Yahoo (YHOO), Microsoft (MSFT)- Update.

Tomorrow is an important day for YHOO, Yahoo Inc. shareholders.

There is a Annual Shareholders meeting which also includes a vote for the new Board.

It is finally up to share holders to decide if they want to elect Icahn's board or stay with the current Yahoo board headed by Roy J. Bostock or get replaced by a board headed by Carl Icahn.

Our position on Yahoo has been short for months now. But, I think it is a risky move to short tomorrow, I also think the Yahoo's deal failure is priced into the stock.

High Risk Traders:
If you think the bad earnings have not factored in you can go ahead and short the stock.

The results are in, Yahoo's Board remains the same. If you have shorted on Friday early hours, you will probably make some money on Monday.

I have been short Yahoo since Microsoft made an offer. I am looking to cash out at around $18. If selling pressure remains I will stay short the stock.


Tomorrow should be a interesting day for Yahoo and Microsoft. If Yahoo's board doesn't get replaced, I advice you to get LONG, Microsoft (MSFT).

The reason for getting long MSFT, is that their stock has been hurt a lot since the acquisition news came up. They will refocus their strategy to buy up smaller web portals or companies so this way they could have a larger foot print and rebuild their online advertising business.

To Russia With Love

Read the Russian Translation of this Article
In this blog we try to profile all of the BRIC countries, and how their economic emergence will impact the world political stage. So far, we have given lots of attention to India and China(because they have the largest amounts of trade and direct investment from the US), but I realized that we have not once talked about Russia on this blog. In many ways the Russian economy is much better poised than India's, and for the most part the country is already industrialized(albeit inefficiently). The Russians seem to be determined to regain their status as a world superpower, and they will be a force to reckon with in the future. (To read more about Russia's history click here)

I did a little research about the Russian Federation, and I discovered that their country could be moving into serious long term financial problems. The Russian economy is inextricably intertwined with commodity prices. 30% of the governments budget revenues come from the hydrocarbon(collective term for oil, natural gas, and refinement) industry, and 60% of their export revenue is from the sale of these hydrocarbons.

In the short term, a drop in commodity prices will devastate the Russian economy. Their oil production is at a staggering 9 million barrels a day, and 50% of this oil is exported. A drop of 20$ in oil prices lowers their oil revenue by $100M a day. This will negatively affect their account balance, and drive down the value of the ruble. For this reason, the government set up a fund, valued at $150B, to help stabilize their financial state. Their economy is extremely sensitive to fluctuations in these commodity prices. Even worse their government is increasing their expenditures, and is banking on the rising fuel prices. They are expanding their military, and their global presence around the world. Building up a military requires significant investment, and prevent them from saving money in case the commodity bubble bursts.

If steel prices, oil prices, and natural gas prices drop, the Russian economy will have a failure. Oil prices fluctuate quite significantly over extended periods of time. The markets can not sustain permanently high prices, because those would result in a drop in demand. Therefore it would be in a petroleum producing nation's interest to have sell oil at future equilibrium prices and lock in these prices, rather than over producing at unsustainable prices and production levels. However, with Russia this is not the case. What's more Russian production is much higher than can be sustained on their current proven reserves. Their current proven reserves are estimated at 60 billion barrels(We can assume that about 50% more is waiting to be discovered). That means (assuming a full production year round) they will pump their current reserves dry within 20 years, and definitely run out(assuming future discoveries) of tradition crude oil deposits by 30-40 years. It is important to note that after the "Hubbert peak" in oil production, the costs for extracting this oil will increase barrel by barrel. Also, 50% of their production is exported and thus will also impact their foreign exchange reserves.

Russia's economy is still very industrial and manufacturing oriented. They don't have a very matured service industry. Russia can not compete with China, Vietnam, etc. in manufacturing just because of costs. And, without a serious service industry the country really has no other source of trade. The emerging Russian IT industry will loose out to cheaper labor in India and China. Russian goods are non-existent in the Western world. Even India, which has a crumbling manufacturing sector, manages to export goods to the US. Russia can not sustain such a large economy on trade within the CIS. So without commodities Russia is just like any other European economy, and very much unlike an emerging market. Stagnating non-commodity sector growth and a high poverty rate will also lead to political unrest.

Russia is falling into the same trap the ruined the Soviet Union. They are resuming strategic activities such as long range bomber flights, and reinforcing their nuclear triad. For the US, such spending is distributed through NATO and an individual country doesn't feel as much of the pain. Russia is attempting to face off with NATO over the Czech Republic, Georgia, and the Baltic nations without any allies. The CIS nations have their own issue and don't want(and need) to oppose NATO expansion. They are expanding their "global strike" abilities and rapidly improving their military hardware. The only problem is they are in this alone, and China or India is unlikely to provide them with military, ideological, or moral support. Without support, NATO is free to outspend the Russians on everything producing an interesting Catch-22. If they take the bait and match our military, they risk a financial crisis. If they don't NATO will expand right to their borders, severly comprimising their security.

From my research, I concluded that though Russia is an emerging power, their emergence needs to be taken with a grain of salt. Historically, we have a bad habit of overestimating the threat that they pose to us. Russia will become a regional powerhouse, but their scope of influence will be restricted to Europe, who rely on their fuel. The growth in Russia is very similar to the growth in the Middle East, and we need to realize that unless their industrial efficiency massively improves they will not succeed in anything other than commodites. Only if Russia, makes the right investments with their current windfall revenues, will their country avert this impending crisis.

I want to know your thoughts on Russia, and whether their growth is "real"(as opposed to speculative short term growth)

All data from CIA world factbook

Click on the pictures to see the host sites of the pics

Product Review: Cuil

Today a new search engine called Cuil (pronounced Cool [don't ask me why]) was introduced to the web, it has been touted as the next greatest thing on the internet. The Menlo Park, CA company delivers content driven search engine results rather than page metric or popularity driven results.

