Monday, June 30, 2008

I'm Glad I Missed This

According to the always gritty and hard-hitting USA Today, on the broadcast of the U.S. Women's Open yesterday, Johnny Miller said the following:

"in noting golfer Paula Creamer's pink ball was in a bunker: "that pink ball looks easier to hit out of a bunker than a white one." …"

I have no idea how a reasonable person would come to that conclusion. I have no idea why I was reading USA today either.

Groundhog Day

Another Monday in June.

Oil is up, futures are down. Very little news around and none of the cheerful variety.

It was a pretty boring sports weekend as well, ex Spain holding up very well in the Euro final. Get well soon Tiger.

At least it's a short week.

Saturday, June 28, 2008

Fire Sale at Merrill?

The Financial Times is reporting that Merrill Lynch will decide between now and when it reports June quarter earnings whether it will dispose of its 20% stake in Bloomberg and its 49% stake in Blackrock.

"People close to the situation said Mr Thain could approach Bloomberg and BlackRock next week to discuss a possible sale, but added that any deal could be complicated by restrictions on Merrill’s ability to dispose of the holdings."

From a strategic standpoint, it doesn't make much sense for Merrill to continue to own Bloomberg, so that should be first to go. If they decide to dump their Blackrock stake, it won't be the end of the world but a sign of how tough the situation is. Blackrock has been a winner and should continue to be. Merrill Lynch has to be one of Blackrock's biggest distribution outlets so it's an important relationship. Merrill brokers need an asset manager of choice. They might as well own a piece of it.

By the way, Google buying the Bloomberg stake and beefing up Google Finance is a layup as far as I'm concerned.

long MER

Guess the Oil Price

In the June 23 edition of Barron's, the following title appeared: "Bye, Bubble? The Price of Oil May Be Peaking"

On June 26th, the title of Floyd Norris's blog post in the NY Times was, "The Beginning of the End for High Oil Prices"

The U.S. market on Friday was teetering on the brink of bear market territory, having declined almost 20% since the October high. Is the media so anxiously calling for oil prices to roll over so that stocks can stop going down? That may be part of it but I think the bigger reason is that this oil bubble is the most unpopular bubble I can remember seeing. Nobody likes it and everyone is feeling it in the wallet.

In the Internet bubble of late last decade, most people loved it. Stocks were trading at 100x revenue and nobody cared except Fred Hickey nd Bill Fleckenstein. In the real estate market frenzy of 2000 - 2005, homeowners were rejoicing everywhere, feeling wealthy and taking equity out of their homes with abandon.

With the most recent oil spike, the oil food chain, from oil-producing countries to the oil companies themselves to oil speculators are wearing the black hats. The fact that reasonably intelligent people are pushing for a windfall profits tax on an industry with relatively low profit margins is a joke.

I saw an email the other day suggesting (jokingly) that we sell wheat to the Middle East at the same prices that they sell us oil.

Now Congress is seriously considering banning institutional investors from trading oil, which is pathetic idea. They should ban ethanol instead.

How about we just use less oil?

Golf Update

At the halfway point of the Buick Open, Bo Van Pelt leads by two.

Michelle Wie is +10 and will be on her way home shortly at the U.S. Women's Open.

I have 2 questions:

1. Did Tiger have his surgery yet?
2. Why doesn't the USGA defend par in the women's open as vigorously as they do for the men?

Friday, June 27, 2008

Everyone is Poorer Today

People must be shell-shocked after yesterday because there is nothing going on.

Oil is up a little but futures are flattish.

Bill Gates, Microsoft zillionaire and guy whose company couldn't buy Yahoo, is now officially retired. While he's not exactly going out on top, he's going out having won a lot more than he lost, including a whopper that will go down in history as one of the most effective money-making machines of all time. It's one thing to invent a new market - the commercially-viable, user-friendlyish operating system. It's another thing to invent a new market where the cost of goods sold on your product is close to zero. It's yet another to maintain dominant market share as household and office penetration rates go from close to nearly everyone.


Thursday, June 26, 2008

Are We Having Fun Yet?

I was busy today so didn't have the pleasure of agonizing over the market intra day.

That was ugly.

Big downgrades, stocks tank, commodities rip. Nowhere to hide.

Kind of Ugly

It's looking like the market open will be pretty ugly today.

My call yesterday for the market to sell off after the Fed non-action was off the mark, although a large part of the day's gains were gone by the close.

RIMM and ORCL both reported last night, and both are getting hit as guidance wasn't quite good enough for either. Not that either was bad, just that the stocks have outperformed and expectations were high, especially for RIMM.

