Tuesday, January 4, 2011

Qualcomm (QCOM) Near Deal to Buy Atheros Communications (ATHR) for $45/Share

Grrr.... so frustrating.  One of our mainstay holdings for the past 2 years - Atheros Communications (ATHR) looks like it will be bought out for Qualcomm for $3.5 Billion of $45/share.  Not only do we miss out on the buyout but one less candidate for the future portfolio. Indeed I said in early December to keep an eye on this one.  [Dec 1, 2010: Keep an Eye on Atheros Communications]

Bigger picture this is becoming an increasing problem for investors such as myself.  A lot of the small to mid cap secular growth stories - namely in tech - are being snapped up or never make it public since the mega cap giants buy them all up - hence their big growth gets embedded in a much slower giant.  Much like Xbox is stuck inside of Microsoft.  (in that case of course, Xbox originated within MSFT but it's the same idea of a high growth arm of a slow plodding giant) I think this might be the reason the remaining independent high growth names have such a premium - scarcity value. There are so few domestic opportunities for secular growth, that for those that remain stand alone, people are willing to pay any premium.  Atheros would not even be considered the cream of the crop in terms of growth like some of the other names that had ridiculous 2010 price appreciation, and probably have priced themselves out of being acquisition targets.

Per NYT:

  • Qualcomm is near a deal to buy Atheros Communications, a semiconductor manufacturing company, for about $45 per share, or $3.5 billion, according to two people with direct knowledge of the talks.
  • A deal could be announced as soon as Wednesday, said these people, who requested anonymity because they were not permitted to talk publicly about the deal. They added that the talks were in their final stages but could still fall apart.
  • The deal would represent a roughly 22 percent premium to where Atheros’s stock traded midday on Tuesday. Atheros stock has jumped about 50 percent off its lows in September as the outlook for business and consumer spending has improved.
  • A purchase of Atheros would be Qualcomm’s largest acquisition ever. Over the past year, Qualcomm, based in San Diego, has quietly sat on a pile of more than $10 billion in cash, while its rival Intel has gone on a buying spree. Last August alone, Intel spent nearly $10 billion acquiring McAfee, the antivirus software maker, as well as units of Texas Instruments and Infineon.
  • Atheros, based in Santa Clara, Calif., makes chipsets for a range of wired and wireless devices, including desktops, laptops and tablets. On Monday, it announced two new wireless products that bring Wi-Fi and Bluetooth technology to notebooks and tablets while reducing reducing power consumption and increasing the longevity of batteries in such devices. 
[Oct 26, 2010: Atheros Communications with Solid Report, but Guidance Soft]

No position

Trading Community Beginning to Turn Against Gold?

Increasingly my belief is large money has the capacity to move markets, and the ability to influence others via options market activity is increasing.  So many people are looking for any edge, and as we saw in 2008 with the banks - once players began blasting these institutions with put buying everyone began asking "what do they know that we don't know" and that led to selling... or more put buying... and it tends to feed on itself.   We saw similar activity in the CDS market for sovereign debt more recently.  The same goes for the upside, especially with so many services now alerting market players to large institutional scale activity in the options market.  One could say in some ways this is using the market psychology to manipulate things if you are a big enough fish.

i.e. short XX in scale, then start blasting the option markets with out of the money put purchases, which scream out to everyone in a market where any dislocation is picked up by algorithms the world over, which then leads to people asking "what does this big boy know?", which leads to copycat behavior or "shoot now, ask questions later".... which leads to ....

You get the point.  A very large player can move markets simply due to their scale causing others to mimic or question their own position.  That original shorting of XX in scale is a winner due to all the following factors.   Not to mention the follow up puts.

Apparently the "trading floors" are buzzing with large scale put purchases of the gold ETF at the 115 strike price (apparently in March).  This same player could have been shorting GLD (the ETF itself) in size ahead of this now very obvious put buying.  So does this feed on itself?  Already the questions begin "what does this person know?"  And so the human psychology plays on itself as the CNBC Fast Money crew jumps on it - so both the retail investor and the institutional investor now know "someone smart" is doing something.  If the herd follows the Pied Piper, the original put buyer (who potentially also has a big short position of the ETF itself) will make mad money frankly only due to the scale of his put position causing herding behavior. 

As we can see from the chart GLD 115 would be a dramatic drop, down below the 200 day moving average.  But frankly it need not go anywhere near that for said purchaser of puts to make mad money.  Indeed with today's 3% drop today this institutional buyer has already made some excellent change.  Even a drop to the upper 120s from the 134s would derive very big profits.  And all it took was said "smart money" leaving his/her large 'footprint' all over the market.

p.s. for your technicians out there, one could make the case gold has just made a head and shoulders formation.  

Here is a video of the Fast Money crew talking it up....

No position

Speculators Moving into the Natural Gas Space?

With almost every commodity known to man (not named cocoa or natural gas) sent to the stratosphere in 2010, one needs to ask if the speculator class will finally start pumping up those few left behind.  Since supply and demand as a reason for prices to adjust is "so 2004", it need not matter if U.S. physical inventories of natural gas are bursting at the seams... we have a fiat money tsunami to push into the market (every market) and we can only run up silver 2-3% a day, so many months in a row.   Don't look now but guess what commodity got 2011 off to a hefty start?

If this continues (clearing $5...and than $5.20 will be important), just another line item to add to the list of price pressures on both consumer and producer in the year ahead - but as always, it won't matter until it matters.

No position

Both Goldman Sachs (GS) and Apple (AAPL) Show Breakout Potential

Yesterday's "we must rally for rallying sake" gap and run, pushed both Goldman Sachs (GS) and Apple (AAPL) above key resistance levels.  Apple is the dominant animal in the widely traded QQQQs, hence the rally in December without Apple's participation was very interesting.  While sentiment readings and the "giddy" factor on CNBC is off the charts, as a bull you definitely like to see these type of moves in what are considered bellweathers.   Apple especially now has a wonderful sideways base to work off of.

With that said, I still think at these levels of euphoria we are now becoming increasingly prone to a blow off type of correction - perhaps Friday's "surprising" employment figures will provide the incentive for the last surge higher before we finally have an inkling of correction.  I would begin building some hedges against long positions starting next Monday (afternoon of course since we almost ALWAYS gap up on Monday mornings) or Tuesday.  Next week will mark the 6th week of non stop rallying (have we even had more than one 0.5%+ down day?); generally a good time to expect some weakness to begin.

