Category Archives: stocks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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