Financials
1. Citi: currently trading a 9x earning for next year.
2. Bear Sterns: as we have said many times before, this is a buy and hold. If you can not afford to stay in this for no less than 24 months, then don't waste your money.
3. Merrill: It will hit 100 over the next 13 months.
Sleeper Picks
1. Shaw GroupShaw Group: The focus is on renewable energy, but lets not forget about the "nuclear" option.
2. Mobile Mini Inc. (MINI): Better logistics then PODS and cheaper prices too. In time this will be a keeper. Plus they offer storage options for a number of different business sectors.
3. Mercury General (MCY): While it is never good to capitalize on others' losses, perennial disasters are big business. Say 'Thank You' to the Santa Ana winds, because the mercury is rising. They did a wonderful job of helping CA brushfire victims.
Tuesday, October 30, 2007
Monday, October 29, 2007
FMC
HERE'S A HALLOWEEN nightmare: Suppose you had to bet all of your investment capital on just one stock and hold it for half a decade. Where would you look for a treat in a market that lately has pulled more nasty tricks than a holiday haunted house?
One good bet would be FMC, a mid-size and fast-growing chemical company that, despite an enviable track record, is as invisible as a ghost to most of Wall Street.
Had you invested $10,000 in the Philadelphia-based company back in 2002, you now would have $42,000 and change, for a total return of more ...
By Jim McTague
Companies Featured in This Article: FMC, Dow Chemical, DuPont, Monsanto
One good bet would be FMC, a mid-size and fast-growing chemical company that, despite an enviable track record, is as invisible as a ghost to most of Wall Street.
Had you invested $10,000 in the Philadelphia-based company back in 2002, you now would have $42,000 and change, for a total return of more ...
By Jim McTague
Companies Featured in This Article: FMC, Dow Chemical, DuPont, Monsanto
Sunday, October 28, 2007
Financial Sector hot picks
Bearing on the Bull
Expect Stan O'Neal, the beleaguered chief executive of Merrill Lynch & Co to step down in the next few days. In reality it is nothing that he did, as much as he was a victim of the success and failures of the financial sector. Unfortunately, when it comes to financials everyone expects them to consistently see double-digit growth; ML had warned of weaker earning, but in the weeks leading up to the report, they had done a wonderful job of downplaying their actual sub-prime exposure. All of this adds up to bad news for high-paid Execs and good news for investors. Merrill will bounce back, and now is the time to buy. As soon as the CEO is gone, the Market will respond, on speculation, that Merrill will turn things around.
Rating: Strong Buy
Bullish on Bear
Citic, Asia's largest securities firm, will pay $1 billion for the equivalent of 6 percent of New York-based Bear Stearns's shares, and the US brokerage will invest the same amount in Citic, the companies said yesterday. They agreed to team up to sell financial products and services in China, and plan a Hong Kong-based joint venture for other Asian markets.
Bear Stearns chief executive James "Jimmy" Cayne, 73, trails US rivals in China, where he has struggled to build a business since opening a Beijing office in 1992. His company has fallen as much as 37 percent this year in New York trading, beset by the collapse of the US sub-prime mortgage market. Surging defaults on loans to home buyers with poor credit histories pushed two of the firm's hedge funds into bankruptcy and eroded its fixed-income revenue.
Bear is still not as attractive as Goldman or Lehman on the short term, but in terms of value it is a cant miss stock. Almost every American bank lost money and/or brokerage house lost money this year. Why is that.
It seems that the Aussie's have the answer, just look at ANZ: they remained glued to their core competency and established a diverse mix of capital investments. Also known as good management. They have a 33% P/E ration, and expect 12% in growth over the next 12 months. Additionally, they are well placed in emerging markets, which tend to have high yields.
Rating: Buy
Expect Stan O'Neal, the beleaguered chief executive of Merrill Lynch & Co to step down in the next few days. In reality it is nothing that he did, as much as he was a victim of the success and failures of the financial sector. Unfortunately, when it comes to financials everyone expects them to consistently see double-digit growth; ML had warned of weaker earning, but in the weeks leading up to the report, they had done a wonderful job of downplaying their actual sub-prime exposure. All of this adds up to bad news for high-paid Execs and good news for investors. Merrill will bounce back, and now is the time to buy. As soon as the CEO is gone, the Market will respond, on speculation, that Merrill will turn things around.
Rating: Strong Buy
Bullish on Bear
Citic, Asia's largest securities firm, will pay $1 billion for the equivalent of 6 percent of New York-based Bear Stearns's shares, and the US brokerage will invest the same amount in Citic, the companies said yesterday. They agreed to team up to sell financial products and services in China, and plan a Hong Kong-based joint venture for other Asian markets.
Bear Stearns chief executive James "Jimmy" Cayne, 73, trails US rivals in China, where he has struggled to build a business since opening a Beijing office in 1992. His company has fallen as much as 37 percent this year in New York trading, beset by the collapse of the US sub-prime mortgage market. Surging defaults on loans to home buyers with poor credit histories pushed two of the firm's hedge funds into bankruptcy and eroded its fixed-income revenue.
Bear is still not as attractive as Goldman or Lehman on the short term, but in terms of value it is a cant miss stock. Almost every American bank lost money and/or brokerage house lost money this year. Why is that.
It seems that the Aussie's have the answer, just look at ANZ: they remained glued to their core competency and established a diverse mix of capital investments. Also known as good management. They have a 33% P/E ration, and expect 12% in growth over the next 12 months. Additionally, they are well placed in emerging markets, which tend to have high yields.
Rating: Buy
Thursday, October 25, 2007
Crude Hits record high -- Again
Report That OPEC Won't Lift Production Quotas Lifts Crude Oil Prices Back Above $90 a Barrel
NEW YORK (AP) -- Oil futures jumped to a new record close of $90.46 a barrel Thursday on news that OPEC production increases aren't coming as fast as expected and that the cartel won't announce new output quotas when it meets next month.
Prices rose in early trading on growing concerns about conflict in the Middle East and declining supplies of crude in the U.S. They got a further boost after Dow Jones Newswires reported that Oil Movements, a company that tracks oil tanker traffic, said crude shipments from Organization of Petroleum Exporting Countries members will grow more slowly than anticipated through early November.
Meanwhile, OPEC Secretary General Abdalla el-Badri told The Wall Street Journal Asia the cartel is not in discussions to boost production by 500,000 barrels. El-Badri's comments counter rumors that Saudi Arabia is pushing for a production increase. In September, OPEC bowed to Saudi pressure and announced a production increase of 500,000 barrels a day, effective Nov. 1.
"It shows a little drama in the cartel," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Light, sweet crude for December delivery rose $3.36 to settle at $90.46 a barrel on the New York Mercantile Exchange after rising as high as $90.60 earlier.
Geopolitical events influenced early trading, with crude rising after Lebanese troops fired on Israeli warplanes. A conflict between Israel and Lebanon wouldn't itself have much impact on oil supplies, but traders worry that any hostilities in the Middle East would eventually draw in big oil producers such as Saudi Arabia and Iran.
Energy traders also remain concerned that a threatened incursion by Turkish armed forces into Iraq in search of Kurdish rebels would cut oil supplies out of northern Iraq.
On Wednesday, crude prices jumped sharply after the Energy Information Administration reported that oil inventories fell by 5.3 million barrels last week, much more than analysts expected. That report reversed a three-day downward price trend, and put energy traders back in a bullish mood, analysts said.
