Wednesday, September 05, 2007

Market Update

STOCKS cheapest in 12 years ? This seems to be the consensus based on this article. However despite the fact stocks are 'cheap' , one needs to take into consideration the fact that we are closer to the end of a multi year bull market and past the peak of the economic cycle. In other words, I believe stocks can still get cheaper.

Mortgage insurers MGIC Investment Corp. and Radian Group Inc have agreed to terminate their merger agreement some two months after the deal became jeopardized by losses at their subprime-mortgage joint venture. MTG and RDN are both great stocks to short. Mortgage woes are going to get worse and these insurers are going to bear the brunt of the fallout.

U.S. private employers likely added 38,000 jobs in August, far fewer than analysts had expected and the slowest rate of growth in four years, a report by a private employment service said on Wednesday. With slowing job growth, increasing unemployment, slowing consumer spending, decreasing home values and slower economic growth, I am surprised we are not already in a recession.

Yahoo, the struggling internet giant, has acquired BlueLithium, the online advertising group, for $300 million in cash, in a renewed effort to close the yawning gap between it and the market leader Google. I believe this should be a big boost for online advertiser ValueClick which is the biggest independent internet advertiser left. VCLK was rumors of a takeover at $40+ a share and right now the stock is $21 and change. VCLK is growing at an amazing rate and a buyout is likely on the cards.

Currently the market is taking quite a dip as investors fear the Fed will not cut rates. It appears Tuesdays are not good days for the market. We have had quite a few large market drops on Tuesdays over the past few weeks. Tuesday July 10th, 148 point Dow drop, Tuesday July 24th, 226 point drop, Tuesday July 31st 147 point drop, Tuesday August 14th, 208 point drop, Tuesday August 28th 281 point drop. Thats a 1000 points lost on the Dow on just the Tuesdays I've mentioned. And the other Tuesdays I have not mentioned from July and August were a break even if added up. Maybe the theme should be to not be long on Tuesdays or short Tuesdays.

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