No position

Byron Wien's 10 Surprises for 2011

After a quite stellar surprise list for 2009, 2010 was a dud for Byron Wien. (see 2010 'surprises' here)  That said, just for fun let's showcase what is a widely publicized list amongst the Wall Street crowd.  (this is his 26th year doing this conjecture)  Looking over this year's surprises, I'd argue many of the items are near consensus, especially in the first part of the list.  For example, many on the Street are calling for GDP around 4%, and unemployment to fall to about 9%... yields to rise on U.S. debt.... the S&P to hit 1400-1450.... M&A to explode higher under an orgy of easy money...gold to keep rallying as central bankers spit on fiat money.... agricultural commodities to surge....oil to continue ever upward.... etc. 


Via Barron's:

Wien defines a “Surprise” as an event which the average investor would only assign a one out of three chance of taking place but which he believes is “probable,” having a better than 50% likelihood of happening.

The Surprises of 2011

1. The continuation of the Bush tax cuts coupled with the extension of unemployment benefits has put all working Americans in a better mood. Real Gross Domestic Product rises close to 5% in 2011 driven by improved trade and capital spending in addition to stronger retail sales. Unemployment drops below 9%.

2. The prospect of increasing Federal budget deficits and rising government debt finally begins to weigh on the bond market. The yield on the 10-year U.S. Treasury approaches 5% as foreign investors become more demanding. Spreads with corporate fixed income securities narrow.

3. Encouraged by renewed economic momentum the Standard & Poor’s 500 rises close to its old high of 1500. A broad range of sectors participate, but telecommunications and utilities lag. With earnings improving, valuations seem low and individual investors return to equities for the first time since the financial crisis. Merger and acquisition activity becomes intense and the market reaches a blow-off euphoria. Stocks correct in the second half as interest rates rise.

4. Although inflation remains benign, the price of gold rises above $1600 as investors across the world place more of their assets in something they consider “real.” Sovereign wealth funds of countries with significant dollar reserves also become big buyers. Hedge funds keep thinking the price rise is becoming parabolic and sell their positions and some even short the metal but gold keeps climbing and they scramble back in.

5. Worried about inflation and excessive growth, the Chinese decide to use their currency as a policy tool. They manage the value of the renminbi aggressively to keep the growth of the economy below 10% and to prevent consumer prices from increasing above the 4%–5% range. The move is viewed as a precursor to the world-wide adoption of a basket including the renminbi as an alternative to the use of the dollar as the principal reserve currency.

6. Rising standards of living in the developing world seriously increase the demand for agricultural commodities. The price of corn rises to $8.00, wheat to $10.00 and soybeans to $16.00. Commodities become a component of more institutional portfolios.

7. The housing situation improves. Although the inventory of unsold homes remains high, the oversupply is drawn down substantially, contrasting with an increase in 2010. The Case-Shiller gradually heads higher and housing starts exceed 600,000.

8. Continuing demand from the developing world and a failure to bring onstream new supply causes the price of oil to rise to $115 per barrel. The higher price at the pump fails to discourage driving, increase sales of hybrid vehicles or cause Congress to initiate conservation measures.

9. Frustrated by the lack of progress against the Taliban and the corruption of the Karzai government, President Obama concludes that whenever American troops return home, Afghanistan will once again become a tribal state ruled by warlords. He accelerates the withdrawal of most military personnel to the end of 2011. Coupled with the pullout of forces in Iraq, this will leave the Middle East without a major Western presence in the face of rising fears of terrorism.

10. Under duress Angela Merkel leads the way in European financial reform. The weaker countries, having pledged to cut their budget deficits in half by 2014, are provided additional transitional aid by the European Union (with Germany’s backing) and the International Monetary Fund as long as they implement their austerity programs, increase some taxes and still show modest growth. The European financial crisis becomes less of a concern. The policies put in place prove psychologically satisfying to the financial markets but harmful in the longer term because they are palliative and do not represent solutions. “

Monday, January 3, 2011

Incredible Run in the Coal Space

You could throw a dart and make tons of money the past 4 months, but certain sectors have been more than incredible.  One such group are the coal stocks - they are making moves similar to the commodities bubble in 08 [May 21, 2008: Coal - Just Amazing].  This was one of my favorite groups in late 2007 through mid 2008 as I believed a secular shift was occurring as coal went from a domestic commodity to something much more similar to oil - global in nature.  The relative ease of transport is what has separated coal from natural gas - both of which the U.S. has in abundance but only the former is (relatively) easy to move around the globe to countries which are the new energy hogs. From 2007 [Sep 18, 2007: Another Look at Coal]

A key driver of this demand has been China's emergence as a net importer of coal in 2007. The country is firing up a new coal-burning plant each week, and this growing appetite has devoured coal from Australia, South Africa and other suppliers that would normally ship to European markets.

Some European consumers have therefore turned to U.S. suppliers to replace coal that is now too expensive to ship all the way from Asia.

Some sample returns below:

Massey Energy (MEE) +77% since early October (3 months)

Walter Industries (WLT) +79% since early September (4 months)

Patriot Coal (PCX) +86% since early October (3 months)

Alpha Natural Resources (ANR) +60% since late September (3 months)

James River Coal (JRCC) +56% since early November (2 months)

Even if you went with the most conservative option - the Market Vectors Coal ETF (KOL) +45% since early September (4 months)

[Dec 6, 2007: Coal Stocks Quietly in Bull Market]
[Jan 14, 2008: New Coal ETF (KOL) Introduced from Van Eck Global
[Feb 7, 2008: Coal Bandwagon Gaining Steam]
[May 1, 2008: Walter Industries - the Most Amazing Company]
[May 5, 2008: Alpha Natural Resources Booming Earnings - Just the Start]
[May 20, 2008: Market Vectors Coal (KOL) Red Hot]

No positions

[Video] CNBC - Goldman Sach's Jan Hatzius Gets Very Bullish on 'Stock Market Economy', Still Some Struggles in Real Economy - Changes Mind on Future QE Prospects

The one economist all of Wall Street (and I am sure many in the Federal Reserve) listens to, has changed his tune quite substantially the past 3-4 months.  Goldman's Jan Hatzius had a quite dour outlook just this past October  [Oct 6, 2010: Goldman Sachs - 2 Scenarios for U.S. Economy in Next 6-9 Months (a) Bad or (b) Very Bad] but 2 months later as the massive "don't call it yet another stimulus" plan looked headed for approval turned quite bullish [Dec 2, 2010: Goldman's Jan Hatzius Turns Quite Bullish]  Indeed the surprise of the payroll tax holiday and some of the other goodies stuffed into the Bush tax cut extensions led him to believe that GDP will be pumped up by an additional 0.5 to 1.0% in 2011

Interesting to note that the man who was saying the Fed would need to eventually do $2 TRILLION of additional Quantitative Easing (again not that many months ago) now has changed his tune on that end as well.  He believes the current $600B is more than likely all there will be.  That said, he does not see the ultra easy Federal Reserve moving to any form of tightening in 2011... or 2012.  This is quite remarkable as it will mean never before seen levels of liquidity for HALF a decade.  We saw the misallocations 1% rates for about 2 years (2003-2004) eventually created ... but as Chuck Prince says - dance until the music stops!  A year ago ago at this time, all the talk was when the Fed would tighten (many thought by mid to late year 2010).... now we are talking 2013.  The massive steroids to the economy continue....

