roughly the average P/E ratio for the past few months.
    The part of the yellow line in the future is obviously projections. You can see that the market is anticipated to recover from a modest dent in earnings growth.
    image551.png

  • Breakfast at Wall Strip
    , November 13th, 2007 at 9:12 am

    Lindsay does a great Audrey Hepburn. Next, I hope they do My Fair Isaac. (“I could have bouuuught all night…”)

  • Leucadia National (LUK)
    , November 12th, 2007 at 2:26 pm

    One of my favorite stocks, Leucadia National (LUK), reported earnings on Friday. If you’re not familiar with Leucadia, it’s basically the Greta Garbo of the stock market. The company has no analysts who follow it, no earnings estimates, no whisper numbers, barely any press releases and it does minimal volume
    Talk about bare bones, check out their website.
    So what does Leucadia do? It’s often called a “mini Berkshire Hathaway” because it’s a holding company that buys assets on the cheap. For nearly thirty years, the firm has been run by Ian Cumming and Joe Steinberg. They own a hodgepodge of businesses; some real estate here, some timber there, even a winery. Nothing terribly exciting.
    But what is impressive is the stock’s long-term performance. Remarkably, Leucadia National has done even better than Berkshire Hathaway.
    Since the stock market bottomed in August 1982, shares of Leucadia National are up over 32,600%. Berkshire is up only 29,600%. (Poor Warren.) Actually, LUK has done even better because it paid out a ginormous dividend in 1999. The stock is up another 60% this year, and unlike Berkshire, they split the shares so normal humans can buy it.
    The lesson here is, don’t be afraid of companies that aren’t widely followed. Some of the best stocks are off Wall Street’s radar screen. Inhabitants of Wall Streetistan tends to see all time and space as neatly divided into three month chunks. The quarterly earnings game is tough to play and there’s a benefit to ignoring it altogether.

  • How to Profit from a Crash in China
    , November 12th, 2007 at 11:10 am

    Some market observers think the Chinese market is a bubble. Me, I’m convinced. The Shanghai Composite has basically doubled this year, and it doubled last year as well. That’s not normal and it shouldn’t be expected to continue. In fact, the index is already down about 15% from its peak.
    The good news for investors is that ProShares has launched a new ETF designed to profit off China’s misery. The UltraShort FTSE/Xinhua China 25 ProShare (FXP) moves twice in the opposite direction of the Chinese stock market. The underlying index is the FTSE/Xinhua China 25 Index (FXI). Check out how that index has done:
    image550.png
    Yep, that might be a bubble.

  • Jim Cramer’s 10 Reasons to Be a Bull
    , November 12th, 2007 at 10:26 am

    At TheStreet.com, Jim Cramer lists 10 reasons to be a bull. Here are his Top 5:

    1. The stock market is cheap. Most of the stocks I follow are in low or mid-teen multiples or at a price-to-earnings ratio vs. high growth rate that I regard as being just flat-out cheap, particularly when you consider a 4% 10-year Treasury. Retail at 10 times earnings? Lots of high-growth tech stocks at mid-teen multiples? It makes no sense to me.
    2. Takeovers and going-privates could come back. On a large scale we saw BHP Billiton (BHP) make a move today for Rio Tinto (RTP). On a smaller scale there’s money to go private, witness Restoration Hardware (RSTO).
    3. There are some very strong bull markets out there. Health care cost containment, agriculture, oil and oil services, infrastructure, tech and aerospace defense. There are a lot of sectors that work.
    4. Interest rates. The financials are so dire that the Fed will have to cut twice by year-end or give us another half-point cut, which will flush a huge amount of money from the sidelines and embolden banks to start lending again.
    5. The market still loves high growth. Witness Google (GOOG), Research In Motion (RIMM), First Solar (FSLR), Apple (AAPL) and Intuitive Surgical (ISRG). Believe me, if this market were really bad, you wouldn’t get those to go up, either.

    If I made a top 10 list, I would simply restate Jim’s first point 10 times.

  • Google Millionaires
    , November 12th, 2007 at 10:15 am

    Bonnie Brown is a former Google employee who made several million dollars off her stock options. So what did Ms. Brown do at Google? Programmer? Designer?
    Nope, she was the company’s in-house masseuse:

    “I’m happy I saved enough stock for a rainy day, and lately it’s been pouring,” said Ms. Brown, 52, who now lives in a 3,000-square-foot house in Nevada, gets her own massages at least once a week and has a private Pilates instructor. She has traveled the world to oversee a charitable foundation she started with her Google wealth and has written a book, still unpublished, “Giigle: How I Got Lucky Massaging Google.”

  • Remembrance Day
    , November 11th, 2007 at 11:00 am

    poppies.jpg

  • Did She Say Shittygroup?
    , November 9th, 2007 at 3:48 pm


    Nah, it must be me.