Greece bond

The market is clearly impacted by the debt problem in Greece. Why? On the surface, Greece is only 2% of European market and most people would dismiss its impact. There are several reasons why it should not be ignored. First, Greece is not alone. Spain, Italy, Portugal and Ireland have similar problems. Second, the increase in the bond yield will depress the balance sheet of Greek banks (just as increase bond yield in U.S. will depress balance sheet in U.S. banks). It will cause downgrade in these banks and its impact will spread to other European banks and globally. Third, it is a challenge for Euro. This is probably the first serious problem for Euro since its inception.

GDP, Microsoft and Amazon

GDP number is higher than expected and it probably will be revised down. The market will have a relief rally today. I still expect the market will be range bound this year.

MSFT had a good quarter and I expect it will have a good year for MSFT because of Window 7 (Ironically, the high demand for window 7 is due to the poor performance of Vista). MSFT will trade between 28 to 33.

AMZN also had a good quarter but the valuation is too high. The fair value is $75 which is 25 times 2010 earning.

Ipad from Apple is going to do ok but I doubt it will become blockburst like ipod or iphone due to crowded market. And for most people, if you can buy a good note book around $400 then why spend $599 for a Ipad.

Potash

As I expected, Potash is having a difficult time to sell fertilizer. The grain prices are not high enough for high demand fertilizer usage. Over long term, however, I am bullish on POT. I will be interested if POT is traded around 90 U$ or 95 C$.

Banks will rebound a bit more because Obama toned down a bit yesterday on bank bashing. Will sell MS around 30.

Summary Jan 27, 2010

The market rallied a bit at the closing. I did not get filled with my INTC order. Obama is going to give a state of union speech tonight and I think it will give some positive spin to the market tomorrow. Gold is getting interesting again. I will be interested in GLD if it drops below 1050 per ounce.

Closing Value
Portfolio 1 (U$): 111577
Portfolio 2 (C$): 80262

sold BRK.B

Sold BRK.B @ 73.25. I will put in an order for 200 INTC @ 19.80. The dividend yield is voer 3% for INTC. My target is 22.

Fed meeting

The fed probably will not change its tone today. It is slightly positive for the market. Apple is going to announce its new product today. Lots of hype but I have some doubts about it. I will write another blog tomorrow about Apple.

I will sell 200 BRK.B at the opening, around 73-74 dollar.

Summary Jan 26, 2010

The market trade a bit lower today. My order I put in last Friday for BRK.B @68 was filled. It was going to be added to S&P 500. I expect BRK.B to increase to 74 tomorrow and I will sell it.

The market is oversold and I expect at least a relief rally soon. But still be careful of the valuation.

Closing value
Portfolio 1 (U$): 110551 (Cash, 400 INTC, 200 BRK.B 200 MS, 200 BAC, 1000 C, 200 BRCD and 200 CYB)
Portfolio 2 (C$):80302 (Cash, 200 HSE, 100 TD and 200 IMG)

correction continues

China is trying to deflate the real estate bubble. The probability of a successful soft landing is no more than 50%. Obama is trying to rein the spending on one hand and to stimulate the economy on the other hand. But his hand is tied because it is a election year. The market is going to range-bound this year as I suggested before, so does commodity. I believe crude oil is going to trade between 65-85 this year. When it trades around 70, I will start to buy some oil producers.

GDP and stock market

There is a long-held false assumption: over long term, stock market will go up as long as GDP goes up. However, it is not proven by the facts. Between 1989 to 2008, Japan grew 30% in GDP while Japanese market was down 78%. I believe GDP has an asymmetric relationship with stock market. Negative GDP will bring down the stock market but positive GDP may or may not prop up the stock market. The other factors are very important are: valuations, leverage level, inflation and interest rate, new technology.

The market will have a pop at the open today but I am not sure if it can last.

