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I thought I was the only person in the world who managed to do that (and it took a great deal of perseverance, I might add)!
hehe. well i do remember throwing it across the room at least twice. but then i just said to myself, hey, this is supposed to be fun ...
re google ipo
i dunno what youj're seeing, but everything i read is talking down the ipo. for example, this from forbes, which is downright hostile:
IPO Outlook
Gagging On Google's IPO
Scott Reeves, 08.06.04, 6:00 AM ET
NEW YORK - Just as some people are famous for being famous, Google's planned IPO is said to be hot because, well, it's hot.
Don't believe it. Hold on to your money or buy Microsoft (nasdaq: MSFT - news - people ), a proven winner. Don't go gaga for Google.
Interest in the IPO is driven by something close to mob psychology. The Dutch auction method of allocating Google's shares is intended to eliminate the wild first-day gains seen during the 1990s tech bubble. But keep in mind that the crazies are out, and Google's stock may climb as much as 40% in early trading because some people don't understand the Dutch auction and will gleefully pay for their ignorance. Selling is the only way to pocket the premium, but selling too quickly is a recipe for volatility.
If the shares don't take off in early trading, "winner's curse" may kick in as successful bidders conclude there is little demand for the stock above or equal to the initial public offering price. If this happens, some winning bidders may conclude that they overpaid for the stock and may seek to dump their shares to limit their losses should the price decline in the future. In that case, unsuccessful bidders with an ounce of market savvy will wait for the price to fall before jumping in. This could result in a significant decline in the value of the shares from the offer price.
"Google is something people use every day," says Tom Taulli, author of Investing in IPOs and co-founder of CurrentOfferings.com. "So, many people think it must be a good investment, right? Google has a small float subject to the impact of hedge funds and short-selling. The stock's performance will resemble an erratic EKG."
So why not launch Google's IPO the old-fashioned way? Price the shares to sell at, say, $20 to $25 each, and watch the fireworks. This is where California egalitarian claptrap kicks in, even in Silicon Valley, where entrepreneurs weaned on venture capital should know better.
The Dutch auction is intended to give individual investors a chance to get shares at a good price. Right. Google's shares are pegged at a mere $108 to $135 each, and only those who were dropped on their head at birth will plunk down that kind of cash for an IPO.
Google's the top search engine, but that's all it is. The company is experimenting with e-mail that may include ads pegged to keywords. That's certain to raise questions about privacy. It may tout photos, but Microsoft and Yahoo! (nasdaq: YHOO - news - people ) are already there. Despite Google's strong earnings, investors may soon ask, Where's the growth?
Keep in mind that Netscape was once a hot IPO, and the company no longer exists. It couldn't move beyond being a Wall Street darling and development bottlenecks allowed the competition to crush it. Google is growing rapidly and faces a new challenge--management, not technology.
Rival Yahoo! has done a better job diversifying with news, sports, personals, travel, jobs, online shopping and other whizzes and whirrs. Investors who want to include a search engine in their portfolio might consider it, lofty valuation and all.
Bill Gates presents himself as a super-nerd, but he's Alexander the Great looking for more empires to conquer. It's been a while since Microsoft crushed WordPerfect and pounded Novell (nasdaq: NOVL - news - people ). All that cash suggests the software giant is ready for fisticuffs, despite the challenge from Linux.
Yet Microsoft's stock recently fetched $28.29 per share, bouncing between $24.01 and $30 in the last 52 weeks. No doubt, the company is looking for something to drive the price--and that something may be search technology. Microsoft rules the desktop computer, and, assuming the antitrust dingbats in Washington aren't unusually stupid, it may be able to uses its strength to muscle into the search engine business. In the meantime, Microsoft offers something Google doesn't even contemplate: dividends.
Or take a look at Intel (nasdaq: INTC - news - people ). Its stock recently traded at $24.90 per share.
Google's planned 24.6 million share IPO includes about 10.5 million shares offered by current stockholders, including co-founders Larry Page and Sergy Brin. Why put your money in their pockets? It's a lot of jingle, too--Page plans to sell 964,830 shares, and Brin plans to unload 962,226.
The company's recent disclosure that it may have violated U.S., federal and state law by issuing about 23 million shares to consultants, as well as current and former employees, adds another layer of risk to the IPO. That's a huge number of shares--not the kind of thing the janitor finds stuffed behind a filing cabinet. The obvious question is: How can a good company be so inept?
