The Rayno Report

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:

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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.

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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.

Mobile World Congress: Adobe Turns it up a Notch

Mon, 15 Feb 2010 18:17:19 GMT

An interesting little battle is� developing on the mobile front with video. You see, as many people complain, the Apple (Nasdaq: AAPL) iPhone does not include Flash support. Neither does the iPad. Coincidence? I think not. Steve Jobs has not masked his disdain for Adobe. Today, Adobe (Nasdaq: ADBE) announced a series of products designed for Google's Android platform, trying to hush the noise over the "Apple ban" and throw its support behind the "more open" mobile platform. Here is an excerpt of some good analysis from ReadWriteWeb:

Today at the Mobile World Congress 2010, Adobe announced several initiatives designed to cement their company's relevance in a world where Apple, one of the top smartphone players, has banned Adobe software from inclusion on all mobile devices including the iPhone, iPod Touch and the soon-to-launch iPad. Without Adobe's Flash runtime, thousands of websites don't work, streaming videos won't play and a number of online casual games are broken. Apple, of course, is fine with this, having worked around the issue thanks to the 150,000+ iPhone applications that deliver the same functionality...although sometimes for a fee. Adobe, meanwhile, is focusing on the other up-and-coming smartphone platform, Google's Android OS, with the launch of their "AIR for Android" offering. With this and the newly announced Flash Player 10.1, wannabe mobile developers don't need to learn specialized code, but can instead leverage their existing development skills to build Flash and AIR-based applications. They can then have those apps run anywhere: PCs, Macs, Linux and mobile...including, surprisingly, the iPhone.

You can read the whole story here. The Adobe propaganda is here. Funny how these little techno-political battles get in the way of making users happy, isn't it? A while back, Jeremy Allaire, the founder and CEO of Brightcover, published a very good overview of the strategic battle brewing between Adobe and Apple on the mobile video front. It's going to get nasty. With the growth in mobile and an explosion of video on the Web, it's only natural that the two of them come together. That means positioning your company for mobile video growth is so strategic. Will HTML 5 win because of Apple's ban?�It's probably going to be messy for years to come. That's bad for the consumer, which nowadays is forced to chose among a variety of propietary formats for mobile video. I like Jeremy Allaire's conclusion:

While it is easy to take a binary position in the future of content applications and run-times, it is evident that the competing interests of platform vendors, consumers and app and content publishers will ensure that this remains a fragmented and competitive environment for many years to come.

His full column: The Future of Web Content -- HTML5, Flash & Mobile Apps

A Speculative Look at Tonight's NBC Olympic Coverage

Mon, 15 Feb 2010 17:42:55 GMT

6:00PM Pre-Olympic coverage featuring Bob Costas 6:10:00--6:20PM Bob Costas: exclusive Apolo Ohno interview 6:20PM Figure Skating: Doubles long-form 6:30PM Profile: Apolo Ohno, gifted child. A touching mini-documentary of Apolo Ohno's elementary school experience, featuring an interview with his math teacher.

Why the Olympics Video and Web Experience is Broken

Mon, 15 Feb 2010 14:47:53 GMT

Had a frustrating weekend trying to tune the family into the Olympics. Eventually I may work out the bugs in�our "personal Olympics experience," but it is amazing to me that this day and age of "advanced interactive video" technology, it is so difficult as a�consumer to find what you want. Here's a list of problems I've encountered:

Keys to Avoiding Gullibility

Mon, 15 Feb 2010 14:18:54 GMT

Did you ever wonder about how things like the Home Shopping Network are so successful? That's right, because people are gullible. Lots of people. That's why there are so many rich people who sell things on TV. I am a regular reader of Guy Kawasaki's blog, and I came across this funny piece on his blog today, "How to Avoid Gullibility. Unfortunately, if you are trading or try to invest in the stock market, there are pitfalls of gullibility ever day. First step: Turn off CNBC.

Who among us have not fallen for a stupid idea, pitch, or proposal? At some level, we’re all gullible where “gullibility” is defined as “an unusual tendency toward being duped or taken advantage of.” Fortunately, Stephen Greenspan has written a book called Annals of Gullibility: Why We Get Duped and How to Avoid It. In the conclusion of his book, Greenspan explains how to become less gullible:

Read the rest of "How to Avoid Gullibility."

America's Fiscal Status: Worse Than Estonia

Sat, 13 Feb 2010 16:03:18 GMT

The world of debt stats and� Credit Default Swap (CDS) information� is like a Freddy Krueger movie. If you don't want to be scared, cover your eyes. Credit Suisse is out with some stats that show the United States climbing the ranks of countries with potentially insolvent and disastrous fiscal conditions. The United States of America, once considered the world's economic stalwart, is apparently sandwiched somewhere between Italy and Estonia in terms of account balance, debt, and CDS spreads. I could narrate, but the chart says it all.� Here's some fun cocktail party conversation for the weekend: Pick a country that ranks as less risky than us, and relate it to your friends:� "Did you know that _____� (Indonesia, Columbia, and Kazakhstan) has a better financial condition than us, according to Credit Suisse? "� Then reach for the nearest cocktail. Preferably something stiff, on the rocks.

[caption id="attachment_1126" align="aligncenter" width="504" caption="Credit Suisse Indicates that America's fiscal condition now ranks somewhere between Italy and Estonia"][/caption]

Google's Major-League Fail

Sat, 13 Feb 2010 00:24:41 GMT

Wow, I go out to pick up the kids and get a cup of coffee (okay, so maybe I also returned some library books), and I come back to find out that the Web is melting up in a huge Google Buzz backlash. Fun! Google (Nasdaq: GOOG): for a company so large, with billions of dollars in profits, you really did screw this Buzz thing up. The bottom line is there are huge privacy loopholes in the Buzz/Gmail monster creation which are exposing people's address books to the great unwashed, and a whole load of people are complaining. One Gmail user now fears for her physical safety, and blames Google. And she's expressing it in a clearcut way. How will Google respond to this? Will they apologize? Will they get sued? It's amazing when you think about it. So far all we've heard from Google executives is a bunch of wishy-washy feel-good techno-smack. They've responded with "product tweaks," oh yay! This could represent a landmark moment in the evolution of Google as a public company. Will they grow up? Here's a great summary of the problem from Silicon Alley Insider (or is it Business Insider? We never figured that out...):

The problem is that -- by default -- the people you follow and the people that follow you are made public to anyone who looks at your profile. In other words, before you change any settings in Google Buzz, someone could go into your profile and see the people you email and chat with most. A Google spokesperson asked us to phrase this claim differently. Like this: "In other words, after you create your profile in Buzz, if you don't edit any of the default settings, someone could visit your profile and see the people you email and chat with most (provided you didn't edit this list during profile creation)." (Freaking out already? Here's how to IMMEDIATELY make these list private and then edit them >)

And here's a news roundup of more chatter about the Google Buzz meltdown from across the transom:

Google May Strip out Buzz from Gmail (From SearchEngineLand -- Google better hurry folks!)
TechCrunch says no, but it may be turned into another Web app.
Here's the clarification, or something, from VentureBeat.
Best Headline: "Wake, up, Google: The World Is Really Pissed Off About Buzz." (Silicon Alley Insider)

Should be an interesting weekend for many Google executives. Maybe they are consulting their official "Don't Be Evil" handbook to figure out what to do.

Friday's News Brew: China Turns the Screws

Fri, 12 Feb 2010 15:13:28 GMT

Good morning, and Happy Friday! Pick a baklava or a profiteroles below. Never a dull moment here in the global markets, as this morning China has once again tried to slow down its economic growth by tightening reserve requirements. Meanwhile, the Euro-area ministers contine to come up with vague and unspecified solution to the Mediterranean debt crisis. Here's what's happening this morning:

China is ordering banks to set aside more reserves for the second time this month (Bloomberg). Hmmm. What are they worried about?
Euro growth slowed (Wall Street Journal).
So far, the Baklava Bailout hasn't happened. All we've got are really vague guarantees (The Telegraph).
EU "bickering" held back a real agreement (Reuters). Rumor has it they couldn't agree whether to serve baklava or profiteroles.

Hey look: It's a "rare bipartisan agreement." (New York Times). But wait a few minutes before they start throwing toys at each other again.
What, me worry? Retail spending was up 5% over last year's levels at this time. (CNN)
Google's Buzz is creating the wrong kind of buzz -- as questions over privacy roil the "blogosphere" (Foreign Policy). Feel like giving away all yer email contact info?
Online video sharing site Veoh has filed for bankruptcy (Dmitry Shapiro).
Why exactly does the tech blog aggregator site Techmeme link to the Google Code Blog?
Microsoft thinks the iPad is silly. That's why they are considering developing Office for it. (T3)
Private equity players have acquired SkillSoft for $1.1B in cash. All cash! (New York Times)
Berkshire Hathaway is joining the S&P index (Wall Street Journal). Funny, it took S&P decades to realize Warren Buffett was a Blue Chip boss?
The City of Chicago has decided to build an airport runway on top of a cemetery.
One in three women watch porn. (Courier-Mail Australia) Much higher than I thought. Leave it to the Aussies to dig this one up.
Olympic hockey Primer (Gunaxin Sports). Get the puck outta here.
A 1,200-year-old tree that was onced saved by King Henry II has died. (GreenAnswers.com).
Time says global warming is to blame for blizzards. Yes, counter-intuitive a bit, isn't it. Not that I know anybody that reads Time.
Bees are addicted to caffeine and nicotine (University of Haifa).

Feds Want Warrantless Mobile Phone Tracking

Thu, 11 Feb 2010 18:57:28 GMT

Another sad news item about government intrusion today. I guess it's confirmed, personal�liberty is on the permanent decline and George Orwell's future has arrived.�The federal government now wants to track your mobile phone use -- without a warrant! Where does it end? First, the Supreme Court gets sponsored by {whomever}, now Uncle Sam gets to tap your phone calls, whenever. From CNET:

Even though police are tapping into the locations of mobile phones thousands of times a year, the legal ground rules remain unclear, and federal privacy laws written a generation ago are ambiguous at best. On Friday, the first federal appeals court to consider the topic will hear oral arguments (PDF) in a case that could establish new standards for locating wireless devices. In that case, the Obama administration has argued that warrantless tracking is permitted because Americans enjoy no "reasonable expectation of privacy" in their--or at least their cell phones'--whereabouts. U.S. Department of Justice lawyers say that "a customer's Fourth Amendment rights are not violated when the phone company reveals to the government its own records" that show where a mobile device placed and received calls.

Hmmm. "No reasonable expectation of privacy." That says it all, doesn't it?

