The Rayno Report

Gold Plunge: The Ultimate Paradox?

Sun, 28 Apr 2013 13:06:34 GMT

The recent gold decline was certainly enormous. But the bigger question is whether the great gold bull market of the last decade is over, and I think the case is still open.

I've held large positions in gold and been a supporter of the gold bull market since about 2004. This comes with definite downside, the largest being that during gold's spectacular market declines, I become associated with gold bugs and vilifed like a doping contender on the Tour de France.

But in all my years of trading and watching gold, I've never seen anything like what's gone down this
past month.

On April 12, 2013, gold, which had been trading heavy over a number of months, suddenly went into freefall. Most reliable accounts indicate that a large seller of gold futures positions had opened the New York market by offering to sell about 30,000 futures contracts -- a mere 3 million ounces. This is several times what typically changes hand an entire day of trading. Because the gold market is quite small (relative to stocks or bonds) and not always the most liquid market, gold immediately plunged $50. And the seller kept selling.

In fact, by some counts, between Friday, April 12 and Monday, April 15, sellings of gold derivatives
contracts accounted for the equivalent of more than 100% of the world annual gold production -- and
this amount was sold on the market during just two days two days. Gold fell nearly $200 in that period.

And then there's this: This past week, Zero Hedge, analyzing the public documents of the major futures gold depositories, saying that JP Morgan was responsible for selling 99% of the gold in the last three months.

JP Morgan is a well-known metals broker or "bullion bank" and an agent of the precious metals acocunt of the Federal Reserve. So naturally, this leads you to the conspiracy theories.

I won't get into the conspiracy theories, but I will ask two simple questions: Why would somebody be
calling in massive amounts of gold from the depositories at the COMEX during the market's biggest
decline in years? Would "smart money" be laying claim to millions of dollars in physical gold if they thought the market was going to decline further?

[img:/assets/13/0428/1315]

As I mentioned, there are currently many paradoxes in the market. But this may be the largest. Why
are physical inventories of COMEX gold plummeting? Econ 101 tells you that plunging prices should be associated with large jumps in inventory, not declines.

The bottom line: It's too early to end to declare an end to this majestic bull market in gold, which started in 2002 and has represented a more than 500% return on the price through the era of Quantitative Everything (QE). The main reason: Physical demand for gold remains strong, despite the bizarre activity being generated by the futures market. And with the strange activity at JP Morgan and the COMEX, it's possible that some very smart money just pulled off the biggest mis-direction trade in the history of the gold market.

Stay tuned. This will be resolved soon. Gold is currently bouncing, and the bounce-back could be vicious as the rubber-band was stretched very far in one direction. If gold can not regain $1500 in the next few weeks or clear $1600 by September it may very well be done. I'm not convinced it's over and I'm sitting tight. My first physical gold was bought at $350 an ounce and I still own most of it. My mental stop is at $1,275 per ounce. If gold gets that low, I would have to reconsider my position.

What do I expect to happen? I actually expect gold to confound the mainstream "experts" once again and make new highs in 2013. This would be a massive reversal. Is there precendent? Sure there is. In 2008, gold fell 30% -- exactly the amount it has fallen from its 2011 high. It then turned around and ripped off a $1,000 rally. These things can happen in the gold market.

Coming Clean On a Bad First Quarter

Sun, 28 Apr 2013 12:56:45 GMT

"Courage is being scared to death, but saddling up anyway."

-- John Wayne

Time to fess up: Yes, we're sucking wind this year -- and it hasn't been a lot of fun. Sometimes the market carries your stocks and investments upwards to the sky, and you feel like a genius, other times, it seems like every trade you make is the wrong one and the market deems you an idiot.

The latter is certainly the case at the moment with our model portfolio down 8% YTD and the S&P close to new all-time highs. I'll be honest, this doesn't make me feel good -- this is the first time in 10 years that my model portfolio has been so deeply in the red after one quarter (we have yet to have one finish the year in the red). But I'm not going to make things up and say it's okay, it's not.

But I'm also not going to panic, because panic is exactly what the market wants you to do, which is why markets often appears to shift gears just after capitulation (whether it's your personal capitulation or the general public's). The Rayno Report portfolio has been pummeled by the plunge in gold and silver and related shares. Also, energy has been surprisingly weak. I own a number of commodity names. The ferocity of the decline in the commodities complex has surprised me, but perhaps what's more surprising to me is that it has been accompanied by a rising stock market (typically plunging commodities fortell weak economic growth, and therefore are often correlated with falling stock prices; this happened in 2008).

Yes, the "Quantitative Easing" program was suppose to stoke inflation and push commodities skyward, but it hasn't, it's pushed commodities into the ground. There may be complex reasons for this but on the surface it's a paradox. My only reasonable explanation is that the situation in China is worse than thought. This is a market of many paradoxes. Below, a chart shows the extreme divergence between commodities and equities.

The S&P 500 is green, a leading commodity index is in blue. What's so strange about this is that it goes against the grain of the post-2009 recovery trade, in which these assets had been correlated by about 90%.

[img:/assets/13/0428/1304]

One bright spot in our calls: We've written here regularly about the "stealth bull market" in biotech shares, which seem to go up every day. The iShares Nasdaq Biotechnology ETF is at new highs near 173, and it's up 21% year to date. Although we hold it in our model portfolio, that's not enough to overcome our worst losers such as Royal Gold (down 32%) and First Majestic Silver (40%). Shoulda bought more biotech. Shoulda coulda woulda.

That's the kind of the market in a nutshell in 2013 -- extremely powerful stocks thrusting to new highs regularly, with others simply left behind. The one observation I have about this market is that it's certainly not as easy as it looks, because many solid stocks have been left behind. One example is Intuit, a technology stock we like because of its steady growth, cash flows, and reasonable valuation. Inuit is a great company, but it's done nothing this year -- it's down 5% in the middle of a "bull market."

So what am I go to do? Absolutely nothing. The reason? April/May has been a key turning point over the years, so I'm going to watch the market closely as we glide into May. My instinct is that it's overbought and getting overvalued, and people will want to take profits going into the summer. Chances are the numbers in our portfolio will improve as the trends change. Precious metals have been so beaten up and have gotten so cheap that something has to happen -- at least a healthy short-term "dead-cat bounce." It's too late to sell them now, and with some of them no yielding over 2%, it's worth just sitting on them. It's early -- it's only April. Energy can still rally. A lot can still happen in 2013.

I would not be shocked at all to see gold and silver turn around and make new hights. To a certain extent the paradox of our portfolio is the paradox of the market -- that some stocks, such as the biotechs, march up nearly every day, but cheap, pedestrian technology stocks such as Intuit do absolutely nothing. We'll cover the paradox of the gold market in my next article.

Sentiment Indicator: Not a Time to Buy Stocks

Sat, 16 Feb 2013 13:18:38 GMT

Following my annual portfolio picks, I got some intriguing questions via email. Do you know the market will go up this year? Should I buy all of these stocks now? Should I go all in?

The answers: No, no, and no.

If I were to summarize my strategy, it would be this: If you want to reduce stress and have a reasonable chance of beating the market, you should 1) Follow a system that buys a basket of "value " with the characteristic of market-beating stocks and 2) dollar-cost average strategically over a long period of time.

In other words, I admit there is never a "perfect time to buys stocks" or "exactly the right stocks to buy." Investing isn't about betting on the sure thing -- it's about spreading out your risk and improving your odds of being slightly above average.

It's really hard -- if not impossible -- to accurately time the market. But that doesn't mean you shouldn't use timing devices! What do I mean? Well, if you think of investing as an incremental rather than a binary activity, you can use timing devices to figure out statistically opportune times to buy stocks.

The most powerful tool at an investors disposal is dollar-cost averaging, in which you deploy cash over long periods of time. This reduces the risk of going into the market at extreme highs. But if you are investing over a long period of time, wouldn't you want to use some timing devices to deploy catch at times you know might have statistically better odds of being "cheaper" times?

For example, at any given point in time during the year -- any time really -- there will be a 5% selloff. The odds are very high -- studies show this happens on average twice per year. So, if you know there is a reasonable chance of a 5% decline in the next 10 months or so, why not wait for it? If you take the long view, this means that you could use timing devices to deploy cash during moments where it is less risky to buy stocks.

What are good timing devices? There are all sorts of oscillators, sentiment indicators, and technical tools such as the put/call ratio. But I find the best tool to be sentiment indicator. I prefer to read the stock market as a barometer of emotion, if anything else. And it is quite interesting that during the course of any given year, this barometer can swing quite violently -- without really much change in economic reality. This is became humans are emotional and their perception of events is often more extreme than the impact of events themselves.

Sentiment readings are excellent indication of this human, emotional component of the market. Bullish sentiment, according to the AAII survey, recently surpassed 50%, a 12-month high, with the long run average being 40%. The low of just the past 12 months is 25%, achieved as recently as July. I find it remarkable that there can be such wide ranges of investor sentiment in such a short amount of time.

The AAII bullish readings are natural contrarian indicators. When the the crowd is feeling especially bullish, it's time to stand aside -- if not outright book some profits. If things are really bearish, it's time to add to stock positions. How do we know this? The data backs it up. See below, thanks to Thanks to Cxoadvisory.com

[img:/assets/13/0216/1326]

The chart above shows average future returns based on the AAII sentiment readings. When things are most bearish -- that is the bull reading is under 30% -- 26-week future returns are on average, much higher, more than 4%. When things are at their most bullish -- as they are right now -- future returns average less than 2%.

To show you what a powerful contrarian tool sentiment can be in the long run, look at it this way: Bullish sentiment was 75% in January of 2000, just a month before a decade peak in the market, and it was at 19% in January of 2008, just prior to the bear market low of 2008. So clearly, extreme sentiment readings can be decent indicators of tops and bottoms.

So, if I were to use sentiment as some sort of long-term stock accumulation device, I might conclude that this really is the worst time to be accumulating stocks (even in a bull market). You want to wait for bearish AAII sentiment readings.

I can also think of it another way. What are the chances for the market to be lower at some point this year? The chances are pretty high. A decline of >=5% but less than 10% can be expected more than twice a year, according to Ned Davis Research. Such occurrences have happened more than 130 times in the last 50 years. A moderate "correction" of 10% or more can be expected about once every two years.

Now, that's the data -- the quantitative side. What about instinct? My instinct is that the market is extended and due for at least a 5% fall. This just meshes with the past action and the "feel" of the market. The market flattened out this week. and lost some momentum after a robust run. I would expect the action next week to be important -- a move to the downside could have a swift psychological effect and lead traders to book profits quickly. A fast move down to the 1425-1450 area would not be surprising.

[img:/assets/13/0216/1328]

Bottom line: I have not been adding to my portfolio. In fact, I have been selling some stocks. If I had cash I were looking at deploying into a new selection of stocks, I would wait for a better time before I started to build a position.

The New Rayno Portfolio is Here!

Fri, 04 Jan 2013 18:17:13 GMT

Here it is! The new Rayno Report Model portfolio for 2013. We have selected 13 stocks for 2013, in order to fight superstitious numbers with even more superstitious numbers (cheeky, eh?).

What exactly is in this portfolio? It is a collection of attractive stocks based on valuation and growth numbers. Our methodology looks for stocks that have attractive sales & profit growth relative to valuation, using forward P/E, return on equity, and growth calculations. The model likes a low P/E relative to its growth rate or Return on Equity. If the P/E is lower than its growth rate (PEG Is less than 1), excellent. If the P/E is lower than both the growth rate and the Return on Equity, fantastic! Lots of studies shows that stocks selling at a discount to growth and ROE outperform over time.


First Majestic Silver Corp.	AG	20.48	2.38B	0.79	10.91	1.22	0
IAC/InterActiveCorp	IACI	46.94	4.15B	1.81	12.4	0.59	2
Intuit Inc.	INTU	62.22	18.42B	2.76	16.55	1.27	1.1
iShares MSCI Emerging Markets Index	EEM	44.99		18.01			1.33
iShares Nasdaq Biotechnology	IBB	142.62		-2.54			0.59
Lindsay Corporation	LNN	81.26	1.03B	3.38	18.05	1.65	0.6
Northern Oil and Gas, Inc.	NOG	17.19	1.08B	0.81	13.04	0.48	0
Omnicare Inc.	OCR	37.5	4.15B	1.47	10.44	0.96	1.5
priceline.com Incorporated	PCLN	648.41	32.33B	26.45	17.32	1.03	0
Riverbed Technology, Inc.	RVBD	21.14	3.25B	0.42	17.31	0.99	0
Royal Gold, Inc.	RGLD	79.31	5.16B	1.62	28.75	4.29	1
SeaDrill Limited	SDRL	37.8	17.73B	2.12	11.86	0.6	8.8
Titan Machinery, Inc.	TITN	25.75	535.93M	2.12	9.76	0.59	0

The bulk of our stocks are you would call "low-PEG" stocks that meet this formula. This could also be known as a "GARP" -- or Growth at a Reasonable Price strategy, though some of these stocks are priced low enought in P/E terms to be considered value investing.

To be clear, not all of the stocks this year fall into this strict valuation criteria. There are two indices -- the iShares Nasdaq Biotechnology index and the iShares MSCI Emerging Markets index -- which is a bet that those sectors will outperform. And I've included two precious metals companies (First Majestic Silver -- AG; and Royal Gold -- RGLD) because I believe that precious metals will reassert their outperformance in 2013. Precious metals companies are typically valued on reserve values, not P/E ratios. I think both these companies are attractively priced and silver seems especially poised for upside in 2013. Precious metals stocks have been unfairly punished by the market in 2013 because of the perceptions that their costs are too high, however I think rising metals prices and profitability in 2013 will show these fears to be overdone.

Overall, in running my screens and analysis for 2013, I was surprised at the number of quality high-growth companies available at reasonable valuations. IACI (Nasdaq: IACI), Priceline.com (Nasdaq: PCLN), and Omnicare (NYSE: OCR) all fall into that category. I like Riverbed (Nasdaq: RVBD) and have been looking forward to the day where it traded at a PEG of 1 or less, and that day is here. On this basis, the market does not appear overpriced. Many high-quality technology names appear quite cheap.

The energy sector is also appealing to me. Drillers have sold off, but Seadrill (Nasdaq: SDRL) has attractive profitability and growth and pays an 8% dividend. Northern Oil and Gas (NOG) is a small, fast-growing oil-shale in the Bakken region -- one of the strongest economic growth stories in the world. Go where things are happening!

In the interest of getting the portfolio out, here it is. I will profile these companies in the coming months.

(Disclosure: At the time of writing, the author and his direct family members owned many of the shares included in this model portfolio. He plans to own all of them by the end of Q1.)

Portfolio Performance for 2012

Mon, 31 Dec 2012 09:08:51 GMT

Our model portfolio as reflected by the Investor Uprising Index is up 11% 2012, which is under-performing the S&P 500 index by 1% (it's up about 12% YTD). Yes there is one trading day left (today). I don't mind at all a positive double-digit year even if I under-perform the S&P 500, because I know that the model portfolio I have built is less risky than the market as whole and has done better in the long run. Personally I believe the S&P 500 is a flawed index.

As I have already mentioned, earlier in the year I left Investor Uprising, where we kept the new "IU25 Index" since 2010. That site is still up, but I will move my model portfolio back to the Rayno Report in 2013. Just a recap of the Rayno Report model portfolio strategy: When I suspended the Rayno Report Portfolio in 2010 to build the Investor Uprising site, it had a remarkable track record of 7 straight years with no losses. The model portfolio avoided the 2008 crash by being 100% in cash. The average annual return of the 7 public portfolios I published between 2004 and 2010 was a 52% annual gain.

All of this data has been transparent and published to my readers. I believe the methodology works and continues to work. The portfolio reflects not one single investing dogma, but a blend of things I've found work over time: 1) Looking for undervalued companies that appear to have been penalized by the market and 2) Spotting quality growth companies that are undervalued by the market (low-PEG stocks) and 3) Sticking with secular (long-term) trends.

My methodology is structured and refined. It is a multi-step process. I run tons of screens and look at every stock individually. I start with a bucket of about 30 ideas and reduce them to 10-12 for the year. Why do I think this formula works and it works consistently? Because it is disciplined and data-driven, it ignores the "noise" and emotion of the market. It's not driven by marketing hype or fads, which influences many of the "picks" in the media and by prominent brokers. In fact what you will find is some of the best performing stocks that have been selected by this formula were "discovered" when the market ignored them or didn't care.

Some of the best picks (with 12-month performance) have included Agrium (AGU), up 47%; Atwood Oceanics (ATW), up 12%; Celgene (Nasdaq: CELG), up 15%; Gilead Sciences (Nasdaq: GILD), up 78%; Priceline.com (Nasdaq: PCLN), up 28%, and Veeco Instruments, up 34%. All of these stocks were carefully selected after they screened for bargain valuations and my qualitative research determined that they would be good additions to the portfolio. I am still working on the list for 2012 which I plan to publish on January 6. It's okay with me that we miss a few trading days of 2013, I hope that's okay with you. There is still some more homework to do. Stay tuned: The list will be out next week.

Why I'll Be "All In" in Gold in 2013: $4,000/oz

Wed, 26 Dec 2012 10:42:05 GMT

I love it when the mainstream media goes negative on gold. That means I can buy more at a cheaper price.

This has happened again and again since the early 2000s when gold started to awake from its nearly 20-year bear market to enter a powerful bull market. We've chronicled it for you here for many years. In 2010, after an extended correction, I told you why it was going over $1,300. This bull move in gold is far from done.

Gold has been outperforming nearly every asset class since 2000, and I don't expect this to end. The recent correction and consolidation from 2012 highs of 1,900 to a recent $1,665 is a gift.

Why? Let me boil it down: Governments around the world have had nearly a universal response the deleveraging of the global banking system -- they are printing money.

The outcome of this "reflation" strategy is that many assets have risen since 2008, when global governments brought a coordinated monetary response to the financial crisis -- but gold has risen faster. See the chart below, which shows you that since the financial crisis, stocks have merely climbed back to where they were before the crisis but the price of gold has doubled.

[img:/assets/12/1226/1051]

Because the mainstream media and many run-of-the-mill financial pundits don't like gold -- and because many of these financial pundits are short-sighted -- they have seen gold's sideways consolidation over the last 12 months as "the end" of the move. I think it's just building a platform from which to launch its biggest move ever.

Why would I have such an opinion? And why should I have conviction? My studies show that over time, gold's strongest correlation has been with money supply. Money supply growth shows no signs of abating. In fact, when the Fed ramps up its latest asset-buying program in 2013, money-supply growth is likely to accelerate. See the chart below.

[img:/assets/12/1226/1050]

The consensus is that gold has already "had its run," and that financial markets will now seek out other assets as the reflation policy is continually pursued. By I ask, if the Fed (and other world governments) are doubling down on the reflation strategy, and gold has been the primary beneficiary of this strategy over the least 10 years, why wouldn't the gold run accelerate?

The piece that gives me the ultimate conviction on this is that historically, you can calculate gold price in relation to the money supply. For many years, under the direction of Former Federal Reserve Chairman Alan Greenspan, it became fashionable to poo-poo gold's role as a currency-backing asset. But gold's recent response to money-printing has shown this is far from true. Gold is reverting to its global role as an asset backing currency bases, because people no longer trust currencies.

Here is that calculation. US gold reserves are reported at about 8,000 tons, according to recent statistics from the World Gold Council (This, of course, doesn't address the conspiracy theorists, who say that much of this gold is gone, or has been lent out.) There are 32,000 ounces in a ton. Therefore, the US has gold reserves of about 256 million ounces. That’s about $435 billion of gold at the recent price of $1,800 per ounce. With the US currency base measure of M1 at $2.4 trillion, US gold reserves represent less than 20% of the monetary base.

Over time, gold has traded in a range of 10% to 50% of the monetary base. Granted, this has been a volatile relationahip, but we are closer to the low end of that range than the higher end of that range. During the Great Depression in the 1930s and the inflation panic of the late 1970s, gold rose to 50% of the monetary base in pricing terms. If you assume a more reasonable rate would be an average, or mean, of 30% of the M1, then the gold price would rise to accommodate a higher share of the M1. At 30% of the M1, gold should be trading at $2,800 per ounce. The chart below shows this relationship.

[img:/assets/12/1226/1048]

But that's not all. This calculation assumes a static M1 -- but in fact the M1 is increasing. In the historical correlation, the gold price can grow two ways -- it can grow as a percentage of the currency base, or the currency base can expand. I believe both things will happen.

The last time the Federal Reserve bought $1 trillion worth of assets, the monetary base grew by $1 trillion. This should not come as a suprise, as this is the method by which the Fed creates money -- for every asset it buys from the bankingsystem it electronically creates an equal value to purchase it. For 2013, the Fed has announced it will be buying approximately $85 billion in assets per month -- for an extended period. It looks like it could buy another $1 trillion or so of assets from the banking system, so it's possible that another $1 trillion will be injected into the monetary base.

This should not be shocking, as demonstrated by the chart above. Since 2008, the monetary base has grown by $1 trillion.

If you use those numbers, then the gold price whould climb closer to $4,000 per ounce, given the relationship between gold reserves and the monetary base I outlined above.

The bottom line: I still think gold is one of the best assets to protect your wealth from monetary inflation. If the Fed is going to double down on money creation, I'm going to double down on gold.

Fiscal Cliff, Schmiscal Cliff: Isn't it Just Reality?

Mon, 24 Dec 2012 10:54:33 GMT

Sorry, but no matter how much financial TV covers the fiscal cliff, I can't get worked up about it. They want me to get hysterical and panic, but my natural reaction to when the media is freaking out about something is to do the opposite.

Look at the housing bubble. Financial media discovered it after it imploded. You should have been worried about the housing bubble in 2007 when mainstream media was running features about people becoming millionaires flipping homes.

Anyway. Here's the thing about the "Fiscal Cliff" -- or FC as I will now call it. It's reality. It's like if you had a bad business that kept losing money and eventually you can't make a mortgage payment. FC is the day the sheriff comes to take possession of your home. You can think of it as an end or you can think of it as a beginning.

FC is a result of reality. "Sequestration," the name for the automatic budget cuts and tax cuts that will kick in in 2013 if Congress doesn't come up with a deal, is the fancy name for finally trying to pay your bills. The Democrats aren't real about the problem. The Republicans aren't real about the problem. The Democrats think you can raise taxes a little bit, tweak the inflation numbers in Medicare, and be alright. The Republicans think that you should implement more of the supply-side tax cuts that haven't worked in 10 years. They're both wrong. You need huge, real structural reform in government. Start by cutting the salaries of Congressmen, and go from there. Cut loopholes. Stop the mega-banks from levering up on financial derivatives. Carried interest: Acknowledge that it's just Mitt Romney's paycheck. Reform the entitlements. Get real with the American public.

And if nobody can do that? Well, welcome to austerity. I find some relief in austerity, in that at least we will no longer be living in denial. I will have less money next year. You will have less money next year. But the first step in recovery is acknowledging you have a problem.

If the FC happens, will the markets freak out? I have no idea. So far, it seems to be that there has been a fairly high probability that the FC would happen, and the markets have rallied. So maybe they know something we don't. Maybe they know that denial is bad.

How to Survive this Market Creaming

Sat, 17 Nov 2012 10:29:54 GMT

This is a pretty withering market correction. Down six of seven days, with the sharp selloffs pummeling Apple as if it's suddenly become some two-bit OTC stock.

Friday's big reversal, especially in Apple Inc. (AAPL) holds some hope. To me it is the early hint that the bottom may be in. Next week will be very important because there is a big meeting of Euro finance ministers on Tuesday morning. Any sharp reversals this week will be bought by a lot of institutional investors.

You have to stand tough. Over years, I've tried to develop a psychological and statistical framework for investing that I promote here on the Rayno Report -- which requires that you ignore the emotions of the general market. Our approach is to accumulate superior stocks with a low valuations relative to their growth rate.

If you are targetting low-PEG stocks you increase your chances of outperforming over time. It can be painful in times like this, but the point of using such a discipline is to try to take some emotion out of it. The entire point of targeting low-PEG stocks is that you are buying stocks with lower risk and this, even if you time it wrong or even buy the wrong stock (it is very hard to time the market or even buy every stock correctly), you have a statistical advantage of coming out ahead over time.

The most emotional times in the market tend to generate the worst decisions. That's my experience, anyway. It's best to ignore your emotions when you are investing in the market -- otherwise you'd be buying in January, 2000 and selling in March, 2009.

That doesn't mean there isn't pain. I added Apple Inc. (Nasdaq: AAPL) and Cirrus Logic Inc. (Nasdaq: CRUS) after my last update, and since then there is no doubt that I've I've been creamed with these new buys. But I'm standing tough. With a forward P/E of near 8 and long and short-term cash of close to $120B, the selling in Apple is getting ridiculous.

The good news: More great stocks are getting even cheaper. ln the next few weeks I will be working up a list of great stocks at discount prices for the end of the year, which I intend to publish before January 1. So stay tuned for the new list.

In the meantime, I've picked up more biotech shares, including the IBB. The next article covers that.

Biotech: The Forgotten Bull Market

Fri, 16 Nov 2012 18:51:52 GMT

I've often joked that I should have dumped everything I own into gold and biotech during the financial crisis of 2008. But it's not a joke. Both have outperformed all of the major indices by a longshot.

In the case of gold, I think there is a broadening public understanding of its outperformance and its role to protect wealth in the face of every-increasing central-bank operations. In biotech, not so much. The average Joe on the street doesn't even seem to understand the basic biotech stocks or how much innovation is occurring in the industry.

Meanwhile, the broad biotech indices are up 60% since 2008 -- before the financial crisis.

Mainstream Wall St. -- and the media -- have largely missed the great biotech bull market. Rayno Report has given you plenty of ideas though. Including this juicy biotech shopping list from July of 2010!

First of all, let's take a look at the IBB, a broad biotech index ETF. For the record, I bought the IBB yesterday, adding to a collection of stocks I've owned for many years including Celgene (CELG) and Gilead (GILD). I bought the IBB because it has pulled back a bunch and it is on my list of things I've always wanted to own more of. Here is the chart:

[img:/assets/12/1116/1855]

Do you think that anybody that owns the IBB is complaining about the miserable decade in stocks? I didn't think so. If you are wondering what the IBB is, it's a large cap biotech index that holds many of the top biotech names such as Amgen (AMGN), Alexion (ALXN), Celgene (CELG), Biogen (BIIB), and Vertex (VRTX). It has also just undergone a big correction. So if you want more biotech exposure, this would be a place to get it.

Now let's look at the Biotech bull market compared with the S&P:

[img:/assets/12/1116/1856]

Are you kidding me? The IBB is up 60% in five years, as measured from January, 2008, before the market crash. The S&P 500, on the other hand, is still underwater -- or just about barely breakeven -- in that timeframe. That is impressive outperformance.

What's going on here? Yes, there is a bit of a momentum factor going on. Many large hedge funds have been "hiding" in biotech because with low macro-economic exposure, it has been sheltered from the global economic storm.

But there's more to it than that. Many of the individual stocks I called out here were identified as value picks in the last five years because of their relatively low price with respect to their growth rate.

My former site Investor Uprising published Guide to Biotech Investing, written by Rod Raynovich (my dad), in 2011, that told you everything about the bull market. We worked really hard on that report. We even told you what monoclonal antibodies were. It was amazing how little hype or interest there was when the report came out. People literally did not care.

That report outlined a lot of reasons for the bull market in biotech: More demand for R&D-based biotech drugs, less R&D spending and more acquisition by big pharma, more healthcare spending, and the fact that healthcare and drugs, are, in general, less susceptible to macroeconomic trends. But again, the world has just about ignored it! And still ignores it!

The bottom line: This bull market is still going strong. And I still like it. For a list of biotech stocks go see Rod Raynovich's regular biotech stock update. If you just want to cover the whole sector with an ETF, the iShares Nasdaq Biotechnology Index (IBB) or SPDR S&P Biotech (XBI) would have you covered.

(Disclosure: The author owns IBB and many individual biotech stocks included in the index, including Celgene and Gilead).

A Market Pragmatist's Reaction to the Election

Mon, 12 Nov 2012 09:02:10 GMT

The U.S. Election presidential election is over. Capping off one of the more partisan election seasons in memory, that means surly neighbors around the country now can exchange retorts of "I told you sos" and "go away." The simmering, partisan feuds in my own extended family have already upped the ante for potential holiday-season disaster.

Media pundits have jumped all over last week's selling, explaining it as some kind of Obama protest vote or a mini nervous breakdown about the "fiscal cliff." That's silly. First off, the sell-off was triggered by bad German economic numbers, not the U.S. election (the market actually intially rallied on an Obama victory, then sold off in the early morning hours after German industrial production numbers were released).

Secondly, if you view the election empirically, an Obama victory would be bullish, as the data is unambiguous that "the market" favors Democratic presidents. Democrat presidents have precided over better returns than Republican candidates -- by a margin 38% to 8% in inflation-adjusted returns, according to historical research (see "The U.S. Presidency and the Stock Market: A political relationshiyps study of the market performance," written by Ray Valadez and Marshall Nickles.").

So, that data clearly dispels some myth still held by media pundits that somehow a Republican victory would boost the market. Blaming Obama for a randomized set of market losses in four days of the year has few statitistical legs to stand on.

If you are a bear looking for data to support your thesis, the presidential cycle theory paints an uglier picture. Markets tend to perform poorly in the first two years of a new presidential term and better in the last two years. We just capped two year of excellent returns -- in the better half of the election cycle. The presidential election cycle theory was popularized by Stock Trader's Almanac author Jeffrey Hirsch.

The idea is this: During the 3rd and 4th year of a Presidential term, the market is likely to perform better as the incumbent introduces policies designed to stimulate the economy just in time for the election season. Note that this theory tends to work regardless of who is in power.

But focusing on these somewhat short-term data points also ignores the larger forces at work with the economy: The global deleveraging cycle. This is something that won't be solved overnight by the politicians in Washington D.C. or Brussels, but at least the early indications are that it's going okay -- at least in the United States it's not nearly the disaster that some paint it to be.

The sad loss of this past election season was that these issues were not adequately explained to the general public. The debate was framed over classical economics in the context of just another cyclical downturn: Should the respnonse be Keynesian or supply side? This is no ordinary cyclical ecomomy: It's a 50-year global credit deleveraging cycle.

Historically these have taken decades to resolve. If you're wondering why the boom years of the 1980s and 1990s felt so good compared to today's World is Flat days, the answer lies in the credit deleveraging cycle. We're now paying the price of decades of credit build-up -- and then collapse.

Look at the chart below, and you can see what credit de-leveraging -- the removal of private credit from the system -- means for the American consumer. The era of borrowing and spending is over. People are now saving and cutting back -- and have been for years.

[img:/assets/12/1112/0918]

I suppose saying this during a nationally televised Presidential election is wonkish and would not be fully understood by the Mom & Pop. "Sorry, folks, but we are deleveraging the largest shadow banking credit bubble in history -- you're going to have to wait five more years."

People don't want to wait. They want stuff now. That's our problem in a nutshell.

The good news? According to Ray Dalio, one of the world's best hedge-fund managers, he thinks the United States is doing a decent job of deleveraging while Europe is doing miserably. This is Dalio's "Beautiful Deleverging," a combination of monetary stimulus and active reduction in bank balance sheets. You can read an interesting interview with Dalio on the topic here in Barron's. If that's not enough, he's written an entire paper detailing the "Economic Machine," and explaining how the current downturn is no ordinary cyclical downturn, but part of a a once-in-a-generation 50-year credit deleveraging.

Looking at deleveraging in the political context, private debt has been slowly reduced, but much of it has been transferred to sovereign balance sheets in order to "save" the financial system. This is what brings us our heated political debates. That can be seen in the next chart, where the public debt inflates to "fill in the hole" to meet the evaporation of private debt.

[img:/assets/12/1112/0925]

We are at an interesting juncture there, as those lines above are close to meeting. There is no doubt that the explosion of sovereign balance sheets poses great risks, but the question isn't if we need to reduce the sovereign budgets and balance sheets, it's when. Moderates such as Dalio and Jeremy Grantham argue that you need to approach the sovereign de-leveraging slowly -- while the private credit de-leveraging takes place. If you don't cushion the collapse in private sector debt with some sort of public offset -- either monetary or fiscal -- the economy would have completely collapsed. So far, the healing of the markets over the last four years has proven them right. But we're not out of the woods yet.

Yes, now that we've deleveraged banks we need to start thinking about deleveraging the government, but it's a delicate balance that can easy be thrown off track. Yes, they'll need to fix the budgets, but be careful -- global deleveraging cycles do not respond well to sharp right turns. A slow, bit-by-bit approach without any radical right or left turns makes the most sense.

In Dalio's model, you cut budgets slowly and if you raise taxes -- you raise them slowly. Meaning, you don't do what Europe did: Full-bore austerity. Meanwhile, the Fed, fully aware of the problem, is undertaking the largest monetary relation in history, attempting to push up assets with its ever-powerful printing press. This process will continue, until there is sufficient inflationary pressures in the in the system to force banks to lend again. This is why owning some gold as protection is not a bad idea. It's good insurance. It's also a reason why gold has been in one of the strongest bull markets in history.

As for the stock markets? Our markets have accurately reflected the credit-cycle deleveraging. Price/earnings ratios have been compressing for a decade. This has produced 12 years of mediocre returns to compensate for the great bull run of the 1980s and 1990s.

Is it possible we can explain this action with plain-old reversion to the mean? Yes, it is. Credit acceleration fueled economic growth and consumption for many decades. Deleveraging produces retrenchment for a typical 15 years or more. It's that simple. Democrat or Republican Presidents be damned, you can't fight the 50-year credit deleveraging. You have to embrace it.

Be patient, because we are nearing the end of one of the worst market periods in history. Develeraging will take another five years. In the meantime, as Apple Inc. has shown us, you can still find winners if you pay attention to stocks that are priced cheaply relative to their growth rate.

The recent selloff seems a bit overdone to me. With the Fed still putting its foot to the floor, you should still buy cheap stocks in this dip. Yes, by the end of this deleveraging cycle P/Es will be more compressed than ever in history. But with a disciplined approach to value stock selection, that means you are being afforded to buy stocks more cheaply than ever before, regardless of who is president.

Gold Update: Another Opportunity

Sat, 27 Oct 2012 09:56:57 GMT

Gold has just undergone another one of its swift and painful corrections. After bottoming in July in the $1550-$1600 range, gold vaulted $200 in just two months, nearly kissing the magic $1,800 per ounce. A reaction has followed, with gold being knocked down back toward $1,700.

This type of action is typical in the gold market, which is volatile and enigmatic (and some say controlled by nefarious sources). However, keep in mind that gold, as an asset class, is still in a strongsecular bull market. Gold has been best-performing asset class over the last decade, averaging 12% per year.

I think it will continue. It is part of the "relation regime," led by the U.S. Federal Reserve and central banks around the world as the print money to save their banking system. For this reason I still think investors need to own some gold and I think this is a buyable correction.

The first question you might ask is won't the gold bull market end? Not soon. My work shows there are major trends that support the gold bull market. Here are the biggest ones:

Money Supply Growth. Following the financial crisis of 2008, the U.S. Federal Reserve has followed a policy of "reflating" the economy by pushing down interest rates and increasing money supply. The price of gold has a historically high correlation with growth in the money supply. This policy is not likely to end any time soon. In fact, the continuing crisis in Europe and the advent of Quantitative Easing III (QEIII) by the Fed is likely to accelerate the trend.
Negative Real Interest Rates. Gold does well in an environment of negative real rates. You calculate the real interest rates by subtracting the inflation rate from the yield on the 10-year treasury note. Treasuries are yielding about 1.75%, inflation is running at an official rate of 2% but an actual rate of 3% or higher if you use other measures. So it's clear the real interest rates are negative.

I think these two trends are part of the current "Fed regime," that is the policies of the current Fed. Ben Bernanke's pledges to keep interest rates unnaturally low until 2015. His term is up in 2014. Recently threats by Mitt Romney to not keep Ben Bernanke in 2014 have contributed to the recent weakness in gold. The market fears that if Romney is elected, you will get a more hawkish approach to interest rates.

This is crazy. The world economy is far too weak for politicians to risk jacking up interest rates now. The global banking system is still enormously fragile. They are terrified of this. They will continue to print money.

So where does that leave us with gold? Below is a three-year chart of gold futures. Gold recently sold off hard down to a Relative Strength Index (RSI) reading of near 25. When the RSI gets into the 20s, this has typically been a goold time to buy gold.

[img:/assets/12/1027/1055]

You can also see that gold has been in a large one-year consolidation pattern after its aggressive run from $1,500 to $1,900 in 2011. There is recent support near the 200-day moving average at $1,660. This consolidation has formed a "wedge" pattern which will likely be resolved by the end of the year. My expectation is that it will be resolved to the upside -- possibly in an explosive way.

Low-PEG Stocks: Apple, Syntel, and Cirrus Logic

Sun, 21 Oct 2012 13:40:12 GMT

As you know, The Rayno Report is religious about finding low-PEG stocks. Like a little child before Christmas, I get excited about finding them under the tree. Some of our low-PEG Hall of Fame stocks are Apple (Nasdaq: AAPL), Celgene (Nasaq: CELG) and Gilead Sciences (Nasdaq: GILD), low-PEGers that we found on these pages before they steadily took off like rocket ships.

What's a low-PEG stock? It's a stock that is priced by the market below its growth rate. Common wisdom is that "growth" stocks, with fast rates of profit and revenue growth, receive premium market valuation -- they have earned the right to be expensive. But what's interesting is that the market doesn't always assign a premium valuation to growth stocks. Sometimes they can be found on sale, for whatever reason: the market is skeptical of the name, the market thinks that growth will slow, there may be issues with the company, or our favorite reason -- the market is being irrational and wrong.

The reason I like the low-PEG stock strategy is that it lowers the risks you take for the potential for great rewards. Odds are, the crowd is wrong that a high-growth company should be valued below market rates. Take a look at Apple: the crowd has been proven wrong again and again.

These are the specific situations we seek: the market irrationally pricing in a cheap valuation on a quality growth name. So how is valuation "measured" and rationality assessed? Fortunately we have metrics like the price/earnings ratio and the PEG ratio. I like to define cheap or expensive in the terms of the price/earnings (P/E) ratio, which is generated by dividing the share price by the earnings per share (EPS). The PEG ratio is generated when you take the P/E ratio and divide that in turn by the earnings growth rate. Let's take an example: Let's say fictional Community Growth Corp. has a share price of $20, earnings of $2 per share, and a growth rate of 15% annual. The P/E ratio would be 10 ($20/$2) and the PEG would be .66 (10/15).

A low-PEG stock by my definition is any stock trading below a PEG of 1, meaning that it's P/E ratio is lower than its earnings growth rate. You might think by my description that low-PEG stocks are rare and hard to find. Oddly, in this market, they aren't! In fact Apple Inc. (Nasdaq: AAPL) by definition has been a low-PEG stock throughout its meteoric rise.

In fact, it seems like every time we run a stock screen of your basic Low-PEG ideas, Apple pops up. But everybody knows Apple right? Its PEG is currently an absurd .48 -- low for what is considered basically to be the best company in the world. Why is this? I think the market discounts Apple because 1) it is so huge and 2) it's worried that at any minute one of its core franchises will come under sudden pressure 3) Highly publicized manufacturing issues with labor and quality control problems in China. Apple stock just dropped $100, trading closer to $600 than its all-time high of $700. If you think any of these issues is overdone buy the thing.

What about some new stuff?

I spent some hours on the weekend looking up some screens and scouring the charts for some interesting names. Two I like that meet my valuation criteria are Syntel Inc. (Nasdaq: SYNT) and Cirrus Logic Inc. (Nasdaq: CRUS).

Syntel is an IT outsourcer based in Troy, MI. Specialities include data warehousing and Web solutions, with a focus on the financial and healthcare sectors. Syntel has very solid numbers including annual net income of about $180 million on revenue of $708 million for an operating margin of 33%. It's got zero debt and $422 million in cash -- nearly $10 per share! With Syntel's shares recently trading hands at $61, it had a forward P/E of about 15 and a PEG of .87. Pretty good numbers for a company with mounds of cash, no debt, and large margins. I love situations like this.

Stock #2 is a little more well-known -- it's Cirrus Logic Inc. Now, Cirrus Logic is a manufacturer for Apple, so if you own Apple you need to be aware of the correlation. But like Apple and Syntel, Cirrus has great numbers. What's good about it is that with a $2.4 billion valuation, there is still a lot of room for growth. Cirrus earns about $90 million per years on $433 million in revenue, for a profit margin of about 19%. It's got a return on equity (ROE) of 20. The forward P/E is 12 and the PEG is .80. All of these are good numbers, in our book. In the last year or so the company has doubled its revenues and quadrupled its profits. I don't see any reason why it can't do that again, yielding a doubling in stock price.

Those are our stocks for the week. Let's see what the screens come up with next week -- I'll have more.

Apple CapEx Explosion: Projecting $1,600 Per Share?

Sun, 07 Oct 2012 10:48:40 GMT

Apple cracked $700 in early September and has now pulled back sharply. It seems to me the pullback has to do with investor concerns over a possible labor strike at Foxconn, Apple's Chinese manufacturing facility.

Certainly, there should be concern. Conditions at Foxconn have been the subject of much controversy, and a plant-wide strike has the potential to shut down iPhone 5 production. But in the past, these things have passed. And they probably will again. More importantly, analysts I have spoken with say Apple could be prepping a huge fourth-quarter product push that many include not just one, but two new products.

The products would be a new iPad as well as the famous Apple TV everybody has been waiting for. If you don't think that Apple is prepping something big, you need to look at this very interesting analysis published by Horace Dediu the ASYMCO Website. Dediu demonstrates the relationship between Apple's groth in Capital Expenditures (CapEx) and revenue growth in new products. What's interesting is that CapEx is a leading indicator because Apple budgets this ahead of the production schedule, so you can see what the company is expecting.

In some shocking graphs, Dediu shows that CapEx has exploded in the just-ended quarter, to a new high of $3 billion, which is almost double what Apple has produced in the past -- just a few quarters ago. This sets the stages for a historic fourth quarter for Apple. Using historical data, Dediu attempted to project the relationship between share price and capial spending, based on what types of revenue growth has occurred in the past after CapEx jumps. According to him $1.5 billion in CapEx -- achieved just a quarter ago -- equates to a share price of $800. If history is any guide, Apple's $3 billion in CapEx would correspond to a doubling of share price from there -- to $1,600.

Of course past history is not guarantee of future results. As of this moment, the market believes a bigger concern are the working conditions in Foxconn. Will it be yet another grand buying opportunity for Apple? I have picked up some Apple shares in the $660 area on this weakness. That's a nice pullback from the all-time high of $700. Apple stock is still cheap with a P/E in the 14 range and a PEG of .63, so it's worth holding. I would no want to miss out on a possible explosion to $1,600 per share

Disclosure: Long Apple

Model Portfolio up 32% YTD

Fri, 21 Sep 2012 14:50:55 GMT

It's been a while since we've updated the goings-on in our model portfolio, which tracks selections based on our proprietary stock-selection formula.

In 2011 I moved my stock-selection process over to www.investoruprising.com, a new Website that I built with UBM for PR Newswire. We created an index based on our stock selection system called the Investor Uprising 25 (IU25). The IU25 Index, which can be tracked in real time here, is up 32% Year-to-date (YTD)! That beats pretty much all of the major averages.

Although the index still has a short track record -- less than 24 months, the way it has behaved affirms my general strategy for picking stocks and building a portfolio -- it requires sticking to a very disciplined, long-term approach based on a value criteria. I don't necessarily buy stocks when everybody likes them, and I don't necessarily buy stocks when everybody hates them (though we try to buy more in the latter case). What I do is try to do is buy the best individual stocks with the most reasonable valuations at certain points in time.

Think of it as shopping for clothes... you want to get the best clothes at the most reaonable price. That requires going shopping often and maybe having to wait until things are on sale.

Here's how I operate my stock-selection system general: I run computer screens of the market and get a group of interesting stocks. Then I further research and analyze them until I believe I can narrow the selection down. I would describe the filtering process as such: 1) Good valuation? 2) Good growth record? 3) Good company? It's very rare that people buy stocks because of these three reasons. I believe that if you look at each particular case, you further reduce the risk in buying a stock. A great company can be available at too high a price. A stock can look cheap until you look under the hood and see the company is terribly managed and not an industry leader.

When all things come together great things can happen. An example I am most proud of is Gilead Sciences (Nasdaq: GILD), one of the IU25's core holdings, which I banged on about for many years. It is a great company, very well run. It got extraordinarily cheap, with a P/E under 10 as it traded as low as the mid-30s. People hated it in 2010. Have a look at the chart, it's very interesting! I bought it, because I believed in the company and I believed in the value. It is now one of this year's best-performing stocks with price north of $60 and just this week hit a new 52-week high.

Because this system ignores the natural bi-polar action of the market, which tends to oscillate between euphoria and panic, we are not always acquiring the trendiest and hottest stocks of the moment.

A great example of this is that we were buying gold stocks when everybody hated them. Often what we acquire are considered "dogs" -- because their valuations are cheap. For this reason, the approach requires patience. Buying mining stocks was the right thing to do, because they were cheap and they have roared back ferociously.

But conversely, we don't necessarly always buy things when they are beaten down. They can still be climbing -- as long as they are cheap relative to the growth rate. A great example of this is Apple, which has always been in our index. The reason? It's always had a very reasonable valuation -- a P/E below 12 generally -- with a high relative growth rate. Apple has historically been a cheap buy in the market.

Another great example is that a few years ago, during the 2009-2012 timeframe, my screening system was spitting out lots of drug stocks such as Merck (NYSE: MRK), Pfizer (NYSE: PFE), and Abbott Labs (NYSE: ABT). They were also paying outstanding dividends, sometimes above 5%. I bought some of these, but the process was painfully slow. These stocks were coming out of 10-year bear markets, and they flatlined for a long time before starting to climb again. But recently they have been outperforming very well.

Using such a system to outperform the market can be boring, because it is often slow, and requires patience. This is not a rapid-fire trading system. It requires trusting the system. At several points in the last year, the IU25 Index and my model portfolios were lagging, bringing out cirticism and self-doubt. But working through this and having patience is the hallmark of great investors.

All of the data on the IU25 Index, which was launched in April, 2011, can be viewed here.

Here are a few facts about the IU25 Index:

Performance, YTD: +32%

Performance, 12 months: +33%

Performance, six months: +6%

Over the last 12 months: 17 gainers, 8 losers

Two biggest gainers: Apple Inc, up 70%; Gilead Sciences, up 65%

Two biggest losers: First Solar, down 72%; Cliffs Natural, down 42%

A word about the future: There will be changes coming and I will be building a new model portfolio for 2013. The reason is that I am no longer with Investor Uprising. Going forward, I will continue to update you with stock selections and new model portfolios on the Raynoreport.com Website. Please check back for updates!

