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  • FOMC Minutes: Support is growing for additional action "fairly soon," unless there is clear strengthening of the economic recovery. QE3 is among possible actions, but other options discussed included extending the announced period of ZIRP, or reducing interest rates on reserves. [View news story]
    "raising interest rates on reserves"

    I don't understand this point. This would be a tightening as banks would hold even larger reserves and get rewarded for it. Reducing interest rates on reserves might force banks to lend more, otherwise this is just another stealth bailout of the banks.

    Please correct me if I am wrong on this as I must be missing something.
    Aug 22, 2012. 02:17 PM | 2 Likes Like |Link to Comment
  • More on Existing Home Sales: The median home price rose 9.4% Y/Y thanks to higher-end homes representing a bigger slice of the home sale pie. NAR spinmeister Lawrence Yun is worried about low inventory, not demand, and calls for builders to build and Fannie, Freddie, and the banks to push their stable of foreclosed homes onto the market. [View news story]
    Two sides to these transactions: buyers and sellers.

    For buyers, it would seem like an excellent time to buy and even with the risk of further declines you are already starting from a low base to begin with so in absolute numbers, risk is a lot less than it used to be.

    Sellers on the other hand are now faced with locking in a loss if they bought at any time within the last 9 years or so especially in the bubble areas. I suspect the psychological impact of this event is yet to be felt as it dawns upon people that the drop in house prices they have heard about actually applies to them.
    Aug 22, 2012. 12:49 PM | 1 Like Like |Link to Comment
  • MBA Mortgage Applications: -7.4% vs. -4.5% last week. [View news story]
    And this is with record low rates.
    Aug 22, 2012. 09:23 AM | Likes Like |Link to Comment
  • 2 Things To Do And Not To Do When Your Investment Thesis Proves Wrong [View article]
    James,

    That's a very nice writeup.

    I do, however, have a concern about this statement:

    "In particular, it is my view that all investors should revert to cash/short-term bonds (including money market funds)"

    Contrary to popular belief there is a potential risk of principal loss in money market funds which means that with zero return you are accepting "return-free risk" (to borrow Gundlach's phrase) in exchange for the convenience of parking your money.

    I would rather choose any of a number of online savings accounts (Capital One, AMEX, ING, etc.) that offer FDIC protection and small but still positive returns. They are generally very flexible and account transfers can be completed quickly. AMEX is the best in the speed of transfer as it historically transfers money into an account the next day. You can link all of these to brokerage accounts.
    Aug 21, 2012. 04:19 PM | 4 Likes Like |Link to Comment
  • Could tablets eventually cannibalize smartphone sales? In spite of the obvious arguments against the idea - a tablet can't fit in your pocket, and holding one against your ear is uncomfortable - it's gaining believers, thanks to the popularity of 7" tablets and Samsung's (SSNLF.PK) 5.3" Galaxy Note (just passed 10M sales), as well as video-calling and VoIP tablet apps. Samsung is reportedly prepping a 5.8" device that would further blur the line between smartphone and tablet. [View news story]
    X-money,

    Any phone larger than 3.5 inches in screensize is by definition a larger screened phone. The S2 has 4.3 inches at a minimum. HTC also has a large screened phone. My LG is larger even though it is an older model.

    They have sold many millions of all of these phones.

    You should keep an open-mind on the subject because it is easy to fall in love with an investment and be blind to the risks especially when things change. Remember the Crackberry?

    Anyway, nothing against AAPL it is a phenomenal company but with the loss of Jobs you may be seeing the early stages of missed opportunities and weaker strategic vision.

    You can google S3 to get the following without much effort:

    Techradar:
    "Number 3: iPhone 4S
    UPDATED Top mobile phones compared: what phone is best for you?
    Make no mistake: the Samsung Galaxy S3 is the best smartphone on the market. It's got every kind of feature we could ask for and more, and raises the bar once again in terms of what consumers should be expecting in terms of battery life, processor speed and media management."

    Iphone 4S number 3 on the list.

    http://bit.ly/RbYXJx

    Newbies looking for a phone always google to help make a decision on what to get. Ignoring this fact is not wise.

    I am not making predictions on the stock price as it looks like it is still cheap but the competitive risks are growing and if you have done well with the stock, congratulations! The question is would you buy it in the same amount today?