Inside the Online Video Bonanza

Thu, 11 Feb 2010 17:41:18 GMT

There has been a lot of debate about the value of the online video market, with respect to companies such as YouTube (owned by Google), Hulu.com, and others. I would include Netflix (NFLX) because even though most of its current business is an analog "envelope by mail" DVD compay, it's clear that the future of Netflex will be streaming digital content into your home. The critics of online video have an argument that goes something like this: "It's way too expensive to deliver online video, the people delivering it are subsidizing the delivery, they're losing their shirts, there is not enough advertising for free delivery, e.t.c." Here's why they're wrong: They are not paying attention to technology innovation and what's happening to the cost to deliver online video, which is plummeting faster than the Greek stock market.

The Baklava Bailout: Today's Shopping List

Thu, 11 Feb 2010 16:53:20 GMT

The market tone is improving immensely. I expect that some kind of European "Baklava Bailout" plan is in the works and will be announced either Friday or Monday. In the meantime, I have been poring over stock screens and doing some analysis to see what kind of stuff has become irrationally cheap in this sell-off. I am selectively and cautiously picking up a few shares here on there based on value screens. What do I look for in screening stocks? Generally I look for stocks whose price/earnings ratios are cheap relative to Return on Equity (ROE), or their growth rate, or preferably, both at the same time. In other words if a company has an ROE of 30 and is growing 30% a year, but the P/E is 15, that's a cheap stock. Some of these stocks are redundant to my "Portfolio," but many have gotten even cheap since the beginning of the year, so I will add to them.

Company	Symbol	Market Cap	ROE	5-yr�� growth	P/E�� (forward)	Categorization
Microsoft	MSFT	245B	41%	10%	13	Tech, value, d
Apple Computer	AAPL	178B	32%	39%	19	Tech Growth
Sybase	SY	3.3B	18%	8%	15	Tech Growth
Gulfmark Offshore	GLF	636M	12.90%	26%	9	Energy

Apple is starting to get real cheap. The market is either pricing in financial Armageddon or Steve Jobs' head exploding. It has billions of cash, a new product, a 30% growth rate, and a P/E under 20. Haven't seen it this cheap in a while. Disclosure: Long AAPL, MSFT, SY, GLF

Comscore's Year in Review: Video and Smartphone Boom

Wed, 10 Feb 2010 19:56:20 GMT

Comscore has issued it's 2009 Year in Review, which is filled with interesting data about Internet trends. Two glaring elements stick out: The growth of consumption in online video as well as the use of smartphones. "Online video viewing accelerated in 2009, with 19 percent more people in the U.S. viewing more videos for longer periods of time," according to comScore Video Metrix, says the report. "In December 2009, 86 percent of the total U.S. online population viewed video content. Americans also viewed a significantly higher number of videos in 2009 versus the prior year, due to both increased content consumption and a growing number of video ads being delivered. " The growth is concentrated in two of the leading video portals, YouTube and Hulu.com. On Hulu alone,� viewers watched more than 1 billion streams for a combined 5.8 billion minutes in December of 2009, that's up 140% versus year ago. The average Hulu viewer watched more than 2 hours of online video during the month, says Comscore. Comscore's data indicates that more video viewing is occuring out of the mainstream, with more video being consumed from niche or "long-tail" sitews. For example, Comscore says the majority of online video content ranked outside of the top 25, "suggesting the increased fragmentation" of the video market . Mobile is, of course, also a big play. Smartphones hold only about 17% of marketshare, but they are eating into that share rapidly. Comscore says the data indicates accelerating use of smartphones. "With so many new smartphone models reaching the market in 2009, the next year promises a rapid increase in market penetration of these devices, which likely means a corresponding uptick in mobile web usage." That's key to understanding growth in the mobile market over the next few years: The mobile Web is going to open up an whole new world of opportunities, especially in the consumption of applications and online data services.

ISIS Gets Whacked for 15%

Wed, 10 Feb 2010 19:53:02 GMT

Every once and a while, it's good to remind yourself what can happen to speculative biotech stocks when clinical data is released. Clinical concerns spur a big sell-off� in Isis Pharmaceuticals Inc. (Nasdaq: ISIS) shares today, which are down 14.6% to $9.40 on volume of 10.6M shares The Mipomersen Phase 3 study in patients with Heterozygous Familial Hypochesterolemia, a genetic disorder, met its primary endpoint but investors were worried about potential side effects such as liver enzyme elevations. The trial goal was met as Mipomersen met its primary endpoint with a highly statistically significant 28% reduction in LDL-cholesterol after 26 weeks of treatment compared to a 5% reduction with the placebo. Isis’ partner Genzyme intends to seek approval in the U.S. and Europe in the first half of 2011. Mipomersen works by decreasing the production of apo-B, which provides the structural core for all atherogenic lipids, including LDL-C, which carry cholesterol through the blood stream. Isis is a leader in the discovery and development of microRNA (or antisense) therapeutics for treating a wide variety of diseases and the Company holds 1600 patents worldwide. Isis has 22 drugs currently in development and three are in Phase 2: 113715 which inhibits PTP-1B an insulin synthesizer for the treatment of Type 2 diabetes, OGX-011 which inhibits clusterin and is overexpressed in response to cancer treatments and LY2181308 which inhibits survivin another overexpressed protein in cancer. ISIS stock is 81 % institutionally owned with big holders in order as of 9/30/09: Fidelity, Federated, Vanguard, Barclays, and State Street. The XBI ETF has an overweighted position of about 4% and the IBB has a less than 1% holding. Holdings should be reviewed at month to see who was selling The ISIS market cap is now under $1B and technical damage to the stock is fait accompli so barring a bear market in biotech the stock should stay in a $9-10 trading range. Stockholder equity is $306M and ISIS investors have invested $682M (Retained Earnings negative) since inception net of partnership revenues of $1.6B .ISIS is positioned as a “direct route from gene to drugs”. Rod Raynovich is the founder of Raygent Associates (www.raygent.com) and a regular contributor to the Rayno Report.

Cheap Stock: Gulfmark Offshore

Tue, 09 Feb 2010 19:10:11 GMT

I have been watching Gulfmark Offshore Inc. (NYSE: GLF) for a while, just seeing exactly how cheap it can get. It is now trading at a forward P/E of 9 making this a very cheap stock. Gulfmark supplies offshore support for energy drilling operations. Deepwater offshore drilling is one of the biggest growth segments in the energy segments, with new discoveries being found very deep under the sea. It is an innovative company, ranked #35 on the Forbes Best Small Companies list. The company has grown revenue 60% since 2006, and it has grown earnings more than 200%. This year, business has slowed down, but if the global economy is indeed picking up I would expect increased demand for offshore drilling services. Estimates for profit next year are for $2.74 per share. If you give the stock a P/E multiple of 10, it should be able to trade up to $27 or $30. That's if business does not improve. If business improves, the upside to this stock is much higher.

The company has a solid balance sheet with $300M in cash and short-term assets; it has $50M in debt. The enterprise value/EBITDA is 4.25, which is extremely low and makes this company a takeover candidate, given that it is cash-flow positive. My general rule of thumb on a stock buy is that if it is making money and the P/E is less than the return on equity (ROE) of the company (in this case the ROE for Gulfmark is 15, the P/E is 9), the stock is a buy. Given the fact that the stock has recently experienced a sharp selloff make this a particularly opportune time to take a look. Disclosure: No position

Is the Baklava Bailout Coming?

Tue, 09 Feb 2010 13:20:19 GMT

For those of you who haven't been paying attention, the markets have been pressured by a Greek debt crisis, in addition to similar simmering crises in Spain and Portugal. Credit Default Swaps (CDSes) on those Mediteranean nations have "blown out" -- indicating high risk of default. This morning, though, markets are rallying strongly as there is a whiff of a Euro-bailout of Greece in the air. European markets, gold, oil, and the Euro have all rallied powerfully in the last hour, indicating that something may be up. The New York Times reports that Jean-Claude Trichet, the European Central Bank president, cut short a trip to take part in a special European summit this week, giving rise to speculation that they are about to pull the trigger on some sort of rescue plan. The Wall Street Journal says the Greek banking crisis will likely force the Euro bank's hand. For anybody who doesn't think the crisis was serious enough, take a look at the chart below, which shows the CDS swaps on Greek and Portuguese debt rising to levels higher than at the global market bottoms of spring of 2009. [caption id="attachment_1060" align="aligncenter" width="554" caption="Default swaps on Greek and Portuguese debt are higher than they were at market bottoms in the spring of 2009."][/caption]

If the bailout comes, it will establish a solid trend of central banks around the world� of printing money to put out fires, which may well reinforce the Austrian school's economic theory that this global crisis will come to an end with showers of money and hyperinflation.

But traders will like it! judging by today's initial reaction, markets could rush straight back into the bull mode on any sign of a bailout of Greece. Can we say it now? Can I call it the Baklava Bailout? Get ready for dessert!

[caption id="attachment_1061" align="aligncenter" width="400" caption="Traders look like they are getting ready for a Greek dessert"][/caption]

Status Updates: Feature or Company?

Mon, 08 Feb 2010 20:52:46 GMT

There is an old venture-capital saying, "never mistake a technology feature for a company." Or maybe there's not, and I just made that up. At either rate, it makes sense. Okay, then, what happened with Twitter? Twitter has all the hallmarks of a "technology feature." Really, the company consists of the� "Status Update"� feature, and that's about it. This is now a paradigm that has taken root in social networks and is transmitting it self rapidly across all means of Internet software. Case in point? Today's scoop from the Wall Street Journal that Google is looking at injecting the status update capability into Gmail. Now, of course, the investors who didn't invest in Twitter based on the "technology feature" rule are of course hitting themselves: Twitter now has a $1B+ valuation, at least on paper. Of course, there is still time for it to go horribly wrong. But it's got to get you thinking: Has Twitter turned the technology feature concept on its head? And if so, what is so unique about social networks?

Top Five Tech Giants to Accumulate

Mon, 08 Feb 2010 17:10:48 GMT

The stock market is into a pretty good-sized correction. It’s not clear to me where exactly the correction will stop, but one thing is clear: The earnings of large blue-chip technology companies have been improving, while their stocks are going down. That's an opportunity. The stock market is a funny thing, it's the only "market" where people get disappointed when prices go down. As a shopper, that's a good thing, especially if you are using good valuation metrics when you do your shopping. Large companies have pared back technology spending for years, but there are signs that it's starting to bounce back, with capital spending budgets. Given that 2010 is off to a good earnings start� for technology companies, I think there's a high probability that companies continue increasing tech spending. I have been combing through the stock screens looking for “dream stocks” – large-cap tech with good track records, improving earnings, and cheap valuations. I found lots of candidates. In fact, other than March of 2009, it was hard to find a time when you could buy high-quality tech stocks at such cheap valuations. Many of them are at P/Es under 20, including Apple, which has a 5-year growth rate of more than 40%! I cannot remember the last time a stock with this kind of growth was available at a forward P/E of 19.