Some even claim that this will be the silver bullet that down the Google juggernaut, but we are still years away from that. The company seems to have raised capital with no problems, and investors are convinced that it will find a niche market. So what is the site and will it revolutionize internet? I spent a few hours checking the site out and comparing it to other search engines. So I picked a random topic(How to grow my own pineapples), and I will compare the results with the Google results to see if there is a difference. I judged how relevant and how helpful each hit was.

Search Term: growing pineapples (somewhat general)
Top 5 Hits(Google) (4/5 relevant)
1. How to Grow a Pineapple Indoors
2. How to Grow a Pineapple from Grocery Store Fruit
3. How to Grow a Pineapple plant and get fruit!
4. A page about growing pineapple plants
5. Pineapple growing in Florida Home Landscape
Top 5 Hits(Cuil) (4/5 relevant)
1. Apartment Therapy The Kitchen: Summer Garden
2. Recipe(tried): growing pineapples and mangos
3. Pineapples Raking in Big Bucks for Mr. AOL - News ...
4. A page about growing pineapple plants
5. How Do Pineapples Grow


Search Term: grow pineapples at home(very specific)
Top 5 Hits(Google) (4/5 relevant)
1. How to Grow a Pineapple Top Indoors
2. How to Grow Pineapple
3. Growing a pineapple at home
4. How To Grow Pineapples at Home | eHow.com
5. Pineapple growing in Florida Home Landscape
Top 5 Hits(Cuil) (3/5 relevant)
1. I'm looking for information regarding how to grow ...
2. DJ Pitch Black, Suicide Commando Hellfire Mix - ...
3. bardofely's Profile - Mixx
4. gardening category
5. SearchEngine.net - Grow Pineapple Plant At Home

As you can see the hits from the sites are completely differ. Though I was very impressed with UI that Cuil offered(tumbnails and snippets from the sites before I visited them), I was dissapointed with the hits for specific searches. Though, I would have eventually found what I was looking for on Cuil, nothing beats Google at specific searches. Cuil's niche seems to be abstractions, and general topics. Their categorization helps such searches. Suppose someone was looking for a printer, Cuil would help them narrow down their search. But if you typed "laser color hp printer", you might get a few odd results. With Google the PageRank metrics iron out all of the irrelevant hits, in Cuil they are displayed. I think Cuil is definately a start, but they need a more effective business plan. I would like to see them enter the ad business(content driven hits would work ideally with ads ), and they should carve out a niche market with blogs and social networking. These two areas are the future of the Internet, and have inherrent advantages with Cuil. Cuil levels the playing feild and gives both small blogs and large corporations an equal opportunity. Next Cuil needs to address this apparent issue with specific searches, since people generally are pretty specific in search engines.

So my verdict is that Cuil, is an innovation. But it is not the innovation that will take down Google. Google is a powerful brand name, and it will be difficult to drive users away from Google's integrated conveniences. I was somewhat dissapointed with Cuil, but their engineers will eventually resolve these issues. It will be interesting to see what happens and I think that if this site pulls its act together it will be a success, since content-driven material is the future of the internet. Much of the information will be concentrated in small networks and blogs, and an effective search engine will have to exploit these mediums. I also think this is a potential aquisition for Yahoo or Microsoft, because it will finally give them access to a market to market that is untapped by Google.

Watch KKR IPO on Monday

Update 8:47AM PT: The date is some "time later in 20008". KFN shares are plunging right now. There is a massive sell off.

Update 8:40AM PT: Here are the long awaited IPO plans of KKR:

• Offer 21% of stock of a combined company
• Listing on NYSE
• Date of Listing is TBA
• They claim KFN shares are 60% of their true value
• Not planning to raise any additional capital after this offering

Original Post

Watch the KKR IPO situation closely, IPOs sometimes take off. You can use this site for the latest updates and information. This post is hooked up to an RSS feed about KKR from Google Finance. I will also acquire links to the teleconference at 8pm ET. I am mildly optimistic about this IPO, but I am unsure about how enthusiastic the company is about this offering. They are going public because of a fund acquisition, and will trade the shares of the combined enterprises on the New York Stock Exchange. If you are going to buy in just remember there are risks holding a large IPO too long, in this market. Remember what happened to Blackstone...

Listen in on the Conference Call

News Feed On KKR

See stock price

Stock Outlook for Next Week

General Advice- Watch this week closely, we might have a rally due to lowering energy prices. Also, there might be many cases that earnings weren't as bad as expected. I would suggest playing ETF's (Specifcally PowerShares) this week and playing the overall market trends. Individual stocks may be unpredictable this week.

Under Armor Inc. [UA] - Under Armor is a high-end sports apparel and equipment company. This company will report earnings on Tuesday, and is also expected to report a 30% growth in sales. They are expected to beat the low expectations that they set, but be careful before buying in. Since they sell to a high end market they will be affected by weakening demand due to the poor economy. Don't be surprised if they revise next quarters estimates or provide negative guidance.
Hold

Hartford Financial Services Group Inc. [HIG]- Insurers are expected to do badly due to disaster claims. However, Hartford Financial is expected to post a profit, and maybe the claims will not affect them as much as expected. If they miss their estimate there won't be much of a sell off, since I believe the negativity is factored into the price right now.
Buy

ArcelorMittal [MT] - Expect a massive profit, even the Motely Fool agrees. This stock is definately a buy, steel prices are sharpely up and investors are looking for "safe stocks". In US markets there will be a migration from small cap stocks to larger cap foreign stocks as the economy deproves. Acquisiton rumors have turned the steel market into a pessimistic bear market. All steel stocks are undervalued and are ready to surge when they report their profits. ArcelorMittal is building up their company, which is attempting to control the industry top to bottom (They are prucuring their own raw materials rather than purchasing them). This vertical integration might hurt their profits in the short term, but will help increase their margins in the long run. The company is periodically buying back stock and this should help push the price higher.
Buy Price Target $85-$90

