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Fits nicely with the morning star red oxy on gold:
http://stockcharts.com/def/servlet/SC.web?c=$gold,uu[r,a]wacayyay[pb50!b200][vc60][iUb14!Lp14,3,3!Ll...
Zeev,
I've tried to keep out of this debate, but I just can't take any more. So here are the "correct" answers to some of the issues raised <g>. On the issue of share buybacks vs. dividends, you are correct and Culmus is wrong. Miller and Modigliani showed a long time ago that dividends and buybacks are economically equivalent in the absence of taxes. Culmus makes the point that INTC's share price would be higher by buying stock than by issuing dividends, which is true enough... but only because the number of shares would be decreased. The capitalization would have been the same in either case (fewer shares times higher price), and stockholders would have been no better or worse off.
You think MRK would have been better off buying some smaller companies than paying dividends? Maybe, maybe not. Don't forget, the shareholders that received those dividends could have reinvested them in the same smaller biotech companies...they don't need MRK to do this for them. So it really comes down to whether you think MRK management could and would have made better investment decisions than their shareholders. Frankly, corporate America's record of adding value through acquisitions has been pretty dismal. On the other hand, a company like Berkshire Hathaway has done a good job in this regard. Still, I'd bet against you on this question, just based on the history of corporate acquisitions.
On your emphasis on tangible book value, I'd generally disagree. Depending on the company, BV is somewhere between interesting and totally irrelevant. There is a large discrepancy between BV and market value for companies like DELL and CSCO. The value created is the difference between the market value (not book) and net contributed capital. Somebody who bought DELL at the ipo and sold today has real wealth, not theoretical. The same point applies to your problem with dilution of BV though share buybacks, which does not trouble me at all. BV is an accounting construct. The share price is what it is.
Okay, I'll shut up now.
Let's face it, Iraq is a disaster. The market began to melt as soon as the wedding party news broke. Anyone who hates the US could not have written a more incriminating headline.
Just based on probabilities, must be Wilt Chamberlain
KLAC
I like KLAC here. The stock has dramatically underperformed both the SOX and its equipment peers, and now looks cheap on a relative basis (at least on P/B). Relative performance now looks like it's bottoming:
http://stockcharts.com/def/servlet/SC.web?c=KLAC:$sox,uu[r,a]dacayyay[pb50!b200][vc60][iUb14!Lp14,3,...
The reason for the underperformance is the weak order guidance given for the June Q. However, the equipment business is lumpy, and KLAC's Dec. and March quarters were huge, so some slowdown was to be expected. The important point is this: longer-term, it is impossible for KLAC to underperform the equipment peer group, because they dominate process control and wafer inspection and this category will get "its share" of fab spending. In fact, process control spending as a percent of total equipment spending is slowly rising as the industry becomes more mature. This is typical for all manufacturing industries.
IMO, long KLAC and short SMH or AMAT makes sense here. Or just forget about the hedge if you happen to like semis here.
Gold stocks doing well given POG.
That would be nice, and would shift the bias back to positive. But has anyone noticed that we are getting dangerously close to that impressive looking hammer bottom from last Oct.? IMO, that is key support. If we breach that, I'm throwing in the towel.
http://stockcharts.com/def/servlet/SC.web?c=$COMPQ,uu[r,a]dacayyay[pb50!b200!f][vc60][iUb14!Lp14,3,3....
China bank issued a warning to investors
UPI - Saturday, May 15, 2004
Date: Saturday, May 15, 2004 9:21:24 AM EST
BEIJING, May 15 (UPI) -- China's central bank has warned investors of possible financial risks in hot iron and steel, cement, and electrolytic aluminum markets.
In its first quarterly report this year, the People's Bank of China said investment in China's iron and steel industry surged 96.6 percent during 2003, cement 121.9 percent and electrolytic aluminum 92.9 percent.
Investment in the three sectors continued to rise during the first quarter, with investment in iron and steel industry up 107.2 percent, cement 101.4 percent and electrolytic aluminum 39.3 percent.
The report said it's possible after all the new projects go into production, market supply would greatly exceed demand, creating waste as well as increasing financial risks, the government-run Xinhua news service reported.
China was the world's biggest steel producer for the seventh consecutive year during 2003 The report said the nation's iron and steel production capacity is expected to greatly exceed market demand by the end of 2005.
--
Copyright 2004 by United Press International.
All rights reserved.
BW,
FWIW, the "stars" align. I personally don't believe in this stuff, but interesting it agrees with you.