Big Winner: CF Industries Hits New All-Time High

Wed, 18 Jul 2012 12:19:33 GMT

Always pay attention to new all-time highs, they are telling you something. Fertilizer producer CF Industries (NYSE: CF) has done just that this week, hitting $208 per share today, a new 52-week and all-time high.

CF has been helped by an agricultural boom, with corn and wheat prices skyrocketing from a U.S. drought, all in the face of rising global grain demand. But for anybody that dismisses this as just another commodity company is ignoring the company's incredible
track record. With a twelve-month return on equity of 39% and an operating margin of 46%, this is a finely tuned machine. There is a reason it is #1 on Barron's list of 500 best companies.</p>

The attractive numbers read like a wish-list of good investments. In addition to those great ROE and profitability numbers, CF has been growing profit and revenue at a 30% annual clip, it's got $1.7 billion on its balance sheet (with $1.6 billion in debt), and a book value of $75 per share. Operating cash flow is $2 billion per year. The company pays a .8% dividend.

I would expect that with such outstanding results you can expect the company to increase the dividend soon.

What's the key to success? In 2010, CF purchased another large fertilizer, Terra, making it the largest fertilizer producer in North America and the second largest in the world. The company has done an outstanding job of integrating those assets and strategically placing fertilizer plants all over North America, optimizing shipping routes and logistics.

The most amazing thing about CF is that it is not unusually expensive, perhaps paying the penalty that it is a commodity producer subject to the pricing swings in fertilizer. The average analyst estimate for 2012 is 26, giving it a P/E of only 7. However many analysts see earnings pulling back to $20 per share in 2013, which would give the company a P/E ratio of 10. Still not too high for a company with such high ROE and profitability numbers.

I think it's still a buy. CF fits our formula for value investing almost perfectly. Buy low-P/E. stock that have high profitability and high ROE. It's a buy and a long-term hold, and the new share-price breakout lends more confidence to the holding.

(Disclosure: I hold CF Industries in personal accounts.)

The Next Value-Added Mobile Services

Thu, 12 Jul 2012 10:12:16 GMT

Have you noticed that mobile networks are becoming increasingly commoditized and more efficient for the consumer? Years ago, text-messaging was a value-added service, now bundles of unlimited text messages are common. And while unlimited data plans are no longer widely available, mobile bandwidth is becoming cheaper and more plentiful. The ultimate trend is that profit margins in pure connectivity and basic services are becoming tighter for mobile service providers.

Another big threat to the mobile operators is the app and social-media revolution. This puts pressure on their own messaging services, such as SMS, as users migrated to social-networking tools such as Facebook and Twitter to communicate with other users over the mobile platform.

So, as usual, mobile providers have to look for ways to diversify into new revenue streams. Clearly the app ecosystem is one place to look, although it's unclear exactly how mobile providers can profit from apps as many apps are downloaded from third parties. In the case of the Apple OS, it's Apple that controls the revenue channel -- and clearly service providers have made little headway in breaking down that relationship.

So what's next? Service providers have to look at a spate of new potential business models as the mobile device takes over the world. Here are the top contenders for new revenue-generating services in the mobile network:

Mobile Payments. Nearly every day I experience a "it would be nice to be able to pay with my phone" moment. We are moving in that direction. In one example, Starbucks has released an Android app that allows customers to pay with their phone. But to me, mobile payments should become pervasive -- as easy as swiping your card at the gas station. Service providers can step in providing secure ecommerce connections and taking a piece of the transaction.

Cloud Services Store your contacts. Back up your files. Replicate data. It's an important feature that service providers and charge a bit extra for if they do it right.

Mobile Health Hi-performance mobile health systems have much promise for service providers because by improving network connections and reliability, service providers could demand a premium. For example, if a patient and health-care provider require a remote-monitoring health applications, service providers could step in by providing high networking reliability and quality of service.

Enterprise Connectivity Services. The number-one headache for the corporate IT manager these days may be the bring your own device (BYOD) phenomenon. But this is where service providers can step in, providing outsourced management and security services. The number-one concern for enterprise managers is mobile security, which is a growing market. Service providers can step in and provide a more secur environment using tools such as Virtual Private Networks (VPNs), remote-monitoring, and anti-virus security features.

I expect to see more and more news about this in the next two years, as service providers and app developers step up the pace of innovation to find new mobile business models. Below is a collection of news of just some recent developments over the last week or so:

Starbucks announces new mobile payment app

Startup adopts Qualcomm platform for remote health monitoring

Healthcare sector to spend $69 billion on telecom

Telefonica to launch European mobile security service

CIOs cite cloud and mobile as spending focus

Apple's Formula for Domination

Sun, 29 Apr 2012 11:39:12 GMT

Apple is probably the best business competitor in the world. And when you win, eventually you will have to deal with anti-trust accusations, much as Microsoft dealt with in operating systems in the 1990s. Anti-trust actions are famously difficult to prove, but I think in the coming years you'll hear more about it with Apple because it controls huge amounts of business.

I wrote about this a couple weeks back on Investor Uprising, but I thought it would be good to summarize what about Apple makes it so dominant in the market... for, well, everything.

Apple, after all, is not just growing in one segment. It's actually taking huge chunks of profit out of entire industries.

Apple also enjoys fatter profit margins because of its vertically integrated model -- which has come at the expense of telecom providers who must subsidize customers' never-ending thirst for iPhones and iPads. It also allows Apple to build in excess profits into components such as chips, because it can charge a premium.

Let's just look at some facts about Apple's dominance.

Apple has single-handedly boosted the stock market. Bloomberg tells us that Apple alone has accounted for 8% of the S&P 500's rise since the 2009 bottom. And Barclay's analysts recently pointed out that Apple has had an outsized influence on the markets, accounting for 15% of the growth in all of the S&P's rise this year. They estimate Apple contributed four times its weight to the index by having outsized profits. So maybe the government should launch an inquiry into Apple controlling the stock market.
Apple's profits account for most of recent profit growth. According to FactSet research, if you subtract Apple's earnings from the market in the fourth quarter 2011, profit growth for all of the S&P 500 was -1.6%. With Apple profit growth added back in, overall profit growth was flat. That's right folks -- without Apple, there would be no growth in profits. It alone accounted for all of the profit growth in S&P 500 in the last quarter last year, and FactSet expects Apple to the be the largest source of earnings growth in Q1 2012.
Apple leverages major telecoms through subsidies. The retail price on a new iPhone can be as high as $600. A telecom carrier will sell it to you for $199. Think about Apple's core sales channel: telecom operators. Apple has so much leverage that it can largely dictate the terms in these relationships so that telecom operators subsidize sales of its devices.
In extreme cases, such as the deal with Sprint, the subsidy is a simple transfer of wealth from carrier to Apple. Sprint tagged its subsidy expense at $1.7 billion, up from $1.2 billion a year earlier. Some analysts predict this can't last, that Apple has to give back more of its profits to carriers. But Apple's immense leverage means it can dictate the terms.
Apple is taking over all of retail electronics. Blog site Zero Hedge recently calculated that Apple's market capitalization now surpasses that of the entire retail industry. How is this possible? Well, as i-devices have added functionality such as music, communications, and video, they have eliminated entire segments of the industry. Maybe this is contributing to Sony's recent woes. Once you have an iPad, you need a portable DVD player?
Apple's winning the smartphone profit battle. Though it's having a see-saw battle with the Android-powered mobile phones and can't quite gain majority market share, Apple recently gained some share back and now represents 43% of the smartphone market to Android's 53%, according to the NPD group. But more importantly, Apple makes more money in this market. Keep in mind that Google does not profit on Android directly because it gives its operating system away for free to phone manufacturers, whereas Apple controls its own manufacturing from the Operating System (OS) to the memory chips. Apple's model results in more profit, because it can charge more for all of the components in its product, including the OS. Even though it's not winning top market share, Apple is winning on profitability.
Apple controls digital music. Remember the music industry? Apple's influence and control of digital music is still growing. It now accounts for 69% of all digital music sales. Amazon is a distant second with 8 percent, according to the NPD group. Apple's growth in digital sales means it now serves up about 25% of all music units, which includes physical units (even though Apple sells no physical music units), according to the NPD group. That's up from 14% in 2007.

I think that Apple's growing power and dominance in a number of industries is likely to be a topic for trade regulators for some time. The regulators have plenty of areas to mine, most notably Apple's control of the relationships in the telecommunications sales channel.

Will they make any progress? It may take years and years, but eventually you may see more legal action against Apple in the realm of anti-trust actions.

Don't get me wrong: I think Apple earned the control of markets that it has. It has better products, and it's a better company. We're also not crying because Apple is one of the leading components of our IU25 Index, which is up 35% in one year.

But it's not just about e-books. Apple's immense control now extends to the broad range of the entire business universe.

Some New Stock Ideas

Mon, 12 Mar 2012 12:30:01 GMT

Our screening system has delivered some great stock ideas over the years. Our screen looks for leading companies whose valuations are reasonable in relation to growth rates and Return on Equity (ROE).

Here's an example from February 11, 2010 -- in which I said Microsoft, Apple, Sybase, and Gulfmark Offshore were buys:

Stock Buys for the Baklava Bailout.

Solid picks from two years ago. Sybase was bought at a 40% premium, Apple has doubled, Gulfmark is up 40%, Microsoft is up about 15% and has paid you a 3% dividend all along.

I frequently publish these screens and send them to readers and friends. Their first instinct is to analyze every pick. "But isn't Microsoft shrinking Windows deployments?" Don't do this. The point of a screen-based portfolio is to follow the computer and ignore your more likely faulty human logic.

Even if you have sector-specific "knowledge," it can be damaging to use it. The numbers don't lie. Often when companies are cheap it just means they are cheap, and then suddenly somebody buys them. This is exactly what happened with Sybase just three months after it made my screen.

Look at Apple. How many people underinvested in Apple? How many people tried to over-analyze whether they could expand another market, like Pad computing? The stock has been cheap for six years. It's still cheap -- currently trading at a forward P/E of 12.

Enough said. Here is the new screen, which I have published on Investor Uprising in our new Market Report.

Disclosure: I currently own Buffalo Wild Wings and I am looking to acquire more of these stocks over time. Positions can change at any time.

Table 1: Our Stock Shopping LIst

Ticker	Company Name	Price 2/29/2012	Market Capitalization (mil.)	Forward P/E	Return on Equity (%)	Yield (%)
AAPL	Apple Inc.	514.85	480,031	12.108	36.6	0
ALTR	Altera Corp.	39.11	12,608	21.608	28.3	0.83
BWLD	Buffalo Wild Wings	86.38	1,586	26.335	15.9	0
CAT	Caterpillar Inc.	115	74,361	12.105	38.3	1.6
CLF	Cliffs Natural Resources, Inc.	65.47	9,298	6.749	32.16	1.76
CMI	Cummins Inc.	123.3	23,779	11.913	33.6	1.3
HD	Home Depot Inc.	46.92	72,330	16.55	20.8	2.47
KLAC	KLA-Tencor Corp.	49.06	8,180	11.681	27.25	2.88
PCLN	Priceline.com, Inc.	632.76	31,511	20.043	47	n/a
QCOM	Qualcomm Inc.	62.78	106,187	16.741	15.7	1.37
TPX	Tempur-Pedic International, Inc.	78.72	5,023	20.185	208.2	n/a
UNH	UnitedHealth Group Inc.	55.32	57,807	11.525	18.2	1.17

CES: What's Hot, What's Not

Mon, 16 Jan 2012 13:06:02 GMT

Returned from CES last week. Slept for a couple days. Woke up. Tried to remember something that will change the world. Couldn't think of anything.

Here's a problem: CES is becoming like the old Comdex. It's like a giant star that's gotten too big and general and will soon Supernova and collapse in upon itself.

Here's another problem. Apple generates the most excitement, both form the technology and a investment perspective, in the mobile consumer electronics space. And Apple doesn't go to CES. So what you have is a gigantic hallway filled with 150,000 people trying to copy Apple.

What's more important is what Apple will do next. Apple will do a sleeker tablet with LTE connectivity. Apple will try to do TV -- again.

That being said, there was stuff to listen to. If you want a list of some potential future tech trends, I wrote about some futuristic stuff on Investor Uprising.

In terms of investment ideas, I believe that the place to look in mobile and consumer is in suppliers and chips, because clearly as devices multiply it opens up many chip markets for many players. Read my CES Investor's Guide on Investor Uprising.

Market Chaos Breaks Loose: What to Do Next

Tue, 02 Aug 2011 15:11:41 GMT

So far our outlook has proven astute, as we advised readers to be continue to be involved in the precious metals as the best hedge in the mounting global debt crisis, which is far from over. Gold has hit a new high this week, and is likely to continue higher -- with periodic pullbacks. But this week, even more action indicates that the European debt crisis is metastisizing and likely to spread to other markets.

The U.S. approval of a new debt ceiling has taken a back seat to some important developments in key markets.The warning signs include the following:

* The Swiss Franc spiking to all-time highs against the dollar and other currencies

* 30-year Treasury bond yield dropping to under 4%.

* All European bonds being sold

* Gold hitting new highs.

The markets are telling you something. Personally I have gone to a much higher cash position, and I have bought more gold and silver as protection against mounting currency devaluation. I also believe there are certain places to hide such as high-yielding energy, dividend, and biotech stocks.

As a reminder, in March, Investor Uprising launched a premium investment newsletter service that gives you access to our best ideas and detailed research. Investor Uprising Confidential (IU Confidential) published an important report, "All That Glitters: The Ultimate Gold Report," which told you why at $1,450 gold was still undervalued and likely to go much higher. Gold traded today as high as $1,646.The report tells you why this is likely to be only a way-station to much higher prices.

IU Confidential also completed some detailed research on the Biotech market, which shows that it can be a "place to hide." The biotech market, as measured by leading biotech indices, did not lose as much during the 2008 financial crisis -- and when it bounced back, the performance was much better than the leading indices. In other words, Biotech has outperformed the S&P 500 with less risk during the last five years.

Our research indicates this is likely to continue. You can still get both of these reports individually -- or subscribe to the service and get both of them plus five more bi-monthly reports for the next 12 months.

As a Rayno Report reader, this research is available to you at an exclusive low price. Click below for these exciting offers:

The Best of Biotech -- $399 Special (Regular $500)

The Ultimate Gold Report -- $299 Special (Regular $500)

Full Annual Subscription: IU Confidential Annual Subscription

(Includes The Ultimate Gold report, Best of Biotech Report + 5 more reports over the next 12 months!) -- $999 Special (regular $1250.

The Acai Adventure

Sat, 04 Jun 2011 12:25:39 GMT

I have become fascinated by Acai, even though I can still not pronounce it correctly and I won't even bother trying to figure out how to print it with the accent which I can't find on my computer keyboard. I'm an admitted latecomer to the trend. Yes, it's old news. But it's still a good story. The recent New Yorker article did a great job outlining the background.

The New Yorker article tells the tale of how two SoCal chums and University of Colorado grads (Go Buffs!) Ryan and Jeremy Black "discovered" acai in the Braizilian jungle and started marketing it in the United States, kicking off what would become one of the most potent health-food marketing booms in recent history, aided and abetted by none other than Oprah.

What I found interesting about the article is not so much about the controversy surrounding the health benefits of acai (like most debates, the truth lies probably somewhere in between), but the entrepreneurial spirit of the two Black brothers and their partner Edmund Nichols. The went to the jungle with a load of credit-card debt, locked in a long-term contract to sell acai through a Brazilian producer, and spent hundreds of thousands in the first year to ship Acai to the United States. Within two years they were doing half a million in sales and now they do $50 million. Quite an adventure.

The other story in acai is about marketing. How does an obscure jungle fruit go from being a locally enjoyed delicacy to a multi-billion-dollar global business in ten years? Savvy marketing. The blacks hooked into real-world health research and captured the Brazilian mystique. The more nefarious marketeers later leveraged Acai into online marketing scams. But both the legitimate companies and online scammers had something in common: They knew that consumers like a good story, and you can't get much better of a story than a mysterious berry coming out of the Brazilian jungle.

Here is an abstract of the article from the New Yorker (full article available only in print):

ABSTRACT: DEPT. OF FOOD about açaí. Açaí was virtually unknown outside Brazil until ten years ago, when Ryan and Jeremy Black, two brothers from Southern California, and their friend Edmund Nichols began exporting it to America. Embraced as a “superfruit”—a potent mix of cholesterol-reducing fats and anti-aging antioxidants—açaí became one of the fastest-growing foods in history. Supermarkets have become filled with açaí-laced products. Lately, however, studies have questioned the extravagant health claims for açaí, and online vendors selling diluted products have raised the question of whether açaí is a fraud. Early boosters like Oprah Winfrey and Dr. Mehmet Oz sued to remove their names from the marketing, and the Federal Trade Commission shut down the operations of a major Internet açaí seller.

Read more http://www.newyorker.com/reporting/2011/05/30/110530fa_fact_colapinto#ixzz1OKFfI9Ay

Riverbed's Next Leg of Growth

Sat, 14 May 2011 10:16:59 GMT

It's hard to pick stocks in cloud computing, because so many of them have become absurdly overvalued. So what I do is look at a handful of them, learn about the companies, and try to figure out which ones have true staying power. Then you look for opportunities to buy them on pullbacks.

Riverbed is a company that I have been following for several years. I have published a profile of Riverbed here on my new site, Investor Uprising, in which I try to explain how Riverbed plans to expand. A true "best of breed" player in WAN optimization, Riverbed is now looking to use its leverage in that market to branch out and grow on more fronts. I had a chance to meet with several Riverbed executives at Interop in Las Vegas, and following those meetings I think the company is on the verge of taking it to the next nevel. CEO Jerry Kennelly very clearly described some growth opportunities for the company that will take it from a point-product company to a multifaceted networking power.

Here's the important thing about Riverbed: Its technology takes advantages of long-term trends in networking in computing: Data-center consoldiation, the migration of apps from the enterprise to the cloud, and outsourced networking optimization. If you are asking what this all means because it's too many buzzwords -- it's that large and small companies both are looking to outsource more of their technology and networking needs to service providers who operate in the "cloud" -- providing any application or computing online, at any time.

The reason this is important for Riverbed is because it flies in the face of what has built the existing networking juggernaut: Cisco Systems. Cisco is built on the emergence of Ethernet networks and IP routing. It comes from an era in which companies hired armies of IT people to configure and deploy Ethernet switches and routers. All of that is moving to the cloud and massive data centers run by service providers. The interesting thing here is that Cisco has displayed weakness in selling data-center products: Its software is aging and lacks the scale to handle the shift.

This is a profound shift and one to carefully watch in the networking space. On the valuation, Riverbed recently pulled back $10 from an all-time high and I used the opportunity to pick up some shares. The P/E is a palatable 30, given a growth rate in excess of 40%. The PEG is now 1.40, which is well of recent highs. You have to pay up for this company because it has such huge prospects.

(Disclosure: Long RVBD).

Uncle Ben: Gold's Best Friend

Wed, 27 Apr 2011 23:16:28 GMT

Another Fed day, another episode of serial money printing, another banner day and a new high for gold.

It really feels like gold has entered the final and most exciting stage of the bull market. As Jim Sinclair, long-term gold trader, Chairman of Tanzanian Royalty Exploration, and Publisher of JSMineset.com says, gold is ready to go ballistic.

It's another breakout in a series of powerful breakouts. We've been alerting you to these breakouts ever since this site was launched. Remember this one? Or what about this one? And this one.

It seems to happen at least twice a year now, gold consolidates for about six months and then breaks out into a powerful $200 move. But silver is now the star, having doubled in less than a year!

Here's some good reading on the topic:

Investor Uprising has a great technical look at gold by Fred Goodman.
My new site, Investor Uprising, has published an new exhaustive, 28-page report on gold, written by yours truly.
Jim Sinclair says we're headed for $1650 next on the way to $2000.

Introducing Investor Uprising

Mon, 11 Apr 2011 19:18:56 GMT

Investment comrades, I have helped launched a new site sponsored by PRNewswire called investor Uprising. There, you will find everything you love to follow, including business trends, rising companies, stock picks, and model portfolios.

The Guide to Investment Metrics tells you how to screen for more reasonably valued companies. Investor Uprising expands on the investment philosophy developed in these pages: looking for reasonably valued, growing companies and invest slowly over time, ignoring volatile market swings and focusing on dollar-cost averaging. It works in bull markets, and it helps you survive in bear markets. By focusing on stocks with low valuations, you can reduce your risk.

Go to the site now and register -- if you are among the first 1,000 registrants you will be entered into a drawing for a free iPad!

Check it out here.

Four Low-PEG Stocks

Tue, 29 Mar 2011 06:38:00 GMT

Next week I am launching a new Website for PRNewswire called Investor Uprising. It is going to focus on high-quality investment opportunities and business trends. We'll also pick and watch lots of stocks on a GARP (Growth at a Reasonable Price) basis.

For the first project, we are creating a list of 30 companies which we will use to build an Index. This comes from a methodology I have used for 10 years to screen stocks and build "monkey" portfolios that can be bought and passively left alone. Using this method, the portfolios have averaged a 30% (cumulative) return since 2006 and none of them has ever lost money.

Next week you will find these stock picks on Investor Uprising (which has not yet launched), but today I'm going to give you four of them. Here are some low-PEG stocks we will be following at Investor Uprising.

Dolby Laboratories (DLB)

12-month sales growth: 28%

12-month income growth: 17%

Forward P/E: 15

Return on Equity: 20%

PEG Ratio: 1

Summary: Dolby is dominating the business for digital music tools. Specifically, it licenses many of the leading digital sound and signal processing systems for digital film, DVS, Blu-ray, and digital 3D systems. It has been steadily growing for years.

Veeco Instruments Inc. (VECO)

12-month sales growth: 150%

12-month income growth: 1,000%

Forward P/E: 13

Return on Equity: 46%

PEG Ratio: .72

Qualitative: Veeco is a leading manufacturer of important manufacturing and testing equipment in the LED, solar, and seminconductor market. It also makes equipment for the manufacturing of disk drives. If Veeco's growth rates seem absnormally hight, its because it swung from losses to a profit in 2010, yielding what looks like spectacular earnings growth. It has also growth its revenue through merger.

Gilead Sciences Inc. (GILD)

12-month sales growth: 0%

12-month income growth: -20%

Forward P/E: 9

Return on Equity: 45%

PEG Ratio: .70

Qualitative: Gilead is an extremely well-managed biotech company with a long track record of high ROE. Recently, it's revenues have been flat and earnings have shrunk due to maturity of some key drug markets. However, it is still enormously profitable, booking $2.9B in profits in 2010, and its valuation is just plain cheap.

Medifast Inc. (MED)

12-month sales growth: 57%

12-month income growth: 147%

Forward P/E: 10

Return on Equity: 33%

PEG Ratio: .50

Qualitative: Medifast is a fast-growing producer of diet supplements and nutrition products. The Medifast brands include many varieties of diet and weight-loss shakes, vitamins, food bars, and other food products.

Stay tuned for the launch of the new site! We are looking for moderators and bloggers. If you are interested, ping me at scott.raynovich@investoruprising.com.

Wake Up: U.S. Budget is Out of Control

Wed, 16 Feb 2011 08:08:55 GMT

I'll try to spare you political rhetoric and speak in simple terms: The U.S. Federal budget is out of control. The deficit remains over a trillion dollars, interest costs are increasing, and if something extreme isn't done very soon it will enter a death spiral.

President Obama has put out a budget showing $3.8 trillion dollars in spending in 2011. The projected federal revenues are $2.1 trillion, creating a $1.7 trillion deficit. Huh? This is somebody who said he was heading back toward fiscal conservatism.

That's insane. Not only will the deficit run over a trillion dollars for the third consecutive year, but the total federal budget only four years ago was $2.5 trillion. Folks, the budget has increased 37% in four years!

What if you own budget did that? What if all of the sudden you were spending 30% more than you brought in? What if you were running a company whose revenues were $2.1 trillion but whose expenses were $3.8 trillion? You would try to bring it into balance, no?

Both parties are hiding their heads in the sand. We all know that the bulk of the money is spent on the entitlement programs and defense. Neither the Democrats nor the Republicans want to touch entitlements -- and the Republicans won't touch defense. So we're stuck.

No, they're sticking to rhetoric about ticky-tack discretionary programs that cost few billion there and a few billion here. It doesn't make a bit of difference. We're talking about hundreds of billions of dollars in cuts being needed.

And would it really be "Draconian" to go back, say, to a $2.6 trillion level of spending, which is what we were spending in 2007? Was the government really that much different then? Is it 37% better now? I don't undersand how this can happen.

Radical change is needed now. Social Security and Medicaire reform is imperative. If you don't think so, just look at the chart below, produced by the independent CBO, and tell me the current Congress is on track to fix things.

Look at the chart above and tell me where the "draconian" cuts are. The budget is skyrocketing. The deficits are skyrocking. There are no draconian cuts.

The current path ain't going to do it. it's just common sense. Another year or two of deficits like this with rising interest rates, and the costs of servicing the debt feed on themselves. Let's get out of denial. Let's fix it.

Rayno Report 2010 Portfolio Summary Letter

Tue, 28 Dec 2010 12:23:35 GMT

2010 was a great year in the markets, and a decent year for the Rayno Portfolio, but let's not get too excited. It's like being happy about getting a new Toyota after your buddy totaled your Porsche. That's how I view the 2009/2010 market in the context of the 2008 financial debacle. Yes, I like the Toyota, but can I get the Porsche back too?

The Rayno Model Portfolio delivered a solid 9% gain -- 10.4% total if you include dividends. This is a slight underperformance in the S&P gains. But please keep in mind that we advised readers to go to 100% CASH (or better yet gold) at the beginning of 2008 -- and so our 2008 Model Portfolio lost no money in one of the worst financial crises in history. A 10.4% gain looks a lot better when you managed to avoid the 35% decline two years earlier.

The Rayno Model Portfolio still has a track record of having NEVER LOST MONEY, and the cumulative returns since 2005 are now in excess of 40% total since 2005. Again, a lot of this goes back to the decision of going to 100% cash in 2008.

Sometimes the best way to make money is to avoid losing it.

The results of the model portfolio are below. To summarize, there were some volatile results in our picks. Our best pick was silver, via the Silver ETF (SLV), which was up 70%. As you know we have been fans of the precious metals for many years, and we believe they are in strong, secular bull markets that will continue. I'm still a huge silver bull.

The Rayno Report's Move in 2011: A Real Job

Tue, 28 Dec 2010 09:25:05 GMT

It's been an interesting year. Shortly after moving to Montana, in the "dark days of 2009" when nobody would pick up the phone, I found myself employment challenged. So I did what any crazy editor would do: I holed up in the office above my garage, with a view of the Rocky Mountains, and created The Rayno Report. It's been a labor of love for about 14 months, interrupted occasionally by powder days and the search for large trout.

The Rayno Report grew in 2010 and thanks to help from sponsors such as Adtran, it made money. My accountant reports I ended the year profitably. But these aren't the kind of profits that will allow me to buy an NBA team any time soon. A few weeks ago I was offered a job which will essentially allow me to do the thing I love -- cover and analyze markets in real time. So I did what any sensible father of three would do -- I decided to take the job.

Rayno Port up 9%: Full Letter Coming

Tue, 28 Dec 2010 09:10:37 GMT

Just a quick hit, I pulled the plug on our annual Rayno Model Portfolio for year-end preparation -- we locked in a 10% gain when you include dividends. This lagged the S&P by a couple of points but as a reminder the model portfolio in 2008 was put in 100% cash -- and we alerted readers to the high potential for the crash -- so we missed the downswoop. That means the Rayno Model Portfolio is up a cumulative 40%+ since 2005 which beats the market by a mile.

The results of the model portfolio are below. I'll have a full summary tomorrow. Our best pick was silver, via the Silver ETF (SLV) up 70%. As you know we have been fans of the precious metals for many years and we believe they are in strong, secular bull markets that will continue.

To recap how the portfolio works: In leading up to the January of each year, I use several stock screening and analayis methods to pick stocks I believe will have favorable returns. I then buy a hypothetical $10,000 of each stock ($100,000 total portfolio), and we let it ride as a passive portfolio for the entire year. It is never rebalanced or adjusted.

The 2010 Rayno Model Portfolio performance summary:

Symbol Last Bought Value Net %Change %Total

AMX 56.38 01/04/2010 11,557.90 1,541.85 15.39% 10.65

DO 64.15 01/04/2010 6,415.00 -3,692.00 -36.52% 5.91

LLY 35.07 01/04/2010 9,749.45 -232.39 -2.32% 8.99

MSFT 28.07 01/04/2010 9,066.61 -940.24 -9.39% 8.36

NYB 19.12 01/04/2010 13,199.70 3,288.20 33.17% 12.17

SLV 28.59 01/04/2010 16,582.19 6,578.79 65.76% 15.29

CTSH 73.08 01/04/2010 15,348.90 5,510.90 56.01% 14.15

SOHU 64.87 01/04/2010 11,029.59 950.50 9.43% 10.17

EWZ 74.04 01/04/2010 9,625.20 -419.50 -4.17% 8.87

CGA 9.31 01/04/2010 5,865.29 -4,054.59 -40.87% 5.40

Total 108,439.86 8,531.51 8.53% (without counting dividends) 10% w/dividends

Netflix CEO's Stock Battle: Bad Move

Wed, 22 Dec 2010 11:28:40 GMT

In my 20 years as a journalist, investor, and a trader, there is no bigger warning sign for a company or its stock as when its executives start taking it upon themselves to battle short-sellers who think the stock is overvalued. Such may be the case with Netflix.

Netflix CEO Reed Hastings -- who by the way has sold more than $40M worth of his company's stock in the last 12 months -- is stirring up a highly visible public battle with some well-known and respected hedge fund managers who are openly shorting his stock.

Bad idea.

A couple of points on this:

1) Netflix is a good company. Hastings is a brilliant man. But he should be focused on running his company not battling a few short-sellers. If the company is being run well the stock will take care of itself.

2) For some stupid reason, CEOs tend to seen their stock price as a direct measure of their ego. Of course, Netflix shares have traded to the stratosphere -- has Hastings' ego gone there too?

3) The action in the stock price is about fair valuation, not always about "is this company good or bad." If a stock gets overvalued and falls, it does not necessarily mean the comany is "bad," it could just mean the shares got overvalued. Hastings shouldn't take the trading personally.

4) These short-sellers -- Whitney Tilson and Manuel Ansensio -- are particularly smart and have good track records. Bad people to pick a fight with. Ansensio calls Hastings attacks "disrespectful." I agree.

5) It reflects poorly on the company. It is in bad taste. The street is littered with the bodies of CEOs who attempted to battle short-sellers and eventually lost.

6) Netflix has tons of cash, good cash flow and a great balance sheet. So what exactly are they worried about?

7) If Netflix executives feel so strongly about their stock why are they unloading as if they have just won the lottery? Sure, they have sold through "automatic sales," but that is a pat defense. If they are so confident in their company's stock price you would think they would have scaled back the selling. After all, if they are selling they are doing the same thing the short sellers are -- trying to lock in the value of a huge run in the stock.

Calm down Reed, get back to real work.

Metals Testing Bottom Today or Monday

Fri, 10 Dec 2010 12:21:03 GMT

The gold and silver negativity is suddenly back on financial TV after euphoria just a week ago -- you know what that means: Time to buy!

I picked up some more gold, silver, and mining shares on this AM's flush. We've come a long way back from this morning's sell-off. At one point we were down $20, now we are only down $6 on the day. Gold has now tested the $1370 level twice and survived; silver has tested $28 twice. Both of them are developing well-defined uptrend channels. I think the metals will bottom either today or Monday.

One of the overhangs has been the anticipation of a Chinese rate hike. That, and the fact that many people had a nice run in the metals meant profit-taking ahead of year-end. But everybody is talking about a Chinese rate hiike so how much of a surprise can it be? I say you buy on Monday whether or not there is a rate hike.

All of this sets up for a nice buy point some $50 or so off the recent high in gold. The last three corrections have been swift in violent: $74-$100 flushes in a matter of days, only to reverse higher. I think we will see a similar thing of this correction, most of which is probably done.

Jon Stewart on Money Printing

Wed, 08 Dec 2010 09:27:18 GMT

Nothing like a guy with a beard with the power to print money.

www.thedailyshow.com

Why LEDs Are Easily a $20B Market

Mon, 06 Dec 2010 10:48:51 GMT

I have been doing some more research on the LED (Light Emitting Diode) market and I have concluded that it could easily be a $20B+ market, which would represent enormous growth from here. It's an exciting market.

As described here in my post on EBN Online, the math is pretty simple. Right now, LEDs are estimated to have less than 5% penetration of the global lighting market, which is estimated to be near $80B. In Japan, LED penetration is already approaching 50%. If you assume that LEDs can get to 30%-40% penetration of the global lighting market in the next 10 years, you are talking about a $20B+ market.

The most common LED play is Cree (Nasdaq: CREE), a market leader with a strong patent position. Another good public-market play is VECO, which makes a variety of LED technologies as well as manufacturing and testing platforms.

(Disclosure: I have been in and out of CREE and VECO over. Currently long VECO, and looking for a better long-term entry point in CREE.)

Behind IDT's Bizarre Oil-Shale Rally

Tue, 23 Nov 2010 10:03:04 GMT

What do Michael Steinhardt, Lord Rothchild, Rupert Murdoch, and Howard Jonas have in common? Oil shale and IDT shares, obviously.

IDT Chairman Howard Jonas has presided over an eccentric -- and so far brilliant -- diversification of his telecom company into the oil-shale business. And somehow he's attracted some of the biggest moguls in the world.

IDT shares have rallied 600% since the company got into the oil-shale business, recently announcing plans to spin off subsidiary Genie energy. Read about it here.

What's Wrong With Cisco?

Sun, 21 Nov 2010 09:25:53 GMT

Wow. Cisco. Who would have thunk the stock would be back below $20 when the new bull market in technology is pushing many shares to new highs. CEO John Chambers is still smiling on TV, but you know he is seething behind the scenes.

Where to start... there are so many things wrong with Cisco right now I'm not sure what to pick first. On a technical market level, it's clear to me that Cisco shares are being sold on strength. Last week's puke-out in which Cisco lost 20% of its market cap came on gigantic volume.

On a strategic level, Cisco is adrift and its M&A strategy has been flawed. It has focused far too much on video and consumer products and less on cloud-computing infrastructure. I have been writing about this on Enterprise Efficiency.Cisco was buying flip-cams and settop boxes when it should have been focused on the cloud.

RightNow Makes a New High

Wed, 10 Nov 2010 15:39:43 GMT

RightNow (Nasdaq: RNOW), the best little technology company in Montana, today is powering to new all-time highs fueled by excitement about cloud applications and its recent success in garnering new customers and restructuring the company with a new COO.

The stock rose 1.54% today to $27.68, a new all-time high.

Scanning the news, it's hard to find anything particular that's driving the stock, unless you think a press release entitled "RightNow Helps Leading Consumer Brands Deliver Positive Customer Experiences and Drive Business Value." Nah.

I last wrote in detail about RightNow this summer when it was powering up its new applications strategy, which seems to be taking hold quite well. Since then, the company has also announced it recruited telecom veteran Wayne Huyard to be the new COO. The stock has more than doubled since the summer.

Right Now's riding the wave of a strong technology rally and also some excitement about cloud applications. It could also be an attractive takeover candicate for a larger cloud applications company such as Salesforce (NYSE: CRM).

Riverbed Makes a Cloud Power Play

Wed, 10 Nov 2010 15:07:03 GMT

Riverbed Technology, a company we've covered closely over the last year, is beefing up its clould services product portfolio in a bid to become the leader in cloud networking services.

Riverbed has been riding the cloud networking movement quite nicely. It sells a lot of gear that can be used by corporations and services providers to build cloud services. Now, it's doubling down. Today it introduced a product called Whitewater, which accelerates data connections to a cloud services, as well as Cloud Steelhead, a product that helps services providers build private cloud connectivity services with clients.

Why QE2 Is Wrong

Wed, 10 Nov 2010 09:00:20 GMT

Obviously, this strange beast called "QE2" is in the news a lot, and lots of folks are having their say. I'll have mine: It's wrong.

I'm with Mark Cuban. Unlike him, I'm not a billionaire. Like him, I am not an economist (thank god), and I agree with common sense. Common sense tells me that QE2 is wrong. Government solutions to market problems have failed in the past, and they will fail again.

Here are some of the reasons why QE2 is wrong:

The Fed's Dangerous Game: Buy Everything

Thu, 04 Nov 2010 09:00:42 GMT

Well, the Fed's dangerous game has commenced. Yesterday the Federal Reserve Board voted to crank up the printing-presses even harder, setting aside another $600B or so to buy bonds and other assets through June of 2011. This morning, markets are on fire, especially commodities such as copper, cotton, gold, silver, and the grains.

Keep in mind that this is an "experimental" policy on a historic scale. The most powerful central bank in the world is firing up the world's most powerful printing press in a way never used before -- to buy back trillions of its own bonds.

ConteXtream Grabs $14M for the Content Grid

Tue, 02 Nov 2010 13:09:13 GMT

Silicon Valley startup ConteXtream (yes, the company name spelling is that silly!) announced yesterday that it landed $14 million in Series B funding to go after a big problem in global networks: Virtualizing the management of broadband applications and content through data centers.

Here's the big picture: As the use of content and bandwidth-intensive applications such as movies, photos, social networking, and games explodes on mobile and wireline networks, service providers are having major headaches managing the bandwidth as well as allocating resources in the data centers to serve these applicatoins. ConteXtream's product, a software solution that loads on commodity PC hardware, adds "smarts" to the network delivery of these applications, allowing service providers to manage the resources on their data centers as a single virtualized "grid."

Markets Gone Wild: Idea Update

Mon, 01 Nov 2010 09:02:28 GMT

Well it's time for Markets Gone Wild, but you may not have the DVD, so let's recap: The Fed has been heavily telegraphing an accelerated money-printing schedule, driving bankers, traders, and speculators into all matter of commodities, stocks, and various exotic financial instruments.

Here's a summary:

* Silver reached a new 30-year high this morning. Incredibly bullish action. I think you should stay long silver here, a way to do that is SLV, or a mining company like Pan American Silver (PAAS), or silver futures. (Disclosure: I'm long all of the above). I've been bullish on silver for what seems like forever, and I remain so.

* Gold made a new high, and pulled back. With more money-printing on the way, it looks poised to break out, again.

* Our Riverbed/FFIV pairs trade worked out okay, in a strange way. F5 Networks (FFIV) has climbed 14% since we spotlighted the idea (we were short), but Riverbed (RVBD) is up 30% (we were long), so if you did the pairs long/short trade the difference has netted about 15%. Not bad for a month's work. The philosophy of this trade worked out okay -- the cloud "bubble" had pushed FFIV to a more unreasonalbe valuation, and it was time for Riverbed to catch up. (Disclosure: I am out of the trade, I think "cloud networking stocks" are getting overextended, though I still like Riverbed long term).

* New highs in stocks we like: EBIX, RVBD, PAAS

* Remember Right Now (RNOW)? Incredibly strong stock. Methinks something is up.

Welcome to MoneyPalooza

Wed, 13 Oct 2010 11:14:44 GMT

Wow. Things have really taken off here. Stocks, commodities, and most notably -- the precious metals. Gold is at an all-time nominal high of 1372 and silver at 20-year highs. Copper is pushing aggressively higher.

The trigger for the greedfest was yesterday's release of the Fed minutes, in which the fed governors indicated they are *this close* to unleashing the hounds of quantitative easing.

For those not into the Fed inside baseball or with only a passing knowledge of economics, "Quantitive Easing" is a central banker euphemism for "printing money." There is a reason why they call him Helicopter Ben. The phrase is interesting in that it makes money printing sound exotic and alluring, though it is not that at all: It's printing money.

Quantitative easing may sound sexy if you are an academic economist from Princeton, but in reality it is the siren song for central bankers. They can be dragged into the rocks very quickly. What can go wrong? Well, just take a look at the 1970s. Money-printing seemed great until inflation and the price of oil got out of control and pretty soon you were looking at 18% mortgage rates.

As I've been writing on this site for some time, the only way to prepare for this is to participate in the rally -- of everything -- but to keep tight stops on your trades and hedge with a healthy precious metals position. Metals are still outperforming everthing else, which is a symptom of central banker money printing gone wild. Think about the fact that the precious metals have been appreciating 10-15% per year for 10 years, while stocks are basically flat. That is the byproduct of money-printing: It has an unintended consequence on hard assets which are reflecting the devaluation of a currency.

Bernanke's Secret Weapon: Money Supply

Fri, 24 Sep 2010 15:21:25 GMT

Well, Ben Bernanke appears to be winning over the gloom-and-doom crowd, at least today. What an impressive rally. I was surfing some data trying to rationalize it, and I have noticed some interesting changes going on in the market. The clue may be in the money supply.

If you look at recent charts of the money supply as put together by the dark, yet excellent analysis of government statistics over on Shadowstats.com, John Williams's site, you can see something that is truly intriguing: an uptick in the money supply growth rates.

[img:/assets/10/0924/1538.500]

Source: Shadowstats.com

The Future is Cloudy: The CNBC "Pairs Trade"

Fri, 24 Sep 2010 09:46:35 GMT

Yesterday I was invited onto CNBC to discuss "Cloud Computing," an incredibly broad topic that somehow got boiled down to four stocks, thanks to the magic of television.

The sector is getting a bit overheated and I have been working out some ideas on how to head and/or short selected stocks. Right now I'm focused on the networking stocks because some of them are getting quite overvalued. CNBC correctly asked me how one could possibly short such a hot sector to which my answer is: hedge.

Anyhow, you can see the clip below. There is also a recap on CNBC.com.

The idea I came up with is that you could hedge with a pairs trade. After sifting through some names and valuations, I have decided that F5 Networks (FFIV) is more overvalued than Riverbed (RVBD), and I like Riverbed better in the long term. So a possible trade here is to stay long Riverbed, and short F5 as a hedge. The premise is that F5 is trading at a richer valuation with 10X sales and Riverbed is "only" trading at 6X sales. I would also note that Riverbed is smaller and growing faster so has more room to grow into its valuation.

Market Update: Watch Your Back!

Wed, 22 Sep 2010 12:44:44 GMT

Stocks are showing some early symptoms of rolling over. Yesterday, the Federal Reserve annnounced it was ready to print money ad infinitum to make sure the world does not run out of money. I do not know what Ben Bernanke's academic friends at Princeton call this, but I call it the "Banana Republic" strategy. Stocks are reacting poorly to the news today.

Perhaps it is the fact that the Federal Reserve statement read more like jawboning than an actual decision. They said in the statement that they will do what they can, but the fact remains that there isn't much left to do but print more money and monetize the debt -- an approach more familiar to countries such as Argentina than the United States of America. And we know how well that worked out in Argentina.

Stocks have rallied powerfully in the last month but they are running up against some heavy resistance levels and technical signals show some of the same patterns we saw before previous corrections -- see the chart below.

The precious metals breakout still has legs, you want to accumulate on pullbacks because precious metals will be the place to be through 2011. I believe in an "Innovation-Devaluation" barbell strategy, but tech stocks are more difficult because they have run far and fast. I believe it can be legged into on the next significant correction before the November election. Don't worry, it's coming -- it always does.

[img:/assets/10/0922/1249.500]

A Strategy for Innovation and Devaluation

Wed, 22 Sep 2010 10:14:05 GMT

Are you wondering how to understand the manic-depressive investment world that we have? I think it's about two things: innovation and devaluation. Innovation, because the only way to stay ahead in this sluggish economy is to have a superior product. Then there is devaluation, becuase the government is printing money to devalue the currency in the face of credit deleveraging.

Now that we've defined the two most prominent features of the market, you should ask yourself how you take advantage of this. The concept I've been thinking about for a while is a concept of a "Innovation-Devaluation" barbell. In bond investing, a barbell is a split between short-and-long dated maturities. I think we have a new barbell here: One that balances investments in innovation with those for inflation protection.

Evolution of Greenspan: Gold Rules!

Wed, 15 Sep 2010 10:42:13 GMT

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."

--Alan Greenspan, 1966

The bizarre, hypocritical evolution of Alan Greenspan continues, as he drifts deeper into the Austrian economics camp. Greenspan is getting some airtime on Financial TV (FTV) this morning as he now says the rising gold price is the "canary in the coalmine."

Greenspan also gained some notoriety recently when it became known that he was advising John Paulson, one of the largest and most successful hedge fund players on the planet, on monetary policy and gold. This advice is ostensibly bullish for gold, as Paulson has built one of the largest gold positions of any hedge fund.

Infospace: Growth for Free

Wed, 15 Sep 2010 10:28:25 GMT

Infospace (INSP) is an interseting stock: Here is a profitable company trading at a Enterprise value/EBIDTA of 1.5, a price to sales ratio of 1, with $223 million of cash in the bank.

In fact, with Infospace trading at about $7, that's only $1 above its cash position, which is $6 per share. This stock is trading like a company that is about to lose a ton of money. The interesting thing is that the operating cash flow over the last 12 months is +$34M, which means it's actually putting money in the bank. What gives? Skeptics could argue that this company, which restructured several years ago, has lost its technology edge and is only a bit player in the Internet search market. But the upside is that you are buying the company only $1 above the value of its cash so essentially you are getting a call option on its growth for $1.

I believe this is a decent bet going into year-end, where Internet advertising and services sector is bouncing back, and Infospace traditionally has its strongest quarters in the last quarter of the year. I have initiated a position around $7 and might buy more if it dips below $7. My stop is at $6, its cash position. The price target is $10 for a risk/reward ratio of 1/3 on the trade.

(Disclosure: Long INSP)

Precious Metals Break Out

Tue, 14 Sep 2010 09:59:50 GMT

The mainstream media and financial press continue to downplay the action in the precious metals, which are staging a significant breakout this morning on news that the federal government is fueling up the choppers to drop more money.

Financial TV and your middle-of-the road pundits remain permanently focused on equities, and are somehow comforted by the meager summer rally in stocks. I'm not impressed, so far. Equities are still badly lagging gold. This has been the pattern for the last 10 years. For example, since October of '09, the S&P is up a paltry 5%, while gold is up 25%.

What does this mean? I think it signifies that we are still in the money-printing regime of the last 10 years, so that whenever the federal government prints money or creates stimulus, a disporportionate amount of the money flows into the precious metals. This is because the smart money knows that what the government is really doing is creating the illusion of growth through currency debasement.

This morning, Silver trades at $20,36, with its eye on the 2-year high of $21. Gold is at $1266, just dollars away from an ALL-TIME high. Imagine the horror in the Federal Reserve when they start reading the headlines about gold making new all-time highs in the midst of their latest money-printing campaign.

Ski Revolution! Boutiques Swarm America

Fri, 10 Sep 2010 10:56:46 GMT

Snow is already starting to coat the peaks of the Northern Rockies, so I've been talking to local ski aficionados and thumbing through the new Powder Magazine Equipment Guide. I'm shocked to find explosive growth in U.S.-based boutique ski-makers producing high quality skis

Many of these ski-makers are classic garage startups launched in the past decade by a few people with some dogs. They are definite leaders in the industry, producing the groundswell behind the "rocker" ski movement, a reverse-camber ski which is the new technology taking hold in the mainstream.

