• Pit Bull Market
    Posted by on March 24th, 2006 at 11:05 am

    Yesterday, the Feds nabbed a bunch of mobsters in a stock scam operation. How’d you like to do business with these folks?

    The defendants, including accused Colombo family captain Joseph Baudanza, 61, and his brother Carmine Baudanza, 63, also extorted stock brokers, traders, cold callers and brokerage firm owners through threats and violence, authorities said.
    One stock promoter was kidnapped and chained to a pit bull dog, one broker was beaten with a bat, and another was stabbed when he tried to leave one of the firms, authorities said.

    In other news, a broker was fired after bringing a prostitute back to the office after hours. Now he’s suing the company. He said he felt unappreciated. (I’m not making this up.)

  • Google Added to S&P 500
    Posted by on March 24th, 2006 at 10:13 am

    Today is the sixth anniversary of the market’s top. On March 24, 20000 (also a Friday), the S&P 500 closed at 1527.46. Six years on, we’re still down about 15%.
    The folks at S&P are celebrating the bursting of the tech bubble by adding Google (GOOG) to the S&P 500. Burlington Resources (BR) has been voted off the island.
    Since Google is about three times larger than BR, index funds need to sell all 499 stocks to make room for Google.
    Also, Alcatel (ALA) and Lucent (LU) are in merger talks. The two sucky companies hope to form one large sucky company.
    Six years ago, Lucent closed at $48 a share. Today, it’s at $3.
    Bed Bath & Beyond (BBBY) is finally starting to move. This stock is a bargain under $40.

  • Top 10 Industry Groups Year-to-Date
    Posted by on March 23rd, 2006 at 6:46 pm

    Steel……………………………………………….38.95%
    Precious Metals……………………………….30.77%
    Commercial Vehicles………………………..24.28%
    Telecommunications…………………………17.12%
    Heavy Construction…………………………..16.44%
    Fixed-Line Telecommunications…………15.92%
    Building Materials…………………………….15.28%
    Industrial Supplies…………………………..14.78%
    Gambling…………………………………………14.76%
    Defense…………………………………………..14.56%

  • GM Sweetens Buyout Deal with New Toyotas
    Posted by on March 23rd, 2006 at 6:28 pm

    I love it.

    General Motors today sweetened its $35,000 buyout deal for 113,000 hourly workers at GM and Delphi, saying that each employee who leaves the companies by the end of March will also get the keys to a brand new 2007 Toyota Sayonara SUV.
    The number one American automaker lost $10.6 billion last year, which according to an unnamed United Auto Workers (UAW) spokesman, is only about $100,000 for each union worker on the payroll.
    The UAW hailed the agreement as “the ultimate tribute to the organized labor movement.”
    “For years, GM has been offering incentives to get consumers to drive their cars out of the showrooms,” said the UAW source, “It’s only fair that they would give us incentives to drive their employees out of the factories.”

    Yes, it’s a parody. But GM is hard to parody these days.

  • The Numbers Guy
    Posted by on March 23rd, 2006 at 3:19 pm

    Carl Bialik writes the “Numbers Guy” column for the Wall Street Journal. Today he has a fun article looking at the chances of picking perfect brackets for the NCAA Tournament.
    Put it this way, it ain’t gonna happen. There’s even a company that provides insurance to companies that sponsor events for picking all 63 games correctly. Talk about a safe business! Fifty contests and zero winners. Papa John’s contest had 90,000 entrants and no one got past the first round.

    To measure the probability for this year’s tournament, Jay Emerson, assistant professor of statistics at Yale, suggests using power ratings developed by Ken Pomeroy, a 32-year-old meteorologist from Cheyenne, Wyo. These ratings are based on team’s records, margin of victory, strength of schedule and other factors, and are expressed in units of points. For example, through last weekend’s games Villanova has a rating of 65.64 and Boston College has a rating of 61.99, so Villanova is expected to beat Boston by about four points — the difference in their ratings — when they play Friday.
    A forecaster could use the ratings from before the tournament (which Mr. Pomeroy sent to me) to predict who would win each matchup. Mr. Pomeroy says the ratings chose a winner in about 71.3% of games this year before the tournament. “There’s so much variation in performance from game to game, that even if you had a perfect system of ranking teams by how good they are, you’d still have significant errors,” he told me.
    Based on Mr. Pomeroy’s stats, I computed the probability that teams would win in all 63 matchups — I don’t recommend you try this at home — and found that if I had relied on power ratings, I would have had a one in 722 billion chance of a perfect bracket. (I’d also have chosen Kansas, a first-round loser, to make the Final Four.)
    Of course, none of these models account for forecaster psychology. The great satisfaction of picking an upset, and the lure of picking one’s own favorite team to win, combine to make picking all favorites more unpalatable than pizza is palatable. These forces conspired to make me, a writer of both a sports column and numbers column, pick first-round loser Syracuse to win the championship in our office pool. I’m tied for last place.

