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The 'experts' estimate that there is over $3 trillion sitting in Japanese banks just waiting for the smoke to clear...
At some point the markets will fly again, but we need the fear to subside and a small catalyst...
I'm thinking either the Fed rate cut next week or the election results will be the trigger.
DJ
What do you folks think of the downgrades? and price drop? Is this warranted? or just games being played?
I think MRVL should hit their numbers this Qtr. I guess the guidance will be the key, but in the past this stock seems to have a mind of its own.
What do you think?
JMHO,
DJ
2 million Palm Centro's should add to MRVL's bottom line...
These are the Xscale 312Mhz... I think these (PA270) have already been moved to TSMC for production. Most analysts had written Palm off so I'm not sure if these sales are estimated in this Qtrs numbers for MRVL. Probably at good GM levels too!
http://blogs.barrons.com/techtraderdaily/2008/07/29/palm-shares-jump-on-strong-centro-sales/
Thanks,
DJ
Apple buying PA Semi...
This is a very interesting play for Apple. I don't think they want to get into the "chip" business, but with the number of devices they produce, there is a potential saving by eliminating the chip "middle-men" as well as having a custom design specific to their needs. They would probably outsource the manufacturing.
http://blogs.computerworld.com/apple_buys_p_a_semi
I agree part of it is a confidence/perception issue, but at the current time, I would not underestimate the irrational actions of the shareholders and investors of/with LEH and others.
People are scared and are just pulling out of these companies, which will destroy their balance sheets and business models. I don't think this is the end. Even the companies that shouldn't have a problem will see a ton of pressure due to these actions. I expect to see more deals and buyouts before this is over. JPM, C, GS, and the other big boys are going to get some sweet deals to clean up this mess before it is all over. I think at some point we need to start looking at the solid companies in the financial sector and start making some investments there.
DJ
Rumor has it, they will get to keep the BIG bonuses they just got paid. It probably won't make up for the shares they had, but a nice parting gift. They will probably get millions in consulting fees to stay on during the transition too.
I hear the value of their property is worth at least $10/share. I guess no one else would want to put the remaining risk on to their balance sheet.
I think LEH is on deck... Let's hope they do better than BSC.
Article about Hedge Funds / Margin Calls and Liquidation from Bloomberg
This seems to be the same issue(s) S2 is discussing in his last update. My topic for discussion is could this cause a collapse in the Hedge Fund industry? and wouldn't this prolong any rise in the markets if the Hedge Funds cannot secure capital to get back into the markets? I've got to think that Investor capital is sitting on the sidelines not going into the Funds? Especially with all the losses they are taking from the margin calls?
Hedge Funds Reel From Margin Calls Even on Treasuries (Update1)
By Tom Cahill and Katherine Burton
March 10 (Bloomberg) -- The hedge-fund industry is reeling from its worst crisis in a decade as banks are now demanding more money pledged to support outstanding loans even when the investment is backed by the full faith and credit of the United States.
Since Feb. 15, at least six hedge funds, totaling more than $5.4 billion, have been forced to liquidate or sell holdings because their lenders -- staggered by almost $190 billion of asset writedowns and credit losses caused by the collapse of the subprime-mortgage market -- raised borrowing rates by as much as 10-fold with new claims for extra collateral.
While lenders are most unsettled by credit consisting of real estate and consumer debt, bankers are now attempting to raise the rates they charge on Treasuries, considered the world's safest securities, because of the price fluctuations in the bond market.
``If you have leverage, you're stuffed,'' said Alex Allen, chief investment officer of London-based Eddington Capital Management Ltd., which has $195 million invested in hedge funds for clients. He likens the crisis to a bank panic turned upside down with bankers, not depositors, concerned they won't get their money back.
The lending crackdown is the worst to hit the $1.9 trillion hedge-fund industry since Russia's debt default in 1998 roiled global credit markets and required the U.S. Federal Reserve to pressure the securities industry to arrange a $3.6 billion bailout of Greenwich, Connecticut-based Long-Term Capital Management LP. Today, hedge funds are being forced to sell assets to meet banks' margin calls, resulting in the dissolution of the funds.
