Tuesday, July 31, 2007


Game Over. Its over for the bulls. Strong start and a horrid close. Everything was thrown out the window. There are no buyers. No place to go hide. The bears are coming after everyone. Subprime is taking down the whole economy. Liquidity is finished. Bernanke is not going to save the markets.

Ok enough with the nonsense. The above were not my thoughts. Its just some of the things I've been hearing. People are fearful. Investors are running for their lives. I smell opportunity. Sure subprime is a problem. But its going to affect a small portion of the economy. There is a good chance we enter a bear period. Than again we may continue our uptrend. Who knows....

Right now the Dow has some support at the 13200 level. That is likely to be taken out and we will probably be seeing 12600-12800. It would be a good idea to have some cash and put it to work once the market starts a broad based rally. Financials look extremely cheap here. GS MER BSC MS are trading like they are on the verge of bankruptcy. If we get a strong rally, I woulddn't be surprised to see the aforementioned names lead the way.

Mid session update

Wild swings in the market today. The bulls came strong out the gate but the bears rallied back to take the major indices into the red. The bulls have once again staged a recovery . The last hour will be crucial. A close in the red could lead to further downside tomorrow. The bulls need a strong close to take control. Europe and Asia were extremely strong overnight with many Hong Kong and Shanghai making new highs.

Key Numbers to watch

Dow: 13,500 . Bears appear determined to keep markets below this level.
S&P: 1,490 . A level of strong support which is now reisistance
Nasdaq: 2,618: 50 day moving average.

Stocks to watch


These are some of the markets biggest and/or leading stocks and weakness or strength in them will go a long way in determining which way the market leans . Financials and technology sectors are key.

I would also keep a close eye on oil prices, the Yen and the US Dollar. There is an 80% plus correlation between the Yen and the S&P with them moving in opposite directions. A rise in oil above $80 could kill the markets. Strength in the USD could lead to falling stock prices and vice versa.

Monday, July 30, 2007


Busy day today. Busy enjoying 'Green Monday'. A relief rally finally. A great opportunity to make money in long positions. DDM SSO QLD MVV SLV GLD FXE were all good to me. I like SNDK LVS NYX MMS INAP GS.

Where do we go from here ? I think we sell off tomorrow and either test the lows or break down. I believe 12600-12800 level may be a good place to start going long if we get there. However with the record short positions we have , we may continue going straight up. Too many people where bearish today anticipating a Black Monday which never came.

Saturday, July 28, 2007


The Dow is currently close to support at the 13200-13250 level. I this level is breached, we could potentially fall down to the 12600-12700 level or the 200 day moving average at 12748 which is likely to move lower in the days ahead.

The S&P appears to have breached support at the 1460 level and the next stop is likely to be the 200 day moving average at 1448 and support at 1440. Another zone of support lies around 1410.

Support for the Nasdaq appears to be in the 2525 range . The Nasdaq is the strongest of the 3 indices which is fairly surprising. The move appears to be from basic materials, oil and financials into tech. Growth stocks are doing better than value. Just look at the relative strength in names like AAPL AMZN GOOG CROX GRMN SPWR CMG the past few days.

Friday, July 27, 2007


A potential rally was thwarted in the final 30 minutes as the markets fell apart. Panic selling, margin calls or was this the work of knowledgable sellers who were getting out before the real carnage begins. Black Monday could be in the cards after a brutal week with two 200 hundred point Dow drops and a 300+ drop. While it does pay to be bold in situtations like this , standing infront of a speeding train can be a stupid idea.

Dr. Doom came out today with the belief that US stocks are overvalued with the end of the LBO boom. He may have predicted the 1987 crash or so he claims. Perhaps this time he is a contrarian indicator.

Technically speaking, the Dow has support in the 13250 region and the 12700-800 region. If the latter is violated, it may be time to get out the markets. The S&P is only 10 points away from its 200 day moving average at 1448 which may offer a lot of support and a good opportunity to go long. Then again, if the 200 day fails, a short may be in order. Who says the markets are boring.

Pre Market

The world is ending. Or atleast thats what one would think looking at the Asian equity markets. Europe is holding up better though still bearish.

Economic Calendar

GDP came in at 3.4% which is better than the 3.2% consensus.The price gauge sowed lower inflation which is a plus.

Volatility in debt markets is becoming a problem as Cadbury Schweppes delays the sale of its US drinks division. This come son the back of KKR failing to find buyers for $10 billion of debt to purchase Alliance Boots Plc.As buyouts fallout, we could be in for some serious downside.

There is a lot of bearishness out there. Dennis Gartman is out on Bloomberg claiming this to be the start of the bear market. He came out on CNBC before to proclaim the February 27 plunge as the start of the bear. Who knows, sooner or later he may be right. When sentiment gets overly bearish, it pays to take the other side of the trade.

Gold and Silver continue to fall lower his morning. The Dollar continues to move higher. The Yen is weakening a bit.

CROX is soaring in pre market. AMGN NFLX TASR AAPL BIDU VDSI are some names that are looking good.

