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Thursday, March 28, 2013

No chatter on S4 price?

The 'wtf - double standard' of the day, Galaxy S4 announced will start at $250 @ att.

Yet, I have not seen chatter complaining about the price hike. Odd considering most analysts who downgraded AAPL the pass few months (which seems to be everyone) want to see a low-cost phone. Now, in the US, where iPhone has gained smartphone share, will be the lower priced premium phone. (Currently, the Galaxy S3 and iPhone have a similar ASP.)

Doesn't take much to figure out what the below chart will look like after this moves. (Chart is from highlighting the shift in iPhone vs Android in the US market.)

Market Thought... mixed signals

Today saw the 10yr yield break its daily trend, which signaled caution.

As to the legitimate "why", I do not know. But seeing how the decline was from the AM, the BoE's request for more capital for UK banks most likely was the "why". (Add the expected fear at stupid comments and actions via the EU, and a hedge via treasuries makes the move today plausible.)

Yet, one of the institution that should have been hit the hardest from such news, GS, performed pretty freaken well.

(I was thinking the news on the banks would have caused GS to hit its 70 sma. Been waiting for a re-entry.)

Also the SP500 held-in very impressively considering the break in the 10yr.  While Apple gave me enough damage today, the break in the yield had me believe the SP500 would decline 1% or so.

Alas, a weekly view of the 10yr is not as bleak.

The weekly technical is still structurally sound. If US jobs data continues to come in with strength, as it has been doing, we may see a treasury yield bounce off the weekly supports. This too can be a prelude to the SP500 breakout via the monthly.

Wednesday, March 27, 2013

Tablet and smartphone growth - IDC $aapl

Over the next 5 years shipments in smartphones and tablets are projected to grow over 100%.

The leader in the very two categories is trading with a trailing multiple of 10.

Makes perfect sense.

fyi... some links

Blogger, for whatever reason, is not allowing the Links to the right of the blog to be updated. This is why the "transparency" link has not been updated.

Monday, March 25, 2013

I wish I could predict stupidity

I was protected (spy puts) coming into Monday trading. All seemed well, the market absorbed the Cyprus news and anticipated lower uS GDP forecast from the World Bank (which I think will be proven incorrect), so I covered the short.

The brilliant Jeroen Dijsselbloem (every day seems to produce a new brilliant person in Europe) invokes the fear of bank runs in Spain, Italy and all other troubled EU banks. So the markets turn.

I just don't understand the level of stupid that comes out of these people's mouths. (I thought American congress had the monopoly on stupid. I am wrong.)

I wish there was a way to forecast stupid.

Friday, March 22, 2013

Market Thought... the C word

So a island with about $70 billion in deposits and a default value of $10 billion is going to unravel the countless EU regime changes, heavy austerity measures (already in place) and unlimited ammo via the ECB?

For. Fuck. Sake. Berlusconi is a bigger fear to Europe than Cyprus.

The real tragedy in Cyprus is with the native-hardworking-citizens who's only mistake was to keep their deposits in a Cypriot bank. (Funds in foreign banks are not going to be 'taxed'.)  Many family friends have lost their childhood homes and lands when the international community allowed Turkey to take the northern part of the island with zero punishment/sanctions.  Then to add insult to injury, the citizens who were forced to leave their lands helplessly watched their lands be sold (on the cheap) a few years ago to the very Europeans that are pushing for the deposit tax.

Now any native northern Cypriot left in Cyprus will potentially get an extra tax on their deposits. So yeah, if I were a citizen in Cyprus that had to deal with the above bullshit, I would have two choice words for the international community: FUCK. YOU.

Hopefully the new developments of the bailout right-some-wrongs with the people, but from a financial perspective, the markets have ZERO business fearing Cyprus.

The crisis in Europe was about bank runs, not country defaults.  The interbank lending risk via Cypriot banks (who will be seeing bank runs once they open) simply does not constitute a crisis, let alone a hiccup. The numbers simply do not justify the fear.

If the markets want to use Cyprus as an excuse to sell off, so be it. But my biggest concern isn't "C" for Cyprus, its "C" for China.  I fear a credit shock is brewing.  When only 20% of loan generation is going to new projects, and the rest to rolling over existing debt, the reckoning is a brewing.

The biggest questions are 1. when and 2. the magnitude of the hit?

China has about $4 trillion in reserves it can use to buy it some time. And their banks have limited exposure to western banks. But the effects of the localized shock will dent China's growth, and that will effect the global economy.  The potential credit shock is what makes me question Li's pledge of 7.5% growth until 2020.

