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Friday, June 29, 2012

fiscal unification begins

So, the unification process begins. The bank regulator is being proposed. (I thought the ECB would actually announce a definitive plan, but this maybe enough for now.) More importantly, and what is most likely driving the futures, is the shift in the EFSF to directly recapitalize the EU bank.

Is this the beginning of the year end rally? If it is enough for China to kick in real stimulus, then I say yes.

I will really start getting excited when there is chatter about a unified tax system (or something of the like). Because with this, the EuroBond is inevitable.

Wednesday, June 27, 2012

Market Thought... now what?

As I sit here trying to type away, I just keep thinking about how "Blah" things are at the moment. We are waiting for Europe to do something, so that China will do something, so that the Global GDP accelerates again.

Germany, China and US job growth have all pointed to an economic slowdown.  This has led to a continued distain for the market. Cash is at very high levels, while equity consolidation has already placed most stocks anticipating a heavy contraction of earnings. During this two/three month period we witnessed:

GS off almost 30%
AAPL off 14%
GOOG off 14%
QCOM off 20%
CAT off 30%
Brent Crude off almost 30%
WTI Crude off almost 30%

From a multiple compression perspective, the declines have been more severe. I just can not escape the feeling that the market is already reflecting a recession.

Yet, the SP500, so far, is maintaining above the 360SMA.

One of the more interesting aspects of the current market are the rails. UNP is near its highs.

Why, during the face of a global GDP slowdown is UNP still trading near its highs?

Will the Europeans really come out with a "plan" for fiscal unity? Will china do some real stimulus (even though their banks had a spike in lending, some a jump in non-performing loans)?

In the mean time, the markets seem to be in a show-me-mood.

Monday, June 25, 2012

Market Thought... walking contradiction

The German economy has started to slow down. China's official PMI is entering levels I thought their central government would not allow. The recent flash PMI was crappy enough to support the downward trend.

The obvious question is itching to be answered, when will the almost $4 trillion in excess reserves be put to use?

Will china wait until Europe has their shit together?

Once the catalyst kicks in, it will most certainly help one of China's largest trading partners (Germany), which should keep an anchor on Europe.

Although the recent economic data is crappy for Germany, they seem to be in a win-win situation. If/when the Euro is saved via Euro Bonds or a true financial unification, its good for Germany. Then China stimulates, its good for Europe, primarily Germany. (The whole thought process is making me interested in the German ETF, EWG.)

We started getting confirming slow down data, which would lead to the logical expectation of a lower treasury yields. But the the opposite looks to be taking place.

One day certainly does not make a trend, but the treasury yield looks to be bottoming. (Since I try to be an optimist, and a believer in a world continuing to function in the foresee able future, I hope the yield has bottomed.)

To be my own devil's advocate, the treasury yield looked like it bottomed in March, and yet, here we are, with a lower yield. The difference between March and now is that valuations (trailing multiples) have already severely contracted. (With the exception of DIS. That sucker just doesn't stop.)

It has been two months since the US job market triggered the decline in the 10yr treasury yield. Now, with Germany and China, we are seeing confirmation of the slower global GDP. Yet, the treasury looks to be bottoming.

Friday, June 22, 2012

trades... IBM, AAPL, SU

At least Europe didn't make the markets go down today. China's Flash PMI was pretty crappy. Curious to how the official manufacturing PMI reads. Doesn't take a genius to figure out what will happen if the official PMI comes in below expectation or even worse, below 50.

In the mean time, there maybe some interesting opportunities that develop.

IBM - Saw a pretty sizable drop today. Obviously the overall market mood did not help, but the reaction to RHT's earnings probably added negativity.

If there is no follow through with the negative market sentiment, then now looks like an interesting level. But if there is follow through, the 186 level looks interesting, and what I am waiting for.

AAPL -  Whats there not to like fundamentally? Looking for the 560 level. Pending market negativity, AAPL may retest 530, but it will have to break the 560 level first. At the moment, I do not know if it will.

SU - Looking to for an anticipated oversold bounce between 25-26.

Oil is not looking pretty, but I think we might see an interesting set up take place. The first half of the year we saw oil related names trade far below the price of oil. Now that oil has come down, with 20/20 hindsight investors can say equities were pricing in the decline in oil.  Well, oil has declined to where equities were projecting. I am thinking the opposite activity develops toward the 2nd half of the year. While I am waiting for this scenario to pan out, I'm just looking for the oversold bounce trade

Tuesday, June 19, 2012

Frank ripped Dimon

Loved the exchange. Both men are awesome :)

iPad hedge... NVDA

Worried that the new entrants into the tablet space will truly dent the iPad? Look at NVDA as a hedge. They seem to be the key beneficiary with their Tegra chips.  This chip has been out for a few months, and frankly lagging Apple's A series chips by 8-9months from development, and longer from a commercial perspective.

