Archive for February, 2010

• There’s a Constitution Laying Around Here Somewhere
  Eddy Elfenbein, February 18th, 2010 at 11:26 am

  The WSJ:

  President Barack Obama on Thursday created a bipartisan commission to confront what he calls the federal deficit’s “disturbing” trajectory.

  Correct me if I’m wrong, but don’t we already have a bipartisan commission in charge of the confronting the deficit called Congress?
  Not that they’re any good but why would a commission be any better?

• Courtier of the Hip Class
  Eddy Elfenbein, February 18th, 2010 at 10:55 am

  Lots of people love Matt Taibbi’s reporting. I find him entertaining, but not very worthwhile. I don’t see him as a journalist but as a courtier to the hip class. He distorts his stories to flatter their prejudices which is everything a journalist should not be.
  Taibbi consistently leaves out important details. He takes already known facts and bends them into dishonest narratives. Moreover, his sex and drug references sound forced and hint at a dramatic inferiority complex.
  Taibbi first attacked Goldman Sachs in July with his famous Vampire Squid article which was later shredded to pieces. Then in October, he went after naked short-selling and strolled into the propellers once again. Now he goes after Goldman again and compares their business to several con jobs.
  Taibbi includes this charmer about Goldman: “They raped the taxpayer, and they raped their clients.”
  See how edgy that is? Of course, he could also talk with some actual rape victims.

• The Hemline Theory Strikes Again!
  Eddy Elfenbein, February 18th, 2010 at 9:20 am

  
  The AP reports that long hemlines are back in fashion:

  So long, miniskirts. The up-to-there trend gave way to longer hemlines at New York Fashion Week.
  There were more pants, too, than in recent seasons when the dress ruled the runways. Even designers who showed shorter dresses paired them with leg-warmers for a less leggy look.
  On Wednesday, Oscar de la Renta showed long slim skirts for daytime, while Michael Kors had the slim shape just below the knee as well as more free-flowing knits that grazed the floor.
  The old saying that hemlines go up in a good economy and down in a bad one is not always the case, but many did see the longer hemline as a reflection of the Great Recession.
  “There’s a general growing up of fashion after a very difficult year,” said Joanna Coles, editor in chief of Marie Claire magazine. “Women don’t want dressing up to be so complicated. The hemline dropping is part of that.”

  This is a change from four years ago when hemlines were rising.

• Sandler O’Neill Cut Estimates and Price Target Price for Eaton Vance
  Eddy Elfenbein, February 18th, 2010 at 9:06 am

  From Barron’s:

  Based on our math, we think Eaton Vance generated about $2 billion of net inflows during fiscal first quarter, translating into 5%-plus annualized organic growth. Though down from the $5.5 billion (15% growth) in fiscal fourth quarter (Oct.), the prior quarter included $3 billion-plus of lower-fee institutional mandates.
  Looking ahead, we expect Eaton Vance to continue to gain market share reflecting strong long-term investment performance track records, reaccelerating equity volumes, broadening flows, and rising demand for the firm’s equity income and tax-managed strategies given the specter of higher tax rates.
  As January AUM came in below our forecast, we are taking down our fiscal 2010 (Oct) and fiscal 2011 earnings-per-share estimates from $1.68/$2.04 to $1.59/$1.93, bringing us about in line with consensus.
  Moreover, our fiscal-first-quarter forecast falls by two cents to 37 cents. As a result of our lower earnings outlook, we are reducing our price target by $1 to $32, or less than 10% upside potential from current levels.
  While Eaton Vance continues to generate above-average flows, we think further upside from here is limited given the stock’s seemingly full valuation. Eaton Vance is currently trading at 19 times our revised fiscal 2010 EPS estimate, or about 15% higher than the peer group average of 16-17 times.

• Missy Francis Basis for Avery Jessup
  Eddy Elfenbein, February 18th, 2010 at 8:51 am

  
  The New York Post reports that former child star and CNBC anchor Melissa Francis was the basis for Avery Jessup, the love interest of Jack Donaghy on NBC’s “30 Rock”:

  Avery Jessup, the new love interest of Alec Baldwin’s “30 Rock” character played by Elizabeth Banks, is based on a real person. A source close to the show said that Jessup, who hosts a fictional CNBC show called “Hot Box,” was inspired by real-life CNBC anchor Melissa Francis. Our source said that Francis herself, who hosts morning show “The Call,” pitched the idea to a “30 Rock” producer. “Francis was hoping to be asked to play the character herself, but they ended up going with Banks,” our source says.

  As a girl, Melissa played Cassandra Cooper Ingalls on Little House on the Prairie. Jason Bateman played her brother James.