"Yesterday's EIA report pretty much changed the personality of the market," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.
In other Nymex trading, November gasoline rose 8.83 cents to settle at $2.2358 a gallon, and November heating oil added 6.64 cents to settle at $2.4084 a gallon.
November natural gas rose 21.6 cents to settle at $7.188 per 1,000 cubic feet as traders shrugged off a government report that inventories grew by 68 billion cubic feet last week, more than analysts had expected, and focused instead on forecasts for colder weather in the Midwest and Northeast and the possibility that a storm system in the western Atlantic could develop into tropical strength as it moves into the Caribbean Sea.
At the pump, gas prices slipped 0.2 cent overnight to a national average of $2.82 a gallon, according to AAA and the Oil Price Information Service.
Associated Press Writer George Jahn in Vienna contributed to this report.
NEW YORK (AP) -- Oil futures jumped to a new record close of $90.46 a barrel Thursday on news that OPEC production increases aren't coming as fast as expected and that the cartel won't announce new output quotas when it meets next month.
Prices rose in early trading on growing concerns about conflict in the Middle East and declining supplies of crude in the U.S. They got a further boost after Dow Jones Newswires reported that Oil Movements, a company that tracks oil tanker traffic, said crude shipments from Organization of Petroleum Exporting Countries members will grow more slowly than anticipated through early November.
Meanwhile, OPEC Secretary General Abdalla el-Badri told The Wall Street Journal Asia the cartel is not in discussions to boost production by 500,000 barrels. El-Badri's comments counter rumors that Saudi Arabia is pushing for a production increase. In September, OPEC bowed to Saudi pressure and announced a production increase of 500,000 barrels a day, effective Nov. 1.
"It shows a little drama in the cartel," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Light, sweet crude for December delivery rose $3.36 to settle at $90.46 a barrel on the New York Mercantile Exchange after rising as high as $90.60 earlier.
Geopolitical events influenced early trading, with crude rising after Lebanese troops fired on Israeli warplanes. A conflict between Israel and Lebanon wouldn't itself have much impact on oil supplies, but traders worry that any hostilities in the Middle East would eventually draw in big oil producers such as Saudi Arabia and Iran.
Energy traders also remain concerned that a threatened incursion by Turkish armed forces into Iraq in search of Kurdish rebels would cut oil supplies out of northern Iraq.
On Wednesday, crude prices jumped sharply after the Energy Information Administration reported that oil inventories fell by 5.3 million barrels last week, much more than analysts expected. That report reversed a three-day downward price trend, and put energy traders back in a bullish mood, analysts said.
"Yesterday's EIA report pretty much changed the personality of the market," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.
In other Nymex trading, November gasoline rose 8.83 cents to settle at $2.2358 a gallon, and November heating oil added 6.64 cents to settle at $2.4084 a gallon.
November natural gas rose 21.6 cents to settle at $7.188 per 1,000 cubic feet as traders shrugged off a government report that inventories grew by 68 billion cubic feet last week, more than analysts had expected, and focused instead on forecasts for colder weather in the Midwest and Northeast and the possibility that a storm system in the western Atlantic could develop into tropical strength as it moves into the Caribbean Sea.
At the pump, gas prices slipped 0.2 cent overnight to a national average of $2.82 a gallon, according to AAA and the Oil Price Information Service.
Associated Press Writer George Jahn in Vienna contributed to this report.
Tuesday, October 23, 2007
Wall Street Up on Strong Profit Reports
Stocks Are Moderately Higher on Strong Earnings Reports From Apple, American Express, DuPont
NEW YORK (AP) -- Wall Street advanced Tuesday, with Wall Street growing more upbeat about corporate profits after solid results from blue chip names including Apple Inc., American Express Co. and DuPont Co.
Apple surpassed analysts' expectations with a 67 percent jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones. The report renewed confidence in the technology sector, which has outpaced the stock market this year but which also has tended to fall the hardest when investors sell off.
Two components of the Dow Jones industrial average -- American Express, one of the largest credit card companies, and chemicals maker DuPont -- posted better-than-expected profit gains as well.
These results reinvigorated investors after companies posted a string of downbeat results last week, a disappointment that contributed to a 366-point slide in the Dow on Friday. So far, 41 percent of the Standard & Poor's 500 index have reported results -- with 51 percent beating expectations, according to the rating agency.
Meanwhile, energy prices remain high and the dollar continues to weaken against other world currencies. Treasury Secretary Henry Paulson said in a speech Tuesday China must allow its currency, the yuan, to gain in value more quickly, to counter imbalances in the economy and make monetary policy more effective in responding to inflation.
In midmorning trading, the Dow rose 68.04, or 0.50 percent, to 13,635.01.
Broader stock indicators were also higher. The S&P 500 rose 8.72, or 0.58 percent, to 1,515.05; the Nasdaq composite index rose 22.32, or 0.81 percent, to 2,776.25.
The stock market had a fitful recovery Monday after plunging Friday. Wall Street had sold off as worries about the credit market's effect on the economy escalated, when several blue-chip companies offered dimmer-than-anticipated outlooks and S&P downgraded more mortgage-backed securities.
Treasury bonds fell as investors moved back into the stock market. The yield on the 10-year note, which moves inversely to its price, rose to 4.43 percent from 4.40 percent on Monday.
Oil prices rose despite expectations of rising U.S. crude inventories, bolstered by concerns over a continuing buildup of Turkish military forces along the northern Iraqi border. A barrel of light, sweet crude rose 41 cents to $86.43 on the New York Mercantile Exchange.The dollar fell against most other major currencies, while gold rose.
Shares of Apple rose $11.37, or 6.5 percent, $185.73 after the company reported it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent from the same period a year ago. That generated $3.1 billion, or about half of the company's revenues for the quarter.
American Express, one of the nation's biggest credit-card issuers, said late Monday that higher spending by cardholders pushed third-quarter profit up 10 percent. Shares rose $1.53, or 2.7 percent, $58.40.
Chemical maker DuPont posted a larger profit for the third quarter on agricultural and nutritional products in Latin America and the company boosted its full-year outlook. The stock rose $1.03 to $47.60.
AT&T Inc., the nation's largest telecommunications company, reported profit rose 42 percent after its acquisition of BellSouth Corp. Shares rose 21 cents to $41.38.
The Russell 2000 index of smaller companies rose 4.38, or 0.54 percent, at 814.46.
Advancing issues led decliners by a 3-to-1 basis on the New York Stock Exchange, where volume came to 99.3 million shares.
By Joe Bel Bruno, AP Business Writer
NEW YORK (AP) -- Wall Street advanced Tuesday, with Wall Street growing more upbeat about corporate profits after solid results from blue chip names including Apple Inc., American Express Co. and DuPont Co.
Apple surpassed analysts' expectations with a 67 percent jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones. The report renewed confidence in the technology sector, which has outpaced the stock market this year but which also has tended to fall the hardest when investors sell off.
Two components of the Dow Jones industrial average -- American Express, one of the largest credit card companies, and chemicals maker DuPont -- posted better-than-expected profit gains as well.
These results reinvigorated investors after companies posted a string of downbeat results last week, a disappointment that contributed to a 366-point slide in the Dow on Friday. So far, 41 percent of the Standard & Poor's 500 index have reported results -- with 51 percent beating expectations, according to the rating agency.