Like Penny Stocks? Microfluidics Might Be Worth a Look

Mon, 08 Feb 2010 15:41:38 GMT

Microfluidics (MFLU.OB) is a leader in advanced nano-material processing for a variety of industriesturn-around play with value characteristics. And it's cheap! ($0.99) Raygent Associates and The Rayno Report will be following up with a report on the company's technology after its earnings report in a couple weeks, but given the company's decent fundamentals and low price there is the potential for a strong move up. The company sells high-pressure microfluidic processors that are used to create materials on the micro-and nano-scale to achieve unique product characteristics and qualities. The technology achieves the following functionality:

Particle size reduction
Bottom-up nanoparticle creation
Cell disruption
Nanoencapsulation
Nanoemulsions and dispersions

The applications for creating this microfluidic "features" is� development and manufacturing of a variety of products in diverse industries such as biotechnology, pharmaceutical, cosmetics and nutraceuticals. These products allow manufacturing to be scaled up in a uniform and repeatable way. For example, 17 of the top 20 pharmaceutical companies use microfluidizer processors and are of particular benefit to manufacturers of vaccines who need to create stable microemulsions of vaccines with their adjuvants. In the company's third quarter financial results released on November 3, 2009, it reported a net income of $450k on revenue of $4.5M with a backlog of $4.75M. Sales were strong from vaccine developers and manufacturers.The balance Sheet as of September 30 showed $1.7M in Cash with long-term convertible debt of $4.7M. Stockholder equity was $1.15M. One see this� company easily growing beyond it's current market cap of $10.5M. With 10.5 million shares outstanding that gives you a share price of $1. Assuming revenues of $18M for 2010 the price/sales ratio would be 0.583.

10 Reasons Why Sarah Palin is Unelectable

Mon, 08 Feb 2010 15:04:56 GMT

"Only dead fish go with the flow." --Sarah Palin, July 3, 2009 What's all this noise about Sarah Palin? Sarah Palin is a populist kook, and the idea that she could be president is absurd. I know, it's not like the American left has their act together�either. There are plenty of kooks on the left, as well. In the interest of fairness, let me break down the kookiness on both sides of the equation: Left-wing kooks: "Those rich people stole everything and they're holed up in a secret society meeting in West Palm Beach! If we double-tax the rich people and then build government-sponsored eco-projects in every county across America, we'll be okay!" Right-wing kooks: "It's a socialist Armageddon! Gay people can get married! Who gave the government the power to build roads? Quick, grab your militia and meet at our planning session in Northern Idaho!" Now, I only pick on Sarah Palin because she is currently the front runner for Chief Kook, and it's making news. But any of you who think she's got a shot at president are nuts. Let's enumerate the reasons:

Friday News Brew: G-7 Brings an Arctic Chill

Fri, 05 Feb 2010 14:51:03 GMT

Not the best week in the markets, so we look forward to a relaxing weekend when you don't have the worry about the CDS spreads on PIIGs, which is not only an unattractive thing to say, but also an unattractive thing to look at. In technology, we had a good earnings run, but I've been noticing the general trend has been to sell off after good news, which is never a good sign of the market's health. We need to kick that pattern to return to the bull. Given that it's Friday let's get on with it and move the bits:

The G7 is meeting this weekend in the arctic (Globe and Mail). Is it just me or does this send the wrong message about the global economy? The fun bit: World leaders may have to sleep in dorms, drive around in tattered rental cars, and watch out for riflemen on snowmobiles (Wall Street Journal).
The unemployment data stopped getting worse (Bloomberg). But let's not get too excited, that's just one month.
Obama as Reagan (Bloomberg). Maybe Obama should get into the movie business?
Remember the part about the CDS spreads on PIIGs blowing out? Well, here it is if you don't know what I'm talking about (Wall Street Pit).
Why six hour flights are now seven-hours (WSJ). That doesn't include when you sit down next to a talkative, drunk, insurance salesman.
Toyota president says "sorry." (L.A. Times). Bummer, dude.
Facebook is redesigning stuff again (Inside Facebook). What's the deal with the manic changes, did they get bored counting their money?
Another publisher has attacked Amazon's pricing structure (Gizmodo). Amazing what a little competition will do, eh?
TechCrunch reporter asks for a kickbook! (TechCrunch). They wanted a Mac -- a sign of the times!
Can somebody just tell Jeff Zucker to shut up.
Asian online trading platform Tora files for $36.4M stock and option offering (VentureBeat).
Microsoft is working on a 17-year-old bug (BBC).
You can now get a degree in Marijuana cultivation (CNN). I can't think of a more dangerous project for a college student.

Cheers! Happy weekend!

First Germanium Laser

Thu, 04 Feb 2010 21:53:36 GMT

That's the first laser made from the element Germanium -- not the first German laser. It's been a while since I was knee-deep in the hard-core optical world, but the endgame has always been optical computing. Today we have the news of what appears to be a signficant innovation, the world's first Germanium laser, developed at MIT. [caption id="attachment_1001" align="alignright" width="250" caption="A lump of Germanium. Doesn't it look like Kryptonite?"][/caption] From Physorg.com:

(PhysOrg.com) -- MIT researchers have demonstrated the first laser built from germanium that can produce wavelengths of light useful for optical communication. It’s also the first germanium laser to operate at room temperature. Unlike the materials typically used in lasers, germanium is easy to incorporate into existing processes for manufacturing silicon chips. So the result could prove an important step toward computers that move data -- and maybe even perform calculations -- using light instead of electricity. But more fundamentally, the researchers have shown that, contrary to prior belief, a class of materials called indirect-band-gap semiconductors can yield practical lasers.

Story is here: First germanium laser brings us closer to 'optical computers'

Stimulus State-by-State

Thu, 04 Feb 2010 20:47:41 GMT

I have been doing some research on government stimulus projects and I came across a very cool map hosted on the Mint Website. The Mint folks used information from ProPublica, a resource for information on the stimulus plan, and broke down the percentage of each state’s unemployment problem that would be hypothetically solved by the total stimulus package. While it is actually �difficult to peg down the effect on the�actual unemployment rates, Mint did their best by using government estimates by Congressional District. Here is the map: Visit Mint.com for more personal finance images.

Marc Faber: The Debt Trap Has Not Been Fixed

Thu, 04 Feb 2010 17:37:06 GMT

Global investor Marc Faber is out with his new monthly Gloom, Boom, and Doom report (subscription -- highly advised) in which he analyzes the global debt problem and what it means for markets in the coming years. Most real financial crises are brought about by debt problems. And the financial system, especially in the United States, has been able to build up more and more debt -- as a total percentage of GDP -- over the years. Is there any mystery why we have been seeing more frequent and larger financial crises? Not really. It's because the investment banks, the powers that be, and governments around the world have allowed debt problems to build and spiral out of control. Marc Faber believes we're still not out of the woods because really nothing has changed with the creation of global debt and leverage. In fact, it may be getting worse. Even after the financial crisis of 2008, after lots of hand-wringing, government actions, meetings, popular discussions, and media analysis, nobody has done anything to stop the trajectory government debt. That means the financial problems have not been solved, and we're likely to have even bigger problems in the future. This was also the topic of a recent cover story in Forbes, the Global Debt Bomb.

Chambers Does His Best to Cheer Ecomomy

Thu, 04 Feb 2010 14:12:21 GMT

Shares of Cisco Systems Inc. are set to gain on the market open after a strong earnings release and encouraging words about the global economy from CEO John Chambers. More importantly, investors hope positive comments from Cisco CEO John Chambers can perk things up on a somewhat gloomy morning (European debt worries are weighing on the market).� “There was major momentum," said Chambers of business in the quarter. " It was quite remarkably balanced across the board, and you would say we are on our way to a reasonably good recovery.” Chambers is often looked to for economic insight because of Cisco's large role in the technology market as well as Chambers knack for monitoring and analyzing data to look for turning points in the economy. He was one of the first major technology executives to alert� investors about the slowdown, and he correctly called a turn in the economy last year. Cisco announced Q2 fiscal year 2010 (Q2FY2010) reveue of $98. billion, an 8% increase over the comparable quarter last year. It saw Q2FY income of $1.9 billion in GAAP terms and $0.32 earnings per share (EPS). Including special items, Cisco earned $0.40 per share, beating analysts estimates of $0.35. More importantly, Chambers said he expected to see economic conditions "accelerate" and upped his forecast for growth for Cisco in the current quarter, which he pegged at 23 to 26 percent. Cisco continues to generate and stockpile massive amounts of cash -- the company reported that cash and cash equivalent and investments for the quarter was $39.6 billion, up about $4.3 billion from last quarter. Chambers commented specifically on a "robust positive turnaround" in the service provider segment, which he said was the biggest turnarounds he'd seen in his career. Perhaps most importantly, Chambers said that with the strong recovery, Cisco could start adding employees back to its workforce.Cisco said it hired 2,000 employees in the last quarter and expected to hire 2-3,000 more in this quarter. In the pre-market, Cisco shares were trading up $0.42, or 1.82%, to 23.49.

Riverbed CEO: 'We're Now the Recognized Leader'

Wed, 03 Feb 2010 21:58:07 GMT

Is Riverbed Technology Inc. now the undisputed leader in the high-growth WAN optimization networking space? CEO Jerry M. Kennelly thinks so. In fact, in an interview today with The Rayno Report�following yesterday's earnings announcement, Kennelly said that Riverbed's big numbers in 2009 have now established it as the ""recognized and permanent" leader of the WAN op. Given the company's growth, there's pretty good reason to believe Kennelly. In announcing earnings, the company hit a new quarterly revenue record with $113.2 million in sales, up 10% over the prior quarter and 23% over the prior year. For the fiscal year 2009, GAAP revenue was $394.1 million, up 18% from $333.3 million in fiscal year 2008. The company says it now has 7,300 customers worldwide. It generated $100 million in operating cash flow in 2009, and added to its cash stockpile, with $325 million in cash and marketable securities.

BlueKai CEO: Billions of Dollars in Online Ad Data

Wed, 03 Feb 2010 16:14:35 GMT

BlueKai CEO Omar Tawakol, who just landed $21 million in financing and whose company has an interesting vision for the future of the Internet advertising industry, spoke with The Rayno Report on Monday about the direction of his company and the new financing.� Tawakol believes his company is onto a multi-billion dollar opportunity. BlueKai aggregates anonymous user data from across the Internet for advertising agencies. It tracks the anonymous user data with a cookie. BlueKai's partners and customers then pay for access to that data and the cookie through an auction process, so that they can see more detailed information about users and target their ads more specifically. Tawakol believes the industry is in the midst of a data "paradigm shift," in that the data aggregation model exists in the offline world, but has not yet been effectively implemented in the new online world. "It's a paradigm issue," says Tawakol, "The new winners usually come from the new paradigm, not the old one."