Summary Jan 22, 2010

Bought 200 MS @ 28. The market was reacting to the possibility that Bernanke may not be confirmed. I thought it is overblown. He will be confirmed, although I do not agree with him all the bailout policies. The market is oversold and a rebound is likely. But I do not believe it is undervalued. If there is a quick rebound, I will sell MS around 30. Intel is under 20 again and it becomes interesting. I may buy 200 shares if it drops below 19.50.

Closing Value: Portfolio 1 (U$): 110496
Portfolio 2 (C$): 80422

financials

The correction in financials continues. I think Goldman probably will go private if it falls too low or it can split it up. I will put order in for GS @151 for 100 share and MS @28 for 200 shares. I am still interested in BRK.B but at a lower price. I will put order in for 200 @68.

Summary Jan 21, 2010

The market is down over 200 points. The psychology of the market changed considerably. My guess it will be in a trading range between 1050 to 1150 for S & P 500 and 10500 to 11800 for TSX. Wealth effect is usually being under-estimated. The correction can take on life by itself.

My objective is to have a portfolio that has much less volatility than the market. The market is down over 2% today but my portfolio are down less than 0.4%

Closing value
Portfolio 1(U$): 111073
Portfolio 2 (C$): 80547

valuation and uncertainty

The uncertainty surround the financials created both risk and reward. The risks include the change of business models, lower leverage and lower profits. The rewards are less earning volatility, which should lead to a higher P/E, less risk of default and potential spinoff businesses. (sum of Parts is usually bigger than the whole). Goldman may take itself out of public market and go private.

correction

As I expected, the election result made Obama determined to fight big banks. The separate of trading and commercial banking is good for the economy in long term but bad for the market right now.The market is sinking. I will take some opportunity to buy a few companies

Bought 200 IMG (C$) @15.4. Keep an eye on financials. I will be interested to buy Morgan Stanly (MS) @28.

correction in the market

The market is down over 100 points and probably will continue for a while. There will be some opportunities coming up. Recently, I sold CHL, IMG and GS. They are all trading below my selling prices. I may consider to buy them back when the prices are right. I am still watching POT and will be interested if it trades below 100 U$. I tried to buy some shares of BRK.B @3340 but did not get filled. Warren Buffette is going to split the share 50:1 tomorrow.

election, China and earnings

The election of a republican to U.S Senator is an indication about the anger and frustration in America. People felt they were being treated unfairly. Some examples: 1. Bailout for the irresponsible parties, whether they are big banks or irresponsible homeowners. 2. Low interest rate punish savers and seniors while favour spenders. 3. Inside and closed door dealing of legislation which smell corruptions. My concern is Obama will have a more populist agenda by tax more on banks.

China is tightening bank lending. I do doubt on soft landing.

Earning in IBM and most banks are good or fair.

citi group, election and Kraft

Citi's earning is as expected. It may trade a bit lower today. Election results may boost the market in a day or two. Kraft's deal is positive long term for the company. One piece of news this morning is Europe may follow U.S. to impose a fee on banks. I think it is likely and it will be negative for big banks.

Summary Jan 18, 2010

It seems that republican may win tomorrow's senator election in Mass. The market may rally on that news because it will stall health care and financial industry reforms. However, it may also indicates that the second stimulus is dead. Since the market is so obsessed with government stimulus, it may not be a good news in short term. Personally, I am indifferent. one way or the other, the health care costs are going through the roof.

Closing value
Portfolio 1 (U$): 111237
Portfolio 2: (C$): 80901

MLK holiday

U.S market is closed for MLK holiday. The European market is up a bit. Canadian market is very quite today. The election tomorrow in U.S. may have an impact on the market. The election of a republican senator will derail president Obama's agenda

commodity

It is easier to group all commodities together. But in reality, you should distinguish them. As I wrote in my 2010 prediction, I think Crude oil will be stable between 65-85. Metals on the other hand, will probably go down. The construction in China will cool down. I am bearish on steel, nickle and aluminum, flat on copper and slight bullish on precious metals. Agriculture products really depends on the weather.

earnings

Earnings in Intel and JPM are good. But the market is fully priced in good earnings. The market opened a bit weak today. I will keep Intel right now. I think it probably goes to 22.50 in 2-3 months.

