Friday, January 30, 2009
The main confusion I have is on the mark to market issue. Its very unclear in my mind what banks have marked down and how hard they would get hit if they sold at these levels. In general though, the plan will have issues if banks are forced to sell at prices lower then the economics generated by the toxic loans. Would you sell your house for less then the rent it generates just because you found one party willing to buy it? If the government really wanted to solve this crisis, they'd just go ahead and pay up and get this over with. In general though, Robertson and Roche are correct that this is the only way. Obama get it done already!
- The joint strategic WiMAX agreement covers, among other things, the resale by Nortel of the Alvarion platform of WiMAX access products and Nortel’s contribution of resources and funding to accelerate Alvarion’s development of its portfolio of WiMAX base stations. Under the terms of the agreement, Nortel is obligated to pay Alvarion for certain research and development services beyond Q4; however, collection of these payments is uncertain and subject to Nortel’s creditor protection proceedings.
- As a result of the foregoing, Alvarion will not be able to recognize approximately $2.4 million of revenues from the sale of products to Nortel during the fourth quarter of 2008.
- Richard Lowe, President, Carrier Networks, Nortel. "Planning is underway to transition our joint mobile WiMAX customers to Alvarion and ensure there is no disruption to service or support."
Tuesday, January 27, 2009
Not being a biotech expert, check out this story on Rigel from Hammer Stock.
- Rigel’s lead drug, R788, is currently being evaluated in two comparative trials in patients with rheumatoid arthritis (RA), a $14 billion indication. During most of 2008, R788 was considered to be one the most promising drugs in the biotech industry, but an update at last year’s ACR meeting raised doubts regarding the safety profile of R788, as reviewed in my recent article on Rigel. According to the company, the safety data from the ACR meeting did not affect its negotiation leverage, as the potential partners had access to the data before it was published, so nothing came as a surprise to them.
Monday, January 26, 2009
- The National Association of Realtors said Monday that sales of existing homes rose 6.5 percent to an annual rate of 4.74 million in December, from a downwardly revised pace of 4.45 million in November.
- The results were better than expected. December's sales had been forecasted to fall to a pace of 4.4 million units, according to Thomson Reuters.
- The nationwide median sales price plunged to $175,400, down 15.3 percent from $207,000 a year ago. That was the lowest price since May 2003 and the biggest year-over-year drop on records going back to 1968.
- And another encouraging sign -- the number of unsold homes on the market in last month fell nearly 12 percent to 3.7 million. At the current sales pace, it would take 9.3 months to sell all the properties, down from 11.2 months in November.
Thursday, January 22, 2009
Exxon is now worth more then all of the Financials in the KBW Bank Index.
Is Exxon Mobil Corp. really more valuable than Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and 21 more of the largest U.S. financial companies combined? Yes, according to stock investors. The CHART OF THE DAY shows the total market capitalization of the KBW Bank Index’s two dozen stocks dropped below the value of Exxon Mobil, the world’s largest oil company, during the past week, according to data compiled by Bloomberg. . . . Companies in the KBW index have lost about $1 trillion in market value since February 2007, when it climbed to a record 121.06.
Plenty of news on Apple on the net so I'll keep this short. I'd be a big buyer at the current qoutes below $90. Incredible value!
Wednesday, January 21, 2009
RVBD focuses on WAN optimization which helps workers be more productive and reduces costs. All important concepts when every company is laying off employees left and right.
- expects fourth quarter fiscal 2008 revenues of approximately $91 to $92 million, representing a Riverbed® record for quarterly revenue, and approximately 20% growth over the same period one year ago. Fourth quarter GAAP EPS is expected to be in the range of $0.29 to $0.33 per diluted share. GAAP EPS estimates benefit from the expected reduction of the valuation allowance on Riverbed’s deferred tax assets. Fourth quarter non-GAAP EPS is expected to be in the range of $0.18 to $0.19 per diluted share. Non-GAAP EPS excludes the impact of stock-based compensation, stock-based payroll expenses and related income tax effects, and the reduction in the valuation allowance related to deferred tax assets.
- These preliminary fourth quarter revenue and non-GAAP EPS results exceed the guidance the company provided on October 23, 2008. At that time, the company estimated revenue between $87 and $90 million and non-GAAP earnings between $0.15 and $0.17 per share.
