Cash Call!

Ever thought of going completely to cash? Check out this article from the New York Magazine and you may do it tomorrow. It is all about managing risk. Know your tolerance and don't overextend. Here is my favorite part:

"The Derivatives-Related Meltdown, Part II
Anybody who glances occasionally at the financial pages these days knows that mortgages issued to home buyers are packaged together (in a process called securitization) into a collateralized-debt obligation, or CDO. That’s what’s known as a derivative, a security whose value depends on the value of other securities. The price of the CDO, you see, is “derived” from the prices of the underlying mortgages. (It works with credit cards, too, or bank loans—any kind of debt will do.)

In principle, the idea of a CDO makes perfect sense. In buying $5 million worth of a CDO, an investor has essentially lent money to an entire portfolio of homeowners, instead of placing all his eggs in one basket, say, by funding a single $5 million mortgage. In the real-estate-crazy environment of the past decade, the CDO market took off like a rocket. But the buyers of these derivatives made a critical error—they confused the spreading of risk with the elimination of risk. A booming economy made this confusion not just possible but irresistible. With relatively few defaults in the first half of the decade, investment firms, including many hedge funds, came to see CDO returns as a sure thing and loaded up on them, often borrowing money to do so, taking on debt to buy debt and thereby setting up a potentially deadly chain reaction. The readiness of the secondary market to buy all these mortgages encouraged the lenders to run wild and lend to anyone who walked through the door, leading—inevitably, in retrospect—to a decline in loan quality. Analyst Christopher Wood of Asia-Pacific investment house CLSA succinctly defines the problem in his highly readable newsletter Greed & Fear: “[Securitization] has one fatal flaw, which will ultimately prove to be its undoing … it removes the incentive of those making the loan to worry about whether the loan is a good credit.”

Still, it all held together until mortgage defaults began to cut into the yields of these CDOs and holders looked to sell them, only to realize their value had slipped. Forced liquidations as a result of that “price discovery” were a primary factor in Bear Stearns’ hedge-fund calamity in August. And it’s not over yet: The aftershocks of the mortgage meltdown are still being felt, as banks such as Citigroup and Deutsche Bank announce multibillion-dollar write-downs.

Each time one of these write-downs has been announced, the market has had a curiously positive response, taking the news as a sign that the worst was over and the banks were cleaning up their books. But because these derivatives are linked to other debt, there’s no reason to be certain that trouble won’t bleed into other markets. Among other things, the liquidity crisis froze the market in structured investment vehicles (SIVs), a nifty bit of financial engineering that banks use to profit from the spread between short-term debt and long-term debt. No one yet knows how nasty these losses could turn out to be because SIVs are stashed, Enron style, off the books."

thanks Jason for the link

Taking it to a whole new level!

Happy Halloween!

Housing Forecast

DOW is currently up $126, thank you big Ben

Fed cuts interest rates by .25%

The Fed just announced that they have lowered the interest rate .25% to 4.5%. The Dow was up nearly 70 points before the announcement and is now trading almost flat. It is always interesting to see how the market is going to react to interest rate activity. A lower interest rate allows investors to invest more on margin and pay lower interest expense. This is a great thing for investors, but the flip side is the reason the Fed is lowering interest rates is due to the economy as a whole (including credit markets, ie housing). The real test will come in a few days when the beige book comes out and we see what the Fed was discussing during the past 48 hours. The Fed notes will give us a better look into where the Fed sees the economy going.

I have a standing limit order on Chipotle to sell a few shares, although it does not look like it will hit the number. I still like Chipotle, but I am up over 10% in less than two weeks. It may be time.

The Big Picture

I was reading The Big Picture and came across a comment made by a reader regarding the housing meltdown and the loan performance by area. Here is the comment:

"It's a new paradigm, and everybody who doesn't buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.

Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas.

This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent."

Hilarious.

Chipotle!

Another great quarter for Chipotle! Earnings of 62 cents a share beat expectations of 53 cents, and are up over 72% from prior year. Chipotle stock rose over 3% in after hours trading. Tomorrow could be a huge day for Chipotle if the Fed lowers interest rates and the market reacts positively. Chipotle also announced that they will be opening a location in Toronto in 2008. You know the Canadians are going to love our burritos.

Tech continues to look very strong!