Click Software Beats by a Penny

Wed, 03 Feb 2010 13:49:53 GMT

Click Software beat earnings estimates by a penny and showed modest growth over the comparable quarter of 2009 as well as the fourth quarter of last year. For the fourth quarter ended December 31, 2009, the company reported revenues of $17.2 million, with net income of $3.8 million, or $0.12 per fully diluted share. This compares with revenues of $14.1 million and net income of $5.0 million, or $0.17 per fully diluted share, for the same period last year, and revenues of $16.6 million and net income of $3.2 million, or $0.10 per fully diluted share, for the third quarter of 2009. Right now the stock is getting hammered pretty good, down about 6%. I think this may be in large part due to comments toward the end of the conference calls about margin pressue due to "increased investment." Given that they raised revenue guidance, I would say the stock is buyable on weakness.

News Brew: Apple Apple, Volcker Volcker

Tue, 02 Feb 2010 17:10:24 GMT

Good morning! Welcome from Big Sky country, where I'm proud to say we have an account surplus. That's petty nice to know in this world of red ink, where entire nations are going the way of Enron. The news these days appears to be dominated by two things: 1) Apple and 2) Paul Volcker. Not necessarily in that order. [caption id="attachment_932" align="alignleft" width="300" caption="Don't mess with Paul Volcker"][/caption] Many of our younger readers may not remember Paul Volcker, as he became Chairman of the Federal Reserve in 1979, back with the Buick LeSabre was a popular vehicle. My uncle had a Buick Lesabre. Fine ride.But the 1970s were not a lot of fun, economically. Good music mind you. Mr. Volcker is one of those people that is "widely credited" with helping to cure many of the economic ills of the 1970s, namely, "stagflation," where there was little growth in the economy but lots of inflation. The worry is that we are entering a similar period in which the government is trying to solve a recession by printing a whole lot of cash. Will Volcker's technique from the 1970s� -- clamping down on banks and jacking up interest rates -- stave off a the reappearance of the 1970s? Big debate. It is interesting that Volcker is winning out in the battle of the Obama Adminstration's economic advisors, with his hawkish approach to bank reform. [caption id="attachment_933" align="alignright" width="614" caption="1979 Buick LeSabre"][/caption] He is testifying before the Senate today and it will be very interesting to see if the dummies in Congress actually listen to this sensible man. Here are just a few of the stories circulating this morning:

Volcker says hedge funds should be allowed to fail (Bloomberg).
WSJ Primer on the "Volcker Rule (Seeking Alpha via the WSJ).
Chris Dodd may kill Volcker Rule (NY Mag). Of course he will. Fiscal discipline isn't any fun if you are in Congress.
Davos Bankers Seek One Message on Volcker Rule (New York Times).
Volcker to Spell Out the Future of Banks (BBC). It might go something like this: They have to stop looting and pillaging with government funds.
Battle over the Volcker Rule Set to Begin (WSJ).

Okay, now let's shift gears from one 1970s/1980s icon to another. Apple Computer. Remember them? They brought you the "desktop" interface, which was subsequently stolen by Microsoft. [caption id="attachment_925" align="aligncenter" width="753" caption="Apple founders Steve Jobs and Steve Wozniak"][/caption]

Now, interestingly, they are bringing to market yet another interface -- which has been floating around for some time -- in the form of the tablet computer. The wires and bloggers this morning are abuzz with the news that there are already many more tablet computers in the works, with all sorts of new features such as cameras� and whatnot:

Apple rumored to have another tablet in the works (TechCrunch). No way, they're working on more stuff to sell?
IPad Camera rumor becoming a reality (Mission: Repair Blog). Funny, this is what the world has come to. Photos of miscellaneous electronics parts making national news.
A first taste of what the Google tablet's interface will look like (TechCrunch).
A little chip designed by Apple itself (New York Times). Apple is so crafty. Design your own chips. Cut your chip suppliers out of the margines. Vertical integration at its best.
You biggest Apple iPad Questions, answered (Fox News).

Well, that's all I got for you today, a whole lot of Volcker and Apple. Think there's something else going on in the world? Go find out for yourself.

Rayno and Harvey Chat Tellabs, AT&T, and Apple

Mon, 01 Feb 2010 19:04:16 GMT

Light Reading EIC Phil Harvey and I are experimenting with a new video chat format. Check it out and let me know what you think! Today's topics are Tellabs, AT&T, and Apple.

Tesla Motors IPO: More Green-Guilt Absurdity?

Mon, 01 Feb 2010 18:14:38 GMT

I found it kind of bizarre that Tesla Motors has filed for an IPO and is looking to raise $100 million from public investors. This comes about four months after the company landed a $465 million taxpayer loan to build factories to churn out really expensive money-losing cars that help rich people boost their egos and make them feel more "green." Let me get this straight: After borrowing half-a-billion dollars from you and I as taxpayers, they want to sell $100 million of stock to the public, of which half will be reserved to pay off the money they borrowed from the taxpayers? Okay. The fact is the company has been bleeding money for years and says it doesn't have any designs on being profitable until 2012, according to the filing.�Huh? I thought that the "new IPO market" was supposed to be for profitable companies, not for extremely high-risk speculative car companies that have no track record of making money. Remember, after the tech bubble we were supposed to dial back on venture capitalists, entrepreneurs,�investment bankers, and other snake-oil salesman from robbing granny's retirement funds for�speculative IPOs.�What, is�it 1999 again?

BlueKai's Millions and Why Ad Data Aggregation is Huge

Mon, 01 Feb 2010 16:58:34 GMT

A few weeks ago�I told you that Redpoint partner Scott Raney was bullish on many things, including Ad-data aggregation firm BlueKai. Guess�I should have listened more closely. Today BlueKai allegedly announced a $21 million round of financing , according to TechCrunch,�though we are still trying to confirm this because we have not seen the actual press release. GGV Capital, Redpoint Ventures, and Battery Ventures are in on the action. If true, this would bring BlueKai's total funding to $35 million, not an insubstantial sum in a crushing econmomic recession (can I have some?). What does BlueKai, a�Seattle-based Internet marketing firm,�do?�The�BlueKai Data Exchange aggregates annonymous Internet data .�Think of this as�creating a new�"data aggregation" layer across the Internet, allowing advertisers to look at the behavior of potential customers over a wide variety of advertising platforms. BlueKai says this data includes the information of more than 145 million users.

Good Morning February! News Brew

Mon, 01 Feb 2010 16:07:23 GMT

I realize I have been commenting incessantly about how fast this year appears to be going but really it is remarkable that it's now 1/12 done. The pressure is on to get things done in 2010. And the pressure is on for the economy to mend, the politicians to stop bickering, and for China and the United States to figure out how to work together. I think this is crucial to world happiness. China-U.S. relations were the big items I saw in the news today. The Apple iPad hype is subsiding like the coed crowd at Fort Lauderdale on the last day of spring break, leaving behind a pile of media trash. I feel quite a hangover, was it worth the party?

U.S.-China relations hit a bad patch (BBC). They're angry we're selling arms to Taiwan. Which is right next door to them. And which they consider part of China. Can you blame them? Wouldn't this be like China selling arms to Florida? Oh wait... Florida is still part of America... and Miami is already fully stocked up on arms.
Arms deal chills U.S.-China ties (Wall Street Journal). More on this. Only because, it matters.
$3.8 Trillion (Bloomberg). Is it just me, or does that seem kinda lika lotta dough?
I was up late last night reading this New Yorker article on Education Secretary Arne Duncan. A good read. If only I was invited to play basketball with them.
The first Amazon-Apple publishing skirmishes. It's only the beginning. This should be fun. Competition is good.
Steve Jobs sh*ts on Google (Apple Insider).� Allegedly says Google's "don't be evil" pitch is bogus and predicts the demise of Adobe Flash. Who's evil now?
Intel, Micron to announce world's densest flash memory (Computerworld).
U.S. sets a record in wind energy production (TMCnet). No, they are not talking about Congress.
Swiss warn UBS bank could collapse (AFP). If you read the fine print, you discover they think this because everybody is picking on them.
Did you know you can run Windows 7 on an iPad? (PC World) Not sure why this is exciting though, as to me it sounds like drinking decaf espresso.
How to hate the iPad (ReadWriteWeb). I can't think of a more solid idea for a headline.
Facebook COO: 175 million people log on every day (TechCrunch).
How videos are found and consumed online (TechCrunch). You mean, it's not through my mother-in-law's e-mail spam?

Well, that's it for today. A little slow this morning. February feels different.

CBST Update: Stock Has Moved After Good Earnings

Fri, 29 Jan 2010 16:01:58 GMT

Here is some delayed delayed housekeeping -- Cubist Pharmaceuticals, a company we've been watching closely on this blog, released a solid earnings report last week and the stock has moved into a solid uptrend. I still like this stock long term, but it's had a nice 20% run since December, so if you are trading it, you can take some off the table. However, the long term value thesis is that this was an undervalued stock -- and as of today it is still trading at a forward P/E of only 11. This, while putting up annual growth rate in the range of 30%, a return on equity of 20%, and an operating margin of 24%. Bottom line: Still cheap. Here are some highlights from the earnings:

Operating income grew 52% over 2008
Total net revenues for 2009 increased 30% over 2008
Total net revenues for the fourth quarter of 2009 increased 27% over the fourth quarter of 2008
GAAP net income for the fourth quarter was $22.7 million (unaudited), or $0.39 and $0.38 per basic and diluted share, compared to $94.5 million, or $1.65 and $1.43 per basic and diluted share, respectively, for the fourth quarter of 2008
Consensus analyst estimates for the quarter for $0.34 per share, so the company beat on the profit side.

Chart still looks good, though it does look susceptible to a correction. I would add to this stock on pullbacks under $20, especially in the $18 range.

Stock Watch: Catching up on Click Software

Thu, 28 Jan 2010 20:30:28 GMT

We are still combing through the leftovers of our "stock machine" scans for the 2010 portfolio.� Click Software is a company on our lists of stocks to watch. Its growth numbers and valuation are certainly interesting, unfortunately it didn't make our 2010 Model Portfolio because of its small capitalization and risky nature. But for those of you looking for a small tech company with lots of potential upside, it's worth a look. Click Software, which makes "workforce management tools," is intriguing for three reasons 1) It has an interesting, differentiated technology with good customers 2) It’s growing pretty fast 3) It has a cheap valuation.� Done deal. The company, with technology that comes out of Israel, provides workforce and service management software for large companies in the utility and telecommunications industry. Some of these customers include Southern California Edison, Bell Canada, and Ericsson. Its software is primarily used on mobile devices to help manage service visits. It's also got an interesting partnership with global software giant SAP.

The company’s got an earnings growth rate close to 20% and a forward P/E of about 17. Its return on equity is 46%. These numbers meet all of our guidelines of looking for companies whose valuation metrics are cheap relative to return on equity and growth (The P/E being lower than the return on equity). It’s a small company, so there is lots of upside. For example, the company did $32 million in revenue in 2006, it did $52 million in 2008, and analysts expect the company to do $70 million in revenue in 2010 with EPS of .41. Multiply that by a more aggressive valuation multiple of 20 and you get a stock price of $8. The stock is currently trading around $7, but it has often sold off down to $5 or $6, in which case you should definitely look at accumulating shares. If the company delivers more profit in 2010, this stock goes into the low teens. Earnings are scheduled for February 3.