Exxon Mobil [XOM]- Watch these profits closely, their stock might fall if profits aren't as high as expected, and watch how much they have invested in R&D. Then again their stock has hit a ytd low recently so there might be a rebound.
Watch

Sun Microsystems [Java] - This earnings report will have an impact on all other tech stocks, so watch it closely
Watch

HDFC Bank ltd. [HDB]- It will be very interesting to see what happens to this stock. There is lots of pessimism against Indian Stocks, but this bank is expected to report decent earnings. Don't buy in because it will act unpredictably.
Invest with fake money

News and Analysis: Ahmedabad Attacks

Final Analysis 10:44AM PST: My analysis of the Bangalore incident was about 50% right. My judgment that Islamic Extremism was not involved was wrong, but I was right that the incident seemed to have a more sinister political motivation. The group that claimed responsibility are what I called Islamic Insurgents. They are local Muslims who believe they have been persecuted and oppressed. The Indian Mujahadeen was also responsible for an attack in Jaipur last year. This group also sites India's growing ties with the United States as a motivation for "open war". One should assume that this recent attack is in retaliation for the progression of the Indo-US nuclear deal. This attack just shows the vulnerabilty of US interests in South Asia and the interests of those who do business with the US. I think the Indian central government will have to consider using their CSIF(Industrial Security Force) for private industries. The CSIF was intended for infrastructure security such as railways and critical public sector industry. However given the recent developments, the private sector might need their protection. This would help ameliorate the uncertainty and nervousness abroad about the rising instability in India.

Final Update 10:41AM PST: CNN reported 46 deaths and at least 89 other causalities. They confirmed the involvement of the Indian Mujahadeen, who also had sent information of upcoming attacks to media outlets as well.

Update 10:12AM PST: CNN IBN is reporting 20 deaths and 56 injuries. The blasts happened over a span of 70 minutes between 6:30PM IST and 7:40PM IST. Islamic insurgents, the Indian Mujahadeen, have "claimed responsibility" for this attack. It is still unclear whether the Bangalore attack is linked to this one. Indian central intelligence recieved information from the group warning of an upcoming attack. Since the two attacks are so similar, authorites suspect they are linked.

Update 9:45AM PST: The CNN news wire reported 17 different blasts; at least 15 deaths; and all major Indian cities are in a heightened state of alert. A full analysis will be coming up soon.

UPDATE 9:11AM PST:CNN is reporting 100 injuries and 15 deaths.Cnn Link

Analysis- Amhedabad is in a volatile region of India, and is prone to the kind of violence I have discussed in my article. These two regions hit by serial bombings are ruled by the BJP party, and there are a variety of different forces that would want to attack them. Until we know more information we can not make a judgement on the cause or the motivation of these attacks. However, one thing is very clear: the attacks(if they are related) are more sophisticated than I had thought before.

UPDATE 8:52AM PST:The Washington Post is reporting that there were seven bombs, and 2 confirmed fatalities. There were 55 reported injures. Washington Post Link

UPDATE 8:43AM PST:New news has surfaced overnight about serial bomb blasts in the city of Ahmedabad. No deaths have been reported, and authorities are estimating about 2 dozen injuries. Stay online for more information as it comes in... CNN Link

Reaction to Bangalore Attacks

Rising Communal Violence in India
For Information on the Next Day's attack: Ahmedabad Attacks
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ORIGINAL ARTICLE
On Friday, at about 1:30PM IST serial blasts hit Bangalore, the Indian IT center. The blasts caused 2 fatalities and about 20 significant injuries. Bangalore is at the center of the Indian economic machine, and contains large amounts of foreign investment. The city is a notoriously soft target and violence is not uncommon. Initially, authorities blamed the Bangalore blasts on Islamic extremists/insurgents, but further examination shows that this is probably not the case. Terrorist attacks are designed for a shock factor, and have much more coordination and sophistication than was evident in Friday's attacks. The police chief mention that "local miscreants" could be involved in such an attack. Some have even alleged that opposition political parties may be implicated in this attack, in the hope that they would destabilize the new BJP, Hindu nationalist, government in the state.

To the international community, two deaths in a large city is meaningless. In all major cities many more people die in drug and gang related violence. But, this is a fundamental misunderstanding of the situation in India. Here are the insurgent forces at work in India:

• Islamic Extremism (From Pakistan and Bangladesh related to Kashmir occupation)
• Islamic Insurgency (Local, related to socio-religious strife)
• Naxalite Insurgency(Local, Maoist rebels wanting to overthrow the government)
• Separatist Sentiments(local groups wanting independence)
• Regional Political Violence(Politics and criminal groups are working together)
• Hindu Retaliation (Retaliation against Islamic groups)

We need to understand the kind of violence in India, is not like the drug violence on the US border. It can not be solved by more police officers or troops, but rather fundamental compromises within the political system. Unfortunately, over the last few years, communal violence in India seems to be on the rise. In fact, yesterday a grenade attack in Kashmir killed at least 9. There are also hundreds of undocumented Naxal incidents in the rural areas, since even the police are afraid to report these incidents. One would think that growth would drive the country towards resolving regional, social, and economic differences; but in India the political situation seems to be dire. The current government narrowly escaped a trust vote, and growth is falling due to a broader global economic slowdown. This coupled with a chronic insurgent violence makes a very deadly cocktail of instability.

The recent attacks on Bangalore have brought this instability closer to home. Almost half of India's IT industry is based in Bangalore and US companies are heavily(some would argue over) invested in this city. An major attack on infrastructure or the population would be severely detrimental to US interests in India. If Bangalore is locked down for two days, US corporations will start to feel the pain. Also, within hours of news of the attack, Sensex, India's leading stock index, took a nose dive. Communal violence is slowly but surely coming out of the shadows and showing its possible impact on the efforts of large multi-national corporations. For a multi-national it is too risky to build a manufacturing plant in rural areas due to the Leftist presence, and these companies may not be willing to put up with such instability and antagonism much longer. Even in Indian cities there is an anti-business/ anti-global sentiment, that alienates the very organizations that brought prosperity to the country.

