Archive for November, 2012

• Morning News: November 23, 2012
  Eddy Elfenbein, November 23rd, 2012 at 7:18 am

  Draghi Says ECB Won’t Be Overburdened by Bank Supervision Role

  Germany’s Business Confidence Unexpectedly Increases

  EU Nations Far Apart On Budget But Summit Grinds On

  Argentina to Appeal U.S. Court Ruling Ahead of December Bond Payment

  S&P Keeps France’s AA-Plus Rating

  Crackdown in Quebec: ‘Le Gap’ Won’t Do

  Citigroup to Shut Almost Half of Greek Branches Amid Crisis

  Diamond, Dimon’s Early Risks Made Them Better: Adoboli

  Seeking Ways to Raise Taxes but Leave Tax Rate As Is

  Early Start To U.S. “Black Friday” Shopping Frenzy

  RIM Gains as National Bank Sees Better Outlook

  New Trading Case Casts a Deeper Shadow on a Hedge Fund Mogul

  Walmart Suspends India Employees

  Josh Brown: The World According to Joe

  John Hempton: Coca Cola Versus Hewlett Packard Advertising

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• Morning News: November 22, 2012
  Eddy Elfenbein, November 22nd, 2012 at 7:30 am

  EU Budget Showdown Pits Bee Subsidies Against Veto Threat

  Hollande Risks Squandering French Bonds’ Sweet Spot

  Deal on Aid to Greece Is Within Reach, Germans Say

  Catalan Banks Owing ECB $77 Billion May Stall Independence Drive

  Tokyo Shares End at Highest Since Early May as Yen Slide Continues

  Gold Steadies On Hopes For U.S. Fiscal Deal

  Oil Prices Stay Steady Despite Mideast Conflict

  Argentina Told to Pay Hedge Funds $1.3 Billion

  U.S. Leading Economic Indicators Rose 0.2% in October

  Fitch Cuts Sony, Panasonic Debt Ratings To “Junk” Status

  SABMiller Says Weak Rand, Europe Currencies Curbed Sales

  Schiff Bidding Seen Making Most Expensive Deal Pricier

  Hostess Judge Approves Wind-Down of Twinkie Maker

  Judge Rules United Not Liable for 9/11 Collapse

  Credit Writedowns: Is There An Asian RMB Bloc?

  Jeff Carter: Failure Is Hard

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• “As God is my witness, I thought turkeys could fly”
  Eddy Elfenbein, November 21st, 2012 at 3:46 pm

• Morning News: November 21, 2012
  Eddy Elfenbein, November 21st, 2012 at 7:29 am

  After Latest Round of Bailout Talks, Greece Still In Limbo

  Miles Says Bank of England Can Do More If U.K. Slump Persists

  Japan Exports Drop Again, Adds To Recession Worry

  Drought No Obstacle to Record Income for U.S. Farms

  Bernanke Says Fiscal Cliff Fix May Bring ‘Very Good’ Year

  Insider Crackdown Uses SAC Manager in Healthcare Pivot

  Tiger Global Takes 9.9 Percent Stake In Groupon

  News Corporation Completes Deal for 49% Stake in YES Network

  Tax Threat Seen as Grinch Poised to Steal Holiday Sales

  In HP-Autonomy Debacle, Many Advisers But Little Good Advice

  Jenkins: Twinkies—A Defense

  Insider Inquiry Inching Closer to a Billionaire

  How to Read Financial News

  Cullen Roche: 5 Risks Besides the Fiscal Cliff

  Howard Lindzon: China China China…Seriously…Pay Attention

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• Medtronic Earns 88 Cents Per Share
  Eddy Elfenbein, November 20th, 2012 at 1:41 pm

  Medtronic ($MDT) said today that it earned 88 cents per share for its fiscal second quarter. That was right inline with expectations. As I said in the last CWS Market Review, Medtronic usually comes very close to expectations.

  The most important news is that Medtronic reiterated its full-year guidance for earnings to range between $3.63 and $3.70 per share. Overall, the numbers beneath the numbers were pretty good. Unfortunately, Medtronic has been hurt by the slower economy in Europe and Asia.

  Quarterly revenue increased 2 percent to $4.095 billion.

  Yet revenue from its two biggest businesses, heart rhythm management and spine, was flat to lower.

  The bright spot in the quarter was provided by indications that these two markets – which together make up about half of its total revenue – were stabilizing, said Chief Executive Omar Ishrak in a telephone interview.

  “Signs of stabilization in (cardiac rhythm management) and spine have been encouraging. In those markets, we have gained share,” he said.

  Cardiac Rhythm Disease Management revenue, which includes sales of pacemakers and defibrillators, was flat at $1.23 billion, excluding the impact of foreign currency, or down 3 percent including the currency impact.

