Quaestors Investment Blog

MSN Strategy lab

2006-04-03T21:38:00.000-06:00

Interesting take on ICICI

As for Suntech Power Holdings (STP, news, msgs), which I hold, and ICICI Bank (IBN, news, msgs) which I dropped, the outlook is mixed. Suntech is involved in the planned floatation later this year of a second Chinese solar company, this one a power generator. The full details of how the future initial public offering on the New York Stock Exchange will be structured, and what the price will be, are unknown. But the assumption that Suntech will be hurt if one of its customers goes public is just silly.

ICICI will be affected by the Reserve Bank of India (the central bank) examination, slated by the end of July, to decide whether to lift all exchange controls on rupee capital exports. Currently, India allows some modest capital exports to invest outside the country. But, to date, most of the liberalization has involved current-account capital exports -- sending or spending money outside India for trade-related transactions.

If the capital-account liberalization goes forward (it did not the last time the New Delhi central bank toyed with the idea), the effect may be to enhance the fees going to Indian banks like ICICI. But ICICI may also face increased foreign competition as the ceiling on foreign ownership of Indian banks will probably also be lifted from the present 5%. India intends to turn Bombay (Mumbai) into a regional financial center; to do this, the silly rubber-stamp raj has to be got rid of.

The country has foreign-exchange reserves equal to 13 months' worth of imports. Its booming stock markets can grow even higher if foreign money can come in without the cockroach trap (that it cannot go out again).

Emerging-market funds, non-resident Indians, institutional investors and Indian funds -- are all waiting for the Reserve Bank of India to move. Then, there will be more inflows, a stronger currency and a better stock market. But right now, the Sensex (The Bombay Stock Exchange's 30-stock benchmark sensitive index) is the best in the world.

Old wine, Old bottle : peaked and tasting better

2006-03-27T18:26:00.000-07:00

One up on Lynch Street

Fool.com: Nygren's Master List July 29, 2004

2006-03-25T00:19:00.000-07:00

Fool.com: Nygren's Master List : Interesting read. I really enjoyed this interview. The key thing I took away from this is that we should study success to be successful. We should look at our successful trades and see how we pulled it off, and then analyze why we failed in the one's we thought we would succeed.

Enjoy.

Folly Volley : Chipotle Mexican Grill

2006-03-23T11:05:00.000-07:00

A fool take on CMG

More ways to use the latest ETFs

2006-03-20T21:26:00.000-07:00

More ways to use the latest ETFs

Can't get enough of these good tips! Nice read. VSP, if you were into CMG - you will love THI

Sensex 18K by 2010! Here's why

2006-03-20T15:36:00.000-07:00

Sensex 18K by 2010! Here's why

Interesting article in REDF. Not that I am into TA, but thought this one was good.

Like Buffett, only better

2006-03-11T10:56:00.000-07:00

Markman rocks in his analysis of BRK 's annual letter and has an opposite view on Buffet. He has a couple of picks himself (LUK, BAM) which beat the current BRK over 2,5, and 10 year periods. Check them out.

Like Buffett, only better

Time For Google To Grow Up - Forbes.com

2006-03-09T23:54:00.000-07:00

Time For Google To Grow Up - Forbes.com

Not being overly bearish currently as that seems to be the prevailing sentiment. (dont get me wrong half the people are more mad than bearish at google). In this world of instant gratification, we need a sane voice like this.

I like his site the internetoutsider.com also.

I would definitely load up on out of the money puts. This one has a long way to go before it begins a reversal. Always be hedged.

2005 Berkshire letter.

2006-03-04T12:52:00.000-07:00

I dont think anyone can write about their business like a story like he does.

Enjoy this - Berkshire Hathaway 2005.pdf

The Secret To Google's Success

2006-02-27T08:09:00.000-07:00

The Secret To Google's Success

Interesting article in business week.

The Strange Case of the Blind Investor at Market Top - MarketWatch

2006-02-20T18:56:00.000-07:00

The Strange Case of the Blind Investor at Market Top - MarketWatch

Interesting article. Super bearish!

Google's Pitch Stays Inside

2006-02-18T12:54:00.000-07:00

Google's Pitch Stays Inside

Very Very interesting. I read this article just after watching "Enron: The smartest guys in the room" (which I beleive is a must see for any one who considers himself an investor) and it has made me remarkably bearish on Google.

Another fact which did influence my opinion:
a) Google calling the DOJ request to provide search sampling criteria "so malinformed that it borders on nonsensical" - WHEN companies like Yahoo, MSN and AOL have complied (one thing for sure we know about the three companies mentioned above is that they have all been through the downturn, and although most of them are lead by young 30+ Presidents, they are mostly less brash than Sergey Brin and Larry Page)

Anyways hope you enjoy the article. And if you have a couple of grand to spare, no harm buying september put.

Ten Things That will change the way we Live

2006-02-17T16:13:00.000-07:00

Forbes article..
http://www.forbes.com/lifestyle/2006/02/16/sony-sun-cisco-cx_cd_0217feat_ls.html?boxes=popstories&boxes=custom

Should it be read 10 things to invest on?

Lessons for the Apprentice Investor

2006-02-15T21:56:00.000-07:00

A phenomenal series of articles by investment guru, RealMoney contributor, Barry Ritholtz.

Lessons for the Apprenticed Investor

India v China: Part TWO

2006-02-13T08:28:00.000-07:00

India vs China - Jeremy Siegel, PhD

China Vs India

2006-01-30T09:19:00.000-07:00

India v China: Who has the edge? - by Jeremy Siegel

One of the series of articles on investing in china and india.

Chipotle ZiZZleZ!

2006-01-26T12:11:00.000-07:00

http://online.wsj.com/article/SB113829672351557263.html

BooYeah!

2006-01-26T05:09:00.000-07:00

Jim Mad Kramer was talking about India, Reliance and its retail potential again yesterday.

http://biz.yahoo.com/ft/060124/fto012420062207374624.html?.v=1

The Motley Fool, 3/25/99: Fool On The Hill

2006-01-22T11:38:00.000-07:00

A very old, but super interesting article I stumbled across on the web. Hope you enjoy it as much as I did.

The Motley Fool, 3/25/99: Fool On The Hill

What are the 10 biggest factors that impact the yield curve?

2006-01-21T07:22:00.000-07:00

http://www.bondtalk.com/global.cfm?S=rultra&SS=education2&LID=2

Is Iran correct?

2006-01-15T16:18:00.000-07:00

Let me know your thoughts....

http://tinyurl.com/bgrky

Inverted Yield Curve

2006-01-12T12:00:00.000-07:00

http://knowledge.wharton.upenn.edu/article/1362.cfm

Mark Hulbert: Novel theory on why it's taken the DJIA so long to brea - Financial - Financial Services - Markets/Exchanges - Market News

2006-01-10T00:51:00.000-07:00

Interesting theory - and quotes a study to affirm the fact that the DJIA is going to rise faster now that 11,000 is behind it.

