NYSE Euronext and Deutsche Borse Merger Announced

Today we heard the details of the Deutsche Borse and NYSE Euronext Merger.  Deutsche Borse will own 60% and the CEO of NYSE Euronext, will be the CEO of the combined company.  Here is a video of some of the trader's responses:

http://video.ft.com/v/791191663001/NYSE-deal-A-bittersweet-day-on-Wall-Street

Here is the full article on some of the details released today ...

http://www.ft.com/cms/s/0/a68dbfee-390c-11e0-b0f6-00144feabdc0.html#axzz1DwrGOVSP

Personally, I think this is a good thing.  It will create a more liquid more efficient marketplace.  If you are a markets person, then you like this.  I just hope that the symbolic establishment that is the New York Stock Exchange is not removed, altered, or ruined in any way, shape, or form.

To those interested in becoming fund managers ...

Steven A. Cohen has some words of advice.  Mr. Cohen is the manager of SAC Capital a large and hugely successful hedge fund in Connecticut.  He spoke with Paul Tudor Jones, another investing legend at the ISI sponsored conference at the Waldorf Astoria. 

Here is what he had to say:
http://dealbook.nytimes.com/2011/02/15/sac-capitals-cohen-opens-up/

Dick Fuld's Full FCIC Hearing

Here is a link to the Dealbook piece on the release of this audio.  This is an absolutely fantastic account of what happened in the last few days of Lehman and what led to their demise.  You can read the books, you can watch the videos, but to hear it from the head honcho himself tells a different story.  It really is an eerie interview and just makes you re-visit just how this happened.

http://dealbook.nytimes.com/2011/02/14/a-different-side-to-dick-fuld/

This one is just hilarious!

Bridging on innapropriate, but I'll put it up anyway...

http://www.fins.com/Finance/Articles/SB129769686350086375/Surprise-Bankers-Get-More-Love-in-the-Office-Than-Accountants?link=FINS_hp&Type=0

Yes, the URL says it all.

Meredith Whitney and her Muni Call

Meredith Whitney has come under some criticism of late.  She made a bet that the municipal bond market was is going to go belly up thanks to fiscal irresponsibility.  Market players have stated that while there are certainly issues within the market, and financial problems scattered among the issuers, to make such an outrageous claim is ... bull***t.  Here are a couple of problems with her call in my opinion, and some of them are outlined in the article linked below:
-Meredith Whitney's new firm, is trying to enter into the business of rating municipal debt issuance.  A call of this nature is certainly filled with self advertising
-The municipal bond market is filled with investors that are looking for protection of assets.  These people are often times very close to retirement or already retired and in very safe asset classes.  While some people will say she is doing her job, this call probably created more phone traffic from investor to manager than we have seen in a while.  The sleep lost is probably creeping up to levels that have certainly crossed the "undeserving" mark. 
-Why do we continue to care this much about one lady who made one correct call.  This is one of the issues discussed in the article.  I feel like Meredith Whitney is quoted as often or more often than Warren Buffet, or Carl Icahn (people with a background in being unbelievably right more often than not).  Go away Meredith.

Here is the article ... http://www.cnbc.com/id/41469440

Bonnies upend undefeated Duquesne

http://www.youtube.com/embed/kOzyciOCH0k

Deutsche Bank, Interesting Stories

First, is Deutsche Bank's profit dropping due to a one time cost in the integration of Deutsche Postbank.  Guidance was positive, and growth in other key segments was better than estimated.  The article is here: http://www.cnbc.com/id/41401413

Second, is how DB now pays investment bankers more than Goldman.  The average number is more than $500,000 last year, and here is the article: http://www.cnbc.com/id/41403338

With all this news, it will be interesting to see how the internship hiring season goes.  Imagine yourself with the following decision to make ...

"Do I go with the historical best-in-class, infamous, Goldman Sachs, or the new up and coming, highest paying Deutsche Bank."

Not a bad predicament to find yourself in.

"You have to feel sorry for AT&T"

Yeah, you do.  They are in big trouble it looks like.  Verizon IPhone is winning in almost every respect, and when 5G LTE comes, I think ATT needs something new, something big, and something soon.

Check out this article for an ATT IPhone user:

http://www.bloomberg.com/news/2011-02-03/verizon-iphone-beats-at-t-at-making-voice-calls-tech-by-rich-jaroslovsky.html

Kevin

Socially Responsible Investing vs Vice Investing

For many people, the current business trend appears to be investing in socially responsible and sustainable companies. Everyday we hear about the idea of "going green." Recently it appears as though everybody wants to lend a hand in saving the environment. So the question becomes: Do investments in such companies pay off... or would you be better off having your money swell like a "juice head" in a gym in a fund that seeks the opposite of social responsibility; a fund that instead favors the gaming industry, big tobacco, guns, etc? Take a look at the article below and then see how passionate you are about those reusable green tote bags for your groceries or the toilet paper rolls without the cardboard the middle.

http://www.aabri.com/LV2010Manuscripts/LV10107.pdf

Shane

Quick Word on Unemployment

Everything everyone says seems to bring back a couple of points.  GDP, the Dollar, and Unemployment are three of the variables that keep popping off of peoples tongues.  With unemployment still significantly above 9% everyone is wondering when it will start to catch up with the broader market indices.  I am here to tell you that the following chart is giving us a reason to believe things are about to change.

So, what is this chart.  The purple area is showing us the civilian unemployment rate, and the red line is showing us the change in the mean duration of the unemployed citizenry.  What we are seeing here is that in almost every case if high unemployment, we see that before there is a drop off in the civilian unemployment rate, we see the percentage change in duration of unemployment fall to below 20% positive change.  I think that we are quickly approaching the time when we can start to expect positive changes in the unemployment rate. 

Get ready for positive news in the upcoming months.

Best,

Kevin

Erin Burnett Wrong! No!

I actually love Erin Burnett.  She is very good at her job, and does a fantastic job (at times) of delivering important financial news to the CNBC audience.  She is currently working to report from Egypt, and was apparently caught in crossfire during her assignment.   