Meanwhile, energy prices remain high and the dollar continues to weaken against other world currencies. Treasury Secretary Henry Paulson said in a speech Tuesday China must allow its currency, the yuan, to gain in value more quickly, to counter imbalances in the economy and make monetary policy more effective in responding to inflation.
In midmorning trading, the Dow rose 68.04, or 0.50 percent, to 13,635.01.
Broader stock indicators were also higher. The S&P 500 rose 8.72, or 0.58 percent, to 1,515.05; the Nasdaq composite index rose 22.32, or 0.81 percent, to 2,776.25.
The stock market had a fitful recovery Monday after plunging Friday. Wall Street had sold off as worries about the credit market's effect on the economy escalated, when several blue-chip companies offered dimmer-than-anticipated outlooks and S&P downgraded more mortgage-backed securities.
Treasury bonds fell as investors moved back into the stock market. The yield on the 10-year note, which moves inversely to its price, rose to 4.43 percent from 4.40 percent on Monday.
Oil prices rose despite expectations of rising U.S. crude inventories, bolstered by concerns over a continuing buildup of Turkish military forces along the northern Iraqi border. A barrel of light, sweet crude rose 41 cents to $86.43 on the New York Mercantile Exchange.The dollar fell against most other major currencies, while gold rose.
Shares of Apple rose $11.37, or 6.5 percent, $185.73 after the company reported it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent from the same period a year ago. That generated $3.1 billion, or about half of the company's revenues for the quarter.
American Express, one of the nation's biggest credit-card issuers, said late Monday that higher spending by cardholders pushed third-quarter profit up 10 percent. Shares rose $1.53, or 2.7 percent, $58.40.
Chemical maker DuPont posted a larger profit for the third quarter on agricultural and nutritional products in Latin America and the company boosted its full-year outlook. The stock rose $1.03 to $47.60.
AT&T Inc., the nation's largest telecommunications company, reported profit rose 42 percent after its acquisition of BellSouth Corp. Shares rose 21 cents to $41.38.
The Russell 2000 index of smaller companies rose 4.38, or 0.54 percent, at 814.46.
Advancing issues led decliners by a 3-to-1 basis on the New York Stock Exchange, where volume came to 99.3 million shares.
By Joe Bel Bruno, AP Business Writer
Monday, October 22, 2007
Cirrus Logic
Cirrus Logic (CRUS), which makes chips that convert analog signals into ones and zeros, and back again, could get a boost from an impending rush in sales of portable audio equipment, or so says Longbow Research analyst Tayyib Shah, who today upgrades the shares from Neutral to Buy, arguing the stock is cheap at 13 times 2008 estimated profit of 35 cents a share.
“The results of our latest Home Audio Survey indicate an earlier than seasonal pick up in sell through,” writes Shah. “Consumer audio (including home audio systems, DTV, portable audio and other applications) accounts for 57% of company revenues.”
He goes on: “The upturn in audio equipment sales is taking place sooner than the normal seasonal pattern this year as consumers are upgrading their systems to enjoy the football season. In our view, the strong interest in flat panel TVs is also leading to complimentary upgrades of sound systems.”
In particular, Shah says Cirrus may be gaining a foothold in portable audio, and in particular, he speculates that the company may have been chosen by Apple (AAPL) to be a “second source” for digital audio decoder chips in some of the iPod products.
Wolfson Microelectronics plc, which trades on the London Stock Exchange, has a larger share than Cirrus in those kinds of chips, notes Shah, but he thinks that with an addressable market of $175 million in CODECs for such portable applications, “even a low 15% share can translate into $26MM in revenues in the FY09 time frame.” To put that in perspective, Cirrus may bring in $195 million in total sales next year, so $26 million would be a measurable contributor to the top line.
Shah’s target price for Cirrus shares is $8.50. Today, the shares are up nearly 8% at $6.93.
Posted by Tiernan Ray
“The results of our latest Home Audio Survey indicate an earlier than seasonal pick up in sell through,” writes Shah. “Consumer audio (including home audio systems, DTV, portable audio and other applications) accounts for 57% of company revenues.”
He goes on: “The upturn in audio equipment sales is taking place sooner than the normal seasonal pattern this year as consumers are upgrading their systems to enjoy the football season. In our view, the strong interest in flat panel TVs is also leading to complimentary upgrades of sound systems.”
In particular, Shah says Cirrus may be gaining a foothold in portable audio, and in particular, he speculates that the company may have been chosen by Apple (AAPL) to be a “second source” for digital audio decoder chips in some of the iPod products.
Wolfson Microelectronics plc, which trades on the London Stock Exchange, has a larger share than Cirrus in those kinds of chips, notes Shah, but he thinks that with an addressable market of $175 million in CODECs for such portable applications, “even a low 15% share can translate into $26MM in revenues in the FY09 time frame.” To put that in perspective, Cirrus may bring in $195 million in total sales next year, so $26 million would be a measurable contributor to the top line.
Shah’s target price for Cirrus shares is $8.50. Today, the shares are up nearly 8% at $6.93.
Posted by Tiernan Ray
Friday, October 19, 2007
Stocks Plummet
NEW YORK (AP) -- The Dow Jones industrial average dropped more than 360 points Friday -- the 20th anniversary of the Black Monday crash -- as lackluster corporate earnings, renewed credit concerns and rising oil prices spooked investors.
The major stock market indexes turned in their worst week since July after Caterpillar Inc., one of the world's largest construction equipment makers, soured investors mood Friday with a discouraging assessment of the U.S. economy. In a week dominated by mostly negative results from banks facing difficult credit markets and rising mortgage delinquencies, investors appeared surprised that an industrial name was feeling an economic pinch, too.
Reports from Honeywell International Inc. and 3M Co., themselves big industrial names, gave investors little incentive to take chances on the market. In one bright spot, Google Inc. rose after reporting stronger-than-expected profits.
Investor sentiment took another hit when Standard & Poor's downgraded another batch of residential mortgage-backed securities, adding to investor unease about credit quality. The latest reduction follows a similar move earlier in the week and affects more than 1,400 classes.
And oil prices appeared on some investors' list of worries after briefly moving above the psychological barrier of $90 per barrel for the first time.
"I was not surprised there was some correction, given our expectation that earnings growth was going to fall short of expectations," said Alan Gayle, senior investment strategist, director of asset allocation for Trusco Capital Management.
"I think stock analysts were slow to incorporate the impact of the subprime crisis on third-quarter earnings," he added.
The Dow fell 366.94, or 2.64 percent, to 13,522.02. The Dow was down for the fifth straight session and for the week was off 4.05 percent. For the year, the blue chip index is now up 8.5 percent.
Broader stock indicators also fell sharply Friday. The Standard & Poor's 500 index fell 39.45, or 2.56 percent, to 1,500.63, and the Nasdaq composite index dropped 74.15, or 2.65 percent, to 2,725.16.
Wachovia Corp. fell $1.74, or 3.6 percent, to $46.40 after reporting third-quarter profits fell 10 percent due to write-downs related to difficult credit market conditions. The nation's fourth largest bank signaled increasing credit troubles ahead.
Google rose $5.09 to $644.71 after the search engine leader said advertising spending lifted third-quarter profit by 46 percent.
The major stock market indexes turned in their worst week since July after Caterpillar Inc., one of the world's largest construction equipment makers, soured investors mood Friday with a discouraging assessment of the U.S. economy. In a week dominated by mostly negative results from banks facing difficult credit markets and rising mortgage delinquencies, investors appeared surprised that an industrial name was feeling an economic pinch, too.