You may be wondering why this is relevant to the United States. I believe, we the American people, have the right and ability to protect our economic livelihood abroad. Our government needs to put pressure on New Delhi to resolve their problems. India is indebted to American capital and investment, so as a country and a people they owe us the safety and security of our assets. To an American, it looks like India doesn't have the will to control their Leftists and Muslims. That attitude angers us because it shows ingratitude for the amount we have contributed to their economic growth. All George W. Bush has to do is to pull out of the nuclear deal, to shamefully dissolve the Indian Congress Party government. With this kind of power, we should protect our foreign interests, and ensure we are not losing our returns to pointless instability. The reason violence continues is that there are many political establishments that would benefit by the instability. If the people loose their cause, then these parties and institutions loose support. The present government relied on a loose irresponsible coalition of minorities and leftists for political gain. Now it proves that such a coalition is a barrier to progress and prosperity. Without our investment, their country would have remained a third world country forever. India needs to realize that their internal problems are not just internal in a global economy. What happens in their country affects us and what happens in the US affects them. Realizing this, the government must take an effort to ensure that multi-national's and industrial infrastructure are given appropriate security. Similarly the central government needs to take an active effort in solving communal violence, and pushing the country on the path of reconciliation. This violence will always be a barrier to growth, and the Indian people can not live like this for ever.

Related Posts
Watch South Asian Political Scene

Relevant External Links
Chronology of Recent Violence
Wikinews

Picture courtesy of Montreal Gazette
Flags courtesy of wikipedia commons
Picture courtesy of http://community.iexplore.com/photos/journal_photos/Bangalore_Microsoft_prefRes.jpg

Stock Profile: Force Protection Inc. [NASDAQ:FRPT]

This is a summary of the report to read the full report (click here)
Company

• Defense contractor specializing in armored vehicles
• US company that sells to overseas buyers as well
• Product lines crucial in modern warfare
  

Summary

• 2 principle competitors AM General, BAE Systems
• Many new contracts
• Competitively priced vehicles
• Support services will provide steady income
  

Earnings

• Next Earnings Release: July 28, 2008 18:00 EST *
  

• Low estimates this quarter
• Missed earnings last quarter
• New contracts could push earnings past expectations

Technical Analysis

• The stock went from $1 to high of 28.
  
• The stock created a head and shoulders pattern.
• Fell all the way down to $3, which was where the rally began.
• Currently the stock is in a accumulation mode.
• This means that good earnings or good news should move the stock higher.
• The trend remains bullish.
  

Verdict

• Buy and Hold
  

Products
Buffalo

Cougar

*Correction- Previously announced date, real date is TBA

Debrief: Obama's Speech

I have to admit Obama's Berlin speech was pretty good, and he took a very centrist stance on economic issues. I think it will be a success and his poll numbers should shoot up quite a bit. His speech did not alienate conservatives, and he invoked Regan's speaking style many times. Fittingly the speech was made a Victory Column (close to Brandenburg Gate where Regan made his speech).

(READ Full Text)



Here are the Talking Points from the speech

• Stabilizing and Winning War on Terror
• Uniting US and Europe
• Breaking down barriers to trade and information
• Human rights
• Preventing nuclear prolifieration
  
• Environmental Responsibility
• Accommodating the changes of Globalization
• American Intervention OK

As information comes in I will add more, but the verdict for now is that it was a good speech

Even though I am not an Obama supporter, the economic policies he highlighted in this speech are actually very centrist and I actually agree with most of them.

UPDATE 11:00 AM PST: Stock Market Stabilized during the speech!

UPDATE 11:20 AM PST: McCain Response on CNN

UPDATE 11:40 AM PST: Stock Market is falling even further after the speech

UPDATE 12:04 PM PST: Summary of the McCain Response

• Bad style for Obama to give a political speech overseas
• Politicizing his fact finding trip
• Changing his positions

UPDATE 1:00 PM PST: Markets close. All 3 indexes losing an average of 2.36%.

FINAL UPDATE: Reaction
Obama gave us lots of insight into what his presidency will be like. He will be a more Clintonian president than an Sharpton president. Though he is preaching leftist policies at home, in practice he will be a center-right politician- like Clinton. Though I thouroughly disagree with Clinton, his economic policies were fairly conservative. He expanded NAFTA, and helped liberlize the world economy. Contrary to what many liberals think, Obama will be this kind of a president.

What do you think about the policies he described in this speech?

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Capitalist Command Economy

It is no secret that the American economy is stagnating, and unfortunately this slow down may be a harbinger of things to come. Jobs are going overseas due to our comparative disadvantage, manufacturing growth is almost non-existent, people are losing their jobs, and yet nothing seems to be changing. No matter what one's political views are, everyone agrees that the countries economy is seriously off course. The liberals will immediately scapegoat conservative policies and try to push their demand-side socialist policies which are only superficial solutions to our current economic crisis. In all fairness, conservatives are also dumbfounded, because for once, the free market can not pull us out of this mess.

It's true that such rough patches have happened before like the Great Depression and the stagflation which characterized the 1970's, but I believe that this recent stagnation is the result of a fundamental economic correction in the world economy. Many countries are rising out of the shadow of imperialism, communism, and political instability. These countries are all growing at astronomical rates, and will pose a serious threat to American supremacy. The worst part of this crisis is that it is difficult to determine how all of it will play out. Will this just be a unnecessary worry? Will oil prices kill the emerging economies on the fringe? Will a major war change the spheres of world political influence? Market economies do not react well to such uncertainty, since they only live in the present. Supply and Demand are determined by prediction regarding the next 1-2 years- not 15-25 years.