The market is probably going to have a correction soon.

Summary Jan 14, 2010

The market is very quite today. I did not get the chance to sell INTC. The earning report from INTC is pretty good. I will probably sell it tomorrow around 22.20.

Closing value
Portfolio 1(U$): 111747
Portfolio 2 (C$): 80905

bank bonus

The public outrage of bank bonuses may have a positive for banks. For the industry as a whole the compensation as a percentage of revenue has come down and probably will continue to go down. It is good for the shareholders.

Intel is going to report earning today. The street expectation is high. Given the high shipments of PC in the fourth quarter last year, it is likely Intel will do well. I, however, will take some profits if it reaches 21.80 today. I will sell 200 shares of INTC @ 21.80

Summary Jan 13, 2010

The financials turned around and the market closed higher.

Closing Value
Portfolio one (U$): 111471
Portfolio 2 (C$): 81017

Public hearing on financial crisis

U.S. is doing a public hearing on the financial crisis. It will create a public relationship problem for large banks. Given it is an election year in U.S., I will not be surprised a levy will be put on large financial institutions. U.K.'s labour party's poll number has risen since it impose a 50% tax on bank bonus.

Google is going to exit from China. I think it is a bad strategy move for google. Google should sell 50% Google China to a partner in China. So it still has a foot in China while avoid all the nuances.

China is trying to cool down the real estate market and commodity market. Soft landing is not an easy job.

The market is weak and be cautious.

Summary Jan 12, 2010

The market held up relatively well. I still think the market has more downside risk than upside potential. There will be lots of rotations going on. My call to take profit on Gold last Friday seems to be right. the gold is down over 20 dollars today. I will be interested in Gold when it trades around 1050.

Fertilizers had a big down day today. The fundamentals in short term is terrible. The long term I am bullish on potash. However, I would not touch POT until it drops below 100 U$.

Sold CHL at 49 today.
Closing Value
Portfolio 1 (U$): 111300
Portfolio 2 (C$): 80940

China raised reserve requirement

Central bank of China raised reserve requirement to cool down the overheating economy and inflation. It would put a damp on commodities.

Obama is considering put a new fee on financial institutions which could amount to 120 billion. If it is temporary, the impact will be small. However I always doubt any government levy will be temporary.

I will take profit on my CHL (China telecom). It increased 9% in 3 weeks.

summary Jan. 11, 2010

The Alcoa's earning result missed the expectation. The major reason is the input cost (mainly energy cost has doubled from a year ago). I will pay close attention to PPI.

Closing Value
Portfolio 1 (U$): 111663
Portfolio 2 (C$): 80949

Labour shortage in China

The numbers came out of China (import and export numbers) were surprised on the up side. The markets in Asia and Europe were being pushed up on this news. My contacts in China told me that over 60% Chinese factories have difficulty to find labours. The implication is inflation, first in China, then export to U.S.

The crude price is approaching to 85 which will slow down the recovery. I am cautious on the market.

take profit on gold

I sold 200 IMG @17.3. Gold is going to range trade. Also bought 100 TD @63.6. I wrote the reason to buy it yesterday.

Electric car

This is the third time I wrote about Electric Car (EV). EV is probably the most important product over next 20 years. If it is successful, both the shortage of crude oil and the CO2 issue will disappear. However, there are many challenges in EV
1. The cost. The cost of the battary will be 15k to 20k higher than the gasilin tank. It will need subsidies from government. Given the deficit situation around world, how long the subsidies can go is a question mark.
2. The range. The most advanced EV has a range of 100 mile without recharge, which is good for daily commute but not for vacation or long distance travel. It will limit its market share to 20% at most. Of cause, technology can improve.
3. Crude oil price. The irony is if EV is successful, then, crude oil will go down. But you really need high gasoline price to motivate people to buy EV. The solution is to apply some taxes on gasoline to keep the price high regardless of the crude price. It certainly is not a winning political argument.
4. Weather challenge. Cold weather is always a problem for battery. It may not be feasible for EV to operate in cold area, like Canada, Russia and north east U.S.
Who are the players:
1. Nissan. Nissan has invested most the money and has the product (Leaf) ready in the fall of 2010.
2. GM. GM's Volt will be ready next year. But its range is much smaller than Nissan.
3. BYD, a Chines company Warren Buffet invested in. The battery is advanced but the car quality need improvement. By the way, BYD is working on how to store solar power which is big. currently, solar power is not reliable because no way you can store the power to use it when there is no sunshine.

