Archive for April, 2009

  • Bernanke at Morehouse
    , April 14th, 2009 at 1:39 pm

    Here’s the text of Ben Bernanke’s speech at Morehouse College. I’ll warn you, it’s long but he explains the financial crisis in easy-to-understand terms.

  • Why Isn’t JPMorgan Chase Too Big to Fail?
    , April 14th, 2009 at 12:22 pm

    On Thursday, JPMorgan Chase (JPM) will report its Q1 earnings. The results will probably be “not horrible.” Which isn’t bad, not to mention horrible.
    The reason I mention JPM is that the bank hasn’t reported a single money-losing quarter since the crisis broke. That puts them in small company. In fact, the bank has beaten estimates fairly consistently. They were also very fortunate to gain both Bear Stearns and WaMu at very good prices.
    As you might expect, the shares have responded very favorably. JPM has more than doubled from its March low. So I have to wonder, is JPMorgan Chase now too big to fail?
    The bank’s market cap is well over $120 billion. Their assets are over $2.1 trillion. The bank has been smart and lucky so now it’s gotten very big. All of the same arguments about the size Citigroup apply to JPM, so where’s the outcry?
    Just asking….

  • Here’s an Idea: The Government Is Auctioning Off Money on Ebay
    , April 14th, 2009 at 2:25 am

    No, not that money. This kind.
    Funny, once upon a time this too was a toxic asset.

  • Great Stock Theory
    , April 14th, 2009 at 2:14 am

    Mebane Faber’s new book, The Ivy Portfolio, has two great graphs showing the distribution of stock returns. (Nick Gogerty has posted them here.)
    We often talk about the market as a whole, but in reality, the large majority of stocks don’t do much at all. The real gains come from a very modest slice of the market. According to the chart, one-quarter of the market accounted for all the gains.
    In short, stock returns have a fat tail. This is why I place so much emphasis on consistency of performance because it’s those “great stocks” that make the difference. The other lesson is that too much diversification really isn’t that helpful.

  • The Citigroup Rally
    , April 14th, 2009 at 12:38 am

    Citigroup (C) was up 76 cents on Monday, which doesn’t sound like much but it’s a 25% gain. Thanks to Goldman’s news, the stock will probably break $4 on Tuesday.
    Looking over the past few weeks, the stock has had a wild ride. On March 5, Citi dropped to just 97 cents a share. One month before that, it was at $4 a share. Obviously, this isn’t much of a rally; it’s more accurate to say that the stock has backed off from peering into the abyss,
    Citi reports this Friday. I have no idea what to expect. How’s this for a wide range? The Street high is a 14 cent profit. The low is $1.14 loss. Pardon me while I get my darts.

  • The Buy List Is Up for the Year
    , April 13th, 2009 at 1:36 pm

    Not a lot, but we’re up.
    Through Friday, the Buy List was up 1.42% while the S&P 500 was down 5.1%.

  • Tom Delay, Evolution and Columbine
    , April 13th, 2009 at 1:13 pm

    Paul Krugman writes about Tom DeLay:

    Going back to those tea parties, Mr. DeLay, a fierce opponent of the theory of evolution — he famously suggested that the teaching of evolution led to the Columbine school massacre — also foreshadowed the denunciations of evolution that have emerged at some of the parties.

    These are the kinds of the things Krugman writes that are so frustrating. He’s a brilliant economist but too often drives off the reservation into dishonesty.
    After reading Krugman’s account, are you led to believe that Tom DeLay said in a clear declarative sentence that Columbine was the result of the teaching of evolution? That he repeatedly said it and would say it again today if asked?
    I really wonder how many people understand that saying something that’s factually correct isn’t good enough. An accurate fact can be presented in a dishonest way. I think if I said this to many political pundits, their heads would explode.
    If I were to ask you what’s the sum of one plus one, and you said that it’s less than 20 trillion, that answer is factually accurate but dishonest. A certain linguist in the Boston area has made his career on such statements.
    The person who engages in dishonesty hurts themselves in two ways. First, they’re being dishonest. Secondly, since they believe they’re presenting facts, they immune themselves over criticism of context.
    Facts can imply something that isn’t true. They can be taken out of context. They can imply a false symmetry. Facts by themselves aren’t enough.
    Krugman has an unusual fixation with Delay and blaming Columbine on the teaching of evolution. He’s mentioned this several times.
    Enough of Krugman’s take. Here’s the full story. One week after the Columbine massacre, Addison L. Dawson wrote a letter to the editor to the San Angelo Standard-Times which mocked the idea that guns were to blame:

    For the life of me, I can’t understand what could have gone wrong in Littleton, Colorado. If the parents would have only kept their children away from the guns, we wouldn’t have had such a tragedy. Yeah, it must have been the guns.
    It couldn’t have been because over half our children are being raised in broken homes.
    It couldn’t have been because our children get to spend on average 30 seconds in meaningful conversation with their parents each day. After all, we give our children quality time.
    It couldn’t have been because we treat our children as pets and our pets as children.
    It couldn’t have been because we place our children in daycare centers where they learn their socialization skills amongst their peers under the law of the jungle while 16 year old employees who have no vested interest in the children look on and make sure that no blood is spilled.
    It couldn’t have been because we allow our children to watch on average 7 hours of television a day filled with the glorification of sex and violence that isn’t fit for adult consumption.
    It couldn’t have been because we allow our children to enter into virtual worlds in which to win the game, one must kill as many opponents as possible in the most sadistic way possible.
    It couldn’t have been because we have sterilized and contracepted our families down to sizes so small that the children we do have are so spoiled with the material that they come to equate the receiving of the material with love.
    It couldn’t have been because our children who have historically been seen as a blessing from God are now being viewed as either a mistake created when contraception fails or inconveniences that parents try to raise in their spare time.
    It couldn’t have been because our nation is the world leader in developing a “culture of death” in which 20 to 30 million babies have been killed by abortion.
    It couldn’t have been because we give 2 year prison sentences to a teenagers that kill their own newborns.
    It couldn’t have been because our school systems teach the children that they are nothing but glorified apes that have evolutionized out of some primordial soup of mud by teaching evolution as fact and by handing out condoms as if they were candy.
    It couldn’t have been because we teach our children that there are no laws of morality that transcend us, that everything is relative, and that actions don’t have consequences. What the heck, the President gets away with it
    .
    Nah, it must have been the guns.

    The letter was later read by Paul Harvey on the radio and then by Tom Delay in Congress on June 16, 1999 during a debate on gun control. (You can see the in the Congressional Record on page H4366.) The words are often credited to DeLay and not Dawson, though DeLay’s reading of it certainly implies an endorsement.
    After DeLay spoke, Barney Frank lambasted the letter by saying it was blaming the teaching of evolution for the shooting. That’s where Krugman got his line.
    First, let’s say a few things about the letter. It’s fatuous and not terribly intelligent. However, by reading it during a debate about control, DeLay was clearly doing the same things that Krugman is doing—mocking the idea of blaming Columbine on one issue.
    The listing of cultural problems makes the point clear. In fact, Dawson is being facetious about it which underscores that he’s tossing out many other suggestions. He’s not saying it’s evolution but the sum total of problems in the culture, where the debate in Congress was focusing on guns.
    Do you think if DeLay were asked, yes or no, was Columbine due to Darwin, he would say yes? Re-read what Krugman wrote. The only “famously” part is due to Krugman mentioning it time and time again.
    If you believe that Tom DeLay blamed Columbine on the teaching of evolution, well…you have your evidence. If you want to write that, go right ahead. But you shouldn’t be such a cheap date. Here’s the key point: I would never write it and neither would many other people because it’s dishonest and not up to professional standards. An editor should not have allowed it to pass. I should hope the Times feels that same way.

  • Mystery Toilet Flush
    , April 9th, 2009 at 2:52 pm

    Listen at the 19 second mark. It might just be symbolic.

    (HT: Joe W)

  • Bed Bath & Beyond Expectations
    , April 9th, 2009 at 1:52 pm

    Here’s part of my latest at Real Money:

    Bed Bath & Beyond (BBBY – commentary – Cramer’s Take) got a huge boost on Wednesday thanks to its better-than-expected fiscal fourth-quarter earnings. The shares jumped 24.3% to close at a six-month high of $31.70.
    As good as Wednesday was, I still don’t believe the shares are overpriced. Investors should take notice because BBBY is poised to go a lot higher.
    The figure that got traders so excited was BBBY’s net earnings of 55 cents a share, which topped Wall Street’s consensus by an impressive 11 cents a share. This was a big surprise since the company had already pegged fiscal fourth-quarter earnings in a range between 40 cents and 46 cents per share.
    Even the company’s own bean counters didn’t see this one coming. Mind you, BBBY’s earnings were still down quite a bit from a year ago — an 18% drop — but investing is an expectations game.

    Here are the earnings results going back a few years:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-99 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-00 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-01 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-02 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-03 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-04 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-05 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-06 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
    Nov-07 $1,794,747 $747,866 $203,152 $138,232 $0.52
    Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
    May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
    Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
    Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
    Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55

  • Rhetorical Question of the Day
    , April 9th, 2009 at 10:49 am

    If people are always complaining that their political philosophy is being sold out by elected officials who espouse that philosophy, is the problem the officials or might it reflect a defect in the philosophy?