I, a life long Republican and a staunch supply-side market economics advocate, struggle to find a solution to our current problem. After looking through some historical references and reading some books, I realize that some degree of industrial planning maybe necessary in our economy. I want to make it clear that I advocate long term plans(5 years or more) and strategic plans(direction and policy). This is different than a true command economy, in which tactical plans(production goals and expansion) are also handled by the economy. I would leave tactical decisions to the free market, and use non-binding supply-side incentives to influence strategic decisions. For example, if our planning organization foresees the need for widgets in 5 years, our government would provide tax incentives(not subsidies!!!!) for the production of widgets. This sort of planning is done by most countries in the world, but in the US we have decided to let free capitalism dictate industrial policy. It would just be comforting that competent people would be steering this nation's economy in the right direction.

Though this may sound good as an abstract policy, it will be extremely difficult to implement. Giving the government the power and the consent to actively control industry is never a good idea. That's why any planning commission must be a powerless group of advisers that advocate certain policy moves that the government should pursue. Ideally, these advisers would steer us clear of foreseeable train wrecks(like rising oil prices, and the credit crisis), but not interfere in short-term market fluctuations.

Here are the areas that I think could have used better(and still could use) planning:

• Lower Education- Chronic under-performance by students can't always be solved by one-size-fits-all social programs, but rather detailed analysis of the root causes of the under performance. Without a strong lower education system, our country will have a shortage of skilled workers, and chronic under-employment.
• Higher Education- Rectifying shortages of certain professions can be done by mandating public universities to increase seats for certain majors, and increase financial incentives.
• Manufacturing- Starting re-training employees and re-tooling plants before it is too late. Negotiating deals for American companies to purchase abandoned plants.
• Energy- determining the future of energy and where investment/attention is needed
• Transportation: building transportation in tandem with industry, and ensuring adequate connections.
• Free Trade- enabling national companies to expand easily

I want to know your thoughts on this post, and whether you think that industrial planning is a violation of free market economics.

Oil down, Stocks up

Another rally fueled by oil news.
Even after the Apple, Wachovia and American Express news.

RIMM and AAPL Chart patterns

RIMM and AAPL are the same style of stocks high PE and highly volatile.
RIMM missed earnings a few weeks ago.

AAPL has come out with bad news.

Look at this chart to see what might happen to Apple if the selling continues.

Intresting chart pattern, Intel and Apple.

If you look at the way Intel had its run up into the 2000 tech bubble and compare it to a current apple chart, it looks like same way Apple went into the 2006-2008 consumer electronics boom.

Link to Chart

Complete Meltdown after hours

This is also the prediction post for tomorrow.
The After hours started out today with

Schering Plough (-3%) , reporting earnings the earnings beat estimate, but the profit falls on unexpected charges.

Merck, (-6%), turns a profit on cost cutting, reporting flat sales, and their flagship drug Vytorin fails a study.
They announced they would not be issuing guidance for future quarter due to the Vytorin study.

Apple, misses estimates, investors are concerned with guidance. Apple has also reported lower margins on sales. Stock fell 17 dollars or 10%.

American Express, down 11%, the company said due to credit issues in this bad economy they expect to not be able to beat guidance till the economy improves.

Sandisk, posts sharp losses, stock falls 13.55%.

This shows that when people thought during a bad economy tech was the place to be, tech constantly under performing.

Like I have said before on this blog, the economy is in a bad shape. Do not buy into these house of card rallies propped up by the SEC and the Treasury.

You should have been shorting at the peak of the up side.

Today was when you should have benefited from the shorts.

Currently DOW futures are at -110. This signals a weak open, probably falling lower.

Outrage over new McCain Ad

A new McCain Ad claims that Barack Obama is to blame for rising gas prices.

Lets look at the facts:

• Obama is opposed to building new nuclear power plants
• Obama is opposed to expanding oil drilling leases
• Obama is opposed to building new refineries
• Obama is opposed to relaxing gas taxes
• Obama is opposed to supply-side free market subsidies of alternative fuel research
• Obama is opposed to releasing publicly held oil reserves for private companies
• Obama is for increasing punitive taxes on American oil companies
• Obama voted for increased regulation on oil production

You make the decision...

Market Outlook July 21st

In this uncertain market, predicting where it will move is the hardest thing to do.

Tomorrow's events:
Bank of America earnings.

As we have seen before lowered estimates are being easily beat by the financial stocks.
Bank of America may be no different, if they are able to beat 53 cent estimate the market will move higher, same happened with WFC, Citi and JPM.

But, what is unknown is that even with bad news such as losses financial stocks keep moving higher. Merill Lynch is a perfect example.

When market manipulation by the SEC and analysts exists you cant predict the market just based on human nature, there are other factors involved.

For now what we know is that: the dow futures for tomorrow are up by 10 points.
That is not a substantial number.
But, if reality sets into the market tomorrow we might see some profit taking or sell off.

Major earnings tomorrow: Schering-Plough and Apple Inc.

If Apple shows any sign of slow down after hours tomorrow, the NASDAQ should be down on July 22nd.

Will Tata Nano be Profitable?

The blogs are hot with discussion about the production costs of the new Tata Nano. The Nano is slated to be the cheapest production vehicle on the market today at a price of only 100,000 INR(~$2500). Rumors have arisen about the rising production price of the vehicle and its profitability.



Here is a profile of the vehicle:

Vehicle Class: 4-Door Light City
Engine: Rear 2 cylinder 623 cc
Drive: Rear
Transmission: 4 gear manual syncromesh
Weight: 1300 lbs (curb)
Fuel Capacity: 4 Gallons
Fuel Efficiency:~70 mpg

Here is a profile of the company:
NYSE ADR TTM


The production costs are rising due to Indian inflation and rising materials costs, what is your verdict on this car?

Is the DOW entering rally territory?

I have been a bear on this blog.
I was suggesting you hold shorts in the last 3 sessions.

Even with bad tech earnings and tech losses, the DOW was higher by 49 points.
While the NASDAQ finished lower.

Are financial stocks in a rally mode?
Is the market creating a double top where were rally up and then experience a correction?