Both Venus and Neptune turn retrograde May 17, along with a powerful trine formation between Mars and Uranus. All of these are Level 1 (most powerful) geocosmic signatures, indicating a high probability of a major change in direction within ten trading days of May 17. That's Monday, so we are there right now, and in fact we note that all of these indices are making multi-week declines into this time band. Not only that, but also all are exhibiting very bullish-looking technical patterns, whether one consider intermarket bullish divergence or technical oscillator divergence. As stated earlier, European stock indices are not making new lows (below March lows), while the Far East and U.S. markets are (intermarket bullish divergence). And all markets show oversold momentum and oscillator levels as these new lows are being made. Many also show double “looping formations” at these oversold levels, and that is a technical pattern indicating that a major rally could be about to commence. I don't know what it is going to take to move the market sentiment from bearish to bullish, but the retrograde of Venus alone suggests that it can occur. Usually Venus retrograde correlates with a shift in central banking policies. Since the fear has been of rising interest rates, maybe that attitude is given reason to change back again. After all, falling stock markets create concern about the future direction of the economy. Maybe the FED will now offer greater assurances that if there are to be any increases in rates, they will be minimal and perhaps even temporary. There may be messages that interest rates will not necessarily start a whole new cycle of successive increases as many of us previously feared. At least not between May 17-June 30, the period in which Venus will be retrograde. Or maybe that is already built into the market at this time, so if rates do increase, stock prices actually start to rally, for investors already know that the rate increase is the last for a while, and not the beginning of more to come.
http://www.stariq.com/MarketWeek.HTM
lol. you can get anything you want (exceptin' Alan).
and he also did "Alan G's Restaurant", and "Sitting on New Lows Again" (aka City of New Orleans, lol). <g>
KBH, good candidate for DCB
http://stockcharts.com/def/servlet/SC.web?c=kbh,uu[r,a]dacayyay[pb50!b200][vc60][iUb14!Lp14,3,3!Ll14...
Nice series of botttoming candles, RSI and ADX reversing from oversold.
P/C ratio high, indicates healthy skepticism of this bounce...encouraging.
Low carbs...PNRA next.
The truth is it was greed as well as stupidity. 45% of the pre-tax profits of Barings comprised the bonus pool in any given year, and this could easily amount to half of the total compensation of a senior employee. At his "peak", Nick Leeson all by himself was responsible for something like a third of all profits of Barings Plc, which included the asset management operation as well as the bank. As long as the profits rolled in (or so it seemed), nobody wanted to ask too many questions. Of course, nobody had to return their bonuses two years after the fact. So the dirty secret of Barings is that many profited from the corruption, much more so than Leeson himself.
DRAM/Flash
9:10AM Ratings Briefing - MU : Smith Barney downgrades Micron (MU 15.28) to Sell from Buy and cuts its target to $12 from $21, as recent checks into NAND and DRAM markets suggest that stronger DRAM contract prices (up 30% since March) and expectations of lower NAND Flash prices are starting to cause some suppliers to reconsider the ongoing shift of DRAM supply to Flash.
Good news for SNDK, imo.
Richard, they are coming off 2 quarters of 50% and 18% sequential order growth. Even if they just hit the lower end of their guidance (-15%), that would still compound to 50% growth over 3 quarters. Sure orders are lumpy and we should have expected a pause, but growth is pretty impressive no matter how you slice it.
Just requires no overlap of the bodies (overlap of shadows is okay).
Hey, I'm no expert either, BTW. One more thing...Nison seems to feel that the reliability of the pattern is increased the more the third candle (today's) "intrudes" into the first candle (2 days ago). So on this basis, it would be nice if FCX closed about a point higher
PCLN interesting here. Nice uptrend, high P/C and short interest ratio. TSG results show travel segment improving.
Nice island reversal on FCX today with the bottom candle a red oxy, and fortified by the DI+ bottom.
http://stockcharts.com/def/servlet/SC.web?c=fcx,uu[r,a]dacayyay[pb50!b200][vc60][iUb14!Lp14,3,3!Ll14...
FCX
Working on a red oxy candle and with the +DI below 10, looks like a good place to buy. I did.
http://stockcharts.com/def/servlet/SC.web?c=fcx,uu[r,a]dacayyay[pb50!b200][vc60][iUb14!Lp14,3,3!Ll14...