Mark Hulbert: Novel theory on why it's taken the DJIA so long to brea - Financial - Financial Services - Markets/Exchanges - Market News

Chipotle IPO

2006-01-05T18:07:00.000-07:00

Mexican restaurent chain Chipotle, a Mcdonald's subsidiary, IPO offer looks impressive. We might want to keep an eye on it. It has strong performance written all over it. Have you folks been to one?

www.chipotle.com

Why whats good for India is good for us - Charles Wheelan, PhD

2006-01-04T14:07:00.000-07:00

Very nice article highlighting the effects of globalization a. la. Tom Friedman I would say.

http://finance.yahoo.com/columnist/article/economist/2074

5 Reasons That Point To A Selloff

2005-12-30T19:01:00.000-07:00

Interesting observations. US markets are being very cautious moving forward.
Also another point to note is that
Gold, Oil, Dollar, Markets never have gone up @ the same time in history.

http://biz.yahoo.com/tm/051229/13715.html

Take Stock of your Stocks

2005-12-29T20:37:00.000-07:00

Another cool article from WSJ. Posting it in its entireity here as I dont know who all still have the subscription info.

It's Time to Take Stock of Your Stocks

By KAREN TALLEY and MOHAMMED HADI
DOW JONES NEWSWIRES
December 13, 2005; Page D2

For many investors, the end of the year is a good time to clean up their portfolios, re-evaluating stocks that haven't done well -- and deciding whether to pare back on winners that have outperformed the market and grown to more than 5% of holdings.

While the overall stock market hasn't moved much, there's been plenty going on among individual stocks.

Take Apple Computer Inc., up 133% as of yesterday's close. Or Google Inc., ahead 114%. Conversely, General Motors Corp. has lost 42% and Verizon Communications Inc. is off 24%.

Whether a stock has been a big gainer or a loser, Joseph Giordano, a financial adviser in Annapolis, Md., says investors should ask themselves a simple question: "Does the reason you originally bought the stock still exist?" If that reason is still there, and there are no big negative factors now affecting the company, "the stock should be held," he says. "If the answer is no ... the investment should be re-evaluated and probably sold."

Robert Zagunis, co-manager of Jensen Portfolio mutual fund in Portland, Ore., sold all of his Merck & Co. stock the very day last year that its blockbuster painkiller Vioxx was pulled off the market. He says the Vioxx problems threatened some of Jensen's fundamental assumptions about Merck.

Daniel Morgan, portfolio manager at Synovus Investment Advisors in St. Petersburg, Fla., sold 2005 laggard GM in January, when the stock was in the mid-$30s. He lost money but decided that selling was better than hanging on. The stock closed yesterday at $23.05. Mr. Morgan says his cue to sell came from factors that included shrinking market share and decelerating earnings at the auto maker.

The decision of whether to sell can be just as hard when a stock has soared as when one has tumbled. You don't want to sell a stock when it still has great prospects, but you have to be wary of keeping a stock just because of its past results.

Mr. Morgan is holding on to Apple even after its big advance. "They've had a great run based on the iPod," he says, "and recently announced a new product category, a video approach." He also is keeping WellPoint Inc., a health-care company whose stock is up 37% this year, even as it trades near its all-time high, where some investors typically take profits. WellPoint trades on the demand from corporate employers for benefits packages, he explains, and "if the economy is doing well, you have demand, like there is now."

Investors may want to trim, but not sell, some big winners. People "should look at the individual stocks that now exceed 5% of their portfolio and then pare back to a more suitable 2% to 3%," suggests Jim Oxley, a financial adviser at Raymond James & Associates in Indianapolis.

Another consideration for investors evaluating their 2005 winners and losers is taxes. If investors act by year end to sell stocks that have declined in value since being purchased, the losses can offset other taxable income and trim the taxes due in April on 2005 returns.

Mr. Oxley of Raymond James recommends "taking winners and using that stock for charitable giving, in place of cash." When you donate shares that have gone up in value since purchase, you avoid capital-gains tax on the increased value, and you can deduct the full value of the gift (as long as you itemize deductions).

Remember that selling a winning stock before you've held it for a year can be costly from a tax perspective. You pay tax at ordinary-income rates, which run as high as 35%, instead of the long-term capital-gains rate, which is a maximum of 15%.

Write to Karen Talley at karen.talley@dowjones.com and Mohammed Hadi at mohammed.hadi@dowjones.com

More wisdom - this time from Ben Stein

2005-12-28T12:25:00.000-07:00

When investing, profit from serenity

A Zen like guide to investing.

Gold still an opportunity for investors - Barron's

2005-12-28T08:56:00.000-07:00

In addition to owning the metal itself, investors have a variety of ways to enter the market with varying degrees of risk.

Morningstar equity analyst Parvathy Krishnan favors Barrick, Royal Gold Inc. (RGL.TO: Quote, Profile, Research) , Freeport-McMoRan Copper & Gold Inc. (FCX.N: Quote, Profile, Research) and Goldcorp (G.TO: Quote, Profile, Research) .

Frank Holmes, chief executive of U.S. Global Investors, is partial to Goldcorp and holds more than 10 percent of Northern Orion Resources Inc. (NNO.TO: Quote, Profile, Research) , Barron's said.

Full Article.

Ten Tips for a Prosperous 2006 -- and Beyond: Money Matters - Yahoo! Finance

2005-12-21T19:54:00.000-07:00

Invaluable advice.

Ten Tips for a Prosperous 2006 -- and Beyond

The 10 worst money predictions of 2005

2005-12-21T19:51:00.000-07:00

All the predictions could have come true with the same probability... except for the No 1. prediction - of course.
Even Buffet bet against the dollar and he is losing hand over fist.
The 10 worst money predictions of 2005

The bulls are pawing and snorting

2005-12-19T23:28:00.000-07:00

Interesting article if you folks missed this one.

The bulls are pawing and snorting - BusinessWeek Online

Pfizer Wins Crucial Patent Case Over Its Best-Selling Lipitor

2005-12-16T18:50:00.000-07:00

In today's WSJ - Stock up 11% after hours.

Pfizer Inc. won a critical patent-infringement case over Lipitor in federal court in Delaware, securing continued protection from generic competition for the world's biggest-selling drug.

The decision by Judge Joseph J. Farnan in U.S. District Court in Delaware rejected a challenge by generics maker Ranbaxy Laboratories Ltd. on two key patents on Lipitor. The ruling lifts a cloud over Pfizer by protecting the drug giant's $12 billion in annual sales of Lipitor through 2011. Pfizer shares surged 11% to $25.16 in after-hours trading.

The opinion found that Ranbaxy's generic drug, which it wanted to sell in the U.S. market, infringed on two patents that Pfizer claimed protect the cholesterol-lowering drug until 2010 and 2011. One patent covered a precursor to the drug and the other the chemical that was eventually marketed as Lipitor.

The legal assault on the Lipitor patents has worried investors. Though most analysts expected the odds favored Pfizer, there was a chance the company could lose its best-selling drug overnight through an adverse ruling in the case. To mitigate the risk, some had argued that Pfizer should reach a settlement with Ranbaxy.

But Pfizer rejected that option and took its chances in court. "If somebody is threatening to steal four tires off your car, it's not a good strategy to compromise and give them two," said Pfizer Chairman and Chief Executive Henry McKinnell in an interview. "There's no question this has been a major overhang on the stock, and fortunately it's now removed."

In 2001, Eli Lilly & Co. lost patent protection on the antidepressant Prozac, its flagship product, after generic company Barr Pharmaceuticals Inc. won a lengthy lawsuit allowing it to bring a copycat to market about 2½ years earlier than Lilly expected, and sales fell precipitously.

