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David White
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David White is a software/firmware/marketing professional and a long time investor. He has worked in the networking field, the semiconductor equipment field, the mainframe computer field, and the pharmaceutical/scientific instrumentation field. He has bachelor's degrees in bioresource sciences... More
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  • RIG Falls Hard on Tepid Results

    RIG was down 5.51% today after it reported a 4% decline in Q4 profit year over year. It has pulled many of its shallow water jackup rigs off the depressed market. 28 of 65 are now inactive. Earnings were $2.21 -- well short of the analysts’ estimates of $2.56. Revenue declined 16%. 2010 results are now expected to be about 5% below current analysts’ estimates. The Q4 results were further driven down by a tax dispute with Brazil. This was settled for $142M. The outlook for ultra-deep water rigs is very strong. The outlook for deep water rigs is good. However, the outlook for the shallow water, jackup rigs is still tough. Much of the shallow water work in the Gulf of Mexico has already been done. Some other areas can say the same. Much more work now is in the deep water and ultra-deep water areas. This may pressure RIG’s jackup rig results for quite some time.

    This is a great company, but even its deep water rig performance in 2010 may be in question as 5 of its deep water rigs are becoming available in 2010. RIG expects to find work for these rigs, but doubt persists. It is probably best to stay away from this stock in the short term. Technically it has broken through its 200-day SMA, which is negative. Plus there may be an equalization period of 2-3 weeks in which analysts may come to a lower consensus agreement on performance in 2010. This could result in further downward movement. That being said, 2011 performance should be better than 2010. Oil prices are going up worldwide. China is now the world’s largest new auto market. It will use more and more oil for gasoline. It will use still more oil for manufacturing, heating, etc. India will use more oil. It’s economy is growing quickly even in 2010. As a long term play RIG is still a great buy, even with the above problems. As a shorter term play, you may want to wait for the analysts to gain a consensus agreement. A chart of the stock is below:

    1 year RIG chart:


    NOTE: The Williams %R data in the chart that shows that RIG is over sold in the very near term.

    Disclosure: I have no position in this stock
    Tags: RIG
    Feb 25 12:05 AM | Link | Comment!
  • Obama Typical Pol? Champions Medical Care For All. Ignores Free Clinics.

    In these days of high unemployment more and more people are going without medical care. President Obama has taken this opportunity to push his socialized medicine agenda. He is right that costs have to be contained. I am not sure how right he is in exactly how he intends to go about it. Meanwhile the bills he proposes wallow in Congressional debates ad nauseum. They may never emerge. Alternatively they may emerge as an even more costly health care system that stifles American businesses and individuals with another huge tax burden. The taxpayers cannot afford this burden.

    In this time of hardship there is action that can be taken immediately. The Congress could enact a big jump in funding for free clinics for the next 3 years or more. Most of these clinics survive largely on charitable donations. Plus they get help from the federal, state, county, and sometimes city governments. Virtually all of the labor is free. They spend their money on medicine and clinic supplies. Often their facilities are donated by churches, etc. They help millions nationwide. They are as strapped for cash now as everyone else. Their county and state governments cannot afford to give them money (or as much). Instead of serving more people as they should be during these times of strife, they are forced to serve fewer. Failing to allocate money for these terrifically efficient and “cheap” medical providers is a perfect case of being penny wise and pound foolish!

    We do not know if Obama’s socialized medicine plan will succeed. We do not know when or if it will be enacted. We do know a lot of people need medical care. Most free clinics actually provide good quality medical care. They make up for any lack of knowledge by their thoroughness. Volunteers really care about the people they are serving. They donate their time. The free clinics don’t have to pay for complex medical billing. They don’t bill. This is another cost saved. Congress should acknowledge their benefit in these times of strife by providing for them. They should not be shrinking in these hard times. They should be expanding their services. They need money to do this.

    Funding free clinics more would likely cut down on state and federally supplied medical care costs. Many people would prefer not to have to fill out all of the forms. Administrative costs for screening many questionably qualified individuals would go down. Many individuals would go to more advertised and more well supplied, much cheaper for the government, free clinics. Tremendous amounts could be saved in visits and clerical costs alone. It often costs more money in clerical costs for state programs to reject someone's request for aid than it costs for a free clinic to provide the treatment the person needs. Many more who do not feel qualified for state programs would seek the medical assistance they need. This might save yet larger costs for the governments down the line, as those people would be prevented from becoming more seriously ill through non-treatment.