Reports from Honeywell International Inc. and 3M Co., themselves big industrial names, gave investors little incentive to take chances on the market. In one bright spot, Google Inc. rose after reporting stronger-than-expected profits.
Investor sentiment took another hit when Standard & Poor's downgraded another batch of residential mortgage-backed securities, adding to investor unease about credit quality. The latest reduction follows a similar move earlier in the week and affects more than 1,400 classes.
And oil prices appeared on some investors' list of worries after briefly moving above the psychological barrier of $90 per barrel for the first time.
"I was not surprised there was some correction, given our expectation that earnings growth was going to fall short of expectations," said Alan Gayle, senior investment strategist, director of asset allocation for Trusco Capital Management.
"I think stock analysts were slow to incorporate the impact of the subprime crisis on third-quarter earnings," he added.
The Dow fell 366.94, or 2.64 percent, to 13,522.02. The Dow was down for the fifth straight session and for the week was off 4.05 percent. For the year, the blue chip index is now up 8.5 percent.
Broader stock indicators also fell sharply Friday. The Standard & Poor's 500 index fell 39.45, or 2.56 percent, to 1,500.63, and the Nasdaq composite index dropped 74.15, or 2.65 percent, to 2,725.16.
Wachovia Corp. fell $1.74, or 3.6 percent, to $46.40 after reporting third-quarter profits fell 10 percent due to write-downs related to difficult credit market conditions. The nation's fourth largest bank signaled increasing credit troubles ahead.
Google rose $5.09 to $644.71 after the search engine leader said advertising spending lifted third-quarter profit by 46 percent.
Crude Awakening 2
Oil prices continue to spike, and there is no solid economic reason to justify the rise. Oil prices surpassed $90 a barrel for the first time in after-hours trading in New York before slipping back Friday in Asia.
What does this mean for consumers? Not only will you see prices at the pump rise, but expect heating oil and natural gas to rise as well - purely on speculation. The general public should not get upset with OPEC, the usual suspect has nothing to do with this rise.
Investors are being drawn to energy futures as a hedge against the weakening U.S. dollar. That, plus worries over tensions between Turkey and Kurdish rebels in northern Iraq, has lifted crude oil prices to new records for five straight days.
Data released in recent weeks shows speculative buying of oil futures is on the rise. Many analysts believe the underlying fundamentals of supply and demand do not support oil prices of $90 a barrel.
On Wednesday, the U.S. Energy Department reported that oil and gasoline supplies rose more than expected last week, countering suggestions that supplies are tight. However, crude supplies at the closely watched Nymex delivery point of Cushing, Okla., fell last week, and several reports in recent days have predicted oil supplies will tighten in the fourth quarter.
Thursday was the fifth day in a row crude prices have set new records. The new record has taken the price of oil nearer, but still below, inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to more than $101 today.
November natural gas futures fell 1.4 cents to settle at $7.360 per 1,000 cubic feet as investors shrugged off an Energy Department report that inventories rose by 39 billion cubic feet last week, less than analysts had expected. Supplies are high by historical standards.
For the savvy futures investor, now is a good time to look at oil; the price will climb to just above $100 per barrel, before this unctious bubble burst. Another gppd place to look on the commodities side is OJ, and not in Las Vegas.
The U.S. Department of Agriculture on Friday estimated Florida would produce 168 million orange boxes for the 2007-08 season, and growers are happy about it.
However, in Australia's Valencia orange crop for 2007 is tipped to be the smallest in over three decades. Those attending the National Orange Forum in Mildura (Victoria) on 9 October 2007 were told the crop would total just 194,000 tonnes by Australian Citrus Growers, down 19,000 tonnes on its initial forecast of 213,000 tonnes. The small crop, attributed to factors such as the drought and low water allocation, may mean that fruit juice processors will run out of supplies, while exports of ValenciaA's will be severely restricted.
The Aussie's along with teh risk of disease in FLA will greatly affect the supply curve, and this will lead to increased prices. It is still unclear if this will affect customers at the local grocery store, but it will affect the "market".
What does this mean for consumers? Not only will you see prices at the pump rise, but expect heating oil and natural gas to rise as well - purely on speculation. The general public should not get upset with OPEC, the usual suspect has nothing to do with this rise.
Investors are being drawn to energy futures as a hedge against the weakening U.S. dollar. That, plus worries over tensions between Turkey and Kurdish rebels in northern Iraq, has lifted crude oil prices to new records for five straight days.
Data released in recent weeks shows speculative buying of oil futures is on the rise. Many analysts believe the underlying fundamentals of supply and demand do not support oil prices of $90 a barrel.
On Wednesday, the U.S. Energy Department reported that oil and gasoline supplies rose more than expected last week, countering suggestions that supplies are tight. However, crude supplies at the closely watched Nymex delivery point of Cushing, Okla., fell last week, and several reports in recent days have predicted oil supplies will tighten in the fourth quarter.
Thursday was the fifth day in a row crude prices have set new records. The new record has taken the price of oil nearer, but still below, inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to more than $101 today.
November natural gas futures fell 1.4 cents to settle at $7.360 per 1,000 cubic feet as investors shrugged off an Energy Department report that inventories rose by 39 billion cubic feet last week, less than analysts had expected. Supplies are high by historical standards.
For the savvy futures investor, now is a good time to look at oil; the price will climb to just above $100 per barrel, before this unctious bubble burst. Another gppd place to look on the commodities side is OJ, and not in Las Vegas.
The U.S. Department of Agriculture on Friday estimated Florida would produce 168 million orange boxes for the 2007-08 season, and growers are happy about it.
However, in Australia's Valencia orange crop for 2007 is tipped to be the smallest in over three decades. Those attending the National Orange Forum in Mildura (Victoria) on 9 October 2007 were told the crop would total just 194,000 tonnes by Australian Citrus Growers, down 19,000 tonnes on its initial forecast of 213,000 tonnes. The small crop, attributed to factors such as the drought and low water allocation, may mean that fruit juice processors will run out of supplies, while exports of ValenciaA's will be severely restricted.
The Aussie's along with teh risk of disease in FLA will greatly affect the supply curve, and this will lead to increased prices. It is still unclear if this will affect customers at the local grocery store, but it will affect the "market".
Wednesday, October 17, 2007
Dell Goes Green
Dell has become the first major computer manufacturer to commit to neutralizing the carbon impact of its worldwide operations, a significant extension of its global climate policy and environmental stewardship.
"Never before in the history of business have we seen such a critical need to build a worldwide community dedicated to improving the environment," Michael Dell, the company's chairman and CEO, said during a policy forum organized by the Center for Strategic and International Studies.
"Leadership starts at home, which is why we are going carbon-neutral, but this should only be the beginning of building long-term partnerships with customers, stakeholders and suppliers of all sizes to team up and make a difference for the Earth we all share," Dell said.
Dell issued a challenge to its peer companies during Dell's speech to join in 'a long-term, carbon-neutral commitment to our shared Earth'. The company also announced a new program called 'Plant a Forest for Me' that enables organizations worldwide to join together with Dell and share best practices, partner and facilitate the planting of millions of trees in sustainably managed reforestation projects.
Sometime down the road, especially if Al Gore has his way, this will be a big deal. While Dell continues to loose market share, they find way to stay competitive. Mother Earth is the newest charity.
