Monday, February 28, 2011

Bernie Madoff: 'The Whole Government is a Ponzi Scheme'; 'The Whole New Regulatory Reform is a Joke'

Ponzi?  I guess it takes one to know one....

I am not sure what to feel, when I find myself in agreement with so much of what Bernie Madoff says in a fresh interview with NY Magazine.   I guess when you have nothing left to lose, you can be brutally honest. Thankfully our regulatory bodies are captured, our politicians are bought and paid for, and our circus and bread goes full steam ahead.  So nothing to see here....

"It's unbelievable, Goldman … no one has any criminal convictions. The whole new regulatory reform is a joke. The whole government is a Ponzi scheme."

Now now Bernie... Goldman is only doing God's work...

The piece is mostly about how Bernie got to where he is now, but there were definitely some interesting big picture quotes as well.  Full interview here:

  • He sees himself not as some evil mastermind but as part of a system of corruption, maybe its linchpin, but he believes that people have lost their perspective on what actually occurred.
  • Madoff told me he wished he’d been caught earlier, anything to put an end to a nightmare he didn’t have the courage to end himself. In his mind, he even tried to act honorably. “I was always able to rationalize it … Look, I tried to give moneys back to my individual clients when I realized it was impossible to get myself out. I tried to return funds to my friends, moneys to the smaller clients. They wouldn’t take it back …"

[Jul 17, 2009: Jon Stewart - the Pyramid Economy with Goldman Sachs as the Eye]

For all the Fuss About China, India Has Been the Better Option the Past Decade ...and Since the March 2009 Lows

Some interesting charts over at, comparing some of the major world indexes (plus the 2 emerging Asian giants) since January 2000, and the U.S. March 9, 2009 bottom.   One can see despite a horrid start to 2011, India has been the lead horse in both categories - in fact more than doubling the return of investing in China over that time.  These 2 countries were neck and neck for much of the decade but after their late 2007 peak and subsequent crash, India has had the much better run.   It remains a shame so few Indian companies trade on American exchanges as ADRs.  For every Indian stock I can throw a dart and find 25 Chinese ones.

Performance since January 2000 (click to enlarge)

Since the March 9, 2009 U.S. lows India not only has been the leader, but China has done worse than even the developed market indexes.  Now to be fair, China bottomed a few months ahead of the U.S. so if we moved the axis back a few months to January 1, 2009 things would look somewhat better - but it even surprised me to see China lagging Japanese equities!  Hong Kong has been the far better option...

Performance since March 9, 2009 (click to enlarge) (CRM) Finally Stalling?

Interesting past 2 days for juggernaut (CRM).  After reporting Thursday evening, the stock scorched short sellers with a huge gap up open at $147ish... then has proceeded to sell off continuously since; both Friday and this morning.  The stock seems to tire in the $145-$150 area the past few months, and has once more broken its 50 day moving average.  When the stock did this in January, it simply turned on a dime and made a mad dash, ignoring the technical damage.  What is interesting here is there is a yawning gap that asks to be filled from November, which is almost the exact price level of the 200 day moving average.  But very few have the strength, or patience to try to short this puppy for any period of time since valuation means nothing.

I won't recreate the wheel on the earnings - the Wall Street Journal shows some of the issues with the company which despite very nice revenue growth, struggles to post increasing profits - especially of the GAAP variety.  
  • Salesforce's sales grew 29% last quarter, but its total operating expenses soared 40% to $365 million. As a result it actually booked a loss – of $391,000 – from operations. 
  • Even for the full year, sales rose 28% but costs rose faster, with the result that operating income actually fell by 15%. The company made a mere $97 million at the operating level out of $1.55 billion in sales.
  • Where's the money going? So many places. It's hiring new staff aggressively, including around 500 just last quarter. It's paying sales staff huge commissions, plus big incentives including in stock.
  • And it's not just the cash that's flying out the door. A lot of stock is flowing to staff in the form of incentives. That's a real cost to investors, too. The numbers tell the story. Six years ago, soon after Salesforce went public, the annual report revealed that there were a total of 111 million shares in existence. Today: 140 million. And next year, management warns, it will rise to 145 million.
  • Now look at earnings. Under generally accepted accounting principles, earnings per share at this growth company plunged 25% last year to 47 cents. That included a 50% fall in the fourth quarter. By that measure, Salesforce stock is now about 300 times last year's earnings.

Of course on Wall Street we IGNORE generally accepted accounting principles in favor of NON GAAP where we can ignore so many costs and wink at each other how "cheap" stocks are as long as don't count things as massive option handouts....
  • Management has been selling the stock.   A lot of it. That's especially true of CEO Mark Benioff. Admittedly, they have been doing this for several years. But according to InsiderScore, Benioff alone sold $220 million worth of stock in the past year.  Net income attributable to the stockholders during the same period? Just $64 million.
  • Management prefers a more generous way of measuring net income. But even by this measure, earnings barely edged up 6% last year to $1.22 per share, and the growth last quarter crawled ahead by a mere 3%. And even that leaves the stock trading on more than 100 times historic earnings.
  • In the next year, Salesforce management now expects the company will earn 11 cents or less (under the strict measurement of earnings) or $1.38 or less (under the more generous measure).
  • Salesforce has plenty of sales growth ahead. There's no question about that. But to justify an $18 billion price tag, it's going to need it. Even to bring the earnings multiple down to a more reasonable, say, 25 times, it will need around $720 million in net income, and so maybe $1 billion in operating income. Right now Salesforce has operating margins of just 6%. 


This gentlemen at Seeking Alpha also does a very good job at sniffing out other issues; but again - with stocks like this, it does not matter until it matters.

No position

Sweet Monday Mornings

Remarkable isn't it? It has almost become like clockwork - I've never seen a pattern continue like this at a 80%+ type of success rate.  Another wonderful surge in futures between 6 AM and 9 AM on a Monday morning, for no particular reason (not even a "Merger Monday" to use as an excuse).

Much like last month, we have Monday morning markup following by the "first day of the month" magic on a Tuesday.  It will almost be a shock to the system if there is a selloff tomorrow.  Last week's selloff is already a fading memory and if tomorrow's rally delivers its normal 0.5 to 1.5% pop we should be at yearly highs.

Side note - no less than 3 "non stock market" type of people asked me this weekend why prices for "everything" were going up.  I told them not to worry... just there imagination as the official statistics show no inflation.  I left it at that, otherwise it would have been a 2 hour conversation each. 

Saturday, February 26, 2011

Groupon Revenue Hits $760M in 2010; Staggering Year over Year Growth

I am keeping an eye on Groupon because it most likely will be the hottest IPO of the year.  The company is currently in hyper growth stage as outlined in the WSJ; the year over year growth is simply astounding as this company - born in late 2008 - continues to amaze.

While the $760M is a jaw dropping figure, I would like to know if the $760M represents the gross amount of coupons sold, or what Groupon received since they only keep half of the coupon deals.  Could not tell from this story.  But even if it's gross revenue, growth from $33M to $380M in a year is astounding.

