Girl: I had a wonderful childhood. (looks at photos of a child) Boy: Yeah? I fuckin' had to listen to Tim Curry narrating nursery rhymes... That's terrifying.
Hobo: Hey! Is that a cell phone? Lady with thick NY accent: Yes, it is, sir. Hobo: We're going to be eating them next week. Lady, without missing a beat: Yeah, they taste great with butter.
Girl #1: Yeah, her mom looks weird. Girl #2: Yeah, she looks like a troll driving. Girl #1: Well, she looks like a troll all the time. Girl #2: Sure, but what's more awkward...a troll or a troll driving?
Hobo to bunch of hipster teenagers in line for a show: Is this the line for a shelter? Teenagers: No. Mini hipster girl, after he goes away: Oh, hell no. Did he just think I was homeless? I'm wearing fucking American Apparel.
Hispanic guy, noting hot chick passerby: Hey, baby. Hot chick: (rolls eyes) Hispanic guy: (takes off shirt and puts it on the ground for her to walk over) Hot chick, stopping: I'll give you some credit for that one...but fuck off. (continues walking)
--50th & 9th
Overheard by: passerby
Headline by: ddv
Runners-Up: · "A Dramatization Of Citibank's Credit Protocol" - NoCredit · "But...I Would Have Taken You to 4th Meal!" - Maddy · "How Many Credits Do I Need to Save Up For a Blowjob?" - mark · "It Was a Bad Day To Forget That He Was Wearing a Sports Bra" - Nick Pollotta · "Matthew McConaughey Finally Gets Some Cred...." - RaindanceRichard · "Next Time He Won't Give a Shirt" - Sim Etrias · "Raleigh Gets the Old "Fuck Ye" From Elizabeth Yet Again" - Laureen
Mom: First it will be spring, then summer, then time for you to go to kindergarten. Four-year-old boy: Will there be nice kids there? Mom: Are there nice kids at your day care now? Four-year-old boy: Yeees... Mom: You're the only bad kid at day care. Four-year-old boy: I knooow!
Suit #1: So I said to them "happy anniversary, here's your cemetery plot." Suit #2 (astonished): What? You really bought them cemetery plots for their anniversary? Suit #1: Yeah. I knew he was gonna drop soon, so I bought them. Suit #2: Well, I guess it's the gift that keeps on giving.
Guy to girl sipping drink: Can I try some? (takes a sip) That tastes like the stuff I used to get lice out of my hair! Girl, taking another sip: Yeah, it totally does! Another girl at table: Gimme some!
Ya sabíamos que Microsoft andaba preparando una aplicación de Facebook para Windows Mobile, que finalmente ha desvelado hoy y que ya se puede descargar y probar en los móviles equipados con este sistema operativo.
Esta aplicación es, de momento, la única que permita la subida de vídeos a Facebook desde el propio móvil, aunque no es la única funcionalidad que incluye. Los usuarios podrán ver las actualizaciones de estado de los contactos, ver y escribir mensajes en el muro, compartir fotos, enviar mensajes, cambiar la imagen del perfil,...
Además, muchas de las actividades que realicemos en Facebook se podrán compartir en diferentes servicios de Windows Live, como por ejemplo las fotos o las actualizaciones de estado.
De momento la aplicación puede descargarse gratuitamente, pero para próximas versiones del sistema operativo, como en Windows Mobile 6.5, facebook para Windows Mobile vendrá preinstalada, por lo que no será necesaria su descarga.
Aunque su aspecto externo haya variado ligeramente desde que lo vimos por primera vez, el Novatel MiFi sigue manteniendo las características que lo hacían destacable, especialmente su tamaño compacto.
Este router 3G, que empieza a distribuir Movistar, nos permite conectarnos a la red sin cables de ningún tipo, ya que la conexión se realiza a través de Wi-Fi. De este modo, podemos acceder con diversos dispositivos al mismo tiempo siempre que tengamos cobertura móvil.
El Novatel MiFi ofrece velocidades de descarga de hasta 7.2 megabits por segundo y de hasta 5.7 megabits por segundo de subida, además de permitir almacenar ficheros gracias a su ranura MicroSD. La batería interna permite utilizarlo hasta cuatro horas sin necesidad de recargar.
El precio variará dependiendo de la tarifa de datos con la que lo adquiramos:
Con la Tarifa Plana de Internet, con 1 GB de datos y un coste de 30 euros mensuales, el precio será de 59 euros.
Con la Tarifa Plana de Internet Plus, con 1 GB de datos pero mayor velocidad de bajada y un coste de 39 euros mensuales, el precio será de 49 euros.
Con la Tarifa Plana de Internet Premium, con un coste de 59 euros mensuales, el precio será de 29 euros.
Vlingo es una utilidad que nos permite realizar controlar diversas acciones del teléfono mediante la voz. Sólo hay que pulsar una tecla y decir al teléfono lo que queremos hacer.
Las acciones disponibles son variadas y bastante útiles, las más usadas frecuentemente. Podemos hacer búsquedas en Internet, dictar mensajes SMS o correo electrónico, llamar a nuestros contactos o a un número concreto, crear notas y tareas, o lanzar aplicaciones. Vlingo utiliza un reconocimiento de voz inteligente que aprende con el tiempo, por lo que no es necesario un entrenamiento previo para comenzar a utilizar el programa.
La semana pasada pude hablar con uno de sus creadores. Me contó que el motor de Vlingo también mejora cuantos más usuarios lo utilizan. Ahora mismo disponen de unos mil usuarios utilizando la versión en castellano y acaban de publicar nueva versión beta para Symbian en fase pública. Vlingo necesita de conexión a Internet para funcionar y también esta disponible de forma gratuita para iPhone y BlackBerry.
John Reese is one of the best marketers of our time. His accomplishments are legendary in this industry. I originally met John because one of the other admins at the Digital Point forums was talking about this guy who promoted his software product and he did hundreds of thousands of dollars in sales in 24 hours. He said the guy just sent out a email recommending his product. I was like WTF I gotta meet this guy. I shot him a email and he asked if I was going to AdTech. I was and we agreed to meet up.
I originally met John at AdTech San Francisco in 2007. I was telling him about this advertising network I was doing called AuctionAds. He listened to me give my pitch then proceeded to gave me about 2 notebooks full of tips on how to market it. It was a HUGE tipping point for AuctionAds. I followed John’s advice and it made a dramatic impact right away.
In the years since I have learned from John more with what he does then directly interacting with him. From his monstrously successful Traffic Secrets programs to some that did not go so hot like Blog Rush.
John shares an enormous amount of knowledge through his successes and failures.
Today John launched opportunity.com . A training program to teach people affiliate marketing. Its free to sign up and get a peek what he is up to. I highly recommend it.
Watching John work might inspire you in coming up with your next big thing.
I'm used to explosive gains in the biotech world, but I've never seen a moonshot quite like this… As I write (TIME), shares of Vanda Pharmaceuticals (Nasdaq: VNDA) are up 712% today.
After closing at $1.08 per share last night, the stock opened at $9.99 this morning on news that the company's schizophrenia drug, Fanapt, was FDA-approved.
Even for a biotech veteran like me, a one-day percentage move like this is unprecedented.
But that's the thing about FDA approvals for small-cap biotech companies. They're huge catalysts for the stock in question. Unfortunately, separating the contenders from the pretenders is a tricky job. And even when you reel in a big winner, you need to know when to dash off with the money. Here are some tips…
Popping the Champagne on Small-Cap Biotechs
No doubt some VNDA investors are popping champagne corks today, following the small-cap biotech's liftoff. It's probably made their year.
Others, however, are still trying to recoup their losses from the stock - even after today's monumental surge. That's because two years ago, VNDA was trading around $25.
As the resident biotech expert here, I wouldn't be surprised to receive e-mails asking why I didn't recommend VNDA.
When I first looked at the company three years ago, I thought the story was interesting. But the risk was just too high.
My pessimism was right, as shares plummeted.
And despite today's news, it was only last summer that the FDA rejected Fanapt, saying that it was too similar to other drugs on the market. The stock dropped below $1.
Things got so bad that the stock was trading below its cash value and activists were demanding that the company be liquidated and cash returned to shareholders.
The bottom line is this…
Small-Cap Biotech Investing - The Risk-Reward Ratio Is Critical
Small-cap biotech investing is risky. I want to lower that risk whenever possible. That doesn't mean I'll avoid risk all together - on the contrary.
But what it does mean is that any position that I enter will have significant upside potential to offset that risk. The more risk… the more profit potential I need to recommend the stock.
As I mentioned, FDA approvals are obviously major catalysts for small biotech companies. Sometimes, good news is already priced into a stock. In this case, it clearly wasn't. The reason why VNDA shares were so explosive today is because virtually no one expected Fanapt to get the green light.