Tech stocks are having a great day today with some of the standouts including Adobe, Baidu, Google, & Garmin. Apple hit another home run with Leopard, announcing today that they have sold over 2 million copies since its release on Friday.

"Analyst Keith Bachman, of BMO Capital Markets, estimated that 200,000 of those sales included Macs that were pre-installed with Leopard. And coming off a quarter in which Apple sold 2.16 million Macs running the previous operating system called Tiger, the question facing Apple is whether Leopard will be a force in adding to Mac sales during the end-of-the-year holiday shopping season." Click here for the complete story. Apple is currently up over $4 trading around $189.

Trick or Treat

The Fed is meeting today to discuss among other things the lowering of the Federal interest rate tomorrow. It is widely believed that the Fed will lower interest rates again, but it is unclear how much (most economists are predicting 25 points). The market has been anticipating another cut since the 50 point cut in September. More importantly the Fed needs to come out with some calming words that can give the market some confidence heading into the holiday season. I am not sure Ben Bernanke fully understands the power of his words. Look for the markets to be calm, slightly to the down side until the announcement.

Romo?

Slow news day today. Gap gets caught using child labor. Oil hits all time high and the Fed will hopefully lower interest rates this week. I think that about sums it up. Oh yeah, Tony Romo was seen this past weekend getting wild with Britney Spears. Nice..

Tech continues to look strong and oil keeps pumping. I may sell off some stocks tomorrow and trigger some gains. I think the market is getting a little finicky.

Congratulations Boston

The Boston Red Sox just won the World Series! Maybe next year my Rangers can make a run (it is not looking good:)

Apple Store

I just got back from the Apple store and the place was packed. The new Leopard software has some really user friendly upgrades. Vista does not even compare. The salesman said the line to pick up the Leopard software last night was huge. He said people were coming in to get the software but many were picking up new laptops, macs and iPods. I don't see the end for apple any time soon. This company has so much potential it is scary.

Disclosure: long AAPL

Bobble Head

I think I know what I am getting my wife for our anniversary! Girls like bobble heads, right? check it out

Friday Afternoon!!

Survived another week of work & market fluctuations. Since it is Friday, take a break and check out this site Faces in Places. Have a great weekend. I also updated my links so take a look and let me know if I missed anyone.

Time to Sell?

Why do investors get out of positions to early? GS, ADBE, & GRMN are a few of stocks that I pulled the trigger on to early. On the other hand, I have managed to get out of some losers before they crumbled. I guess you just have to try and hedged your exposure and asses your risk. If a stock jumps 10-15% in a few days it is hard to stay long.

AAPL, CMG, & DWA are all having nice days. The market has been looking weaker with the recession talk and housing still getting hit hard. Countrywide recovered a little today on positive forward outlook, but the earnings are pretty bad. This is probably a good long term play if you have the stomach for it.

Other stocks I am looking at include Southwest Airlines (LUV). LUV is trading pretty low due to higher fuel prices, so I am going to keep my eye on oil futures and may trade on dips.

Googolplex?

Brainstorming a $208 billion dollar company:

"Sean and Larry were in their office, using the whiteboard, trying to think up a good name - something that related to the indexing of an immense amount of data. Sean verbally suggested the word "googolplex," and Larry responded verbally with the shortened form, "googol" (both words refer to specific large numbers). Sean was seated at his computer terminal, so he executed a search of the Internet domain name registry database to see if the newly suggested name was still available for registration and use. Sean is not an infallible speller, and he made the mistake of searching for the name spelled as "google.com," which he found to be available. Larry liked the name, and within hours he took the step of registering the name "google.com" for himself and Sergey (the domain name registration record dates from September 15, 1997)." See complete story here.

Still Bullish? Amazon

Amazon announced Q3 earnings yesterday with surprising results. Third quarter earnings increased 41% to $3.26 billion. Although investors sold off the stock yesterday on lower forcasted earnings, today analyst H Terry of Credit Suisse raised the price target from $100 to $120. Amazon closed today down .52 cents to $88.21.

Another rough day

The DOW is currently down nearly 80 points & Nasdaq is down 31 points. Today is looking pretty uneventful except Chipotle (CMG) which is up $5.45 (4.41%) on news that it will be joining the S&P Midcap 400.