Not all of the skis are handmade in America, with many of them being produced in Europe. But I found very few that are produced in China, unlike the mass-market skis. What's interesting is that these small companies are gaining a lot of attention in the ski community for their innovation, high quality, and attention to detail. Here is proof that startups, jobs, and products can be created through hard work and innovation.

Flashback to 1987

Thu, 09 Sep 2010 15:27:05 GMT

Just in case you thought booms and busts on Wall Street were a new concept. Here is a classic clip from 1987. Check out the cameo appearance at the end by Max Keiser (now an avante-garde Web-based market commentator).

Market Update: It's the Wild West. What's up?

Wed, 08 Sep 2010 11:19:21 GMT

The market is pretty fascinating right now. It is currently featuring 100-point intra-month S&P swings, a solid rally in eccentric commodities like coffee, currencies bouncing around like ping-pong balls, and wild technology M&A speculation. What's not to like?

My bearish thinking is beginning to morph into a more bullish tilt. The reasoning for this is three-fold: 1) The Feds are printing more money 2) Technical "Commitment of Traders" (COT) reports show institutional buyers getting more bullish and retail investors getting more bearish -- usually a bullish indicator 3) it's looking like the bears have had trouble taking the market down in September, which is when they usually take it down.

News Brew: $33 for 3Par

Thu, 02 Sep 2010 11:02:07 GMT

Well, the 3Par bidding war saga looks to be coming to an end as HP's final $33 offer has been accepted and Dell has pulled out of the race.

It makes you wonder about the "efficient market" theory, doesn't it? I mean, here is a stock that was trading around $10 and basically flatlined for about a year, only to suddenly increase by more than 300% in a period of three weeks. The market certainly wasn't efficient at pricing 3Par shares.

Here are the latest stats on 3Par at the current near-$33 level:

Market Cap: $2B

Forward P/E: 122

Revenue (TTM) $203M

Price/Sales (TTM): 9.84

Enterprise value/EBITDA: 294

Hmmm. Not sure I'd call that a bargain.

Onto the rest of the news:

The Atlantic coast of the U.S. is prepping for Hurricane Earl (New York Times).
Andy Roddick is out at the U.S. Open (Wall Street Journal). But the real reason to cite this story is because of this great line: "Andy Roddick’s early exit breaks the hearts of T.V. producers dependent on repeated Brooklyn Decker reaction shots"
3G Capital is acquiring Burger King (Wall Street Journal). Will that yield downloadable mobile burgers?
Bernanke admits he "wasn't straightforward" on Lehman (Bloomberg). According to my thesaurus, here are some synonyms for being "not straightforward": dishonest, crafty, crooked, deceitful, evasive, fraudulent, oblique, shady, shifty, sly, surreptitious, tricky.
Jobless claims decline (CNNMoney.com). Barely.
Ten questions and answers on Apple TV (PCMag). Silliest uestion: Does Apple have a Twitter killer?
In case you haven't refinanced yet, you might want to note the current 30-year mortgage is at 4.32% which is a new all-time record since records starting being kept in 1971 (did they not have mortgages before 1971?) (Wall Street Journal).
Most interesting financial headline of the day: "I'm selling the house and piling the proceeds into Greek government bonds." (Telegraph)
The verdict is in: People hate the new Digg (Mashable). Yes, I do too.

CIO's 10 Loathsome Tech Industry Types

Tue, 31 Aug 2010 13:55:18 GMT

I'm a key influencer. I'm also a technology evangelist, analyst, and journalist. And I can also leverage core competencies. Uh-oh. Sick of me yet?

We live in a world of prototypes, buzzwords, hype, and cliche. That's why I think CIO has hit the market with an article on the "10 Loathsome Technology Industry Types."

Here's an excerpt:

Vendor Marketing EVP You've got great hair—and you know it. Every conversation inevitably returns to "synergistic opportunities for the brand" or "CSR initiatives." You've got an iPhone 4 and you're hip to Facebook and Foursquare. Your most recent and greatest idea (if you do say so yourself): "I know how we'll get potential customers' contact information: Free iPad Giveaway! No one else is doing it!"

Venture Capitalist Wait, wait, don't tell me: You're based in the San Francisco / Palo Alto area, right? Uh-huh. And you once worked for HP or IBM? Yes. You enjoy yachting and golf? You betcha. And, of course, don't forget about your passion for "fine wine." How unique.

The Influencer A relatively new moniker for the same old type of self-aggrandizing, undeserving attention whore of years past: You've probably referred to yourself as a "guru" or "visionary" before. But your "highly soughtafter" methodology for measuring your Twitter influence is a secret worth keeping close to the vest. Definitely.

Pretty good stuff. Go check out the full story at CIO.com: "Influence This: 10 Loathsome Technology Industry Types."

VMware: Cisco's Big Strategic Dilemma

Tue, 31 Aug 2010 12:27:10 GMT

If only you could have the problem of having a 2% investment in a company whose share price has gone to the moon, right? Well, that's where Cisco is with VMware. While its equity stake looks smart at this stage, in the longer term Cisco is going to have to make a bid for either EMC (VMWare's parent company) or figure out the next step to get in the virtualization game.

Here's the problem: Virtualization and cloud computing, VMware's bread-and-butter, is the technology flavor of the decade, and Cisco is relying heavily on a strategic partnership with VMware to get it done. Sources in Silicon Valley are chattering about what Cisco will do about virtualization, a party its been largely left out of. As VMWare's price has shot up while Cisco's share price has stagnated, it's now become all but unaffordable to for Cisco -- VMware now has a market capitalization of $33B.

Bloomberg Survey Sees Gold $1,500

Tue, 31 Aug 2010 09:42:32 GMT

Gold is popping this morning on a number of bullish forecasts, among them a survey of analysts by Bloomberg that sees the yellow metal going to $1,500:

Gold may rise as high as $1,500 next year, 21 percent more than the $1,240 traded at 1:45 p.m. in London, according to the median in a Bloomberg survey of 29 analysts, traders and investors. Dan Brebner, an analyst at Deutsche Bank in London who is the most accurate forecaster so far this year, says the metal may reach $1,550.

With the economy stuck in neutral and Ben Bernanke's money-printing minions firing up another round of Monopoly money, I don't see any reason why gold can't go to $1,500. However, if you are late to the gold party and are afraid of chasing it, here's an idea: Buy some gold mining stocks. They have lagged the gold rally most of the way up.

Some quality gold and silver stocks, including Newmont Minining (NEM), Royal Gold (RGLD), and Pan American Silver (PAAS), are breaking out this morning with bullish action.

News Brew: Litigation Central

Mon, 30 Aug 2010 12:08:46 GMT

What's on my mind this morning? Litigation. Like, Paul Allen suing everybody. And everybody suing Facebook.

What's up with that? Has the economy gotten so bad that the world is looking to lawyers to boost buisness activity?

In other news:

Genzyme rejects Sanofi bid (Wall Street Journal)

Intel to buy Infineon's wireless outfit for $1.4B (CNN Money).

Blackberry gets a stay in India (BBC). Quick -- figure out how to let people spy!

HP authorizes $10B buyback (Bloomberg). Bidding wars, buybacks -- who needs all that cash, anyway.

Government to propose new fuel economy stickers (USA Today). They'll come with pretty new graphics! Yay, now that's what I call bureaucracy at work...

Most people don't want to be located (NY Times). Especially me. Right now.

Google plans pay-per-view films (Financial Times).

Cisco is reportedly trying to buy Skype before its IPO (TechCrunch).

The M&A Boomlet: Is Big Tech Stuck?

Thu, 26 Aug 2010 12:29:57 GMT

This bidding war between HP and Dell for 3Par says something to me about big technology companies: They are stuck. They can't grow internally, so they have to look outside the company.

If you think about the evolution of all big industries, they trend toward consolidation and giant companies eating up new companies in the search for growth and innovation. This certainly appears to be the case with players like HP, Dell, Microsoft, and Cisco. The new innovation is not coming from within, it's coming from outside.

What's So Sexy about 3Par? Virtualization

Mon, 23 Aug 2010 10:19:12 GMT

Little storage player 3Par Data is suddenly the envy of many, as it gets caught up in a massive bidding war between Dell and HP which have caused its share price to nearly double in a period of a week.

What gives? Well, virtualization and data centers, in a nutshell. As traditional enterprise spending slows, data centers continue to grow like mad, fueled by Internet services, social networking, and "cloud computing." It turns out that storage and virtualization services -- 3Par blends both of these -- are crucial to this high-growth area of computing.

The Newest Green Fuel: Urine

Mon, 23 Aug 2010 10:11:10 GMT

First there was "greentech," now there is "yellowtech." A team of research scientists in the U.K. are investigating whether urea, a major component of urine, could be used to create energy through low-cost fuel cells.

From Physorg.com:

The biggest obstacles to commercialising these proton exchange membrane fuel cells are cost, with the membrane and conventional, platinum-based catalysts, and challenges involving the transportation and storage of the highly flammable hydrogen or the toxic methanol.

The Carbamide Power System involves far cheaper membrane and catalysts, and can be run on urea (also known as carbamide), a mass manufactured industrial fertilizer and a major component of human and animal urine.

Read the rest here.

News Brew: Intel Locks Down McAfee for $8B

Thu, 19 Aug 2010 09:38:43 GMT

Another day, another deal. Intel has agreed to buy security software firm McAfee for $7.68 billion (Wall Street Journal). That's $48 per share, or a 60% premium to Wednesday's closing price. Nice pop!

This is a pretty interesting move for Intel, as the chipmaker moves into the big security software market, taking on other giants such as Symantec.

Some more news:

Dick's Sporting Goods (DKS) reported earnings jumped 32% (Wall Street Journal).People need more tube socks.
Williams Sonoma posted strong earnings and raised outlook (ABC News). Pots and pans are back?
Germany's economy is growing strongly, expected to hit 3% growth this year (BBC).Get me a Porsche.
The dark side of Mark Hurd's management style (MarketWatch). Rumored to have locked employees in a room to make them watch bad B movies.
RIM is looking to get into mobile advertising (Wall Street Journal). Kinda late guys, no?
Facebook launches "Places" (TechCrunch). It's now gonna tell people where you are.
The tragic death of everything (Technologizer).
378 million shareholders voted against Michael Dell (CNNMoney.com).
Man killed by exploding mobile phone (Daily Telegraph). Really! The brand was Nokia, FYI.

Biotech IPOs Could Fuel Genomics Boom

Wed, 18 Aug 2010 16:30:33 GMT

Two big coming biotech IPOs are likely to reignite investor interest in biotech, specifically the genomoics sector. Complete Genomics (Future symbol: GNOM) and Pacific Biosciences (Future symbol:PACB) have filed S-1 Registration Statements with plans to go public in the fourth quarter. This also happens to be the time when the biotech market is bullish seasonally.

Biotech had a good year in a choppy overall 2010 market, with the NYSE Arca Biotech Index up 15.3% year-to-date (YTD). Selected molecular diagnostics stocks have fared well YTD with GenProbe (GPRO) up 12%, Illumina (ILMN) up 50% , and Sequenom (SQNM) up 44%.

Stock Watch: Looking at Our Picks

Wed, 18 Aug 2010 10:54:04 GMT

Let's catch up on many of the public companies and stocks we've been following:

Notebook Dump: Tech Thoughts, Trends, Rumors

Tue, 17 Aug 2010 11:38:32 GMT

After months of talking to smart people and taking notes, my latest notebook is filled. Usually what I do at this point is read back through the whole thing to see if there are any nuggets that I missed or forgot about.

Why not just dump it straight onto the Web? This is stuff that real people are saying in the real world. For your pleasure, here you go:

News Brew: iPhone 4 Goes to China

Tue, 17 Aug 2010 11:15:18 GMT

Is there a more explosive economic concept than combining iProducts with China? Didn't think so. In that vein, MarketWatch reports that China Unicom starts to ship iPhone 4 in China next month.

Our mind is boggled by the concept of hundreds of millions of frenetic Chinese citizens roaming the fastest growing country on earth clutching iPhones and iPads.

On to the rest of the news:

News Brew: Dell Ponies Up for 3Par

Mon, 16 Aug 2010 09:30:22 GMT

Dell is making a big move into the data storage market with a $1.15 billion all-cash deal for 3Par Inc. It comes at an interesting time, as 3Par's growth and share price had recently slowed and it is still losing money. The offer is an 86% premium to 3Par's closing price Friday of $9.65

The move shows Dell has an interest in moving outside the commoditized world of PCs and comsumer electronics and into higher margin data-center products. 3Par specializes in building large storage arrays for corporations and data centers which can be "virtualized," or partitioned so that the system can handle data from many applications at once.

At any rate, it's paying off big for 3Par shareholders this morning with the stock indicating it will trade up nearly 85%.

Hulu is said to be preparing an IPO that would value the company at more than $2B (New York Times).
Japan's economy is stuck in its tracks again. And theoretically, that means China is now more powerful (Bloomberg). Bullish on Moo-shu, bearish on Sushi?
Want a 4.4% mortgage? Good luck, says Fortune.
China's currency fell to a seven-week low agains the U.S Dollar (Wall Street Journal). Remember all that noise about them strengthening the Chinese currency?
This is what I want for Christmas: A Ferrari simulator (Physorg.com). Scratch that, I want a real Ferrari.
Facebook is buying Chai Labs for $10 million (VentureBeat). Here's a fun fact: it was founded by a former Google executive.
VCs and Super Angles: The War for the Entrepreneur (TechCrunch). Hmm, a bunch of rich arrogant people beating each other to a pulp. Sounds fun.
Tim Ferriss thinks he has a way for you to read 300% faster (Tim Ferriss blog).

Are Net Neutrality Fanatics Being Naive?

Fri, 13 Aug 2010 10:39:53 GMT

The "Net Neutrality" debate has taken a interesting turn this week, triggered by Verizon and Google's joint statement to move toward more tiered services on the Internet.

Here's where I am on net neutrality: It's not black or white. It's gray. Yes, we need to preserve an element of freedom to access applications over broadband. But also, the definition of net neutraility needs to leave some wiggle room to help telecom and media companies roll out some newer premium appications that make money.

I think the recent developments are actually exciting, because there is now a catalyst for change and the debate is out on the table. Verizon and Google getting together is kind of like the executives of the Boston Red Sox and New York Yankees coming to the table on a stadium-sharing deal. But this shows how crucial the issue is, if two of the most powerful corporations in the world are willing to come to the table to talk about it.

[img:/assets/10/0813/1241.500]

As the net neutraility fanatics grab their pitchforks and fire up their blogs, ready the roast the big evil corporations that are trying to swipe away their YouTube Internet, they're being naive if they think things can stay as they are. Stuff's gonna change.

News Brew: Oracle vs. Google -- Battle of the Titans!

Fri, 13 Aug 2010 09:35:42 GMT

Oh, this is fantastic, Oracle is suing Google. Larry Ellison vs. Eric Schmidt -- the Alpha Male vs. the Science Geek. This is going to be very interesting!

Oracle says in a press release that Google "knowingly, directly and repeatedly infringed Oracle's Java-related intellectual property." What's interesting is that it involves Java technology, which Oracle acquired when it bought Sun Microsystems earlier in the year. Hmmm, did Oracle lawyers know something that Sun lawyers didnt?

I'm sure you'll be reading more about that in the days ahead. On to some more news:

IBM is buying software company Unica for $480 million (ZDNet). Unica helps retail sellers target marketing efforts and predict consumer behavior. I bet they can't predict my behavior.
Sequoia is backing Airstrip, a software company that makes mobile patient monitoring applications (VentureBeat).
WePay raises $7.5 million for group payment systems (TechCrunch).
Retail sales rise less than estimated (Bloomberg). Hmm, just a theory here, but does that mean everybody spent their tax refunds?
China mudslides kill more than 1,000 (CNN).
Russian fire spreads near nuclear facility (Bloomberg). No, they don't mean it's come close to Boris Yeltsin.
Google defends net neutrality plan (PCWorld).
New Google apps extend the cloud (InformationWeek).
Citizen scientists, using their computers in the Einstein@Home project, have discovered a rare star (BBC).
Belgium is looking to get greener -- by liquifying corpses (Greenbiz.com). Ewwww.
Liberals start "F*ck Tea" party compaign (CBSNews). Now, that's kind of funny.

Internet Advertisers in EU May Lose Their Cookies

Thu, 12 Aug 2010 10:24:58 GMT

Quietly, the European Union is moving toward broad privacy tightening of privacy on Internet applications, specifically in relation to advertising.

The European "Data Protection Working Party" is developing rules for online privacy, and one of the more commonly discussed elements of the new rules is the "cookie directive," which would require all opt-in by consumers to accept a cookie.

This, of course, is a big change in the way online advertisers currently track your activity. They don't need opt-in to insert a cookie in your browser.

Coming Privacy Freakout: Ad Industry in Denial

Mon, 16 Aug 2010 10:20:29 GMT

The Internet advertising industry appears to be in denial about the growing momentum behind Internet privacy -- and it should start to prepare for more protection of data through global privacy legislation.

As I noted last week, the European Union is moving toward privacy policies, most notably with the "cookie directive" which would require all advertisers to obtain opt-in to place cookies in user browsers. In addition, we are in the early stages of new privacy legislation in the United States which would introduce tighter Internet privacy.

All of these powerful new regulations are likely to put signficant pressure on Internet media, most notably the ecosystem of ad networks and data exchanges.

Chamberspeak Gone Bad

Thu, 12 Aug 2010 00:36:17 GMT

Something on Cisco's earnings call last night went terribly wrong. In a rational business sense, Cisco made plenty of money, even though they missed analyst estimates: $1.9B in profit and $40 billion in revenue for the first time in the company's history really isn't that shabby.

But something else was going on. The conference call was awful. It did not inspire confidence. Cisco executives bungled words, proceeded with a new "four-part" format as if they were trying to choreograph an opera at the Met, and struggled to explain the business climate. Even John Chambers himself, master of the bullish technology catchphrase, seemed to have trouble elucidating exactly what the problem was.

"We think the words unusual uncertainty are ... a description of what's happening."

Whaaa? Had we been suddenly been dropped into some metaphysical California Yoga retreat? Unusual uncertainty? What is that? That's not the Chambers I know. That's downright whimpy.

Cisco Misscos!

Wed, 11 Aug 2010 16:25:17 GMT

Cisco shares are getting hammered nearly 6% after hours after the company missed targets set by analysts.

The company said in a release that it earned $1.9 billion, or 33 cents per share, in the fiscal fourth quarter that ended July 31. That is an increase of $1.1 billion, or 19 cents per share, over a year ago. But analysts had expected 42 cents in earnings. Overall revenue grow to a record $40 billion.

That's a big miss, especially for Cisco, a company that often beats estimates. Given that it's a technology bellwether and often looked to for guidance on the economy as a whole, it will likely add to pressure on the general market tomorrow.

Internet Privacy War Gathers Steam

Wed, 11 Aug 2010 09:48:40 GMT

The Internet privacy movement appears to be gathering steam and leading to growing paranoia (warranted) among those who have the most to lose: Dozens of venture-backed ad networks and advertising data companies.

What's going on? Well, certainly the Wall Street Journal series on data privacy didn't help. This may be the high-profile media piece that tips public opinion toward the privacy advocates, who have been quietly ramping up their assault on the free-and-easy exhange of Internet advertising data.

What should be scaring the Internet marketing companies: The ideas are starting to gain traction in Washington, D.C. Reps. Ed Markey (D-Mass.) and Joe Barton (R-Texas) recently issued statements that "that the price of consumers' daily use of the Internet increasingly is surrender of their personal information."

At the same time, you have other escalating assaults on the Internet advertising marketing machine. Let me name just a few examples:

Europe is ramping up on Internet privacy, including cracking down on cookies. In fact, the EU has issued on opinion that all behavioral advertising must be opt-in. Why aren't more people talking about this?
The U.S. Senate is prepping online privacy legislation!! (Washington Post)
Facebook's privacy errors continue to boggle the mind (Christian Science Monitor)
Other countries aren't happy with Google's Street View. South Korea recently seized Google's computers in an office raid.
The media is starting to question free-and-easy Internet ad data. This may only be the beginning.
The solid privacy series in the Wall Street Journal woke a lot of people up to reality. Maybe this will start to tilt public opinion in the direction of more legislation?

This potentially huge development doesn't seem to be getting that much play. Over the past few years, the venture capital industry has funded hundreds of ad data and ad network companies, all of them based on the premise that ad data would be freely acquired, exchanged and even traded. One such company is Blue Kai, a company I've followed on this site, which has their entire business model based on the exchange of anonymous ad data. There are dozens more. What happens to companies like that if powerful privacy legislation is passed?

And then we have even a bigger story: What about Google? Imagine what could happen to Google's market cap if the legislators initiate sweeping changes to Internet privacy laws.

This story is currently being underreported and underhyped. If you are in the Internet advertising or media industry, you should watch it closely. It could change your life.

Market Update: Batten the Hatches

Wed, 11 Aug 2010 08:47:28 GMT

Let's see, the stock market rallied while economic data was weakening. Yet bonds were rallying at the same time, and yields have been plunging -- to near record-lows of 2.75% in the 10-year! This was a great dichotomy that had many people scratching their heads. Why would stocks rally and bond yields plunge while we got weakening economic data?

Well, if they were fueling up the helicopters, that would make sense.

Remember the bond market is often "smarter" than the stock market. The plunge in yields has been telling you something. Is it not interesting that the stock market and bond rally continued until the Fed announcement and then failed on yesterday's news? Sell the news, baby.

RightNow Opens Up the Customer Cloud

Tue, 10 Aug 2010 13:31:05 GMT

BIG SKY, MT -- RightNow Technologies (Nasdaq: RNOW), a provider of customer-service software, today launched an ambitious new platform to open up the way customer service applications are built "in the cloud."

With the new "Cloud CX Platform," RightNow is honing its focus around improving customer experiences across the Web. With so much marketing hype and confusion built around "cloud computing," this is an important expansion of RightNow's CX (Customer Experience) product that the company hopes will help differentiate itself in the larger cloud services market -- basically any software than can be sold as a service (Saas).

"This is our largest product announcement to date," said Greg Gianforte, CEO of RightNow, at the launch event here this morning. "We're exposing our cloud platform to our customers."

Marketo En Fuego: Close to $20M in Sales

Tue, 10 Aug 2010 08:37:29 GMT

Service-as-a-software (Saas) company Marketo is riding the trend of real-time analysis of customer behavior, making it one of the fastest enterprise software companies in the venture market and a solid IPO prospect for 2011.

The company, a startup founded in 2006, recently surpassed 600 customers in July. Marketo’s revenue is approaching the $20 million level, based on estimates from company sources that the average annual sales per customer is in the $30,000 rage. While the company is not yet profitable, it looks to be a solid IPO candidate for later in 2011 or 2012.

Zero Hedge & Nanex Confirm How HFT is Corrupting Markets

Tue, 10 Aug 2010 00:01:00 GMT

Still wondering why the market has such bizarre action? Why the Mom-and-Pop investor wants little to do with it? Wondering if fear of Flash Crash II runs high? Look no further, High Frequency Trading (HFT) has been indicted in full.

The blog Zero Hedge, one of the most cutting-edge and informative places to get inside knowledge on how the market works, has been pointing to anslysis from Nanex, a market data provider, on how HFT is corrupting markets and trigger May's "Flash Crash." It paints an incredibly disturbing picture of a dysfunctional market rigged by crooked robots.

I won't reprise the entire analysis -- you can wade through the orginal posting on Nanex discoveries yourself, and it's worth a look if only to see the fascinating and bizarre charts. But I can summarize it: The markets have run amok with diabolical "quote stuffing" programs that try to mine holes in the market system and fool other computers and markets into coughing up stock quotes at absurd prices.

Jodie Fisher: Who Is She, and Did She Do Porn?

Mon, 09 Aug 2010 12:11:21 GMT

There is never a dull moment in business scandal world, and the journos and bloggers are being kept very busy by this Mark Hurd story. But let's get down to the most important questions: 1) Did they have sex and 2) Was she ever a porn star?

I'm speaking of Jodie Fisher, the Hewlett-Packard contractor and "actress" which led to the demise of Mark Hurd, who resigned as the company's CEO on Friday following his having falsified expense reports that involve her.

First question: Did they have sex. Oddly, all of the news reports say no. Okay, but I'm real skeptical. It's hard for me to imagine this being a full-blown "scandal" without there being a little more than some aggressive courtship and falsified expense records.

News Brew: The Hurt's on HP's Hurd

Mon, 09 Aug 2010 11:42:48 GMT

Well, what's more important -- a generous severance package or avoiding being disgraced by a sketchy expense-account scandal involving a sub-contractor that happens to be a reality-show actress? That's the moral balance former HP boss Mark Hurd is contemplating this morning.

Hurd resigned on Friday after the Hewlett-Packard board had decided he had broken company policies by falsifying expenses and conducting a personal relationship with a contractor named Jodie Fisher, a former "actress" (yes she has been in porn) and a reality TV contestant. Meanwhile, Hurd's severance package could reach $40 million, reports CNBC.

Pretty weird. Pretty creepy, and I imagine it will only get more so. Here's some other goings-on in the news:

Skype files to raise $100 million in an IPO (Bloomberg). The phone calls might be free, but the investment bankers won't be, I'm sure.
Naomi Campbell took blood diamonds from a brutal dictator. She also flirted with him. Mia Farrow is testifying against her, saying she lied about it (ABCNews). I just find this story fascinating. Maybe Mark Hurd is involved as well?
Yet another Black Swan event: Tiger Woods now sucks at golf (WSJ). He might not even make the Ryder Cup.
Apple's executive in charge of the iPhone has left the company after only one year (PCWorld). Yeah, but how weird is it that his name is "Mark Papermaster"? Is he related to Chris Moneymaker?
Is Net Neutrality Socialism? (PCWorld). Some broadband apps are more equal than others.
A giant ice-sheet is breaking off a Greeland glacier (BBC). I don't know if y'all saw "Day After Tomorrow," but I think that means it's about to get really cold, before it gets really hot. Or something. As long as it doesn't involve Randy Quaid playing a scientist again, I'm cool with that.
Needham says AAPL will go to $375 (Macnn). But can they do it with out Mark Papermaster?
Why do people hoard (Time). I'm glad we have those serious journalists over at Time to answer these important questions for us.

Slip, Sliding Away: Google's Superpoke!

Fri, 06 Aug 2010 12:02:09 GMT

It's Friday, so rather than do any real work, I've been soaking in the news, networking, and catching up on all the gossip surrounding the developing sale of Slide to Google for some $182 million + employee retention bonuses.

Slide, you say? What's that? They make "casual games," which is Silicon Valley speak for: goofy cheap stuff you can build quickly then flip. And what's the big technology innovation Slide will leave the world for $182 million? Superpoke! -- the Facebook app. Yipppeeee! In 10 years will anybody give a damn what Superpoke! is?

The gossip is juicy. Credit where credit is due: TechCrunch had a huge scoop here, digging up the story before it was announced and even publishing the amount that everybody will make (or not make) on the deal. Judging from chatter on various message boards, the top employees at Slide make out well but the great-unwashed -- pretty much everybody on down the line below employee #10 -- didn't make diddly.

News Brew: Jobs, Yoko Ono, and the iPod

Fri, 06 Aug 2010 09:21:28 GMT

The engine of value creation, economic growth, and mortgage payments is jobs. To build stuff, you still need to hire people. Unfortunately this morning's jobs report was a bit of a disappointment, as private-sector jobs creation fell short of expectations, growing by only 71,000 for the month.

Unemployment remains elevated, with the number of unemployed persons, at 14.6 million, and the unemploymen rate, at 9.5 percent, unchanged in July, according to the Bureau of Labor Statistics (BLS) report.

Where are the jobs? Healthcare, and surprisingly, manufacturing. Healthcare added 27,000 jobs and manufacturing employment increased by 36,000 jobs in the month.

I've been doing my own research in the technology industry, and I will say, I have noticed an uptick in activity lately. Two sources at Internet jobs boards indicated that jobs listings are growing. Individual companies have also been expanding their hiring. For example, take a look at the "Careers" page of Right Now Technologies, a local company I have been following here in Montana. Their listings have expanded to 58 people.

Now, 58 jobs is not enough to counteract the macro trend, but it's clear that there is still growth in innovation markets (hey, I had to find the positive spin somewhere).

On to more of the news:

CNN's take on the jobs market. Before you read this, you have to realize the big headline loss was in temporary Census workers.
Wheat prices are hitting highs on the Russian drought situation. Meanwhile, millions of metric tons of wheat are rotting in India (AP).
Activision Blizzard fell on disappointing results (AP). No blizzard of cash, apparently.
Yoko Ono says the Beatles won't be coming to iTunes any time soon (AppleInsider). As long as they keep Yoko Ono's music off iTunes as well, we'll be okay.
Mixed metaphor of the day: "RIM, Adobe, and Microsoft Grasping at Mobile Straws" (PCWorld). I am trying very hard to imagine what a mobile straw is. Aren't all straws mobile?
All 1,000 studemts at Kearns High School in Utah will get an iPod touch (Salt Lake Tribune). And just in case you don't know how to get some people riled up -- point out that these were bought with stimulus money!
Neither Google or Verizon officials are talking about the latest net neutrality kerfuffle -- the rumors that they're going to do a "deal" for tiered traffic pricing (CNET). Meanwhile, I'm still campaigning for beer neutrality -- all the beer you can drink.
1 million little brown bats have been killed by a disease known as white-nose syndrome (BBC). That's not to be confused with white-man syndrome, which renders Silicon Valley executives unable to stomp their feet in rhythm to soul music.
Japanese social games company DeNA is on track for $1B in revenue (TechCrunch).That's a lot of sushi.
Avere Systems raises $17 million (VentureBeat).

WSJ's "DataGate": Did They Forget Google?

Thu, 05 Aug 2010 12:50:35 GMT

You have to commend the Wall Street Journal for assigning the resources and churning out the investigative pieces as part of the "What They Know" series. But I thought they missed a lot of things.

For example, didn't they forget Google?

The series of articles goes on at length about cookies, with much detail about data aggregation firms such as BlueKai and [x+1], and the way advertisers target you through your browsing. But there wasn't much in depth about the bigtime data machines like Google or Bing and where that will go in the future -- such as location-based tracking and artifical intelligence.

Marketing & Ads: it's the Metrics, Silly

Thu, 05 Aug 2010 11:25:13 GMT

There is a lot of buzz, hype, critical analysis, and downright drivel out there about trends in marketing and ad spending. Some have even asked whether advertising is dead. They're wrong.

Advertising is not dead folks, it has become more vibrant and complex than ever. It's growing in the online world where aggressive metrics and analysis demand instant accountability.

Here's an experiment: Try to go the next five minutes without seeing some kind of add. Ooops, too late, already happened, right?

In the Q4 of 2009, online advertising hit a new all-time quarterly high of $6.3 billion. What's changing about advertising is that its morphing, and the metrics and data used to track it are becoming more sophisticated than ever.

Take the famous "Cog" ad by Honda. Reportedly took $6M and more than three months to develop this high-concept, cross platform viral video ad. It got lots of media attention too:

News Brew: Intel Settles with FTC (As Expected)

Wed, 04 Aug 2010 13:43:28 GMT

Well, who doesn't like to say, "I told ya so?" I certainly do, which is why I'm pointing out that Intel has settled (again) with the Federal Trade Commission (FTC), promising to stop using bundled pricing to keep down the competition. On June 24 we pointed out that a variety of sources were expecting a settlement soon, with a minor wrist slap for Intel.

It has turned into a complete non-event. Investors today reacted with a yawn, as Intel shares in afternoon trading were exactly flat, at $20.71.

In other news:

BP says it has the oil spill solved (Washington Post). Really. No, this time, you should believe them.
Apple rumor mills are already cranking up for the fall, with speculation over the iPhone 5 and iPad mini (CNET). Also coming: iPad Double-mini, iPhoneMiniPad, the iPodPad, the iToilet, and the iToldYaSo.
Why the UAE is done with the Blackberry (WSJ).
ISM service index expanded in July (Bloomberg). Apparently, there was a surge in sales of Big Macs.
Billionaires like Bill Gates and Larry Ellison are pledging more money to charity (WSJ).
Time Warner revenues and earnings increased (TheStreet.com). Just in case it sounds foreign, let's repeat that: Time Warner revenues and earnings increased!
ADP sees slight uptick in jobs (Forbes). Apparently that Big Mac surge forced McDonalds to hire.
Priceline and Electronic Arts helped boost tech stocks (MarketWatch).
Toyota's back with $2.2B in profit (Detroit Free Press). I don't know why I used the DFP link. Mildly sadistic, I guess.
Senators are taking for-profit education to the woodshed (Reuters). Fifteen schools investigated.

Gold Update: Comex Inventories Under Siege?

Wed, 04 Aug 2010 11:13:26 GMT

There has been a remarkable turnaround in gold in the last week, which happens to coincide with the monthly futures roll from the August to the October or December contracts. Eric De Groot says this week's strong moves may be related to physical delivery notices at the COMEX exchange.

De Groot writes on his blog:

"There were unusual movements of COMEX gold inventories on July 28 and July 30 that 1) coincidentally roughly equaled what was needed for the sellers of contracts to meet delivery requirements, and 2) may indicate that unusually large quantities of COMEX gold will be withdrawn by the end of August."

This is a big deal, as it could be the start of the massive COMEX short squeeze that people have been waiting for for a long time. It follows rumors of a run on COMEX silver inventories.

Gold Bears Still Don't Get It

Wed, 04 Aug 2010 09:33:09 GMT

Amazing to me, having followed, traded, and invested in gold over the last 8 years, that there are still so many gold skeptics out there. Like being wrong for a decade isn't enough?

Gold bears have trouble with basic comprehension of the bull market. Primary example is Ben Bernanke, who naively stated before Congress that he "didn't understand" why gold was going up. Why Ben, it's easy: It's because you are creating mountains of debt and paper money. You want some gold coins or burning paper money? What's not to understand?

[img:/assets/10/0804/1007.500]

This morning, Gold is breaking out again into bull territory, the beginning of a new phase that will likely carry it back above $1,300 by year-end. The correction is over.

A China Reality Check

Tue, 03 Aug 2010 12:55:48 GMT

Today's story about garbage threatening the Three Gorges Dam could be seen as a metaphor of all things going on in China. China is huge. It's got a gigantic, expanding economy, which also yields huge amounts of trash, toxic waste, and social pressures.

[img:/assets/10/0803/1335.500]

China is hyped by the mainstream press and many investment gurus, including hedge-fund ace Jim Rogers. Sometimes it reads as if China is the golden growth story. But a lot of this hype is overdone, and ignores many serious problems within both the Chinese economy and political-social landscape.

This doesn't mean I don't like China. It's an incredibly complex country. It has immense cultural and political history, and an a deep culture -- not to mention good wonton soup. But, China's got issues.

The WSJ's "Data Panic"

Tue, 03 Aug 2010 11:18:42 GMT

Apparently the Wall Street Journal discovered over the weekend that companies can gather lots of data about you on the Internet.

I suppose this is their play for a Pulitzer Prize -- a groundbreaking story that exposes the evil of Internet data collection. Only one problem: The Internet -- and financial industry -- has been mining your data for over a decade. And unless you hide in a cave with Ted Kaczynski, you're not going to escape it.

In fact, everybody mines your data. Think of the credit-card companies or your bank. Or Google. They know everything. I like to tell my wife that, "Google knows more about me than you do."

News Brew: Rehab is a Booming Business

Tue, 03 Aug 2010 10:36:01 GMT

At the Rayno Report, we are always looking at hot new growth trends. Why not rehab? Charlie Sheen and Lindsay Lohan are doing it.

Now, I haven't done much research on it but I don't think there are too many publicly-listed rehab plays. Maybe there is a private-equity rollup in there somewhere.

What we really need is rehab for Washington D.C. and Wall Street. Now, that's a great idea! Can you see all the Federal Reserve officials, Senators, and Goldman Sachs bankers doing Yoga in California with Lindsay Lohan? Hey, it worked for Michael Milken.

Okay, onto more news:

Pfizer beats the street and its stock-price hiccups (Reuters). Gets my award as the most boring blue-chip of the last ten years. Maybe it's time to buy that 5% divvy?
Meanwhile, when's the last time you heard about Pfizer and Proctor & Gamble both listed in the WSJ as "Hot Stocks" (WSJ)?
For those who think China's now a preeminent global leader: China's Three Gorges dam is imperiled by islands of garbage (Reuters).
Blackberry threatened by a Gulf states ban (BBC).
Federal government declares Gulf Spill the "worst ever" (CNN). No report on what they think about Charlie Sheen's shenanigans.
Pending home sales decrease 2.6% (Bloomberg). Hmm. People are buying houses. Shocking, isn't it?
Blackberry is introducing it's new touch-screen phone today (Bloomberg). No word on whether you can use it to call Saudi Arabian intelligence officials.
Remember when the U.S. Dollar was a piece of trash? Well, that's back again... (WSJ). I will trade you dollars for rubles.
Is Bing outmaneuvering Google? (CNN).
Corning is trying to bring back "Gorilla glass," a product from the 1960s (AP). Can you call something 50 years old innovation?

Synaptics: Good Play on Tablets, Touch

Fri, 30 Jul 2010 12:30:14 GMT

A great why to find advantageous companies is to look at those driving key technology market trends and generating good business results when the rest of the market is struggling. This story fits Synaptics, the touch-interface specialists, perfectly.

Synaptics makes human interfaces (mostly touchpads and touchscreens) for a variety of PC and smartphone devices. Big customers include Dell, LG, Ericsson, HTC, and Sony. The company has grown fast, roughly doubling revenue and earnings since 2007, at a time when the economy has been dark, at best. During this time, the stock price has been volatile, but largely flat, and the stock price relative to earnings has gotten cheaper and cheaper.

[img:/assets/10/0730/1253.500]

The company announced earnings yesterday, reporting net income of $19.3 million, or 54 cents a share, compared with $12.4 million, or 34 cents a share, a year ago. Synaptics earned 70 cents a share. Revenue hit $145.8 million, a ries of 27% over last year.

Traders: Data Center Addicts, Too

Fri, 30 Jul 2010 11:13:08 GMT

Interesting post on Themis Trading which I picked up via Zero Hedge on the trading investment in data centers. Equity firms spent $1.8B in data centers last year, wow!

The only problem with this trend? Programmers are getting gypped:

"According to our buddies at the Tabb Group, equity firms spent $1.8 billion last year on data centers; half of that total came from sell-side shops. But even though they are spending tons of cash on the infrastructure, they are not exactly doling out the cash to their programmers."

Source: Themis Trading.

Market Update: Chop Suey

Fri, 30 Jul 2010 08:52:30 GMT

Trying to trade or game this market? Be careful, you can get your head ripped off. That being said, I believe the downtrend has now resumed and that the market is currently a downtrending market.

I expect we'll revisit sub-1,000 on the S&P again -- more likely even sub-900 -- before the federales start fueling up the helicopters for another money drop. I'd buy the market on a 200-point S&P drop Reasons why I remain negative on the market:

CEOs: Please Buy Stuff

Fri, 30 Jul 2010 08:19:07 GMT

Is leadership finally starting to lead? CEOs and corporate executives, who lead our business climate, have been victim of the same cautious and negative thinking as consumers and investors for a long time. But they may finally be emerging from the psychological funk.

The last few quarters have shown a capital-spending led recovery. Companies are sitting on record piles of cash and free-cash flow, and they are finally starting to invest. This is an important trend that show business leaders are finally finding the will to invest.

This would be a huge trend reversal, if it holds. What's interesting about cash and capital spending, as you can see in the chart below, is that it is not a recent trend established in the last recession. Companies have actually been decreasing their capital spending for the last ten years.

[img:/assets/10/0730/0834.500]

Let's face it, the economic engines won't get humming along until executives start getting a little more confident and start building new things, buying equipment, and hiring people. The equipment buying is starting to happen, which hopefully means the jobs are next. Jobs will be where its at. In fact, there is evidence that business leaders are starting to come out of the long slumber.

Bloomberg has a nice article pointing to this topic today.

RightNow: Steady as She Goes

Thu, 29 Jul 2010 10:44:58 GMT

RightNow Technologies, a scrappy CRM company that is starting to become a more serious competitor with CRM giants such as SAP, Oracle's Siebel, and Salesforce, just announced a solid quarter in which they continue to make customer and revenue gains.

The company reported GAAP earnings of $1.4 million, or 4 cents per share, for the quarter. The non-GAAP earnings, which analysts use in their estimates, were 9 cents per share, matching the street view. Revenue grew 20 percent from the year-ago period to $43.5 million. But company executives were careful to stress on the call that recurring revenue stream is growing at a 27% clip.

News Brew: Google Googles Gaming

Wed, 28 Jul 2010 11:49:09 GMT

The bandwagon story of the day is Google looking into creating a "Facebook competitor" by talking with popular online gaming companies (Wall Street Journal). That's funny, I thought Facebook was a social networking site and not a gaming company. Shows you what I know.

That's also not to mention that Google has already tried to "do" social networking, but looks to be failing miserably with Buzz.

The spin in the Wall Street Journal is that by talking to social gaming companies like Zynga, Google is contemplating creating an alternative to Facebook, where many of the social gaming companies are growing like weeds (e.g. "Scott has acquired a semi-automatic weapon to blow you away in Mafia Wars!").

Apple's Secret: The Billing Relationship

Wed, 28 Jul 2010 09:34:03 GMT

Very interesting article by Peter Kafka in AllThingsD this morning about Time Inc.'s frustration with Apple. Apparently Time executives are mystified as to why Apple won't give them control to sell their own subscriptions via an app for the iPad.

Well, I'll tell you why: Apple loves to control the billing relationship. They don't want to give it up. This was the brilliance of iTunes and how they ended up taking control of digital music from the music industry. It was the music industry's huge strategic error. Apple knows that if they control the billing relationship, they control the access to the customer, and therefore can dictate the terms of just about any ecommerce relationship.

Why Time Inc. executives are so "mystified" by this is a mystery to me. Apparently their magazine executives are not talking to executives in the same company that got reamed in the music business. Apple wants to control billing, they want to control pricing, and they want to control the consumer. Period. You want to try to mess with that? Take a hike.

This is one reason why I don't think the iPad will be the "savior" of the media industry that everybody has made it out to be. Unless Apple opens up, and starts sharing a bigger piece of the pie with content and applications producers, it will be the same movie all over again.

WSJ Pay Survey: Barry Diller #2, huh?

Tue, 27 Jul 2010 12:20:32 GMT

The Wall Street Journal pay survey is a fascinating read. My initial impression was surprise that Steve Jobs was only number five. But the thing that shocked me the most is that Barry Diller, the CEO of IACI, is number two on that list, having made $1.14B over the years 2000-1010.

This is egregious. Not because Barry Diller is incompetent. He's a a smart guy, and a media visionary. It's because it's way out of line with what his company did. If you include Expedia shares, an IACI spinoff, IACI shareholders lost 18% over the decade period in which Dillar's compenstation was measured, according to the Wall Street Journal. In fact, IACI alone stock fell 80% during the time that Barry Diller made $1B.

News Brew: Do You Feel Like a Squirrel?

Tue, 27 Jul 2010 11:34:40 GMT

I read somewhere recently that watching the market these days is like watching a squirrel trying to cross the street. It zigs, it zags, you're not sure if it will make it to the forest or get flattened by a bus. Couldn't think of a better metaphor.

How else to explain a market that gives up 8% one month and gains it all back another, only to sell off when consumer confidence numbers are announced? And by the way, how do you explain the fact that the market is at highs while consumer confidence is at a five-month low? The answer: We are all squirrels, zigging and zagging randomly across a economically screwed up landscape, trying to find our way.

If there's any good news to be had, it's that the cost of debt is approaching an all-time low. Greeaaaattttt!!! Go borrow some money (if anybody will lend it to you). Yes, today, the 30-year mortgage yield hit all-time lows. Can you figure it out? I can't.

Onto more of the news:

DuPont profits top estimates, raises guidance (Bloomberg). Well, at least we're still selling tons of chemicals.
So, we're now back to zero (Bloomberg). Is that really something to get excited about?
Apple has a new "27-inch Cinema Display." (Apple) Translation: Apple is selling TVs.
Yes, ComScore is cooking Yahoo's numbers (TechCrunch). And Yahoo is pissed.
BP CEO Tony Hayward -- one of the most popular people in the Gulf States -- is being banished to Sibera (AP).
Among Hayward's parting words, before he heads of to a Siberia oil-executive slave camp (we wish): BP was 'a model of social corporate responsibility' (The Guardian). Can somebody, uh, shut this guy up?
Funnest headline of the day: Blagojevich lawyer may be muzzled (Chicago Tribune). Why stop with the lawyer?
Fannie and Freddie conference to convene (MarketWatch). Lawmakers said to start with a game of "pin the losses on the asshole."
Home prices show stability after modest gain (CNNMoney). All five people who still have equity in their homes said to be ecstatic.

Biotech Diagnostic Stocks Rally

Mon, 26 Jul 2010 13:29:01 GMT

A rally in diagnostics stocks was triggered last week by earnings from for major players. This week, the AACC (American Association of Clinical Chemistry) meeting could add fuel to the fire, when close to 20,000 clinical lab professionals and over 500 exhibitors gather to discuss key industry developments.

As of mid-morning trading, many diagnostic stocks are up 2%. Here is a financial summary from last week's earnings announcements:

		7/26/2010	2010
Company	Symbol	P $	Q2 Rev $	Q2 EPS	PEG	P/S	Sh.Equity $
Cepheid	CPHD	16.5	49.6	-0.03	n/a	4.8	137
Immucor	BLUD	19.3	82.9	0.3	1.27	3.87	439
Meridian	VIVO	19.5	33.9	0.16	1.72	5.4	139
Neogen	NEOG	28.3	39	0.2	1.66	3.8	153

Among the topics that will be covered in Plenary Sessions at the AACC are: Biomarkers for Alzheimer Disease, the Changing Healthcare Landscape, Stem Cells, Inflammation and Cardiovascular Disease and Systems Medicine (P4).

There are several symposia such as Personalized Medicine and Immunosuppression in Solid Organ Transplantation. Laboratory medicine topics are very broad including diabetes, endocrinogy testing, pharmacogenomics,lipid management and sepsis diagnosis. The conference program is here.

Our focus for the Meeting will be companies in the "Tools and Diagnostics" area as well as hot topics in laboratory medicine. Some players exhibiting in our universe in addition to those four above are: Abaxis (ABAX), Alera (ALA), GenProbe (GPRO), Luminex (LMNX), Quidel (QDEL), SeraCare (SRLS) and ThermoFisher (TMO) .

Rod N. Raynovich is the principal with Raygent Associates, a biotech consultancy, as well as a regular contributor to The Rayno Report.

What Happened to Calix Shares? R&D Spending.