  • Medtronic Wins Patent Ruling
    Posted by on March 23rd, 2006 at 2:16 pm

    From the AP:

    An arbitrator has ruled in favor of Medtronic Inc. in a patent dispute with Johnson & Johnson over the design of its stents, the tiny wire metal mesh used to prop open arteries.
    Johnson & Johnson had alleged that Medtronic’s “Driver” stent and several other Medtronic stents infringed on patents owned by J&J’s stent unit, Cordis Corp. The arbitrator ruled that the stents were licensed under a 1997 agreement between the companies, Medtronic said on Thursday.

  • Defense & Aerospace Stocks
    Posted by on March 23rd, 2006 at 12:00 pm

    One of the hottest sectors of late has been defense and aerospace stocks. This decade’s NASDAQ might be the Spade Defense Index (^DXS), which is up 125% since March 11, 2003. And lately it’s been very strong, up 11.2% since January 23, 2006.
    The defense industry is dominated by six major large-cap stocks; Boeing (BA), United Technologies (UTX), Lockheed Martin (LMT), Northrop Grumman (NOC), Raytheon (RTN) and General Dynamics (GD). While many of these companies have done well over the past three years, the really big gains have come from smaller players like BE Aerospace (BEAV) and Precision Castparts (PCP).
    Though some have compared the war in Iraq to Vietnam, one area of difference is the behavior of stocks. Many defense stocks started underperforming the market in mid-1967, several months before the Tet Offensive, perhaps foretelling the end of American involvement.
    Also, defense stocks peaked in mid-1985, more than four years before the Berlin Wall came down. Again, the market proved the Wisdom of Crowds.
    But if the defense sector is telling us anything about the future, it’s that we’re going to be in Iraq awhile longer.

  • The Morning Market
    Posted by on March 23rd, 2006 at 10:16 am

    Here are a few quick items for this morning:
    First is that Respironics (RESP) was upgraded by Wachovia. It’s about time this stock got some love.
    Also, Seeking Alpha has posted Biomet’s (BMET) conference call from Tuesday.
    Finally, Expeditors (EXPD) released its latest 8-K report. They’re the only company I know of that regularly takes time to answer questions from shareholders. I always learn something useful by reading these. On a related note, Virginia Postrel writes about how the shipping container changed the world.

  • Crushing Your Enemies in a Pile of Collapsing Debris
    Posted by on March 23rd, 2006 at 9:40 am

    xps_600_ren_mon_300.jpg
    Behold! The Dell XPS 600 Renegade, the ulimate in computer gaming technology. The price tag, $10,000.
    Best. Computer. Ever.
    But what can it do?

    The limited-edition, custom-painted Dell(TM) XPS 600 Renegade delivers to U.S. consumers an immersive gaming experience based on the industry’s first dedicated physics accelerator — the AGEIA(TM) PhysX(TM) processor.
    The AGEIA technology lets users interact with supported games in more sophisticated and realistic ways. The AGEIA PhysX processor can power real-time dynamic motion and interaction on a massive scale so games can feature large numbers of complex characters and moving objects in incredibly life-like environments. For example, instead of using traditional weapons, gamers can pull down the roof on their enemies, crushing them in a pile of collapsing debris.

    Poland, sold separately.
    By “traditional weapons,” they mean traditional computer game weapons.
    Today, Dell announced that it’s buying Alienware Corp., a company that also makes high-end computers favored by gamers. I had no idea these things cost so much.
    Interestingly, Alienware uses AMD’s chips and Dell only uses Intel’s. Dell said that Alienware will be a subsidiary and will continue to use AMD’s products.
    Business Week has more.

  • Language Matters
    Posted by on March 22nd, 2006 at 3:08 pm

    Polonius: What do you read, my lord?
    Hamlet: Words, words, words
    — Hamlet: Act II, Scene 2

    According to a recent academic paper, company press releases contain more information than we realize.
    Three researchers (Angela K. Davis, Jeremy M. Piger and Jeremy M. Piger) took an interesting approach. They ignored the numbers and instead focused on the language contained in press releases. Using text-analysis software, they looked for optimistic and pessimistic language used in 24,000 press releases.
    Optimistic language included words that conveyed praise, satisfaction or inspiration. This includes words like best, better, favorable, good, great, important, positive, profitable, strong and successful. Pessimistic words conveyed blame, hardship or denial (i.e., alarmed, burden, conflict, weakness, setback).
    Their results show that language matters. It’s as if the companies are tipping their hands. According to the researchers’ (jargony) conclusion:

    Taken as a whole, these results suggests that the optimistic and pessimistic language used in the narrative disclosures of earnings press releases contains information about future firm performance incremental to other factors that are commonly associated with future earnings. This result suggests that market participants consider optimistic and pessimistic language usage to be a credible (at least to some extent) source of information about managers’ future earnings expectations. Finally, the association between market returns and the unexpected portion of optimistic and pessimistic language is substantially stronger than the association between market returns and the expected portion of optimistic and pessimistic language. This result suggests that managers likely have reputations for routinely providing optimistic or pessimistic disclosures and that the market responds to language usage that differs from those initial expectations.

    Interestingly, they also found that corporate press releases are getting longer. Click here to see the paper.
    I double-checked Microsoft’s press release from yesterday, and it doesn’t contain a single negative word. These guys are good. In fact, at no point do they even say that Vista is being delayed.