Bespoke Investment Group

Ken Heebner: At Least He's Honest

A few minutes ago on CNBC, Erin Burnett asked her panel of guests if they would consider buying Apple's (AAPL) new iPad tablet computer.  The only panelist who raised their hand was Steve Liesman.  One of the panelists on the show who didn't raise his hand, however, was Ken Heebner, who manages the CGM Focus Fund.  As of its most recent filing, Heebner's fund had a 1.06 mln share position in Apple Computer, representing 6% of his fund's holdings.  Yet he still wouldn't buy an iPad, or at least say he was interested in buying one?  At least he's honest.

Will He or Won't He Be Confirmed

Worries over the confirmation of Ben Bernanke eased somewhat today as the administration reiterated its support for the current Fed Chairman and polling of Senators showed that he's at least on track to get the 60 votes needed.  Traders at Intrade currently have the odds of confirmation for a second term at 90%.  We are wondering if Bespoke readers, whom we think as a whole represent a good picture of 'the market', are putting the odds above, the same, or below the 90% mark.  Please take part in the poll below and tell us whether or not you think Ben Bernanke will get the 60 'yes' votes needed to win confirmation for a second term by the Senate.  Thanks for participating!

Will Bernanke Be Confirmed By The Senate?
	Yes
	No
Free polls from Pollhost.com

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Bernanke Confirmation Odds

The Intrade odds for Ben Bernanke to be confirmed by the Senate for a second term have dropped from about 95% down to 80% today.  This is a pretty big drop, but the money is still betting that he'll be confirmed.

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Intrade Contracts For Health Care and House Ownership

After Scott Brown's unlikely win last night for the open MA Senate seat, we checked Intrade to see which way the odds have moved for various political scenarios.  After the special election, Intrade started up a new contract for whether "Obamacare" health care reform will pass before 6/30/10.  The specifics of the contract are that either the House bill, Senate bill, or any combination of the two bills would have to pass for the contract to pay out.  As shown in the first image below, the initial bid/offer stands at 25/30, so the odds are currently about 25% that a bill will pass by mid-2010.

The more stunning contract is whether or not the Democratic party will retain a majority in the House.  After the election last night, the odds have moved down to 54% that the Dems will maintain House ownership, even with a 40-member lead.   

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4.22 Citi Shares For Each Person in the World

A comment on Zero Hedge today offered up an interesting stat -- that there are 4 shares of Citigroup for each person on the planet.  Wow. 

We looked at all US stocks and found that Citi has by far the most shares per person on the planet.  With 28,260,770,000 shares outstanding and 6,692,030,277 people in the world in 2008, the Citi shares/person ratio is 4.22.  There are only four other US stocks that have enough shares outstanding to give every person in the world at least one share -- General Electric (1.59 shares/person), Bank of America (1.48), Microsoft (1.33), and Pfizer (1.21).  Bill Gates held 681,395,074 shares of MSFT in his last Form 4 filing.  That's enough to give everyone in the world a tenth of a share of MSFT just from his holdings. 

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Stocks For the Next Decade With a Twist

By now we're all familiar with the sometimes disastrous returns an investor can see if they follow the advice of columns that suggest stocks to buy for the next decade.  With that in mind, an MSN article we read today may provide the key to success.  In the article, the author suggests seven companies that aren't likely to be around in 2020.  If the stocks that everybody loves at the beginning of a decade tend to do poorly over the course of the decade, are the stocks that everybody hates potential winners?

Below we highlight the seven names cited in the article.  As shown, most of these companies have been poor performers and are in industries that are on the decline.  Of the seven names, only six are publicly traded.  Will Magellan be the hot IPO of the decade?

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"Get Bernanke Back in Front of a Mic...STAT"

Judging by today's intraday trading, policymakers in Washington should be getting on the phone and ordering Fed Chairman Ben Bernanke to get back on the airwaves.  As shown below, while Bernanke was speaking earlier and all but promising to keep rates low for an "extended period," the S&P 500 rallied.  Since wrapping up his Q&A, however, the market has erased all of those gains and then some.