I am not mad that she called Michael Pento rude, because he may have (like so many other heralded CNBC guests) pushed his opinions in an unfair and abusive way.  Michael Pento works for Euro Pacific Capital, under Peter Schiff, who I am a huge fan of.  This guy has been a bond bear for a long time, and it seems as if Michael Pento is joining in with the rest of Europac.  I am not even upset that Erin questions his calls.  At the time it certainly seemed like rates were going to stay low.  Fundamentally it seems wrong, but with the FED buying the long end of the curve, it could possibly be enough of a force to keep rates low. 

The chart above shows the yield on the 10 year US Treasury Note.  The yield on this security was 2.77% on the day of this interview.  Today, the 10 year US Treasury Note is trading at 3.32%, or 20% higher.  The reason I am upset with Erin seems to believe that the United States will always be the worlds reserve currency.  I am upset that she doesn't get the fact that demand for US Treasuries is not actually real.  It is a ploy by the FED to keep rates low.  Individual investors, institutional investors, and world governments including china are actually cutting the amount of Us Treasuries in their reserves.  Maybe it is my recent behavioral finance experience, which has led me to question market efficiency a bit more, but I don't think it is at all reasonable to expect that with increased fiscal irresponsibility that we will continue to see such high demand for what used to be considered the risk free security. 

Sorry Erin, I love your work, but you were so WRONG!!!

Innovation X

I must admit that I'm not a huge reader aside from internet stories, blogs, twitter, newspapers and magazines but my father recently sent me a book in the mail and it's quite the page turner. Adam Richardson's Innovation X explains why a company's toughest problems are its greatest advantage. Perhaps I'm being biased since I have recently grown fond of the ideas of innovation and UX (user experience design). Regardless, I highly recommend checking it out.

"Adam Richardson brilliantly hits upon a global, macro trend that is impacting all corporations, large and small -- the blurring of lines between historically siloed industries , companies, products, and solutions. Innovation X explains how an integrated design strategy is shaping the future of global business, one idea at a time."

-Michael Mendenhall, senior vice president and chief marketing officer, HP

http://www.amazon.com/Innovation-Companys-Toughest-Problems-Advantage/dp/0470482192

Shane

Random Talk on Twitter

That's right! You can now follow your favorite business blog on Twitter @RTblogspot. Quick, fast and mobile!

http://twitter.com/#!/RTblogspot

Follow us and we'll follow you.

Shane and Kevin.

Dealbreaker Article

Farmer shoots a trader!

http://dealbreaker.com/2011/01/commodities-trader-shot-dead-by-farmer/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+dealbreaker+%28Dealbreaker%29#

This is the epitome of counter-party risk.

Kevin

The Not So "Big Apple"

It should come as no surprise that one of the most innovative and praised tech companies is having such great success in China; and although NYC will always been known as the "Big Apple," new Apple Store's in China are outselling Manhattan's Fifth Avenue 'Cube' See story below.

http://www.bloomberg.com/news/2011-01-26/apple-s-stores-in-china-outsell-manhattan-s-fifth-avenue-cube-.html

Apple Inc.

http://finance.yahoo.com/q?s=AAPL&ql=1

Enjoy,

Shane

frog design

Headquartered in San Fransisco, frog design is a global innovation firm that helps create and bring to market meaningful products, services and experiences. The company has become a recent obsession of mine as I find myself intrigued with their loose, versatile, creative and unique styles of design and thought. Take a gander through their website and blog... I don't think you'll be disappointed.

frog design website: http://www.frogdesign.com/

frog design blog: http://designmind.frogdesign.com/blog/

Below is a video of Luke Williams, a fellow at frog and marketing professor at NYU's Stern. The focus of his presentation is "disruptive" form of thinking.

http://vimeo.com/17822197

Hope you enjoy,

Shane

GDP and Population of our States

Cool chart here.  This compares the GDP of the United States to other similar countries.  Gives you an idea of how important we are to the global economy.  Also compares populations.


http://www.economist.com/blogs/dailychart/2011/01/comparing_us_states_countries

Enjoy

Interesting Video on Gold vs. Cash

http://www.wallstreetoasis.com/blog/cash-vs-gold-the-video

Interesting Stories, All from Dealbook

Here ya go!

http://dealbook.nytimes.com/2011/01/10/the-legal-issues-in-the-goldman-facebook-deal/ 

http://dealbook.nytimes.com/2011/01/10/facing-scrutiny-banks-slow-pace-of-foreclosures/

http://dealbook.nytimes.com/2011/01/10/morgan-stanley-and-proprietary-trading-group-to-part-ways/

http://dealbook.nytimes.com/2011/01/11/goldman-releases-report-on-practices/

http://dealbook.nytimes.com/2011/01/11/with-verizon-will-apple-take-a-bite-of-more-enterprise/

Enjoy,

Kevin

Alcoa Kicks off Earnings Season ... Again!

If you have ever followed equity markets for a period of three months or longer you probably know that Earnings Season, the time when most all of global companies present performance from the preceding quarter, is led off with a report from Alcoa.  Today Alcoa got this Earning Season off to a good start, however question of Alcoa's optimistic projections led to the stock falling in after hours trading.

Heres the story from Reuters http://www.reuters.com/article/idUSTRE7095TC20110111?feedType=RSS&feedName=globalMarketsNews&rpc=43

Kevin

iPhone to Verizon

Speculation is that tuesday, Verizon will announce their iPhone.  Here is a great site that highlights some of the things we can expect to see, and not expect to see ahead of the announcement. 

http://mashable.com/2011/01/09/verizon-iphon/#

I own Verizon (VZ) and Apple (AAPL) as well as some Calls on Verizon.

Kevin

Dynamic Yield Curve

Merry Christmas and Happy New Year!