Technological changes are swift and brutal on the Internet. There's no immediate apocalypse in the wings for Google, but Microsoft is circling.
The Dutch auction will screw up the dynamics of Google's IPO. Many individual investors don't understand how the auction works and know only that they want Google's shares. Those who survive may learn something.
Terrific company. Nutty deal. The shrewd investor will wish Google well but say, "Not with my money."
An Update From Last Week
On Wednesday, Nanosys withdrew its IPO due to "adverse market conditions." As I said in last week's column (see: "Nanosys: The Giant Dwarf"), the deal was generating a lot of buzz, but it wasn't necessarily a good investment. The deal underscored the IPO market's pioneering spirit, but as Nanosys found out, it's tough to be the leading edge of technology.
wow, that's kinda like tyrone slothrop's penis and the v2's falling on london in gravity's rainbow.
indeed. damn cake-eaters.
this lists omits: ucpix. 125% inverse small/mid cap
whoa! sounds like ur talkin' about jim cramer.
on a less perverse topic: google news carries this story:
More investor doubts cloud Google IPO
Daily Times, Pakistan - 2 hours ago
SEATTLE: Concern over Google Inc.’s growth prospects, pricey market value and a complex IPO process has intensified after the Web’s most popular search ...
the daily times of pakistan is reporting on the google ipo? hunh?
"NVDA not 11 (edit=14.6?)"
perhaps you're not watching a.h. after they announced their big miss ... ? 11.35
"... expect retailers to warn early."
i've been watching jcp alot lately. interesting behavior yesterday on the news of their sale (like 7% intraday move, up and down), but i'm betting that was a double top ...
now sbux ... i wanna see that go to 38 fast
"Can't go wrong in the medical area. It will be the next boom. Very large segment of the population getting older."
perhaps. but the "can't go wrong" is a little strong: demand, sure. but you're forgetting how all of this will cause politicians to meddle more. a boon for candian hospitals, i bet.
"The emphasis to me would be more toward the Olympics and maybe NY. closer to the convention,just a WAG, hopefully, none of it materializes."
well, though this is "no politics", i more suspect it has something to do with bush's new august offensive in the election race.
Holland Tunnel Closing To Inbound Truck Traffic
Commercial Vehicles Should Use Lincoln Tunnel, George Washington Bridge
POSTED: 10:30 pm EDT August 1, 2004
UPDATED: 10:53 pm EDT August 1, 2004
JERSEY CITY, N.J. -- The Holland Tunnel is expected to close to commercial traffic heading to New York at 12:01 a.m. Monday, officials said Sunday evening.
The ban was "correlated to the warning about the downtown financial districts," said Tony Ciavolella, a spokesman for the Port Authority of New York and New Jersey.
He said commercial vehicles should use the Lincoln Tunnel and George Washington Bridge as alternative routes.
The ban would definitely affect trucks, said Ciavolella, but it was not immediately clear whether commercial vans would be prohibited.
The ban was not slated to affect vehicles leaving New York City.
No ending date for the ban was set.
"This plan is part of the Port Authority's continuing cooperation with federal, state and local agencies," Ciavolella said.
The Holland Tunnel runs from Jersey City, N.J., to lower Manhattan, near where many financial institutions are based
"I smell desperation of the top .005% of wealth. LOL!"
hmm. but who will a VAT be popular with? if we're talking about the same amount of money, just redistributing how its collected, then surely those with the least income relative to expenses - e.g. seniors and retirees - can't like this.
and as for the growth angle ... okay, i'm not an economist. but i hear VAT and i think europe. hardly a capitalist growth story.
dunno. again seems a way to shift the tax burden further onto the middle class, but ... i haven't read all the arguments pro and con, so who knows. me, i buy very little, so i would like it
well, probably. does a vat apply to gas etc?
what happens to corporate taxes?
"where in the article do you read that retirement plans would be eliminated?"
nowhere. though, on the face of it, what's the point of an ira, 401k, 403a, 529 etc if the irs is eliminated? with only a VAT, stuffing money into an IRA seems indistiguishable from putting it into the bank or a brokerage account ... and with fewer restrictions.
whoa. the end of ira's and 401k's and tax returns ...