There's another big reason for paying more attention to the risk-reward ratio with biotech. And a profitable one, too…
Small-Cap Biotechs: 3 Benefits of Locking In Profits
I'm a big proponent of taking partial profits on a winning position when appropriate. If a small-cap biotech stock is up significantly, locking in some gains serves three purposes:
Returns Investment Capital: While remaining in the position, I now have capital to put into other opportunities.
Helps Weather The Downside: If I still believe in the company and the investment, taking partial profits allows me to give the stock more room to fluctuate, as I'm no longer concerned with losing my original investment.
Participate In Upside: Having secured my original investment, I can now allow my winners to run. That's where truly large gains happen.
Recently, when I recommended that subscribers take partial profits in a top-performing stock, I received a ton of email asking why… particularly when I expect the stock to go significantly higher.
I emphasized the reasons above - that taking some profits lowers our level of risk, while still allowing us to go for the home run.
I'll give you another specific example…
In my small-cap healthcare service, Access, we took 65% gains in half our position in SIGA Technologies (Nasdaq: SIGA). That's allowed us to let the stock run to current levels, which are now 158% above our entry price.
So while VNDA blasted its way higher today, remember that it's a perfect example of how volatile the market can be - and how things don't always happen the way you expect.
One of the best ways to make sure that volatility doesn't negatively impact your portfolio is to play with the house's money whenever possible.
President Barack Obama sent lawmakers a budget package today (Thursday) that proposes to shrink or eliminate 121 federal programs and save almost $17 billion in the fiscal year that begins Oct. 1. But the budget plan contains cuts that will face vigorous opposition in Congress and fierce resistance from special interest groups.
The package of proposed reductions fills in the fine print of a $3.55 trillion budget outline approved by lawmakers in April that contains Obama's top agenda items, including a healthcare overhaul, a push for renewable, clean-energy sources and changes in education funding.
The President wants to cut or end a number of programs that he feels are wasteful or ineffective to take the first toward getting spending under control. But the administration's attempt at bringing fiscal discipline to Washington has already been met with skepticism by analysts.
The cuts are miniscule compared to the overall budget package and deficits that will be ushered in the next few years. The $787 billion stimulus package Obama pushed through Congress combined with the $700 billion Troubled Asset Relief Program (TARP) bank bailout will come on top of the $1 trillion deficit the administration inherited when he took office in January.
Total savings from the cuts, even if they were accepted by Congress in their entirety, would represent a paltry 0.4% of the overall budget. The Congressional Budget Office projects the deficit will be $1.85 trillion this year, about four times the previous record, and $1.38 trillion in fiscal 2010.
Only about 80 of the proposed cuts are new - the others had been previously revealed. And most of the cuts will be from the "discretionary" budget, avoiding the so-called untouchable "third-rail" entitlement programs of Social Security and Medicare.
Those two programs account for more than 40% of government spending, meaning the more difficult work on deficit reductions has been left for another day. "More serious efforts at deficit reduction are going to require entitlement and tax reform - that's where most of the money is." Marc Goldwein, policy director of the bipartisan Committee for a Responsible Budget, a Washington-based research group, told Bloomberg. "To really get the deficit under control, we're going to have to start thinking bigger," he said.
But some in Congress defended the administration's approach, saying the list of program reductions is just the start of a more comprehensive effort to cut spending and pull the reins on the skyrocketing deficit.
"It depends on what it means over the scope of five and 10 years." Representative John Larson (D-Conn.) told Bloomberg. It's a "deep, cavernous hole where we have been left, we're looking a long way up but it's a steady climb" using the budget plan agreed to by Obama and Congress, he said.
Yesterday it was leaked to the press that Bank of America has to come up with another $34 billion in capital – and guess what… The markets rallied.
That means just one thing… there's a head of steam going right now, and it's something you can play for some fast gains. Fact is, you can capture the next 2% or 3% on the Dow by buying the index… Or you can use this momentum to turn $15 into $384… or even $1,500 into $34,834.
You can do it almost like clockwork – and with a higher degree of safety than buying the whole market. The next set of gains is set for May 21, 2009. Investment Director Keith Fitz-Gerald has the full story on this unique recommendation. I think you'll be amazed at how simple and easy it is to multiply this rally by 5 to 18 times in a matter of a day…
Gold isn't going to $2,000 an ounce. Before you gag on your coffee or suffer chest pains, allow me to explain.
We're about eight years into the bull market, and gold has breached the $1,000 level twice and has spent weeks trading above the old high of $850. Some observers are now saying that gold's pretty much had its day and that once the recession is over, it will retreat for good.
However, the four-digit gold price we've seen so far is with no price inflation to speak of, no effects of the atrocious increase in the money supply, and despite a rising dollar. What happens to gold when each of those pictures gets turned upside down – high inflation, excess cash jolting the economy, and a falling dollar? After all, gold's performance to date has been powered only by general anxiety, not by any visible erosion in the dollar's value.
I decided to take a fresh look at calculations that could be used to appraise gold's upside potential. No one of them, by itself, comes with compelling logic. But they all point in the same direction.
Gold's Percentage Rise in the Last Bull Market: What if gold in this bull market repeats the percentage rise in the last bull market? In the 1970s gold rose from $35 to $850, a factor of 24.28. Our low in 2001 was $255.95. Multiply that by 24.28 and you get a gold price of $6,214 per ounce.
U.S. Gold Holdings to Money Supply: The M1 money supply consists of currency and checkable deposits. The U.S. government currently holds 286.9 million ounces of gold. If the government were to make each dollar redeemable by the amount of gold it possesses, we'd arrive at the following price for gold: $1.569 trillion ÷ 286.9 million oz. = $5,468.80 per ounce
Gold/Dow Ratio: The ratio was about "1" when gold peaked in 1980, meaning the Dow and gold were the same price. To restore that relationship at today's stock prices would mean when the Dow is at 6,626, gold should be at $6,626/oz. Of course, we think it likely that the Dow will get a lot lower before gold peaks. But even if it drops all the way to 4,000, that would imply a gold price of $4,000/oz.
All the Money in the World vs. Gold Reserves: If the public eventually sees the paper game being run by the central banks for what it is, governments will be forced to back their currencies with gold (and perhaps other tangibles like silver). Assuming they had to go into the market and buy the gold needed to restore faith in their currencies, the numbers might look like this: Total central banks reserves (including gold holdings) = $4.8 trillion, divided by 929.6 million ounces total gold reserves held by all official institutions that issue currency = $5,246 gold price.
U.S. Gold Holdings to U.S. Foreign Trade Deficit: The size of a country's deficit or surplus would be of no consequence if all currencies were convertible into a fixed amount of gold. However, the dollar is increasingly considered a hot potato, and when the trade balance reverses, as it must, dollars will flow back to the U.S. and fuel domestic price inflation. Based on the cumulative trade deficit of $9.13 trillion (up from $6 trillion since June '07!) and U.S. gold holdings of 286.9 million ounces, the corresponding price of gold would be $31,822 per ounce.
U.S. Gold to U.S. Government Liabilities: Finally, the GAO (Government Accountability Office) calculates an income statement and balance sheet for the U.S. government. As you'd suspect, it is dominated by future liabilities for Medicare and Social Security. What if they had to be backed by the supply of gold? Official U.S. government liabilities now ring in at an incredible $55.2 trillion. To make good on that would require a $192,401 gold price.
No, we don't think gold will hit $192,000 or even $32,000. And there really isn't any surefire way to forecast the eventual high. But it's clear that every weathervane is pointing in the same direction. So, yes, gold isn't going to $2,000; it's going higher.
When determining how to keep your wealth safe, the state of global affairs can be a powerful reminder that gold should be part of the strategy. And today our world, essentially, is on fire.
- Eastern Europe borders on bankruptcy. Brazil's economy is falling off a cliff. Ditto Mexico.
- Protests have erupted in Latvia, Chile, Greece, Bulgaria, Iceland, Dublin, and parts of the U.S. Workers have gone on strike in Britain and France.
- In the U.S., 36 states and the District of Columbia have proposed or implemented reductions in the civil workforce. (You think customer service is poor now…)
- An astounding one in nine homes, 14 million, sits empty in the U.S. The December median price of a home sold in Detroit was $7,500. More than 8.3 million homeowners were upside down on their mortgage in the fourth quarter. Freddie Mac's new CEO resigned after six months on the job.
- Last quarter, 12 U.S. banks failed, bringing the 2008 total to 25, the highest one-year death rate since 50 failed in 1993. More foreboding, another 252 banks joined the FDIC's "problem list." So far this year, 19 banks have failed.