  • Daily deals website Groupon Inc. saw its revenue surge to $760 million last year from $33 million the previous year, with more than a third of its 2010 sales coming from outside the U.S., according to an internal memo. 
  • The email, sent by Groupon Chief Executive Andrew Mason to staffers in early January, also reveals the founder's grand ambitions for the company he started three years ago. Mr. Mason writes that he hopes to achieve "billions in revenue" in 2011.
  • Groupon is one of a handful of Internet companies, including Facebook Inc., Twitter Inc., and LinkedIn Corp., which have had investors keening for either private placements or an IPO. The scramble has fueled a spike in valuations of these private companies.
  • The Chicago-based company spurned a $6 billion takeover bid from Google Inc. in December and went on to raise $950 million in financing from private investors early this year. It is also preparing for an initial public offering later this year that could raise $1 billion, people familiar with the matter have said.
  • Groupon had grown to more than 4,000 employees and expanded to 565 cities at the end of 2010, up from about 120 employees and 30 cities in 2009, according to the memo. Some of that growth has been fueled by the acquisition of rivals in Europe and Asia. Overseas activity represented about $285 million of its revenues last year and almost three-quarters of its employees.
  • Mr. Mason told his staff to beware of complacency, warning that "clones" and large technology companies, will commit significant resources to taking away Groupon's market share. "If you feel a little like Frodo climbing Mount Doom, you can't be blamed," he wrote, a reference to the protagonist of "Lord of the Rings."
  • The company, which is known primarily for offering online coupons for local merchants, is also moving to generate sales from national retailers. According to the memo, "national deals" accounted for 12% of revenue in the fourth quarter of 2010.
  • Groupon now has 51 million subscribers to the email it sends to promote deals, and hopes to increase that number three-fold, to 150 million, by the end of this year. The company also hopes to generate more revenue that doesn't rely on this email blast. In the memo, Mr. Mason wrote that he hopes for, "at least $1B in revenue from new products we launch in 2011, not just the current daily email."

Links for Warren Buffet's 2010 Letter

Warren Buffet's much read annual letter is out and I've added some links below for those who are interested.

The full letter in pdf format is here.

1) The NYT Dealbook does an overview in As Berkshire Improves, Buffet Sings Praises of U.S.

2) The Associated Press writes Warret Buffet Remains Optimistic About U.S. Future

Billionaire Warren Buffett wants Americans to be optimistic about the country's future but wary about borrowing money and the games public companies play with profit numbers they report.  He said a housing recovery will likely begin within the next year.

3) WSJ Dealbook has quotes and quips from the letter below

Discussing why Berkshire keeps so much cash on hand:
Borrowers then learn that credit is like oxygen. When either is abundant, its presence goes unnoticed. When either is missing, that’s all that is noticed.

“Money will always flow toward opportunity, and there is an abundance of that in America.”

On human potential and the nation’s future
Human potential is far from exhausted, and the American system for unleashing that potential–a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War—remains alive and effective.

John Kenneth Galbraith once slyly observed that economists were most economical with ideas: They made the ones learned in graduate school last a lifetime. University finance departments often behave similarly. Witness the tenacity with which almost all clung to the theory of efficient markets throughout the 1970s and 1980s, dismissively calling powerful facts that refuted it “anomalies.” (I always love explanations of that kind: The Flat Earth Society probably views a ship’s circling of the globe as an annoying, but inconsequential, anomaly.)

One footnote: When we issued a press release about Todd [Comb's] joining us, a number of commentators pointed out that he was “little-known” and expressed puzzlement that we didn’t seek a “big-name.” I wonder how many of them would have known of Lou in 1979, Ajit in 1985, or, for that matter, Charlie in 1959. Our goal was to find a 2-year-old Secretariat, not a 10-year-old Seabiscuit. (Whoops–that may not be the smartest metaphor for an 80-year-old CEO to use.)

On hedge funds:
The hedge-fund world has witnessed some terrible behavior by general partners who have
received huge payouts on the upside and who then, when bad results occurred, have walked away rich, with their limited partners losing back their earlier gains. Sometimes these same general partners thereafter quickly started another fund so that they could immediately participate in future profits without having to overcome their past losses. Investors who put money with such managers should be labeled patsies, not partners.

Berkshire and the housing/mortgage crisis:
Our borrowers get in trouble when they lose their jobs, have health problems, get divorced, etc. The recession has hit them hard. But they want to stay in their homes, and generally they borrowed sensible amounts in relation to their income. In addition, we were keeping the originated mortgages for our own account, which means we were not securitizing or otherwise reselling them. If we were stupid in our lending, we were going to pay the price. That concentrates the mind. If home buyers throughout the country had behaved like our buyers, America would not have had the crisis that it did.
(Emphasis added)

On home ownership
Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates. … But a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender–often protected by a government guarantee–facilitates his fantasy. Our country’s social goal should not be to put families into the house of their dreams, but rather to put them into a house they can afford.

On the worst of the global financial crisis:
As one investor said in 2009: “This is worse than divorce. I’ve lost half my net worth–and I still have my wife.”

In discussing the bazaar that is the coming annual meeting:
Remember: Anyone who says money can’t buy happiness simply hasn’t learned where to shop.

Friday, February 25, 2011

NASDAQ Bounced Perfectly Off the 50 Day

Sometimes I get caught up on my focus on the S&P 500 index, and ignore Mr. NASDAQ.   In retrospect we had a helpful hint that a bounce may be coming because while the S&P 500 did not get within sniffing distance of its 50 day moving average, the NASDAQ did.  Indeed, this index traded intraday below the 50 day briefly both Wednesday and Thursday....

Now both the S&P 500 and NASDAQ are in almost identical position on their charts, breaking back over their 20 days ...

The VIX Calls Trade

I mentioned early in January that normal hedging procedures were causing a major detriment, as the non stop melt up wrecked havoc on a portfolio which was not "100% long and strong".  Instead I offered the a strategy employing VIX calls - buying some call options out 4 months (minimum) and then using that as portfolio insurance.  For example, I mentioned the trade Jan 7th around 17 (you could have averaged down later that day into the mid 16s), and when the Egypt fiasco broke out at the end of January, I said to take 1/3rd off the table in the 19s on that Friday spike down in the market.  Then when VIX fell back into sleepy time under 17 you could rebuy those VIX calls (this time moving out to at least May so time decay does not hit you).

My ultimate goal was "something in the 20s" which took almost 2 months to happen, but finally struck this past week - one could have sold the last 2/3rds of the original January position (in 2 pieces) first on the huge volatility spike Tuesday (I think VIX was up near 30%) and then the last 1/3rd Wednesday.  That would have left you only with the "replacement" VIX calls (in this case May) that you bought post Egypt, with the entire original position bought Jan 7th sold for very nice profits.

