GalaTime

The past few weeks have led to a whole range of new words & phrases being added to the financial world’s vocabulary, such as:

• Fannie Phony & Freddie Fraudy
• United Socialist State Republic of America
• Comrade Paulson
• Federal Reserve Pawn Shop
• In Goldman Sachs we trust
• Federal Reserve Pay-Day Loans
• Bill (Please bail me out, again!) Gross
• Lehman Lie-man
• Lehman Too big to fail Too small to bail
• Bailout Nation
• Bailouts ‘R Us

Sources: Bloomberg, CalculatedRisk, BigPicture, RGE Monitor, . . .

Any others?

With everyone & their grandmother offering their analysis on the future of Lehman Brothers, I figured I’ll also chip in some unsolicited advice: Lehman’s market cap is down to $2.5B - and dropping fast every day; assuming that David Einhorn’s Greenlight Capital probably made a cool $1B shorting Lehman, wouldn’t it be nice & clean for Einhorn to just reverse his trade and buy-out Lehman?

• Financial Times: Global equity trading falls 37%

The value of equities traded on global exchanges last month fell 37% compared with the same period a year ago, while derivative volumes fell 21%.

“Hedge funds are trading less because they can’t get leverage, since investment banks are short of capital to lend them,”

Volumes on the Shanghai stock exchange fell 78% compared with the same period a year ago.

So it wasn’t just the summer doldrums - NSE CM Turnover - August sucks!

• Economic Times: Promoters go for name change to escape bears

There has been a mad rush to change names with as many as 17 companies doing so in August and 36 in the past three months.

A new name, preferably with words like ‘infrastructure’, ‘energy’ and ‘power’, has apparently worked magic for shares of some of the recent name changes. The sharp gains, however, are not supported by good fundamentals or any positive announcements.

Brahmaputra Infraproject (formerly Mewar Industries) is one notable example where the stock shot up nearly 50% against a 1.5% fall in the Sensex in the past one month

Sort of reverse of 1999, when every promoter was adding ’software’ or ‘dot-com’ to their company name.

• Financial Times: Masterful inactivity can turn out the best option

Sometimes it is better not to invest, however, as demonstrated by an Indian property fund last year. After a significant fund raising, the manager, who wishes not to be named, could not find any suitable investments.

Finally, months later, he gave the cash back to investors, who were unlikely to have been disappointed. This was one of the top performing Indian property funds just by virtue of having kept the money in a bank.

Did he earn management fees of 2% p.a. for keeping the money in a bank?

• RGE Monitor: Asia ex-Japan Strategy: Earnings Growth: Used to Be 10%, Now 4%, Soon Zero

Asia now has four markets where earnings growth rates for 2008 are set to be negative: HK (due to the Hutch effect), Malaysia, Singapore and, the new joiner, Taiwan. At the other end of the spectrum are Thailand with 114.8% EPS growth, India and Indonesia at close to 16% and China at 15.4%. In the case of Thailand, most of the growth is due to the low base effect (2007 EPS growth was -35%) but for the others the risk to further EPS downgrades has to be a
high certainty event.

Nine is the average number of months that earnings have been downgraded (12 months forward) before stock market returns have turned positive on a 3, 6, 9 and 12-months basis.

• Economic Times: Astrologers make a killing as bulls turn to stars

A player like ganeshaspeaks.com got into the business of predicting stock market trends five years go. Today, the client base in excess of 150 and is growing by 20% each year. Mr Joshi is quick to admit that astrology is not 100% accurate, but rather it improves the rate of success by 20-25%. He charges Rs 1,000 as a monthly fee and speaks of stock brokers and fund managers as his clientele.

Astromoneyguru.com, meanwhile, has seen its client base jump four-fold from 1,000 to about 4,000 over the past three years.

At the end of it, what is required is the coming together of three critical factors — an understanding of markets, astrology and a certain level of computer literacy.

There’s a sucker born every minute.

• Washington Post: A Few Speculators Dominate Vast Market for Oil Trading (thanks for the link, Arjun)

Even more surprising to the commodities markets was the massive size of Vitol’s portfolio — at one point in July, the firm held 11 percent of all the oil contracts on the regulated New York Mercantile Exchange.

The CFTC, which learned about the nature of Vitol’s activities only after making an unusual request for data from the firm, now reports that financial firms speculating for their clients or for themselves account for about 81 percent of the oil contracts on NYMEX, a far bigger share than had previously been stated by the agency.

