Archive for February, 2008

• Will Ferrell on CNBC
  Eddy Elfenbein, February 4th, 2008 at 1:46 pm

  This is a bit old, but here’s Will Ferrell causing havoc on Power Lunch.
  

• Profile of Steve Schwarzman
  Eddy Elfenbein, February 4th, 2008 at 12:00 pm

  This must be the season for gigantic profiles of financial bigwigs. Now, the New Yorker‘s James B. Grant takes 10,000 words to look at Steve Schwarzman. Here’s a teeny, tiny bit:

  There were no dance performances on Yale’s all-male campus, but the New England women’s colleges were filled with aspiring dancers. It occurred to Schwarzman that with these women he could stage a dance performance, and charge admission. “Put attractive women in tights and you’d sell out,” he said. He got in touch with Walter Terry, the dance critic for Saturday Review, and persuaded him to attend. He scheduled the performance for a weeknight, when nothing else was competing for students’ attention. The event sold out, and Terry wrote about it in Saturday Review, in the issue of March 29, 1969. In the article, Schwarzman, asked about his future, said, “I can’t afford the arts right now. That takes money. So I’m going to a school of business administration.”
  Schwarzman had majored in Intensive Culture and Behavior, an interdisciplinary subject, and hadn’t taken a single economics or accounting course. Law school or business school seemed a logical next step, but he had little sense of where either would lead. During his senior year, he had sent a letter to W. Averell Harriman, the wartime Ambassador to Russia and former governor of New York, who was serving as the President’s representative at the Paris peace talks. “There weren’t that many people in that era to admire, and I wrote him a letter saying I admired him and wanted to meet him,” Schwarzman recalled. Harriman, a fellow Skull and Bones man, invited him to lunch at his town house, on the Upper East Side, occasionally interrupting their talk to take calls from Cyrus Vance, in Paris. According to Schwarzman, Harriman asked him, “Young man, are you independently wealthy?”
  “No, sir, I’m not.”
  “Well, I am the son of a very rich man, which has made an enormous difference—that’s the reason you’re seeing me. If you have any interest in the political world, I advise you to become independently wealthy yourself.”

  You gotta admit, that’s good advice.

• Google Attacks Microsoft/Yahoo Deal
  Eddy Elfenbein, February 4th, 2008 at 9:26 am

  This is a bit pathetic. Google is complaining about the potential merger between Yahoo and Microsoft.
  At Google’s blog, the company’s lawyer asks, “Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?”
  That question makes little sense. He’s implying a relationship between the deal and Microsoft’s future attempts at breaking the law. By that logic, how do we know that this deal won’t lead to Microsoft selling crack? If Microsoft wants to overpay for Yahoo, that’s their business.

• Mstislav Rostropovich
  Eddy Elfenbein, February 1st, 2008 at 4:42 pm

• ExxonMobil’s Earnings
  Eddy Elfenbein, February 1st, 2008 at 3:07 pm

  One of the big stories today is ExxonMobil‘s (XOM) record earnings. For 2007, the company earned $40.6 billion, the most ever for an American company. For the fourth-quarter, the earned $11.7 billion, which is also a record.
  Despite the huge numbers, it’s really not as impressive as it sounds. First, XOM’s net increased by less than 3% last which is less than the growth of the economy. In real terms, this year’s profit is less than last year’s. Thanks to fewer shares, EPS rose by 10.2%. Also, the company’s profit margins slipped slightly from 10.5% to 10%. Finally, the company paid over $100 billion in combined taxes for the year.

• Bottomfishing in Homebuilders
  Eddy Elfenbein, February 1st, 2008 at 2:35 pm

  I’m not much of a fan of bottomfishing for investments. There are two reasons. First is that stocks can go much lower than you assume. It’s very hard to know where it will end. The second is that when the selling does end, it usually takes a knowledge of the company or industry that only very few people have. A lower stock price doesn’t mean that a stock is cheaper. Strangely, much of the evidence suggests just the opposite.
  Having said that, here’s a look at the battered Homebuilders ETF (XHB). For those brave souls who bought a few days ago, they’re already seeing some nice gain.
  

• The Kirk Report’s Top 10 Stock Screeners
  Eddy Elfenbein, February 1st, 2008 at 1:27 pm

  Charles asked his readers for the best stock screeners. Here’s what they gave him:
  1. AAII’s Stock Investor Pro
  2. Amibroker
  3. Investor’s Business Daily
  4. Morningstar
  5. MSN Deluxe Screener
  6. SmartMoney
  7. Stock Screen Machine
  8. StockCharts
  9. Worden TeleChart/Blocks
  10. Yahoo Finance
  I can’t claim to be familiar with all of these, but Charles’ readers prefer AAII by “a wide margin.”