My first gift to you ... the dynamic yield curve.  This is a historic yield curve that moves over time.  It is compared to the S&P 500 and shows how the yield curve affects the market.  This is a very cool tool, and signifies that we are probably going to see positive equity returns in 2011. 

http://stockcharts.com/freecharts/yieldcurve.html

Enjoy,

Kevin

SIMM Related

http://dealbook.nytimes.com/2010/12/29/where-homework-is-managing-a-200000-stock-portfolio/


This is a link to an awesome piece done by the New York Times and Dealbook.  It talks about business schools and the growth in popularity of trading rooms, as well as student managed funds.  In the 90's it was extremely rare for schools to have mock trading rooms and student managed funds.  Nowadays, over 200 schools have trading floor simulators. 

The one interview with the managing director from Guggenheim, states the importance of the Bloomberg Terminal for applicants.  With the information given in this article/video it seems as if prior Bloomberg terminal understanding is not just a plus, it is a must.  This is something SIMM has been preaching for the last few semesters. 

For more information on St. Bonaventure's Student Managed Fund (SIMM) please check out our website.


Kevin

A Bearish Note in a World of "Bull"

Regardless of what websites you use to gain access to financial stories, or what channel's you watch for nightly news, you have probably heard nothing but bullish calls and predictions about 2011.  I have heard "Dow 13,000" and "Buy Buy Buy" more times in the last week than I have in any other week period in my entire life (albeit short). 

In another seemingly bullish bit of news this morning, Jobless Claims, that is, the number of people filing first time unemployment benefits, fell 34,000 to 388,000.  This number was a major drop from last week, and way lower than expected.  So, all is good right?  Markets should be up 1 or 2% at the open right? 

Wrong, instead, at least until the Chicago Manufacturing Number, markets are unchanged.  Here is my explanation for why this number didn't produce such a major jump in the markets. 

1)  The last week was filled with snow for most of the northeast.  If you could get out of your house, you were most likely spending time shoveling as opposed to running down to the local office to file for unemployment claims.  

2)  It was a holiday week, probably the most stressful week of the year, and one in which most people spend time doing last minute shopping, wrapping, and traveling.  This week is likely to spent with family, and again, not spent filing for jobless claims. 

I wouldn't take this number too seriously.  It definitely is good if you look at the trend, however the number itself (388,000) doesn't mean much to me, and shouldn't mean much to you either.  Interestingly enough in the  30 minutes it took me to write this post, there were two great pieces of economic news.  They were:
-Chicago Fed Manufacturing Data better than expected
-Pending Home Sales way better than expected

Good Timing.

Kevin

Stories of the Day 12/27/2010

Hello,

Sorry for the long sparse blogging of late. 

What happened to good old Tesla?  After a massive jump on its IPO, the stock has failed to do anything.  And today, it fell 17%.  Why?  We learned in class of lock-up's and how they can be included in the terms of the IPO.  Tesla's lock-up expired today.  If anyone had realized this (besides institutional money managers), they could have profited big time today.  This lock-up expiration, allows for an additional 60 - 70 million shares to be released into the market (for you economists out there ... supply up, price down). (Here) is an article from Marketwatch.

AIG led financials higher today after they announced new credit lines to help pay off U.S. Taxpayers.  More than 30 banks will help provide the credit for AIG and the lines will be administered by JP Morgan Chase.  It seems as though the global insurance giant is taking steps towards freedom, and profitability.  The Boomberg article is (here).

Gary Kaminsky of CNBC's Strategy Session gave his input today in forecasts for the upcoming decade.  His predictions include: outperformance of growth strocks, 6-7% equity returns annually, and no bursting of the bond bubble.  CNBC article is (here).

Enjoy

Hope all of your Holiday's were as nice as mine.

Kevin

Attire on Wall Street

For those of you about to enter the working world, wondering how to dress for the interview or for the first day, take some hints from Wall Streeet: Money Never Sleeps.  That is, if you can afford it.

http://clothesonfilm.com/wall-street-money-never-sleeps-ellen-mirojnick-costume-qa/15225/

Stories of the Day

Copper, something we speak about often in our SIMM meetings, has a very interesting fundamental story.  Firstly, it is believed that one trader owns about 50-80 percent of the copper on the London Metals Exchange.  Also interesting for Copper Traders, is that new ETF's which are to be launched soon are likely to create a shortage for the metal, and will likely help drive prices upwards (here)

GDP reports were released today, showing the US economy grew less than expected, but still grew.  Stocks were up in trading today after the news.  Inflation expectations were lowered, and expectations for the job market remain the same after the un-exciting number. The story (here).

The economist says that in 2011, the biggest thing to worry about are sovereign debt problems.  They don't just warn about the ugly eurozone countries, even american bond yields are expected to rise, and not necessarily as a hope for growth.  Read it from the economist (here).

Gold Silver Ratio

http://www.minyanville.com/businessmarkets/articles/pair-trade-pairs-trading-pair-trading/12/21/2010/id/31818?camp=syndication&medium=portals&from=yahoo

Really cool article on pair trading Gold and Silver.  Examines whether the gold/silver ratio does have a reversion characteristic.  Interesting piece considering all the talk in financial news about the two commodities.

Enjoy

Stories of the Day 12/21/2010

Today, financial news has been filled with further talks of Lehman Brothers.  Unfortunately for them, it's not even their actions that are receiving the negative press this time.  E&Y, the firms auditors are now being probed.  Article form Yahoo Finance (here)

In another regulatory note, the SEC is now pursuing Mark Hurd, former CEO of HP on Insider trading charges involving an acquisition which the former CEO might have leaked information about.  The Bloomberg article (here)

Kevin

Equity Analyst Coverage Part 2

Finished my research on equity research analysts.  The second paper basically covers the results of my own studies.  It is at the very bottom of the page and has replaced Part 1.  Due to the constraints of blogger, I cannot show the results of my testing.  So, when it says results are below, they actually are not.  If you would like a pdf or word version of the paper just contact us. 

If anyone is interested in seeing Part 1 or my data set I would be happy to share. 

