Chinese Market Makes All-Time High
Posted by Eddy Elfenbein on March 21st, 2007 at 2:46 pm

It seems like it was only a few weeks ago that the Chinese stock market was ready to take down the world with it. Come to think of it, it was just a few weeks ago. On February 27, the Shanghai Composite Index fell 8.8%, which would be like the Dow losing over 1,000 points. The Dow responded by dropping 416 points.
Well, now the Shanghai Composite has regained all its lost ground and is at a new all-time high. Last year, the Chinese stock market was up 130%.

The Fed Stays Put
Posted by Eddy Elfenbein on March 21st, 2007 at 2:15 pm

As expected, the Federal Reserve left interest rates unchanged. This is the sixth straight time the Fed has held its powder. Here’s the statement:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been mixed and the adjustment in the housing sector is ongoing (old statement: “suggested somewhat firmer economic growth, and some tentative signs of stabilization have appeared in the housing market“). Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.
Recent readings on core inflation have been somewhat elevated (old statement: “have improved modestly in recent months”). Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected (this is new, despite the word “remains”). Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.

Barry Ritholtz provides his own reality-based Fed statement:

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been much worse than what we were hoping for: Housing is a bigger mess than we anticipated; Business Capex is heading south, as are durable goods. Retail sales have been punk for 3 months running, (and what’s with those excuses from the retailers? Too hot! Too cold! Lunar eclipse!) Don’t even ask about the Automakers. We expect the economy is likely to continue to soften until it slips to about a 1.5% GDP.
Even worse, recent readings on inflation have been elevated. We were hoping that inflation pressures would moderate as the economy stabilized, but no such luck. In these circumstances, the Committee’s predominant policy concern is that we have painted ourselves into a corner, and we are running out of options. On the one hand, Inflation remains an ongoing concern, as medical costs, food, and energy remain problematic. On the other hand, its is apparent that growth is cooling rapidly. Housing has flipped from a net positive for consumers and job seekers to a net negative.
All told, we are running out of options until one or the other of these gets much much worse. Future policy adjustments, therefire, will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. As noted above, if GDP slips below 1.5%, we will be shifting our bias towards easing. Appreciably worse that 1.5%, and we will have to act on rates to prevent a recession — inflation be damned.
On a final note, the FOMC has taken up a collection, and as a retirement present, we are sending former Chairman Alan Greenspan to a lovely spa on Fiji Island for the foreseeable future. Since there are no satellite feeds, internet connections or any off island communications at all — preferably, around December 2008.

CNBC Cartoon Show
Posted by Eddy Elfenbein on March 21st, 2007 at 11:16 am

CNBC is looking to start a cartoon show based on the comic strip CEO Dad. They’re going to start with one-minute shorts that could evolve into a half-hour show.

“CEO Dad” centers on Frank Pitt, chief executive of a Styrofoam peanut manufacturer in Pennsylvania, who tries to balance work life and home life with his wife, Chloe, 10-year-old son J.D., 7-year-old daughter Grace and dog Taylor. His family believes he’s more focused on work than home life.
“‘CEO Dad’ is the kind of man whose prenup has a noncompete clause,” Stern said. “The irony of the situation is that his family is everything he hopes and dreams it would be if he weren’t in it.”
Stern said he was a workaholic CEO dad himself until a home break-in nearly took his wife’s life and he was held at gunpoint — an act witnessed by his 5-year-old daughter. After that, he became a “comedic evangelist” and set out to bring humor to others’ lives.
“When you lose balance (in your life), the first thing to go is your sense of humor,” he said. “I’m trying to reach all the people who are working too hard to get them to laugh at themselves and find a little bit of healing.”

Good Name for a Band
Posted by Eddy Elfenbein on March 21st, 2007 at 11:08 am

Ladies and gentlemen, put your hands together for Funkwerk!

Millions of wrinkles, billions of dollars
Posted by Eddy Elfenbein on March 21st, 2007 at 11:01 am

Here’s an interesting article from the Arizona Republic on the growing anti-aging business:

The face of middle age increasingly is smooth and wrinkle-free.
More and more Americans are using an arsenal of cosmetic procedures – eyelid lifts, lasers and skin fillers – to turn back the clock.
This is more than just a vanity play.
The $12 billion-a-year industry is big business for companies such as Medicis Pharmaceutical Corp., which has hitched its growth to selling skin products that make people look and feel younger.
Medicis sells the nation’s most widely used “dermal filler,” Restylane, and has two more anti-wrinkle products on the way.
While the Scottsdale-based maker of skin and acne products sees a lot more room for growth, so does its chief rival, Irvine, Calif.-based Allergan Inc., which makes Botox and recently launched Juvederm, a skin filler that competes with Restylane.
Both companies see dollars in demographics. Fewer than 1 million people now pay for these dermal filler injections that plump up wrinkles to help skin retain its youthful appearance, but more than 25 million American women age 30 and older earn enough money to afford such treatments.