Frothing Media Pack Turns on Apple

Thu, 28 Jan 2010 14:09:06 GMT

Funny how fast things can turn against you. After months of generating endless Apple tablet - er iPad - hype, now that the product is out there are plenty of�journos and bloggers descending on the Apple tablet like a pack of rabid hyenas, ferociously attacking it. Let us count some of the more common critiques of the new Apple iPad: The proprietary "Splinternet:" The most common general critique of Apple is its closed system and proprietary nature. The iPad isn't really even a Web device, say critics. Take this interesting conversation between journalist Kai Ryssdal and Forrester Resarch analyst Josh Bernoff. Bernoff has a new theory called "splinternet" in which proporietary mobile devices like those from Apple are creating runaway republics that aren't fully capatible with the Web. Kai Ryssdal says that Apple "kind of blew it." DRM. Apple is facing a lot of criticism from the no-DRM movement given the propritetary, locked-down nature of its system and the fact that it controls most meda through its own DRM scheme. Ars Technica asks if the iPad is "nothing more than the golden calf of DRM." Battery life: There appears to be a smattering of complaints about the iPad's battery life which was announced as 10 hours, meaning more like 4.5 hours in real life. These complaints ring pretty hollow for me. Most laptops only go about 4-5 hours. My standard for battery life is can it last five hours on a plane flight? That's the most I want to use a computer on a plane flight anyway, unless I'm going to China. It would appear the iPad meets that criteria. No 3G on entry level. The entry level price of the iPad at $499�only includes WiFi, but no 3G mobile network access. That's less communications capability than the iPhone. Hence, the idea that the iPad is really just a large iTouch. No Multitasking. No Flash.�Lots of people, including Blip.tv CEO Mike Hudack, griping about the lack of multitasking support. Let's just quote Mike cause his blog entry is so awesome: "No Flash support? �No multitasking? �No widescreen videos? �No camera (this thing�had the potential to REVOLUTIONIZE cam whoring)?" Mike says, "iPad more like iBad." Even the name isn't original. Watch this naming dispute with Fujitsu, which marketed an iPad as early as 2002. AT&T. Of course, the iPad will give folks even more reason to bash AT&T, with its exclusive deal with Apple intact. And increases the likelihood of even more network brownouts. For some AT&T bashing, why not go to the ultimate AT&T basher, Fake Steve Jobs.

RealtyTrac: One in Ten Nevada Homes in Foreclosure

Thu, 28 Jan 2010 13:35:15 GMT

Just in case you thought it was safe to plunge back in the housing market, be careful. RealtyTrac's recent data shows a painful number of foreclossures, with states such as Nevada, Arizona, and Florida. RealtyTrac's report shows 3,957,643 foreclosure filings� were reported on 2,824,674 U.S. properties in 2009, a 21 percent increase in total properties from 2008 and a 120 percent increase in total properties from 2007. The report also shows that 2.21 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006. More than 10 percent of Nevada housing units received at least one foreclosure filing in 2009, giving it the nation’s highest state foreclosure rate for the third consecutive year. Nevada foreclosure activity in December increased 27 percent from the previous month but was still down 22 percent from December 2008. Fourth quarter foreclosure activity in Nevada was down 37 percent from the previous quarter thanks to substantial decreases in October and November. The foreclosure crisis is concentrated in several states, including Arizona, Florida, and Nevada. More than 10 percent of Nevada's housing units had a foreclosure filing, while Arizona registered a foreclosure rate of 6 percent of its housing units. �Florida registered the nation’s third highest foreclosure rate, with 5.93 percent of its housing units receiving at least one foreclosure filing during the year. Foreclosure inventory is key to the recovery in the housing market. Although housing inventory numbers have been shrinking lately, which many experts believe is a key to the recovery in prices, there is the fear that a new flood of foreclosure inventory in 2010 and 2011 will depress prices again. This is commonly referred to as the shadow inventory. Interestingly, the Federal Open Market Committee statement issued yesterday a statement yesterday that no longer included kind words on the housing market. The phrase "The housing sector has shown some signs of improvement in recent months," was removed, after appear in the�Dec. 16�FOMC statement. Concern may be arising from a renewed weakening in new-home sales. In December, new-home sales fell 7.6 percent from the previous month.

Netflix Quarter: Wow -- Warner Bros Deal Was Key

Thu, 28 Jan 2010 13:17:46 GMT

Who knew sending DVDs through the mail could be so profitable?�Movie rental company Netflix annihilated earnings expectations, posting earnings of $31 million, or 56 a share, compared with a profit of $22.7 million or 38 cents a share a year ago. Revenue rose 24% to $444.5 million. Analysts had expected a profit of 49 shares on revenue of $446 million, according to Factset research. In the pre-market, the stock was up as much as 18%. "Q4 was a great quarter," said Netflix CEO Reed Hastings. "Over one million net new subscribers, strong earnings and a significant expansion in streaming. As our guidance for 2010 indicates we expect the momentum to continue." Looking at the broad numbers, it's clear that Netflix beat on profitability, not revenue, indicating it was better at controlling costs than folks expected. On the conference call, Hastings said that the new rental window deal with Warner Bros. was key. The deal with�Warner Bros., which makes Warner DVD titles availabe for rental as soon as 28 days after their release, has given Netflix cost savings. "Warner has given us a huge number of copies up to the 29th day at a very attractive price so we were able to fulfill all of the consumer demand and we were able to use those savings to pour that into more streaming content," said Hastings during the conference call Q&A session. The release deal with Warner Bros. has been the topic of much debate in the industry. Warner�Brothers imposed the 28-day delay on�rental kiosks, popularized by $1-rental company Redbox, and then�Redbox sued Warner Bros. as well as other studios.��The studios are pushing to keep the rental window delay at 28 days because data shows as much as 75% of packaged media are sold within 4 weeks of the relase. Hastings said on the call that the reconfiguration of rental windows in the movie industry is a huge issue for companies like his. A big factor is the competition from Redbox, the $1 kiosk rental operation, which has been pressuring margins in the movie rental business. It seems that getting special release�terms is key to maintaining the competitive edge in this market.

News Brew: Tablets, Tantrums, and Treasury Secretaries

Wed, 27 Jan 2010 17:09:44 GMT

Greetings, it's Tablet Wednesday! It would be so much better if it were a Tuesday so that we could call it Tablet Tuesday. I find it funny that people are still trying to print sketchy "scoops" in the hours up to the Apple tablet computer launch. Like this grainy puzzle-pieced photo from Engaget. Holy cow, is that some kind of map... on an LCD screen! Well, that's the news business in 2010. Any piece of incremental information, no matter how shady or inconclusive, needs to be published. With that, we travel onto the world of shady Internet journos, toiling overtime to bring you the n0t-so-much-news: McGraw-Hill CEO Terry McGraw, who I once worked for, tells you all about the tablet. No word on whether the tablet will have an� feature to buy your own S&P ratings.

The Business Insider rounds up all the rumors. No word on whether Henry Blodget thinks the stock is going to $800.
Can we link to ourselves? Here's what I think about the notion that the tablet will save the content industry (Rayno Report).
Apple gets a slew of new patents related to the tablet (Patently Apple).
Apple Tablet Portends Rewrite for Publishers (Wall Street Journal).

Oh, and in case you thought anything else was going on in the world:

Treasury Secretary Geithner is getting grilled on AIG (BusinessWeek). He's crispy. Fried. Done.
Geithner denies role in AIG payment disclosures (Reuters).
Bernanke says he didn't negotiate with the AIG lenders. (Reuters) Also, rumor has it he's not really sure what "money" is.
Superbowl ad stokes abortion controversy (Reuters). Not going to touch this one!
Toyota halts sales on millions of vehicles, stock slammed (Associated Press).
Roku wants to create a 100-channel Internet TV box (Bloomberg). Memo to Roku: The Internet has infinite channels.
AT&T to launch Yelp competitor (Forbes). Isn't this kind of like your grandma launching an Internet startup?
Oracle plans to hire people (InfoWorld). Yes, you too can wash Larry Ellison's car.
Send inmates to Mexico, says Shcwarzenegger (Agence France Press).
Five things Obama could learn from Reagan (Time). Somehow, I just don't see Obama reading this article. Or behaving like the Gipper. Or looking like him. Or moving to Santa Barbara. Yep, it's completely confirmed: They're totally different people.
My vote for the best headline of the day, even though I'm not sure what it means: "Facebook and Twitter? Why not just put a gun to your head?" (Network World).
The FCC is probing mobile phone termination fees (Digital Trends).
The Mars rover is dead (National Geographic). Long live the Mars rover!
Leading space scientist claims Earth becoming invisible to aliens (Telegraph).

Message to Content Creators: Beware Steve Jobs!

Wed, 27 Jan 2010 15:38:06 GMT

You would think only one thing in the world is happening today: The Apple Tablet. Just when you thought Steve Jobs could not ratchet up his control of media and marketing, he has elevated it yet further. The media is taking the Apple story hook, line, and sinker. The chief theme?� How the tablet will save the media. There's New York Times article: "With Apple Tablet, Print Media Hope for a Payday." Ha! Herein lies more proof that Apple and Steve Jobs are master hypnotists. Somehow the spin is that the tablet is the magic bullet for ailing legacy media. Media companies, beware! The tablet may be a grand success, but it's not going to make you rich! What's good for Apple is good for Apple. Profit streams accrue to Steve Jobs' bank account. In the first fiscal quarter of 2010, Apple� earned a net quarterly of $3.38 billion. You think any of that's going to you? Think again. Apple has a cash position of $39 billion. You think it got there by striking generous profit sharing deals with the music industry? Listen, I work in media. I more than anybody would like to see some magical new business model created to rescue content creators from digital destruction. But I'm not optimistic. The movie industry isn't growing, the music industry has been beaten up by piracy and ill-advised legal moves by recording monopolies, and newspapers have been eviscerated by Craigslist and Google. It's grim out there. But Apple as a savior? C'mon. This is the company that has left the music industry feeling� jilted for its bad iTunes deals, which essentially hand over subsidized music to customers in exchange for boosting Apple's hardware sales. Get this straight: iTunes is not a royalty scheme, it's a one-time licensing fee. In other words: it's a subsidy to sell hardware. The music guys hate this deal. Secretly, the music industry is steaming about iTunes but they're not sure about their next move. Now, take the Tablet. Please! It's probably going to sell for a few hundred bucks. Yeah, you'll be able to buy subscriptions on it. Cheap. But remember the Apple business model: The company sells hardware! In a business built to sell hardware, they will seek to add extra content value -- at the lowest price possible -- to incent hardware sales. Think about it: Apple has the power. You want to get on the Tablet? You're going to have to pay. It's a marketing model. Can this save the content industry? I dunno. Did the iPod save the music industry? Did the Apple TV save the broadcast TV industry? Did the iPhone save the telecom industry? Nope. They all just made more money for Apple.