Iran Talks Should Lower Oil Prices

The US-Iran multi-party "negotiations" should help lower oil prices. Any positive result out of these talks will help diffuse the current tensions between our country and the Islamic Republic. A war with Iran threatens 40% of the world tanker-carried petroleum supplies. Therefore, oil futures speculators are speculating on a conflicts and subsequently increasing the price of crude oil. Conversely any negative development will have the obviously opposite effect.

Some view these talks as a reversal of US policy, and an inconsistency in the Bush Administration's message of not negotiating with Iran without preconditions. This policy has been ridiculed and criticized thoroughly over the last few years because for the most part the Administration has not given us a proper justification for it.

Direct talks with the Ayatollah or Pres. Mahmoud Ahmadinejad without preconditions or goals, would be propagandized and would viewed in the Islamic world as an American surrender. Basically, we should not talk with the Iranian regime unless we are sure we will get something out of it, and these benefits would outweigh any PR nightmares that come out of the talks. Second, the upcoming negotiations in Geneva are not a reversal of policy since we have engaged the regime in back-channel and proxy talks for years. It would, in fact, be a mistake not to participate because this way we can gauge what their demands are without dealing with the PR baggage of Ahmadinejad. Also, we would have the strength and the support of the international community behind our negotiators. Finally, most reports agree that Iran is on the brink of economic ruin: 25% inflation and 20%(and rising) unemployment. Iran needs international support more than we need their cooperation. A war would hurt them more than is hurts us, since even a small disruption in oil exports would rapidly decrease the cash flow into the country. Eventually, they will have to approach the Western world for trade and technology agreements.

Picture Courtesy of Wikipedia

Update: Blue Chips Mixed, but Tech Down

Google and Microsoft are leading the fall in the tech industry. Some blue chips are rallying due to stable oil prices.

Outlook for Friday July 18th

Expect a doom and gloom Friday.
Wednesday and Thursday the market rallied like a house of cards on bad news and beating low estimates.

Tomorrow will be a real test for Technology stocks, the biggest names in tech: Google, Microsoft fell after hours to earnings reports.
IBM beat estimates by 16 cents.

Yahoo, Apple trading down after hours due to the bad news.

Dow Futures are at -90.
If the -90 open holds, the market will fall and eventually we will see a typical bear market close.
Hopefully you were shorting yesterday and the day before, the shorts might finally pay off today.

Next Briefing: Market Hours tomorrow. Stay Tuned.

Faith in the Free Market

At a time when the economy is slumping and it looks like there is no relief on the horizon, we the American people tend to gravitate towards socialist economic reforms. But, we need to realize that it was the free market that built this great country. The liberals in Congress are discussing market regulation that would set back the liberalization of 80 years. They want to punish corporate profits, and procure votes from their vote banks all while flushing the middle class down the toilet. They scapegoat Big Oil, but conveniently forget that 40-60% of oil shares are owned by pension funds and IRA's. They will soon push price controls on oil, and forced production levels. Next they will reverse 20 years of negotiation on free trade and adopt a protectionist mind set, and consequently drive inflation through the roof. They talk as if that America is still the manufacturing super power that it was in the 1970's, and turn a blind eye to her evolution into a service oriented, innovation driven economy. The liberals identify themselves as the party that stands for progressive and pragmatic change, but in reality every step they take forward; the we are taking several steps back.

We the American people should retain our faith in the free market and realize that it is the free market that will rescue our economy. A free, de-regulated market enables businesses to raise capital and reap the benefits of their entrepreneurship. We should strive to build a competitive market, one that can compete in a truly global economy. Also, we should ensure that our securities markets are transparent and free. A free securities market will ensure distribution of risk, and will be a harbinger of future market trends.

In summary these are the policies I want to see:

• Privatization of Government Entities
• Downsizing the Washington Bureaucracy
• Decrease in Social Entitlements and reinvestment in knowledge and infrastructure
• Deregulation and liberalization of the markets
• Using tax incentives to motivate business agenda
• Increasing military spending
• Reducing barriers to trade
• Reducing punitive environmental regulations
• Securitizing small farms and distributing small farmers risk rather than using subsidies

I know that this is a deviation from what we usually talk about on this blog, but I couldn't keep this rant to myself. I had to speak out before we turn into the People's United States of America, and I love this country too much to see that happen. I just want to know everyone's thoughts on the state of the economy and what our new way forward should be.

God Bless America
Flag picture courtesy of : www.barnstable.k12.ma.us
Oil rig courtesy of: http://ntis04.hgac.cog.tx.us/website/photolab/photos/energy/oil-rig.jpg

Exxon touches YTD Low.

The recent fall in oil prices and the market rally today hurt every large cap Energy stock.
CVX, Chevron is in the same position.
These companies are falling fast.
If you are taking a negative position based on the post before.
You should think of this a good time to buy into this space.
I would say a 6 month low for large cap stocks that trade based on oil prices are a good bet.
If you believe rallies like today will take place over the next few months you should steer clear.
Take your position and prepare yourselves.

More Reasons for a market drop in the next 3-4 months.

From The Minutes of the Federal Open Market Committee:

The information reviewed at the June meeting indicated that economic
activity had remained soft in recent months.

Manufacturing activity had deteriorated.

Business investment in equipment appeared to have moved down.

Residential construction had continued its steep descent.

Labor demand continued to weaken in April and May.

Industrial production contracted in April and May at a slightly faster pace than in the first quarter.

Retail purchases of motor vehicles fell to a low level.

More broadly, households' financial conditions appeared to have
weakened in recent months.

Activity in the housing sector remained very weak in April and May.

Real spending on equipment and software appeared to move down a bit
further in April and May

Business outlays on transportation equipment continued to fall
sharply.

The U.S. international trade deficit widened in April, as a jump in
imports outweighed a rise in exports.

Recent data pointed to broad softness across the advanced foreign
economies in the second quarter, consistent with a weakening of
consumer and business confidence.

Headline consumer price inflation in the United States remained
elevated in April and May.

