• E*Trade to Buy BrownCo
    Posted by on September 30th, 2005 at 11:17 am

    E*Trade Financial said that it’s going to buy BrownCo from J.P. Morgan Chase. This is good news, and I expect to see more mergers in the future. This comes on the heels of E*Trade buying Harrisdirect. Also, Ameritrade is merging with TD Waterhouse.
    BrownCo is famous for its rock-bottom fees. The company’s average account size is $146,247, compared with $31,663 for E*Trade. I think we’ll see more of the big boys on Wall Street pick up niche brokers.

  • Google May Be Bad for You?
    Posted by on September 29th, 2005 at 3:47 pm

    John Battelle, one of the founders of Wired, has a warning for avid Googleholics:

    Next time you tap a phrase into the Google toolbar on your Internet browser, think about what you’re revealing to one of the America’s biggest corporations.
    Whether you “googled” for Paris Hilton, a stock tip or a gift for Mom, you’ve opened a window on your life to a company with a market value of $92 billion, the 22nd largest in the U.S.

    He takes a close look at the search engine in his new book, “The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture.”

  • Bayou’s Marino and Israel Plead Guilty to Fraud
    Posted by on September 29th, 2005 at 3:35 pm

    This is hardly a surprise. Samuel Israel and Daniel Marino have pleaded guilty to fraud charges in relation to the Bayous hedge fund. The fund has, or at least had, $300 million.

    Israel, who rents a Tudor house with enclosed grounds in Westchester County, north of New York City, said in July that he would shut Bayou’s four hedge funds, which he managed, and return investors’ money in August. That didn’t happen, triggering investigations by Connecticut banking regulators, the U.S. Securities and Exchange Commission and the Federal Bureau of Investigation.
    Marino wrote a six-page suicide note with details of the alleged fraud that was recovered by police at Bayou’s office in Stamford, Connecticut, police said. Marino, who didn’t take his life, grew up in Staten Island, New York, before relocating to Westport, Connecticut. He earned a Certified Public Accountant’s license in 1990, according to New York records.

    And now for the understatement of the year:

    The confession in the suicide note may have made a defense by Marino and Israel difficult had they gone to trial.

    Yes, that would hurt your defense a tad.

  • Today’s GDP Report
    Posted by on September 29th, 2005 at 10:29 am

    The government revised the GDP report for the second quarter. Before, the government said that the economy grew by 3.285% for April to June quarter. Now it turns out the economy really grew by 3.307%.
    To some people what I have to say will be heresy, but economic growth is surprisingly stable. By listening to political rhetoric, you’d think the economy gyrates wildly, usually corresponding to policy changes in Washington. But the facts say otherwise.
    Since March 1966, the economy has grown by 3.0792% a year.
    Since December 1997, the economy has grown by 3.0798% a year.
    Since June 1986, the economy has grown by 3.0795% a year.
    Since December 1997, the economy has grown by 3.0710% a year.
    Looks like a trend to me.

  • Europe’s Economy
    Posted by on September 28th, 2005 at 1:17 pm

    Daimler Chrysler just announced that it will cut 8,500 jobs in Germany over the next year.

    The world’s fifth-biggest carmaker said the move would cost 950 million euros, to be offset by extraordinary income and efficiency gains.
    It reiterated its forecast for a slight rise in 2005 operating profit excluding charges to restructure its Smart minicar business.
    The Mercedes division employed around 105,000 staff at the end of last year, of which some 94,000 were in Germany.
    “These headcount reductions are indispensable. They will contribute to significant improvements in the competitiveness of Mercedes-Benz through an increase in productivity,” it said in a statement. “The measures will also contribute to the sustained safeguarding of production (in) Germany.”

    So if all lost for Europe’s economy? Matthew Lynn says, “Don’t Blame Oil for Europe’s Economic Slowdown.”