With all that said, it will continue to not feel like any sort of recovery for large swathes of the populace... but for the "Stock Market Economy" Mr. Hatzius is waving the green flag.  Below we have a video with some of his thoughts courtesy of CNBC

8 minute video - email readers will need to come to site to view

ISM Manufacturing Pops to 57.0 from 56.6 Matching Expectactions

At this point I don't think the economic data matters much as animal spirits are extremely high with the belief the market simply can not go down as the Bernanke put makes the Greenspan put look like amateur hour.  After today's spike, the S&P 500 is only about 10-12% away from many strategists year end targets of 1400-1425.  With 51 more Mondays to go this year and 11 more "first day of the months", not sure how we're going to be able to contain ourselves to only a 10-12% gain from here. 

As an aside every working American just got a 2% raise today, as the payroll tax holiday kicks in - that is $2000 per median household ($50K income) and $4000 for a higher income household ($100K).  This is on top of the huge transfer payment increases we have seen the past 2-3 years, some are measuring those at roughly $2500 per household.  (across 110M households)  While these numbers don't seem huge consider the median household income is roughly $50K.  The government is increasing this by about $4500 in 2011 (transfer payments + payroll tax) or almost 10% per household ... of course offset by massive deficits.  However, that is a huge non organic increase in income for the average household.  Spending is done at the margins if you exclude the upper end consumer... and these are significant supports for the consumer spending economy we now depend on.

It is going to be fascinating to see if the politicos actually take the payroll tax holiday back in 2012 or if they will extend it another year going into an election - because we surely will hear cries of "tax increases" if the 1 year tax hiatus is allowed to expire a year from now.

Today's ISM Manufacturing figure came in line with expectations at 57.0 with prices paid up 3 points (72.5 from 69.5) and new orders up 4.3 points (60.9 from 56.6).   In the Bernank's world, this is a great report as he loves inflation.  Strangely, both the export and import components fell, as did inventories. While manufacturing is only about 11% of the economy, and 9% of employment this report is still more closely watched than Wednesday ISM Non Manufacturing.

More from Bloomberg

Cummins (CMI) Gained 140% in 2010

One of our favorite names - Cummins (CMI) had a monster 2010, up about 140%, tacking on some $10B+ of market capitalization.  This is one of the many "U.S." companies increasingly only in name with the majority of revenue coming from overseas.  Cummins represents the quandry facing investors in 2011... or at least "some point in 2011" when the current euphoria wears off.  Where to put your money for outsized gains?  Perhaps Cummins has another 25% type of year in it - or perhaps it is being priced for perfection and prone to a blow up in the year ahead as some earnings report disappoints the new crowd of speculators who have piled into the name.  Indeed, last quarter the company missed on both the top and bottom line but since we are in the David Tepper market where no one loses anymore as The Bernank says the market must go up - it did not matter.

Earnings are slated to jump from $5.00 for year end 2010 (soon to be reported) to $7.00 in year end 2011.   That's a forward PE of 16, using earnings a full year out from now - for what is an industrial cyclical - albeit one with some fantastic secular underpinnings.  Further with commodity inflation we have to begin to model the same problems we had in 2008 - when input prices (i.e. steel) began to surge, profit margins were punched in the gut across industry.  [May 14, 2008: Deere Earnings - Why I'm Avoiding Equipment Stocks]  [May 17, 2008: WSJ - Fast Rising Steel Prices Set Back Big Projects]  If speculators continue to push commodities up at current pace, we're going to start seeing some tremendous headwinds in late 2011 - a mirror of what happened in 08.  So while the market certainly can continue upward in the year ahead, it is going to be difficult for the exact same names that have been market leaders the past 2 years to continue to carry the baton - or at least to expect level of performance similar to what we've seen.

The CEO for Cummins made a quick appearance on CNBC Fast Money Friday.  See below.

Some highlights from the crew:
  • The maker of diesel engines, fuel systems and emission controls based in Columbus, Indiana benefited from an expansion into overseas markets such as China and India, powering trucks carrying everything from grain to iron ore to people.  
  • “Global economic strength, a replenishment cycle of old trucks and some production capacity taking out during the recession are driving the gains,” said Karen Finerman, President of hedge fund Metropolitan Capital Advisors and owner of Cummins shares. 
  • ... governments around the world.... implementing emission standards that would require the purchase of efficient engines made by companies like Cummins.
  • In the third quarter, sales in non-U.S. markets jumped by 56 percent and accounted for about 60 percent of total revenue. Providing engines to power medium-duty trucks and buses in Brazil were a particular highlight. The company, located about 1 hour south of Indianapolis, has customers in 190 countries.
  • In October, the company raised its 2010 sales forecast to $13 billion, which would be an increase of 11 percent from 10.8 billion in annual revenue last year.
  • Analyst sentiment has cooled slightly a bit on the name after the big gains this year. Nine analysts rate it a “buy” and nine call it a “hold” or “underperform.” The average 12-month price target of Wall Street is $107.67, which would represent an almost 7.7 percent return in 2011, not including the dividend. 
[Nov 19, 2010: Bloomberg - Oldest Truck Fleet Since 1979 May Mean 56% Jump in North American Output]
[Oct 26, 2010:  Cummins Misses on Top and Bottom Lines, but Foreign Sales up to 63% of Revenue]
[Jul 27, 2010: Cummins Demolishes Estimates]
[Sep 23, 2007: Stock to Watch: Cummings Hitting on all Cylinders] 
[Feb 11, 2009: WSJ - Cummins Engine Shifts Gears Amid Stall]

No position

First Day of the Month + Monday Morning Meltup Kick In for Start of 2011

Looks like 2011 is going to be little different than 2010 and 2009.  As noted last week the first day of the month is almost always up and usually in relatively sharp fashion...this has been a pattern for well over a decade.  As a special bonus this month the first day of the month happens to be a Monday.  As has happened repeatedly since the 09 lows Monday morning gap ups have become the rule.  News or no news.  For an 'efficient market' which supposedly discounts such things it is remarkable how patterns that are now obvious to everyone keep working.  Looks like another year where much of our gains will come premarket and on little news.