Pfizer is facing heavy pressure from generics. Drugs that account for a quarter of its U.S. sales are slipping away. Last month the U.S. patent for antibiotic Zithromax expired. Next year antidepressant Zoloft will go generic, and generic competition looms in 2007 for blood-pressure drug Norvasc and allergy drug Zyrtec.

ETF oriented to Indian stocks in the works

2005-12-12T10:10:00.000-07:00

Indian ETF?

This would be nice as it will allow investors to buy without the high mutual fund fees and loads and achieve better diversity among indian stocks traded in american markets.

Natural Gas not so hot right now, but good long term - TheStreet.com

2005-12-02T08:31:00.000-07:00

Very well written article on one analysts (and majority) view of the current condition of the nat. gas market. The author/interviewee makes several cases for not getting into natural gas until the end of winter, but the article lays out a good bullish picture for nat. gas stocks for the long term. Read more: Bulls remain cool on Nat Gas

S &P ups its rating on Chesapeake

2005-12-01T23:02:00.000-07:00

Chesapeake Energy (CHK ): S& P Ups to 5 STARS (strong buy) from 4 STARS (buy)
Analyst: Charles LaPorta

Our upgrade is based on valuation. We believe the stock's recent decline reflects declining natural gas prices and the implied dilution from the recent issue of equity-linked securities. However, we think Chesapeake Energy's shares provide value, despite the lower natural gas prices, because the company has hedged over 70% of its fourth quarter production and over 50% of its 2006 production at what we believe are attractive prices. We are lowering our 2006 earnings per share estimate by 15 cents to $2.60, on lower gas prices, but maintaining 2006's at $3.35. Our target price stays at $37, reflecting a price-to-earnings of 11 times our 2006 estimate.

To diversify or not to diversify...

2005-11-29T23:02:00.000-07:00

Nice post by Robert Kiyosaki, the author of "Rich Dad, Poor Dad"

Why the rich get richer? - To diversify or not to diversify

More CHK - How it all began...

2005-11-23T08:16:00.000-07:00

Chesapeake's story

Jubak artcile (mentioning CHK)

2005-11-23T08:12:00.000-07:00

Profit from Shorts' Woes - by Jim Jubak

CHK - Chesapeake Energy

2005-11-18T11:49:00.000-07:00

I havent done a recommendation in quite a while and discovered its actually fun to do one. Here's a recommendation to consider.

Chesapeake Energy (CHK) has pulled back from its recent highs. The run up for the year has been over 70% (the stock doubling at one point). While this may seem like astronomical performance, my opinion is that this pullback is an opportunity to buy. Natural gas stocks are currently under pressure due to unexpectedly warm Fall weather in the cold regions, thus lowering expectations on natural gas usage in the winter. First of all, the weather is as predictable as the markets direction.

Chesapeake in particular has come under pressure primarily because of profit taking. Insiders in the meanwhile have purchased in large quantities in September. The company has strong fundamentals and the long term technical trend remains bullish, with stock price still riding barely above 100 day and 200 day moving averages. The price did flirt with the 100 day trendline and dipped below it slightly during the recent pullback, but as mentioned earlier, insiders have been buying on these dips. Options based sentiment (contrarian indicator) suggests bullish action, the volume put-call ratio seems to be making a turn off a recent high indicating a bullish move. The Open interest put-call ratio is showing similar short-term high.

I would suggest adding this to our watch list and looking for opening a position on the first positive sign on natural gas. Compared to other stocks in the sector, CHK has a stronger growth potential with proven earnings, at an affordable price.

Ben Stein on Yahoo Finance

2005-11-14T11:03:00.000-07:00

Ben Stein mines through cement and steel, for market trends based on macro hints.

Cement, Steel and Stocks - by Ben Stein

Toll brothers says era of soaring prices has ended

2005-11-09T09:08:00.000-07:00

NY Times story

Hidden Gems November Issue, LAST ISSUE

2005-11-07T11:47:00.000-07:00

Hi all this is our last issue. As discussed earlier, we will not be renewing our subscription to hidden gems.

Hidden Gems - Nov 05 Issue, loging reqd.

The Indian Consumer...

2005-11-06T15:26:00.000-07:00

Morgan Stanley chief economist is counting on the Indian consumer to save the developed world! Consumer confidence, desi style...

Here Comes the Indian Consumer: Stephen Roach, Morgan Stanley

The Greenspan Put explained...

2005-10-26T09:03:00.000-06:00

Jim Jubak has posted a nice article that in part explains what "the Greenspan Put" is. He goes on to explain why some think there is a crisis looming - thanks to Greenspan.

The Greenspan Put

Pankaj

Housing market bubble-blues

2005-10-17T10:56:00.000-06:00

A few of our friends [including yours truly] are currently looking at getting into a new home. Yeah, while the interest rates are still low, might as well - right? I have voiced my opinion in the past discounting the supposed bubble and claiming that if you wait for house prices to go down by 20%, you will be waiting for a long time to buy a house. While I am still not taking back my reservation about housing prices tumbling down (reminds me of the fake news paper headlines from "One up on Wall street - PeterLynch), I am reading more and more reports of a "peak" having been reached. Having sold my own home very close to the "peak" - unknowingly off course - I have to beleive some of the reasons behind their arguments.

My arguments in support of the claim that there will not be a housing bust anything close to the internet stock bust of 2000, have been based on the fact that the evidence to support significant percentage of speculative home buying for investment purposes is simply not there (see my comments on the State of the Nation report in June on this blog). The contrarians' on the other hand argue that it doesn't take speculative buying for the market to peak. Unsuspecting "new" home owners lured into houses they cannot afford at "interest only" loans can just as well cause the housing bubble. What's more serious - to me at least - is the cheerleader effect! Let me explain. In the internet/tech stock boom era, there were analysts and brokerage companies providing fuel to the fire but publishing sky high out of this world ratings and growth rate projections of the same stocks that eventually tumbled. In this current run up of housing prices, this job has been carried out by Real Estate Agents. There has been reportedly more influx of new, inexperienced, real estate agents in this community partly fuelled by the initial housing price increases. Thus it has become a self feeding frenzy - housing prices go up, attracts new realtors applying for new licenses, results in inflated pricing, and so on. All along, it has been in the interest of realtors to ask and bid for higher and higher home prices consistently. Indeed, Realtors have been cheering the ascent of house prices. This is serious, considering the inexperience and impatience of new realtors. As supply exceeds demand, (which already seems to have begun in some markets), these new realtors and the sellers they represent are going to face the reality that their sky-high asking prices cannot be fullfilled by buyers. Eventually they will recognise that they must reduce their listing price. When a noticeable trend like this is set in place, the inexperienced realtors can very well easily move in a herd to outsell other properties at lower prices, ensuing a price war and a house price collapse. Given, this is a highly judgemental call on the quality of recently licensed realtors, but one must remember a similar euphoria led to the fall of dotcom stocks.

All said, I continue to beleive that there will be no cutbacks in housing prices of the order of (or even close to) the fall of dotcom stocks in the bust of 2000. However, I am keeping a close watch on how these things develop. I am also planning to look into foreclosed homes and buying and selling of foreclosed homes as a business activity. For more on the housing market you can start by reading the Contrarian Chronicles on MSN Money Central and follow like minded links at the bottom.