Red Meat For Goldman Conspiracy Theorists

Earlier today, Bloomberg announced its rankings of Wall Street's top economic forecasters.  And the winner is...Jan Hatzius of Goldman Sachs.  Congratulations on some great calls.

 

Conspiracy theorists out there are just wondering why the accuracy score wasn't higher given that Goldman supposedly gets all the reports ahead of time.

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Roubini Says Don't Forget About Me

Yesterday, Meredith Whitney went on CNBC and said she hasn't been this bearish in a year.  Ignoring the fact that we don't remember her ever really turning bullish in the first place, Whitney believes that the "recent market rally is not rooted in fundamentals and the U.S. economy is likely to fall back into recession next year."  With Whitney getting all the headlines today as the biggest bear on the street, Nouriel Roubini is out upping the ante.  In a New York Daily News column today, he says that the "worst is yet to come" and that "the damage will be extensive and severe unless bold policy action is undertaken now."

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3COM Traders and Their Connections

Many will remember that in last week's second round of arrests in the ongoing insider trading crackdown, the traders that were targeted were all cited for their buying stock in 3Com (COMS) back in 2007 just weeks before Bain Capital and Huawei Technologies announced plans to acquire the company.  While the deal later fell through on national security concerns, the traders cited made over $10 million in illicit profits on their trades.

Fast forward to yesterday, and COMS now finds itself in the crosshairs of another potential insider trading scandal.  Following last night's announcement that Hewlett-Packard (HPQ) would buy COMS for $7.90 per share in cash, many bloggers have been quick to point out the surge in yesterday's option volume.  Zero Hedge notes that yesterday's volume in COMS call options was three times the existing open interest, and that $1.5 million was made in profits as a result.

Since merger news often has a way of 'leaking' to some before it is released to the general public, it is not uncommon to see a spike in option volume ahead of an official announcement.  Usually these cases go unnoticed and receive little attention (or prosecution), although an individual was charged back in September for loading up on calls in Perot Systems (PER) ahead of the DELL takeover announcement.  However, with the ink barely dry on last week's SEC complaint regarding insider trading in COMS, even if you knew about the deal ahead of time, who on earth would be so brazen (or stupid) as to act on that information when it involves the same stock?

Is The NBER Gearing Up For a Big Announcement?

The NBER (National Bureau of Economic Research) is the organization in charge of dating recessions and expansions in the US economy, so when the official announcement is made that the most recent recession is officially over, it will come from the NBER.  Interestingly, over the weekend, the organization revamped its website for the first time in several years.  While companies change their websites for multiple (and often insignificant) reasons, many revamps are often timed to coincide with major events.  With most investors and economists agreeing that the economy has seen its trough (probably in June or July), we wonder if the NBER's website update was put in place ahead of an announcement from them that the recession is over?

 Old website:

 

New website:

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Big Winning Streaks for INTC, XOM

Heading into today, the S&P 500 Consumer Discretionary, Technology, and Energy sectors were on 8-day winning streaks.  Today only the Energy sector is trading higher, and as shown below, this would be the 9th 9-day winning streak for the sector since 1989.  On day 10 following these 9-day winning streaks, the index has only been up once.

Two stocks in the Dow are also on big winning streaks.  Intel (INTC) is on a 10-day winning streak, and Exxon Mobil (XOM) is on a 9-day winning streak.  Intel has only been up 10 days in a row 4 other times in its history, and it has gone on to post gains on day 11 50% of the time.  Exxon has only been up 9 days in a row 3 other times in its history, and it has gone down on day 10 67% of the time.

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Break out the Dow 10,000 Hats...Again

For the fourth time in the index's history, the Dow has broken above 10,000 after trading below that level for at least a month.  While the media would have you believe otherwise, the more this occurs the less exciting it becomes.  Call us at Dow 100K.