November 24, 2007 Recap

Daily Recap

Bad news in the housing sector continues to worry investors, but rumors of upcoming fed rate cuts rallies the market back from early losses. Continued deterioration in the housing sector could lead the fed to down tick the federal discount rate before the fed meets next week. The discount rate is the interest rate the fed charges banks to loan money.

Market Clips

Mark Zuckerberg, founder of Facebook, is the newest internet spun billionaire. Starting the social networking site four years ago while a student at Harvard, Facebook today announced they have sold a 1.6% stake to Microsoft for a reported $240 million dollars. This purchase values the company at $15 billion dollars.

Merrill Lynch & Co. reported Q3 earnings yesterday that included a $7.9 billion dollar write-down in mortgage backed securities. This is the companies first loss in six years.

Does size matter?

Apple has a lot of growth potential! See Gizmoto for the complete story.

TASR

Bought this morning @ $16.56

Currently trading for $17.49

Up 5.6% in half a day! If every trade was this easy, I would be very wealthy.

Early Bird

Bought some TASR today on a dip @ $16.56. Taser came out with steller earngins today with sales rising 56% in Q3. This is one that I am going to put on the side burner and try to forget about. In one year this stock could double (or be a dud:) Here is Howards take on it.

Overall the market is down a bit giving back some of yesterdays gains. I am going to take a look at Amazon which is down do to forward looking statements. Earnings are strong so this may be a buying opportunity.

Currently holding: AAPL, CMG, DWA, TASR, & a bunch on mutual funds

Bullish

The market today was flat and turned bullish toward the close. More great earnings from Amazon and Apple. Both these companies are very bullish. I have been covering Apple pretty consistently and Amazon has been on my watch list for a while. I may pick up some shares tomorrow.

Currently I am reading "Into The Wild" a book about a young mad who ventures out on the road to live a life of travel and adventure(sounds appealing but he ends up freezing to death). Why do men have this instinctual desire to explore & travel, while women have the exact opposite? Good book if you get the chance.

Betting vs. Investing

Investing is calculated betting. When you purchase a stock you have hopefully done sufficient research to make an intelligent decision (based on the best available data). The main difference in gambling and stock picking is that investing is based on facts, not luck (although luck helps). Before buying any stock I always do my research which includes a lot of reading and analyzing. The hardest part of investing is sorting the filler data from important helpful data. Investing is calculated and precise. It requires knowledge, skill, and a little luck to become successful. You have to feel the feelings and live the experience to become a good investor. Most investors will say you need to think logically and not make decisions based on emotions. This is true for the most part, but sometimes you have to listen your intuition and sell that dog or double down.

Apple Blows Up!

Apples new strategy for selling iPods and Macs this holiday season is to make there investors very wealthy. Apple blew away estimates and recorded another fantastic quarter. With earnings of 1.01 a share and revenues of 6.22 billion apple easily beat estimates (see below). Apple shares are up nearly $12 or 7% in after hours trading.

Does money grow on trees? (AAPL)

Apple announces earnings tonight with analysts expecting 86 cents a share, on revenue of 6.071 billion for Q4. AAPL was up today (2.31%) $3.94 on anticipation of earnings. iPhone sales should be the major focus as we roll into the holiday season. I may take a trip by the apple store tonight to do a little product research (ie check out the new gadgets).

Ugly Day

Dow gave back 366 points today on recession concerns. Concerned yes, worried not yet. Another week in the red will get me a little worried. This is a strong market, so I am not going to worry and just think of this as a buying opportunity and have a great weekend. Is it bad that I am more concerned with my fantasy football games this weekend than the Dow?

What makes a stock great?

Today I picked up a little Chipotle (CMG) on the dip. I also had lunch at Chipotle and the place was packed. Chipotle still has a lot of room for growth and could easily add another 20-30 points. Cramer thinks Chipotle will not go much higher, but we will see what the market says. With this momentum it can be hard to stop. Earnings will be released on the 30th.

While I was eating my burrito today I began to compare Chipotle's success with another one of my families favorite restaurants, PF Changs (PFCB). PF Changs owns the highly successful PeiWei chain of restaurants. Why is Chipotle selling for nearly 74 times earnings hitting all time highs, but PFCB is only selling for 21 times earnings hitting all time lows? Two words: Quarterly Growth. CMG's quarterly growth is yoy is 85% while PFCG is only 14.7%. CMG is a growth stock that has huge potential and more importantly momentum.

