• From 1999: Smart Money’s “Ten Stocks for the Next Decade”
    Posted by on December 30th, 2009 at 2:00 pm

    Not looking so good.
    Inktomi (INKT)
    Red Hat (RHAT)
    Scientific-Atlanta (SFA)
    America Online (AOL)
    Broadcom (BRCM)
    Nokia (NOK)
    Nortel Networks (NT)
    MCI WorldCom (WCOM)
    Monsanto (MON)
    Citigroup (C)

  • What the Steep Yield Curve Means for Stocks
    Posted by on December 30th, 2009 at 10:52 am

    Bespoke Investment Research notes the unusually steep yield curve. In fact, it’s close to the steepest curve on record. The only other time the curve was wider was in August 1982 when the stock market took off.
    A few years ago, I looked at the impact of the yield curve on stock prices. The effect is pretty dramatic. Over a 45-year period, all of the S&P 500’s capital gain took place when the the 10-year note was higher than the 3-month T-bill by 65 or more basis points. That’s about 70% of the time. For the other 30% of the time, the market was flat. Today, the spread is about 380 points.

  • This Is the Last Time I’ll Wear My Niners’ Jersey in Philly
    Posted by on December 29th, 2009 at 11:40 am

  • The 10 Interception Limit
    Posted by on December 28th, 2009 at 7:20 pm

    What is it about 11 interceptions? Since 1981, no defensive back has made it to 11 inceptions in one season even though 11 different players have made it to 10. Another 28 players have made it to nine, including three this year. You can add another 45 players who have made it to eight. Talk about thin tails, this data set seems to have no tail at all.

  • Tiger Woods Destroyed $12 Billion in Market Value
    Posted by on December 28th, 2009 at 2:51 pm

    If academics say it, then it must be true:

    More difficult to determine, though, is how the scandal would hit his corporate sponsors. So Victor Stango and Christopher Knittel, two economic professors at University of California, Davis, decided to take a stab at quantifyiung the effect–performing what is called an “event study.” To do this, the professors looked at the nine sponsors for which stock price data was available and compared stock returns for those companies for the 13 days after the accident, both to the entire stock market and a group of competitors. The market value of the sponsors fell 2.3%.
    The ones hit the hardest? The three sports-related companies–Gatorade (owned by PepsiCo), Nike and Electronic Arts. Those companies experienced a 4.3% decline in stock value. Meanwhile, consulting firm Accenture “experienced no ill effects.”
    Overall, the pace of the losses slowed by Dec. 11, the day Woods announced he would take a leave from golf, but as of Dec. 17, shareholders had not recovered their losses, according to the study.

  • The Perils of Economic Stats
    Posted by on December 28th, 2009 at 1:25 pm

    Coming on the heels of Robert Shiller’s idea for securities based on national GDP, consider the problem of constant revisions. GDP growth for the third quarter of 1983 has been revised ten times, including once this year.

  • CEO Pay Is Negatively Correlated to Share Performance
    Posted by on December 28th, 2009 at 10:48 am

    I can’t say this is much of a surprise:

    It turns out that the bigger the CEO’s slice of the pie, the lower the company’s future profitability and market valuation. “These CEOs,” says Prof. Bebchuk, “seem to be trying to grab more than they should.”
    Finance professor Raghavendra Rau of Purdue University and two colleagues looked at CEO pay and stock returns for roughly 1,500 companies per year from 1994 through 2006. They found that the 10% of firms with the highest-paid CEOs produce stock returns that lag their industry peers by more than 12 percentage points, cumulatively, over the next five years.
    Companies at the top of the pay pile, Prof. Rau concluded, award their CEOs an annual average of $23 million—but leave their shareholders poorer (relative to other companies in the same industry) by an average of $2.4 billion per year. Each dollar that goes into the CEO’s pocket takes $100 out of shareholders’ pockets.

  • The Decade In One Graph
    Posted by on December 28th, 2009 at 12:24 am

    Here’s the decade version of the chart I posted last week.
    image883.png
    This is the relative strength of ten S&P industry groups set to 100 ten years ago. The big winner has been energy. Interestingly, financials were in the lead until mid-2004.

  • Did the Immigration Protests Burst the Housing Bubble?
    Posted by on December 27th, 2009 at 10:47 pm

    Steve Sailer has often called the recession the “diversity recession” due to the concentration of the subprime mortgage market within minority homeowners. The numbers are hard to come by, but the figures that do exist support much of what Steve has said.
    I was curious to see what happened at the peak of the housing market and it seems to have coincided with many of the immigration reform protests in the spring of 2006. The largest events were the mass rallies on April 10 and the Day Without An Immigrant on May 1. There were also many other rallies in March and April (here’s a rundown).
    Here’s a look at peak price dates for the 20 different metro areas in the Case-Shiller Index. These are the seasonally adjusted numbers. I also included how much the index is down from the peak price to the most recent data point.
    Metro…………………………….Peak…………………………..Decline
    Boston…………………………..Nov-05……………………….-15.2%
    Cleveland……………………….Jan-06……………………….-15.5%
    San Francisco………………….Feb-06……………………….-39.5%
    Detroit……………………………Feb-06……………………….-44.0%
    San Diego……………………….Mar-06……………………….-39.3%
    Denver……………………………Mar-06……………………….-8.5%
    Washington…………………….Mar-06……………………….-29.2%
    Phoenix………………………….Apr-06………………………..-52.6%
    Los Angeles…………………….Apr-06……………………….-39.4%
    Minneapolis……………………..Apr-06……………………….-29.2%
    Las Vegas……………………….Apr-06……………………….-56.1%
    Tampa…………………………….May-06……………………….-40.8%
    New York…………………………May-06……………………….-19.5%
    Miami………………………………Dec-06……………………….-46.6%
    Chicago…………………………..Feb-07……………………….-22.8%
    Atlanta…………………………….Apr-07……………………….-19.0%
    Dallas………………………………Apr-07……………………….-5.3%
    Portland…………………………..May-07……………………….-20.2%
    Seattle…………………………….May-07……………………….-22.8%
    Charlotte………………………….Aug-07……………………….-11.5%
    Eleven of the 20 markets peaked between February and May 2006. I’m not saying that the immigration protests caused the housing bubble. That was forming for a long time. The bursting of the bubble’s was long overdue and perhaps the dislocation in the housing sector brought on by the protests impacted the markets. Then, once the slide started, it couldn’t be stopped.
    This evidence is very circumstantial but I think the hypothesis has merit. As they say, more research is needed.

  • Sunday Links
    Posted by on December 27th, 2009 at 5:54 pm

    Here are a few items I’m reading.
    William Voegeli on the disaster that is California
    Phil Birnbaum on the performance of pitchers.
    Dave Barry’s brilliant take on the year 2009.
    James Altucher comes out against homeownership.
    Kid Dynamite on mean-reversion and momentum investing.
    Finally, here’s the 2010 Bespoke Roundtable which I participated in.