User 283977

Candidates to Replace GM, Citigroup in the Dow

The purpose of an Index is that it is representative of what you are trying to measure. As a consequence, there should be representatives from key sectors of the US economy.

If all they want to do is to make a substitution, I would replace GM with a steel company like Nucor (NUE) or US Steel (X). While I was at it I would also remove City (C) and replace it with Wells Fargo (WFC) or Bank of America (BAC).

As to the effect of the replacements on the Index valuation, remember it’s a 'scaled' average. So when replacements are made, they change the scaling.

If they really want the Dow Index to be representative, then they need to consult with a technical expert that is an expert in the design of representative Indexes.

eBay Offers Something Amazon Cannot

Future performance of these two companies will be determined by how happy their customers are. There are quite a few negative comments about Ebay on Seeking Alpha with respect to its management and the changes made by that management from both buyer and seller perspectives. Its easy to bump a companies bottom line short term. The question with respect to being long on Ebay is very much a question of customer (buyers AND sellers) satisfaction, specifically with respect to the changes by the current management. Based on what I have seen posted by Seeking Alpha members, Ebay might be a better short prospect.

Why I'm Selling Apple and Google Today - and Holding Amazon

If you are going to purchase Apple, Google, or Amazon, what is your six month projected profitability, and how did you come up with that figure? Is there a reason why Apple's sales should surge in the next six months? Google's earnings are based on advertising revenues. Will advertising revenues surge in the next six months? Amazon tends to drift somewhat downward after the Christmas season, but there is not a lot of data on that. However, it seems logical that retail should do best right after a successful Christmas season, and that people are more likely to sell right after peak sales for the year. So I would think Amazon will start trending downwards for a while.

I agree with the Authors decision to sell Apple and Google. They are great stocks, but given the current market conditions, I think they are mostly going to be moving sideways. And yes, Apple is going to be putting out some more insanely great products. However, I suspect people are in a cash conserving mode, and they will put off purchases of things they really don't need until they feel safer with respect to their economic prospects. I have two G4s that I want to replace, but I am waiting. Amazon appears to be at a support level, and the next support level is around $75. I see more downside potential than upside for Amazon in the next six months. So I would wait.

The perception of Apple, Google, or Amazon being currently cheep is based on their market valuation during a large speculative bubble. It took many years for that bubble to form. Ruminations that Google is going to be back at $500 to $600 at the end of 2009 do not seem realistic. Yet if you look at the current S&P projected year end price of Google, its $500…. Of course, S&P provide no method for their projections. This leaves the investor to wonder if the projection is valid, or if S&P is touting the stock….

Wall Street Breakfast: Must-Know News

Since the price of oil has recently substantially dropped, I suspect Kuwait may be signalling it wants to renegotiate. The ROH deal is now under a cloud… I would think ROH's price will be dropping, and that opens up yet more wiggle room for renegotiating.

Doom and Gloom for Retail Sales, Both Online and Off

Good article... here is another point that might merit consideration...

The recession is putting a lot of pressure on city and state governments to raise sales tax. This is what is happening in California. The Internet provides a way to avoid those increases, and with the price of oil down, shipping costs are going down... Based on this I would reason that while retail sales are going to decrease, Internet sales should drop less. In a way, the recession should accelerate the transfer of proportion of sales from brick and mortar retail to Internet retail.