Managed to get my position of 1000 shares down to an average of 112.50 pence. Holding the 1000, will buy more on the dips.
Waiting for another big move down from the markets. Got a lot of cash at the moment and want to pickup bargains again. Will probably invest more heavily this time around.
Also bought 1000 shares of Level 3 Communications (LVLT). Just an impulse buy. Maximum loss is $700 so I’ll see how that one turns out.
People will say I’m crazy but that’s because people love bandwagons. Wal-Mart is a bandwagon stock. People have jumped on it because the economy is bad and everyone will shop for bargains.
If we look at the Wal-Mart valuation realistically though that is not going to happen. Wal-Mart was the stock to invest in 18 months ago as the bargain hunter stock.
There are some problems with Wal-Mart and the fundamentals of the markets.
Wal-Mart has a P/E of 17 and is valued at $225B.
Dividend is nothing to write home about
A lot of other big blue chips are in the 10-12 P/E range
If Wal-Mart is a good bet when the economy is bad what happens when it recovers? Surely the growth will stop?
If the economy stays bad for a really long period of time surely we are going to go into deflation and see Wal-Mart profits drop too?
Deflation will lead to asset prices dropping further and big funds will have to give in and sell into the $225B monster
If the economy turns good I think investors will take their money out of Wal-Mart and start putting it elsewhere where larger growth prospects are.
You see, I cannot see any reason to not short Wal-Mart when it is in the $58+ range
Nice rally today, I sold a lot into last weeks though.
Current holdings
4x NDAQ100 futures
100 Rio Tinto Shares
1000 SOLA Shares
I sold my 500 NVDA (Nvidia corp) last week at $7.75 and made 25c per share trading 500 last friday, wish I held on for the rally, but oh well it’s back down again. Also sold a NDAQ100 future today at 1200.
Lightened by position so I can concentrate more on work and load up if we dip down again.
Current Orders
BUY 500 NVDA @ $6
BUY 500 SOLA @ 90p
BUY 1 NDAQ100 @ 1102
SELL 1000 SOLA @ 180p
SELL 100 RIO @ 1505p
Google Finance: http://finance.google.com/finance?q=LON:SOLA
A huge selloff here on some news from JASO.
Just bought 1000 @ 134.25p
Limit sell set at 200p, will consider selling at 150p+ depending on other market conditions. Been wanting to get in on this company for a while though. Not sure about a long term hold at the moment. The way the markets are at the moment a long term hold may not break even for 5/10 years.
Buy the fear, sell the party
Update: Bought 500 more at 95 and sold at 110 and 500 @ 90 and sold at 105. I want around 2000 shares of this company. I am going to keep trading and if it drops heavily enough i may commit to another 1000.
I’m so glad I sold into the recent rally. I knew it wouldn’t last. Inflation is no longer an issue in the world. Depression is on the way. The only way we can generate inflation is to print trillions of dollars. Rate cuts do not inject that much money into the system.
http://www.bloomberg.com/apps/news?pid=20601087&sid=axScg04s0X38&refer=home
The reason inflation is not a worry any more is because cash is in short supply. All these hyper inflated assets are crashing in price. There is no liquidity in the markets to buy them and no one wants them because they are not worth anything.
I do not understand the BoE inflation targets though. Inflation has been over the target for the past couple of years. Why maintain such static numbers for inflation? Isn’t that childsplay? Surely we should be looking at long term inflation rather than just a one dimensional YoY basis. If inflation is 3% one year and 1% the next we’re looking good, why would we want to aim for 2%? We’ve had 5% inflation this year and he’s worried about a -1% drop in inflation. Considering what happened with oil in the past year it is not a surprise that we are deflating. Is he seriously saying we want higher oil prices just so our inflation number looks nice? Oil hit $145 and is now sat at $57. That is a good thing!
Our currency is getting killed at the moment too so that is surely sending prices of goods up?
I still don’t understand the obession with inflation targets and controlling the economy with the interest rate. It seems like the dumbest system ever. Isn’t there quite a bit more to the world than that?
Also why are they surprised that price of materials are sinking so much? If something goes up 100% then drops 50% it is back where it started. Yes a 50% drop sounds bad, but in the bigger picture it is really nothing. So long as things maintain equilibrium I do not see the point of fussing about deflation in commodities as an effect of a bubble.
