Your opinion matters, please vote.
Wednesday, August 24, 2011
Do you expect Bernanke to announce (or strongly hint at) a QE3 program this Friday at Jackson Hole?
Do you expect Bernanke to announce (or strongly hint at) a QE3 program this Friday at Jackson Hole?
Your opinion matters, please vote.
Your opinion matters, please vote.
Thursday, August 18, 2011
Tuesday, May 10, 2011
Why this summer will be the most boring trading season since the summer chop-fest-palooza of 1994.
In March of 2011 a massive magnitude 9 earthquake hit the World's 3rd largest economy, this earthquake triggered a tsunami with waves of up to 125 feet high, and the incident damaged a nuclear power plant to the point were a 'Nuclear Meltdown' seemed almost unavoidable. In total 14,949 people were confirmed dead, 5,279 were seriously injured, and the estimated overall cost of this natural disaster is around $300 Billion dollars.
As you well know, all of our global markets are interconnected and a crisis in Europe or Japan, or anywhere else in the world will effect our US markets. But how did the S&P 500 react to one of the deadliest, most destructive earthquakes in Japan's history? From March 11, the day that the earthquake hit, to March 16, it only went down for 3 days and dropped a measly 3.5%. Now, if the threat of a nuclear meltdown and the destruction of one of the World's major economies was viewed upon by the markets as an "insignificant event", there is virtually nothing that will rile the markets, especially during the summer trading chop-fest when a significant portion of Wall Street's elite will be vacationing in their summer homes in the Hamptons or off vacationing in Tahiti.
The simple fact of the matter is that nothing will ever compare to the absolute destruction, devastation, and utter pandemonium that spread across the globe as a result of the Housing Crash and the ensuing Financial Crisis. Firms that had been around for 150 years, that had survived through the great depression, collapsed in 2008. GM went bankrupt, AIG received billions of dollars in bailouts, Citi group same thing, the VIX went up as high as 89, and there were days when the Dow Jones would make 1,000 point intra-day swings. We'd be up 400 points in the morning just to end the day down 600 points. Shares of Bank of America were routinely moving 25% from one day to another. For those of us who lived through and witnessed financial companies that were leveraged 40-to-1 destroy the XLF financial ETF, causing it to fall 82% in a little less than 2 years, everything else just seems a little quaint.
Trading and investing has become boring again. Things are neither massively risky, grotesquely overvalued, or hugely undervalued. My advise to you for this summer is, forget about the markets. Nothing of any real importance is going to happen between June and August. Just buy the stocks you love, sell the pieces of junk you might still own, and don't make another trade until September. In the mean time, if you can afford it, go out and spend every single day at the beach, travel to Europe, take your kids to Disney Land, go spend a week on the beaches of Australia, visit Hawaii or Brazil, go see Katy Perry, Rhianna, or the Black Eyed Peas in concert. Have some fun this summer! Sleep in as many hotels as you can. The market is going to be a snooze fest for the next 3 months.
Follow me on Twitter
As you well know, all of our global markets are interconnected and a crisis in Europe or Japan, or anywhere else in the world will effect our US markets. But how did the S&P 500 react to one of the deadliest, most destructive earthquakes in Japan's history? From March 11, the day that the earthquake hit, to March 16, it only went down for 3 days and dropped a measly 3.5%. Now, if the threat of a nuclear meltdown and the destruction of one of the World's major economies was viewed upon by the markets as an "insignificant event", there is virtually nothing that will rile the markets, especially during the summer trading chop-fest when a significant portion of Wall Street's elite will be vacationing in their summer homes in the Hamptons or off vacationing in Tahiti.
The simple fact of the matter is that nothing will ever compare to the absolute destruction, devastation, and utter pandemonium that spread across the globe as a result of the Housing Crash and the ensuing Financial Crisis. Firms that had been around for 150 years, that had survived through the great depression, collapsed in 2008. GM went bankrupt, AIG received billions of dollars in bailouts, Citi group same thing, the VIX went up as high as 89, and there were days when the Dow Jones would make 1,000 point intra-day swings. We'd be up 400 points in the morning just to end the day down 600 points. Shares of Bank of America were routinely moving 25% from one day to another. For those of us who lived through and witnessed financial companies that were leveraged 40-to-1 destroy the XLF financial ETF, causing it to fall 82% in a little less than 2 years, everything else just seems a little quaint.
Trading and investing has become boring again. Things are neither massively risky, grotesquely overvalued, or hugely undervalued. My advise to you for this summer is, forget about the markets. Nothing of any real importance is going to happen between June and August. Just buy the stocks you love, sell the pieces of junk you might still own, and don't make another trade until September. In the mean time, if you can afford it, go out and spend every single day at the beach, travel to Europe, take your kids to Disney Land, go spend a week on the beaches of Australia, visit Hawaii or Brazil, go see Katy Perry, Rhianna, or the Black Eyed Peas in concert. Have some fun this summer! Sleep in as many hotels as you can. The market is going to be a snooze fest for the next 3 months.
