The Buy List YTD
Posted by Eddy Elfenbein on 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
Posted by Eddy Elfenbein on 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
Posted by Eddy Elfenbein on 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
Posted by Eddy Elfenbein on 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
Posted by Eddy Elfenbein on 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
Posted by Eddy Elfenbein on 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
Posted by Eddy Elfenbein on 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!
Posted by Eddy Elfenbein on 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!

The Stock Market Fails to Outperform the Stock Market
Posted by Eddy Elfenbein on December 2nd, 2009 at 2:52 pm

Felix Salmon points to a study by Ken French and Eugene Fama showing that the returns of mutual funds are pretty evenly distributed. The tails are a bit fatter than the bell curve would suggest. The study also shows that fees basically eat up all the alpha. (This leads Matthew Yglesias to call the entire mutual fund industry “an elaborate fraud.”)
Felix writes:

For the vast majority of actively managed funds, true α is probably negative; that is, the fund managers do not have enough skill to produce risk adjusted expected returns that cover their costs.

Personally, I’m happy with some negative alpha out there because it means more for me. However, this study doesn’t impress me much because it looks at the fund industry as a whole. What the study shows is that the stock market doesn’t outperform the stock market. I can live with that. What would be more interesting is to see if the small group of active managers with positive alpha continues to have positive alpha. That’s the key.

The World’s Tallest Buildings and Market Bubbles
Posted by Eddy Elfenbein on December 2nd, 2009 at 12:47 pm

Here’s a look at the relationship between the successive tallest buildings in the world and market bubbles. Via Tyler Cowen, I see that Ed Glaeser writes “Dubai now has the tallest building in the world, and 11 skyscrapers that are taller than any European building.”