A lower open is expected on the indices today. if yesterdays lows hold, this may prove to be a good buying opportunity atleast for a short term trade.

Thursday, July 26, 2007

Recap - Bloody Thursday

I knew selling those inverse ETFs would bite me yesterday. And it did. Nonetheless I went short once support levels were broken notably the 13680 on the Dow and my profits were substantial though the beating I took on individual equities is one I would like to forget. Today seemed a capitulation day closer to a bottm than a top. Financials were murdered along with goldand silver, miners and housing. The homebuilders were taken out back and executed while the financials were disembowled until that late rally. The only positions that did not let me down were BIDU and FFIV. DXD QID SDS came mighty handy during the middle of the day all the way till 3pm. I was able to snap up some bull ETFs such as QLD DDM SSO for the ride back after that. I currently hold the bull ETFs in anticipation of further rallying unless ofcourse the blasted GDP report comes in below consensus.

Hank Paulson rode out on his white horse to save the markets today with his comments that subprime didn't pose a threat to the economy though this is a load of bull. The market is all about sentiment though and these calming words were all it took to reignite the bulls.

AMGN is up nicely in after hourse while RVBD is getting massacred. Speaking of massacres, AKAM took a bullet to the head today though it was a lot worse midday. AKAM is a steal at these prices. RACK is up in after hourse despite another loss. This company is on the buyout block though and the chances are it gets taken private or bought out by DELL or SUNW.

RMBS is getting killed in AH. So is NTGR.

NIHD looks like a buy at these prices.

I took a dip in SNDK under $56 .

Pre market

The Asian and European markets are fairly weak this morning.

Economic Calendar

Orders for durable goods are up this morning as demand for airplanes remains strong. However demand was less than Wall Street estimates.


Ford reported a surprise profit after 2 years of losses.

Home builder DR Horton swings to a loss as the housing downturn worsens.Home buidling stocks continue breaking to yearly lows.

The markets are set to open lower this morning. A lower open might provide a great buying opportunity as long as July 24th low of 13661 on the Dow and July 25th 1504 lows on the S&P 500 are not broken. The S&P also has support at 1490. The Dow could find support near its 50 day moving average at 13585.

Wednesday, July 25, 2007

Earnings Focus

AAPL is extremely volatile in after hours trading as it announces blow out earnings of 92 cents a smashing estimates of 72 cents. However guidance for the 3rd quarter was offered at 65 cents a share well below the average estimate of 83 cents.
AAPL will be a good buy below $120 in my opinion and it should get there in a week ot two.

AKAM is being beaten up after hours despite beating revenue estimates and meeting profut estimates. Q3 guidance was a little weak. AKAM is a great buy under $40.

BIDU is going through the roof as earnings come in at 54 cents vs consensus of 43 cents. The stock is up over 20% in after hours. BIDU is a position I have had since it was in the 90s and I may take more profits here.


The bulls prevented the bears from taking control. I sold of my inverse ETF positions entirely and hope it does not come back to haunt me. I like AKAM FFIV AAPL before earnings.


After a terrific start out the gate, the sellers have once again regained control.
This here says it all.

Banks Postpone Chrysler Funding Plan

Investment banks raising funds for the turnaround of Chrysler Group postponed a
$12 billion debt offer after investors balked, so they will now fund the bulk
themselves to keep the automaker's sale on track, people familiar with the
matter said Wednesday.

Deals are getting harder to fund as investors are getting cold feet from the subprime blow up and CDO defaults. While the Chrysler deal is still on track, a lot of other deals are likely to fall apart in the coming days and weeks. The driving factor in the move up in US equities has been the record number of buyouts. These buyouts have fueled speculation and run ups in the stock price of similar companies. As these buyout deals fall through the crack, equities as a whole will suffer.

Pre Market

Today is a big day for earnings. Some of the names to report include AAPL AKAM AB AMP BIDU CL COP ETFC EQIX FFIV FLIR GD GSK WFR QCOM ROK R SYMC .


Economic Calendar

New Home sales are out at 10am.

There will be a bounce in the markets today especially after AMZN earnings yesterday. The stock is up 21% in pre market and looks to continue its incredible gravity defying run.

Boeing came in with solid earnings and this should boost stocks in the defence aerospace sector.

Shanghai is back at all time highs . The run in the Chinese markets is nothing short of amazing.

The real estate bubble is not just confined to the US. London has a bubble of its own. Pity those who think Manhattan real estate is pricey.

Tuesday, July 24, 2007

Pre Market

A lot of earning reports , some misses and disappointments. Texas Instruments, DuPont Co. and Countrywide were some of the big misses. Lockheed Martin was one of the bright spots from with great earnings due high demand for fighter jets, missile defense and information technology. McDonalds swung to a 2Q loss due to a one time charge. American Express failed to impress as increased delinquencies has investors worried. AT&T posted a 61% profit increase though investors which also failed impress.


Economic Calendar

Apple has been downgraded this morning and shares are under pressure. Many analysts have $200+ price targets on AAPL.

Netflix got beaten over its earnings and lowered outlook. I think NFLX is a decent buy under $17. There is a good chance it will be bought out.