"Never before in the history of business have we seen such a critical need to build a worldwide community dedicated to improving the environment," Michael Dell, the company's chairman and CEO, said during a policy forum organized by the Center for Strategic and International Studies.
"Leadership starts at home, which is why we are going carbon-neutral, but this should only be the beginning of building long-term partnerships with customers, stakeholders and suppliers of all sizes to team up and make a difference for the Earth we all share," Dell said.
Dell issued a challenge to its peer companies during Dell's speech to join in 'a long-term, carbon-neutral commitment to our shared Earth'. The company also announced a new program called 'Plant a Forest for Me' that enables organizations worldwide to join together with Dell and share best practices, partner and facilitate the planting of millions of trees in sustainably managed reforestation projects.
Sometime down the road, especially if Al Gore has his way, this will be a big deal. While Dell continues to loose market share, they find way to stay competitive. Mother Earth is the newest charity.
Monday, October 15, 2007
It's Tribe Time Now
What do the Cleveland Indians, a professional baseball team have to do with the Worlds' financial markets? ... Absolutely nothing, but they are up 2 games to 1 over the Boston Red Sox, and that has to be worth something.
Friday, October 12, 2007
Next week
Next week all of the big Banks will release Q3 earnings reports. So far Goldman is the only one of the banks that has seen any sort of growth. But the big news of the day is Oracle. They are in a buying mood. T
Oracle unveiled its $17-per-share cash offer Friday, one day after BEA rejected it as inadequate, according to a letter BEA released a few hours after Oracle's revelation catapulted its stock to a new 52-week high.
BEA makes "middleware," products that help software applications run more smoothly on top of databases, while Oracle makes business management software.
Oracle's bid represented a 25 percent premium over BEA's closing stock price Thursday.
"It is apparent to our board...that BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated," William Klein, BEA's vice president of business planning and development, wrote in the rejection letter.
Industry analysts believe BEA might be able to escape Oracle's clutches by finding a white knight. Activist investor Carl Icahn, who is using his 13.2 percent stake in BEA to push for a sale, told CNBC he believes other bids are likely.
SAP, IBM and Hewlett-Packard Co. are considered the most probable candidates to vie for BEA.
Oracle unveiled its $17-per-share cash offer Friday, one day after BEA rejected it as inadequate, according to a letter BEA released a few hours after Oracle's revelation catapulted its stock to a new 52-week high.
BEA makes "middleware," products that help software applications run more smoothly on top of databases, while Oracle makes business management software.
Oracle's bid represented a 25 percent premium over BEA's closing stock price Thursday.
"It is apparent to our board...that BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated," William Klein, BEA's vice president of business planning and development, wrote in the rejection letter.
Industry analysts believe BEA might be able to escape Oracle's clutches by finding a white knight. Activist investor Carl Icahn, who is using his 13.2 percent stake in BEA to push for a sale, told CNBC he believes other bids are likely.
SAP, IBM and Hewlett-Packard Co. are considered the most probable candidates to vie for BEA.
Thursday, October 11, 2007
Boeing's Eggs 87
It looks like Boeing has 86ed the on time departure of its new luxury liner the 787. This, just months after laughing in the face of rival AirBus because of its planned delays on delivering it new luxury liner the A380. While Boeing has done a great job outsourcing the production of the plane’s parts, the problem is that its supply chain is was not equipped to handle the numerous moving pieces in a way that would bring them all together in an efficient manner.
Boeing manufactures the 787's tail fin at its plant in Frederickson, Washington, the ailerons and flaps at Boeing Australia, and fairings at Boeing Canada Technology. For its entire history, Boeing has guarded its techniques for designing and mass producing commercial jetliner wings. For economic reasons, the wings are manufactured by Japanese companies in Nagoya, e.g. Mitsubishi Heavy Industries; the horizontal stabilizers are manufactured by Alenia Aeronautica in Italy; and the fuselage sections by Vought in Charleston, South Carolina (USA), Alenia in Italy, Kawasaki Heavy Industries in Japan and Spirit AeroSystems, in Wichita, Kansas (USA). The passenger doors are made by Latecoere (France) and the cargo doors, access doors and crew escape door are made by Saab (Sweden). Japanese industrial participation is very important to the project, with 35% work share, with many of the subcontractors supported and funded by the Japanese government.[49] On April 26, 2006, Japanese manufacturer Toray Industries and Boeing announced a production agreement involving $6 billion worth of carbon fiber. The deal is an extension of a contract signed in 2004 between the two companies and eases some concerns that Boeing might have difficulty maintaining its production goals for the 787.
From France, Messier-Dowty builds the landing gear and Thales supplies the integrated standby flight display and electrical power conversion system.
Honeywell and Rockwell-Collins provide flight control, guidance and other avionics systems, including standard dual head up guidance systems. Future integration of forward-looking infrared is being considered by Flight Dynamics allowing improved visibility using thermal sensing as part of the HUD system, allowing pilots to "see" through the clouds.
Connecticut (USA)-based Hamilton Sundstrand provides power distribution and management systems for the aircraft, including manufacture and production of Generator Control Units (GCUs) as well as integration of power transfer systems that can move power from the Auxiliary Power Unit (APU) and the main engines to the necessary parts and machinery of the aircraft. Cold weather test of the APU took place in Alaska.
The final assembly consists of attaching fully completed subassemblies, instead of building the complete aircraft from the ground up. This is a technique that Boeing has previously used on the 737 program, which involves shipping fuselage barrel sections by rail from Spirit's Wichita, Kansas facility to Boeing's narrowbody final assembly plant in Renton, Washington. After stiff competition, Boeing announced on December 16, 2003 that assembly would take place in Everett, Washington, employing 800 to 1,200 people. The 787 production line had been expected to finish assembly on an aircraft in as little as three days, compared with 11 days for the 737; however it looks like it will take more 35 days.
Expect the stock price to experience some losses, because there is no clear end in sight. But things should rebound once Boeing figures out how to make this plane correctly. We therefore remain neutral on Boeing. If you have some stock, do not rush to sell it, but now is not a good time to buy... the company is currently experiencing some turbulence, so all owners should remain seated with their seat belts securely fastened.
Boeing manufactures the 787's tail fin at its plant in Frederickson, Washington, the ailerons and flaps at Boeing Australia, and fairings at Boeing Canada Technology. For its entire history, Boeing has guarded its techniques for designing and mass producing commercial jetliner wings. For economic reasons, the wings are manufactured by Japanese companies in Nagoya, e.g. Mitsubishi Heavy Industries; the horizontal stabilizers are manufactured by Alenia Aeronautica in Italy; and the fuselage sections by Vought in Charleston, South Carolina (USA), Alenia in Italy, Kawasaki Heavy Industries in Japan and Spirit AeroSystems, in Wichita, Kansas (USA). The passenger doors are made by Latecoere (France) and the cargo doors, access doors and crew escape door are made by Saab (Sweden). Japanese industrial participation is very important to the project, with 35% work share, with many of the subcontractors supported and funded by the Japanese government.[49] On April 26, 2006, Japanese manufacturer Toray Industries and Boeing announced a production agreement involving $6 billion worth of carbon fiber. The deal is an extension of a contract signed in 2004 between the two companies and eases some concerns that Boeing might have difficulty maintaining its production goals for the 787.
From France, Messier-Dowty builds the landing gear and Thales supplies the integrated standby flight display and electrical power conversion system.