Enjoy,

Kevin

Stories of the Day 12/9/2010

Morgan Stanley, the sixth largest bank in the US, expects to cut investment banking bonuses.  The expectation.  The source declined to be named, but managers know they are dealing with a pool that is likely 10% to 30% smaller.  The percentage of revenue awarded as compensation last year was 62% and something that CEO James Gorman promised to change. The Bloomberg article (here).

I don't think that this has any value to any of us whatsoever, other than giving you a laugh.  The video is from the middle of October, and shows Mr. T at the Bloomberg studios to discuss the recent run-up in gold prices as well as his gold promise program.  Enjoy (here).

In a very highly discussed M&A deal, AirProducts (from my hometown Allentown, PA) has raised its bid to $70 a share for Airgas.  The bid for Airgas was labeled by AirProducts as their "best and final" bid for the firm that if accepts, will be valued at over $5.8B.  These talks have been going on for 10 months now and the offer deadline has been extended to January 14th.  The Dealbook article (here)

After a poor week of economic news, we have seen a slew of positive news.  The most recent jobless claims data pushed stocks higher in early morning trading.  Wall street economists predicted 428,000 would claim joblessness, compared to the actual 421,000.  Stocks have since sold off, but this is getting us back on track on the economic front.  The Associated Press article (here)

Kevin

Last Day to Vote

Today is the last day to vote in our poll. 

Do you think that Wikileaks and Julian Assange are doing the correct thing by disseminating this information?

Vote on the left.

Kevin and Shane

Stories of the Day 12/8/2010

Here is an interesting video about the female factor in finance.  It is not a completely feminist talk.  She isn't saying that women are better, instead she is saying they are different.  That difference creates a resistance to the type of herding behavior that has created bubbles and gotten us into trouble.  Great video (here)

The Men's Bonnies won a huge game yesterday at Carnasecca Arena in New York City.  Another late jumper from Nicholson put the Bonnies over the Johnnies in an exciting game.  The article is (here) and you can link to video on ESPN 3.  I also want to be the first to let you know that you should be checking the Bonnies website all day thursday in anticipation of an announcement.  One of my teammates and roomates will receive credit that is well deserved.  He has asked that I not share, so I won't but stay tuned to Gobonnies.com tomorrow to see the news.

How bad is this really getting?  In an attempt to support Wiki Leaks, hackers have attacked websites like Mastercard and Visa.  These two, along with a number of others who are outspokenly against what Julian Assange is doing are victims of these hackers attacks.  They used twitter to own up to their attacks.  Keep voting on the left whether or not you think Wiki Leaks is good four our country.  Read the article (here).

Interview on Treasuries, QE2

Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC, talks about the outlook for U.S. Treasuries and quantitative easing by the Federal Reserve. LeBas speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

http://www.bloomberg.com/video/65069566/

Shane

The Random Rant

Here's a new series of posts where we rant about whatever topic we may choose.  Today I want to talk about Bloomberg.

I have always been a believer in Bloomberg being "the" best financial tool available.  Today absolutely solidified that opinion and after my hour on the system, I have to reiterate how amazing the Bloomberg service is.  I uploaded my Equity Research Coverage on the blog last week, (it is available for your reading at the bottom of the page) and mentioned that the second paper would be posted later this week.  Well, in my data gathering for that paper, I pulled up my account on the Bloomberg Terminal.  Being a Bonaventure Student, I get free access to the terminal.  I needed to fill in about 7 or 8 pieces of data for 200 securities, and had planned out about 4 hours for the process.  Two companies in to my data gathering I became extremely bored.  One of the most amazing tools on the Bloomberg is the Help Function (double clicking the HELP key).  This function connects you to the service desk where you speak to a very knowledgeable service representative.  I asked him if there was an easier way to compile this data.  I was expecting him/her (I didn't know, and they don't tell you) to say no, or be completely incompetent like so many other customer service representatives tend to be -- I am sorry if I am offending anyone.  Not only did their representative know exactly what I was looking for, this genius basically populated all of the fields for me.  When I received my next "IM" it had all of my fields completely filled.  It saved me approximately three hours and forty-five minutes.  If you are a financial professional with the financial means to afford this service (it is extremely expensive, but not at all overvalued) then I would absolutely suggest it.  If you are a Bonaventure student, or a student of any other University that has access to this tool, and you are not already using the Bloomberg, then you are crazy.  It is the most universally known financial information service on the planet, and offers a number of other useful tools.  Students specifically, there is a function called Bloomberg University (BU Go) that allows you to become certified in any one of the following market sectors: Equities, Fixed Income, Currencies, or Commodities.  What better way for you to distinguish yourself at an interview than saying I am Bloomberg Certified.  Seriously, this is the coolest most useful tool out there, and if you are not taking the opportunity to use it, then in the words of the men's soccer team head coach Mel Mahler, "SHAME ON YOU!"

Learn more at Bloomberg's Website

Kevin

Stories of the Day 12/6/2010

Republicans, business owners, and the american public are finally getting what they need.  Today President Obama gave in to his counterparts and announced that he would extend the Bush Tax Cuts for another two years, while also announcing payroll tax cuts and dividend taxes remaining at 15%.  While I think this is a step in the right direction, we still cannot seem to find common ground on where to make cuts in government.  I believe that this is a sign of democrats finally starting to realize that they are fighting an uphill battle.  Read the story from CNBC (here).

Today, the United States Government announced that they are ready to exit their stake in Citigroup.  They plan on using a public offering to dispose of their holdings in the major US Bank.  Shares of the company finished the day unchanged, but have moved negatively in after hours.  The government plans to hold on to warrants that will allow them to buy shares in the future.  2.4 Billion shares expected to be for sale, check it out (here).

(here) is an interesting note today from CNBC.  The United States Treasury in an attempt to produce colorful new currency, has once again showed the inability of government to do almost anything efficiently.  The $120 million that was apparently spent to produce this new currency, may be out the window as there was an issue with a crease in the paper.  Wonderful.

