Category Archives: stocks

Long-Term Stock Market Volatility Datapoint of the Day

Warren Buffett, take note: Although mean reversion makes a strong negative contribution to long-horizon variance, it is more than offset by the other components. Using a predictive system, we estimate annualized 30-year variance to be nearly 1.5 times the 1-year … Continue reading

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GE Datapoint of the Day

Rolfe Winkler has run the numbers on how GE compares to other banks (yes, GE is a bank) and has come to the conclusion that as of December 31, GE had total tangible common equity of… wait for it… $5 … Continue reading

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Hedge Fund Datapoint of the Day

For most of 2007, Target stock was trading in the low 60s. If you’d bought $2 billion of stock at those levels, you’d have about $1 billion today, since the share price now is in the low 30s. That’s the … Continue reading

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Earnings Datapoint of the Day

Floyd Norris reports today that the S&P 500, in aggregate, is about to report its first quarter ever of negative earnings. Howard Silverblatt, S.&P.’s index maven, reports that with almost three-quarters of the companies in the index having reported fourth-quarter … Continue reading

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The US Airways Share Price

Can we please do something about the reporting of US Airways’s stock price? The NYT says today that "the airline’s share price shot up 13 percent Friday", and even the Economist is blogging the same thing. The clear implication is … Continue reading

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Buying Equities for their Option Value

Commenter dWj makes a good point about stocks: they are naturally going to be more richly valued than bonds, because of their option value. "Stockholders are long volatility," he writes, "at least relative to bondholders" — and he’s quite right, … Continue reading

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Why Aren’t Stocks Falling?

As SAR notes, the "longer and deeper recession" meme is "becoming the popular view" — it’s increasingly difficult to find people who really think we’ll bounce back in the second half of this year, and economists generally are much more … Continue reading

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Taking a Bankrupt Company Public

One of the defining features of the dot-com bubble was the long line of loss-making companies coming to market with IPOs. That all came to an end when the bubble burst, and right now nobody is coming to market with … Continue reading

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Default Recovery Swaps

With Bank of America flip-flopping on whether the appointment of a car czar constitutes an event of default for CDS purposes, Alea, who found the flip-flop, also finds a new default derivative product: the Default Recovery Swap. These things aren’t … Continue reading

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Q Datapoint of the Day

Remember Pimco’s graph of Q showing it around the 0.3 level? I wasn’t sure where that number came from, and now CLSA’s Russell Napier has come out with a slightly more realistic (to me) number — which is also a … Continue reading

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Q

The most striking thing about Bill Gross’s column this month, about equity valuations, is the first graph, showing the evolution of Tobin’s Q over the past few decades: Gross explains that Q is the value of the stock market, divided … Continue reading

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Genius

How to fix Wall Street craziness: Ban all trades in the final hour of the session. (HT: Joe B) Update: Kedrosky’s on board!

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Ignoring the Stock Market

This is what a yawn sounds like. The Dow’s down 450 points, the S&P 500 is off more than 6% — and this news, if it can be called news, is nowhere to be seen on the NYT’s home page. … Continue reading

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Why We’re Ignoring Big Stock-Market Moves

Megan Barnett notes today that extraordinary volatility is being met with shrugs. It’s true that it’s something to which we’re getting accustomed; I think there are two main reasons. The first is that in normal markets, a huge swing tends … Continue reading

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Demonic Short Sellers

Jim Surowiecki says, quite rightly, that short selling can cause viciously self-fulfilling downward spirals, especially in financial stocks. But reading the WSJ’s long and alarmist tale of what happened to Morgan Stanley in September, I’m more convinced than ever that … Continue reading

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Citi’s Share Price Problem

When it comes to judging the stock market’s reaction to the Citigroup bailout, there’s only one number that everybody’s looking at: the Citi share price, which opened Monday at about $5.80. What does this mean? Two things are worth bearing … Continue reading

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Great Moments in Punditry, Felix Salmon Edition

Me, in July 2007, on the subject of the IPO of Kingdom Holdings, Prince Alwaleed bin Talal’s investment vehicle: Fancy investing in an extremely successful hedge fund without paying 2-and-20? … Kingdom could be the next Berkshire Hathaway (maybe it … Continue reading

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When Stocks Go to Zero

The percentage fall in the valuation of the stock market is, pretty much by definition, lower than the percentage fall in the enterprise value of America, Inc. And the more levered that America Inc was, the greater the difference between … Continue reading

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Ugly

If you thought that the sudden sell-off from yesterday afternoon would reverse itself in morning trade, think again: this is looking increasingly like a secular down market rather than simply a case of high volatility. Citi’s down further this morning, … Continue reading

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The US Firebreak

One thing I remember vividly from the economic crises of 1998 was the way that stock-market losses would chase each other around the globe, in a never-ending cycle. A fall in the US would precipitate a fall in Asia, which … Continue reading

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Stocks: Recession Bites

For some reason, I started paying more attention than usual to the stock market today. The closing prices are sobering: Sears Holdings and Goldman Sachs, down 10% to new lows. Google below $300. Citigroup below $10. Morgan Stanley down 15%. … Continue reading

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Great Moments in Journalism, Amex Edition

The AP reports on today’s fall in Amex shares: American Express Co. shares plunged Wednesday after a report that the credit card issuer is seeking $3.5 billion in funds under the government’s plan to directly invest in financial firms… The … Continue reading

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Sheldon Adelson’s Surprising Capital Raise

Never count Sheldon Adelson out. I don’t know how many other people could manage to raise $1.62 billion in a public stock offering after their company’s shares had fallen 94%. Yes, it helps that Adelson’s putting in another $1 billion … Continue reading

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Big Moves in Low-Priced Stocks

I’ve been doing quite a good job of screening out stocks-are-up-stocks-are-down noise of late, which is a good thing, but allow me a small relapse in response to Jim Surowiecki, who talks today about what happened to Citigroup stock this … Continue reading

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How Stocks are Like Bonds

Many thanks to Nadav Manham, who, after reading my exchange with Jim Surowiecki, pointed me to a fabulous (if long) article which Warren Buffett published in Fortune in 1977. Headlined "How Inflation Swindles the Equity Investor", it details how a … Continue reading

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