BUD's non-statement yesterday is leading the Wall Street Journal and others to speculate that they are going to fight the InBev deal. The following headline: "Anheuser May Reject InBev, Unveil Plan to Spur Profit" seems more than a little perverse to me.

Board Member, "So, should we agree to get acquired?"
Exec at BUD, "No, if the deal goes through they are just going to cut costs and try to increase profits."
Board Member, "Well, the media is all over this. We have to do something."
Exec at BUD, "Let's cut costs and increase profits."
Board Member, "Good idea. Why didn't we do that already?"
Exec, "Shhhhhhhhh."

long BUD

Wednesday, June 25, 2008

The NHL Loves Broadcom Shareholders

Or something. What am I missing?

The National Hockey League announced today that it has suspended Anaheim Ducks owner Henry Samueli indefinitely. Samueli, co-founder of semiconductor company Broadcom, pleaded guilty to making a false statement during an SEC investigation into options backdating.

"While Mr. Samueli has been an exemplary owner, we hold NHL personnel to the highest standards, and this plea requires the imposition of discipline under league rules," Commissioner Gary Bettman said.

Why stop there? Maybe the NHL should set up a task force to investigate every traffic ticket and credit card late payment penalty incurred by its team owners. Takings mulligans or gimmes over 3 feet should also be considered serious violations of league policy.

Crystal Ball Time

I'm pretty sure it would be both miserable and risky to have a 1-day investment time horizon. If my holding period were from now til the close today, I'd have to make a big bet on the short side.

I was just thinking some more about what Bernanke and his boys are cooking up in their 2-day meeting. My guess is nothing. On top of that, I can't imagine what they could say to cheer the equity markets. The Fed can't fix oil prices or other commodity prices, they can't fix housing, can't give us a presidential candidate who knows the difference between an income statement and a balance sheet. They could help the dollar but that would probably require raising rates.

Futures are up a little as of 6:30 a.m. which is a terrible setup if I'm right. If the market trades up this morning and the Fed statement is a lead balloon, it could be a very messy afternoon.

Tuesday, June 24, 2008

Hunter S. Thompson

"History is hard to know, because of all the hired bullshit, but even without being sure of 'history' it seems entirely reasonable to think that every now and then the energy of a whole generation comes to a head in a long fine flash, for reasons that nobody really understands at the time—and which never explain, in retrospect, what actually happened . . . "

Hang in there. Gotta be in it to win it.

Wait. What?

The S&P 500 is down 10% YTD. Tough, yes, but not the end of the world.

The China Shanghai Composite index is down 50% YTD. Also down big are the reputations of economists and strategists who called for a decoupling of the U.S. economy from the BRIC economies, and by association financial markets.
We sneeze, they get a cold. The linkage remains.

Rock. Hard Place. Go.

If you're like me, doing nothing can be very satisfying when you're convinced that it's the correct course of action. Doing nothing when there are obvious problems around you is difficult to pull off. The Fed starts a 2-day meeting today. I wonder what the hell they are going to talk about, let alone do.

Rates are probably as low as the are going to get via Fed actions, but the economy is very troubled. UPS and oil at $138 are today's latest examples.

Commodity inflation is ripping and it may be that housing is bottoming. Even if it isn't bottoming, it doesn't seem to be our marquee problem any more. Even so, I can't imagine a rate hike in here.

That is what makes this environment so difficult. Time may be the most important factor in resolving what is going on. In the words of Winston Churchill, "If you are going through hell, keep going."

Monday, June 23, 2008

Water Torture

UPS joined lots of other economically-sensitive companies today saying the current quarter and year estimates just ain't happening.

High fuel costs, customer nausea over price increases and who-the-hell-knows what else are leading to an earnings malaise that is not threatening to get out of the way any time soon.
I was at a car dealership today and asked my sales guy how business was going. He said something like, "Well, I've been doing this for 20 years and ............."
I'm not a fan of this action.


Does this deal make too much sense?

There is considerable dissonance in the press this month as writers strain for an angle and find none.

Forbes online this weekend wrote a non-story about how difficult it would be for SABMiller to upset this apple cart, either by launching a counter offer for Bud or itself becoming the target for InBev. Barron’s opines that while said combo may be good for SABMiller due to potential confusion created, worldwide #4 Heineken may be the loser if they can’t find a partner.

Alrighty then. Maybe the angle is this: aside from the recent spike around the merger talks, BUD’s stock has been about flat (not counting dividends) over the last 5 years. InBev has done a better job increasing shareholder value. The offer is a god one. BUD should sell.

long BUD

Welcome to the Summer

Officially it's here and there's not much going on today.

Bunge is buying Corn Products in a mid-sized acquisition.