The ECB and Fed have removed the black swans from Europe and the US.  If China can keep its target, then that removes its as a black swan.  But that remains to be seen, and the FXI is discounting something.

In the mean time, US jobs data continue to support the US markets will continue its new dynamic.

The SP500 is at a triple top resistance via the monthly chart.

Its time for a break-out. The 10yr yield is very oversold, but still holding its upward trend. If it can hold the trend and bounce, the action would support a market break-out. (Via funds exiting bonds, and entering equities.)

For the trend to break, we would need to see a shock via an escalated fear in Europe (which I will contend is a bullshit fear) or poor economic data begins to surface.

Tuesday, March 19, 2013

$aapl, u honey-badger

Given Apple's rediscovered stance of barking-back to the media, its not a complete honey-badger. It only gives a fuck, to the media and wall street, when it wants to give a fuck. (Apple always gives-a-fuck about innovation and customer satisfaction.)

Bottoming action is taking place.

Its attempted to break its 38sma three times in the last 5 months. Obviously failed twice.  Same can be said about the 10sma on the weekly.

This go around the stock is held together by the low 400 support and a technical break in Google.

Over the last few months too much bullshit was spewed trying to justify Apple's decline via the fundamentals. From a pure technical perspective, there was one glaring truth: a rotation from AAPL to GOOG.  This looks to be changing. The strength in AAPL and the technical set up in GOOG suggest the rotation is flipping.

The obvious trade is for AAPL to re-test its 90 sma on the weekly, near 500.  (There maybe some technical resistance near 460, due to the 50sma on the daily chart. But like Apple and the honey-badger, I don't give a fuck. The stock does not belong in the 400s. I will add on any pull-back from the 50 sma.)

How funny would it be if the new OS X was named Honey Badger!

Saturday, March 16, 2013

manipulating chatter... 820 Party

Anyone think media manipulation (at a massive scale) does not happen? Get your head out of the sand.

In China, the attempt at negative Apple chatter was discovered through a careless "Post around 8:20" instruction.

Curious as to which group was behind the attempt. Short Sellers? Competitors? Both?

In a related thought, a sincere "fuck you" to the Wall Street Journal.

$ebay, baby

EBAY acted like it was going to bounce off of its 90sma, but was bitch-slapped, a few times, by timely chatter.

When the 90sma was tested late last week, it made an intra-day reversal. Sweet, all according to plan as the stock had the upward bias to bounce off support. As this week started, ChannelAdvisor indicated that February retail sales were weaker than anticipated for eBay.  That allowed the stock to test 51, but make an impressive reversal thanks to analyst support, and the upward bias.  The very next day, on Wed, the stock just lost it.  Comments from North American boss at Mastercard regarding increasing fees were at the root of the decline.  An analyst with Evercore Partners then supported the stock highlighting that the street is already factoring in the increase in fees, and the fee should have a modest effect on Paypal. (I agree with Evercore.)  But the upward bias was lost.

With the lack of strength on Thursday, the stock collapsed from the support on Friday.  Now what?

Fundamentally, I am a fan of eBay here. They have structured their businesses to compliment and the proof is in the pudding.  Paypal alone is a viable competitor in the payment space. And with their new focus on improved developer support/tools, and a focus as an innovator, they are a real threat to the traditional card companies. (Their purchase of Duff Research can also leverage GSI.)  I would even argue Paypal is pushing faster to all facets of payments than any competitor. Leaving them in a great position for the brave new world of ubiquitous online/offline payments.

Now that the 90sma support appears to be broken, eBay will probably consolidate.  The current level, around 50, does act as a horizontal support on the daily. I am not sure of the strength of this support given the weakness on Friday. More likely, the weekly and/or monthly SMAs supports will be achieved.

The weekly suggests the stock could bounce off the 50sma, where it could be the bottom range of the consolidation process.  As the stock consolidates near the high40s/low50s, the monthly 20sma will approach the stock price, and could act as the footing for eBay to resume its uptrend.

Thursday, March 14, 2013

$ibm, u bitch

Impressive move today.

If it holds on the weekly, and I think it will, its a break-out from a year long consolidation.

Given the very over bought position (short and long-term technicals), I was expecting some level of consolidation near 207 before the break out. (Not three days at pretty over-bought levels at 210.)

Not a fan of chasing. I am waiting for IBM to now re-test 207-210. Since its trading at highs, any trades I take on here will be relatively nibble, until a reasonable consolidation takes place.

A long held thesis of mine has been multiple expansion for IBM. Now that the SP500 is experiencing its own multiple expansion, IBM should also start to see its multiple approach pre-crisis multiples of 16-17 as the year progresses.

