Friday, May 25, 2012

Memorial Day Weekend

Last weekend was Victoria Day weekend in Canada. This weekend is Memorial Day weekend in the US! I hope everyone will have an enjoyable weekend and stay away from stocks and finance related things until at least Monday night.

As a Canadian investor who has a lot of exposure to US equities, my schedule tends to revolve more around the US equity markets, which means last weekend wasn't really a long weekend, and this weekend is the long weekend. :)

This week is also Fleet Week in NYC. They should come to Toronto some time. I would definitely go down to harbor front or Toronto island if this came to town!

Nothing too interesting in the stock market lately. Europe is back in the headlines (surprise surprise?). Personally I think Greece is like a cancerous tumor. It needs to be dealt with, and cut off, before it infects others, and the best way to do it is not to keep putting it off, but deal with it swiftly and immediately.

I continue to think the market is giving us a buying opportunity, but this buying opportunity may present better value if something dramatic really happens in Europe.

Make sure to cover all your bases with proper risk management, and continue to buy in increments. I think it will all work out as the US economy provides the stabilizing force for the world.

Tuesday, May 22, 2012

Facebook IPO

Haven't been watching the market lately with Diablo 3 out last Tuesday. I was able to watch some CNBC last week during lunch and dinner, and everything seemed to be about Facebook IPO.

My suggestion? Stay away!

If I had $100 billion in cash (roughly how much Facebook was worth at the $38 IPO price), I would not go and buy all of Facebook. I would prefer to go buy half of all the railroads in north america (CN, CP, CSX, Union Pacific, KSU, etc, all of them!!), or all of Mcdonalds, or BOTH Boeing and Caterpillar. These companies are what make our economy hum, and play an integral part in a global economy. They make things. They ship things. What does Facebook do? Enable people to slack off at work?

I would not buy FB at 100 billion, which is how much Mcdonalds is worth. I would not buy FB at 50 billion, which is how much Boeing is worth. I wouldn't pay 20 billion for FB, which is how much Cummins is worth.

Monday, May 14, 2012

JPMorgan Bomb

It wouldn't be fair if I didn't talk about JPMorgan's fiasco at all, so let's just go over what's happened since the revelations late last week.

Since the news broke about JPMorgan's $2 billion loss in its CIO (Chief Investment Office) divison, the stock has been taken out to the woodshed and demolished. It is currently down about 12% from when the news broke. The stock sat just under $41 previously, and is currently just under $36.

While $2 billion is not a lot of money when put into the context of how much money the CIO of JPM manages (something in the order of few hundred billion), it leaves investors wondering what else could be going on that we don't know about.

Heads have already begun to roll over the weekend, with many top level managers of the CIO resigning or leaving, being replaced by others. How does this affect us, the average investor?

Wednesday, May 9, 2012

Europe is Back...

"Not this shit again..."

That seems to be the common thinking among investors and traders alike these days.

Mixed in with all the mediocre US numbers that came out during the last few weeks, Europe seems to be in the headlines again. This past weekend both the incumbent Greek and French governments were toppled, ushering in new left wing socialist governments in both countries. Funny enough, both socialist leaders have been harking about stopping the austerity measures, and spending their way out of this problem.

In the short term, I expect markets to continue to be choppy. I think from a long term perspective, mid yield stocks continue to be appealing compared with bonds or bond replacements (high yield stocks). If we've learned anything from the Europe crisis in 2011, it was that the most hammered sectors will be financials and banks. 

That being said, I continue to believe banks present some of the most attractive long term value in the stock market. Just be prepared for some extreme volatility in the short term.

One thing I've learned in the 5 years that I have been investing is that the best times to buy, are typically the times when things look so bad, you start questioning yourself whether you should buy. 

Thursday, May 3, 2012

Earthquake at Green Mountain and more

This is why I stay away from companies involved in scandals with medium to high probability of financial fraud. The hilarious thing is GMCR was also a high octane growth stock with stratospheric valuations. Put those 2 together and you have a recipe for waking up to a 45% drop in stock price.

Traders will probably start piling into the stock looking for an oversold bounce, but as a conservative investor, I don't touch any stock that has a material probability of going to 0, and I believe Green Mountain is in that boat.

Tuesday, May 1, 2012

Earnings Period Volatility

As earnings season continues, the volatility in specific names continues.

Looking at the broad market, the S&P has been stuck between 1350 and 1400 for some time now, but we've had some pretty large moves in individual names. During these earnings period weeks, its important to not act too quickly, as often you will end up regretting it later.

For example, let's take everyone's beloved Apple (AAPL). Apple reported stellar numbers after the close on April 24. The stock proceeded to open $50 or about 10% higher the next day. If you had bought Apple on the pop on April 25th, you'd be down about 5% as of today.

Apple in particular is dangerous here, because from a technical sense, the stock is broken. While the valuation of the stock is not excessive by any means, the stock simply feels tired. The day to day price action on Apple feels very weak. On broad up days, the stock tries to rally and fizzles. On down days, Apple often ends up closing near its day's lows. This is evidence of a weakening stock. I'm not saying Apple will crash here, but that a correction is underway, and even a great earnings did not stop the correction from continuing.