Since Google ramped up their hiring over the last 4 years, there has not been a fast growing company to carry the torch to continue high quality job growth.
On the contrary, large companies with well paying jobs have been continuing to trim payrolls in the name of efficiency. Telecommunications companies continue to consolidate.
Investment banking and financial firms are cutting people and costs. Mergers and acquisitions continue in many industries creating greater efficiencies but with a lack of long-term investment or job growth.
The trend will only reverse when:
(1) the U.S. dollar declines low enough to encourage jobs to return to the U.S. that had been shipped overseas.
(2) the next wave of innovation begins creating a wave of growth
Tuesday, March 25, 2008
Wednesday, February 13, 2008
Yahoo! Rejection of Microsoft Bad for Shareholders?
Yahoo! rejected Microsoft's buyout offer over the weekend.
With the U.S. economy continuing to weaken and advertising slumping, many people are worried that Yahoo! may be hurting its shareholders by rejecting Microsoft's initial offer and playing a game of chicken with other bidders to get a better bid.
Businessweek summarizes the situation nicely in the article below:
http://www.businessweek.com/technology/content/feb2008/tc20080211_848555.htm?campaign_id=yhoo
With the U.S. economy continuing to weaken and advertising slumping, many people are worried that Yahoo! may be hurting its shareholders by rejecting Microsoft's initial offer and playing a game of chicken with other bidders to get a better bid.
Businessweek summarizes the situation nicely in the article below:
http://www.businessweek.com/technology/content/feb2008/tc20080211_848555.htm?campaign_id=yhoo
Buffett Plan to Save Muni. Bond Market is a Joke
Warren Buffett is proposing to buy from the bond insurers $800 Bil. worth of municipal bond insurance from them. By buying from them their safest insurance, he would only be weakening these companies further, creating a worse situation for the bond insurance market and the financial markets while putting extra money in his pocket.
I agree with the thoughts of Mark DeCambre in the article from TheStreet.com linked below:
http://www.thestreet.com/story/10403198/1/buffetts-not-insurers-only-hope.html
I agree with the thoughts of Mark DeCambre in the article from TheStreet.com linked below:
http://www.thestreet.com/story/10403198/1/buffetts-not-insurers-only-hope.html
Lenders Demanding Larger Deposits
Morgage Insurer MGIC reported a $1.5 Bil. loss for the 4th Quarter on higher home delinquincies and payouts.
Starting March 3, MGIC said it will require at least 5 percent down on homes in so-called restricted markets. They include the entire states of Arizona, California, Florida and Nevada and major metro areas such as Washington, D.C., Detroit, Chicago, Boston and Atlanta.
Starting March 3, MGIC said it will require at least 5 percent down on homes in so-called restricted markets. They include the entire states of Arizona, California, Florida and Nevada and major metro areas such as Washington, D.C., Detroit, Chicago, Boston and Atlanta.
Stock Market will Stabilize When...
The U.S. Stock Market will stabilize when people believe that asset prices including homes and commercial real estate stop declining.
Currently the financial markets are in turmoil because many loans have been taken out on residential homes and commercial real estate where the value of the asset has dropped and is now worth less than the loan.
Lenders are concerned that borrowers will walk away from the asset used as collateral for the loan, leaving them to hold the bag and pick up the pieces.
I do not believe that asset prices will stabilize until 2009 at the earliest.
Currently the financial markets are in turmoil because many loans have been taken out on residential homes and commercial real estate where the value of the asset has dropped and is now worth less than the loan.
Lenders are concerned that borrowers will walk away from the asset used as collateral for the loan, leaving them to hold the bag and pick up the pieces.
I do not believe that asset prices will stabilize until 2009 at the earliest.
Thursday, February 07, 2008
Utilities Look Undervalued Here
Slowing growth for the U.S. is hitting the stocks of electric utlities and telecommunications companies hard. These sectors pay high dividends (3-5%) relative to treasury bonds and cash, providing a safer alternative to riskier parts of the stock market.
Some suggestions for this space include:
Electric Utlities - SCANA (SCG) and El Paso Electric (EE)
Telecommunications - Verizon (VZ) and AT&T (T)
Some suggestions for this space include:
Electric Utlities - SCANA (SCG) and El Paso Electric (EE)
Telecommunications - Verizon (VZ) and AT&T (T)
Stocks & ETFs versus Mutual Funds
A good reminder on CNBC concerning the purchase of stocks & ETFs versus mutual funds.