Sunday, January 2, 2011

Most Read Posts of 2010

With about 7000 posts authored in roughly 3.5 years, it is always interesting to see what is the most popular amongst readers.  Below I've listed the most visited stories in year 2010, excluding the posts along the top of the page such as "About Me" and "Fund FAQ/Pledges".

  1. [click here]  Kyle Bass of Hayman Capital - Japan Defaults or Devalues Debt in 3-4 Years; U.S. in 10-12
  2. [click here]  Ordos - China's Empty City (this post is actually from 2009 but was still a hit in '10)
  3. [click here]  Byron Wien's 10 Surprises for 2010
  4. [click here]  Zero Down Mortgages Restarted by Biggest Subprime Lender in Town - Fannie Mae
  5. [click here]  Sovereign Risk Chart - Where Would the U.S. Fit in, on Europe's Scale?
  6. [click here]  Video - Who is Sylvain Raynes and How Did He Make it on CNBC? (my nomination for 2nd funniest video in history of FMMF after the infamous Jeff Macke clip)
  7. [click here]  Charles Biderman of TrimTabs Claims U.S. Government Supporting Stock Market
  8. [click here]  His is (Way) Bigger Than Yours... One Day Trader's Office Setup
  9. [click here]  Oh My - We're Crashing (flash crash in real time!)
  10. [click here]  Jim Cramer has Lightbulb Moment - Not Paying Mortgages is Keeping Americans Spending

Other fun stats

After U.S., Canada, and U.K. the countries most visitors came from
  1. India
  2. Germany
  3. Singapore
  4. Australia
  5. Croatia! (Since inception I seem to have a random fanbase there)
  6. Hong Kong

Top cities globally
  1. NYC
  2. San Francisco
  3. Chicago
  4. L.A.
  5. London
  6. Houston
  7. Seattle
  8. Washington
  9. Atlanta
  10. Singapore (city-state)
  11. San Jose
  12. Dallas
  13. Toronto
  14. Minneapolis
  15. Austin
  16. Hong Kong
  17. San Diego
  18. Zagreb (I was hoping it would be Dubrovnik but beggars can't be choosers)

[Video] Joseph Stiglitz, Nouriel Roubini, VY Reddy, Raghuram Rajan Look Ahead to 2011

A nice series of videos with 4 powerhouse economists (this is where I insert the joke that if 4 economists are in the room, we should expect 7 opinions).  Americans will be very familiar with the progressive Stiglitz, and the now infamous Roubini.  Joining them is the former chief economist of the IMF Raghuram Rajan who had a very impressive interview on CNBC last October (which I never posted to the blog but you can see it here), and a man who at this point most Americans could only wish for as a central banker, VY Reddy.  Unlike the Greenspan's and Bernanke's of the world who claim the bubbles (which they create) are not something they can see.... and that they can only fix the bursting bubbles after the fact, Doctor Reddy was pushing against the easy money bubbles as they were creating, helping India avoid massive financial damage seen in the West.   He stood up to private bankers who were furious that a central banker would not be their drug dealer in chief, but in the long run he worked for the people - not the bankers.  What a concept. [Dec 28, 2008: NYT - How India Avoided the Crisis]

All together about 35 minutes of interviews

Chinese PMI Falls in December

The Chinese PMI figures, goosed by a type of stimulus that would make Keynes blush [Feb 16 2009: Is China Pulling an Alan Greenspan?] , have been part of the reason the first day of each month in the U.S. has seen strong surges the past year and a half (many of those days had very large premarket gains).  Now with China trying to put the brakes on a highly inflationary environment, the "we can have it both ways crowd" has switched to the tone of "China will perform a perfect soft landing".   While most of China's data should be taken with many grains of salt, the government's Purchasing Managers Index has a parallel private sector report conducted by HSBC, so there is at least some checkpoint for a smell test.  As always any figure over 50 continues to point to expansion... the PMI in China fell near 50 during the summer doldrums but recently popped back to mid 50s.  While the current readings have dropped, some mixed news on the inflation front was also reported.

Via Bloomberg:
  • A purchasing managers’ index fell to 53.9 from 55.2 in November, China’s logistics federation and the statistics bureau said Jan. 1.   Growth slowed for the first time in five months and the reading was less than any of 13 analysts’ estimates in a Bloomberg News survey. Their median forecast was 55. 
  • A separate report from HSBC Holdings Plc and Markit Economics indicated that manufacturing growth cooled in December and input and output prices rose at a slower pace. 
  • Manufacturers’ input costs rose at a slower pace, the report showed. At the same time, the logistics organization cautioned that inflation is spreading from food to raw materials and energy and could erode the nation’s export competitiveness. 
  • An output index fell to 57.5 last month from 58.5 in November and a measure of new orders dropped to 55.4 from 58.3, while an index of new export orders rose to 53.5 from 53.2. An input-price index dropped 6.8 points to 66.7 after surging in November to the highest level since June 2008.  
  • A survey released by the central bank in December showed consumers more concerned about prices than at any time in the past decade.
  • China’s key stock gauge declined 14 percent last year, the worst performer among the world’s 14 biggest benchmark indexes, because of concern that government curbs to counter inflation will crimp growth and profits. The measure jumped 80 percent in 2009 as a 4 trillion-yuan ($610 billion) stimulus package and record lending helped the economy recover. 
The government-backed PMI, released by the Beijing-based logistics federation and the National Bureau of Statistics, gives an indication of manufacturing activity by surveying more than 820 companies in 20 industries, including energy, metallurgy, textiles, automobiles and electronics.

Friday, December 31, 2010

The Year Ahead, and Times Gone By

I was going to do a somewhat witty cynical prediction list for 2011, with some serious thoughts thrown in but most everyone has rolled out their 2011 predictions so why be like everyone else?  Instead, as a very big year approaches (and a chapter closes) I thought I'd steal a page from a few guys who have written some excellent commentary of late.  If you are not reading James Altucher's blog - The Altucher Confidential - he does a great job of personalizing his life experiences into financial lessons, or even life lessons.  It is some compelling reading and he brings a lens to his life everyday - something I'd find difficult being a much more private person.  Josh Brown over at The Reformed Broker who normally writes in a style similar to mine, went much more introspective in a post yesterday, discussing how 2010 has been a turnaround period in his life on so many levels.  We are 'twitter friends' and do quite a bit of online chatting back and forth, so I was surprised to see what a tumultuous year he had.... but his current path is upward in a big way.  So like Josh, I'd thought I'd take a break from the norm and talk about some of the journey, as it helps to personalize people in a world awash in commentary.


