Month: April 2008

He says rock-bottom interest rates actually went against his “19th century” aversion to easy money. “My inner soul didn’t feel comfortable,” he says.

—Alan Greenspan, “Greenspan Goes on Defensive,” the Wall Street Journal

Are you feeling depressed?

Anxious?

Nervous about the housing market? The job market? Oil prices at all-time highs? Gasoline prices cracking $4.00 a gallon?

Can’t sleep with iron ore prices going through the roof? Coking coal prices soaring? Rice-rationing triggering social unrest and mass starvation?

Then read your Wall Street Journal today—specifically “Greenspan Goes on Defensive”—and have a good laugh.

Not since Bill Clinton told the world he “did not have sex with that woman” and George Bush gave his Nixonian “mistakes were made” speech on Iraq, has a public figure of such stature tried to brazenly downplay his role in a public failing entirely of his own making.

To whit, Alan Greenspan’s Federal Reserve’s Bubble-inducing 1% interest rate monetary policy—the fallout of which we are all dealing with today.

Here’s just a sample, but you must read the entire piece for yourself:
“I was praised for things I didn’t do,” Mr. Greenspan said during one of three interviews at his sun-drenched office in downtown Washington, D.C. “I am now being blamed for things that I didn’t do.”

It is difficult to recall Mr. Greenspan ever denying whatever undue credit he was given back when his legacy was still untarnished. But now that his legacy has been not only tarnished, but bound with duct tape, he has come out swinging.

And not merely with logic and numbers.

Turns out, the man called “The Undertaker” by his role model—the androgynous, free-market, absolutist Ayn Rand—has a softer side that he never revealed to the capital markets denizens who once idolized him, until today:

He says rock-bottom interest rates actually went against his “19th century” aversion to easy money. “My inner soul didn’t feel comfortable,” he says.

Makes one wonder what Ayn Rand is doing right now. Rolling in her grave, perhaps?

More likely she is trying to summon the spirits with which to contact her broker, in order to buy more gold futures for her estate.

Jeff Matthews
I Am Not Making This Up

© 2008 Not Making This Up LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

One month ago, we asked readers to “Name That Company!”

The company in question was Toll Brothers. In the course of that company’s regular earnings call, management had disclosed certain interesting developments in the housing market that were as unexpected as they were dramatic.

Specifically, Bob Toll discussed the fact that home sales had picked up in certain previously-dead regions of the country, in one instance (Naples, Florida) “shockingly so.”

Wall Street’s Finest did not so much dismiss the glimmer of good news as ignore it, logically reasoning out that whatever few good data points Toll could offer were certainly overwhelmed by many more bad data points in most other regions of the country.

Nevertheless, our way of looking at the news was simply this: it was the first good news on housing in this country in quite a long time, and it came at a point in the cycle when nobody seemed to expect the housing market to ever recover, possibly not even before the sun is a cold, tiny lump of debris hurtling through space.

Given the hostile reaction subsequently posted in the comments beneath the post (sample: “Yes, That IS from TollBrothers. What a joke…”[sic]) we deemed it the first sign of life in the U.S. housing market and officially reversed our August 2005 call (‘Anybody who buys a home they don’t need is a moron’) while acknowledging that when a second sign might come is anybody’s guess.

Today we ask readers to “Name That Index!” Now, this particular index has not seen the light of day since last summer, and has responded not one bit to whatever desperate Fed measure came its way…until the massive Fed response to the Bear Stearns collapse March 17.

Since the close of business on that dark Monday morning, this particular index is up 31%.

As for a general hint as to the index in question, let’s just say that we here at NotMakingThisUp think the second sign of life in the U.S. housing market has been spotted.

Jeff Matthews
I Am Not Making This Up

© 2008 Not Making This Up LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

“At that point in time, we still have, Doug, correct me if I’m wrong — about 200,000 shares outstanding on the old buyback. Again, we — like we buy our stock like we do everything else, if there’s an opportunistic place to buy it. We don’t just buy it arbitrarily because we can, we buy it to support what we consider basically ridiculously low levels.”

The speaker of those words was Stuart Rose.

Stuart Rose runs a small electronics chain called REX Stores—a sort of poor man’s Best Buy, to use a hoary phrase, but one that fits the bill here—and has done so for many years, since the days when REX was more a growth stock and less the value stock it has become.

We mean not to denigrate REX or Mr. Rose, but to praise his stewardship of a business that might well have gone the way of so many brick-and-mortar consumer electronic victims of Best Buy and Amazon.com.

Despite Mr. Rose’s background (I believe he was an investment banker out of DLJ, but I could be making that up), he has caused the company to make a small fortune in synthetic fuels and, more recently, ethanol, while running the appliance chain more or less for cash.

And a good part of that success is this: Rose’s attitude towards share buybacks has always been as hard-headed as the way he manages the business.

Unlike Scott’s Miracle-Gro, Dean Foods, and Office Depot, which collectively might go down as the poster-children of poorly timed “returning-value-to-shareholder” activities such as share buybacks and large one-time dividends, REX Stores has bought its own shares when the price made sense, and held off when it didn’t.

Which is why REX, a tiny company that did a mere $235 million in sales last year, has nearly $100 million in net cash on its books, while Office Depot, which did $15 billion in sales last year, had only $220 million in cash compared to $600 million in debt at the end of 2007, thanks to the “cash-clearing” share repurchases (at more than double the current share price) executed by Office Depot’s eager-to-please-Wall-Street’s-Finest CEO, Steve Odland.

REX Stores may never be a Best Buy, and we don’t know enough about the business itself to even have an opinion about the company as a potential investment—nor would we express such an opinion if we did.

But one thing the company has in its favor: the guy who runs it knows that the trick to buying back stock AND increasing shareholder value is never to buy back stock “just because we can.”

Jeff Matthews
I Am Not Making This Up

© 2008 Not Making This Up LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.