XXXXX DRUDGE REPORT XXXXX SUN AUG 01, 2004 21:01:25 ET XXXXX
REPUBLICANS PLAN PUSH FOR ELIMINATION OF IRS
**Exclusive**
A domestic centerpiece of the Bush/GOP agenda for a second Bush term is getting rid of the Internal Revenue Service, the DRUDGE REPORT has learned.
The Speaker of the House will push for replacing the nation's current tax system with a national sales tax or a value added tax, Hill sources tell DRUDGE.
"People ask me if I’m really calling for the elimination of the IRS, and I say I think that’s a great thing to do for future generations of Americans," Speaker of the House Dennis Hastert explains in his new book, to be released on Wednesday.
"Pushing reform legislation will be difficult. Change of any sort seldom comes easy. But these changes are critical to our economic vitality and our economic security abroad," Hastert declares in SPEAKER: LESSONS FROM FORTY YEARS IN COACHING AND POLITICS.
"“If you own property, stock, or, say, one hundred acres of farmland and tax time is approaching, you don’t want to make a mistake, so you’re almost obliged to go to a certified public accountant, tax preparer, or tax attorney to help you file a correct return. That costs a lot of money. Now multiply the amount you have to pay by the total number of people who are in the same boat. You can’t. No one can because precise numbers don’t exist. But we can stipulate that we’re talking about a huge amount. Now consider that a flat tax, national sales tax, or VAT would not only eliminate the need to do this, it could also eliminate the Internal Revenue Service (IRS) itself and make the process of paying taxes much easier."
"By adopting a VAT, sales tax, or some other alternative, we could begin to change productivity. If you can do that, you can change gross national product and start growing the economy. You could double the economy over the next fifteen years. All of a sudden, the problem of what future generations owe in Social Security and Medicare won’t be so daunting anymore. The answer is to grow the economy, and the key to doing that is making sure we have a tax system that attracts capital and builds incentives to keep it here instead of forcing it out to other nations."
Developing...
-----------------------------------------------------------
Filed By Matt Drudge
Reports are moved when circumstances warrant
http://www.drudgereport.com for updates
(c)DRUDGE REPORT 2004
Not for reproduction without permission of the author
"Haven't they ever heard of cutting spending?"
haha! in an election year! i wonder who's gonna run on that platform ...
someone playing around?
GIVN
16.04 $ 1.02 100
16.04 $ 1.01 200
16.04 $ 1 100
16.04 $ 1.01 200
16.03 $ 33.03 200
16.03 $ 33.80 1000
16.02 $ 33.80 500
16.01 $ 33.80 500
hmm, not just shaeffer. more paranoia from martin goldberg.
Tonight:
It was interesting that yesterday, the QQQ shares traded more than 150 million shares, while the full Nasdaq index traded only 1.8 billion. The last time QQQ index shares traded that much was when the Nasdaq was in similar peril in May. What I suggested may have been happening in the article of a few months ago appears to be happening again!
June 6:
About three weeks ago, it looked as if the Nasdaq was going to break the neckline of a complex head and shoulders pattern to the downside. That would have resulted in technical damage too much for a world of chart watchers to ignore and not act upon by selling. But at the very moment when it appeared as if the Nasdaq was in severe technical peril, an apparent large buyer of the QQQ index stepped in and saved the day. As is usually the case when a head and shoulders neckline is whipsawed, this was followed by a sharp and tradable rally. Tonight I would like to explore this recent trading action in depth. Is there a defensible “conspiracy theory” affecting recent market action?
[...]
schaeffer gets paranoia
Schaeffer on Charts: Isn't It Odd?
Bernie Schaeffer
7/29/2004 12:09 PM ET
http://www.schaeffersresearch.com/c...s.aspx?ID=10704
Much has been made in recent weeks of the fact that the market has this year been trapped in a very narrow trading range. I've commented on this myself, and I've attributed much of it to heavy selling of option premium and its strangling effect on market volatility. I still believe this, but I also believe there may be more at work at the low end of the range than mechanical buying of shares to hedge long put positions by those on the other side of the premium selling trade.
Yesterday morning, the market was greeted with a dollop of unpleasant news, including a tepid durable goods number and an across-the-board downgrade of chip companies by a major firm. But per the chart below of the Diamonds Trust (DIA) - an exchange traded fund that represents the Dow 30 and is priced at about 10 percent of the Dow Jones Industrial Average (DJIA) - we opened very strongly on big volume. Odd.
