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Thursday, May 30, 2013

developments in Facebook

Apparently Facebook took it on the chin with a few advertisers due to some hate filled pages. So-much-so that advertisers walked away until the issue gets resolved.

Was this the underlining reason the stock has declined some 20% in 2-3weeks? Could be, assuming the loss of advertisers correlates to a meaningful loss of revenue/earnings. But the trading dynamic still smells like a liquidation. Although, at this stage of the game, and after a very decent earnings report, I am confused as to why the liquidation is taking place.

Without understanding the reason for the decline, melting through some pretty heavy and obvious support levels, I am failing to understand the trading dynamic at the moment. Without understanding the decline, I will be hard pressed to understand the catalyst to turn the stock. (It melted through resistance levels that should have produced a bounce given its technical set up, but nothing of the sort took place.)

In the mean time, I will continue to keep my eyes open.

A closer look at the revenue trends did not show anything atypical. Historically FB typically sees a slow down in the March ending quarter. Year over year they grew fairly nicely, almost 40%. The only knock could be the revenue growth being linear vs exponential.

Monday, May 27, 2013

Market Thought... Japan yield

At the moment, Japan's rise in rates have not been the catalyst to the Nikkei's decline.

Within May, the Nikkei kept rising as the 10year Japan government bond yield rose.

In fact, the Nikkei declined 7% while the bond rates have leveled off.

Saturday, May 25, 2013

$FB weakness

Facebook has traded down 14 of the last 16 trading days, ever since they reported their solid earnings.

From technical perspective, the above chart looks like chaos, but the blue horizontal support line is legitimate. Its the resistance, from August-to-November, turned support.

FB is also very oversold. In fact, its the most oversold its been, since the CCI was able to begin calculating.

Their earnings report was pretty solid, allowing for the stock to rise some 5% after the release. But over the last two weeks, there was no negative chatter to be a catalyst for a 17% decline (from the 29 level).

The new negative developments surrounded the Home concept and the HTC First phone, which have seen underwhelming demand.  I barely view this as a negative because Home is more of an experiment as to where they can take mobile applications verse a centerpiece of the future. 

The only other negative development I could uncover is that their Insights data could not be view current data since May 13th. For an Ad company to not allow brands to view current data, and being slow to fix it, is a concern. (Does it merit a 8% decline since May 13th?)

Regardless of the negativity, the above chart suggests a liquidation. The level of negativity from the ADX suggest some fund(s) or person(s) are liquidating.

We know it can't be Mark Zuckerberg, as per an 8-K filing from Sept 4th 2012:
Mark Zuckerberg has not adopted a Rule 10b5-1 Plan and has informed us that he has no intention to conduct any sale transactions in our securities for at least 12 months. Mr. Zuckerberg currently holds in aggregate approximately 444 million shares of Class B common stock as well as 60 million shares of Class B common stock issuable upon the exercise of an option.
Those +400 million shares/options are locked in until Sept 2013.

On the positive side, and something that got very little chatter, is to have advertisers target users based on pretty recent activity through the site and the apps connected to the graph. Giving more accuracy to the target audience. 

After the recent earning's report, Facebook's position in mobile can not be denied. But the real catalyst I am waiting for is for Facebook to start leveraging their position as a local search engine (the link is to ComScore's infograph which highlights Facebook's position as a local search provider).  Facebook has to stop dicking-around with local search, and develop a product that people already utilize it for. Vis-a-Vis Wonder.

Thursday, May 23, 2013

Market Thought... Japan's 1987?

Here is what the SP500 looked like running into the 1987 crash, and after.

It rallied over 100%, and had a few breathless moments where it gave back (in max pain) 50%. But considering the moves, stabilized with the 500 moving average.

Here is what the Nikkei looks like, excluding the decline. (I will update later.)

So far its rallied +60% off its base (Oct-Nov 2012).


After reviewing the trend, yesterday's decline barely broke the Nikkei's trend.

This sucker has a ways to go before being a true crash.

Also, a second look at the Yen during this decline doesn't really show a correlation.

Sunday, May 19, 2013

Market Thought... wall of weak worry

Given the current environment, a wall-of-worry is an odd statement.

The market kept pushing upward thanks to good jobs numbers and David Tepper's comments on CNBC.

So far, within May, the SP500 is up about 3.8%. The solid move took place while the VIX has been steady, very steady.

The recent move should have allowed the VIX to see substantial decline. A decline that would push the low 10s (historic lows) and new lows for the below trend:

Back in January I wrote my thesis on the market's 'new dynamic' pushing new highs. Based on the above, it appears the market is still climbing a wall-of-weak-worry.

This go around, the worry seems to be protecting gains versus protecting against a catastrophe.

Thursday, May 16, 2013

Looking to short $goog

Reasons to come...

1.  Very very overbought, and accelerating from its already accelerated up momentum. (The momentum whores have control.)

2. Motorola looks to become about a $7 billion write down.  Motorola is dragging down GM and Operating Margins, and given Samsung's profit share of Android handsets, there appears to be no profits in sight.  Their Nexus brands are nice for the technocrats, but not making much head way in handset sales.