Business spending was expected to remain sluggish, as tight credit
conditions, uncertainty about economic growth, and the rising costs of
inputs--especially energy and raw materials--appeared to be making
firms quite cautious and inclined to defer capital expenditures.

Participants were concerned about the inflationary consequences of
recent increases in the prices of energy, food, and imports, and they
expected headline inflation to rise in the very near term.

Many financial institutions continued to experience significant credit
losses and balance sheet pressures.

Credit availability was likely to remain constrained for some time.
Labor markets have softened further and financial markets remain under
considerable stress.

Tight credit conditions, the ongoing housing contraction, and the rise
in energy prices are likely to weigh on economic growth over the next
few quarters.

It was agreed that the next meeting of the Committee would be held on
Tuesday, August 5, 2008

Tomorrow's Outlook, July 17th

JP Morgan, Merill Lynch, Microsoft are the big earnings headlines for tomorrow.

JPM Reports before market open, possibly setting the tone for the markets overall performance.

Along with these large cap stocks, a few Regional banks and commodity companies will be reporting earnings.

After what happened today, with Wells Fargo, 1 company beating estimates= over joyous market.

We will probably see the same type of action as today but profit taking will probably be taking place at the same time.

USO, UNG, GLD were bought into weakness today. While selling to strength had a lot of large cap stocks.

Tomorrow could be an interesting day given that earnings season is in full force.
It all rests on JPM earnings before the market.

IEM (Iowa Electronic Market)

For those of you who want to make some quick money, but don't like to trade on financial markets meet the IEM. The IEM is essentially a futures market, which specializes in political an policy markets. IEM traders manage an account with no minimum balance and easy controls.
About IEM
Sign Up

Current IEM PICKS

Market:PRES08_VS 2008
Symbol:UDEM08_VS
Position:Short

Market:PRES08_WTA
Symbol:DEM08_WTA
Position:Long

Outlook for Wednesday, July 15th.

Asia is mixed.
Currently Hongkong is up 80 points
Tokyo still hasnt recovered from yesterdays drop.

Dow futures are at +39 points.
Tomorrow's open will be a strong one but there might be a sell off later in the day.

But, if the 40+ gain holds for the first few hours without faltering we might see some buying activity throughout the day especially with oil down $9.
Oil bulls could be bracing for a retreat and then the market should go down like previous patterns.

Tomorrow could be positive but could turn negative if confidence in finance stocks is low.

PWND (PowerShares Global Nuclear Energy Portfolio - PowerShares Global Wind Energy Portfolio)

This is a new ETF which I think is a good buy because these energy sources will have a higher demand if oil prices stay high.

VT (New ETF) Low Volume.

I stumbled upon a new ETF, VT, Vangaurd Total World
If you are looking for a negative next few months you get into this ETF, and start a short position on it.
It was started one week ago.
As it picks up more volume it can achieve its goal of tracking the world markets better.

Tomorrow's Positions

Short, JNJ
Watch, INTC
Short, BIG
Short, USB
Long, SKF
Long, DXD

Tomorrow's Predictions.

Same story as last night, Asia starts the day low.

Hongkong, Japan, Sydney experience major sell offs.

Even with the bail out news yesterday these markets failed to show any upside.

For now you should stick to ETF's.

The unwind from the top of the Dow 2 months ago was all based on oil prices.

I predict that the next downward spiral will be due to Financial company earnings.

Financial Earnings tomorrow:
US Bancorp
First Mariner Bancorp
State Street
and a few regional banks.

Large Cap Earnings:
CSX
JNJ (Johnson and Johnson)
INTC (Intel)

Hold your shorts.

As you saw today the rescue operation did not do much, the market opened high and tumbled down fast.
We are still long all the inverse ETF's such as QID, SKF.

Also stay short the Index funds like QQQQ, XLF.

Buying and holding is a still long ways away.

Stay away from the financials, as a lot of analysts are recommending get away from the idea that banks are too big to fail.

In the end you wont know how much bad paper these banks have yet to write down.

Hold Positions

The essential thing about bear markets is that they are unpredictable, hold positions unless you have a reason to do so otherwise. Wait this out and do not panic sell.

DOW, US Stock Futures

Futures were up about 104 points, now 11:50 PM PST. +71.

30 point difference, to figure out tomorrow's open is tricky.

I think stocks will be mixed tomorrow, possibly heading lower.

Asia is in a sell off mode right now.
Tokyo is giving up gains.
Hongkong giving up opening gains.

I recommend not covering shorts tomorrow, but add more short positions at a higher price.

Earnings Front:

Genentech reports After Market Close
and 4 other financial companies, look at the earnings calender on the right for more details

SBUX, Starbucks Short

We believe that Starbucks is a strong short position.
The downward trend continues, a good time to short will be before close tomorrow, if the stock is trending up.
If its trending lower open a short position when ever you get a chance.

Dow Up Tomorrow.

9:48 PM PST

For now the futures are pointing up.
Tomorrow we could a 100 point gain the open.
We have no idea how the market will trend as time goes on.

Next Update at 1:00 AM PST.

When premarket begins we will have a sense of how FRE and FNM are moving.
Big moves like this always take place about 12 hours before the open.
Same with Bear Stearns.

Revisiting Iran

Over the past few days people have tried to develop a more perfect picture of the military, political and economic conditions in Iran. This article summarizes it:
http://www.strategypage.com/qnd/iran/articles/20080712.aspx

Hold Shorts through the Earnings Season

Try to resist the urge to cover all of your positions, this earnings season will be disappointing.

Worldwide Quarterly Forcast

Not Suitable for Investment

• Crimson - investment friendly environment is not availabe
• Red - investment gains are outweighed by political instability

Bear Market

• Blue - investments are not expected to return much, only specific sectors show growth. Total economic growth is low or non-existent
• Light Green- Substantial economic growth, but significantly less than expected. Investments might outperform local investments.

