Archive for November 2012

Weekend Open Thread: Corporate Screw-up of the Year Award   7 comments

For this weekend’s open thread, I offer the “Corporate Screw-up of the Year Award”. Although we still have a month left, it is pretty clear who the nominees are. I will let you folks pick the winner.

Nominee #1: JPMorgan’s Incredible Growing Trading Loss

What was originally estimated to be a trading loss of $2 billion, and has currently lost “more than $6.2 billion”, originated from what one lawsuit (from several pension funds) has called CEO Jamie Dimon’s actions which “secretly transformed the [Chief Investment Office] from a risk management unit into a proprietary trading desk whose principal purpose was to engage in speculative, high-risk bets designed to generate profits.”

Dimon himself called it, “flawed, complex, poorly conceived, poorly vetted and poorly executed…This should never have happened…I can’t justify it. Unfortunately, these mistakes were self-inflicted…However, we also understand the need for rules and practices to ensure that hedging doesn’t morph into something different. What this hedge morphed into violates our own principles.”

Fortunately for JPMorgan, they are a “too big to fail” bank with over $890 billion in cash. Even Warren Buffett thinks Jamie Dimon should replace Tim Geithner as Treasury Secretary. Or maybe Warren is just offering that as a parachute? As Mel Brooks once said, “It’s good to be the king!”

Nominee #2: Hewlett-Packard’s Autonomy Mistake

Admittedly, the Hewlett Packard acquisition of software company Autonomy took place in 2011, it didn’t blow up until 2012. Here is the abbreviated story (from Wikipedia):

On 18 August 2011 Hewlett Packard announced that it would purchase Autonomy for US$42.11 per share, around $10.2B. The transaction was unanimously approved by the boards of directors of both HP and Autonomy and the Autonomy board recommended that its shareholders accept the offer. On 3 October 2011 HP closed the deal with over 87% of Autonomy shares acquired.

In May 2012 Mike Lynch left his role as Autonomy CEO after a significant drop in revenue in the previous quarter.

In November 2012 Hewlett-Packard announced that it was taking an $8.8 billion accounting charge, after claiming “serious accounting improprieties” and “outright misrepresentations” at Autonomy. However, Mike Lynch counter-alleged that the problems were due to HP’s running of Autonomy, citing “internecine warfare” within the organization.

The FBI is investigating it now. What we have here is a failure to perform due diligence.

Nominee #3: Apple’s “Which way did they go?” iMaps

Two Apple executives lost their jobs over it. But since Apple released the iPhone 5 on September 21st, with an absolutely godawful map application, the once almighty Apple stock has taken a dive, dropping from $696.91 to the low on November 16th of $505.75, a 27% drop. While Apple can bounce back from this, like they did from the iPhone 4’s “antenna-gate”, but they don’t have Steve Jobs to save them this time. Is Tim Cook up to the job? Or is this just the first of many mistakes to come?

When the final story is written on Apple, this could be the event which presaged the decline.

That’s all folks! Have a great weekend!

PORTFOLIO UPDATE: My portfolio closed down 0.27%.

Posted November 30, 2012 by edmcgon in Open Thread, Portfolio, Stocks

Daytraders Corner   52 comments

Expect a roller coaster today, as the markets will be dominated by rumors out of Washington. S&P 500 December futures are flat at the moment, with a price target of 1417. If we have a positive opening, I will be tempted to go short (except for the fact I will be sitting in an orthodontist’s office with my daughter). I expect we will test the 1408-1410 support level at some point today. On the other hand, if we get a “happy talk” rumor, we could pop up to the 50 day moving average at 1422. But I don’t expect us to break either of these levels until something definitively good or bad happens.

The S&P 500 levels to watch today:

UPSIDE: 1417 (November 6th’s low), 1419 (2 data points), 1422 (April’s high and the 50 day moving average), 1428 (2 data points), 1433-1434 (2 data points), and 1437 (top of the Bollinger Bands).
LAST CLOSE: 1415 (also May’s high).
DOWNSIDE: 1412 (November 2nd’s low), 1408-1410 (6 data points), 1401 (November 8th’s high), 1397-1398 (2 data points), 1393 (20 day moving average), 1388-1391 (8 data points, including July’s high and the 10 day moving average), 1386 (November 21st’s low), 1384 (November 12th’s high and the 200 day moving average), 1380 (November 14th’s high), 1377 (3 data points), 1373 (November 9th’s low), 1371 (November 14th’s low), 1370 (2011’s high), 1363 (June’s high), 1362 (November 16th’s high), 1360 (November 15th’s high), 1354 (August’s low), 1352 (November 14th’s low), 1349 (the bottom of the Bollinger Bands), and 1348 (November 15th’s low).