I can't figure out whether the Saudis are serious when they're talking about pumping "all the oil we need."

30-year mortgage rates are up a full 0.5% over the last month. Is the mortgage market more savvy than the Fed?

R.I.P. George Carlin. The headline in the NY Times today labels him as "splenetic." That's a heck of a way to go out.

Sunday, June 22, 2008

Now I'm Worried

Barrons, the financial weekly that is wrong with alarming frequency, is calling a top in oil this weekend. Could it be happen?

"...prices could fall to $100 a barrel by the end of this year if Saudi Arabia makes good on its pledge to increase production; global demand eases; the Federal Reserve begins lifting short-term interest rates; the dollar rallies, and investors stop pouring money into the oil market. China raised prices on retail gasoline and diesel fuel by 18% Thursday, in a move that is expected to curb demand."

The folks at Barron's call themselves "value-focused" or something like that. They're usually negative on any security that may be expensive by any metric.

Since you can't value commodities the same as paper assets, I'm not sure what to think. I'm not going to run out and buy a Hummer, though.

Who is Watching your 401(k) Plan?

The answer is probably, "you are."

For many Americans, I am pretty sure that this is a problem. If you've got a job at a decent-sized company and have been working for a while, your 401(k) plan is probably your second biggest asset after your home. Let's say your 401(k) has $200,000 in it. If your best friend had an investment account with $200k in it, would you feel qualified to manage it? If your answer is "no", you probably should seek some help with your 401(k) allocations.

At Marketwatch a while back they put up a troubling article outlining some common mistakes that are being made by American savers. The biggest one in my opinion is the amount of money that people are investing in their own company's stock. The correct amount is zero (some matching programs make this more difficult). As an employee, you are totally dependent on your employer for your monthly income. You have the choice to not rely on them for your post-retirement income. Take it.

My Advice?

First, do not select the company stock option from the menu. Second, if your employer has a matching policy, maximize the benefit you can derive from it. Third, do some research on asset allocation and don't be afraid to ask for help.

Saturday, June 21, 2008

Golf, Tiger, and the End of an Era (Maybe)

I like Tiger Woods but I am not his biggest fan. I am a big fan of how he has helped elevate the game of golf at the pro level. I hope his surgery and rehab go well and he comes back next year as good as ever. Better is probably out of the question.

If he doesn't come back, a couple of things come to mind:

  1. The movie based on his story and ending with the 2008 U.S. Open will be a doozy

  2. It will be years before someone can win a Major without the media speculating about what would have happened if Tiger was there

I'm willing to bet that he'll be back.


It’s probably not a bad thing if you don’t know what that means or haven’t seen it before. More likely it’s a good thing, especially if you haven’t used it before.

It means, “too long did not read”, and has been used increasingly on the Internet when the reader wants to make a point but the original writer’s post or article was too long for that reader to bother with.

There are lots of things that I want to teach my kids, or at least give them a chance to learn. Having the attention span to follow something through to the end is one of them. It’s not one of the things where you can learn from your mistakes either. It’s more of an over-arching attitude that would be very tough to unlearn.

I can’t imagine anything that is too long to read, if it is good enough or interesting enough.

There is a lot being written on the short attention span/instant gratification generation that is coming of age now. I can’t help but wonder what is going to happen to good books, serious movies and the arts in general if nobody has time for more than a sound byte. We may also be in danger of having a workforce at some point down the road that can only work on a project for 5 minutes at a time.

Maybe it’s cyclical and will move back in the other direction. I doubt it.

Friday, June 20, 2008

Don’t Tell Me You Wrote That Down

We are entering a strange new era, the ushering in of which is being accelerated by the indictments of those two poor bastards from Bear Stearns.

There is all kinds of irony here.

Anyone who spends time on an Internet forum or message board has seen that the English language, particularly spelling and grammar, is in decline. Emails are following text messages and IMs in becoming more and more informal. At the same time, the blogsphere allows anyone and everyone to be published and get their ideas and opinions out there at the drop of a few keystrokes – no editor required.

The Bear hedge fund managers are in hot water for saying privately that their funds were in trouble while at the same time assuring investors that all was well and even raising fresh capital. That is bad but not exactly my point.

My point is that while it is easier than ever for people to disseminate ideas in written form, some of the folks we’d most like to hear from are going to stop doing so. The risk is too great. Dealbreaker today is speculating the Jimmy Cayne, Bear’s former CEO, may be in the same jeopardy and his embattled fund managers.

If I were managing anything bigger than a picnic, I’d think twice about putting anything in writing that a lawyer didn’t look at first.

Hi. I'm back.

That is all for now.