I am not mentioning trades day by day anymore, but if you wanted to be more aggressive the VIX has been an excellent range bound trade that I would have definitely been playing on the side as well, aside from the major trade above.  Buying $16.50 and below and selling "near $18" would have yielded multiple winners as the VIX seems to have a floor near 15/16.  And in this specific case since VIX was nowhere near 18 when the Libya situation broke out, you would have extra gains from not just the main VIX trade, but this shorter term batch of VIX calls as well.

I'd continue this strategy until it stops working...

No position

[Video] Bob Prechter of Elliot Wave Defiant, Continues to Call for a Retest (and Break) of 2009 Lows

After some impressive calls in 2008 and 2009 (including one to get out of shorts and go long as sentiment had gone extremely poor in February 2009), Bob Prechter of Elliot Wave fame has had a more difficult time of it of late.  That said, he is not the only one because the only working strategy for most of the past 2 years has been "buy in the morning, buy in the afternoon, and buy some more".  While I respect someone who has a disciplined system and sticks to it (which I think is the only way you survive in the long run in the market), as I've been saying for a few years this market does not act like it used to.  So adjustments are necessary.   Respect the trend...until it ends.   The trend right now is "massive pain for those who bet against The Bernank".  Maybe in the "long long long" run Prechter will be proved correct, but can we ever imagine a real serious correction ever again?  The Fed will come in with multi trillion QEs as managing the stock market is now apparently a new mission for the institution....

For those interested, he is even bearish on commodities and his only favorable long idea is the U.S. dollar since sentiment is so strongly against it. 

p.s. I do agree that sentiment is off the chart, but we've been talking about that for weeks (if not months) and it has not mattered.

  • Investors have gotten wildly bullish of late, as the bull market that started in early 2009 keeps driving stocks to new highs.  But the pigs are about to get slaughtered, says Bob Prechter, president of Elliott Wave International and editor of the Elliott Wave Theorist.  
  • Prechter still thinks the new bull market is just a cyclical "retracement" of some of the bear market losses that we've had since the market crashed in 2008.  Prechter expected this retracement to drive stocks 50% above the market lows, but stocks have since soared 30% higher than than he expected.  
  • So when the day of reckoning comes, Prechter thinks, it will be even more startling.  And Prechter still thinks that stocks will eventually crash to new bear-market lows (read: below 6,800 on the DOW). 
  • What makes Prechter think this day of reckoning may come sooner rather than later?  Sentiment indicators and other technical analysis. 
  • Investor bullishness has now gotten so extreme, Prechter says, that it has exceeded the levels in 2008 before the market crashed.  Investors could still get even more bullish, of course, but eventually they'll pay for this optimism. 
  • And Prechter's not just bearish on stocks: He thinks oil, silver, and other commodities are absurdly overvalued, too.  The only thing he's bullish on is the dollar. 
  • And lest he be dismissed as a perma-bear, Bob Prechter is quick to add that he hopes there will come a day when he can come on the show and tell everyone that stocks are finally so crushed and hated that it's a historic opportunity to buy them. 

Very Short Half Life for Bears

"Here we go again."

As I said yesterday when explaining how I thought turn out, "X and Y most likely would happen but..... in a normal market; this is not a normal market."  With the break of Wednesday's intraday lows of S&P 1300 there should have been a nice downside follow through.  Instead since 2 PM yesterday, the S&P 500 has gained 1.85% in a span of some 4.25 market hours.  We have seen so many "V shaped" moves since March 09, it is too numerous to count.  They come off good, bad or indifferent charts - and they don't need any large amount of volume, as many have been of the low volume variety, further confounding any of us who started in the market pre 2009.  All that we know is what used to be a rare pattern has somehow become common. 

My gut was shorts would scramble to cover Friday afternoon ahead of "Monday morning gap up" (and the move up would be far less intense than nearly 2% in hours) but even that was asking too much by 24 hours.  The half life of a bear move of any sort is tiny.

Bigger picture the S&P 500 has moved back above the 20 day moving average so short sellers had a level to bet against, and that level has been punctured.  Back to the daily melt up, until the action tells us otherwise.   If the market remains strong and finished out here or higher, the only hope the bears still have remaining is a 'double top' on a rally to last week's highs and then some sort of reversal.  If not, off to the races...

Thursday, February 24, 2011

Algos Go Wild - Oil Drops $4 in Just over an Hour, S&P Rockets up 15

Quite a reversal going on; the S&P 500 certainly broke 1300, down to 1294ish around 2 PM.   Then oil which was hovering near $100 all day, began dropping like a rock and gave back some $4+... with it almost step by step the S&P 500 ran up in a straight line.  Amazing how all these HAL9000 algos connect and move in concert.  We are but gnats on elephants HAL's behind.

Intraday move of S&P 500 - zoom zoom.

Here is the closest instrument I could find to represent what happened in oil intraday - breathtaking drop.

General Motors (GM) Falls Below IPO Price on Earnings

Not a good day in the auto sector; General Motors (GM) just fell below its IPO price making a lot of instiutional investors unhappy.  This despite a beat on earnings - the reasoning is much the same as I mentioned with Magna earlier in the day.  They also rewarded their workers to the tune of $200M, which in Wall Street's short term focused objectives, is a negative.

Via Reuters:
  • General Motors Co posted fourth-quarter results that topped Wall Street expectations, but its shares fell below their IPO price as investor concerns shifted to the pressure from rising oil prices and higher costs of launching and selling new cars.  GM posted a profit of $4.7 billion for all of 2010, its first full year after a landmark bankruptcy that scoured costs and debt from its balance sheet.
  • That marked the automaker's first full-year profit since 2004 and its largest profit since 1999, when it earned $6 billion on booming sales of trucks and SUVs.
  • GM's fourth-quarter net income of $510 million represented a slowdown from the previous three quarters, but topped analyst expectations after adjusting a one-time charge to buy back preferred shares held by the U.S. Treasury.
  • Revenue rose nearly 15 percent from a year earlier to $37 billion.
  • Barclays Capital analyst Brian Johnson said GM's fourth-quarter results represented "somewhat of a mixed bag" that would call into question the "upper end of investor expectations."  The most bullish forecasts for a recovery in the cyclical auto sector had been under scrutiny since last month when GM's closest rival, Ford Motor Co, reported a fourth-quarter profit that fell far short of expectations.
  • Ford's results touched off a slide in shares of both companies as investors worried that higher costs for everything from steel to plastic to the engineering teams behind new vehicles would erode profitability in future quarters.  
  • The surge in oil prices to 2 1/2 year highs near $120 a barrel on Thursday added to the pressure on GM and other auto-related shares, analysts said.  
  • In addition to higher commodity costs, analysts have questioned GM's higher spending on incentives since the start of 2011, with some rivals saying the automaker was at risk of slipping back into its old ways of pushing volume by sacrificing profit per car.  GM said it had pushed its spending on incentives up by almost 13 percent in January, but executives said that was a temporary move that would be reversed. 
  • Separately, GM said it would pay more than $200 million in bonuses to hourly workers, including payouts of about $4,300 for each of its roughly 45,000 U.S. factory workers represented by the United Auto Workers union.
No position

Polypore International (PPO) Impresses the Street

Our old friend Polypore International (PPO) continues to be a performer, although is becoming less of a secret, on the back of its lithium battery business.  It is still a quiet enough stock that none of the major news agencies like Reuters or AP writes an earnings review. Year over year growth trends ex battery business were ho hum, but with a 8 cent beat versus expectation, off to the races she goes.  The stock was looking very troubling the past few days, but quite a reversal today.  Kind of strange such a little followed stock reacts so violently at its earning reports - last quarter it fell 20%, this quarter up 15%!

