Bloomberg.com: Worldwide:
"The U.S. Securities and Exchange Commission filed a lawsuit against two former Apple Inc. top executives for their roles in backdating stock-option grants, including some made to Chief Executive Officer Steve Jobs.
Former Apple General Counsel Nancy Heinen's lawyers have said she'll fight the case. The SEC settled with former Chief Financial Officer Fred Anderson. He agreed to forfeit $3.5 million and pay a $150,000 fine to resolve claims he filed false financial reports and had inadequate accounting controls at the Cupertino, California-based company, the SEC said."
Tuesday, April 24, 2007
Monday, April 16, 2007
How good of hedge is gold?
Market.view | A fine and fickle friend | Economist.com:
"A recent paper...attempts to answer this question—or, rather, it attempts to answer two questions. Does gold usually move in the same direction as shares or government bonds? (In other words, is it a hedge in normal times?) And does gold move in the opposite direction when shares or bonds are falling sharply? (Is it a safe haven in extreme times?)
The academics looked at a period from end-November 1995 to end-November 2005. They found....[that] It does well in the short term when shares fall; but if shares fall for long enough, investors start to liquidate their portfolios and gold suffers with all the rest....So those investors who want to buy gold are really making a commodity bet or a currency bet. They are not protecting themselves against a prolonged bear market in shares and bonds.
The academic paper is by Baur and Lucey:
“Is Gold a Hedge or a Safe Haven? An analysis of Stocks, Bonds, and Gold"
"A recent paper...attempts to answer this question—or, rather, it attempts to answer two questions. Does gold usually move in the same direction as shares or government bonds? (In other words, is it a hedge in normal times?) And does gold move in the opposite direction when shares or bonds are falling sharply? (Is it a safe haven in extreme times?)
The academics looked at a period from end-November 1995 to end-November 2005. They found....[that] It does well in the short term when shares fall; but if shares fall for long enough, investors start to liquidate their portfolios and gold suffers with all the rest....So those investors who want to buy gold are really making a commodity bet or a currency bet. They are not protecting themselves against a prolonged bear market in shares and bonds.
The academic paper is by Baur and Lucey:
“Is Gold a Hedge or a Safe Haven? An analysis of Stocks, Bonds, and Gold"
Wednesday, April 11, 2007
CIBC analyst got death threats on Citigroup: report - Yahoo! News
It is well known that there have traditionally been many more buy recommendations than sell. This has been largely explained incentives both of the analyst (who does not want to lose the information that comes from better access to management) and from the brokerage firm (who does not want to lose potential investment banking business). Recent research (Kadan, Madureira, Wang, and Zach) suggests that these problems have been at least somewhat mitigated by regulations, but not completely.
Why? Well in what sounds like a plot from a novel or movie, we may have to add another explanation: Death threats!!!
CIBC analyst got death threats on Citigroup: report - Yahoo! News:
"The analyst whose downgrade of Citigroup Inc sparked a broad stock market sell-off on Thursday said she has received several death threats stemming from her research, the Times of London said. Meredith Whitney of CIBC World Markets Inc late Wednesday downgraded Citigroup to 'sector underperformer,' saying the largest U.S. bank by assets might need to raise more than $30 billion of capital and cut its dividend. Her downgrade triggered a 6.9 percent drop in Citigroup's shares.... 'People are scared to be negative, especially when a company has such a wide holding,' Whitney told the Times of London in an article published Saturday. 'Clients are not pleased with my call and I have had several death threats,' she continued. 'But it was the most straightforward call I've made in my career and I am surprised my peer analysts have been resistant. It's so straightforward, it's indisputable."
Why? Well in what sounds like a plot from a novel or movie, we may have to add another explanation: Death threats!!!
CIBC analyst got death threats on Citigroup: report - Yahoo! News:
"The analyst whose downgrade of Citigroup Inc sparked a broad stock market sell-off on Thursday said she has received several death threats stemming from her research, the Times of London said. Meredith Whitney of CIBC World Markets Inc late Wednesday downgraded Citigroup to 'sector underperformer,' saying the largest U.S. bank by assets might need to raise more than $30 billion of capital and cut its dividend. Her downgrade triggered a 6.9 percent drop in Citigroup's shares.... 'People are scared to be negative, especially when a company has such a wide holding,' Whitney told the Times of London in an article published Saturday. 'Clients are not pleased with my call and I have had several death threats,' she continued. 'But it was the most straightforward call I've made in my career and I am surprised my peer analysts have been resistant. It's so straightforward, it's indisputable."
Friday, January 12, 2007
Blaine Lourd Profile - Executive Articles - Portfolio.com
What a great article! Inherently readable, a great story, and even ends up with a happy ending. I usually hate to give away the story, but in this case I will. It is the story of a stereotypical stock broker who sees the light and realizes that indexing is generally a better idea.
