• Gold Surges to Record High
    Posted by on November 9th, 2010 at 12:10 pm

    Gold is now down only 40% over the last 30 years (adjusted for inflation).

  • Alternative Investments
    Posted by on November 9th, 2010 at 11:59 am

    Since 2002, what asset class has averaged 11% per year?

    Give up? I’ll give you a hint: fine wine!

  • Apple Hits New All-Time High
    Posted by on November 9th, 2010 at 11:32 am

    Shares of Apple (AAPL) have been as high as $321.30 today. The stock is now up more than four-fold in less than two years.

  • JPMorgan Had Perfect Trading During Q3
    Posted by on November 9th, 2010 at 11:02 am

    From Bloomberg:

    JPMorgan Chase & Co. racked up a perfect trading record for the second time this year, making money every day last quarter after accomplishing the same feat in the first three months of 2010.

    Cumulatively, the results mean the New York-based bank made more than $200 million on 12 days in the first nine months and lost money on only eight, JPMorgan said today in a regulatory filing.

    JPMorgan, the No. 2 U.S. lender by assets, follows Bank of America Corp. in reporting a perfect record for the quarter. Goldman Sachs Group Inc., which makes the most revenue on Wall Street trading stocks and bonds, had losses in that business on two days during the third quarter while Morgan Stanley reported 10 losing days for the period.

    Trading revenue at eight of the biggest Wall Street firms declined an average 12 percent through September from the same period a year ago. Goldman Sachs generated 69 percent of revenue this year from trading, and said third-quarter trading results declined 36 percent. The seven days that New York-based Goldman Sachs made more than $100 million last quarter were the fewest since the fourth quarter of 2006.

    Morgan Stanley said yesterday it made more than $100 million on one day last quarter, versus 18 days in the third quarter of 2009.

    Morgan Stanley, also based in New York, had $1.43 billion in total sales and trading revenue for the third quarter, the lowest since the first quarter of 2009. Excluding losses and gains tied to its own credit spreads, Morgan Stanley generated $1.31 billion from trading fixed-income products, down 24 percent from the second quarter.

  • Baxter Raises Dividend
    Posted by on November 9th, 2010 at 9:56 am

    Good news from Baxter International (BAX). Three weeks after releasing a very good earnings report, the company is raising its quarterly dividend from 29 cents to 31 cents per share.

    The dividend is payable on January 5, 2011 to shareholders of record as of the close of business on December 10, 2010. Going by today’s price, Baxter yields 2.4% which is just below the yield of the ten-year Treasury.

  • Morning News: November 9, 2010
    Posted by on November 9th, 2010 at 8:16 am

    Stock Index Futures Signal Early Dip

    Gold Hits Record on Euro Zone Debt Fears

    China and Germany Slam U.S. Policy before G20 Summit

    Fed Officials Voice Concerns about Bond Buying

    The Return of the Risk Arbs

    The Flash Crash, in Miniature

    Bankruptcy Filings Jump 14% in 2010

    Publishers to Get 70% of Sales on Kindle Device

    Barclays Profit Declines 76%, Says Capital Remains ‘Strong’

    BP May Pay Billions for `Missed Signals’ That Led to Disaster

    Ben Aronson’s ‘Risk and Reward’ Exhibition

  • Wheel of Fortune Solved With One Letter
    Posted by on November 8th, 2010 at 4:04 pm

    Way to go, Caitlin.

    Via William Wei

  • 5/30 Spread
    Posted by on November 8th, 2010 at 3:13 pm

    No commentary here; I was just struck by the huge spread between the 5-year and 30-year Treasuries. There are now 300 basis points between the two.

  • Short-Term Rates on Growth and Value
    Posted by on November 8th, 2010 at 2:08 pm

    I was curious to see what the impact of changes in short-term interest rates is on growth and value stocks.

    I used the Vanguard Growth (VIGRX) and Vanguard Value (VIVAX) funds as proxies and looked at how they reacted to changes in the 90-day T-bill. The data goes back to 1993.

    I found that there were 1,737 days when short-term rates fell, 1,739 days when short-term rates rose and 950 days when short-term rates stayed the same. I then averaged out those periods to annualized periods.

    When short-term rates fell, Value fell by 21.78% while Growth fell by 18.96%.

    When short-term rates stayed the same, Value rose by 16.65% and Growth rose by 19.10%.

    Finally, when short-term rates rose, Value rose by 42.54% and Growth rose by 36.13%.

  • S&P 500 to 1500?
    Posted by on November 8th, 2010 at 11:35 am

    Here’s a look at the S&P 500 along with its earnings.

    The black line is the index and it follows the left scale. The yellow line is its trailing four-quarter operating earnings and it follows the right scale. I’ve arranged it so the two lines are scaled at a ratio of 16-to-1. This means that whenever the lines cross, the market’s P/E Ratio is exactly 16.

    Why 16?

    There’s nothing special about 16 except that historically that’s been about the average ratio.

    Let me say a few things about the P/E Ratio. It’s far from a perfect measure of the market, but it’s still a very good measure. You also want to look at other measures like dividend, cash and interest rates, but for this post, I want to concentrate on earnings.

    Earnings have rebounded quite sharply and stock prices have kept up. From here, however, the earnings growth is projected to tail off. Earnings will still grow, but not at the rate we saw before.

    (Note that I prefer to look at operating earnings instead of as-reported earnings. I think this is a better metric for looking at the broad market.)

    According to the latest forecasts, the S&P 500 is projected to earn $94.27 next year. At a ratio of 16-to-1, that translates to an S&P 500 of 1508. The index would have to rise by 23% over the next 14 months to get there, which is very reasonable.

    But even if the market’s P/E Ratio drops to 14 by the end of next year, the S&P 500 would still have to rally close to 8% to get there. And that’s a very conservative estimate.

    The only danger is a Double Dip which looks increasingly unlikely. In fact, the Double Dip hysteria of this summer made the Y2K frenzy of 1999 look like reasoned discourse.