Archive for June, 2008
Saturday, June 28th, 2008
A few months ago a friend of mine asked whether Citi was a good buy since it was so cheap ($19). I said wait for another few months and you will find yourself asking the same question when it is lower than what it is now. As investors, you have to adapt to reality and adjust your investment psychology and style. We are seeing a major asset re-pricing occuring at a Global macro level. Frankly, investors lost confidence in the U.S financial markets and banking systems. We are seeing investment banks rushing to downgrade each other which only amps up investor anxiety. Whatever happened to “you scratch my bach. I scratch yours” concept?
Citigroup, Lehman Brothers, Merril Lynch are all facing severe credit crunches. I wouldn’t be surprised any one of these major banks will go bankrupt in the near future. Lehman has the worst credit spread among the banks widening 30 basis points last Thursday. Disclosure: short on Lehman and XLF.
Will there be a economic recovery in the 2nd half of the year? I really doubt it. We are entering into a recession (possibly stagflation) and I do not see any recovery until 2010. Fed is caught beween Rock and Hard place. Will Fed reduce (or hold) rates to spur up the economy, or raise rates to fight off the inflation and support dollar? Bush’s tax refund/break is definetely not working here (i think it was a dumb idea to begin with). As dollar continue to decline, Oil and commodities will continue to raise.
Technology sector has been performing great until last week. RIM’s dissapointing news put a stop in the Tech rally. I think Nasdaq will test its March lows again. So, in summary we are not out of the woods yet. If anyone says otherwise, predicts a recovery in the 2nd half of 08, they don’t know what they are talking about. My prediction for Dow Jones by year end - 10000, S&P - 1100. We are most probably going back to 2006 levels. Take a break from all these depressing news and enjoy the summer.
Pic 1: Dow 2008 Target
Pic 2: S&P 500 2008 Target
Short Financials and Tech -
RIMM, LEH, Citigroup, Merrill
Long Commodities, Agriculture and Energy -
Titan Industries, USO, Monsanto, Agrium, Haliburton, Potash
Filed under: Economy, Financial Markets, Trading Strategy | | No Comments »
Wednesday, June 25th, 2008
As expected Fed holds rates steady, says the risks to growth have lessened. The FOMC announced that it held the fed funds and discount rates steady. The fed funds rate is at 2.00% and the discount rate is 2.25%.
The Fed said upside risks to inflation, and inflation expectations, has risen. However, the Fed still expects inflation to moderate and will act as needed to promote growth, and keep prices stable.
Filed under: Economy, Economy Statistics | | No Comments »
Monday, June 23rd, 2008
More bad news in the Financial Sector.
Goldman and Citigroup announced major job cuts. XLF made a new 52 week low today (21.53) at 10:30 a.m EST.
Moody downgraded the credit ratings of Ambac Financial (ABK) and MBIA (MBI) citing their limited ability to raise new capital and write new business. Analysts cut their price targets for, among others, Goldman Sachs (GS), Citigroup (C) and Wachovia (WB).
Filed under: Financial Markets, Financial Statistics | | No Comments »
Sunday, June 22nd, 2008
From FT AlphaVille
Filed under: Economy | | 1 Comment »
Saturday, June 21st, 2008
Anyone see a parallel here?
Filed under: Financial Markets, Trading Strategy, Energy | | 1 Comment »
Friday, June 20th, 2008
NYT report on Israel’s simulated attack on Iran’s nuclear facilities earlier this month refuelled the oil rally. Crude Oil futures jumped $2.69 to settle at $134.62 a barrel on the New York Mercantile Exchange. DJIA fell more than 200 points to end its lowest level in 3 months. Today was also the Quadruple witching day - the volume was heavy towards end of trading hour.
http://voanews.com/english/2008-06-20-voa75.cfm
My opinion
If Israel did attack Iran (which they may do even without U.S blessing), it will move up the Oil price to $175. We should be prepared to see $6 at the pump. In that event, all indices will see a sharp sell-off. Dow is already on its way to test the March lows (11600). Any external event might only make the situation worse.