Mon, 26 Jul 2010 09:35:59 GMT

Calix shares got hammered pretty hard on Friday after the company issued weak earnings guidance on the quarter. But investors might have been panicking about a whole lot of nothing.

In fact, more intrepid investors might look at why the earnings forecast were down: More R&D spending, possibly related to more big customers. But on Friday this did not matter, investors were in no mood for optimism. The earnings started out well enough: The company announced record revenues that were up 50% from the year-earlier period. In the pre-market, shares were up 10%.

Then the conference call came. The company gave revenue guidance of $70-$75 million and said earnings would only be in the 4 to 8-cent range. Most analysts had earnings of 14 cents or so. Most analysts were also expecting $80 million in revenue.

Why the NYT is Competely Out of Touch

Sun, 25 Jul 2010 12:32:07 GMT

It's official, the New York Times has completely lost the plot. In a world racked by recession, a massive oil spill, financial fraud, and historic levels of debt and wealth inequality, the most popular article today on the Website on the bible of the "liberal media elite" is "36 Hours in Florence."

Yes, Florence. How refreshing! And symbolic. When the world is melting down in fianncial disasters and toxic sludge, why worry when you can sip some Brunello. This says it all about the New York Times.

That piece is followed quickly in the queue by Thomas Friedman's latest piece of hypocritical liberal 'tude: "We're Gonna Be Sorry." Thanks, Thomas: Another short-on-substance, 1,000-word diatribe about looming dangers of greehnous gas, mailed in from his own carbon-spewing 11,000-ft. mansion. Memo to Thomas Friedman: Shut down the AC in your West Wing, and you might do more to stop global warming.

Tech Earnings Winners & Losers

Fri, 23 Jul 2010 10:37:35 GMT

Tech earnings reports are rolling in like Budeweisers in a NASCAR infield, and we've got it covered. What's striking is the range of results, from earnings bombs like Netflix, and Amazon, to solid efforts from blue chips Apple and Microsoft.

Here's our recap of the Winners and Losers of earnings season:

Calix Breaks Out on First Earnings

Fri, 23 Jul 2010 09:20:53 GMT

Broadband equipment maker Calix is rallying on its first post-IPO earnings release, after it announced that revenue increased 50%.

The company announced revenue for the second quarter of 2010 of $71.7 million, an increase of 50% from revenue reported for the second quarter of 2009 of $47.8 million. It also booked a GAAP net loss of $3.2 million, or pro forma $(0.09) per share, compared to a GAAP net loss of $8.8 million, or pro forma $(0.33) per share, reported for the second quarter of 2009.

In the pre-market, the stock was bid at around $11.75, which would be a 10% gain over yesterday's closing price of $10.80.

[Editor's update: Though the stock initially rallied, it later sold off on the conference call when the company issued weaker-than-expected guidance. Read our update here.]

Calix President and CEO said the results were due to gains in braodband sales and that the results represent gaining "momentum."

Calix is the beneficiary of several trends, among them the demand for broadband access brought about by mobile and the expansion of Web and video applicatoins, as well as a boost to the rural broadband market brought about by the broadband stimulus package from the government.

Two Markets: Technology and the Rest

Thu, 22 Jul 2010 10:29:14 GMT

One thing becoming clear in as the volatile stock market marches into they unknown world of bank stress tests, serious government intervention, and bank roulette -- technology is set apart from the rest of the field.

Many mid-to-large technology companies are well capitalized, cash-rich, and profitable. This means they can simply power through the economic doldrums, generate a large cash stash to reinvest through either acquisitions or R&D.

Below is a list of cash-rich technology companies. What will they do with all this money? My guess is that eventually, acquisitions will be on the docket.

Just for chuckles, I screened for stocks with more than $1B in cash. Below is what I got:

Some Thoughts on Bernanke

Wed, 21 Jul 2010 16:26:38 GMT

There has been a massive amount of attention focused on Fed Chairman Ben Bernanke's testimony before Congress today. The testimony lacked any new large developments. However, we did glean more insight into his thinking and what it means for the American -- and global -- economy.

My macro opinion of "the economy" is that it is being held hostage by debt and uncertainty. For too long, our financial markets have focused on government largesse, policy moves, and debt funding to drive growth on Wall Street. Unfortunately, this is not what the real economy -- "Main Street" -- is all about.

The economy cannot be controlled by Ben Bernanke and the federal government. You see that now when 0% interest rates are doing nothing. That is because for too long, the economy has been fueled by financing and easy money that drove Wall Street bonuses and the debt bubble. As we saw, the more debt we create, the more we borrow from the future.

News Brew: Goldman Goes Down

Tue, 20 Jul 2010 10:53:03 GMT

Just when you thought Goldman was a rigged, unstoppable money-printing machine, the bank's profits fell 86% in the first quarter of 2010, missing estimates badly, as it settles with the U.S. government for a half-a-billion-dollar fine.

Did you really think Goldman was that good? Or did you think they were just a bunch of proprietary traders playing with free government money. It would be interesting to see what Goldman's profits would be if they had to borrow at 4% like the rest of us, instead of the 0% gift from the U.S.A.

In other news:

Here's an update on the oil spill (AP). Now there's seeping. When will it end?
Five things to watch on Appl's earnings (Macworld). Will you be able to hear Steve Jobs on the conference call or will you get disconnected?
Home construction sinks again (AP). Shocking, isn't it?
Nokia-Siemens has won a $7B contract with the LightSquared venture (Reuters). That's a lot of bandwidth.
Great story: Social networking sites are as annoying as cable companies (TechCrunch). That's pretty annoying.
Amazon says its selling more e-books than hardcovers (Wall Street Journal).
Top 30 Android apps for 2010 (PCMag).
The mysterious Facebook claimant has a few questions to answer (Bloomberg). My question: Who the heck are you?

What's to Like About the S&P Chart? Not Much.

Thu, 15 Jul 2010 13:59:12 GMT

The other day I ranted on the many opinions of the economists. Everybody has an opinion. What's my opinion on the market? The S&P chart stinks.

The market action fits almost exactly the technical picture I expected: A rally to 1100 on the S&P might run out of steam and reverse. This is exactly what happened to the last rally, nearly a month ago, for those of you who forgot: We had a rather violent bounce of 100 S&P points that failed.

Today, like clockwork, the rally is starting to weaken. Don't listen to the pundits on TV telling you earnings matter. They don't. The market is marching to the beat of a different drummer.

We remain in a violently chopping, downtrending market that is switching direction roughly once per month. If you are an investor, stay away. If you are a trader, make sure you can switch teams quickly, as it appears to me the S&P may be starting another rollover. We topped out almost exactly at the top of the channel carved out by recent descending highs and lows. See the chart below to see what I mean:

[img:/assets/10/0715/1413.500]

Keep in mind, if you have been trying to jump on rallies or jump on bear raids, there's a high risk of a violent reversal. A post on Zero Hedge encapsulates this very well. The data below shows you that a 6% rally is just as likely to be followed by a 6% selloff, and vice versa.

[img:/assets/10/0715/1414.500]

What's really uncomfortable about this is how perfectly the market has alternated between aggressively rallies and vicious sell-offs -- a month up has been followed by a month down (often bigger) each time. I think if you are trying to pick stocks in this market you certainly need to do it carefully. If we were all geniuses, we would buy cheap stocks at the end of the selloffs and then put some hedges in after these 6% rallies. Or you could just sit on a lot of cash and watch the hedge-fund computers chew each other up, which is what appears to be happening to me.

What's my course of action? I have just re-initiated a small S&P short and bought a few index puts to hedge my smallish stock positions. Do I feel confident at all that this will work out? Not really. But my read on the chart is that we are rolling over again.

News Brew: Apple Under Pressure, BP Relieving Pressure

Thu, 15 Jul 2010 11:45:13 GMT

Funny how fortunes swing. Just a few weeks ago, BP was racing quickly to the bottom as Apple was contemplating world domination. This week, their fortunes have reversed -- if only a bit -- as Apple confronts antenna engineering problems and BP's shares are on the rebound on the promise of an oil cap and/or takeover.

Apple shares were down 3.73 (1.45%) to $249 and BP shares rose .84 (2.3%) to $37.02 in midday trading. Apple will be holding a press conference on Friday, as its antenna problems on the iPhone 4 appear to be expanding.

Read on, for the full news:

An Apple engineer alerted CEO Steve Jobs to the presence of an antenna problem, reports Bloomberg.
U.S. Sen. Schumer has written a letter to Steve Jobs about the iPhone 4 problems (AppleInsider). Dear Steve, my phone's not working. Can you fix it for a tax break?
The antenna problems don't seem to be stopping Apple's rollout of new products -- an 11.6-inch MacBook and new iPod Touch are on the way (DigiTimes).
Here's some fun: A writer says the Droid X self-destructs if you try to modify it (MobileCrunch).
If the Droid X is a big success, Verizon may not need the iPhone, says the New York Times. Somehow we doubt that.
The Pentagon is running out of funds (Reuters). Soon to be downgraded to a Triangle.
Manufacturing data bad = stocks down (Bloomberg). One question I've always had: If the stock market is "forward looking" and "discounting," why can it react so violently to news?
Billionaire Carlos Slim is digging for gold in Mexico (Bloomberg). Funny how even Billionaires want to find more money, isn't it? I mean, I'd hit the beach after the first $2B.
BP says it's repaired the cap on the well and a test is proceeding (New York Times). We can only hope this doesn't end in another disappointment.
I've seen lots of folks distributing the "Methane Bubble Doomsday" story on the social networks. Other journalists appear to be debunking it. Don't believe everything you read on the Internet, folks!
Thierry Henry has retired from International football (WSJ). All washed up, at 32 years old, apparently. Hello MLS!
I just don't know what to think of this headline. What do you think? Woman With World's Largest Breasts Fights For Life.
2.5 million muslims are threatening to quit Facebook (tnerd).

Innovation Succeeds: Growing in the "Great Recession"

Wed, 14 Jul 2010 13:44:24 GMT

Just because an economy is crummy, or just sub-par, does not mean you cannot make money. Plenty of companies have proven that innovation can create value even in a down economy.

This was a fascinating topic to me in the earlier part of the last recession as I watched Google and Whole Foods Markets climb steadily during the recession of 2000-2002. If you think about it, these were very strong companies that created lots of value, jobs, and profits during a period in which the economy was stagnant or shrinking.

What about now? Regardless of the worst economy in 80 years, there are still opportunities.

To give you some examples, where are some more ways companies create value in a down economy:

Providing a technology that performs a task more efficiently, better, and cheaper. This is a basic goal of technology innovation: Give your customer 5X the power at the same price, then they buy a product. Some examples I see of companies doing this include Riverbed (RVBD), in enterprise networking, CREE in LED lighting, and Western Digital (WDC) in digital storage. All three of these companies have grown during the "Great Recession."
Scientific discovery in healthcare. A scientific discovery can create value no matter what the macro economy is doing. Many biotech companies are still booming and creating value, regardless of what the economy does. This is because they can make discoveries that create new markets out of thin air. Some quick examples: Qiagen (QGEN) develops new test for human papillomavirus -- its stock us up 50% in five years. Illumina (ILMN) has outstepped the competition in sequencing genes. In five years, its stock is up 500%, compared with the S&P being down in the single digits.
Providing a high quality product and brand. Markets are constantly choked by competition, but if you can consistently provide high-quality product that gets consumers excited, you will take market share and grow your brand. Some great examples of this are Apple (AAPL), Green Mountain Coffee Roasters (GMCR), True Religion Apparel (TRLG), and the Intercontinental Exchange (ICE). All of these companies have grown in the last five years. In fact, Green Mountain tripled revenue in the years 2007-2009, and ICE doubled reveune from 2007-2009.

Adtran Ramps on Connectivity Buildout

Wed, 14 Jul 2010 13:09:41 GMT

One of the themes we've been following here is the buildout in more telecom connectivity -- whether it be Ethernet connections or all those data connections to mobile-phone towers -- and Adtran's earnings appear to bear that out.

The Alabama-based networking and telecom equipment company handily beat analyst estimates, announcing quarterly Earnings Per Share (EPS) of .44, whereas consensus expecations were for .35. The stock was trading up 7% -- about $2 -- to $30.90 in midday trading.

Morning Market Update: Don't Get Fooled Again

Tue, 13 Jul 2010 12:06:30 GMT

This morning I woke up and flipped on the computer and my market-monitoring screens to find a sea of green. Everything up: stocks, commodities, gold & silver. Then what happened? My music player, in shuffle mode, queued up the Who's "Don't Get Fooled Again."

Funny. Coincidence? I don't think so. Roger Daltry is onto something. It would be easy to get lulled into a newfound sense of complacency if you didn't consider that just a month ago, the S&P rallied from a bottom of 1,050 to 1,116. That was a huge fakeout.

This last rally has now taken us from a low of 1022 back to the current 1,094. Powerful, no doubt. But it's also giving me a funny sense of deja vu. Note that the last rally, in June, was about 66 points in the S&P. The current rally has retraced 82 points of the recent decline, but it's still below June's high. If it's going to fail, it should fail this week. If not, the bulls have a solid argument to get bullish again.

Are the bulls really confident? So far in the last two months or so, the 50-day moving average has turned down, it's cross the 200-day moving average, and we've traced out a lower low and a lower high on a subsequent high. Would that make you comfortably long stocks? Not for me.

Reddit: We're Totally Pathetic

Mon, 12 Jul 2010 14:37:10 GMT

Tired of touchy-feely blogs from arrogant Internet companies? Might want to take a look at the recent post from the Internet sharing company Reddit, in which company officials admit they are totally pathetic.

"We've been kinda bummed at reddit these days. It seems like every week something comes up that slows performance to a crawl or even leads to a total site outage. And we almost never get a chance to release new features anymore."

Huh? You mean, you have trouble running your business and I'm supposed to care? You're a business. You're supposed to figure out how to make money. It's not like you are some starving orphan in Somalia, right?

But wait... there's more:

"The good news is, our traffic continues to grow by leaps and bounds. In July 2008, we served up 51 million pageviews and it took four engineers to support it. Since then, we've added user-created reddits, self posts, sponsored links, self-serve sponsored links, awards, a mobile interface, RSS feeds, moderation tools, layers of anti-spam and anti-cheating code, we've gone open source, and our traffic has grown to about 280 million pageviews per month. But after all that, we still only have four engineers. We're reaching the limits of sustainability."

Um. Okay. So here you admit to "getting traffic," which on the Internet is akin to "seeing cars drive by on the freeway," but you have no idea how to make money from that and run a business. Sympathy level rising rapidly!

Then they go on to metion some experimental (stupiod) ideas, and then they ask readers they're advice:

"As long as we're going to be taking suggestions and money from you guys, we might as well also take the name you came up with: this new program will be called "reddit gold".

How much would you pay for this wonderful opportunity? $10? $30? $∞?

No, seriously, how much would you pay? We have no idea what we should be charging. So for now, we're just going to let you pay whatever you want. You can even just send us a postcard. Visit http://www.reddit.com/help/gold for details"

I'm hoping this blog is some kind of hoax or joke. I really didn't know much about your company, but now that I have read this I have concluded you are the most pathetic, sad company on earth. Good luck to you.

Prechter's Impossible Forecast

Sat, 10 Jul 2010 12:53:49 GMT

Thank you Jason Zweig. I was looking at a way to debunk Robert Prechter's absurd, self-serving prediction of Dow 1,000, when Jason Zweig picked up the baton and took it apart about as well as anybody, in his Wall Street Journal column.

Now, I'm as bearish as the next guy. But I'd be buying Dow 6,000 pretty aggressively. It'll never get to 1,000. Precter's apocalyptic forecast is clearly a publicity stunt, probably designed to sell more research from his company. The New York Times turned Prechter's obvious (effective) marketing ploy into a major feature story, without any critical analysis. That's where Zweig's analysis comes in.

When I first saw the "Dow 1,000" prediction, my first thought was, "What would the earnings of Dow companies have to be to get there?" Zweig effectively describes:

"A 90% drop in the Dow (if the weighting of its 30 companies didn't change) would leave only one of the components—IBM—trading above $10 a share. Alcoa, Bank of America, General Electric and Pfizer would be under $2 apiece, in danger of being delisted by the New York Stock Exchange.

To get to Dow 1000, the earnings of these leading companies would have to fall by a punishing amount—and investors would have to price them at record-low multiples of those ravaged earnings. Take Pfizer: One way it could lose 90%, says Jeffrey Yale Rubin, director of research at Birinyi Associates, is if its earnings shrank by 70% and its stock traded at a price/earnings ratio of 2.3."

As Zweig says, this is pretty much impossible. The entire global economy would have to grind to a halt, and P/E ratios would have to fall to historic lows. The entire population would have to stop buying basic items such as toothpaste, drugs, or gas.

But there's yet another component of impossibility. Where Prechter really goes wrong, other than not even considering the components of the Dow, is inflation. He completely ignores it, just like he's been getting the greatest bull market of the decade (gold) wrong for ten years. In fact, maybe Prechter is making desperate forecasts exactly because it's been so long since he's been right.

The last time the Dow was at 1,000 was 1983. The index currently treading water nearly ten times higher, around 10,000, but not all these gains since 1983 are from organic growth. Much of the gain in the index is due to the perpetual rise in inflation. According to inflation indexes, $10,000 today was worth $4,700 in 1983 in inflation adjusted dollars.

To get to Dow 1,000, not only would the world economy have to collapse, but we'd also have to reverse three decades of inflation with a 50% haircut in the value of the dollar. At the rate the government's printing money now, that does seem pretty much impossible. Zweig is exactly correct.

What if the Economy is Just Boring?

Tue, 13 Jul 2010 13:34:15 GMT

As you scan the landscape of pundits and economists these days, it seems as if there are only two options: Implode in a fiery economic inferno or come roaring back like economies of yore.

Just remember one thing: Economists are often spectacularly wrong.

I've found that if you hear too much chatter about one thing, it's more likely that the opposite will happen. How many times has the economy threaded the needle of non-expectancy, just as Nassim Taleb outlined in his now-famous book, The Black Swan.

Time for Microsoft to Reorg and Focus

Thu, 08 Jul 2010 13:23:20 GMT

Yesterday, I pointed out that it's absurd to consider Microsoft a declining company when in fact it's been making an average of $15B a year in profit and has increased the value of its balance sheet by billions of dollars every year for the past three years, during the worst recession of the past 80 years.

Today, to answer the critics, I will point out what's gone well and what's gone wrong with Microsoft. I'll even make suggestions about what the company should change. I believe the company is coming to a crucial point in its history, and CEO Steve Ballmer needs to make some radical changes.

First off: Microsoft's core businesses are as healthy as ever. Now that it fixed the Windows Vista debacle and Windows 7 is shipping, Microsofts' Windows Division and its Business Division are firing on all cylinders. Consider this: in fiscal year 2009, which ended June 30, 2009, the Windows division made $10B in profit. It has already equalled that in only 3 quarters of business this year. That means when Microsoft announces its earnings later this month it's likely to report year-on-year profit growth of more than 20% in the Windows division.

News Brew: Video & Search, What Else?

Thu, 08 Jul 2010 10:22:15 GMT

Today's headlines are filled with the usual obsessions: bank risks, online video, iPhone's and search.

What I find interesting about today's market dynamics is the dichotomy between Silicon Valley, where everything's gravy and people think it's still easy to get rich -- and the rest of the world, where people are worried about their state or country going bankrupt and making a dime is very tough.

Here's the news for today:

As we predicted a while ago, YouTube would go to HTML5 soon. It has now, with a mobile version of YouTube (TechCrunch).
Fast Company says Twitter now has the world's fastest growing search engine. But Silicon Alley Insider begs to differ, saying the numbers are inflated.
Speaking of Twitter, it can get you in a lot of trouble. A CNN Senior Editor is leaving the company following a tweet in which she praised Hezbollah leader Sayyed Mohammed Hussein Fadlallah. Say that three times, very fast (Mediaite).
It was only a matter of time before we got naked pictures of the "Sexy Russian Spy" (Mediaite). “I found her Russian accent such a turn-on,” says her ex-husband.
Meanwhile, back to the economy. A reader of Jim Sinclair's Mineset has pointed out that the banks being seized by the FDIC had their assets inflated by 20 to 80% (MineSet). Amazing stuff, that is.
Speaking of greedy, lying banks. Yes, the European stress tests probably are a joke (Bloomberg).
"American Dream Elusive for New Generation," declares the New York Times, profiling a recent college grad. And then you read that da guy lives in a "comfortable suburb West of Boston," he's pictured with a nice road bike and a computer, and he turned down a job for $40,000 per year. Shall I play the violin on my small pinky?
They've picked an English ref for the World Cup final (Telegraph). Hmm, it's hard to figure out who he'll be more biased against, the Dutch or the Spanish.
Bond market signals depression, nobody cares (Telegraph).
Pharma giant Merck is closing 16 factilities (WSJ).They just don't make drugs like they used to.
Greece "Paralyzed By Strike" ahead of key pension vote (WSJ). Let them eat Souvlaki!
Experimental solar aircraft makes a historical overnight flight (BusinessWeek). Yes -- a solar night flight. I had trouble figuring it out to. Add in the fact that it averaged 26 miles-per-hour, and it becomes a real head-scratcher.
The next iPod Touch will include most of the features of the iPhone 4, says this reporter (CNET). Yes, that means all of the features except for the phone -- which doesn't really work that well anyway.

AT&T: Software Patch Will Fix Data Problems

Wed, 07 Jul 2010 16:31:25 GMT

Following the reports yesterday of dysfunctional data downloading on the iPhone 4 via AT&T's network, AT&T sent us an email today with an offical response -- saying it's a software problem in Alcatel-Lucent equipment that will be fixed shortly.

Here's the response from AT&T:

"AT&T and Alcatel-Lucent jointly identified a software defect -- triggered under certain conditions – that impacted uplink performance for Laptop Connect and smartphone customers using 3G HSUPA-capable wireless devices in markets with Alcatel-Lucent equipment. This impacts less than two percent of our wireless customer base. While Alcatel-Lucent develops the appropriate software fix, we are providing normal 3G uplink speeds and consistent performance for affected customers with HSUPA-capable devices."

The Absurdity of a Microsoft "Death"

Wed, 07 Jul 2010 13:23:00 GMT

It had become popular in the mainstream media to popularize the "dying" of Microsoft. This is absurd. What is common with a "dying" company is a deterioration of its financial position and diminishing assets. Microsoft is a money machine.

I'm not saying that Microsoft does not have challenges. I'm just saying that the negative sentiment against the company does not reflect certain business fundamentals.

Martin Armstrong Predictions Still Look True

Tue, 06 Jul 2010 14:46:36 GMT

Martin Armstrong is a fun character to follow. The famous economic forecaster -- the fomer head of Princeton Economics who is now spending some time in jail for conpiracy to commit fraud -- regularly writes market missives from jail. What's interesting is that his predictions have been uncanny.

For example, look at the chart below. This chart was actually published in 1997. It correctly predicted a major top at the end of the millenium, an interim bottom in 2002, and another top in 2007. It is now predicting the resumption of the downtrend into a major, secular bottom in the 2011/2012 timeframe.

[img:/assets/10/0707/1218.500]

Armstrong is a big believer in Kondratieff cycles -- long-term market cycles that are said to follow and predict long-term human psychology in economics.

Here is a description of his beliefs from a recent New Yorker profile:

"One day, in a newspaper, the young Martin Armstrong came across a list of financial panics between 1683 and 1907. He found that, on average, there had been a panic every 8.6 years. As he read more, he began to suspect that 8.6 was a highly significant number. In the early seventies, Armstrong became a trader and dealer in gold, and began compiling forecasts about commodities and currencies, which he sent out to clients. Over time, forecasting became his business. He constructed what he called an Economic Confidence Model, which he relied on to predict an upturn in the price of commodities in the early days of 1977. It worked."

The legal intrigue and conspiracy theorists behind the famous economic forecaster make him even more interesting to follow. Armstrong was stuck in a long-term legal battle in which he was held in contempt of court for 7 years. He finally pleaded guilty this year and is now serving a 5-year sentence for conspiracy to commit fraud. He regularly published writings from his jail cell which can be followed here.

iPhone 4 Upload Caps: More to Come?

Tue, 06 Jul 2010 12:30:17 GMT

Word on the street is that more iPhone 4 users are complaining about mobile data upload caps (hat tip to Gizmodo). Shocking, isn't it, that as carrier networks are brought to their knees by massive data consumption, that they would try to dial it back? Expect more.

The users are complaining that AT&T is capping the download speeds to 100Kbit/sec in some regions, predominately New York. I have put a call into AT&T to see if they will comment on this.

This is only the beginning. Expect to see more aggressive "traffic management" from service providers as the smartphones proliferate in the market. As we have analyzed in the Rayno Report sponsored whitepaper, "The Data Deluge," mobile data consumption is about to take off with the next generation of smartphones, and the problem of managing data consumption will increase by an order of magnitude.

July 4th News Brew: Explosions or Implosions?

Mon, 05 Jul 2010 10:54:51 GMT

I hope all the Yanks -- and anybody else celebrating -- had a happy July 4th. Yesterday we hosted two riders from the Texas 4000 who were doing a lot more than I will do this month -- riding 4,000 miles from Texas to Alaska to help fight cancer. Kudos to Joel and Shilen and good luck! You can track our friends on the "Rocky Route" here.

In the news, ironically the July 4th festivities were marred by financial pyrotechnics rather than the celebratory kind, as the papers jumped on the fiscally depleted state of the nation -- and the world:

Illinois is drowning in red ink (New York Times). Depressing story. And you thought California was bad?
Huge pension problems in Illinois were not helped by the fact that they turned to the OTC derivatives casino to make back their lost money (Medill).
Bank meltdowns continue (Fed.gov). Yikes!
The recession has now killed of 7.9 million jobs in America (CNNMoney). Hey, I hate to be a downer, but it's reality, bro!
Hey, not everything's bad! Markets are stable today (Associated Press). Maybe we should just keep the U.S. markets closed.
The BP tab is now over $3B (USA Today). That's if you can actually put a price on the total environmental and economic destruction.
The first test of the "superskimmer" are inconclusive (Reuters). Let's all hope it works.
All about Google's $700 million purchase of ITA (TechCrunch). Vertical search is the new deal.
Apple is sucking wonton in China, says Lenovo chief (Financial Times). Hmm. Big competitor trash talks big competitor, says "C'mon over." Why, exactly.
The Kin was the mother of all consumer toy flops, says the New York Times. File under Microsoft's epic flops along with "Bob."

Biotech Buyout Targets: Who's Best?

Fri, 02 Jul 2010 13:11:17 GMT

Bloomberg yesterday started the rumor-mill going that Sanofi-Aventis is on the prowl for a large biotech company, sending many biotech stocks higher on Friday (on a day in which the market is down).

The rumors make sense, as big pharma is constantly on the prowl for solid biotech companies. Let's take a look at the dynamics and which companies would be most attractive from a valuation standpoint. The three companies mentioned cited by Bloomberg as targets include Allergan (AGN), Biogen-Idec (BIIB), and Genzyme (GENZ).

The Wall Street Journal, trying to catch up with Bloomberg, has tossed in Amgen (AMGN), Gilead (GILD), and Celgene (CELG).

Let's take a closer look at all of these stocks to try to see who is the best bet. Biogen jumps out to me the most. Including the most recent quarterly results, Biogen is trading at a forward P/E of 10. It has an operating margin of 30%, return on equity of 16%, and has been growing at a 7% clip. The market cap is $13B.

Google Gets ITA for $700M

Fri, 02 Jul 2010 12:54:36 GMT

After a long, drawn-out bidding process, Google has finally scooped up ITA for $700 million.

Reports of the bidding war for ITA first surfaced in April. From what I understand, Google first approached ITA with a cash affer (in the $700 million) range, but then ITA's Internet travel partners freaked out about the prospect of Google owning their chief travel-software provider. Other companies in the bidding included Orbitz and Kayak.

This deal is going to cause a lot of competitive hand-wringing because Cambridge, Mass.-based ITA, which has 500 employees, supplies travel software to a lot of Google competitors, including Orbitz and Microsoft's Bing. It is widely anticipated to be challenged along anticompetitive lines, though Reuters today quoted law experts as saying it's not likely that the deal will be blocked.

Google's CEO Eric Schmidt says that Google will honor all of ITA's contracts and that its intention is to improve its travel search information, not get into the business of selling travel services.

Look Out Below: Market Cracks Key Technicals

Wed, 30 Jun 2010 16:17:50 GMT

Well, today's fairly predictable late-day puke will give the "technicians" a field day tomorrow.

Here are just some relevant technical points:

Market back below 200-day moving average (MA), which has flattened and looks to be turning down.
"Death Cross": 50-day MA crosses the 200-day MA.
12-month moving average is turning down.
Market made a new 6-month low.
Significant level of support -- 1030 to 1050 -- taken out with conviction.
Market has been rallying on low volume and selling off on high volume.
The tape has generally been ugly, with a bear-market morning rally, late-day sellof mode that was characteristic of the bear market 2008/2009.

Now, I am not a technical black magician, but I do believe that techicals have a way of confirming changes in fundamentals and psychology. The fundamental data has been weakening. A weak jobs report on Friday could be the nail in the coffin.

Technically, all of the above indicates resumption of the secular bear market. It will have all the talking heads, traders, and banks in a new psychological framework.

As they say, at any point in time the market has a way of creating the most pain for the most people and I think the violent reversal off the recovery rally and the contrairian plunge in bond yields has taught everybody that lesson once again.

Mobile App Usage: An Apple and Android Story

Thu, 01 Jul 2010 01:00:00 GMT

Apple and Google Android application development communities continue to flourish while others languish.

This has huge implications for everybody. Growth in application environments often represent key turning points in tech markets. If you think of Microsoft's ascendancy, it was the emergence of the PC (more bandwidth) and the Windows application envrionment which provided an explosion in business applications.

Want another example? The Web and pervasive broadband sparked an explosion of Internet applications. Now a similar thing is happening in the mobile world where an explosion of bandwidth and device power is providing a fertible market for new apps.

What's that mean for the legacy players? It means they are in a world of pain. If RIM and Nokia don't do something soon, their leadership in the worldwide phone market will quickly become a footnote. I continue to believe that Nokia's connection to the Symbian operating system is its biggest liability. As Apple and Android gain steam, Symbian is being marginalized and the longer that Nokia puts all its eggs in this basket, the more trouble it will be in.

Below is an interesting chart from the latest Morgan Stanley report on Internet developments, which I think is a must read.

[img:/assets/10/0701/0936.500|Source: Morgan Stanley]

The explosion of apps in the mobile market is a fascinating, positive development for the technology industry and its implications should not be underestimated.

Morning Market Wrap: A Snoozer, So Far

Wed, 30 Jun 2010 13:05:12 GMT

Time to write up the morning market wrap, before I fall asleep. Kind of a snoozer. Markets are enjoying a small relief rally this morning as no new disastrous news emerged overnight. Data was relatively benign.

The ADP jobs number came out weak, but market digested that. We all know the jobs situation sucks. None of the European banks blew up overnight, and the CDS spreads (an indication of risk) stabilized after hitting new highs yesterday. Euro banks also apparently borrowed less from the ECB than believed, which we are supposed to take as good news.

What to expect going forward? I say, watch the bond market. The fact that bonds hit record highs yesterday, sending the 10-year yield down below 3%, is a big warning sign. This is the trade that has caught everybody -- even the biggest smarty-pants hedge funds -- flat-footed. Yields were supposed to go up, remember? Apparently a lot of hedge funds are being trashed on "yield-steepener" trades (that is a bet that short-term rates do not go up as fast as long-term rates -- i.e. the spread widens), or so says Zero Hedge.

The fact that the yield curve is flattening is surprising a lot of people and does not transmit a good signal about the economy.

In the meantime, it does not look like anything big will happen today. Grab a sandwich, call your mortgage broker about refinancing your mortage at 4.50%, and check back on the market with 60 minutes to go, when all the wild stuff usually happens anyway.

News Brew: Smartphone Madness

Wed, 30 Jun 2010 11:21:32 GMT

If you think about what's happened the last 4-5 years in smartphones, it's truly remarkable. Apple has created an entirely new, multibillion-dollar franchise. Nokia and RIM's dominance have been severly damaged. And entirely new app and OS systems have been developed.

What's it all mean? As we surmised back in January, it probably means more pain for the legacy market leaders -- people such as Nokia, Ericsson, and RIM. Clearly their market-share is eroding, but more importantly they are losing their grips on OS and apps markets. Apps willd drive this market forward, and Apple and Google's Android are leading here.

With that, on to the news, which in the tech world today is dominated by smartphones:

With Verizon rumored to be close to picking up the iPhone, look for them to sell upwards of 12 million (Apple Insider). Boy, Nokia and RIM are totally screwed now.
ZDNet answers your Verizon iPhone questions (ZDnet)
Credit where credit is due: Bloomberg had the original iPhone-on-Verizon story (Bloomberg). The big Bloomie can still rock out!
RIM CEO puts on the gameface, even though quarterly subscribers were weak and clearly the iPhone-on-Verizon story is scary for RIM (WSJ). Rearranging deck chairs, anybody?
RIM is trying to lure developers to its App store (WSJ). Here, kitty kitty.
How to troubleshoot the iPhone 4 antenna problems (BGR). 1) Get out of car 2) Put on tin-foil hat.
Cisco introduced a tablet device! (ZDnet). Picture John Chambers speaking in his soothing tones: "This will really enable collaboration and innovation in the workplace.. " yada yada yada.
Cool international espionage news of the day: A Russian spy worked in the Barclays office in London (Guardian). I love the fact that she had a LinkedIn profile. Think of all your Facebook friends that could be spies!
Market looks pretty snoozy today (MarketWatch). Time for the hedgies to spruce of their end-of-Q marketups and markdowns and then grab a facial. Don't be lured into complacency, becuase the next market facial may be coming.
Wall Street psychology cheat sheet (The Big Picture).
Profiles of "Open Carry" advocates (Time). In Montana, this is not news. My friend pointed out that he walked by a guy carrying a shotgun down the street the other day.

Five Reasons to Stay Negative on the Market

Tue, 29 Jun 2010 10:45:25 GMT

For the past few weeks I have been alerting readers to some negative technical signs in the market, including the development of a "Head & Shoulders" pattern in addiction to a potential "Death Cross."

But is that all? Am I saying sell the market because of a couple eccentric technical indicators for stock-market geeks? No, in fact. Technicals should be used to confirm a fundamental view. There has actually been a lot of confirmation of the technical indicators via fundamental data.

I am still short the market, and I in fact added to that position this morning. Here are my top five reasons why the market will remain weak:

Jobless claims aren't really declining that much. The four-week moving average has only declined by 1,500 claims. In other words, the employement situtation remains weak.

Barry Ritholtz points out in his blog that the Chicago Fed National Activity Index appears to be peaking, and still reflects negative consumer and housing activity.

The Death Cross is here. This reflects a flip in investment sentiment and a growing negative picture in the stock-market technicals.

Mutual fund cash levels recently hit an all-time low. This means that mutual funds have less cash to invest, and potentially more stock to sell.

Head & Shoulders: Never a stock chart to like.

Tesla IPO: Money-Losing Mania

Tue, 29 Jun 2010 10:07:26 GMT

The Tesla Motors IPO is the talk of the town today, but to me it is a bad flashback to the poor IPO practices of the 1990s. The electric car company priced 1 million shares yesterday at $17 per share and it is expected to start trading today.

Tesla doesn't make a dime, and it's still a cash-flow negative entity, bringing back fond memories of the late 1990s when hundreds of unprofitable venture-capital backed firms were floated on the public markets, making entrepreneurs and venture capitalists rich while draining the accounts of millions of unsuspecting investors. A very small percentage of these compeanies ended up doing well. It's a high-risk prospect. This is not an IPO for my taste. When investing in public companies, I prefer companies that actually make money.

But set aside these fiscal details for a moment and consider this: Tesla sells expensive electric cars -- each of which require complex battery packs made up of thousands of cells -- for close to $100,000 each. They are trying to market this product in the teeth of the worst recession in 100 years.

Here are some more facts about Tesla you may want to consider before you buy any of the stock:

The company's loss in the first quarter rose to $29.5 million from $16 million a year ago
Production of Tesla's sedan, which is years behind schedule and is consider the key to making the company money, has slipped again. The big guys, such as GM and Nissan, are catching up in electric vehicle production.
The company will have a market cap around $1.3 billion after it floats.
Venture Beat did some fine work in uncovering that founder and CEO Elon Musk has been having cash-flow issues. Might that have rushed the IPO along?

Good luck, Tesla.

News Brew: iPhones, G-20, and FIFA

Mon, 28 Jun 2010 10:22:30 GMT

Another Monday, another predictable news flow: Apple is selling millions of iPhones, oil is gushing into the Gulf of Mexico, the stock market is falling, and FIFA refs are botching calls in the World Cup.

It would be more fun to be distracted by the World Cup if there were better officiating (On two hand, I can count major, game-changing botched calls I have witnessed). Bloomberg has pointed out that it may now be time to use technology -- can I suggest some eyeglasses?

Meanwhile, Apple's money machine churns along and the G-20 accomplishes exactly nothing. Here's this morning's news:

Apple says iPhone 4 sales have topped 1.7 million already (Apple).
Oh dear. What's Steve Jobs going to do about iPhone sex chat? (Business Insider)
BP says it's now capturing 24,000 barrels of oil per day (Reuters). Of course, this is the same company that once pegged the spill at 5,000 barrels a day.
Elevation Partners -- otherwise known as the VC Firm of Bono -- is putting another $120 million into Facebook (TechCrunch).
G-20 decides that debt is bad, flying in the face of Obama administration policy of running up the tab (Bloomberg). Go ahead, a dare you to name the 19 and 20 countries in the G-20.
A Macallan 50-year-old for $10,000, anybody? (Bloomberg)
Wondering why gold is rallying? Veteran bank-watcher Ambrose Evans-Pritchard says another round of quantitative easing is on the table (Telegraph).
Senator Robert Byrd, 92, is dead, and there's a scramble on to figure out how he will be replaced (Wall Street Journal).
England gets a good kicking from the press after its demoralizing 4-1 loss to Germany (Guardian).

California: "Screwed Up and Dysfunctional"

Fri, 25 Jun 2010 09:55:39 GMT

The situation in "Greece by the Pacific" -- a.k.a California -- is truly fascinating. The state filled with Hollywood actors, Porsche-driving venture capitalists, and mega-yacht owning entrepreneurs is in the middle of a financial meltdown, and nobody seems to care.

The fiscal situation continues to devolve, yet it's amazing the complacency and nonchalance you encounter in discussions about the world's 8th largest economy.

I think CEO Bob Nichols of Windward Capital Management Co. in Los Angeles nails it when he calls it "screwed up" and "dysfunctional" in a Bloomberg article.

“It’s unbelievable,” says Nichols. “How do you screw up a place with the growth capability of California? It’s so dysfunctional.”

What Will Intel's Wrist Slap Look Like?

Thu, 24 Jun 2010 12:13:43 GMT

There are wide-ranging reports, including this one from the San Jose Mercury News, that Intel and the Federal Trade Commission are in settlement talks and a resolution may be imminent.

Given the history of the FTC and technology companies, this is not surprising. They aim for settlement and wrist-slaps as opposed to brack-beaking fines, unlike the Euro trade commission, whose goal is often to slow down as many American technology companies as possible with gigantic fines. Intel was fined $1.5 billion by the EU last year.

The basic claim is that Intel used customer rebates and discounts, as well as other tactics, to unfairly compete with competitors AMD and Nvidia.

Gleacher & Company is out with a report today saying they do not expect any big fireworks in the settlement, but rather a consent degree that is already priced into Intel's stock. Gleacher says a settlement could be more of a "tailwind" for AMD than Nvidia.

"The FTC is unlikely to issue a fine in the same way the EU did. It is likely to issue a consent decree, whereby INTC is required to comply with certain practices as outlined by the FTC; non-compliance could result in criminal prosecution," says the Gleacher note, issued by analysts Doug Freedman and Ian Eng.

Overall, Gleacher expects the market to react favorably to a settlement for AMD, negatively for NVDA. It has a favorable opinion of Intel going forward.

Morning Market Report: Soft and Soggy

Thu, 24 Jun 2010 10:55:45 GMT

An analyst I often consult with described this morning's market as "soggy," which is just about the best term I can think of. The Fed did nothing to buoy spirits yesterday, as they downgraded their outlook on the economy, keeping rates artificially low (perhaps forever?).

This morning, equities are trading down. Right now the market is trading on headline news, the regulatory framework in Wasthington, and largely ignoring corporate profits news, which has been positive-to-benign.

Tonight we have big tech reports from RIM (RIMM) and Oracle. Lately the trend has been for the market to sell off on good news, which is indicative of a bear market approaching, so this will be interesting to watch. Remember: it is the reaction to the news not the news itself that matters.

I am looking more at technicals as I believe this is a technical/supercomputer driven market and I continue to believe we are setting up for a "death cross" as the 50-day moving average threatens to crossover the 200-day moving average shortly. I am surprised that more people are not talking about this, as it is a medium-trend indicator not to be ignored. In addition to that, we have formed a large head-and-shoulders pattern in the S&P, another formation that I do not like, especially given the recent action in the market.

In my long-term investment accounts, I am currently largely in cash. In my short-term trading accounts, I am short the S&P. I added to that S&P position this morning. I also re-entered a gold position.

(Disclosure: Short S&P futures, long gold)

iPhone Fanatics Queue Up in NYC Heat

Thu, 24 Jun 2010 09:39:06 GMT

According to recent news reports, it's 84 degrees in NYC, and climbing rapidly. And it's only 9AM. Of course, that doesn't stop iPhone fanatics who are queuing up like mad to get their hands on the new goods.

See below, for some video footage shot and posted to YouTube by BTIG research.

Yes, these people are fanatics. Apple seems to manufacture more of them every year.

In other iPhone news:

Piper Jaffray says 1 million iPhones are likely to be sold in the first 3 days (MocoNews).

A shortage of the devices is likely to frustrate consumers (The Guardian).

Bloomberg puts the tally at 1 million in the first day (Bloomberg).

News Brew: iPhone Mania, U.S. Victory!

Wed, 23 Jun 2010 12:42:16 GMT

Nothing to get a bunch of slathering sycophantic tech journos rolling like a new iPhone upgrade. This morning's news focuses on the rollout of the new iPhone and related upgrade and connectivity issues.

Excuse the brevity, but this morning we were delayed this morning by the important professional business of watching the U.S. World Cup victory over Algeria! Here are the links:

Walt Mossberg: iPhone is "Top of Class." (Wall Street Journal)
Engadget: iPhone 4 is the best smartphone on the market.
If you are shopping for all things Apple, the iPhone 4 is slower than an iPad, says MacRumors.com.
In non-Apple news, how many people would like to be a fly on the wall for the Obama/McChrystal meeting? (Bloomberg). I would!
Sales of new homes plunge to lowest level on record (Bloomberg). But seriously, would you expect anything else? The country is awash in empty, new houses.
Unemployed people are frittering away their free time (Wall Street Journal). This comes from a government study. Better question: is the government studying unemployed people a good use of government-employed people?
The Fed is likely to do nothing (Wall Street Journal). Possibly for another 10 years.
Uh-oh. BP's taken the cap off (BusinessWeek). What will they screw up next?
Scammers were all over the U.S. homebuyer credit, says a watchdog (Reuters).
Adobe was down on earnings of 28 cents per share, up from 24 cents last year (MarketWatch).
Facebook CEO says: We're really gigantic (Guardian).
New meaning to the word, "GOOOOOOOOOOLLLLLLLLLLLLLL!" (USA Today).

Can Google Win With Free? Doubtful.

Tue, 22 Jun 2010 13:42:36 GMT

There is a growing "meme" out there that Microsoft is on the verge of death and that Google will take over the world with free stuff. Please.

I'm actually anti-Free. I haven't even read Chris Anderson's book titled "Free." Don't really feel like I need to read it either. I think free as a business is almost always representing subsidy -- a crutch to gain market share in the eary going. Eventually, if you want a business, you need to move to premium, paid services.

Think of all the free stuff out there, and then try to give me an example of some free stuff that holds the best market position: That is: Highest quality, high margins. I can't think of anything.

Market Update: Dancing on the 200-Day

Tue, 22 Jun 2010 09:41:16 GMT

The equities markets are reaching a critical juncture following a two-week rally off the "flash-crash" bottom. What now? My view is that we are still in the process of forming a rather signficant top, which will be confirmed if this rally starts to fail in the next week.

Much of the trading being done now -- the battles between the large hedge funds and juiced-up High Frequency Traders -- is a technical skirmish over key levels. The market worked hard to recapture the 200-day moving average (MA). This would be a common place for the rally to either fail or bust through in recapturing the bull trend. Another technical level that many traders have their eye on is S&P 1150.

The problem I have with the notion that we could be re-entering a bullish mode is this 1) Volume on rallies has been light 2) The 200-day MA is starting to flatten out, rather than upslope. This is an indication that the one-year-old cyclical bull market is losing some steam.

[img:/assets/10/0622/1256.500]

But here's an even bigger problem I have with the market: It looks to me like we are going to get the "death cross" within the next month. This is a technical indicator that occurs when the 200-day MA crosses over the 50-day MA. At the same time, there is a bearish "head-and-shoulders" pattern forming in the S&P, as marked by the triangle above. Of course this formation would not be completed unless the rally fails here -- but if the rally does fail, that would paint a very bearish picture for the markets.

I realize it's bad to "anticipate" technical market events, but this is just a gut feeling I have from looking at the chart knowing that it's very similar to market charts in 2007. This leaves me extremely cautious and I am now out of most stocks. If we get the death cross, I will have no problem being short this market.

Technicals can be used to onfirm fundamental ideas. And here is a fundamental idea I've been considering for quite some time: the year-long rally from March 2009 to April 2010 was created largely by government stimulus programs and the creation of liquidity by the federal government. Wouldn't it confirm that idea if just two months after they announce the end of many of these federal programs (the buying of treasuries and $1T in mortgage-backed securities), the stock-market rally starts to fail? That would confirm to me that this "steroid market" has been juiced by government money and has little to do with economic reality.

A really economic boom and stock-market rally cannot be built on the Feds artificially lowering the cost of financing -- it must come from actual business growth.

My Neighbor: I'm in All Cash!

Tue, 22 Jun 2010 09:31:36 GMT

I like to chat about the market, with anybody who will tolerate it (I'd say this is about 30% of the public). Yesterday I was out in the beautiful Montana sunshine, talking to one of my neighbors about the market.

I think it's good to get this "man on the street" perspective as much as you can, just to get a qualitative sense of what the individual investor thinks of the market. Here's it in a nutshell: My neighbor hates the market. He's in 100% cash. He scoffs at the notion of the economy recovering. "Recovery? What Recovery!?"Now, he qualified this by pointing out that he is sending his kid to Dartmouth, so he needs to come up with $50,000 in tuition every 12 months, so it doesn't make sense for him to risk a lot of cash in the market.

My neighbor says that he was lucky in that he pulled most of his money out of the market in 2007, because his kid was going to college. So he missed the "great collapse" as he called it. Many of his friends were not so lucky, he points out. Many of them had their nest eggs seriously damaged.