We then drifted lower till very early in the afternoon, with the DJIA showing a 91-point loss to 9994 at its low. Suddenly, in the midst of typically one of the sleepiest hours of a market session, big volume in the DIA showed up to stem the decline. Odd. And in an odd replication of Monday afternoon's "miracle rally" after a dip below DJIA 10,000, the market exploded to the upside in a magical final hour of trading.
Why do I deem the action at the low end of the trading range to be "odd?"
1. In addition to being keyed to important round-number price levels, the rallies are often initiated at specific "round number" times of the day - most frequently (all times Eastern) at 10:00 a.m., 2:00 p.m., and 3:00 p.m. It's difficult to imagine that such impeccably timed buying is random and diffuse.
2. The volume spikes are most heavily pronounced in the DIA exchange-traded fund. The DIA moves the "headline index" DJIA - the index that the vast majority view as indicative of the health of the market. And the DJIA's relatively modest capitalization (at least compared to the S&P) and its odd price-weighted calculation render it extremely malleable.
3. The buying will often begin at a time when the market is in freefall. It is odd that a rational, profit-motivated buyer would be willing, time and time again, to step up and "catch the falling knife."
4. The buying occurs as part of huge "buy program" operations, which have an immediate and substantial impact on market psychology, as in "let's get out of the way of this freight train." Note the huge spikes yesterday afternoon in the NYSE "net ticks," which spent a good deal of time above the "+1000" level. We've traditionally gone for days at a time without a "+1000" tick reading, but when the buying begins at the low end of the range there will be multiple +1000 tick readings in a very concentrated time period.
Remember the so-called "Greenspan put?" In the late-1990s, investors assumed that Greenspan would always come to the stock market's rescue at critical junctures, so downside risk was given scant consideration. One of the results of the Greenspan put was the market's plunge from the peak of the bubble, as the legions of those who believed in the put panicked on the realization that the market was no longer going to be held together.
And right at this moment, we seem to have a "DJIA 10,000" put, which allows wise-guy trader types to make a quick buck with little risk by stepping up and buying on these pullbacks and which freezes any major selling from the institutional behemoths, who even in own their slow, plodding way can't help but notice the "impregnability" of DJIA 10,000 (see chart below). As a result, many investors are now comfortable in maintaining a much greater exposure to the market than may otherwise be warranted. And when the support breaks - as I believe it ultimately must - a panic market plunge (instead of a much more gentle market decline) is almost guaranteed.
John Q. Investor was painfully fooled in the bubble but he gamely came back for more. If he experiences "déjà vu all over again" in terms of an accelerated market plunge below a bogus "support level," we can forget about him participating in the market for many years to come.
hmm. big volume just came into sbux, to the downside.
of course, you should note that one of the components of the lei/wli's is the dow. meaning only that, using the wli to predict where the market is going involves some dependent variables.
"THE WORLD IS COMING TO AN END"
or the carry trade, at least. though i suppose some of us live in smaller universes than others.
"Now, whammo, MSFT, is to now reward shareholders with a slammo dividend, and you know MSFT can very likely keep this up."
keep this up!? they promised $75B, which is more cash and short term investments than they've accumulated since inception.
dunno, to me it says that they acknowledge that their cash hoarding has been fruitless and future opportunities are limited, at least when compared with the tax breaks that they'll all get now when emptying the coffers.
geez, its still msft after all.
yep. you've borrowed it, so the original owner gets the dividend, and someone has to pay the guy u sold it to for the short.
on the other hand, the dividend doesn't come around until after november, since that's when the vote is.
Global: The World's Biggest Hedge Fund
Stephen Roach (New York)
July 19, 2004
The title belongs to America's Federal Reserve. Not only is the Fed the unquestioned leader in world central banking circles, but the US monetary authority has led the way in setting up the biggest macro trades of modern times. Highlights include Carry Trade I of 1993, the equity bubble of the late 1990s, and now Carry Trade II -- all direct outgrowths of trading strategies implicitly recommended by Greenspan & Co. So far, the world is no worse for the wear. But it's a world that now lives from trade to trade. And with that precarious existence comes the ever-present risk of breakage -- the aftershocks that follow the unwinding of every trade. We have the Federal Reserve to thank for that.