Why ETFs Beat Stock Picking

2005-10-15T19:14:00.000-06:00

Pretty grim article for those of us who want to pick stocks :| It is truly eye opening.

Why ETFs Beat Stock Picking

Meet the Automatic Millionaires: The Automatic Millionaire

2005-10-11T06:58:00.000-06:00

Nice article...

Meet the Automatic Millionaires: The Automatic Millionaire - Yahoo! Finance

Shoulda Woulda Coulda

2005-10-07T12:35:00.000-06:00

Bernie Schaeffer has an interesting list of investors' "Shoulda, Coulda, Woulda"'s 12 to 18 months from now. Check it out and dont get caught saying it. :)

Shoulda Coulda Woulda

HG - Interview with Aswath Damodaran, Author of "Investment Fables"

2005-10-06T15:41:00.000-06:00

Very nice interview by Tom G of Aswath Damodaran. They go over a host of basic investment stuff and he (Aswath) basically nails it everytime. If you want to get your funda's cleared (once again), this is a must read. I am going to check out the book one of these days.

Interview Transcript [Login Required]

How to lower the price of gas

2005-10-04T22:21:00.000-06:00

I found this link when reading the link Pankaj posted to Mark Cuban's blog. I think it is interesting on how simple his take is, and how objectively he can look at things. The more I read articles by these CEO's I feel that the main advantage they have is the clarity of thought - the ease with which they can think through a given situation to the possible ends, and make the best possible decision at that moment in time. Mark Cuban is one such guy - He might appear like a goon on the NBA circuit always getting into trouble with the league, but I watched him a couple of times on CNBC on the Squawk Box, and that guy is no accidental dot-com billionare.

How to lower the price of gas.

Excellent post on UPL on yahoo boards

2005-10-04T22:09:00.000-06:00

I thought I should share this with you. This was a rant against the nincompoops/short sellers/pumpers on the yahoo UPL message board...

I haven't posted here in several months, but the latest assault on intelligence on this board has drawn me out of my silence. There is no reason to surrender to the level of ALLCAPS "sellatbid" types, who apparently operate with minimal literacy and identifiably poor command of language under several Yahoo nicknames. Ignore. Don't reply. He/they/it will go away. Feed him with replies to his numbskull nonsense, and he'll be energized for another round. Some mighty smart people seem unable to resist the temptation to reply. To each his own.

There is every reason to stop a moment and review (a) where we have come from -- and why?; (b) where we are going -- and why?; and (c) does a day, or a few days, of pause or pullback justify any concern at all?

(a) Look at a 5 year, 2 year, 1 year or six month chart. Even a one month chart tells the same story -- that you are very, very fortunate to be long UPL. We have come a long way, very quickly. Even if you just got into Ultra this summer, you are far, far ahead of anything the big brokerage houses and stock market gurus preach about the need for diversification, spiders and index funds. So, why are you worried about a small pullback on some profit taking? Never develop an Investor's Business Daily attitude about "tight stops" with Ultra. It might work in some stocks, but all that philosophy will do for you here is make you lose your shares and miss out on the next big run-up. The winning philosophy with Ultra is disarmingly simple: Buy. Hold. When you get more money, buy more. It may not be be "fun" like hitting the craps tables, getting free drinks and whooping it up when somebody rolls well -- but as Mr. Yarber posted today, this is investing, not gambling. Ask youself if you're investing or gambling. Then -- why have we come so far to date? See bobw's succint and impeccably researched recaps of Ultra's fundamentals. These fundamentals include shrewd acquisition of drilling rights to an ocean of natural gas -- not in some remote and politically unstable Maniac-istan, but right here is Wyoming (well, that state did produce Dick Cheney, but that's another topic, and not one to debate here of all places). Combine that incredible asset -- Pinedale -- with the very best management (featuring first and foremost integrity, then excellence in execution, add to it a conservative reserve booking rule, and you get fantastic results with the lowest drilling costs in the industry, delivered by people you can trust with your money). The recipe for success was there long before we saw a spike in natural gas prices. We have come so far because this company has all the right ingredients for success and has executed on its business plan in a manner that analysts are just beginning to recognize.

(b) We're going to keep going up -- maybe not this week, but over time, and for years to come. The stock will split and hit $60 again before another year is out -- and that may be conservative. Why? Same reasons. It all comes down to unparallelled assets being managed by exceptional professionals, in a market that increasingly values the product we produce. Yes, this stock's Price-to-Earnings ratio is high and it will compress -- but not because the earnings will go down or the stock price will fall. It will compress because the earnings are going to be so huge that the stock price, while rising steadily, just won't keep up. Look for a double at a minimum over the next year and continued fantsastic growth for many years to come, until someone with a household name buys the company. Do you want to miss that moment, whenever it comes?

(c) Does a pullback matter? No. It's inevitable; people and companies take profits. it presents buying opportunities; it will be brief and soon forgotten when Mr. Watford and his team announce this quarter's results and tell us what is in store for the next.

Buy. Hold. Ignore. It should be your mantra.

[External] Economist.com: Currency competition

2005-10-03T16:23:00.000-06:00

Great educational article which also delves into history of the dollar's dominance and possiblities for the future. I recommend it highly.

http://www.economist.com/displaystory.cfm?story_id=4455891

BRKB

2005-09-29T09:53:00.000-06:00

Scores of amateur investors, bred in the philosophy of Buffet, Munger, Fisher, Graham and the likes dream to save enough just so that one day, they can afford to buy 1 share in the exemplary investment success, and partake in the spoils with the legendary investor Warren Buffet. Well, I am delighted to report that I have managed to do just the same. Thanks to Berkshire's B class shares, a single share in this investment was made "affordable" to smaller investors of my kind some time ago. I wanted to wait till I could afford more than just 1 :) An irregular reader of the pedantic discourses delivered by Mr Buffet and Mr Munger over the years during their Annual Report to shareholders, I hope to become more regular in my pursuit of their wisdom.

Apple shares fall on nano recall

2005-09-28T22:07:00.000-06:00

Shares fell 4% on reports some nano's had faulty displays and Apple promised to replace them.

Link

http://www.marketwatch.com/news/story.asp?guid=%7B319D041C-DA64-4F65-9032-88424AE155D1%7D&siteid=google

eBay's Bet: The Skype's the Limit

2005-09-26T16:53:00.000-06:00

Something that piggy backs on Pankaj's post on eBay's marriage with Skype
eBay's Bet: The Skype's the Limit

[external] Whats an Investor? - blogmaverick

2005-09-26T11:14:00.000-06:00

Interesting post by Mark Cuban on his blogmaverick today.

Click below:

Whats an Investor?

Inveneo

2005-09-26T11:04:00.000-06:00

I read about Inveneo in an IP telephony magazine and on the web. I was delighted to find out that a simple and familiar technology like VoIP is being applied in an unusual way to make communications a reality where it is needed most. I work as a Sr Network Architect for Vonage Networks and have considerable technology and industry experience in this field.