``There has to be more in the next weeks,'' Allen said. ``There are people who have been hanging on by their fingernails who can't hold on much, much longer.''
`Mercy of Counterparties'
Ivan Ross, founder of Westport, Connecticut-based hedge fund Tequesta Capital Advisors, received a call from his bankers on Feb. 22 demanding he put up more money or risk losing his loans. Ross was unable to meet the margin call as the market for mortgage- backed debt seized up, preventing him from selling securities to raise the cash. Four days later, lenders liquidated his $150 million fund.
``Because it's impossible in this environment to move among dealers, you're at the mercy of counterparties,'' said the 45-year- old Ross, who has managed hedge funds for 13 years, including a stint handling mortgage-backed debt for billionaire George Soros. ``To the extent they want to shut you down, they can.''
The demise of Tequesta revealed the deathtrap for hedge funds caught in the credit maelstrom of banks selling mortgage-backed bonds as fast as they can while demanding more collateral from clients who use the securities to back loans.
Carlyle Fund
On Feb. 24, London-based Peloton Partners LLP gave up a ``night and day'' effort to stave off demands from banks, including Goldman Sachs Group Inc. and UBS AG, for as much as 25 percent collateral for securities that once required 10 percent, according to investors in the fund. Peloton, run by former Goldman partners Ron Beller and Geoff Grant, liquidated the $1.8 billion ABS Fund, its largest.
The same day, about 5,000 miles (7,770 kilometers) away in Santa Fe, New Mexico, JPMorgan Chase & Co. told Thornburg Mortgage Inc. that it had defaulted on a $320 million loan because it couldn't meet a $28 million margin call, according to U.S. regulatory filings.
Thornburg, the home lender that lost 93 percent of its market value in the past year, was near collapse March 7 after it failed to meet $610 million of margin calls. Chief Executive Officer Larry Goldstone said in a statement the company fell victim to a ``panic that has gripped the mortgage financing industry.''
Repo Agreements
Carlyle Capital Corp., the debt-investment fund started by private-equity firm Carlyle Group of Washington, was suspended from trading in Amsterdam on March 7 after it couldn't meet margin calls, and its banks seized and sold assets.
``Banks are reducing exposure anywhere they can and the shortest way to do that is to cut leverage,'' said John Godden, chief executive officer of London-based hedge-fund consultant IGS AIS LLP.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
The managers that trade fixed-income securities generally borrow money through repurchase agreements, or repos. In a repo, the security itself is used as collateral, just as a homeowner puts up the house as collateral for a mortgage.
Collateral `Haircuts'
Banks usually limit their risk on repos by lending less than the value of the securities used as collateral. Tequesta was able to borrow $95 on $100 worth of AAA rated jumbo prime mortgages in early 2007, meaning the bank took a $5, or 5 percent so-called haircut. By last month, the amount required had risen to as much as 30 percent, Ross said. Jumbo mortgages are loans of more than $417,000, typically used to finance more expensive homes.
The losses started in mid-2007, when prices of subprime loans, those to homeowners with bad credit histories, started tumbling because of a surge in delinquencies. The contagion spread to other credit markets, including bonds backed by student loans and credit cards and now mortgages backed by federal agencies, which have an implied guarantee from the U.S. government.
Prices keep falling, with yields on mortgage-backed debt issued by agencies such as Fannie Mae rising last week to the highest level relative to U.S. Treasuries since 1986. Costs to protect corporate bonds from default are close to a record high.
Under such circumstances, lenders have no choice but to ask clients to put up more cash. For AAA rated residential mortgage backed securities, banks have raised haircuts 10-fold in the past year to 20 percent, according to estimates from Citigroup credit analyst Hans Peter Lorenzen in London.
Treasury Swings
On AAA asset-backed securities, banks are demanding a 15 percent haircut, up from 3 percent last summer. Corporate bond haircuts have gone to 10 percent from 5 percent, bankers said.
