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Thursday, August 18, 2011

Market Thought... by the balls

Negativity is just so pervasive. Its got the market by the balls.  On Monday I posted a 'heads up' post about the rumor mongers attacking the EU banks for their leverage. Today we are seeing that pan out with the NY Fed requested funding data, yesterday getting news about an EU bank borrowing $500M in 7day emergency liquidity and of course the issues that happened prior to the shorting ban.

The only positive note is that the ECB has calmed the sovereign debt market, for now. But it seems there is a group of hedgies hell bent on causing trouble.  If they can't do it via sovereign debt, they will do it some other way.  The way to take care of these characters is to provide a real solution.  At what point will the EU get their heads out of their ass, and act? (Its not a question of if they will act, they will act, its just a matter of how much damage they are willing to see.)

Outside of the obvious frustration, internals look interesting. Some stocks have reached their bottoms from last week, others are really close. This could become relevant, so I am paying close attention.

As for the market, from a pure technical perspective, it could test its 1120 level.

I think there is tremendous opportunity here for companies in secular growth trends (AAPL, GOOG, IBM, AXP, POT, SU and plenty of others), but no one will care with negativity running so high.


  1. I can't help wondering how all these companies could be in secular growth trends simultaneously. Specifically, SU trades largely with oil prices; but higher oil prices raise input costs for companies and fuel costs for consumers. Recently you expressed some long-term bullish optimism based on the new mpg standards. Doesn't suggesting a secular growth trend for SU fly in the face of that long-term optimism?

  2. Current growth trends are in: cloud, mobile, social, data analysis, payment use of cash-to-altervative, food and energy. (Look each sector up individually, and the data will prove it.) The companies mentioned play along into these themes.

    Food and Oil are more so the rate of usage which allows for very low inventories, and elevated prices. SU will benefit only if oil stays above a certain level. (Obviously the higher the price per barrel, the better for SU. But at current multiple, SU is pricing in an earnings discount.) The MPG standards are truly an unrealized future benefit, but it will not bring oil below $80 a barrel. It will most definitely slow cost-to-consumer from the price increases in the future. Estimates for the cost savings have assumptions that gasoline per gallon will be between $3-6, which suggests oil per barrel will remain elevated and between $80-120 (or higher).

    Keep in mind, some tech growth trends are also designed to ultimately save money and add productivity. (ie To only have one data center using virtualization and shared use instead of 10. And make things more efficient via data analysis.)