Joe
I do the same thing you do, and consistently find 6-8 unwanted things every day, despite the fact that I never download anything, and only visit "legitimate" financial sites. Some of my friends who are unaware of this problem have had their computers rendered virtually unusable. How any advertiser could think there is economic benefit in this is beyond me. Congress needs to act.
SNDK:
They missed their product gross margin guidance of 33-35%, reported under 32% and guided to 30% for the rest of the year. I think this is what is bothering the market...maybe also the lack of big upside in the guidance. The offset is royalties, which are stronger than expected (to me, this is a good tradeoff, because royalties have 100% margins, are more predictable, and are not as subject to pricing issues).
East, did you ever buy that LUV? Good numbers reported today, I think.
DALLAS, April 6 /PRNewswire-FirstCall/ -- Southwest Airlines Co. (NYSE: LUV - News) announced today that the Company flew 4.7 billion revenue passenger miles (RPMs) in March 2004, compared to 4.1 billion RPMs flown in March 2003, an increase of 15.2 percent. Available seat miles (ASMs) increased 5.4 percent to 6.4 billion from the March 2003 level of 6.0 billion.
FNM
Yes, that is true - FNM hedges the risk of interest rate movements by matching the durations of assets (mortagages) and liabilities (funding sources) within 6 months. Others do not. How is it that FNM and FRE, with their large scale, implied government guarantee, and thus lower borrowing costs can lose share at a time of low interest rates? It is because the like of BAC and WM are much more exposed to the "carry trade" - borrowing very short and lending long, which gives them a temporary funding cost advantage. This carry trade across the entire economy (not just mortgages) is a ticking time bomb ready to explode when rates rise. With all the political criticism levelled at FNM, the reality is that the economy has less risk if FNM holds the mortage than anyone else. I'm sure this opinion will be very popular on this thread <G>.
I am not saying that the mountain of debt out there is not a huge risk. It is. There is mounting default risk if asset values decline (although FNM also offloads much of that too by selling mortages). But at least the duration risk is minimized.
osprey
Unfortunately the benefits are indexed to the cpi, so causing inflation won't help...they'd just increase as fast as inflation. On the other hand, maybe this is a good way to pay off all that money we owe to those pesky Chinese and Japanese. Hey, how about finding a way to increase inflation but then have the government under-report it in the cpi? Nah...they'd never do that, would they?
Thanks, I'll look (eom)
Silver is cranking. bo's coming on CDE and SIL soon? Hope so!<g>
Zeev
CBOE shows an equity P/C of 1.08 (539k/499k), which excludes all index options...not just the QQQ.
http://www.cboe.com/MktData/default.asp
Still pretty impressive. Why not use this rather than your "virgin" calculation?
Semis are saying the market is going lower. They'd better pick up soon...and I hope they do, because I own a few <g/ng>
AFCO, bounce candidate?
http://stockcharts.com/def/servlet/SC.web?c=afco,uu[h,a]dacayyay[pb50!b200][vc60][iUb14!Lp14,3,3!Ll1...
Stock very oversold, but putting in a series of bottoming candles. Note ADX and DI+. Fundamentals seem good and valuation attractive, as far as I can see.
lol, I too wish these columnists would just make the point and then shut up. The main point BTW is that the recent buying in tech anti-funds is bullish for tech short-term, all else being equal (which, of course, it never is).
From Schaeffer
http://www.schaeffersresearch.com/commentary/observations.aspx?click=home&ID=9768
Nasdaq Bears Hits All-Time High with Rydex Funds
Jerry Wang
3/26/2004 3:07 PM ET
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During the past several weeks, Schaeffer's Investment Research has detailed how some well-known sentiment indicators have showed an influx of negative sentiment in the face of the market declines on March 8 through 11 and again on March 19 and 22. On indicator in particular showing this influx is in the Rydex family of funds. By monitoring the flow of assets from bearishly- to bullishly-oriented funds, it is possible to gauge sentiment on these investors and, in certain cases, draw contrarian implications from them.
The Rydex OTC fund is built to track the movement of the Nasdaq Composite (COMP), while the Rydex Arktos fund is designed to move inversely to the COMP. There are several more funds in the Rydex family that go equivalently long and short various broad-market indexes, but these are among the older and more popular funds. Typically, when participation in the OTC fund reaches an extreme, it signals that stock market sentiment on the whole has swung too far to the optimistic side. This is a sign that stocks are ripe for a pullback, as there is a lack of available buyers to stave off the next wave of selling. Conversely, when Arktos fund assets start to dominate, stock market sentiment has shifted to the pessimistic side and the shortage of sellers can be easily overwhelmed by any new buying demand.