This perspective is important, I think, only because you really don't read about it much in the mainstream media. I think the individual investor feels burned by Wall Street and won't be back as a major player for a long time. This is why the market liquidity remains somewhat thin and is being driven by mostly large hedge funds and institutional players battling each other.

News Brew: Gold, China, and e-Book Readers

Mon, 21 Jun 2010 10:14:45 GMT

We live in a world of well-defined growth markets. These appear to now consist of Gold, eBook readers, emerging markets, and anything manufactured by Apple. If you go to sleep for 5 years do you really think any of this will change?

This morning, markets were driven by the much-ballyhooed news that China will allow its currency to float more freely. This ends a two-year peg to the U.S. Dollar, which many economists and U.S. politicians say has made goods in China unnaturally affordable (take a trip to Walmart, if you don't know what they mean).

Lots of people seem to think that a Chinese currency revaluation is the cure for the world's ills. But trying to derive market direction out of a Chinese currency decision is problematic. Here's why: China only announced that they will widen the band in which the Yuan will trade, which means they will still tightly control it. And past moves have been slow and methodically controlled by the Chinese government.

To put things in perspective, take a look at what happened to the Yuan in 2005 -- it was revalued 2.1% against the dollar, a more powerful move than the one just announced. But if you read this Washington Post story from 2005, you can see how quickly these moves can fade in importance.

More news from this morning's market activity:

The latest government revaluation helps the Chinese Yuan rise to its highest level ever (Wall Street Journal). Waiting for the new movie: A Fistful of Yuan.

U.S. ambassador says China's move will help us get along (Reuters). Yes, until China introduces a $5,000 automobile to the U.S. Market.

Gold hits an all-time high of 1266.50 in overnight trading, before backing off after the New York open (Kitco News).

The stocks analysts like the least performed the best (Bloomberg). Any real surprise here?

Looking for a private suite for your transatlantic flight? No problem. (Wall Street Journal)

Bernie Madoff has allegedly told prison inmates he's got a secret $9B stash (Fox News). Is it held in Gold? Or Yuan? In China?

Abnormal levels of radiation have been discovered at the North Korea/South Korea border (AP).

A large armada of U.S. warships are heading toward the Persian Gulf (Debka.com). That can't be good.

Telecom New Zealand: 10% Div Worth a Shot

Wed, 16 Jun 2010 01:00:45 GMT

I've been poking around Telecom New Zealand (NZT) for quite a while. It first showed up in a dividend stock screen when the dividend was paying about 8%. Forbes' Ken Fisher, who is a pretty good stock picker, recommended it. Now the stock is lower and the dividend is at about ten percent.

What happened? They recently reduced guidance. Then the CFO left. But as the stock goes down, the dividend goes up. This company has generous free cash flow -- somewhere in excess of $150M in 2010, likely. It's got $1.5 billion in debt, but it also has EBIDTA approaching $1B, so it is adequately covering the debt payments and the dividend.

The forward P/E is about 11. Basically, I feel lucky that I waited to buy this stock, because it looked like it was cheap, and then it got even cheaper. But now that it's fallen to a level of about $6 and is paying 10% dividend, which is almost irresistable to me. I think it's worth a shot. After all, we are talking about a telecom services stock in one of the healthiest regiona economies in the world.

With this week's bounce off of $6, the stock could be forming a long-range double-bottom. A buy here with a stop at $5.50 seems like the right thing to do.

[img:/assets/10/0615/1417.500]

(Disclosure: Long NZT)

The Meaning of 4G

Tue, 15 Jun 2010 10:15:41 GMT

I recently penned a column for Light Reading on the arrival of 4G and what it will mean for the large global service providers. I think this is a watershed moment for the telecommunications industry and not many folks seem to be paying attention to it.

The business models of the major service providers are about to change radically -- as they go from a heavily regulated, profitable, "utility" model of landline-phone service to the Wild West of the mobile Web. in the pre-4G world, the bulk of their revenue came from predictable and profitable voice services. In the post 4G-world, they will have to provide larger amounts of commoditized data at a lower price point. The bottom line is that 4G is expensive and their margins on mobile data are much lower than voice.

Not only that, but data traffic will predominate the traffic and revenue on 4G networks. When 4G networks get rolled out in 2011-2012, the delivery of mobile data will increase by an order of magnitude. This will present challenges to them on the cost front.

Here are a few facts you might want to follow:

The global mobile data revenues reached $220 billion and mobile data now contributes 26 percent of the overall global mobile service revenues, according to Chetan Sharma Consulting.
2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic. In the US, the yearly mobile data traffic exceeded the voice traffic for the first time.
It is expected that 2009 marked the year that mobile data traffic reached a new milestone of 1 exabyte (EB) or 1 million terabytes (TB). By 2016-17, the global yearly mobile data traffic is likely to exceed 1 zettabyte (ZB) or 1,000 exabytes, according to Chetan Sharma Consulting.
Over 50 percent of the world's households carry a mobile device, according to Accel Partners.

You can read the article in its entirety here.

Twitter on the Fritz: Back to Real Work?

Tue, 15 Jun 2010 08:34:16 GMT

Millions of people yesterday had to resort to verbal communication with friends and colleagues in addition to returning to actual, productive work as Twitter was down for several hours. We're not sure, but this may have resulted in a slight, although temporary, uptick in the global economy.

Meanwhile, the techno-pundits are also all over the fact that the Twitter is moving into the geo-location business. Obviously they have to do this, given the popularity of rising social networking company Foursquare.

Now, I'm not a big geo-location guy. Maybe because that's because I'm worried that if I tweet that I'm out of town, somebody will rob my house. Or maybe it's just because I don't want people to know where I am.

The Twitter blog notes that geolocation is especially timely with the World Cup. I'm trying to figure out this spin. You mean, you need the right technology tool to tell people in the office that you are blowing off work to watch the World Cup?

In the interest in geo-location disclosure: I will note to readers that I'm technically on vacation this week so updates will be sporadic, at best. Here's a clue: At some point, I will be checking into a Broadway show, and possibly a beach on the Atlantic.

News Brew: Another AT&T Headache

Thu, 10 Jun 2010 10:37:25 GMT

Can AT&T stop messing up? In this morning news, Gawker appears to have broken the scoop that 114,000 iPads have been victim of a security breach exposing email and iPad IDs.

The security breach has "exposed the most exclusive email list on the planet, a collection of early-adopter iPad 3G subscribers that includes thousands of A-listers in finance, politics and media, from New York Times Co. CEO Janet Robinson to Diane Sawyer of ABC News to film mogul Harvey Weinstein to Mayor Michael Bloomberg," writes Gawker.

AT&T confirmed the story this morning (Wall Street Journal). Just another black eye for AT&T, which is still trying to work out connection issues with the iPhone.

In other news:

Why just focus on bad news from AT&T? They're rolling out 3D coverage of the World Cup with ESPN (Businessweek).
AllThingsD reports that a Wall Street analyst says T-Mobile will be the next carrier to get the iPhone. InformationWeek's Eric Zeman says that's completely wrong.
BP tries to reassure investors (New York Times). No, really, we're not a disaster! We know what we're doing! Really!
Meanwhile, BP's bonds are starting to look like junk (Zero Hedge)
Global markets rally (Bloomberg). Well, you can't go in the same direction all the time. That wouldn't be very interesting.
Six strange iPad accessories (Newsweek).
The HTC EVO is seriously flawed, says TechCrunch.
Far out news of the day: Is the Obama administration looking at a plan to scrap social security? (Washington Post)

Bernanke Needs to Get Tougher

Wed, 09 Jun 2010 11:42:08 GMT

For the first time in a while, I actually watched the Chairman of the Federal Reserve's testimony before Congress this AM. Not quite as exciting, as, say, a Celtics-Lakers game, but it offered a moderate amount of intersting information.

There are plenty of people in the "I hate Bernanke" club, mostly those of the Austrian "rip the lungs out of the market" economic school, but I believe the jury is still out. There is still hope for Bernanke to change his tune, from Mr. Softy to a harder line.

This morning I sensed for the first time that Bernanke was speaking to the markets, acknowledging firmly that the United States could lead the world out of the recession and fiscal crisis -- if it finds a way to address the enormous budget deficits. He even mentioned specifically that he thought markets would respond positively if Congress showed some will to take on the budget deficits.

News Brew: Obama Wants to Kick Ass

Tue, 08 Jun 2010 12:27:18 GMT

You know what's fun? When the president threatens to kick some ass.

President Obama's highly visible comments on national TV are garnering many video and Google searches worldwide, as everybody pitches in on exactly how Obama can kick some ass down there in the Gulf of Mexico, where BP has turned an entire ocean into a toxic waste dump.

One version of the ass-kicking threat can be seen below:

Now, can Obama actually kick somebody's ass? Debatable. But certainly this is a historic moment for the president. When we reached deep into our archives (i.e., many Google searches), though, we did find evidence of other presidents kicking ass. For example, George H.W. Bush (Bush I), said he kicked some ass in a vice presidential debate.

iNews Roundup: Apple's Next Phase

Tue, 08 Jun 2010 01:01:23 GMT

Don't you love the way that Apple dominates the news? Steve Jobs could put out a press release saying he's going to have his teeth cleaned and it would dominate the news flow on Financial TV. Oh really? Who's the dentist? Will this delay a product release?

Yesterday, of course was the release of the new iPhone 4, which had every tech pundit and their cousin covering every angle. For that reason, I'll keep this post short, giving you a few links to coverage and a few thoughts for what it means for Apple.

The main points of iPhone 4:

It's slimmer, .37 inches vs. .45 inches for the prior iPhone (PC World review)
It's got video calling (mirror.co.uk).
It's got a sharper screen. And a Gyroscope (CNN)
Actually, they are calling the screen a "retina display," because its density of 326 pixels per square inche allegedly rivals the human retina. Yeah, right Apple (Tom's Guide).
IOS 4, which includes support for multitasking, iBooks, and other stuff (Mashable).

Okay, so what's it all mean? What's interesting to me is the statement that Apple has made with its last two releases: iPad and the iPhone 4. Have you noticed that Apple and Steve Jobs in particular claim to be "driving industries forward." For example, the message of the iPad as that it will enable the publishing industry to function in the digital world.

But rather than focus on whether or not the iPhone is driving some industries forward I can't help but think how it's driving the telecommunications industry backward. What do I mean by that? It is becoming more evident that the iFranchise is making the telecommunications provider increasingly commoditized and irrelevant.

What's AT&T's role in the iPhone franchise other than to connect the thing to a mobile network and then disappoint users. is AT&T adding any other value at all?

If all of the innovation is coming from Apple, what value are the service providers adding? What does this mean for the future of the mobile telecommunications industyr? Check out the videoconferencing component of iPhone which uses a WiFi connection and could certainly accelerate the trend of Internet communications platforms cannibalizing service provider networks.

Think about that, AT&T: Just look at what's happened to Apple's shareprice when compared to yours. Clearly they are the innovator and you are now the commoditized service provider.

[img:/assets/10/0608/0023.500]

[img:/assets/10/0608/0022.500]

Now, who has derived the most value out of the iPhone franchise?

News Brew: Zuck's a Sitting Duck

Thu, 03 Jun 2010 14:00:50 GMT

Am I the only one perplexed by this Mark Zuckerberg fiasco? I mean, yes, the guy is the founder and CEO of Facebook. But he's mucking things so badly it's probably time for him to get kicked upstairs.

The headlines are blaring this morning about Zuckerberg's disastrous appearance at the Wall Street Journal D8 conference, in which apparently he was sweating like Albert Brooks playing the news anchor in the movie Broadcast News.

Here's a roundup of what's going on with Sweaty Zuck, and other news:

Liveblog of Kara Swisher and Walt Mossberg interviewing Zuckerberg onstage at D8. Best quote: "When I was in college I did a lot of stupid things." Amen, brother!
MarketWatch comments on Zuck's "Richard Nixon" moment. Please note the tie-in above to Broadcast News, in which the TV producer comments, "He's sweating more than Richard Nixon!"
Facebook continues to face heat over privacy. As much heat as a Finnish sauna, apparently.
Top 5 Facebook privacy settings you need to know (HuffPost). Plus, I really hope you don't have anything truly personal in there.
BP's turned to the "Giant Shears" (Guardian). Seriously, could a multinational corporation appear any more incompetent?
Gulf oil could spread to Atlantic Coast (Wired).
Israeli Parliament members come close to blows over flotilla debate (LA Times)
And they killed a U.S. Citizen (The Atlantic). Oops. How's that for improving relations?
Whirlpool recalls 1.7 million dishwashers (Reuters). Apparently they have the ability to whirl flames.
Stocks give up most gains (CNN). Is that from yesterday, or from 10 years ago?
Neilsen files for $1.75 billiion IPO (Reuters). Better hurry.
Hoenig says Fed should raise rates (Reuters). Now that would make things interesting!

Stop Freaking Out about AT&T's Plan Switch!

Wed, 02 Jun 2010 23:32:56 GMT

Well, AT&T has eliminated the unlimited data plan, and Internet anarchists everywhere are having a cow. The funny thing is AT&T's headline on the announcement: "AT&T Announes New Lower-Priced Wireless Data Plans..."

First question: Are the plans really lower priced, as AT&T claims? Now that's funny. If you read the headline on this press release you would think it was some mundane, tiny pricing shift -- like AT&T thought it could slip one by millions of frothing-mouthed, blogging mobile data heads. Of course the digital-media addicted Internet anarchists note that by definition eliminating an all-you-can eat plan is raising prices. MobileCrunch calls this a "sad day in data land."

Five Signs Big Media is Screwed -- and Why It's Okay

Wed, 02 Jun 2010 19:02:46 GMT

I'm in the media business. Hahahahahaah. Is that a sick joke? Is there even a media business any more? Last I checked it looked like one of those smoldering post-napalm scenes from Apocalypse Now.

No, you certainly can't hammer on a typewriter next to Cary Grant and enjoy a two-martini lunch and a union paycheck anymore, I will tell you that. Those days are over.

Why even bring this up? Because apparently Steve Jobs is telling the media world they need to cut their prices to survive. Hahahahah. The prices are already cut, Steve. MOST STUFF IS FREE, geddit?! We're already broke, how does cutting prices help?

Steve Jobs: AT&T is Working on It

Wed, 02 Jun 2010 18:18:44 GMT

Looks like it's Steve Jobs Wednesday here in the tech media world. Lots of stuff coming out of the Wall Street Journal's D8 Conference, where Jobs spoke at length. There were some especially interesting comments on the iPhone, the iPad, and the service from AT&T.

Jobs downplayed his knowledge of "how telecom networks work," but he did answer a question that we all want to know the answer to: When will AT&T fix its iPhone service issues? Much of this involves around the challenges of high-speed mobile data, especially via the backhaul networks. This is the topic of our new report, "The Mobile Data Deluge."

Introducing: The Mobile Data Deluge

Tue, 01 Jun 2010 13:03:06 GMT

The Rayno Report recently completed "The Data Deluge: A Mobile Revolution," which details enormous changes that will becoming to telecom networks over the next few years.

The explosion of smartphones over the next 2-3 years is likely to put enormous burdens on telecommunicaitons networks, and it's going to force telecom companies to do a lot of upgrading of their equipment and technology, especially the area of the network known as the "mobile backhaul" portion which links cell sites to the core of the network.

This and forthcoming sponsored research papers will be available, free of charge to registered users, in our reseach store, which is here. Our first report is sponsored by Adtran. I am happy to announce that Adtran will be sponsoring this site for the next few months (hopefully longer), and that they have sponsored some research which the Rayno Report has conducted on their behalf.

The reason that the shift from mobile voice to mobile data will have such a huge impact on the industry is that it was orginally architected to handle voice calls, and the move to 4G represents a historic shift. This will create many problems and challenges for the telecom industry. As you can see below they make a lot more money from voice.

Here's just an example of the growth we expect to see in new data-rich mobile applications: the number of mobile phones has grown 460 percent in just seven years. As these types of growth rates extend into the 4G "smartphone market" -- which will accelerate in the next two years -- you will see data on the telecom networks increase by an order of magnitude.

Consider this:

* A 4G network will accomodate data speeds up to 150 Mbit/s. Considering that most 3G networks provide data rates under 10 Mbit/s, this will be a huge jump in data. This will result in an explosion of new data-rich applications and user demand, which will flood the networks with more data.

* New smartphones applications are already blossoming, with billions being downloaded every month. This is shifting the user demand from voice to data. Telecommunications networks will need to accomodate this new demand for data.

* Smartphones currently have under 20% market-share of the mobile phone market. That will probably expand to more than 50% in the next three years, creating even more demand for data networks.

To read more, check out our free sponsored research paper.

News Brew: Stop the Oil!

Tue, 01 Jun 2010 11:38:31 GMT

Hopefully one of these mornings we'll wake up to learn that they've stopped the oil leaking into the Gulf of Mexico. Depressing stuff, it is.

Meanwhile, while the oil spills, Google and Microsoft are sparring, with Google launching an anti-Windows campaign. Here's what's in the news today:

BP shares plunge after top-kill effort fails (Reuters). Now, you would think they would have had a plan to stop this. It appears they don't.
BP tries again with the dome (New York Times).
The White House Tries to control the PR damage (Washington Post). Good luck wid that.
As if there's not enough going on, we now have another conflict off the coast of Israel (AOL News).
Hewlett-Packard is taking a hefty axe to the workforce -- to the tune of 3,000 workers (Reuters). Let me get this straight -- company doing great, but taking a $1B charge and cutting 3,000 workers?
Stocks were boosted by manfacturing data (Reuters). For about 30 minutes, after which point they started to fall again.
ZipCar files for $75 million IPO (Reuters).
The Financial Times says Google is ditching Windows because of security issues. Eric Schmidt got tired of all those uninvited pop-ups.
Microsoft responds by mocking Google (Business Insider).
Meanwhile, Google is talking about something called a sensor revolution. Check it out.

Exclusive! Detailed Analysis the Facebook "Hoodie Video"

Fri, 28 May 2010 12:57:12 GMT

I admit, I have become fascinated with Facebook Founder and CEO Mark Zuckerberg's "Hoodie Video," which was released this week to announce changes to Facebook's privacy settings. I'm sure that this video will be analyzed by cultural anthropologists years from now, as they point to the the peak of arrogance and juvenile behavior in Internet culture.

I have set out the analyze the film in entirety. I believe it is representative of the failure of Facebook's entire marketing and PR program, as well as the general dysfunction in Web media.

Real Metrics on Apple vs. Microsoft

Thu, 27 May 2010 18:15:17 GMT

It's funny how the financial and technology press like stampede onto the same story like uneducated mass of Angus cattle. Yesterday's example: 15,000 stories about how Apple has surpassed Microsoft in market cap.

Chetan Sharma: 7 Billion App Downloads

Thu, 27 May 2010 12:36:44 GMT

I have been digging into the excellent research put out by consultancy Chetan Sharma which digs deep into the telecom industry. Today I was shocked to read that more than 7 billion mobile apps downloads were made in 2009.

That is a shocking number. Now, some of this is misleading, I realize. I have several contacts in the mobile apps business which tell me that it is still hard to earn a living from mobile apps, unless you hit a real home-run and are in the top 5% of apps, it's hard to make money. The reason for this is that many apps are free, or very low cost, so if you include a revenue share from a partner such as Apple you really need to sell millions and millions of apps to make any money.

Facebook's PR Disaster

Thu, 27 May 2010 11:37:05 GMT

I believe it's evident now that Facebook is not yet a grown-up company or ready for IPO, proven by its feeble response to the privacy crsis over the last few weeks. CEO Mark Zuckerberg has not fared well in a crisis of leadership indicating the company cannot master even basic principles of public relations and customer satisfaction.

Today, Facebook is finally making some serious changes to its privacy policy, privacy controls, and public-relations approach. But it has taken far too long. And I don't think it helps that in the video, Zuckerberg has personality of a robot reading from a script.

Massive Shakeup in Microsoft's Gadget World

Tue, 25 May 2010 14:00:21 GMT

A big shakeup is coming in Microsoft's consumer products division -- the Entertainment and Device Division -- which produces mobile phone technology,the Xbox, videogames, and other devices. The biggest news is that two huge names in technology and senior Microsoft executives, J Allard and Robbie Bach, will be leaving Microsoft.

Market Update: Death Cross Coming?

Fri, 21 May 2010 11:50:26 GMT

About a week ago, fortunately, I was actually right and [story:/2010/05/three-bad-signs-for-this-market/|alerted readers that I would be selling any rallies in the S&P]. After the famous "Euro Bailout Rally," which turned out to be a one-day wonder, we have done nothing but go straight down. You get the feeling that some of that bullish complacency is eroding from a year-long cyclical bull rally that took indices up nearly 100%. What next? Well, I say, watch out for the "Death Cross."

What is the Death Cross? It’s a technical indicator produced when the 50-day moving average crosses over the 200-day moving average. The reason it’s important is that a lot of professionals watch these averages, and it’s also an indicator of a medium-term change in trend. In other words, if we get the death cross, you would see a lot of people move from bull to bear mode, and you would also see a mad scramble for a lot of people to sell and lock in all those profits from the last year.

Things can change in a hurry. What I find so dangerous about this rally is that a lot of it was artificially produced — i.e. the government giving big banks free money to trade and run things up — and thus I think there is a lot of "fast money" in the market. What happens when fast money starts losing? It sells quickly.

Will Google's Global IP Bid Turn up FTC Heat?

Tue, 18 May 2010 13:44:35 GMT

As if Google isn't doing enough to rile up the Federal Trade Commission, today it announced that it is offering $68 million in cash to buy Global IP Solutions (GIPS), a company that makes Voice Over IP (VOIP) software. Google's press release says it's offering to buy all the shares of Oslo, Norway-based GIPS for $2.12 a share. GIPS is listed on the Oslo Stock Exchange and the offer represents a 27% premium over the closing price of May 14, but after being acquired it will be delisted and become part of Google. A Wall Street Journal article noted that GIPS financial performance is quite small -- it only has $12M in revenue and was losing money -- but that its tools will be useful to plug VOIP technology into various Google communications applications.

Where to Buy Gold Next

Tue, 18 May 2010 12:56:13 GMT

Well, gold had a nice aggressive run from $1,100 to $1,250 in the space of a month. And now, in classic fashion, gold is experiencing one of its nasty bull-market corrections. It's down about $16 today. Yet another indication that you should sell gold when CNBC announcers are getting hysterical about it, and buy it when they forget about it. I think nailing the bottom of this particular gold correction is going to be very difficult. Gold is entering the third and final stage of its majestic bull market, which will result in a parabolic rise. It's going to be wild from here on out, and I don't think $50 intra-day moves are out of the questions. That being said, this may be your last chance to get in before price movements become too big to stomach. Where do I think you do that? The typical pattern has been for the correction to retrace 50% of the prior move. As I mentioned the last aggressive move was $150, so you could reasonably expect to retrace half of that, which would yield $75, down to $1175. But in this case, we might not get that far down. Due to the accelerating nature of the gold chart, I think there may only be a few days to buy it in my "buy zone," which is between $1175 to $1200. I would love to be buying more gold in the green circle identified in my chart below. My stop would be $1150. I really, really doubt that we will get down as low as $1150. Now, if you don't own any gold, it's a little more tricky than if you've been riding this move up and sold off some of the gold into the strength. If you are trying to establish a position it may be wise to just wait a few days and see how this correction pans out. The first say you see a decelerating decline at or below $1,200, that's the time to give it a shot.

A Respite Rally?

Tue, 18 May 2010 12:44:07 GMT

Okay, so, as expected, the S&P filled the "Flash Crash" gap we talked about here a few days ago. Kind of. Now what? This morning we are exeperiencing a relief rally. The Euro is actually green by a few points. Gold is getting pummeled (as it always does after a $150 run). Will it last? I think it's important to see how powerful this rally is after a few days, rather than a few hours. I have covered my shorts for the time being but I expect to reload at a later date, possibly as early as later in the week. And I will be buying gold on its decent toward the 1200 area, where there is a lot of support. I will not really be impressed with a rally in stocks unless they can convincingly break through 1160 level on the S&P. There are too many reasons to sell right now.

Ron Paul: It's the Debt, Stupid

Mon, 17 May 2010 14:14:02 GMT

For those of you who are still scratching your heads wondering why the stock market hasn't gone anywhere for ten years, why there's a new sovereign debt crisis every two weeks, and why it seems as if financial markets are inherently unstable these days, I believe Ron Paul has the answer: It's the debt, stupid. Still, a lot of people seem to be not aware of this basic common sense. If you run up the tab, you have to pay for it somehow. Usually that subtracts from future potential growth -- or provides a headwind to the current growth rate. At any rate, what's so scary about this debt crisis is that it is global in nature and involves some of the largest Western economies. Remember when the Unted States and Europe ruled the world? Follow Ron Paul's thread on why debt's weighing us down and the global currency system is falling apart:

Weekend Reading: Brunch with Debt?

Sun, 16 May 2010 14:16:55 GMT

Happy Sunday. Are you putting that Sunday brunch on your credit card? After all, we are a debt-driven society. And in this weekend's reading, debt seems to be all over the map. Greek debt. UK debt. U.S. debt. College debt. Mortgage debt. My debt to society. I'll have more on this tomorrow, but debt is the foundation of the weakness in Western Capital markets. If any of us thinks that creating more debt, rather than paying of debts, is the answer -- we're sorely mistaken. We can dig our way out of this, but it's not by borrowing money and spending. It's by creating -- business, technology, companies, artwork, literature. Here are some articles I'm surfing in the press today: Paul Volcker sees Euro disintegration. So do the markets. That's okay, I have fond memories of the French Franc and the Deutsche Mark. Especially back in the 1980s when you could change 8 Francs for a dollar and a cold Duvel could be had in a cafe for 8 Francs. When you boil down the Euro disagreements, here's what it comes down to: You're going to see a lot of intense arguments about who works harder, who doesn't, who should pay off whose debts, and who has the right to retire at age 60 on the government dole. The Boulder startup scene gets some props into the New York Times. Funny, though, in the first paragraph the reporter refers to Boulder as "usually seen as an enclave of hippies, marijuana dispensaries and rock climbers." Apparently this reporter hasn't been to Boulder since 1982. The last hippie I saw in Boulder is now running a social media startup. It's a great time to browse mansions built by a movie mogul. Google says it was "accidentally collecting data" from thousands of Wifi sites since 2006. Um. You're kidding, right, Google? I mean data is your business. What's next? "Sorry, but we accidentally handed all of your email over to the Russian government." Joe Queenan has a great piece in the Wall Street Journal about the economic malaise of our youngest generations. This is something I've thought about a lot. And I'd have more sympathy for the "millennials" if I met more of them that weren't ADD-addled, entitled, spoiled brats. Maybe more of them should work on street fairs!

Three Bad Signs for This Market

Thu, 13 May 2010 19:51:30 GMT

I don't want things to fall apart in the stock market. No really, I don't. But the unusual level of "CNBC Optimism" combined with a bad chart, and terrible reactions to so-called "good news" today are all leading indicators, to me, that all is not well in market land. Let's take a look at these items one-by-one: 1) A $6B deal between SAP and Sybase is announced. It can't help the market though. As I like to say, it's not the news but the reaction to the news that matters. The market's reaction was muted, at best. Tech stocks have been selling off all day. 2) Even John Chambers can't save the market. When America's most polished optimist, John Chambers, announces a "great quarter" and comes on CNBC, but the market sells off, that's a bad sign. Cisco reported its "strongest quarter ever," but the stock has sold off nearly 5% so far today. Hmmm. 3) The S&P chart, which I commented on here, is looking more and more awful. Following the trillion-dollar Euro bounce, further gains have been muted, and we are getting yet another rounded top in the context of a scary looking waterfall like pattern. You think all those High Frequency Trader (HFT) programs are done with their mini-panics? I don't. On the chart below, I have shown the downward angle of the top we've formed in the last few weeks, as well as circle the area where that interesting "panic gap," was created after the Euro bailout was announced. Notice that the "Euro Bailout Rally" is now just a blip in the overall chart. For whatever reasons, markets like to gravitate back to areas of huge turbulence -- especially when there was a large gap. This is what I expect to happen to this market. That area will be tested again and either fail or succeed. Disclosure: Short S&P (stop at 1175), long S&P puts.

$6B SAP-Sybase Deal: The Value of the Stock Screen

Thu, 13 May 2010 07:00:01 GMT

SAP AG has agreed to acquire Sybase Inc. in a deal valued at $5.8 to beef up its mobile platform and help compete with arch-enemy Oracle Corp. The deal is an all-cash offer for Sybase shares at $65 per share. Could you have spotted the deal coming? Yes. I'm a big fan of stock screens. Sybase was on the radar here at the Rayno Report after it started showing up on stock screens as being undervalued, with the screens singling it out for solid profit growth and a low P/E value. We cited it in early March on our shopping list of stocks to pick up after the February market swoon. Another reason is that Fred Hickey, well-known technology stock analyst, was on top of the Sybase situation, calling it an undervalued company with buyout potential in this year's Barron's roundtable. Hickey has the hot hand, he also called out Novell for its large cash position just before it was picked up a bid from hedge fund Elliot Associates. If you were sitting on shares of Sybase, there's a huge premium. The deal price is 56 percent higher than the closing price of $41.57 yesterday. In after-hours trading stock last night, the stock was up 35 percent at about $56.

What Gold and Technology Have in Common

Tue, 11 May 2010 12:53:41 GMT

I get a lot of questions about why I write about technology, the stock market, and gold so much. Why mix it up? Well, that's because I believe that the world is very connected -- especially the financial and economic world. Technology really isn't that different from gold, actually. They are both currencies. They are both means of trade. I also believe that both are capable of spawning revolutions.� You see, gold, like technology, is based on a standard: it's a standard for the monetary base.That's becoming more evident today as we see gold head to new highs, as I wrote would happen here. As the world fiat monetary system collapses (we're witnessing this before our very eyes), that will spawn a move to more open monetary systems. Think of the days back during mainframes and proprietary mini-computer standards. The world was ruled by technology fiefdoms� and proprietary systems produced by powerhouses such as IBM in Wang Labs. The mini-computer was replaced by the industry-standard PC. Wang filed for bankruptcy. In the 1980s, and later, in the 1990s, the move to open systems accelerated as chips, networking standards, and communications opened up and could become interchangeable, spawning the creating of a massive ecosystem of suppliers. There were suddenly thousands of technology producers, rather than a handful. Technology activity throughout the world exploded. That's the power of open standards.

Bizarro S&P Chart Now Has Huge Gap

Tue, 11 May 2010 01:30:34 GMT

I like stock charts. I have studied many of them over the years, and consulted with the best chartologist. Today's big rally, following last week's meltdown, has retraced about two-thirds of the markets losses in the last week. But it has also produced a scary, bizarro chart. Today's gap-up now leaves a huge gap between the 1130 and 1145 level, which I have marked below with some white lines. Let's call it a "Euro freak-out" gap.� It is my experience with dramatic moves like this that these gaps are almost always filled again.This ugly chart is among several reasons why I'm not confident in today's "comeback rally."

Um. A Trillion Dollars for This?

Mon, 10 May 2010 18:21:44 GMT

After the European Central Bank (ECB) announced an unprecedented market intervention, the Euro and global stock markets have fallen after this morning's gap up, which is not a good sign at all. During the weekend, with markets and the Euro in freefall, the Euro bankers enacted a $1T bailout package to reassure markets before they opened in Asia early this morning. The plan includes nearly $1 trillion in loans and a bond purchase program to stanch the bleeding in sovereign debt in countries including Greece, Spain, Portugal, and Ireland. Unfortunately, the markets do not appear reassured. The Euro is only up a few points, after being up nearly 2% earlier in the morning. The ECB policy actions were designed to prop up the Euro, after all. Remember, a market's reaction to the news is always more important than the news itself. Can this be construed as good news? Hardly. The size of the response indicates the crisis may have been bigger than we thought. Last week there were many rumors of European bank insolvencies and Credit Default Swaps (CDS) were rising, signaling genuine alarm.

The Trillion Dollar (Euro) Gambit!

Mon, 10 May 2010 13:23:29 GMT

The Euro bankers have taken a page out of Ben Bernanke's playbook and pledged nearly $1 trillion in aid to fight the declining markets. Well, I didn't think they had it in 'em. Therefore, the situation must have been worse than we thought. Nearly� $1 trillion dollars in loan guarantees and bond buybacks will be deployed to stem the bleeding in European sovereign bonds, which started in Greece but then quickly spread to Spain, Portugal, and Ireleand. Will it be enough? We can only hope so, because I think the alternative is something along the lines of financial armageddon. Unfortunately, I think their show of force is demonstrative of just how scary things were getting last week, and that they know further dangers are lurking below the surface of sovereign debt plan. So here's my plan over the next two weeks:

Monitor the bounce in markets. If the bounce loses altitude at an early stage (say, after a day or two), re-short markets
Buy more gold and silver on any weakness

Do I think things are "saved"? Probably not, though we have bought some time. I will let the markets tell me the story. If this rally cannot be sustained and gold continues to hold its gains, that's a sign that Trichet's $1 trillion bazooka may not be enough.

Can the Euro Bankers Save the System?

Sat, 08 May 2010 16:04:10 GMT

While the rest of the world sips coffee, mows the lawn, takes the kids to soccer practice, or whatever else it is that you do on Saturday, the world banking system is frantically meeting behind closed doors to save the global financial system. This is it. This is the mother of all crises. They really need to announce a Hank Paulson bazooka. After reading and analyzing reports from the top sources in the markets, it's clear to me that panic is going on behind the scenes and European banks are planning to launch several efforts to staunch the bleeding on Monday, including opening up currency swap lines with the Federal Reserve as well as creating some sort of "rescue fund."

Crash Watch

Fri, 07 May 2010 19:54:06 GMT

I remain on crash watch over the weekend. If the Euro bankers don't do something soon, this could be a real mess. I have gone to basically 80% cash, plus I am short S&P futures with a stop set at 1120. The market action today was simply horrible. You would think there would have been some kind of bounce from yesterday's debacle, but any bounce was feeble and the market is now trading in a steady downtrend. What's more, from charts I have looked over from prior crashes, this doesn't look good. Expect some fireworks on Monday.

Is the Market Haywire? Of Course it's Haywire -- It's Run by Lunatics

Fri, 07 May 2010 14:02:00 GMT

It's funny to watch all the commentators and analysts come out of the woodwork this mornin g to explain how "things could go wrong in the market." It's as if they haven't noticed the market has been dysfunctional for quite some time. The market, fundamentally, is broken. I think this is because of the lack of liquidity from the small guy and the growing influence of gigantic over-leveraged quant traders. Think of the crises we've had in the past: Long-Term Capital Management in 1998, the banking crisis of 2007/2008. Both were basically caused by hot-shot bankers with lots of overleveraged money and too little liquidity. Inevitably, some rocket-scientist trader starts making money, leverages up, and gets a god complex.That's when things go wrong. Case and point: The major investment banks, coming off record profits in 2006/2007,� were leveraged more than 30-to-1 going into the 2008 crisis! The financial markets always have a way over going overboard and plunging us into crisis. I believe there are two things at the heart of this: Overleverage, and ego (or greed). Go back and read "When Genius Failed," it's a great book that explains this perfectly. Isn't it interesting that the Long-Term Capital Management Crisis in 1998 was triggered by a sovereign-debt crisis. As for what happened yesterday: For those who weren't there, it was a wild ride, with the largest Dow Jones Industrial Average point swing ever -- with the average down 10% and 1,000 points at some time. People are still trying to explain what happened. I was actually at my screen when it happened (luckily, I just happened to be short at the time), and it felt like I had been sucked into some kind of science-fiction film. I saw the S&P E-mini plunge nearly 70 points in about 10 minutes. Markets recovered quickly from the 10-minute intraday plunge, and now the analysts and commentators are trying to explain the unreal things that� happened with the market and some particluar stocks (at one point in the day, Accenture -- a $40 stock -- was trading at .01). Here's a chart of the action in the E-mini S&P futures contract, one of the alleged culprits of yesterday's weirdness: Yes, this was an extraordinary move. But my feeling is that more "strange things" like this are happening all the time. During the recent market "meltup," I can remember many days in which the market didn't move at all for hours, and then suddenly out of the blue it vaulted 10 S&P points in 10 minutes. Should we investigate that, too? Even this morning's action is strange, and discomforting. Looking at the chart above, I would not be surprised if the market heads back down toward yesterday's mythical intraday low (if you blinked you missed it), just because it now lies in the memory chip of some high-powered quant trading fund. CNBC and others have pointed out that these sort of events do nothing to restore the confidence of the average retail investor (let alone Jim Rogers), and they are absolutely correct. In addition to the scary trades that still go on in the "dark market" (credit derivatives swaps as detailed in the SEC investigation of Goldman Sachs), we have the market increasing being controlled by highly leveraged computer-driven traders. These shops use the most sophisticated technology in the world and they trade tens of thousands of shares of stock in a microsecond, mostly driven by computer algorithms. The best analogy I can think of is take a look at what happened to Toyota. Imagine a Prius with bad software. Then imagine that happening to global trading markets. Scary thought.

Cloud Genius: Citrix CTO Simon Crosby

Thu, 06 May 2010 16:12:38 GMT

At the trade conference Interop last week, I did a "power-course" on cloud computing with the mission of discovering: What about cloud computing is total BS and what is real? It turned out that I ran into the right person. I learned more eating tacos and listening to� Simon Crosby, CTO of the Datacenter and Cloud Division at Citrix Systems Inc.� (CTXS), than I did anywhere else. If you want a quick definition of cloud computing, here it is:� “Cloud Computing is a data center that serves you back applications and content," says Riverbed CEO Jerry Kennelly. The way Citrix' Crosby tells it, elements of cloud computing� are the Wild West of Information Technology (IT) -- inviting people to break out from the bolt-down world of enterprise computing and do what they really want. This may also put a lot of people out of business, and make fortunes.Crosby's also filled with radical technology statements such as: [caption id="attachment_2259" align="alignright" width="120" caption="Simon Crosby, Datacenter CTO of Citrix"][/caption] "Anything that runs on an operating system is legacy technology." "Networks scale. The limit is humans." "The storage industry is about to be completely transformed again." "The security business and the detection business has totally failed." In short, some fundamental "cloud computing" concepts are enough the change fundamental business models for entire industries: For operating systems vendors, service providers, and software vendors as well.

News Brew: Euro Groundhog Day

Thu, 06 May 2010 14:27:30 GMT

It's Groundhog Day again in the markets! Repeat after me: Euro down, Greece unrest, sovereign debt panic, Angela Merkel, Jean-Claude Trichet. Euro down, Greece unrest, sovereign debt panic, Angela Merkel, Jean-Claude Trichet.Rinse and repeat, as markets collapse. What I'm watching carefully is that despite incredible dollar strength, gold is threatening new highs. It's funny though, not a whole lot of people seem concerned that this is signaling something: a full-blown global currency crisis. Currency crises are the most pernicious of market events, because it means that suddenly you don't know how to value things. That means volatility. More ahead. Moving on to other news:

It's the CONTAGION! It's spreading! (Bloomberg). It's like a giant, hedge-fund fueled green slime.
Cut, cut, cut, says Trichet (Bloomberg). Is it just me or does Trichet look a little bit like a deer in the headlights
Trichet keeps ECB nukes in the silo (Marketwatch). Headline of the day.
Productivity continues to rise (Wall Street Journal). Of course it is. That's because the five people left with jobs are doing the work of 50 people.
The FCC wants to regulate the Internets some more (Wall Street Journal). That's because, like, the Internet has grown too fast when it's unregulated, you know?
Another company joins the HTML5 parade (TechCrunch). For those of you who don't know what that means, it's like, bad for Adobe.
Another great headline: "Facebook's Mark Zuckerberg: 'I'm CEO ... b****!' (Fortune). More confirmation that the billionaire is just a spoiled brat.

AT&T Leads in Dropped Calls, Survey Says

Wed, 05 May 2010 15:46:26 GMT

No, that crummy connection from AT&T on your iPhone is not your imagination. According to some new research from ChangeWave research, AT&T (T) drops three times as many calls as Verizon (VZ). The issues of whose network is better was the heart of Luke Wilson's war. Looks like AT&T is losing. ChangeWave says that in a� survey of 4,040 consumers using North American mobile carriers, Verizon customers reported only 1.5% of their calls being dropped over the past three months, the lowest in the� industry. AT&T reached its all time worst rating in this measure, with customers reporting 4.5% of calls dropped in the last three months. AT&T finished last in the March survey of North American mobile providers. Sprint finished second with 2.4% of calls dropped, and T-Mobile finished third with 2.8% of calls dropped.� The trend shows� an increasing number of dropped calls among AT&T customers surveyed and a decreasing number of dropped calls for Verizon customers.

Can HP's Memristor Start a Revolution?

Wed, 05 May 2010 15:00:55 GMT

Recently several members of the analyst and press community had the opportunity to attend an HP Labs event on Energy and Infrastructure. Prith Banerjee, senior vice president of research at HP and director of HP Labs, laid out the foundation of HP's vision for sustainability. I met with representatives from numerous labs including: color reflective display technology, real-time streaming analytics, information and quantum systems, sustainable IT, exa-scale data center technology and advanced wireless networking. But the big news for data centers was in memristors. All the meetings offered valuable insight into the future of computing. Stan Williams, HP Fellow and Director of� the Information & Quantum Systems Lab, discussed two fundamentally game changing and related technical efforts that his labs are working on: For the purpose of this blog, I will focus on memristors and its initial application. The original idea of the memristor, which is an abbreviation for memory resistors, was defined in the 1970's by Leon Chua. HP was the first to build a working memristor in 2008.� Today, capacitors, inductors and resistors form the three basic circuit elements with the memristor now being considered the fourth fundamental circuit element. The memristor differs from the other circuit elements in that it can retain memory without power.� This leads to three critical questions: Why does this matter? What is the practical application for it? When does it leave the Labs? First, memristors will offer dramatic improvements in storage (e.g. days of video on the form factor the size of a thumb drive). If Memristor production is successful, it could be replace flash memory as we know it. Mr Williams said it would be approximately 3 years before we could expect commercial prototype but at that time he expects memristors to offer storage density of about 20 gigabytes per square centimeter. HP expects memristors to be faster, lower powered and to offer at least twice what comparable Flash technology could offer in 2013. If HP is right, they could change the Flash market overnight and make a mint on licensing fees. Imagine how an increase in storage with a reduction in power consumption could change the capabilities of small factor consumer electronic devices such as cameras, e-readers and smartphones. But Mr. Williams also offered a longer term, roughly 8 year vision, of how memristors could change the computing landscape by integrating offer both logic and storage. This April, in the science journal Nature, HP published advances in its research study in nature titled� "'Memristive' switches enable 'stateful' logic operations via material implication" This means memristors could replace transistors on processing chips. Mr. Williams painted avision of memristors as a bridge that brings storage and computing closer together. Over time, memristors could entirely flatten data center architectures by enabling computation to be performed in chips where data is stored, rather than on a specialized CPU. This is important because space and power are such huge factors in the cost of data centers. Some sort of memristor revolution could result in data centers that require less square footage and less power even if it is no longer possible to make transitors smaller. In short, it could spark a revolution in the data center as well as in the CE field.

News Brew: Leaking Oil, Leaking Markets, and E.T.

Wed, 05 May 2010 14:33:28 GMT

It's Groundhog Day in the market this morning where you wake up and hear about a "Plunging Euro" and "Greek Contagion" and "Angela Merkel." As one of my favorite market mavens in Chicago said, "It's like Chinese water torture." Only, it's more like, Greek water torture... on to the news:

Euro tumbles to 1-year low vs. the dollar (Reuters). Great, maybe next time I go to Europe I can finally get a beer for under $8.
Three people killed in Greek protests (New York Times).
Moody's warns on Portugal (Wall Street Journal)
Scottish airports closed by volcanic ash (BBC). This time, scientists say the smoke might be coming from Greece.
"1 or 3 Gulf leaks halted but oil flow same." Okay, so, if you've halted a leak, but the flow is the same, have you really accomplished anything?
Rupert Murdoch brags about his iPad (Paidcontent.org) Says his makes more money than yours.
But is the News Corp. subscription strategy months away? (AllThingsD)
Picasso work sells for $106 million dollars! (New York Times). Is there an ETF for Picasso?
Ernie Harwell: RIP (Detroit Free Press). Great man, great life.
Scientists explain why computers crash but humans don't (Physorg.com). I beg to differ. I've crashed many times.
NASA team claims to have evidence of extraterrestrial life (Washington Post)

Ten Interesting Trends To Look At

Tue, 04 May 2010 17:58:05 GMT

For those of you new to the Rayno Report (oh wait -- I'm new too), one of our big themes is investigating, analyzing, and playing the big trends, whether it be in markets or technology. I am a big believer that at fundmental turning points there are huge opportunities. Here are some of the trends to look at and pay attention to� in reverse order: 10) The world is running out of rare-earth metals (Forbes) 9) Growth of LEDs. Eight) Terrorism-scanning software is becoming very sophisticated. And that means a growing threat to personal liberty (Telegraph). 7) Growth of digital Imaging. In all forms. 6) Computer-algorithms are taking over financial markets (Source: NYSE, Nasdaq) 5) Government debt is becoming the biggest threat to world financial markets (Source: BBC) 4) World currencies are being debased. And Gold is becoming the ultimate world currency. Again. 3) Cloud Computing -- and what it means for many technology businesses. 2) Video is taking over the Internet (Source: Cisco Systems). 1) Internet data traffic -- and mobile data traffic, in particular -- is exploding. Unfortunately, revenues aren't!

News Brew: Bomber Busters, Euros, and iPads

Tue, 04 May 2010 17:04:27 GMT

Yesterday I remarked about the proliferation of bad news. Well, here's some good news: The NYPD did an incredible job defusing a bomb in Times Square, conducting a quick investigation, and rounding up a potential suspect. Amazing if you think about the alternative. Heroic execution. Not only was there heroic execution on the part of the police in diffusing the bomb and launching a quick investigation, but if they got the right guy, it has a Hollywood twist: They nabbed him as the plane was about to take off. Here's more on that story, as well as other stuff going on in the busy world:

Times Square bomb plot suspect arrested at last second (CNN). I think he's lucky Jason Bourne wasn't on the plane.
The suspect allegedly drove to the airport packing a 9MM gun (NPR). I'm ready to see the movie. Now.
Times Square bomb, oil spill complicate White House agenda (Washington Post). Nobody says it was easy being the President of the United States.
Bomb suspect may have been targeting military recruiters (Washington Post).
What we know about the suspect (The Atlantic).
Shifting gears to market action: More Euro-melting triggered this morning's swoon (WSJ).
Think you understand the sovereign debt crisis? If not, just take a quick look at this chart, courtesy of Pimco (Business Insider).
Just when it looks like the VIX has collapsed -- yes, that's the time to sell (Bloomberg BusinessWeek).
Apple policy said to trigger investigation by the Federal Trade Commission (Bloomberg). Only one entity can stop god: the government.
Apple feels the heat from the FTC. Maybe it's time to pull a switcheroo? (Electronista)
Ning is going to stay free for teachers (New York Times). Great, now do you know anybody that uses Ning? Any teachers? Right, didn't think so....
YouTube is developing a self-serve rental model (MediaPost). Netflix executives must be taking notice.
Apparently there is a black-market for IP addresses (Infoworld). "Psst.. hey buddy... wanna buy 72.145.228.27!?"
Was wondering what the local snowpack was like. I found this cool site (NOAA). At least they put some of my tax dollars where I want them.
Things you learn without running water (The Daily Green). Some of them, I just don't want to know.
Twitter has launched its "embed Tweet" program (HuffingtonPost). More evidence that civilization will be ending as we know it.

