Buzz Bits: Dow and Nasdaq End Lower
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You don't often get better clues… - Ryan Krueger - 3:37 PM
- …of where to go hunting if you were not already there as when the Department of Justice thinks business is just too good somewhere in a terrible tape. I am not touching CME, ICE, or NMX. Yet. But am interested a great deal.
They are just getting hammered on the news I have not chewed all the way through yet. Meanwhile I am still long the business of trading and volatility via GFIG. I also continue to believe the Nasdaq's worst month in history can be traded from the long side by carefully building a position in NDAQ which the same month quietly announced record volumes and became the largest exchange in the U.S.
- …of when a company says repeated take-over offers are simply not enough, as you have heard from Rio Tinto (RTP). This group I am not waiting for, rather I have over-weighted Materials and will likely add more. I think if you want a paired trade, they play catch up with Energy which has lapped the sector during the bull run for each. Or, on an absolute basis I like many of them alone. The contracts that are being drawn up right now will call into serious question the notion that everything is slowing, because it is not. If I had to make a pure guess about a rallying point in an otherwise declining tape it will be the day that a sovereign wealth fund buys a Materials company instead of more shares of a broker. Bidding on what their countries are running out of seems like a better idea than another one on what the U.S. has too much of.
Pork Bellies, I Knew It!!! - Todd Harrison - 2:47 PM
- There's a method to the madness!
- No sooner did I post my last Buzz--asking the question whether beta and Bear Stearns (BSC) bode well for Boo-- did the market fall over and go bump.
- I'm not sticking a fork in my arm--OK I did, but only once--but I am looking for situations while exercising my right to exhibit patience. I've traded like a banshee these last few weeks, fading the tape both ways, and I'm alright doing a bit less at present.
- Pharma continues to out-perform, albeit under resistance at DRG 320.
- What's the singular for hair?
- Cisco (CSCO) takes the stage tonight and a few Minyans have asked my thoughts. My official response is "no edge" but my sense is that there's risk to the downside. Either way--even on a strong number--I am taking Chambo at face value based on his previous outlooks juxtaposed against the path of the economy.
Plosser Covers All the Bases and the Greenspan Legacy Lives - Kevin Depew - 2:32 PM
Taking a look at Philadelphia Fed President Charles Plosser's speech delivered today to the Birmingham Rotary, it's noteworthy that not one, not two, but three different forms of "-flation" were either mentioned directly or alluded to.
Plosser began with inflation and an allusion to stagflation: "Unfortunately, I expect little progress to be made in reducing core inflation this year or next, and I am skeptical that slower economic growth will help. All you have to do is recall the 1970s when we experienced both high unemployment and high inflation to appreciate that slow economic growth and lower inflation do not necessarily go hand in hand."
But he also uttered the central bank's dreaded D-word: "Taking expected inflation into account, the level of the federal funds rate in real terms - what economists call the real rate of interest - is now approaching zero. That is clearly an accommodative level of real interest rates. The last time the level of real interest rates was this low was in 2003-2004. But that was a different time with a different concern - deflation - and we were intentionally seeking to prevent prices from falling. Recently we have had reason to be worried about rising inflation, not declining prices."
By now, you know I think that will change.
Finally, Plosser noted the limitations of monetary policy. Increasingly, as we have seen in Fed Chairman Ben Bernanke's recent comments, the Fed is doing what all worthy bureaucratic institutions do - distancing itself from shouldering full responsibility for solving the debt crisis:
"Although it might be tempting to think that monetary policy is the solution to most, if not all, economic ills, this is not the case. I think it is particularly important, for example, to recognize that monetary policy cannot solve all the problems the economy and financial system now face. It cannot solve the bad debt problems in the mortgage market. It cannot re-price the risks of securities backed by subprime loans. It cannot solve the problems faced by those financial firms at risk of being given lower ratings by rating agencies because some of their assets are now worth much less than previously thought. The markets will have to solve these problems, as indeed they will. But it will take some time."
I believe this distancing from the debt crisis, this handwashing, more than any other thing, will one day come to be seen as the real Greenspan Legacy.
Randoms - Fil Zucchi - 1:52 PM
- Ciena (CIEN) is up about $1.50. Tough to attribute reasons to this, but last night's report by JDS Uniphase (JDSU) struck all the right chords for the optical networking space. Along the same lines, yesterday I added to my Inifinera (INFN) position. However, I would not extrapolate the JDSU results to what Cisco (CSCO) may say when it reports tonight.
- Akamai (AKAM) is up at bat tonight. Estimates are smack in the middle of guidance; the stock is bouncing along the bottom of its recent trading range; and I know of no reasons why AKAM business should have deteriorated. To me this translates into a fairly "low bar" to overcome. The stock is acting well so far today, and if it pops a bit more I'll be buying some mid-dated puts (to go with my LEAPS); however this latter batch is not so much for "insurance", as it is a backstop to add to my position if the stock gets weaker for no real reason.
- Loopnet (LOOP), Costar Group (CSGP) fierce competitor, did not exactly blow the cover off the ball when it reported last night. I am staying short CSGP even though my additional "upside" is limited by options I've written against it.
- Snaps to uber-Minyan Gerry Vos of CRT Capital for steering me clear of Sirf Technology (SIRF) when I was tempted to circle back. What does this mean for customers Garmin (GRMN) and TomTom (TOM2 NA)? Probably nothing too good, but: (i) SIRF stated that PND volume sales were rather strong almost through the end of the quarter; where it got killed was on the handset side of the business, on pricing (good for the customers), and competitive losses – i.e. Broadcom (BRCM) ate its lunch; and (ii) at some point the multiples for GRMN and TOM should begin to discount the likelihood that consumer will slow down their "toy spending". What's that point? For GRMN I am thinking the mid $50's (15x '08 est. of $4.25 on about 20% growth); for TOM, currently at 11x '08 estimates, I think we are already there.
Position in INFN, CIEN, AKAM, CSGP, TOM2, CSCO
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