Stocks I am keeping a close watch on include GOOG AAPL RIMM GRMN AMZN MSFT CSCO C GS BAC XOM GE IBM . How these stocks fare has a huge impact on the overall market.

Monday, July 23, 2007

Pre Market

Buyouts are moving the market futures higher this morning . The GSF takeover by RIG is propelling other offshore drillers stocks up including DO NE .

HPQ is buying NWRE and OPSW. Some names that could be takeover target due to the HPQ buyouts include ULTI LNUX OTEX ARTG SONE ELON RVBD LNOP STAR NWK SILC .

Cerebus is buying out United Rentals for $4 billion in cash. RRR is a name to watch in the contruction gear rental industry.

Saturday, July 21, 2007


An excellent read on CDOs and how the problem is a lot worse than Wall Street is letting on.

A typical mezzanine asset-backed CDO is divided into layers. At the bottom is the riskiest and most lucrative piece, the equity tranche. It takes the first hit when the underlying collateral gets into trouble as homeowners fall short on their mortgage payments. At a 5 percent default rate on the underlying assets, the owners of the CDO equity slice lose all their money.

Next up is the BBB rated portion. It gets bashed when defaults climb to more than 5 percent, and wiped out should they reach 10 percent. The A rated piece goes boom at 14 percent, and the AA tranche becomes worthless at a 23 percent default rate.

And more from the same article

Daniel Taylor, a Philadelphia-based fund manager at Aberdeen Asset Management, reckons it will only take a 1 percent decline in national U.S. house prices for collateral losses to surge to more than 40 percent -- at which point your top-rated security is in the same sinking boat as the lower-rated securities.

This is some scary stuff. The subprime/CDO issue is the real deal.

Friday, July 20, 2007


Dow down 149 , Nasdaq down 32 , S&P down 19. Need I say more ?
The markets came unglued today as poor earnings from GOOG CAT MSFT set the tone. An attempt at a rally was quashed in the last hour of trading as sellers continued to dominate. There was an obvious attempt to drive the S&P 500 down as an ungodly amount of S&P 1550 July puts were in play. With option expiration this decline came as no surprise. Next week will be interesting. Will the Dow be able to reclaim to 14,000 level and will the S&P be able to break past 1550 ?

As I expected, SNDK sold off its gap today. I closed out my position early as my year end price target of $60 was met.

AAPL was one of the few bright spots today as analysts upgraded price targets to $200 for this stock.

Gold and Silver continue to do well and outperform the overall markets. Financials remain weak led by GS MER BSC MS JPM C BAC . If financials remain weak,its hard to believe this rally can continue.

Capitalization of the S&P 500

Here is a good link to the capitalization of the S&P 500 showing the companies with the highest and lowest weightings. The top 20 XOM GE MSFT C T BAC CVX PG CSCO JNJ AIG PFE JPM IBM MO INTC COP HPQ VZ AAPL are a combined 30.18% of the index. So if you can see what these stocks are up to pre market, you will have a good idea where the S&P is going. The top 100 stocks make up 64.27 % of the index.

Pre market

Weakness is expected at the open as Caterpillar sees a 21% drop in Q2 profits.

Citibanks profits beat expectations and the stock is up in pre market while Wachovia is up slightly after meeting consensus.

I expect Googles earnings miss to put a lot of early pressure on the Nasdaq.

Thursday, July 19, 2007

Google earnings miss

GOOG missed earnings by 3 cents and the stock is down a fair amount in after hours. With sky high expectations, any signs of an earnings slowdown could be potentially hazardous for this internet high flyer.

SNDK reported a profit decline though numbers topped analysts expectations substantially and the stock is up in after hours. Nonetheless strong earnings were already built in to the stock price and recent run up and I expect some selling tomorrow.

The Dow closed at 14,000 on the dot allowing the cheerleaders at CNBC to have a collective orgasm.

Foreigners saving the US markets ?

Foreigners have been buying US corporate bonds, treasuries and equities in record numbers in part due to their huge foreign reserve surplus - think China and the Middle East who have a combined $1 trillion plus in foreign reserves.
Treasury buying as of late has slowed down and thus the increasing yields. These international buyers have kept our rates low while helping sustain this bull market. A weakening US Dollar is starting to worry these buyers and affect their returns. Perhaps further slowdown in Treasury buying could cause yields to increase further putting an end to this bull rally. Just something to consider.

Wednesday, July 18, 2007

Freeze in LBO lending ?

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said demand for leveraged buyout debt is drying up and banks may be left holding more loans that they can't sell.

There is ``kind of a little freeze in the marketplace,'' Dimon said on a conference call with investors to discuss the New York-based bank's second-quarter earnings. ``If you see this continue you will see the Street taking on a lot of bridge loans and more aggressive repricing of those things.'' Bloomberg

When Jamie Dimon says something, I would listen carefully. He is easily one of the five smartest and most influential men on Wall Street.