At least one bank has raised Treasury haircuts, which range from 0.25 percent to 3 percent, depending on the length of the loan and the creditworthiness of the borrower, said bankers, who declined to be identified. They said they wouldn't be surprised if the practice becomes more widespread, not because they expect the U.S. government to default, but rather because there have been bigger price swings in the Treasury market, which affects value.
Some banks may have been late to raise haircuts for their biggest hedge funds because they are lucrative clients, said Jochen Felsenheimer, head of credit strategy at Milan-based UniCredit SpA, Italy's biggest bank.
``Until now, hedge funds have been the big winners of the crisis and this could be as well due to banks not having yet drawn down their margin,'' Felsenheimer said.
Survival of Fittest
Carlyle said in a March 6 statement that margin prices requested for securities weren't ``representative of the underlying recoverable value'' of its securities. Lenders started to liquidate its portfolio of $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac.
``It's not a question of prime brokers deciding which firms live and which don't,'' said Odi Lahav, head of the European Alternate Investment Group at Moody's Investors Service in London. ``They're trying to manage their own risk. There's a Darwinian aspect to survivorship in this industry.''
Some managers set themselves up for a stumble by taking on too much leverage and not anticipating that terms could change, said Christopher Cruden, CEO of Lugano, Switzerland-based Insch Capital Management, which oversees $150 million for clients.
``If you're going to dance with the devil, there comes a time when your toes are going to be stepped on,'' Cruden said. ``Prime brokers are there to do business, not be your friend.''
To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net; Katherine Burton in New York at kburton@bloomberg.net
Last Updated: March 10, 2008 05:47 ED
http://www.bloomberg.com/apps/news?pid=20601109&sid=aqcXY9R7AbkY&refer=home
Does anyone know what impact 401k investors are creating by modifying their allocations (both current and future)? Is there even a way to figure this out? Maybe the MF expense ratios?
In my circle, a lot of people moved out of stocks and into fixed interest or bonds over the last year. Many became aware of this from the last market slowdown.
I'm just wondering if this aided in the rapid decent in the market and if it will aid in the future rise when things stabilize?
DJ
Yeah... In 3 years you will have run up $75K in credit card debt and will need 5 yrs to pay it off while drinking tap water and watching cable (thank God for ESPN) sitting in your studio appartment at $3500 a month :o)
...and finally when you see the light of day, and get to step out of your apartment again, you'll meet someone, get hitched have a couple of munchins, and be $1 million in debt with a projected retirement age of 125!!!
Just ask the rest of the board they'll set you straight!
Now go have some fun!!!!
DJ
Waterloo / Alero,
My 2 cents for what they are worth...
Have "big" fun for a couple years (2-3 not too many more though).
NYC has a world of opportunities and experiences (but it is expensive!). Take advantage of these while you are young.
I agree with the 1/3 (maybe up to 2/5) housing expense ratio. Always take the "free" 401k money and even sock away a couple more percentage points if possible, but otherwise try to do as many of the things you have dreamed about while you have this opportunity and a few dollars.
If you do choose NYC, north NJ has some locations (Hoboken is a young <30 party town) that works well for NYC jobs and will save you a few pennies on living and beer.
Good Luck!!
DJ
Apple COO Cook Reportedly Confirms Forecast For 10 Million iPhone Sales In 2008; Stock Jumps After Hours
February 27, 2008, 5:33 pm
Apple (AAPL) shares are making a nice move after hours, apparently in response to a talk COO Tim Cook gave a little while ago at the Goldman Sachs tech conference in Las Vegas. I’m trying to track down a transcript or a playback; no luck so far. However, the talk was covered by live by MacDailyNews, which will have to do for now.
(A spokesman for Apple tells me that a playback should be on the Apple IR web site soon; I will add a link once they have it live.)
