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  • Stewart vs. Cramer: A Cheap Shot [View article]
    Stewart owes Cramer nothing any more than Saturday Night Live owes something to someone they skewer. These are not news shows, and they don't need to pretend to be fair and balanced any more than Limbaugh. They have an agenda, and that's fine: ratings.

    While I don't think Stewart is smart enough about the markets to be the one to Monday morning quarterback ANYONE here, you have to admit...the clips of all these getting it SO wrong are funny and sad to watch.

    They are wonderful reminders that, at the end of the day, you have to DO YOUR OWN HOMEWORK. You don't buy Bank of America just because Cramer said on TV that it's going to $60.

    The moment Stewart downplayed the importance of the stock market as an indicator as to how things are going, he 100% lost me as someone whose opinion matters.

    Cramer, Stewart, Limbaugh, SNL...all ENTERTAINMENT. Nothing more. Do your own homework.
    Mar 15, 2009. 09:45 AM | 11 Likes Like |Link to Comment
  • Should Google Be Paying a Dividend? [View article]
    "The story asserts that Google simply doesn’t need that much cash to run the business - and that the company is unlikely to an acquisition of the size that would require that much capital."

    Perhaps the people at Google know more about Google's future plans than someone else's "assertion."

    And as someone else said, in the current market, cash is king.

    When a company begins to pay a dividend, it's basically saying, "We're running out of opportunities to deploy this capital--either internally or externally--and hit our target ROE."

    It could be that paying a dividend might in fact send the wrong message to current shareholders. Perhaps Google has big plans for that $16 billion war chest.
    Mar 7, 2009. 08:52 AM | Likes Like |Link to Comment
  • Siegel vs. Standard & Poor's [View article]
    Yes, I read this in the WSJ, too (2/28/09, Letters to the Editor):

    In his "The S&P Gets Its Earnings Wrong" (op-ed, Feb. 25), Jeremy J. Siegel claims that Standard & Poor's systematically understates the earnings of the S&P 500. In his view, the recent losses of the financial companies in the S&P 500 should be discounted because of their diminished weights in the index.

    His argument, however, fails the simple tests of both logic and index mathematics. A dollar earned or lost is the same, irrespective of whether it is earned or lost by a big index constituent or a smaller one.

    Prof. Siegel's example of Exxon-Mobil illustrates why S&P's method of calculating earnings works. If large Exxon-Mobil earned $10 billion and small Jones Apparel lost $10 billion, index investors collectively -- and individually -- would bear a proportionate share of both Exxon's earnings and Jones's loss, despite the fact that the value of Exxon-Mobil's shares in the index portfolio is about 1,381 times the value of the Jones's shares.

    To use an analogy, we could hypothetically view the S&P 500 as a single company with 500 divisions, with each division having earnings and an implicit market value. The smallest of these divisions could have an outsized loss that wipes out the combined earnings of the entire company. Claiming that these losses should be ignored or minimized because they came from a less valuable division is flawed.

    Prof. Siegel's approach -- applying the weights based on market values to the results based on a company's earnings -- effectively mixes apples and oranges.

    David M. Blitzer
    Managing Director, Chairman of the Index Committee
    Standard & Poor's
    New York

    On Feb 28 12:09 AM Ricard wrote:

    > I really don't get Siegel's point:
    > "Suppose on a given day the only price changes in the S&P 500
    > are that the largest stock, Exxon-Mobil, rose 10% in price and the
    > smallest stock, Jones Apparel Group, fell 10%. Would S&P report
    > that the S&P 500 was unchanged that day? Of course not. Exxon-Mobil
    > has a market weight of over 5% in the S&P 500, while the weight
    > of Jones Apparel is less than .04%, so that the return on Exxon-Mobil
    > is weighted 1,381 times the return on Jones Apparel."
    > "Yet when S&P calculates earnings, these market weights are ignored.
    > If, for example, Exxon-Mobil earned $10 billion while Jones Apparel
    > lost $10 billion, S&P would simply add these earnings together
    > to compute the aggregate earnings of its index, ignoring the vast
    > discrepancy in the relative weights on these firms. "
    > This is as it should be. Siegel goes way off thinking that earnings
    > should be weighted like price. In his example, Jones Apparel with
    > that enormous loss vs market cap would have an equally enormous negative
    > EPS, which then would require weighing. If done properly, you'd come
    > up with the same number had you simply done what Siegel accuses S&P
    > of 'improperly' doing.
    > Or, you could choose to eliminate price weighing on the index. Exxon
    > gains $30 billion in market cap, great, the index goes up by 30 billion
    > points (around 10% move upward). Jones loses $20 million in market
    > cap, great, the index goes down by 20 million points (around 10%
    > move downward).
    > Think of it this way - If GE's financial division reported a $30
    > billion loss, while its manufacturing reported a $15 billion gain,
    > GE as a whole would report a loss. Even if you weighed the loss of
    > the financial division vs its size compared to GE, you'd still get
    > a negative P/E for the firm. There's no way to avoid this simple
    > fact.
    > Siegel's point is utterly ridiculous. Middle school math students
    > could do better.
    Mar 1, 2009. 10:02 AM | 5 Likes Like |Link to Comment