Follow me on Twitter
Saturday, April 2, 2011
Some very sloppy and lazy reporting on $LULU
An article on Lululemon was published at Yahoo Finance on Friday April 1st (maybe this is a bad April fools joke?) titled, "Has Lululemon has stretched its value to the limit?". Besides the bad grammar in the title, the article is littered with misinformation. It is so bad it's almost like the article is talking about a different company. Basic facts such as what the price of the stock is/was, what date the company reported earnings on, and, apparently, even how much the stock moved in percentage terms are all completely, absolutely wrong.
Firstly let me give you the link to the article I am talking about here. I also took a screen-shot of it in case they take down the page.
Firstly, the article states that shares of Lulu were trading at $94 on March 30.
This is just flatly wrong. Whether we're talking about the shares that trade in Canada ($LLL) or the shares traded here in the US ($LULU), shares of lulu have NEVER traded above $90 on a closing basis. They have made an intra-day high of $90.96 but this is still $3 away from where the article says they were trading (are we even talking about the same stock?). Also Cramer didn't feature Lulu on his show on the 30th. His latest piece on Lulu was on the 25th. You can see it here.
Then the article says that the company reported earnings on March 26 and that the shares rose 15% on that day!
Not only did lulu NOT report earnings on the 26th (which was a Saturday), the shares also traded lower on the earnings release! They reported on the 17th. I know this first-hand because I owned some March call options on LULU that ended up expiring worthless because of the drop & OPEX the very next day. Lulu's latest big one-day gain (which caused me to have a Yogasm) occurred on March 28th, when Lulu announced a 2-for-1 stock split, posting an 8.4% gain on the day, not 15% (I wish).
The lesson to be learned here is this: Always do your own research from reliable sources. If sloppy, lazy reporting like this can get on a reputable website like Yahoo Finance, imagine how wrong and inaccurate information could be at other lesser known websites.
Firstly let me give you the link to the article I am talking about here. I also took a screen-shot of it in case they take down the page.
Firstly, the article states that shares of Lulu were trading at $94 on March 30.
This is just flatly wrong. Whether we're talking about the shares that trade in Canada ($LLL) or the shares traded here in the US ($LULU), shares of lulu have NEVER traded above $90 on a closing basis. They have made an intra-day high of $90.96 but this is still $3 away from where the article says they were trading (are we even talking about the same stock?). Also Cramer didn't feature Lulu on his show on the 30th. His latest piece on Lulu was on the 25th. You can see it here.
Then the article says that the company reported earnings on March 26 and that the shares rose 15% on that day!
Not only did lulu NOT report earnings on the 26th (which was a Saturday), the shares also traded lower on the earnings release! They reported on the 17th. I know this first-hand because I owned some March call options on LULU that ended up expiring worthless because of the drop & OPEX the very next day. Lulu's latest big one-day gain (which caused me to have a Yogasm) occurred on March 28th, when Lulu announced a 2-for-1 stock split, posting an 8.4% gain on the day, not 15% (I wish).
The lesson to be learned here is this: Always do your own research from reliable sources. If sloppy, lazy reporting like this can get on a reputable website like Yahoo Finance, imagine how wrong and inaccurate information could be at other lesser known websites.
Monday, March 28, 2011
Tweibo, Super-Bowl, and Old Media Obsolescence TWIT SINA
How does Twitter make money?
What is Twitter's business model?
They have hundreds of millions of people using their service but how will they monetize that?
These are all reasonable questions to have about a company that is supposedly trading at nose-bleed, bubbly valuations, and has no idea how to generate revenue. The answer is very simple: As of July, 2010, Twitter had 190M users. If you wanted to advertise to those 190M users by having Twitter send each one of them a tweet, how much would it cost?
To put these numbers into perspective, let's compare Twitter's user base to a traditional media event with a similar number of "users", the Super-Bowl. Super-Bowl ads which only reached 90M viewers in 2010 (according to Nielsen) cost an estimated $2.6M per ad in 2010. That's approximately a cost of $28.8 for every person reached by the ad. If we assume that 10M Twitter accounts are spam-bots, that still leaves us with around 180M active users. If Twitter charged the current Super-Bowl ad rate to send 1 AdTweet (or RevTweet = Revenue Generating Tweet) to all of its users, it would have the user base necessary to justify a price of $5.2M per AdTweet, double the cost of 1 Super-Bowl ad. As such, Twitter would only need to send 192 AdTweets per year to be a $1 billion dollar company in terms of annual revenues. That's less than 1 AdTweet per day. No one would have a problem with that. I follow around 200 people, in one hour I see between 140-180 tweets, so 1 adtweet per day would be a tiny fraction of the total.