It all started in 197..... wait, I won't go that far back.

I was always fascinated by the market

I don't know when I first started getting into 'the market' but at least as far back as the teenage years it held an interest for me.  Being an analytical type, as a teenager every September I'd look forward to Kiplinger's mutual fund review where they had these massive tables of mutual fund results.  I am pretty sure I was using Lotus 1-2-3, because this was before MS-Excel hit its stride - but I'd look over those charts - find all these best 3 year, 5 year performers - type in all their data into a spreadsheet, sort 'em, analyze 'em, sort 'em again, print them, study them - oh it was fun.  Thankfully the Facebook was not around.  This was before the days of the internets (sic), so magazines like Kiplinger's and Money, and those huge bulky Morningstar "books" at the library was all you really had to research.  So once I had the 'best funds' I could not wait to get to the library to leaf through the Morningstar profiles to see what stocks they held, the fund history, and such.  And no, I did not wonder why I was the only kid at the library vying with tiny men with white hair for those Morningstar books behind the reference desk - but I am sure the librarian did.  So while we did not have the internets, we did have computers - probably the early versions of PCs since I don't think the Commodore 64 could handle spreadsheets - but my memory is fuzzy.

The college years

Eventually I graduated and headed off to Ann Arbor for college where other matters became more pressing - such as a somewhat real life.  I still read the magazines in my free time, but academic and social activities were more the focus, so the investing life was dialed back but never far from mind.  I was one of the first people to get email (had to go to 4 buildings to get it accomplished) but the internet was new and fresh and a huge time sucker for someone like me who is a data whore hog. I am sometimes asked why I did not go into a career in "investing" out of college since it was a passion ... probably much of that was comfort level.  I had no idea where to begin and Michigan is not exactly a hotbed for the investment world ala a NYC, Chicago or Boston.  Being simple minded (what do most 18 year olds know about their future?) I initially picked a career path by process of elimination and what was a clear path.  For example, if you are going to be a doctor you go the pre-med path.... if you are going to be a lawyer you go the pre-law path... if you are going to be an accountant you go to the business school.

I didn't want to be any of those things, but I liked chemistry.  So I came upon the great idea I'd be a chemical engineer.  Didn't know much about it, but I saw in the tables it was well paid and if I could do "chemistry stuff" how bad could it be?  Well I found out it was bad.  It started out ok - I took all these fancy classes that were filled with future engineer or doctors - Calculus I, II, III.... Organic Chemistry I, II.... Physics I, II.   Uhh, I thought college was supposed to be fun?  Long story short - there was a lot less chemistry and a lot more upper level math/physics which were not my favorites - differential equations anyone?  By mid sophomore year I saw this was not for me - I was not passionate enough about this line of work to continue, but now I was stuck.  At Michigan, the undergrad Business School is a 2 year program that you apply for - it's own entity.  I did not even have enough "humanities" to apply at the time, so 2nd half sophomore year was full of (ahem) less rigorous classes.  Got my only A+ during my college career - Anthropology 101 - compared to the heck I had been through the first 3 semesters this was much more palpable.  Then I had to apply for B-school, but I knew my GPA was going to be worse than most due to the type of classes I had taken. Rather than rejecting me right away, they were kind enough to wait list me until right before the fall semester began... and then they rejected me.  Leaving me scrambling for classes - and which direction go.   So I decided to make a hybrid program for myself.  Economics was the only "business" type of major in the "Humanities" part of the college, but I would take a year's worth of applied business (accounting, finance, marketing) - with no credit earned mind you, since I was not part of the business school.  Hence my 4 year program became a 5 year program... but at least I could get a job in a state where Econ majors are not exactly in high demand - we don't have many think tanks in Michigan.

Off to work life

So I had my degree which I feared somewhat useless on a resume if my eventual plan was not to be a professor - but at least had some accounting classes so I could highlight that aspect of my 5 year sojourn.  I was not ready to leave the state since I enjoyed the comfort level of being around family, so I did not utilize the full scope of the career placement - many of the recruiters were from out of state anyhow and most of the jobs I were interested in, were going to those darn B-school kids.  So I found my own way after graduation and ended up in a starter accounting job in a manufacturing business (what else?).  The work was relatively simple and somewhat repetitive, and I stayed far too long in a low paying job - even my boss was telling me to leave (politely) as this work was below me.  In retrospect it was probably the best workplace I ever had - which was a curse - hard to leave an environment you really enjoy.  There were people there 10, 20, 30 years older who I enjoyed - you don't realize how hard that is find until you churn through multiple jobs in life.  In that time, I  found some guys there who were really into the markets so I rekindled my love affair with the markets, but this time mutual funds were out and it was equity time.  I opened my first brokerage account and could place trades electronically via phone!  How cool - of course this was right before the explosion of online brokerages.....this was mid to latter 1990s.  Well me and my work friends - one guy in particular - became geniuses in the late 90s (you too? what a coincidence)  We traded NASDAQ stocks - heck you put the buy in at 10 AM, go do some work, and at 1 PM you check in and you were up 8%.  4 out of 5 days a week - this stuff was easy.  Me and my much older friend even discussed opening a hedge fund as he had some dough, as did some of his friends.  How great that would have turned out.  (!!!)

So like any genius in the stock market, I was not content with just making 80% in 5 months, I was learning about options - yeah!  I tracked options and saw when I bought Athome Networks and it went up 18% in 3 days I could have made 90% if I had bought calls instead.  My path to being a millionaire would be cut by 80%.  All I had to buy the dip, any dip.  Late 99 was the best... the NASDAQ went from 3000ish to 5000ish in just a few months.  Holy smoke - I started to dabble (I did not inhale the options) in calls... and it worked pretty well.  Then February, March 2000 came along and finally a big dip.  All I needed to buy this one and in a few weeks I'd be doing things unheard of in my little part of the world.  Uhhh.... well let's say buying the dip did not work out so well in 2000.  Crash. Burn. Fail.   You lose! You get nothing! Good day sir!

And so a good few years of building up went up into flames in a few months in the options markets.  Lesson learned.  Tuition extracted.  Market player humbled.