    Why is this not being done? If it is, I certainly haven’t heard about it. I think a lot of free clinics haven’t either. My thought is that this type of thing would be viewed as a temporary and perhaps minimal fix. It would likely help. However, the backers of the socialized medicine initiative don’t want it because it would lessen the need for the change they are proposing. Plus it would use up some of their political capital to get this sort of bill passed. The more capitalistic (republican) Congress persons don’t want it, because they are opposed to any type of socialism. The average Joe or Jane suffers! The taxpayer suffers!

    The lack of a major initiative by the Obama administration to increase the funding to free clinics substantially during these hard times is hypocritical. Obama has to pay attention to politics if he is going to get anything done. However, he should be paying attention to the needs of his country at the same time. If he can spend billions to bailout the automakers or AIG to benefit Americans, he can spend say $10B to provide stop gap medical care for many needy Americans. He doesn’t need to start new free clinics, although that could happen. He simply needs to give the existing ones a chance to provide good care to the many needy. If a free clinic spent say 80% of the monies on supplying medical services to the community, it should qualify. Even free clinics need a few salaried people to order the supplies and organize the show, etc. My own belief is that any money spend on these free clinics would be more than made up for by the consequent decrease in use of more expensive “main stream” county, state, and federal medical care programs. Certainly many more people in desperate need of medical care could get it more easily.

    Will Obama step up on this issue? Or has he become what he claims he detests -- a typical Washington Pol? Changing the banking system in one fell swoop would likely be disastrous. Many realize this. Changing the medical system in one fell swoop would likely be just as disastrous. These things both need to be well thought out. They both need to be phased in. A free clinic initiative might give many people help while Congress makes up its mind how to change the current medical system. I would agree with Obama that it does need to be changed. It’s expenses are simply growing too quickly. However, that is not excuse for ignoring the present.

    Disclosure: no postions directly related to this
    Tags: SPY, DIA, QQQ
    Feb 07 6:26 AM | Link | Comment!
  • Reasons For A Negative View On The Equities Markets In The Face Of A Good Earnings Season

    1) Marketwatch: Fannie Mae and Freddie Mac are checking files for underwriting flaws and forcing banks to repurchase those loans. The biggest losers are likely to be BofA, JPMorgan, and the mortgage giants themselves, who will still be stuck with billions of dollars in properly-documented delinquent mortgages. More bad news for BofA and JPM is not what the market needs right now.

    2) China tightening means lower than expected construction. It means lower than expected growth. This means lower than expected demand for industrial metals, wood, etc. China tightening also means fewer loans will be given to buy big ticket items. This includes houses and cars. Tightening means China will have to export more industrial metals, etc., or it will face big layoffs. It will likely face some amount of deflation in industrial metals, and in real estate (both commercial and residential). When the China stimulus package ends (more layoffs), these problems will be exacerbated, especially in industrial metals. The extra export of industrial metals by China (especially to avoid layoffs) will likely have a negative impact on world industrial metals prices and margins throughout 2010 (and possibly beyond). This may lead to depressed prices on base metals a little later.

    3) The USD Index has been generally rising for the last two months. It has risen from approx. 74 to almost 80 at the close Friday Jan 29, 2010. This is putting a lot of pressure on the USD carry trade. Many are already selling things to repay their borrowed USD’s before they go up more. One of the things they are selling is stock. This often means they are selling the “hot stocks” because those are the stocks these “risk on” traders own. When you see these “hot stocks” go down, it may not mean there is something wrong with them, it may only mean they are heavily owned by some very serious investors. The recent heavy drop in technology issues may be an example of this. The downtrend in the Hang Seng Index is evidence that money is getting tighter there.