- The central bank of Ukraine banned the early redemption of term deposits, the most popular form of savings in the country. Bank deposits have dropped 20% since September, as bank customers dodge the risk of getting locked in.
- The projected US$1.75 trillion federal budget deficit is almost four times the nation's previous record-high budget deficit. The Times Square debt clock reads over $11 trillion. Japan's now reads $7.8 trillion.
- High unemployment has become a worldwide epidemic, with the infection spreading.
- With world economies taking it on the chin, it's little wonder that investor interest in gold as a safe haven is growing – a trend we expect to continue. And just wait until the dollar resumes its slide, the expanding money supply jolts the real economy, and inflation kicks in.
Given the ongoing turmoil and the swallowing darkness at the end of the crumbling economic tunnel, our recommended strategy here at BIG GOLD remains keeping one-third in cash, one-third in physical gold, and one-third in our selected gold stocks. New money for investment should be split among the same three categories; we just don't see any safer places to be.
As economies around the world continue to shrink and governments continue administering larger doses of the wrong medicine, we'll sit in relative comfort with our gold for protection and our stocks for profit. We expect the prices of both to rise as others join us.
The housing market is considered the antagonist to this global financial mess. But inside all the hate is a well-balanced company that has had no problem beating the market.
Here is an interesting question for you. Over the last year, the worst in post-war history for investors, what would you rather own, Toll Brothers (NYSE:TOL) or a sample of the entire market like the S&P 500?
Off the top of their heads, most investors would likely want to own the market. After all, how in the world would a homebuilder be able to "beat the market" during a horrific crash in housing prices?
Here's the surprising answer…
If you went with the S&P, you would have lost double what you would be down in Toll Brothers. Yes, the nation's most prominent homebuilder, a company that helped us get into this financial fiasco, beat the pants off the market over the last year.
Toll's shares are down 16%. The S&P is down 35%. It is even beating the index over a five-year range:
The gap between the two is only going to get bigger as the economy and the real estate sector recover. Toll's future looks significantly brighter than most publicly traded companies.
Don't hate me because I'm beautiful
One of the most interesting facets of the current economic downturn is the horrific impact it has had on the nation's builders. In this world, it is true only the strong survive. The notion is especially poignant in the housing industry.
Toll Brother's recently issued debt with a coupon rate of just 8.9%. That figure is less than many folks are paying for a used car loan and is indicative of an extremely strong balance sheet.
The company will be able to use this sort of leverage to overpower its competitors. In the high-end construction business, few builders are able to get construction loans. Even fewer can do it as cheaply as Toll.
A valuable portfolio of high-quality land assets is also not hurting the company's long-term chances. While competitors are forced to turn to the faster-moving low-end market, Toll is sitting on top-notch properties that are bound to pay off in as little as a few years.
Toll is not the kind of investment short-term speculators want to mess with. This company is a long-term winner that will become even more dominant in an industry that is slowly but surely rebuilding.
Granted, Toll will never be the fast-growth wealth generator it was just a few years ago, but that industry is gone. In its place is a more secure, dare I say more conservative, industry where fundamentals matter and a strong market stance will propel a company towards healthy long-term revenue streams.
It goes against much of what mainstream investors believe these days, but the housing market is not the death trap so many folks believe it is.
They're tearing down houses out west…as you've probably heard. It's cheaper than going through all the necessary steps to get the houses mortgaged out, so banks are just bulldozing McMansions.
And closer to home, toxic drywall has become the scourge of South Florida.
It's particularly bad in St. Lucie County. They're now saying thousands of homes could possibly be contaminated…that the nearly-toxic levels of sulfur might have seeped into the foundation, meaning the homes will need to be demolished.
And the rest of the U.S. housing market is just as shocking. The free-fall in home prices is still accelerating. 20% of American homeowners are underwater on their mortgages…some 11% (and maybe more) of all the homes in America are unoccupied and unsold…
But most Americans still don't recognize the biggest mistake they made during the boom…
And That's Confusing Real Estate Speculation With Real Estate Investment
It didn't even occur to me until just a few weeks ago.
I was watching a presentation from Frank Trotter of EverBank, and it gave me a renewed bearishness for housing. As one of America's few responsible bankers, Frank has an intimate knowledge of the U.S. housing market…and since his bank isn't holding a boatload of "toxic assets," he tells it like it is.
He insisted that houses are not investments; they're utilities. Buying a house for US$150,000 in 1975….then selling it for ~US$850,000 in 2005…sounds great, but after inflation, you only made about 1.5% a year.
That's a nice little gain, but not on an investment. The house required upkeep…the lawn had to be mowed…you can look at the 1.5% as a return on your time.
And yet, as Frank answered questions following his presentation, the audience asked questions about when…and where…they should be buying houses. "Is it a good time to buy in Austin?" they asked…
And I realized that we've all been fooled. Hoodwinked you might say.
You see, the bubble saw prices rising like a rocket ship; and anyone with a piece of the action stood to make a ton of money. Even I watched the shows on TLC – saw a few nervous, amateurish homeowners flip a house and clear US$100,000 – and I was fascinated. "If they could do it…" we all thought.
But that was during the bubble. And as prices fall across the board, so do the profits to be had from speculation. And just because houses might start to seem cheap doesn't mean the market's in for the same kind of rising prices we saw in recent years. In other words; speculation is dying a pretty quick death in U.S. housing markets.
And indeed, most bubble-based "investment" really turned out to be speculation. These deals exposed "investors" to a heap of leverage…and as the old saying goes… "Leverage makes poor men rich, and rich men poor."
But at the same time, falling prices are making true Real Estate investment more and more attractive, as houses and apartments reach crucial rent ratios and rates hit all-time lows.
So what is true Real Estate investing?
It's All About Cash Flow!
And in some ways it's easier…and far safer…than any form of Real Estate speculation.
Our Executive Editor – Justin Ford – has been investing in Real Estate for years. He's taught courses and seminars on the subject…made a bundle off of cash-flowing properties…organized deals for other investors…and he knows firsthand the profit potential of true real estate investment.
And unlike most people, Justin still sees mortgages as a great way to build your wealth with relative safety. In a recent conversation with some of the younger members of our staff, Justin laid out a scenario where Real Estate investment could make them a fortune by the time they reach their 50's…
"Go out and buy some houses selling for ultra cheap prices," Justin says. "Buy at 4 to 5 times annual rent. You’ll be able to pay management, all expenses and debt service, allow for 10% vacancy and put a few dollars in your pocket every month. But make sure you get a fixed rate. Because the mortgage will then “kill off” the balance through amortization."
"So buy a house today for $50k that was worth $125k at the peak"
"Have it professionally managed. 30 years from now, the mortgage will be zero. If you throw the extra cash flow at the principal, you’ll probably pay it off in 20 years or a little less. You’ll own the $50k house, free and clear."
"And if it goes up just 1% or 2% a year on average (and it could go up a LOT more than that thanks to inflation) your $80k or $100k is yours free and clear. And you put in just $15k to buy it. (That’s $10k down payment and $5k closing costs and reserves.)"
"So you turn $15k into $50k, plus get net income in a scenario where there is ZERO appreciation for decades. Highly unlikely…given the major correction is probably more than halfway over (some homes, after all are selling for less than replacement cost, even if you got the land for Free!)"
"Add to that all the money pumping out of DC," Justin concludes, "…and the prospect for inflation, including housing inflation, in the next five years or sooner is strong."
We'll be going into more detail on Real Estate investing in future A-Letters. But one thing is certainly clear; with the stock market still up for grabs and many other investments still suffering, true Real Estate investment could be one of the best profit opportunities at these levels…one that pays a steady cash-flow and gives you a real, tangible investment for your money. It's at least worth considering.
Casino stocks have been more than down on their luck lately. In fact, they've been on the ropes more than one of their prizefighting boxers. And it's no wonder.
The recession has hit consumers hard. And many have cut their spending, doling out their dollars for the necessities: food, shelter, clothing and gasoline - but little else.
To say business has been bad doesn't really capture the scope of the damage.
It's easy to see the effects on casinos - the top dogs in most markets - and we don't always notice the impact to the rest of the food chain.
Restaurants have plenty of empty tables these days. Those little beepers you get while waiting in line are just sitting around collecting dust.
Malls resemble ghost towns; most of the visitors are store employees themselves. Many of the weekend customers are teenagers, with little more to spend than time.
That's why it's so surprising to find a company that's doing well, much less a casino.
Amidst all of this economic devastation there are companies who have been holding their own and putting up impressive earnings figures. We've found one casino stock in particular that has a unique business model of drive-to locations that's been succeeding where Vegas hasn't.
Casino Stocks Drop As The Travel Industry Suffers
The travel industry is suffering right now. And while it's put a bite on tourism, it's hurt most casinos much worse.