Eventually I took the boss's advice and moved on to another company and more fruitful opportunities - and out of accounting (snooze) and into finance, which suited me far better.  And others after that moving up the food chain. It definitely took me a few years of relative hiatus (2001-2002) from actual heavy duty market activity, to get over being burned so badly and still to this day I wake up every day thinking how I can not lose money, rather than how to make money when devising strategy or trade ideas.  Which is why 2008 and early 2009 - while crazy in it's own right, was not particularly game changing on a personal level - I had already lived that nearly a decade earlier and it had never left the conscience.  As the years passed, I continued to watch and read up on the market and now had the internet to supplement my learning curve.  I became scared of what little I knew "back in the day".   But over the years I tried many things - from penny stocks, to buy and hold (did I mention snooze?) to fundamental analysis to technical analysis.  For most of this time, I thought being purely analytical would put me at the top but if that was the case engineers and statisticians would dominate the charts of the world's best investors - they do not.  Patterns, sentiment, human emotion - all of these became things to learn.  Sometimes I'd be active in the markets, other times I would not do a trade for many months as I had a career of course.  Some things worked, some didn't but it was all a learning experience.  I honestly did not mind losing money (too much!) since it was my own; paper trading just was not for me; I learned better from actual pain - whereas if I lost someone else's money (even in a mutual fund recommendation for someone's 401k) it would tear me up.  Which apparently is the complete opposite view that Wall Street takes as other people's money (OPM) is a plaything... ugh.  But I digress.

Follow the dream

By 2005-2006 I had settled into a strategy that was a hybrid of technical and fundamental analysis and worked for me.  I always tell everyone what works for me might not work for you - find what suits your temperament and ability.  It took me a long time to find a sweet spot and even then I did end up leaving a lot on the table with my style as I usually only had 5-6 stocks, and once I got a nice move in 1, I left the stock trying to find the next idea - often to see my old idea continue onward and upward many more tens of %.  So I often wondered what I could do with much more capital where I had many more positions, and I was able to leave a pot of money in older positions while still having money to put in new.  If I only I had a mutual fund or something!!

While I enjoyed the work I did it was never a love.  I'd come home in the evening and spend hours researching companies, reading market websites like (CBS)Marketwatch, Yahoo Finance, TheStreet.com, message boards, etc - blogs were really not part of the big picture then other than the first wave such as Barry Ritholtz's The Big Picture. But I could read and research about markets for hours on end.  There had to be a way to get this as a career.  They say do what you love and you don't work an hour of your life.  Should I just pack up and go to Boston or NYC and start as a runt again from the bottom ladder?  Did I want to do that at my age, not knowing it would ever truly pay off?   I saw the story of the 'red paperclip guy' - he started with a red paperclip and through a series of trades, eventually got a house.  Was this applicable to me?  Not in the direct sense but if that guy could pull that off maybe I can pull off a crazy idea.  I had a decent investing skill set, not the best, not the worst - and I had a decent writing skill set, maybe I can use the internet to marry a skill set with capital.  Worst case scenario I'd give it a year or two, and waste a lot of time.  All I needed to do is find a way to outline my thoughts, trades, ideas, and views... and have a transparent tracking mechanism held by a 3rd party to showcase my portfolio.  (ironically in the past few years, a few services have sprung up to do just these things - I was a few years early to the foray)  I did the homework, I learned what a blog was and how to do it (sounds simple now but they were not all the rage in 2007), I researched who could hold my portfolio so others could view it, and away I went in mid 2007 - perfect timing for the tsunami the market was about to embark upon.

After quite a few years of trial, tribulations, hits, misses, and literally thousands of hours of my life vaporized chasing my goal - here we are.  So that's how *this* came to be and after paying years of dues, I look forward to the next chapter of the book in 2011.  Much like when I started this site, I won't know how the next step will turn out, but I expect to look back in a few years in wonderment at all that has happened during the journey  Have a great new year's.

(Almost) Every Stock That Gained 100%+ in 2010

While commodities was the place to be in 2010, there were some extremely strong pockets in the equity markets as there are almost every year.  Below I've compiled a list of 'liquid' non micro cap stocks that returned at least 100% in 2010, with 2 hours to go.  There were 112 opportunities to make mad money; of course some were buyouts....if anyone has 2011's list in advance, I'd appreciate an email...

  1. Market cap of at least $300M
  2. Return of 100%+
  3. Average daily volume of 200K+
  4. Stock price over $10
I've highlighted names, we've either owned (blue) or discussed (purple) during the year.  Some of these are amongst my favorite fundamental stories, hence I believe 2011 is going to be much tougher to find huge winners as they've had tremendous runs.  Indeed as I expressed a month ago, 2010 might have been my best year ever in terms of the market moving up the names I focus on and championed - APKT, RVBD, FFIV, LVS, CMI, BWA, MGA, et al.