Also, they announced the purchase of Mazu Networks. Another similarity to FCSX in that having a strong balance sheet allows these companies to snap up competitors on the cheap. Much better to buy at depressed levels then when the market is booming.
- Mazu Networks provides a unique, powerful and flexible analysis and reporting software that provides a holistic, real-time view of application usage and performance. This perspective is critical to understanding the application environment and taking the right steps to validate and ensure delivery of business-critical applications across the wide area network (WAN).
Monday, January 19, 2009
- Contract law and political posturing aside, since the recession began in December 2007, commercial bank lending rose 5.7%, impressive given the sharp economic contraction. Moreover, lending increased in all categories but home equity lending. And compared to the prior year? Commercial and industrial loans grew at about half the 11% rate in 2007, but total real estate lending grew just 0.6% less, and consumer loans grew at the same 8.9% rate, according the Federal Reserve.
- the Fed’s recent Consumer Credit Report (January 8, 2009) suggests that commercial banks are taking market share from finance companies, savings institutions, and especially securitized asset pools, which continue to contract materially. Until confidence is restored, closed securitization markets will inhibit improved residential mortgage and consumer credit availability.
Sunday, January 18, 2009
Some of our favorite stocks would be FWLT and ATW. FWLT for their huge backlog of energy related projects unlikely to get canceled with high prices in the future. ATW for it's deepwater drilling focus. ATW has more risk being a small cap with debt, but it currently trades at $15 with earnings in the $4-5 range expected for next year. The company is also on an aggressive growth plan with its 9th ship to begin work in February and 2 ultra-deepwater ships being built for 2011 and 2012. This provides for huge growth for this sector, but also high risk considering the uncertainties in both the credit and oil markets.
If your a bull on the oil market as suggested by future oil prices, then FWLT and ATW provide great investment opportunities at these levels. Especially, ATW that trades close to its recent lows.
From a technical standpoint, the markets had a perfect setup last week. On Thursday, the S&P had a reversal at 820. Basically the low of this market except for the brief 2 day drop below 800 and dramatic snap back. Then on Friday, the S&P closed over 850 which a lot of technical traders consider the low of the trading range. Otherwise, buy at 850 and sell when the market reaches 920-940. Currently the 50 day EMA is at 904 so a move above this level would also encourage buying.
From a psychology standpoint, the situation couldn't have been dire the last 6 months. Of course, partly from the fear of changes coming from the Obama presidency such as higher capital gains taxes. Now that Obama will actually be in office I suspect we'll see some of that fear dissipate. He's already made it clear that the capital gains taxes will likely not be changed until 2010. Plus the huge stimulus plan about to be finalized. Not to mention, the media is likely to point a much rosier picture now that the anointed one will be in office. It won't surprise me to see consumer confidence rise quickly as 2009 progresses.
The market wanted to rallied shortly after Obama's victory to the 1,000 range. Don't be surprised if it happens again. At this time, don't be surprised when the media begins pointing to a bright future. Something they dare not do when Bush was still the President. This story wouldn't be so ripe if the markets had already rallied to say 1,200. Hence, it just seems like the perfect setup. This week shall be fun to watch especially if you've covered most of your shorts.
Copy from a Don Hays article on 12/19. Predicted back then that the inauguration would be the perfect rally time following how the markets bottomed in ‘42 and ‘74.
Our 1974 rhyme that we hummed to you for the last week or two has not been destroyed yet, but even if right is definitely only a rhyme, not a reprint. We’ve also presented 1942 as a possible model, and in many ways we think 1942’s situation is a little more similar to today’s market than 1974. But again, we are only searching for some historical wisdom that can be translated into today’s market expectations. We’ll show you those two historical examples in today’s report. In both of the two previous examples, at the current time-scale the markets took at least a couple week’s sabbatical. In 1942, it took almost a month off. I guess in relation to the condition of our overbought/oversold indicators we would opt for the 1942 4-week sabbatical example. Also, that would almost perfectly line up with the Inauguration of Barack Obama as President. Hollywood couldn’t plan a better script. We continue to hold out, however, that a significant bottom has been made, and based on the line-up of super-strong Psychological, huge monetary liquidity, and stock market valuation that ranks right up there with the bargain basement values recorded at the bottom of those bear markets in 1974 and 1982, we believe it will be the final bottom of the bear market and a launching pad for tomorrow’s strong bull market.
