Archive for 2007

  • Productivity Soars
    , 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.
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  • The Good Side of the Subprime Mess
    , 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
    , 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
    , 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
    , 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
    , November 6th, 2007 at 2:56 pm

    Here’s 25 years of Aflac (AFL):
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    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!

  • Nicholas Financial’s Earnings
    , November 6th, 2007 at 2:29 pm

    Nicholas Financial (NICK) is getting slammed in today’s trading. The company just reported a profit of 25 cents a share compared with 27 cents last year. Digging down into the decimals, that’s a decline of 6.5%.
    Not surprisingly, the difficult credit environment has been hard on NICK. The company’s provision for credit losses grew by 90% over last year. Still, we’re talking about a portfolio that has a pre-tax yield of nearly 9%.
    The shares are currently down 4.3% today, and they’re off more than 33% for the year. I won’t even hazard a guess as to what NICK will make for next year but I don’t see much more risk here. The shares are currently going for about seven times trailing earnings.
    Here are some stats on NICK from Seeking Alpha.

  • The Price of Gold in Dollars and Euros
    , November 6th, 2007 at 12:52 pm

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    The rise in gold isn’t all about the dollar going down, although that’s certainly helped.

  • Soros Sees Gloom and Doom
    , November 6th, 2007 at 9:39 am

    George Soros is out there predicting again. Of course, he’s famous for breaking the Bank of England in 1992 and making a cool billion in the process. So perhaps he’s worth listening to.
    This time, Soros sees bad news for the United States. Very bad news.

    Billionaire investor George Soros forecast on Monday that the U.S. economy is “on the verge of a very serious economic correction” after decades of overspending.
    “We have borrowed an awful lot of money and now the bill is oming to us,” he said during a lecture at the New York University, also adding that the war on terror “has thrown America out of the rails.”
    Asked whether a recession was inevitable, Soros said: “I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing.”
    Famous for his speculative attack on the Bank of England that made him more than $1 billion, Soros declined to nominate which currencies are more vulnerable currently. He also declined to comment specifically on the dollar.
    “I know exactly where the currencies are going to but I’m not going to tell that to you,” he told the audience.

    According to Soros, we’re on the verge of a recession. Maybe, but I’m a bit skeptical. Soros said the same thing last year, and a recession didn’t come about. In fact, economic growth has accelerated for the past two quarters. Nine years ago, Soros said that the global capitalist system “is coming apart at the seams,” yet this could be the strongest world economy ever seen.
    Still, if you constantly predict awful news, sooner or later, you’re going to be right. In my book, the doomdayers need to work on their timing.

  • Mark Sellers at Harvard
    , November 5th, 2007 at 5:11 pm

    Fascinating talk. It’s a big long but well worth it. Here’s a sample:

    I know that everyone in this room is exceedingly intelligent and you’ve all worked hard to get where you are. You are the brightest of the bright. And yet, there’s one thing you should remember if you remember nothing else from my talk: You have almost no chance of being a great investor. You have a really, really low probability, like 2% or less. And I’m adjusting for the fact that you all have high IQs and are hard workers and will have an MBA from one of the top business schools in the country soon. If this audience was just a random sample of the population at large, the likelihood of anyone here becoming a great investor later on would be even less, like 1/50th of 1% or something. You all have a lot of advantages over Joe Investor, and yet you have almost no chance of standing out from the crowd over a long period of time.
    And the reason is that it doesn’t much matter what your IQ is, or how many books or magazines or newspapers you have read, or how much experience you have, or will have later in your career. These are things that many people have and yet almost none of them end up compounding at 20% or 25% over their careers.