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Thursday, November 29, 2012

Market Thought... yes ma'am, may I have another

"I'm disappointed in where we are and disappointed in what's happened over the last couple of weeks." -Boehner

That's a pretty different characteristic to Blankfein's opinion last night. I guess Boehner is telling the markets that the republicans want to be bitch-slapped, a hard bitch-slap across the face. Its probably the uncontrollable fruedian sadomasochistic persona dug deep within the extreme of the Grand Old Party.

The markets are the great equalizer. The effects of the markets have changed more governments in Europe, then years of war.  The bitch-slap the market can induce is literally forcing legislative changes all across Europe.  Like a mother disciplining her son, that back-of-the-hand has power.

On November 6th, the American voters have already given the Republicans a black eye. In response, the Republicans shifted their tune. First Boehner came forward with a softer, beaten tone. Throughout the last two weeks, multiple republicans have begun to back away from a grade-school-caliber-tax-pledge. (Many CEOs are also lobbying to stress the importance of a deal.)

The chatter would suggests a deal will be made before the end of the year.  But, if the Republicans choose to ignore the pressure of the American people and the most respected CEOs in America, then they will get bitched-slapped by Mrs Market.  This is a ridiculously obvious scenario. Its almost childish, and frankly embarrassing, if the Republicans allow the markets to force their hand.

The current trading dynamic suggests the markets want to go up. The SP500 is pretty overbought, and has been for the last 30 SP500 points, yet cutting though resistance. Economic data is getting better. Jobless Claims are rapidly improving from the effects of Sandy. The only thing that can derail the desire to push-upward is sadomasochistic behavior.

Monday, November 26, 2012

Facebook new trading range

Nice breakout from 24. Looks like Facebook is approaching 27, and potentially a new trading range.

FB is about to approach a heavy resistance area while being very very overbought.  The easy trade from 19-27 is ending.  A new trading range will emerge, but it is too soon to tell from where.  The obvious is between 22-27.  Although 24 should act as the new base.  Given the shift in momentum and better perception from the street, if FB starts breaking through 27, the new range could be low 30s-to-24. 

Congrats to those that played the recent trade. As I have traded the stock pretty well, I am currently left with an initial position in FB. I would like to let this position ride, in hopes 27 is breached, and a higher trading range is seen. (The obvious technical stop out of the trade would be a breach in the 5 SMA. As FB is currently riding the moving average up.)

Fundamentally, I really do think Facebook mobile ads are not in the same league as general mobile banner ads. I think Facebook ads are far superior. Based on the chatter, the ads appear to be best of breed within mobile.

Friday, November 23, 2012

Google... brilliantly shifting

Over the past year, Google had an interesting roller coaster ride of perception. Earlier in the year, the influencer-blogger-class all were spewing garbage chatter that Google was the next Microsoft. Despite the clear evidence and blatant comparisons to the contrary. That perception has allowed Google to trade at recession level trailing multiples (below 19) in May/June of this year.  (The market was being stupid.)

(A blog search for GOOG or Google will bring up all my thoughts on Google from earlier in the year.)  The market has now witnessed how rapidly Google can transition. The rate at which is simply awesome.

1. The revamped Google Play has become a worthy competitor to iTunes.

2. Google's branded phones/tablets, Nexus line, are gaining brand recognition and have high demand. (The line is no longer an avenue to push higher standards with OEMs, it has become a sought after brand.)

3. Google mobile services are simply kick-ass.

4. Google's voice recognition technology (Google Now) is at par, and arguably some what better, then Siri.

The shift has not gone unnoticed. The market has rewarded Google with an expanded multiple (higher valuation). It currently trades at a trailing multiple of around 21. Thats about a +25% increase from its 2012 troth.

At the moment, the market appears to be efficient with Google's stock price.  IMO, in order for Google to maintain its 19-21 multiple it needs to make better progress with its hardware profitability.

As the post PC world rapidly takes over, I fear desktop search will erode far more quickly than analysts are currently expecting. (Even though October saw an increase in desktop activity.)  And even though Google is well positioned for the mobile transition w/their android network, the mobile ad rates are simply not yet high enough for that transition.

Google needs to utilize all possibilities to increase revenue and earnings. Now that Google has developed a brand name with the Nexus line, Google will need to shift strategies from a no-profit device to a for-profit device. (If ever so gradually.)  The level of demand they are seeing for the Nexus 4 and 7, means they can charge high prices.  This also means Google can cut even more expenses from Motorola. (There should not be such redundancies within Google. They need to streamline.)

