Archive for March, 2010

Futures Flat as US Market Awaits Housing Trends

Tuesday, March 23rd, 2010

U.S. stock index were flat Tuesday following a positive close on Wall Street Monday as investors looked toward key housing data to gauge the strength of the sector. 

Tuesday’s economic numbers focus on housing, with the National Association of Realtors set to issue existing home sales figures for February at 10 am. Economists expect that number to drop 2 percent from January levels to an annual sales rate of 4.95 million units. At the same time, the Federal Housing Finance Agency will put out its monthly reading on home prices.

The Treasury is set to auction $44 billion 2-year notes Tuesday, with results available shortly after 1 pm. That will be followed by a sale of $42 billion in 5-year notes Wednesday and $32 billion in 7-year notes on Thursday.

Of companies in the spotlight, KB Home KBH 17.27, reported a $54.7 million quarterly loss as it said its backlog rose for the first time in four years.

The housing numbers will be heavy construed as the winter weather placed home shoppers at bay. Tax incentives will expire June 2010. Homes sales don’t typically improve until March and April. If April sales are horrendous, this will definitely be of concern. In any event they’ll probably be much of an improvement compared to 2008. In the long run I don’t see 2% house appreciation on annual basis for quite some time. That is not until employment conditions improve.

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Hospital & Drug Makers Gain

Monday, March 22nd, 2010

With a sweeping overhaul of the nation’s health care system, Congress would be giving the health care industry as many as 32 million additional paying customers in the next few years. That would mean millions more Americans buying private health insurance and better able to pay for their hospital stays, doctors’ visits, prescription drugs and medical devices.

As the vote neared that the final legislation was shaping up as much kinder to the industry than many initially feared. Hospitals and drug makers, which supported the final legislation, are the clear beneficiaries. Hospitals in many cases have had to accept patients regardless of their ability to pay and it’s a problem that has left many companies in shambles, such as Tenet Healthcare. THC 6.39, Now, fueled by the prospect of $940 billion in government assistance to help pay for the care it will be giving, Tenet shares were up more than 9% at the close.  Health Management Associates HMA 9.04, rose even more, climbing 11.3%, as both it and Tenet have been trading below the $10 level for several years. A number of others in the group posted sizable gains and included acute care hospital operators Community Health Systems CYH 40.51, LifePoint Hospitals Inc. LPNT 37.83, and Universal Health Services Inc. UHS 36.65, +0.06, +0.16%) All three jumped by roughly 6%.

Hospitals have little to fear. The number of newly insured is expected to decrease significantly the amount that hospitals now lose each year when they provide care to people with no means to pay. But the expanded enrollments in the low-income Medicaid program could be a mixed reading, because Medicaid typically pays hospitals less than the actual cost of care. So the question becomes whether hospitals were already treating many of these patients without any reimbursement at all, or whether they will now see an influx of new money-losing Medicaid customers.  For their part, the hospitals agreed to help defray the costs of the legislation by agreeing to contribute $155 billion over 10 years, largely by accepting lower payments under the Medicare program for older Americans.

The Healthcare bill will be tacked on to those making more than $250,000. This will have to help finance some of the reforms via higher taxes, but that won’t be known for some time whether the legislation has been effective as many of the reforms come into effect in four years. Costs could well continue to soar.

I’ve placed a BUY rating on THC, HMA, CYH, & UHS

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Historic Health Care Vote Passed – Palm Lower

Monday, March 22nd, 2010

In a climactic vote after a year of wrenching debate, the House of Representatives on Sunday approved a Senate bill overhauling the U.S. health-care system, handing President Barack Obama a key victory on the most significant social-policy legislation in decades. House lawmakers voted 219-212 to approve the reform bill, a wide-ranging measure aimed at extending insurance coverage to about 32 million Americans. The legislation costs $940 billion over 10 years. Congressional analysts estimate it will cut the deficit by $138 billion during that period.

No House Republicans voted for the Senate bill, which now goes to Obama for signature. Thirty-four Democrats also voted against it. In brief remarks at the White House, Obama called the bill “a victory for the American people.” “We proved that we are still a people capable of doing big things, and tackling our biggest challenges,” Obama said Sunday night. He thanked members who voted for the bill, saying the vote wasn’t easy, “but it was the right vote.” Democrats are already widely expected to lose seats during the November elections.