Stocks and ETFs trades take 3 business days to clear versus mutual fund trades which take 1 day to clear.
Why is this important?
If one sells a stock or ETF and buys a mutual fund the same day, there will be insufficient funds in the brokerage account to purchase the mutual fund because the stock or ETF transaction needs another 2 days to clear.
Stocks and ETFs trades take 3 business days to clear versus mutual fund trades which take 1 day to clear.
Why is this important?
If one sells a stock or ETF and buys a mutual fund the same day, there will be insufficient funds in the brokerage account to purchase the mutual fund because the stock or ETF transaction needs another 2 days to clear.
Tuesday, February 05, 2008
Car Rental Agencies Commodity Business
Car Rental companies are a dime-a-dozen and are very sensitive to economic conditions as shown by the weak results from Dollar Thrifty (DTG) yesterday.
From Barron's yesterday: "Car rental companies have fallen sharply Monday, with Hertz (HTZ) and Avis Budget Group (CAR) in the wake of the profit warning from rival Dollar Thrifty (DTG) which issued a profit warning late Friday. Trying to sneak downbeat earnings guidance past this market is generally about as successful as trying to camouflage that ugly dent in the passenger-side door of the Fiesta you’re returning. Analysts are insisting the selloff of names like Avis is unwarranted, because, unlike Dollar’s leisure-travel market, Avis is a commercial-fleet operator, and thus not exposed to the same market conditions. No buyers for that argument, though."
I rented a car last spring to attend a wedding one weekend and was amazed how cheap the rental was. I may be wrong, but it seems to me like prices for car rentals have not changed much over the last few years.
Stick to investments in hotels and hotel REITS where there is differentiation among properties and greater control over the supply of hotel rooms in many competitive markets.
Bargain basement recommendations for hotel REITs include Felcor Suites (FCH) and Ashford Hospitality (AHT).
From Barron's yesterday: "Car rental companies have fallen sharply Monday, with Hertz (HTZ) and Avis Budget Group (CAR) in the wake of the profit warning from rival Dollar Thrifty (DTG) which issued a profit warning late Friday. Trying to sneak downbeat earnings guidance past this market is generally about as successful as trying to camouflage that ugly dent in the passenger-side door of the Fiesta you’re returning. Analysts are insisting the selloff of names like Avis is unwarranted, because, unlike Dollar’s leisure-travel market, Avis is a commercial-fleet operator, and thus not exposed to the same market conditions. No buyers for that argument, though."
I rented a car last spring to attend a wedding one weekend and was amazed how cheap the rental was. I may be wrong, but it seems to me like prices for car rentals have not changed much over the last few years.
Stick to investments in hotels and hotel REITS where there is differentiation among properties and greater control over the supply of hotel rooms in many competitive markets.
Bargain basement recommendations for hotel REITs include Felcor Suites (FCH) and Ashford Hospitality (AHT).
Consumer Non-Discretionary Stocks Cheap Here
Consumer non-discretionary stocks look undervalued here.
My favorites in this space include:
Unilever (UL) (UN) Forward P/E: 14.58
Proctor and Gamble (PG) Forward P/E: 16.92
Sara Lee (SLE) Forward P/E: 13.48
Upside targets for these stocks are 10-20% from current levels.
Each of these stocks also pay dividends from 2-3% per year as well.
My favorites in this space include:
Unilever (UL) (UN) Forward P/E: 14.58
Proctor and Gamble (PG) Forward P/E: 16.92
Sara Lee (SLE) Forward P/E: 13.48
Upside targets for these stocks are 10-20% from current levels.
Each of these stocks also pay dividends from 2-3% per year as well.
Monday, February 04, 2008
Lack of Innovation Hurting U.S.
The U.S. domestic economy is getting hurt by major productivity improvements and the lack of new technological innovations that resulted in major job creation in the past.
U.S. corporations are more efficient than ever resulting in record profits, but unfortunately this efficiency has meant that fewer people are needed to run these companies.
New industries and innovations need to drive U.S. job growth. Unfortunately since Google and Facebook, there has not been major new industries or innovations in recent years that have resulted in major increases in employment.
Our country can only support so many teachers, healthcare workers, and government workers.
If the U.S. does not continue to innovate, we will ultimately lose our place as the most admired economy in the world.
U.S. corporations are more efficient than ever resulting in record profits, but unfortunately this efficiency has meant that fewer people are needed to run these companies.
New industries and innovations need to drive U.S. job growth. Unfortunately since Google and Facebook, there has not been major new industries or innovations in recent years that have resulted in major increases in employment.