Long -> Oil (USO), Commodities, Agriculture
Short -> Financials (XLF)
Gold (GLD) and Silver (SLV) rebounding (looking good)
Speaking of Financial Markets, has anyone noticed Chinese Shanghai Index? It’s literally cut-in half since the start of the year.
Filed under: Economy | | 1 Comment »
Wednesday, June 18th, 2008
Will this be happening again?
Filed under: Financial Markets, Trading Strategy | | No Comments »
Wednesday, June 11th, 2008
The Fed’s Beige book — which contains anecdotal economic information from the various Fed districts — was just released. The book said consumer spending slowed in March. Five regions reported stable economies, while seven reported softer or sluggish growth. There has been “tighter credit standards” for most loan types. The book reports moderate or limited wage growth. Separately, the May budget deficit widened to $165.9 billion from $67.7 billion. Economists forecast a deficit of $165 billion.
- Fed funds futures suggest a 14% chance the Fed will raise rates by 25 basis points on June 25, and a 86% chance that the Fed will leave the rates unchanged at 2.00%.
- Crude oil is up 4.7% to $137.48 per barrel, and traded as high as $138.30. Crude is up 43% this year, and is up 108% compared to one year ago.
Filed under: Economy, Economy Statistics | | No Comments »
Tuesday, June 10th, 2008
June 11 (Bloomberg) — Japan’s first-quarter economic growth was faster than the government initially reported after figures showed businesses spent more than estimated. Gross domestic product expanded an annualized 4 percent in the three months ended March 31, the Cabinet Office said today in Tokyo, quicker than the 3.3 percent estimated last month. The median estimate of 22 economists surveyed by Bloomberg News was for 3.8 percent growth.
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I also thought I would share this chart with our readers. We predicted that Japanese market will do better this year compared to other Asian peers and ofcourse our U.S market.
This chart compares the iShares MCSI Japan Index and iShares FTSE/Xinhua China 25 index.
Japan - China comparison
Let me know what you think!
Filed under: Financial Markets, Trading Strategy | | No Comments »
Monday, June 9th, 2008
Apple officially announced its launch of the next generation iPhone 3G. Key take-aways from Job’s speech at the Worldwide Developer Conference meeting..
· The new, 3G iPhone will sell for $199 for 8GB of storage, $299 for 16GB
· Launch delayed by 6 weeks (July 11) L
· Support for full location based GPS service
· 3G iPhone will 300 hours of standby time, improved from 8 hours to 10 hours on 2G talk time, and he’s quoting 5 hours of 3G talk time. Browsing should give you 5-6 hours, video 7 hours, and audio 24 hours of continuous operation.
· The 3G speeds are close to Wi-Fi
· Enterprise e-mail support (sorry Crackberry fans)
· 22 countries will get 3G iPhones first
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Apple’s upcoming iMac has made a tentative appearance in US retail channel systems. Meanwhile, one rumor has the 3G iPhone receiving both GPS and a significant visual update, an analyst calls WWDC’s opening “D-Day” for new iPhone models, and the latest SDK for the handset may allow background apps.
* AT&T is cut the price of new iPhone to $200
http://techland.blogs.fortune.cnn.com/2008/04/29/att-to-cut-the-price-of-apples-new-iphone/
* Apple announced there are no more iPhones left in its U.S. and U.K. online stores.
http://www.siliconvalley.com/latestheadlines/ci_9234243?nclick_check=1
* Piper Jaffray analyst Gene Munster says the devices are in short supply at many of the retail outlets as well.