However, something that’s even closer to my heart is the dream to bring access to communications capabilities at the fingertips of rural populations. Their Uganda deployment is a shining example and a proof in a sense that this can indeed be done. As an engineer I have believed that technology can be applied for the benefit of rural communities if the right economic model is put in place. In this context, I have proposed a model for Rural Enterpreneurship and offered myself and my time as a volunteer in such organizations' continuing efforts to bring VoIP to the 3rd world. Being born and brought up in India, my affiliations and inclinations naturally belong to that country more than others. Does anyone know if there are any plans of bringing a similar solution such as the one deployed in Uganda, to Indian villages also? It would be a privilege to get an opportunity to be involved in such a project. As for the Rural Enterpreneurship economic model for bringing communications accessible to rural populations, I would be glad to expound upon it if you send me a message or leave a comment on this blog.

Hearty Congratulations and Warm Regards to Inveneo.

CBOE - Weekly Strategy Discussion

2005-09-20T10:37:00.000-06:00

Bear put spread...
CBOE - Weekly Strategy Discussion

Welcome to the Era of Blooks! They are your best friends...online!

2005-09-19T07:52:00.000-06:00

http://www.hackoff.com/

Hackoff.com is a novel about a murder mystery set in the internet era. More so, it is published as a blog - its a book, its a blog, its hackoff.com!

Troubling Exits At Microsoft: Financial News - Yahoo! Finance

2005-09-16T18:20:00.000-06:00

If you can read such a looong article...
Troubling Exits At Microsoft: Financial News - Yahoo! Finance

The power of 3: More on "SkyBayPal"

2005-09-15T21:41:00.000-06:00

http://investor.ebay.com/downloads/050912ebay.pdf
Investor Presentation slides on the Skype deal!

CBOE - Weekly Strategy Discussion

2005-09-13T11:51:00.000-06:00

Keeping this alive...
CBOE - Weekly Strategy Discussion

Marriage of the week - eBay buys Skype!

2005-09-13T09:31:00.000-06:00

eBay announces it is buying Skype!

Welcome to the new community shopping experience.

Oil & Energy ETFs: What Will The Future Bring?

2005-09-08T16:48:00.000-06:00

Very interesting article...
Oil & Energy ETFs: What Will The Future Bring

Google the ultimate Deflator...

2005-08-27T01:26:00.000-06:00

from Om Malik's blog. Seems like you could almost have a blog dedicated to just Google, Google news, speculations, stock offerings, stock chart, business model, philosophy and art - all things Google. Just like the name suggests, there's really a "google" number of possibilities.

Anyway, here's the link. The Guest post by Robert Young is more interesting.

Google - the ultimate Deflator

Business 2.0 - Magazine Article - Printable Version - The $50 Million Giveaway

2005-08-26T10:33:00.000-06:00

Want to write a business plan for over a million dollars? How about one of these ideas!!

The $50 Million Giveaway

PS: I have some thoughts on the "$2M CUSTOMER SERVICE OVER IP" contest paid for by Shanda Bahles, El Dorado Ventures. I am currently in the business of VoIP for call centers.

Is Google Shopping?

2005-08-24T07:22:00.000-06:00

Just going through Google's interest in voice messaging and webphone, and the fact that they are getting into the IM world (VOIP also) - and the recent money raised through the $4 billion secondary offering, I am thinking they are going to buy somebody out...
I have been trying to play the guessing game and here is my shortlist
1. Skype
2. Vonage
3. Avaya
LVLT has a good backbone infrastructure, but I dont know if they would pay 4 bil for it.

Speculatively Yours,
Me.

Barron's Online - Surviving the Recession

2005-08-23T16:28:00.000-06:00

Another article underlining Sector wise investment. Click here to read.

NY Times: The Breaking Point

2005-08-22T02:05:00.000-06:00

MUST READ if you are concerned/curious about risingoil prices. Very interesting brief on Ras Tanura, the largest oil terminal of the world from where 10 percent of the worlds oil is shipped. Also goes into OPEC, oil reserves, etc and the Saudi domination.

The Breaking Point

The numbers behind Google's secondary offering

2005-08-19T07:18:00.000-06:00

From an article in WSJ -

"...Amid all the mystery, the tech company seemed to leave a clue that suggests the size of the offering wasn't arbitrary by stipulating that the number of shares Google plans to sell is 14,159,265. Those are the first eight digits that follow the decimal in the value of pi (which is 3.14159265), a number representing the ratio of the circumference of a circle to its diameter."

Damn, these guys are so geeky, I would fit right in if I had the smarts!

Barron's Online - Superior Energy Insiders Sell Near High

2005-08-18T15:31:00.000-06:00

Energy insiders selling at high's. A look further shows Exxon Mobil insiders are also selling and so are Sunoco (SUN) insiders. Take a look at the article linked to the title of this post.

Some trader's take

2005-08-18T15:01:00.000-06:00

In Barron's...

PPI Results Increase Inflationary Fears

Alfstad Capital
1420 Fifth Ave, Suite 2200
Seattle, WA 98101
(206) 274-5160

WITHOUT DOUBT, at long last some might say, energy prices are starting to have a real impact on the monthly data releases and it is only a matter of time until they influence prices across all sectors of the economy.

The markets aren't ready or willing to adjust to that fact quite yet. Instead many traders remain convinced that the US economy will soon roll over and growth will die allowing the inflationary pressures to subside.

So, although the headline number this morning for July -- that jumped 1% instead of the 0.5% rise called for -- we see the markets virtually unchanged after an initial drop.

The core rate surged by 0.4%, light years ahead of the 0.1% forecast, yet the street is dismissing that news as a one-off event.

Year-over-year, the the headline report is up 4.6% and the core is up 2.8%. The core rise is the largest seen in 10 years! Yowzer Batman, those are big jumps.

CNN.com - Panic ensues in rush for�cheap laptops - Aug 16, 2005

2005-08-17T12:22:00.000-06:00

BIZARRE!

CNN.com - Panic ensues in rush for�cheap laptops - Aug 16, 2005

More on Buy-n-Hold

2005-08-17T10:46:00.000-06:00

On the issue of Buy-n-Hold, I agree with Gadda. I see why he mentioned the 401(K) exception now. True, in 401(K) accounts and IRA's investors may tend to get more complacent (and hence that effectively results in a buy-n-hold strategy).

The managed mutual funds mostly recommend this strategy to reduce turnover and redemptions. They are just trying to lock in customers for a long long period. They go one step further and lock you in for a few years when you buy class A or class B funds (i think).

The "advisers" recommend it because they have already made their sale once and will be earning on that sale for years to come (read mutual fund load). This means they have no incentive to refer their client to switch to another mutual fund or stock. Besides "advisers" are mostly dumb - at least the ones I met in Utah. They are just a little more than glamorous "car salesmen" peddling insurance, stocks and funds to unsuspecting "investors". We are far more smarter than to trust a fin. adviser.

My rants and cynicism aside, buy-n-hold truly has no evidence of beating the market. At least not to the extent that it is purported to be. Diversification does. But as soon as you mention Diversification - people jump to mutual funds! Managed mutual funds are a scam. Under the name of diversification they turn into these behemoths - its a lot like putting your chips on every number on the Roulette table in case you were to miss the winner. Many of them are simply pointless. Picking a good managed mutual fund is just as (or maybe more) difficult than a stock. Its almost like trying to hire a good stock picker (very few of these around, Peter Lynch, Bill Nygren, Buffet, ?Tom Gardner?, etc.).