employment and deficit

Both U.S and Canada continue to lose jobs and the economy is not as strong as the stock market suggest. The Fed will continue its QE and low interest rate policy. U.S. government will probably start another stimulus program which will add deficit. Long term rate will go up because of the deficit. I am puzzled by the argument that short term deficit does not matter, only the structure deficit matters in long run. If you run a 1 trillion dollar deficit stimulus program, the interest alone will be 40-50 billion dollar a year, that becomes long term problem.

Summary Jan 7, 2010

The financial has been strong since I bought Bank of America a week ago. BAC is up 15% in a week. My target is $18. Probably will sell it tomorrow.

Closing Value
Portfolio 1 (U$): 111383
Portfolio 2 (C$):80846

China raised rates

China is surprising the market to raise short term rates. It is a long term positive but short term pain. The commodity should trade down.

U.S. retail number overall is fine. But don't read too much about it. The cold weather probably play a part.

The market will go down today. I will put a buy order for 100 TD bank @63.3 in C$ portfolio. Rational:
1. The dividend yield is around 4%. 2. The yield curve spread is wide. 3. TD waterhouse is doing very well. 4. It is taking advantage to build s strong retail presence in Northeast U.S.

summary Jan. 6, 2010

The market is losing momentum and I expect it to go lower for the next few days.

Closing value
Portfolio 1 (U$): 111307
Portfolio 2 (C$): 80920

why keep interest low over long term is bad policy

Fed is trying to keep interest rate at zero for long term. The question is not how low the rate, it is the duration. If interest rate is kept low for extended time, people's behaviour change. The long term consequences are
1. encouraging consumption and discouraging saving.
2. encouraging borrowing, especially government borrowing which will be addictive
3. encouraging riskier investment which will producing bubble after bubble.

All these will make people feel good in short term but damaging in long term.

Bickering in Europe

There are news coming out from Europe which are not helpful. EU officials insist that they will not bail out Greece. Iceland's president veto the bill to repay UK and Dutch's guarantee for Iceland's bank deposits. It angers U.K. I can see all these tensions building up. It may help U.S dollar a bit in short turn.

summary Jan. 5, 2010

The financial showed some strength. Banks of America is up 3%. Since I bought it last week, it already went up 7%. My target for Bank of America is $18.

HSE did not reach 31.

Closing Value
Portfolio 1 (U$): 111190
Portfolio 2 (C$): 80860

weather related

The weather is colder than normal and there are lots of snow storms in Asia, Europe and North America. The weather will increase food prices which will put pressure on inflation, especially in India and China.

There are some inflow of money from retail investors into equity funds. It always happens in new year. I will take some profit. I will sell HSE at 31 for a total 12% return in 2 months

summary Jan. 4, 2010

The market was up today. If we can ignore the macro picture, the valuation is fair. However, considering higher oil price, higher bond yield and higher deficit (higher taxes in 2011), the market is in stretch. There will be opportunities here and there but you have to be nimble.

Closing value
Portfolio 1 (U$): 110972
Portfolio 2 (C$): 80980

first trading day in 2010

The market usually goes up on the first day. People want to be optimistic about new year. Oil is up, gold is up and bond yield is up as well. All these will keep the stock market in check.

My current portfolio
Portfolio 1 (U$): cash, 400 INTC, 200 CYB, 1000 C, 200 BAC, 100 CHL and 200 BRCD
Portfolio 2 (C$): Cash, 200 HSE and 200 IMG