And no place got hit harder than Las Vegas. "Sin city" experienced a 10% drop in visitors in January and February. Unfortunately, that's the good news. Gaming revenues were a paltry $937 million, down almost 20%.
More visitors equal more spending in the gambling capital of the world.
And when you consider that over 37 million visitors go to Vegas every year, a 10% drop equates to 3.7 million people not adding tens of millions to the economy - or a casino's bottom line.
As the infamous strip has grown, mega-casinos have popped up as well with each casino supporting thousands of workers and capable of adding billions to their parent company's bottom line. A 20% drop in revenue for many casinos means that they aren't able to pay their fixed expenses.
That sobering statistic has translated into a huge problem for many of the gaming companies, who now find themselves scrambling to stay solvent. They've laid off thousands of employees and slashed expenses in an effort to stem the red ink.
But it hasn't been enough: Las Vegas-based MGM Mirage (NYSE:MGM), Riviera Holdings (AMEX:RIV) and Station Casinos are all in discussions with their lenders and bondholders. The topic? Missed debt payments.
Station Casinos missed a payment last week, and Riviera missed a $4 million interest payment on its $25 million line of credit on March 30.
Casino Stocks - It's All About Location, Location, Location…
At first glance, you might think all gaming companies and casino stocks are in similar straits. But they're not. An important difference sets at least one of them apart: casino location.
Not too surprisingly, with fewer people willing to shell out money for airline tickets, a greater percentage of Vegas visitors are coming from drive markets like Southern California.
It's not that people don't want to gamble - they just don't want to shell out hundreds or thousands of dollars for plane tickets to get there.
So it stands to reason that if we wanted to "invest in sin," we should take a look at gaming operators who own casinos primarily served by drive markets, whether it be Las Vegas or elsewhere.
Ameristar Casinos, Inc. (Nasdaq: ASCA) isn't the biggest casino operator, but it's certainly one of the most profitable. None of its eight casinos are in Las Vegas, and all of them cater to local, drive-to clientele.
Cactus Pete's and Horseshu are both located in the town of Jackpot, Nevada - a popular recreational vehicle destination in the northeastern part of the state. With a full hookup RV park right next to the casino, Cactus Pete's - the largest gaming and entertainment destination in northeast Nevada - allows RV gamblers easy access to casino facilities.
The Ameristar Casino Hotel in East Chicago, Indiana - one of the largest casinos in the Midwest - is a short drive for its Windy City clientele.
The company recently completed a 130,000 sq. ft. addition to its casino in St. Charles, Missouri. With its seven restaurants, Resort Spa St. Charles is a short 20-minute drive from downtown St. Louis.
The company's Kansas City, Missouri 3.5-acre casino floor features more than 3,000 slots, 105 gaming tables, 12 restaurants, an 18-screen movie theater complex and a Kid's Quest childcare facility. And it's a mere five minutes from downtown.
The Council Bluffs, Iowa crowd need only head down to the Platte River, where three full decks of gaming await on the largest riverboat casino in Iowa. Ameristar also owns a large land-based AAA 4-Diamond hotel adjacent to the riverboat.
The company's Casino Black Hawk is located about 70 miles from Golden, Colorado. A major regional gaming and entertainment destination, the Black Hawk complex, sports a 1,550-space parking garage, one of the largest in the area.
The Casino Hotel Vicksburg, another riverboat casino located on the mighty Mississippi, is the largest dockside casino in the southwest part of Mississippi. Number one in its market for the past several years, this facility sports a colorful blues bar and a state-of-the-art gaming center.
Casino Stocks: Ameristar's Business Model Is Working…
So how well is Ameristar's "drive-to" business model working? Quite well, thank you. Last quarter, it achieved record earnings - chalking up $0.52 per share - compared to a net loss of $1.07 for the same quarter in 2008.
"Ameristar achieved record EPS in the first quarter," said Gordon Kanofsky, Ameristar's Chief Executive Officer and Vice Chairman. "This was largely because of our sustained emphasis on achieving operational and marketing efficiencies, particularly during the current recession."
Even more impressive, the company achieved these results on revenues of $315 million, $10 million lower than the previous year.
To experience a decline of only 2.7% when the rest of the industry's looking at 20% declines speaks to the validity and diversity of the company's business model.
Since most of the casinos are located in travel destinations, hotel occupancies remain high, offsetting small declines in gaming revenues.
The company remains well capitalized, having recently amended its credit facility with its lender through 2012.
CEO Kanofsky commented on the company's future outlook: "Despite expected continued difficult economic conditions in 2009, we believe Ameristar is well positioned to continue to drive year-over-year margin growth.
"We also believe that regulatory reform in three of our key markets - coupled with significant investments in two of those markets - should drive future revenue growth, enabling Ameristar to emerge from the recession stronger and more profitable."
We wholeheartedly agree. If you're looking at investing in sin through casino stocks, Ameristar Casinos sports some of the best odds outside of Las Vegas.
The bulls went on another rampage during Wednesday trading on the Canadian Markets as investors gobbled up resource stocks. For the tale of the tape, the TSX Exchange added 2.66%, while the TSX Gold Index surged 4.5% and the TSX Venture Exchange, Canada's largest junior exploration bourse, tacked on 1.70% with the advancers swamping the decliners by a 500 to 391 margin on good volumes of 213 million shares traded.
Yamana Gold (NYSE:AUY) tabled first quarter earnings of $86 million or $0.12 per share on revenues of $224.3 million. Production rang in at 271,482 gold equivalent ounces with cash costs hitting $379 per ounce. Yamana ended the day up C$0.39 at C$10.33.
Kinross Gold (NYSE:KGC) earned $76.5 million or $0.11 per share in the first quarter on production of 526,888 gold equivalent ounces. Revenue rang in at $532.7 million with cost of sales coming in at $419 per ounce. Kinross closed at C$19.70 for a C$0.50 gain.
Northern Freegold Resources completed its earn-in on Atac Resources‘ Golden Revenue project in the Yukon. Atac received C$100,000 and 1 million Freegold shares as it final payment and Atac retains a 1 percent net smelter return royalty. Atac ended the day up C$0.025 at C$0.215, while Northern Freegold added C$0.01 at C$0.59.
Alexco Resource (AMEX:AXU) stated that initial underground chip-channel results from the Bellekeno resource in the Yukon returned up to 57.3 ounces of silver per ton over 6.04 metres. Alexco ended the day up C$0.05 at C$1.79.
Fewer than expected job losses in the United States during April and a robust rise in Canadian building permits in March caused euphoria on the Canadian markets. Clearly this logic is somewhat flawed given the overall weak numbers but who am I to argue with a stellar bull run. We shall see what Thursday trading has in store.
The base metals were all solidly in the green on Wednesday. Copper started moving higher early in the pre-dawn hours, and continued the trend pretty much straight through the day, just coming off its intraday highs to finish at $2.1725/lb., up more than 12½ cents.
Nickel was flat until mid-morning, then it too caught fire and shot up to close at its intraday high of $5.7516/lb., up more than 43 cents. Zinc made a strong upmove, ending at $0.713/lb., up nearly 4 cents. Aluminum was solid, adding over a penny and three-quarters, to $0.6926/lb., while lead posted a modest gain to $0.6453/lb., up just under a penny.
Copper led the industrial metals higher, making a powerful move that took it up the most in a month after the better-than-expected jobs data left traders with hope that the economic worst is in the rear-view mirror. It was the metal's fifth positive session in the past six.
"I think people are feeling pretty confident that the economy is in fact bottoming and we are starting to see the light at the end of the tunnel," said Matthew Zeman, of LaSalle Futures Group in Chicago.
"It’s just one in a long line of more encouraging economic data that has been coming out in the last couple of weeks," said Gayle Berry, an analyst at Barclays Capital (NYSE:BCS).
The jobs report notched another positive in a week that has featured less-than-dismal numbers from the service industries in the U.S., manufacturing in China, U.S. construction spending, and the housing market.
Berry added that market participants are coming around to "the view that global output may now be starting to pull itself out of the hole it fell into at the end of last year."
Oddly on such a strong day, the supply situation failed to be supportive. Copper inventories monitored by the LME were up sharply yesterday, rising by 7,225 metric tons, to 402,150 tons.
That could signal a slowing of the movement of copper from Europe to China, since the price differential has narrowed of late.
"Because the arbitrage halved over the past couple of weeks and physical premiums have come off, maybe we’ll see less European metal going into China," Berry said. "But [we don't want] to read too much into one day’s trend."
The results of the government's bank stress tests won't be released until 5 p.m. today, but people familiar with the tests and banks involved have already leaked some of the results.