Look at it this way. These are the people who are controlling our future:

US government

From left to right, there is a tax cheat, a guy whose own political party doesn’t listen to him, a community organizer, and a guy who thinks paying income taxes is voluntary. Have a nice day!

(hat tip to Reuters via KCCI.com for the pic)

Posted November 30, 2012 by edmcgon in Daytrading, Market Analysis, Politics

Ed’s Daily Notes for November 30th   4 comments

The Weekly Standard: McConnell ‘Burst Into Laughter’ as Geithner Outlined Obama’s Plan

A bad sign for President Obama’s plan to fix the fiscal cliff:

Mitch McConnell, the Senate Republican leader, says he “burst into laughter” Thursday when Treasury Secretary Tim Geithner outlined the administration proposal for averting the fiscal cliff. He wasn’t trying to embarrass Geithner, McConnell says, only responding candidly to his one-sided plan, explicit on tax increases, vague on spending cuts.

Geithner suggested $1.6 trillion in tax increases, McConnell says, but showed “minimal or no interest” in spending cuts. When congressional leaders went to the White House three days after the election, Obama talked of possible curbs on the explosive growth of food stamps and Social Security disability payments. But since Geithner didn’t mention them, those reductions appear to be off the table now, McConnell says.

Obama is pushing to raise the tax rates on couples earning more than $250,000 and individuals earning more than $200,000. But those wouldn’t produce revenues anywhere near $1.6 trillion over a decade.

One of the things that might have caused the laughter might be Geithner’s proposal to end the debt ceiling. Is this really the time to end the debt ceiling? If anything, it is the time to enforce it.

Another humorous aspect to Obama’s budget is his much-touted “Buffett tax”. As much as Obama talks about how important that is, it really doesn’t do much. From JP Morgan, via Zero Hedge:

Hippo budget

Most of Obama’s $1.6 trillion in tax increases (note that is only $160 billion next year, with the deficit projected to be $1 trillion) are coming from “eliminating tax breaks” for the wealthy, and from “closing corporate loopholes” (see Obama’s budget proposal here). But it gets better: Even after this tax increase, Obama’s budget projects a budget deficit of $901 billion next year. With the debt ceiling already at $16.4 trillion, and the government set to hit that limit at the end of this year, it would have to be raised to about $17.3 trillion just to get through next year. With U.S. GDP at about $15 trillion, that means the debt would rise to 115% of GDP. That would put the U.S. between Portugal (108%) and Italy (120%) for the debt/GDP ratio.

Mind you, I don’t expect the Republicans to come up with a truly fiscally conservative proposal. But I can certainly understand why they would laugh at Obama’s proposal. For this lame budget proposal, Obama gets the bear:

facepalm10

Bloomberg: Euro-Area Unemployment Rises to Record 11.7% on Recession

The euro-area jobless rate rose to a record in October as the fiscal crisis and tougher austerity measures deepened the region’s economic woes.

Unemployment in the 17-nation single-currency bloc increased to 11.7 percent from 11.6 percent in September, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995 and is in line with the median estimate of 34 economists in a Bloomberg News survey. Inflation eased to 2.2 percent in November, the slowest rate in almost two years, separate data showed.

The euro-area economy has shrunk for two successive quarters, forcing companies to cut costs to help weather the downturn, and economists foresee a further contraction of 0.3 percent in the fourth quarter, the median of 25 forecasts in a separate Bloomberg survey showed. The Organization for Economic Cooperation and Development this week forecast contractions of 0.4 percent and 0.1 percent this year and next.

