Archive for November, 2009

  • Gold Hits New All-Time High
    , November 4th, 2009 at 9:35 am

    The yellow metal is closing in on $1,100 an ounce. But gold has a long way to go to match its inflation-adjusted high from 30 years ago. Gold would still have to double from here to reach that.

  • Historical Footnote to Today’s Election
    , November 3rd, 2009 at 10:57 pm

    Today is Election Day in New York and after 34 years in office, 90-year-old Robert Morgenthau did not seek reelection as Manhattan’s District Attorney. It’s an understatement to say that Morgenthau is a legend in New York politics. Consider that he ran for governor 47 years ago when he lost to Nelson Rockefeller. Obama was a little over one-year old at the time! Morgenthau tried running again in 1970 but his campaign didn’t get far.
    Morgenthau also comes from a very prominent New York family. His father was FDR’s Treasury Secretary, and his grandfather was Wilson’s ambassador to—not Turkey—but the Ottoman Empire (or if you prefer, the Sublime Porte). Henry Morgenthau Sr. is probably best known for publicizing the Armenian Genocide.
    Also, on the TV show Law & Order, the elderly DA Adam Schiff is based on Robert Morgenthau.

  • Berkshire Hathaway to Split 50-for-1
    , November 3rd, 2009 at 10:47 am

    It finally happened. Warren Buffett’s Berkshire Hathaway (BRKB) announced that it will split 50-for-1. These are the B shares, not the A shares which are still around $100,000.
    The Class A and B shares usually trade at a ratio of 30-to-1. If you own the Class A shares, you can convert it into 30 B shares, but not the other way around. The B shares, however, only carry 1/200th the voting power of the A shares.
    In other words, post-split, the B shares will be about 1/1500th of the A shares. Going by today’s price, the B shares will be around $65.

  • Cognizant Technology Rises on Earnings
    , November 3rd, 2009 at 10:45 am

    One today after saying that I’m probably going to ditch Cognizant Technology (CTSH) at the end of the year, the company comes out with great earnings.
    For the third quarter, CTSH earned 48 cents a share which creamed Wall Street’s estimates of 41 cents a share. For the fourth quarter, the company sees EPS of 49 cents a share.
    The company now expects earnings for this year of $1.88 a share. That means that it’s going for 22 times earnings which is a bit rich for me.

  • Thoughts on Next Year’s Buy List
    , November 2nd, 2009 at 12:38 pm

    Around mid-December, I’ll unveil the Buy List for 2010. As usual, I’m only planning on making minor changes. My goal of this site is to prove that investors can beat the stock market by not doing much. With investing, your laziness is often your best friend.
    I try to make sure that my changes aren’t a big surprise so I’ll share with you some of my thoughts about the Buy List. Some of the stocks that I’m considering cutting are Amphenol (APH), Cognizant (CTSH), Donaldson (DCI), Danaher (DHR) and Moog (MOG-A). Both DCI and DHR have been on the Buy List since the beginning.
    Stocks I’m considering adding include Johnson & Johnson (JNJ), Pfizer (PFE), Abbott Labs (ABT) and WR Berkley (WRB). WRB was on the Buy List in 2006 and 2007. These are just ideas so I may change my mind before I make the 2010 Buy List official in a few weeks.

  • Sysco Beats by a Penny
    , November 2nd, 2009 at 10:55 am

    This morning, Sysco (SYY) reported fiscal Q1 EPS of 46 cents, one penny ahead of expectations. The results don’t include an 11-cent tax benefit.
    I like Sysco’s business because it’s remarkably stable. However, this is the fourth straight year-over-year decline for Sysco. In the comparable quarter from last year, they made 45 cents a share, so the decline isn’t that much.
    Since the earnings declines have been getting smaller, I think it’s very likely that this will be the last one. The stock is reasonably well-priced though it’s not an outrageous bargain.

  • Arnold Kling on the Bond Bubble
    , November 2nd, 2009 at 10:28 am

    Arnold debates the marekt:

    Markets: With so much unemployment and excess capacity, we cannot possibly have inflation.
    Kling: Do you not remember the 1970’s? Furthermore, you may be over-estimating the excess capacity. An excess capacity to sell houses and trade securitized debt may not help absorb demand in other sectors.
    Markets: The Fed has no plan to raise interest rates. Therefore, interest rates cannot rise.
    Kling: The Fed merely determines the composition of government debt. The amount of government debt is determined by fiscal policy, which the Fed does not control. At some point, the huge supply of government debt has to matter. If the public loses its appetite for government bonds, then the only way the Fed can absorb the supply is to print gobs and gobs of money. Prices will rise, and bond-holders will suffer a partial default in terms of purchasing power. Even if the Fed is relatively passive, I think that the high-inflation scenario is plausible.
    Markets: I can hold bonds for now. If inflation threatens to come back, I will see it in plenty of time to get out.
    Kling: That is how bubbles work. Everyone thinks that they have more protection from the bubble than they really have. Personally, in spite of the inflation bets in my portfolio, my big worry is that I do not have protection from the political risk and financial chaos that could come from a sovereign debt crisis.