House lawmakers also approved a separate “reconciliation” bill, which amends the Senate bill by extending subsidies to buy insurance and imposes a Medicare tax on unearned income, among other things. The vote on that measure was 220-211.

The overhaul got an 11th-hour boost late Sunday afternoon, when anti-abortion Democrats announced a deal with the White House. To allay the concerns of those lawmakers, Obama pledged to sign an executive order reaffirming that no federal money would be used for abortions. The overhaul is paid for with billions of dollars in cuts to Medicare and new taxes, including on high-value health plans.

Pharma companies are dragging the European markets. In my belief I believe that the extra 32 million Americans extending coverage will only benefit the Pharma companies. I’m long Pharma sector. There’s signs of bottoming in the Pharma ETF: XLV

Palm – is set to open below $4.00 to $3.70. From my original Feb 23, 2010 announcement @ $9.11. The stock has fallen 60%. The March $9 Puts (which have expired this past Friday) have garnished a whopping 649% Gain. Congrats to all Members!!!

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How to Profit During a Minor Correction

Friday, March 19th, 2010

I believe we’re in a stimuli supported bull market. I don’t believe the naysayers that have stated the last 7 months, that we’re headed towards a double dip rhetoric. I don’t see that in hind site. Though, we’ll experience several minor recessions in this decade, possibly the next one in 2012. Markets and world economies are badly bruised with the economic slowdown. To press matters worse, sovereign debt has been the jingle for several years. From Zimbabwe to Argentina, fiscal irresponsibility has been felt by all in the free world market.

Many of us have 401k’s, Roth IRAs, annuities, and long term investments. In a perfect world we all love to see markets to reach for the skies. From the 90′s until 2000 we experienced just that. There were teachers, postal workers, to garbage men that believed they were all guru’s of the market. You couldn’t have gone wrong selecting a stock off the boards. Those were the good old times. Wake up!!! It’s 2010. The truth of the matter, as investors, we have to take fiscal responsibility of managing our finances and not forget the basics. Whether it be business, personal wealth, or stock trading, we must protect ourselves from these hiccups.

I have a prime opportunity for wealth, while markets correct themselves. The rule of the game is to follow the trend up or down and profit!!

We’ve gone through our second mediocre stage of a correction, with the first being from June 11th 2009 to July 13th of -9.2% and the second being January 20, 2010 – Feb 5 of -9%. Notice the trend? I’m not referencing that the current leg we’ll experience a similar correction. We’ve been trending up on the current leg since Feb 5th. The market needs a breather as it exhausted it’s rocket fuel. I’m noticing a similar trend to pretty much all the equities in addition to the indices.

Let’s use QQQQ which follows the DJIA and SPY which follows the S&P. I’ve attached (3/19/10) 1 year chart of the DJIA. Notice the two dips. When price drops below the 50 day moving average is when one must act aggressively and purchase in the Money or near the money Puts  to protect downtrend of your long term investments or day-trading opportunity. During this cycle, the QQQQ and SPY puts can garnish gains anywhere from 75% to 300%. This strategy is coined “Straddle” (if you own stock interest or call contracts)

In this particular example, it’s customary for a market to create a new support level since the current leg is exhausted. It’s rather healthy for a bull market to follow this trend. It normally lasts 5-10 days. I don’t believe we’ll experience a -9% correction similar to the previous two downturns. We’ll see a modest 2-4% correction. This may equate to a 75% to 150% gain on in the money put. SPY April $116 and $117 puts currently trade @ $1.50 and $2.00 respectively.

Another thing one must note which may signal a developing correction is the 50 day moving average. If that begins to cross over the 100 day, that may essentially signal an indecisive market developing. Time will tell, in any event take advantage of this opportunity to profit!!!  Cheers

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Palm's Ship is Sinking, Shares Slip Afterhours

Thursday, March 18th, 2010

Ladies and Gentlemen, on Februay 23rd I announced that PALM(at the time, it was priced @ $9.11) looked set to crash. I had recommended to short and purchase the puts. The maker of the Treo and the  Palm Pre and Pixi with its Garnet OS 5.5 (based off of the Access Linux Platform) operating system, had sold terribly as I suspected during the 4th quarter. It was initially launched on the Sprint service and then fully launched on the Verizon network at the end of December. Verizon had launched a tremendous marketing campaign with prices slashed on the Palm Pre. This was the early signal that led me to believe Palm was in for some trouble. Nonetheless, the company had concealed information to shareholders that they had experienced production setbacks of the newly launched Pre and Pixi phones. Well, that setback which was to last only 3-5 days, had really halted production to more than a month. Nonetheless, Palm phones weren’t selling or enticing the PDA/smartphone buyers.  