Real deflation where everything starts dropping in price is an issue. I think that is on the way. Jobs are being cut heavily. Wait till unemployment rises and people are desperate for jobs. Supply will out weigh demand and wages will drop. That’s when we’re in for trouble, especially with the amount of debt around the world.
I’m glad the UK goverment holds all my debt and I’m sitting on a nice pile of cash. I can’t wait to go shopping!
No long sentences to confuse people here, just facts. What we know…
The Foundry Company
New manufacturing company
44.4% stake held by AMD
55.6% stake held by ATIC valued @ $700M (Abu Dhabi’s Advanced Technology Investment Company)
ATIC will add 1.4B in funds to the company with promise of $3.6 - $6B in investment in new facilities over 5 years.
$1.2B of AMD’s debt will be transfered (AMD debt is approx $5B).
Acquire Dresen fabs.
Plan to spend $3.2B on NYC fab.
AMD
$1.2B of debt transfered to TFC leaving approx $3.8B
Investment of $314M increasing stake to 19.4%
$700M from the TFC deal
No fabs
Huge loss of hard assets
No burden from fabs
So what has happened here? Basically a lot of strain has been taken off AMD but now they are effectively the same as Nvidia. They are a design company. The thing is if you are going to do this why would you want to use AMD’s laclustre manufacturing process? Why not just use TSMC?
This brings up the issue of the cross licensing agreement with Intel. How will this deal satisfy the requirements of the cross licensing agreement? I mean if it does then why not just outsource to TSMC?
Big investment also brings up a few other issues. AMD is currently allianced with other companies, IBM and Toshiba to name two big ones. Will these companies be so willing to keep the alliances they have made? Will they expect more from AMD now? The idea of this alliance is to cut costs. With AMD’s investors having cash falling out of their backsides I can see the others wanting a bit more in terms of investment from AMD. I have the feeling they have been getting what is almost a free ride on the back of IBM lately. AMD only made chips for itself before. If they are going to become a foundry they also become competition.
Another problem that is overlooked is the overhead associated with out sourcing. Assuming TFC will be a complete seperate entity from AMD the two companies will have to work together as seperate entities. This will add time delay to development. If this isn’t the case then I don’t see why the company was split since to me it would imply the company is just two logical units but still one physical unit. TFC wants to be a foundry though so once other orders come in AMD may not get the priority over fabs they are used to.
The issue for investors is dilution. AMD is now heavily diluted and 20% is owned by Abu Dhabi. They will have approx 660M shares outstanding once this deal goes through. That’s about 50% dilution since 2005 (approx 430M shares in 2005).
Lastly here’s a comment from Dirk. I never understand comments like this though
Dirk Meyer, AMD chief executive, said the move allowed the group to maintain access to leading-edge technologies without having to make the capital-intensive investments of semiconductor manufacturing.
Someone still has to manufacturing the chips and maintain fabs etc. The costs are still there, just not directly on AMD’s balance sheet. Is Dirk saying that TFC is just being made to be a huge corporate loss machine for AMD? AMD may get good prices however both companies will be striving to have balance sheets in the black.
Dow 11,015.69 -372.75 (-3.27%)
Nasdaq 2,178.98 -94.92 (-4.17%)
S&P 500 1,207.09 -47.99 (-3.82%)
JPMorgan Chase & Co. -13.28%
Wells Fargo & Company -11.61%
Bank of America -8.88%
The short ban is working well. It’s almost as effective as a tea towel on a burning house.
I’m annoyed the market is sinking though. I don’t have an options account yet. It will probably be too late to take advantage of this temporary bubble by the time mine is verified and activated.
This all reminds me of a quote from an old music production lecturer. “You can’t polish a turd”. No amount of fiddling with the free market will fix the fundamental problems of the financial markets. All they have done is well, made things worse.
Short sellers have sat back and seen that even longs have no faith in financial stocks. I’d expect financials to get hammered through October. Of course earnings is the key though. It’s all down to them. Check the consensus estimates. Wall St. is good at guiding really low so they can rob individual investors despite dire earnings.
Fridays rally has caused the worms of ignorance crawl out the woodwork. The short ban co-inciding with a huge rally must mean that shorts caused the markets to sink? The beauty of correlation causation fallacy.
