- The company slashed its fourth quarter revenue forecast to $8.2bn, less than two months after it cut its outlook to $9bn, plus or minus $300m, from $10.1bn to $10.9bn.
- Intel also said it expected a net loss in equity investments of up to $1.2bn, up from an earlier expectation of a $50m loss.
I said yesterday let's start the countdown for when the first CNBC anchor says "well I guess it's not all priced in after all" - looks like it took less than 24 hours.
And most fun of all is the info out of India - we have an Enron situation with Satyam (SAY) which is one of their outsource companies.
- The chairman of India's Satyam Computer Services Ltd. quit Wednesday after admitting the company's profits had been doctored for several years, shaking faith in the country's corporate giants as shares of the software services provider plunged nearly 80 percent.
- The company's balance sheet -- riddled with "fictitious" assets and "non existent" cash -- contained a $1 billion hole that could no longer be concealed after a deal intended to save the struggling company was scuppered, Chairman B. Ramalinga Raju said in a letter to the board.
- "It is one of the biggest frauds the Indian capital market has seen. People have been taken by surprise by the gravity of the event," he said. "After overstating profit and understating debt, the company's net worth is zero."
See, it is awesome when America exports its innovations to the world - the world is learning from us! American capitalism exported is "working!" Thankfully, unlike American shareholders who like to be rolled over as we kneel in worship at our CEO superstars - Indian shareholders puked on this deal with the 2 construction firms.
That said, I've been highlighting the Indian banks - I am going to use this opportunity to begin a starter position in HDFC Bank (HDB) - it is down 11% on the news which is completely unrelated, other than its a mark against India governance. Of the two banks I've been highlighting I like the business model of HDB better and both stocks (IBN being the other) have fallen exactly to their 50 day moving averages.
I'm starting with a 1.5% stake in the $67.10s... if the market falters I don't expect this name to hold this average but I won't be cutting back too much since I have a huge cash horde and have sold a lot of names, and exposure into this rally the past two weeks. I closed both Indian banks out of the portfolio in mid July - so a half year later, we are getting one of them back.'
Another way to play this is Cognizant Technology (CTSH) or Infosys (INFY) - among a number of other Indian outsource firms. Satyam's business has to go somewhere and both these stocks are up today, and the charts are looking positive as they break above resistance.
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As for the market, S&P 920 is the key level which we are currently below. But the bulls are persistent and already trying to ignore the Intel news, along with the ADP jobs report and whatever else they can ignore. Obama will be on CNBC @ 3 PM with an interview so that should be worth at least 4000 points on the Dow so we could be up 40% by 3 PM as Obama weaves his magical words. (ok not really) I don't think President Elect Midas can plug every hole in a quickly faltering world economy - but let's respect the price action.
I don't like to buy stocks or have a lot of exposure going into earnings reports because it's such a gambling situation - you can lose (or gain) 10, 20, 30% overnight. That's not for me - although it appears a lot of retail investors love that game. I guess it's easier than visiting Vegas. The monthly jobs report is akin to an earnings report on the entire market - we'll have a knee jerk reaction to a number that will revised in 30 days and is inaccurate as heck in the first place. But that's the way the casino works. We know the news will be bad - it's just a matter of seeing how the market digests the news. I will keep repeating this earnings season is going to be putrid so I just cannot see the market ignoring the bad earnings reports coming for 5 weeks in a row. But let's see what the market does with the Friday report first... the close at 4 PM on Friday will be very important to me (S&P 920 will have to be held for me to remain "bullish" - ahem) - after that the earnings season mine field will begin in earnest.
Long HDFC Bank in fund, no personal position
8 comments:
I am routed here via marketroll.
HDB is a good bank, but look at their P/E ratio. Moreover, the EPS for 2008, 2009 are shrinking.
Out there in India, HDB and IBN are hit with loan defaults because of collapsing real estate market, overhyped bubble [in everything].
I'll tell you what? Our parents bought 1 acre of land for 300$ in 1996. Recently, I visited India and was shocked to find that it is priced at 85000$, that's right - 3 hundred to 85 thousand $. And my parents don't want to sell it! I asked them to sell it as I saw the cookie crumbling just like the American real estate market, but they just won't listen. See, my parents have 0 debt and they lose nothing. But, what about the real estate investors who took loans from HDB, IBN. They will default, no doubt. HDB and IBN will go lower, likely.
But, I agree that HDB is a better bank than IBN. I would buy HDB at 55. IBN at 13 - 15 range.
But, look at TCL, INFY. These 2 shares are very good, have minimum xposure to the crisis that is going on all over the world. May be INFY will have lesser revenue from lowered outsourcing. But, TCL is good and the cell phone industry in India will still grow at booming rates. There is still growth potential in that area.
- Venky
The irony of Satyam is that the word Satyam means Truth in the Indian language. So I think they should now change the name of the company to Asathyam, which means untruth.
Hi Venky, thanks for the comments. A lot of earnings in banks will be dependent on how resilient the Indian economy is in the next 18-24 months. I have a lot more faith in their resiliency than the US economy but that view is not shared by 99% of Americans. That said, there were bubbles in every country and I expect writedowns - but its all relative right. Many US banks are technically insolvent if not for government propping them up. Not so much in many Asian banks. This is just a way to have one foot in India - there are very few ways to really play India versus say China.
I am less of a "value" investor than I used to be in the old days - I used to look at stocks and buy the cheap one in the group and watch the expensive ones continue to run up, up up while the cheap ones languish. The market does not seem to focus as much on (relative) value as even 5 to 10 years ago. I've been stuck in many cheap stocks that the market ignored for ages.
I have not heard of TCL - but Tata is everywhere - Tata Motors Ive been in.
I am interested in the CTSH and INFY's of the world BUT in a global slowdown I am worried they might see some shrinkage plus they get hit everytime the rupee strengthens. I was very heavy into these names in 2005-2006 when they were pure growth stocks. Now, they are more trades. But they should benefit from SAY's downfall.
StockManiac,
That is beyond funny.
You are welcome. It should be alright to buy any Indian stock today - for a quick buck and then out. Be watchful about the Indian market, there are many complexities involved [in addition to bubble bursts] namely terror attacks, political problems etc.
- Venky
Thanks, I've been in and out of India for the better part of 8-9 years. A lot more instruments now than before - usually I'd just use closed end fund like IFN - some newer ETNs and ETFs have arrived but not a lot of individual stocks.
I enjoy watching India as much for economic reasons as anything political - they are a grand experiment of democracy, western rules, with Asian promise and a lot of very poor people that I hope reach middle class in the next 30+ years. Many 100s millions still without electricity! Lots of potential but will it be fulfilled - fascinating from that angle.
Mark, I was there four weeks after six long years in U.S. It looks your outlook on India is too early and too promising. It would probably take at least two decades to see real-estate sustain current prices. There is only one way the prices can go till then.
There is rampant corruption in every walk of life and money and political power makes rules. I hope Satyam is not the tip of the iceberg. The Ambani brothers openly accuse each other fudging books.
Lot of private banks in India gave loans to people who can't repay, just like here in U.S. The private banks just started to get hesitant to give loans for land purchase in the nowhere land. They are still giving loans for lands in city area limits. The defaults are not started/reported yet. I think India is what U.S. was three years ago, on real-estate and consumer loans front.The private banks will have greater pain.
Ok fine. I guess corrupt American banks it is! :)
Gosh, where do I have left to invest... hmm, Iceland perhaps.
I agree with srtella. Perfectly right!
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