Basically I am expecting IBM to trade near 260 by the end of the year.

Wednesday, March 13, 2013

The Wall Street Journal is officially a tabloid

One of my trading tools is measuring and understanding viable chatter.  There are plenty of bullshit chatter that needs to be filtered out of the equation. That leads me to ignore some publications all-together.

Every publication has some level of bullshit chatter.  This is why the occasional "fluff" piece is bearable. The reasons behind the "fluff" could be a weak reporter funneling a story or a weak reporter confusing commentary for fact. But when there is consecutive fluff, the publication no longer matters.

Over the last few months the Wall Street Journal has allowed far too much fluff to get pasts its editors. So much so, that I no longer take the publication seriously.

I question their facts. I question their sources. And I question their practices.

The straw-that-broke-the-camel's-back is an apparent interview with Phil Schiller. I find myself asking, 
how did the interview take place? And what were the questions asks to him?

The "rare interview" provided zero new information, and a restatement of obvious and readily available facts. It seemed as if Phil was responding to a question via email to a general person about the fragmented Android OS, and an article was formulated around a two line response. (Similar short responses Steve Jobs would give to random emails all the time.)  Then the article was sensationalized by adding "Samsung" in the article and headline.

Either way, I now find the WSJ to be useless in viable chatter.

Improved web services... $aapl

Even though I think the concept of a poor web services argument for Apple is bullshit, here is some chatter:

1. The Loop reports noticeable improvements to Apple Maps. (This corroborates a recent report by the ever-bashing-on-Apple reporter John Dvorak who provided real world results of Apple Maps besting Google Maps via PC Mag.)

2. Apple Store App was updated yesterday, and I found it to be noticeably faster and more responsive. (Suggests Apple is focusing on quality.)

Sunday, March 10, 2013

interesting technicals... SP500 $fb $bac $ebay $vlo

SP500 - On Jan 20th I highlighted the 'new dynamic' the market would be entering. Looks like we keep pushing to that new dynamic.  The monthly SP500 chart is trying to push through. (Although a leadership rotation may cause a consolidation. See VLO below.)

FB - Either its going to bounce from the current support via the daily or it may test  around 25 via the weekly chart

BAC - looking for BAC to approach its 9SMA.

EBAY - Its performance on mobile, payments and leveraging GSI is impressive.  The stock is now at the 90 sma support, which it has bounced off of in the past.

VLO - A market leader that is breaking its first level of SMA support.  Should see a short-term bounce off the 38 sma. Not sure if it will continue its march higher until a consolidation takes place. (It already saw a growth in earnings and multiple expansion. May be due for a consolidation.) I am looking for the 100 SMA to be achieved. (Don't think the stock will collapse to the SMA, but the the two may converge over the next few weeks.)

Monday, March 4, 2013

perverse perspective

I love the markets, but sometimes they are really stupid.

Last year the market perceived Google incorrectly.  The big boys very blatantly ignored Google's potential. With the false assumption of the Facebook and the "walled garden" threat Google's trailing multiple unfairly reached levels seen during recessions and financial shocks (between 15-16).

Throughout the year, I was very critical of the low valuation, but also of Google's strategy. I wrote much about what I thought they needed to do to become a true player in the mobile space. The posts include:

- Google+MMI need to improve (A few months later we saw the improvement: GOOG is ready for MMI. Q4 2012 showed MMI is no longer a margin issue, for now. More on that below.)

- Google's Opportunity

- Google needs to Wake Up

Looking back, Google has taken those steps, and added a thoughtful approach to design. Google's transition has been reminiscent of another brilliant company. So much so, I feel Google was/is busy executing a flattering strategy: mimicking Apple.

While Google was dealing with a contracting multiple in 2012, Apple on the other hand, had a multiple that held up fairly well during the 2012 market down turn.

In today's market, the sentiment has shifted. The market is now rewarding Google with a premium multiple, while giving Apple a severely discounted multiple.  Apple's multiple is so low, the last time the modern version of Apple witnessed such a low multiple was during the great recession back in 2009.

Whats more, the last 3-4 years as Apple was growing its top line by +40% annually, (and at times +85% of the bottom line) its trailing multiple systematically contracted. The market never, NEVER, truly projected Apple's growth in the last 3 year.  Until recently, the multiple leveled off to around 14, with its highs and lows being 12 and 16, respectively.

So as Apple grew as a company, its stock valuation shrunk. But that is not currently happening with Google.  Google is the third largest US company with a $260B market capitalization, and trades with a trailing multiple that has expanded near 25.