Growing Economy

• Grey- Economic growth is driven by commodity prices. Investors take the risk that commodity prices will fall.
  
• Dark Green- Real economic growth, and investments will likely outperform local investments.
  

Very Bearish on Africa

I never usually advocate short selling, but I think that Africa will be hurt the most by any global economic down turn. South Africa, arguably the only investment grade economy in Africa, will face face social pressure (from rising tensions in Zimbabwe) and economic pressure( inflation and food prices). For these reasons I suggest a long term short sell of
EZA iShares MSCI South Africa Index (ETF)

Fannie Mae and Freddie Mac

My current advice is to stay out of this mess with FNM and FRE. Don't try to short them now, it is too late. Also, this is a good time to start covering any previous shorts. The government will ultimately bail them out.

Speculating on a War

In view of the recent heightened tensions with Iran, one may wonder how an average investor can take advantage of the effects Iranian regime's belligerent rhetoric. I have noticed that every time the regime threatens the Western World, the oil futures markets skyrocket. This is because the Iranian Revolutionary Guard threatens to disrupt oil supply in the event of any conflict. This is primarily possible because Iran has strategic access to the Strait of Hormuz, which is a key super tanker shipping lane. About 40% of the worlds shipped oil, passes through that choke zone; and being only 21 miles wide, it can be easily blockaded with conventional naval area denial mechanisms temporarily. Also, Iran is the 4th largest exporter of oil, and has an inherent control of the oil supply. If a full fledged conflict arises there may be no way of profiting from it since both economies would be harshly affected, but one can easily profit from the speculation arising from the recent sabre rattling.

Your Iran Conflict Portfolio:
USO- United States Oil Fund Long
UNG- United States Natural Gas Fund Long
QQQQ- PowerShares Short
GLD- Gold ETF Watch
DBC- Commodity ETF Long
FRPT- Force Protection Inc. Long

Picture: Courtesy of Wikipedia

GE, Market Update at 8:33 AM PST

GE Earnings are out.

Profits are down 6%

Missed by 1 cent.

Since this is PreMarket, we will not know which way the street will react to this news.

As predicted, WYNN is experiencing a partial sell off, profit taking.

INFY traded down in Pre Market, with really low volume, while the Indian markets traded down 450 points.

As Predicted, there is a Pre Market profit taking on LVS, people are selling any rally in the casino industry.

1 hour to market open.

WYNN, LVS, INFY are experiencing losses as the market is down -230 points.

I warned you about this fall last night, if you had bought the ETF's listed in my other post, they moved on avg. 7% due to market fall.

Looks like there is not much Buying today. Stocks opened low and are staying low.

Watch List: Las Vegas Sands (LVS)

The stock fell to its 2 year low 34.01 on Thursday's close.

The after hours trading pushed the stock up to $37.00.

There is a chance that it will open at $35.00 or lower.

If you want to take the risk that this stock will break support again, you can take a short position on it.

But, After Hours data suggests that there was a lot buying going on. Maybe some investors see it as a value play.

Pick your position on the casino business, which also include the hotel business.

Wynn (WYNN) Resorts

This stock is up 80.40 +10.46 (14.96%) After Hours.

• Due to a IPO planned in Hong Kong.
• Due to a $500 million Buyback

My opinion is that this stock is will go into a sell off pattern tomorrow.

The US market is not getting any better anytime soon.

According to the State of Nevada, gambling revenue fell 15% in May.

Keep a watch on this stock for tomorrow's trading day.

If GE misses tomorrow this should be a good short target because the news that sent this stock high doesn't account for any US/Vegas gambling data.

Infosys (INFY)

From Reuters:
"India's Infosys Technologies Ltd beat expectations with a 21 percent rise in quarterly profit thanks to a weaker rupee, and raised its full year guidance on hopes for a revival in outsourcing demand."

As my colleague noted about negativity in the Indian Economy in the previous post.

Indian IT companies seem to be not affected by the slow economy.

Infosys also noted that it will try to find other markets like Europe, Asia and Middle east to avoid the US economic slowdown.
This is their way of diversification.

We currently hold 140 shares of Infosys at the price of $44.07 a share.
We are expecting a target of $46.30 for this stock tomorrow.
GE is still a wild card in this target.

Watch South Asian Political Scene

Investors commonly make the big mistake of discounting the impact of local and international politics on the stock market. I feel that the ongoing politics of South Asia are not given enough importance. As growth slows and inflation rises in India, we will soon see the impact in our local business who have invested heavily in India. India's newly liberalized economy is volatile and will fall if there is a chance of political instability. Likewise, political instability in neighboring Pakistan will also trigger nervousness and uncertainty in the Indian public.
Picture: Chennai taken by Sanjay Krishnan

Things to watch for:

• Parliament proceedings on the US Nuclear Deal - (If it falls through it is likely that the ruling Congress party will be ousted; also will show the strength of protectionist factions in India)
• Any revision of Indian growth or inflation numbers
• Any change in Indian government subsidies
• Impact of rising leftist influence
• Instability in Pakistan
• South Asian Monsoon Rains

Stocks to Watch:
IFN - India Fund
FNI - Chindia fund
IBN - ICICI Bank
INFY - INFOSYS Technologies
WIT - Wipro Technologies

GE Earnings 8 AM EST, 5 AM PST. EPS: 54 Cents.

Currently Short General Electric.
at the price of $27.50 @ 100 shares.
Hopefully this short pays off.


As goes GE so goes the market.

If you see any miss by GE, get ready to fire the order on:
SKF
SDS
SRS
QID
There are all ultrashort ETF's and short the market in some way.

Edit:

If you notice a up side move in the stock. If GE beat by 1 or 2 cents.
You will probably see it sell of later in the day.

GE is down 25% Year to Date. People that bought before last earnings are probably looking for any opportunity to get out of this stock.

Stocks like this come down fast, go up slow. Especially in a slow economy.

On the flip side I give it a $30 price target if they beat earnings substantially.