Bear Stearns Hedge Funds worthless

Bear Stearns told clients in its two battered hedge funds late yesterday that their investments, worth an estimated $1.5 billion at the end of 2006, are almost entirely gone. In phone calls to anxious investors, Bear Stearns brokers reported yesterday that May and June had been devastating months for the portfolios.

The more conservative fund, the High-Grade Structured Credit Strategies Fund, was down 91 percent by the end of June, investors were told. The High-Grade Structured Credit Strategies Enhanced Leverage Fund, which used extensive borrowings and assumed more risk, has no investor capital left, the firm said. NY Times

How will this affect the overall markets ? Is it not possible that other hedge funds are in the same position ?

Friday, July 13, 2007

Midday Observations

Soon $100 bills will be used as toilet paper. The USD is going down the toilet.
Who in the right frame of mind will accept US Dollars as payment for anything ? Oil producers have started switching to Euros and other currency. Perhaps they will turn to gold as a way to make payments........

JSDA is consolidating nicely after the runup. Once the 50 day moving average is broken there will be a lot of upside.

IBKR is the worst IPO of the year.

DIVX is a buy once the 50 day moving average is taken out. Looks like a double bottom.

With the runup in HOV you would have thought Warren Buffett has taken a stake.

Strong move in SIGM the last few days. AUTH ? Whats going on there. Is there a real story here.

Pre market

Asia is very bullish and Europe is not too far behind. Shanghai continues to show weakness despite a belief by many that the Chinese government will not allow a market crash prior to the 2008 Olympics.


GE was the big name reporting today and its earnings met estimates and its decision to sell it subprime unit WMC was met with approval.

Some great news for stock market bulls as retail spending fell in June by the most in two years. The 0.9% decrease was far below a consensus range of -0.6% to 0.6% and and average estimate of flat sales.

``Consumer spending can't be sustained at the pace it has been,'' said Carl
Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. ``We'll
remain below trend for growth in the second half. This could be the beginning of
the long-anticipated slowdown in housing-related spending.''

No sh*t. We are seeing the beginning of the housing induced recession. No more
writing checks against your home equity.

The euro broke through the US$1.38 mark Friday for the first time, as persistent worries about the strength of the U.S. economy pushed the European currency higher.
The 13-nation euro moved as high as US$1.3811 in afternoon European trading before falling back to US$1.3805. That was up from US$1.3783 in New York late Thursday. AP


Thursday, July 12, 2007


Capitulation by the shorts propelled the Dow to a record close and its best gain in 4 years. The S&P and Nasdaq were not far behind. The S&P 500 finally broke through the 1540 level where it has encountered some resistance previously. Weak numbers in retail were overlooked as Walmart posted better than expected same store sales. Some apparel retailers had some huge gains today including ANF AEO CTR and Target was also up big on reports of an activist investor taking a stake. By sector, aluminum, industrial suppliers and consumer finance were the big gainers while hotels and brewers lagged. Gold and silver both had excellent days as did the miners.

Pre market

Asia and Europe are both very bullish this morning.

Economic Calendar


Crude oil rose to more than $73 a barrel in New York after the U.S. government reported supplies of oil dropped because of a decline in imports.

Crude-oil stockpiles dropped 1.5 million barrels to 352.6 million barrels last week, according to the U.S. Energy Department. Imports fell 7 percent to an average 10 million barrels a day, the lowest since the week ended April 13. Bloomberg
I think oil prices are close to peaking for the year. Lately, a lot of 'dumb' money has gone long oil.

Retailers posted modest June sales results, with department stores showing weakness and apparel sellers posting mostly flat sales.

Among the casualties is Macy's Inc., which reported weaker-than-projected sales and cut its fiscal second-quarter earnings outlook. Five other retailers also lowered forecasts.

Conversely, Wal-Mart Stores Inc. beat its modest outlook and Cato Corp. sees earnings above expectations amid solid sales and lower-than-expected markdowns.

As they did in the prior three months, June same-store-sales comparisons will be impacted somewhat by calendar shifts that are moving holidays into different monthly reporting periods compared with 2006. WSJ
As I suspected retail sales are slowing.

Rio Tinto has sparked a bidding battle for Alcan by tabling a $38.1 billion (£18.9 billion) offer for the Canadian aluminium producer, $10 billion more than the bid made by Alcoa.

The Anglo-Australian mining giant said that the $101 per share all-cash bid, the largest ever made in the industry, had been unanimously recommended by Alcan’s board.

The acquisition will fuel a fourfold increase in Rio’s alumininum output and see it overtake Alcoa and Russia's Rusal as the world’s biggest producer of the metal at a time aluminium prices are soaring on the back of demand from Russia and China and with Indian demand set to take off. Times online

Wednesday, July 11, 2007

Market Recap

The major indices closed up with the Dow, S&P and Nasdaq all having nice gains. Railroad, steel and metals were the outperforming sectors while gold mining and consumer finance were the laggards.

In after hours, Genentech announced second quarter results with net income growing 41% and numbers beating analyst expectations. Yum Brands also announced an excellent second quarter with phenomenal growth in the overseas markets.

Pre Market

Asia apart from Shanghai and Europe are both being hit badly.