Bank of America Corp. (NYSE: BAC) faces a $34 billion shortfall, the largest among the 19 banks tested. Wells Fargo & Co. (NYSE: WFC) must raise $15 billion; GMAC LLC (NYSE: GMA), $11.5 billion; Citigroup Inc.(NYSE: C), $5 billion; and Morgan Stanley (NYSE: MS), $1.5 billion, the Journal reported.
J.P. Morgan Chase & Co. (NYSE: JPM), Goldman Sachs Group Inc. (NYSE: GS), MetLife Inc. (NYSE: MET), American Express Co. (NYSE: AXP), Bank of New York Mellon Corp. (NYSE: BK) BB&T Corp. (NYSE: BBT) and Capital One Financial Corp. (NYSE: COF) are in the clear in terms of having adequate capital cushioning, according to Bloomberg News.
Results for Fifth Third Bancorp (NASDAQ: FITB), KeyCorp (NYSE: KEY), PNC Financial Services (NYSE: PNC), Regions Financial Corp. (NYSE: RF), State Street Corp. (NYSE: STT), SunTrust Banks Inc. (NYSE: STI), U.S. Bancorp (NYSE: USB) are not yet available.
The banks will have until June 8 to develop a plan to raise the required capital and face a Nov. 9 deadline to implement it. They may choose to raise the funds in a variety of different ways. They may sell assets, court private investment, or convert the government's existing preferred shares into common stock.
Citigroup has already announced plans to convert a portion of the government's $45 billion stake to common stock, a move that will give the federal government a 36% stake in the company. Other banks regional banks such as Fifth Third or Regions Financial could be forced to take similar action, but are loath to do so, as it would dilute the value of their common stock.
Morgan Stanley plans to close its capital gap by selling assets or stock to private investors, a person briefed on the plan told TheNew York Times.
While Bank of America has said it doesn't agree with the Fed's conclusions, the bank yesterday outlined its strategy to accommodate the government's demands. BofA is exploring the sale of business units such as First Republic and asset manager Columbia Management, the Journal reported.
The sale of those businesses could raise a combined $4 billion David Hendler of CreditSights Inc. told the Journal. BofA could also get about $8 billion for its partial stake in China Construction Bank Corp.
Beyond that, BofA would have the options of converting the government's existing $45 billion investment or $33 billion in private preferred shares to common stock.
Inbox too full? Subscribe to the feed version of Contrarian Stock Market Investing News - Featuring Bargain Stocks in a feed reader.
If you prefer to unsubscribe via postal mail, write to: Contrarian Stock Market Investing News - Featuring Bargain Stocks, c/o Google, 20 W Kinzie, Chicago IL USA 60610
In August, 2008, California's governor approved a bill providing that on and after January 1, 2010, any instrument, whenever executed, that became irrevocable on or after January 1, 2001 the law regarding no contest clauses will change.
Girl: I can't decide if I should wear my hair up or down. (friend nods) I mean, you know when you have to make, like...decisions?
--Bathroom, Columbia University
Very white middle-school boy, yelling to friends: He say yo' momma got a cheap-ass weave!
--87th & Lexington
Girl with huge curly hair: You see I, ugh...randomly wake up reaching up to feel, and see if my hair is still there. Then my subconscious is like "wait! Am I breathing?" Oh yes. I'm breathing!
--Chat N Chew Restaurant
Young teen guy to girlfriend: You see, I got hairline issues. You know, 'cuz when you get older, your hair follicles increase and your hair is less. I'm not used to my hair. It used to be here (points to his forehead), but now it's here. (points to the same place on his forehead) I got hairline issues.
--4 Ttrain
Overheard by: Megz
Nanny, adjusting ward's ponytail: If I fall, I'm taking your hair with me.
Hobo to long-haired hipster playing around with remote-control car: Get a job, asshole!
--Norfolk & Rrivington, Lower East Side
Overheard by: globalvillageidiot
Hobo to passerby: Hey, wanna cum on my ass?
--72nd St & Amsterdam
Overheard by: Rei
Hobo to girl giving him money: Not too much, gorgeous!
--13th St & University
Hobo: What time is bedtime at the Neverland ranch? When the big hand touches the little hand! (pause) Why does Michael Jackson like twenty-seven year olds? Because there's twenty of them!
--1 Train
Bag lady, screaming and chasing a suit: You muthafucka, you stole my 401k! I'ma getchya and take it back!
Nerdy tourist boy looking at display: My depth perception is yelling at me...
--Museum of Natural History
Overheard by: jules
Pizza guy on cell: Have a good 4th... What? No, I said to have a good 4th, not "may the force be with you." (pause) Have a good 4th. (pause) Yeah, have a good 4th, and may the force be with you. Uh- huh. Good night.
--Dekalb & Hall St, Brooklyn
Indian nerd to friends, in the midst of heated debate: Dude, vitamins are fucking weak!
--Grand Central Subway Platform
Overheard by: djprojexion
Geek on cell, in line at Comic Con: Dude, I'm at the con... It's like, ten times more awesome...than anything awesome!
--NYC Comic Con
Overheard by: RedmanInc
Nerdy guy: Some super powers come with implied powers. Like the power of flight. You assume the power of wind resistance, because you'd get pretty freaking cold flying 200 mph. But no one ever thinks of that.
Guy to girl: I have a proprietary interest in your nipples.
--Park Slope
Overheard by: Hunter (aka
Hobo coming out of cardboard box to group of blonde chicks: Run yo nipples!
--Blake St
Teenage girl: It's so fucking cold my nipples could pick up radio stations.
--Central Park
20-something Asian guy: But I know babies' nipples are so sensitive...
--Grand & Eldridge
Hobo, yelling at couple on the street: What the hell I look like to you? Huh?! I'm a gangsta! If I had three nipples and no legs, I'd still get laid! (shakes cane at them)
Earth chick on cell: I had meditation and yoga class today. So, if you're coming over tonight we have to have spiritual sex.
--Barnes & Noble
Guy on cell: You're never going to believe this, but I need to tell you anyways. I just did some witchcraft.
--9th St & 3rd Ave
Overheard by: Smoking Student
Yoga teacher: Not being able to do something can teach you a lot about yourself. Like how you're a fucking loser.
--Midtown
Rich white girl with dog in purse: Yeah, so when I went to go buy a dog, I picked Pookie out because he's a Pisces and I'm a Virgo, and that way our personalities will match.
--C Train
Overheard by: evan
White dude to another: I'd like to see what his chi looks like.
Will natural gas make a comeback? The odds are pretty good that bargain hunters buying natural gas at today's bombed-out levels could probably double their money in under a year.
All thanks to the fact that we could soon be facing rising industrial demand and the possibility of supply outages caused by the looming Hurricane season. Not to mention that demand typically rises during the summer as individuals turn up the air conditioning.
There's no doubt about it; the best risk-adjusted speculation now for commodities investors is natural gas. There's no other commodity that's this cheap, this battered and this oversold (see chart below.)
From its high in July of last year, spot natural gas prices have now collapsed a cumulative 74%. In 2009 prices have declined 37%. Crude oil – on the other hand – has been driven higher by big supply cuts by OPEC and Russia earlier this year, seeing prices rise 19% to $53 a barrel.
Over the last several months, natural gas has been hammered as the global economy suffers its worst recession since 1981-82 coupled with soaring gas inventories. Though an extremely volatile commodity, natural gas at these levels has historically been a strong speculation following big bear market crashes.
Canada is home to some of the best natural gas companies, including Encana (NYSE:ECA). The stock is more than 50% below its all-time high and pays a 3.6% annual dividend at current prices.
It's time to ride natural gas.
At just $3.55 BTUs (British Therman Units) it's hard to believe prices can head much lower. All the bad news is already baked into gas prices. It's my favorite energy play right now in Commodity Trend Alert (CTA) – celebrating its 7th year this summer.
Currencies back off… More problems for BOA? More on China…Aussie Retail Sales rebound… And Now… Today’s Pfennig!
Good day… And a Wonderful Wednesday to you! I had someone last week in Bermuda ask me why I have my little sayings like Wonderful Wednesdays, and Fantastico Fridays… I told him that it had to do with my life scare of almost 2 years ago, and that I now celebrate each and every day! (well, maybe when I had pneumonia two weeks back I wasn’t celebrating….)
OK… I hope your Cinco De Mayo fun was… Well… Fun! We went out with some good friends, but was back home before bed time for yours truly… Still fun though!
The currencies, led by the euro have run into a dollar road block… It’s all about the Stress Tests this morning folks… It now appears that Bank of America (BOA) will need approx. $35 Billion, and not the measly $10 Billion rumored yesterday. That’s quite a boat load of money, folks… So… All eyes are on the Stress Tests results which are expected to be released tomorrow. But this kind of rumor regarding BOA (NYSE:BAC), is weighing heavily on the risk assets this morning, with a bias toward risk aversion.
