My Love for Android Knows No Bounds
This has been one of the laziest market weeks I’ve ever gone through. As a result, I’ve had more coffee this week than I’ve had in a long time.
I tell you, the girls over at Dutch Brothers (a drive-thru coffee joint here in Oregon, which hires shockingly good looking people) not only know my name by this point, but they’ve also figured out exactly what I love to drink, and what car I drive.
They have my coffee ready for me by the time I drive up to them! It’s fantastic. But it goes to show you how much time I’ve spent getting coffee this week in order to cope with this flat market.
After all the excitement of Monday’s rally, the rest of the week was flat, flat, flat.
Dow Jones Industrial Average
Just look at that. The Dow Jones stayed in a 33 point range for most of the week.
A big reason why the market was so flat is that investors were posturing for today’s Bureau of Labor Statistics employment report. At the start of the week people were throwing around all sorts of optimistic jobs numbers. I even saw Zero Hedge –- the most bearish blog I’ve ever read in my life — point out analysis calling for a jobs number surpassing 300,000 due to seasonal fudge factors.
From ZH…
An analysis out of Stifel Nicolaus points out that due to various seasonal adjustments, an NFP print of up to +100,000 could be expected (which incidentally does not reflect anything favorable at all about the actual employment picture as it is due exclusively to seasonal fudge factors). In fact, Stifel argues, a print of +316,000 is theoretically possible
Alas, the positive number never came. Instead the employment report showed an 86,000 job drop.
A couple things you should be aware of regarding the employment report…
- Bernanke said himself that it would take 100,000 new jobs a month for the unemployment rate to start dropping.
- When trying to look for a bottom, it’s best to look at how many hours the average work week is. Right now it’s at 33.2. Once employers start feeling better about the economy, we’ll see this number increase. That’s because an employer would rather give an existing employee more hours rather than hiring a new employee.
- There are 2.5 million people that have no job and want one… yet are still not counted in the unemployment report.
- In February the BLS will make revisions to the 2009 unemployment numbers. Analysts are expecting a HUGE decline as the BLS accounts for fewer jobs created at small businesses. Calculated Risk, who is very good when it comes to predicting economic numbers, has calculated that revision to lead to 824,000 more jobs lost. This would most certainly shock the market and lead to a higher unemployment rate.
So while the jobs report has certainly been improving, we’re not out of the woods yet.
As for the market…
The three major US indexes are at or near 52-week highs and overbought. Investor sentiment is at extremely bullish readings. And the VIX is at a 52-week low.
Even the commodity companies I love so much are sitting at 52-week highs. So what does that leave for us, the guys who profit off of short-term market swings?
One rout we could take is getting into some bearish credit spreads. In other words we sell call options in hopes that they are never profitable for the buyer. But honestly I just don’t feel comfortable going against the dominant uptrend right now. Nearly ten years of playing the stock market has shown that type of play to be a painful one.
What it comes down to is good old fashioned stock picking.
One stock I’ve recently loved up is Google, mainly because of the Android operating system for mobile phones. It’s really started picking up market share after Motorola’s recent release of the Droid for Verizon.
Admittedly I think the Droid is a hideous excuse for a phone. But everyone seems to be eating it up. Most of that love is because it runs on Google’s OS.
In just the last year the Android operating system has picked up 12.4% market share in the smartphone sector, mainly at the expense of the iPhone and the Blackberry.
And with a slew of new Android devices hitting in the first quarter of 2010, I fully expect that market share to hit 20% or more by the end of the year.
This is great news for Google, and so I expect GOOG to be a low risk way of riding the Android OS higher. Another way to take part is to get into Motorola itself. The company has picked up pace ever since the release of the Droid. Analysts expect 1.4 million Android devices sold for Motorola in the 4th quarter alone. In all, Motorola sold 12.5 million handsets for the year. For a company everyone expected to vanish by 2010, that’s remarkable.
Motorola isn’t sitting on its ass either. It’s gone ahead and released another phone, the backflip, for AT&T. It also plans on introducing more new Android based models this year.
At this point Motorola has good exposure to AT&T, T-Mobile, and Verizon Wireless. That’s good in my books. All it needs to do now is charge for the European market and sales should beat expectations.
Just be aware that positions in these companies should be held over the mid to longer-term (about 6 – 12 months).
Take care,
Charles Delvalle
Categories: Macro View Points, Stocks, Technical Analysis Tags: android, ATT, Bernanke, BLS, Dow Jones, employment report, GOOG, MOT, smartphone, VIX
Will the Money Printing Ever End?
Will the Fed keep printing money?
That was the question on everyone’s mind yesterday, as the markets stayed relatively flat all day.
Investors weren’t sure what to make of the Fed Minutes that were released. In those minutes, the Fed openly debated extending the money printing program. It’s interesting that the debate is even around at this point in our so-called recovery.
After all, the Fed has already stopped buying back Treasuries. And it makes a point to tell investors that many of its emergency programs would wind down early this year. Up to this point, it seemed that the Fed was worried about not tightening soon enough.
But the minutes released today showed that this worry wasn’t the consensus. Some of the Fed governors are worried about tightening too soon.
I say rightfully so. Up to this point the “recovery” we’ve seen was led by stimulus and an inventory rebuild. For this recovery to be genuine, consumers need to start spending.
But with consumers drowning in debt, I don’t see consumer spending picking up.
So the economy will drag during the second half of the year. And if the Fed starts tightening right now, it risks pushing the economy into a double-dip recession.
Of course, the temptation to tighten will always be there.
For instance, the Bureau of Labor Statistics’ December Employment Report is expected to show a gain when it gets released on Friday. The Fed might read too much into it… maybe even forget that it was the stimulus and inventory rebuild that helped create these temporary jobs… and decide to quickly tighten rates in order to avoid an inflationary onslaught of epic proportions.
Of course, we in a deflationary time. Debt deflation is still running rampant. Credit is tight. And banks are still going bankrupt everyday.
This isn’t an inflationary environment.
Too bad everyday investors don’t ever think of that stuff. If employment surprises to the upside on Friday, this market could easily make new highs. Dow could hit 11,000 +.
Take your risk money and buy some calls.
Take care,
Charlie
Stuff to Read…
http://www.bloomberg.com/apps/news?pid=20601087&sid=atPFbpy.GylQ&pos=5
Categories: Macro View Points Tags: deflation, employment report, Fed, treasuries