    If oil is so deadly to Europe’s economic prospects, then why is it that Japan appears to be emerging from a recession, when Europe is still stuck with miserable growth? Japan isn’t exactly famous for its oil wells.
    Likewise, the U.S. Because taxes on pump prices are so much lower there than they are in Europe, the impact that an increase in oil prices has on consumers is proportionately much greater. And yet, U.S. growth rates remain significantly higher than Europe’s. The U.S. economy expanded an annual 3.3 percent in the second quarter, compared with 1.1 percent for the euro area.

    Lynn concludes:

    The reasons why Europe’s economy is growing so slowly are familiar: high taxes, dysfunctional labor markets, and restrictive monetary policy. The first step toward fixing those is honesty. Right now, that appears to be a commodity in shorter supply than oil.

  • Fair Isaac Hits New All-Time High
    Posted by on September 28th, 2005 at 12:55 pm

    Fair Isaac finally hit a new all-time high today. It took nearly two years for the company to break into record territory.

    J.P. Morgan upgraded Fair Isaac today to overweight from neutral. I’m not a big fan of following analyst upgrades or downgrades, but this one is nice to see. Fair Isaac has a very strong business. I especially like the fact that its gross margins come to about 70% of sales. That’s the sign of a well-run business.

    The company will report its fiscal fourth-quarter earnings in late-October. The current estimate is for 49 cents a share. This means that although FIC’s stock is roughly where it was two years ago, its profits are nearly 30% higher. This is a solid stock to own.

    You can see my complete Buy List here.

  • Warren Buffett’s Shareholder Letters
    Posted by on September 27th, 2005 at 8:35 pm

    If you’re new to the world of investing, I recommend reading some of Warren Buffett’s annual shareholder letters. You can find a complete collection here.
    The letters have a folksy style and Buffett always makes a good point. This is the best way to get a nice summary of Buffett’s investing philosophy, and you can see how little it has changed over the years.

  • Google Watch
    Posted by on September 27th, 2005 at 11:38 am

    If you go to Google today, you’ll see that today is the search engine’s 7th birthday. Happy Birthday!!
    Wait a minute! Didn’t they just celebrate their 7th birthday three weeks ago? It turns out, Google has a few birthdays. Search Engine Watch is on the case.

  • Frontier Airlines
    Posted by on September 27th, 2005 at 10:01 am

    One of the best ways to look for a good stock to buy is to find the most-unloved industry, and pick out that sector’s best stock. It’s no secret that airlines stocks have performed horribly. Make no mistake, the industry is in rough shape, but there are good stocks out there. For example, I think the industry’s woes have given us a good opportunity in Frontier Airlines. The stock is now below $10.
    Frontier has a lot going for it. For one, it’s an airline that’s not in bankruptcy. That right there is a big advantage over it competitors. Frontier is small regional airline based in Denver with a solid balance sheet. The company has switched to using all Airbuses. Frontier has slowly expanded its market share.
    The airline is popular with its passengers. The company is ranked near the top in customer satisfaction surveys. The downside is rising fuel costs. Frontier is one of the least efficient airlines in handling higher fuel prices. The company should post third-quarter profits in late October. Frontier has posted better-than-expected earnings for the last two quarters.
    Frontier was originally based in Denver, one of United’s hubs, to piggyback on their business. Now that United is doing so poorly, Frontier can actually take some of United’s core business.
    Today, the Wall Street Journal highlights Frontier’s growing service to Mexico. Two years ago, Frontier flew 33,000 passengers to Mexico. Last year, it flew nearly 100,000, and this year it will fly over 200,000 people to Mexico.

  • GM’s Debt Downgraded Again
    Posted by on September 27th, 2005 at 9:34 am

    GM’s outlook is actually getting worse. I didn’t think that could even happen. Its debt is already rated as “junk.” Today, Fitch lowered its rating to even junkier junk (double-B). The Delphi story is going to end soon and it’s not going to end well.
    Here’s a short history of GM’s debt rating. It wasn’t that long ago that GM was one of the bluest blue chips on Wall Street. Last quarter, GM lost over $250 million, and over $1 billion in the quarter before that.