Buzz Bits: Dow, Nasdaq Rise
Your daily Buzz & Banter highlights.
Duck, Duck, Goose! - Todd Harrison - 3:18 PM
Man, OK, a few thoughts in no particular order....
The good news, I suppose, is that some axioms (such as the first move post-FOMC is typically the false move) remain in play. The pressure was short-lived before the dollar headed south and (pick an asset class) smiled in kind. Equities, crude (+4.5%), metals (gold, silver), soybeans, corn, orange juice. One and all, all for one.
We've watched the world unfold in real-time over the last five plus years in Minyanville. It was--and continues to be--the most interesting stretch in the history of the financial markets. I hold myself to task for seeing many of these agendas but perhaps not profiting as I could or should have. I own that, but not much else for more than a trade.
I must confess something. As I was contemplating what to write just now, I leaned back in my chair and felt a profound sense of sadness. Yes, sadness. Emotion is the enemy when trading but the feeling had nothing to do with a P&L. It was more like... how can I say this... we've reached a point of no return. We may have been there long ago but, well, it sorta sunk in.
I stand to gain a lot from hyper-inflation. But this isn't really about me. It never has been. It's about "us", those who are charging ahead, pun intended, with a false sense of securities. I've seen manias last much longer than I could conceive and respect that this, too, could last. But I also believe that for every reaction, there is an equal and opposite reaction.
And that's what's scary. Even on Halloween.
Keep in mind that today is mutual fund year-end for alotta players and tomorrow is a new day, promised to nobody. And--just projecting here--I would offer that Hoofy better hold his ground today. For if we lose our collective bid, the near-term catalyst will have already passed.
Fare ye well.
Plugging it into the GIG - Jeff Macke - 3:16 PM
We've heard the statement from the FOMC. Let's plug it into our unpatented GIG ("Growth, Inflation, Guidance") model:
Growth: This the part where the FOMC justifies cutting rates. With a nice GDP number fresh on this morning's wires, the Fed had to look forward here, citing a concern that "economic expansion will likely slow in the near term".
Inflation: The Fed fleshed it out from last month, adding "recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation". That was literally the only change in our inflation paragraph but it put inflation back in play.
Guidance: As opposed to last month's "All Growth, All the Time" focus, this time around the FOMC sees a balance between growth and inflation. Translated from Fed-ese: we're done cutting unless the data convinces us otherwise.
As for the dissension of Thomas Hoenig, call me a conspiracy theorist, but I don't think anyone dissents unless it's part of a larger strategy. From where I'm sitting, the dissension was simply another way of getting across the point that the Fed is no longer in cutting mode. If you need a "reason" for the market rally, you can go with the idea that the Fed thinks the panic has passed and they are done killing the dollar to save the US (NB: the dollar is still dead, the Fed just isn't going to keep killing it).
Oil Field Flares - Adam Michael - 1:25 PM
One of my small cap energy plays is American Oil & Gas (AEZ). The stock is up today on no official news. I am hearing that the company's Hagamen well in the Fetter field had a huge flare last night that could be seen for miles.
So what does a huge flare mean? It means they have a lot of gas is coming at them while they continue to drill horizontally. The last well AEZ drilled in the Fetter field had a flare so large it made the local paper... once completed, the well was a (unstimulated I might add) monster.
I am also hearing that Chesepeake (CHK) has been buying up everything it can around these guys and that there are landmen/scouts crawling all over the place out there. This is a very encouraging sign for AEZ.
Position in AEZ.
Let's Look At The Match-Ups... - Sean Udall - 9:23 AM
Did anyone notice that Google's (GOOG) market cap is now higher than Cisco's (CSCO -- by $18 bln? Even though I'm out of GOOG for the time being, I don't think it's grossly overvalued.
Ditto on VMWare (VMW) being higher than Texas Instruments (TXN) -- revenue comparison here is $1.3 bln vs. $13.8 bln respectively (forward sales). Yes growth rates are drastically different but it's hard to believe VMW is worth more than TXN. PSR for VMW is now 40 times.
Baidu.com's (BIDU) market cap is 30% of Yahoo's (YHOO). Meanwhile, YHOO owns 40% of Alibaba (a company with possibly twice BIDU's sales and similar growth), and YHOO has about $5.5 billion more in revs. BIDU is trading 78 times sales vs. YHOO's 6 times.
Another BIDU look could be as a comp to Riverbed Technology (RVBD). Different space for sure, but forward sales and growth rates are similar, BIDU is currently more profitable but RVBD just became profitable with a 19 cent per share improvement on the EPS line vs. prior year. RVBD trades at 12 times sales.
Research in Motion (RIMM) is trading with a market cap of $67 bln vs. Motorola's (MOT) $43 bln. PSR's are 16 and 1 respectively.
Position in YHOO, RVBD.
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