• Nominal GDP
  Eddy Elfenbein, February 1st, 2008 at 12:33 pm

  Wednesday’s GDP report was awful. It now looks like the economy has entered a recession, or a best, a situation very close to one.
  Here’s a look at nominal, meaning not adjusted for inflation, GDP growth. Some folks think this is where the Fed Funds rate ought to be. For the last quarter, nominal GDP growth came in at 3.2% (annualized) and the Fed is now down to 3%.
  
  The problem with GDP is that one lousy quarter usually leads to another lousy quarter. The data series is very trend sensitive. For real GDP, the magic point seems to be 2.8%.
  In 1990-91 there were seven straight quarters below 2.8%.
  Then 26 of the next 34 were above 2.8%.
  This was followed by 11 straight quarters below 2.8% (in 2000 to 2003).
  Then nine out of 12 were above, and only three of the last nine were below.
  Over the last 60 years, 57% of the quarters have had growth above 2.8%. But one quarter with above 2.8% growth has a 66% chance of being followed by another above 2.8%. A quarter with less than 2.8% growth has a 44% chance of being followed by another one below 2.8%.

• J’accuse!
  Eddy Elfenbein, February 1st, 2008 at 12:11 pm

  
  The strange case of Jerome Kerviel is getting stranger. The WSJ reports:

  Société Générale says wayward trader Jérôme Kerviel lost the bank $7.2 billion. But that was last week. He’s now on his way to cult celebrity — and he still hasn’t lost his job.
  Société Générale has stopped paying Mr. Kerviel and told him not to come to the office, but it hasn’t managed to formally fire him. French law stipulates that to do that, the bank must first call him in for a sit-down meeting and explain its dissatisfaction. He has the right to bring along a trade-union official, a lawyer or anyone else he’d like.
  That will be complicated: A pair of Paris judges this week released Mr. Kerviel from custody but forbade him to have contact with the bank. “This is a very peculiar case,” says Emmanuel Dockès, a law professor at l’Université Lyon 2, Mr. Kerviel’s alma mater in central France.
  Reviled by Société Générale as a malevolent fraudster and “mutating virus,” Mr. Kerviel, 31 years old, is now being hailed by a growing band of fans as “Robin Hood,” “the Che Guevara of Finance” and even a genius worthy of the Nobel Prize in economics.

  By calling him “the Che Guevara of Finance,” do they mean that he personally shot countless people, including children, for “ideological crimes,” and tried to blow up the Statue of Liberty? Eh…probably not.

  “Let’s be honest: No one likes banks…and people like the rich to get cheated,” says Christophe Rocancourt, a celebrated French con man who swindled wealthy Americans in the 1990s by masquerading as a French member of the Rockefeller family, a film producer and various other people.
  Edward Yardeni, an American economist who runs an investment-strategy consulting firm, credits Mr. Kerviel with helping save the U.S. from recession. “Merci beaucoup, Jérôme,” says Mr. Yardeni, a former chief economist at Deutsche Bank. Société Générale’s unwinding of Mr. Kerviel’s bad bets, he says, accelerated a market slide that prodded the Fed to slash interest rates.
  Mr. Yardeni says French courts will have to decide whether Mr. Kerviel belongs in prison, but “we owe Jérôme quite a few thanks,” and he “certainly deserves a footnote in American economic history.”
  The French Communist Party, meanwhile, has compared Mr. Kerviel with Alfred Dreyfus, a Jewish French army officer whose persecution by the military hierarchy at the end of the 19th century has become a byword for gross injustice.

  Wow, I didn’t even know the PCF was still around! Those boys really did have a tough century. It wasn’t just anyone who opposed World War 2 and supported the wars in Indochina and Algeria, plus the Soviet invasion of Afghanistan. There are, however, some problems with their comparison. For example, Captain Dreyfus lost his job and was sent to Devil’s Island. Kerviel is probably looking at a move deal.

• The Worst Idea in the History of the World
  Eddy Elfenbein, February 1st, 2008 at 11:10 am

  I’m exaggerating, but not by much:

  New Debit Card Borrows Against 401k
  With the threat of a recession looming, many families are looking for ways to get some quick cash to make it through these hard times.
  In a move that financial analysts are calling a dangerous gamble, one company is offering a debit card that lets you tap into your 401k savings.
  Borrowing against your 401k isn’t a new concept, but financial planners say making that money so easily accessible through a debit card greatly increases the potential danger. Money taken out of a 401k now could mean less money left for retirement.
  The Reserve Solutions ReservePlus debit card lets employees borrow against their 401k plan by making withdrawals at ATMs, paying interest on the money withdrawn.

  Will the payouts be in cash or lotto tickets?