Expectations were $160M and 34 cents; Polypore came in at $169.5M and 42 cents.

Per Press release:
  • Sales were $169.5 million compared with $152.0 million in the prior-year period. Excluding the effect of foreign currency translation, sales increased 14%.
  • Adjusted Net Income and Adjusted EPS were $19.3 million and $0.42 per diluted share compared with $16.2 million and $0.36 per diluted share in the prior-year period. 
After a boffo year of growth, the lithium battery business is now 20% of revenue:
  • Lithium battery separator sales were $33.9 million, an increase of $9.0 million, or 36%. The increase, while limited by capacity, reflects strong demand in consumer electronics and growing demand in Electric Drive Vehicles ("EDVs"). For the year, sales were $131.0 million, an increase of $44.9 million, or 52%.
The rest of the company is pretty boring (although filtration business did solid 20% growth), so I won't go into it - you are buying this name mostly for this niche battery business. 


Polypore International, Inc., a technology filtration company, develops, manufactures, and markets microporous membranes used in separation and filtration processes. It operates in two segments, Energy Storage and Separations Media.

[Dec 7, 2010: Polypore Surges Higher on Upgrade]
[Nov 4, 2010: Earnings Report Swamps Polypore]

No position

Testing Yesterday's Lows

The S&P 500 has come in to test the lows of Wednesday; as I said this morning a break of this level would be a powerful incentive for bears.  There should be no particular reason the 1300 level holds, so I'd be surprised if we don't see further downside.  That said, I've been surprised often the past 2 years.

Monday is a day and a half way so bears need to get their work in quick. ;)  Thirteen downside points until a real support level.  That is where it should actually get quite interesting.

No position

Magna International (MGA) Fails on Earnings, as Input Costs Start to Hurt

One of my fears in the auto supplier trade (a big theme of 2010) was the impact of ever rising prices in the "hear no inflation, see no inflation" world of Mr. Bernanke.  I thought it might take a few more quarters to hit, but it appears the danger has already arrived as evidenced in Magna International's (MGA) report last evening.  This despite a very nice increase in content per car. MGA reported 88 cents v 94 expectation and with the run in the stock, very little room for disappointment.  The stock is being pummeled today and has taken a lot of damage technically.

These are the downfalls of companies who still have a heavy amount of costs in materials rather than mostly labor.   Most of the other suppliers seem to have missed out on the issue this quarter, but I'd expect it to be a growing problem through 2011 as the pedal to the medal by the Fed continues.  Although as Bernanke tells us, his actions only make the stock market go up, not commodities. Ahem.

Via Reuters:

  • Magna International Inc returned to a quarterly profit and hiked its dividend but earnings fell short of expectations on higher input costs and as losses deepened at its electric car unit.  
  • The world's No.3 auto parts maker forecast a flat operating margin of about 5 percent in 2011 as expected steeper prices for steel and resin, used in automotive finishes, and the costs of launching new facilities take the shine off higher anticipated sales. 
  • "Given what's happening in the world today, and depending on what happens to oil prices, the headwinds on resins may increase as the year progresses," Magna Chief Financial Officer Vince Galifi said on a conference call.
  • Earlier Aurora, Ontario-based Magna reported net income of $216 million, or 88 cents a share in the quarter ended Dec. 31.  That was a turnaround from a loss of $139 million, or 62 cents a share, in the year-earlier period but below the 94 cents that analysts, on average, were expecting, according to Thomson Reuters I/B/E/S.
  • Sales were 22 percent higher at $6.6 billion as global vehicle production and sales continued to recover from a devastating auto sector downturn in 2009. 
  • But losses at Magna's new E-Car Systems electric vehicle operations, which it owns together with Magna founder Frank Stronach, deepened to $37 million from $16 million as the venture invested in new technology and engineering.  "It is a tough business because volumes are not huge yet," Magna Chief Executive Don Walker said. 
  • The company generated cash from operations of $415 million in the fourth quarter, lifting its cash on hand to $2 billion at year-end.
  • Its average dollar content per vehicle rose 17 percent in North America and 6 percent in Europe from a year earlier. Both North American and European vehicle production increased 7 percent. 
  • It repeated the sales forecast it made last month for 2011 and also said it expects to spend between $1 billion and $1.1 billion on fixed assets in 2011.
[Nov 5, 2010: Magna International Crushes Estimates, Announces 2:1 Split, Stock Buyback]
[Aug 25, 2010: Bookkeeping - Starting Magna International]

No position (PCLN) Delivers Yet Again

TweetThis (PCLN) continues to astound me with it's performance.  Since the August lows, it has doubled... after having a stellar 2009 and early 2010.  I was a mega bull on this name a long while back but in this case I certainly left the train far too early and left a ton on the table, as the stock has gone so much farther than I anticipated.   Despite being a momentum stock with heightened expectations for much of the past year and a half, each of the last 3 quarters the stock has gapped up on earnings which is a rare thing to do, three times in a row.

Analysts were in fro $3.09 but the company was able to beat that by 31 cents.   They also guided up for the next year. 

Via IBD:

  • Priceline late Wednesday reported Q4 profit that shattered analyst views, but sales just missed as airline ticket revenue slipped.  Still, the name-your-price online travel site guided profit and sales above analyst views for the current quarter.
  • The Norwalk, Conn.-based company said it earned $3.40 a share minus special items last quarter, up 71% from the year-ago quarter. That beat by 31 cents the estimate of analysts polled by Thomson Reuters. In Q3, Priceline beat by 36 cents.
  • Sales surged 35% to $731 million, but still missed analyst expectations for $734.9 million.
  • Gross bookings, the value of all travel services bought by customers, jumped 44.2% to $3.26 billion in Q4, led by a 64.9% surge in international gross travel bookings. Domestic bookings rose 8.5%.
  • Hotel room nights booked surged 50.6% worldwide, but airline ticket bookings fell 2.3%.
  • Gross margin came in at 65.4%, up from 57.8% a year earlier.
  • "This company continues to execute," said Standard & Poor's equity analyst Scott Kessler. "Priceline has demonstrated time and again that they are the best operator in (online travel)."
  • "Their growth strategy in Europe is working for them better than anyone else in the industry," said Morningstar analyst Warren Miller.
  • For the current quarter, the company sees revenue in a range of $753 million to $782 million, and EPS in a range of $2.34 to $2.44. Analysts have been modeling $742 million in revenue and EPS of $2.30.
  • Boyd said he expects "some deceleration" in Priceline's international growth "due to the sheer size of the (online) travel business" and hard-to-beat comparisons as the world economy recovers.
  • Analysts say Priceline's risks in 2011 include whatever impact Middle East tensions will have on travel and fuel costs.