* AT&T’s product listing includes a new option — “iPhone Black,” the rumored color of the 3G model.
http://www.appleinsider.com/articles/08/05/12/att_now_showing_iphone_black_model_in_device_listing.html
* Apple has confirmed to Fortune that Steve Jobs will deliver a keynote address on June 9, the first day of Apple’s World Wide Developers conference.
http://apple20.blogs.fortune.cnn.com/2008/05/12/3g-iphone-steve-jobs-to-deliver-keynote-june-9/
* AT&T told retail employees not to schedule any vacation between June 15 and July 12 to ensure sufficient staffing for “an exciting Summer Promotional Launch.”
http://www.boygeniusreport.com/2008/05/06/apple-and-att-to-launch-iphone-3g-a-lot-sooner-than-we-think/
Filed under: Digital Media, Broadband | | No Comments »
Sunday, June 8th, 2008
Let’s see how I did with my 2008 predictions.
- Housing Depression will lead into consumer driven Recession in the first half of 2008 (Right on!)
- Corporate profits drop 10-20%
- All major indexes fall atleast 10% from current levels (as of Jan 2nd) (Right on!)
- Major European economies deteriorates lead by U.K housing market downfall (On its way down)
- China, India, Brazil and Eastern Europe will continue to shine despite recession in the U.S and Western Europe
- China market will double from here before Olympics in Aug. (Bad call!)
- Dubai and London will continue to vie for the financial capital of the world
- Japanese market will put a surprising resurgence (atleast 10% from current levels) (Right on so far..Up 15% since the bottom made in Jan)
- Citigroup will cut dividend by 40-50% (Right on! 41%)
- Housing bust in U.S will lead to a few high profile bankruptcies/take-over
- Countrywide Financial (CFC)
- Beazer Homes
- Bear Sterns (Right on!)
- E*Trade
- MBIA/Ambak (close to)
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- Google tops $1000
- Apple, Research in Motion move into bubble status (20-40%) from current levels (Spot on!)
- Apple will take over music business (over-optimistic here)
- USD will rally in early part of the year, but will continue to fall over 10%, Euro will continue to replace USD in foreign currency exchange baskets (Spot on)
- China Yuan will appreciate another 10%
- Gold rises to $1000/oz … first in 3 decades (March 13..spot on)
- Hillary Clinton will most probably win presidency - 60% (Wrong!, new prediction is Obama next U.S president)
- Crude price will shoot past $135 by year-end, gas at pump will touch $4/gallon (spot on, $140 Jun 6th)
- Sovereign Wealth Funds will become target of U.S politicians as they continue to gobble up American companies
Filed under: Economy | | No Comments »
Sunday, June 8th, 2008
We discussed this before many times. We predicted Oil to reach $150 - $200 by year end. Seems like that prediction might come true.
Only a few days ago, we wrote about the impact of $200 oil on the economy. Economist, the weekly magazine notes in their last issue (“Recoil” cover story”) there is about 60% speculation in the oil price.
Jacques Chahine writes in his outlook paper “An oil bubble to rival the internet boom”.
| In terms of stock market capitalisation, the energy sector (together with electricity and gas utilities) is the largest in America, with 17.6% of the S&P 500 total. It has overtaken the fi-nancial sector, which before the subprime crisis accounted for 22.3% of the index. In 2006, energy accounted for 8.6% of US household spending; crude prices climbed an average 10% in 2007 and are expected to be up 47% in 2008.
Unquestionably, there is a bubble in oil company profits, although masked by what look like low PERs. EPS have risen 8.7 times over since 1994, and this is another record. The sec-tor’s share prices have risen ‘only’ 512% over the same period, but are extremely vulnerable to a change in the economic situation.
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For those of us who missed the oil rally, how do you play this one out? Is there an opportunity to cash out on the oil bubble? I believe yes. All bubbles eventually face the same destiny. Eventually they will burst and price comes back to earth (reverse to mean). When the oil peaks and burst, one easy way to make money is to buy short funds such as UltraShort OIL & GAS (Amex: DUG). This fund invests 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index.
Filed under: Financial Markets, Trading Strategy | | No Comments »
Wednesday, June 4th, 2008
In this continuing saga, Icahn has recently shot off an angry letter to Yahoo’s management proposing them to fire Jerry Yang and others in the board to make way for a more Microsoft friendly board.