My current fear with Google going forward is that they will be a habitual under performer during their quarterly releases until they streamline their hardware efforts or mobile ad rates rise.

Until the above changes are made, I am uncomfortable with Google having a multiple higher than 22. With that being said, Google has shown their lack of stupidity and ability to rapidly adjust. They will eventually streamline their hardware operations. Until then, I am more comfortable entering GOOG when it has a trailing PE of 19 or below.

Wednesday, November 21, 2012

Iger buy $1M of AAPL

Being the CEO of Disney, and an Apple board member, this buy can make one think the Apple Television is around the corner.

Maybe he sees the potential of an unannounced New product. Or he just thinks at current price it's worth a big buy, despite a new product. Maybe a bit of both?

Monday, November 19, 2012

To our congressmen and women...

You gonna go that inch for us? Heal as a team or die as individual parties. What are you gonna do?


Thursday, November 15, 2012

its official - AAPL the cheapest

How things change in 8 weeks. Eight straight weeks of decline has allowed AAPL to become the cheapest, literally, amongst other large tech stock.

Here is a quick look:

PE - 14.41
Forward PE - 8.23
Cash (net debt) ~ $54B (~$6/share)

Microsoft is obviously heavily dependent on the PC, making its prospects suck. Ballmer is kind of a crappy CEO, confusing the act of copying competitors (in search and mobile) and calling it 'innovative', thereby bastardizing the word.  Forward PE is also suspect due to the low expectations of Windows 8 adoption and rapidly declining PC sales.

PE - 13.36
Forward PE - 11.17

They are positioned in the heart of the next phase of technology utilizing big data. The cash position is irrelevant with IBM because of their continuous re-purchases and dividend. They have a good balance of healthy financial engineering.

PE - 8.74
Forward PE - 10.17
Cash (net debt) ~ $3B

They are in a rapidly declining sector, and not moving fast enough in mobile.

PE - 17.48
Forward PE - 13.09

I don't need to look at their cash because they just confirmed at least 10% revenue and earnings growth per year for 5 years! The benefits of being in the sweet spot of a sector growing from 1.2B units to 5B units globally.

PE - 20.28
Forward PE - 13.95

I don't need to look at their cash either because Google is knee-deep in mobile, social and web services that are growing strongly.

PE - 11.91
Forward PE - 8.96
Cash ~ $121B (~$127/share)  Remove the cash and the value of Apple's businesses (which are gaining market share) are in single digits. SINGLE f-n DIGITS!

They are knee-deep in mobile. They are growing their computer business while disrupting the PC and their own computers. Despite being called "high priced" by Ballmer (who laughed at the iPhone and is now blatantly using Apple's strategy), the iPhone continues to take global market share.

Of all the above companies (and I am a big fan of IBM and GOOG), only QCOM and AAPL are completely leveraged to mobile and the next evaluation of computing.  Both are trading at the low-end of their multiples, except AAPL is trading with the lowest comparable metrics. The lowest, yet the best positioned to continue to take advantage of the mobile trend.

Another interesting fact, with today's decline, the cash-to-stock price divergence has become historic. It is now around 28%.

Wednesday, November 14, 2012

Market Thought... Limbo

The week of meetings. The president is meeting with business leaders today, and civic leaders on Friday. How awesome would it be if a deal was announced this weekend!?! (It wouldn't be awesome, it would be Fucken-Awesome :)

Around 10:15-10:20 this morning the market lost its air. The only economic data point around that time was Business Inventory, and the number was better than expected. So that's not the reason for the decline.

It seems as if the bigboys are simply waiting. Momentum boys are using this to drive direction. They chose down. (Ill update this post with some charts later in the day.)

Looks like we are in these mo'mo hands probably until the end of the week. I don't think any short, in their right mind, would want to take a chance going into the weekend over weight short, in case a surprise deal is announced.

Keep in mind, CEOs want a deal. They don't mind some tax increases, and seem to be on the same page with the president. Leaving the House as the road block. (Whose leader is open for increases.)

Update: The market is front-loading the "bitch-slap" to our civic leaders. The weakness throughout the day is putting more pressure on both sides to get the deal done, with the Republicans having more to lose if they fail. (There is no excuse the republicans can run from, fresh off of an election, which chose Obama's message.)

After 10:15ish, the SP500 started to breach its 200sma, so the negative chatter was inevitable.

Blah fed minutes didn't help the situation either.

