Intel

Intel reported very strong earnings. Both revenue and profit exceeded expectations. The profit margin was very impressive. I like Intel the most among large high tech companies for the following reasons:
1. It is the strongest in the industry and its competitors are weak. Intel has over 80% market share and AMD has 15%. I do not see new companies get into this space. So Intel is likely to keep its profit margin.
2. The demand is strong. Netbooks and laptops are becoming essential for most people. Developing countries' demand are very strong as well. Corporations are upgrade their computers right now because of window 7.
3. The life span of a laptop/netbook is shorter than desktop.
4. Apple's mac is using Intel chips as well.
5. The company has very strong balance sheet.
6. Intel pays a 3% dividend
7. The valuation is very reasonable.

My target price for INTC is $28, which implies a 14X p/e

China observation 4-auto industry

The auto demand is very strong and there is a waiting list for some imported cars. The gas price is as high as those in U.S. There is not much financing going on for auto purchasing and most people pay cash for their cars. The strong demand in auto, real estate and high speed train has pushed up steel demand and the iron ore price will sure ignite inflation.

The tightening in China will have a profound impact on global economy, probably more so than the Fed.

summary for April 9, 2010

Dow is at 11,000 and it is higher than I expected. The major reason is the liquidity created by the FED. The valuation is not cheap but Fed and central banks all around world are creating money rapidly. The Fed increased its balance sheet by 2 Trillion dollar. Money supply increased over 40% in China last year. All these money are finding their ways to risky assets. It is real estate in China and stocks and junk bonds in U.S and other market.

Closing Value
Portfolio 1 (Cash, 200 intc, 1000 c, 200cyb, 200 brcd and 200 ms): 113942
Portfolio 2 (Cash, 100 TD, 200 HSE and 300 HXD): 82517

Greece situation

Greece situation is becoming worse everyday and it had impact on European banks and Euro itself. Eventually the problem will be solved. The question is at what cost. Germany is not going to throw in a lifeline easily and it will impose tough conditions. The long term problem is the social unrest in Greece. I do not see it has a major impact on U.S. market.

negative impact of low interest rate

The ultra low interest rate has discouraged savings and encouraged consumptions which is a short term boost for GDP but problematic over long run. There is another negative impact of low interest rate which is not discussed in the market: it increases pension liability. Pension liabilities are discount back to present value by long term interest rate. The lower the rate, the higher PV of liability and a bigger shortfall of pensions. More companies (defined contribution) will have to put more money into their pension because of the low rates.

China observation 3-consumer spending

Chinese consumers are overall optimistic. Most restaurant are full and car sales are up 30-40% annually. However, the sky-high housing price is going to put a damp eventually on consumer spending.

Salary is rising fast among skilled labour in China and the potential of RMB appreciation will export Chinese inflation to U.S.

Luxury goods and electronics (computers, flat screen TV and etc.) are seeing huge demand and probably bodes well for high tech companies such as Intel, CISCO and Microsoft.

oil price and job number

Oil is hovering around 86 dollar and 10 year bond yields over 4%. I do not believe U.S. economy can stand these pressure. I sold 200 HSE today @30.6.

Employment data was good on Friday and will continue its upward trend for a while but the market is way ahead of itself.