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yayaa
How about this Sinatra song (I really gotta stop this, I promise this is the last one, to "My Kind of Town")
My kind of stock
Micron is
My kind of stock
Micron is
My kind of people too
People who
Lie to you, and
Each time I look
Micron is
Cooking the books
Micron is
One that won't leave you in hock
It's my kind of stock
Goldman comments on semi equip this a.m.
Summary: We are incrementally more negative on the semi equipment stocks
following three days of meetings at the Goldman Sachs Asia Tech Conference.
While we remain convinced that the equipment industry has begun a cyclical
upturn and that the stocks won't peak for the cycle until the industry
reaches normalized levels of cash flow in early 2004, we believe it is
likely that the stocks will trade down 15% before resuming their upward
move. The potential catalyst for the sell-off is the equipment companies
offering conservative Q4 sequential order guidance. We now believe this is
likely based on data points we learned at the conference. Our main concern
is that several of the projects that were originally slated to make orders
in Q4 have either been pulled into Q3 (i.e. Samsung's Phase 2, Fab 12) or
pushed into Q1'04 (i.e. SMIC, STMicro, Sony, and Toshiba). Given the recent
run in the stocks and the plethora of Street upgrades that have heightened
expectations, we believe conservative Q4 order guidance will hurt the stocks
in the short term.
OT: Greenspan to Watch Over Me
There’s a somebody I’m longing to see
I hope that he turns out to be
Greenspan to watch over me.
I know nothing of the market, although
I will I know make lots of dough
If he will watch over me
Although he may not be the man some
Will think of as handsome
His “Put” is as cute as can be
Won’t you tell him please to ramp, ramp away
Buy IBM and KLA
Greenspan to watch over me
Bear, I think that downgrade is old news, though...last Thursday.
mlsoft, re: semi fundamentals
A few weeks back, I mentioned (I think to you) that my inputs suggested business was quite strong and well above expectations. Having put that out there, I feel obliged to say that more recent inputs have been less encouraging. I still think things are recovering, but maybe only in line with seasonals...and IMO expectations have caught up to or exceeded reality. Just FWIW, and I hope this is of some use.
Tax debate simplified:
http://www-hoover.stanford.edu/pubaffairs/we/2003/henderson09.html
Here's a surprise...much of the former Soviet Bloc and China now have fairer, simpler, and LOWER tax rates than the U.S. Our tax burden (measured as a percent of national income) has been steadily climbing since WWII and now stands in the low 20% range. That of our emerging competitors (ex-Western Europe, which is in the same boat as us) is in the mid-teens. This is the single largest threat to our competitive standing in the world. The other stuff - trade policies and currencies, etc. - are irrelevant in the long run, by comparison. If a lower government burden is equated with economic freedom (which it is), and economic freedom correlates with economic growth (which it does), there is much to worry about. JMO.
Why it's ok if manufacturing jobs move offshore.
http://www-hoover.stanford.edu/pubaffairs/we/2003/henderson09.html
Bullwinkle...
Excellent article. This China paranoia is ridiculous. A prosperous (and increasingly capitalist) China is in everybody's best interests, including ours.
Regarding the peg, the conventional wisdom is again 180 degrees wrong. No country ever devalued its way to prosperity. To the extent that the Chinese are willing to sell us stuff below "fair value" (whatever that means), it represents a massive transfer of wealth from them to us - not the other way around.
Bad news on IBM? Just buy MMM. Bad news on MMM? Go long IBM for a sure thing. I am not a subscriber to the market conspiracy theories, but this looks a little fishy even to me.
BVF
Fundamentals look compelling, but Wall Street doesn't trust the accounting and the management...probably with good reason. I'm long anyway, because I don't see how the Welbutrin daily launch can miss.
metsin
This is bad news for CDWC, if true. This is the sector which has been carrying the ball for them. Stock looks expensive at 22x for 8% growth (on forward 12-month numbers). Chart beginning to look ragged with 3 ugly candles in a row. I am short.
http://stockcharts.com/def/servlet/SC.web?c=cdwc,uu[h,a]daclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3!L...
Zeev, possible evening star doji on the COMP (needs confirmation tomorrow), and semis, internets, and biotechs acting badly. You may get your wish very soon.
NYSE83
I sold my TGAL Friday...I am bummed - left half the profit on the table.
see msg# 130865.
mlsoft
Well, I hope you are right and I am wrong, at least short term, because I am short. FWIW, Soundview is out pumping the sector this morning:
"Industry Net: Intel's preannouncement provides further evidence of broad-
based semiconductor recovery. ... We
reiterate our Outperform rating on the industry...