This transformation began in earnest in 1987. As the US equity market surged toward excess that summer, there was deep conviction that downside risks were not to be feared -- that they would be protected by the options strategies of the perfect hedge, "portfolio insurance." The Crash in October unmasked the flaws in that supposition. The Fed responded to this crisis by offering up the unconditional palliative of an open-ended liquidity backstop. Out of that chaos nearly 17 years ago, the dip-buying mindset of a generation of equity investors was borne. In retrospect, the buying opportunity created by the Crash of 1987 was a bargain that no serious investor -- especially the levered hedge fund community -- could afford to miss.
Five years later, financial markets were offered another learning experience. In response to what Fed Chairman Alan Greenspan dubbed "financial headwinds," the Fed slashed its policy rate to 3% in September 1992 and held it there until February 1994. The Fed believed that an unusually steep yield curve was the appropriate antidote for the credit crunch it thought was hobbling economic activity -- an outcome brought about by America's saving and loan crisis and widespread loan losses in the commercial banking system. With the federal funds rate pushed down to the inflation rate, overnight money was essentially "free" in real terms. For a troubled banking system, this was a great opportunity to re-liquefy balance sheets. For the levered hedge fund community, this was another no-brainer -- the only question was where to play the spread. The origins of the modern-day "carry trade" are traceable to this period.
Fast-forward to 2004, and it's déjà vu -- but with several important new twists. First, the financing of the current carry trade is now occurring on much more generous terms; the federal funds rate of 1.25% is fully 200 basis points below the headline CPI inflation rate (3.3% Y-o-Y as of June 2004) -- offering a negative cost of overnight money. The real federal funds rate hasn't been this low for this long since the late 1970s. In effect, levered investors are now being paid to play the yield curve. Second, suffering from a shortfall of income generation in a uniquely jobless recovery, American consumers have turned into the functional equivalent of heavily levered hedge funds -- going deeply into debt to extract purchasing power from their homes (see my 4 June dispatch, "The Mother of All Carry Trades"). Third, the carry trade has now become central to America's twin-deficit financing imperatives; record budget deficits and current account gaps have been funded "painlessly" -- in large part though purchases of dollar-denominated assets by Asian monetary authorities. The yield curve play has turned foreign central banks into hedge funds as well.
The Fed obviously sees its role quite differently. Fixated on inflation control -- yesterday's battle, I must add -- the US central bank pays little heed to excesses that emerge in financial markets. Favoring a reactive over a pro-active approach, the Fed believes it has both the skills and the tools to respond to problems in asset markets as they unfold. In the words of Chairman Greenspan in describing the Fed's conduct as the equity bubble expanded in the late 1990s, "...we chose...to mitigate the fallout when it occurs" (see his January 3, 2004 speech at the Meetings of the American Economics Association, "Risk and Uncertainty in Monetary Policy"). The Fed believes that this approach has been vindicated by the subsequent course of events. In light of America's surprisingly mild post-bubble recession, Greenspan argued (in this same speech) that it is reasonable "...to conclude that our strategy of addressing the bubble's consequences rather than the bubble itself has been successful."
Success at what cost? That is really the ultimate question in all this. To the extent that the Federal Reserve continues to set the stage for one risky macro trade after another, I believe there is great peril in its strategy. Last year's deflation scare was a case in point. As disinflation approached the hallowed ground of price stability, nominal interest rates moved down to rock-bottom levels. But as the risk of "unwelcome disinflation" stoked fears of a Japanese-style deflation, the Fed went into a fire drill that pushed its policy rate perilously close to the zero boundary. Yet another carry trade became a sure thing in this climate. As the risk of deflation receded, the debate turned to the Fed's exit strategy -- the so-called normalization of an extraordinary monetary accommodation. By telegraphing that the ensuing shift in policy would be "measured," the US central bank put financial markets on notice that it will be taking its time in raising interest rates. For those playing the carry trade, time is money.