    [Aug 3, 2010: Priceline Rides Foreign Markets for Huge Earnings Beat]
    [Feb 23, 2010: IBD - Could and Expedia Hit Headwinds?]
    [Feb 18, 2010: - Another Stellar Earnings Report]
    [Nov 10, 2009: Hits an Earnings Home Run]
    [Aug 10, 2009: - Recession Recsmession! Continued Impressive Results]
    [May 14, 2009: in Investors Business Daily]
    [May 11, 2009: Continues to Execute Well]
    [Feb 19, 2009: Impresses on Earnings]
    [Aug 6, 2008: - Down 17% on Good Earnings?]
    [May 8, 2008: 2 Earnings Reports of Note: AIG (AIG) and Priceline (PCLN)]

    No position

    Saudi Arabia Unleashes Huge Stimulus Plan to Stave Off Uprising

    We have become numb to large numbers in the U.S. with trillions thrown around by the Federal Reserve, and government - $300B bailouts to Citigroup and Bank of America don't even bother our psyche anymore.   Hence, the $36B "social program" announced yesterday by Saudi's King Abdullah doesn't sound like much to the typical American, but in relation to the GDP of the country that is roughly 10% of GDP!  In U.S. terms that would be a $1.4 trillion stimulus plan.

    Hence we have a dichotomy in the Middle East/Northern Africa as those without oil can't afford to pay off the people to continue government as it is now, whereas those with oil (except for that crazy in Libya) have quickly been handing out goodies to the people.  For example last week, Kuwait passed out $3600 to each citizen, and will now pay for free food for 14 months.  Now comes the Saudi package.... funny on the timing of all this 'benevolence' in the Middle East.

    Via Bloomberg:

    • As Saudi Arabia's 86-year-old monarch returned home from back surgery, his government tried to get ahead of potential unrest in the oil-rich country Wednesday by announcing an unprecedented economic package that will provide Saudis interest-free home loans, unemployment assistance and sweeping debt forgiveness.
    • The total cost was estimated at 135 billion Saudi riyals ($36 billion), but this was not largesse. Saudi Arabia clearly wants no part of the revolts and bloodshed sweeping the already unsettled Arab world.
    • Saudi officials are "pumping in huge amounts of money into areas where it will have an obvious trickle-down by addressing issues like housing shortages," said John Sfakianakis, chief economist for the Riyadh, Saudi Arabia-based Banque Saudi Fransi. "It has, really, a social welfare purpose to it."
    • The most prominent step was the injection of 40 billion riyals ($10.7 billion) into a fund that provides interest-free loans for Saudis to buy or build homes. The move could help reduce an 18-year waiting list for Saudis to qualify for a loan, Sfakianakis said.
    • Other measures included a 15 percent cost of living adjustment for government workers, a year of unemployment assistance for youth and nearly doubling to 15 individuals the size of families that are eligible for state aid. The government also will write off the debts of people who had borrowed from the development fund and later died.
    • While Saudi Arabia has been mostly spared the unrest rippling through the Middle East, a robust protest movement has risen up in its tiny neighbor, Bahrain, which like others around the region is centered on calls for representative government and relief from poverty and unemployment.
    • There are no government figures in Saudi Arabia that provide a national income breakdown, but analysts estimate that there are over 450,000 jobless in the country. Despite the stereotype of rich Saudis driving SUVs, large swaths of the population rely on government help and live in government-provided housing.
    • King Abdullah returned to the situation Wednesday after spending three months in the United States and Morocco getting treatment for a bad back. The economic sweeteners were announced before his plane landed.

    Much like the U.S. - it is the "circus and bread" routine I often mention, keep those struggling with just enough to keep them fed and entertained and they are content to sit home and not get into one of those inconvenient revolts.   With 45M Americans on food stamps you can imagine what would happen within hours if that program would be repealed.  Via the Globe & Mail
    • For economists, it’s all about incentives. Forget any deep seated human desire for things like freedom and dignity. The social unrest across the Arab world comes down to comfort: those who have nothing riot; those who can afford a decent meal will stay home rather than put themselves in front of batons and bullets. 
    • The time tested way to dampen popular unrest is to provide food and entertainment to the masses,” Marc Chandler, head of global head of currency strategy at New York-based Brown Brothers Harriman, wrote in note Wednesday called “Bread and Circuses: Reform Saudi Style.” “In effect, the 86-year-old king is increasing the basket of goods citizens get in hope that it will help soften demands for political change.” 

    Market Mood Change

    Nice win for "da bears" yesterday, with another close below the 20 day moving average.  Stocks bounced sharply off psychological support at S&P 1300 midday, but closed relatively weak.  This morning we are seeing a rare event - premarket weakness.  Indeed this entire week we've seen this, which has been so rare.   For the first time in a long time, we can call stop calling this the unshortable market.  As mentioned yesterday, shorts can continue to play this market to the dark side, versus the 20 day moving average as a stop out level, currently 1315.  If the S&P 500 can fall through yesterday's lows today or tomorrow, a move to the 50 day continues to be my near term goal.

    What I'd normally do at that point is lift shorts, and then only re-engage them below the 50 day moving average if and when; otherwise that would be the quick and dirty correction everyone has waited on and off we go back to rallying.  At least into a reflective bounce.  Also continue to be aware the "first day of the month" hits next week, and has been a source of danger for any shorting - if we see a bad first day of the month, this would be another psychological change.

    The long dated VIX calls I recommended buying as a market hedge in the low 17s/upper 16s, six to eight weeks ago also would be paying off substantially here.   My goal with these was an eventual move into the low 20s which has finally paid off.  Actually, trading those between 16s and 18s has been an  excellent trade a few times this year already, but now this is icing on the cake.

    As with Tuesday, there was a lot more damage in the high fliers than in the major index... so many charts have so little support since they had gone parabolic, so this is the other side of momo investing.  When it turns, it turns fast.

    No need to hash out oil, obviously the higher it goes the more that 2% payroll tax reduction of 2011 gets sucked into the pockets of our friends in Canada, and over in the Middle East.

    Strangely, the U.S. dollar does not appear to be catching a bid as a safe haven trade - instead the money flows into gold and silver.  Maybe the first chink in the reserve currency or fx traders might be sanguine about the Middle East/Northern Africa issues.  

    Wednesday, February 23, 2011

    An Opening for the Bears?