Disclosure: Long CMG

Adios Analog!

Best Buy (BBY) announced yesterday that they are no longer going to be carrying analog TV’s. This could not make me happier. More stations need to convert to HD, pronto. I recently bought a 40’ LCD that I love, but I only get a handful of channels in HD. The sports are amazing especially golf and football, but I need everything in HD. Once you go HD you will never want to watch regular TV again. I have blogged about Texas Instruments DLP technology before. This is a great trend to follow. Check out Mark Cuban's blog here (yes, Dancing With The Stars Cuban). He owns HDNet that has some pretty great programming and he gets into more specifics on his blog.

Best Buy is a great stock that still has some growth potential. According to business week “more than 60 million U.S. households currently rely on an antennas or analog cable.” This is a huge market that is just beginning to be tapped.

Thanks to Keith for the link.

Craiglist Post

I have received this e-mail from a number of people regarding the craiglist post last week. I decided not to blog about it then because everyone I know that reads this blog sent me the e-mail, but wallstrip has its own twist on this post. Funny stuff.

New Trading Software

I finally downloaded the new active trading software offered by my brokerage company and it has made my trading so much easier. I loaded it last week, and I have seen immediate results. I find myself trading more (I guess that is the idea) and following my positions more carefully.

The market has been in the red for the past few day and today looks like it is not going to break the pattern. Pretty heavy in cash right now, looking for some bargains on trending stocks.

Timmmmmbeeer

Market is down 160 points due to earnings releases today. The bears are eating this up.

The banks are going to team up to try and revive the credit market. Lets see if 100 billion dollars will have an effect on the credit "Crisis." The number of defaulting sub-prime loans is less than 1 percent. I wonder how many stock options have been written with financial companies undervaluing there holdings.

1/15/2007

The 2006 extended tax deadline is finally upon us. This has been one of the tougher tax seasons, but I survived.

The Dow is in the red, currently down 106 points, with no big movers in my portfolio.

Sold Garmin today at $114.99, bought 10/3/07 @ 96.97

Happy with a 18.58% return in 12 days. Annualize that...

Interesting Facts

From the US Department of Health & Human Studies come some very interesting numbers, here are a few I found surprising:

- 24.4% of Blacks aged 12 or older were current smokers
- Among the 21 major occupational categories, the highest rates of past year major depressive episode among full time employed workers aged 18 to 64 were found in the personal care and service occupations (10.8%) and the food preparation and service related occupations (10.3%).
- From 2004 to 2006 an annual average of 6.3 million women (9.4%) aged 18 to 49 needed treatment for a substance use problem.
- An annual average of 943,000 persons aged 12 or older were recent initiates of hallucinogens (i.e., they had used hallucinogens for the first time in the 12 months before the survey).
- In 2006, an estimated 20.4 million Americans aged 12 or older were current (past month) illicit drug users
- Slightly more than half of Americans aged 12 or older reported being current drinkers of alcohol in the 2006 survey (50.9 percent). This translates to an estimated 125 million people, which is similar to the 2005 estimate of 126 million people (51.8 percent).
- More than one fifth (23.0 percent) of persons aged 12 or older participated in binge drinking (having five or more drinks on the same occasion on at least 1 day in the 30 days prior to the survey) in 2006.
- In 2006, among young adults aged 18 to 25, the rate of binge drinking was 42.2 percent, and the rate of heavy drinking was 15.6 percent.

We are supposed to be one of the most progressive nations in the world. Scary statistics. Get off the drugs people.

100 Oldest Domain Names

Here you go..

Media Power

I don't want to come off as a conspiracy theorist, but the media has tremendous power over the financial markets. Turn it on CNBC or Bloomberg and watch the reports with a suspicious perspective. Before a correction the media will start getting real negative and jump on any bad news and beat it to death. Subprime mortgage of late is the best example. The media tried to scare investors out of the market and kept calling for a 10% correction. When you start hearing that talk it is time to start liquidating some of your more risky positions.

Take a look at the cover of this weeks Barron's (picture above) and judge for yourself.