A few tidbits from the MacDailyNews account:
* He was bullish on Mac: “huge headroom,” iPhone: “enormous potential,” iPod: “transforming into first mobile platform” with the Touch, and AppleTV “potential exists for enormous opportunity.”
* Lower price on Shuffle should help sales in emerging markets.
* To Apple, iPod does not feel like a saturated market.
* On track for 10 million iPhones in 2008.
* iPhone unlocking shows pent-up worldwide demand.
* Did not rule out selling unlocked iPhones; will roll out in more markets.
In after hours trading, Apple is up $4.54, or 3.7%, to $127.50; the stock was up $3.81 in the regular session.
http://blogs.barrons.com/techtraderdaily/2008/02/27/apple-coo-cook-reportedly-confirms-forecast-for-10-million-iphone-sales-in-2008-stock-jumps-after-hours/
Could the RIMM forecast be pulling MRVL up with it?
Is RIMM a good indicator for MRVL earnings? (10% customer) I still don't buy a takeover/sale of this company at this time (or valuation). Unfortunately, we still need to get the GM number higher for others to take notice.
I agree with whoever said that we are stuck until the big money comes into play. Maybe that will happen when the GM breaks 50.
DJ
Net try this list...
It lists by exchange so you will need to change that field. There are a couple of other selections as well.
Have fun!
DJ
http://www.marketwatch.com/tools/marketsummary/screener.asp?exchange=15&view=4&lookup=Look+Up
RVBD just got a push from Cramer tonight (1/15) on Mad Money. It will be interesting to see how it reacts tomorrow.
DJ
Investors Pulling Billions Out Of Mutual Funds, ETFs This Month
Maybe this accounts for the recent market selloff? Is this a case where talk of a recession may actually cause it to happen?
Food for thought. Where are they putting this cash???
DJ
Posted By:Bob Pisani
Topics:Mutual Funds | Investment Strategy | Stock Market
A couple of quick notes:
1) TrimTabs notes that investors took $10 billion out of U.S. equity funds in the first four trading days of 2008, and an additional $12.1 billion out of U.S. equity ETFs. That is a lot. How much? The worst month for outflows was May of last year, when $8.4 billion was pulled out. That's $8.4 billion FOR THE WHOLE MONTH; $22.1 billion was taken out the first four days of 2008.
Of course, such extreme pessimism often indicates at least short-term trading bottoms.
2) All sorts of indicators of a technical sort have been going off in the last few days. Richard Russell at Dow Theory Letter told me this morning that a bear market was reconfirmed as the Dow Industrials broke below their November 21 lows. But there are others as well that have flashed sell signals.
http://www.cnbc.com/id/22571545/site/14081545
Easy, you just announce the layoffs but never execute them!
The street loves to hear about layoffs!
Then during the CC, after reporting blowout numbers for rev, eps, and gm, you tell everyone that biz grew so much that you had to postpone the layoffs for now. (not closing the door on the possibility of them happening in the future)
...but there's a catch. You need to have a savvy PR dept, CFO and CEO! (sorry MRVL's screwed)
(don't laugh, I read a similar strategy this morning)
OK, somebody wake me up now!
DJ
BofA downgrades semis (but not MRVL)
Any thoughts on what this does to MRVL? I'm worried the hedge funds will have a field day with this. I can't even guess what will happen anymore with this stock. Holding my breath...
DJ
http://biz.yahoo.com/ap/080102/chips_ahead_of_the_bell.html?.v=1
S2, Is the inverse then true? Is this a good time for small individual investors to be looking for bargains / bottom feeding? or is it still too risky?
I hope everyone had a great Christmas! / Holiday!
Does anyone here follow ITWO? I'm currently in the house of pain with it. I think newbie is from TX, any thoughts/insights on this Dallas POS?
Thanks,
DJ
Look to Richardson to be VP on almost any of the DEM's front runner's ticket. He should pull most of the Latino and Native American vote, but it will be very interesting to see who he backs when he ends his presidential run.
