For the green shoots believers, a dose of reality: The Journal of Commerce reports that the Cass Freight Systems Index (Cass is a company that tracks freight spending) fell by a whopping 25% in April 2009 (hat tip to ZH).

This comes on the heels of a strong run-up in transports. The IYT Index that tracks this segment dipped below $40 in early March. At close of day on Tuesday it logged $59.54. Freight shipments and freight spending are the lifeblood of the U.S. economy and a key leading indicator for economic activity as both retailers use them to replenish inventories and durable goods.

Continue reading Doomsday Scenario: U.S. freight index falls 25% in April

Doomsday Scenario: U.S. freight index falls 25% in April originally appeared on BloggingStocks on Wed, 06 May 2009 09:10:00 EST. Please see our terms for use of feeds.

Apple, Inc.

Continue reading Doomsday Scenario: Rotten Apple, hedge fund lies, bad case of natural gas

Doomsday Scenario: Rotten Apple, hedge fund lies, bad case of natural gas originally appeared on BloggingStocks on Fri, 06 Mar 2009 17:40:00 EST. Please see our terms for use of feeds.

Lies and statistics: Home sales did NOT rise originally appeared on BloggingStocks on Thu, 25 Oct 2007 16:25:00 EST. Please see our terms for use of feeds.

There has been considerable debate about the role of momentum in sports. In a landmark study, Thomas Gilovich and several colleagues provided evidence that the "hot hand" in basketball was nothing more than a myth. Since then, there has been considerable research suggesting that many of the old saws about sports are untrue, and a movement toward more enlightened analysis has emerged, best exemplified in Michael Lewis' book Moneyball.

In this weekend's Wall Street Journal, Allen St. John wonders about the idea of "momentum" heading into baseball's post-season.

He writes that "while much is often made about late-season momentum as a harbinger of playoff success, in reality the relationship between the two is small... The playoffs are truly a second season. Only once since the advent of the wild card has the team with the best regular-season mark (the 1998 Yankees) won the World Series."

So if your favorite team has limped into the post-season, don't worry about it! Occasionally, there are legitimate reasons to fret over lost momentum. If a team has experienced a disastrous September because of injuries to its top starters, that will be a problem heading into the post-season -- not because of momentum, but because the pitchers are likely to remain unavailable!

I would argue that investors should look at the stock market the same way. Rather than buying into the idea of "momentum" in the stock market (I've seen no evidence that such a phenomenon really exists), think about factors that actually effect the business. Leave the cliches about "fighting the tape" and "moving averages" to the old wives.

Baseball playoffs: Does momentum exist? originally appeared on BloggingStocks on Sun, 30 Sep 2007 13:10:00 EST. Please see our terms for use of feeds.

Most investors probably think that when an investment ratings service like Moody's, Standard & Poors or Fitch gives a company, financial institution or security the highest rating of "AAA," it carries the least possible level of risk. Most investors would think that this rating would be reserved for United States Treasuries and only the most secure of companies like Berkshire Hathaway (NYSE: BRK.A), Johnson & Johnson (NYSE: JNJ), or United Parcel Service (NYSE: UPS). Actually, this happens to be the case, and these companies are among the very few to receive AAA ratings outside of financial institutions.

So what happened in the case of the Collateralized Debt Obligation (CDOs), where the ratings agencies determined that high-risk securities batched together had a smaller chance of default than the individual securities? Perhaps that is the case, but triple-A? Well, it seems to me that large investment banks knew they needed the AAA ratings to have a marketable security. They went to the ratings agencies that understood this and the agencies created the rational or plausible deniability to support the rating. This may be a bit harsh, but it does seem that the ratings agencies were working in reverse: first establish the rating and then the support for the rating. The ratings services are all heading for cover and many of the previously AAA-rated securities are being re-evaluated.

Continue reading Subprime = Triple-A ratings? or 'How to Lie with Statistics'

Subprime = Triple-A ratings? or 'How to Lie with Statistics' originally appeared on BloggingStocks on Wed, 25 Jul 2007 15:50:00 EST. Please see our terms for use of feeds.