One would question the real motive behind Icahn’s move. Obviously he is here to make a buck (albeit under the covers of providing shareholder value). We discussed in the first part in detail.
http://www.vitaltrends.info/digital_media/yahoo-board-icann-face-off.html
Yahoo is in a precarious position here. As long as it manages to keep the major shareholders from turning to the dark side (Icahn as Darth Vader), it will be able to stave-off this merger threat. But in the end Yahoo might give-in to the pressure and agree to the $33/share deal with Microsoft.
Icahn writes “I have long been cynical about the effectiveness of many of the boards and CEOs in this country and as a result the inability of our companies to compete. I have constantly complained about how far CEOs and boards will go in order to retain their jobs, yet even I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft.”
http://www.businessweek.com/technology/content/jun2008/tc2008064_740360.htm
Yahoo’s Chairman of the Board Roy Bostock responded today to this letter
“Your letter seriously misrepresents and manipulates the facts regarding the recent events pertaining to Microsoft and Yahoo!. You rely on, as “facts,” a series of unsubstantiated allegations from a complaint filed in a Delaware court which grossly misstate the very clear record and position established by the Yahoo! Board.”
http://www.businessweek.com/technology/content/jun2008/tc2008064_578861.htm
Icahn’s roll call of stock market successes include profitable showdowns with Marshall Field, Phillips Petroleum, Texaco, USX and, most recently, BEA Systems. There have been flops, too: the now-defunct airline TWA and video rental chain Blockbuster Inc., whose stock has lost nearly two-thirds of its value since Icahn bought a stake in the company in 2005 and muscled his way on to the board of directors. (From AP)
See Icahn’s interview with WSJ - http://link.brightcove.com/services/link/bcpid452319854/bctid1079215502
Filed under: Digital Media, Web2.0 | | No Comments »
Wednesday, June 4th, 2008
News Media around the world is predicting the first non-white candidate to be the next president.
http://www.mediabistro.com/fishbowlDC/newspapers/how_the_world_sees_obamas_win_86286.asp#more
In this analysis, we will review how good is Obama’s presidency will be for the U.S economy.
1) WSJ Blog says “Sen. Barack Obama has the support of heavyweights like Warren Buffett and former Federal Reserve Chairman Paul Volcker. Now he needs to convince regular investors and small business owners skeptical of high taxes and government intervention that he can manage the U.S. economy.
Andrew Busch, Global FX Strategist at BMO Capital Markets in Chicago, said Obama could ease fears on trade by dialing back his opposition to the stalled free trade agreement with Colombia. That kind of about-face is unlikely, though, given the tone of the debate over trade.”
http://blogs.wsj.com/economics/2008/06/03/obama-has-something-to-prove-on-economy/
2) Kudlow and Co blog blames the recent sell-off in the market to Obama’s selection as the Democratic nominee.
“We couldn’t help but notice yesterday, around 1:25 pm ET, when the Associated Press came out and announced that it had done the math and figured that Obama truly had virtually clinched the nomination, it was at that precise moment, when the stock market started to fall.”
http://www.kudlowsmoneypolitics.blogspot.com/
3) CNNMoney compares Obama and McCain on various economic issues that are on voters and investors mind
http://money.cnn.com/2008/06/04/news/economy/mccain_obama_econplans/?postversion=2008060412
Filed under: Economy | | No Comments »
Monday, June 2nd, 2008
The new PubMatic AdPrice Index indicates Long Tail content demands more CPM value than regular content.
Small Web site: Less than 1 million page views per month
Medium Web site: Between 1 million and 100 million page views per month
Large Web site: Over 100 million page views per month
Filed under: Digital Media | | No Comments »
![Freakonomics[Revised and Expanded]](/images/21xRHBWYYML.jpg "Freakonomics[Revised and Expanded]")