    Expectations for the new Iphone are sky-high which is scary if it does not live up to expectations.

    From TechCrunch on July 23rd:
    http://tcrn.ch/RbYVBk
    "A new survey out from 451 Research/ChangeWave on consumer smartphone sentiment found that Apple’s iPhone 5 — whatever that may turn out to be — is seeing an “unprecedented” wave of advance demand — higher than any other iPhone model has had before, with 14 percent of respondents saying they were “very likely” to buy the iPhone 5."
    "A key difference here, which should be noted, is that while Apple has yet to any anything official on its next iPhone, the Samsung Galaxy S3 was launched months ago, and so people who are being canvassed would have already known more about what the device had (or didn’t have) when responding — even if the phone had yet to hit the market. In the case of the iPhone 5, ChangeWave says that it presented respondents with a description of “probable” features for the device.

    Those included a larger screen, better camera, new OS and 4G capability."

    That last line ( "larger screen") is what users want in the new Iphone 5 according to their research.

    Good luck.
    Aug 20, 2012. 02:15 PM | 1 Like Like |Link to Comment
  • Interest Rates: The Darkest Black Swan Ahead? [View article]
    Benny,

    "People buy payments, not price."

    That is a profound statement. Explains the whole buying process in as few words as I have read anywhere else.

    A few years ago it was all greed driven based upon future price appreciation so when you have eroded this relationship, you make it more about the living in a home rather than the home as investment which might explain the still tepid home ownership interest despite the record affordability.

    I can see rising rates increasing the cost of ownership but not the price of houses until we have a much stronger employment market, and in fact, I surmise the price of a house would have to fall to maintain the same payment structure now that 20% down is almost a given. I think the balloon payment option is a thing of the past but you never know :)

    A rising rate environment might make existing MBS's more attractive however as pre-payment risks go down despite the potential for a rise in default risk.

    ZIRP has certainly turned the investment environment on its head and created incredible interest rate risk for just about anyone who holds a fixed income investment which includes just about everyone alive today. Pension funds must be scared out of their wits by what the future holds based upon the duration risk that has been created.

    Funny no one thought ZIRP was going to be a permanent investment fact when it started five or so years ago. I would never have believed it back then and I still don't believe it now :)
    Aug 20, 2012. 11:25 AM | 2 Likes Like |Link to Comment
  • Caterpillar (CAT) CEO Doug Oberhelman gives a sobering outlook for the world economy, saying that while the prognosis is not as bad as at the start of the financial crisis in 2008, it's more uncertain. "The storm clouds are around things that none of us know about - like what will happen with the political situation in Europe," Oberhelman says. [View news story]
    Interestingly he rarely ever sounds this bearish.
    Aug 20, 2012. 09:33 AM | 3 Likes Like |Link to Comment
  • Could tablets eventually cannibalize smartphone sales? In spite of the obvious arguments against the idea - a tablet can't fit in your pocket, and holding one against your ear is uncomfortable - it's gaining believers, thanks to the popularity of 7" tablets and Samsung's (SSNLF.PK) 5.3" Galaxy Note (just passed 10M sales), as well as video-calling and VoIP tablet apps. Samsung is reportedly prepping a 5.8" device that would further blur the line between smartphone and tablet. [View news story]
    With bluetooth or just a good set of headphones you don't need to put anything up to your ear so the whole limitation on size idea is only an issue when it's heavy or doesn't fit in your pocket.

    My wife spends more time on her S3 than she does on her laptop which is a complete reversal from when she had her BB Pearl.

    What's truly threatened is the high-end laptop.

    And for you AAPLbots, I personally don't understand why AAPL just doesn't offer more choice for those of us who want a phone with a bigger screen. Why not offer both?

    It's weird because it is obvious that AAPL is losing some sales that they would be getting if they offered more variants.
    Aug 19, 2012. 10:56 PM | Likes Like |Link to Comment
  • Fins Prepare To Slip Away, Merkel Fantasizes About Political Union [View article]
    UI,

    You will like this quote from WSJ blog in May 2011:

    http://on.wsj.com/P7snoF

    Prime Minister Jean-Claude Juncker, the man who is the head of the Eurogroup council of euro-zone finance ministers. Mr. Juncker, who has been prime minister of Luxembourg since 1995, has been president of the Eurogroup since 2005. In that position, he bears primary responsibility for communicating the euro-zone’s financial and economic posture.