On a few positive notes, the SP500-VIX overlay, along with the market's very oversold condition, suggests we are near a bottoming (assuming a deal is done).  The treasury yield is also very oversold, and it did not act as safe haven play.

Thursday, November 8, 2012

Market Thought... fiscal cliff will be avoided

The voters have spoken, and the chatter from the republican party seems like they understand the need to embark a more moderate tone.  Most shocking, and comforting, was Boehner firmly establishing the House's willingness to work with the president.

IMO, the 'fiscal cliff' uncertainty will end quickly. (If not, the republicans seal their fate in 2016. Hurricanes we can not control, jumping off a fiscal cliff we can certainly prevent.)

Boehner's statement is the strongest and latest confirmation of a new Washington. Frankly, I am surprised the market did not adjust for this chatter.  Instead, the market declined about 4% in two days.

Complimenting the market decline was the weak action in treasuries.  After the election, the 10yr decline below support levels.

What I find particularly inefficient about the current decline in treasuries is that it is contradicting the jobs data.  As indicated in the above chart, the last 5 employment numbers have been better than expected.  On top of this, the jobless claims, while volatile, have been near the low end.

Economically, there seems to be a disconnect with the action in treasuries and job data.  The disconnect is contributing to the market decline because a lot of models use the strength in treasuries as a point of reference.

The market was already reacting to a weaker earnings front, but some of that weakness was already expected. So the move to 1400 on the SP500 was not surprising. Consensus estimates were for the SP500 to see a decline this quarter.  This was factored into my previous Market Thought post.

The timing of the decline does not suggest this is an earnings decline. Also, the market is allowing for some serious multiple compression, especially within the technology names.  This maybe attributed to the weak technicals in the Nasdaq.

Of course a lot of this weakness is probably due to AAPL. Seven straight weeks of decline, seven!

AAPL has declined to three very strong supports:

1. The weekly 50 SMA.

2. The support line

3. The trailing multiple is simply too low. Way too low. From a trading pattern perspective, below 12.5 is a super strong buy for AAPL.

Anyone can whip out superficial negatives for AAPL from manufacturing issues to management shake-up to whatever the talking heads care to pollute the airwaves. The fact is, AAPL will be experiencing lower year-over-year comparisons. Does that mean anything for a company increasing its cash position about $4-10billion a quarter? The awesome, +85% growth, comparison did jack-shit to the stock's multiple from 2010-2011. I pointed this out about a year ago in the "Apple stock seriously discounting" post.

The "Apple stock seriously discounting" post highlights the severe multiple compression experienced since Apple's fiscal 2010-present. Since then, a very strong argument can be made AAPL has been basically trading with its cash position.

With the current decline in stock price, there is a disconnect between the cash position, and the stock. Either Apple's cash position is going to come down some $30 billion this quarter or the stock will rise to catch up to the cash position. (For the Q1, I assume a +8B to the cash position. Although even if the position is flat, the stock still needs to catch-up, as it did in Q2 2012.

(IMO, the cash vs stock price also highlights why AAPL is not your normal parabolic chart. The move is supported by the most important capitalist foundation, cash.)

Needless to say, I think this market decline is ridiculous and way over done. Along with Apple's decline.

Thank Elizabeth Warren

Today was a tough day but financials got knocked hard.  The chatter was blaming Warren. Despite having a light position in JPM, and swallowed the 5% hit, I have no problem with Warren or the banks.  I am a big fan of hers, but a fan of the banks too.

Until today, banks were trading near book value. They should, at the least, keep trading near book value until rates rise (due to improving economy) and can be valued via earnings.  With a stable economic environment, bank stocks should maintain book values.

The Warren decline, allows for re-entry of the bank stocks. As per the technicals, GS gets really really interesting between 110-113.

JPM gets really really interesting around mid 38.

Wednesday, November 7, 2012

QCOM = awesome

Better than expected quarter numbers. Better than expected Q1 2013 guidance, which brings QCOM to an accelerating earnings growth from a flat to contracting earnings story for the quarter.

I will update this post tonight with numbers, but the story is very much intact. The best part is that the big-boys have to readjust their models , and their automated programs will flash "buy" or "cheap". What ever we call it, the stock will be given a higher multiple.


Today's severe decline should not have happened, but it did. The magnitude was most likely exaggerated because the Nasdaq started breaking some key moving average supports, and of course Apple's decline.

A pure technician poops their pants, and sells. A person who understands the magnitude of a 42% year-over-year smartphone growth, and a projected 1B to 5B unit growth, understands QCOM should be in the 70s not 50s!!! In-turn, QCOM exceeded expectation and analyst guidance by 16%.