Blaine Lourd Profile - Executive Articles - Portfolio.com:
"As a group, professional money managers control more than 90 percent of the U.S. stock market. By definition, the money they invest yields returns equal to those of the market as a whole, minus whatever fees investors pay them for their services. This simple math, you might think, would lead investors to pay professional money managers less and less. Instead, they pay them more and more...Nobody knows which stock is going to go up. Nobody knows what the market as a whole is going to do, not even Warren Buffett. A handful of people with amazing track records isn’t evidence that people can game the market. Nobody knows which company will prove a good long-term investment. Even Buffett’s genius lies more in running businesses than in picking stocks. But in the investing world, that is ignored. Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud."
And later on some so-called experts:
" There's a shelf of financial bestsellers whose titles now sound absurd: Ravi Batra's The Great Depression of 1990; James Glassman's Dow 36,000; Harry Figgie's Bankruptcy 1995: The Coming Collapse of America and How to Stop It. There’s BusinessWeek’s 1979 description of "the death of equities as a near permanent condition,"
and after he finds DFA (yeah Eugene Fama's firm) and comes to realize that indexing is probably the way to go.
"I think more and more brokers will move to an efficient-markets strategy, because all of their products go bad.
Blaine Lourd Profile - Executive Articles - Portfolio.com:
"As a group, professional money managers control more than 90 percent of the U.S. stock market. By definition, the money they invest yields returns equal to those of the market as a whole, minus whatever fees investors pay them for their services. This simple math, you might think, would lead investors to pay professional money managers less and less. Instead, they pay them more and more...Nobody knows which stock is going to go up. Nobody knows what the market as a whole is going to do, not even Warren Buffett. A handful of people with amazing track records isn’t evidence that people can game the market. Nobody knows which company will prove a good long-term investment. Even Buffett’s genius lies more in running businesses than in picking stocks. But in the investing world, that is ignored. Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud."
And later on some so-called experts:
" There's a shelf of financial bestsellers whose titles now sound absurd: Ravi Batra's The Great Depression of 1990; James Glassman's Dow 36,000; Harry Figgie's Bankruptcy 1995: The Coming Collapse of America and How to Stop It. There’s BusinessWeek’s 1979 description of "the death of equities as a near permanent condition,"
and after he finds DFA (yeah Eugene Fama's firm) and comes to realize that indexing is probably the way to go.
"I think more and more brokers will move to an efficient-markets strategy, because all of their products go bad.
Blaine Lourd Profile - Executive Articles - Portfolio.com
What a great article! Inherently readable, a great story, and even ends up with a happy ending. I usually hate to give away the story, but in this case I will. It is the story of a stereotypical stock broker who sees the light and realizes that indexing is generally a better idea.
Blaine Lourd Profile - Executive Articles - Portfolio.com:
"As a group, professional money managers control more than 90 percent of the U.S. stock market. By definition, the money they invest yields returns equal to those of the market as a whole, minus whatever fees investors pay them for their services. This simple math, you might think, would lead investors to pay professional money managers less and less. Instead, they pay them more and more...Nobody knows which stock is going to go up. Nobody knows what the market as a whole is going to do, not even Warren Buffett. A handful of people with amazing track records isn’t evidence that people can game the market. Nobody knows which company will prove a good long-term investment. Even Buffett’s genius lies more in running businesses than in picking stocks. But in the investing world, that is ignored. Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud."
And later on some so-called experts:
" There's a shelf of financial bestsellers whose titles now sound absurd: Ravi Batra's The Great Depression of 1990; James Glassman's Dow 36,000; Harry Figgie's Bankruptcy 1995: The Coming Collapse of America and How to Stop It. There’s BusinessWeek’s 1979 description of "the death of equities as a near permanent condition,"
and after he finds DFA (yeah Eugene Fama's firm) and comes to realize that indexing is probably the way to go.
"I think more and more brokers will move to an efficient-markets strategy, because all of their products go bad.
Blaine Lourd Profile - Executive Articles - Portfolio.com:
"As a group, professional money managers control more than 90 percent of the U.S. stock market. By definition, the money they invest yields returns equal to those of the market as a whole, minus whatever fees investors pay them for their services. This simple math, you might think, would lead investors to pay professional money managers less and less. Instead, they pay them more and more...Nobody knows which stock is going to go up. Nobody knows what the market as a whole is going to do, not even Warren Buffett. A handful of people with amazing track records isn’t evidence that people can game the market. Nobody knows which company will prove a good long-term investment. Even Buffett’s genius lies more in running businesses than in picking stocks. But in the investing world, that is ignored. Wall Street, with its army of brokers, analysts, and advisers funneling trillions of dollars into mutual funds, hedge funds, and private equity funds, is an elaborate fraud."
And later on some so-called experts:
" There's a shelf of financial bestsellers whose titles now sound absurd: Ravi Batra's The Great Depression of 1990; James Glassman's Dow 36,000; Harry Figgie's Bankruptcy 1995: The Coming Collapse of America and How to Stop It. There’s BusinessWeek’s 1979 description of "the death of equities as a near permanent condition,"
and after he finds DFA (yeah Eugene Fama's firm) and comes to realize that indexing is probably the way to go.