Honeywell and Rockwell-Collins provide flight control, guidance and other avionics systems, including standard dual head up guidance systems. Future integration of forward-looking infrared is being considered by Flight Dynamics allowing improved visibility using thermal sensing as part of the HUD system, allowing pilots to "see" through the clouds.
Connecticut (USA)-based Hamilton Sundstrand provides power distribution and management systems for the aircraft, including manufacture and production of Generator Control Units (GCUs) as well as integration of power transfer systems that can move power from the Auxiliary Power Unit (APU) and the main engines to the necessary parts and machinery of the aircraft. Cold weather test of the APU took place in Alaska.
The final assembly consists of attaching fully completed subassemblies, instead of building the complete aircraft from the ground up. This is a technique that Boeing has previously used on the 737 program, which involves shipping fuselage barrel sections by rail from Spirit's Wichita, Kansas facility to Boeing's narrowbody final assembly plant in Renton, Washington. After stiff competition, Boeing announced on December 16, 2003 that assembly would take place in Everett, Washington, employing 800 to 1,200 people. The 787 production line had been expected to finish assembly on an aircraft in as little as three days, compared with 11 days for the 737; however it looks like it will take more 35 days.
Expect the stock price to experience some losses, because there is no clear end in sight. But things should rebound once Boeing figures out how to make this plane correctly. We therefore remain neutral on Boeing. If you have some stock, do not rush to sell it, but now is not a good time to buy... the company is currently experiencing some turbulence, so all owners should remain seated with their seat belts securely fastened.
Tuesday, October 9, 2007
Emerging Tech
A good place to look over the next few years is tech stocks; but not domestically necessarily. Computer companies cannot continue to meet revenue goals by selling units to 15% of the population. A good example of how the emerging markets will fuel growth is Mexico. Every public school in Mexico, even in the most remote rural regions, has an IT program and is connected to the Internet.
United Microelectronics (UMC) a Taiwan based producer of semiconductor technology saw shares of its stock rise over 20% today, on news of September sales numbers. UMC announced that it did 10.5 billion New Taiwan Dollars in sales in September, that is an increase of over 14% from this time last year. Still, UMC is the AMD of Asia; rival Taiwan Semiconductor (TSM) reported sales of 29.45 billion New Taiwan Dollars in September, an increase of 6% from last year. This September sales boost was exactly what TSM had been looking for, because over the past three quarters they have seen sales down more than 5%.
Asia as a whole, and especially China, will be experiencing technology growth similar to what the US did in the mid through late nineties. There are over one billion people in China, and they all talk on phones... Keep China Telecom in mind. I expect it to make waves in the near future. Additionally, China has stepped up to the plate and made huge investments in Africa, especially in terms of infrastructure.
United Microelectronics (UMC) a Taiwan based producer of semiconductor technology saw shares of its stock rise over 20% today, on news of September sales numbers. UMC announced that it did 10.5 billion New Taiwan Dollars in sales in September, that is an increase of over 14% from this time last year. Still, UMC is the AMD of Asia; rival Taiwan Semiconductor (TSM) reported sales of 29.45 billion New Taiwan Dollars in September, an increase of 6% from last year. This September sales boost was exactly what TSM had been looking for, because over the past three quarters they have seen sales down more than 5%.
Asia as a whole, and especially China, will be experiencing technology growth similar to what the US did in the mid through late nineties. There are over one billion people in China, and they all talk on phones... Keep China Telecom in mind. I expect it to make waves in the near future. Additionally, China has stepped up to the plate and made huge investments in Africa, especially in terms of infrastructure.
Risk vs. Reward
When you think about a "safe investment" frequently you think about so-called "blue chip" stocks. While the symbols may change the results are the same: growth that will moderately exceed past the average. Below are some excellent blue chips for the 21st century along with some target goals. Blue Chippers are almost always well established companies with very solid earning and new income stream potential. That stability and consistency allows the company to pay dividends frequently.
Google: They raise their target to $670 from $620, and raise estimates. They lift their 2007 EPS estimate to $15.83 from $15.70; 2008 goes to $22.21 from $21.95. The analysts cite accelerating U.S. search query growth, continued monetization improvements, strong international growth, few signs of slowdown in online financial services advertising spending and a positive currency tailwind.
Amazon: Price target to $105 from $90. EPS for 2007 up to $1.14 from $1.12, and for 2008 to $1.91 from $1.90. The analysts cite traffic acceleration in the third quarter, strong growth in high margin third party merchandise sales, and rising customer loyalty from the Amazon Prime program and free shipping. The also says that prior technology and content spending will bear fruit in 2008 and beyond. They do see some bumps ahead, however, including Q3 margins on the last Harry Potter book, tougher comps in Q4 and the loss Borders revenue in the 2008 first quarter.
eBay: Price target to $44 from $43; 2007 EPS to $1.13 from $1.10; maintain 2008 at $1.53. They say that “core listings have stabilized,” and that ASPs continue to grow in high single digits while conversion rate have improved from “core-store rebalance.” They raise third quarter revenue estimate to $1.864 billion from $1.815 billion, but says that a “3Q beat” is already priced into the stock.
Today:
Google is up $6.71, or 1.1%, to $616.33.
eBay is up 17 cents, or 0.5% to $38.33.
Amazon is off 85 cents, or 0.9%, at $95.
High Returns
Any smart investor is always balancing safety with return potential. the problem has always been the higher the risk the higher the reward. What a wise advisor can do is help explain and calculate the difference between preceived risk and actual risk. I am very sure that very few people realized that risk associated with investing in ENRON.
For the savvy investor looking for high growth, the goal is always to be on the front-end of the next trend. Right now if you looking for the next trend look towards Africa. The Nigerian stock exchange is up over 100% for the year. However, all we ever hear about Nigeria are the negatives.
The other good thing about investing is emerging markets is that you are doing your part to help those who are less fortunate. Dont sent money to some NGO, send money to an employer. From a particle point: had you invested $1,000 in Congo Telcom 5 years ago, today you would have $1,000,000. Lets see AT&T match that.
From 1999 through 2004, the number of mobile subscribers in Africa jumped to 76.8 million, from 7.5 million, an average annual increase of 58 percent. South Africa, the continent's richest nation, accounted for one-fifth of that growth. Asia, the next fastest-expanding market, grew by an annual average of 34 percent in that period.
Google: They raise their target to $670 from $620, and raise estimates. They lift their 2007 EPS estimate to $15.83 from $15.70; 2008 goes to $22.21 from $21.95. The analysts cite accelerating U.S. search query growth, continued monetization improvements, strong international growth, few signs of slowdown in online financial services advertising spending and a positive currency tailwind.
Amazon: Price target to $105 from $90. EPS for 2007 up to $1.14 from $1.12, and for 2008 to $1.91 from $1.90. The analysts cite traffic acceleration in the third quarter, strong growth in high margin third party merchandise sales, and rising customer loyalty from the Amazon Prime program and free shipping. The also says that prior technology and content spending will bear fruit in 2008 and beyond. They do see some bumps ahead, however, including Q3 margins on the last Harry Potter book, tougher comps in Q4 and the loss Borders revenue in the 2008 first quarter.
eBay: Price target to $44 from $43; 2007 EPS to $1.13 from $1.10; maintain 2008 at $1.53. They say that “core listings have stabilized,” and that ASPs continue to grow in high single digits while conversion rate have improved from “core-store rebalance.” They raise third quarter revenue estimate to $1.864 billion from $1.815 billion, but says that a “3Q beat” is already priced into the stock.