This evening, Palm announced Q3 Earnings which ended February 26th (Fiscal year starts June 1st – ends May 31st) For its fiscal third quarter, Palm said it lost $18.5 million, or 13 cents a share, compared with a loss of $95 million, or 89 cents a share, for the comparable period the previous year.Excluding certain items, the company said it would have lost $102.8 million, or 61 cents a share. PALM is now down 14% afterhours trading at $4.84

Revenue more than tripled to $350 million compared to $90.6 million in the same period last year. On a non-GAAP basis, Palm said revenue would have been $366 million. Analysts were expecting the company to report a loss of 42 cents a share on revenue of $316.2 million, according to consensus estimates from Thomson Reuters.  

The company said it shipped 960,000 smartphone units to distributors for the recent quarter. Analysts were expecting roughly 850,000 units. Smartphone sell-through to consumers was 408,000 units, lower than the range of 500,000-600,000 expected by analysts. The difference between unit shipments and sell-through illustrates lower-than-expected sales of Palm products at wireless carriers. Because of this inventory build-up, Palm expects sales to be particularly weak for the current quarter. On the conference call, the company said it expects revenue of $150 million for the May quarter. Analysts were looking for $305.8 million. A huge disappointment to shareholders but great news to our “short” investors!!!

Palm said it had $591.9 million in cash, cash equivalents and short-term investments by the end of the quarter, relatively flat with $590 million at the end of the previous period. The company did not give an estimate for cash burn in the fourth quarter.

In plain English, Palm posted dramatically smaller losses on a sharp jump in sales for the third fiscal quarter, though the company’s closely watched smartphones sales to consumers fell short of expectations.

Jon Rubinstein, Palm’s CEO, admitted to “execution missteps” in a conference call with analysts and said the company is working “aggressively” to boost sales. Analysts are becoming increasingly bearish, noting that Palm is facing a rapidly closing window to carve out a space in the competitive smartphone market, where it competes with popular devices such as the iPhone, BlackBerry and Motorola Droid. I think it’s an uphill battle, and the chances for them are running out. I believe the stock is likely to trade more on the company’s asset value and takeover potential going forward. Given that its new webOS is a worthy contender and stacks up nicely against the iPhone, Android and others, it must have options. One solution could include identifying a buyer or partner for the company. Right now, it’s largely a niche player, and should be looking for a company with deep pockets, strong relationships with developers and a good distribution network. That shouldn’t be so hard given that so many companies are looking to get a piece of the smartphone action. In fact, it’s no wonder something hasn’t happened already.

I believe the best suitors may be Nokia, Dell, or Hewlett Packard. Both Dell and Hewlett Packard are venturing into the smartphone arena with recent roll outs. Click on their respective links above. I think the real value is in Palm’s webOS which they built from the ground up. I’m sure suitors have been patiently awaiting for this day to come, and purchase a great asset at a steep discount than it was, say 6 months ago. The winning suitor will gain a great asset and increase shareholder value!!! Let the best suitor win!

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CPI Tame, Ebay(Paypal) & China Agreement

Thursday, March 18th, 2010

Consumer prices,  were reported  flat last month, as the weak economy limited the ability of companies to charge more for goods and services. Inflation I believe will be tamed for quite awhile through fiscal support and surplus inventory flush. The Labor Department’s report Thursday indicates there is little sign of inflation, which enables the Federal Reserve to keep the short-term interest rate it controls at a record low in an effort to revive the economy. A rise in food prices last month was offset by a drop in gasoline and other energy costs. Excluding volatile food and energy prices, the core CPI rose by 0.1 percent in February. That matched analysts’ estimates. Consumer prices rose 2.1 percent in the past year, down from January’s 2.6 percent pace. The core index rose 1.3 percent in the past year, down from 1.6 percent in January.

Further supporting my investment call on EBay Inc. EBAY 27.02, has struck an agreement with China UnionPay Co., the mainland’s largest electronic payment group, in a deal that will allow Chinese consumers to purchase from overseas merchants using the on-line auction houses’ Paypal unit, according to a published report Thursday. Under the deal Paypal will gain access to a massive segment of the Chinese market and present a challenge to EBay’s China rival Alibaba Group, which operates Alibaba.com. China UnionPay cardholders will, from the third quarter, be able to link their bankcard accounts with PayPal and access a network of nearly eight million online merchants. Paypal as I stated will be the wealth machine of Ebay. The stock price has already shown us this is true from my initial announcement of my Large Cap Picks. It’s now up 21%.

