investors, VC-IPO, venture capital
In Investing on June 24, 2008 at 8:53 pm
Investor and entrepreneur Paul Kedrosky writes about decreasing number of VC-backed IPOs. In Q1 2008, there were 5 VC IPOs and so far, in Q2, there are zero. The five firms in Q1 raised a total of $282.7m which is 87% less than the $2.2b in Q1 2007 and 91% less than the $3b raised in Q4 2007.
Kedrosky points out that the investors seem to be making smarter choices. There have been 22 IPOs with a market cap greater than $100m and a share price over $5.
As you can see from the chart below, an equally weighted IPO investor would have easily outperformed the SP500 and Russell 2000 by 26% and 22% respectively.
Sources: Red Herring | Paul Kedrosky
economy, FedEx, John Paulson
In Investing on June 18, 2008 at 5:22 pm
Calculated Risk writes today that Chrysler is seeing June 20% below expectations.
Additionally, FedEx and shipping in general, are expecting a difficult 2009.
And lastly, John Paulson, who currently manages $28 billion, said global writedowns and losses from the credit crisis may reach $1.3 trillion. He notes, “we’re only 1/3 of the way through the writedowns” at the GAIM International hedge fund conference in Monaco.
Alt-A lending, Fed, housing crisis, subprime
In Investing on June 18, 2008 at 4:33 pm
Dave Merkel points out on Seeking Alpha 10 notes on resident housing prices:
1) residential real estate values are still fall nationwide.
2) Housing prices will fall another 10-15%.
3) Foreclosures are making a larger percentage of sales, meaning sale prices are still falling. For places like Sacramento, CA, foreclosures make up the majority of sales.
4) Government-sponsored enterprises (GSEs) like Fannie Mae and Fannie Mac are in trouble.
5) With housing prices depressed, labor mobility will also be limited.
6) Lending standards are going to tighten (duh).
7) Mortgage rates are rising because of the Fed chatter.
8) Prime adjustable rate mortgage (ARMs) will be the next target.
9) Housing starts remain low.
10) Alt-A and Prime are going to be an increasing problem in the near future.
Bespoke Investment, returns, SP500
In Investing on June 13, 2008 at 7:23 pm
The Wall Street Journal called the past decade “the lost decade” for US stocks. The SP500 is up just 1.3% over the last ten years if you account for inflation and dividends according to that article.
The folks over at Bespoke Investment went back to 1900 and charted the results. The noted, in red, the periods when the 10 year returns are lower than they are now.
CFO, Erin Callen, Ian Lowitt, LEH
In Investing on June 12, 2008 at 3:00 pm
I was just reading, “The Halo Effect” a few days ago. The authors spoke about the myths concerning the misattribution of potential success (or failure) in corporate management based on short-term outlooks.
Bespoke Investment Group just posted about Susanne Craig’s probable dismay after writing a glowing editorial on Erin Callan, Lehman’s CFO last month, only to see the firm facing selling pressures.
LEH just announced that it will be replacing its CFO only 3 days after announcing it was raising $6bln in new capital. The stock dropped sharply on the initial news reports trading down to $22.
Ian Lowitt will succeed Erin Callan as the Firm’s CFO. He joined LEH in 1994 from McKinsey and Company where he was an engagment manager. He holds a B.Sc in electrical engineering and a M.Sc. in digital electronics from the University of Witwatersrand in Johannesburg, South Africa. He is also a Rhodes Scholar.
bernanke, currency, dollar, trichet
In Investing on June 11, 2008 at 9:58 pm
Kathy Lien writes why she doesn’t expect the US dollar to hit a new low against the Euro:
1) The continuing battle between Bernanke and Trichet is rather entertaining. Both have repeated warned of inflation issues, signally rather strongly that they will now be focused on policy issues. The tug of war between the ECB and the Fed will make it difficult to break out of the 1.53 to 1.58 price range.
2) The economic data is stabilizing. While non-farm payroll remains weak, pending home sales have greatly improved. The service and manufacturing sectors are showing signs of improvement. With the economy failing to spiral out of control, Bernanke and Trichet have the time to work on inflation.
3) The European market is looking pretty weak right now. In fact, the German government bond just became inverted; the 2-10 spread turned negative for the first time since 2000. (Note, the 2-10 spread is a strong leading indicator of a serious downturn).
4) The FXCM Speculative Sentiment Index has been flipping from negative to positive this week, indicating that range trading dominates the EUR/USD for now.
CPI, inflation fears, recession
In Investing on June 9, 2008 at 9:02 pm
The Wall Street Journal write about the Misery Index–a combination of inflationary measures and unemployment. They note it is technically still relatively low when compared to the 1970s but the truth is that the way they are measured have been dramatically changed–comparing 2008 vs 1973 makes no sense according to Barry Ritholtz.
Why? Because while the offical 5.5% seems love, the CPI is closer to 10+ with a Misery Index around 17% and 21%–closer to the1970s.
Core CPI, Ed Schafer, food inflation, inflation, Secretary of Agriculture
In Investing on June 5, 2008 at 8:24 pm
The Big Picture is reporting that Ed Schafer, US Secretary of Agriculture, told CNBC , “Internationally we’re looking at a 43% inflation rate in food this year,”
The core rate of inflation excludes food and energy, and allows for ‘cleaner’ longer-term trends. Of course, food and energy inflation matter for those of us breathing so look at both metrics.
Read more about Schafer here.
federal reserve, Jeffrey Lacker, moral harzard
In Investing on June 5, 2008 at 6:59 pm
The Big Picture notes that the Federal Reserve Bank of Richmond Jeffrey Lacker made a speech today in London criticizing the Bear Stearns Bailout.
“The danger is that the effect of recent credit extension on the incentives of financial market participants might induce greater risk taking, which in turn could give rise to more frequent crises, in which case it might be difficult to resist further expanding the scope of central bank lending.”
-Federal Reserve Bank of Richmond Jeffrey Lacker.
It is extremely unusual for a sitting Federal Reserve policymaker to critique the lending programs of the central bank.
credit, financial companies, LEH, risk management
In Investing on June 4, 2008 at 3:32 pm
Man Lehman is having a rough time right now. They fell 8.1% on Monday, slid another 9.5% on Tuesday. This comes even though they are buying back large amounts of its own shares to make themselves more attractive for a capital infusion (such a deal would be based on share price). It also had the additional benefit for shoring up confidence in management. This doesn’t work in the long run as Barry Ritholtz points out in his article–folks back in 1929 tried the same thing–and is tantamount to “swindling themselves.”
Lehman has lost $500m-$700m on certain hedge positions in the second corner and folks are still feeling skittish as they remember that Lehman has a tendency to not disclose enough information on its fiscal health.
Across the globe, financial companies have lost $380b in writedowns this year thanks to shobby risk management.
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