It started with Dubai. Then it spread to Greece, Now its moving to Spain and Portugal. What is it? It's fear that some European countries will default on their sovereign debt.

The Europe Markit Sovx index, which measures the cost of insuring against default, jumped 100 basis points for the first time, along with heavy buying of credit default swaps (CDS). CDS spreads on Portugal hit record highs, up 17 basis points to 212. Greek swaps rose 7 basis points to 398.

Continue reading Fear over Sovereign Debt Rattles European Markets

Fear over Sovereign Debt Rattles European Markets originally appeared on BloggingStocks on Thu, 04 Feb 2010 12:00:00 EST. Please see our terms for use of feeds.

Except for the chosen ones -- CEOs and the like who have outrageous salary and benefit packages -- almost nobody has been able to escape the financial pain in the world today.

'My pal Warren,' Chairman of Berkshire Hathaway (NYSE: BRK.A and BRK.B), who only draws a $100,000 salary, has watched his net worth diminished by billions of dollars as his stock has unraveled like everything else. I last read Buffett had a 31% stake in Berkshire so he understands his shareholders angst, even if he does not feel their pain. The stock has dropped from a 52-week high of $151,650 to yesterday's close of $77,500 for a loss of 49%.

Once again in quarterly SEC filings Berkshire's holdings were released and I could not help but wonder if this great holding company had not become one more giant index fund. There are a lot of quality names in the mix including:

• Burlington Northern Santa Fe (NYSE: BNI)
• Coca-Cola (NYSE: KO)
• ConocoPhillips (NYSE; COP)
• Johnson and Johnson (NYSE: JNJ)
• Kraft Foods'A' (: NYSE: KFT)
• Procter and Gamble (NYSE: PG)
• U.S. Bancorp (: NYSE: USB)
• Wells Fargo (NYSE: WFC)

The above referenced stocks are all down with the market and there are still more that might be considered fallen angels or turn-around plays within Berkshire's holdings that include:

• American Express (NYSE: AXP)
• General Electric (NYSE: GE)
• Goldman Sachs Group (NYSE: GS)
• Home Depot (NYSE: HD)
• Lowe's Cos (NYSE: LOW)

In addition to these publicly traded stocks Berkshire holdings include privately held Geico Insurance, See's Candies, Dairy Queen, Florsheim Shoes, and a multitude of others. Since so many stocks have been accumulated over the years I started to view BRK as a stock index and with that in mind did some comparisons between the Standard & Poors 500 and BRK.

The following is a three-year chart that illustrates that buying BRK instead of the index anytime in the last three years would have been beneficial by a 30% margin.

Continue reading Is Berkshire Hathaway better than S&P Index?

Is Berkshire Hathaway better than S&P Index? originally appeared on BloggingStocks on Fri, 21 Nov 2008 17:00:00 EST. Please see our terms for use of feeds.

Strength of REITs shows market offers no easy money originally appeared on BloggingStocks on Thu, 03 Apr 2008 17:46:00 EST. Please see our terms for use of feeds.

According to a study written up in the New York Times (subscription required) this week, it isn't lousy management's frequent trading that's responsible for the poor performance of mutual funds. Nope, it's the investors who redeem their shares and force the funds to sell even if they don't want to. The study found that "liquidity-motivated" trades perform poorly compared to trades based on fundamentals.

Mark Hulbert, the author of the piece, suggests that investing in closed-end funds may be a way to avoid this problem, because they generally don't face redemption. In an exchange-traded fund, an investor who wants to sell shares just sells them to another investor. It's just like how selling shares of McDonald's Corp. (NYSE:MCD) would have no impact on the operations of the company.

And yet there's still a problem: Regardless of what any study says, mutual funds simply cannot, on average, outperform passively managed indexes. It's a zero-sum game. Before expenses, the average fund's performance can only be average. After expenses, the average fund is considerably below average. The fact that ETFs are almost always passively managed (rebalanced/adjusted once a year generally) is a large contributor to their outperformance. The fact that they are immune to redemptions by panic-stricken shareholders at precisely the wrong time adds to their value.

The more I study it, the more obvious I think it becomes: ETFs are probably better than traditional mutual funds for most investors.

Mutual fund underperforming? Blame the shareholders! originally appeared on BloggingStocks on Mon, 15 Jan 2007 18:10:00 EST. Please see our terms for use of feeds.

Engadget Index up $19.20 on first day 'trading' originally appeared on BloggingStocks on Thu, 26 Oct 2006 18:02:00 EST. Please see our terms for use of feeds.

• 3M Company (NYSE:MMM), $79.20 up 3.66% today; 52-week high $88.35; 52-week low $67.05. P/E 17.47. Latest quarter results show it is up 6% on LCD growth. I think that P/E is nice and low for a company which, despite its industrial roots, is really an innovative company that actually makes things that people want. A good 10% below the 52-week high sounds like lots of room to me.

Continue reading Dow 12,000: Where to go from here? Five stocks with room to zoom

Dow 12,000: Where to go from here? Five stocks with room to zoom originally appeared on BloggingStocks on Fri, 20 Oct 2006 16:46:00 EST. Please see our terms for use of feeds.

I'm looking at my screen and I rub my eyes. Could it be? On the left-hand column I read a headline, "Slowing Economy Spurs Bond Rally." Over there in the side bar is the cute box that shows the Dow Jones Industrial Average and the S&P 500. The chart spikes peppily. "11610.55" is the bright number next to DJIA. "1330.60" reads the S&P 500 -- its five-year high. [Update: at market close, the S&P 500 had hit a brand-new five-year high of 1336.34, with the DJIA at its 2006 high and second-highest close ever, 16669.39.] The world is full of bright, happy green that seems to belie the sad economic data, the slow in advertising, the doom for American autos.

Could it be true?

It seems as if it is. One one side we have the DJIA and the S&P 500. The Dow's all-time high is 11,750 (140 90-ish points away), while the all-time closing high is only 11,722 (that's 111.45 52.61 points away from right now, if you're counting along with me). The S&P is raring to go, as well, creeping ever so slowly up towards its all-time high of 1,552 (although it's still 222 215 points away, 16.6% 16.1%). Strikingly, the current level is higher than the index has been for five-and-a-half years.

And yet, still, economy slumps, slows, dips, weakens. Why are consumers so confident, why are investors eagerly buying up stocks, while the rest of the indicators seem to warn them away? I've searched my brain for a creative answer, and can't discover one. What do you think?

Dow, S&P near all-time highs while economy slumps. Why? originally appeared on BloggingStocks on Tue, 26 Sep 2006 17:37:00 EST. Please see our terms for use of feeds.