DNA and YUM are two big names reporting after the bell.

Just as Wall Street began to dust itself off from last month’s subprime mess that left Bear Stearns begging for mercy, Standard & Poor's sent the whole stock market running for cover when it threatened to cut the credit rating of more than $12 billion in bonds backed by subprime mortgages.

S&P said it is considering such drastic actions because of evidence of increasing delinquency, default and loss on subprime home loans and the reduction of credit support, which “exceed historical precedent and our initial expectation." S&P shifted some of the blame away from borrowers by saying that loss rates have been partially fueled by “lower underwriting standards and misrepresentations in the mortgage market.” Forbes

A fresh read on the housing slump's impact on home loan applications is due out Wednesday.

The Mortgage Bankers Association will report its weekly index of home-loan application volume at 7 a.m. EDT. The number of applications rose slightly last week after falling the two previous weeks. Business Week


Tuesday, July 10, 2007

The bulls got beaten up today. The Dow is starting to look like a triple top with each peak slightly below the other. The S&P broke below its 50 day moving average and also looks like a triple top with each successive peak below the other. The Nasdaq has by far been the strongest index though there was some heavy selling today. Gold, Silver, oil , the Euro and natural gas were all very strong. Thus I had some big gains in GLD SLV UNG FXE and equities like NYX JSDA LLNW BBND BIDU RACK as well as my inverse indices QID SDS DXD MZZ . Overall I was up quite nicely for the day despite taking it on the chin in positions like LVS UXG PRAI OXPS HANS NTRI FFIV GE .

Volume today was on the heavy side and decliners outpacers advancers 6-1 on the NYSE. Homebuilders and banks all got killed. Electronic office equipement actually finished higher as a group. Internets didn't do too badly either. On a side note, Bernanke was unable to rally the markets like he usually does. Not good for the bulls.

One of the reasons for todays market decline was some poor earnings starting with Alcoa yesterday evening and continuing on to companies such as Home Depot and Sears this morning. Lets take a look at the factors mentioned that caused Sears to miss.

"We are disappointed with our recent performance," Chief Executive Aylwin Lewis said in a statement. "Although we believe our business has suffered from many of the same factors that have led other retailers to announce disappointing results and lowered expectations, our recent performance underscores our ongoing need to become more relevant to consumers while improving our discipline around expense management."

SAME factors that caused other retailers to miss. In other words the housing slowdown. So housing is affecting the broader economy, a scenario which the bulls are denying.

"While investors have sought to value Sears as something other than a retailer, its recent results demonstrate that it is not immune to the current challenging sales environment impacting retailers with big-ticket home exposure," Goldman Sachs analyst Adrianne Shapira wrote in a research note.

Current challenging sales environment impacting retailers with big ticket home exposure. So consumers are not spending on home appliances as much because

a)They cannot tap into their Home equity due to declining or stagnant home prices

b)They are not buying new homes like they were a year ago.

c)They are suffering the effects of inflation via higher food and gas prices.

d) All of the above.

I would say d) All of the above, fits the bill.

"It looks like it's going to be a pretty rough quarter, particularly with the home appliance category," said Morningstar analyst Kim Picciola. "There are a lot of retailers vying for the same share of consumers' wallets and it doesn't seem as though they're changing their competitive position in the market place. They're continuing to lag to tough competitors like Wal-Mart and Target."

It will be interesting to see when Target and Walmart report.
Alcoa Inc. said late Monday earnings slipped in the second quarter, pinched by curtailment costs at two smelters and an ongoing bid for Alcan Inc., while revenue climbed on higher aluminum prices and volumes.
Kicking off second-quarter earnings season, the New York-based aluminum producer said net income for the three months ended June 30 fell to $715 million, or 81 cents a share, from $744 million, or 85 cents, in the year-ago quarter. Marketwatch
Not a Great way to start earnings season.

The Home Depot Inc., the world's largest home improvement store chain, warned Tuesday that its earnings will decline this year more than previously expected because of weak conditions in the housing market and the sale of its wholesale distribution business. AP
Housing weakness continues.

Sears second-quarter earnings will likely fall well below Wall Street expectations due to disappointing sales of home appliances and other products at both Sears and Kmart, the department store chain said Tuesday. AP
Might be a good time to short the retailers and big department stores.

Pepsi Bottling Group Inc., the world's second-largest soft-drink distributor, posted profit that exceeded analysts' estimates and raised its earnings forecast on increased demand for Lipton tea and Aquafina water.

Second-quarter net income increased 9.5 percent to $162 million, or 70 cents a share, from $148 million, or 61 cents, a year earlier, the Somers, New York-based company said today in a statement. The results topped analysts' estimates by 7 cents. Bloomberg
International growth is the prime factor

VMware, the fast-growing software maker, could be worth nearly $10bn after its flotation, according to filings with US regulators.

The company, which is controlled by EMC, the world's biggest maker of data storage equipment, said on Monday in a filing with the Securities and Exchange Commission that it expected to sell up to 37.95m shares at $23 to $25 apiece in its initial public offering.MSNBC
Appears to be an excellent IPO to get into and sell

Standard & Poor's may cut credit ratings on $12 billion of bonds backed by subprime mortgages, citing expectations that losses will continue. Bloomberg
Only $12 billion ?

