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Investing

Glass half full? Glass half empty?

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Week in review 030109 to 030709

We are officially in Obama bear market (source: Bloomberg), in other words, the stock market (i.e., Dow industrial for most people) dropped 20% since President Obama took office in Jan 20. Yesterday S&P 500 briefly touched 666 (the number of devil), pretty scary, huh? I am sure this economy/financial crisis has been the hot topic in many kitchen table, or office cafeteria. The financial media is also taking the crisis as oppertunity — we have seen numerous experts, panel discussions, such as the “Help Wanted” talk last night on CNN money, which is mainly talking about the Feb. job (loss) number: 650,000. This number is actually small, if we put it into perspective that 20 million Chinese migrant workers already lost job since the end of last year (read my friend Bo Peng’s article if you are interested).

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Economy Investing

Bank nationalization: II

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This is the second part of my thoughts on bank nationalization, I hope President Obama and his finance team can read my blog, as they are thinking through the “bank rescue”, the No. 1 issue facing this country, and the world economy for that matter.

As I said in my previous post, bank nationalization appears bad for the existing shareholders of bank common stocks, in the sense they will get wiped out or diluted. But I also said this is merely “mark to market” for them, whether they want to face it or not, the day of reckoning will come soon or later. In the mean time, when we are waiting for the eventual take over of some of the nation’s largest banks, consumers and business get scared, they either withdraw money and put under their mattress (consumers), or stopped investing and started hiring freeze/travel freeze/lay off (business). This will have spill over effect on the world, as we are living in a increasingly globalized economy. When the rumor of China new stimulus started, the US stock market started to rally. You got the idea.

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Stocks

S&P 500 10 years chart

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March 04 1999 to Mar 02 2009, courtesy of Google Finance.

SP500_Mar04_1999_Mar02_2009

Two thoughts pop up by looking at the charts:
1) We probably have not hit bottom yet;

2) The drop in mid 2008 till now is so sharp, 50% in one year 🙁

BTW, I think it’s a good idea to stay away from the market these days. Learn from the Oracle of Omaha.

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Investing

Leveraged ETF pitfall (from MorningStar)

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(Update Mar07, 2009) I found a good example on performance comparison of regular ETF vs. leveraged ETF. In the past year, the finanicals ETF XLF lost about 75%, while the ultra financial proshares UYG (2 times bull) lost 95%. You can use google finance to draw the comparison.

MorningStar link here.

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Economy

Dow 5,000?

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I remember years ago (in dot com era) there is a book named Dow 36,000. Obviously that predication was a laughing stock becaue Dow crashed in year 2000. No I am not trying to make a fool of myself, my title Dow 5,000 is merely to reflect today the Dow and S&P dropped to 12 year low again (source: bloomberg).

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Economy Stocks

Bank nationalization may not as bad as it sounds: I

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What is nationalization
This is my understanding. Usually a company has 3 types of capital: debt, preferred stock, common stock. In terms of ownership the equity holders (common stock holders) own the company. We say they borrow from the debt holders: in return they pay interest and principle to the debt holders down the road.

In the case of bankrupcy, debt holders have priority over preferred holders, preferred have priority over common, etc. (note all debt are not euqal too, some are senior than others, some are secured, some are not).

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Economy Life Tips

Buying books from Borders

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I have been a Borders customer for a long time, most times buying coffees while studying (reading books) there, from time to time I also bought some computer or finance related books, such as Effective C++, My Life as a Quant, etc. One benefit of buying books at Borders (compared to Amazon) is getting the book right away, vs. waiting and waiting (I normally use Amazon free shipping option which typically takes a week). We know time is money in many cases.

Recently I bought two books from Borders, one is Cocoa Programming on Mac OS X, another one os Pro C#, both with 40% discount (available to Borders members only, free to join). With the 40% discount, the books are about the same price at Amazon. For instance, the list price of Pro C# 2008 is $59.99, it’s $36 after 40% off (before tax). Amazon price is $37.79.

borders book store
(Source: NPR Market Place)

Inventory

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Master Series

Berkshire Buffett COP Conoco Phillips stake

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(Update Feb 29 2009) CNBC is putting up some nice words on Buffett today. After all, he lent $3 b to GE (the parent co. of NBC) last fall.

(Original) In these turbulant days, investors, ordinary and professional alike, look for directions from investor guru more than ever. Of course among gurus people pay attention, is Warren Buffett quarterly stock holdings change: people are interested in what he bought and what he sold, some (like yours truely) tried to understand his move and thinking, and follow him if makes sense. To avoid copycats, Buffett usually tries to delay his 13G filings as late as possible (within the deadline of SEC, or other regulatories). He famous sent a regular mail to Hongkong Securities Exchange after he sold the PetroChina stock, postmarked by the deadline of HSE.

Warren Buffett pic

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Economy Stocks

The end of rampant consumerism

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(Update May 2020) I found from this website, it seems the US consumer saving rate went up a bit in last 5 years, from 6%, 8% to most recent 13% . I can understand the last part due to pandemic. In fact our restaurant eat out (to go, take out) shrunk a lot. My wife is stocking up groceries and cooking much more.

(Original Feb 2009) From Yahoo Tech-ticker.

I am sure car companies don’t like this, so as the jewery makers, Nieman Marcus, Saks 5th Ave. etc etc.

The most interesing point I heard from this clip is American consumers recently shift from overspent 6% (negative saving rate of 6%) to a saving rate of 3%.

Categories
earning

Ingersoll Rand: huge write down, stock still up?

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This morning, Ingersoll Rand (NYSE: IR), the diversified industrial company makes procucts to air conditioner (Trane) to Schlage locks, reported its Q4 2008 earning this morning. Some highlights: it wrote down $3.7 billion (pre-tax, $3.4 b after tax) from Trane acqusition, or a loss of $10.56 per share. Interestingly, the stock went up about 15% in today’s trading. Why?

Some are saying the reason is the Q4 earning is above guidance (and street expectation).

Ingersoll Rand logo

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