So Europe, how’s that austerity working for you? If it’s any consolation, the U.S. will be joining you soon…

Fox Business: Natural Gas Falls Further After EIA Supply Data

Just when you think natural gas can’t get any cheaper:

Natural-gas futures lost more ground Thursday after the Energy Information Administration reported that inventories of the commodity unexpectedly rose 4 billion cubic feet for the week ended Nov. 23. Analysts polled by Platts expected a withdrawal of between 9 billion cubic feet and 13 billion. Total stocks now stand at 3.877 trillion cubic feet, up 26 billion cubic feet from the year-ago level and 190 billion cubic feet above the five-year average, the government said. January natural gas was at $3.67 per million British thermal units, down 13 cents, or 3.4%. It was trading around $3.72 shortly before the data.

Keep this in mind before jumping into a natural gas investment: It could be years before natural gas starts to see demand rising faster than supply.

Posted November 30, 2012 by edmcgon in Economy, Market Analysis, News, Politics

November 29th: Ed’s Daily Portfolio Summary   11 comments

DIS: 0.52 to $49.72 (1.06%, -1.76% overall)–bought at $50.61
INTC: -0.56 to $19.53 (-2.79%, -0.36% overall)–bought at $19.60
LINE: 0.04 to $39.73 (0.10%, 0.56% overall)–bought at $39.51
NNVC: -0.02 to $0.50 (-3.85%, -10.71% overall)–bought at $0.56
PGX: 0.01 to $14.76 (0.07%, -0.87% overall)–bought at $14.89
SAND: 0.16 to $12.35 (1.31%, 1.48% overall)–bought at $12.17
SLW: 0.25 to $37.06 (0.68%, 20.52% overall)–bought at $30.75
YHOO: -0.04 to $18.87 (-0.21%, 24.39% overall)–bought at $15.17

OVERALL: -0.01%

Posted November 29, 2012 by edmcgon in Open Thread, Portfolio

Quote of the day   Leave a comment

We all know what to do, we just don’t know how to get re-elected after we have done it.“–Jean-Claude Junker, Prime Minister of Luxembourg

Posted November 29, 2012 by edmcgon in Economy, Politics

Update: Sandstorm Gold (SAND)   Leave a comment

I am looking to sell half of my Sandstorm Gold (SAND) position today at a small profit, mainly to cut down on the position. As of yesterday’s close, it accounted for 14.47% of my portfolio, which is a bit higher than I prefer, although I still like SAND as a long-term hold.

In the pre-market, I am trying to sell it at 12.50. I may lower that after the markets open.

UPDATE 10 am EST: I sold half my SAND at 12.45. The “final” line on that part of my position:
SAND: +0.26 today, +0.28 overall to $12.45 (+2.13% today, +2.30% overall)–bought at $12.17

Posted November 29, 2012 by edmcgon in Portfolio Moves

Daytraders Corner   55 comments

The S&P 500 finished yesterday in the middle of a strong resistance/support range, at 1409. With futures strongly positive this morning, I see the next stop at the 50 day moving average of 1423. Beyond that, there are two strong resistance ranges, plus the top of the Bollinger Bands. While the market seems to have strength, it may get tired if we reach the 1437 level.

But don’t get too cocky: All it takes is an idiot like Senate Majority Leader Harry Reid to open his mouth and send the markets down. If that happens, we could easily return to the 1390’s again.

The S&P 500 levels to watch today:

UPSIDE: 1412 (November 2nd’s low), 1415 (May’s high), 1417 (November 6th’s low), 1419 (November 5th’s high), 1422 (April’s high), 1423 (50 day moving average), 1428 (2 data points), 1433-1434 (2 data points), and 1437 (top of the Bollinger Bands).
LAST CLOSE: 1409 (within the 1408-1410 range, with 5 data points).
DOWNSIDE: 1401 (November 8th’s high), 1397-1398 (2 data points), 1393 (20 day moving average), 1388-1391 (7 data points, including July’s high), 1386 (November 21st’s low), 1385 (10 day moving average), 1384 (November 12th’s high and the 200 day moving average), 1380 (November 14th’s high), 1377 (3 data points), 1373 (November 9th’s low), 1371 (November 14th’s low), 1370 (2011’s high), 1363 (June’s high), 1362 (November 16th’s high), 1360 (November 15th’s high), 1354 (August’s low), 1352 (November 14th’s low), 1349 (the bottom of the Bollinger Bands), and 1348 (November 15th’s low).

Posted November 29, 2012 by edmcgon in Daytrading, Market Analysis