    I have long said this is the unshortable market.  The strength has been so unyielding, even breaking the 13 day moving average (not to mention something more serious) was impossible.  In a normal market, the falling to the 20 day moving average is very normal, even in an uptrend.  But those moments have been extremely rare the past 6 months.   What I was looking for a month ago when the market broke down due to Egypt was a fall through the 20 day moving average - that did happen, and the market closed on the lows of the day (and week).  In normal times that is a very bad development for the technical structure of the market.  But I was wary.  Why?  Because it happened on a Friday, and since March 2009 almost all gains have come on (a) premarket surges Monday morning or (b) the first day of the month.  And after the Friday Egypt was roiled came Monday + the first day of the month (Tuesday).  Like clockwork the market gapped up Monday and was at yearly highs by Tuesday.  So much for the technical condition.

    This time around, Monday is still a few days away, as is the first day of the month.  So the bears might have a small window of opportunity.  Now neither of these days should really mean anything but the psychological impact of seeing those type of days always work for the bulls, feeds on itself.  What would be truly striking would be a poor Monday premarket and/or a poor first day of the month - talk about a change in character.

    Yesterday I said I'd like to see the 20 day moving average pierced, and then to close below it another day or two.  Thus far today in the early going, the bears finally have some mojo.  Of course the close is more important than intraday so we'll see what happens at 4 PM, but for the first time since November shorts actually have a level to play against.  Once can short the index versus the 20 day moving average - if a burst of buying occurs the trade is over, and back to the unshortable market we go.  But at least there is some downside opportunity now and perhaps a move to the 50 day moving average on the S&P 500  (1286).  That would still be a shallow correction if it happened versus last Friday's highs, but at least a bone for the long suffering bears.

    One thing to note - EVERYONE thinks this dip is a buying opportunity.  In normal times, that would have be thinking it is not going to be so neat and easy.  A nice 3-5% dip that can be bought, and we can all live happily after.  The market *should* be messing with as many people as possible, so a nice cute short lived correction should not be what happens.  But this has not been a normal market in a long time.   Just in case there is any inkling of normalcy, a few out of the money puts 4-5 months out, would be an interesting insurance policy that could play out if we get something more serious - such as a break of the 50 day moving average, that really shakes some confidence.

    Tuesday, February 22, 2011

    Only Second Revisit to 20 Day Moving Average Since Thanksgiving

    Finally an exciting day.... this is only the second episode (Egypt being the other) where the S&P 500 has retraced to the 20 day moving average since Thanksgiving.  Let's see what the dip buyers do.

    Bears will want at minimum a close below the 20 day, and to stay there for a few days.  If that happens, a good chance like in November a move to the 50 day (which of *course* would be the buying opportunity of the decade) ;)  But the bears mortal enemy - the first day of the month - is next week so let's see what is in store... 

    Dip Buyers Feel Pain for First time in.... a While

    After this morning's buy the dip knee jerk reaction, for the first time in a long while some dip buyers find themselves underwater.   Until a pattern breaks, traders will repeat it indefinitely - the fad since QE2 was hinted was buy every dip.  What has changed nowadays is these patterns don't reverse for a very long time.  Aside from some trouble in November due to Ireland, this has been the only trade in the market.

    Still nowhere near the 20 day moving average - much like a month ago when I mentioned this was my line in the sand, we are nearing it close to the end of the month.  But with the first of the day month effect almost always leading to big up days, that was reversed quickly and it's been non stop upside since.

    Pavlov Dogs

    After gapping down to SP 1325 or a loss of 18 points the frenzied dip buyers are rejoicing at a chance to buy into a market where the only losers are bears.  We have already surged 9 points from the open, erasing half the losses in some 40 minutes.  Buy the dip has become ingrained because dips only come once every 3 weeks.  And usually they are of the 0.3% variety.  We have become Pavlov dogs and my earlier question about how soon the dip buyers would show up has become rhetorical.

    Now we see if we can go green by end of day.

    Lots of damage in some individual stocks under the surface however...

    Tuesday Morning Surprise

    Markets are putting investors in unfamiliar territory this morning, an actual down open of note.  The market has been so teflon coated it feels foreign.  Aside from the Friday morning when the Egyptian riots actually affected the psyche this appears to be only the 2nd serious selling pressure day of the year...

    Obviously the events in Libya weigh as the country carries 2% of the world's oil production.  Unlike Egypt the head honcho is not a U.S. ally and at least in this moment is acting far more brutal towards his people so the questions are a bit broader.

    Taking away the truly horrid things happening on the ground, the larger issue is uncertainty and if this regional unrest gets to larger oil producing countries (larger in terms of production).  Most have a different leadership situation and have been acting ahead of the curve... for example immediate raises for workers, and in Kuwait's case for example paying for a year's supplies of food for its citizens.  These countries obviously have the means to do so, due to oil.

    So the next question is how soon does the dip get bought? will buyers show up within milliseconds? The POMO operation? Or heck, not until tomorrow?  Because after cant go down anymore....

    Oil. Rice. Remember these are the 2 key levers to watch in the world economy.

    Friday, February 18, 2011

    Rare Stocks/ETFs that Fell the Past Half Year aka "72 Losers"

    If you are at least an average dart thrower you could have made mad money blind folded the past half year.  With the S&P 500, NASDAQ, and Russell 2000 up between 30-35% in that time frame, it would have taken a very specialized skill set to pick losers since Bernanke declared war on bears at Jackson Hole, Wyoming.  But it was possible.... here are the unsavory stocks/ETFs that some unlucky souls may have embraced, missing out on the party. 

    My target pool is some 2020 stocks/ETFs, with market cap over $300M, stock price over $10, and trading at least 200,000 shares a day.   Of that, only 3.5% of the entire market lost at least 5%...  72 shameful actors.  (to put it in perspective the best 72 stocks/ETFs in the same time frame gained between 113-400%)

