The Tasgall Group

Here’s a lighter note from back in July 2002 at the bottom of the bear market:

If you had purchased $1,000 worth of “WorldCom” stock one year ago, it would now be worth US$10.59. If you had purchased US$1,000 worth of “Enron” stock one year ago, it would now be worth US$0.71. If you had purchased US$1,000 worth of “Budweiser” (the beer… not the stock) one year ago, drank all the beer, then traded in the cans at the redemption center, you would have US$107.

Given the current conditions of the market, drink heavily and recycle.

The NY Times has a good calculator online that compares the cost of buying versus renting, and is worth playing with a bit…

From Bloomberg:

Federal Reserve officials agreed last month that higher interest rates could still “prove necessary” even as they removed a reference in their policy statement to tighter credit.

And here’s the definition of jawboning:

…to attempt to influence or pressure by persuasion rather than by the exertion of force or one’s authority, as in urging voluntary compliance with economic guidelines…

If anyone still thinks that the Fed is trying to control inflation — they’re not.? They’re primarily interested in controlling inflation expectations.? Hence all the jawboning.

Ever wonder what is going on with Ben Bernanke’s personal finances?? Slate took a look back before he was appointed the Fed Chair position.?? Bernanke’s net worth is between $1 and $5 million, and he owns only one common stock — shares of Altria/Phillip Morris.
Also amusing…? the personal financial profiles of Barack Obama, Harriet Miers, Chief Justice John Roberts, and plenty more I’m sure…

You may have heard that Intercontinental Exchange (ICE) is making a $9.6 billion bid for the Chicago Board of Trade (CBOT). One of the more interesting factors is that the ICE “only” has a market-cap of $8.8 billion, which makes the acquisition price a very curious event.

How can ICE do that? They’re making the offering with new stock, which means they’d issue new stock worth over 100% of their current market cap. Most people can’t do things like that, but basically the management at ICE have managed to secure the equivalent of a line of credit with their investment banks. They’ve talked to the brokers that would help them issue the new stock, and convinced them to help them sell such a large chunk of shares. (In a deal like this, the investment bankers will make a ton of money in fees, so I doubt it took much convincing.)

So, the yield curve inverted back at the beginning of August 2006… a full 8 months ago. As we talked about a few times, the typical response to an inverted yield curve is a recession in 6 to 12 months…

Well folks, we’re smack dab in the middle of that timeframe now… and several of the yield spreads worth watching are closing in on the zero line.? Some would say the uptrend in the yield curve is the real harbinger of ill fates, rather than the inversion itself.

Anyone want to take a bet on whether or not we’re heading into a recession?

I find myself reading a few good blogs consistently, one of which is The Big Picture. Here are two of the recent highlights:

Small Cap vs. Large Cap

Today, the market cap weighting is once again hiding something significant from investors: This time, its the fact that the stock market isn’t particularly cheap. The relative cheap prices of the OEX100 (S&P100) is hiding the relative prices of the rest of the index…

How different? “According to Ford Equity Research, the average P/E ratio among the 50 largest-cap companies is now 19” — thats about 30% of what it was for the grouo in March 2000. On the other hand, the 50 smallest companies P/E ratio is now 30.7 — 50% higher than it was in 2000.

The Market as a Forecasting Tool

Mr. Market is at times a Rorschach test, a blank slate upon which participants project their hopes and fears. He reveals the personality characteristics and emotional functioning of investors by their interpretations of the noise he generates. Remember this the next time you are tempted to create a grand theory of what happens next based only upon a few of his recent squiggles…

Just found this annecdotal quote from Mish’s blog (not sure if it is true, but it could be):

Earlier this year I received a note saying the Core Bond Fund in my 401k was changing to a new bond fund this year. They nicely transferred the old holdings to the new fund without any cause for action on my part.

…The new fund is almost 37% invested in mortgage securities. The old was only a tad over 1%.

Imagine my surprise when the value of the [new] fund had dropped almost 13% from Friday to today! [3/2/2007 -3/5/2007]

(more…)

I find it amusing when the USPS announces their “forever stamp” and the implicit statement that makes regarding inflation…

The post office is basically admitting that their services and their costs will always continue to rise, a sign of perpetual inflation.? While the forever stamp makes sense as a business case (it can’t be cheap to make those 1c and 2c stamps all the time), it is another example of the increasing costs of government service, and the pricing distortions caused by monetary inflation.

Here’s a rather peering look into the mechanics in ARM and Option Arm loans that is an interesting read…? There are many different possible reasons for rates (and payments) to reset or recast…

The short version — it’s so complicated that it takes around 10 paragraphs just to cover a hypothetical loan.

Any wonder why the average homebuyer might not understand what they’ve gotten themselves into?? Especially when some smooth talking salesman tells them that their payments won’t go above $X per month for the first year… and after that you can simply refinance if the payments adjust too high?