"I think more and more brokers will move to an efficient-markets strategy, because all of their products go bad.
Monday, December 4, 2006
Cost of Nymex trading seat falls as screen trading surges
Don't think electronic market is changing the market landscape? Think again! case in point, the price of a seat on the NYMEX fell by a staggering 75%!
Cost of Nymex trading seat falls as screen trading surges:
"THE cost to lease one of the 816 seats on the New York Mercantile Exchange, the world's largest energy market, has plunged 75 percent as electronic trading overtakes the traditional open-outcry system.
Three new seat leases, which give the holder the right to trade on the Nymex floor in Manhattan, were issued starting on Friday at US$5,000 a month, and several renewals were also signed at that price. Last month, seats were leased for as much as US$20,000 a month, according to data on Nymex's Website."
and later:
"The shift to electronic trading is drying up liquidity on the floor," said Robert Webb, a finance professor at the University of Virginia and a former trader on the Chicago Mercantile Exchange. "It's totally a reflection of a lack of potential profit opportunity by trading on the floor.""
And from Bloomberg:
"As part of the IPO process, seatholders were issued 90,000 shares in Nymex for each seat they owned. Those shares are now worth about $11 million. Prior to the IPO, Nymex members traded the shares among themselves, often for about $45 each, valuing a seat at about $4 million just a month ago.
The trading right component of a Nymex seat yesterday sold for $500,000, according to Nymex's Web site."
So while trading is still taking place, it is migrating more and more to electronic markets and not the floor
Cost of Nymex trading seat falls as screen trading surges:
"THE cost to lease one of the 816 seats on the New York Mercantile Exchange, the world's largest energy market, has plunged 75 percent as electronic trading overtakes the traditional open-outcry system.
Three new seat leases, which give the holder the right to trade on the Nymex floor in Manhattan, were issued starting on Friday at US$5,000 a month, and several renewals were also signed at that price. Last month, seats were leased for as much as US$20,000 a month, according to data on Nymex's Website."
and later:
"The shift to electronic trading is drying up liquidity on the floor," said Robert Webb, a finance professor at the University of Virginia and a former trader on the Chicago Mercantile Exchange. "It's totally a reflection of a lack of potential profit opportunity by trading on the floor.""
And from Bloomberg:
"As part of the IPO process, seatholders were issued 90,000 shares in Nymex for each seat they owned. Those shares are now worth about $11 million. Prior to the IPO, Nymex members traded the shares among themselves, often for about $45 each, valuing a seat at about $4 million just a month ago.
The trading right component of a Nymex seat yesterday sold for $500,000, according to Nymex's Web site."
So while trading is still taking place, it is migrating more and more to electronic markets and not the floor
Thursday, August 24, 2006
Common Investment Mistakes
Could almost be called "Behavioral Finance in Practice" by the Wall Street Journal's Jonathan Clements from MoneyWeb:
Some look-ins:
""People tend to buy the investments they wish they had bought last year," says Terrance Odean, a finance professor at the University of California at Berkeley. "Partly, people simply extrapolate the past trend. But also, people feel that the markets are more predictable than they really are."
If we were rational, we would grow leery as an investment rises in price, because we are now paying more for the same investment. Instead, however, we are drawn to hot stocks and hot mutual funds, because we assume that the future will look like the immediate past."
"Rather than accepting that market conditions have changed, home sellers today are often fixated on the price they paid or the price they could have gotten at the market peak. Indeed, whether it is real estate or stocks, folks like to "get even, then get out."
This, of course, is partly about making money. But it is also about avoiding regret"
"According to the Commerce Department's Bureau of Economic Analysis, the U.S. savings rate turned negative over the three months through June 2005 and it has remained that way ever since.
Partly, this reflects our struggle with self-control. Instead of rationally socking away money on a regular basis, we prefer to spend today and put off saving until tomorrow.
I suspect the negative savings rate, however, is also driven by our overconfidence"
As always Clements offers some good advice in a readable fashion.
Some look-ins:
""People tend to buy the investments they wish they had bought last year," says Terrance Odean, a finance professor at the University of California at Berkeley. "Partly, people simply extrapolate the past trend. But also, people feel that the markets are more predictable than they really are."
If we were rational, we would grow leery as an investment rises in price, because we are now paying more for the same investment. Instead, however, we are drawn to hot stocks and hot mutual funds, because we assume that the future will look like the immediate past."
"Rather than accepting that market conditions have changed, home sellers today are often fixated on the price they paid or the price they could have gotten at the market peak. Indeed, whether it is real estate or stocks, folks like to "get even, then get out."
This, of course, is partly about making money. But it is also about avoiding regret"
"According to the Commerce Department's Bureau of Economic Analysis, the U.S. savings rate turned negative over the three months through June 2005 and it has remained that way ever since.
Partly, this reflects our struggle with self-control. Instead of rationally socking away money on a regular basis, we prefer to spend today and put off saving until tomorrow.
I suspect the negative savings rate, however, is also driven by our overconfidence"
As always Clements offers some good advice in a readable fashion.
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