In Oct 2011, I wrote a post about when to begin to question Apple's competitiveness.  One of the items was Apple's chip capability, as the chip differentiates Apple's products. From a hardware perspective, Apple products are, for the most part, superior.

As new tablets enter the space they are using chips at (arguably) par to the current Apple offering. However, supposedly 'real' iPad competition will not be available until later this year. And if those other tablets are not priced competitively, forget it, there is no competition. (Even Kindle Fire sales dropped off due to the iPad 2 price change.)

Basically, the competition is lagging, which means its not really competition.  But if anyone wants to protect, or benefit from the new competition, NVDA looks interesting here.  The Surface announcement has allowed NVDA to break out from its negative trend.

I may look to play NVDA on weakness because there will be a market for tablets that are not iPads, even though I feel MSFT is doing its best to botch up a fine product with the confusion it inspires.

Monday, June 18, 2012

Microsoft confusion continues

The tablet MSFT unveiled today has one kick-ass trailer. Really kick-ass. And the blogs have been pretty kind to the product.

But I'm still confused. Maybe it's because they did not give enough info on the strategy and product. Here are my sources of confusion:

1. 2 versions of the product, ARM based and intel based. Why 2 versions?

2. Is MSFT killing the license model?

3. What's the cost?

4. When is it available?

5. What about mobility. New devices are now shifting to LTE. Is the surface supporting 4G?

6. Battery life?

Gotta give credit where credit is do. Microsoft delivered something interesting today. But in typical Microsoft fashion, it left me interested in the package, but empty inside.

I remember when the iPad was announced. What made it remarkable was the price point, not the fact that it was a tablet. If the Surface (with specs comparable to the iPad) is not below priced significantly below the iPad, the blogger excitement will die quickly.

Sunday, June 17, 2012

Greece vs Germany... oh. yeah. its on!!!

Greece vs Germany, this Friday. Symbolism at its finest.

Regardless of what happens, and the barely positive elections by the New Democracy, the chatter of re-assurance has increased significantly. And the increase is not by some 2nd rate officials, the chatter is coming from people that matter.

6/14/12 - The ECB, with Draghi as an author, is working on the unification of the banking system, a bank regulator with teeth and a deposit insurance program.

06/13/12 - Geithner - Europe will hold it together, "They tell us privately they will do what ever is necessary to hold it together."

06/14/12 - Germany now willing to share the debt burden.

6/11/12 - Spain gets aid, with out much resistance.

06/4/12 - Germany's willingness to act on a solution. (eurobonds, bad bank)

06/03/12 - Soros leading the big boys to a less negative view.

Usually, chatter is far more subtle then the above. But we have a situation where the chatter has become breathtakingly blunt, and the message from Europe more unified.

Next step, Greece wining the Euro Cup 2012! Then getting their shit together with austerity, and ensuring its implemented every step of the way.

Friday, June 15, 2012


QCOM had a punch-in-the-gut type of action today. I tried to look at it objectively.

1. I was expecting some level of holdup at 59-60 due to the 32SMA resistance. Resistance is also confirmed via the weekly chart.

2. Rumors of Samsung slow down of older phones and weak Lumina sales. Seriously, I mean, Seriously?

3. There was continued chatter on tuesday night and picked up wed morning to the potential extent to the 28nm production issues. Was the market a full 24 hours late to the chatter?  With QCOM trading at trailing multiples near 10year lows, how much more of a discount will the market give QCOM?

Thursday, June 14, 2012

timeless portfolio changes - VZ, KMP and F, DD

I try not to make any changes to the Timeless Portfolio, to keep the theme "timeless" :), but I can not ignore the potential to maximize the gain.

KMP will be replacing VZ.

Verizon's yield is starting to decline. Historically it has traded with a yield range between 3.5-7%. It's yield is near 4.7% now. The stock could keep rising to approach a yield of the low 4s. Which should equate to a stock price near 46. But KMP has declined off of its highs, making its yield more interesting.

The short-term risk with KMP is that its power to increase its yield is hindered due to the depressed Nat.Gas and declining crude prices. Until prices firm up, the stock should chill here, yielding 6.3%. (If KMP approaches low 70s, I will actually purchase it for the real portfolio.)

 DD will be replacing F.

Thanks to the market decline DD took a hit, and is now yielding near 3.5%. Ford has not increased their dividend as much or as quickly as I wanted to see. I also like the way DD has transitioned their business being more exposed to Ag and foods, along with the benefiting from the lower nat gas price.

The changes will be reflected tomorrow.

Wednesday, June 13, 2012

Market Thought... firming up

Seems like action is firming up at current levels. 

The activity is supported by a slew of individual names (including JPM, GS, AAPL etc), but technically more significant its supported by the Semis.