3. Search share has peaked.

But search is over, right? Or at least that is what Google declared at the I/O today.

Despite the language Google tries to use, the vast majority of their business comes from search. The only difference between now and a few years ago is that "search" is now defined by desktop, mobile, voice and their "Google Shopping" (paid results).

The bottom line is that voice search commoditizes desktop search (even if this push-pull is not yet seen w/in the data). And with Google pushing Google Now, voice search becomes an answer engine. There will be a transition to a new model of search advertising. That could be through paid listings or incorporating daily deals when asking Google Now for a restaurant.

Through out the I/O presentation, as we were all witnessing Google's transition into a closed-ecosystem predicated on a Google+ account, I kept thinking of the above transition.

Will the transition over come the law-of-large-numbers? (A $300Billion company w/ a 27 tailing multiple. The expected return for Google is about 20% higher then the second next highest multiple of the 10 largest US Corporations by market capitalization.)

4. Despite the above concern via traditional search, display and real-time-bidding are growing nicely for Google.  But is it enough to justify the future expectations currently priced into the market?

About 11 days ago, I noticed this tweet:

Over $400 Billion dollars in advertising will be online, but will Google be the beneficiary? At some level, of course they will benefit, especially with real-time-bidding.  But a huge chunk of that $800 (and subsequently $400) billion come from TV ads, and Google will only benefit from those via Google Fiber. (Assuming its profitable.)

TV channels will merge into Apps, like Netflix, but they will most likely keep their business model with respect to attracting ads.  (Google could become a new aged TV Guide, but so can Facebook, given their position in App discovery.)

5. Amazon is getting into the Ad game too.  With Facebook and Amazon in the game, bringing different information to the table, not sure what this does to pricing.

Google is riding awesome momentum, and should bounce around the upward trend. (This is why any shorts I take on will be a quick trade to any down side.) As the quarter approaches its quarter end, the momentum whores take their gains, and break the trend.

If/when Google cannot meet expectations of a $300B company to generate the premium growth the market is expecting, its multiple will normalize and decline.  If history is a guide, it will trade with a multiple between 16-19:


Tuesday, May 7, 2013

new dynamic... $aapl

Bottom is in.

The daily SMAs that were resistance have been breeched.

The major resistance of the 10SMA on the weekly was breeched.

The monthly is locked-stocked and ready to move from its oversold condition. Last time this level of oversold condition existed AAPL ran hard.

But the last run was also accommodated with an accelerating EPS. Apple is not in that position right now. Instead it has $60B in bids under the stock.

There are still plenty of technical resistance points before Apple approaches its historic trend line (seen in the weekly chart, near the high 500s). And typically, after a major break of resistance, there is some level of consolidation to be expected.  The consolidation maybe near around 430-440.

Not gonna be shy to add during the consolidation. The reasons:

1. IBM is the ultimate stock for financial engineering. Its multiple is near 14. (Prior to the financial collapse it was 16-17.)  Apple has embarked on the largest financial engineering project in history. That alone merits a trailing multiple higher than 10.  If it starts to trade like other well executed financially engineered stocks, its multiple will be higher. (So will its stock.)

2. If you were a business man that owned the most successful and profitable restaurant in NYC, would you sell it for 6 times earnings? Enough said.

3. A nice estimate of high-end addressable market was conducted by Benedict Evans suggesting the remaining size of the market is 1.6 billion, globally.  As a rough estimate (and ignoring re-fresh cycles and a push to 'best-of-breed'), the latest IDC estimate was that Apple controlled about 17% of all smartphone shipments.  Apple controls a much higher portion of the high-end market, but for the sake of conservatism, lets assume the iPhone captures 20% of the 1.6B. Thats about 320M new iphone customers.  Last quarter Apple sold 37.4 million iphones.  Thats about 1.5-to-2yrs worth of growth from new customers remaining.

There is enough growth within the iPhone and financial engineering for Apple to eventually get back to the mid 500 level.

Of course, the level of growth from iPad, iTV and iTune/iCloud should allow Apple to continue to trend near the high 500s.  New products are a bonus, and pending their uptake, allow Apple to continue the trend line on the weekly chart.

(NOTE: I mention iTV because the change in tone from the cable providers, developments with Aero and the potential that NFLX is proving to every channel provider in the world signals a change-is-coming.  And iTV is a prime staging area.)

Thursday, May 2, 2013

$FB new dynamic

If the action holds, FB has breached its 3-4 month negative trend.

The new trading dynamic should allow FB to trade towards the low 30s.  Probably 32 before a new catalyst is needed to push it higher.

FB does not lack catalysts.  As a company, they just have to keep executing on their current trajectory. But their ultimate catalyst, and one that I think will take it well into a +100B market cap, is their leverage of local search.  Many many people use social as their local search engine, and FB simply has to tap it. Wonder was a proof of concept, and that was developed a few months ago. It is only a matter of time before FB does the same.

Wednesday, May 1, 2013