Sharks Are Circling Treasury Secretary Geithner

Wed, 27 Jan 2010 04:04:23 GMT

I'm not sure U.S. Treasury Secretary Geithner is sleeping especially well tonight, knowing that as he puts his head down on the pillow,� the Internet is boiling over with a mounting amount of evidence that he didn't take taxpayers' interests into full account in funding the AIG bailout when he was President of the New York Fed. Now, it is interesting that former U.S. Treasury Secretary Henry Paulson also "knows nothing," about mounting evidence that Goldman Sachs and other banks were ready to settle for concessions on their insurance contracts for an AIG failure.� Wasn't Paulson, the former Goldman boss, actually U.S. Treasury Secretary when the AIG bailout commenced? So what's going on here, anyway? For those of you not paying attention, the debate surrounds key details in the mega-billion federal bailout of AIG (Now well in excess of $100 billion at last count). It's come to light that key documents appear to indicate that the bank counterparties to AIG -- the ones that would get paid insurance in the case that AIG failed -- were willing to take "haircuts" on their insurance countracts for AIG. The federal government, instead, paid full price on those contracts -- straight out of the taxpayers' pockets. And now the bloggers, journalists, and Congressmen are opening up a can of whoop-ass on Geithner. Here's just a taste of it: Who Will Succeed Tim Geithner as Next Treasury Secretary? (HuffPost) Two at Fed Had Doubts Over AIG's $30 Billion Payout (New York Times) Presenting BlackRock-AIG Presentation In Which It Becomes Clear That Soc Gen Had Pledged Sub-50 Cent Securities... (ZeroHedge) New York Fed documents reveal more detail about AIG bailout (Washington Post) Lawmakers Request GAO Audit On AIG Bailout (Wall Street Journal) New Questions Surface About Bernanke's Roles In AIG Bailout (BigGovernment) Geithner defends AIG investments, says value may rise (Reuters) I think maybe the clearest indication of where this is all going comes from the latest New York Times story, linked above, which was posted just an hour ago:

Weeks after rescuing the American International Group with an $85 billion taxpayer loan in late 2008, Federal Reserve Board officials rejected a proposal that would have forced the insurer’s trading partners to return $30 billion in cash that they had received from A.I.G. in the preceding months. The Fed chose instead to let the banks keep the cash and to receive additional billions from taxpayers. This decision was made, internal documents show, after two Fed governors expressed concern that such a plan might be “a gift” to the company’s trading partners, including Goldman Sachs and Soci�t� G�n�rale, a major French bank. The documents were provided to Congressional investigators by the Federal Reserve and were obtained by The New York Times.

Source: New York Times Geithner has been called before Congress to testify next week. But this may run deeper, as clearly the Federal Reserve Chairman Ben Bernanke should have been in the loop. Good luck Timmy. Even odds you last past next week. As for Ben Bernanke, he's lucky that his confirmation vote is being rushed through Thursday, because the sharks are smelling blood on him, as well. What does this all mean for the markets? It's certainly not good. When's the last time there was a simultaneous confidence of crisis with the U.S. Treasury Secretary and the Federal Reserve Bank of the United States?

Getjar's CEO: A Multi-billion-dollar Market in the Making

Tue, 26 Jan 2010 17:48:19 GMT

Getjar Inc. is the biggest mobile apps company you've never heard of (okay, so maybe some of you have heard of them). My guess is that some day this will be an IPO, or at least a multi-hundred-million-dollar acquisition. They have hosted a half a billion mobile apps downloads to date, for thousands of handsets, ranging from Motorolas to Kyocera. [caption id="attachment_809" align="alignleft" width="128" caption="Getjar CEO Ilja Laurs"][/caption] Founder and CEO Ilja Laurs has built this company very carefully from scratch. The business model is interesting. Rather than just sell apps and take a cut, Getjar actually helps developers market the apps for specific mobile phone markets. Getjar is very much taking advantage of the "off-deck" movement, in which users want to find software and applications for their phones in an open, Web-based environment, rather than depend on the phone manufacturer to supply the app "on-deck," as was more the case just five years ago. "Our model is unique," says Laurs. "We help developers become successful. We split the transaction for distribution with the developer. We charge the developer for incremental distribution." The way Laurs describes it, Getjar is a "device-agnostic platform" for developers and consumers. You go there, plug in your phone type, and search for thousands of applications. Here are some other elements to watch about the company: Company Growth:�Getjar has achieved immense�scale for a company of its size.�It is�indisputably one of the leaders in mobile apps,�second behind Apple in apps downloads, enabling millions of downloads per�yer and hosting 50,000 mobile apps. Yet the company has�only 35 employees. Laurs said at the time of this interview (a few weeks ago), he expected the company to be profitable in Q4, 2009. Laurs says the company tripled download traffic and revenue in 2009. �I would expect 2010 will be a big year of expansion for this company. Laurs says he expects to hire as many as 50 people. The CEO to Watch: Laurs is a 33-year old Lithuanian native. He graduated Jackson high school in Ohio in 1994 as an�exchange student. After returning to Lithuania to attend Vilnius University where he studied Economics, he launched over 20 successful projects, as diverse as Lithuania's largest hotel reservation system LithuanianHotels.com, mobile payments service MicroPay.lt, and mobile games studio Gaxo Interactive. He likes to play basketball and tennis and will probably kick your ass at chess. Laurs also has a lot to say about mobile applications platforms in general. He thinks the industry is in the early stages of massive growth, and that it will be a mutli-billion-dollar market. He also believes there will be an explosion of applications activity based on the mobile Web, with developers and consumers going to the Web for apps downloads. "Consumers do not go to carrier portals for content. Consumers like to access apps from a mobile Web." He says the mobile Web accounts for 80% of Getjar's downloads. "In ten years it will be a huge market with billions of dollars." What's the basis of that? Laurs says that Getjar's research shows that the mobile apps market has characteristics similar to the downloaded music market, where consumer behavior is similar. He believes the most money to be made is in the development end, which is why Getjar works so closely for developers. Getjar has received $6 million in funding from Accel Partners, according to CrunchBase.

Q&A About Apple’s Accounting Changes

Tue, 26 Jan 2010 16:01:51 GMT

In releasing their fiscal Q1 2010 fiscal earnings, Apple announced some major accounting changes today. This was many months in the making, but it required getting some accounting changes passed by the FASB (Financial Accounting Standards Board). When you have people like FASB and a slew of bean-counters involved, watchout. These are major change that affect how Apple recognizes revenue. It does not change the cash flow picture, which once again shows you how important it is to monitor cash flow -- or how much cash is actually flowing in or out of a company. Because I had so many questions about it myself, I conducted a Q&A – with myself. I then proceeded to answer the questions by looking at Apple’s filings, the CC transcript, and various reports. Here is my self-inflicted Q&A: Q: What the heck. An accounting change that moves the numbers in their books by billions of dollars? A: Yep. They have come up with an entirely new way to account for sales of iPhone and Apple TV “as well as other types of transactions related to revenue recognition.” These changes are retroactive to 2007, when Apple started selling the iPhone and Apple TV, which as far as I know, nobody buys. Q: Okay, what exactly did they do? A: They changed the way they recognize revenue, which means, when they are allowed to count stuff that they sold. In the old method, when they sold, say, an iPhone, they were required by FASB to recognize the revenue over a period of time, rather than recognizing all the revenue up front. This is called “subscription” accounting. The logic here is that�they were providing software upgrades so that the user was getting value over time. Q: Huh. You mean FASB thought the iPhone was a subscription product? A: Yes. Kind of silly. It�really it didn’t make much sense, since with a hardware product, you sell it when you sell it. Q: So you think the accounting change is good. A: Well, it makes more sense to me. When you sell an iPhone, for say, $300, shouldn’t you just count that as $300 in revenue on the books? I don’t think anybody really thinks of iPhone as a subscription product. Q: This accounting change boosted revenue a lot. By how much? A: Apple reported Q1 revenue of �$15.7B with the new accounting change. Revenue in the Q1 of fiscal 2009 was $11.88B. This represents a gain of nearly $4B. According to Apple CFO Peter Oppenheimer, on the conference call, “roughly half was attributed to the performance of the business.” In other words, Apple gained $2B in revenue from accounting changes and $2B by actually selling more stuff. Q: How will this affect the share price? A: In theory, it should have little effect. People have known about this for a while. Finanicial analysts have been trying to adjust to the accounting change well in advance and were calculating a separate set of numbers based on the changes (non-GAAP). If you are a crazy person like Jim Cramer, you tried to game this when you first heard about it -- like in September with the stock at $170. But basically, they sell what they sell, and changing the accounting doesn't change how the business is doing, but maybe how it is preceived in the near term�with a different set of numbers. Q: I don't understand. If the numbers are all different, why doesn't that change things? A: What the change meant was that Apple was building up a non-GAAP (Generally Accepted Accounting Principles) revenue stream that is now being recognized as GAAP. Most people anticipated that. If anything, there might be a “sell the news” effect now that the new revenues are baked into the cake.�It doesn't change how much product they actually sell, just when they can recognize the numbers. The bottom line is, in the future, they will either grow faster and sell more product, or they won't. The accounting doesn't change that.

Morning News Brew: China and Apple Dominate

Tue, 26 Jan 2010 14:45:40 GMT

Repeat after me: Apple, China, Apple, China, Apple, China. Apparently, if you are in the news business, that's all you need to remember, because this company and that country appear to dominate everything going on in the business world. Apple announced blowout numbers, which we correctly hunched yesterday. Now it will be interesting to see how the stock trades in light of a more general market malaise. The stock chopped around quite violently in the after-hours market but was only up 1% in the premarket. With the massive numbers they announced, that's got to be a bit disappointing to Apple bulls. Meanwhile, China is slashing loan growth again. This seems prudent to me, a little bit like weeding the garden (or weeding the bubble?), but it has commodities and equities markets minorly spooked this AM. That's the beauty of a centrally-planned economy, eh? When you want banks to lend less, you say: you shall lend less. It makes you wonder, why didn't we think of that?