To date, of course, the Fed has taken but one small step in returning its policy rate toward a more neutral setting. This has done next to nothing to discourage the vast array of carry trades that are still on the books in financial markets. Amy Falls, our global fixed income strategist, argues that most of these levered bets are now almost back to positions prevailing before the Fed's late June move. That's especially the case, in the view of our fixed income team, insofar as most spread products are concerned -- namely mortgage-backed securities, high-yield bonds, emerging market debt, and even investment grade paper. Our European equity strategists, Teun Draaisma and Ben Funnell, make a similar point -- that with sharply negative real short-term interest rates, it takes a lot more than 25 bp of monetary tightening to unwind the carry trade (see their July 13 essay, "The Crowded Carry"). They underscore the weakest link in this daisy chain -- that the risks to the levered community are likely to fall most acutely on banks and consumers, where the need for carry-trade-induced income generation is most acute. That pretty much fits with my own concerns, especially with respect to the over-extended American consumer.
What worries me the most in all this are the mounting systemic risks toward carry trades and the asset bubbles they spawn. To the extent that such trading strategies create artificial demand for assets, a seemingly unending string of bubbles is a distinct possibility. That's precisely what's occurred in recent years -- from equities in the late 1990s, to sovereign bonds, a host of spread products, and now possibly to a global housing bubble (see my 15 July dispatch, "Global Property Bubble?" and the accompanying round-up of worldwide housing market conditions conducted by our global economics team). This profusion of carry trades would not have occurred were it not for the Fed's extraordinary degree of monetary accommodation and the steep yield curve it fostered.
It doesn't have to be this way. Both the Bank of England and the Reserve Bank of Australia have adjusted their policies to take property bubbles into explicit consideration. Moreover, Ottmar Issing of the ECB has publicly stressed the need for central banks to do a much better job in grappling with the linkage between monetary policy and asset markets (see his February 18, 2004, editorial feature in the Wall Street Journal, "Money and Credit"). The Fed, by contrast, remains in denial on this key issue -- refusing to concede that monetary policy must take asset inflation into account.
Unfortunately, the role of the US central bank goes beyond benign neglect. Over the past several years, the Fed actually has been quite aggressive in arguing why excesses are not bad. That was the case when it repeatedly justified the equity bubble on the basis of the so-called productivity renaissance of the New Economy. It has also been the case when the Fed has argued that America is not suffering from a debt problem, nor a twin deficit financing constraint. By serving as a cheerleader when financial markets are going to excess, the Fed is losing its credibility as an objective observer. It is no longer the tough guy that relishes the role of "taking away the punchbowl just when the party gets going" -- to paraphrase the legendary mantra of former Fed Chairman William McChesney Martin. By condoning excesses, the Fed, in effect, has become a stakeholder in the carry trades it spawns. Investors, speculators, income-short consumers, and financial intermediaries couldn't ask for more. It's the ultimate moral hazard play that that has turned the world into one gigantic hedge fund.
http://www.morganstanley.com/GEFdat...040719-mon.html
marc faber stompin' some bools again ...
AN EVENTUAL INEVITABLE CRISIS
by Marc Faber
Whereas the bulls are convinced that the market will rise strongly for the rest of the year on the back of what they perceive to be "great economic news", the bears feel that the market is on the edge of a collapse.
There is a third possibility, which would be particularly unfavorable for the hedge fund industry. The markets could enter a long and tedious trading range. I am leaning towards the view that, for most markets, including developed and emerging stock markets, as well as for bonds and commodities, we saw the highs for this year in the January to March period.
From here on, I think that additional gains will be minimal and that the rewards will not compare favorably to the eventual downside risk. But, as was the case in Asia where most markets peaked out between 1990 and 1994, and were then followed by a trading range with a downward bias until the real collapse occurred in 1997/98 (a full seven years after most markets had topped out, and the final collapse manifesting itself in a devastating asset and currency slump), it is also possible that U.S. asset prices (homes and stocks) can continue to hold on to their gains for some time. It's even possible that they make marginal new highs given the monetary conditions currently in place and the willingness of the U.S. monetary authorities to take extraordinary measures to prevent asset deflation from spreading.
Still, I believe that, as John MacKay stated, "legislators are as powerless to abrogate moral and economic laws as they are to abrogate physical laws". Therefore, I am convinced that only a very serious crisis can correct some of the blatant imbalances that our global economic system has created. In other words, what we are dealing with at present is a battle between the economic policymakers and the "market." Guess which side I would bet on in the final battle!
So, at the very least, investors should gradually take out some insurance against what, in my opinion, is an eventual inevitable crisis, by being well diversified in every aspect of the investment universe.