Finally, the strategy recommended by the author, of owning just four sector funds in which sectors are picked on intermediate-to-long term demographic trends, economic activity, etc (macro stuff) does seem appealing. I actually think the strategy used with ETF's would actually have some merit (he recommends 4 matching ETFs in his article at the end). It would be interesting to find out if this has been previously employed by a money manager on a large scale and what the returns have been. The Macro trends are not easy to pick either. Besides, its yet another buy-n-hold variant.

IMO, the individual investor, i.e. people like us, can never be a successful buy-n-hold investor. There are a couple of reasons for that:

1) One person alone cannot track more than a handful of stocks, not consistently over years and years. Its just not our job - we are busy with our "paying" jobs, our lives, etc. So Diversification goes out of the window. Even with just a handful of stocks (say 8 stocks) it is a lot of hard work to keep up with the research, competetion, etc.

2) The individual investor does not have the resources available to him/her that fund managers have. This is a slightly falacious argument. The internet is perhaps the biggest resource and if you are willing to shell out the money you can read almost any report that is also available to a fund manager. The true resource shortage though is time. The fund manager has assistants and interns and employees at his/her disposal to read stock reports, industry competetion, etc. It may be possible for an individual investor to perform these activities for a limited time until he/she has enthusiasm or anxiety about a stock they own, but to keep up with the research over years and years and not have your judgement be affected by market volatility is a very hard feat to accomplish.

Market volatility, media noise and impetuous decision making are more likely to affect the judgement of the individual investor. There are few of us who have that detached, scientific almost surgical attitude towards what we own. This results in more than average failed attempts at buy and hold by mom-n-pop individual investors. What do they do when they realize this is just not working? They buy and hold a managed mutual fund!! After all, the experts know what they are doing, right?

What does this say about investment clubs? I think a lot. For investment clubs run by amateurs, like us, we are a lot like the impetuous individual investor that gives up after some failed attempts. The difference is that we hope to level out our anxiety by relying on each other's judgements from time to time. Its a very effective model - but it has nothing to do with buy-n-hold!? There is nothing about an investment club that makes them a better buy and hold investor than the managed mutual fund. And we know that the managed mutual funds aren't doing great anyway. So from a performance point of view, we are just slightly better than the mom-n-pop impetuous individual investor. Thats hardly a worthy goal to achieve.

Should we really put so much emphasis on buy and hold in our club?? What do you guys think?

Kindred Healthcare (KND)

2005-08-16T14:07:00.000-06:00

Healthcare in general is beating the S&P and with healthcare inflation growing twice the rate of core CPI, the profits should continue to grow higher. The stock has pulled back significantly but fundamentals and technicals are pointing to positive outlook, presenting a good buying opportunity.

1 year chart with 10day, 50day MA, Volume, Volume Oscillator, Exponential MA and RS:

Click for Chart.

Schaeffer's Score Summary

Yahoo Finance Company Key Statistics

Insider Transactions (on Yahoo Finance)

You want to buy and hold?

2005-08-16T12:30:00.000-06:00

"Buy and hold what?"....

Nice article on fallacies of buy-n-hold, importance of demographic trends, and some fund recommendations.

MSN Money - A 4-fund portfolio you can buy and hold

Street Chatter: GameStop, and Cendant

2005-08-12T15:10:00.000-06:00

More Charts: This time GME. Game Stop has been a good performer on earnings. This is a bullish outlook on GME.

Read more...

Schaeffer on Charts: More Bearish Blue-Chip Banter

2005-08-12T13:51:00.000-06:00

Take a look at these charts on blue-chip stocks and read Bernie's analysis. We hold a couple of these big-boarders (C, PFE). We need to look carefully at these before our conference call. Also, the 10 yr T-bill is seeing a bit of a rally. Would this be a harbinger of times to come? At some point the T-bill yields are going to reach low enough to spark an upward move, which would mean good income at zero risk compared to the stock market nowadays. One more thing to think about before the conference call - rotate some money into risk-free investments.

Schaeffer on Charts: More Bearish Blue-Chip Banter

Stealing your neighbor's Internet? Experts urge caution - Aug. 10, 2005

2005-08-12T10:26:00.000-06:00

You could land in Jail.

Stealing your neighbor's Internet? Experts urge caution - Aug. 10, 2005

Hilarious

2005-08-12T07:37:00.000-06:00

Very off topic, but had to share this with you guys. I just stopped by at Harmon's this morning and I read this on the World News (Something) [I think it was a tabloid :-)]
Garden of Eden Found!
Original Apple Recovered!!
U.S. Grows Tree From Seed.

I googled it and found that News Corp has a stake in almost all tabloids!

'Nuff said. Made my day!

Hidden Gems Qtrly Review

2005-08-11T10:12:00.000-06:00

Quarterly Reviews August 11, 2005

Dear Hidden Gems Member,

Your Hidden Gems mid-month update is now available. In it, we cover the most recent news for our companies as earnings season winds down. Also, following on the success of our first Hidden Gems Haiku Contest, we offer a new contest and another chance for you to win a free year's subscription to our newsletter. Enjoy!

The Hidden Gems Team

Get Update

A contrarians take on PFE

2005-08-11T00:52:00.000-06:00

Bernie Schaeffer takes on PFE pointing out that while the shares could trade in a narrow range for a while, the possibility of a breakout is high on the negative side.

The CSCO Debacle - On the Money, Mr. Schaeffer!!

2005-08-10T16:00:00.000-06:00

If you would have read Bernie Schaeffer's commentary on the CSCO pre-earnings backdrop yesterday (posted at 12:55 ET) you might have been pursuaded to purchase some CSCO October 20 Put Options (they were going at a little over a dollar - closed at $1.05). Bernie was right on the money on his sentiment reading. Today the CSCO stock plunged almost 7%. The Options are worth 1.80 and the correction is under way - A whopping 76% from yesterdays close. Even if you didn't move your ass upon reading Bernie's article, and waited for the CSCO earnings release after market close, you may have observed that the market did not even budge at the more than expected earnings report from CSCO. Noticing the complacency you would have rushed to your computer to put in a trade at market open to buy some Puts. You would have still bought them at around 1.40 (yes they opened over 40% up today) and still made over 50% in one day! If you did nothing at all, you're just like me - another coulda-been.

Schaeffer on Charts: Cisco Systems: A Pre-Earnings Backdrop

Closing Bell: BULL vs BEAR

2005-08-09T15:02:00.000-06:00

Happened to catch the Closing Bell (oooh Maria Maria...) on CNBC when I went home for lunch today. On the heels of the Fed move and more significantly their comments, Maria asked two investment talking heads to take sides on what the market's going to do by year end. Legendary BULL, Joe Battipaglia predicts the market is going up 5% by the end of year 2005. Schaeffer Investments' Todd Salomone was the BEAR predicting a 10% pull back in the market by year end. Very interesting (sometimes convincing) arguments on both sides. What I don't get is why does CNBC not hold their guests on One-on-One pieces like this accountable for their past record. A simple Google Search on Joe Battipaglia reveals that he was Bullish even during the heydays of the DotCom boom and never let up. Todd's record on the other hand is less public - after he is not a star like Battipaglia. Anyways, thought I'd share it with you since both the 5% and 10% figures seemed quite interesting.

Index Funds.com - Index Funds Investing

2005-08-05T10:35:00.000-06:00

For those of you looking for a good resource for investing yourself in Funds, Index Funds Online seems to be a great resource.