The euro didn’t get any help from the latest print of Retail Sales this morning either… Eurozone Retail Sales in March fell by the largest amount on record… The Eurozone recession is really deepened, doubt about it! But remember this… In 2002-03 the euro ignored the recession that had a tight grip on Germany, the Eurozone’s largest economy, and rallied strongly VS the dollar… It was simply a case of “your car is uglier than mine” regarding the problems that were cropping up for the dollar at that time. And since the euro is the offset currency to the dollar… Voila! The dollar’s car was uglier than the euro’s car…
One thing I also want to mention is that we saw the euro climb back above 1.34 again yesterday morning briefly… It sure seems to me that the euro is performing according to many currencies moves I’ve seen since 1992. What I’m talking about here is the fact that the euro keeps probing higher into the 1.34 handle, only to be knocked back down… This can be good or bad, depending on patient the traders are… Usually, a currency goes above a level that sees a ton of resistance (sells / profit taking), and it falls back. The currency will do this a few times, at which time traders can see this as a challenge, and push the currency higher… Or can grow tired and impatient and give up the rally, thus allowing the currency to drift lower. We’ll have to keep an eye on this in the next week…
One currency that has pushed past a road block, and not given it up is the Aussie dollar (A$), which passed 74-cents the other day… Yes, the A$ has given back some ground following the Big Dog euro… But not below 74-cents, not yet any way! The A$ got a boost overnight as Retail Sales for March reversed the 2% fall in Feb, with a 2.2% rise! Of course, the Gov’t has sent out a round of checks about this time… So, one would expect this to happen… It will be important to see if this is a one-and-done, or if it has legs…
OK… Yesterday, I opened Pandora’s Box of inquiry regarding the Chinese / Argentina currency swap line story I brought to you… Inquiring minds want to know more! Well… I researched this more yesterday, and this is beginning to scare the bejeebers out of me folks… First of all the currency swap line that China and Argentina agreed to, was actually the 6th currency swap line that China has done in the past 6 months… They have in the books, South Korea, Hong Kong, Malaysia, Indonesia, Belarus, and now Argentina… Now, when these other swap lines were announced I didn’t think too much about them… But now… stop for a minute and think back to last month, when we told you that China was calling for an end of the dollar’s reserve currency status…
Now… Don’t these all take on a different meaning now that China has made their intentions known? To me… All these swap lines are like pieces of a puzzle, and are fitting together very nicely for China… 1. I think China is trying to gain wider use of the renminbi in Southeast Asia… And 2. I think China will continue to add pieces of the puzzle, and when all the pieces are in place… China goes back to the G-20 ministers and says… “I want the dollar removed as the world’s reserve currency”
What does this do to the dollar? Well… If we look back at the last reserve currency of the world, the pound sterling, we can see that it was a long slow decline that took years to see any recovery, and then only briefly. And to each and every consumer in the U.S. a weaker dollar will mean a loss of purchasing power, as witnessed last year before the financial meltdown… Remember back around this time last year, I came up with some data that really illustrated the loss of purchasing power of the dollar? Well… It went something like this… In the past 6 years, the price of Oil has rising in dollar terms by 319%, while the rise in euro terms was only 94%, and against Gold it was only 50%… So, that’s what the U.S. consumer can expect… A loss of purchasing power…
That is… Unless they have a “hedge” against this scenario… I can hear you asking right away, “What’s this “hedge” Chuck? Ahhh grasshopper, the “hedge” is to diversify a portion of your dollar denominated investment portfolio out of the dollar!
Whew! That was a lot of typing all at once, and I’m worn out! Be right back…
OK, I’m back, bet you didn’t even miss me. HA! I’m still waiting for the news from Norway’s Norges Bank regarding the size of the rate cut that has been forecast… Most observers believe it will be 50 BPS… I think they will opt for a smaller cut of 25 BPS… But given the strange things that are valuing currencies these days, a 50 BPS cut would probably help the krone more than a lesser cut of 25 BPS. Not exactly the “fundamental” way of valuing a currency, but in these strange days, it seems to be the norm.
News from Switzerland this morning has the Swiss National Bank (SNB) watching the advances by the franc very closely… Hmmm… Recall that I explained to you that the SNB was NOT going to allow the franc to get too strong VS the dollar, as the SNB wanted a weaker currency to bring inflation into their economy… The SNB is scared to death about the prospects of deflation getting a grip on their economy… But debasing the currency to achieve this? I don’t think this should be their route… I’m not a fan of the SNB right now…
And tomorrow is meeting day for the European Central Bank (ECB)… ECB President, Trichet, is between a rock and hard place… He wants to continue to provide price stability, but his economy is diving deep into a recession… What’s a prudent Central Banker to do? The markets believe he will cut rates at this meeting, which is also a weight on the euro this morning… I’m on the fence with this one folks… I know in Trichet’s heart of hearts, he wants to keeps rates unchanged… But I don’t think he’ll be able to follow his heart…
My friend, Ashish Advani, made a call to buy Indian rupee last month, in my “paid subscriber” newsletter, The Currency Capitalist (shameless plug!) … And this morning, Standard Chartered Plc said that, “India will be a growth outperformer this year because it is relatively insulated to the global recession and the trade deficit has been narrowing quite rapidly. The Indian rupee will rally as India’s Trade Deficit narrows and the economy expands faster than most Asian nations.”
The data cupboard will produce the ADP Challenger employment report this morning… Recall, that this is the report that tried to emulate the Bureau of Labor Statistics’ (BLS) methodology, but has failed in past months to be a solid indicator of what the Jobs Jamboree will hold in store for us. Nevertheless, the ADP report will give us an “idea” of what to expect, so, it is worth the couple of minutes it takes to review it when it prints this morning.
OK… Before I go to the Big Finish, I wanted to share something with you… In these times when Banks all over are having a rough go of it, EverBank continues to steer the ship in the right direction… I’ve been highlighting the 2008 annual results at the top of the Pfennig for some time now, to drive home the point… But now, I have even more ammo… Our 1st QTR 2009 results saw a press release yesterday, and I believe I can now share them with you…
Net income of $14.4 million, a 65% increase from the first quarter of 2008 > Asset growth of 28% over the same period last year, to over $7.6 billion > Deposit growth of 42%, or $558 million, to over $5.6 billion
In addition to producing solid earnings and growth in our core businesses, we further strengthened our capital and liquidity positions and significantly increased our loan reserves. EverBank’s total equity rose to over $541 million, a 49% increase over the first quarter of 2008 and more than $170 million above the amount required by the FDIC to be deemed “well capitalized.”
YAHOO!
Currencies today 5/6/09: A$ .7422, kiwi .5822, C$ .8480, euro 1.3320, sterling 1.5090, Swiss .8830, rand 8.5240, krone 6.5740, SEK 7.98, forint 214.20, zloty 3.30, koruna 20.08, yen 98.30, sing 1.4750, HKD 7.75, INR 49.49, China 6.8215, pesos 13.27, BRL 2.1350, dollar index 84.05, Oil $54.17, Silver $13.47, and Gold… $905
I promise. Alexander Green and I are not in cahoots about the coming boom in corporate takeovers… We both researched the possibility separately. Unprompted, I might add. And yet, armed with different evidence, we arrived at the same conclusion. If you ask me, such a convergence of analysis in a narrow space of time shouldn't be ignored. So today, let's move on from why a takeover boom is imminent and focus exclusively on three takeover targets you can profit from…
Identifying The Market's Next Takeover Targets
The task of identifying the market's next takeover targets can be daunting. Literally thousands of potential targets exist, which is probably why most investors liken it to a crapshoot and in turn, shun such a strategy altogether.
But that's a monumental mistake!
They're passing up easy double-digit profits. Historical takeover premiums (the amount paid over the current share price for a target company) average 22%, according to a study in The Journal of Finance.
And that's just the averages.
It's common for many deal premiums to reach into the high double digits and even triple digits.
Investing in Takeover Targets - 3 Steps to Improving Your Odds
By following three simple steps when investing in takeover targets, we can dramatically improve our odds of success…
Go where there is consolidation. Consolidation trends are a powerful predictive tool because they tend to persist. Think about it. When your biggest competitor goes out and doubles in size overnight, there's only one way to respond - find a suitable acquisition of your own to remain competitive. Thus, by focusing on those industries and sectors undergoing the most rapid consolidation, we can isolate high probability targets.
Focus on companies with valuable (and undervalued) assets. Whether it's a new drug, a mammoth oil discovery, key market share, distribution channels, or a few promising patents, the real reason a company is acquired is because it owns a particular asset of value to the acquirer. Only invest in companies with such "must have" assets. And to reduce risk even further, I suggest buying clearly undervalued companies - ones trading at or near cash levels on the balance sheet. (Yes, they do exist.)