I think he is a smart guy, so look for him to pull out early and boost someone else's campaign. I don't know who that will be but if I had to bet, that person will get the DEM nod for President.
I feel like I'm watching the final season of the West Wing all over again... This time for real.
DJ
Qualcomm raises profit forecast.
...now we just need MRVL to do the same!
WASHINGTON (MarketWatch) -- Qualcomm Inc. revised higher its financial forecast for the first quarter Thursday, citing strong shipments of computer chips used to run mobile phones.
http://www.marketwatch.com/news/story/qualcomm-raises-forecast-first-quarter-profit/story.aspx?guid=%7B8AE50FF2%2DB385%2D423A%2D8E97%2D51CA58306916%7D&dist=hplatest
Can options be exercised during an SEC investigation?
If so... and if the options reset on 12/12 as Lakers pointed out, I would think we might see some exercising in the near future!
Look to Sehat to lead followed by some of the new guys with the company. This is an easy way for mgt to send some signals to the street and make some money themselves. If not, Sehat should purchase a few from the open market. That would send a nice message as well!
The timing would be ideal as we are pretty much in the middle of the QTR.
...I guess I'm just wishing again.
DJ
I guess I was just wishing!
The market really wanted .50 too!
I guess we'll see....
DJ
PS MRVL seems to be holding up...
I just grabbed a couple FEB08 15 C for 1.15 on a gamble.
jb / plash,
I think .25 is in the bag (.5 for the discount), but my gut is beginning to think that .50 is a real possibility.
I'm sure it will be a split vote. The key will be if BB can convince the others that the Paulson's plan will not have a big impact in what is happening in the housing/credit market.
I hate the thought of high inflation, but the only fix I see is to get interest rates low enough (3.5-3.0 FF) where housing prices stabilize and people can afford to stay in their house or start buying investment property.
I believe we will still have a major economic slowdown, if we try to let this shake out on it own. I see it as a downward spiral taking consumer confidence/spending with it. The FED has to keep the economy expanding or look out, stagflation here we come!
IMO,
DJ
Thanks alero. After I decide, I'll post where I'm leaning towards and hopefully someone here can give me the +/-s of the platform like you did.
Have a great weekend!
DJ
alero, are you looking at any other brokers?
I was thinking about IB too, but I want to review other options as well. I currently use TD Ameritrade, but the fees are a little high for the small trades I'm thinking about playing.
Is anyone using or has tried this speedtrader.com that keeps popping as an ad here on investorshub? any other low cost brokers out there?
TIA,
DJ
The SEC could still take Welli out in hand-cuffs.
I'm sure the MMs would have a field day with that.
It seems like we have been waiting forever since the Wells notice came out. Does anybody have an update?
I'm hoping we just get the standard "no-harm" / "no-foul", just pay us $10 million and we'll go away letter. I would be nice to close the book with the SEC. I wonder is this is affecting the search for a CFO?
DJ
...but will it leak before or after DEC07 Options EX? JAN08?
the next ER/CC?
Based on the past, I doubt we will get any info from AAPL, but there is a chance that RIMM might let the details/spcs slip.
As to MRVLs power saving technology, it looks like TXN has just released the same type of device/chip as MRVL (can you say patent litigation??).
Lakers, If you know the workings on these products, do you know the difference? Is this a competing product? From the PRs, it looks like the MRVL chip is for small/smaller power supply(s) while the TXN is geared toward the bigger devices?
You heard SS in the CC... There are a billion devices shipped per year that could use this technology!!! I don't know the ASP, but the potential here looks awesome.
TIA,
DJ
http://www.informationweek.com/news/showArticle.jhtml?articleID=204203521&cid=nl_IWK_daily
Good Luck S2! I hope you have a speedy recovery!
John, Are you still buying the JAN08 $15 calls? or something else?
I also like S2's call to short (the DEC07 $15 puts?)
Are you in the camp that the SP will pin 17.50 again for DEC07 OE? Or do you think this next wave up will push thru the 17.50 area?
TIA,
DJ
I think that is what I heard. Also 30% coming out of TSMC already.