Market Action: S&P Diving Board Chart?

Tue, 04 May 2010 14:13:26 GMT

This morning, the stock-market action is looking a bit like Charlie Sheen after a raging Hollywood party. Remember, the best parties always have a hangover. The market has grown increasingly volatile over the last few days. It's not the kind of action that I like. In addition, the currency world has been positively insane, with massive swings in the Euro, Dollar, and gold. Right now the dollar is screaming and the Euro is down about 150 points. This wild currency action is indicative of more instability in the sovereign debt markets. I spent the morning unloading the most of the remaining stocks that I owned that had been accumulated in the last 6-12 months. The reason? A lot of these stocks have run long and strong. These violent market swings, and the S&P chart, have my spidey-sense tingling. I will keep a few low-priced blue chip stocks but for the moment, with this kind of market action, I'm content to sit on a very large cash position. And I'm hedging that by shorting S&P futures. With the futures position, I don't have any problem being slightly net short at the moment. See the chart below and what do you think? I've seen this� formation before and I like to call it a "diving-board chart." That's fine, if there's water in the pool. But what if the pool is just cold, hard cement?

Apple's Sold 1M iPads -- but Stock's Only up $6

Mon, 03 May 2010 18:57:48 GMT

Apple announced today that it has already sold 1 million iPads, coming in less than a month after it was launched. Wow. As pointed out in the press release, that means it took less than half the time it took the iPhone to get to 1 million (74 days). And as an experienced trader and investor, I know to watch the reaction to the news rather than the news itself. Apple, a stock I'm accustomed to seeing up $10 or $20 in short swatches of time, is only up $6 (2%). That seems like a lot but in the Apple world, it's quite a pedestrian gain.� In addition, on the chart, it looks like it's struggling to take out a new high (around the $267 level). Watch this development carefully. If it fails to take out a new high today or tomorrow,� I think it's time to book profits. Disclosure: I was in Apple briefly earlier in the year, but I unloaded my Apple stock around the $230 level. Doh! But sometimes you can't get greedy.

News Brew: Can We Have Some Good News Now?

Mon, 03 May 2010 15:21:52 GMT

As a long-time journalist, I know that the media world is hopelessly slanted toward negative news. But unfortunately, this week's bad news is all real -- and not exaggerated. Greece is melting down, sovereign debt issues plague the globe, and now we have a massive environmental and economic catastrophe in the Gulf of Mexico. Can you cut us a break, boss? Here's a rundown on what's going on on this dreary Monday:

The Gulf oil spill will probably take months to contain (Washington Post)
BP says it's ready to pay (Reuters) But it also says it's not to blame... figure that one out.
Will the spill affect Obama's new "drill, drill, drill" policy?(CNN) That's what Barry gets for pretending to be Ronald Reagan.
Deepwater Horizon had a history of problems, before the spill (Nola.com)
Apparently blowout preventers fail frequently... (Kansascity.com)
On to Greece... The Baklava Bailout is finally here (BusinessWeek). That's the slowest cooking Baklava, ever.
Germany's share is $30B (Associated Press). And Angela Merkel can say goodbye now.
Apple iPad 3G estimated to have sold 300K on launch weekend (Apple Insider). AT&T engineers trying to figure out what to do now.
Is an anti-trust investigation at hand for Apple's app world? (New York Post). Steve Jobs' squeaky clean, integrated world may be just a little too integrated.
Roger Ebert hates 3D (Newsweek). Funny, given that he's not exactly 2D.
Is IronMan 2 about Bill Gates and Steve Jobs? (TechCrunch) If so, I'm glad they went with an allegory, instead of real life.
A detailed analysis of Groupon (TechCrunch).

Interop News Brew: The Future is Cloudy

Thu, 29 Apr 2010 08:00:17 GMT

LAS VEGAS -- You've heard about the "cloud," yeah? That's a fancy marketing term for connecting to computer services over a wire. In the old days they called that a mainframe. But we're oversimplifying, of course. Whatever it is, cloud is clearly where it's at here at Interop. Better yet, people actually seemed moderately excited to be here. The gloom and doom of recession felt as if it were lifting. A conference organizer told me that paid attendance was up, even though booth revenue was flat. Here are some highlights of the show: Cloud Champions: Two of the leading "cloud networking" software vendors -- which we defined yesterday as deploying content and applications as a service -- are VMWare and Citrix, who were ever-present at the show. VMWare (VMW)� launched VMForce with Salesforce.com (CRM) which allows developers to deploy Java-based applications in service-as-a-software environment. Citrix was demonstrating a cool product in Receiver, which allows you to access your Windows desktop and applications from an iPad. Hot Startup: Arista Networks, the brainchild of networking heavyweights Jayshree Ullal (ex Cisco) and Andy Bechtolsheim (ex Sun), is making some real progress with a high-performance Ethernet data-center switch. First, they shipped the sucker. And impressive demo with Ixia shows the switch delivers 800Gbps of throughput with less than 3 microseconds of delay (between you and me, that's damn fast). The company is clearly trying to take out Cisco's data-center switch business. The Arista 7500 claims 10 terabits per second of switching capacity with one-tenth the power of competitive platforms. We saw some big-time potential customers in the booth, including some top network architects from Yahoo and United Airlines. It was� winner of a Best of Show award. Quote of the Day -- Had a great lunch with Simon Crosby, CTO, and Laura Heisman, Director of Analyst Relations, both from Citrix. Simon fascinated with long soliloquies about the future of cloud computing and IT technology. More on this later. For now, his zinger on cloud computing and what it means for the IT business:� "Anything with an operating system is legacy technology." Hmmm. Cloud Hype: Whoever came up with the term Cloud Computing has won. I searched on Google and found 21,400,000 results for "cloud computing." This YouTube video ranks highly in defining it. Avaya Doubles Down on Data: Many have been wondering what Avaya would do with it's dumptruck filled with Nortel gear that it acquired in Nortel's implosion. They're not taking it to the dump, they said, as CEO Kevin Kennedy is working hard to re-energize interest in their data portfolio. Remember, this is one to watch. Avaya went private in an $8B deal. I imagine they are trying to claw their way back to the public markets. Las Vegas Wind Warning: Hmm, is it any coincidence that during a major technology show infiltrated by reams of 'cloud computing' announcements, the National Weather Service had issued a high-wind warning? I don't think so.

Palm Wednesday: HP Can Do Everything

Wed, 28 Apr 2010 21:43:18 GMT

HP is starting to sound like the first year of the Obama Adminstration. They have their own version of fixing the economy, winning a war, and giving everybody health insurance -- it's beating Cisco with 3Com and then conquering the mobile-phone market with today's announcement that they'll buy Palm for $1.2B. Is HP biting off more than they can chew? Can't say we were right about Palm, or were we? HP did the deal at $1.2B. It surprises me. My premise was that paying over $1B for a company that is losing money and market share, with a negative book value, and $400B in debt is just slightly nutty, but what do we know. Apparently the HP CFO knows more than me.

Broadpoint AmTech: Mad About OVTI

Wed, 28 Apr 2010 18:19:35 GMT

Research firm Broadpoint AmTech, which has been on top of the solid rally in specialty chipmakers, yesterday raised its earnings estimates and price target for Omnivision (OVTI), a chipmaker that specializes in imaging silicon for applications such as cameras in mobile phones. OVTI, a favorite of the momentum investing crowd, had huge moves from 2002-2006, but then stumbled badly in 2008. Broadpoint AmTech analyst Doug Freedman seems believes it will rally on faster-than-expected earnings growth tied to smartphone growth and other markets driving the adoption of Omnivision's imaging technology. The favorite speculation among investors now is whether it will gain entry into Apple's i-Business. It could also ride the wave of growth of cameras and imaging technology in smartphones in general.

HP CTO: Cisco Gear Costs Too Much

Wed, 28 Apr 2010 16:43:36 GMT

LAS VEGAS -- Demonstrating HP's feisty attitude in its escalating networking row with Cisco, HP Network Chief Technologist Paul Congdon attacked Cisco's dominant position in the networking business, saying it is leading to "crazy behavior" and overpriced products. At the top of Congdon's� list of industry problems? "Lack of Competition." This is leading to "crazy behavior... causing you to pay too much for your networking equipment," said Congdon, on a panel titled " Why Networking Must Change," Congdon did not name Cisco by name. But it was clear who it was when he remarked that "In most industries, the market share is separated by 10 percentage points..." Take a look at the chart below and conclude what you may. Congdon's solution for customers? "Open up and write your own RFPs." More standardization would help too. But Congdon's contribution wasn't all Cisco bashing. He also had a� list of trends for the industry. Other than "Cisco Charges Too Much," Here are the rest... * Growing complexity in networks is breeding inefficiency * Massive growth in Internet- connected devices, projecting to 20 million new video-enabled mobile devices in 2010 alone * Scaleability requiring more networking intelligence on the edge of networks * Applications need to be dynamically adaptable to the network, rather than vice-versa Did Cisco respond? Not really. Thomas Scheibe, Director of Data Center Switching, the Cisco representative on the panel, remained civil -- and boring. He kept to a script that involved heap of Layer 2 switch fabrics, mobility, and virtualization. Congdon's got a point -- though it's not really clear how easily HP or anybody else can do anything about it. Networking upstarts have been trying to create "best-of-breed" products with more aggressive price/performance technology to take on Cisco -- and not making a lot of progress. See the chart below. Doug Gourlay, VP of Marketing from Arista Networks, took another jab at Cisco: "Many of the incumbents have used switching and routing technologies as cash cows to� fund entrance into marketing adjacencies to bring us wonderful technologies such as Flip cams." That drew laughter from the audience, which then went back to taking notes on future data-center virtualization.

Cloud Computing in 400 Words or Less

Tue, 27 Apr 2010 21:54:15 GMT

LAS VEGAS -- I entered the show floor here at Interop, a long-running IT and networking technology conference, only to be bombarded with the words "cloud computing." For those of you who don't know what it is -- in addition to being the hottest technology marketing concept du jour -- it's the idea that you can tap into computing services and applications by "plugging into the cloud" of a service provider, rather than building the technology infrastructure yourself. This can work on an individual level or a corporate level. On a personal consumer level, I think a good example of cloud computing is Web photo services. We used to manage and store photos ourselves -- first in analog format and later in a digital mode. Increasingly, consumers are turning to a managed photo service where they store photos on a company's servers, to access and manage as they please. On a corporate level, the same thing is happening: companies are increasingly outsourcing technology and IT infrastructure to the "cloud" -- that is, a network that they can connect to remotely.

How to De-Supersize Healthcare

Tue, 27 Apr 2010 21:30:43 GMT

LOS ANGELES -- On Monday April 26, a panel moderated by CNBC anchor Maria Bartiromo including executives and leaders including Michael Milken convened to discuss Health Reform in a session focused on "Prevention and Cures". The primary focus of the discussion was the need for government policy and health reform to address "wellness" and chronic diseases such as diabetes. One of the conclusions from the panel is that the healthcare reform recently been enacted into law is "uneconomic" and has put prevention and wellness on the "back-burner" even though unhealthy living represents a major �cost to society. A lingering concern is that we are a few years away from�price-setting�of medical products and services.

Facebook Wants Everything

Mon, 26 Apr 2010 14:24:14 GMT

Sometimes it's nice to get away a few days, disconnect, and refresh the mind. And then you come back, and find out that Facebook wants to rule the world. I was aware of the Facebook f8 announcements last week, but an impending vacation spared me the need to expend brainpower on it. I did not hop on this Facebook F8 story like all the other slathering Web 2.0 toadies out there. No, we're not like this. This is supposed to be an analytical and skeptical source of information. So I will tell you: Facebook wants to take everything. Watch out or they'll pick your pocket. The heart of these new Facebook initiatives, loosely grouped as the "open graph," is that if you "opt in" to Facebook's new personalization tools, it will be able to track pretty much anything you do on the Web and your information relationships to other Facebook friends� -- and show it to other people. Now, Facebook uses the term "opt-in" loosely. That's because it has automatically opted in its hundreds of millions of users. Facebook apparently knows when and where you want to "opt." Here's what I think about that: Boy, these Facebook people sure are greedy. They want to control everything. And most people who are trying to compete with them are pretty much screwed. Especially media companies and publishers. Many Facebook competitors for sure. If you are a publisher or some sort of niche social network, you should be very, very careful of you you use the new Facebook APIs. Yes, it's true, Facebook's new tools will make it easier for you to "plug in" to social network. You may get more traffic. But guess what -- who owns the data? Facebook. As soon as you hook into Facebook, you will be handing them over the keys to your kingdom. And you know Facebook wants to advertise to your users. It's all about the data. Google is about the data. Facebook is about the data. If you do anything on the Web that entails a service, content, and advertising, it's about the data of your users. That's your gold. And Facebook now wants to hijack all of the data on the entire Web. This is why Google engineers are freaked out about it. Geddit now? So the big question is: Are users going to allow them to do that? Well, they already have. Because Facebook has decided by default that you are opted in. Well, you say, the Web is already like that. Like Scott McNealy famously said, there is no such thing as privacy anymore. But I'm not just talking about privacy. Yes, the privacy freaks are going to have a cow about this. And you should really be concerned about which settings you've checked on Facebook. But I'm not just talking about that. I'm talking about business. Control. Owning things. We are told now, over and over, that Facebook has 400 million users. It's allegedly surpassed Google in total audience (I still have a hard time believing this). So the really already own a lot of stuff. But that's not enough for the Zuck-man. Now not only does he want to own all these users, but he wants access to every single piece of data about where they go, what they like, and how they interact with the Internet. Do you trust them? I don't.

A Look at HP's Looming Battle Against Cisco

Thu, 22 Apr 2010 16:00:36 GMT

With the recent acquisition of 3Com under its belt, HP is positioning itself as an alternative to Cisco Systems and expects it to be a two horse race. Given the acquisition, how does HP stack up against Cisco? While the question is simple, the answer is not. In aggregate, the combined HP-3Com company is positioned favorably against the networking giant Cisco. In Monday's industry analyst call, Dave Donatelli, Executive Vice President, Enterprise, said HP would win in the industry for five reasons: 1. HP has superior technology that empowers business innovation. 2. HP has an architecture built on open standards so clients can leverage best in class solutions and market driven innovation, while adopting an evolutionary approach to a simpler, more flexible network environment. 3. HP has an end-to-end product portfolio - from the network edge to the core of the data center - under a single pane of glass management that significantly lowers operational costs. 4. HP has networking as part of the Converged Infrastructure to deliver a complete strategy and portfolio for building the data center of the future today. 5. HP offers our customers lower total cost of ownership (TCO). In a later slide, HP claimed 30-65% TCO savings depending on the category.

Gilead, Abbott Trigger Biotech Retreat

Wed, 21 Apr 2010 19:59:53 GMT

Gilead Sciences (GILD) share got clobbered today, trading down 10% at midday, after the company lowered its 2010 sales forecast to a range of $7.4-$7.5B from $7.6-$7.8B citing recently enacted healthcare legislation. Net income for the quarter ended March 31 jumped from $854.9M or $0.92/sh. compared with $589.1M or $0.63/sh. in the Year ago period. Gilead’s first-quarter sales increased 24% to $1.79B primarily due to strong sales of its antiviral drugs to treat HIV-related conditions. CFO Robin Washington said the decrease reflects the impact of recently passed U.S. healthcare legislation which would have an sales impact of $200M and an earnings impact of $0.15 sh. in 2010 primarily in the HIV business.�Sales of its HIV drug Atripla increased 36% to $692 M for Q1 compared to analysts’ estimate of $726M. Royalties from Roche sales of Tamiflu were $246.3M from increased sales related to the influenza pandemic. The healthcare reform impact would be �related to pricing of antiretroviral sales in the use from Medicaid and Medicare Part D. However, no 2011 guidance was given due to the fact that the bill was passed only on March 23. There are also pricing pressures in Europe.

Google's Rumored $1B ITA Deal: Bing Travel Killer?

Wed, 21 Apr 2010 16:04:34 GMT

Bloomberg has scooped everybody this morning with the news that Google is talking to travel-technology power ITA Software about a potential acquisition in the $1B range (article available to Bloomberg subscribers only). This would not only provide a nice juicy exit to ITA, a venture-backed company in Cambridge, Mass., that's been steadily growing since the late 90s, but it would also represent a potentially violent shakeup of the travel industry data business. With a purchase of ITA, Google would making a grand entrance into the complicated business of travel data and technology, which ITA supplies to leading travel information and agencies such as Orbitz.� If you're curious about ITA, here's a profile. I've spoken to a handful of people this morning, none of whom want to go on the record about this, but the consensus seems to be: "Hmm, interesting, I wonder what Google's up to?" Here's what I've concluded: Google's bid is just a direct play to up the ante on its search and advertising business in general, especially in the travel search vertical. It would certainly be viewed as a competitive move against Microsoft's Bing, which is a customer of ITA's and has been lately been beefing up its travel offerings.

Apple's Mac Attack Adds to Cash Stash

Wed, 21 Apr 2010 13:12:29 GMT

It gets to the point where you wonder of maybe Apple will make enough money that they can help us bail out the U.S. government. Apple announced earnings last night, and it was a barn-burner of a quarter, with the company thrashing earnings per share (EPS) estimates by almost $1.00. Shares look like they will open about 6% higher, blowing through the $250 mark. The company announced earnings per share EPS of $3.33, beating consensus estimates of $2.45.� Revenue was $13.5 billion vs. $12.04 billion consensus estimates, and a 49% increase over the prior March quarter’s results. Most notably, the company is showing strong growth in its core Mac computer growth, which may demonstrate that as it launches newer products such as the iPhone and the iPad, that's adding strength to the overall franchise. Mac sales were up 33% from the prior year. "This very strong performance was due primarily to the more than doubling of iPhone sales and the strong momentum of our Mac products," said Apple CFO Peter Oppenheimer on the conference call. Some other quick facts from the call:

Oppenheimer pointed out that they company printed a much smaller sequential revenue decline from the December to March quarters than they normally experience after the falloff from the holiday season, which demonstrates how strong the quarter was.
Operating margin was $4 billion representing 29.5% of revenue. Net income of $3.1 billion was up 90% over the year-ago quarter.
Apple sold 2.94 million Macs, a record for the March quarter. This represents 33% year-over-year growth.
Sold 10.9 million iPods, about equal to the 11 million sold in the year-ago quarter. "iPod Touch continued to be very strong with units growing 63% year-over-year."
Sales of $1.1 billion for the iTunes store.� In February the store crossed the 10 billion mark for songs purchased and downloaded.
8.75 million iPhones sold during the quarter, an all-time high exceeding the previous record set in the December quarter.
The company now holds cash plus short-term and long-term marketable securities totaling $41.7 billion at the end of the March quarter compared to $39.8 billion at the end of the December quarter, an increase of $1.9 billion. Cash flow from operations was over $2.3 billion.
Forecast for revenue on the June quarter: between $13-13.4 billion compared to $9.7 billion in the June quarter last year. Company said it expects the gross margin to come down to 36%� from 41.7% in the March quarter reflecting increased stock-based compensation expense.

MFLEX: Cheap Smartphone Play

Tue, 20 Apr 2010 17:35:14 GMT

Here’s an interesting company: It’s the second-largest manufacturer of “flex circuitry assemblies” in the world, which go into many consumer devices and mobile phones. It’s grown earnings 16% in the last year, and the company has nearly doubled in size since 2006. Think you’ve heard of it? The company is called MFLEX (Nasdaq: MFLX). I’d be impressed if you named it. The Anaheim, Calif.-based company, whose full corporate name is Multi-Fineline Electronix Inc, keeps a low profile – and its Website lacks some flash. But it’s a profitable company that’s been growing for decades and it’s now positioned well in the growing smartphone market. The flexible assemblies, which it manufactures to put into electronic components that can bend and fold,� are in high demand for products such as smartphones.

News Brew: Gimme My iPhone Back

Tue, 20 Apr 2010 15:25:26 GMT

Yesterday we covered the brewing story of the mysterious lost iPhone prototype which was scooped up by voracious journalists at Gizmodo (for cash) and then shown to the world. Well, the story has, of course, bloomed, with Apple requesting its property be returned. Seems reasonable to me. I mean, you lost your phone, you know who has it, so you ask for it back, right? That's just common courtesy. We'll see what happens with Gizmodo. I have a hunch that this could get really ugly. Read on, for that story, plus even more about the guy who lost the phone:

This is the new� iPhone. And everything about it (Gizmodo). I wonder, did they try to hotwire it too?
Here's the letter from Apple's lawyer (AppleInsider).
Shameless Gizmodo has also published a detailed account about how they think the iPhone was lost (Gizmodo). By an Apple employee. In a German-style beerhouse. Drinking. On his birthday.
ZDnet asks if Apple will sue (ZDnet). Well, of course they're going to sue.
In other news, Google is being pinned down on privacy policies (WSJ).
Google's services are currently blocked in a quarter of the countries in which they operate (Washington Post). Didn't know that.
Google takes a picture of a woman 43 times (CNET).
Steve Jobs: If you want porn, buy an Android phone (TechCrunch). And don't lose your phone in a bar.
IMF say high debt levels are dangerous ( Bloomberg). Thanks, Dr. Obvious.
Goldman Sachs doubles profit, says it's clean (Bloomberg).
Microsoft is looking at sweatshop allegations (Eurogamer). Sweatshops? In Asia? No, you have to be kidding...
Euro flights are slowly resuming (CNN). Just watch out for spewing volcanoes.
The most-loved CEOs (Forbes). That is, until their scandals break.
Facebook owns 41% of social media traffic (Mashable). So what are they going to do with it?
Watch out for the Internet coupon that knows everything about you (New York Times).

Apple, Gizmodo, and the Stolen iPhone

Mon, 19 Apr 2010 23:36:06 GMT

Tech blog Gizmodo has acknowledged paying for the acquisition of prototype next-generation iPhone that was allegedly "found in a bar" in Redwood City (oohhh, what was the Apple employee drinking?). Gizmodo then took lots of photos, disassembled it, and published detailed reports. Nick Denton, publisher of Gizmodo, acknowledged that he paid for the device and says he's a proud practitioner of "checkbook journalism." How pathetic. This has got to be the beginning of the end of the techno-blogosphere. Has Gizmodo gone TMZ on us? The Guardian points out that technically, this is quite possibly illegal. Did cheeky Nick check with his lawyer's before proudly tweeting it around town? But even a better question: Is it real? To show you how far Apple geeks will go, Daring Fireball blog author John Gruber has gone to extreme analytical lengths to prove this may be a real Apple prototype. The clue in his hunch is the presence of a glass-like ceramic enclosure: "Apple patent application, for high-durability ceramic enclosures. Glass-like appearance and feel but far stronger and more scratch resistant. And: radio transparent." Not everybody is buying it. One contributor to the Gizmodo message board says it's a "controlled fake":

I'm with thousands others who believe this is a controlled fake. And for all I've seen so far, Giz could be in it. Some things just don't add up, like how Giz wasn't able to figure out the screen resolution and CPU. Giz, if you managed to display anything on this (and you said you did get the "Connect to iTunes" screen) you can photograph it next to a ruler, zoom in and count the pixels per cm and extrapolate to the screen size. It will give you "only" an estimate, but it's better than nothing. And you managed to crack it open and yet no pics of the CPU? Puh-lease! How high on crack do you think we are?

We like conspiracy theories. We'll see if Apple retaliates. What if both Apple and Gizmodo were both� in on the action? This could be an elaborate hoax. Nick Denton is an innovator -- maybe this is some kind of new,� avant-garde advertising business model. It just goes to tell you, you can't really tell what's what anymore on the Internet.� It's a hall of mirrors.

2009: The Inverse of 1999?

Mon, 19 Apr 2010 22:23:10 GMT

It is remarkable how fast things have changed in just a decade, isn't it? I've thought many times about how the mindset of people today is almost the photographic negative of life in the Internet bubble in 1999. I was� embedded in the Internet bubble in 1999, building a Website for the then-hot publication Red Herring, and writing about, of all things, Internet stocks. When I wrote positive stuff about Internet stocks people wrote in calling me an idiot and when I wrote something negative -- for example, we published a series of investgative pieces about a stock called Corel, which I opined was likely to collapse -- people threatened to sue me or worse (incidentally, Corel stock did eventually collapse and was recently delisted). What fun! But that's how journalism works in general: You never win.

The Goldman Sachs Selloff: A Rear-View Mirror Panic

Mon, 19 Apr 2010 17:29:18 GMT

It was fascinating how the SEC lawsuit against Goldman Sachs precipitated a global selloff in just about everything on Friday: Stocks, commodities, pieces of paper. Its seems to me the mass hysteria was overdone. What gives? After all, the SEC launches lawsuits all the time -- and often fails to win them. What's more, this was a civil suit, not even a more official prosecutorial effort by a real organization, such as a District Attorney. Here's what I think: The markets are dumb. Really. The market is not going to go up or down based on the output of this SEC lawsuit. The markets are going to go up or down based on whether or not there is a strong recovery in the economy. The lawsuit itself has virtually no bearing on this, because it consists of government bureacrats picking over the carcass of a Wall Street disaster that started unfolding nearly 3 years ago. The damage is done. The SEC is looking in the rear-view mirror.

News Brew: Why We Don't Trust Government ... or Wall Street

Mon, 19 Apr 2010 16:46:34 GMT

Now, I don't want to get off on a rant here, but nobody trusts the government, it's confirmed by the Pew Research Center and The Atlantic magazine. And why should we? We all know that our system is now run by a bunch of greedy, power-hungry, and pork-infested politicians. What's interesting is this comes at a time when the public's confidence in Wall Street is also at an all-time low. So who to trust if you don't trust the beltway or Wall Street? I vote for main street, where hardworking people are still struggling get it done the right way, without pork-barrel spending or shady derivatives products. Since distrust and cynicism are rampant, let me present you today's "Conspiracy +" News Brew, where you can take hold of how the Powers That Be are doing their best to keep hard-working people down:

The SEC fraud charges against Goldman continue to dominate the news. I'm sure the lawsuit will be a tricky one. BusinessWeek has a nice article detailing what the SEC will have to prove. Namely, that Goldman Sachs was being 'materially misleading.'
Was there fraud? It's not clear-cut, says much of the Monday-morning analysis (Wall Street Journal)
For you legal eagles, here's a nice wrap of the defense strategies Goldman might use (The Atlantic)
20 Winners and Losers from the Goldman Sachs accusations (The BusinessInsider)
Malaise on Wall Street continues, with the markets bleeding red (MarketWatch).
The consensus is that the Goldman lawsuit will embolden the Obama agenda to regulate the finance industry. There's only one thing worse than conniving and greedy investment bankers -- politicians trying to clean up the mess. It just never works out the right way.
How financial regulation might resemble airport security (The Atlantic).
You have to love all the headlines linking selling to Goldman Sachs. I think the most far-fetched would be a connection to the wheat market (BusinessWeek).
It looks like there was a secret, government run prison in Iraq (L.A. Times).
Jim Sinclair has a brilliant analysis of how TARP money translated directly into bank bonsues (JSMineset).
What's next for the "Volcano Crisis" -- Reuters has a full report.
An incredible collection of Volcano images (Huffington Post). Resembles, in some way, the portfolios of mortgages that Goldman Sachs was selling.
Here's an interesting report on the tax bills for some of the largest companies in the world (CNNMoney). I don't feel like I got any of it.
For those who still care about Guantanamo, Col. Lawrence Wilkerson's charges are certainly interesting (The Public Record).
Al Gore's environmental organization is fueling up with cash from Dow Chemical (The Independent). What's wrong with this picture?

Key Trends from Google Earnings Call

Mon, 19 Apr 2010 14:59:58 GMT

This is a big year for new Google products, as the company has introduced its own smartphone, the Nexus One, and is in the process of trying to buy AdMob, the mobile advertising player, pending Federal Trade Commission (FTC) review. I thought it would be a good idea to run through the Google earnings call from last week and see which key trends the company is focusing on. Here they are:

Mobile advertising. Google sees huge growth in mobile advertising. This is why they would like to close the AdMob deal. On the earnings call, the company said that advertising customers are seeing increased mobile search & advertising activity and and that the company is focused on a "mobile first" strategy of adding mobile-friendly features. It was mum on what's going on with AdMob and the FTC other than saying they are "working with the FTC."
Location: A main component of mobile is location. During the quarter Google launched Near Me Now which allows you to search via location to find services in the vicinity.
Android & Chrome growth: Google is pushing hard with its new operating systems. The company said that Android is now powering 34 devices, up 70% quarter-over-quarter. 60,000 Android devices are sold and activated every day, according to Google. There are now 38,000 apps, up 70% quarter-over-quarter.
Nexus One Profitable: The company stated on the conference call that Nexus One is now a profitable business.
Traffic acquistion costs: On the negative side, Google's costs for traffic acquisition were up. One financial analyst noticed that it's interesting that Google is becoming more of a marketing company. Traffic acquisition costs were $1.7 billion or 26% of total advertising revenue. in fact, overall, Google's marketing spend overall increased nearly 50% year-over-year.
Paid Click & Ad trends: Susan Wojcicki, VP of products, Google said: "We saw advertisers come back and start spending again driven by a lot of our largest advertisers really increasing their spend ..."
Social Networking Competition: Perhaps the most interesting part of the conference call came when a financial analyst, Imran Khan of JP Morgan, asked about growth in social networks, including Facebook : "They are growing significantly faster as a [profit] source to a lot of your big customers like Ebay. How do you think Facebook and other social networking sites are a big long-term threat to Google’s business model?" Google's answer: "We don't comment on the issue of Facebook."

Goldman Chart: At Least the Suit Wasn't Leaked

Fri, 16 Apr 2010 16:02:45 GMT

Well, I like to look at the bright side of the SEC fraud charges against Goldman Sachs. At least by the look of the 5-day chart of GS, nobody saw it coming. So we know that the SEC wasn't leaking information and trading on it!

Goldman Sachs Charges are Mind-Blowing. Not.

Fri, 16 Apr 2010 15:22:27 GMT

I'm reading through the SEC complaint and many of the news stories about the alleged fraud in a mortgage-backed security called ABACUS 2007-AC1 (it just sounds diabolical, doesn't it?). The complaint� charges that the game was rigged, with Goldman Sachs allowing a hedge fund, Paulson & Co. (which was predominantly short the mortgage market) help select the securities that were in ABACUS, which was loaded with poor-quality mortgages, and then sold it to an unsuspecting client. Now, in Goldman's defense... it was acting as a broker between the two parties. So the question is what material knowledge it should have disclosed to the buyer. The SEC is essentially saying that Goldman was rigging a little time bomb on the declining mortgage market, and did not disclose that it knew the deal was filled with danger and conflict. It says that a Goldman executive, Fabrice Tourre, structured the deal and purposely left out material information about how dangerous the securities in ABACUS were. You can read the complaint here. Here is the Wall Street Journal article. And the Reuters story. If true, this story will confirm what we already knew: that the large Wall Street operators are filled with snake-oil salesmen trying to sell stuff to people to fill up their own bank accounts. What will probably happen? Goldman will get a wrist-slap, and we'll go back to business as usual... The market is currently freaking out with a big selloff. Presumably, this is because we'll now have suspicion about Goldman Sachs and all of Wall Street and it will be harder for them to mint money churning trades onto unsuspecting fools. The market is possibly also selling off because this will impact Paulson & Co., one of the largest hedge funds on earth, may have to liquidate some positions or be investigated itself. Have we learned anything?

News Brew: Europe Still Closed, is There Life on Mars?

Fri, 16 Apr 2010 14:59:04 GMT

The Black Swan is one of my favorite books, if only because it proves the absurdity and unpredictability of life. It ratified something I had suspected for many years: Nobody has any idea what's going to happen next. Take the volcano ash, for example. I don't imagine a lot of people this week thought� that they could wake up on Thursday to find that a large volcanic eruption in Iceland had pretty much shut down most air travel in Europe... and that it might extend through the weekend. Just like� CEO of Bear Stearns played golf, having no clue that his company could be vaporized in a matter of days. Whoops! Yes, Nassim Nicholas Taleb is onto something. Black Swans happen all the time! So let's review the strange and unpredictable things that are happening on this news day:

The volcanic ash cloud is spreading and getting worse, wreaking havoc on European air travel.
The ash cloud may prevent President Obama from attending the state funeral for late Polish President Lech Kaczynski (Associated Press)
Obama says that we will end up on Mars, in his lifetime (SFgate.com). Funny he can't even get to Europe but thinks we can get to Mars.
What's up with Larry King and 8 wives? See this video clip: Why the ladies Love Larry King. Um, the money? The fame? um... I just dunno.And, by the way, somebody says he didn't have a prenup.
The hottest blondes in sports (Bleacher Report). I dunno, I realize this has nothing to do with anything. It's Friday. I just felt like I had to link that that.
The HTC Droid Incredible will be out on Verizon by the end of April (PCWorld).
How about that meteor (Telegraph). Or was it something else?
Headline of the week: "'Tyrant King' Leech Discovered, Attacks Orifices" (National Geographic). You just have to see the picture. By the way, don't look if you haven't had breakfast.
Don't you hate it when you find a Python in your hotel room? (Associated Press). In the toilet!
"Has Steve Jobs gone mad?" (Fortune). Another great headline.
The SEC is suing Goldman Sachs (Bloomberg). Good luck, SEC. You couldn't even catch Bernie Madoff.
The Bank of America has returned to profitability (Bloomberg). That has a nice ring to it. We hope it's real.
China has adjusted policy on home ownership, requiring larger down payments (Wall Street Journal). You think they don't learn from us?

Death to the Twitter Hole Fillers. Long Live the Twitter Hole Fillers!

Fri, 16 Apr 2010 13:24:52 GMT

Another day, more Twitter. Are you annoyed? Fine, so am I. But you see, if you are a budding manic techno-bloggo--analy-journalist like myself, you need to cover this stuff. There's this thing called Search Engine Optimization (SEO), which is why most people on the Internet write about Twitter. For those of you who don't know what Twitter is: It's a software application designed to make the world even more manic and ADD-driven by encouraging people to broadcast any thought they've ever had into the Internet via the use of text messaging. I break down the Twitter camps into three kinds of people: 1) The people who are addicted to it 2) The people who hate it 3) The greedy bastards who want to make a lot of money on it.

Bronte Capital's First Solar Short

Thu, 15 Apr 2010 18:16:43 GMT

It always shocks me when a big trader comes out and says they're shorting a stock. Mostly, because I'd prefer to keep it quiet (people generally hate short-sellers, whether that's illogical or not). A hedge fund manager and Greentech Media contributor is advocating shorting First Solar. I figure, he's looked carefully at the industry, he must know something. So I thought I'd check it out. John Hempton of Bronte Capital says First Solar became a great company by innovating efficiencies in the manufacturing of solar cells. But he thinks that these efficiencies are largely evaporating as the price of solar-cell silicon material drops and competition from the semiconductor industry closes in fast.

Is Twittermania Justified? My IPO Roadmap

Thu, 15 Apr 2010 16:16:23 GMT

Well, Twittermania has taken full hold in Silicon Valley. Maybe it has something to do with the fact that Techmeme, a news aggregation site frequented by technology trade journalists, VCs, and PR people, now dedicates nearly half its front page to Twitter news, including putting direct links to the Twitter company blog above the fold. For example, here are the links today just from Techmeme:

Twitter will have an official Android App (TechCrunch)
Sorry Bit.ly, Twitter confirms it will launch its own link shortener (TechCrunch)
Twitter makes itself more useful (NY Times Bits)
The details: How Twitter's newfangled revenue model will work (VentureBeat)
Twitter does 19 billion searches per month, beating Yahoo & Bing (Searchengineland)
Tweet preservation (Twitter Blog)

Okay, I feel a bit nauseous. The direct links to the Twitter blog put me over the top.

What's Wrong with a Palm Acquisition? The Numbers

Wed, 14 Apr 2010 17:20:59 GMT

As rumors run amok about who's going to buy Palm, I have to point out what I did earlier: I can't see paying a premium for this company. A lot of the reports are missing some basic facts, such as: Palm is losing money and has many liabilities. And it has a�negative book value, according to numbers reported by Capital IQ. In a world of rapid-fire news, blog, and opinion reports and itchy trigger-finger day traders, it's fun to watch everybody jump on the Palm story. Bloomberg has reported that the company has engaged bankers to sell the company. People ate it up pretty quickly, buying up the shares on the news that the company is now officially on the block, thinking it would result in some sort of quick, generous return.But always remember there's a key element in doing a deal: The price. It doesn't always work in your favor.

MobileIron: Making Smartphones Safe for Enterprise

Tue, 13 Apr 2010 20:09:28 GMT

There is a surge of startups trying to address the management of smartphones in enterprise networks, which is surely going to be a massive issue. If you think about how the number of smart, networked mobile devices are proliferating, and how employees use them for both work and private purposes, you can imagine this is a big management headache. That's the opportunity that Silicon Valley startup MobileIron is going after. I spoke to MobileIron back to CTIA and have since done some more research on the company. The company last August raised $11 million in Series B funding from top investors including Norwest Venture Partners, Sequoia Capital, and Storm Ventures. The company is led by CEO Bob Tinker, who was a former business development manager for Cisco's wireless business units. He was also formerly vice president of business development at Airespace, which was acquired by Cisco in 2005.

News Brew: Treacherous Tuesday

Tue, 13 Apr 2010 16:59:49 GMT

Welcome to Tuesday's news brew, where we wrap up the world's business news. It's a busy day, from Baklava Bailouts to Twitter Tweets. The markets are selling off, from stocks to commodities, though the general stock market selloff is quite subdued. Let's start with Twitter, which we covered in an earlier post, but has plenty of opinions around the horn:

Want to catch up on the latest Twitter "monetization" announcement? Start by reading Jeremiah Owyang's excellent analysis (Web Strategy).
Twitter has launched Ads -- where better to read about that then Ad Age?
John Battelle has some thoughts (Searchblog). They're not fully formed though -- he says they are "developing."
Twitter to roll out advertising (WSJ).
Mary Meeker is bullish. On Mobile. Big surprise there, eh?
An Android "iPad killer" is on the way. Will that boost Adobe?
Greece is trying to lay off the Baklava Bailout by selling more debt (Bloomberg). Isn't funny how the answer to bad debt is always more debt?
Citigroup took at $15B loss on "liquidity puts," according to Congressional testimony. Sounds like they should have been called "lack of liquidity puts."
The U.S. trade gap widened more than expected (BusinessWeek).
Chinese growth may accelerate (BusinessWeek). That's right. They can grow even faster.
Oil sells off as supplies balloon (Reuters)
Here's a cool map of U.S. trade sanctions around the globe (VisualEconomics.com)

Raygent Biotech Portfolio Update

Tue, 13 Apr 2010 16:29:09 GMT

Below find the summary of our Diagnostics and Tools Portfolio as published on Raygent.com and Genetic Engineering News (www.genengnews.com) on Feb.2, 2009. We are currently reviewing four new stocks: Genomic Health, Genoptix, �MicroFluidics, and Neogen. All of these stocks are “holds”. �Immucor (BLUD) has support at 20 and is now in the portfolio.

		3/29/10 $ P	Original Rec	Price	% Return
Abaxis	ABAX	26.8	2/2/09	15	79
Genomic Health	GHDH
Genoptix	GXDX
GenProbe	GPRO	48	2/2/09	45	7
Hologic	HOLX		2/2/09	12	52
Illumina	ILMN	39	2/2/09	29	35
Immucor	BLUD		4/5/10	20	0
Inverness	IMA	39.7	2/2/09	25	37
MicroFluidics	MFLU
NeoGen	NEOG
Qiagen	QGEN	$23.10	3/15/10	21.5	12
Sequenom	SQNM	6.1	11/18/09	3.75	37
SeraCare	SRLS	4	11/18/09	2.75	81

Paid Tweets Are Here!

Tue, 13 Apr 2010 13:44:28 GMT

Well, they did it: Twitter has announced a business model. It's called advertising. Heard of it before? They are calling it "Promoted Tweets." What's interesting is that the social media company (can we now call them a social marketing company?) has figured out a way to weave sponsored tweets into the fabric of the system: That is users, can essentially vote about which ads stay or go. Sponsored Tweets will be bought and plugged into the system, clearly marked as sponsored. This will happen via the search page, where sponsors will bid for search terms, a la Google. Users can treat them like regular tweets -- for example, retweet them -- or ignore them. Posts that get sufficiently ignored will presumably go away, according to Twitter. The initial sponsors -- Twitter calls then "innovative advertising partners" -- will include Best Buy, Bravo, Red Bull Sony Pictures, Starbucks, and Virgin America. I am quickly imagining the Twitter-scape littered with Red Bull-fueled promotion artists.

News Brew: Flash, Euro Trash, and China

Fri, 09 Apr 2010 15:31:32 GMT

Good morning on this marvelous Friday. News Brew is behind the times, but we're catching up fast. The world is moving faster than we can track. This morning, the Greek rescue package is on the docket again, as is more on the Adobe-Apple "Flash Wars" and of course, there's news on China (isn't there always news on China?). Is it just me or is the world rife with economic conflict? Everywhere, people are fighting over money. It didn't used to be like this. In the 1990s, people didn't care about money, they'd flip you a few Internet shares or cut you in on their new condo project with a free loan. My have times changes. Nothing more evident than this than the conflict in Europe, where the Europe Union is quickly becoming the Europe Disunion. You see, nobody wants to pay somebody else's bill. And that's why the Germans (and others) are reluctant to bailout Greece. It's kind of like paying your brother-in-law's mortgage after he lost everything on a bender in Vegas. Keep in mind, the same thing can happen in the United States. For example, will taxpayers in Arkansas want to bail out obnoxious Californians? The State of California is almost out of money. So the next fiscal fight is likely to be whether Uncle Sam pays the tab for those whacky Californians. Here's some more of what's going on in the business world this morning:

More Euro flip-flopping. The Baklava Bailout is coming. No, really, they say it is. (Bloomberg)
China looks to be prepping for the big "Yuan Reval" (Bloomberg). To you and me, that means the price of iPhones will go up.
Isn't it a bit strange that as people are talking about China taking over the world, scores of local officials have killed themselves? (Shanghailist)
Looks like Apple has slipped in some language to ban Flash-to-iPhone conversion (Daring Fireball). For those who need translation: Apple is aggressively trying to ban workarounds that allow people to view Flash content on their iPhone.
Twitter's got a major redesign in the works (icodom). I wonder if it will be like Facebook, where they change everything around, piss everybody off, and create a questionable privacy faux pas as well.
How Apple plans to take on Google in mobile ads (BBC). Yes, this war will be juicy.
The infamous "AIG party hotel" has been sold (Reuters).
Speaking of a party: Carlsberg brewery workers are striking after told they can only drink at lunch (DailyMail). Is it just me, or can European unions be really twisted?
Gold is breaking out again (Reuters). Where are the mindless CNBC gold bears when you need them?
They've discovered a new evolutionary ancestor of humans (DailyTech). No, the creature was not found buried on Wall Street.
The ten most over-used movie catchphrases (moviefone). My personal favorite, "Say hello to my little friend!"

Who Would Buy Palm?

Thu, 08 Apr 2010 16:51:24 GMT

Yesterday, Palm (PALM) shares traded up on lots of option-buying activity and chatter that it could be acquired. Today, the shares are backing off. Financial reporters, traders, and stock-message board hounds are scrambling around to find the "Palm acquisition story," but what if there is no story? I cannot see Palm being sold except in a fire sale. Think about it, if you are trying the sell something, the ideal condition is to sell it when it's hot, the market is moving forward, and everybody wants a piece of you. Think of selling the nicest house on the street during the real estate bull market in 2006. Easy sale, right? Multiple bidders. But what about selling a sub-par property in a down market? Selling Palm now is akin to selling a fixer-upper in a real estate glut. Palm OS is losing market share. It's got huge competitors -- RIM, Apple, Microsoft, and now the Google Android devices. Barron's reports today that Barclays Capital is throwing cold water on the Palm acquisition story, and this doesn't surprise me. It sites Lenovo, the Chinese PC manufacturer, as one of the potential suitors, according to the "rumors." Meanwhile, Palm CEO Jon Rubinstein is quoted in Fortune as saying the company "has great assets," which to me is a euphemism for "we're trying to sell." Rubinstein even admits to blowing it. Here's the problem I have with that scenario, as well as any other Palm acquisition scenario. If you are a manufacturer looking for a smartphone platform, including the OS, why would you look at Palm? Take a look at what HTC did with Google Android -- they snapped in an open OS, built a phone, and started selling it. If you are going to start a smartphone manufacturing operation right now, the OS is not the problem. There are plenty to choose from.� Why pay a premium to buy an OS when you can snap in something open that is gaining momentum, such as Android, rather than with Palm's OS. We detail the dynamics of the new smartphone OS market in our new report, the "Android Ecosystem," which is on sale now.

The FCC Broadband Circus

Thu, 08 Apr 2010 13:21:20 GMT

The whole�National Broadband Plan discussion is turning into�a circus, at tax-payer expense. The way I see it, the FCC is standing in front of the operators with the tax-payer's checkbook, ready to spend the dough. Didn’t we�pay�operators years ago to connect our households? Didn’t we auction off boatloads of spectrum? Didn’t we also do this in wireless? Wasn’t 3G supposed to be data nirvana? Instead, operators have gouged consumers with fees while wracking up huge profits. The United States�is 18th in the world today as far as broadband speed, but that’s because of the route that the operators have taken, not from a lack of government (taxpayer) money.

Rupert Still Railing on Google

Wed, 07 Apr 2010 19:37:20 GMT

You gotta love Rupert Murdoch. While many media executives are hunkered down in their bunkers, whimpering about lost revenue streams and afraid to say anything remotely offensive to people like Google CEO Eric Schmidt, the News Corp. CEO is still firing off missives about how Google is stealing money from him. Let's follow the story from the beginning. Murdoch has been an aggressive champion of the idea that content should be paid for and not given away from free. That's why he's locking most of the Wall Street Journal, which the News Corp. owns, behind a paywall. He's said that he'll take most of News Corp.'s content sites behind paywalls in due time.