Monday, January 12, 2009
In all fairness the company did report a not loss of $3M in Q4 due to a $25.7M bad debt expense. Of course that impacted the stock and caused undue FEAR that all of their customers would default leaving FCSX holding the bag. Over 2 months have passed since that original announcement of exposure to bad debt so the market should be a lot more comfortable that the problem was isolated and now contained then again why is the stock price still in the low $4s.
- Total revenues were $85.6 million in the three months ended November 30, 2008, an increase of 16.3% compared to $73.6 million in the prior year quarter.
- net loss for the first quarter of $3.0 million, or $0.11 per diluted share, compared to net income of $13.1 million, or $0.45 per diluted share, in the prior year quarter.
- Bad debt provisions totaling $15.6 million, net of tax, or $0.56 per diluted share, in the first quarter 2009.
Netting out this bad debt expense along with other one time gains and losses, FCSX would've earned $.34 in Q4. Very impressive for a company focused on the commodity sector in the midst of a horrible bear market. Yes, thats correct expectations are for solid profits in 2009.
My concern for a while has been that customers would pull back on commodity trading/hedging if commodities dropped to lower prices. Maybe it will happen if the volatility drops leading to complacency. So far the opposite has happened even with some customers limited by credit lowering their ability to hedge. For now, it appears that the huge swings in prices have sent more customers rushing to risk managers. With many a pundit exclaming that the commodities will soar again, FCSX is a good bet to gain from the volatility in the market.
After the close today (1/12), FCSX announced the buyout of Elders Risk Management in Australia. This adds yet another cog to the gobal force that FCSX has developed. In a increasingly global market place, having a global risk management firm will be beneficial to customers. Also, buying when everybody else is selling is very smart as well.
- Elders Risk Management Pty Ltd, an Australian-based company that specializes in risk management for the producers and users of agricultural commodities, including grains, livestock, cotton and wool.
Monday, January 5, 2009
Alot of the reason for the outperformance is that the fund is designed with up to 1/3 of the portfolio in short positions. Using the UltraShort Real Estate ETF (SRS), the portfolio was able to offset some of the losses in the 2/3s long positions. Unfortunately though, its been well documented of late that these Ultrashort ETFs aren't good for long term investments and the remaining position in SRS and the original position in the Ultrashort Oil & Gas ETF (DUG) have provided negative returns. In fact the position in DUG is now down 44% proving you can have the right thesis but the wrong vehicle and still lose money in this market.
Another saving grace is that the portfolio invested in short term Bond ETFs that provided nice returns compared to likely losses in stocks. Also, timely investments in BMY and NYX helped offset the weak market.
Friday, January 2, 2009
- The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December, a greater-than-expected decline from November's reading of 36.2. Wall Street economists surveyed by Thomson Reuters had expected the reading to fall to 35.5.
- New orders fell to their lowest level on records going back to 1948.
- Prices fell as the number of respondents saying they had paid more in December than in November sank to its lowest monthly reading since 1949.
- Only three recessions in the history of the index have showed weaker manufacturing readings, said John Ryding, of RDQ Economics. Those recessions were in 1948 to 1949, 1973 to 1975 and 1980.
This stock will be in the penalty box for awhile. They still have a compelling story, but until they do a much better job of handling the Street it'll have a difficult time moving. They do have a good balance sheet and were still profitable so it isn't all bad. Just difficult to trust now.
For the 2008 fourth quarter, the Company now expects revenue to be approximately $76 million and net income to be approximately $5 million. Both revenue and net income guidance are now lower than previous guidance of $158 million and $15.5 million, respectively.
Mr. Jinxiang Lu, A-Power's Chairman and CEO, commented, "Due to the unusual current macro economic conditions, a few of our key potential contracts, which we expected to close in the fourth quarter, were postponed. As our projects are highly capital intensive, we always require a sizeable down payment as a key component of our standard contract. Under today's environment, we believe that it is even more important to exercise prudence on customers' payment terms and to continue to focus on our cash flow management.