It looks like Rashkin will be better prepared this time. Just look at how he worded GM 48.3%.
"...Non-GAAP gross margin for the three months ended October 27, 2007, which included a portion of application and communication processor products at full purchase cost from Intel, was 48.3% compared to non-GAAP gross profit for the three months ended October 28, 2006 of 51.3%."
...maybe that's why they still call them Intel XScale processors, because Intel is still making ALL the profit off of them. LOL
http://www.marvell.com/press/pressNewsDisplay.do?releaseID=933
I was looking at those (Dec17.50s) last night and am wondering if one of those big hedge funds is suckering us all in? The way they have played pin the stock price @ OE is making me nervous.
I keep looking at all the data and keep coming to the conclusion that there is very little down side left for this stock, but I keep hearing that fumbling/bumbling CC from last qtr and know that mgt can kill us again with a bad presentation.
I guess I'll just have to hold my breath until 4:45
Do you think tech will still lead this next rally? or something else? IMO, until the economy really falls off a cliff, I think most of the tech companies will make their numbers, but it will be hard to guess the message(s) that will be sent during the ER/CCs.
I guess we will know in a couple of days if the SOX can really hold or reverse from this 402/Aug level?
...as to MRVL, I just hope they have been throwing this baby out with the bath water. I thought that we would be around 18 by now, but the bigger market has been steering the ship. I hope mgt can deliver tomorrow and clearly explain where they are going with this company.
Thanks,
DJ
Alero, Good Luck.
Sorry I didn't get back to you sooner. If you do head downtown, check out the Golden Nugget, the Horseshoe, or the 4 Queens.
In either case, have fun!
DJ
Don't forget ACES! Always split ACES too!
...if surrender is available you may want to surrender those 8's.
If you're looking for cheaper play, take a ride downtown to some of the older casinos where you can play for less!
Since we can't beat "them", we might as well join them!
...any tool we can to make some $$$.
I'm learning a lot here! I kind of think of it as "street" smarts.
Thanks S2,
DJ
Does anyone know whats up with TXN? <eom>
Yep another 120,000 $17.50 options set to expire worthless.
Johnberchick should hit paydirt again here. I think he had a short spread going on these that should payoff.
...but I think this should be the last 17.50 pin we get. It's beginning to look like the new pin strategy (Jan) is setting up @ 20.
I still think we trail up to 18.25 after OE and before ER. Especially if HP and TGT don't have any bad news.
Hopefully management delivered solid earnings and we get a DECENT conf. call!
Good Luck All,
DJ
My 2 cents on earnings...
cbs, I pretty much agree with your calculations and assessment, although, I'm still not sure about the GM this qtr. (No worse than last qtr, and long term, it will be fine IMO).
I believe inthedark is correct that the overall market will be a big question, but with less then 3 weeks until earnings I'm not sure anything will be different (or really answered) from today.
CSCOs comments were a major catalyst to what happened this week and most were due to the financial sector and more importantly related to the business economy (vs consumer). I don't have the facts but I'm guessing that CSCO derives 70%+ from the business market while MRVL is probably 50% business and maybe 10% financial???
Put this all together and I think (IMO), that we stay flat (+/- .25) into options expiration and after that move just over $18 going into the earnings call and close to $19 after the call.
HP's ER on 11/19 and TGT's on 11/20 could shed some light on the economy for tech and retail so I hope we DON'T hear anything bad from either these two.
...at the end of the day, I think this ER call will be better in every aspect compared to the last one (giving us the slight boost in SP) but, we're still at the mercy of the overall economy going forward.
Thanks,
DJ
ckg, It looks like he resigned/retired that day as well. Maybe that had something to do with it? It almost looks like he wanted a "clean" break from MRVL. I think this was all of his available shares and options.
With the SEC investigation on-going maybe this "looks" the best for him and the company? (He still made a nice profit) I'm sure the SEC would be all over them if the SP pops and then he executed?
Who knows?...