Buzz Bits: Dow, Nasdaq End Week on Positive Note
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NZT Conclusion - Vitaliy Katsenelson - 3:11 PM
I received a lot of emails about the New Zealand Telecom (NZT) fall out. It has taken me awhile to come to a conclusion about what to do with NZT as the issue is riddled with the uncertainty of governmental actions.
I tried to look at it from many different angles. It is important to note that the news was not good for NZT and it will impact their earnings and cash flows. However, it will happen sometime far down the road and I believe the impact is lower than indicated by today's stock price. I believe the dividend is safe, the company is still in great financial shape and that is unlikely to change anytime soon.
At the end of the day, the NZ government's objective is not to destroy one of the largest employers and biggest companies on its stock exchange, but to increase the speed of the broadband in NZ. Interestingly, the proposed regulation fails to accomplish that. I still own the NZT stock and did not sell a share. I hope this article will provide further explanation of my view of the company.
Position in NZT
More of the same - Kevin Depew - 1:29 PM
Today there are 17 new PnF buy signals so far, compared to 8 new PnF sell signals. That is a very small amount. As well, the broadest bullish percent indices are split, with the NYSE slightly higher and the Nasdaq lower. The Dow Jones Bullish Percent, is unchanged, already in a column of Os, and actually on a sell signal as it has been since last October - a significant bearish divergence.
I believe this bearish divergence is directly related to what John described below. One of the most useful aspects of PnF charts is that they chart significant demand or significant supply since it takes a lot to cause an action on the chart. While this insensitivity is a weakness for short-term trading, over the long-term it is a strength in terms of providing an accurate context for stock movements.
While the indices are moving higher, the stocks inside these indices are giving more and more sell signals. That is not an interpretation, it is a fact. The action is unambiguously negative in terms of market health.
Down Under News from Singapore - Laurie McGuirk - 12:56 PM
Hi Guys, I am in Singapore till next Wednesday but not getting much of a break – bloody lawyers and accountants!! I'm writing by the pool here and a little distracted but-----I don't disagree with Scott's observations in relation to base metals and most commodities – BUT I contend that Precious metals are a whole different bag of prawns due to both monetary and industrial/commercial application.
The leasing and forward selling of gold and silver have had a massive impact over the past 10-15 years on the price itself. This has created artificial supply to a market that has been in supply deficit for many years. The old "paper metal vs. physical metal story"…gold and silver won't be affected by global demand declines that may occur in Copper/lead/zinc etc, IMO.
The general public have NO exposure to physical precious metals yet, apart from paper metal or equities. The precious metals rush has not even begun yet, IMO. Sure the precious metals equities could lose 25% and hurt plenty but the physical metal has no such downside, IMO. Physical metal has no margin calls/leverage etc. unlike paper markets that can create problems in markets. There is too much paper chasing bugger all metal and all dips are buying opportunities, IMO. I am happy to be wrong, holding real metal.
Silver fundamentals dictate higher prices and have for 30 odd years (the US Government stockpile was all that has held the price down and that is all gone). 3 figure silver is a formality, IMO, in the next decade. We have covered much of this over the years and when people say to me "what do you think"- I'm saying "go read what I wrote 2, 3 ,4 years ago - the story is unchanged and my reasons are as robust or more so - we are just closer to D-Day. Loz
Position in silver, gold
Get your head out of the clouds - Adam Warner - 12:10 PM
We are back down to human option levels here in Apex Silver (SIL), as volatility has dipped into the low 70's in May and June, and the mid 60's further out. That is off triple digit readings of early this week on Bolivian nationalization fears, and a single trading day that saw the stock lose 1/3 of its value in the morning then recoup half the loss in the afternoon.
Prior to this recent stretch, a 50 volatility was high, so the move to 65 in the out month's is even more impressive than a temporary blip in near month options on an unbelievable range day. And indicative that the market fears we will revisit this story.