Ticker Company Gain Industry
WNC Wabash National Corp. 543% Trucks & Other Vehicles
IDT IDT Corporation 439% Diversified Communication Services
VHC VirnetX Holding Corp 403% Internet Software & Services
ISLN Isilon Systems, Inc. 393% Data Storage Devices
APKT Acme Packet, Inc. 391% Communication Equipment
TGA TransGlobe Energy Corp. 379% Independent Oil & Gas
REE Rare Element Resources Ltd. 331% Industrial Metals & Minerals
MCP Molycorp, Inc. 305% Industrial Metals & Minerals
KEM KEMET Corp. 285% Diversified Electronics
ENTR Entropic Communications, Inc. 283% Semiconductor - Broad Line
MIPS MIPS Technologies Inc. 258% Semiconductor- Memory Chips
PPO Polypore International Inc. 247% Industrial Equipment & Components
SPRD Spreadtrum Communications Inc. 243% Semiconductor - Broad Line
MSB Mesabi Trust 238% Diversified Investments
TZOO Travelzoo Inc. 231% Internet Information Providers
NFLX Netflix, Inc. 226% Music & Video Stores
LDSH Ladish Co. Inc. 225% Metal Fabrication
AXTI AXT Inc. 224% Semiconductor - Integrated Circuits
QCOR Questcor Pharmaceuticals, Inc. 219% Biotechnology
RVBD Riverbed Technology, Inc. 217% Networking & Communication Devices
FNSR Finisar Corp. 217% Networking & Communication Devices
TRS TriMas Corporation 204% Industrial Equipment & Components
CROX CROCS Inc. 204% Textile - Apparel Footwear & Accessories
AREX Approach Resources, Inc. 199% Oil & Gas Drilling & Exploration
MBI MBIA Inc. 198% Surety & Title Insurance
LVS Las Vegas Sands Corp. 197% Resorts & Casinos
NXTM Nxstage Medical, Inc. 197% Medical Appliances & Equipment
HUSA Houston American Energy Corp. 196% Independent Oil & Gas
FRG Fronteer Gold Inc 194% Gold
HSFT hiSoft Technology International 193% Business Software & Services
BSFT BroadSoft, Inc. 190% Communication Equipment
ACTG Acacia Research Corporation 186% Research Services
OPEN OpenTable, Inc. 183% Business Services
ITMN InterMune Inc. 183% Biotechnology
ATML Atmel Corporation 166% Semiconductor - Broad Line
GGAL Grupo Financiero Galicia S.A. 162% Foreign Regional Banks
GORO Gold Resource Corp 162% Gold
LCAPA Liberty Capital Group 161% Entertainment - Diversified
RES RPC Inc. 160% Oil & Gas Equipment & Services
APL Atlas Pipeline Partners LP 153% Oil & Gas Pipelines
SLW Silver Wheaton Corp. 152% Silver
JAZZ Jazz Pharmaceuticals, Inc. 152% Biotechnology
FFIV F5 Networks, Inc. 150% Data Storage Devices
TAL TAL International Group, Inc. 149% Rental & Leasing Services
RDWR Radware Ltd. 149% Information Technology Services
PANL Universal Display Corp. 148% Computer Peripherals
CMG Chipotle Mexican Grill, Inc. 147% Restaurants
CMI Cummins Inc. 143% Diversified Machinery
TWI Titan International Inc. 141% Auto Parts
SIGA SIGA Technologies, Inc. 141% Drug Manufacturers - Other
DECK Deckers Outdoor Corp. 140% Textile - Apparel Footwear & Accessories
BIDU Baidu, Inc. 139% Internet Information Providers
EXXI Energy XXI (Bermuda) Limited 139% Oil & Gas Equipment & Services
ARMH ARM Holdings plc 138% Semiconductor - Specialized
PWER Power-One Inc. 137% Diversified Electronics
PAY VeriFone Systems, Inc 137% Business Equipment
HNR Harvest Natural Resources Inc. 136% Independent Oil & Gas
WBC WABCO Holdings Inc. 136% Auto Parts
NG NovaGold Resources Inc. 135% Gold
CRUS Cirrus Logic Inc. 134% Semiconductor - Specialized
NOG Northern Oil and Gas, Inc. 134% Oil & Gas Drilling & Exploration
EZCH EZchip Semiconductor Ltd. 134% Semiconductor Equipment & Materials
TEN Tenneco Inc. 133% Auto Parts
URI United Rentals, Inc. 132% Rental & Leasing Services
PETD Petroleum Development Corp 131% Independent Oil & Gas
LULU Lululemon Athletica Inc. 131% Textile - Apparel Clothing
BEZ Baldor Electric Co. 128% Industrial Electrical Equipment
KRA Kraton Performance Polymers Inc. 128% Chemicals - Major Diversified
LOGM LogMeIn, Inc. 127% Information Technology Services
XXIA Ixia 126% Semiconductor Equipment & Materials
CATY Cathay General Bancorp 126% Regional - Pacific Banks
SWC Stillwater Mining Co. 126% Industrial Metals & Minerals
DHX Dice Holdings, Inc. 124% Staffing & Outsourcing Services
BKI Buckeye Technologies Inc. 124% Paper & Paper Products
WNR Western Refining Inc. 123% Oil & Gas Refining & Marketing
CPX Complete Production Services, Inc. 122% Oil & Gas Equipment & Services
TRW TRW Automotive Holdings Corp. 120% Auto Parts
CVI CVR Energy, Inc. 120% Oil & Gas Refining & Marketing
BWA BorgWarner Inc. 119% Auto Parts
ZUMZ Zumiez, Inc. 118% Apparel Stores
MMR McMoRan Exploration Co. 114% Independent Oil & Gas
FOSL Fossil, Inc. 114% Recreational Goods, Other
VRUS Pharmasset, Inc. 112% Drug Manufacturers - Other
VSH Vishay Intertechnology Inc. 112% Semiconductor - Broad Line
VMW VMware, Inc. 112% Technical & System Software
VPHM ViroPharma Inc. 110% Biotechnology
DDS Dillard's Inc. 110% Department Stores
LCC US Airways Group, Inc. 109% Major Airlines
PIR Pier 1 Imports Inc. 109% Home Furnishing Stores
GBX Greenbrier Companies 109% Railroads
ILMN Illumina Inc. 109% Biotechnology
CYD China Yuchai International Limited 108% Diversified Machinery
MGA Magna International, Inc. 108% Auto Parts
ACOM Ancestry.com Inc. 107% Internet Information Providers
TKR Timken Co. 107% Machine Tools & Accessories
BBEP Breitburn Energy Partners LP 106% Oil & Gas Drilling & Exploration
DIN DineEquity, Inc. 106% Restaurants
TIBX Tibco Software, Inc. 106% Business Software & Services
VRX Valeant Pharmaceuticals Int'l 105% Drug Delivery
BFR BBVA Banco Frances S.A. 105% Foreign Regional Banks
MOTR Motricity, Inc. 105% Diversified Communication Services
OVTI OmniVision Technologies Inc. 105% Semiconductor - Integrated Circuits
IGTE iGATE Corporation 105% Information Technology Services
SWKS Skyworks Solutions Inc. 105% Semiconductor - Integrated Circuits
ANN AnnTaylor Stores Corp. 104% Apparel Stores
GTLS Chart Industries Inc. 104% Metal Fabrication
CSTR Coinstar Inc. 103% Business Equipment
TICC TICC Capital Corp. 103% Asset Management
UA Under Armour, Inc. 102% Textile - Apparel Clothing
BID Sotheby's 102% Specialty Retail, Other
IMAX IMAX Corporation 102% Photographic Equipment & Supplies
APSG Applied Signal Technology, Inc. 101% Communication Equipment

Huge Week of Data Ahead

This market has truly become a snoozer - there have only been a few times when I can remember such little intraday volatility day after day (after day, after day).  I don't know if the economic data matters much nowadays since everyone is convinced 2011 is smooth sailing ahead so anything bad people can say is either backwards looking or will mean QE3 is assured, and anything good is ... good.  Hence, investors are having it both ways right now in the 'can't lose' market.  With the 4 month sprint up, many people are now calling for a pullback right after the new year - but with so many people calling for that one wonders if it will be just that easy.  Especially with the data that is surely to be positive next week.  Maybe it will be a few weeks later when earnings season begins - many stocks are now priced for perfection so if perfection is not shown in the earnings period, we could see selloffs - see Nike (NKE) a few weeks ago.