 

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Intrade 2016 Olympics Odds

For those wondering who will be selected to host the 2016 Summer Olympics today, prediction markets website Intrade.com has the odds pretty much up in the air.  Traders are currently putting the odds for Chicago to win right at 50%, while odds for Rio de Janeiro are not far behind at 45%.  As shown in the chart below, Chicago's odds have fallen from a high of 64% a few days ago down to a current level of 50%, so it looks like it's going to be a close call in Copenhagen today.

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What Happens If You Get Sick On Vacation Time?

Presented without comment:

Claim Back Holidays Lost to Sickness, European Court of Justice - Richard Edwards, UK Telegraph

Workers who fall ill during their holidays could now claim the time back from their employers following a landmark European Court of Justice judgment that lawyers warned was open to abuse.

The court ruled that employees had the right to ask for statutory leave to be "reallocated" when it was spoilt by sickness.

Under the terms of the judgement, employees would even be allowed to carry any annual leave ruined by illness over into the next holiday year.

Click here to read the rest of the article.

Google Finance Sparklines

We're big fans of cool presentation methods here at Bespoke, and Google Finance has recently added a new sparkline feature that we like that highlights price movements among comparable stocks.  Below is a snapshot of the charts that can be shown on a monthly, yearly, and even intraday basis.  While Yahoo! Finance dominates Google Finance in terms of traffic, Google Finance has many unique charts and tables that shouldn't be overlooked.

 

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MacroShares Typo

As first-year analysts know all too well, you'd be hard pressed to find something that bankers hate more than a typo on a deal sheet.  That's why we did a serious double take when we saw the typo on the first line describing one of the two new MacroShares housing ETFs.  On the description page for UMM, MacroShares mislabeled the ETF as the "down" ETF instead of the "up" one.  For an ETF where money is on the line, you can rest assured that someone at MacroShares will hit the fan when this typo gets discovered.  Everyone makes typing mistakes -- us included -- but it's hard to believe that the one below slipped through the cracks.

 

(That was quick!  Within an hour of our post, the typo was corrected.)

Michelle Caruso-Cabrera, Charlie Gasparino Bash Finance Blogs

At about 2:40 into this interview, CNBC's Michelle Caruso-Cabrera and Charlie Gasparino share some knee-slappers (at least in their opinion) that belittle finance blogs.  Something about "moronic bloggers" being a redundant phrase and changing the "Zero Hedge" blog title to "Zero Intelligence."  Even though these two seem to think they're the smartest people in the room, you can't help but get a sense that something deeper is at play with their criticism that probably has to do with the mainstream media continually losing share to blogs and other media outlets.

Fool Me Once, Shame on You. Fool Me Twice, Shame on Me.

Only a little less than ten years after his first hedge fund blew up and threatened the stability of the financial system, John Meriwether has announced that his current fund, JWM Partners, will wind down operations after a loss of 44% from September 2007 through February 2009.  At the start of 2008, the fund had assets of over $1 billion.

Back in 1998, when Meriwether's first fund (Long-Term Capital Management) got into trouble, the Fed had to arrange a $3.6 billion bailout in order to 'save the financial system.'  Today, Fed bailouts to save the financial system cost trillions.  Talk about inflation!

Following the closure of his current fund, Bloomberg reported that, "For many investors, John Meriwether is by now just another hedge-fund manager.”  Just another hedge-fund manager?  How many other hedge fund managers do you know with a resume that includes a US Treasury trading scandal, Long-Term Capital, and now this?

Another Month, Another Lousy Expiration Week For The Bulls

While we've only had two full days of trading, options expiration week is shaping up to be a lousy one.  If it feels familiar, that's because it is.  As shown in the chart below, last month's expiration week (May 11 - May 15) was almost as bad as this month's has been.  While the S&P 500 is down 3.6% so far this week, last month it was down 2.2% in the first two days of trading and finished the week down 5%.  As Yogi Berra would say, the bulls are hoping it's not deja vu all over again.

