Wednesday, February 15, 2012

Some I would buy, given they are at certain levels:

* Charming Shoppes (CHRS), under $4.50
* Colgate-Palmolive (CL), under $85
* Clorox (CLX), under $65
* Cohen & Steers (CNS), under $31
* Dell (DELL), under $16
* eBay (EBAY), under $30
* E*Trade (ETFC), under $9.10*
* Ford (F), under $12
* iShares FTSE/Xinhua China 25 Index Fund (FXI), under $37.50
* General Motors (GM), under $24
* Goldman Sachs (GS), under $105
* Hewlett-Packard (HPQ), under $26.50
* International Flavors & Fragrances (IFF), under $57*
* KKR Financial (KFN), under $9.10
* Legg Mason (LM), under $26
* Lincoln National (LNC), under $22.50
* MetLife (MET), under $35
* MGIC Investment (MTG), under $4.10
* Och-Ziff (OZM), under $8.75
* Pitney Bowes (PBI), under $18.50*
* PepsiCo (PEP), under $64*
* Procter & Gamble (PG), under $63
* PNC Financial (PNC), under $55
* Prudential (PRU), under $56
* Schwab (SCHW), under $12
* ProShares UltraShort 20+ Year Treasury (TBT), under $19*
* T. Rowe Price (TROW), under $58
* Waddell & Reed (WDR), under $28
* XL Group (XL), under $18.50
* Exxon Mobil (XOM), under $78

*Eligible to buy at current levels

All Things Digital has tweeted that talks on Yahoo!'s (YHOO) sale of its Alibaba stake have broken down. Stock's getting hit; YHOO's a graveyard.

The sooner Greece declares bankrupcy, the sooner the market can move on fundamentals, not macro risk.

Headlines crossed today, reporting that Greece's Prime Minister says that a Euro Group meeting will take place in Brussels tomorrow.

More mumbo jumbo as Greece is hopelessly bankrupt.

The sooner they declare, the sooner the market can move on fundamentals not macro risk.

In a Q&A session at the 2006 Berkshire Hathaway (BRK.A/BRK.B) annual meeting, Charlie Munger, Berkshire's vice chairman, was asked about Dr. Siegel's theories.

Munger said, "I think Jeremy Siegel is demented."

Buffett, clearly embarrassed, added "Well he's a very nice guy."

Munger continued, "He may well be a very nice guy, but he's comparing apples to elephants in trying to make accurate projections about the future."

"What the wise man does in the beginning, the fool does in the end."

-- Warren Buffett

The combined market capitalization of Google (GOOG) at $200 billion and Microsoft at $257 billion is less than Apple's capitalization at $475 billion.

The combined market capitalization of each of Apple's key vendor rivals -- Samsung, Nokia (NOK) HTC, Motorola Mobility (MMI), Research In Motion (RIMM), Sony (SNE) and LG -- stands at $235 billion (less than half Apple's capitalization).

The 17 brands that make up Apple's smartphone competition have a total market capitalization that falls about $100 billion short of Apple's current equity value.

No one deserves this level of adulation -- no one.

I believe that the stock market will do better in 2008 than it did in 2007, when it chalked up a 5.5% return, the fifth year in a row that the market went up. Year-ahead forecasts for the market are notoriously difficult, but I believe that a 10% to 12% gain is possible, on the heels of a recovering financial sector. Financial stocks plummeted about 20% last year, and this was the reason why the market had a mediocre year. Outside of financials, the S&P 500 Index had double digit returns. A revival of financial stocks would spur good market gains this year.
-- Dr. Jeremy Siegel, "Outlook for 2008"

Over the past few weeks -- in a cover story by Gene Epstein in Barron's ("Enter The Bull"), in flattering words of endorsement from Jim Cramer on "Mad Money" and on Real Money, on CNBC's "Street Signs" and in an appearance on "Fast Money" -- Wharton Professor Dr. Jeremy Siegel has been heralded for his wisdom and forecasts.

History shows that the media has a penchant for untimely anointments -- the names are well known by all of us. Think Dr. Nouriel Roubini and his very incorrect view on stocks and of the economy since the generational low in 2009, or Meredith Whitney's wrong-footed view on municipals over the past 18 months.

I recognize that Roubini correctly forecasted the demise of the world's economy and the consequences of the mushrooming of the derivative market in 2007-08, and Meredith Whitney correctly predicted the demise of the domestic banking industry during the same time frame. And I also recognize that Siegel, along with many other pundits, expressed caution toward the sky-high technology multiples in late 1999 and early 2000.

But quite frankly, the streets of Wall Street are paved with geniuses who have made one great call in a row.

I don't mean this to be an ad hominem attack on Siegel (or on the others), but frankly I don't get the media's adulation, continued preoccupation and almost deification of these wags and their views.

Dr. Siegel comes off as a very nice person, but he is an academic who has been bullish at some very wrong times. Importantly, his theories regarding equities for the long term have been wildly off, as bonds have outperformed stocks for one, five, 10, 30 and 40 years, which, according to his investment thesis, is impossible.

His view on the fixed-income market also has been manifestly incorrect over the last two years. Dr. Siegel's Wall Street Journal op-ed, "The Great American Bond Bubble" was wrong in its conclusion back in August 2010.

In a Wall Street Journal column back in July 2009 -- "Does Stock-Market Data Really Go Back 200 Years?" -- Jason Zweig even questioned whether Dr. Siegel's data were compromised:

There is just one problem with tracing stock performance all the way back to 1802: It isn't really valid. Prof. Siegel based his early numbers on data first gathered decades ago by two economists, Walter Buckingham Smith and Arthur Harrison Cole.

For the years 1802 through 1820, Profs. Smith and Cole collected prices on three dozen banking, insurance, transportation and other stocks — but ended up including only seven, all banks, in their stock-market index. Through 1845, they tracked 19 insurance stocks, but rejected 95% of them, adding only one to their index. For 1834 onward, they added a maximum of 27 railroad stocks.

To be a good measure of stock returns, an index should be comprehensive (by including many stocks) and representative (by including the stocks commonly held by investors). The Smith and Cole indexes are neither, as the professors signaled in their 1935 book, "Fluctuations in American Business." They cherry-picked their indexes by throwing out any stock that didn't survive for the whole period, whose share prices were too hard to find or whose returns seemed "inflexible," "erratic," or "non-typical."

-- Jason Zweig, Wall Street Journal "Does Stock-Market Data Really Go Back 200 Years?"

As The Big Picture's Barry Ritholtz put it (in reaction to the above Wall Street Journal column):

Thus, Siegel's basis for Stocks for the Long Run [2] exclude 97% of all the stocks in the early history of the US market by cherry picking winners, ignoring survivorship bias, and engaging in data smoothing.


What did this do to the results? As you would imagine, it juiced them significantly. The era of 1802-1870 ended up with a much bigger dividend yield then it should have had. Siegel originally started at 5.0%, but over ensuing versions, that crept up to 6.4%. The net impact was to raise the average annual real returns during the first half of the 19th century from 5.7% to 7.0%.

If you artificially raise the initial returns in the early part of the data series, then the final annual returns become much higher. As Zweig sardonically notes, "Another emperor of the late bull market, it seems, has turned out to have no clothes.

To summarize, as Bill King has put it, "Permabull Jeremy Siegel, who has been not just wrong but magnificently wrong, is forecasting DJIA 15k."

As it is said, "Beware of false prophets of the past."