    On the tape, Mr. Juncker says he has “had to lie” and, speaking about touchy economic topics, “When it becomes serious, you have to lie.”
    Aug 19, 2012. 01:19 PM | 3 Likes Like |Link to Comment
  • Valuentum's Outlook For The Market [View article]
    UI,

    I agree with both points.

    On point 1, with ZIRP this could continue indefinitely and the perverse incentive this creates for management means it will continue.

    On point 2, James Montier of GMO did a really good analysis of this issue that is well worth the read. I suspect you have already read it but in general, the monetary flows of the overall economy are an accounting identity and therefore deficit spending has to show up somewhere and in this case it appears that corporate margins have benefited disproportionately. However with recent fiscal "tightening" (as in incremental growth of deficits) this could become a negative drag for margins which may explain why earnings' growth has slowed noticeably.

    Link to the Montier piece:
    http://bit.ly/RajFte
    Aug 19, 2012. 12:53 PM | Likes Like |Link to Comment
  • Why low volume actually is bullish, according to Ryan Detrick: Total-dollar volume is higher now than in the 2003-07 bull market, so how can bears say lower share volume is bearish? "As long as volume stays low and bears use it as ammunition for lower prices, just smile and nod your head, knowing this isn't true." [View news story]
    Here's the conclusion to the piece:

    "In conclusion, does stock volume matter? A few years ago, I would have said absolutely. Now, after this study, I'm not so sure. Nonetheless, the results speak for themselves."

    I defy anyone to try to draw any possible actionable information from this "analysis".
    Aug 18, 2012. 11:34 AM | 4 Likes Like |Link to Comment
  • July Leading Indicators: Leading Index +0.4% to 95.8 vs. +0.2% expected, -0.3% prior. Coincident Index +0.3% vs. +0.2% prior. Lagging Index +0.4% vs. +0.2% prior. [View news story]
    Big improvement from June reversing the negative trend of the prior 3 months. Slow growth but hard to see recession here in the short-run.

    Perhaps this really does take QE3 off the table.
    Aug 17, 2012. 10:10 AM | Likes Like |Link to Comment
  • Valuentum's Outlook For The Market [View article]
    "And while bottom-line expansion hasn't been entirely driven by sales growth (only about 43% of companies that have reported second quarter results exceeded top-line consensus) and third-quarter earnings may face some material headwinds (namely from foreign exchange and higher input prices from the drought in the US), we continue to think the domestic economic backdrop is encouraging (even if it may not be robust)."

    That seems like the most accurate piece of this analysis and it makes sense. Why wouldn't stocks pull back regardless of the path of the economy if this is true?

    This weak performance in top-line results came after all the downward revisions in estimates prior to the quarter's inception so in some ways it is even worse.

    This market is running on momo juiced by algos and the rise of the machines :)
    Aug 16, 2012. 10:30 PM | 1 Like Like |Link to Comment
  • Groupon (GRPN -27%) had its defenders on this dark day. Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript[View news story]
    SA,

    You think GRPN is one of those "different types of companies deserve different types of P/S ratios"?

    I don't. I think its a dog.

    There are literally thousands of companies worldwide that are more interesting and offer a better ROI. No reason at all to settle for a company that relies upon complex accounting methodology and revenue recognition policies to explain its business.
    Aug 15, 2012. 06:16 PM | Likes Like |Link to Comment
  • Groupon (GRPN -27%) had its defenders on this dark day. Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript[View news story]
    SA,

    It does no such thing - you do not ignore the things you mentioned. You start with PSR and if it doesn't pass that screen, it is very likely not a "Super Stock" as defined by Fisher. The link I provided also addresses those other ratios that cover capex, R&D, etc. and it fails all of those tests as well.

    The purpose of using PSR is to force discipline on your investing process and to stop you from buying crap like GRPN in the first place. You focus on stocks that meet the PSR criteria and then do further fundamental analysis as you suggest.

    I recommend the book "Super Stocks" as it is a very worthwhile and profitable read.

    Why analyze a pig when you can analyze a star?
    Aug 15, 2012. 10:56 AM | Likes Like |Link to Comment
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