 

 

International Revenues and Recent Stock Performance

When the US Dollar experienced its big decline in the years leading up to the 2008 rally, stocks with high amounts of international revenues outperformed as businesses in other countries bought more goods from US companies.  As the Dollar made its comeback last year and earlier this year, stocks that generated most of their revenues domestically outperformed.  But now that the Dollar has pulled back again, the international revenue trade has made a comeback. 

We broke up the S&P 500 into deciles (50 stocks in 10 groups) based on a stock's percentage of international revenues and calculated the average performance of stocks in each decile since the May 8th market top.  Over this same time period, the US Dollar has declined quite a bit as well.  As shown below, the 50 stocks with the highest percentage of international revenues are down just 1.3%, while the 50 stocks with the lowest percentage of international revenues are down 7.9%. 

Depending on which way you think the dollar will go from here, you can play stocks with high amounts of international revenues or low amounts.  One of the only places to find a stock's percentage of domestic and international revenues is Bespoke Premium.  Yearly members have access to this information for all S&P 500 and Russell 1,000 stocks going back three years.  And even if you don't want to use the info as a strict dollar play, it's still good to know the geographic revenue breakdown for the stocks in your portfolio.  Subscribe to Bespoke Premium and receive our International Revenues Database free today.

 

Silent Majority Fools Intrade Traders

We like to follow the various contracts traded on Intrade for a number of reasons, including how well "prediction markets" actually predict.  Some of the more popular contracts on the betting website are the ones allowing traders to pick who will win American Idol, which ended last night.  Below we highlight the contract prices since the show began for the two finalists on last night's show.  Up until the final night of performances, the Adam Lambert contract trended higher and ultimately rested at around 75 (75% chance to win).  Leading up to the results show last night, the Lambert contract traded down but stayed above 50%.  As shown in the chart, the "crowd" definitely guessed wrong leading up to the finale, as the underdog Kris Allen actually won with the most votes.

 

New York Times vs. Adam Smith

Anyone who has ever taken an economics course knows the basic rules of supply and demand.  When demand is high and supply is fixed, prices rise.  Likewise, when demand falls and supply remains unchanged, prices fall.  Given these basic rules of economics, one would assume that the newspaper industry would be cutting prices given the continued decline in their circulation rates.  Last week, the Audit Bureau of Circulations announced that newspaper circulation in the six months ending March 31st declined by 7%, which was an acceleration of the declines seen over the last two reporting periods.

Less than one week after these figures were released, however, The New York Times seems to think that the answer to weaker demand is higher prices.  This morning, the Financial Times is reporting that the Times will raise the price of its Monday - Saturday editions to $2.00 (from $1.50) and the price of its Sunday paper to $6 (from $5).  Higher Prices = Higher Demand?  Adam Smith must be rolling over in his grave.

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Google April Fools' Day Jokes Miss the Mark

Google's April Fools' Day jokes this year are a 3-D web browser, something called CADIE, and an auto response function for Gmail.  Historically the company has had some pretty good April Fools' Day jokes, but they seem a bit boring this year.  And they're well past the point of actually fooling anyone anymore since everyone has come to expect it. 

Treasury Secretary Geithner Can't Catch a Break

No matter what your opinion of Treasury Secretary Tim Geithner, given the reported staff shortages at Treasury and the myriad of issues on his plate, it's hard not to have some sympathy for the hand he has been dealt.  To make matters worse, just when it looked like things were starting to level off for him, the Wall Street Journal reports that Frank Brosens, who was the leading candidate to run the $700 billion TARP, has withdrawn his name from consideration. 

While the official reason for his withdrawal from consideration was due to 'personal reasons', given that Mr. Brosens was a partner at Goldman Sachs for 15 years, we wonder if Administration officials are starting to notice the growing sentiment among some in the public that it seems like working at Goldman Sachs is a prerequisite to work in Treasury or the Fed.