    4) The Fed is inching closer to stopping its buying of MBS’s in order to support the real estate market. The home buyer tax credit is edging closer to expiring. This is definitive tightening by the Fed. Governor Hoenig has even come out in favor of raising rates soon. Plus we all know Fisher is a hawk. This would be another negative for the market. These things all make analysts think that the real estate market is in for more trouble in the immediate future. As the real estate market goes, so go the US credit markets, so go the equities markets.

    5) The financial trouble in Greece has put the focus on possible sovereign debt defaults. The EU has said they will bail Greece out if need be. However, many people think Greece is just the tip of the iceberg. There are many other European countries that are in trouble such as Spain, Portugal, Ireland, Italy, etc. S&P even warned the UK about possibly downgrading their debt rating. After you get done with Europe, many also point to California and other states that are in terrible financial shape. Whatever ultimately happens, the CDS’s for sovereign debt have already gone up dramatically since early January. This means the cost of borrowing has gone up. This is a very negative thing in countries trying to recover from a recession. It means the recovery time will be longer. It means the possibility of slipping back into a recession is higher.

    6) Many think US equities are over priced. They are temporarily oversold in the near term, but that still may not mean they will not go down. If they are over priced in a worsening environment, then they are very over priced. Some think the S&P500 Index only rates a value of about 900. If the analysts’ outlooks for 2010 and beyond are worsening, the pundits may push the market down drastically from its current value. Commodities will likely fall too.

    7) Obama’s bashing of top US banks is making people feel uncertain about even these stalwarts’ future. Are they going to be broken up? Are parts going to be required to be split off? How much is all of this going to cost? All of these are worries for the markets. All of these tend to pressure banks, which already face real estate and credit card problems, with still further negatives. Changes necessitated by new US or even worldwide regulations seem likley to hurt banks profits in the near term.This is bad for the equities markets.

    8) The price of oil may be a problem again in the near future. The phrase “peak oil” is being mentioned with increasing frequency. 2009 levels were very comparable to 2007 levels of use (less by the US but more by emerging economies). The worldwide demand is supposed to grow by approx. 1M bpd in 2010. Further growth is expected in 2011. Many are now suggesting $100+/barrel oil in 2011. This will be a big negative for a US recovery. High oil was one of the principal reasons for a US recession.

    9) Now that the recession is perhaps over, many are turning their attention to the US budget deficit. Worries are proliferating about the US having trouble selling its bonds in the near future. It seems fairly certain that the US will have to give buyers higher yields soon. This in turn will make it harder for the US economy to thrive.

    10) The US equities markets rallied in early Jan. before earnings, when they had no really valid reason to do so. This may have pushed them farther into over bought territory. It may partially explain the recent quick drop.

    11)   With the first real sign of weakness in the markets since March 2009, people who have made 60% profits since then may be anxious to take some profits, especially if the outlook seems to be in danger of changing.

    12)   Much of the reason for the great +5.7% GDP number on Friday is purported to be inventory restocking. With a lot of stimulus spending due to take palce in 1H 2010, GDP numbers may stay up, especially with some inventory restocking still to come. However, looking out beyond 1H, there will be little stimulus and little inventory restocking. Many are worried the US economy will flounder, especially if there is a significant credit collapse due to further real estate problems. Further we have not seen job growth yet. This is needed for the recovery to take a firm hold.

    12) I am sure I have neglected to mention many items. Please feel free to add these in the comments if you wish.

    In all of this one should not lose sight of the fact that earnings have improved. In Q4 results we are seeing significant revenue growth from a number of companies. This bodes well for the future. The balance between this and other factors may make for a very choppy market. Just when you think it is headed down for sure, it may head back up (or vice versa).

    The chart of the SPY ETF gives us a good picture of recent market action. The market has fallen swiftly from approx. $115 on the SPY to Friday’s close of $107.39.


    Good luck trading.

    Disclosure: no positions in SPY
    Tags: SPY
    Jan 31 9:25 AM | Link | 1 Comment
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  • I meant to say DURATION not Distribution. A good reference on this is
    Nov 17, 2015
  • I am doing well compared to others who wrote a lot about energy and basic materials. Can't really compare that to a strictly finance writer.
    Nov 17, 2015
  • My rating plummeted with oil. I did obviously shift to writing about finance, REITs, and some healthcare.Rating system doesn't work for this
    Nov 17, 2015
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