We view Intel's preannouncement as more than mere seasonality in the PC
market and/or market share gains. Rather, we believe that we are entering
the first stages of a broad-based semiconductor industry upcycle."
mlsoft
I sold half of my large MU position Friday, as well as a bunch of other semis, and am now net short the group. Friday looked like a top to me. But I have to disagree with your assessment of the fundamentals. DRAM contract prices have been firm to up, and I think I mentioned that MU now is on allocation. I suspect the rest of the market is tight, and I think it is only a matter of time before spot prices move higher. Demand has indeed been improving. You don't have to believe me...just look at INTC. Capacity is hard to judge, because of obsolescense and shifting to other product areas, such as SRAM and ASICs (which has been occurring). In any case, capacity is a lot tighter than most believe, because so much of it is uneconomical, and just a tiny fraction at 300 mm / 90 nm (which seems to have technical problems, especially for low k). And finally, inventories are very tight. All of this, combined with the seasonals and very modest expectations, are an explosive mixture IMO. These comments could also apply to the rest of the semi industry aside from DRAMs.
I am more bullish on the semi fundamentals than I have been in a long time. The valuations and the technicals keep me on the sidelines for now, but I'll be back if we get a retrenchment.
From Goldman this morning
S&P 500 [SPX] Abby Joseph Cohen - Portfolio Strategy: Raising S&P 500 EPS estimates following strong 2Q 2003.
Chinese currency peg
According to a Chinese friend of mine, one of the biggest obstacles to changing the RMB:$ peg rate of 8.28 is the fact that the rate in Chinese sounds like "wealth begets more wealth" (the Chinese word for the numeral 8 sounds the same as the word "wealth"), and the Chinese culture is very superstitious. If it is changed, the peg will not contain a 4, because the word for 4 sounds the same as the word for death, and is therefore very unlucky.
aj
Strange closing candles on the COMP and NDX today. IYO, is a red oxy bullish even when it occurs after a nice runup?
Jerry
It is not bad, but I always feel a bit scuzzy drinking a $6 bottle of wine. If you want a great value AND a great wine (and don't mind spending a few extra $), may I recommend the Santa Rita Reservas from Chile?
Ebay up strongly despite disappointing weekly listings.
SMH sure looks like it wants to take out the top of that triangle around 33.
http://stockcharts.com/def/servlet/SC.web?c=smh,uu[h,a]daclyyay[pb50!b200!f][vc60][iub14!lp14,3,3!ll...
mlsoft
I did not read this information...I heard it from a contact that I have found to be reliable (not the company). FWIW, I think the industry in general had a pretty good July, and that has continued into August. I'm not sure this will translate into higher stock prices, but it should. Longer-term, I am worried about valuations, and may be as bearish as you. But I am flexible. I do think business conditions are improving more rapidly than most investors believe, and for the moment I am moderately long (both semis and the market).
You may want to listen to some of the webcasts from the Soundview Semi Conference too, if you haven't already. You can find them at vcall.com. They sound more upbeat to me...see what you think.
Bear, re: MU
It doesn't matter. Inventories are tight, demand is picking up, and MU is about to put its customers on allocation.
CIT
Nice earnings, and nice breakout on good volume.
http://stockcharts.com/def/servlet/SC.web?c=cit,uu[h,a]daclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3!Ll...
For those who like penny stocks, TGAL is up 50% today and breaking out on large volume. I am long a little just for fun.
http://stockcharts.com/def/servlet/SC.web?c=tgal,uu[h,a]daclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3!L...
Ah, augie, now that you mention it, I'm not really sure what this chart is showing...the title is not all that clear. I assumed it was the risk-free rate vs. earnings yield, but you're probably right. Thank you for pointing that out.
Zeev,
But here is a chart which seems to say that stocks are still overvalued relative to interest rates, unless one can make a case for a secular uptrend in valuations (which certainly looks like it has happened, though I'm not sure why).
http://www.sharelynx.net/temp/Mark/ABY.gif
SC
I just spoke with a contact at LU who is pretty highly placed in finance. He said the same thing.
More on expensing stock options
Goldman Sachs was out with a report today that says that expensing options would more than wipe out all 2003 profits for the median company in their software coverage universe, which includes all the biggies. The MSFT hit was relatively mild at just over 20% of profits.
Expensing options would seem to be a done deal, and I think has the potential to put a huge dent in this Nas rally. I wonder how tech investors will react to the news that all of their "profits" have in reality been flowing to the employees. Stock grants will slow this expensing because of the vesting period, but ultimately will be as expensive as options, if not more so (because of tax considerations).
