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Buzz Bits



Goooooooooaaaaaalllllllll!!!!!!! - Fil Zucchi - 3:10 PM

Score one for Johnson & Johnson (JNJ) as Guidant's (GDT) board names JNJ as the winner of the 2005 lawsuit-lotto.

In related news, rumors are swirling that Boston Scientific (BSX) remains undeterred and may soon make a bid for Refco.

Phone home - Sanjay Somaney - 3:10 PM

As the cost of fixed lines and wireless calls come down, India is seeing rapid growth in teledensity. India's teledensity is now at 10.4% versus 9.6% in June. The total subscriber base has increased to 113 million in September compared to 104 million in June as leased line pricing has dropped by 70% in the quarter ended September 2005.

Indians pay an average of 2 cents/minute for a cellular phone call and 1.8 cents/minute for a wireline call. Fixed line subscriber growth in the September quarter was 1.15 million net adds and the wireless sub base grew by 14% in the quarter. Mobile sub base growth for the year was 51.4%. Not shabby, huh?

Internet susbscriber base is now at 6.1 million and broadband subscriber growth was an astonishing 55% in the quarter. Broadband subscribers grew from 396k at the end of June to 610k at the end of September.

While these numbers are still small the percentage increases are not. These growth rates will continue as more and more Indians are now able to afford the connection charges and Indian PC companies bundle their goods with ISP's. Massive potential.

Possible ways to play this rapid growth are the two Indian telcos and the two Indian ISP's that trade here on our exchanges.

Flashback! - Bill Meehan - 1:42 PM

This day in market history...

  • Closing levels this day 11 years ago:
    o DJIA: 3839.49
    o S&P 500: 460.86
    o Naz: 742.46
    o Crude: 17.74
    o Gold: 381.75

This day in Minyanville history...

  • Prof. Succo wrote of hedge fund strategies and wished everyone Happy New Year

In other news...

  • In 1958, Johnny U led the Baltimore Colts to a 23-17 OT victory over the NY Giants in the NFL Championship game.

Mini Minyan Mailbag - John Succo - 11:52 AM

Prof. Succo,

I was wondering if you would answer one dumb question?

You mention that money supply has picked up recently, yet I see that the MZM 3yr annualized growth rate is down from 12% last year to an "extreme" low of 3.5% now. I don't understand.

Thanks in advance,
Minyan Scott


You have hit on the crux of the matter.

M3 includes credit. The expansion of credit is the driver to world liquidity.

MZM is a narrow definition of money, like cash and money instruments. How many times have you seen people buying coffee at Starbucks (SBUX) with a credit card? In addition, there has been a relative outflow to money market funds due to low interest rates.

It is the expansion of credit that is driving growth (speculation), not cash.

position in sbux

Prosciutto for everybody - Fil Zucchi - 11:16 AM

So, Whole Foods (WFMI) is worth another half a billion today because a bunch of computers must buy it at the close on a random date. Nice. Keep in mind that by all standards WFMI's last quarter was less than stellar, the company trades at 56x next year earnings, and that's excluding stock option compensation dilution of 20% a year. Yes, I am non-advising that I am adding to the other side of that trade.

For the Minx as a whole, mixed tea-leaves for now. The Spiders (SPY) 10 min. chart shows either a double top or reverse dandruff - depending on the color of your glasses. With breadth in Hoofy's corner for now, and strong reasons to jack the market higher for the next 2 and ½ sessions, Boo's path may be lumpy. But yesterday's and today's post-open swoons smell of size supply behind the scenes.

Early week-end anyone?

Position in WFMI, SPY

Whole Foods Volatility Fiesta - Adam Warner - 11:11 AM

WFMI options are lifting nicely today, making even that Organic Ostrich meat at the store seem cheap. Yes the stock split today and got that "thick envelope" in the mail from the S&P, but no, neither should cause much of a surge. Volume is impressive as well as the near money strikes have already seen action in 90 minutes that approaches their open interests.

It's just nice to see some interest and nervousness in an option for a change. Maybe that VXO will reach bar mitzvah age yet.

position in WFMI

Myth Busting Yield Curve Inversion - MV Respect - 9:06 AM

Myth: When the 2-year to 10-year US Treasury yield inverts, it quickly leads to a recession and has been very bad for equities.

Reality: Since 1982, the 2-10 yield curve inverted 4 distinct times, leading to an average SPX gain of 13% within 6 months. While inversions have predicted the last two recessions, 19 and 27 months elapsed between the initial day of 2-10 inversion and the 1990 and 2000 recessions, respectively. We also make the following observations:

  • Every initial occurrence was followed by near-term equity market strength (<6 months).
  • The average gain in the S&P 500 (SPX) over a short-term period was 13%, with a worst case gain of 7% in two months.
  • 3 of the 4 inversions saw near or well above 20% gains over the next 12-months (25%, 27%, and 18%).
  • The only negative occurrence saw a loss of 5% one-year later (where valuations, balance sheets, and earnings were in much worse shape).
  • The average one-year gain was 23% with a loss limited to minus 5%.
  • The SPX was up roughly 50% from the first inversion in 1997 and it took 27 months before a recession.

Snoop Tony Dwyer of FTN Midwest Research

Feds begins crackdown of IO and Option ARM Loans...ruh roh Rastro... - Bennet Sedacca - 8:46 AM

Last week, federal regulators issued joint proposed guidance on non-traditional mortgages. Considering that 1/3 or more of home purchases were IO loans the last two years, there were undoubtedly loans that didn't meet the new Fed rules.

Specifically, they said, "our concern is elevated that nontraditional products due to the lack of principal amortization and potential accumulation of negative amortization. The Agencies will carefully scrutinize institutions' lending programs, including policies and risk management processes. Remedial action will be requested from institutions that do not adequately measure, monitor, and control risk exposures in loan portfolios."

On a separate note, one of the hottest real estate markets (outside of our home base of Orlando) has been Sarasota, Florida. Well, people are starting to try to cash in. Homes for sale in Sarasota are up 196% year-over-year, new listings up 318%, and sales down 34% and months available supply up 357%. Yes, Virginia, the bubble might be about to burst.

Many thanks to our friends at Ned Davis Research for use of this research.

Hoofy's Bio Portfolio - David Miller - 8:12 AM

The biotech sector dodged a bullet this morning when the FDA approved Celgene's (CELG) Revlimid. When FDA staff requested more time to review this application, many in the biotech community wondered if the Oncology Division's Dr. Richard Pazdur would go against his ODAC panel and deny approval. It was clear during the panel meeting Dr. Pazdur and his biostatistics team were not impressed with the single-arm Phase II data set and wanted the panel to reject the application.

Is this post-von Eschenbach approval as bullish for biotech as the post-McClellan May 2004 ODAC panel was bearish? One would normally not think so given the tiny indication, but I believe it safe to say an FDA rejection here after the positive ODAC vote would have been very bearish.

Insofar as the absence of a very bearish event can be considered bullish, we'll count this as a win for Hoofy's biotech portfolio.

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