Our country can only support so many teachers, healthcare workers, and government workers.
If the U.S. does not continue to innovate, we will ultimately lose our place as the most admired economy in the world.
Cost of Manufacturing in China Going Up
Expect inflation in Chinese produced goods to hit the U.S. in a big way over the next year.
Great article below:
http://www.smartchinasourcing.com/china-competitiveness/cost-of-manufacturing-in-china.html
Great article below:
http://www.smartchinasourcing.com/china-competitiveness/cost-of-manufacturing-in-china.html
Be Wary of Google Stock
Google stock closed below $500 per share for the first time since August 2007 today.
Google is exhibiting major heartburn over the proposed merger of Microsoft and Yahoo!.
Google owns the search market with close to 60% market share.
Yahoo! and Microsoft combined would have 35% market share in search providing a solid competitor to Google where no solid competitor exists today
Google stock looks like it has peaked and is ready to continue to move lower for the following reasons:
1. Technically the chart pattern in Google is weak with major support levels recently crossed.
2. With close to 60% market share in search, Google has reached its growth limits
3. Google has been on a hiring spree, hiring lots of new employees while the core talent exits the company, cashing out their stock options
4. Google is spending gobs of money on initiatives with little payback potential such as alternative energy and open wireless access that have little to do with their core software technology strengths.
Google is exhibiting major heartburn over the proposed merger of Microsoft and Yahoo!.
Google owns the search market with close to 60% market share.
Yahoo! and Microsoft combined would have 35% market share in search providing a solid competitor to Google where no solid competitor exists today
Google stock looks like it has peaked and is ready to continue to move lower for the following reasons:
1. Technically the chart pattern in Google is weak with major support levels recently crossed.
2. With close to 60% market share in search, Google has reached its growth limits
3. Google has been on a hiring spree, hiring lots of new employees while the core talent exits the company, cashing out their stock options
4. Google is spending gobs of money on initiatives with little payback potential such as alternative energy and open wireless access that have little to do with their core software technology strengths.
Saturday, January 26, 2008
Financial stocks strong this week
Financial stocks rallied this week from their lows.
Bank of America (BAC) was up about 8%.
US Bancorp (USB) was up about 9%.
Citigroup (C) and Wachovia (WB) were each up about 10%.
and Wells Fargo was up about 15% for the week.
When the financial stocks bottom, we will most likely have hit our lows for the year.
Price action in these stocks over the next month will dictate whether we have reached a short-term or long-term bottom.
Bank of America (BAC) was up about 8%.
US Bancorp (USB) was up about 9%.
Citigroup (C) and Wachovia (WB) were each up about 10%.
and Wells Fargo was up about 15% for the week.
When the financial stocks bottom, we will most likely have hit our lows for the year.
Price action in these stocks over the next month will dictate whether we have reached a short-term or long-term bottom.
Market valuations near 2008 lows
The global financial markets continued to deteriorate over the last 2 weeks.
Wednesday we hit a candlestick bottom where the Dow Jones Industrial Average (DJIA) rallied 600 points from its bottom.
On Friday, the gains from Thursday and much of Wednesday evaporated with a nearly 200 point loss in the DJIA.
The technical trend is still down.
Stock valuations based on book value and past earnings have not been been this low in over 5 years.
For long-term investors, this is a great time to invest.
In the short-term, continued volatility and earnings downgrades are expected as consumer spending continues to decrease and global growth continues to decelerate.
Wednesday we hit a candlestick bottom where the Dow Jones Industrial Average (DJIA) rallied 600 points from its bottom.
On Friday, the gains from Thursday and much of Wednesday evaporated with a nearly 200 point loss in the DJIA.
The technical trend is still down.
Stock valuations based on book value and past earnings have not been been this low in over 5 years.
For long-term investors, this is a great time to invest.
In the short-term, continued volatility and earnings downgrades are expected as consumer spending continues to decrease and global growth continues to decelerate.
Tuesday, January 08, 2008
Financials Need to Bottom First
The overall U.S. stock market will not change course and move higher until the financial stocks lead the process of bottoming and turning over. Unfortunately this looks far from occurring as numerous banks, brokerages, and mortgage lenders hit new lows today.
Either one of two events should occur in the near future to help the market hit a near term bottom: (1) a major Federal Reserve cut in interest rates or (2) a dramatic panic selloff that purges all weak and fearful holders of stock out of the market.