Google-Apple War Escalates with Ads

Wed, 07 Apr 2010 16:44:57 GMT

I have been looking forward to a big Google-Apple brawl which I'm sure is only going to get more nasty. It looks like it's escalating quite rapidly, with AllThingsD reporting that Apple is set to announce its own ad platform. This would make things very interesting between Google and Apple. Google clearly is dominant in the online advertising space, but needs to make more inroads. That's why it is in the process of buying Admob, a transaction which is being reviewed by the Federal Trade Commission (FTC). Apple, on the other hand, clearly has a dominant mobile platform and thinks it would be nice to roll up some advertising with that to beat Google at its own game. AllThingsD's Peter Kafka points out that when Apple announces an ad platform, it will be difficult for the FTC to argue that Google is building a monopoly, especially when Apple is so powerful in the mobile space:

Why would Google applaud the entrance of a new advertising rival? Because Google is trying to convince federal regulators that it has advertising rivals so that it can proceed with its $750 million purchase of AdMob. That deal is being held up for review by the Federal Trade Commission, and there have been consistent murmurs from Washington that the purchase could be in jeopardy. Apple’s plan to get into mobile advertising has been apparent since early January when the company purchased Quattro Wireless for $275 million. Like AdMob, Quattro specializes in ads that run within apps. That’s a tiny market now, but it’s expected to grow along with the booming app economy, pushed by the mobile platforms Apple (AAPL) and Google (GOOG) are promoting.

All the more evidence that the companies are headed for a gigantic collisions in the mobile space. Google is ramping up its Android mobile operating system and will be on a lot more phones by the end of the year. These two companies are going to be going head-to-head in the online advertising space.

35 Pages of Pure Android

Tue, 06 Apr 2010 17:43:28 GMT

Well, we've done it. We've published our definitive Google Android Ecosystem report -- all 35 pages of it. I've been working closely with independent analyst Randy Giusto for about 3 months now. It's been a lot of work, but the report is done, and it's ready to be purchased at our Research Store (break out the plastic!). If you want the Cliff's Notes, basically what we found was that Google Android adoption is accelerating in the developer community, and the operating system (OS) is likely to take off in late 2010 and early 2011. Because Android is an open-source, unlocked OS model, it could precipitate a sea change in the way that smartphones and applications are marketed in the mobile marketplace. Another important finding is that dozens of Android-based devices are in development and will start shipping toward the latter half of this year. That will swing the mobile "buzz" back toward Android -- ending the solitary rule of iPhone in the marketing department. It's likely that Android will quickly become the number two operating system behind iPhone in terms of user excitement and adoption. The move toward Android will present an entirely new set of questions for mobile service providers and device makers alike: Can the existing business model of subsidized phones continue? In Europe, for example, unlocked phones are interchangeable between carriers but users pay full price for the phones. Because Android is pushing the world toward an unlocked, open, world, it's likely to bring about enormous challenges for service providers who are used to having more control. For more information, you'll have to purchase and read the report in entirety. Here are some of the questions that it answers:

How Google Android will change the mobile operating system market forever
Which hardware manufacturers are readying Android devices
What the impact will be for application developers.

The report, which will be regularly priced at $1,500, is available now for a special discounted price of $1,250 (17% off). It is available at http://www.raynoreport.com/shop.

KP "Doubling Down" on iPad Apps

Tue, 06 Apr 2010 14:33:36 GMT

Gold-plated Silicon Valley venture firm Kleiner Perkins Caufield & Byers (KP) is upping its bet on iPad applications.� The partners, in a post on TechCrunch, say that the immense growth projected in the iPad market is leading them to� "double down" by boosting the venture capital firm's fund focused on the iPad -- the iFund -- by $100M to a total size of $200M. Why now? KP partners believe, apparently, that the iPad is ushering in a new phase of innovation comparable to the World Wide Web. Kleiner Perkins Caufield & Byers partners John Doerr, Bing Gordon, Chi-Hua Chien and Ellen Pao write that the iPad experience is a follow-on boom to the Web:

The rest of the 90’s were a ONCE-in-a-lifetime experience. Entrepreneurs created the Web, and great ventures – Netscape, Amazon, Ebay, Google, and others. And they changed our lives. Silicon Valley became the Florence of the New, Networked Economy. The advent of the iPad feels like deja-vu, like it’s happening all over again. Not once, but TWICE-in-a-lifetime.

The VC partners have funded 14 companies, with 3 in stealth mode. The companies include Booyah, Cooliris, GOGII, iControl, InMobi, ngmoco, Pelago, Pinger, Shazam, shopkick, and Zynga mobile. KP partners say the companies in the iFund have generated more than 100 million downloads and that they expect the companies to generate more than $100 million in revenue this year. To read the full article, go here.

The Economy: Startups Must Lead

Mon, 05 Apr 2010 16:18:45 GMT

I have been working for about 20 years, pretty much straight through since college, in the same industry (media). I have survived three recessions (1990-1991, 2000-2002, and 2008-2009). What's interesting is that I've found each time we came out of the recession, the best opportunities came out of startups. This is why I think that innovation, startups, and new technology will drive this recovery. It won't becoming out of those large, slow, political corporations. In my case, during recessions I left the large restructuring dinosaur-like company (in some cases, involuntarily) and moved to a startup. Both times it created opportunity.� In the late 1990s, a company called CMP Media Inc. (now called TechWeb and part of United Business Media), fired a whole handful of us. Led by founders Peter Heywood and Stephen Saunders, we started a new company called Light Reading Inc., which over six years grew from 2 to fifty employees. The company that fired us ended up buying the entire company back again 6 years later, for $30 million plus (if you include an earn-out). Expensive mistake, for them.

Hulu's Hula Party

Thu, 01 Apr 2010 13:46:05 GMT

It's the "third anniversary" of Hulu, otherwise known in the beginning of the end of network TV. And now, the message that Hulu is leaking to the press is that Hulu is a grand success. The company has released revenue numbers -- $100M -- and said it's profitable. The loyal press mavens (myself included, I guess), are lapping up the Hulu success story. Yes, it is a success story. Hulu's a great site, and a good concept. Real media people banded together to take on low-quality Internet viral video. There's no reason we should be surprised that large amounts of high production-quality entertainment TV can't be successful over cat videos on the Web. As I wrote a few months ago, it's likely that video will take on an increasingly large role on the Internet, and become more profitable, because the costs of delivery are declining rapidly. The New York Times has a classic 'We Are Too Erudite to Commit' headline on the topic: "Successes (and Some Growing Pains) at Hul." Thanks NYT. You mean growing a $100M company from scratch has some challenges? To its credit, the NYT story does add a minor scoop: Hulu will have an iPad app. The New York Times says that the Website is coming under pressure from its content owners NBC Universal, the News Corporation and the Walt Disney Company, to add subscription products and boost advertising margins. Well, of course the content companies want more money. That's because they still haven't come to grips with the fact that their broadcast business model is turning to sand, and they think there's going to be a gravy train on the Internet. My message: Chill out dudes, you have a massive, growing Internet property. Use it to your advantage!

And Mossberg Said, Let There Be iPad

Thu, 01 Apr 2010 12:00:50 GMT

If there is a technology guru and review who can make a break a technology's future with a few keystrokes, it's Walt Mossberg. The veteran gear reviewer for the Wall Street Journal is now out with his take on the iPad, and he calls it nothing short of revolutionary. Oh boy. This should uncork any remaining iPad hype that hadn't already boosted the press� into oxygen-depleted zones of the atmosphere.� The iPad is now akin to the discovery of the wheel.

The Myriad Patent Pickle: A Shocking DNA Ruling

Thu, 01 Apr 2010 07:00:42 GMT

This week's development of a legal judgment against Myriad Genetics (MYGN) is shaking the biotech world. On Monday, a judge in the District Court for the Southern District of New York ruled against Myriad and granted a motion for the plaintiffs, the American Civil Liberties Union(ACLU) and others, concluding that isolated DNA compositions are not patent eligible subject matter. This essentially invalidated Myriad patents BRCA1 and BRCA2 used in their breast cancer diagnostic tests. Intellectual Property (IP) is the raw material for the creation of biotech companies. Without an invention covered by a robust patent portfolio, venture funding can be very difficult. Since the beginning of the “genomic age” in the late nineties the patenting of genetic materials and methods have gone through a minefield of lawsuits and opinions but in the end �have significantly protected companies with well designed IP. However, patents on human genes have always been a gray area.

Pad Fever is Coming: Can the Networks Handle It?

Wed, 31 Mar 2010 18:01:45 GMT

I have a Labrador� as a pet. They are famous for eating everything.� So are mobile consumers, which brings an interesting question: With a flood of mobile "tablet computing" devices such as Apple's iPad coming, are the wireless networks ready for mobile consumers, the Labradors of data? The short answer is, "No." The problem is that tablet computers and all of their bandwidth-heavy network-based applications are a little too innovative for the 3G networks they will be running on. Really, they need 4G, which isn't really widely available yet, unless you are in a Sprint/Clearwire WiMax zone.

Future of the Media, Part I: Get Back to Quality, Sissies!

Tue, 30 Mar 2010 17:20:33 GMT

(Publisher's Note: This is the first of a series of articles written by the Publisher of the Rayno Report on the media business). It’s been interesting to see speculation about the media industry and how it has been effected by huge shifts in consumption toward mobile devices and social media. Larry Kramer, the founder of MarketWatch, has gotten a lot of play out of his "Gutenberg Moment" catchphrase.� Yes, the media business is struggling. But unfortunately, technology is not a “magic bullet,” and it seems to me as if media executives are being distracted by technology and forgetting that content, not technology, has been the key to prosperity in the media business. With a technology revolution underway in the mobile space, publishers, journalists, and media personalities are caught between a bipolar world of excitement and dread. They are excited because hot consumer devices such as the iPhone and the iPad get them excited about, well, media. These devices are superb in the access and presentation of media, and they’re likely to improve at an increasing rate. As a consumer, it’s fun.

iPad Ratchets up Flash vs. HTML5 Debate

Mon, 29 Mar 2010 14:03:38 GMT

Adobe's Flash platform is coming under increased scrutiny as the iPad gets ready to ship.� As a number of big players start thinking about their HTML5 strategy, it's clear that the "Flash issue" is on everybody's mind. Here's where we come to the Flash problem: Apple famously doesn't like Adobe's Flash and won't support it.� When the iPad comes out, the primary video clients will be Apple's Quicktime and HTML5. The iPad, with its larger screen than the smaller iPhone and iTouch products, will be even a more powerful video and media platform. With Apple representing one of the fastest growing segments of online video, this will put pressure on the Flash empire as it will give users and developers a chance to look at the emerging alternative, HTML5. HMTL5 is an open standard, which will give it a natural advantage over Flash. Oh, and did we mention that HTML5 will be pushed heavily in all of the coming Google Android-based devices? Proof that video service companies are nervous about this potential tectonic shift is evident, as video streaming provider Brightcove has announced it is aggressively rolling out an HTML5-based alternative to Flash may be proof enough that that the Flash assault has started. Brightcove has announced a push to add features to HTML5 to "bring it to parity" with Flash by adding advertising and management features. This is important because Brightcove has long been thought of as a "Flash shop" in the video platform industry. The Web video platforms host and stream videos for media clients, making it easier to manage the video, insert ads, and make sure they're reaching and functioning in a wide range of devices and browsers. Brightcove's CEO and founder, Jeremy Allaire, threw down the gauntlet a few months back when he wrote a lengthy post on TechCrunch describing the coming conflict between Flash and HTML5. The announcement that Brightcove is working hard to "bring HTML5 to parity" with Flash indicates two things 1) Allaire and Brightcove see HTML5 as a legitimate threat to Flash's dominance in video on the Web 2) They are wisely hedging their bets. I'm impressed with the Brightcove move because it is the type of the strategic move that is made at crucial inflection points in a company's history. It shows that Brightcove is not standing still. But let's not stop there, other influential video players are taking a closer look at HTML5. The big one? YouTube, of course, which streams billions of videos a day, primarily in Flash. YouTube is one of the largest Web sites in the world, so if they turn away from their Flash roots, something big is happening.� It turns out that YouTube has an "experimental" program to test HTML5. My prediction: You'll see YouTube streaming video in HTML5 by the end of the year.

Smartphone Traffic Going Gaga

Thu, 25 Mar 2010 16:19:30 GMT

Not Lady Gaga, just Gaga. Admob is out with its latest metrics report and it says that smartphone traffic is growing like mad, on pace to nearly triple in a year. Below is Admob's chart showing how smartphones are taking off. Also, Android continues to grow fast, according to AdMob (although Admob's OS data will soon become suspect as it's in the process of being acquired by Google). And Symbian OS share continues to collapse, as its traffic share fell from 43% to 18%. Below is a chart of the OS share according to Admob's measure of apps traffic. Samsung leads the feature phone category, followed by Nokia and SonyEricsson

News Brew: Euros, Google, and Jobs

Thu, 25 Mar 2010 16:01:33 GMT

For those of you who have had your eye on the ball, unable to track the "financial crisis du jour" around the world, we appear to be finally reaching some sort of closure of the Ouzo Crisis, otherwise known as:� "Who's gonna bail out the Greeks?" This is the Baklava Bailout we've been waiting for for months. The Germans finally appear to be softening their stance, willing to toss a few Deutsche marks -- er, I mean, Euros -- in the pot. It's important to watch this stuff, because winding our way through these debt crises is crucial to recovery in the world economy. It's like a version of economic dodge-ball: It's possible we'll have rolling debt crises over the next few years, and we need to work our way through them and hopefully avoid a debt crisis in the Big Kahuna -- the U.S. of A.� Because you know, after everybody else is bailed out, it's not likely there will be anybody left to bail America out. Anyway, on that positive note, let's move on to da news:

When there's a Euro crisis, you need to brush up than Ambrose Evan- Pritchard (Telegraph).
Google's China plan gets complicated (Wall Street Journal). You would think "not being evil" would be pretty simple: Censorship or no censorship. Not when billions of dollars and the Chinese market is involved.
Unemployment claims dropped for the third time in four weeks (MarketWatch). They're at 442,000. Watch the number 400,000. I've heard that's where we need to get to actually create employment .
Banks still need free money, says Bernanke (Wall Street Journal). Even though they're doing nothing but hoarding it and creating exotic carry trades. Meanwhile, rumor has it Ben has the helicopters idling on the tarmac with the crates of cash lined up.
Best Buy profits rise 37% (Wall Street Journal). Recession be damned, we need our gadgets!!
Qualcomm raises forecast, helps spark tech rally (MarketWatch).
Engadget has an entertaining piece on the WSJ on the iPad, where they say the WSJ says it will charge $17.95 a month. (Engadget). Interesting. Did I tell you they offered me the print version for $10 per month (shhhhh.).
Google's working on ads that learn how to follow you. Kind of creepy, I don't like the idea of being followed by an Ad.

CTIA: Mobile Backhaul Buzz

Wed, 24 Mar 2010 21:55:22 GMT

LAS VEGAS -- All of the exciting new devices and discussion about high-bandwidth 4G (Fourth Generation) data services (up to 100Mbps) here at CTIA have the comm equipment guys salivating: It's likely to mean a boom in new business for building backhaul networks, the plumbing that carriers need to haul all of the data to and from the mobile towers. There are deals to be had, as Alcatel-Lucent announced a new deal with Verizon for backhaul networks paving the way for 4G. In addition, equipment vendors were announcing new gear that can accommodate service providers that need to overhaul their networks for mobile upgrades. For example, Huntsville, Alabama-based Adtran yesterday announced a flexible new Ethernet mobile backhaul product, the NetVanta(R) 8044M,� that can easily swap between copper and fiber.

A Three-fer: IPOs Are Back!

Wed, 24 Mar 2010 19:20:48 GMT

Who knew? The IPO market is doing well. Despite a glum market day featuring extreme weakness in bonds and a lackluster stock market, three companies went public today with roaring debuts: Calix Networks, Maxlinear, and First Interstate Bank. MaxLinear, which makes RF (radio frequency) chips for consumer devices such as settop boxes and mobile�phones� opened 31% higher in a New York Stock Exchange listing, while broadband equipment maker Calix Networks Inc. rose 28% on its first trade, also on the�NYSE. A regional bank system, First Interstate, opened 10% higher on the Nasdaq. Three for three, not bad! I guess the underwriters have got their pricing right. The new issuance shows investor demand for relatively young, growing companies. MaxLinear sold 6.4 million Class A shares, one million more than originally expected, at $14 a share. Calix priced 6.3 million shares at $13, the high end of its $11 to $13 range. First Interstate BancSystem Inc. sold 1.3 million more shares than expected, but priced them at $14.50, toward the lower end of its $14-$16 range. The IPO of Calix System is of special relief to me, as my former outfit Light Reading had been looking for the company's IPO since about 2004. Finally Calix CEO Carl Russo,�the former startup CEO who scored a $7 billion dollar �deal in selling Cerent to Cisco Systems�in 1999, has had�(another) big�day! All three companies appear to be riding some nice trends: Calix focuses on broadband access equipment, which could be getting a boost from a national broadband policy. MaxLinear is riding the wave in the mobile wireless market, and First Interstate is benefitting from a rebound in national banking, as consumers shy away from the big bad "too-big-to-fail" banks.

Smartphone Software Data: Blackberry Still in Charge, but Android Gaining

Wed, 24 Mar 2010 15:46:44 GMT

Service provicers are spending the most time testing the Blackberry OS, but Android-based phones are gaining and the Microsoft Windows and Symbian OS continue to lose share with developers, according to data from mobile developer testing specialist DeviceAnywhere . The data, which measures testing of smartphones on the four major U.S mobile networks, is released monthly with the latest numbers coming from January of 2010. In DeviceAnywhere's measure of time spent on the OS, BlackBerry lead the way with 58.5% usage, up from 50.6% from�January of 2009. Microsoft Windows Mobile fell from 22.5%� in January of 2009 to 16.2%% and Android jumped from 2% to 5%. Here are a few bullet points from the research:

Android Testing On the Rise.

From a standing start in 2009, Android has become the fourth most tested smartphone Operating System in DeviceAnywhere Test Center in the United States.

The Android-based T-Mobile G1 has risen to become the most-tested device on the T-Mobile Virtual Developer Lab.

Less Time Spent on Microsoft Windows Phones.

The time spent on Windows Mobile dropped significantly from 26.5% in January ‘09 to 16.2% in January ‘10, as a proportion of total time spent on smartphones in DeviceAnywhere Test Center.

Handset Manufacturers without Established App Stores Holding Up Well.

While industry discussion has focused on app stores, testing on mobile devices from application developers, web, content and media companies has taken a wider view.

The second, third and fourth most popular devices for testing on DeviceAnywhere Test Center are Samsung, Motorola and LG respectively, all of which do not yet have US application storefronts.

In terms of popular devices driving usage, the BlackBerry 9000 and the Apple iPhone were the most popular on the AT&T network. On Sprint, it was the BlackBerry Curve (8330) and the Palm Pre. On T-Mobile it was the HTC G1 and the Motorola V2 and on Verizon BlackBerry led the way with the 9630 with the 8330 in the first and second spot.

CTIA Notes: So Far, So Good

Wed, 24 Mar 2010 11:00:07 GMT

LAS VEGAS -- Given that the rest of the Western world is wallowing in a lingering recession/depression, it's nice to hunker down in Vegas at the CTIA where it's sunny, people are still smiling, and the mobile world looks like it's going strong. I would describe the news flow as light, but there is plenty of excitement in the halls and aisles of the trade-show floor where serious innovation and is happening around the growth concept known as the mobile consumer: New location-based mobile apps, 4G, mobile commerce, unified communications, and even such staid telecom technologies such as fiber and mobile backhaul are all being lifted by the increasing mobile data traffic.� People will chuck their cars and forfeit their homes before they'll part with their smartphones, apparently. Well, if you don't have a home, you may as well have a device so that you can still network and send Twitter messages.

Raygent Biotech Update and Allocation

Wed, 24 Mar 2010 07:00:41 GMT

� Although we are still technically in a bear market for early-stage biotechnology due to lack of speculative funding from both VC’s and investment banks syndicating IPO’s, many public companies have been doing well. As a result we have a more bifurcated market with larger caps stable or growing and smaller caps in a funk. Nonetheless there is plenty of money on the sidelines that will drive stocks of companies with compelling products and technology. At the recent Rodman and Renshaw Investment Conference in November of 2009� the buzzword was “cash runway” as smaller cap companies with weak balance sheets need to retrench until new money comes back into the market. Nonetheless, Rodman continues to fund PIPES in the biotechnology sector as technology is progressing and deals are being done. Negative articles and “hand wringing” abound in the biotech market citing clinical trial failures, political concerns, a dearth of funding and a “breakdown of the business model." But these critics miss the point: the universe of companies and universities in the biomedical sector are�trading and investing in R&D programs that result in drugs, diagnostics and services with the objective of improving healthcare.

Liveblog of CTIA Sprint Developments

Tue, 23 Mar 2010 20:00:46 GMT

LAS VEGAS -- Service provider Sprint, which has suffered some much-publicized�problems following its merger with Nextel, losing customers at an alarming rate, is making a major push towards its 4G/Wimax efforts here at the CTIA wireless show. WiMax is a "4G" or Fourth Generation wireless technology offering bandwidth up to 100Mbps. It's considered a rival to forthcoming LTE�(Long Term Evolution) technology being pursued by Sprint rivals AT&T (T)�and Verizon (VZ), but Sprint and Clearwire have been aggressive in marketing WiMax ahead of the pack, making it a huge and risky bet numbering in the billions of dollars. Today Sprint announced its bringing more WiMAX cities�online 2010, adding Cincinnati, Cleveland, Los Angeles, Miami, Pittsburgh, Salt Lake City and St. Louis to their list of�4G�locations. Today at 1:30 PT Sprint is also expected to announce new 4G device developments. We'll be attending the event and our live blog will follow below... check back in with us at 1:30 PT!

Google's China Trouble Hints at Trade War

Tue, 23 Mar 2010 15:17:39 GMT

Google's announcement that its moving its servers to Hong Kong, along with China's harshly worded response, is indicative of a brewing trade war between open, Western countries and China. With Baidu (BIDU)�stock pushing toward $600, it's pretty clear who the main beneficiary is here: the leading Chinese portal. Meanwhile, Google is losing influential business partners in China. Billionaire Li Ka-shing's Tom online shopping service pulled Google search from its Web site, and many others are following suit, according to BusinessWeek. The media is describing this as a technology soap opera with implications for other Internet companies in China, but I'd look at it in�even broader context: This is a watershed moment in relations with China for global business. With Chinese trade being one of the main drivers of International commerce, this means trouble. It could be the beginnings of a crippling trade war. The Google-China row is just the latest in a series of warning signs that a trade war is brewing. U.S. Congress has been stepping up its complaints about the Chinese currency peg. It's clear to�many business executives, including those in the �automobile industry, are worried that China is accelerating its protection of national markets. And now the Google moment, which is de facto protectism on behalf of China, which refuses to back down on censorship. It leads me to ask: How can this have a happy ending? Western companies are trying to negotiate with Chinese authorities on Western terms, where the markets are open and the human rights more universal. But the rules are lopsided, as China is still a totalitarian state using a command-and-control economy. Do we really think�this can end well for�Western business. Beijing will continue to do what's good for Beijing, and they can, because their the ones with a billion people and the fastest growing markets in the world. Google's move is probably just the first in a series of trade disputes that are likely to heat up.

Revisiting AT&T at CTIA

Mon, 22 Mar 2010 22:55:53 GMT

LAS VEGAS -- Who knew? I got something right. About a month ago, I advocated a complex trade involving AT&T. The main premise: The stock was cheap, the dividend was large, and there is a tendency for it to move up into the dividend payment date. So far, so good. AT&T is up about 10% since we looked at the trade. It's still set to pay a dividend that will pay about 6%.� The front-month options tripled into the expiration last Friday. I sold the stock and the options with a collective 20% gain in one month, but I probably pulled the trigger too early. AT&T has exhibited more stength today and likely will rise further on the wireless��hype associated with CTIA. Verizon, coincidentally or not, is also benifitting from the pattern of rising into the next quarter's dividend payment. Verizon is priced a little higher than AT&T, with a P/E of 23 versus AT&T's more modest P/E of 12. Verizon also pays a 6% dividend. The largest North American �service providers such as AT&T and Verizon both pay juicy dividends and will likely get a lot of attention here at CTIA, where every device manufacturer and their cousin will be making announcements about new smart devices on their network. These devices, many of them Android-powered, will be more open and Web-enabled than ever before. And they will be data-hungry. In its last earnings release, AT&T announced that growth in wireless data services and applications grew 26%, indicating that this is where the growth lies. I think more complex and data-hungry devices will only help this trend. AT&T announced today that it's adding new Palm and Dell smartphones to�its �lineup. Everybody is also closely watching the 4G service annoucements here at CTIA, which will unleash even more bandwidth for data-hungry services. I think the bottom line is that these trends will be good for the leading service providers, including AT&T and Verizon. AT&T, Verizon, and Sprint are likely to do a lot of sparring here about their next-generation wireless data services. In fact, it's already started. The bottom line? AT&T and Verizon appear to be consolidating their lead, and a wide range of data-hungry smartphones should be good for business.

The Disappointing Greentech "Bubble" and What it Means for Vinod Khosla

Mon, 22 Mar 2010 14:33:08 GMT

So far I've been pretty unimpressed by the "bubble" in GreenTech. It's been the bubble that popped before it even expanded. You would think that will all of the hype, slathering media coverage, and government subsidies, we'd have a roaring party going on in greentech markets. Or maybe even a roaring IPO market? Instead all we have are some pretty feeble success stories and at most, a couple of modest IPOs in 2010. There have been a handful of "greentech" companies slated for IPO in 2010, the most commonly discussed are Solyndra and Silver Spring Networks. I have no idea how they will do, nor I have I (yet) investigated these particularly companies thoroughly, but my initial feedback from reliable sources is an indifferent shrug. A Google-like outcome is not likely. More concerning is some feedback I have been getting from the sources in the venture-backed greentech market, where valuations are under pressure, it's extremely difficult to raise funding, and the general feeling is that of disappointment.

CTIA Wireless Show Next Week: Here's a Preview

Fri, 19 Mar 2010 10:00:00 GMT

We are doing some last-minute prep and packing our bags for the CTIA wireless technology show in Las Vegas next week, so we'll have limited posting today. But what we do have is a preview of the activity to watch.Here you go:

Look for Sprint and HTC to be announcing the Supersonic: An Android powered mobile device with a 4.3-inch display that runs on Sprint’s 4G network (i.e., WiMax). It would be the first "WiMax Phone." I’ve heard a reference to this as the “Trophy Wife Phone.” Ha! Good one.
More Android stuff. Most major networks including AT&T, Sprint, and T-Mobile have announced support for Android devices such as Motorola’s Droid and Google's phone, made by HTC. Expect the same from Verizon next week.
Verizon will be having an all-important event in which it is expected to talk about its LTE strategy. LTE is the next-generation of phone networks.
In case you can’t wait for all the dumbed-down mobile tech news for the masses, CNBC will be broadcasting from CTIA.
Keynotes: Tuesday, March 23: CTIA Chairman Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets; Randall Stephenson, chairman, CEO and president of AT&T Inc; I�aki Urdangar n, chairman of Telef�nica Internacional, USA Inc.; and J.K. Shin, president, Mobile Communications Business, Samsung Electronics Co., Ltd. Wednesday, March 24: CTIA president and CEO Steve Largent will host two fireside chats with industry leaders Dan Hesse, CEO of Sprint Nextel and Bill Morrow, CEO of Clearwire. In addition, John Stanton, chairman of Trilogy International Partners; Ren� Obermann, CEO of Deutsche Telekom AG; and Padmasree Warrior, CTO of Cisco, will discuss the evolution of the mobile market and the innovations that will drive new growth. Thursday, March 25: CNBC anchor Michelle Caruso-Cabrera will moderate a keynote roundtable featuring Academy Award-Winning Director James Cameron, U.S. Chief Technology Officer Aneesh Chopra and Twitter Co-Founder Biz Stone. The panel will discuss the transformative power of wireless and its continued impact on business, media and the economy. Full schedule is here.
Tablets, tablet, tablets: Expect lots of previews of tablet-like devices that run on new wireless networks.
Next-gen smartphones: The usual cast of characters such as RIM, Toshiba, Garmin, Samsung, Sony, and Nokia will be talking about next-gen smartphones that do all this and that. Here's a nice preview (TheStreet.com).
As usual, government and Net Neutrality policy will be a big topic. The FCC is at it again, trying to mix up telecom. Light Reading has a nice video discussion on the matter. Or, see what Gary Bolton from Adtran has to say about the FCC plan.

Sequoia's Kvamme: Media and Ads Are Now Competely Free. Bummer.

Thu, 18 Mar 2010 20:24:00 GMT

I am perplexed by a story going around orginating in the Gigaom universe (via Fortune, Techmeme, various blogs, e.t.c.) that Sequoia partner Mark Kvamme is� telling folks that advertising can be had completely free on social networks. Thanks Mark! You see, Kvamme says that the "masses make their own media" on social media sites such as Facebook, LinkedIn, Twitter, and .... ugh... Funny or Die (a Sequoia investment). I quote from the Gigaom article: “If you take what’s going on on Facebook, on LinkedIn, on Twitter, on Digg, the masses are starting to make their own media, and it’s basically free,” he noted. “So if you can figure out how to work in this world, you can get your message out very quickly.”

Android Sales: Big, or Not So Big?

Thu, 18 Mar 2010 14:52:50 GMT

Trying to track the news on Android sales can be challenging. A recent spate of reports on disappointing Nexus One sales (Google's Android phone) had some folks scratching their heads. But this morning, Barron's reports that BroadpointAmTech sees Android sales climbing. BroadpointAmTech analyst Mark McKechnie lifted his 2010 forecast on Motorola's Android phones from 1.7M to 1.9M. But McKechnie noted that this is still a problem for vendors of older phones, such as Motorola, because sales of Motorola's older, "legacy" phones are declining faster than Android phones are ramping. Just a few days ago, mobile analytics company Flurry said that Google's Nexus One phone� sold only 135,000 units in the first 74 days, compared with Motorola Droid's 1.05 million and Apple iPhone 3GS' 1 million units. That was deemed disappointing by many Android-watchers. Randy Giusto, an independent analyst who is also a contributing analyst to the Rayno Report, says its too early to make big judgments about the success of Android or the Nexus One. "Goldman Sachs went crazy and said they would do 3M units, so that got everybody's expectations a little high," says Giusto. "[It's an experiment to push the envelope, the question is whether other phone suppliers will adopt Android, which would be great." However bullish Goldman Sachs was in the beginning, they've backtracked now. The firm recently slashed the sales forecast to 1M.

News Brew: Fed Prints, Wall Street Mints

Wed, 17 Mar 2010 15:59:08 GMT

Kind of a slow day in the news, eh? That's probably because after the Fed announced it will continue its free money for Wall Street policy indefinitely, there was nothing left to say. At any rate, here are a few items on my screen:

Dow sets new 52-week high (Wall Street Journal). Breakout or fakeout! Tough call.
Inflation's siren song (Wall Street Journal). My prediction, the Fed will keep printing money until gold is $5,000.
The chips are chipper (Reuters).
Thinking wind power? Solar? Nuclear? Ethanol. Nah, try coal (Bloomberg)
Microsoft is out with Explorer 9 (PCWorld)
Swedish music service Spotify says it has 320,000 paying users. (NetworkWorld)
$2 Trillion in new debt. Looks like we just picked up Wall Street's tab (CBSNews)
I wasn't going to buy the home, then I saw the realtor's headshot on the sign (The Onion)

Chetan Sharma: $17.5B in Mobile Apps by 2012

Wed, 17 Mar 2010 15:03:39 GMT

Chetan Sharma Consulting is out with an report on the mobile apps market, which says that mobile apps downloads are expected to go from 7 billion in 2009 to 50 billion by 2012, growing at a rate of 92% CAGR. Chetan Sharma says this will create a $17.5 billion market by 2012. Chetan Sharma looked at the growth of ondeck (offered on carrier deck), offdeck (outside the carrier), smartphones, featurephones, paid, free, and advertising based (including virtual goods) apps revenue. It calculated the growth in the five major regions: North American, Europe, South America, Asia, the Middle East, and Africa. It then looked at smartphone and subscriber growth, looked at who is downloading mobile apps, and estimated how apps downloads are likley to grow over time. The report says that in 2009, the total number of apps downloads were about 7 billion, with Asia leading growth at 37% of downloads. By 2012, the number of downloads are exptected to growth to 50 billion per year. The main driver of apps growth will be wider adoption of "featurephones" and smartphones. However, Chetan Sharma also observes that the revenue models associated with apps are changing. For example, in 2009, advertising contributed almost 12% to overall apps revenue. This share is expected to more than double by 2012 to almost 28%, according to the report. You can read the whole report here.

Top Ten Reasons Not to Trust This Market

Tue, 16 Mar 2010 16:03:35 GMT

In bull/bear chatter on the stock market, my bull friends are getting increasingly confident. That's a contrairian warning sign to me. We are close to a possible turning point in the markets. My guess is that this would happen after expiration on Friday. My spidey sense is tingling: I see market volatility ahead. Here are my Top Ten Reasons why I don't trust this market right now 1) VIX, a measure of volatility which often moves in opposition to markets, is at a multi-year low. 2) ECRI leading economic indicators down 3 weeks in a row. 3) Increasingly wild and unpredictable action in the dollar. 4) Informal polling of business friends: Not one person says business is much better. 5) Correlations between the S&P, dollar, and gold are breaking down for the first time in many years, interesting a possible change in market dynamics. 6) Several leading technical analysts calling for the top. 7)� Bullish sentiment near multi-year high. 8)� "Things never look as good as they do at the top." 9) Fed running out of money in the printing press division. 10) Chart showing a perfect double-top in a long-term 10-year bear market chop. Of course, I'm just being cautious. I let the market dictate my actions. I reserve the right to change my opinion immediately, especially if the market is able to break out after options expiration this Friday. One reason why the top MAY NOT be coming: 1) The Feds are starting to print more money again because they know the alternative is disaster.

News Brew: Inflation, Deflation, War

Tue, 16 Mar 2010 14:06:07 GMT

Sometimes America can be myopic, self-centered, and oblivious. Today is one of those days when many of the news outlets are focusing on Twitter, the Toyota recalls, and Taylor Swift. With more chaos brewing in the Middle East, it's a good time to remember that there are some major wars underway. I only say this because these are disturbing times, and we have to be reminded of the fact of the dangers of global political conflicts. Keep it in mind. Let me catch you up to date on what's going on "out there," as well as other stuff:

Violence in Israel is flaring up again, following the reopening of a synagogue in Jerusalem's Old City (The Guardian).
The Obama adminstration and Benjamin Netanyahu are headed for a showdown (NPR)
George Mitchell's Israel trip is on hold (Politico)
What does it mean for Iran? Well, the eminent bombing rumors that have circulated may be put on hold. (Huffington Post)
Several folks think Biden's trip to Israel was aimed at discussing the bombing of Iran. Instead, it devolved into a critique of Israel's settlement policies. (Politico)
The US and EU are calling for a "clear response" to Iran. Some believe that bombing isn't yet off the table. (AFP)
Iran is standing its ground (Tehran Times)
Zero Hedge technical take predicts a� market crash in April (Zero Hedge)
U.S. Housing starts declined 5.9% in February (Bloomberg). Do housing start numbers in the dead of winter really matter?
The Fed wants to "avoid lower inflation" (Bloomberg). Isn't that another euphemism for printing money?
U.S. lawmakers are going to press China for action on currency (Reuters). Yippee! Trade War with China! Just what we all need!
Sony has signed a $250M deal with the Michael Jackson estate on forthcoming albums involving both previously unreleased material and famiar ones. (Wall Street Journal). Just beat it!
Core Strength Training for Men. (Wall Street Journal). I just think it's funny that you can find this stuff on a Wall Street Journal page.
Is China-Google a lose-lose scenario? (Associated Press)
Google's biggest blunder: Not letting Microsoft buy Yahoo (Slate). I can go with it.
Vitamin D linked to lower heart disease risk (L.A. Times)

Twitter Has a New Platform That Does Stuff (What?)

Tue, 16 Mar 2010 13:20:29 GMT

Parsing today's news, I see that Twitter has announced a new platform that does some stuff. I wish I could tell you what it was, but the press reports are so vague that I don't understand! For example, VentureBeat reports that "Twitter CEO Ev Willams demonstrated a new platform today that will spread the microblogging network's proifles, tweets, and possibly advertising across the Web." Okay. First, why is the VentureBeat reporter referring to Evan Willams as "Ev." Is this to show they're buddies? Sheesh, amateur hour. Next, what the heck� is this thing? Tweets will be everywhere. Aren't they already? And how are they doing this? Some other takes on the Twitter "news," which I think was announced at the rapidly devolving SXSW (South By Southwest) conference:

TechCrunch's Michael Arrington is cringing at the fact that Twitter wants to do good. He should.
Twitter has made some sort of announcement on its blog. "We’ve developed a new set of frameworks for adding this Twitter experience anywhere on the web." ARGHHGHG. Can somebody actually tell me what this thing does!!!
Ahh, now this is my cup of tea: The Evan Williams keynote actually sucked, and people bailed. (CNET)
If you want to ask real questions (apparently the interviewer at SXSW didn't), here are some on Twitter itself (Mashable)

Alrighty, Twitter, everybody's talking about you. That's great. Now get on with it and do an IPO, to show that the technology markets can still drive the American economy.

Hitwise: Facebook More Popular Than Google

Mon, 15 Mar 2010 22:52:55 GMT

Hitwise reports that for the first time ever, people spent more time on Facebook than Google for the week ending March 13, 2010. Amazing, isn't it! From the Hitwise blog:

March 15, 2010 Facebook reached an important milestone for the week ending March 13, 2010 and surpassed Google in the US to become the most visited website for the week. Facebook.com recently reached the #1 ranking on Christmas Eve, Christmas Day, and New Year’s Day as well as the weekend of March 6th and 7th. The market share of visits to Facebook.com increased 185% last week as compared to the same week in 2009, while visits to Google.com increased 9% during the same time frame. Together Facebook.com and Google.com accounted for 14% of all US Internet visits last week.

CNBC Food Fight!

Mon, 15 Mar 2010 19:34:41 GMT

Don't you love it when two grown-up colleagues start calling each other names on their own broadcast? Steve Liesman and Rick Santelli really went after each other today. It all started when Liesman called Santelli "ignorant" and Santelli fired back for Liesman to "grow up."

Top Ten Reasons to Look Forward to an Apple-Google Fistfight

Mon, 15 Mar 2010 16:50:10 GMT

It's pretty clear that the Apple and Google fistfight is coming. This should be fun to watch -- kind of like watching two preppy investment bankers go at each other in the corporate parking lot. A little background: I think the defining moment came last summer when Google CEO Eric Schmidt resigned from Apple's board. Today, developer Tim Bray showed us why Google is gearing up for a fight with Apple with Android, and why it could be worthy.Both Google and Apple are headed for a collision course because they both want a large piece of mobile apps and mobile services. I've been doing some research, and Android is real, and it's coming soon (we'll have a comprehensive report next week!). Here are my top ten reasons why I look forward to this: 10) Fawning press reports on the iPhone and Google get boring. 9) It would be interesting to watch the iPad fail, just to mix things up for a change. Eight) Google has a point: Apple's system is far too closed. 7) Apple has a point: They make better user interfaces than anyone. Period. 6) It would make the world seem less obvious. 5) Googlers need to prove they can do something other than Adwords. 4) It doesn't involve Redmond. 3) Maybe there's a chance we get to see Eric Schmidt go Steve Ballmer on us? 2) We'll get cheaper phones. 1) It's the battle of the arrogant preppies! Somebody will lose!

News Brew: China Monday

Mon, 15 Mar 2010 15:57:35 GMT

Well, if you didn't think economic and policy actions in China were driving the markets, look again. Nearly all the market activity this morning revolves around China, whether it be stock markets, commodities, foreign currency, Google, Baidu, or whatever. Take a look:

Markets are off on fears that Chinese officials will tighten policy further to cool off inflation, says da Bloomberg.
Baidu shares are flying -- up more than 6% -- on reports that Google is close to shuttering its China site (Wall Street Journal).
Word is that China is talking tough on censorship (Washington Post). Did you expect anything less?
Chinese Premier Wen Jiabao is pushing back on calls to let China's currency rise (Reuters). Hmm, yet he's worried about inflation? Unpeg your currency, dude!
Chinese energy company Cnooc is gobbling up oil resources in South America (New York Times). That's a hungry monster, that China!

And in other, non-China news:

The Apple blogs are reporting that orders for the iPad are slowing down (Apple Insider).
Flurry reports that the iPad has boosted app developers, who are excited about the platform (Fortune).
Here's a daily news wrap from the SXSW show (Billboard). Billboard? Yes, billboard. You know, SXSW was supposed to be a music show.
ABBA and Jimmy Cliff have been inducted into the Rock and Roll Hall of Fame (CNN). Now that is one interesting combo. I would like to see a concert with them playing together.
Colorado is ground-zero for Amazon's fight to stave off state taxes (MSNBC). Note to Amazon: Have you noticed that the states are, like, broke?
FBI details most difficult Internet scams (NetworkWorld).

Developer Tim Bray: The iPhone Omits Freedom

Mon, 15 Mar 2010 13:55:51 GMT

Noted developer Tim Bray, who is an XML co-author, former Sun Microsystems employee, and outspoken tech blogger, has decided to take a job working on Google's Android platform and framed the decision as a battle against an evil empire: Apple. Bray writes in his blog that Apple is creating a sterile, controlled future of the Internet with the iPhone. From his blog:

The iPhone vision of the mobile Internet’s future omits controversy, sex, and freedom, but includes strict limits on who can know what and who can say what. It’s a sterile Disney-fied walled garden surrounded by sharp-toothed lawyers. The people who create the apps serve at the landlord’s pleasure and fear his anger. I hate it.

Bray likes Google Android because it creates a more open alternative to Apple's mobile platform. The blog is an interesting read if you want to take a look at Android's competitive advantages. Some advantages that make Android a good competitive mobile OS with Apple, according to Bray, are that Android is more open to the Web, it has a good user experience, and good developer APIs. Bray isn't a pure idealist, though. He points out that Google's a big corporation itself and is likely to develop plenty of its own evil:

It’s now too big to be purely good or in fact purely anything. I’m sure that tendrils of stupidity and evil are even now finding interstitial breeding grounds whence they will emerge to cause grief. And there are some Google initiatives that I feel no urge to go near.

You can read the rest of his post here.

Patrick Kennedy: The Worst Rant Ever?

Thu, 11 Mar 2010 18:38:56 GMT

Well, if you haven't seen it, look below. Representative Patrick Kennedy's rant is a classic. All over the Web, of course. There are so many things wrong with this rant I don't know where to start. First of all, the tone is a turn-off. His hoarse, scratchy voice doesn't do it for me. The accusatory pointing isn't working either. Also, factually, I don't know what he's getting at. Is he saying the American people don't have access to information about the wars? That's certainly not true. Maybe he's translating his dislike of two or three very specific "members of the media" as the "National Press Corp." Maybe as a member of Congress� he can point to all the folks in the room -- on both sides of the aisle -- as the source of the problems, rather than the media.

More Deconstructing of Cisco's Router Spin

Thu, 11 Mar 2010 18:20:09 GMT

As I've been in the media industry nearly all my life, I understand spin. And I'm continually fascinated by how the mainstream media often "buys the spin" when they report technology stories. No better example than how they all piled on Cisco's new router announcement this week, often just quoting the press release as fact. Here at the Rayno Report we embark in a battle against the spin. in the interest of truth, let's take you through the Cisco story again and show you who's right and who's wrong. Here's a prime example of what's wrong: This terrible piece of journalism in AOL's DailyFinance: "Cisco Unveils Its New Superfast Network Router." The headline is hilarious, it could pass as an Onion piece. And the story that follows is pathetic, almost� a pure regurgitation of the press release. Do some analysis folks! pick up the phone! I quote from the story: "Networking giant Cisco (CSCO) on Tuesday unveiled a new network router it says 'will forever change the Internet and its impact on consumers, businesses and governments.'" That's the lead. If you parse it, it's really just Cisco's own subjective propaganda, there are no factual statements in the lead.� The reporter, Sam Gustin, has made the press release the story. He's handed control to Cisco.

News Brew: Google, Carlos Slim, and the iPhone

Thu, 11 Mar 2010 17:43:24 GMT

Sometimes, covering the news makes me nauseous. It doesn't help that all over the Web, there are hundreds of sycophantic bloggers embracing tech-company spin. Of course, often, the companies might have something legitimate to say. but more often than not it's just propaganda. This week's, slathering, sycophantic barrage came on the Google Apps Marketplace, announced yesterday. From the Google blog: "Every day, thousands of businesses choose the cloud. More than 2 million businesses have adopted Google Apps over the last three years, eliminating the hassles associated with purchasing, installing and maintaining hardware and software themselves." Ewww. Can I just point out one thing? Google makes almost ZERO money on cloud applications! Despite all the hype over "cloud-based services" and "open, free apps," Google hasn't made a dime on this. Google should just admit it likes to hand out free stuff to generate more adwords traffic, that's their business model! Anyway, now that I've got that off my chest, let's move on to other news:

House bans earmarks for for-profit companies (The Washington Post). Wow! You mean, Congress might actually try to do something logical? But the Repubs might have a point -- why not ban all earmarks?
Time to ramrod through financial reform, I guess (L.A. Times). That can't be good.
Google's in talks with China (Los Angeles). Not sure if it wants the Mu Shu pork or Chicken Chow Mein.
Bing is gaining marketshare from Yahoo (Business Insider). Don't you love a nasty fight for second place?
Telecom mogul Carlos Slim is now the world's richest man! (BusinessWeek). Bill Gates, now a pathetic number two, seen doing shots of tequila in Redmond.
The Papandreou Offensive (BusinessWeek). I just thought that was a great headline. I didn't actually read it.
Florida floreclosures rise again (Bizjournals.com). In other news, Dunkin' Donuts is still making donuts.
Caterpillar might build excavator facility in the U.S. (Reuters). They should think about putting it in Washington. A lot of stuff to excavate there.
The IRS has $1.3B in unclaimed taxes (WalletPop). Well, good luck, I know I'm not getting any of it.
They've discovered an all-black penguin in Antarctica (Yahoo Green). Can you believe there's a site called "Yahoo Green." That's funny, Yahoo.
New battery charging method could improve recharge times (Technology Review). Apply an oscillating electric field to the anode of a lithium battery and the recharge time drops dramatically! Why didn't I think of that?
Apple to support iPhone multitasking (TG Daily). Now your wife will be able to talk on the phone, drive the car, and tell you to take out the garbage at the same time!
A bunch of Wizard of Oz remakes are bouncing around Hollywood (L.A. Times). No confirmation of whether Alan Greenspan is involved in the financing.

