Archive for December, 2009

• The 90s Are Officially Over
  Eddy Elfenbein, December 7th, 2009 at 11:28 am

  You’ve Got Freedom: AOL ends ties with Time Warner

  AOL is shaking loose from Time Warner Inc. and heading into the next decade the way it began this one, as an independent company. Unlike the 1990s, though, when AOL got rich selling dial-up Internet access, it starts the 2010s as an underdog, trying to beef up its Web sites and grab more advertising revenue.
  Despite a few bright spots in its portfolio of sites, such as tech blog Engadget, AOL has a long way to go until Web advertising can replace the revenue it still gets from selling dial-up Internet access. One especially popular property, entertainment site TMZ, is a joint venture with a Time Warner unit that will keep TMZ and its revenue after AOL splits off.
  Now investors are getting a chance to place bets on AOL. On Wednesday, Time Warner shareholders as of Nov. 27 will get one share of AOL for every 11 of their Time Warner shares. The next morning, AOL CEO Tim Armstrong is set to ring the opening bell at the New York Stock Exchange, and AOL will begin trading under the ticker symbol of the same name — the one it had when it was known as America Online and used $147 billion worth of its inflated stock to buy Time Warner in 2001.

• Where We Stand with TARP
  Eddy Elfenbein, December 7th, 2009 at 11:07 am

  It looks like Uncle Sam will only take a $42 billion bath from the TARP program. Only a few months ago, it looked like it would cost a lot more. Overall, that’s a return on equity of about -11%. That’s really not so bad. I have to confess that I’d be almost as worried if the Feds made money on TARP since it might give them confidence to try it again.
  Of the money lent to banks, TARP has worked fairly well with a profit of $19 billion on $245 billion lent out. The problem is that nonbank borrowers like General Motors have bled out the rest of the borrowing. Citigroup is the only major bank left that hasn’t paid back all of its TARP money.
  This was an ugly government policy but it was the right thing to do. Now all we need is a clear exit strategy.

• The Buy List YTD
  Eddy Elfenbein, December 7th, 2009 at 9:08 am

  With just a few days left in 2009, the Buy List continues to do well. Through Friday, the Buy List is up 42.36% for the year versus 22.44% for the S&P 500 (that doesn’t include dividends). The Buy List is just a hair below its November 17th high. Since March 9, we’re up 88.37% to 63.48% for the S&P 500. But of course, that’s just a suckers rally.

• Gold Is Down Again Today
  Eddy Elfenbein, December 7th, 2009 at 9:05 am

  After taking a bath on Friday, gold is down again today.

  Gold for February delivery slipped $26, or 2.22%, to $1,143.50 a troy ounce early Monday. Gold prices fell sharply Friday after after a much better-than-expected jobs report from the government showed employers trimming a mere 11,000 jobs in November as the unemployment rate ticked down to 10% from 10.2% in the prior month.
  “We’ve had a substantial turn in the dollar,” said Mark Hansen, director of trading at CPM Group. “People are taking a second look at their commodity exposure, especially precious metals, which have been investor favorites in the past couple of month.”
  Gold prices were pressured by a stronger dollar, as the greenback hit a five-week high against a basket of currencies Monday and also rose against the euro.

  We’ve become very used to a script lately—dollar down, gold and stocks up. Could that be coming to an end?
  Bloomberg notes that since 1980, gold has been an awful investment:

  Gold’s best year in three decades has yet to match the returns of an interest-bearing checking account for anyone who bought the most malleable of metals coveted for at least 5,000 years during the last peak in January, 1980.
  Investors who paid $850 an ounce back then earned 44 percent as gold reached a record $1,226.56 on Dec. 3 in London. The Standard & Poor’s 500 stock index produced a 22-fold return with dividends reinvested, Treasuries rose 11-fold and cash in the average U.S. checking account rose at least 92 percent. On an inflation-adjusted basis, gold investors are still 79 percent away from getting their money back.
  “You give up a lot of return for the privilege of sleeping well at night,” said James Paulsen, who oversees about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “If the world falls into an abyss, gold could be a store of value. There is some merit in that, but you can end up holding too much gold waiting for the world to end. From my experience, the world has not ended yet.”

• The $1 Million Gold Bet
  Eddy Elfenbein, December 4th, 2009 at 2:43 pm

  I noticed this on Barry Ritholtz’s site more than two years ago (via Prieur du Plessis). Jim Sinclair offered a $1 million bet to anyone that gold will reach $1,650 an ounce by the second week of January 2011. We’re a little over a year away.
  At the time of the bet in April 2008, gold was going for about $900 an ounce. It recently jumped over $1,200 an ounce (although it pulled back sharply today to around $1,160). So gold has had a good run. But it still needs a good surge over the next thirteen months to hit Sinclair’s target.
  Will it make it? I have no idea. This one may come down to the wire.

• The World Cup Draw
  Eddy Elfenbein, December 4th, 2009 at 1:56 pm

  We’re in Group C:
  Group A
  South Africa
  Mexico
  Uruguay
  France
  Group B
  Argentina
  Nigeria
  South Korea
  Greece
  Group C
  England
  United States
  Algeria
  Slovenia
  Group D
  Germany
  Australia
  Serbia
  Ghana
  Group E
  The Netherlands
  Denmark
  Japan
  Cameroon
  Group F
  Italy
  Paraguay
  New Zealand
  Slovakia
  Group G
  Brazil
  North Korea
  Ivory Coast
  Portugal
  Group H
  Spain
  Switzerland
  Honduras
  Chile
  They always talk about one group being the Group of Death. I’m not sure if there is one this time. In 2006, our group was considered by some (though not all) to be the GOD. We were up against Italy, the Czechs and Ghana. We tied Italy and lost the other two.
  The U.S. will play England on June 12. We play Slovenia on June 18 and Algeria on June 23.

• Finally! Not Completely Awful News for Jobs
  Eddy Elfenbein, December 4th, 2009 at 10:07 am

  The unemployment rate dropped to 10% in November from 10.2% in October. To be very precise, the unemployment rate fell to 9.992%.
  That’s good news but the economy is still losing jobs—only 11,000 jobs were lost last month. That’s a dramatic improvement over the data we’ve seen during the past two years. The Labor Department also revised the data higher for September and October.
  Here’s a look at the unemployment rate:
  
  Here’s a look at non-farm payrolls:
  
  In less than two years, seven million jobs have been lost.

• Quote of the Day
  Eddy Elfenbein, December 4th, 2009 at 9:48 am

  From Larry Ribstein: “For awhile I carried on an experiment of analyzing closely a mainstream media business commentator to see just how bad it is. The commentator is Gretchen Morgenson, and my findings, as set forth in this archive: very bad.”

• Tim Sykes Rant
  Eddy Elfenbein, December 3rd, 2009 at 2:27 pm

  I’m glad to see Tim Sykes come out of his shell to tell us what he really thinks.
  

• Sign Up Today!
  Eddy Elfenbein, December 2nd, 2009 at 3:28 pm

  Sign up for the Wilmott-Taleb “Robust Risk Management” course in London just £1,999 (or £1,499 if you’re early). Sign Up Today!