Since February 1999, the (net asset value) NAV-adjusted Rydex OTC/Arktos ratio (ROAR) has spent most of its time between 10 and 50. [Their asset figures are adjusted for changes in NAV, so that the resulting ratio only reflects actual fund flow. *Readings prior to February 1999 were too volatile because the Arktos fund just opened in September 1998.*] Notice how, for the most part, lows in the ratio (excess of Arktos funds) coincide with market bottoms.
The bottom in the ratio came over a range during April and May 2000 rather than a point. The September 2000 bottom in the ratio didn't accompany much of a market rally. The market rally after the February 2002 bottom in the ratio lasted just a month. But, the October 1999 and February 2003 ratio bottoms coincided with the beginning of very powerful market rallies. Both the theory and the history suggest that the current reading of 8.3 (an all-time low denoted by the big red dot) is likely a very bullish sign for the tech market.
However, as pointed out by Chris Johnson in the weekly Investor's Edge column, one mitigating factor could be that the current readings are due to a "gradual" inflow of assets into the Arktos fund. In contrast, a quick rush into the fund, or "spike" behavior, would have been more indicative of sentiment that makes for great contrarian reads. Notice how the drops in the ratio in June and September 2003 were much steeper than the current slide since January.
On the other hand, the slope of the decline has steepened since March (thanks in no doubt to the six big sell-off days the previous two weeks). Note that, since such ratios are bound above zero, maintaining a steep downward slope becomes increasingly difficult, and therefore, more "spike-like" in nature as it approaches zero.
In all likelihood, this indicator will ultimately turn out to be a bullish factor for the Nasdaq when it bottoms out. [On a side note, the ratio for the S&P 500 Index, the NAV-adjusted Rydex Nova/Ursa ratio, is not at nearly as pessimistic a reading.] The manner in which the pessimism built up (slowly) shouldn't be as significant as the fact that it is there in the first place.
Jerry Wang
Options Expense
FASB proposal on expensing options is imminent. According to CSFB, options expense would have reduced S&P 500 eps by 8% in 2003 vs. roughly 20% in both 2002 and 2001. Earnings would have been more than wiped out for telecomm equipment and semiconductors, and almost wiped out for internet. Sorry I cannot furnish a link.
Chinese foundries
Although I don't think SMI is a good value here, there is an interesting point to keep in mind. Investors seem to think that China is some technology backwater, and that SMI and others will have a tough time competing with the established foundries in Taiwan and elsewhere. But I think this is a misconception. Over the past few years, there has been a serious "brain drain" from Taiwan to the mainland, especially engineering talent. These people are attracted by the greater opportunity afforded by China and the easy cultural transition. As such, there is already world-class process talent in China, and the learning curve there will be much quicker than anyone seems to believe. And money continues to flood into China, so I don't think capital will be a limiting factor. At some point, SMI will be a buy, IMO.
Put/call not doing much so far at 0.7.
COMP 200-week SMA formidable resistance:
http://stockcharts.com/def/servlet/SC.web?c=$compq,uu[h,a]waclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3...
Liberty Media, longer-term idea:
http://stockcharts.com/def/servlet/SC.web?c=l,uu[h,a]waclyyay[pb50!b200!f][vc60][iub14!lp14,3,3!ll14...
Large ascending triangle measures 50% higher.
Fundamentals are solid: stock selling at 30% discount to NAV, company just reported above expectations and announced spinoff of international assets with more shareholder value enhancing moves to come, and strong management team led by John Malone.
Potential concerns: Comcast owns a large piece, which may need to be liquidated to fund DIS acquisition, if successful. Also, stock reacted badly to the good news of last week...never a good sign short-term.
AJC said last week that stocks were 15-20% undervalued:
"Equity valuation has improved and shares now appear between 15% and 20% under priced. Our yearend 2004 S&P 500 fair value price target remains 1250, compared to 1150 for yearend 2003."
She subsequently raised her S&P earnings forecast by 1.1% for this year and 2.6% for next year, so presumably stocks are even more undervalued in her model.
FWIW, re semis, I am hearing that business has stabilized and improved very recently from the seasonal weakness earlier in the quarter.
Zeev, your song is good, but please do not give up your day job.
AJ
The number 72 guarantees 2 months' supply, plus a couple extra for "emergencies". Lesbians and fat women are not allowed in heaven (only fat men). Mutants are okay, and available on request. I don't know the answers to your other questions, but I shall try to find out.