For the most part, if you are reading this post, you know that what I am about to say is very true. People use Twitter more than crack addicts use crack. I personally use Twitter every single day of the week, 24 hours per day (who doesn't?). In other words, if I'm awake, I'm using Twitter. We are all hopelessly addicted to it and for a very good reason. Twitter has single-handedly become society's #1 source for news. It has made television, radio, and newspapers almost completely obsolete for getting breaking news. By following the right people, you can hear the latest breaking news hours before it gets reported on TV or radio, and 24 hours before it hits the pages of the newspapers. In a sense, active Twitter posters have become society's new news broadcasters sharing videos, pictures, and news with the world. Social Media News is destroying Old Media News.
[Warning]***
This post divulges into wild-eyed speculation beyond this point.
[/Warning]***
Furthermore, it is even possible that in the future either Twitter or Weibo is going to acquire its rival, or they are going to merge. Weibo is exactly like Twitter, 140 characters and all, the only difference is that Sina is headquartered in China and is made for the Chinese speaker. From a business standpoint it would make sense as it would create a massive social media audience to whom you could advertise to. However, pause for a moment and just think of all the implications such a merger would have. A large portion of Chinese citizens already know how to speak English. This platform would allow, for the first time ever, Chinese citizens to talk directly with random or specific US citizens, at virtually no cost, and would allow for finding and meeting new people (networking). Imagine half of your followers being from China. If such a union ever took place, it would not be that hard to see out 75 years into the future a World in which the dominant global language is some mixture of English and Chinese as a direct result of Tweibo.
Disclosure: I currently do not own SINA but I will soon.
You can follow me on Twitter at @elwalvador
What is Twitter's business model?
They have hundreds of millions of people using their service but how will they monetize that?
These are all reasonable questions to have about a company that is supposedly trading at nose-bleed, bubbly valuations, and has no idea how to generate revenue. The answer is very simple: As of July, 2010, Twitter had 190M users. If you wanted to advertise to those 190M users by having Twitter send each one of them a tweet, how much would it cost?
To put these numbers into perspective, let's compare Twitter's user base to a traditional media event with a similar number of "users", the Super-Bowl. Super-Bowl ads which only reached 90M viewers in 2010 (according to Nielsen) cost an estimated $2.6M per ad in 2010. That's approximately a cost of $28.8 for every person reached by the ad. If we assume that 10M Twitter accounts are spam-bots, that still leaves us with around 180M active users. If Twitter charged the current Super-Bowl ad rate to send 1 AdTweet (or RevTweet = Revenue Generating Tweet) to all of its users, it would have the user base necessary to justify a price of $5.2M per AdTweet, double the cost of 1 Super-Bowl ad. As such, Twitter would only need to send 192 AdTweets per year to be a $1 billion dollar company in terms of annual revenues. That's less than 1 AdTweet per day. No one would have a problem with that. I follow around 200 people, in one hour I see between 140-180 tweets, so 1 adtweet per day would be a tiny fraction of the total.
For the most part, if you are reading this post, you know that what I am about to say is very true. People use Twitter more than crack addicts use crack. I personally use Twitter every single day of the week, 24 hours per day (who doesn't?). In other words, if I'm awake, I'm using Twitter. We are all hopelessly addicted to it and for a very good reason. Twitter has single-handedly become society's #1 source for news. It has made television, radio, and newspapers almost completely obsolete for getting breaking news. By following the right people, you can hear the latest breaking news hours before it gets reported on TV or radio, and 24 hours before it hits the pages of the newspapers. In a sense, active Twitter posters have become society's new news broadcasters sharing videos, pictures, and news with the world. Social Media News is destroying Old Media News.
[Warning]***
This post divulges into wild-eyed speculation beyond this point.
[/Warning]***
Furthermore, it is even possible that in the future either Twitter or Weibo is going to acquire its rival, or they are going to merge. Weibo is exactly like Twitter, 140 characters and all, the only difference is that Sina is headquartered in China and is made for the Chinese speaker. From a business standpoint it would make sense as it would create a massive social media audience to whom you could advertise to. However, pause for a moment and just think of all the implications such a merger would have. A large portion of Chinese citizens already know how to speak English. This platform would allow, for the first time ever, Chinese citizens to talk directly with random or specific US citizens, at virtually no cost, and would allow for finding and meeting new people (networking). Imagine half of your followers being from China. If such a union ever took place, it would not be that hard to see out 75 years into the future a World in which the dominant global language is some mixture of English and Chinese as a direct result of Tweibo.
Disclosure: I currently do not own SINA but I will soon.
