Archive for March, 2009

  • So Long Risk Premium
    , March 12th, 2009 at 11:33 am

    Bloomberg reports that long-term government bonds have outperformed the stock market over the last 30 years. The article quotes Douglas Cliggott, “Over the last 30 years there’s been no risk premium.”
    Technically, the most common reference to the risk premium is stocks versus short-term T-bills. The problem is that the market isn’t that cheap when looking at long-term corporate yields (it’s not expensive either). What’s happened is that the spread between government and corporate debt has widened pretty dramatically.
    research.stlouisfed.org031209.png
    The graph above shows the 10-year yield versus BAA debt. Clearly, folks have moved strongly away from risky assets. It’s not so much that the risk premium is gone, it’s that we’re in a T-bond bubble.

  • Good Retail News
    , March 12th, 2009 at 10:58 am

    There was actually good news in retail sales. Good, not great. Retail sales for February dropped by 0.1% last month which was slightly better than what analysts were expecting. The best news came from the revisions for January. That number was revised higher to 1.8% from the original 1.0%. It’s not great but let’s hope this trend lasts.
    Interestingly, if you exclude car sales from the February numbers, then retail sales rose by 0.7%

  • Bernie Goes Down
    , March 12th, 2009 at 9:49 am

    Madoff pleas guilty:

    Disgraced financier Bernard Madoff entered federal court in lower Manhattan this morning and pleaded guilty to all 11 felony charges lodged against him in involving one of the largest Wall Street Ponzi schemes ever.
    He will now face the wrath of many of the investors who say he ripped them off to the tune of $50 billion dollars, as they will speak in court. The 70-year-old Madoff now faces a maximum prison term of 150 years.
    Victims of the one-time Nasdaq chairman and one of Wall Street’s elite had been gathering at the courthouse as early as 8 a.m. Those alleged to be cheated by Madoff lost their life’s fortunes, charities lost their investments, school trusts were blown and at least two investors took their own lives.
    The question now is whether Madoff will go right to jail or will he remain out on bail under house arrest in his $7 million Manhattan penthouse to await sentencing. Most victims, as expected, prefer the former.

    See ya in 2159, Bernie.

  • Past Marchs and the Market
    , March 10th, 2009 at 12:44 pm

    It was six years ago tomorrow that the S&P 500 closed at its then low point of 800.73. Five months earlier there was an even lower low on October 9. The market’s high in 2007 also came on October 9.
    It was on March 10, 2000 that the NASDAQ reached its highest close of 5,048.62.

  • Picking a Bottom
    , March 10th, 2009 at 11:25 am

    S&P recently said that the S&P 500 will have a slight earnings loss for the fourth quarter of 2008. This is the first loss ever for the index. However, AIG’s gigantic $62 billion loss knocks out $5.13 on operating earnings, so the other 499 made a small gain.
    I’ve seen a lot of folks throw out numbers for a bottom in the S&P. Nouriel Roubini, for example, sees earnings for the index coming in at $50 for 2009. Using a multiple of 12, he places a target of 600 for the S&P. I agree on the $50 a share for earnings, but I’m inclined to see a higher multiple simply because that level of earnings would (hopefully) mark a trough.

  • Gasparino Interviews Cayne
    , March 9th, 2009 at 2:12 pm

    The G-Man lands an interview with Jimmy Cayne. If there’s a line on swear words, I’m taking the over:

    I have to admit I’ve always liked Jimmy Cayne. I’ve always found him informed, charming, and really funny—he reminded me recently of the time he and I were in the Four Seasons restaurant at a party for the GOP convention and he spotted Al Franken and told him that Bill O’Reilly crushed him when the two debated face-to-face. “Remember me saying to Franken, ‘Hey you laid down. He made you look like an asshole.’”

    It’s a good interview. I’m looking forward to Charlie’s book, The Sellout.

  • A Rise In Used Car Prices
    , March 8th, 2009 at 10:42 pm

    John Hempton eyes one tiny spec of good news in the Fed’s Beige Book:

    …the used car business is holding up surprisingly well. This was mentioned in the Federal Reserve’s Beige Book – but also in the Manheim index of used car prices at auction. This index spiked up last month!
    The biggest single determinant of losses in a subprime auto finance book is not loss rate – it is severity – the loss after the car is auctioned. I am not about to buy non distressed auto securitisations or anything – but if you want to play in the distressed stuff this is clearly good news.

    Hopefully, this is good news for companies like Nicholas Financial (NICK). That stock got knocked around hard last week. On successive days, the shares ranged from $1.80 to $2.71.

  • Satuday Night Live Takes a Look at the Banking Crisis
    , March 8th, 2009 at 10:37 pm

  • 43 Years Of No Real Gains
    , March 6th, 2009 at 12:57 pm

    Adjusting for inflation, the Dow is basically where it was in 1966.

    image782.png

    This doesn’t include dividends.

    From February 9, 1966 to yesterday’s close, the Dow gained 562.7%. The CPI from February 1966 to January 2009 (we’ll get February’s report on March 18) rose 559.8%.

    That works out to a real gain of 43 basis points stretched out over 43 years.

    Oh…and we’re down today.

  • Ouch!
    , March 6th, 2009 at 9:18 am

    image781.png
    This really says it all. The economy has lost about 2.5 million jobs over the last four months. The jobless rate is now 8.1% which is the highest in 25 years.