Archive for July, 2008

  • Best Headline of the Day
    , July 8th, 2008 at 5:22 pm

    Thank you, Associated Press:

    U.S. exports cigarettes, bras, bull semen to Iran
    U.S. exports to Iran grew more than tenfold during President Bush’s years in office even as he accused it of nuclear ambitions and sponsoring terrorists.
    America sent more cigarettes to Iran — at least $158 million worth under Bush — than any other product.
    Other surprising shipments during the Bush administration: brassieres, bull semen, fur clothing, sculptures, perfume, musical instruments and military apparel.
    Top states shipping goods to Iran include California, Florida, Georgia, Louisiana, Michigan, Mississippi, New Jersey, North Carolina, Ohio and Wisconsin, according to an analysis by The Associated Press of seven years of U.S. government trade data.
    Despite increasingly tough rhetoric toward Iran, which Bush has called part of an “axis of evil,” U.S. trade in a range of goods survives on-again, off-again sanctions originally imposed nearly three decades ago.

  • The S&P 500 Priced in Eggs
    , July 8th, 2008 at 1:31 pm

    Felix Salmon links to a chart by DeForest McDuff of the S&P 500 priced in eggs. McDuff writes:

    Investment returns matter only to the extent that you can buy more “stuff” in the future. The U.S. stock market has been slowly losing real purchasing power for almost a decade, with no signs yet of a trend reversal.
    It’s true that the prices of hard assets like oil, gold, and omelettes have been increasing rapidly, but this is a direct consequence of decades of underinvestment in these asset classes. If you’re not thinking about investing in terms of purchasing power, then you’re playing the wrong game.

    This is correct, however, I caution against looking at the stock market in the price of some commodity. This is a subtle but important point. A lot of financial analysis involves developing a “feel” for the numbers.
    The problem of pricing the market in terms of some commodity is that it often involves two data sets with very different characteristics. Equity prices are tied to corporate profits and therefore cyclical. At least in theory. Commodity prices, however, are often marked by price disruptions, meaning dramatic price spikes. If you look at the long-term chart of nearly every commodity, you’ll see a few large spikes followed by long periods of not much.
    That’s why when you compare stock prices to a commodity, it often tells you less about equity prices and more about the commodity. From my experience, the most often used example is gold. For the last 35 years, the prices of gold has been a wild ride from around $30 to over $800 back to $250 and then up to $1,000. The stock market can be wild but nothing like that. Also, gold doesn’t pay dividends where the market does. It may not be much each quarter, but if you’re looking at a chart going back a few decades, it does add up.
    Think of it this way. A commodity is a thing. In 1,000 years, gold will still be gold. But equity is what you do with the thing to make money. If you make enough money, you can buy more things. A stock can own a commodity, but a commodity can’t run a business.

  • Sir John Templeton Dead at 95
    , July 8th, 2008 at 1:01 pm

    john_templeton.jpg
    One of the true giants has passed:

    Sir John Templeton, who has died aged 95, was a legend in the world of fund management and invested much of his multi-million pound fortune in promoting spiritual and religious progress.
    Sir John Templeton
    Templeton boasted one of the longest and most successful track records on Wall Street. From its foundation in 1954, his Templeton Growth Fund grew at an astonishing rate of nearly 16 per cent a year until Templeton’s retirement in 1992, making it the top performing growth fund in the second half of the 20th century.
    A $100,000 stake invested in 1954 would, with distributions reinvested, would have grown to $55 million in 1999.
    The Templeton formula was simple in theory, though not easily achieved in practice.
    He looked for bargains — shares selling well below their asset values due to temporary circumstances — and would usually hold on to them for five years or more until they reached what he considered to be their true worth.
    It was an approach that required rigorous research and determination not to be swayed by the fashions of the moment.

  • Tom Gallagher on the Global Economy
    , July 8th, 2008 at 12:49 pm

    I’ve embedded the whole video, but the key part is Tom Gallagher’s talk. I’d recommend watching 24:05 to 32:15.

  • The Chinese Bubble Bursts
    , July 8th, 2008 at 10:57 am

    In early 2007, the Shanghai Composite made news all around the world when it plunged 8.8%. Let’s just say that the pullback was a buying opportunity. Eight months later, the index was 120% higher.
    Nine months after that, which is today, we’re back where we started. Thanks for the wild ride!
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  • The Pickens Plan
    , July 8th, 2008 at 8:21 am

    T. Boone Pickens is launching an ad blitz on how to fix the energy crisis.

    Today, Pickens will take the wraps off what he’s calling the Pickens Plan for cutting the USA’s demand for foreign oil by more than a third in less than a decade. To promote it, he is bankrolling what his aides say will be the biggest public policy ad campaign ever. The website, www.pickensplan.com, goes live today.
    Jay Rosser, Pickens’ ever-present public relations man, promises that Pickens’ face will be seen on Americans’ televisions this fall almost as frequently as John McCain’s and Barack Obama’s.
    “Neither presidential candidate is talking about solving the oil problem. So we’re going to make ’em talk about it,” Pickens says.
    “Nixon said in 1970 that we were importing 20% of our oil and that by 1980 it would be 0%. That didn’t happen,” Pickens says. “It went to 42% in 1991 with the Gulf War. It’s just under 70% now. Where do you think we’re going to be in 10 years when our economy is busted and we’re importing 80% of our oil?”
    Finding solutions to other major issues, including health care, are important, he concedes. But “If you don’t solve the energy problem, it’s going to break us before we even get to solving health care and some of these other important issues.” And it has to be done with the same sense of urgency that President Eisenhower had when he pushed the rapid development of the interstate highway system during the Cold War.
    Of course, Pickens also has a particular solution in mind.
    Wind. And natural gas.

  • Top 10 Stocks Since the Last Recession
    , July 8th, 2008 at 2:10 am

    The Motley Fool lists the 10 best-performing stocks since the last recession (3/1/2001-7/6/2008):
    Company……………………………..Return
    Ultra Petroleum……………………..4,378%
    Southwestern Energy…………….3,348%
    Potash…………………………………2,070%
    Walter Industries………………….1,860%
    Apple…………………………………..1,715%
    Canadian Natural Resources…..1,658%
    Intuitive Surgical……………………1,627%
    Research In Motion………………..1,548%
    Range Resources…………………..1,515%
    Terra Industries…………………….1,236%

  • Inflation in Apparel
    , July 7th, 2008 at 4:15 pm

    There’s certainly lots of inflation in commodities, but there’s hardly any in other parts of the economy. Here’s a look at the CPI Apparel Index (not seasonally adjusted as the wiggles suggest). Prices are basically where they were 20 years ago.
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  • Southwest Airlines on WallStip
    , July 7th, 2008 at 1:31 pm


    In 1974, you could have picked up shares of LUV for just a penny. That’s just adjusted for 14 stocks splits totaling 300-for-1 (two 2-for-1s, nine 3-for-2s, and three 5-for-4s).

  • Who Killed the Economy
    , July 7th, 2008 at 1:10 pm

    Fill out your brackets today. Since “Morons Who Borrowed Way Too Much For a Ridiculously Overpriced House that They Couldn’t Afford Anyway” isn’t participating, I’m going with Greenspan.