You can follow me on Twitter at @elwalvador
Sunday, March 27, 2011
Medical Marijuana another reason to be bullish on NetFlix
I was watching the History Channel last night and I found yet another reason to be bullish on NetFlix. The show was on the Booming medical marijuana industry in California. To make a long story short, marijuana is now on par with alcohol in the West Coast. All you need is a doctor's recommendation that you need cannabis to treat a medical condition and just like that you can now buy weed in clean, brightly lit, safe, slick, modern stores. Stores whose appearance rivals the aesthetic designs of Lululemon or Apple.
You can also get it delivered to your house if it's too embarrassing to be seen at such a place. While watching the show my brain was churning trying to figure out: how could I directly play this ragging bull market in weed in the West Coast? And a few ideas came up: Invest in who ever owns the Munchies brand? Maybe.
Or perhaps invest in whoever sells Visine? Yes, but what else?
But then it hit me. What do people do most often when they get stoned? They sit on the couch and watch movies! Duh! Naturally, NetFlix came to mind. NetFlix is a pure play on the growing cannabis market.
Disclosure: I currently do not own any NFLX but I may in the near future.
Follow me on Twitter at @elwalvador
You can also get it delivered to your house if it's too embarrassing to be seen at such a place. While watching the show my brain was churning trying to figure out: how could I directly play this ragging bull market in weed in the West Coast? And a few ideas came up: Invest in who ever owns the Munchies brand? Maybe.
Or perhaps invest in whoever sells Visine? Yes, but what else?
But then it hit me. What do people do most often when they get stoned? They sit on the couch and watch movies! Duh! Naturally, NetFlix came to mind. NetFlix is a pure play on the growing cannabis market.
Disclosure: I currently do not own any NFLX but I may in the near future.
Follow me on Twitter at @elwalvador
Friday, March 25, 2011
Long, impressive sounding names: Lululemon Starbucks.
When you order a Mocha Latte Double Frappuccino Espresso at StarBucks, what the hell does that even mean? It doesn't matter. It is sooo much fun ordering a simple cup of coffee using a complicated mess of words, one of which makes you sound Italian, that it hardly even matters what the coffee tastes like. You could almost make the case that SBUX is charging you for the right to use the words Venti and Frappuccino inside their stores. Additionally, a long, magnificent name like that does more than just make you feel good about being able to remember the whole thing, let alone say it. It literally imbues the coffee with magical god like powers. Because suddenly, you are not just buying "an ordinary" cup of coffee, no, no, no! You are buying a Venti Mocha Latté Double Frappuccino Espresso and you know that the coffee has to be made out of the finest ingredients on earth because you just spent enough money on it to send 10 African Children to school for 5 years.
And this is the very same demand creation strategy that is being employed by the lovely ladies over at Lululemon. As any Lulu “educator” will tell you, you are not just buying ordinary yoga pants, far from it. You are buying Anti-Camel Toe, Tata-Taming, Wunder Under Crops made out of Luon, with the Multi-color Unicorn Tears print on it, embedded with SilverScent anti-stink technology! The name makes it very, very, crystal clear: These are the most amazing, extraordinary, spectacular yoga pants that woman has ever created. In fact, these are the best damn freaking yoga pants in the entire Universe! And obviously they are made out of the highest-tech, most cutting edge fabrics, as evidenced by the equally magnificent price tag.
I think the success of Starbucks is largely, if not entirely, attributable to its ability to make their customers believe that they are buying so much more than just coffee. And I also believe that Lululemon is doing the exact same thing and will have the same level of success that Starbucks had (has). In fact, I know they are doing the same thing. Lululemon's CEO, Christine Day, was an executive at Starbucks for 20 years before coming to Lululemon. This among other things is why I believe so strongly in owning Lulu.
Disclosure: I am massively, ragingly, long Lululemon stock.
And this is the very same demand creation strategy that is being employed by the lovely ladies over at Lululemon. As any Lulu “educator” will tell you, you are not just buying ordinary yoga pants, far from it. You are buying Anti-Camel Toe, Tata-Taming, Wunder Under Crops made out of Luon, with the Multi-color Unicorn Tears print on it, embedded with SilverScent anti-stink technology! The name makes it very, very, crystal clear: These are the most amazing, extraordinary, spectacular yoga pants that woman has ever created. In fact, these are the best damn freaking yoga pants in the entire Universe! And obviously they are made out of the highest-tech, most cutting edge fabrics, as evidenced by the equally magnificent price tag.
I think the success of Starbucks is largely, if not entirely, attributable to its ability to make their customers believe that they are buying so much more than just coffee. And I also believe that Lululemon is doing the exact same thing and will have the same level of success that Starbucks had (has). In fact, I know they are doing the same thing. Lululemon's CEO, Christine Day, was an executive at Starbucks for 20 years before coming to Lululemon. This among other things is why I believe so strongly in owning Lulu.
Disclosure: I am massively, ragingly, long Lululemon stock.
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