2022 World Cup

If you're a soccer fan chances are that you're as upset as I am with the recent announcement that the 2022 World Cup will not be held in the United States... but rather in the Qatar. Located in the Middle East, Qatar is roughly the size of Rhode Island but boasts the second highest GDP per capita (Luxembourg being number one). The U.S. was not the only contender that fell short in their attempt to host the tournament, Australia, Japan, South Korea, and Indonesia also placed bids. In researching FIFA's decision I must admit that Qatar's pitch to the committee was impressive to say the least. The link below provides a video of some of the stadiums that will be built.

http://www.brandchannel.com/home/post/2010/12/02/World-Cup-2018-2022.aspx

The article below discusses some of the financial implications of the announcement last week.  First, equities in Qatar are not surprisingly at their highest level in two years.  The economic growth that can be caused like this is often times underestimated.  Here is a country, already second in GDP per capita, that is going to need to build 9 stadiums, refurbish 3 more, and build a metro line.  Imagine tiny little Rhode Island building 9 stadiums and their own metro line.  The reason for equity prices jumping is that employment will skyrocket and say high for probably the next 10 - 12 years.  All of these people now with more expendable cash will spend it, and thus the cyclical nature of economics will take over.  The article also mentions one of the really cool features of the upcoming event: Air Conditioned Stadiums.  With temperatures expected to be safely above 100 degrees, this will be almost a necessity.

http://www.bloomberg.com/news/2010-12-05/qatar-shares-surge-to-two-year-high-on-winning-world-cup-bid-barwa-jumps.html

Shane and Kevin

Nassim Nicholas Taleb

Now, for those who aren't new to reading financial blogs, you have most likely heard of Nassim Taleb, and black swans.  However, for some newer readers, we have decided to put the following video on the website.  The video is a recent TIME interview with the author and academic.  He discusses a couple of his ideas past and present.  Get used to this guy, because his work is not only brilliant, but it is defining a new side of finance.

http://www.youtube.com/watch?v=E3bu_7Bfatg

Enjoy,

Kevin and Shane

Equity Analyst Coverage Pt. 1

At the bottom of the page, I have posted my most recent paper.  This paper is for Dr. Mahar's MBA-Behavioral Finance class.

The paper is a preview and introduction to the following topic: the value of equity research analysts and the information they pass along to their clients.  It mentions a number of older studies on similar topics, and then gives light into the research that I have been performing.  The second part, which will include the results of that research will be posted within the next week.

Kevin

Stories of the Day 12/1/2010

On a bleak note, the US housing market has continued to struggle.  Foreclosure sales fell in line with the entire market and predictions for 4th quarter are that we will see continued slowing.  Is this just the new normal in the housing market, or are we still sifting through this mess that we got ourselves into.  Associated Press article (here).

Automakers are out with their sales from last month.  Hyundai was a winner with sales of its Sonata, while Honda, Nissan, Ford, GM, and Chrysler all reported positive numbers.  The one loser ... Toyota.  This is the second straight monthly sales decline for the company.  JD Power says it's a continued result of their recalls.  (here)

For those of you preparing for summer internship recruiting, here is an awesome website.  They do great stuff for anyone looking for a career on Wall Street.  Whether you are looking at Sales and Trading (S&T) or Investment Banking (IBD), subscribe to their articles, because they are extremely thorough.  Mergers and Inquisitions can be visited through our links on the left or (here).

Kevin

Stories of the Day 11/30/2010

Wikileaks' Julian Assange apparently has information on a major American Bank that is still running.  The market seemed to suspect Bank of America today.  Premiums on their Credit Default Swaps increased by 25 basis points and their stock dropped by more than 3%.  All US banks took a hit today barring Citigroup, but Bank of America was seemingly most affected by the news.  Check out the New York Times article (here) and we would love to hear your thoughts on if Wikileaks and Julian Assange are doing the right thing.  Check out the poll above.

Good update of the days market stories.  Europe debt crisis continues to drive these markets, as well as another security breach at Google scaring investors to sell out of their holdings in the tech firm.  Check out the full article including an interesting note from the CBOE (here)

Bonaventure's Advanced Corporate Finance class just completed our project submissions earlier in the month.  This blog is a result of that project.  A couple of other students submitted some interesting projects as well.  They are (here) and (here).

Kevin

Stories of the Day 11/29/2010

Stories of the Day is back ... enjoy

In the spirit of including a technical analysis piece, I had to give you this.  I don't claim to be a scientist, so I don't know how this works, but apparently sun spots are used to predict financial crisis'.  This comes from a money manager who is said to have a good reputation.  2013 is going to be a tough year for the markets according to the man who called the top of the Dow in 2007 and incorrectly called for Dow 5,000 last summer.  Take it for what it's worth (here)

The average shopper spent $365.34 over the thanksgiving weekend, up 6.4% from last year.  Shoppers were hungry for "doorbuster" deals this year.  I am not as inspired by this number as other people are.  Consensus was that there were better deals this year, and I think consumers need those deals to get them in the doors.  Check out the statistics and predictions (here)

Another exciting day in the markets is behind us.  European debt worries continued to cause euro depreciation.  As we have seen, when dollar is up, US stocks are down.  If we cannot break that trend, I feel that we may be in for a decent size correction to finish off 2010.  Oh yeah, gold rose again as well.  Check out the recap (here)


Kevin

Random Talk Mission Statement

This is probably something we should have done earlier, but here it is anyway.

Random Talk Mission Statement:

           

            Random Talk seeks to offer interesting content involving both the world of finance and the community.  As two college students seeking academic enrichment, we understand that posts may often be biased, however, it is in our best interest to irritate as few readers as possible while helping to enlighten as many as possible. 

            Most important to us are posts involving current issues in finance.  Topics, while unlimited, might most often include:

·         Corporate Finance

·         Valuation

·         Securities, Global Markets

·         Hedge Funds and other Alternatives

·         Risk Management

·         Qualitative Analysis

·         Analysis of Jobs within the field

            We would also like to offer information about issues at St. Bonaventure.  Random Talk understands that we are a representative of the University and seeks to improve the reputation of an already highly regarded School.  It is for that reason that our posts may also include topics such as:

·         St. Bonaventure Athletics

·         Stories about current students and their work

·         Interviews with faculty

·         Local community events

·         Regional and national events involving St. Bonaventure

            Our most valuable content will be concise and thorough and will offer multiple opinions.  We seek to do much more than just report the news.  Linking to stories and other social networking options is likely, but we hope to include our own useful analysis, whether it be factual or opinionated.

