AMZN V GOOG

AMZN will need to grow earnings 40% per year or better over the next 5 years to justify its current valuation. If GOOG was able to grow earnings 40% per year over the next 5 years, its present stock price would be $1200+, more than double its current $567. Now you tell me, which company would you pick to grow quicker over the next 5 years - AMZN or GOOG ?
An online retailer vs the most dominant force in the internet world ? Seriously folks, either AMZN is massively overvalued or GOOG is massively undervalued. The truth is probably somewhere in between.

Of note, AMZNs largest shareholder at 22% - Legg Mason and its legendary manager Bill Miller is preparing to tone down risk in the portfolio by reducing sizeable positions . Could this mean cutting down the $8.5 billion worth of AMZN stock he currently owns ? Me thinks so. AMZN is Millers largest position. AMZNs second largest holder T. Rowe Price is also cutting back.

BLACK FRIDAY

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.

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.

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.

Recap

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.

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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

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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

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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

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

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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

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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

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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

Recap

Despite the fact the market was barely down, I got killed on most of my positions. Apart from SBUX MMS PRAI IBKR SNDK and a few others, my longs were beaten up by a baseball bat.
NYX and LVS have become such garbage I am ashamed that I own them. And the less said about GLD and SLV the better. Gold and Silver were murdered today. First they were hung from a tree, than tortured with a blowtorch and finally decapitated. Someone is seriously try to shake out Gold and Silver longs.

Todays market saw capital fleeing speculative securities and move into larger caps and more secure companies like PFE PG WMT GIS. Google is also looking very solid as it sits near 52 week highs.

Was Bear Stearns fooled by '6 inch hooker heels' ? PIMCOs Bill Gross thinks so.

Consumer confidence and housing continue to deteriorate. As the days of easy credit are left behind, the American consumer will start to feel the pinch. No American Express, Mastercard, Discover or Visa as they are all maxed out. From now on it will be PayDay Loans, Advance America and Cash Call. EZPW CSH FCFS AEA will be some likely beneficiaries from this trend.

I am starting to sense a change in the overall market trend. Unlike the sudden plunge on February 27, this change has been set in motion over the past few weeks. Higher volume on down days combined with financials falling behind. You can sniff the big money running for the exits. The capital markets are serious business and the major players appear serious in their desire to leave. The rush to get that Blackstone IPO on the market was a telling sign. BX incidently fell below its IPO price today. What a surprise !

The Week ahead

The week ahead in the capital markets will be testing. Here is an economic calendar for the week ahead. Below are the important pieces of economic data that I will be looking out for.

• Existing Home sales on Monday
• Consumer confidence and New Home sales on Tuesday
• Durable goods on Wednesday
• GDP and Federal Open Market Committee announcement on Thursday
• Personal Income and Outlays, NAPM Chicago, Construction spending and Consumer sentiment on Friday

As one can see, there will be an overload of data being thrown our way and how the market reacts will be key. The Dow, the Nasdaq and the S&P 500 are all at critical junctures and anything can happen. We could break support levels especially on the S&P 500 at 1490 and face a substantial drop. For now while the bull market is still intact there are subtle signs of the equity market wearing itself down. Volume on down days has been high, financials and especially banking have been breaking down and the powerful utility sector is tumbling. Not to mention oil prices breaking out to near $70.

As a side note, the ability to watch DVD movies on your computer courtesy of Netflix is going to boost the company tremendously. At a buck away from 52 week lows, NFLX is a good buy especially when you also take into account rumors of a potential buyout by Amazon.

I am also keeping a close eye on Google. The stock is breaking to all time highs and I think GOOG $600 could be on the scorecard pretty soon as long as the overall markets hold up. The release of the iPhone and the movement of Apples stock AAPL will be another item to watch.

The breakout in the Semiconductors and momentum in names like SNDK MU MXIM TXN NVDA as well as SMH and USD will require a close watch.

The movement of the US dollar, the Yen , the Euro and Gold and Silver will be of special interest to me. Long Gold, Silver and the Euro.

MARKET UPDATE

The bulls are going great guns. The indices are at a daily high. Can we go higher from here or will the bears crash the party ? On a personal note the portfolio is soaring. NTRI,TZOO, BLUD and GOOG are all up over 2%. QLD, DDM and SSO are adding to the green. Will add some SDS, DXD , MZZ and QID for insurance.

GOING FISHING

I am going to find some issues to go long today. There is too much doom and gloom out there. Picking some high beta names. Some NTRI, a bit of BLUD, a little AKAM, a pinch of CELG and a topping of HANS. I think I'll toss in some TZOO and a helping of GOOG for good measure.And I'll close out that blasted AAPL short position for good measure. Maybe we'll rally, maybe we won't. But if we rally I think I may outperform. If not I will just dump 'em all.In a bear market its best to position for a rally before the actual rally because, once you spot the rally its usually too late.

CONTEMPLATIONS, REFLECTIONS AND CLAIRVOYANCE

Looking at the past year, we've experienced ups and downs in the market. We started off strong, stunmbled in May recovered in August and had a very strong rally into the close of the year. With the Dow hitting all time highs and the S&P 500 not too far behind , 2006 was a great year for those long the equity indices. In individual sectors and stocks we have had a mix of good and bad.

First with the good. RIMM had an exceptional year. A nice 100% gain though one could have made more if they traded it through highs and lows. CRS was positively on fire through the early part of the year and one of my big winners (until I was stopped out). TIE was another rocket in the same group as CRS and I sort of regret passing TIE over for CRS. It was a toss up between TIE, ATI and CRS and I choose the slowest horse. Oh well, a 70% gain isn't so bad though I missed out on a 150% plus on the other 2. Speaking off ATI. The chart says it all. How could I have missed it ? What a Monster !! Speaking of monster the energy drink, here is a chart of HANS. I got stopped out early in the year with a small profit. I hated what happened next though I did manage to get short in the $180-200 range and ride it down to $120-130 pre-split . NTRI rocketed upwards with no stopping it till May and than recovered nicely for another big run which ended in what looks like a double top as evident from the charts ( May and December peaks). ZOLT was one hell off a stock and though it closed the year badly, it made a lot of people very rich. ERS could well have been the stock off the year if people had been smart enough to get off in early May. 600% gain in 5 months . Spectacular !! Than another huge potential gain for anyone going short. WOW !! Just look at the charts.

Now to the not so good. Does anyone think GOOG's best days are behind it ? This is one stock that is all over the place. How is someone supposed to stay long or short a stock like this ? AAPL another totally unpredictable stock. Great for trading though. Look how RACK got decimated midyear though it pulled through at the end. NETL was downright ugly. Look at this crazy stock IFON . Jan though April downtrend, huge spike in April till early June and than total collapse through July before a couple of run ups and than a reversal to a downtrend. Great for trading by the seat of your pants. A killer in most ways though. This was a pretty crapy year for EBAY till the lows in June July. YHOO had a pretty terrible year. It was a year that had it all. The good, the bad and the ugly.