What's up with this Apple accounting change? (Barrons). I am always suspicious of moves by the bean-counters. It appears to me that they are recognizing more revenues as a result of jettisoning subscription accounting, but it doesn't change their cash flows, so who really cares? Remember, cash flow is king.
The New York Times hopes Apple will save them. That's funny. I mean, really funny. Did the iPod save the music industry?
TechCrunch was hacked (TechCrunch).
Coraid raises $10M for storage virtualization (VentureBeat).
I've always wondered how much beer you can fit in a Mazda. Apparently, a lot. Like, 696 beers�(The Press -- New Zealand).
This is interesting -- even though Obama's been experiencing some sinking political support and poll numbers, a Fox poll says he would still beat any GOP candidate in 2012 (Fox News). Goodbye Sarah Palin?
A tortoise that's been extinct for 300 years is being resurrected via genetic data�(Mother Nature Network).
Google's looking�to end-around Apple with its new Google Voice (Reuters).
The UK has ended its recession with a raging gain of .1% in�GDP (Telegraph).
Goldman Sachs economist and Manchester United fan Jim O'Neill�criticizes his own bank's underwriting of�Man U's�new�bond issue�(Telegraph). "His comments could prove deeply embarrassing for the Wall street giant." I hope you enjoyed your career, Jim.
How much Haiti aid will be sucked away by corruption ? (Reuters)
Chinese media are stepping up the rhetoric in the war with Google. (Reuters)
The pope is asking his priests to become more hip to the Internet. (CNET). I have a word of advice to men of the cloth: Be very, very careful, it's too easy to sin on the Internet.

The Cult of Apple's Stock

Mon, 25 Jan 2010 20:27:28 GMT

Apple is reporting after-hours! Stop everything! This is a ritual we encounter every three months with the news media when one of the tech mo stocks reports: Apple, Amazon, or Google. They hype them to the moon. Apple to me is the most amazing cult stock, where one mention of a tablet can move the world by 10%. I am not an Apple man, neither in hardware nor spirit. Unfortunately, none of my fancy trading analysis or data feeds run on Apple, so I am a slave to Wintel. I also don't own the stock nor do I worship Mr. Jobs. Make no doubt about it, it is a good company. It has a great brand. And they make damn good products, even if they are prone to breaking a lot. It is certainly one of the most interesting consumer electronics companies in the world. But the stock?It's got a market cap of $184 billion, for iPhone's sake.� I can just never get comfortable buying into it when the frothing Apple maniacs are driving it up $10 at a time. Now, I have no special knowledge of what will happen after the bell. Technically, Apple looks more vulnerable than ever ahead of the report. Analysts have been steadily driving their estimates up over the last three months. You are talking about the holiday sales quarter for Apple. So my hunch is they will beat. But then what? As they say it is the stock's reaction to the news, not the news itself that matters. So I would be waiting to see what happens after the news is out before I anticipate the next big move in the Apple stock price. My guess is that it will be down. That has been the pattern of earnings season. Technically, Apple looks more risky than ever. The chart has that roundy toppish feeling, not something I like in particular.

On fundamentals, the company is growing about 20% per year and the valuation is at trailing price/earnings multiple of 32 and a forward multiple of 21. So, not exactly cheap, but not horrendously expensive either. Gun to my head, I'd wait to buy Apple at $175, where it would make me feel more comfortable. $200 is not a price I like. But the Apple stock cultists would hate to hear that -- they want to BUY, BUY BUY!!

Rich Wong, Accel: Android Off to a Good Start

Mon, 25 Jan 2010 18:17:12 GMT

Rich Wong, the Accel venture partner who is spearheading many of Accel's wireless investments, is increasingly bullish on the Android market. As you may known, Accel rung a big exit recently when Google agreed to by mobile advertising specialist AdMob for $750 million, a nice chunk of change in a currency that might be even better than U.S. Dollars -- Google shares. Wong� (Twitter: rich_wong ) is closely tied to Accel portfolio company Getjar, which is a play in the Android� applications market -- as well as the growth of the "off-deck" mobile apps market in general. Getjar has been growing very fast according to both Wong and CEO Ilja Laurs, whom we interviewed several weeks ago (Notes on the interview coming tomorrow. ) Laurs says that Android apps haven't yet caught up to Getjar's other apps platforms, but he sees it being "the biggest platform in 10 years." Wong throws in his endorsement: "I think Android has done an incredible job," he writes�in an e-mail. "When you think about complexity of delivering a great ui/experience on multiple hardware types versus say iPhone which is only on one... They've done an impressive job and I think this raises the water level for the entire industry" Now, different hardware types will certainly be part of the problem for Android, where iPhone has the advantage. While Apple developers have the advantage of only having to deal with one device, the wider-ranging bid of Android across dozens of handset makers will challenge developers with different implementations. But that also means that with larger handset markets such as Nokia's and Motorola's, Android may have a larger pond to grown in. The chart below includes some data from AdMob showing the growth in requests for Android applications, with HTC Magic and Motorola's Droid leading the way. Source: Admob, Inc. What does this mean for the handset market in general, you ask? We have covered this topic before. It coud change the dynamics quite a bit, depending on which handset makers are the most aggressive with Android. So far, Motorola and�Taiwanese vendor HTC are leading the pack. Android may be a real threat to RIM's�Blackberry, as initial data shows this is where apps market share is being taken from. Wong and Admob execs see gains for any device with a WiFi connections, as Android apps might be better suited for a bigger data connection. Motorola is climbing the rankings while Nokia appears to be sinking. [caption id="attachment_761" align="aligncenter" width="330" caption="Admob data shows growth in handset requets for apps on the Android platform"][/caption] Source: Getjar Inc. This is really interesting data and it bears close watching over the next six months to see how the handset applecart may be upset by the introduction of Android phones. It could give a great indication of who has the most to gain in 2011, which both Wong and Getjar CEO Laurs say may be the "Year of Android." I will publish more slides and information from my dicussion with Laurs tomorrow.

Morning News Brew: January 25th, 2010

Mon, 25 Jan 2010 17:01:35 GMT

Damn, January is almost over and I am nowhere near accomplishing one-twelfth of what I wanted to get done in 2010. Are you? That's okay, our world leaders aren't there yet, either. They are set to gather in Davos this week for that annual junket known as the "World Economic Forum." Primary objective? To tell us how smart and rich they are. What is the World Economic Forum you ask? It's a gathering of really, really rich people, who do their best to massively screw up a tiny resort town in Switzerland. For one week, we'll get to hear breathless reports of how fast leading business executives and investment bankers are destroying the global economy. It's also an excuse for pundits and TV personalities to brag incessantly about how they got this cherry assignment. Personally, I see it as yet another sign that the global power infrastructure is approaching a modern version of the Roman Empire. But I will watching, and listen, to key figures. One person I always pay attention to is George Soros, who has now apparently been bounced from the Davos headlines by partying, Playboy doomsday ecnonomist Nouriel Roubini. How these two got on the same page I'm not sure. Let's get this straight: Soros is a billionaire, with four decades of successful investment under his belt. Roubini predicted a fairly obvious investment banking meltdown in 2008 and then partied like crazy with hotties for awhile.Who's the bigger brain? At any rate, before I ramble on, here are some more links and newsbits:

Existing home sales shocked everybody by falling (Bloomberg). Gee, what a shock.
Ed Whitacre will become the permanent CEO of GM (Wall Street Journal). Hey, I met this guy once! He was running a telephone company at the time. Isn't that funny! I bet he puts telephones in cars.
Nice Joe Queenan piece on why NBC is making a Leno mistake (Wall Street Journal). "Jay Leno, much like Adolf Hitler, is a master of making secret demands for foreign territory and then acting like the wronged party." LOL! Now that is a good line.
Wal-Mart Stores to eliminate 11,000 Sam's Club jobs (Bizjournals.com). For this, they gain 10 points in their bid to top the mega-hated companies list.
The man who lives without money (The Guardian). Better to do it voluntarily, I say.
Great soundbite alert: British P.M. has been accused of "moral cowardice" (The Telegraph).
Jim Rogers is calling for a sizable market correction (The Telegraph).
TechCrunch reports that Steve Jobs has been overheard saying the tablet will be the most important thing Apple's ever done. This coming from the person who thinks he's the most important person.
An outfit called Flurry says the Apple tablet will be really, really good for video games. Oh great, just what we need -- more brain-dead teenagers zoning out on on shoot-em-ups in the local Starbucks.
China said it didn't have anything to do with attacking Google's servers (Agence France Presse). Righhtttt... and I'm Brett Favre's sports psychologist.
Speaking of Brett Favre, what exactly is he going to do for an encore? Las Vegas is posting odds on an over/under on retirement reversal annoucements. The over is at 8 and I'm taking it.
Brett Favre does Pants on the Ground (HuffPost). Did the reporter really ask him about slapping guys on the butt?
Woman falls, rips Picasso painting (Agence France Press via Yahoo). I can't tell you how many times I feared my kids doing this.
Map of the interactinos between the genes in a yeast cell (BBC). Just testing how geeky y'all are. Please, no comparisons to social networking.
Obama unveils new intitatives for the middle class (Reuters). He's got a problem. First he's got to re-create the middle class.

Greentech Media: IPO Candidates Piling up

Thu, 21 Jan 2010 17:57:08 GMT

Greentech Media, a fine place to go for everything green and techy, says that 2010 promises to be a big year in the green technology IPO market, with potential IPO candidates�stacking up like cars on the 405 in L.A. Companies making a bid for public market debuts include thin-film solar play Solyndra, Chinese solar firm JinkoSolar, and yet another Chinese solar polysilicon maker Daqo Energy. Those companies filed for IPOs seeking to raise $300 million, $100 million, and $100 million, respectively. That's $500 million in capital among four companies, for those of you who can't bother with the math. Greentech says that other companies that might seek IPOs include Nanosolar once it gets to $50 million in revenue.�� SunRun and SolarCity are other potential IPOs. Greentech says other potential companies include:

�Tesla Motors : electric cars for rich people.
�Bridgelux, an LED company
�Brightsource��
Silver Spring Networks, a smart grid company
�Trilliant, another grid-maker
�Enphase, which makes solar inverters.

We can only hope the markets hold up to support these IPOs, which would make for a very interesting 2010 and bring a lot of fresh capital to the green technology market.

Tech Standouts: eBay and Seagate

Thu, 21 Jan 2010 17:29:27 GMT

Despite a nasty general market selloff, eBay and Seagate Technology remain standouts in the technology markets today with strong earnings reports. Seagate shares were up 1.81 (10%) to 19.57 and ebay shares were up $1.94 (9%) to 24.17 in mid-day trading. eBay reported earnings of $1.36 billion, or $1.02 a share in the fourth quarter. This compared with $367 million, or 29 cents a share, in the year-earlier period. Excluding the one-time gains, eBay earned $586 million, or 44 cents a share, in the recent period. Analysts expected earnings of 40 cents a share. Seagate announced second quarter earnings per share of $1.05, versus consensus expectations of 65 cents. Second quarter revenues were $3.03 billion, whereas many analysts were expecting $2.85 billion. Seagate attributed it strong quarter to a revival in demand for disk drives, which has been fitting with our theme of a recovery in the general PC market. eBay reported that its PayPal online payment united gave a strong boost of earnings, and that the company also saw� "turnaround progress in our core eBay business."