Position in SIL
Starbucks Redux - Brian Gilmartin - 12:02 PM
In my preview for Starbucks (SBUX) on Wednesday, we said that margins would be key to the report, and in fact SBUX reported a 105 basis point gain (year-over-year) in gross margin, from 58.6% to 59.65%. In addition, operating margin expanded 35 bp's to 10.71% from 10.36%.
SBUX has popped nicely since Wednesday night's report on heavy volume.
The growth and margin expansion isn't coming from international (as some guru's have speculated) but from the US domestic store base. As we mentioned in our earlier piece this week, the death of the US store base for SBUX growth initiatives is greatly exaggerated.
With the $0.02 per share beat on eps, and even a little better on revenues, SBUX put together another stellar quarter. I have trimmed a little from client accounts only because of the growth in the position as a percentage of the accounts, but will reiterate to subscribers that SBUX now faces easier monthly comps for the rest of calendar 2006.
The stock is (perennially) expensive on a valuation basis, so time your positions accordingly.
Position in SBUX
Asia Connects the Dollar Dots - William Fleckenstein - 10:08 AM
That the dollar has been unable to bounce is big news. A couple other comments worth making about the dollar: First, at the annual meeting of the Asian Development Bank in India, finance ministers from a few small dollar-holders named South Korea, China, and Japan reaffirmed their commitment to some sort of Asian-currency block. Specifically, the big three I just mentioned noted that they had agreed to study the formation of a common Asian currency.
I'm not sure they'll be able to accomplish that, at least not in any near-term timeframe. But the fact that these finance ministers are intent to do so means that they understands the loss-making potential of holding the dollar. That they are continuing to talk more about a third major currency means that their dollar appetite will continue to diminish -- which, given the amount of new dollars created daily, will only add to the weight on the dollar.
Second, it's worth noting that even though a bunch of central bankers have suggested that the recent G7 statement was not an attempt to get the dollar lower, their message has fallen on deaf ears. It's another signal that the dollar is in serious trouble now, and not at some theoretical future date.
Eye Balls? - Todd Harrison - 9:59 AM
The mother of all reversals? You can't help but think it with the giggles so widespread. But as it stands, and until either the breadth or financials fail--or the dollar rallies-- it'll remain in my mind and not on my sheets
In that vein, I'm watching JP Morgan (laggy) and Citi (under fitty) as the money centers aren't acting as snazzy as one might think. The brokers are quelling any concerns Hoofy might have, however, as the XBD (broker index) dances up a deuce.
For my part, and as discussed, I'm gonna dig into the action a bit more as the opening euphoria gives way to some selective opportunities. I know its been a long week, Minyans--trust me, I'm right there witcha--but we gotta stay lucid as we truck to our requisites two-day respite. I am, so you know, scooting a bit early today as I've got a five hour drive--in the rain, no less--awaiting.
As always, I hope this finds you jinglin', baby.
Position in C, JPM, financials
OK. Can you really stand to see this chart? And were those numbers really good for bonds? - Bennet Sedacca - 9:53 AM
Cyclical versus secular. See the chart here. It is a log scale of 30 years or so of data of the 10 year, ending April 30. As you can see, we are challenging the trend line that has been in place since I was in HIGH SCHOOL. If we break, it COULD be a false breakout or it could confirm the hyper inflationary action in the commodity sector. No predictions here, but it is now officially on my radar. My guess? Since secular bears usually follow secular bulls, a good case can be made for the trend being broken.
Now for today's numbers and the action. I have been talking about today being a cycle HIGH in bonds, so I am not surprised by the spike. 105-16 to 105-24 in 10's ought to be stiff resistance before bonds resume their decline. The wage numbers to me were inflationary as wages are starting to spike to the highest year over year in a long time. THAT, Minyans, is inflation.
Also, May is the worst month of the year for bonds, so I may be wrong, but I think people will look at these yields later this month and wish they faded 'em. Then a rally in the Summer and then a challenge of the secular line? That is what I expect. Time will tell.
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