Most of the ignorance is coming from the UK where the FTSE was up nearly 10% at one point. What these people fail to realise and research is the FTSE futures and the fact that the UK markets close before the American markets. Americans can trade ADR’s for UK stocks after our markets have closed.
When the FTSE closed at 4884 on thursday the DOW was trading at ~10620. When the dow closed thursday it closed at 11027. The FTSE and Dow have quite a strong 2:1 point relationship. If the dow moves 2 the ftse moves one. This is not absolute on a minute by minute basis but it is a general rule I use.
When the DOW closed on thursday FTSE futures closed at 5080. That is almost perfect 2:1
The FTSE closed friday @ 5310 +8.84%. The real FTSE rally from shot banning is only +4.5%. Still impressive but there are more factors to weigh in.
On thursdays news of the bank bail out American investors could cover their short positions. On friday on the news of the short ban they could also cover. For the UK it was different. All that news came in one go. All investors wanting to cover will have had to cover in the same trading day. Heavy short covering means buying. These two factors gave sellers a unique opportunity. The big boys knew they had an amazing opportunity to squeeze a huge amount of shorts.
Just as a market collapses if they are no buyers it bubbles when there are no sellers. Check friday volume for financial stocks. Lowest of the week for most. This includes the huge option blocks that go through too. Lowest volume of the week on quad witching day? That doesn’t sound like a liquid market to me. Liquidity is the problem in the markets too. So what has banning shorts achieved? It’s killed the last source of market liquidity.
There is a hate for shorts. Thing is it is not their fault. If people were buying stocks and the stocks wouldn’t go down. No one wants to buy junk bank stocks though. Everyone is sitting and holding hoping for the best. AIG LEH BSC have all shown us you can end up with next to nothing. The rest of the financial sector is not faring much better than nothing either.
EDIT: It’s monday today and what is happening to financials? They are sinking. Oh what a surprise. But how is this possible with short selling banned? Maybe it is because shorts are only a fraction of the market?
ABK and MBI are two of the monoline bond insurers that got hit heavily hit in the credit crunch. They regained some ground in recent weeks which was surpising since nothing has really changed for them.
ABK was trading near $10. That may not sound a lot but when you put in 150% share dilution that is $25! It appears no one else in the market looked at this fundamental factor. They are probably all too busy drawing stupid lines and plotting worthless averages all over the graphs.
Well yesterday ABK and MBI were put on ratings reviews. Is this any surprise? Why would anyone suddenly think these companies were fixed and on the road to making profits anywhere near pre crisis levels?
As a result ABK has tumbled and MBI will probably go too. It’s a shame I couldn’t short ABK though, not because of the short ban but simply because it’s not a stock that I have been able to buy or sell since it got removed from the S&P 500. When it was up near the 10’s a week or so ago it just looked like a diamond opportunity. MBI is looking the same, but with a short selling ban on financials I will miss out again.
Maybe I should get off my ass and get an options account?
Some really interesting news today
LEH files for chapter 11
http://www.marketwatch.com/news/story/lehman-file-bankruptcy-protection/story.aspx?guid={50D06AF4-0AD5-4B38-8206-D4C8D6E62EC7}
BAC buys MER.
http://www.marketwatch.com/news/story/merrill-lynch-bought-b-50/story.aspx?guid={CF19C66B-BEBF-4A50-AA1C-88BDE2D21FAE}
Massive news but a lot of other things have happened and will be neglected as important because they are not seen to be as significant as the bankruptcy and acquisition.
AIG Seeks $40B loan :O
http://www.marketwatch.com/news/story/aig-seeks-40-billion-loan/story.aspx?guid={F588B80C-2D77-43A2-A2B8-85BE4CC2C85B}
Banks setup $70B loan programme
http://online.wsj.com/article/SB122144631339134981.html?mod=mktw
ECB and BOE inject more money into markets
http://www.marketwatch.com/news/story/european-central-banks-inject-funds/story.aspx?guid={FB0CA8CD-48E9-48CC-996B-F219C8027E69}
Fed increases lending facility
http://online.wsj.com/article/SB122143939332934501.html?mod=mktw
Markets are sinking. No one will want to buy today. I’m not sure what to expect in the near tearm but I’m swinging towards an “unrealistic” rebound as loan liquidity gets sunk into the market.
Unfortunately I own some Nasdaq 100 but I’m hoping it won’t be hit too bad since there are no financials in it!