Insist on improving fundamentals. Understand that takeovers take time. In fact, acquiring companies might spend as much as nine months conducting due diligence. Yet, even then, there's nothing stopping them from walking away from a deal (Microsoft -NASDAQ:MSFT- and Yahoo! -NASDAQ:YHOO- ring a bell?). I recommend buying an "insurance policy" to protect against such unprofitable break-ups. By that I mean, only buy companies with improving fundamentals - whether it's strong earnings growth, new product launches, increasing market share, etc. That way, you stand to profit even if a takeover never materializes.
You'll recall in my previous article about the imminent takeover boom, I singled out three sectors that fit the first criteria above - health care (specifically drug makers), energy and technology.
3 Takeover Targets to Add to Your Portfolio Today
For those unwilling to expend the effort to carry out the next two steps… or just eager to get going immediately, here are three takeover targets to consider adding to your portfolio today:
Crucell NV (Nasdaq: CRXL): Merck (NYSE:MRK) and Schering Plough (NYSE:SGP). Pfizer (NYSE:PFE) and Wyeth( NYSE:WYE). Roche and Genentech (NYSE:DNA). Now Gilead Sciences (NASDAQ:GILD) and CV Therapeutics. Crucell is likely next. It's the largest independent vaccine maker, with products for treating influenza, childhood diseases and hepatitis B. Crucell's PER.C6 cell line is its most valuable asset. The company already licenses out the technology to over 60 companies. And there's no doubt management is accepting offers. In January, it was in friendly talks with Wyeth, before Pfizer swooped in and bought Wyeth and ended the discussions. Best of all, multiple suitors exist (Novartis -NYSE:NVS-, Sanofi-Aventis (NYSE:SNY), Merck and eventually Pfizer) so a bidding war could unfold, which translates into greater profit potential for us.
Anadarko Petroleum, Corp. (NYSE: APC): As oil tycoon T. Boone Pickens famously observed, it's often cheaper to drill for oil on the floor of the New York Stock Exchange than in the ground. Andarko proves it, as its reserves currently trade for less than $10 per barrel. Throw in a recent deep-sea discovery off Brazil, minimal political risk (80% of assets are located in North America) and high-quality, relatively untapped and undervalued natural gas assets and the takeover case here is an cinch. A multi-billion dollar stock repurchase program provides downside protection, too.
Lawson Software (Nasdaq: LWSN): The company is a quickly growing niche vendor of enterprise resource planning (ERP) software for medium-sized businesses. Tech heavyweights like Oracle (NASDAQ:ORCL), Cisco (NASDAQ:CSCO)and Microsoft are in desperate need of new growth initiatives. They have little exposure to the middle-market. And they have the cash to afford to buy it. The $308 million in cash sitting on Lawson's balance sheet reduces our risk and also represents a 32% instant rebate to any potential suitors.
Full disclosure: I have recommended all three of these companies to subscribers in recent months. And we're sitting on gains of 8%, 25% and 59%, respectively, proving it pays to follow step 3 above.
So to echo Alex's sentiments from Monday, if you haven't added a handful of potential corporate takeover targets to your portfolio, what are you waiting for? The opportunities and potential profits will be historic.
After posting stellar gains on Monday, the Canadian Markets took a well deserved breather during Tuesday's session. For the tale of the tape, the TSX Exchange added 0.19%, while the TSX Gold Index fell 0.3% and the TSX Venture Exchange, Canada's largest junior exploration bourse, tacked on 0.31% with the decliners beating out the advancers by a 437 to 397 margin on good volumes of 207 million shares traded.
Mindoro Resources inked a deal allowing Gold Fields (NYSE:GFI) the right to earn up to a 75 per cent stake in Mindoro’s El Paso, Lobo and Talahib porphyry copper-gold projects in the Philippines. Gold Fields must fund all the exploration and produce a feasibility study for each project to earn the interest. Mindoro ended the day up C$0.01 at C$0.15.
Tenajon Resources tabled an updated resource for its Moly Brook zone in Newfoundland. At a cut-off of 0.04% molybdenum, the indicated resource tallies 86.8 million tonnes grading 0.065% molybdenum and the inferred resource came in at 31.3 million tonnes grading 0.056% molybdenum. Tenajon ended the day down C$0.02 at C$0.10.
HudBay Minerals lost $3.95 million in the first quarter, compared with a profit of $21.52 million in the same period of 2008. The lower earnings reflect significantly lower realized prices for copper and zinc in 2009. On the exploration front, HudBay cut 23.11 grams gold per tonne over 8.75 metres at its Lalor deposit in Manitoba. HudBay ended the day down C$0.18 at C$8.65.
The Canadian markets are showing exceptional resilience in the face of still-weak economic data. We shall see what Wednesday trading has in store.
When recessions bite, people turn to cheap comfort foods like macaroni and cheese. And as it turns out, those deliciously cheesy elbows have been a pretty good indicator of difficult times.
This from the Financial Times: Sales of Mac & Cheese – which can feed two or more people for as little as $1 – have become an indicator of the health of the US consumer.
Kraft first reported a surge of "almost 20 per cent" in Mac & Cheese sales during spring and early summer last year as economic pressures increased.
Mac & Cheese sales also jumped in 1990, when the US economy was also in a downturn.
It's not just Mac & Cheese that are surging, either. Other budget menu items are also making gains. Kraft, the largest US food group, reported "solid gains" in powdered drinks and desserts. "Businesses like Jell-O, Mac & Cheese, and Kool-Aid are doing exceptionally well," says Irene Rosenfeld, CEO of Kraft. "There is no question that we are benefiting from the value orientation of consumers," she said.
Kraft also reported strong sales of its ready-to-eat frozen DiGiorno and Jack's pizzas, which it markets as a cheaper and higher quality alternative to ordering pizza to be delivered. Overall, its food business has been benefiting as families eat at home more rather than in restaurants.
That makes Kraft (NYSE:KFT) one of the strongest recessionary plays we've seen in a long time.
Let's take a look at the positive action driving the markets…Just as I predicted, the broader U.S. stock market continues to surge higher.
Take a look at this daily chart of the S&P 500:
The S&P 500 is a good proxy for the broader U.S. stock market. And as you can see, stocks continue to march higher. In fact, from a low of 667 on March 9 to last Thursday's high of 889, U.S. stocks have shot up a mind-boggling 33%.
But that's not all. Take a gander at the large arrow on the left of the chart. It marks the summit of the market's last upside run. Because the market reversed course to the downside that day (Feb. 9) and at that level (875), that peak is called - in technical parlance - a "resistance" level.
The market also failed to penetrate this resistance level just a few trading days earlier, on Jan. 28. All told, that means 875 is a pretty tough point for the market to get above.
That's why the market's most recent action is more significant than most investors and traders are thinking: It smashed above key resistance at 875 like a walk in the park. No doubt about it, that shows uncommon technical upside strength.
Here's the best part: When the market breaks through resistance - especially after failing to do so in previous attempts - that resistance level has an excellent chance of becoming a stopping point when the market decides to turn down again.
In other words, strong resistance - once defeated - becomes solid support for future price action. So when the market pulls back - and it surely will - it's very likely to not fall too much below 875. And I don't have to tell you that can be very reassuring.
There's more good news. Just as I thought, the most recent run continues to be backed by higher average volume. And on the chart, that's marked by the upward sloping average volume line near the bottom of the pane.
Significant? Certainly. When strong upside runs - especially when they include breaks above strong resistance levels - are powered by increasing average volume, it's a clear sign that higher prices are attracting more investors and traders. And they're buying more and more shares to prove it. That means lots of upside pricing pressure in the days and weeks ahead.
But before we start the big celebration, take another look at the chart. Notice that while the market has surged higher, it's done so with very few significant pullbacks.
In other words, the market's most recent run since the beginning of March - including a staggering 33% pop in prices - has been practically straight up.
I don't have to tell you that's a ton of upside action in a short amount of time. And for someone who's been around the block a time or two like me, that's a red flag.
Why? Because like many things in life, markets don't go straight up for very long. And if they do for a while, it only makes sense that they're going to pull back and take a breather.
Plus, big run-ups mean some traders are likely sitting on some juicy profits. So when they take some of that money off the table, that selling pressure will cause prices to drop.
Here's what I'm looking for: Over the course of the next few months, we'll likely see a significant pullback in the 10-15% range. On the S&P 500, that means a drop of 90 to 134 points.
Now, it probably won't happen violently and quickly. I think there's just too much investor optimism for that. But it could easily happen over a few weeks, with downdrafts in the 1-3% range.