Between 2009 and 2010, Apple was a company producing around $50B in revenue, it was growing its top line and bottom line by 40% and 85%, respectively. Its market capitalization was between $100 and 200B yet its trailing multiple was contracting, and did not see north of 22.

Naturally, I think to myself, WTF?!? And I have been thinking and writing about the "WTF" for the last two months. The market is writing off the leader in the evolution of computing (AAPL), and embracing a stock whose company is following the lead.

There are plenty of arguments circulating as to why this phenomena is taking place.  The reason range from the most obvious to the not-so-well-thought-out.

1. The obvious being an expected contraction in earnings from Apple, and an earnings growth for Google.

2. Not-so-well-thought-out being Web-Services theory. (Apple is perceived to have none, while Google has plenty.)

Are the above reasons valid?


Google will continue to benefit through advertisements, and even more so over the next quarter or two as the company has muddied the water w/respect to where their ad generation is coming from. With their unification of mobile and desktop investors will gain less transparency of performance. (Google is basically becoming a black-box.)  But their market share in mobile search and desktop search is already at peak levels. Any growth coming from search will be from sector growth.  Given mobile will cannibalize desktop, this push-pull action does not merit a premium 25 multiple for the 3rd largest US corporation in the US.

Apple has given the road map for hand-set profits. Samsung also showed Google what its missing from the handset game. Google definitely can gain revenue from the handset space.  The only question to this is whether or not Google can sell a premium device at a profitable price.  So far Google has only sold hardware at cost, and it has not shared details of device sales to get an accurate portrait of demand.  Also, Apple has shown its premium hardware can be manufactured at a better price Samsung's premium hardware. (Galaxy 3 $283, iPhone 5 $199)

Will Google allow for margins to shrink or sell hardware at decent margin (a margin level to justify a premium multiple)?

Will Google truly transition into a true hardware company? If they want to be at Apple's level, they will have to take some serious risks with manufacturing, distribution and supply-chain management.  Risks that maybe a bit bumpy to execute.  Like billions in upfront cash and equipment purchases.

(As far as the "carrier-cutting-off-subsidy" threat, I simply point to Vodafone Spain. It removed subsidized smartphones, and lost 639,000 subs in one quarter.  Premium phones do a great job to have users obtain a higher monthly data charge.  Unless carriers want to be charged with 'collusion', or a carrier wants to lose share, the subsidies will be removed. Basically, I do not think this is going to happen.  This should benefit both Google and Apple.)

Apple should continue to benefit from increase adoption of their products, but as the iPhone's growths eases from its exponential rise, it should see a similar growth to the general smartphone market adoption. (With the exception of areas like China, India and emerging markets.) Apple has always focused on China, and the proof is in the revenue. (Some $24B in revenue from China.)  But Apple is now focusing the iPhone on the rest of the emerging markets, and that should allow for higher adoption. IMO, the true driver of growth for Apple is the iPad line and its continued growth in services.

Web Services:

The web is the premise of Google's core business, so its obvious that they excel here. But just because Apple does not compete with the type of Web-services Google offers, Apple's services are more than just 'pretty good".   Pundits and chatter focus on one or two ancillary items, like the initial poor Maps experience or poor iAd performance.  But the fact is that Apple's services saw a revenue of $12.890 Billion for 2012.  In December 2012 its 3month ending net sales was $3,687B vs a 2011 3month ending of $3,020B. A 22% increase. This is a tremendous re-occuring and growing revenue/earnings stream that acts as a moat to the iPhone/iPad/Mac hardware.

Because of the current perspective, Google is in a trading scenario where the "trend is your friend".

Apple is in a perversely negative cycle that will not allow it to breach its 10SMA on the weekly.

I certainly do not want to be hating on Google just because it is seeing positive sentiment. I am a fan and a bull of the company, just not of the stock when its at such a high multiple with such a high market capitalization.  But just like I defended Google when the market was shitting on it, Apple too does not deserve the perverse perspective it is currently seeing.

A few potential catalysts for AAPL:

1. The fruits of the Oct 2011 reorganization. Will we see enough positive changes to iOS user interface that will get the people excited. (But not mess with the famous ease of use.)

2. Improvements to Passport to include mobile payments

3. Apple TV SDK (allowing for 3rd party app of Apple TV). Or maybe a deal with a few cable/internet providers that would have Apple TV as their interface instead of the current cable box.

4. Announcement of the iTV (actual television). 

5. China Mobile deal. (Although the China 3G sales numbers suggest this really not needed right now).