China executed the former head of the drug regulator for taking bribes, signaling the government's determination to tackle a series of health scares over fake medicines and unsafe food that has drawn international criticism.

Zheng Xiaoyu's death was reported by the state-run Xinhua News Agency today as officials separately outlined a plan to improve drug and food safety, conceding the system isn't strong enough and the trend ``isn't promising.'' Bloomberg
Maybe they need to start doing this to our elected officials

The overseas markets are mixed while the futures are indicating a lower open for the US markets. There is likely to be relative strength in tech while retail will be weak.

Saturday, July 07, 2007

Oracle Corp.

Description - Oracle Corporation, an enterprise software company, engages in the development, manufacture, distribution, servicing, and marketing of database, middleware, and application software.

Competitors - IBM, MSFT , CA, SAP

Financials 2005 2006 2007

Total Revenue $11,799,000,000 , $14,380,000,000, $17,996,000,000
Net Income $ 2,886,000,000, $ 3,381,000,000 $ 4,274,000,000

Net Income has grown by an average of 21% the last few years. The recent quarter saw a 23% rise in net income. Oracle has been on an acquisition binge over the last few years acquiring over 30 companies . It appears these acquisitions are paying of financially based on the solid top and bottom line growth. ORCL is trading at a forward P/E of less than 18 and a trailing P/E of 25 . Considering the solid earnings growth, ORCL justifies a P/E of 30 or even 35 especially, when you compare it to competitors and other tech giants such as IBM MSFT SAP CSCO INTC that trade at similar multiples yet, have not displayed the same type of earnings growth.

Technically, ORCL has been range bound the last few years between $10-15 before finally breaking out above $15 last year and trading in a $15-20 range. The current breakout above $20 is very positive from a technical standpoint. Provided the overall markets hold up, I think ORCL has a good chance of making a run to $30 by years end. Support is around the breakout point of $19.75 and the 50 day moving average and uptrend line round $18.

Friday, July 06, 2007


The major indices all finished higher though the volume was once again very light. Gold, mining and construction were the big winners today while paper and the brewers were the losing sectors. RZ TCN POL AMCC VIMC ETC were the biggest gainers while MTEX PMTC BHIP were the biggest losers among individual issues. With regards to the porfolio, I had huge gains in BIDU UXG PRAI HANS NYX LVS MU and SNDK . BIDU has been on fire along with names like RIMM GOOG AAPL TNH CROX FSLR and its starting to take the feel of a market top with parabolic moves.

The job situation in June was essentially as expected, but Wall Street was taken completely by surprise by a stunning upward revision to the numbers for the prior two months.

Nonfarm employers added 132,000 workers last month, while about 125,000 had been forecast, and the unemployment rate was unchanged at 4.5%, the Labor Department said Friday.

However, the big news came in the change for April and May, when, combined, 75,000 more jobs were created than the government first reported. The Street

Crude oil rose to a 10-month high on concern unrest in Nigeria and maintenance of a North Sea oil field will curb supply as unexpected refinery closures cut fuel output.

The main militant group in Nigeria's oil-producing Niger River delta region condemned the kidnapping of a 3-year-old British girl. Brent oil, produced in the North Sea, is also rising because of planned maintenance at a field in the region. Refineries in California, Texas and Kansas have shut or slowed operations this week. Bloomberg

Zurich-based financial giant UBS (UBS) has a disconcerting habit of dispensing with senior managers without warning. Luqman Arnold was shoved out as chief executive officer in December, 2001, and replaced by Peter Wuffli in circumstances shrouded with mystery. Now, Wuffli has lost out in a boardroom coup.

In the early hours of July 6, UBS surprised just about everyone by announcing that the group chief executive would "relinquish all of his functions at UBS and leave the bank." Wuffli will be replaced by Marcel Rohner, the deputy CEO and chief of UBS's most valuable business, private banking (or Global Wealth Management, as it is officially known). Business Week

Some interesting action in Hilton Hotels calls pre the announcement ... Value Discipline

Friday's COTs report - based on the previous Tuesday's data - has really moved into strange territory for the equity indexes - a true jumble of bullish and bearish signals. The "dumb money" small traders have struck a historically extreme net long position in S&P 500 futures and options. This gave me a new bearish signal on Friday. COTs Timer

U.S. stocks closed higher Tuesday and extended Monday’s rally as investors focused less on declines in pending home sales and factory orders and more on a healthy flow of merger news.