Today:
Google is up $6.71, or 1.1%, to $616.33.
eBay is up 17 cents, or 0.5% to $38.33.
Amazon is off 85 cents, or 0.9%, at $95.
High Returns
Any smart investor is always balancing safety with return potential. the problem has always been the higher the risk the higher the reward. What a wise advisor can do is help explain and calculate the difference between preceived risk and actual risk. I am very sure that very few people realized that risk associated with investing in ENRON.
For the savvy investor looking for high growth, the goal is always to be on the front-end of the next trend. Right now if you looking for the next trend look towards Africa. The Nigerian stock exchange is up over 100% for the year. However, all we ever hear about Nigeria are the negatives.
The other good thing about investing is emerging markets is that you are doing your part to help those who are less fortunate. Dont sent money to some NGO, send money to an employer. From a particle point: had you invested $1,000 in Congo Telcom 5 years ago, today you would have $1,000,000. Lets see AT&T match that.
From 1999 through 2004, the number of mobile subscribers in Africa jumped to 76.8 million, from 7.5 million, an average annual increase of 58 percent. South Africa, the continent's richest nation, accounted for one-fifth of that growth. Asia, the next fastest-expanding market, grew by an annual average of 34 percent in that period.
Sunday, October 7, 2007
Another Strike?
DETROIT (AP) -- Negotiators with the United Auto Workers union and Chrysler LLC have made progress on efforts to reach a new four-year contract agreement, but the union has notified the company that a strike is possible, a person briefed on the talks said Sunday.
The union gave Chrysler a 72-hour notice of a potential strike, the person said, but it was unclear Sunday exactly whether the notice would end on Tuesday or Wednesday.
Bargainers working in committees made progress during the weekend but still have much work to do on difficult issues, said the person, who spoke on condition of anonymity because the talks are private.
A strike notice could be a union tactic to put pressure on the company as the talks intensify, said Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues.
"The union wants the deadline to encourage a settlement sooner rather than later," Shaiken said.
The UAW went on strike for nearly two days last month before coming to a tentative agreement with General Motors Corp. Normally the union settles with one U.S. automaker and then uses that deal as a pattern for the other two. But this year, Chrysler and Ford Motor Co. both have said they have needs different from GM's and may need a different deal.
Shaiken said the notice doesn't necessarily mean there will be a strike because the union could extend its contract hour by hour when the deadline passes. A second strike in one set of negotiations would be rare, he said.
"I think the union may feel things are going well, but they want the discipline of a deadline," Shaiken said.
A short strike may not hurt Chrysler much because it has five U.S. plants scheduled to be shut down for a week or two starting Monday because of lower market demand for their products.
Negotiators bargained Saturday and returned to the table Sunday, Chrysler spokeswoman Michele Tinson said, adding that the two sides were making progress.
"We remain optimistic," she said Sunday afternoon.
UAW spokesman Roger Kerson declined to comment on the talks.
The union gave Chrysler a 72-hour notice of a potential strike, the person said, but it was unclear Sunday exactly whether the notice would end on Tuesday or Wednesday.
Bargainers working in committees made progress during the weekend but still have much work to do on difficult issues, said the person, who spoke on condition of anonymity because the talks are private.
A strike notice could be a union tactic to put pressure on the company as the talks intensify, said Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues.
"The union wants the deadline to encourage a settlement sooner rather than later," Shaiken said.
The UAW went on strike for nearly two days last month before coming to a tentative agreement with General Motors Corp. Normally the union settles with one U.S. automaker and then uses that deal as a pattern for the other two. But this year, Chrysler and Ford Motor Co. both have said they have needs different from GM's and may need a different deal.
Shaiken said the notice doesn't necessarily mean there will be a strike because the union could extend its contract hour by hour when the deadline passes. A second strike in one set of negotiations would be rare, he said.
"I think the union may feel things are going well, but they want the discipline of a deadline," Shaiken said.
A short strike may not hurt Chrysler much because it has five U.S. plants scheduled to be shut down for a week or two starting Monday because of lower market demand for their products.
Negotiators bargained Saturday and returned to the table Sunday, Chrysler spokeswoman Michele Tinson said, adding that the two sides were making progress.
"We remain optimistic," she said Sunday afternoon.
UAW spokesman Roger Kerson declined to comment on the talks.
Thursday, October 4, 2007
Financial Sector Options
For the savvy investor now may be the time to get back into financials, and a good place to start is Citi. The Nation's largest bank is really under emense pressure to step up its earnings. Citi's stock price is down more than 14% from the beginning of the year, and that has investors out for blood. Additionally Citigroup's equity report did not help; up just 1.7% since Aug. 10, versus a 5.7% gain for J.P. Morgan, a 4.5% gain for Bank of America and 8.1% gain for Wachovia. This means that the margins are there Citi just has to find them.
All of the big banks: Bank of America, Citigroup, J.P. Morgan, and Wachovia, have all recently begun tightening credit default swap spreads. If you want to take a gamble and be ahead of the curve on the rebound, try some stock options. What this will do is limit the risk in a particular stock, and/or sector. Remember the financial sector as a whole is just now peering though the credit-cloud that has been cast over it by the subprime mortgage crisis. The November 50 calls are a good bet.
Credit Default Swap
Many people may not have a clue as to what a CDS is, so we will explain. A credit default swap, or CDS, is a tradable contract, although not in the listed-securities market, that reflects the credit risk of a particular company, like Citigroup. The contract term is typically five years, and during that time the CDS owner is protected from a "credit event." In essence, a credit default swap is like a put option.
A tightening of credit spreads bodes well for a stock because it demonstrates that investors are less afraid the company will default on its bonds. CDS are increasingly important in options trading because there is a growing interest in the influence CDS products have on options volatility.
All of the big banks: Bank of America, Citigroup, J.P. Morgan, and Wachovia, have all recently begun tightening credit default swap spreads. If you want to take a gamble and be ahead of the curve on the rebound, try some stock options. What this will do is limit the risk in a particular stock, and/or sector. Remember the financial sector as a whole is just now peering though the credit-cloud that has been cast over it by the subprime mortgage crisis. The November 50 calls are a good bet.
Credit Default Swap
Many people may not have a clue as to what a CDS is, so we will explain. A credit default swap, or CDS, is a tradable contract, although not in the listed-securities market, that reflects the credit risk of a particular company, like Citigroup. The contract term is typically five years, and during that time the CDS owner is protected from a "credit event." In essence, a credit default swap is like a put option.
A tightening of credit spreads bodes well for a stock because it demonstrates that investors are less afraid the company will default on its bonds. CDS are increasingly important in options trading because there is a growing interest in the influence CDS products have on options volatility.
Wednesday, October 3, 2007
Hump Day News
In the every-changing technology sector we have some new "toys" coming out over the next few months. At the top of the BUY list is LG. Not only does LG have new iPhone-like phones coming out, but they also have a new line of durable goods such as: refrigerators, washers and dryers that will be hitting the market soon. Furthermore, LG is really showing the markets its acumen and flexibility by competing against Apple in the wireless arena with its new Voyager and Prada, but LG is also building iMac monitors for Apple.