Shane Nolan and Kevin Mjaatvedt

SIMM Reports to Board

Sorry for another hiatus.

I wanted to let everyone know that St. Bonaventure SIMM (Students in Money Management) has once again completed another successful report to its Advisory Board.  SIMM is outperforming not only the S&P 500, but the blended benchmark that it has created for monitoring progress.  For a little bit more about SIMM, check out their website here (here).  The Fall 2010 Semi-Annual Report should be on that website soon.

FYI:  SIMM manages over $185,000 from both the Endowment and individual donations.  They are ranked by Seton Hall as one of the top 5 programs in the country due to the fact that it is almost 100% run by students.

Check out their website, they also have a Twitter, Facebook, Linkedin, and Blog.

Kevin

Stories of the Day 11/10/2010

First off, I want to apologize for no SOTD yesterday. 

This will be the first time either of us hint at our political stance.  USA today reports that the number of federal workers earning over 150,000 have doubled since the new president took his seat.  Not long ago it was very public that Obama did not want private sector CEOs making as much as they were.  The big difference is that the public sector gets paid with taxpayer dollars unlike CEOs.  (here)

The federal budget deficit took a step in the right direction this October.  Improved economic conditions led to increased revenues and increased tax receipts.  This is a small step in the right direction, and one that I expect to see continue with the weak dollar. (here)

As earnings season wraps up, Cisco gives us good numbers and a disappointing outlook.  Less demand from the government was a major cause of this negativity.  I put this article up for two reason.  Number one is that Cisco, a tech leader is struggling, and number two is that you cannot trust a headline earnings report.  Listening to calls and even reading transcripts are extremely important.  (here)

A-10 Mens Soccer Tournament

St. Bonaventure is preparing for their trip down to Charlotte NC.  The bonnies finished the regular season ranked fourth in the A10 and are set to take on St. Louis University this Thursday November 11th at 8:00PM.  If you are in the Charlotte area or know anyone in the Charlotte area please come check the game out.  If you interested in watching the games online, they are available at http://www.atlantic10.com/championships/2010-m-soc-champ.html

We hope to see you there.

Kevin and Shane

Stories of the Day 11/8/2010

James Gorman of Morgan Stanley bashes attitudes and the "hero status" on Wall Street.  He asks for a more balanced pay structure and a new thought process for the entire industry.
http://www.bloomberg.com/news/2010-11-08/morgan-stanley-s-gorman-says-hero-culture-needs-to-change-to-limit-risks.html

With all of the currency talk, and the interest rate questions where is a safe place to invest right now?  Three hints: 1) its a color 2) its worn as an accessory and 3) its gone up over 1100% since 1976
http://finance.yahoo.com/news/Gold-sets-record-high-amid-apf-905022540.html?x=0&sec=topStories&pos=8&asset=&ccode

The importance of blogging in Asia is being recognized by one blogger.  The social networking tool is a trendy and efficient space to advertise on.  Some of these bloggers are making quite a living.
http://www.cnbc.com/id/40065706/

Equity Market Returns During "Gridlock"

In the spirit of not letting the results of the most recent mid-term elections pass us by, I wanted to look at what happens to our markets when the congress is split and when it is in line. 

Before we get into the results let me start by describing the data.  My data set is annual from 1945 to 2009, and therefore, not as large as I would like it to be.  According to about.com, only nine years during that time have seen a split congress (gridlock). Fifty-six years have seen the same party control both the house and the senate.  Now the results.

The first chart compares the first nine years of cooperation in congress against all of the nine years in which congress was in gridlock.  The results of investing one dollar in each circumstance would result in better success during the time of both parties controlling one congress.  Again, due to small data sets, take all of these results with a grain of salt.  Through seven of the nine years, gridlock returns were higher than coop returns, with the years 2000 and 2001 greatly affecting the results.  What you cannot see (because I did not include the table) is how short periods of gridlock tend to last.  The longest period of gridlock is from 1982-86, and the only other two occurrences are from 1953-54 and the aforementioned 2000-01.

The second chart shows the annualized return over all fifty-six yers of split congress vs. that of the nine years of gridlock.  We see little difference between times of split congress and those of same party occupancy.  When congress is split we do see higher returns, but when we ran the regression, this t-stat was so puny it wasn't worth mentioning. 

So what should we take?

1) Political control is not necessarily the driving factor for equity market returns.  Much more prevalent are unemployment, GDP, sentiment, and corporate earnings.  So when planning allocations, you should probably worry more about monetary policy and underlying fundamentals. 
2) Don't expect the gridlock to last.  The average number of years that congress remains in gridlock is three.  I am willing to bet that regardless of who comes out on top during the next election, someone will come out on top.  When you really think about the period of time we are in, that estimate is not too hard to explain.  I believe that Republicans have actually put themselves in a tough situation.  When everything is said and done (two years from now) the blame will be placed on the republicans.  If they have turned things around then we are likely to see Mr. Obama unemployed, as well as Republican control of house and senate.  If things stay the same or worsen, I think we can expect to see re-election, and the democrats retaking the house.

Kevin

"Absence makes the heart grow fonder. The quest for the McRib happens throughout the country each year."

That's right, the McRib is back at McDonald's. Hate it or "love it" the pork patty bbq sandwich is back on the menu for a limited time-- six weeks to be exact. As our country swells not by population, but rather in size (as measured by BMI) so too does the fast food industry. Despite the known health issues of dining at your local McDonalds or Burger King, many of us frequent such establishments. Some cite the convenience and speed of service as their reasoning while others just admit that they enjoy a succulent BigMac Meal. But even if you don't enjoy fast food dining, you may want to take a serious thought about buying some shares in MCD.