Cheers!!!

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Luck of the Irish- Market is Up Again

Wednesday, March 17th, 2010

The luck o’ the Irish was with the bulls today, as the blue chips extended their longest winning streak since August 2009. The Federal Reserve’s decision to maintain rock-bottom interest rates continued to stoke buyers, with a bout of encouraging economic data adding fuel to the fire. More specifically, the Producer Price Index (PPI) fell by a steeper-than-anticipated 0.6% in February, the Labor Department reported, as declining energy prices sparked the index’s sharpest drop-off in seven months. Despite paring its gains in afternoon action, the Dow Jones Industrial Average (DJIA) settled in the GREEN for the seventh straight session, with all three major market indexes tapping new highs by the close.

That prompted a fresh wave of speculation about whether this is a full-on breakout for the market from the recent trading range.

I believe we’re going to break out of the recent trading range. I think we’re going to see some strong earnings at the end of the first quarter. We’ve got some momentum that’s going to carry us on the domestic side and the international equity side as well. 

According to the Dow Theory, the oldest market-timing system still in widespread use today, it is bullish when the Dow averages, reach new highs. That’s bullish enough, but Dow Theorists are not the only ones ecstatic about a Dow close above 10,725. 10,725 level represents the 50% retracement level of the recent bear market. There was a moment of concern over the last two months that the Dow was unable to surpass that level on Jan. 19, since reaching that level and promptly turning down suggested to that we were still in a bear market rally. A convincing close above that 50% retracement level, however, would persuade me that the seesaw of the market has tilted in favor of the bulls.

Crude-oil futures closed at $82.93 a barrel and gold futures also gained, finishing at $1,124.2 an ounce.

Underpinning commodities’ gains, the dollar fell against the Japanese yen and rose against the euro.

In Stock News

Dell finished up 2.03% for the day to finish at $14.59

Silver also made new gains.

DDR still remains strong

Palm is still a dog in the market.

Ebay has been on fire since my announcement. Undiscovered treasure

I have few more undervalued Large Caps I’d like to add in the near term that may bring wealth to investors!

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DDR Up – New 52 Week High, DELL Breakout

Wednesday, March 17th, 2010

Developers Diversified Realty Corporation (the “Company”) (NYSE: DDR) today announced the pricing of $300 million of senior unsecured notes in an underwritten public offering. The offering consists of $300 million of 7.50% notes due April 2017. The notes are being offered to investors at a price of 99.995% with a yield to maturity of 7.50%. Interest on the notes will be paid semi-annually on October 1 and April 1. The offering is expected to close on or about March 19, 2010, subject to customary closing conditions.

The net proceeds to the Company, after subtracting the underwriting discount and estimated offering expenses, are expected to be approximately $296.8 million, which the Company intends to use to repay debt with shorter-term maturities and to reduce balances on the Company’s revolving credit facilities.

My initial announcement was made February 19, 2010 that this was the stock to be in @ $10.00 Since then DDR has been up every single day with exception of 2 days. That is pretty impressive especially with a 27% gain in the stock and the option has gained a whopping 525% for the March $10.00 strike priced at .40 at the time. Imagine placing $1,000 investment in the option!

Dell is my next stock on my conviction buy list. It’s beginning to break out. After trading in a narrow range the past week, it has begun it trajectory upward. My price target for DELL is $15.50 – $16.25. My initial announcement was made March 10th. It’s still not late to jump aboard the April or May calls of $14.00 and upward.

Cheers!!!!

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S&P at 17 Month High

Tuesday, March 16th, 2010

After a shaky start, stocks ended the session with respectable gains! The driving factor of the FOMC drove the bears to cover their shorts. The Federal Open Market Committee (FOMC) took the spotlight today, and the central bankers shocked absolutely no one by voting to maintain interest rates at their current, rock-bottom levels.The U.S. Federal Reserve renewed its pledge on Tuesday to keep interest rates near zero for an “extended period” even as it sounded more upbeat about jobs. 