Two More Private Equity Buyouts
Posted by Eddy Elfenbein on March 21st, 2007 at 10:08 am

Two more companies are going the private equity route, Affiliated Computers (ACS) and Claire’s Stores (CLE). Both have been very good long-term investments.
Here’s a look at ACS:

This is how Claire’s Stores has done:

Jim Cramer the Manipulator?
Posted by Eddy Elfenbein on March 20th, 2007 at 3:22 pm

There’s a recent video of Jim Cramer talking about how he used to manipulate the stock market. Personally, I think he’s just showing off for his audience, but The New York Post hints that he might have said too much.
John Carney adds: “One added thing to watch for: Jim Cramer takes a swipe at easily manipulated financial reporters, who he calls ‘the Bob Pisani’s of the world.’ We’re sure his CNBC colleague appreciates it.”
Jon C. Ogg at 24/7 Wall Street doesn’t think it’s a big deal. He points out that the NYP is owned by Murdoch who will soon be launching a competitor to CNBC. Naturally, they want to take JJC down a peg or two.
Bess Levin adds:

A few people also seem to believe that the SEC can make Cramer “give back ill-gotten gains,” especially since they apparently “hate him.” But Cramer seems to rest assured that his relationship with Eliot Spitzer, forged at Harvard, will protect him. At a lecture at the 92nd Street Y a few months back, Cramer told the audience that a reporter had called him to get dirt on the couple, and his response was “I’m never going to say anything bad about the Spitzers.” When pressed further for comment, Cramer asked him, “What do you need to know?” the answer apparently being “Something no one’s ever said about Shiva (Eliot’s wife).” Cramer offered, “She’s a knock-out.” That kind of street cred has got to count for something.

My issue is that the video contradicts Cramer’s earlier stand. From The Fortune Tellers: Inside Wall Street’s Game of Money, Media and Manipulation:

For all his bravado, Cramer could be hypersensitive to criticism. He called up some of his detractors after the SmartMoney fiasco and yelled at them. When he felt himself under assault, his rapid-fire cadence turned faster, his high-pitched voice a little squeakier. Cramer had no ability to hide his constant swirl of emotions. Once, after Lisa Napoli of The New York Times wrote a mixed profile about his activities and potential conflicts, Cramer declared: “I wish I had been a vicious spinmeister and just beaten the shit out of her and gotten her exactly where I wanted her…Give me a fucking break. Come on, I’m not this huge manipulator of stocks.”

When in doubt, I always refer to Jim’s 25 Rules of Investing. Specifically, Rule #21: “Just because someone says it on TV doesn’t make it so.”
Exactly. That’s why I use the Internet.

The Cyclicals Keep Going
Posted by Eddy Elfenbein on March 20th, 2007 at 2:50 pm

To follow up on my earlier post, the Morgan Stanley Cyclical Index (^CYC) finally cracked its 13-year high yesterday. The CYC/S&P 500 ratio is now inches away from a 29-year high:

Hedge Funds Loading Up on Cocoa
Posted by Eddy Elfenbein on March 20th, 2007 at 2:39 pm

Jim Cramer likes to say that there’s always a bull market somewhere. I think he’s right. There’s now a surging market in the cocoa pits. Yes, cocoa is hot! As always, we can blame hedge funds who have been making majors moves there. Check out this chart:

The Financial Times reports:

Investor interest in cocoa has overwhelmed the traditional trade buyers and sellers, such as the confectionary and cocoa processing companies, in the cocoa futures market.
Weekly data from the Commodity Futures Trading Commission, the US regulator, shows that hedge funds and commodity index funds with long positions, a bet on rising prices, accounted for about a third of all New York cocoa contracts held.
Cocoa markets are subject to wild price swings, which has made some veteran traders wary of predicting further price gains.

Take-Two Takes Five on Their Annual Meeting
Posted by Eddy Elfenbein on March 20th, 2007 at 1:54 pm

The soap opera at Take-Two Interactive (TTWO) may finally be reaching a conclusion. The company which makes Grand Theft Auto is in a load of trouble. Outside of the fact they don’t make money, is that TTWO is under a slew of lawsuits and investigations. In one of the dumbest moves of the year, they’ve just launched a lawsuit against one of their biggest critics.
A group of shareholders has had enough and is aiming to take over the company and ditch the current management. I so hope they win. It looks like they have the votes to do it. The management team has delayed its annual meeting to explore their options, including a sale. Please, no one is going to buy Take-Two. I hear people say Electronic Arts (ERTS). No way.
If Take-Two is lucky, the dissident shareholders will win and turn the company around.