    Ticker Company Loss Industry
    TZA Direxion Daily Small Cap Bear 3X Shares -66.2% Exchange Traded Fund
    ENOC EnerNOC, Inc. -41.6% Business Services
    SKF ProShares UltraShort Financials -38.8% Exchange Traded Fund
    SDS ProShares UltraShort S&P500 -38.6% Exchange Traded Fund
    AMAG AMAG Pharmaceuticals, Inc. -38.1% Diagnostic Substances
    ACOR Acorda Therapeutics, Inc. -30.7% Biotechnology
    ALNY Alnylam Pharmaceuticals, Inc. -27.9% Biotechnology
    UEPS Net 1 Ueps Technologies Inc. -27.3% Business Services
    SCO ProShares UltraShort DJ-UBS Crude Oil -24.4% Exchange Traded Fund
    NKTR Nektar Therapeutics -24.3% Biotechnology
    CISG Cninsure Inc. -24.1% Insurance Brokers
    AUTC AutoChina International Ltd. -23.3% Diversified Investments
    SKX Skechers USA Inc. -22.4% Textile - Apparel Footwear & Accessories
    MSI Motorola Solutions Inc. -21.6% Communication Equipment
    CLNE Clean Energy Fuels Corp. -21.2% Gas Utilities
    HMIN Home Inns & Hotels Management Inc. -21.0% Lodging
    GNK Genco Shipping & Trading Ltd. -21.0% Shipping
    HGG hhgregg, Inc. -18.8% Electronics Stores
    STRA Strayer Education Inc. -18.4% Education & Training Services
    THOR Thoratec Corp. -17.7% Medical Instruments & Supplies
    AMLN Amylin Pharmaceuticals, Inc. -17.2% Biotechnology
    JNY Jones Apparel Group, Inc. -16.9% Apparel Stores
    HTHT China Lodging Group, Limited -16.5% Lodging
    RSH RadioShack Corp. -16.1% Electronics Stores
    CSCO Cisco Systems, Inc. -15.9% Networking & Communication Devices
    CPLA Capella Education Co. -15.6% Education & Training Services
    FSYS Fuel Systems Solutions, Inc. -15.5% Auto Parts
    PWRD Perfect World Co., Ltd. -15.0% Application Software
    EIM Eaton Vance Municipal Bond Fund -14.6% Closed-End Fund - Debt
    GOLD Randgold Resources Ltd. -14.0% Gold
    TLK Perusahaan Perseroan (Persero) PT  -13.8% Telecom Services - Foreign
    TLT iShares Barclays 20+ Year Treas Bond -13.7% Exchange Traded Fund
    EJ E-House (China) Holdings Limited -13.6% Property Management
    MNTA Momenta Pharmaceuticals Inc. -13.4% Biotechnology
    STRI STR Holdings, Inc. -12.0% Specialty Chemicals
    AUXL Auxilium Pharmaceuticals Inc. -11.7% Drug Related Products
    LFT Longtop Financial Technologies Limited -11.3% Business Software & Services
    CETV Central European Media Enterprises Ltd. -11.1% Broadcasting - TV
    NAT Nordic American Tanker Shipping Ltd. -10.9% Shipping
    MBT Mobile Telesystems OJSC -10.6% Wireless Communications
    EXPE Expedia Inc. -10.3% Lodging
    WPRT Westport Innovations Inc. -10.1% Pollution & Treatment Controls
    DLB Dolby Laboratories Inc. -9.9% Diversified Electronics
    HDB HDFC Bank Ltd. -9.9% Foreign Regional Banks
    DNDN Dendreon Corp. -9.4% Biotechnology
    GFA Gafisa S.A. -9.3% Residential Construction
    LFC China Life Insurance Co. Ltd. -9.2% Life Insurance
    PML PIMCO Municipal Income Fund II -9.2% Closed-End Fund - Debt
    DWA DreamWorks Animation SKG Inc. -8.9% Movie Production, Theaters
    TNK Teekay Tankers Ltd. -8.7% Shipping
    CHL China Mobile Limited -8.1% Wireless Communications
    AGO Assured Guaranty Ltd. -8.0% Surety & Title Insurance
    HBI Hanesbrands Inc. -8.0% Textile - Apparel Clothing
    EGO Eldorado Gold Corp. -7.8% Gold
    WWE World Wrestling Entertainment Inc. -7.7% General Entertainment
    VGR Vector Group Ltd. -7.6% Cigarettes
    AB AllianceBernstein Holding L.P. -7.5% Asset Management
    MMYT MakeMyTrip Limited -7.4% General Entertainment
    MPWR Monolithic Power Systems Inc. -7.1% Semiconductor - Specialized
    NPM Nuveen Premium Income Municipal Fund 2 -7.0% Closed-End Fund - Debt
    FBR Fibria Celulose SA -6.8% Paper & Paper Products
    DFT DuPont Fabros Technology, Inc. -6.6% Property Management
    LNCE Lance, Inc. -6.5% Processed & Packaged Goods
    ENI Enersis S.A. -6.5% Foreign Utilities
    NUVA NuVasive, Inc. -6.1% Medical Instruments & Supplies
    CEDC Central European Distribution Corp. -5.8% Beverages - Wineries & Distillers
    ETR Entergy Corporation -5.7% Electric Utilities
    NIO Nuveen Insured Municipal Opportunity Fund -5.3% Closed-End Fund - Debt
    FRO Frontline Ltd. -5.3% Shipping
    AKAM Akamai Technologies Inc. -5.2% Internet Information Providers
    IEF iShares Barclays 7-10 Year Treasury -5.1% Exchange Traded Fund
    CREE Cree Inc. -5.0% Semiconductor Equipment & Materials

    Solar's Turn

    Usually I'd say you know you are late in the rally when the solars start taking off, but since every other historical indicator I use has become moot under The Bernank, I'll just pass this along as information and sit back as Groundhog Day happens for the upteempth time since late August.   Looks like Yingli Green Energy (YGE) and Sunpower (SPRWA) earning reports are the drivers today, but these already had started to move en masse late last week.  I don't follow this sector closely anymore as it is a heartbreaker (after dry bulk shipping, probably the worst sector the past few years) ... heck even Solarfun (SOLF) has gotten serious and changed its name to Hanwha SolarOne (HSOL) after the Korean company took a major stake.  (what fun is that?)

    At this point just change the name of the laggard sector, and repeat the parabolic moves.  Refiners, solars, you name it - we can Bernank it upward.

    A sampling of names in this group...

    No positions

    Aruba Networks (ARUN) Scorches Upward, Despite CFO Departure

    Aruba Networks (ARUN) is a name I've been watching for half a year or so, but have not mentioned in the blog.  This company is part of the 'mobile internet' tsunami if you will, and has had quite a year - hence showed up on quite a few of my screens. 

    Last evening the company reported a solid quarter - very good growth but not far much above expectations (beat by 1 cent), WITH the CFO resigning.  Now there appears to be a good reason for the CFO leaving (venture capital) but that usually adds at least some questions to shareholders.  Not in the current environment.  Further, I can't recall many times when a 1 cent beat led to a 15% surge in shares.  Guidance was "fine" but nothing special versus expectation.  This is ebullient action, and showcases this market is a death trap for anyone daring to bet against it.

    Revenue was a solid beat at $93.9M vs analysts $87.9M, while non GAAP EPS came in at .14 v .13.   (full report here)  The forward PE is now well above 50, but valuation is only a state of mind in the current frenzy.