As you know by now the first day of the month is now almost always a winner... so I'd assume the fund inflows that drive the first day of the month will only accelerate on the first day of the year.  Plus China reports its Purchasing Managers Index ahead of the our open Monday and we have also now construed the Chinese to be perfect.  If the data is strong, we say "China is still on track - just booming!".... if the data comes in weaker, we say "China is doing an excellent job of cooling down its inflationary conditions!".  Once more, a "can't lose" psychology.

Yesterday's Chicago Purchasing Managers Index was the best it's been in 20 years which should bode well for the ISM Manufacturing figure next week.  Granted manufacturing employs less than 10% of the U.S. workforce nowadays, but people still treat this report as if we are living in 1975. 

 (hat tip Bespoke on the chart)

ISM Non-Manufacturing is more important to today's workforce ... it has been lagging the manufacturing index throughout the recovery but has shown better the past 6 months than the first year+ of the 'non recession'.  The other big report of the week is Friday's monthly jobs data - if you recall last month's was a complete outlier [Dec 3, 2010: Quite a Disappointment - November Figures +39K Jobs, Unemployment Rate +9.8%] so I'd expect a big revision upward to the November data and decent data in December.  This economy needs to be churning out 250K-350K jobs to really begin to make a dent in the unemployment rate but for the market any figure over 0 seems enough. But frankly with the government feeding money into the hands of Americans (another leg of this begins next week as the 2% payroll tax kicks in) and no one worried about the double dip now beginning in housing - these are not big concerns to the market.

Technically this sideways action has consolidated the big move from late August and helped to work off overbought conditions - so as long as the 'can't lose mentality' continues we could see another leg up as a multitude of reports hit next week.  Bears will want to see a non reaction to good news as their chance to possibly have a moment in the sun i.e. yesterday's blockbuster Chicago PMI did not budge the market (granted it was a holiday session).  Once good news fails to move the market, we should believe it's finally been discounted.  At this point we are discounting Goldilocks.

Monday - ISM Manufacturing, Construction Spending (both 10 AM)
Tuesday - Factory Orders (10 AM)
Wednesday - ADP Employment (8:15 AM), ISM Non-Manufacturing (10 AM)
Thursday - Weekly Claims (8:30 AM)
Friday - Monthly Employment (8:30 AM), The Bernank Speaks (10 AM)

NYT Dealbook: New Round of Financing for Groupon Sets Stage for Late 2011 IPO

Whatever the valuation the story of Groupon is just amazing; this company was not even in existence 10 quarters ago... and now has turned down a deal to be bought by Google for $6 Billion.  [Nov 30, 2010:  From Startup in 2008 to Potential $5-$6B Buyout from Google in 2010]   Just as awe inspiring is revenue over $1B... in 2 years... incredible.  Judging by the valuation the rabid "It's 1999 all over again, just replace Alan with Ben" investors have placed on the Youku's of the world (which in a word is cuckoo!), Groupon might be worth $20 billion.  [Dec 13, 2010: Careful About that Youku on Your Shoe] Not saying this is a sensible valuation, but with easy money flying out of every orifice and a major dearth of high growth companies in our country, any visible rapid growers are going to attract mounds of money.  In Youku terms Facebook should be worth more than Apple + Exxon combined...

And if you are wondering, I asked around if I would have any chance to be part of this sort of financing (which I would be very interested in getting in) and I could tell from the laughter meant no.   If you are not one of the kingpins you can forget it.

Via NYT:
  • The 30-year-old founder and chief executive of Groupon, Andrew Mason, could raise as much as $950 million from investors in the next few weeks, laying the groundwork for a multibillion-dollar initial public offering in 2011.
  • The social buying site, which offers coupons for local businesses, has so far locked up $500 million in fresh capital from Fidelity Investments, Morgan Stanley, T. Rowe Price, and other large investors — allowing Mr. Mason and eight other directors to take a significant amount of cash off the table.  In the coming weeks, the company could bring in another $450 million, according to a Securities and Exchange Commission filing on Thursday.
  • If successful, Groupon’s latest fund-raising effort would be the largest ever for a start-up (if?)
  • On Dec. 20, Groupon hired its first chief financial officer, Jason Child, a former Amazon.com executive. By Thursday, Fidelity, T. Rowe Price, Morgan Stanley, and others had committed $500 million.
  •  Meanwhile, Groupon, with revenue above $1 billion, continues to grow at a breakneck pace. In the last month, the site’s subscriber base has jumped 42.3 percent to more than more than 50 million worldwide, the company said.
  • Groupon could be rushing its debut, in part, to cement its dominance in the online advertising market. While Groupon is the 800-pound gorilla, it is a highly competitive space that has spawned scores of clones that are becoming viable threats. The No. 2 player, LivingSocial, has more than 10 million subscribers and recently raised $175 million from Amazon.  For now, Groupon has first-mover advantage. But that edge can quickly evaporate as Friendster and MySpace learned when Facebook entered the social media fray years ago.
  • “If they raise all this money privately and then become the first to go public in this space, they will become the de facto winner,” said Peter Falvey, co-head of technology investment banking for Morgan Keegan. “They have a good lead, but the idea is to go for the knockout punch — an I.P.O. would be a huge branding event.”
  • For Groupon’s new class of investors, it is all about that eventual payday. By jumping in now, T. Rowe Price, Fidelity and Morgan Stanley get an opportunity to peer into the company’s books and more important, get in before the public offering so the potential for a windfall is greater.
 No positions

[Video] Rare Earth Metals, the Serengeti, and China

I caught a edited for size version of this report on last night's NBC Nightly News; but the Today show has an extended version of the same piece which I've embedded below.  With the way it was edited I was confused why a government had decided to cut a road through a reserve that I assume is one of it's largest revenue generators via tourists.  But in the last few seconds of the piece, they laid out the reason - a shortcut for trucks to get to rare earth metals, sponsored by China.  Just can't escape the rare earths nowadays.  If you are unfamiliar with some of our older stories, China is all over Africa - it is the new paradigm colonialism.  In return for access to resources, China provides funding for development which a relatively poor continent (and it's politicians) are happy to receive. [Sep 30, 2009: China Attempting to Secure 1/6th of Nigeria's Proven Oil Reserves] And certainly it is now just African countries China is 'developing'.  [Aug 2, 2010: Bloomberg - New "Silk Road" Built by China Connects Asia to Latin America] [Nov 11, 2009: China Continues Expanding "Infrastructure for Resources" Policy with Agreement in Malaysia]

This is a tough one because while they flip through some aghast foreign tourists at the end of the piece, who are we to tell another country what to do.   Even if for the betterment of global society, we wish these things would not happen.

(6 minute video)

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