Archive for November, 2009

  • The Humps Have Spoken
    , November 20th, 2009 at 12:50 pm

    The stock market is down for the third day in a row. I won’t say I told you, but I did in fact tell you so.

    If the current humpy thing doesn’t pass the last humpy thing, then that probably won’t be good*. Unless of course, there’s a new and higher humpy thing. Bottom line: It remains to be seen.

    image874.png
    I fully expect the present trend to continue up until the point it stops.

  • T-Bills Rates Turn Negative
    , November 20th, 2009 at 10:18 am

    Here, I’ll pay you to borrow my money:

    Some Treasury bills maturing at the start of next year traded at negative rates Thursday, a sign of investors’ strong demand for the safest securities at a time when T-bills are in scarce supply.
    When market participants buy Treasury bills at negative rates, they are essentially paying the government to keep their money safe.
    Rates on issues maturing in early January and February turned negative Thursday, to as low as -0.03%, traders said. Some issues maturing in the first two weeks of December also slipped, trading at flat to a bit negative Thursday.
    Bill yields last fell below zero in late 2008 amid the financial market panic that was triggered by the bankruptcy of Lehman Brothers Holdings Inc. (LEHMQ). The decline this time, though, isn’t driven by the same sorts of fears–it’s more about a scarce supply of T-bills amid strong demand for safe assets, given the hazy economic outlook.
    The amount of T-bills in the market has shrunk with the government letting the bills in its Supplementary Financing Program–which financed the ballooning deficit though the issuance of bills–mature rather than sell new bills to roll over the debt. At the same time, money-market investors face fewer options to park their cash.
    Rates on bills three months and out, though, were still trading positive Thursday (Barely! – Eddy). Strategists, however, said they wouldn’t be surprised to see those rates turn negative as well.
    George Goncalves, managing director and head of fixed-income rates strategy at Cantor Fitzgerald in New York, said this year the rate on the three-month T-bill could fall as low as -0.05%.

  • I’m Gonna Need Two Forms of ID With That
    , November 20th, 2009 at 8:49 am

    Ever see a check for $9 billion?
    Too Big to Fail: The $9 Billion Japanese Check to Morgan Stanley
    (Via: ARS)

  • Quote of the Day
    , November 19th, 2009 at 11:33 pm

    From Eric Falkenstein, whose book just arrived in the mail:

    Most pundits, professional and amateur, consider a genius as someone who can effectively articulate one’s platform more efficiently than themself. An idiot is someone who effectively articulates the other side.

  • Byrd’s Record Is Nothing to Celebrate
    , November 19th, 2009 at 2:21 pm

    Senator Robert Byrd is being celebrated this week for breaking the record for longest service in the United States Congress. Byrd served six years in the House and another 50 years in the Senate.
    For me, I’m going to take a pass on the celebrations. While I wish Senator Byrd well, I don’t think having a job as a legislator for 56 years is anything to celebrate. In fact, I think it’s scandalous.
    Being a member of Congress doesn’t make you a member of a special class. There’s no achievement involved. I wish they’d see it that way, and I think it would make for a healthier environment for the republic. You simply won an election. It’s a job that millions of Americans can do, and many can do it—and indeed have done it—better than Senator Byrd.
    I don’t see why anyone should make a career of ruling over others. When it’s to be done, it should be done for a modest period of time. There are many more important things to do with one’s life than tell other people what to do. You can start a business or become a teacher, or serve your community in countless ways that more valuable than being a member of Congress.
    I also think that any political career that’s worth having is one that will end in defeat. If you’re always on the popular side, then you’re probably not doing much good. Senator Byrd spoke about his regrets in his Congressional career—like voting against the 1964 Civil Right Act. These regrets underscore that Byrd merely followed the popular political winds in his home state. He wasn’t a leader at all, but a follower—and he’s been doing longer than many of his colleagues have been alive.
    Notice this clip of Byrd speaking about his regret over the Civil Rights Act vote. He speaks some nonsense over the loss of his grandson, and the epiphany that black people must love their grandchildren as well. Oh dear lord. So this thought never occurred to him? He lived a long life (until being a grandfather) without considering this most basic moral and legal concept. If the people of West Virginia keep sending him to DC, that’s their right, but I see no reason to celebrate 56 years of this garbage.