    Via IBD:
    • Aruba Networks (ARUN) late Thursday announced the surprise resignation of its CFO, but reported second-quarter results that beat analysts' views and maintained its triple-digit profit growth pace.  The maker of products that help workers link securely into computer networks with mobile devices also beat views with its Q3 outlook.
    • Aruba said per-share profit minus special items soared 133% to 14 cents from 6 cents a year ago. Sales for the quarter ended Jan. 31 jumped 50% to $93.9 million.  Analysts polled by Thomson Reuters had expected 13 cents on sales of $87.9 million.
    • For the current quarter, it sees EPS minus items of 14-15 cents on sales of $95 million-$98 million, where analysts were expecting 14 cents and $92.2 million.
    • "The phenomenon we are seeing is BYOD, or bring your own device," Aruba CEO Dominic Orr said on a conference call with analysts. "Employees expect to use their smart phones securely and immediately."
    • But the company also said that, after six years at Aruba, CFO Steffan Tomlinson would leave for an unnamed venture capital post on March 31. 
    • The stock has jumped 167% since early May.
    • "We believe that the enterprise network is transitioning from a wired-centric to a mobility-centric architecture and the market is recognizing Aruba's unique ability to address the requirements of this new architecture," CEO Orr said in a statement.
    • Aruba specializes in enterprise wireless access gear that securely controls mobile data for companies and other enterprises. It calls the much larger, broader-based Cisco Systems (NMS:CSCO) its top rival. Aruba says its focus helps it compete in its niche.  Aruba's access controllers aim to securely manage wireless communications going in and out of local area networks. Software systems in the data center filter the traffic to detect intrusions.
    • "As more mobile devices get used, they'll need to access the network locally," said UBS analyst Jack Monti. "Aruba plays an important role in filling that demand."  
    • Also, most of Aruba's clients run on the older 11g Wi-Fi wireless standard. Many are now converting to a faster 11n standard. This upgrade cycle should create "a multiyear tail wind for Aruba," said Gleacher & Co. analyst Stephen Patel.
    • Lately, Aruba's gross profit margins had been above its average 67%-70%, says Blaine Carroll of Hudson Securities, but the Q2 margin was 67.6%.
    No position

    Silver (SLV) Broke Out Yesterday

    While gold has been a bit of a laggard, silver has broken to yearly highs (and I believe all time highs as well - don't quote me).  Look for trend type traders such as myself to pile in here, now that a 'double top breakout' has ensued.

    I am using the ETF for charting purposes rather than the metal itself....

    No position

    BW: A Twitter Knockoff has China Talking

    Looks like Sina (SINA) is starting to get some mainstream financial press - no longer our secret.  I think in the long run it would be smart for Sina to do an IPO just for Weibo.  If Twitter is valued at $10B for 175M users, you can imagine the feeding frenzy for Weibo by American investors. 

    Via BusinessWeek:

    • Ye Fangzhao, a 25-year-old freelance brochure editor for auto companies, abandoned Twitter a year ago to start using Sina Weibo, China's homegrown equivalent. Now he's on the micro-blogging service 10 hours a day, using it to connect with motoring experts and keep up on trends. "I don't need to go to bookstores or buy magazines," says Ye, who lives in Xiamen, on China's east coast. "It saves me time and money."
    • Sina Weibo has become China's leading site for micro-blogging, the Twitter-inspired phenomenon focused on extremely short messages. The site is responsible for 87 percent of the time spent on micro-blogging services in China, says Eric Wen, an analyst at Mirae Asset Securities in Hong Kong.
    • In the lead-up to the 20th anniversary of the Tiananmen Square protests in June 2009, the Chinese government blocked Twitter. Shortly after, during ethnic riots in Xinjiang, Facebook went dark, too. The ensuing social media vacuum left an opening for Sina Weibo, which appeared in August of that year. Rivals such as Tencent, Sohu, and NetEase (NTES) didn't begin rolling out their own micro-blogging services until early 2010. That gave Sina Weibo a head start, and it is now a top information source for many Chinese—and often an outlet for the controversial topics avoided by state-controlled media.
    • Weibo is a division of Sina Corp. (SINA), which operates China's third-most-visited website. Sina's shares, traded in the U.S. on the Nasdaq exchange, have almost tripled in price since Weibo's launch, and the company has a $5.7 billion market capitalization. 
    • Although Weibo does not yet make money, it is at the forefront of Sina Chief Executive Officer Charles Chao's effort to turn the company's sites into the premier destination for China's 450 million Internet users. He hopes Weibo's popularity will help Sina evolve from a Yahoo! (YHOO)-like portal that creates content internally to a Facebook-like site that attracts outside developers. "Our strategy is to build a platform that is open to everybody," he says.
    • Weibo mimics the format of Silicon Valley's micro-blogging pioneer. "We learned much from Twitter," says Chao. Weibo limits posts to 140 characters—though in Chinese, in which many words are just two or three characters, a lot more can be expressed under that constraint than in English. Weibo users follow and comment on updates from other members and can post photos and videos.
    • Celebrities are a big part of Weibo's appeal. The most popular accounts belong to entertainers such as actress Yao Chen, who has 5 million-plus followers. Just as "tweet" has become a verb in English, "zhi weibo"—literally "to knit a scarf"—has entered the lexicon in China. ("Weibo" means "micro-blog" but sounds like Mandarin for scarf.)
    • Like other Internet services in China, Weibo deletes or limits sensitive posts as required by the government. Nicholas Kristof, the New York Times columnist who often writes about human-rights issues in China and elsewhere, opened an account late last year. Kristof, who can write in Chinese, says censors deleted his account after five posts, one of which mentioned the 1989 Tiananmen Square crackdown. During the recent anti-Mubarak protests in Cairo, a search for "Egypt" returned only an explanation that legal restrictions prevented Weibo from displaying the results.
    • Despite censorship, Weibo is "by far the best platform for free speech" in China, says Lee Kai-fu, Google's (GOOG) former China head and one of Sina Weibo's most popular users. Although the search term for Egypt was restricted, many Weibo posts mentioned the protests, and at least one account offered a live webcast from Tahrir Square.
    • Weibo hasn't released user figures since October, when it had 50 million members, but analysts at investment firm Susequehanna International predict it will have 120 million members by 2012. Twitter had 175 million as of September. Says Ma Yuan, an analyst with investment bank Bocom International Holdings in Beijing: Weibo "is becoming the next killer application on the Internet and mobile phones."
    [Feb 16, 2011: Goldman Sachs - Sina Cut to Neutral; Says Weibo Fully Valued]
    [Jan 31, 2011: Results Should Bode Well for Sina,com]
    [Jan 11, 2011: Word is Getting Out on Sina's Secret - Weibo]
    [Dec 9, 2010: The Twitter of China - Weibo]
      No position

      Thursday, February 17, 2011

      Refiners are the New Cloud Computing or Social Networking Stocks

      It is interesting how the overall market is not going parabolic (instead she is slow and steady as she goes) but different sectors within the market are going parabolic.  I have not seen a move like this in the refiners since perhaps late 07 or early 08.  There is something called a crack spread which is essentially the different between inputs (crude oil) and outputs (refined petroleum) and based on how these stocks are moving, I assume it must be blowing out.  The red line below is the 20 day moving average - these are acting like Netflix or JDS Uniphase.... 30% over the 20 day for a refiner?  Holy Bernank.

      No positions

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