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Buzz Bits: Dow and Nasdaq End Lower

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Price Structure Peaking for Gold Miners - Michael Paulenoff - 2:19 PM

My pattern, momentum and cycle work on the Market Vectors Gold ETF (GDX) suggest strongly that the price structure is peaking and could roll over at just about any time in the upcoming two weeks.

This is also due to my perception that the underlying fundamentals have turned less friendly towards the miners, gold "consumption," inflation, and the overall bull market in equities.


Click to enlarge



A couple of dots connected to the consumer... - Fil Zucchi - 1:45 PM

I am sorting through the Cypress Semi (CY) call transcript, and so far it is a bit less negative than I originally thought. No doubt however that the semi business most exposed to consumer spending was weak and getting weaker.

Which leads me to a brand new short position I put on: Dolby System (DLB). This one has large chunk of its license revenues tied to consumer electronics, and even much of the rest of its business is only one step removed from the consumer. It trades at a 32 P/E, 9x EV/Sales, and current estimates show 11% growth for 2008. Full year 2008 estimates have continued to creep higher, leaving the stock no room for disappointment. There are fat premiums in the options, for those looking to hedge their bets.

Positions in CY, DLB


A not-so-rhetorical answer... - Mr. Practical - 1:18 PM

I ran across this rhetorical question sent to Moody's and S&P last week concerning MBIA (MBI) by Mr. Bill Ackman of Pershing Square:

"Does a company deserve your highest Triple A rating whose stock price has declined 90%, has cut its dividend, is scrambling to raise capital, completed a partial financing at 14% interest (now trading at a 20% yield one week later), has incurred losses massively in excess of its promised zero-loss expectations wiping out more than half of book value, with Berkshire Hathaway as a new competitor, having lost access to its only liquidity facility, and having concealed material information from the marketplace?"

My cryptic answer would be only when it has to be AAA in order for the financial system to remain solvent. In other words, No, but the consequences are so disastrous that there are crazy behind the scenes cajoling and manipulation to keep the rating. What we are witnessing is a complete break down of the U.S. financial system due to over compression of risk. These are dominoes folks with no separation between links. Despite what is being said in public, the government and Wall-Street has come to that realization. With the U.S. still 25% of world GDP, the rest of the world will also see how closely we are all linked.

The "tax rebate" that is not a tax rebate is no stimulus. The small amount of money consumers are receiving from our children will be eaten up in the long run in higher import costs from a lower dollar (additional deficit spending lowers the value of the dollar) and interest expense from higher deficits. It is merely a psychological ploy by inept government bureaucrats trying to stay in power.

I hate to be so emphatic and negative but it is merely an attempt to offset the euphoric babble the media/government is feeding the public. Risk is high.


Harley Davidson - Kevin Depew - 12:11 PM

I was listening to the Harley Davidson (HOG) all this morning and although the headlines now on Bloomberg make it appear the company reported, disappointed, stock went down, the reality is that it wasn't until later in the call that the stock began to come unglued, and much of that revolved around clarification of the company's views on 2008.

Even while the company was detailing the year-over-year 7.7% decline in revenue and a 20.7% decline in domestic shipments, there was apparently a bit of optimism left regarding the sharp increase in international shipments, up 20.5%, primarily due to a weak dollar. Pricing also increased 4.5% year-over-year.

The problems, again, were related to 2008 economic guidance. Among the issues:

  • "Consumer confidence is low. Housing and credit issues persist. All this adds up to a weak retail sales," CEO James Ziemer said.
    environment for major discretionary purchases, including our motorcycles.
  • HOG said they expect higher losses (in HDFS) and higher delinquencies in 2008.
  • Seeing a strong used market as people trade down from new to used given challenging economic environment.


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No positions in stocks mentioned.

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