Buzz Bits: Dow Slides, Nasdaq Holds
Your daily Buzz & Banter highlights...
Randoms - Fil Zucchi - 2:57 PM
- Ciena (CIEN) reported a perfectly good quarter and underscored the trends which I have highlighted a number of times: (a) the hardware infrastructure of the IP network - especially in the "metro network" - is running out of capacity, and (b) the growth in the amount of content getting thrown into the networks is accelerating. I heard nothing to suggest that these trends won't last at least several more quarters. I don't know why the stock is down. I am already there, but somewhere around today's lows I might get tempted to add.
- I am hesitant to draw conclusions in areas where my knowledge is limited, but there seems to be a rather large disconnect between Thornbug Mortgage (TMA) stock/preferred stock, and the debt. Either the former is a screaming buy, or the latter is overpriced.
- I've once again cut to the bone my position in Foster Wheeler (FWLT). That said, the group is as strong as a moose - look at charts of McDermott (MDR) and Fluor (FLR). Other names covering Hoofy's back include fave Monsanto (MON), Bunge (BG), which I am playing much larger through Quintana Marine (QMAR), EDO Corp. (EDO) and Harris Corp. (HRS). These are all old names for me as I continue to stick close to home.
- Looking for fresh ideas? This is just an abstract, but it touches on fairly arcane areas of the IP network, which, in my opinion, have a lot of investment potential.
- So far my Blue Coat System (BCSI) "chart based" short is working out ok. I've put a trailing stop for break-even.
- It's slow and thin out there so don't get tempted by boredom to do something you might regret.
Positions in BCSI, HRS, EDO, QMAR, BG, MON, MDR, FWLT and CIEN.
What is the difference between asset inflation and inflation? - Kevin Depew - 2:49 PM
What is the difference between asset inflation and inflation? My understanding is there is a difference between the two.
Inflation is the result of greater quantity of money in circulation. Period. There is no difference between the two. This money's source is the banking system. When financial assets absorb this money - as they did in the 90s, and more recently with houses - asset prices "inflate."
That is the myth of Greenspan's "historically low, low inflation environment." What transpired was hyperinflation in financial assets because the money he helped create as head of the central bank was almost exclusively transferred to stocks and bonds. It is tempting to think that in an "inflation" all prices will rise at the same rate. Eventually, this money can spread into other areas, but it does not have to.
One of the consequences of an end of a period of hyperinflation is that money is rejected as a medium of exchange. Just take a look at the Asset Backed Commercial Paper market today. This was good for exchange as recently as a month ago, but today has been totally rejected and essentially cannot trade at any price. No one is willing to accept it so its "value" has essentially been destroyed.
NMX: the only value left on the (commodity) floor? - Sean Udall - 2:32 PM
While it's hard to call any of the commodity exchanges a value at current levels, my feeling is that Nymex Holdings (NMX) has the best relative value. I believe the shares have been held back of late due to consistent selling of post-IPO lock-up shares, even with the backdrop of potential deals from other global exchanges.
I do have longer term concerns with NMX in that I feel the current feeding frenzy of commodities will end and probably end badly. However, that may take a few more months and maybe even as long as a year or more. Moreover, in the early decline of the current commodity fervor (bubble), there could be a tremendous surge in volume on the exchanges as global commercial players look to reposition their portfolios for the next price leg in many commodities.
So going into the next few weeks and with EPS reports looking to be strong next quarter for Intercontinental Exchange (ICE), CME Group (CME) and NMX – a partial position (or bull put spread) heading into next quarter might offer a strong risk reward. I will look to add to the name on any material weakness, should it present itself in the coming weeks.
On a related note, I disagree with some in the media that believe a NMX/NYSE Euronext (NYX) merger would not be the most beneficial transaction (long-term). I think location synergies as well as diversification of the business lines combined with the technological expertise would make the combined company an exchange worth holding onto for quite some time.
Position in NMX and NYX.
Energy Buzzin' - Adam Michael - 11:55 AM
While I still expect to see some additional seasonal weakness in natural gas and crude oil this fall, I can't help liking the charts of many of the energy shares. Earlier this morning, I highlighted a bullish setup with the OIH and XLE.
Some specific names that show signs of short-term bottoms include:
- Integrated/Refiners Oil: COP, XOM, MRO, VLO
- Natural Gas: UPL, APA, CHK, SWN
- Oil Service: RIG, SLB, HAL
- Seismic: MIND, DWSN
Position in OIH.
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