So keep an eye on the Golden Arches this week, perhaps the long awaited return of the McRib could "Super Size" stock price.

The following article describes McRib lovers... "legions of McDonald's fans await Tuesdays nationwide return of the McRib sandwich, a pressed pork patty sandwich with no ribs, 26 grams of fat and a committed cult following."

http://www.latimes.com/business/la-fi-1102-mcrib-20101102,0,381391.story

Anne Cates on the McRib

http://www.marketwatch.com/story/mcdonalds-mcrib-is-mcback-2010-11-02

McDonald's Corporation (Public, NYSE:MCD)

http://www.google.com/finance?client=ob&q=NYSE:MCD

An article on the World's Fattest Countries- US checking in #18

http://www.forbes.com/2007/02/07/worlds-fattest-countries-forbeslife-cx_ls_0208worldfat.html

Shane

Weekend Reads 11/7//2010

St. Bonaventure Men's Soccer team clinches post-season birth (here)

Women's Soccer finishes up one of the most successful seasons in program history (here)

Quick October review of hedge fund results (here)

Trade deficit is expected to shrink thanks to weaker dollar (here)

Christian the Lion (here)



Kevin

Stories of the Day 11/5/2010

Is Buffett showing signs of aging (in terms of performance, that is)?  His Berkshire Hathaway saw net income drop by 8% this quarter.  According to the company, newly acquired Burlington Northern added to the bottom line.  The drop was caused by paper losses on their derivatives portfolio. 
http://finance.yahoo.com/news/Berkshires-3Q-net-income-apf-2853681267.html?x=0&sec=topStories&pos=1&asset=&ccode

Positive jobless data helped broader market equity prices increase.  The Unemployment Rate remained unchanged at 9.6% and we added to payrolls by 151,000.  The dollar also rose, and treasuries fell.  However, not all data was positive as pending home sales fell for the month of September.
http://www.bloomberg.com/news/2010-11-05/u-s-added-151-000-jobs-in-october-exceeding-forecasts-unemployment-9-6-.html

Bill Fleckenstein and Barton Biggs go toe-to-toe on the issues involved in QE2.  Interesting quotes from the video include "Easy money gets markets up, but easy money doesn't necessarily solve the problems" and "Quantitative Easing is Clueless".  The video is really good and very informative.  Check it out.
http://dealbreaker.com/2010/11/bill-fleckenstein-would-like-an-answer-from-bloomberg-anchor-betty-lui/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+dealbreaker+%28Dealbreaker%29

Kevin

Lady Bonnies Roll Over Minutemen

Congratulations to the Women's Soccer team who earned the programs first post season victory with a 2-0 decision last night against UMASS in the Kingston, RI. The Brown and White were lead by Anna Cunningham and Tori Burchett who both tallied a goal in the contest. Fittingly enough both Anna and Tori were honored by the A-10 Conference Wednesday night. Cunningham earned a spot on the Conference's First Team while Burchett was selected as Honorable Mention All Conference. Nicole Markert earned her 6th shutout of the year with the 2-0 win. With Nicole in between the pipes this year the team boasts an impressive 11-5 record.

The ladies will take the pitch tonight against Dayton, kick-off is slated for 7:30. The game is sure to be a battle as the Flyers will be seeking revenge. Just twelve days ago the Bonnies handed Dayton their first regular season loss in over two years. Although beating a nationally ranked team twice in two week span is certainly a tall task, the team remains optimistic. Junior Dakota Carroll says "the team is feeling good and confident" and added with excitement that Bonnies never say die! The team may be in uncharted waters but with a passion to win and the confidence to succeed anything is possible. Go Bonnies!

Shane

Stories of the Day 11/4/2010

Here are a couple of stories that we felt were important:

WARNING: The Dow Jones Industrial Average has now reached pre Lehman Bros. levels. The DJIA finished just above its close on Friday September 12, 2008. This article is a good macro review of the days happenings.
http://www.marketwatch.com/story/dow-back-to-pre-lehman-level-2010-11-04

Jean-Claude Trichet vs. Ben Bernanke, ECB vs. the Fed, Quantitative Easing vs. Exit Strategy ... Who's right? Which is headed in the right direction? What will work best? All of these questions are to be examined in the next few weeks, months, and possibly years; all of this comes after President Jean-Claude Trichet announced that the European Central Bank would not stray from its plans of an exit strategy. This announcement in so many ways contradicts the ideas and beliefs expressed by the Federal Reserve yesterday. Obviously these are two different economies, but in a global economy where everything is connected, something about these two offsetting statements seems a bit fishy. We will see what is to come.
http://www.bloomberg.com/news/2010-11-04/trichet-says-interest-rates-are-appropriate-as-ecb-gauges-fed-ireland.html

ChartFacts gives you 3.6 Million Data sets to build and share charts with. For those of you who do not have access to a Bloomberg Terminal, or other type of charting software, you need to try this out. You should be on seeking alpha anyway, but if your not then go sign up. Add the application and start charting. Here's the link to the article:
http://seekingalpha.com/article/234374-chartfacts-3-6-million-data-sets-at-your-fingertips?source=hp_wc&wc_num=2
And here is a sample chart (This does the application no justice, but you can customize everything. ChartFacts is extremely powerful):

Kevin and Shane

How to Be a Millionaire by Age 25

I'm sure many of you have made it a point to get to the box office and catch the most recent hit movie. I'm talking about The Social Network. If you haven't seen it I would imagine your aware of the plot... chronicling the co-founder of Facebook, Mark Zuckerberg.

As a graduating senior searching for job opportunities I found this article to be a fun read. Although being a millionaire by 25 may seem impossible; here a few folks who would tell you different. So dream big! Enjoy.

http://finance.yahoo.com/career-work/article/111047/how-to-be-a-millionaire-by-age-25?mod=career-worklife_balance

Shane

Inflation Expectations in the US Bond Market

Bond markets are telling, and often times great predictors of the future.  With all of the talk of Quantitative Easing 2, and the announcement yesterday, I wanted to see what the bond market feels about QE2's effect on inflation. 