Index Funds Online

Cnooc Withdraws Unocol Bid

2005-08-02T20:46:00.000-06:00

Cnooc Withdraws Unocal Bid
Amid Heat From Washington

The Cnooc saga has fueled more general skepticism in China about U.S. motives. "Free trade for the U.S. isn't really free and fair, it's just what's best for the U.S.," said Xing Houyuan, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, a think tank related to China's Ministry of Commerce. Ms. Xing, speaking after Cnooc had signaled its withdrawal, added: "This isn't going to have any positive impact for the U.S."

India - The next big player

2005-07-31T15:19:00.000-06:00

Interesting thoughts from John Mauldin - he is the dude who wrote the classic Bull's Eye Investing.

Short, but the observations are nice.
India - The Next Big Player

The Appeal of a Resilient Market

2005-07-31T14:39:00.000-06:00

Interview with S & P's Steve Biggar. I personally am not currently bullish on the market and am expecting a 5% pullback - if not something sharper. Something's to note in his notes are "Market's ability to handle $60 oil". I know I don't know as much as these guys do - but there is a huge disconnect in what he says and what I expect.
The Appeal of a Resilient Market

More on the Chinese Yuan revaluation debate...

2005-07-29T15:39:00.000-06:00

Bloomberg.com: John M. Berry

"The balance of convenience"...

2005-07-29T15:34:00.000-06:00

Awesome article by Andy, the piece on Reserve Bank's attempt to copy Greenspan's way with words was hilarious. The article puts into perspective that both Chinese and Indian officials have a ways to go to begin playing with the big boys and start gaining some respect in the fin community. Their current statements don't help this goal in the least bit.

Bloomberg.com: Bloomberg Columnists

More on VIX...

2005-07-29T03:33:00.000-06:00

... from my subscribed newsletter.

Index option volatilities have followed actual volatility lower.
While there is much conjecture on what has caused this low
volatility period we’re in, historians suggest that low interest
rate environments are accompanied by low volatility in the stock
market. That might not explain why volatility is so low, but at
least it is better than nothing.
Don Fishback (http://www.donfishback.com) recently
conducted a study which had some interesting results. Noting that
the current actual (historical) volatility of $SPX was at its lowest
point in 20 years, he was curious to see just how low it was,
compared with longer-term histories – going back 50 years or so
on the S&P 500. The results were rather startling. Even though
we think volatility is boringly low right now, it was actually lower
than this for much of the time in the 1950's and 1960's. In fact, it
was almost always lower than the current volatility. After 1972,
however, volatility was higher (except for the 1993-1996 period).
But the other fact – that low volatility is common in low
interest rate environments – was provided by technician Alan
Shaw. While this may be known in some circles, it certainly isn’t
common knowledge, or else there wouldn’t be so much discussion
as to why $VIX is so low. By the way, the reason $VIX is low is
that actual volatility is low, and the two are highly correlated,
despite the media’s attempts to characterize $VIX completely as
a “fear gauge.” As we’ve pointed out many times, $VIX is only
a sentiment indicator at extremes – usually at market bottoms
more than tops – and most of the rest of the time is merely
reflective of the actual volatility of the $SPX Index.
I realize that doesn’t offer much hope of $VIX increasing
anytime soon, unless the Fed increases interest rates more than it
has. There obviously isn’t a direct correlation, though, because
$VIX has been moving lower this year while the Fed has been
raising rates. But perhaps the correlation is stronger with longerterm
rates, which haven’t moved higher yet (the “conundrum”).

POSCO

2005-07-28T20:39:00.000-06:00

Hey guys this has been in the validea hot list for ever. I recommended it some time ago and recently I noticed it has been going up. It has really attractive valuations. I still feel this will be really good for our portfolio.

You can read more in validea. Here is from the recent newsletter:

POSCO (ADR)

Strategy: Value Investor
Based on: Benjamin Graham

POSCO manufactures and sells a line of steel products, including hot rolled and cold rolled products, plates, wire rods, silicon steel sheets and stainless steel products. The Company produces over 28.9 million tons of crude steel. In Korea, POSCO produces all of its steel at Pohang Works that has 12.87 million tons of annual crude steel and stainless steel production capacity, and Gwangyang Works that has an annual crude steel production capacity of 15.83 million tons. The Company sells primarily to the Korean market, with Korean sales accounting for 68.9% of its total sales volume of steel products during the year ended December 31, 2003. POSCO's exports in 2003 accounted for 31.1% of its total sales volume of steel products. The Company's major export market is Asia, with China accounting for 36.8%, Japan 18% and the rest of Asia 23.7% of its total export volumes in 2003. Other products include lower value-added, semi-finished products, such as pig iron, billets, blooms and slabs.

Guru Score: 100%

SECTOR: [PASS]

PKX is neither a technology nor financial Company, and therefore this methodology is applicable.

SALES: [PASS]

The investor must select companies of "adequate size". This includes companies with annual sales greater than $340 million. PKX's sales of $55,187.1 million, based on trailing 12 month sales, pass this test.

CURRENT RATIO: [PASS]

The current ratio must be greater than or equal to 2. Companies that meet this criterion are typically financially secure and defensive. PKX's current ratio of 2.10 passes the test.

LONG-TERM DEBT IN RELATION TO NET CURRENT ASSETS: [PASS]

For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). Companies that meet this criterion display one of the attributes of a financially secure organization. The long-term debt for PKX is $1,988.2 million, while the net current assets are $5,325.1 million. PKX passes this test.

LONG-TERM EPS GROWTH: [PASS]

Companies must increase their EPS by at least 30% over a ten-year period and EPS must not have been negative for any year within the last 5 years. Companies with this type of growth tend to be financially secure and have proven themselves over time. PKX's EPS growth over that period of 267.1% passes the EPS growth test.

P/E RATIO: [PASS]

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which this methodology states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. PKX's P/E of 4.23 (using the current PE) passes this test.

PRICE/BOOK RATIO: [PASS]

The Price/Book ratio must also be reasonable. That is, the Price/Book multiplied by P/E cannot be greater than 22. PKX's Price/Book ratio is 1.00, while the P/E is 4.23. PKX passes the Price/Book test.

Time to consider options?

2005-07-28T20:06:00.000-06:00

U.S. Stocks Face Multiple Threats

At major bottoms in stocks, we often see the volatility indexes at extreme highs; conversely, when the stock market is at or near a peak, we usually see volatility at very low levels.

The VIX, or the volatility index, is a measurement of options premium volatility as it relates to the most important benchmark for institutional activity, the S&P 500. This is also the index and option set that I use when it comes time to take a short position on the overall stock market.

The picture this current view portrays is really quite shocking. Despite all the aforementioned risks that are obvious to anyone willing to take off their rose-colored glasses, volatility is at an all-time low. I assure you, this is not a sign of health but of impending disaster for stocks.

Since there is such a diminished view of risk, and since this affects option premium prices, when it comes time for us to take on put options once we achieve critical mass readings in the model, these premiums will be relatively very low.

Consequently, it is entirely possible that we may be able to achieve relatively more leverage than ever as we take on deep-out-of-the-money positions. This is a real bonus that one could not always expect to see just before a market meltdown!

I remember from the options newsletter where it was recommending trading volatility instead of stocks. If I understood that correctly then this is the right time for buying options. If the current volatility is low as the article claims we should straddle major indices such as S&P500 based on the assumption that whenever the market gets back to its average volataility we can make money irrespective of how the market goes.