  Sales of implantable heart defibrillators were the highest they have been in 10 quarters and sales of leads rebounded to levels not seen since the company recalled its Fidelis lead 5 years ago.

  Spine revenue was $782 million in the quarter, 5 percent lower excluding foreign currency translations, or down 7 percent including the currency impact.

  Ishrak said his biggest disappointment in the quarter was China’s results.
  “Chinese growth was 11 percent.. That could have been better,” he said.

  The shares are reacting well today; at one point MDT nearly broke above $43. This may reverse the trend of the past few weeks. In early October, MDT was as high as $44.79 and it got as low as $40.44 a few days ago.

• Hewlett-Packard Is Lower Than it Was 18 Years Ago
  Eddy Elfenbein, November 20th, 2012 at 11:13 am

  Remarkably, Hewlett-Packard ($HPQ) still finds ways to disappoint investors. The stock is now lower than where it was 18 years ago. $HPQ has gone from 10 cents per share in 1964 to $67 in 2000 back to $12 today.

  

  Earlier this year, HPQ got to $30 and in 2010 it got as high as $49. Two years ago, when the stock was at $42, I was warning investors to stay away from HPQ. I reiterated that advice again, again and again.

• Point Spreads and Efficient Markets
  Eddy Elfenbein, November 20th, 2012 at 10:31 am

  I’ve been playing around with the database on Pro Football Reference. They have a database of NFL games going back over 30 years with point spreads. Give me any open database, and I’ll spend time looking through it.

  What fascinates me is inherent biases in any type of market. Just as value investing has been proven to hold up over time, there are also small biases in the market of football point spreads. It may seem odd to think of it this way, but a point spread is a market just like any financial market.

  For example, favorites fail to cover slightly more than they do cover. This doesn’t appear to be an exploitable bet since bettors have to pay the vig (the bookie’s cut). I suppose that people like to bet on winners so they may overpay. That could be the same reason why so many stock market superstars are overpriced.

  Also, favorites playing on the road don’t do a good job of covering the spread. This is particularly acute during the latter weeks of the season. Also, wider points spreads (over 10 points) seem to be unjustified as a whole. These biases are well-known to gamblers and have been documented by academics, but they were new to me.

  I think there’s something about numbers, odds and statistics that people just don’t get. If you were to say to a roomful of intelligent people that men are on average taller than women, I can guarantee you that someone will say, “That’s not true, what about Tracy?” Yes, It’s frustrating as hell, but take some solace because this is why we’ll always see market mispricings.

• Gold Adjusted for Inflation
  Eddy Elfenbein, November 20th, 2012 at 10:06 am

  Here’s a look at the price of gold adjusted for inflation. As strong as the yellow metal has been over the past 13 years, it’s still below its peak from 1980.

  

  I think the takeaway from this chart is that gold appears to be highly trend-sensitive. By that, I mean that there’s no middle ground — it’s either red hot or ice cold.

• Morning News: November 20, 2012
  Eddy Elfenbein, November 20th, 2012 at 7:13 am

  EU Leaders Face Greek Aid Gap in Brinkmanship With IMF

  Yen Rallies From 7-Month Low as BOJ Refrains From Easing

  France Loses Top Rating at Moody’s in Blow to Hollande

  Egypt Reaches Preliminary Deal For $4.8 Billion IMF Loan

  Ericsson Helps Iran Telecoms, Letter Reveals Long-Term Deal

  Retailers Add Politics and Nature to Their Holiday Worry List

  Banks Hiring for Home Loans as U.S. Rebounds

  Early Dividend for Wal-Mart Is Latest Move in Tax Tactics

  Credit Suisse Names De Boissard to Co-Lead Investment Bank

  Apple Shares Jump 7.2%

  The World’s Hottest Hedge Fund Manager Thinks Groupon Stock Is A Good Deal

  Glencore Investors Support Xstrata Merger

  Hostess, Union Agree To Try Mediation To Avoid Liquidation

  The Branding of Black Friday

  S&P 500 Historical Annual Performance vs. Dow

  John Hempton: Journos And Short Sellers Getting It Wrong

  Cullen Roche: The End of the Commodity Super-Cycle?

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• The Growing Spread Between the Dow and S&P 500
  Eddy Elfenbein, November 19th, 2012 at 12:51 pm

  I’m not a fan of the Dow Jones Industrial Average. My major complaint is that it’s a price-weighted index whereas the S&P 500 is weighted by market value. Also, it’s only 30 stocks. When I refer to “the market,” I’m almost always referring to the S&P 500.

  Normally, the two indexes behave pretty similarly — but not this year. The S&P 500 is opening up a big lead against the Dow. If the Dow were up as much as the S&P 500 is YTD, then it would have to be 670 points higher than it is now.

  

  When market gurus talk about “the market,” it’s not even clear which one we’re talking about.