In the first chart, I just want to show the current spread.  We see that over a 10 yr period, bond investors are expecting to see 2.18% inflation. To explain, the 10 yr Note Yields 218 bps more than the 10 yr Treasury Inflation Protected Security (which has no interest rate risk).




First Chart:  10 Yr US Treasury Bond Yield Index (orange) against the 10 Yr US Treasury Inflation Protected Bond Yield Index (white) over the last year.

 In the second chart, which is the same as the first just over a shorter period, we see the increase in this spread.  It shows that in the past month (the time period in which we have started to see serious talk about Quantitative Easing 2) the expectation for inflation has increased by over 20%. 

Second Chart: 10 Yr US Treasury Bond Yield Index (orange) against the 10 Yr US Treasury Inflations Protected Bond Yield Index (white) over the last month.

It will be interesting to see how Quantitative Easing works out.  This spread is one indicator to watch, as it will give you real time inflation expectations. 

Kevin

Monkey Business

Below is the video we watched in 401 yesterday of a couple of problem solving monkeys. We love this video too much not to post it. Enjoy

http://www.youtube.com/watch?v=aAFQ5kUHPkY

Kevin and Shane

Better Understanding "The Goldman Sachs"

I watched this video the other night.  It is an impressive account of the most prestigious financial firm done by CNBC's David Faber.  It really shows both sides of the argument.  If you haven't seen it on CNBC, its a must watch ... so check it out here. 


"Goldman Sachs Power and Peril"
For full disclosure, SIMM (Students in Money Management) owns Goldman Sachs.

Kevin

Calling All Gamers...

For those of you who enjoy spending your nights on the couch talking trash to your fellow gamers on X-BOX 360 or PlayStation 3 perhaps your love for Call of Duty or NHL 2011 garners more respect than others may think. On the surface you may be seen as a "gamer" who spends far roo much time away from reality. However, I am here to ensure you that your quick thumbs drive a successful industry, and one that garners far more analysis than the average person may think. Not only have video games been a part of our childhood but if you choose, may play an important role in your future. As the market rebounds from recession "tech stocks" continue to catch my eye. So the next time your about to "snipe" whether it be in a team deathmatch on Call of Duty or with Alex Ovechkin on NHL remember it's not always fun and games... there's money to made.

http://www.marketwatch.com/story/electronic-arts-aol-lead-tech-stock-action-2010-11-03?siteid=yhoof

Shane

Is Behavioral Finance a Growth Industry?

In our most recent advanced corporate finance classes (401) we have been discussing Behavioral Finance. I have found it to be some of the most interesting material covered thus far. But then again who wouldn't love watching youtube videos of monkeys instead of listening to a lecture (sorry Prof. Mahar). Anyways here's an article I found that particularly tickled my interests in the field. Enjoy.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=444

Shane

Stories of the Day 11/3/2010

Here's a quick look at a few developments from the day.

Republicans take the house of representatives, win a significant portion of governor's races, and come outrageously close to winning the senate as well. This marks major change in Washington and it will be interesting to see what happens over the next two years. Unfortunately for former Bonaventure graduate Carl Paladino, he did not win the governor's race in New York State. Check the link for complete election results.

http://www.cnn.com/ELECTION/2010/results/main.results/

The formerly debunked General Motors has announced its "new" IPO. The shares are expected to price between $26 and $29, and begin trading on November 18th. The company will announce quarter results on November 10th. It will certainly be a busy couple of weeks for GM.

http://www.bloomberg.com/news/2010-11-03/gm-seeks-10-6-billion-in-ipo-to-cut-treasury-canadian-stakes-in-carmaker.html

The Federal Reserve announced today more details for QE2 (Quantitative Easing Round 2). The Fed plans to buy $75 Billion of treasuries per month, totaling $600 Billion. They also left benchmark interest rates at the 0% to 0.25% range.

http://www.bloomberg.com/news/2010-11-03/federal-reserve-to-buy-additional-600-billion-of-securities-to-aid-growth.html

Kevin and Shane

Successful Week for Bonaventure Athletics

Lets give where credit is due. St. Bonaventure Athletics and particularly a few familiar faces have recently earned some impressive accolades. Below are links to some of our fellow teammates' and your fellow students' stories.

Men's Soccer earns 5th place Mid-Atlantic Regional Ranking

http://gobonnies.com/sports/m-soccer/2010-11/releases/20101102a9wzrg

Kevin Okapal earns spot on ESPN Academic All-District First Team

http://gobonnies.com/sports/m-soccer/2010-11/releases/20101102r1t3nc

Emmett O'Connor earns second A-10 Rookie of the Week Honor

http://gobonnies.com/sports/m-soccer/2010-11/releases/201011015phmnb

Anna Cunningham earns spot on ESPN Academic All-District Second Team

http://gobonnies.com/sports/w-soccer/2010-11/releases/20101103lg4sx2

Andrew Nicholson's bright future chronicled by ESPN

http://gobonnies.com/sports/m-baskbl/2010-11/releases/20101102vhd3w4

Kevin and Shane

Think you have what it takes to be an investment banker?

If you're like me perhaps you dream of a successful career in investment banking. Maybe you'd rather move to Vermont and own your own emerging maple syrup conglomerate. Either way, here's a quick read on what you can expect if you're trying to break into a career in investment banking. Enjoy.

http://www.careers-in-finance.com/ib_breakin.htm

Welcome

Welcome to Random Talk. Whether you are a one time visitor, or a follower we hope you like what you see. The blog is run by Kevin Mjaatvedt and Shane Nolan, two students at St. Bonaventure University. We will attempt to keep you interested with what in our mind, is important news and insightful analysis regarding financial markets. However, anything and everything is fair game so whether it be Bonaventure news, political news or random accounts of nights downtown in Alleghany (okay, probably not), anything is in play. You will likely see some sort of competition between the two of us, but we will explain every new feature when it is released. Again hope you enjoy, and feel free to contact either of us by checking out our profile.

Kevin and Shane