The reason I am advocating diversification is that when quoting Leo Tolstoy's description of the situation in Moscow when Napoleon reached the outskirts of the city, both inflationists and deflationists were right at the same time. Naturally, I am leaning towards an overweight position in hard assets over paper money and financial assets, knowing full well that, in a crisis, hard assets might also decline in value (except possibly for gold and other precious metals), but likely less so than financial assets.
Being diversified in terms of the "investment universe" also means holding assets in different jurisdictions. I have repeatedly advised our American readers to hold accounts outside the U.S. I am well aware that this has become increasingly difficult, and, under pressure from the U.S. authorities, some Swiss banks are extremely reluctant to accept such accounts. (If they do accept such accounts, they must not give U.S. residents advice by telephone, fax or e-mail; therefore, almost full discretion or periodic visits may be advisable.)
Singapore is, however, a viable and safe alternative to Switzerland. Still, the fact that the U.S. authorities have made the opening of overseas accounts so difficult should serve as a warning signal of things to come - that is, foreign exchange controls.
In terms of financial assets, I would overweight Asian equities, due to their lower valuations when compared to U.S. equities and the relatively favorable macroeconomic conditions in Asia (current account surpluses and undervalued currencies).
But, as I have pointed out before, whereas Asia may eventually de-couple economically from the U.S. business cycle, there is still a very close financial connectivity in place, with the result that at present the Asian markets track the movement of the S&P rather closely. Moreover, the overheated Chinese economy will have to slow down considerably at some point and could lead to some disappointments among the perennially bullish Asian investors.
In terms of commodities, I would be careful about buying markets where there are large speculative positions outstanding. In a recent issue of the outstanding Global Equity Strategist report, James Montien of Dresdner Kleinwort Wasserstein argues that "despite the talk of unwinding of the global reflation trade, we have only seen the tip of the iceberg", and that "outstanding positions and leverage remain enormous." Montien warns that, "when these trades finally snap, the devastation is unlikely to go unnoticed", and that "oil looks like it might become the next 'China'". I concur with James Montien's views and I am now also concerned that, despite long-term favorable fundamentals, the oil market could, in the near term, sell- off quite badly.
The only commodities I still like are coffee, which has recently broken out on the upside, sugar and orange juice, which is extremely depressed. In particular, sugar and orange juice would seem to offer a favorable ratio between potential returns and risks.
Finally, every investor should consider that, the longer the monetary- and credit-driven speculative party lasts, the worse the eventual outcome will have to be. So, the higher the markets soar and the more speculative they become, the more precautions will be advisable.
Regards,
Marc Faber
for The Daily Reckoning
re program trading: although probably not more than earlier in the year; just less overall volume, so less of the 'non-program' variety.
hickey on tech
That High-Tech Balloon Is Going Ssssssssss
Published: July 11, 2004
THE warnings from technology companies came fast and furious last week, cuffing investors who had bought their shares on hopes of super earnings generated in a hot economy. Individual investors and hedge funds alike had piled into tech stocks and enjoyed the ride through 2003, convinced that 2004 results would justify the shares' soaring prices.
But with software companies like Siebel Systems and Veritas Software, hardware companies like Unisys and computer resellers like the CDW Corporation and Ingram Micro Inc. cautioning that their businesses softened in the second quarter, the sound of air escaping a balloon is more than detectable.
Inquiring investors want to know: Is this a blip, or is the second-quarter slowdown the beginning of a longer-term malaise in tech?
Fred Hickey, editor of The High-Tech Strategist in Nashua, N.H., and a technology stock analyst who knows the industry down to its nittiest and grittiest, says the setbacks in the sector are just beginning.
Investors may have been lulled into thinking that the second-quarter results at tech companies would be sunny because reports of shortfalls had been relatively rare.
Companies typically alert investors to problems late in a quarter, but by June 30, that front was quiet. "Normally the third month in a quarter belongs to the confessors," Mr. Hickey said. But at the end of June, he added "there were more positive preannouncements than negative."
Nevertheless, two signs point to problems ahead for technology stocks, he said. First, semiconductor shares, which often lead the action in tech stocks, have gone into a nose dive. The semiconductor stock index, known as the SOX, is down 11.2 percent this year, and spot prices of computer chips are forecasting further declines.