Are you CEO Material?

2005-07-27T12:16:00.000-06:00

This is a quiz more of the history of capitalism rather than an aptitute test. Its amusing nevertheless.

http://encarta.msn.com/encnet/departments/elearning/?page=ceoquiz&Quizid=98&GT1=6672

China's Revaluation

2005-07-24T20:06:00.000-06:00

A small move, a 2.1% rise against the dollar. But this is bound to put upward pressure on long-term interest rates. Here is a nice discussion in WSJ on the implications of this move. Couple of interesting ones on the same topic:
An Awesome Move By China
China lets the yuan rise—but how far?

India and America

2005-07-24T19:55:00.000-06:00

Together at last . Also on the same topic India As A Global Power . Its a long one and haven't read it all but looks quite interesting.

Time to raise the equity risk premium

2005-07-18T20:53:00.000-06:00

"The Importance of London Attacks"

We believe that the financial markets may not be prepared to weather such a scenario. We are not predicting this scenario, mind you.

Rather, we are arguing the case that the financial markets do not appear ready for the type of unpredictable, debilitating, long-term warfare that has been a fixture in the Middle East, but has been, up until now, far removed from the major metropolitan areas of Europe and the United States.

This geographic dynamic may have changed in London last week, a point lost on many investors. The investment implications: perhaps it's time to raise the equity-risk premium. Also, stay long in stocks that directly or indirectly address homeland security.

Do you guys have any good security related stocks in mind?
The Forbes article posted by Pankaj had recommended SBL which is trading at its 52 week low maybe a good one. I don't like the valuation but growth potential is there.

CNOOC, CVX, UCL and the Congress

2005-07-15T10:31:00.000-06:00

Everyone has obviously been hearing this story a lot in the news lately. It's got me thinking (not something I do on a regular basis). MNA activity almost always presents "arbitrage" opportunities. For investment banks and other insiders privy to such deals, the arbitrage opportunities are actually practical or even profitable. But the high profile, and public nature of this transaction, the money involved, and the political factors all combined, this, in my opinion, is a very opportune climate for some intense but clever speculation. The hedger in me just cannot resist at least hypothesizing some basic outcome scenarios. So here we go.

There are really only two scenarios on the surface of the deal (simplified).

Congress decides not to meddle and let the market sort it out, in which case CNOOC's bid, which is at a significant premium over CVX's offer, will almost definitely win. After all UCL's shareholders are most likely to care how much they get for their stock today as opposed to the hopes/expectations that an acquirer might improve the management and deliver better dollar/share int he future (regardless of who the acquirer is). Thus CVX is to loose and UCL is to win because they are getting a lot more for their shares than the market is paying.
Congress decides to step in and stop the acquisition attempt on political grounds. This would mean the CVX wins the bid (since the two parties had already agreed and some time had already passed). In this case, CVX stands to gain at least in part due to the perception that they got a good deal on UCL - only because there was a higher bidder who lost out. The primary gain though for CVX is the oil resources of UCL.

There are a couple more fringe possibilities too. This, in my opinion, is more likely closer to reality.

Congress dilly-dally's (as usual) giving mixed signals, expressing concerns over national security, and then expressing faith in capitalism and markets, then expressing communistic intentions of China, then again stepping back because of corporate lobbying and/or because of local job situations. This may go on until long enough that the deadline passes by, CVX does not counter bid and CNOOC wins the deal. The stakes will be too high to block the acquisition after that. UCL wins in this case because it got the higher bidder to pay its shareholders.
CVX figures out that Congress is just playing politics, lobbying is not worth it, and raises its bid to match or beat CNOOC's bid. In this event, we enter a bidding war. The argument that CVX will not raise its bid can be countered by the possibility that CVX may bid just to push CNOOC to bid even higher and force them to overpay (this happens in auctions and bidding often, when one party knows it cant win, it engages in a proxy bidding war just to inflate the price for the eventual winner and thus hurting the winner). In case of a bidding war, it is likely CNOOC decides that it does not want to raise its bid beyond a limit and backs off, CVX ends up with the spoils at a higher price than they would have wanted to pay. In any case UCL wins. CVX may loose or the effect of bidding war on CVX can be neutral (in the more likely case that CNOOC wins).
CNOOC may up its offer even more (without any incitement from CVX or Congress) just to sweeten the offer and make it irresistible. Don't laugh, the Chinese have been known to do such things. An offer you cannot resist? Possible.
A third or fourth or fifth party emerges and joins the fray to takeover UCL. This is like certain mammals mating rituals. Exxon-mobil, Shell etc could make offers.

So the question to ask is, what is a good mean to base some hypothetical and speculative bets on this story? Lets look at the numbers first.

CNOOC's current bid stands at roughly $67 per share of UCL.
CVX's current bid stands at roughly $60.65 per share of UCL.
UCL shares are trading at $65.32 - thus some of the euphoria of CNOOC winning may be priced in, part of the euphoria is speculation that either CNOOC or CVX may bid higher. Wall Street is betting on a higher bid from CNOOC or Chevron.
CVX shares are trading at $56.41.
CNOOC's US listed shares are trading at $60.88.
UCL shareholders will vote on CVX proposal on Aug 10.
UCL is saying it will take as much time as necessary to consider CNOOC's bid.
Unocal is the No. 9 U.S. oil company. Chevron is No. 2, after Exxon.

So what are the public arbitrage opportunities present here? Are there any at all? Here's my opinion and I welcome your comments, opinions arguments for and against my speculation. I am going to make a speculation based on certain axioms I beleive are true:

Nobody settles for a lower bidder if a higher bidder exists. So UCL saying that its taking its time in considering CNOOC's bid only means that they are waiting to see if CVX or CNOOC itself bids higher or if any other companies add to the bidding. The other thing they are trying to assess is what Congress will do.
So far Congress has passed only rhetoric (in other words a lot of bloated gas from those fat old farts). But, I am not sure which way to go on this one, so I am going to punt and hedge my bets on this variable.
When a bidder knows he is not going to win, he may most certainly raise his bid in order to hurt the next winning bidder. This avoids from making him look like a loser (having quietly let someone else win) and also hurt the winner. Who wins? - the one who is being paid on the bid.

Based on these three assertions I recommend the following:

CVX is already beaten up, it may be beaten some more if they re-bid, but they will likely let UCL pass them by in that case. Their shares are bound to rebound should they loose the bid. There is a slight down side risk if they win the risk (but I beleive most of that risk is priced in). I say, buy some August/Sep Calls for CVX at strike $54.
CNOOC's listed shares dont have any options - so I am not going to make any trades on CNOOC.
UCL is set to win if CNOOC wins the bid (UCL share price has this priced in). If CVX wins or congress steps in, UCL share price will drop on knowledge/speculation CNOOC may not win the bid. But downside is potential is limited to around $60. I recommend hedge your bets and straddle here - Buy Aug 64 Calls and Buy Aug 69 puts.

Would love to hear your comments. Thanks for listening.

Speculatively yours,

chompi.

Structured Products

2005-07-14T17:24:00.000-06:00

Has anyone heard about this? I learnt about it through my options subscriptions. Merill Lynch offers Structured Products called MITTS and there was a positive recommentation on BBH or BHM (biotech holders) structured products both from Merill.

Structured Products

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