As a side note, expect Verizon and Vodafone stocks to get a shot in the arm as a bi-product of the new LG cell phones. The LG phones will connect to Verizon Wireless' latest data network, providing speeds much higher than the AT&T network which the iPhone currently uses. The Voyager also has direct access to Verizon Wireless' online music store, which has been a big hit, mainly in part to some very crafty advertising.
The Big Bear
For weeks now I have been telling you to watch Bear Stearn, and again we have movement. Bear Stearns Cos. said earlier today that they were laid off more than 300 workers; affectively fusing its two mortgage businesses. While the stated cause was the ongoing uncertainty and turmoil in the home loan industry, Bear is not a big sub-prime lender, so the story does not add up. While the credit crisis may have contributed to a dramatic slide in the investment bank's profit, so did poor management.
As an investment bank, Bear did a lot of underwriting for many of these mortgages, which hurt them substantially. However, the heavy mortgage exposure is more a product of mismanagement then it is market timing. Bear Stearns is the company most heavily exposed to mortgages among the major investment banks. It has now laid off two-fifths of the employees in its mortgage businesses this year, the company said.
Shares of Bear Stearns lost 70 cents to $137.87. The stock is down more than 20 percent for the year. However, it is safe to say that over the next few months, or maybe years, Bear will bounce back. They will begin to diversify, and generate revenue through bond market and fixed income securities.
Dynasty Taxes
We at Landes try to stay away form politics, but there is a pressing issue that may affect us all. Earlier this week Hilary Clinton announced that he has risen over $28m over the summer months. As a candidate this is a good thing, as a financial advisor, I am not so sure. Mrs. Clinton has said that if elected she would move to raise the capital gains tax rate from 16% to 32%. What that means is that revenue from stock sales, treasury markets, forex, and other investment income would not be treated the same as money earned or "working" income. The question is: will this threat cause a major sell off if she is elected? Please leave your comments.
As a side note, expect Verizon and Vodafone stocks to get a shot in the arm as a bi-product of the new LG cell phones. The LG phones will connect to Verizon Wireless' latest data network, providing speeds much higher than the AT&T network which the iPhone currently uses. The Voyager also has direct access to Verizon Wireless' online music store, which has been a big hit, mainly in part to some very crafty advertising.
The Big Bear
For weeks now I have been telling you to watch Bear Stearn, and again we have movement. Bear Stearns Cos. said earlier today that they were laid off more than 300 workers; affectively fusing its two mortgage businesses. While the stated cause was the ongoing uncertainty and turmoil in the home loan industry, Bear is not a big sub-prime lender, so the story does not add up. While the credit crisis may have contributed to a dramatic slide in the investment bank's profit, so did poor management.
As an investment bank, Bear did a lot of underwriting for many of these mortgages, which hurt them substantially. However, the heavy mortgage exposure is more a product of mismanagement then it is market timing. Bear Stearns is the company most heavily exposed to mortgages among the major investment banks. It has now laid off two-fifths of the employees in its mortgage businesses this year, the company said.
Shares of Bear Stearns lost 70 cents to $137.87. The stock is down more than 20 percent for the year. However, it is safe to say that over the next few months, or maybe years, Bear will bounce back. They will begin to diversify, and generate revenue through bond market and fixed income securities.
Dynasty Taxes
We at Landes try to stay away form politics, but there is a pressing issue that may affect us all. Earlier this week Hilary Clinton announced that he has risen over $28m over the summer months. As a candidate this is a good thing, as a financial advisor, I am not so sure. Mrs. Clinton has said that if elected she would move to raise the capital gains tax rate from 16% to 32%. What that means is that revenue from stock sales, treasury markets, forex, and other investment income would not be treated the same as money earned or "working" income. The question is: will this threat cause a major sell off if she is elected? Please leave your comments.
Monday, October 1, 2007
Q3 Earning report
The first big story of the week is out, and it is a whooper. Citi's earning will fall nearly 60% analysist are reporting. On top of that Citi said its profit were hurt substantially due to loan loss reserves of about $2 billion.
While all of that sounds very bad, it is not all doom and gloom; while Citi will not see any increased growth, Citigroup's said third-quarter revenue will be about the same as it was this time last year. But it will write down about $1.4 billion of its $57 billion portfolio of leveraged loans, lose about $1.3 billion on the value of securities backed by subprime loans, and lose $600 million in fixed-income credit trading, as the bank had trouble navigating market volatility. At some point this has to be expected, growth slows.
"While the direction of the pre-announcement should not come as a surprise, the magnitude is greater than expected with credit being a factor," Lehman Brothers analysts wrote in a note. "Still, we wonder with (Citigroup) among others, attempting to put a tough quarter behind them, if this move helps flush out the negative factors plaguing financials."
September is traditionally the worst month for stocks, the same is true for the 3rd quarter. This is the time when managers begin to make shifts so that assets are in line with future predictions for the beginning of the new year. So looses are no a bad thing. This is a good time to buy; many large caps will look like value stocks right now. Several analysts have predicted major banks may decide to log hefty losses this quarter to clean up their balance sheets ahead of the new year.
Before Citigroup's warning, analysts had been all over the map in their earnings forecasts, but on average had anticipated a modest profit rise. The bank moved its earnings release date to Oct. 15 from Oct. 19. Last year, Citigroup's third-quarter net income was $5.51 billion, or $1.10 per share.
The week of Oct. 15, Bank of America Corp. and JPMorgan Chase & Co. -- the nation's second- and third-largest banks, respectively -- will also be reporting their third-quarter (loss?) results. For BoA we are expecting losses, remember they had to visit the Discount Window just a few weeks ago.
Profit losses will not be limited to the financial sector alone, it looks like for the first time in more than 10 years, the nations largest chain pharmacy, Walgreens, will report a loss as well.
While all of that sounds very bad, it is not all doom and gloom; while Citi will not see any increased growth, Citigroup's said third-quarter revenue will be about the same as it was this time last year. But it will write down about $1.4 billion of its $57 billion portfolio of leveraged loans, lose about $1.3 billion on the value of securities backed by subprime loans, and lose $600 million in fixed-income credit trading, as the bank had trouble navigating market volatility. At some point this has to be expected, growth slows.
"While the direction of the pre-announcement should not come as a surprise, the magnitude is greater than expected with credit being a factor," Lehman Brothers analysts wrote in a note. "Still, we wonder with (Citigroup) among others, attempting to put a tough quarter behind them, if this move helps flush out the negative factors plaguing financials."
September is traditionally the worst month for stocks, the same is true for the 3rd quarter. This is the time when managers begin to make shifts so that assets are in line with future predictions for the beginning of the new year. So looses are no a bad thing. This is a good time to buy; many large caps will look like value stocks right now. Several analysts have predicted major banks may decide to log hefty losses this quarter to clean up their balance sheets ahead of the new year.
Before Citigroup's warning, analysts had been all over the map in their earnings forecasts, but on average had anticipated a modest profit rise. The bank moved its earnings release date to Oct. 15 from Oct. 19. Last year, Citigroup's third-quarter net income was $5.51 billion, or $1.10 per share.
The week of Oct. 15, Bank of America Corp. and JPMorgan Chase & Co. -- the nation's second- and third-largest banks, respectively -- will also be reporting their third-quarter (loss?) results. For BoA we are expecting losses, remember they had to visit the Discount Window just a few weeks ago.
Profit losses will not be limited to the financial sector alone, it looks like for the first time in more than 10 years, the nations largest chain pharmacy, Walgreens, will report a loss as well.
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