Come back kid, tech

Tech rebounded strong today after a sharp drop yesterday. Apple ended up 3% along with Garmin, up 4%. Nice gains going into the weekend. I am going to put on some limit orders to sell Garmin. I am up over 10% in less than two weeks. I sill like the stock, but when you get a jump like that it only makes sense to bring in some profits. Yesterday, Goldman Sachs raised the one year target price of Apple to $190. This stock has more momentum then the Patriots (who are going to get schooled by the Cowboys this weekend!)

Disclosure: Long Apple, Garmin & Dallas Cowboys

Have a good weekend

Crazy Day

A ton of volume today around 2:15 as traders decided to take some gains and news came out on Baidu. The Dow opened strong and held the gains for most of the afternoon, until the news hit the tape and everything went crumbling. I guess my buddies down on wall street left me out of the loop again. I am still holding nice gains in all positions and plan on holding out for more upside. It is going to take more than Baidu news to slow this bull market.

Show me the MONEY!

Garmin & Apple are unstopable! (watch, they will be down tomorrow) My portfolio is holding up strong and I am going to add some positions tomorrow.

I am looking very hard at TASR. I have been sitting on the sidlines watching this thing skyrock. Time to jump in.

Apple

Apple is still my largest position and I don't see that changing for a while. The new product line is sharp and iPhone sales should be strong over the holidays. Microsoft launched a new line of Zunes today. Apple has this market nailed for a reason. Microsoft did not bring anything new or innovative needed to win over iPod fans. Now that I think about it Microsoft has not brought anything new and innovative to the market in a long time. Vista has been a giant disappointment, although it is still the main software for all new computers (besides apples of course). Apple is innovative, creative and sexy. Good luck Microsoft!

Disclosure: Long Apple

Heavy Lunch

Today has been a strong day for my portfolio, although the market has remained relatively flat all day. Yesterday I picked up a little Garmin (GRMN) and Dreamworks (DWA). Garmin has performed well today, up over 5% and Dreamworks has stayed pretty flat, down 1%. Garmin is new to this blog although it has been on my hit list for a while. Recently it fell almost 20% after Nokia announced it was purchasing Navteq Corp. for $8.1 billion (Garmin was rumored to be looking at this buyout). Buying opportunities everywhere, just have to know where to look.

Dream Works

Bee Movie is beginning to get some buzz! This looks like it could be a huge hit for dream works (DWA). Currently trading at a 52 week high around $34 this stock could go much higher once the buzz about the Bee Movie gets stronger (the apple effect). Jerry Seinfeld returns to the screen as the voice of the main bee along with Renee Zellweger as his sweet honey (sorry it's just too easy). It looks pretty funny and the word around the playground (according to my undercover stock picker nephew) is this going to be the biggest movie of the fall. Look for this stock to go much higher.

Disclosure: going long

TASR

"Don't taser me bro!" The line made famous by the UF student, Andrew Meyer, tasered at a John Kerry Forum. Watching the video is a bit disturbing when you realized they had him handcuffed when they tasered him.

This recent tasering has brought the use of nonlethal weapons to the forefront and since this in a stock blog and not a political platform I will take a quick look at TASR. Taser International, Inc. produces tasers and other nonlethal devices for law enforcement, military, correctional facilities, and Americans looking to fry someone. Taser recently released three new products one of which you can shout from a 12gauge shotgun (picture above).

The stock has been on a run recently gaining another 4% today. Currently trading around $17 TASR looks prime to go higher.

The UF situation is unfortunately not an isolated incident. TASR has had many lawsuits filed against them for producing the weapons most of which have been dismised. If you live under a rock here is the video from UF.

10% Correction! What a Joke

The analysts were screaming for a 10% correction a few months ago and they got it. Two months later we are back over 14,000 and the bulls charge on. I guess the speculators came out of the market when we hit 14k earlier this year and wanted to get back in on the low, so they talked down housing until the market could not take it any more. With no decline in May they were looking for a correction and they got it. This market is strong in my opinion but it is amazing the power of momentum and media.

Back to the Daily Blog

Guess who's back, back again. Sorry for the laps in blog posts. Life can get really crazy. Back in school getting an MBA. Should be challenging but stimulating.

Some really interesting movements in the market recently. Tech stocks have been moving nicely and financials are recovering. Housing stocks are still getting nailed but most investors are just ignoring the obvious. Sold some positions in Goldman Sachs and Adobe yesterday with double digit gains in both. Looking for some new stocks. Thinking tech or natural resources.