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Zagzagel420
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12 year technician
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  • The Problem Isn't With Sirius, It's With The Markets...
        Much controversy and debate roots from this topic.  Why do companies lose stock value, while the company only seems to be growing stronger?  In this case, Sirius XM.

        Many longs across message boards are perplexed and in disbelief that their "golden egg" is losing value.  In what seems to be an almost day by day occurrence, (SIRI) continues to fall closer toward the recent 1.59 - 1.62 bottom established in August.

       Now when you compare the charts of other companies to Sirius XM, the picture isn't quite as bad as it seems.  Most companies have already broken below the recent bottoms established in August.  Sirius XM however, has yet to break through that point, which I like to refer to as "The Alamo".  I refer to it as such, due to the fact that it is the point from a technical perspective, where the chart has no near term support established. This causes a "last stand" type of mentality for traders.  In most cases, when this point is breached, most longs will exit, and shorts will pile in... (I believe Sirius can't be shorted at the moment because they have no shares available, but don't quote me on this).  This exact scenario is playing out across the board, especially in any bank stock you throw a dart at.  The fact that (SIRI) has not broken through "The Alamo" can be seen as a huge positive.  One could argue, the companies stock price is showing signs of strength the same as (LVS), and (AAPL) which have yet to break through their "Alamo" respectively.  To further support this theory, institutional ownership has been steadily increasing, from 38% to 41% in the last two months.  I can already hear the longs cheering as they read this...

    Now the bad news.  "The Problem isn't with Sirius, It's with the Markets"...  Where to begin...?

    Let's start with the good old U.S. of A., and ill spread across "the pond" later.  Specifically the 2008 Financial crisis, which has yet to pan out completely.  Currently the mortgage foreclosure rate is as high, if not higher than it was in 2008.  Many people are not paying a dollar on their mortgage due to the fact they are upside down.  Why pay the mortgage on a 500k house when it is only worth 250k right? right...  So banks that are already sitting on insane amounts of housing inventory are just watching the situation get worse slowly but surely.  Second, the same banks sitting on the housing inventory, are not giving out loans.  Qualification has gone through the roof since 08', leaving a lot less buyers.  All of this is mainly a problem for the banks, although it effects stocks in particular as the banks take hits on their balance sheets.  What we are currently seeing play out in stocks like (BAC).

    Then we have the national debt, which some argue really has no effect on stocks, and it is a normal part of the economic cycle.  Although it does effect our budget spending, unemployment rate as government workers lose jobs, and income tax levels as they rise, which all play out in the markets.  I don't really want to dive too far into this, although the point of mentioning it merely is, it's another point of uncertainty and another hit to investor confidence.  Oh yah, and it takes us to our next problem...

    S&P Downgrade of U.S. debt.  First time in our history that our country is not triple AAA rated.  Investor confidence?  You have to be kidding me right?

    Next we have unemployment.  9.1% as of July, hovering at the highest rates since the late 70's.  Link supplied:  http://data.bls.gov/pdq/SurveyOutputServlet  This is obviously the biggest problem in my humble opinion.  Lack of jobs = lack of consumer spending = lack of company earnings = lower stock prices to reflect earnings.

    Now that those "minor issues" have been outlined, we move over the pond to Europe.  Many Countries are highly in debt and are defaulting slowly but surely, starting with Greece.  As of friday, the Greek 1 year note was yielding 98%.  Meaning, you get a 98% return on your bond within 1 year.  WOW, great investment right? Wrong...  98% yield because every bond seller knows they will be worthless, and are willing to offer insane yields to sell the bonds.  Greece is defaulting, and the bond market is telling us this.  Once Greece defaults, every single European bank that has exposure will take hits to their balance sheets, big hits.  And that's just the beginning.  We still have a handful of countries lined up, Italy, Portugal, Spain, etc...   Now the problem for us, is on a few levels.  Europe happens to be one of our biggest importers of goods, which will inevitably lead to a further slow down on our side.  Also, some but not all of our banks have exposure to European banks, through stock holdings, and through inter bank lending.  Long story short, if European banks take a hit, so will ours, and so will our markets.  Once again we are currenty watching this play out in our financial stocks.

    Just the thought of all the problems, makes a person want to exit for good.  Luckily, we as investors and traders, have a nice healthy "greed bug" in us, which will prevent us from ever exiting for good.  With that said, we also have a very healthy "fear bug", which kicks in when danger is upon us, causing us to exit positions and sit on the sidelines.  For now, the "fear bug" is winning, the tide is lowering, and all ships are going down with it...  Including Sirius XM (NASDAQ:SIRI)... For now...


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: SIRI, AAPL, BAC, LVS
    Sep 10 4:20 PM | Link | Comment!
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