FWIW, I think CIT is worth a look here.
http://stockcharts.com/def/servlet/SC.web?c=cit,uu[h,a]daclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3!Ll...
After breaking out marginally, the stock declined has declined to the uptrend line. The huge volume spike at the recent test of resistance tells me the stock is poised to break out in a more serious way. Stops should be set just below the rising support line.
On the fundamental front, credit spreads have declined by 200 bps since last fall. This is important because cheaper money is the lifeblood of this company. Valuation is low, at 1.1x tangible book vs. 1.6x LT average.
The risk is the aircraft leasing portfolio, but this is only 9% of their book.
They report the 24th.
All IMHO, and use at your own risk, and do your own DD.
No, augie, except of course the shares outstanding cannot exceed the authorized shares. If they do, the board simply authorizes more shares (with shareholder approval). This is usually automatic...same way it is handled with options.
syl
I agree with you. The companies you mentioned know that investors do not factor in options expense. Otherwise, why would they be so violently opposed to expensing options? I think people will be shocked by the amount of earnings dilution if MSFT's practice becomes widespread.
Nevertheless, I think this was a smart move on MSFT's part in at least one respect. Not only does it make their earnings more transparent and preempt the whole options expense debate, but it eases the impact on earnings relative to expensing options, because the full impact phases in over 5 years, the vesting period.
A couple of other points...there are already a fair number of companies, mostly non-tech, that grant shares rather than options (for example, the large bank I used to work for). These companies are going to start looking a lot better on a relative basis.
Finally, I have heard some pundits say that stock grants will be less expensive for the company than options. I disagree. Ignoring the effect of taxes, they should theoretically be equally expensive. But taking taxes into account, stock will be more expensive. This is because the stock becomes taxable to the employee when it vests, whereas options become taxable when they are exercised, which is usually much further into the future. Therefore, on an after tax basis, employees will "demand" more stock than options in order to have the same compensation. (Here I am talking about the expected dollar value rather than the number of shares or options).
MSFT just announced they will be replacing their options program with a restricted stock grant program. This makes perfect sense, since restricted stock has all the benefits of options without the valuation difficulties. The market may not like it, however, as the stock is expensed immediately as it vests. MSFT's earnings estimates are about to to take a significant haircut.
plexxus
Aside from the trendline bounce off a couple of nice doji, also note the RSI strength, triple top, positive volume trends, ADX confirmation, and relative performance uptrend...looks very positive to me. But sentiment, fundamentals, and things like the BP's and Summation Indices look so scary, I wonder if we're setting up for a blowoff top that will end very badly.
In edit, I notice my annotations didn't come through. One of these days, I'll get the hang of this <ng>.
http://stockcharts.com/def/servlet/SC.web?c=$compq,uu[h,a]daclyyay[pb50!b200!f][vc60][iUb14!Lp14,3,3....
Longest Nasdaq down streak since 1971 is 16 days.
http://www.vtoreport.com/nasdaq/nasdaq-streaks-day.htm
Hi there Culmus.
Point taken about the investment income. Conventional wisdom says stocks go up because profits go up, but maybe it has been the other way around!
I've been busy and don't get to read these boards as often as I'd like.
Hope you're well and having a good year. Slow but steady progress here...plus, I've been spending some weekends off the coast of beautiful Maine...so no complaints <g>
Regards
jd
Culmus
The implied growth rate in the Barra model is a historical number, rather than one based on analysts' expectations. Here is how Barra describes it:
"The capitalization-weighted average of the individual constituent growth rates. The individual company growth rate is the 60 month average of the historical EPS growth, a function of return on equity and retention rate."
Because it is a rolling 5-year number, it will lag badly. If you look at the long-term ROE chart, there has been an upward trend coincident with the great bull market dating back to 1983. However, ROE peaked around the same time as the market, and has rolled over sharply. Interestingly, ROA does not show the same long-term uptrend as ROE, implying that corporate leveraging was a major driver in higher ROE and stock prices. That game is now over, as I think you have pointed out before. So...a different interpretation but the same conclusion.
From Goldman Sachs this morning on NVLS:
Novellus Systems [NVLS] US$32.17 NVLS FQ2 MID-QUARTER UPDATE: NO CHANGE TO GUIDANCE BUT TONE SURPRISINGLY UPBEAT
I must have missed that part of the call.
greenehugh, re: TMR
Yes, I own this thing. Complicated capital structure and income statement, but the cash flow numbers look impressive. Chart isn't too shabby either! <g>