But the biggest trouble spots on Mr. Hickey's horizon are the ballooning inventories on tech companies' balance sheets. Already rising in the first quarter, these inventories will probably show a surge for the second quarter, he said, because few tech companies appear to have cut production in recent months.
Investors may not have noticed how inventories have grown at some of their favorite technology concerns. After all, balance sheets are boring; income statements make for much jazzier reading. And comparing balance-sheet items in quarterly reports requires some work: most show only assets and liabilities from the current and previous quarter, not from the same quarter during the previous year.
IN the first quarter of 2004, inventories jumped 21 percent to 61 percent, year over year, at such tech stalwarts as Dell, Cisco Systems, Intel and Texas Instruments. And that was when the economy was cooking. So Mr. Hickey expects inventories to show a surge for the second quarter. When inventories rocket, profit margins are hurt. Hefty write-downs are another common result.
The sales shortfalls at some technology companies will become most evident in the third quarter, Mr. Hickey said, making for some very ugly earnings comparisons from the same period in 2003. Back then, tax rebates were propelling consumers into the stores and gross domestic product soared 8 percent, annualized. Computer notebook sales in the third quarter of 2003, for example, were up 60 percent.
But this year, personal computer sales in the United States are growing at rates in the single digits or low teens. PC and notebook sales are also slowing in Europe and are actually declining in Japan.
In addition, the tax rebates, courtesy of the White House, are spent, mortgage refinancings have peaked and rising oil prices are pinching consumers. So it's no wonder that sales of tech gear have slowed.
Mr. Hickey said the inventory situation at some of the nation's biggest technology companies reminds him of late 2000, when demand from nascent Internet companies screeched to a halt. Although it became apparent in March 2000 that the Internet boom, created in part by a profligate Wall Street, was over, the impact of this steep decline in demand did not show up in major suppliers' results until much later that year and in early 2001.
"This industry is hopelessly optimistic," Mr. Hickey said. "They always overproduce."
None of this would matter if technology shares were cheap. But they are not. The price-to-earnings ratio on both Dell and Cisco is 32. Texas Instruments' is 30, and Intel's is 26.
"On June 30, the bulls were extremely long and vulnerable, even though underneath the surface there was a lot of trouble in a lot of places," Mr. Hickey said.
Perhaps the companies issuing early warnings recently will prove to be in the minority by the time all second-quarter results are out. But technology has had a heck of a run in the past year. As they say, nobody ever went broke taking profits.
well here's a fun non-partisan political treatment of the election. enjoy ...
http://jibjab.com/thisland.html
A White House aide told Pakistani intelligence chief Ehsan ul-Haq that the best days to announce the killing or capture of any target would be July 26, 27 or 28, coinciding with the first three days of the Democratic National Convention in Boston, the Magazine cited an unidentified subordinate of ul-Haq as saying.
wow, and i thought i was just a cynic. apparently nothing is beyond politics.
of course, if they failed, they could still pull that "#2 is surrounded and pakistani's are closing in", which was good for modest support in the markets back at the january top.
interesting. just noticed that the weekly leading indicators have taken a pretty steep plung and are now back about 0 ... that's quite a plunge since march (8pts)
http://www.businesscycle.com/
interesting, the sector that seems to be dumping hardest this a.m., among things i watch, is retail - rth down about 1.25% now
"Seriously, the nasdaq has its own "logic". A lot of stocks are "developmental stage companies" aka story stocks."
yeah of course, but ... c'mon, yahoo!? i think yahoo needs a makeover; how long can you keep combing your hair forward to hide a receeding hairline? none of those old adjectives fit anymore.
"Yhoo, not great but what is the big deal?"
!!!! what's the big deal is i wanna know. why the heck is it trading at 150x earnings now anyway, or 75x forward earnings?
OT oddly the other side of that statistic was omitted:
"Melissa Lee said yesterday that 92% of money managers the network polled thought the markets would do better with George W. Bush as president."
only about 60% of them, though, actually want to see him reelected.
"This is the third day in a row"
indeed. intc looking like its going to put in 3 black crows on the daily. of course, that's often good for a bounce before continuing also ...
muchas danke, mon chou.
sbux getting some selling pressure here; trying to catch up to jcp.
"Some would say warped."
not after 'eternal sunshine of the spotless mind"!
and there goes jcp ... plop!