. . . at the end of July, just four swap dealers held one-third of all NYMEX oil contracts that bet prices would increase.

PS: A counter argument to the claim that speculation drove oil to $147.

• NY Times: Has Oil Peaked?

The people who run the Dow Jones industrial average are messing with it again, and in that, there could be a warning that oil prices have peaked.

Dow announced today that Chevron and Bank of America will enter the DJIA on Feb. 19, replacing Honeywell and Altria. Dow has a record — not a perfect one, to be sure, but a good one — of climbing aboard trends when they are close to ending.

• Barron’s: This Credit Crisis Has a Long Way to Run

Ten years would be a perfectly normal period of time to go from a peak of a great bubble [like the one in 2000], based on the history of bubbles and their aftermath, to the low. I have long thought that 2010 would be when we hit the biggest discount to fair value. Trend-line value on the S&P, by the way, in 2010 is 1100. (The S&P 500 traded at 1334 late last week.)

I have yet to meet a private-equity firm that put into its spreadsheet the assumption that systemwide profit margins could decline by 20% to 30%. They have taken the current, abnormally high profit margins as a given and then determined to improve them by, let’s say, 15% and assume everything works out pretty well.

• Wall Street Meltdown

• IHT: Warren Buffett, investor on a hot streak, makes more deals

On Friday, Buffett stunned Wall Street by announcing that he would enter the troubled bond insurance business. He also spent about $440 million for a unit of ING Groep, the Dutch financial giant.

Three days earlier, on Christmas, he agreed to buy a $4.5 billion stake in the industrial conglomerate owned by the Pritzker family. And a few weeks before that, he waded into the junk bond market, buying $2.1 billion of debt issued by TXU, the electric utility.

• NY Times: Winners and Losers in a Year of Deal-Making

DEALMAKER OF THE YEAR To Rupert Murdoch, who did the impossible, again. You bought virtually the only asset in the world that wasn’t for sale. And you did it without having to raise your bid. Granted, the price might never make financial sense, and you were negotiating with the gang-that-can’t-shoot-straight. But for you, the asset is priceless. Now please don’t mess it up.

FROM PAWN TO KING AWARD To Nelson Peltz of the Triarc Companies. Nelson had a huge year. Once considered the Rodney Dangerfield of Wall Street, not getting any respect — he was described in “Predators’ Ball” as Michael Milken’s “pawn” — he has reinvented himself as an activist investor in recent years. But he’s no hold-up artist. Managements at Heinz, Wendy’s and Cadbury Schweppes have begun listening to him, perhaps under duress, but listening nonetheless. All shareholders seem likely to reap the benefits.

• Washington Post: An Inconvenient Year
  

. . . other than that, 2007 was a disaster. American consumers came to fear products manufactured in China, which covers pretty much everything in the typical American home, except the dirt. Global warming continued to worsen, despite the efforts of leading climate experts such as Madonna and Leonardo DiCaprio, who emerged briefly from private jets to give the rest of us helpful tips on reducing our carbon footprints.

On the economic front, the dollar continued to lose value against all major foreign currencies and most brands of bathroom tissue. There was a major collapse in the credit market, caused by the fact that for most of this decade, every other radio commercial has been some guy selling mortgages to people who clearly should not have mortgages. (“No credit? No job? On death row? No problem!”) It got so bad that you couldn’t let your dog run loose because it would come home with a mortgage. The subprime mortgage fiasco resulted in huge stock market losses, and the executives responsible, under the harsh rules of Wall Street justice, were forced to accept lucrative retirement packages.

For those who have wondered about option trading being sexy, here is a fitting reply, courtesy of an ad at Yahoo Finance:

OK, Galatime.com has officially arrived. It was on Conde Nast’s Portfolio.com:

Yes, I know what this reminds you of - that scene in Monster’s Inc where Mike Wazowski is excited to see himself on TV.

TV Ad: We’re M. I… Monsters, Incorporated. We scare because we care.

Mike: I can’t believe it.

Sully: Oh, Mike…

Mike: I was on TV! Did you see me? I’m a natural!

For your weekend entertainment (as long as you don’t own toxic/subprime/marked-to-zero CDOs or bank with Northern Rock.)

Found via the PMarcA blog.