Real Estate was the only sector down for the day. Leadership for the shortened session was provided by Energy along with Technology, Financials and Industrials. All of those sectors were mentioned as areas of alpha generation in Monday’s commentary, with the exception of Financials, which in our opinion remains suspect until the issue of sub-prime lending works it way thoroughly through the system. Portable Alpha

What is a hedge fund? Forward-looking due diligence on whether the strategy is likely to produce absolute returns in difficult times is surely the acid test. The sub-prime meltdown has revealed several leveraged beta bundlers but the market dependence was obvious AHEAD of time. Anyone with genuine skills and experience knows illiquidity can be expensive during market turbulence. It was clear since inception that Bear Stearns' two troubled credit investment products were never hedge funds. Hedge Fund

Thursday, July 05, 2007


A day of strength in the Nasdaq and tech in general while there was weakness in the Dow and S&P. Volume was fairly unimpressive thought the Qs keep surging to new highs. We will not have any clear direction till next week at the earliest. It appears traders are still on vacation.

The best sectors were hotels and travel and leisure due to Blackstone Groups Hilton buyout while automobiles and auto parts were the losers led by GM and F on weak sales.

Big gainers on the day included LOCM HLT JSDA CMPP CPSL BRR . Among the big losers were LIV PNSN ENTU TMY .


Advanced Medical Optics Inc. made a $75 cash-and-stock offer for rival eye care company Bausch & Lomb Inc., according to a published report Thursday afternoon, trumping a $65-a-share deal with private equity firm Warburg Pincus.
The offer from Advanced Medical is valued at $45 in cash and $30 in stock, the Wall Street Journal reported on its Web site, citing unnamed people familiar with the matter. MarketWatch


Six major U.S. airlines agreed to sell their stakes in ARINC Inc. to an affiliate of private-equity firm Carlyle Group.

AMR Corp.'s American Airlines, UAL Corp.'s United Airlines Inc., Continental Airlines Inc., Delta Air Lines Inc., Northwest Airlines and US Airways Group Inc. participated in the deal, according to ARINC. Together these airlines own more than 90% of the common stock of ARINC. WSJ


Samsonite Corp. agreed to be bought by CVC Capital Partners Ltd. for about $1.1 billion, giving the 97-year-old luggage maker its fifth owner in 21 years.

Investors will get $1.49 for each Samsonite share, the company said in a statement today. That values Samsonite at 12 percent more than its share price July 3. Including the assumption of debt, the transaction value totals $1.7 billion. Bloomberg


Pre Market

The markets in Asia are mixed with Shanghai down over 5%. The European indices are more on the bearish side as the ECB keeps rates unchanged while the Bank of England raises interest rates by a quarter percent.

Treasuries fell after a private report based on payroll data showed companies in the U.S. added more jobs last month than economists forecast.

``The ADP number continues to show strength, and it has been a better indicator than it was earlier this year on job growth,'' said Jeffry Feigenwinter, head of U.S. Treasury trading in New York at BNP Paribas Securities Corp. Bloomberg

Planned U.S. layoffs fell by 22 percent in June from May, as manufacturing showed the need for more workers than in the same month last year, an independent report showed on Thursday.

However, the deteriorating U.S. housing market and the subprime mortgage sector's woes are causing cutbacks to accelerate in the financial sector.Reuters

Jones Apparel Group Inc. received a $900 million unsolicited non-binding proposal for its Barneys New York Inc. division from Japanese clothing company Fast Retailing Co.

In June, the Bristol, Pa., apparel wholesaler agreed to sell luxury retailer Barneys for $825 million in cash to Istithmar, the Dubai government's investment arm. Jones Apparel said that agreement is still in effect. WSJ

The Chinese Ministry of Information Industry has given permission for BlackBerry to start selling its addictive email devices in China.

The company got approval last month and expects to have handsets in shops by the end of August. The Register

Gold and silver are on the rise this morning. The US Dollar and the Yen are losing strength while the Euro is gaining. Treasury yields are up.

The pre market futures are showing a bullish open for the US markets. Blackstone Groups bid to buyout Hilton is going to have a bullish effect on the markets and hotel stocks in particular. CHH IHG MAR HOT MHGC are all up this morning on the back of this.

Monday, July 02, 2007


Strong rally in the markets with the Dow, S&P and Nasdaq all up around 1% or more. The bulk of the gains came in the first hour. Volume was on the light side which is understandable considering a lot of traders are on vacation ahead of the July 4th weekend. Utilities, basic materials and oil and gas were the biggest winners today. LOCM IOC ZN DELT VMED were some of the days biggest gainers. TRMP ADLS CRYO PTT were the biggest losers. My biggest gainers included HANS NTRI VCLK OMRI PRAI and UXG. GLD and SLV along with FXE also did very well.

Oil prices rebounded Monday from early declines to settle above $71 for the first time in 10 months as traders focused on a refinery outage in Kansas and new accusations about Iran's role in Lebanon and Iraq.

Early in the day, investors sold to lock in profits from last week's rally, which drove prices above $70 a barrel for the first time since August. But as the day wore on, light, sweet crude for August delivery rose, settling up 41 cents at $71.09 a barrel on the New York Mercantile Exchange and up from a session low of $69.57. On Friday, oil prices rose to close above $70 a barrel for the first time in 10 months. Continue reading

The dollar fell to a 26-year low against the British pound Monday ahead of an expected rate hike by the Bank of England later this week.
The pound rose to $2.0173 -- its highest level versus the dollar since June 1981 -- in New York trading before retreating to $2.0165. The dollar also dropped to within a cent of its all-time low versus the euro, as rising global interest rates made the currency less attractive to investors.