• The Federal Reserve’s Profit Machine
  Eddy Elfenbein, February 18th, 2010 at 8:36 am

  Worried about the Federal Reserve’s profits? Maybe at some point, but for now the central bank is raking it in.
  Any profit the Fed makes over 6% goes directly to the U.S. Treasury. For the month of January, the Fed forked over $5.2 billion (see page 6). For the first four months of this fiscal year, the Fed has paid the Treasury over $24 billion which is twice as much as one year ago.
  For the 2009 calendar year, the Fed’s net jumped 46% to $52.1 billion, and $46.1 billion of that went to the Treasury.

• Self-Parody Alert
  Eddy Elfenbein, February 18th, 2010 at 7:43 am

  From Nassim Taleb:

  Giving businessreaders my book: like giving vintage Bordeaux to drinkers of Diet Coke and listening to their comments about it [TBS-2nd ed]

  Oh dear lord. Let’s ponder the irony that that thought was a Twitter tweet.

• Minor Error from Krugman
  Eddy Elfenbein, February 17th, 2010 at 11:20 pm

  I’m only writing this so I can say that I’m correcting a Nobel laureate. It has no other purpose.
  Last month, Paul Krugman wrote:

  Remember, the great bank runs of the early 1930s began with a run on the Bank of the United States, which was only the 28th largest bank in the country at the time.

  The bank was actually called Bank of United States. They wanted the “the” in there, but state banking regulators objected fearing that depositors would assume the bank was backed by the government.

• Hunter S. Wannabe’s Latest
  Eddy Elfenbein, February 17th, 2010 at 10:17 pm

  Lots of people love Matt Taibbi. In my book, his last two articles on Wall Street make him oh-for-two. Here’s a snippet from his latest “Wall Street’s Bailout Hustle.”

  Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley, applied for, and received, federal permission to become bank holding companies — a move that would make them eligible for much greater federal support. The stock prices of both firms were cratering, and there was talk that either or both might go the way of Lehman Brothers, another once-mighty investment bank that just a week earlier had disappeared from the face of the earth under the weight of its toxic assets. By law, a five-day waiting period was required for such a conversion — but the two banks got them overnight, with final approval actually coming only five days after the AIG bailout.
  Why did they need those federal bank charters? This question is the key to understanding the entire bailout era — because this Dollar Store scam was the big one. Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of “free money” by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.
  When Goldman Sachs and Morgan Stanley got their federal bank charters, they joined Bank of America, Citigroup, J.P. Morgan Chase and the other banking titans who could go to the Fed and borrow massive amounts of money at interest rates that, thanks to the aggressive rate-cutting policies of Fed chief Ben Bernanke during the crisis, soon sank to zero percent. The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008. “They had no other way to raise capital at that moment, meaning they were on the brink of insolvency,” says Nomi Prins, a former managing director at Goldman Sachs. “The Fed was the only shot.”

  Or there’s another way of saying it — the government did the right thing in a very, very bad situation. Here’s Tyler Cowen:

  Without the bailouts we would have had many more failed banks, very strong deflationary pressures, a stronger seize-up in credit markets than what we had, and a climate of sheer political and economic panic, leading to greater pressures for bad state interventions than what we now see. Milton Friedman understood all this quite well, which is why argued bailouts would have been a good idea in the 1929-1931 period.
  (By the way, some libertarians like to pretend that Milton Friedman blames the Fed for “contracting” the money supply by one-third in that period but in reality Friedman blames the Fed for having let the money supply fall by one-third and not having run a bank bailout.)
  If you are a libertarian, is not our current course more favorable for liberty than would have been a repeat of 1929-1931? If not, I would be curious to hear your counterfactual version of how matters would have proceeded, without the financial bailouts. Is it that you think the regional banks would have raised the financing to pick up the entire bag and keep the banking system afloat? Or is it that natural market forces would have somehow avoided a wrenching surprise deflation? Or do you think the authorities for some reason would have not nationalized the major banks? Please let us know.

• 50 Straight Years of Dividend Increases
  Eddy Elfenbein, February 17th, 2010 at 4:25 pm

  The Dividend Growth Investor Blog lists ten stocks that have raised their dividend for 50 straight years; Diebold (DBD), American States Water (AWR), Dover (DOV), Northwest Natural Gas (NWN), Genuine Parts (GPC), Procter & Gamble (PG), Emerson Electric (EMR), 3M (MMM), Integrys (TEG) and Vectren (VVC).
  I should add that one of our Buy List stocks, Johnson & Johnson (JNJ), is at 47 years.
  The Dividend Growth Investor also notes that Parker-Hannifin (PH) would be on the list but it took a year off in 1991. At one point, Winn-Dixie (WINN) was at 56 straight years before the wheels came off their business. Kellogg’s (K) was at 44 years before it froze its dividend in 2001.