Venture-Capital Downturn Likely to Continue

Thu, 11 Mar 2010 16:48:39 GMT

I have been catching up on some data and news stories about the beleagured venture capital industry.� A continuing shakeout in the industry means that fewer venture-capital firms are in the market with less money, meaning tougher terms for startups. Unfortunately, it doesn't look like this will change any time soon unless we get some gigantic IPOs to pay back all the funds. Yes, you can read some success stories about M&A and wins from a few of the major, top-tier firms. But that's just a small percentage of the industry. In sum total, most venture capital funds have had crappy performance over the last 10 years and many of them are shutting down. According to this Wall Street Journal article, the number of venture-capital firms shrunk from 1,023 to 794 from 2005 to 2009. And they're raising less money. 125 venture funds in the U.S. collected $13.6 billion last year, down from 203 funds that raised $28.7 billion in 2008, according to the Journal.

Market Alarm Bells Ringing

Thu, 11 Mar 2010 14:10:40 GMT

Yesterday, I was liquidating stocks and buying S&P puts to protect my remaining position. I will continue to do so today. I will probably go from 80% invested to 40% invested. The remaining stocks I own will have reasonable P/Es and they will be hedged with S&P puts.� Two charts have got my attention. First, the recent marginal new highs in the indices have been accompanied by lower volume. I just don't see as much enthusiasm in the rally anymore, and there is certainly not large amounts of institutional buying. Secondly, the chart formation is a scary double-top. We rallied back to the January high of 1150 in the S&P, but now it looks like we're failing again. I will remind readers that the correction after the January high was particularly nasty. I would not be surprised to see some as big, or bigger, now. The second chart goes back to my earlier point: Where's the money going to come from? Yes, it's tricky to game this market, because the Wizard of Oz can always print money. But ideally a rally needs real cash to survive, it's the fuel of the stock market. Unfortunately, much of this fuel has been the cheap financing from the government that's fueling short-term bets by investment banks and traders on Wall Street. But they've bought the asssets, and the money is borrowed, so they want to sell higher to pay it back. The stronger, longer-term money has also been used up: mutual funds. As demonstrated by the chart below, it turns out that mutual fund cash levels are returning to all-time lows. Remember, mutual fund cash levels rose in the crash of 2008, allowing them to come into the market in 2009 and help fuel the rally. That cash has now been almost entirely deployed. Where's the new money going to come from? Unfortunately, I think this is a bad picture for the market. If the mutual funds start liquidating the stocks they've piled into over the last 12 months, the tide will turn quickly.� It's why I'm selling any of the stocks I made money on in the last few months and why I'm hedging the rest.

Recent Marc Faber On Gold and Greece

Wed, 10 Mar 2010 22:59:53 GMT

Marc Faber, always worth listening to. This is from last week but still timely now that gold is down another $20... I'm looking to buy more around $1075.

Mobile Mojo Chat with Phil Harvey

Wed, 10 Mar 2010 15:50:47 GMT

Google (GOOG), Motorola (MOT), RIM (RIMM), Palm (PALM)? How do you sort all these characters out? Light Reading Editor in Chief Phil Harvey and I have been experimenting with a new video call format which is embedded below. This week, we catch up on the big trends in the mobile market.

Today's Biotech Bingo: Intermune

Wed, 10 Mar 2010 14:28:34 GMT

We've been pointing out the wild action in biotech stocks, where one stock can rally 50% in a month yet another can get pummeled for 67%. That's the world of Biotech Bingo. Today's lottery ticket is Intermune (Nasdaq: ITMN), which looks like it will trade up something close to 60% today after an FDA Panel of lung experts voted 9-3 in favor of approval of Intermune’s drug perfenidone for idiopathic pulmonary fibrosis. IPF is a disabling and ultimately fatal disease that affects about 200,000 people in the U.S. and Europe combined with 30,000 new cases per year in each region.

You could have bought this stock for $15 at the end of February, and it may hit $40 today. This will likely reignite a pretty hot biotech rally, as we could see the IBB (biotech ETF)� approaching�its 2001 high of 100.

Cisco Core Router Announcement: What's it Mean?

Tue, 09 Mar 2010 18:35:39 GMT

There was an incredible amount of hype leading up to Cisco's announcement of a new core router, the CRS-3. Typically, router announcements are not covered in detail by the mainstream press, but with Cisco's marketing acumen, they were able to raise the level of interest to a crescendo. Big deal? sure. Was it the revolutionary thing that will change the Internet? No. A revolutionary innovation would be if somebody suddenly announced an entirely new technology, like optical routing. Or that routers weren't even necessary anymore. A true innovation is unfathomable, such as trying to imagine the World Wide Web in 1982. This is an incremental upgrade of the traditional routing technology.�It is, in fact, a crucial and necessary upgrade in capacity to an existing product that helps Cisco keep their edge in the core router market, but not an entirely new technology.

Let's Live Blog Cisco's "Mega Internet World-Changing Announcement"

Tue, 09 Mar 2010 16:02:31 GMT

Let's give it a shot and live blog this puppy... Cisco's "change the Internet" announcement... it's supposed to be starting shortly (11AM ET). "The Broadcast Will Begin Shortly." It appears they are starting late.That can't be good for revolutionizing the Internet. Okay, here we go... 8:04 PT. We are greeted by Suraj Shetty, Cisco's VP Worldwide Marketing and John Chambers, CEO of Cisco. They are sitting around a table. It feels like watching "Face the Nation," only they are talking about routers. 8:07 CRS-3 announcement... Chambers says this has "12X the capacity of our competitors"... so apparently a lot of this is about a core router so far.

What's Cisco Got? Predictions All Over the Map

Tue, 09 Mar 2010 03:55:37 GMT

Well, Cisco marketing and public relations professionals deserve a promotion for generating spectacular attention on an announcement tomorrow. They say it will "change the Internet" -- and journalists worldwide complied with the spin.� Through their coordinated effort, Cisco marketing pros have managed to generate a ton of hype about the announcement tomorrow, including lifting the stock price by nearly 4% today. So what is it? An Internet powered-hairdryer? A web-surfing Taco? After combing through many blogs and sources, the best theory I've found is the TV "settop on steroids" being pushed by blogger-networking site SiliconAngle. The funny thing is, everybody else is all over the map. The major news organizations have been notably weak on guessing what Cisco's got in its back pocket, but so have the usual trade publications, as well. Let's recap what they've said: Financial Times: Cisco is working with service providers to develop a new high-speed broadband network. BusinessWeek: Cisco will announce a new router. Wall Street Journal: Cisco's got a blade server. Reuters: "New technology for communications service providers to offer advanced high-speed connections." Hmm, sufficiently vague. MarketWatch: "More robust gear for video Web traffic." Bahahah. What they heck is that? DailyFinance: Backing up the settop on steroids theory. So there you have it. Unfortunately, I was working on some development for my new Web site today so I didn't have time to call my old Light Reading sources. But just a scan of all of the shotgun blasts by technology journalists around the world indicates I may have spent the better part of my day chasing my tail. Kudos for SiliconAngle for piecing together the most credible report from what looks like multiple sources! For the record, Light Reading is going with the "integrated network" theory, but sources SiliconAngle... Kind of weak guys!!!!

Ebix Numbers Don't Disappoint; Stock up 6% Pre-market

Mon, 08 Mar 2010 14:20:22 GMT

Ebix Inc, the company we discussed here on Friday, is out with earnings and they don't look too shabby. The company hit $0.92 in EPS for Q4 2009 and $3.10 for the year. Net income was $12.1, up 53% year-over-year The stock is bid in the pre-market at $18, up 6% from a $16.95 close of Friday. It''s a small-cap stock, not a lot of institutional interest in the pre-market, so it's hard to tell what will happen when the market opens. But it looks to me like the stock is going to open up big. These numbers represent new record revenues for the company. Keep in mind here the thesis was that this is a fast-growing, profitable company whose shares were undervalued. I have no idea what it was doing with a P/E of 12, but it's going higher.

AT&T: Free Money? The Stock That Nobody Expects to Move

Fri, 05 Mar 2010 17:26:35 GMT

I have been taking a closer look at AT&T (NYSE), thinking about what to do with it. The first reason I'm thinking about it is that juicy 6.8% dividend. Thinking: Why not just pile in some money and sit on it for a while? Obvious answer: risk of capital loss. Now, I realize AT&T is not the most volatile stock. But look at Toyota: Shit happens. What if you wake up some morning and iPhones are exploding, Luke Wilson gets put in jail, and you are forced to sell the stock at $20, logging a 16% loss.Then that 6.8% dividend would not compensate you for the risk. So I thought about how to collect the dividend and hedge the stock. What if you could buy a bunch of AT&T stock, collect the dividend, and sell some covered call options as a hedge? That might be a decent strategy. For those not familiar with covered calls, what you do is you sell the call�options (an option to buy the stock at a higher price), selling an equivalent number of options on the shares that you own. That upside of this strategy: You are collecting premium on the options in addition to the dividend, if the stock stays below the excercise price. �The downside: If the stock takes off, you will have to buy those calls at a higher price, or tender your shares (hence, the "covered" calls), thereby capping your upside.

Inflation Trade Gathering Steam

Fri, 05 Mar 2010 16:47:50 GMT

Today's "jobs Friday," when the federal government announces its mystifying and statistically incomprehensible report on jobs, thus assuring the job security of media pundits everywhere. And hey, I'm one of them! What's interesting about this month's jobs report, with a report of 36,000 lob losses (less than expected) is not so much its contents, but the market's reaction. All markets are up. That reaction says to me: Inflation ahead. Keep in mind, when everybody is getting fired, it's very hard to create inflation, because nobody has any money to buy anything. However, once the printing presses start running, and job losses start to diminish, all it takes is the slightest bit of hiring to create inflation. Why is that? Because the feds have pumped trillions of dollars of money into the system, and all the banks and consumers need is a whiff of things improving to get the ball rolling again.� Right now that money is trapped on banks, who are clutching it with their fists, saving it for more potential losses or to lend out, if things get better. With that trillions of dollars of liquidity out there, that means that inflation will accelerate meaningfully if there is only a slight uptick in demand.

Ebix: A Healthcare Software Company Worth a Look

Thu, 04 Mar 2010 18:23:00 GMT

In investing and analysis, it's best to avoid becoming enamored or "married" to one idea or stock. But I find that I'm hooked on a company called Ebix. I keep trying to find ways to punch holes in the story behind this company, and it's really hard. I am scratching my head about why the shares are so cheap. This just seems like a fast-growing company whose stock is priced cheaply. With a quarterly earnings call coming up on March 8 and the stock having pulled back 25% or so from its recent highs, it's a good time to take a look at Ebix shares. Ebix was formerly known as Delphi, but changed its name in 2003. It's focused on selling software and e-commerce software for the insurance industry. Many of its software products are customized, allowing insurance carriers to design systems for policy and claims administration. Since CEO Robin Raina has taken over as the CEO of the company in 1999, he's done a great job at growing the company. For example, the five-year revenue growth rate� is 39% and profits have grown 79% annualized. To put things in perspective, the company was doing just $30 million in business in 2006, but looks on track to do about $90 million in 2010. It has grown in each of the last five years, even through the recession.

Thursday's News Brew: Tivo Wins on Replay

Thu, 04 Mar 2010 17:47:23 GMT

Happy Thursday and welcome to our news brew, where the headlines are almost as strong as the coffee. There is the usual boring round of news involving Greece, government-owned banks, and healthcare... but we're going to move on to something that's much more interest to us: TV. And more specifically, Tivo, which just won a patent suit against Dish. Tivo is soaring today, up nearly 50% to $15, on news that a Federal court has upheld a lower court's finding that Dish has been violating Tivo's patent on DVR technology. For those of you who live in a cave, those are the little boxes that allow you to digitally record and play TV content, the most effective tool I've found for skipping really annoying ads. In June, Tivo received a judgment in its favor and Dish was ordered to pay $193 million in damages. I think this victory is a victory for technology, and sports fans everywhere who need a way to cram 3 NFL games into 1 hour of viewing time. Elsewhere in the news:

Pending home sales "unexpectedly" drop (Bloomberg). People don't have hundreds of thousands of dollars to buy houses. Is that really unexpected?
Greek P.M. demands that aid plan be detailed (BusinessWeek). Tell us how much money you're going to give us, dammit! The Ouzo is waiting...
Jobless claims fell to 469,000 (BusinessWeek).
Mortgage windfall misses many (Wall Street Journal). This is kind of sad, pathetic, and depressing, isn't it?
What labor productivity means for employment (The Atlantic). It means that because executives need to keep their bonuses up, they're going to fire half of your coworkers and make you work twice as hard.
Gizmodo reports that Microsoft is doing something with Verizon (maybe) related to a device that may or may not be the project code-named "Pink." They think.
An explosion of mobile patent lawsuits (New York Times).
Continental Airlines has figured out a way to generate extra revenue from tall people (Houston Press).
Study says you may be more gullible when in a good mood (Physorg.com). Ah-ha, I'll try to remember that next time I'm in Vegas.
Virgin Galactic is planning test space flights in 2011 (Reuters). Start saving now!

That's all for now! Time to get back to my Tivo...

Medivation Slams the Brakes on Biotech Rally

Thu, 04 Mar 2010 00:05:56 GMT

On February 18th, we told you why the Rayno Report was bullish on diagnostics. I guess we weren't bullish enough, as the life sciences and biotech markets have taken off in the last month, with many of the picks up big in less than a month. Here's just an example of what we saw in the last 20 days: Sequenom (SQNM): Up 50%. Holy cow! Why didn't we bet the ranch (cause the wife won't let us -- and we don't own a ranch). Genomic Health (GHDX): Up 9%. Not bad. Qiagen (QGEN): Up 5%. Okay, so not as impressive. SeraCare (SRLS): Up 0%. Okay, not impressive at all. IBB ETF (IBB): up 8%. A general biotech rally clearly took hold. What to do now? Well today, the risks in the biotech market were evident as Medivation (MDVN)� crashed after releasing disappointing Phase III results for its Alzheimer drug, known as dimebon, saying that the drug was ineffective in treating cognitive decline or behavioral disorders. The stock plunged 67% to 13 on Wednesday. In a joint release Medivation and its partner Pfizer (PFE) said its two Phase III trials did not meet its co-primary or secondary efficacy endpoints compared to placebo. Our partner Raygent Associates, which has been following these developments, says: "Alzheimer Disease (AD) has proven to be one of the most difficult challenges for healthcare," with over 5 milliion individuals affected and estimated costs more than $600 billion. Drugs currently on the market have had minimal effectiveness. The bottom line: if you happened to wander into any of the biotech stocks, especially SQNM, in the last month, maybe it's time to book some of those large gains. But clearly biotech and diagnostics continue to be in bull mode and should be held in some amount in diversified portfolios.

Google's Telecom Move: Dumb Business or Smart Publicity?

Wed, 03 Mar 2010 17:40:10 GMT

Google (Nasdaq: GOOG), the most arrogant company in the history of business, wants to get into the megabroadband business.� I have been scratching my head over this one for weeks. I have no idea why they want to get into telecom. This is akin to a child telling a dad that they want to be an Olympic curler, rather than an NFL quarterback. I covered telecom for 10 years at Light Reading. We covered the ascent of the great telecom bubble. That was a lot of fun, but not as much fun as covering the descent of the great telecom bubble. Telecom is a really tough business. Let me boil down the telecom business from the Google executives who didn't get the memo: You need a crapload of money. You do this by borrowing it (like the big telcos), or in Google's case, by tapping your underground vault of cash. Then you spend it.� You spend it fast. You hire a bunch of really expensive engineers to design a complex, expensive network, and then you spend decades building it, praying like hell that in the end people will use it long enough before it becomes out of date. Last I checked, the average fiber installation to a home costs between $3,000-4,000, depending on a variety of factors, such as the density of the housing and whether the cables can be delivered in the air or need to be buried. Google says it's going to do this for up to 500,000 homes. Hmm. By my calculation, that's like $1.5 billion or so. Google says it's going to spend "hundreds of millions." That's the problem with telecom. It requires such huge amounts of capital that even when you are done building it, and it's successful, you realize it's going to be many, many years before you recoup your investment. Just look at Verizon and AT&T. They are massive companies, with massive cash flows. But they also have accumulated huge amounts of debt. Verizon has $63 billion in debt. That's right: $63 billion. On a market cap of $82 billion or so. AT&T has$72 billion in debt. This is what telecom does to you. It turns you into a capital-intensive debt addict. Now, I've mentioned Verizon and AT&T, but those are the successful telecom companies -- the ones that got their networks to pay for themselves. It's more fun to talk about telecom debacles. Remember the first iteration of Global Crossing?� That was a disaster, ending in the fourth largest bankruptcy in history. And my personal favorite, Iridium? Total, unmitigated disaster. Billions in capital thrown into an incinerator. Back to Google. Why the hell are they doing this? What's wrong with them? I supposed they are doing it for the publicity, and to aggressively push a broadband agenda. Fine. But it's not going to be good for their balance sheet. They are in a business, keyword marketing, in which it's mostly based on software and they can generate 60% profit margins. Why would they want to plunge into a low-margin, capital intensive business like telecom? My guess is they're doing this as an expensive publicity stunt that just won't pan out as the say. No, Google's not going to tank because of this experiment. It's just not going to deliver, because it's going to discover that delivering gigabit fiber broadband to hundreds of thousands of houses is a bigger pain in the ass -- and much more expensive -- than they think. Then they'll abandon it. Yest, it will end up just like their WiFi experiment, which faded into the Ether.

Oh Novell! Hickey Calls It

Wed, 03 Mar 2010 17:15:57 GMT

Funny how the market works sometimes. I had been looking into Novell, which was an interesting idea brought up by longtime tech newsletter publisher Fred Hickey in this year's Barron's roundtable. I guess he was right because today hedge fund Elliott Associates offered to by the company for $5.75 per share, a 25% premium over yesterday's market value. Hickey had pointed out Novell's large cash position making it an attractive stock. Nice job Fred! Wish we hadn't been slacking on that one. In the meantime, I'm holding onto my Sybase (NYSE: SY) another Hickey pick, based on improving fundamentals and solid cash flow.Sybase holds $14 per share in cash and trades at a forward P/E of about 15 at a $44 share price. What's interesting about Novell is that it's already trading above the buyout offer, indicating that the market thinks there may be other, higher offers. Definitely worth watching!

Cubist Update: Holding for Potential Breakout

Tue, 02 Mar 2010 15:17:02 GMT

It's time for an update on Cubist Pharmaceuticals (Nasdaq: CBST), a small, fast-growing drug stock we've been following here. Our technical and trading outlook has held to form (for once!), as we advocated picking up the shares in the mid-teens for a trade into the twenties. Yesterday the stock moved to new highs in 2010, hitting $21 bucks and change. This morning shares are off .20, but that's no big deal after a move of about $1.50 over two days. I still hold CBST and I'm not ready to sell it in case this rally gains momentum. The stock could easily trade into the upper 20s on a breakout above $22. To recap the Cubist story: The company grew 30% in 2009 and has a Return on Equity (ROE) of 60%. The general rule here at Rayno Report is we like growth stocks with an ROE that is higher than it's P/E. We started buying CBST with the P/E around 12. The valuation has expanded now giving CBST a P/E of 19. But given it's growth rate (30% in 2009, 160% over five years), that's still not too high. If the company lives up to its revenue growth plans in 2010, it can easly grow the valuation. So I'm hanging on to see what this company can deliver. Another item: CBST often comes up on the lists of potential acquisition candidates. Disclosure: Long CBST

Morning News Brew: Does a Watched Baklava Bake?

Tue, 02 Mar 2010 14:46:54 GMT

Incredible, isn't it, that weeks after we started watching for the baklava bailout, we're still waiting? Each morning the financial news is driven by news, rumors, and speculation about the how, why, who, and when around saving the Greek financial system. Here's the way I look at it: The Euros don't have a choice, they have to do something. A collapse of Greece could set any number of potential boogie-men in motion, including the tumbling of more derivatives dominoes, a chain reaction of debt-worries across southern Europe, and possibly, a collapse in the Euro. As much as the Germans hate this sort of thing, they will likely be forced to act. At any rate, whether it's right or wrong, that's my take. Let's look at the news this morning:

Greece set to outline austerity measures (Wall Street Journal)
German finance minister: Don't talk about what we're talking about on Greece (Reuters)
Reports: Greek bailout may come this week (HuffPo)
CF Industries renews pursuit of Terra (Wall Street Journal).
Poll says 31 percent of Americans think Toyota is unsafe (Reuters). But wait, that's not even enough for a simple majority.
Geithner and Summers in charge of finding new Fed governor (BusinessWeek). Oh dear, isn't that like the fox guarding the chicken coop?
New York Times jumps on takeover rumors (Boston.com). Please, somebody, put those shareholders out of their misery.
Four men charged in online ticket scam (CNET). Their computers bought 11,000 tickets to Boss shows. Impressive!
Weed killer 'castrates' male frogs (CNN). Now, taking away a frog's manhood is just not right.
Google is acquiring Web photo company Picnik (TechFlash). Terms not disclosed. But Picnik is allegedly profitable and has 22 employees.
Facebook users prefer Fox News to Google news (VentureBeat). Also rumored to take cream, rather than milk, in their coffee.
Android App can recognize a person and pull up their status updates (VentureBeat). No word on whether it lifts their wallet too.
If you press the F1 key in Windows XP, your computer might implode! (ComputerWorld).

That's it for today. Make sure you check the frogs in the garden, avoid the F1 key, and eat some baklava today before the world runs out.

Piling on Palm: Magnifying the Risk of Handset

Mon, 01 Mar 2010 14:54:14 GMT

Ever since Palm last week announced weak handset sales, folks have been piling on, telling us how much trouble the company is in. Funny how the market works, isn't it? Just a year ago, Palm was "a comeback story," according to some analysts. This may be a tale of trouble in the handset market: It's pretty hard to make the best "gadget," especially when you are trying to "come back" and challenge larger companies in the dominant position. I don't see how anybody is going to challenge the momentum of the iPhone and Research in Motion (RIM) in the current market. Here's a roundup of the "Palm is Dead" story: Palms survival at stake (MarketWatch) Time to start looking for a buyer, Palm? (AllThingsD) Watching Palm crumble (Motley Fool) Palm's last ditch effort (TheStreet.com) The funny thing is to contrast it with the stories of the "comeback": Palm's comeback story: Be the iPhone? (Motley Fool) Palm's comeback story: new phones, new Verizon deal (BusinessWeek) Palm ups its game at CES (Yankee Group) So which is it folks? Comeback or debacle? One of my principles of investing: Find places where it's relatively easy to make money -- or where, statistically, you could have a huge payoff on a long-shot. Palm doesn't seem to be the place. Competing with Apple, RIM, and now Android-powered devices seems like too much of a stretch. Investing in speculative smartphone comebacks in one of the most competitive markets extant does not seem like a healthy way to earn a living.

Market Thoughts: Watch the Wizard of Oz

Thu, 25 Feb 2010 16:05:08 GMT

How do you trade or invest in a market where the most volatile moves occur in 5-minute spams driven by computer algorithms on steroids, the average investor's involvement is limited at best , and the entire complexion of the market can be changed with one stroke of a pen by a government official. The answer: Very gingerly. Fundamentally, there are interesting parts of the market: you can find high quality, growing stocks with low valuations. But technically, the market is a mess. After plummeting to a low near S&P 650 in the panic bottom of 2009, the market has rallied back toward S&P 1150 It now sits at 1090, but the action is lackluster and the chart is certainly starting to look "toppy." The rallies come on low volume, and the selloffs come on high volume, which is a bad sign.

Then there's the huge, macro picture of the market. The economy is improving, but much of that has been engineered by deficit spending. There is a huge, direct correlation between the amount of liquidity the government has pumped into the market and the rally in stocks. This can be viewed almost as a direct transer of cash to the banks in the famous bailouts: The Feds bought Treasuries and mortgage-backed securities from the banks, and they took they took cash and and piled into risky assets such as stocks and commodities to gun their portfolios.

What now? Well, for the market to have another leg up, you need to find another source of liquidity, as the free government money dries up. We need the famous "cash on the sidelines" to get involved. Now, the problem with that is a lot of that cash has been used. Some of it went into stocks, some of it went into bonds, but a lot of the money has been put to work. In March of 2009, there was more money in money markets than there were in equities. As the equity markets rallied, more than $500 billion was drained from money markets and put to work in equities. I don't think you count on the cash from the average-Joe investors "on the sideline." This money includes money that people are stashing in their mattresses and keeping in their 401K for retirement. Following the events of 2008, the average investor is likely terrified to pour any money in stocks, especially if they are close to retirement. What will it take them to get involved? Probably a much improved economy and lower unemployment rate. Perhaps the best hope for the stock market is that as the low interest rates stimulate inflation, money will begin to flow out of bonds and into stocks. What about the Federal Government? That's the biggest source of cash and liquidity, and they have certainly facilitated this rally. If you wonder why investors shudder whenever government officials mention "withdrawing liquidity," it's because that liquidity has formed the basis of the economic recovery. The United States government acquired trillions of dollars of assets and injected cash into the system. You know what that means: The U.S. Federal Government (and American citizens) are left holding the bag. What will happen to these assets. Will the federal government, as discussed, start withdrawing the assets by selling them? What will they do with all the junk on their books? My guess is they will continue to hide it. As we see below, the federal balance sheet is still growing, not shrinking. In short, the Feds control the market. That's what's scary about the market, and why I call it the Wizard of Oz market. It's not being controlled by market forces anymore -- it's being controlled by the man behind the curtain. My best guess is that whenever market swoons come, the federal government will print more money. The will sit on these assets for as long as possible, until they have boosted the system sufficiently by printing money and creating inflation. You heard about zombie banks in Japan, yeah?

Twitter and Yahoo Deal Seems Meaningless

Wed, 24 Feb 2010 14:38:30 GMT

I am racking my brain trying to decide what to make of the deal in which Yahoo has announced a partnership with Twitter to more deeply integrate the two platforms.On the business side, there doesn't appear to be much near-term impact, as no money is changing hands or set to change hands. My first conclusion: What an awful press release. The headline is "@yahoo + @twitter Sitting in a Tree... T.W.E.E.T.I.N.G." Seriously. That's the headline. What are we in Kindergarten? On the technical side,� the deal is an acknowledgement by Yahoo that it will go with social networking services such as Facebook and Twitter rather than developing its own social networking platform. What's does this mean on the businsess side? I have no idea, but this "deal" is remarkable for its lack of any meaningful business exchange, such as money, revenue-sharing, salesforces, e.t.c. As far as the two platforms being integrated, it's somewhat of a meaningless announcement. The Web is integrating itself. Social networking services are about as integrated as you want them to be. What do I mean by that? Well, because of the proliferation of Twitter APIs and its integration with Facebook and tools like TweetMeme and TweetDeck, you can pretty much plug in Twitter wherever you want, right? The Yahoo announcement comes down to nothing more than them acknowledging that they need to open their platform to more successful social networking platforms, rather than trying to build social networking tools themselves. What about further down the road? On the money side, I imagine that Twitter has some vision of monetizing its feeds here, and possibly plugging into Yahoo's big marketing relationships in the future. Yahoo, meanwhile, wants the traffic. But there are some crucial questions here: Will the existing Yahoo advertisers want to advertise next to Twitter content, or would they rather be placed next to premium content? And how do you count the "Twitter traffic"? Is it the same as a page view on a Reuters story? I am skeptical of the business model here, primarily because most social networks so far have failed to lure the big advertisers, who aren't sure about advertising in the wilds of social networks.Look at what happened with MySpace. Third question: What exactly is Twitter. And what does it mean to be integrated with Yahoo? Well, Twitter is a messaging platform. So, Yahoo has basically decided to integrate a new third-party messaging platform, without paying them any money. I think that's all the deal comes down to. Read on for more news on the topic: Yahoo dramatically expands Twitter relationship (AllThingsD). Yahoo gets closer to Twitter (New York Times) Yahoo to announce broad Twitter partnership (PaidContent.org)

Hedge Funds Dumping Tech in Favor of Industrials

Tue, 23 Feb 2010 17:49:53 GMT

Some really good data has been published over at Zero Hedge aggregating the latest hedge fund data. The data, which comes from a variety of sources including Goldman Sachs, Compustat, and FactSet Rearch, indicates that hedge funds were collectively dumping tech stocks in favor of industrials in Q4 2009. This is an interesting development. Given that tech was the hedge fund flavor of 2009, maybe this indicates that the largest industrials may be their favor of 2010? It could also just be indicative of profit-taking on tech in Q4 into year-end. Some of the most heavily sold stocks included National Semiconductor (NYSE: NSM), Fidelity National (NYSE: FIS), eBay (Nasdaq: EBAY), and F5 Networks (Nasdaq: FFIV). Some of the most heavily bought stocks included Stanley Works (NYSE: SWK), A123 Systems (Nasdaq: AONE), and FedEx Corp. (NYSE: FDX). Nice graph of the major trend developments here. Of course, that is just the tip of the iceberg. The data is comprehensive. Take a look.

Pravda Predicts: Multiple "U" Recovery, Many Bikinis

Tue, 23 Feb 2010 16:21:50 GMT

Pravda always makes for some interesting reading, whether you are an Oligarch, a Marxist, or a Capitalist. They have been putting out some interesting stuff on the "Death of American Capitalism" lately, always a fun read. But what I find peculiar about Pravda is while at the same time it is predicting the end of American capitalism, it seems obsessed with American celebrities in bikinis. For example, from today's Pravda, we have a column titled "The American Self Immolation, Truly a Sight to See." What a title. Here's an excerpt:

It can be safely said, that the last time a great nation destroyed itself through its own hubris and economic folly was the early Soviet Union (though in the end the late Soviet Union still died by the economic hand). Now we get the opportunity to watch the Americans do the exact same thing to themselves. The most amazing thing of course, is that they are just repeating the failed mistakes of the past. One would expect their fellow travelers in suicide, the British, to have spoken up by now, but unfortunately for the British, their education system is now even more of a joke than that of the Americans.

Yet another Pravda column, "Amercian Capitalism Gone with a Whimper" preoccupies itself with sophisticated economic analysis of American and its eminent demise:

It must be said, that like the breaking of a great dam, the American decent into Marxism is happening with breath taking speed, against the back drop of a passive, hapless sheeple, excuse me dear reader, I meant people.

True, the situation has been well prepared on and off for the past century, especially the past twenty years. The initial testing grounds was conducted upon our Holy Russia and a bloody test it was. But we Russians would not just roll over and give up our freedoms and our souls, no matter how much money Wall Street poured into the fists of the Marxists.

Colorful stuff!� And not without some truth. What I find most entertaining about this anti-Capitalist rants in Pravda, however, is that they are surrounded by Google keyword ads and suggestive bikini shots of� rich capitalist celebrities! Funny stuff. What an ironic juxtaposition! Such you have the irony of the socialist-driven culture: You are tained to share everything� at the same time bombarded with images of what the rich people have at the same time! It's almost masochistic, isn't it?

�

Survey Says: Windows 7 Adopted Twice as Fast as Vista

Tue, 23 Feb 2010 15:49:20 GMT

The Rayno Report has been carefully tracking the Windows 7 adoption cycle, with the premise that there was pent-up demand for Windows upgrades and new PCs and technology in general. A recent survey says that Windows 7 adoption is preceding at twice the pace of the Vista. Now, you could spend a lot of time arguing about whether this is because Windows 7 is a great operating system or whether it's because Vista was such a dismal failure, but that's not the point. The point is that this means there was demand for upgrades and that this should help the software and PC industry at a time when it's desperate for any kind of growth. From the report, in Computerworld:

Windows 7's trajectory has been faster than Vista's ever since the former's release, with the newer operating system beating Vista to the 4% mark by several months. By the end of January 2010, Windows 7's usage share was 7.5%, also double the 3.75% that Vista enjoyed by the end of its fourth month.

Read the whole article here.

Tuesday Morning's News Brew

Tue, 23 Feb 2010 15:19:53 GMT

Good morning on this winter day. I realize it's been a particularly brutal winter in many parts of the United States and Europe, but just be thankful you don't live in Siberia (not sure if we have any Siberian readers yet).The town of Hoseda-Hard, Russia hit the second-coldets temperature on recored in Europe last week, at -70 degrees F (-56 C). To warm things up, lets take a look at some news:

Stocks open down on falling consumer confidence numbers (Bloomberg)
The Apple "Sexy Ban" is still percolating in the newsprint.
Apparently Apple's ban includes apps developed by swimwear companies. The great 2010 Bikini Ban is on!
The swimwear is gone, but not all the adult apps! (PCWorld)
There are 50 million Tweets going off per day, says Twitter.
Home prices slipped in December, but the annual rate of decline has slowed (Reuters). Always when reassuring when the economic "good news" is that things aren't getting worse as fast as they were.
Gartner says the handset market will rebound in 2010 (Reuters). In other news, Gartner's magic quadrant will be moved slightly up and to the right.
Ah yes, nice to have a job on Wall Street, isn't it? Bonuses moved back up 17% in 2009 (Wall Street Journal).
A Microsoft executive has compared living without Google to quitting smoking. This writer decided to give it a shot. Yes, and a life without windows might be akin to giving up the sauce (CNET).
European banks face one Trillion Euro in debt rollovers (Telegraph).
French air-traffic controllers have gone on strike (EuroNews).
Oil can't quite hold $80 (Wall Street Journal).
Star Trek fans set nerd world record (joystiq). That's 99 Star Trek costumes. C'mon now, we can do better than that! 99?
Cool picture of Endeavour landing.

Monday News Wrap

Mon, 22 Feb 2010 16:06:40 GMT

Here are some of the bigger headlines around this morning:

Michelin Man Meets Stonehenge to Birth an Olympic Rock Star. Is that really a Wall Street Journal headline?
Sadistic finance article of the day: "Europe's monetary union has become of instrument of deflation torture." Yes, always leave it up to Ambrose Evans-Pritchard to come up with the uplifting angle.
Remember what we were saying about deep-water drilling? Schlumberger says it's driving the Smith acquisition (Wall Street Journal).
Toyota cited $100 million savings after limiting recall (New York Times). Oops.
Geithner: independent consumer agency needed (Reuters). Yes, creating more spineless bureaucracies will fix our problems.
Lowe's grows quarterly profit (Triangle Business Journal). It turns out that people still need to buy light bulbs and house plants, after all.
Carl Icahn seeks four seats on the genzyme board (New York Times). Is Carl Icahn the kind of guy who also makes 4 trips to the salad bar?
Experts close on Google hackers (Financial Times).
Apple removes over 5,000 apps (Apple Insider). Cries of hypocrisy abound. Can you believe the yanked the "Wobble iBoobs" app?
Facebook has acquired a Malaysian company called Octazen Solutions (TechCrunch). No, I didn't just make that up.

Broadpoint: Semis and LLTC Can Move Up

Fri, 19 Feb 2010 12:15:29 GMT

Broadpoint AmTech this week upgraded Linear Technology (Nasdaq: LLTC) to Buy from Neutral. The reason we think this is particularly interesting is that the upgrade comes from Doug Freedman, Managing Director of Broadpoint, who used to work at Linear Tech. We're not saying he knows any non-public information, of course, but we are saying he knows�the company and industry very well and has good sources. He is also the highest ranked analyst covering LLTC, as measured by StarMine. Broadpoint says that the Street consensus is missing the industrial demand part of Linear's business, which is strengthening.Broadpoint's revenue and EPS estimates for Linear are now above that of the the Street consensus. Some highlights of the report:

Mix-shift growing increasingly favorable. In our view, the Street is missing the magnitude of ongoing industrial (45%+ of sales) strength, the benefits resulting from its lower exposure into competitive high-volume markets (largely consumer-based), and that its focused tier one (Huawei, CSCO) solutions are limited to diverse higher-margin proprietary products.

Earnings power is underestimated. We expect above-market performance, in-line with our broader Overweight Semi thesis, as the stock is likely to benefit from continuous and steady shipments into under-shipped end-markets, particularly Industrial (late-cycle recovery) and Communications (US and China orders) with possible share gains resulting from sustaining low lead-times (~4 weeks). Consequently, we model more growth for CY1Q10 (now +10% vs. prior +8.5%) and expect a sub-seasonally flat 2HCY10. As such, our FY10 (June) and FY11 pro forma EPS, including SBC, estimates are now $1.51 (vs. prior $1.48, and Street $1.45) and $1.90 (vs. prior $1.79, and Street $1.76) respectively.

Cost controls likely better than we previously expected. We are increasingly confident that management will be able to maintain flat expenses Y/Y (as a percentage of sales), near 24% in FY11 (vs. our prior 25%). When coupled with higher sales estimates, we believe FY11 Operating Income will increase to 55% (vs. prior 53%).

Broadpoint is generally bullish on semiconductors, but specific to Linear, it points out that the company has good earnings leverage. It expects that growth in the industrial market segment as well as a benefit from Chinese stimulus spending will drive an influx of new orders. If you are looking at the stock, of course, the question is whether this information is already "baked in." If you believe, as BroadPoint does, that there is more earnings leverage in the stock and that 2010 earnings can move to or beyond $1.51, the stock can move up. However, currently, priced at $27, Broadpoint's earnings estimate for 2010gives the stock a forward multiple of 18. So, it's not the cheapest stock on the block.

Technically, the stock has pulled back quite a bit from the highs in the Q4 of 2009, so if you are thinking of taking the plunge, now's the time.

(Disclosure: no position in LLTC)

Time to Pile on NBC's Olympic Absurdities

Thu, 18 Feb 2010 21:29:27 GMT

The outcry and complaints about the NBC Olympics coverage are escalating. And NBC is sitting on their hands. What's the beef? The fact that they show very little of anything live, when they do it's nearly impossible to find, and they've reduced prime-time to dumbed-down snippets of the stars. In theory,� NBC has the capability to show as many events in entirety as they want through their numerous cable channels: NBC, MSNBC, CNBC, and NBC-Unisersal. How can they screw it up so badly? Oh, that's right, it's NBC -- they've become very good at screwing things up! Here's a rundown of valid attacks circulating the media:

Google: Patronizing Poseurs Gone Wild?

Thu, 18 Feb 2010 18:23:29 GMT

Leave it to my good friend, ex-colleague and former boss Stephen Saunders to stir up some trouble among the Silicon Valley technorati. Can you really blame him? Nobody needs the piss taken out of them more than Google. In the video below, Saunders nails just about everything that is wrong with the rah-rah, touchy-feely, do-no-evil culture that is Google:

Bullish on Diagnostics (Part II)

Thu, 18 Feb 2010 18:05:18 GMT

�Yesterday, we gave you an intro to why the clinical diagnostics sector looks primed for sustainable growth.� Many sources paint an optimistic scenario for the In Vitro Diagnostics (IVD) market.�In a�report from the Embargo Group of Austin,Tx, a survey of executives in the IVD and medical device industries said that 71% of the executives expect overall sales to increase in 2010 and 70% felt positive or somewhat positive about the overall business environment. Despite declining prices due to lower reimbursement for tests and increased competition, IVD companies are betting on strong returns from new products in advanced lab automation and molecular diagnostics.� Enterprise Analysis Corp.(EAC)� forecasts a 2010 growth rate of 6.1% for the industry versus 5.3% in 2009. Another trend in the IVD marketplace is that there is solid evidence of the diagnostic test value through health economic studies.

3GSM/MWC Boiled Down to 20 Items (or less)

Thu, 18 Feb 2010 08:00:18 GMT

Okay, so I'm superficial. I like to simplify things, boil them down. Also, I'm not in Barcelona, so I can afford to make aloof comments about news developments thousands of miles away.� I'll try to filter things for you -- here's some highlights of things happening at the big Mobile World Congress show in Spain this week:

Microsoft launched Windows Double-secret Mobile System Mobile Phone 7, or something like that. Here's a cool visual tour. Actually it's called Windows Phone 7. The old Windows Mobile was called Windows Mobile. Why the name change? Lord if I know. Obviously they pay expensive consultants to make these decisions. They didn't stop there -- they may be renaming Windows Mobile 6.5 as "Windows Phone Classic." As if an operating system can be classic, like a Cola.� I know one thing, if you have both "Windows" and "7" in the name, it doesn't exactly scream cutting edge, new, and earth-shattering, does it?

Clinical Diagnostics for Growth (Part. I)

Wed, 17 Feb 2010 21:43:07 GMT

The health-care debate is drawing lots of attention to problems: rising medical costs, the Medicare budget, need for better clinical outcomes, and the push for biogenerics. This has caused a lot of concern among investors and limited returns in the healthcare sector. But biotechnology is evolving particularly in genomics, robotics and cell biology, and opportunities still abound where there is true innovation. M&A activity has picked up, even though funding for venture start-ups, equity for public companies, and IPOs have slowed to a trickle. This means that companies in the diagnostic sector that already have the cash flow or a strong balance sheet, product sales,� and platform technologies �can take advantage of this environment because diagnostic tests have become faster, better and cheaper with the added blockbuster of molecular medicine that can ultimately deliver lower costs of treatment and better clinical outcomes. Below are some thoughts on specific stocks to watch in this space.

Hank Paulson: Former Treasury Secretary, Book Author, or Megalomaniac?

Wed, 17 Feb 2010 00:14:52 GMT

What's this today in the New York Times? Hank Paulson has penned an incredibly patronizing, simplistic and revisionist "Op-Ed" titled "How to Watch the Banks." Is that title a one-liner? Upon first reading this insulting exercise in pedantry, I sat in shock that somebody could really think the American public could be so stupid. '"Watch the Banks." Seriously, Mr. Paulson -- or can I call you Hank -- really? Isn't it a little late to watch the banks? And dude, wasn't that YOUR job? Oh, wait, Hank -- that's right. You didn't lose any money, at all. That's because you conveniently, as the Treasury Secretary, had already sold all your hundreds of millions of dollars in Goldman Sachs stock, for which you were exempted on paying capital gains taxes on, and most of that actually ended up going UP in the crisis because you put a whole lot of that dough into Treasury bonds and the government bought treasury bonds. That's right, by becoming Treasury Secretary, Hank, you saved hundreds of millions of dollars in taxes. Nice trade, bro! Talk about talking your book, Hank!

Bloomberg Earnings Survey is Bullish

Tue, 16 Feb 2010 20:41:49 GMT

Bloomberg is out with a story saying the that a divergence is emerging between what companies are predicting will happen to their earnings (they will go up) and what Wall Street analysts think will happen to earnings�(they will go down). This historically indicates�the stock market rally can continue. Ten percent of companies raised their earnings forecasts this quarter, while 4.1 percent lowered them, says Bloomberg, which cites historical data from Bespoke Investment Group indicating that's the widest spread on record. What's interesting is that stock analysts are still so skeptical of corporate profits in 2010, even though companies are telling them they'll earn more. From the Bloomberg story:

The divergence may force Wall Street firms to increase estimates later this year, a bullish signal after the largest monthly drop for equities since February 2009. The last time companies were raising forecasts at a comparable rate while analysts reined them in was the start of 2004, when the S&P 500 gained 9 percent. “Wall Street analysts are still very gun-shy of predicting a real recovery in earnings,” said David Kelly, who helps oversee $480 billion as chief market strategist for JPMorgan Funds in New York. “It tells us the stock market is cheap. The chances of companies beating estimates are extremely high.”

So do Wall Street analysts know something that the companies don't know, or are they just out to lunch? My bet, based on historical experience, is the latter.

Can Microsoft Be Relevant Again in Mobile?

Tue, 16 Feb 2010 16:22:20 GMT

Today there's a barrage� of news streaming from the Mobile World Congress show in Barcelona (I miss the tapas), and I see two news items dominating: The new HTC phone, based on Google Android; and Microsoft's release of its new Windows Mobile 7 operating system. It leaves me wondering: can Microsoft be relevant in the mobile market again? To be fair, Windows 7 mobile is getting good reviews. Why, even "bloggers" like it, so it must be hip. Steve Ballmer can be seen in the clip talking about the Windows Phone 7. But even if this is a successful release, I'm trying to imagine an endgame in which Microsoft wins in mobile, and I can't. First big problem with Windows 7: Windows 7 i s a descendant of the Zune operating system, which couldn't be a good thing. The last time I saw a Zune, it was in the hands of a teenager on the train to Hoboken, N.J., who was being mercilessly needled by his friends: "You have a Zune... bahahahahah!" (actually, I totally made that up. But it seems real, doesn't it?) Here's the bottom line: Microsoft has been losing market share in mobile (see the latest Comscore data below). It's way behind Research in Motion (RIM), which happens to be a company focused on mobile. In releasing a new operating system, Microsoft is going up against the fastest growing development communities out there: The iPhone and Android. It's clearly not going to generate as much buzz as those two. Developers and users just aren't as interested in a Microsoft mobile product. [caption id="attachment_1192" align="aligncenter" width="255" caption="Comscore Inc. puts Microsoft's recent smartphone market share at 18%.i"][/caption] Why is Microsoft being so stubborn in the mobile market? I guess it's because Windows Mobile 7 is an "operating system," and Microsoft feels as if it's an operating system company. But the fact is that it's in third place, chasing people Symbian and RIM, while at the same time Apple, and Google are gaining momentum, has got to be troublesome. What's it mean for� Microsoft stock? Not sure whether it's related to Windows 7 mobile or a general market rally, but Microfsoft shares were up 1.55%, to $28.23, in early trading Tuesday.The Rayno Report has made the bullish case for the stock before. We're not sure Windows 7 mobile matters to the stock much anyway, given that it's a small part of Microsoft's business. (Disclosure: Long MSFT).

Google Climbs Down to the BBC

Tue, 16 Feb 2010 14:38:50 GMT

After the gigantic Google Buzz cockup, as they say in Britain, Google has gone on the record with the BBC as saying it did insufficient testing of its new social networking product, which had privacy flaws exposed last week. Last week the Web exploded with complaints from Buzz users about inadequate privacy features and email address book loopholes. The BBC story says that Google only tested the product internally and did not try it out with external users. From the BBC story:

Google said that it was now working "extremely hard" to fix the problems. "We're very early in this space. This was one of our first big attempts," Todd Jackson, Buzz product manager, told BBC News. "We've been testing Buzz internally at Google for a while. Of course, getting feedback from 20,000 Googlers isn't quite the same as letting Gmail users play with Buzz in the wild." Many of the firm's new services are tested by the so-called Google Trusted Tester program, a network of friends and family of Google employees who are given confidential access to products before they launch. Buzz was not tested by this program.

Read the whole story here.

Possible Yuan Revaluation: More China Chaos

Mon, 15 Feb 2010 21:57:38 GMT

There are increasing signs that China's heading for big economic changes, and that will likely fuel an increase to the market chaos. The most recent speculation involves a potential upward revaluation of the Chinese Yuan against foreign currencies. Goldman Sachs Chief Economist Jim O'Neill (no lightweight) -- says that something is brewing in China as they may be preparing the revalue the Yuan higher by�as much as 5%. This would represent another leg of Chinese monetary tightening. China has been tightening its monetary policy by requiring banks to increase reserves. It has a history of raising reserves repeatedly when it goes into a tightening mode. A Yuan revaluation would represent a big move to cool off growth and stave off inflation, which has been increasing in China. Marketwatch reports that real-estate prices on the Chinese vacation island of Hainan have increased 30% in one week.� That's almost the definition of hyperinflation.