Before the manufacturing issue, which looks to have gotten alleviated, QCOM's low-end trailing PE was 19. It would only go below 19ish during recessions. There will NOT be a recession in smartphone/tablet growth.  A very reasonable assumption is that QCOM should, at the very least, start to trade at its old low-end multiple of 19-20.

QCOM will have a trailing EPS of 3.51 (GAAP). Slap a 19 multiple, and we get a stock price of 66. Looking forward, as the holiday season progresses, QCOM will merit a higher stock price, thanks to accelerated earnings. The trailing eps will approach 3.68, which will lead to a stock price of 70 with a multiple of 19.

Of course, I am only assuming the low-end estimate. But doesn't a stock, knee-deep in a sector growing in multiples, deserve a higher multiple?

AAPL fyi

Apple is trading near historically low trailing multiples. (12.59)

Also, does anyone even realize the iPhone 5 hasn't even been released yet in china. (That's coming in December.)

Strong demand across all product lines, and the multiple is at historic lows. Makes complete sense.

Election over, fear pop up

That was quick. With literally no time to breath, fear chatter of EU and 'fiscal cliff' are now in control.

The most glaring note of promise with respect to the fiscal cliff was Gov Christie, and how he was able to squash partisan perception.

Update: The selloff is overdone.

Monday, November 5, 2012

Subsidies a non-issue for AAPL

"Vodafone's Spanish division is bringing back subsidised smartphones, it said on Monday after losing more than half a million customers in the second quarter of this year while competitors Orange and and Yoigo gained market share."

Back in May, the removal of subsidies were considered stupid and greedy

3M in 3 days

Apple made over $1 billion in revenue over the weekend. One billion unsubsidized dollars.

(3M iPads assuming the lowest price of $329 but of course the newest iPad sold in the weekend also at a higher price.)

Should we assume the iPad mini is the first non-Jobs product that sold out in Apple history? If so, it says a lot about Apple's culture driving the company.

Sunday, November 4, 2012


fyi - still dealing with limited Internet and loss of power.

A lot of consolidation over the past month. About 18% in a month and a half, while the iPhone 5 has strong sales and the iPad mini looks promising. The decline has allowed for multiple compression, despite very healthy revenue growth.

Any argument that justifies high multiple stocks simply does not apply for AAPL because of its size. Regardless of enviable organic growth.

Trader chatter gave credence to the daily 200day sma. IMO, that sma was weak for AAPL. The 90 day mattered more. Once that broke, the higher probability was to test the 38sma on the weekly chart. But if sentiment got more negative, trader sentiment is likely to take AAPL to the 50 weekly sma.

My recent thesis on AAPL is predicated on the multiple the market will allow it to have. With Friday's decline, the multiple has reached 12s. 12.9!! The market has not declined nearly as much to merit the low multiple. (That Sentiment shared for QCOM as well.)

IMO, next week we get a flush out as AAPL tests the area near the weekly 50 sma. Will be accumulating near between the 560-570 area.

Current estimates have come down quiet a bit. Apple estimates are near 11.75, where as the street has them at 13.30. Apple usually beats the x-max quarter by 20-30% (not factoring in last years 38% beat because margin expansion will not be so awesome this year). Can't blame the street for coming down either. Apple has missed their estimates 2 quarters in a row, although Apple usually misses the fall quarter. 

Friday, November 2, 2012

Apple Maps - it helped

It helped me today. Along with Siri. The combo were actually productive to my well being.

First a background of opinion:

I have not upgraded to iOS 6 via the iPhone yet because of the removal of Google Maps. Big fan of street view, and its functionality. But I updated my LTE iPad to have the latest OS.

Today's situation:

Going to the doctors I tried using Google Maps, but the loading time was pretty long on the phone. So I used Apple Maps. (It loads quickly.) The turn by turn was very good, and my wife was a big fan. What really impressed me was as I was leaving the doctor's office.

Driving off, I forgot to enter the new destination. I put Siri to the test. I asked Siri for directions to my destination, and she produced wonderfully. Kudos.

Now, once I have access to WiFi, I'll upgrade to the new OS.

ps - Getting ready to add to the AAPL position. (more over the weekend)

Thursday, November 1, 2012

Difficulty with links

The limited access to the web (via iPad and iPhone) is preventing the update of the Transparency link.

Still in the dark, and Sandy is making me take cold showers.