While the Fed was widely expected to keep its target rate for overnight loans between zero and 0.25%, analysts combed the central bank’s accompanying policy statement for clues as to the timing of future rate-hike moves. Still, it repeated its view that the economy’s recovery would likely be moderate for a time and that inflation was likely to remain subdued as it held interbank overnight rates in a zero to 0.25 percent range. 

“The (Fed’s policy) committee … continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” the central bank said in a statement.

For a second consecutive meeting, Kansas City Federal Reserve Bank President Thomas Hoenig dissented, saying the term “to keep rates exceptionally low for an extended period” was no longer warranted. 

The central bank also said business spending on equipment and software had risen “significantly,” also a brighter assessment than the one it gave in January.

The central bank reiterated that it intends to wrap up purchases of mortgage-related assets by the end of March, but said it would monitor the economic outlook and financial developments to see if more support is necessary. The consequence, higher mortgage rates if the private market does not fill in the government’s role of purchasing the mortgage-related assets.

Also fueling gains for commodities, S&P affirmed Greece’s sovereign ratings, sparking a rally in the euro and putting further pressure on the dollar. The dollar’s slide against the euro and other major currencies boosted commodities including gold and oil, making them less costly to foreign buyers.

Gold for April delivery finished up $17.10, or 1.5%, at $1,122.50 an ounce. The SPDR Gold Trust GLD 110.35, the largest exchange-traded fund backed by gold, rose 1.6%. Data showed holdings in the fund drop rose by 343.53 tons in the week ended March 6.

Other metals also gained. May silver futures rose 24.2 cents, or 1.4%, to $17.35 an ounce. Copper for May rose 6.5 cents, or 1.9%, to $3.37 a pound.

Palladium for June delivery was up $11.75, or 2.6%, at $472.40 an ounce and platinum for April gained $14.90, or 0.9%, to $1,630.70 an ounce.

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Markets Up Prior to Fed Meeting, Housing Ok

Tuesday, March 16th, 2010

Stocks moved higher Tuesday as investors awaited word from the Federal Reserve on the direction of interest rates. One would think that the major market indexes are poised to receive good news from the Federal Open Market Committee (FOMC), which is expected to reiterate its stance of holding interest rates steady for an “extended period of time.” However, many analysts belief that this may be the last time this particular language is included, and that the Fed may give such indications in today’s policy statement.

Investors took some comfort from economic reports showing the drop in new housing starts and building permits about in line or even slightly better than expected. Housing and employment are the two main hurdles for the economy to cross yet. U.S. housing starts fell about 5.9% to a seasonally adjusted annual rate of 575,000 in February as several massive snow storms hit the East and South and stalled home building, according to data released Tuesday by the Commerce Department. Starts were down in the Northeast and South, but up in the Midwest and West. Most of the decline in February was in the hugely volatile multifamily sector. Construction of single-family homes fell 0.6% to a 499,000 pace, while building of large condos and apartment buildings plunged 43%.

Building permits which aren’t as affected by weather events as starts, dropped 1.6% to 612,000 in February. Permits for single-family homes fell 0.2% to a 503,000 rate. Many economists consider the single-family permits figure to be the most reliable and important number in the release. Over time, permits and starts are highly correlated. Single-family permits are up 32% compared with February 2009. The industry has slashed production of new homes to work off a massive inventory of unsold homes. The number of homes under construction fell 2.2% to a seasonally adjusted 492,000, the lowest on record dating back to 1970.

Builders remain very pessimistic about a recovery, despite a generous tax subsidy for buyers. In March, the home builders’ sentiment index dropped back to 15 from 17 in February. Builders face tough competition from foreclosures of existing homes, and buyers remain cautious about the job market. I’m led to believe the generous gains from the housing market from 2000 through 2006 will not return. I think we will continue to see a weak housing market. The housing trend has topped out. It had developed over 25 years with a steady increase of 2.5% annualized gain through 2000. We probably won’t see 1-2% annual housing gains for another 3-5 years. There has been an abundance of new homes built the past 10 years. I foresee the next real estate boom happening not for at least another 20 years. It’s the law of cycles. Look what happened during the Depression. It wasn’t until 20 years later after WW II, that we experienced a housing boom. That ended in the 70′s of course. But, owning a home still remains the best asset, that is if you have a long term outlook. It’ll be the best asset to own along with Gold as inflation rears it’s head the next 3-7 years. Fixed Rates and payments on homes remain the same even when everything else rises!

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