The 13-nation euro rose to $1.3637, just shy of its April 27 all-time high of $1.3682, before dipping back to $1.3623. Continue reading

The nation's factories, plants and utilities expanded at a faster pace in June, suggesting hardy consumer spending is boosting confidence among manufacturers even as prices for raw materials rise.

The Institute for Supply Management said Monday that its manufacturing index rose to 56 in June. The reading marked the fifth consecutive month of growth for the manufacturing sector and the 68th consecutive month of growth for the overall economy. Continue reading

They say they don't ring a bell at the top of a market. However, sometimes you need to listen to history with dog ears.

At the end of the first week of June I wrote a piece called A Pivotal Set Up Worth Watching.
Now, at the beginning of the first week of July, it is a good time to further flesh out the bones of that set up.

To review, the average time for a blowoff is ninety calendar days (sometimes extending to four months). Since the closing low for the year occurred on March 5th and the intra day low occurred on March 14th, that translates to an approximate window between June 5th and July 5th on the one hand and June 15th to July 15th on the other for a peak. Continue reading

June's trading in the stock market provided a little bit of something for those who think the glass is half full, as well as those who see it as half empty.
The good news is that the stock market didn't collapse in the wake of the sharpest correction since the Beijing Surprise in late February. Indeed, given the daunting number of hurdles that the stock market had to jump over in June -- everything from much higher bond yields to the potential collapse of several hedge funds -- it is impressive that the market showed as much resilience as it did. Continue reading


For one long-standing indicator of shifting moods in the stock market, a now-or-never moment is at hand.

The gauge in question, which focuses on cash reserves held by managers of stock-mutual funds, has been emitting increasingly bearish signals about the market outlook.

But nobody has been paying much attention. The indicator's once-stellar record of accuracy has been less than compelling lately. What's more, the whole premise behind it may be out of date.

That hasn't stopped some commentators from arguing that closer heed is due. ``The risk of a cyclical price top and subsequent sell-off is very high,'' says Norman Fosback in his newsletter Fosback's Fund Forecaster, from Boca Raton, Florida. Continue reading

Sunday, July 01, 2007

Weekend News

The U.S. regulatory crackdown on insider trading is missing widespread abuses in the $4 trillion options industry, undermining everyone from Goldman Sachs Group Inc., the world's biggest securities firm, to Citadel Investment Group LLC, the $14 billion hedge fund manager.

Interactive Brokers Group Inc., which handles 20 percent of all U.S. options trades, lost as much as $25 million in the first quarter to investors who may have violated laws by using non-public information to trade. Market makers PEAK6 LLC and AGS Specialists LLC say insider trading is costing them at least 10 percent of annual earnings. Bloomberg

Apple Inc.'s initial iPhone sales may have met analysts' top projections, suggesting Chief Executive Officer Steve Jobs will reach his goal of making mobile phones as profitable to the company as computers and the iPod.

Shoppers bought as many as 200,000 units the first day after the iPhone went on sale June 29, according to Global Equities Research in San Francisco. Analysts' estimates ranged from 50,000 to 200,000 units. Bloomberg

The Carlyle Group is in discussions with Virgin Media, the British cable company whose largest investor is Richard Branson, over a potential bid worth around $20 billion, a person familiar with the negotiations said today.

The talks are still early and may not lead to a bid, this person noted.

As the coffers of American buyout firms have swelled over recent years, the firms have become more aggressive in seeking out targets beyond the United States. On Saturday, two American private equity firms partnered with the Ontario Teachers’ Pension Plan to win Bell Canada, that country’s largest telephone company, for 51.7 billion Canadian dollars ($48.8 billion), the largest leveraged buyout ever. NY Times

Manufacturing activity in China expanded at a slower pace in June, according to a survey of purchasing managers released today.

The Purchasing Managers' Index fell to 54.5 from 55.7 in May, the China Federation of Logistics and Purchasing and the National Bureau of Statistics said in an e-mailed statement. That was the lowest reading in four months. China Daily

There is a rather dispiriting resemblance between the latest credit crunch and the bursting of the dotcom bubble.

Ahead of each, there were plain warnings not just of what would happen but how and why. All that was missing was when.

But there is one fresh angle this time. The market has been struck by the disturbing notion that credit derivatives might not be worth what they were supposed to be.

This should hardly be news to anyone who read Warren Buffett’s broadside against derivatives four years ago. There is no market, he pointed out, for complex derivatives. So instead of being marked to market, they are marked to model – or in some cases, marked to myth.
Financial Times

Asian countries were warned on Monday against complacency that another Asian financial crisis could not hit the region.

"It is important that we make sure that we do not become overconfident that a crisis can never happen," said Thailand's finance minister, Chalongphob Sussangkarn.

He was speaking at a forum in Manila to mark the 10th anniversary of the Asian financial crisis, which was triggered by a large outflow of capital toppling an overvalued Thai baht. Reuters