Archive for June, 2008

• Oil Prices Through the Years
  Eddy Elfenbein, June 18th, 2008 at 2:55 pm

  Here’s a cool chart from Forbes showing the price of oil since 1861.
  (Via: Kedrosky)

• Oopsie!
  Eddy Elfenbein, June 18th, 2008 at 1:06 pm

  From Bloomberg:

  Morgan Stanley suspended a credit trader and disclosed a $120 million “negative adjustment” related to erroneous valuations of his positions, Chief Financial Officer Colm Kelleher said.
  The New York-based firm is cooperating with authorities in London after discovering the error in May, Kelleher said in an interview today. He declined to identify the trader. Joseph Eyre, a London-based spokesman for Britain’s Financial Services Authority, declined to comment.
  Morgan Stanley, the second-biggest U.S. securities firm by market value, joins at least three competitors in identifying incorrect pricing this year. Credit Suisse Group, Switzerland’s second-largest bank, announced $2.65 billion of writedowns on asset-backed securities in March after an internal review found intentional “mismarkings” by a group of traders.

  Ever notice how these mistakes, I mean, negative adjustments always negative. If they’re always mistakes, shouldn’t some be positive?

• Was the Idea for Facebook Stolen?
  Eddy Elfenbein, June 18th, 2008 at 12:45 pm

  In Rolling Stone, Claire Hoffman takes a 6,300-word look at “The Battle For Facebook:”

  In a lawsuit one judge describes as a “blood feud,” three fellow Harvard students claim Zuckerberg fleeced their idea after they hired him to code a social-networking site they were creating. “We got royally screwed,” Divya Narendra, one of the students, has testified. And in April, another classmate, Aaron Greenspan, filed a petition to cancel Facebook’s trademark, claiming he invented an online facebook months before Zuckerberg. Greenspan, who has compiled reams of e-mails chronicling his months of communication with Zuckerberg, bristles at equating the Facebook prodigy with Microsoft’s founder. “Gates was shrewd, calculating and insanely competitive, bordering on autistic,” Greenspan writes in his self-published autobiography. “Mark was inarticulate and naive.”
  The legal challenges to Zuckerberg’s empire paint a curious picture of the man who has put himself in charge of our social future. One of the world’s most popular networking tool was launched by a brilliant but ostracized nerd sitting alone in a dorm room. From his days at Phillips Exeter Academy, where he was known as the prep school’s top programming impresario, Zuckerberg has drawn on a powerful combination of isolation and entitlement to surpass his peers. He is a Nietzschean superdork for the digital age — a college student who gamed the system, propelled by a primal understanding of how to program computers to serve human needs. Whatever the outcome of the legal wrangling, the battle over the origins of Facebook prompts a fundamental question: Is Mark Zuckerberg’s social-networking empire, like so many other great fortunes in history, founded on a crime?

• RBS Predicts Gloom Followed By Doom
  Eddy Elfenbein, June 18th, 2008 at 10:10 am

  From the Telegraph:

  The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks.
  “A very nasty period is soon to be upon us – be prepared,” said Bob Janjuah, the bank’s credit strategist.
  A report by the bank’s research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
  Such a slide on world bourses would amount to one of the worst bear markets over the last century.

• Questar (STR)
  Eddy Elfenbein, June 17th, 2008 at 1:02 pm

  I’ll never understand why a company with a cool name like Mountain Fuel Supply Company would want to change its name to the horribly ugly sounding Questar (STR), but change it they did.
  Perhaps they knew what they were doing. The stock has been an amazing performer for years. Over the last 20 years, the shares’ total return (including dividends) is up about 60-fold, which is over 22% a year. The stock hit another new high today.
  

• FactSet’s Earnings
  Eddy Elfenbein, June 17th, 2008 at 10:37 am

  Very strong earnings report today from FactSet Research Systems (FDS). Sales and net income both rose 22%. Earnings-per-share came in at 65 cents, two cents a head of the Street. For the same quarter one year ago, FactSet made 56 cents which included a four cent tax benefit.
  Here are some highlights from the company:

  Other Financial Highlights
  * U.S. revenues were $102 million, up 18% from the year ago quarter.
  * Revenues from non-U.S. operations increased 30% to $45.7 million.
  On a constant currency basis the increase was 29%.
  * Operating margins were 32.5%, consistent with the previous and
  year ago quarters.
  * Other income declined 60% to $0.9 million from a reduction in U.S.
  interest rates during the last nine months.
  * Free cash flows generated during the quarter was a record
  $45.8 million, exceeding the average of the previous four quarters
  by $17 million.
  Operational Highlights — Third Quarter of Fiscal 2009
  * Users rose to 39,600 at quarter end, up 500 professionals over the
  past three months.
  * Client count was 2,044 at May 31, a net increase of 23 clients.
  * PA 2.0 subscribers totaled 5,487 users from 607 clients at the end
  of the quarter.
  * Employee count at May 31, 2008 was 1,826. Headcount did not change
  during the third quarter. The number of employees is up 18% over
  the last year.
  * FactSet already has accepted offers from 80 new employees for the
  upcoming fourth quarter, the majority of which will expand the
  sales and consulting and engineering departments.
  * Capital expenditures were $12.3 million, net of landlord
  contributions for construction. Expenditures for computer equipment
  were $7.6 million and the remainder covered office space expansion.
  * Client retention rate remained above 95%.
  * On May 8, the Company’s Board of Directors approved a 50% increase
  in the regular quarterly dividend from $0.12 per share to $0.18 per
  share. The cash dividend of $0.18 per share will be paid on
  June 17, 2008 to holders of record of FactSet’s common stock on
  May 29, 2008.
  * Common shares outstanding at May 31, 2008 were 48.0 million.

  Here’s a look at the company’s stock (blue, left scale) and earnings-per-share (gold, right scale). The two lines are scaled at 30-to-1. FactSet’s P/E ratio plunged from 37 in October to 19 in mid-March.
  

• Hedge Fund Manager Still Alive, Fund Not So Much
  Eddy Elfenbein, June 17th, 2008 at 10:12 am

  The U.S. Marshals say that Samuel Israel III did NOT leap to his death after writing “suicide is painless” on the hood of his car.
  Well done, Marshals, even though I could have told them that. The hood thing had all the earmarks of the first clue on any Law & Order. Please, no one is ever guilty at the 18th minute mark.

  “Suicide has been ruled out,” William Dundon, a spokesman for the U.S. Marshals Service, said in an e-mail to Reuters.
  Another law enforcement official who is familiar with the investigation, but not authorized to speak publicly on the matter said “the investigation is solely a fugitive investigation now.”
  Israel, 48, had been due to begin serving a 20-year prison term in Ayer, Massachusetts a week ago.
  Officials would not say how authorities had learned that Israel, who suffers back and heart problems, was alive. But after no body washed up on the Hudson’s shores for days, police became skeptical he was dead.
  In April, Israel was sentenced for fabricating investment returns, making up an accounting firm to sign off on documents and ultimately stealing $450 million from investors, including Indiana’s DePauw University.
  He was out on bail to allow time for prison officials to prepare his medication, court documents show.
  In an ironic twist, Israel’s disappearance may be especially awkward for his lawyers.
  Lawyers at Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C. defended Israel plus another fugitive, Jacob “Kobi” Alexander, the former chief executive of Comverse Technology Inc, who is wanted in the U.S. on stock-options backdating charges. Alexander escaped U.S. authorities in 2006 and has been living in Namibia since then.

  This is a good day for people who shorted the suicide contract. I wonder what the odds are that they’ll find Israel in Israel.

• Little Bank, Big Profits
  Eddy Elfenbein, June 16th, 2008 at 1:34 pm

  I love finding tiny companies that no one knows about, but are great investments. This is especially true with small banks. There are roughly a bazilion little banks that are publicly traded, and yet many aren’t followed by a single Wall Street analyst.
  Here’s a good name to consider, Smithtown Bancorp (SMTB). The funny thing is that this bank is based in Wall Street’s backyard yet only two analysts follow it. The company has a market cap of roughly $200 million, which is barely a peep compared with the big boys (Citigroup’s market cap is more than 500 times larger).
  Like a lot of banks, Smithtown is going through a rough patch, but the company still earned $1.47 a share last year. That was its 13th straight record year. Not a lot of companies can boast of that.
  The shares are down about 15% in the past year.

• Say It Ain’t So, Lenny
  Eddy Elfenbein, June 16th, 2008 at 1:19 pm

  Forbes recently suggested that Lenny Dykstra isn’t making his own stock picks, but relying on Richard Suttmeier (note both Lenny, Suttmeier and I are columnists at RealMoney.com).
  Peter Kafka prints Suttmeier’s response (you can read it here) and I think they have a good case. First, they’re not doing anything secretive or improper. Secondly, Dykstra is merely using Suttmeier’s research as a primary screening tool.Sheesh! What’s the big deal about that?

• Oil at $140
  Eddy Elfenbein, June 16th, 2008 at 11:03 am

  The price for oil is at another new record near $140 a barrel. A gas station in Egnland, however, is selling gas for just £1.99 pounds a litre.
  Wait a sec, that’s $17.69 a gallon.
  According to GasBuddy.com, Hume Lake Gas in Hume, CA is selling gas for $4.99 a gallon.