  • Donaldson Tops Estimates
    , November 19th, 2009 at 10:26 am

    I mentioned before that Donaldson (DCI) is a candidate to be cut from next year’s Buy List. This obviously terrified them as DCI reported first-quarter earnings of 45 cents a share, which was an amazing 11 cents better than expectations. That’s a huge beat and the stock is up nicely today. Donaldson now expects full-year earnings (excluding items) between $1.75 and $1.95 a share. I still think the shares are on the high side.

  • Sysco Raises Dividend
    , November 19th, 2009 at 9:51 am

    Sysco (SYY) already pays a fairly high dividend. Oftentimes, stocks with high dividend yields are traps because the lower share price merely reflects the market’s belief that the dividend will soon be cut. That isn’t the case with Sysco as they just raised their quarterly dividend, from 24 cents a share to 25 cents a share. That’s $1 for the whole year. Going by the current price, that’s a yield of 3.7% which is more than a 10-year Treasury bond.

  • More Problems with Yahoo Finance
    , November 19th, 2009 at 9:39 am

    I’ve written before about my concerns with the historical prices section under Yahoo Finance. The problems seem to continue.
    For Nicholas Financial (NICK), Yahoo Finance shows the 10% stock dividend happening yesterday. Note how the “Adjusted Close” column differs from the “Close” column. That’s not correct. The stock dividend won’t happen until December 7, and shareholders should expect to see the new shares in their accounts the next day. I hope Yahoo Finance works to find a better data vender for their historical stats.

  • Value Investing Still Wins
    , November 19th, 2009 at 9:05 am

    Here’s an update to some research I’ve shown before. The data comes off Professor Ken French’s data library. This shows stock market performance ranked by P/E Ratio decline. Stocks with the lowest P/E Ratios do the best, while those with the highest P/E Ratios do the worst. I’ve also included a line for the overall market.
    image873.png
    There’s a small quirk to the data. The decile markers are determined by NYSE stocks, and those are then placed on the entire universe of U.S.-traded stocks. As a result, the deciles with lower P/E Ratios tend to be smaller than the deciles with higher P/E Ratios. You can see that the market line isn’t doesn’t quite fall in the median. This doesn’t undermine the lesson that value investing has done better, but it’s less dramatic than the numbers here suggest.
    Here’s how the annualized performance numbers for the deciles (from June 1951 through September 2009)
    One 8.51%
    Two 8.58%
    Three 10.66%
    Four 10.39%
    Five 11.11%
    Six 13.38%
    Seven 13.69%
    Eight 14.28%
    Nine 15.64%
    Ten 16.65%

  • Study: The More Successful a Company Becomes, the More Likely It Is That It Will Break the Law
    , November 18th, 2009 at 9:34 pm

    Can’t say that I’m surprised:

    The more prominent and financially successful a corporation becomes, the more likely it is to break the law, according to a new study led by a Michigan State University scholar that challenges previous research.
    MSU’s Yuri Mishina and colleagues argue that unrealistically high pressure on thriving companies increases the likelihood of illegal behavior, as the firms are faced with continuously maintaining or improving their performance. Previous research suggested high-performing firms are less likely to feel the strains that can trigger illegal activities such as fraud, false claims and environmental and anticompetitive violations.
    The MSU-led study, which will appear in a forthcoming issue of the Academy of Management Journal, analyzed 194 large public manufacturing firms in the United States between 1990 and 1999.
    “We found that high-performing companies tended not to be able to sustain that high level of performance over time,” said Mishina, assistant professor of management and lead researcher on the project. “At the same time, high performing and highly prominent companies tend to be the ones that are punished most severely for not meeting performance expectations. And so it becomes a choice: Do I cut corners to try to meet these high performance goals and maybe get caught, or do I accept the results of not meeting my performance goals and be punished for sure.”

    In other news, Crossing Wall Street is wanted in 38 states.