JPM is interesting here, with its reverse head and shoulder set up. It looks like it wants to push toward 37-38. Looking to add near morning weakness, around mid 32. (If negative sentiment takes JPM, it could go to 31, maybe even lower pending negativity. But at current levels JPM is discounting a lot.)

I am still trying to figure out why all financials are still trading 20-30% below book. With the threat of bank runs off the table and assets from US housing that are viable again, US banks should be trading near book. Looking for GS to test 110, once it breaches current negativity.

AAPL is sitting on support and came off of its oversold condition. Seems to be favoring a continued push higher from here, but if AAPL decides to breakdown it will most likely re-test 530.

Tuesday, June 12, 2012

Market Thought... no euphoria

Were the actions over the weekend meaningless?  I don't think so. Seems like Europe is rolling out their version of TARP, to finally stem their bank runs.

Of course, looking at this from the perspective of debt-on-debt, it sucks. But the debt-on-debt view is kind of disingenuous because it ignores the actions taken. It ignores:

1. major structural reforms

2. a willingness from the ECB

3. Germany has toned down the austerity chatter, and is showing a willingness to now entertain the progress of a Eurobond and experiment. 

I try to be as objective as possible.  Since my 're-evaluation' post there were a few developments:

1. US jobs payroll numbers were crappier then desired. (Although the jobless numbers were okay.)

2. China's PMI was also crappier then desired.

3. The above EU developments. (I view them as pretty good.)

Economically speaking, the bears have a good reason to tout their thesis.  Especially if the US jobs data continues to be crap, and China does not pick up.  But valuations matter, and China will be politically forced to tap their +3Trillion in reserves if need be.

I am a surprised US banks did not rally today. Knowing the EU banks will not cause a domino effect, and the US housing data continues to improve, I expected the US banks to start making up some lost ground and start pushing towards book value again.  Which would mean GS pushes toward 120-130. (Normally I would think JPM should start approaching 46, but they have to work out their trading mess.)

Thursday, June 7, 2012

Market Thought... same wall, same worry

Good day today. Tomorrow could be another good day, or a bad day, depends on the direction of the 'end of world' philosophy is flying.

There really is not much to say. There hasn't been a lot to say except to ask the inevitable questions as highlighted in my last post.

The game Europe is playing is getting old. Its tiresome.  I mean, CNBC had a special about Spanish bank runs. Spanish bank runs! For fuck sake, the entire periphery has been in a bank run since August 2011. As if this was some new earthly revelation!

We are now at the literal and psychological do-or-die point for Europe. Given the increased chatter for Germany's willingness to experiment with ideas, and actually ironing out pre-requisite financial infra-structure for an eventual Eurobond, the market is right to get giddy.

Today the SP500 gained some technical footing. If we get follow through, a bottom maybe in the works. (A few internal stocks are already showing signs of bottoming. For example, FCX, SU, SLB, IBM, AAPL, the SOXX etc)

But tomorrow is a new day. Maybe the wind blows piss of some EU Official's shoe, and his frustration caused him to tell Spain to fuck off and the market decides to decline 30 points. I don't know.

At this point, I just want the EU bs to subside.

Monday, June 4, 2012

Market Thought... sleep

I'm laying in bed, wide awake and it's 2:00am. I have to wake up at 6am. I need to sleep, but I can't. So I'm typing away with my iPhone.

I find myself wondering about my initial thoughts on friday as the crappy Chinese, EU and US data was released.

1. Why has china allowed their official PMI to get near 50 without tapping into their +$3trillion reserve?

2. Will the EU states wait until there is another market collapse until they finally issue a infrastructure derived 'Eurobond'?

3. What will Obama do to unleash the +1trillion on corporate balance sheets to drive growth?

4. Will the US really start to attack it's crumbling infrastructure by utilizing a public/private funding initiative?

Maybe china's service growth can off set its manufacturing PMI data? Europe, or rather Germany, needs to stop dicking around. The US needs to maximize its potential.

The only positive right now (that I can tell) is that equities are re-visiting 2009 multiples, depths of Financial Armageddon multiples. At some point, valuations will matter.

Secular growth companies are trading at really really low levels. Will AAPL see a 20% reduction in eps from an economic slowdown? Will the chip makers supplying the iPhones and iPads, and other smartphones, see a 20% reduction in eps?

Anyway, I need to try to sleep.

Friday, June 1, 2012

One-two punch, and a kick in the...

1. Official China PMI less then expected. (punch 1)

2. Manufacturing EU PMI continues to be week. (punch 2)

3. US employment data came in less then expected, and the ave weekly earnings declined a tiny bit. (Kick in the nuts. Despite the April upward revisions, the current data still stings.)

The string of 'blah' data suggests the emerging markets need to stimulate their economies, and the west needs to implement an infrastructure build via private/public funding.