There is a strong likelihood that both of the events above may occur, creating a market panic bottom.
Unfortunately until all of the bad debt in the financial markets is identified and properly accounted for, a major long-term bottom is not likely.
For long-term holders of stock, this is a good entry point.
Either one of two events should occur in the near future to help the market hit a near term bottom: (1) a major Federal Reserve cut in interest rates or (2) a dramatic panic selloff that purges all weak and fearful holders of stock out of the market.
There is a strong likelihood that both of the events above may occur, creating a market panic bottom.
Unfortunately until all of the bad debt in the financial markets is identified and properly accounted for, a major long-term bottom is not likely.
For long-term holders of stock, this is a good entry point.
January 2008 Market Stats
For the first 5 trading days of the year, both the S&P 500 and the Dow Jones Industrial Average are down over 5% each and the Dow Transportation Average is down over 9%.
The 10-year trasury yield broke below 3.8% today as well making current dividend yields for many stocks looking very attractive.
So much for January being one of the best months of the year for the market.
The 10-year trasury yield broke below 3.8% today as well making current dividend yields for many stocks looking very attractive.
So much for January being one of the best months of the year for the market.
Friday, December 21, 2007
Bottom fishing now that tax loss selling is ending
Many stocks near 52-week lows are great bargains now. Downside is finally reaching a short-term bottom now that tax-loss selling for 2007 is wrapping up. Caution is still warranted as not all stocks near 52-week lows are considered worthy of purchasing.
Continued caution is still warranted for home builders, mortgage insurers, and airlines and transportation companies dependent on cheap financing and low energy prices.
Retailers can be selected cautiously given how beaten down they are.
International firms and cyclicals with high international exposure are still favored areas for purchasing beaten down names right now.
Continued caution is still warranted for home builders, mortgage insurers, and airlines and transportation companies dependent on cheap financing and low energy prices.
Retailers can be selected cautiously given how beaten down they are.
International firms and cyclicals with high international exposure are still favored areas for purchasing beaten down names right now.
Foreign ownership of US Assets continuing to increase
Foreign investment vehicles from Asia are continuing to gobble up US assets. A Singapore investment fund has recently announced a large stake in Merrill Lynch. This follows large investments by China, Dubai, and Australia in our country within the last year.
National barriers continue to blur. Soon people will be asking why U.S. taxpayers are paying for a large military to defend foreign owned assets when much of the U.S. will be owned by foreign interests soon at the rate at which foreign capital is being recycled back into the country.
National barriers continue to blur. Soon people will be asking why U.S. taxpayers are paying for a large military to defend foreign owned assets when much of the U.S. will be owned by foreign interests soon at the rate at which foreign capital is being recycled back into the country.
Time for Year End Rally
Many stocks have been decimated this year and with Christmas around the corner, we should see a short-term move higher through the first week of January. Whether the trend continues past the first week of January is the big question.
Outside of housing and the financial markets, the US economy continues to show strength.
Demand for employees with strong skills are still greatly in demand.
Outside of housing and the financial markets, the US economy continues to show strength.
Demand for employees with strong skills are still greatly in demand.
Tuesday, December 18, 2007
Financial stocks remain near record lows
There is continued concern that the credit defaults for subprime borrowers will spread to higher quality borrowers who are getting squeezed by the increased costs for debt obligations plus basic needs such as food and gasoline.
This concern is weighing on higher quality financial firms along with the lower quality names.
As a result of this concern, stocks such as Bank of America (BAC) now yield over 6%.
If one already owns financials, I would not be selling these stocks at these low levels, but holding on for the long-term.
End of year tax loss selling is only exacerbating the reduction in share prices for these higher quality names.
The stock market will not be able to recover without a recovery in the financial stocks.
As a result, any recovery in the overall stock market is unlikely until mid-year 2008.
For those with patience and the ability to withstand volatility, the large financial, industrial, and retail companies provide good entry points at this price level.
This concern is weighing on higher quality financial firms along with the lower quality names.
As a result of this concern, stocks such as Bank of America (BAC) now yield over 6%.
If one already owns financials, I would not be selling these stocks at these low levels, but holding on for the long-term.
End of year tax loss selling is only exacerbating the reduction in share prices for these higher quality names.
The stock market will not be able to recover without a recovery in the financial stocks.
As a result, any recovery in the overall stock market is unlikely until mid-year 2008.
For those with patience and the ability to withstand volatility, the large financial, industrial, and retail companies provide good entry points at this price level.
Subscribe to:
Posts (Atom)