Even if Ben Bernanke is right about the stress tests truly reflecting the "financial conditions" of the banks, it doesn't matter much. Banks themselves are still worried that they won't get paid back on old loans.
The latest Federal Reserve survey of senior loan officers finds very few shoots of green in that garden. According to the survey, "A significant majority of banks reported that credit quality for all types of loans is likely to deteriorate over the year." And this assumes the economy won't get any worse than it already is now! Here are some specifics (hat tip, Real Time Economics)
Commercial and industrial loans: Of 52 banks responding, none said they expect improving quality, but seven said they expect delinquencies and charge offs to stabilize at current levels.
Commercial real-estate loans: Only 1 of 51 banks (the other doesn't make such loans) sees improving quality, and three see quality stabilizing at current levels. Of the 47 who see a worsening picture, 13 expected a substantial deterioration in 2009.
Prime residential mortgages: Only 1 of 50 banks sees improving quality, and seven see quality stabilizing at current levels.
Subprime mortgages: No bank sees improving quality, and only two see quality stabilizing at current levels.
Home equity lines: No bank sees improving quality, though nine expect quality to stabilize around current levels.
Credit card loans: None of the 31 banks who make such loans expects improvement, and three expect stabilization.
Other consumer loans: Only one of 50 banks expects improvement, though 12 see loan quality stabilizing around current levels.
The broad sweep in housing-gold ratios is just as broad and as sweeping as both gold bulls and bears might hope…
Even the UK's small, tightly packed mainland, floating off the edge of Europe, includes disparate and distinct real-estate markets. Glasgow is as different from London as Cornwall from Cheshire. But in the main (and the mania), and with a peak of 185,000 new dwellings under construction in 2006, the broad sweep of house-price inflation…followed by an inevitable slump lasting six years or so…tends to apply across the nation.
In the United States, in contrast, new housing starts at the peak of what pundits, economists and investment bankers clearly felt was a coast-to-coast boom in 2006 approached 1.63 million amid a total housing market of 128 million units spread across 3.5 million square miles.
By necessity, that makes the idea of an "average" home price more slippery. But let's not let such quibbles clog up our spreadsheet! Not after math PhDs, applied to mortgage-backed zeroes, clicked and dragged the answer "AAA" whenever asked. And not before we contend with the data itself.
This first chart's solid enough, thanks to the certainty with which the Census Bureau dispenses its data.
It shows the median price of new US housing, at sale, divided by the ounce-price of gold, monthly average. And as you can see, new housing has swung wildly – measured in ounces – over the last 45 years. Quite clearly, one made a better home for investment than the other over distinct periods, as the mid-way price of new homes (half the market paid less, the other half more) was rocked and rolled by booms, bubbles and busts in both bricks and bars.
Second up, existing homes bought on the secondary market – and the same picture, but only on an annualized basis (and with the National Association of Realtors thrown in as a source) for the Census Bureau's less lengthy, less detailed data.
You can see, between the two charts, how new housing during this last real-estate boom (2000-2006 in nominal prices) began and topped out much sooner when priced in terms of gold. New units also reached further above existing-home prices too, peaking at $243,000 in 2006 – then 550 ounces of metal – or some 10% higher than the secondary market.
Perhaps that extra cash paid for new homes' expanding foot-print. But it's also worth noting, turning aside from Gold Investment for a moment, that new US home prices this decade also saw the mean outstripping the median as never before. The gap between average and mid-point prices, in fact, gaped from one-fifth or less (1975-1999) to as wide as 30% during the summer of 2006. Which might show, we guess, a growing number of super-priced units way up at the top-end of the market…bought and paid for, perhaps, with bonuses skimmed off mortgage-backed bonds sold against the sub-median half.
Finally, the money shot…
True long-run figures for housing, like the concept of "average" itself, are more sketchy than Mel Gibson after a night on the sauce.
We've used Robert Shiller's invaluable numbers, of course, but they only come as an index, itself built from five sources stretching back to 1890. Rolling those numbers back from today's current average ($175,000 according to the NAR) only throws up big gaps with the Census Bureau prices collated and published every 10 years starting with 1940. It also puts the price of US housing above $4,000 in 1900 – and in 1900 dollars, too – when average wages were just $2 per day.
Okay, so home-buying was yet to meet democracy through that great 20th century liberator, the securitized mortgage loan. And yes, two-thirds of US homes had yet to gain running water, let alone electricity. But as in the UK data, Gold Bullion regained its Great Depression value in housing as the Great Inflation of the 1970s peaked out, suggesting (to us, at least) that its utility as a store of value was little diminished by new bath fittings and copper wiring.
The broad sweep – smoothed out to fix those anomalies which our quick desk-bound research, a mere 5,000 miles from the Library of Congress throws up – remains as broad and as sweeping as either gold bulls or bears might hope to spy.
From here, the bottom in housing may still be to come, at least priced in gold. Broad-sweeping investors are invited to draw their own conclusions.
"The data we have are accurate reflections of the financial conditions of those banks," says Fed head Ben Bernanke regarding the stress test results… Hmmm…
Didn't Bernanke also recently lean on BoA CEO Ken Lewis to commit securities fraud by not declaring losses at Merrill Lynch prior to its takeover by BoA? We appreciate that Gentle Ben is just doing his job and all. But does he really think we’re going to trust him following the Merrill-BoA episode?
We don't believe a word Bernanke says about the economy… or about banks. As NYU economics professor Nouriel Roubini put it recently, the stress tests (or "fudge tests" as he calls them) aren't worth the paper they're written on. They're meaningless, because they have been reverse engineered to create positive results. Here's Roubini on the subject:
If you look at the actual data today macro data for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in U.S. government baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless as actual data are already running worse than the worst case scenario.
Nassim Nicholas Taleb, a scholar of risk and chance at Polytechnic Institute of New York University, author of The Black Swan:
The Impact of the Highly Improbable: “This stress test is the equivalent of testing the Brooklyn Bridge by running a single heavy truck on it.”
After an off day on Monday, with the LME closed for holiday, the base metals were mixed on Tuesday. Copper pushed as high as $2.15 early in the pre-dawn hours, but that was it as it sank pretty much straight through the day from there, just coming off its intraday lows to finish at $2.0468/lb., down nearly 4 cents from Friday.
Nickel peaked above $5.50 before it too declined, but it managed to eke out a gain late, closing at $5.3206/lb., up just over a penny. Zinc traded mostly sideways, ending at $0.6744/lb., up less than a half-cent. Aluminum also wound up at $0.6744/lb., down less than a quarter-cent, while lead posted a modest gain to $0.6362/lb., up just under a penny.
Copper backed off its gains, falling from a 2-week high as declining equities and a strengthening dollar were the main drivers of the day, along with perhaps a bit of profit taking after several days of higher prices. The metal had moved up12% in the previous four sessions on speculation that manufacturing will rebound.
As one trader commented, "We’ve moved up for the last couple of days and I’d say it’s probably profit taking. But I don’t think the selling was based on anything too noteworthy."
Volume was light, and with London closed on Monday, some traders see a market mood where holiday mode persists for a few more days.
In any event, the supply situation continues to be supportive. Copper inventories monitored by the LME dropped again yesterday, falling by 3,775 metric tons, to 394,925 tons.
But, "Prices have reached a top," wrote Eliane Tanner, an analyst at Credit Suisse Group (NYSE:CS) in Zurich. She predicted a drop "in the weeks ahead."
Citigroup analysts agreed, writing that, "Copper has run way ahead of its fundamentals."
In company news, Xstrata (LON:XTA) reported that copper output in the first quarter of 2009 fell 1.3% percent from the same period a year earlier, to 217,092 metric tons, while production of coal, nickel, platinum and zinc in concentrate all rose.
Inbox too full? Subscribe to the feed version of Contrarian Stock Market Investing News - Featuring Bargain Stocks in a feed reader.
If you prefer to unsubscribe via postal mail, write to: Contrarian Stock Market Investing News - Featuring Bargain Stocks, c/o Google, 20 W Kinzie, Chicago IL USA 60610
You are subscribed to email updates from BOLDATPORN To stop receiving these emails, you may unsubscribe now.
Email delivery powered by Google
Inbox too full? Subscribe to the feed version of BOLDATPORN in a feed reader.
If you prefer to unsubscribe via postal mail, write to: BOLDATPORN, c/o Google, 20 W Kinzie, Chicago IL USA 60610
Vlingo es una utilidad que nos permite realizar controlar diversas acciones del teléfono mediante la voz. Sólo hay que pulsar una tecla y decir al teléfono lo que queremos hacer.
Subscribe to the feed version of BOLDATPORN in a feed reader.
Post a Comment