Nightmare Scenario: Trade War With China

Thu, 21 Jan 2010 16:49:39 GMT

There are lots of things to worry about these days, among them�plummeting bank credit, high unemployment, pollution, corrupt politicians, terrorists, and natural disasters. But things could get worse: Tensions appear to be rising between the United States and China. If you think things are bad, contemplate a trade war with China. The U.S. government has called for a "probe" into the recent hacks on Google's servers. And Secretary of State Hillary Clinton said that companies operating in China should refuse to support "politically motivated censorship." These are strong statements, and exactly the kind of statements the Chinese government doesn't like. Imagine us, a country subsumed in massive debts, lecturing our biggest creditor on what to do. Hmmm. Is it just me, or has anybody noticed that China happens to be a totalitarian regime? That they've funded trillions of dollars of our economy by buying Treasury bonds? And suddenly it's time for the "freedom" lecture. You're not going to make them be "free." Their government is not based on freedom. America can be incredibly arrogant and condescending on the world scene.�But it's not the time to be beating our chests. The fact is, right now we are a�nation of many weaknesses, owing trillions of dollars of debt to other nations.�We should actually be looking to strike more conciliatory tones with our trade partners, rather than going on the attack. I believe it's helpful to understand the other point of view. I think this article in China Daily is very good at framing the Chinses mindset . If you think you understand China, read the article, rather than just listening to Hillary Clinton's propaganda.

�The Chinese Government has been learning to introduce free market mechanism into its economic system and society for the last thirty years. The Chinese government believes that it has succeeded in its efforts in introducing the free market into its economic system and asked other countries in the world to recognize its free market economy status. Some countries have already recognized China as a free market economy and others have not. I think that the Chinese government should allow Google the freedom to leave, just as it allowed its freedom to come into China, in order to demonstrate that China is practicing free market in managing its economy.

Interesting prespective, no? Starting a trade war with China now would be a total nightmare. The world economy has largely been driven by growth in emerging markets in the last 10 years, with a large part of that coming from China. The growth in China has actually been beneficial to us, as we outsource many tasks to them including the contruction of many electronic gadgets such as iPhones. That keeps prices low. But at what cost? We clearly have been supporting a totalitarian regime and encouraging slave labor in sweatshops. And it's caused extreme economy inbalances with our trade deficit, as China stubbornly maintains the peg on their currency. Source: Economywatch.com But it's a funny time to suddenly get a moral concience about this. We're in a global recession, and reviving trade with Asia is central to the recovery. As for problems with censorship and personal freedoms,��it's not like this these problems in China are a sudden revelation. Remember that thing called Tianamen Square? The economic relationship we have with�China have been based on us keeping one eye on business and looking the other way when it comes to things like personal freedom and free markets. If we start taking the moral high ground now and escalating the rhetoric, we risk plunging into a trade war... or worse. We either need to shut up and�accept the fact that China is a totalitarian and mercantalist nation and allow political change to come from within China, or we need to�pull out. Now is probably not the time to be picking fights. With the bulk of trade in the world economy coming with China, a full-scale trade war would lead us to even more dark economic times than we're already accustomed to.

Congressional Junkets Skyrocket. What to Do? Raise the Debt Ceiling

Thu, 21 Jan 2010 16:16:21 GMT

Now, I don't want to go all Glenn Beck on you. I bring this information to you in a non-partisan way. But apparently Congressmen are spending more money than ever on overseas trips, just as Congress is looking to seek a $1.9 trillion increase in the federal debt limit The Wall Street Journal ran a piece on Tuesday showing that the U.S military is funding thousands of dollars of alcohol and food for lawmakers on their trips overseas. Mind you, this isn't the base cost of the trips. These are additional costs to ply our Congressmen with libations�overseas. The journal estimates these added military funds run at $4,300 per trip for 43 trips examined. An analysis by the Journal showed that overseas travel was $13 million in 2008, a tenfold increase from 1995. To get a taste of it, here is a description of one trip as quote from the journal:

When Democratic Sen. Chris Dodd of Connecticut—who heads the Banking Committee and ranks second on the Foreign Relations Committee—traveled to Europe in December 2008 to study banking issues, the Army dispatched an official to make sure the trip went smoothly. Records show the military gave the liaison $7,000 to cover expenses.

The�Climate Summit�in Copenhagen, held in December, might have been the Superbowl of Congressional�junkets.�Remember that? �It's where government officials, scientists, and climate wonks from all over the globe jetted into Copenhagen in December for a massive carbon-spewing party that ended with what is described by the New York Times as "a tentative nonbinding agreement" on carbon emissions.�In other words, they accomplished nothing.�I'm wondering how much carbon they would have saved by not having the the Climate Summit at all. In fact, the Climate Summit ended with bad vibes all over.�The waste, �both in carbon terms and taxpayer funds, was mind-boggling. A nice investigative piece by CBS News showed that millions was spent to send a huge Congressional delegation. Let's take a look at the scale, according to CBS reporting:

Delegation leaders: House Speaker Nancy Pelosi, House Majority Leader Steny Hoyer, and�Chairman of the Tax Committee Charles Rangel.
Additional Congressmen: Democrats: Waxman, Miller, Markey, Gordon, Levin, Blumenauer, DeGette, Inslee, Ryan, Butterfield, Cleaver, Giffords, and Republicans: Barton, Upton, Moore Capito, Sullivan, Blackburn and Sensenbrenner.
Travel required�three U.S. Military jets:�two 737s and�and�one Gulfstream 5. Estimated cost: $200,000. That doesn't include the extra carbon the jets spewed to to to a conference designed to reduce carbon spewing.
321 Hotel nights (Marriott). Let's say it was $250 per night, probably a conservative estimate for Copenhagen with a rapidly plummeting dollar. That's $80,000 or so.

Needless to say, the timing is interesting, given that Congress cast a last-minute vote in 2009�to increase the federal debt limits and the U.S. government deficits mount into the trillions. Now Congress is looking to seek a $1.9 trillion increase in the federal debt limit. Yes -- you got that right -- $1.9 trillion more in debt! This would take the debt limit to�more than�$14 trillion. If the debt limit is not raised or expenses are not cut in 2010, the U.S government risks defaulting on its obligations.

Markets Are Down: Maybe It's China, Stupid

Wed, 20 Jan 2010 19:36:27 GMT

This morning I posted an item on Scott Brown and how it was interesting that the markets are down. Shame on me. Not only am I making the #1 mistake that financial journalists make -- a spurious correlation�-- but I didn't even analyze the more obvious reasons. You see, China tightened credit again.�And in other data, housing starts were down. There are a whole host of reasons why the market could be down. When�China tightened credit again overnight, that may have helped spur a rally in the U.S. Dollar, which started in the wee hours of the morning U.S. time. Because China, credit, and currencies have been ruling the market (not politics), it's my guess that this has been a bigger factor in today's market selloff. Take a look, for example, at what the BBC has to say about it. The selloff started in Europe, centered around the China news. Financial "journalists" worldwide will continue to�scurry to�explain how the markets can be down when Massachusetts elected a Republican Senator. For example, the Business Insider is busy scratching its head and bashing Cramer�about it. �This is a U.S.-centric view of things. The bottom line is that scientifically, it's nearly impossible to determine "why" the market is down. It could be random noise. Or it could be some overleveragd hedge fund liquidating. Because nobody knows for sure, let me now annex possible theories I introduced to include more options: 1) China cut credit again. In a liquidity-driven market, this is bad. 2) Republicans gained a senate seat. That means less healthcare and less stimulus. The market rally has been coincident with government stimulus, therefore the market is selling off on the idea there will be less liquidity in 2010. 3) It's raining in California. 4) Scott Brown has a nice haircut, and and once posed nude. The idea of a former male model as U.S. Senator has investors scared. 5) The latest numbers show the drop in the bee popuation reaching a crisis. (Telegraph) 6) Conan is toast. (Popeater.com) Go ahead journos. Pick a random data point and write a story about your theory. The market is down because (choose one).

What is Wrong with Arthur Sulzberger Jr.?

Wed, 20 Jan 2010 16:25:07 GMT

Seriously. Arthur Sulzberger Jr.: What is wrong with him? After at least a decade of mismanagement of his family's New York Times empire, which has fought with shareholders and investors and has come very close to plunging it into bankruptcy�(who knows if the coast is clear?),�the Chairman and Publisher�of the New York Times has �finally made a "decision" about an Internet pay model --�without having made any actual�decisions. I'll tell you what's wrong: He can't even make basic business decisions. The New York Times is going to start charging for access to articles, the newspaper says. When will they charge? Maybe "early 2011." How much? Not sure. It will be a flat fee for unlimited access, though. When do you have to pay? Not really sure about that, either. You'll get something for free, but they're not sure yet. You can read some articles, but we're not sure now many. This is not how business decisions are supposed to be made. I'll tell you what the problem is: If the New York Times actually goes through with this (who knows, Arthur may change his mind yet again), they have a tough year ahead of them. They may not even make it to the famous pay gate in 2011.�Now that they have announced they will go to a pay model, they�will start cannibalizing their Internet traffic. They need to figure out how much ad revenue they will lose to the decline in Internet traffic and how much revenue they can possibly get from pay revenue. Then all the sales people selling Web ads have to go back to their big advertisers and explain how this is all going to work out for them. If you are a salesperson, this is unfun. With mounds of debt, an unsteady cash flow, and the newspaper market in decline in the middle of a harsh recession, it's not exactly the time to be making wishy-washy decisions. What's the New York Times stock doing (NYT)? it's down 1%. This man has made shareholders miserable for far too long. I'm shocked that he's able to hang on. The only reason is the company's whacky preferred shareholder structure. Arthur, can you just make a decision?�If you�can make a boneheaded decision to build some gigantic, unaffordable, ego-boosting skycraper in New York City -- which you later have to�sell in order to raise some cash --�you should be able to make a basic business decision about your core product in�its most important growth market. Arthur: take a look at your balance sheet. You have nearly $1B in debt and almost no cash. You have negative shareholder equity, yet somehow you manage to have disdain for shareholders. You are not in a position of strength, nor do you act like you are. New York Times Co. (NYT)

Balance Sheet
Total Cash (mrq):	28.09M
Total Cash Per Share (mrq):	0.194
Total Debt (mrq):	916.53M
Total Debt/Equity (mrq):	N/A
Current Ratio (mrq):	0.793
Book Value Per Share (mrq):	3.385

�
Stockholders' Equity�� 2008�� 2007�� 2006
Misc Stocks Options Warrants	- �	- �	- �
Redeemable Preferred Stock	- �	- �	- �
Preferred Stock	- �	- �	- �
Common Stock	14,889��	14,889��	14,886��
Retained Earnings	998,699��	1,170,288��	1,111,006��
Treasury Stock	(159,679)	(161,395)	(158,886)
Capital Surplus	22,149��	9,869��	- �
Other Stockholder Equity	(372,095)	(55,451)	(147,164)
�
Total Stockholder Equity	503,963��	978,200��	819,842��
�
Net Tangible Assets	($208,645)	$166,299��	$35,474�

Source: Yahoo

It's Brownie Boy! But What Does it Mean for Markets?

Wed, 20 Jan 2010 15:40:46 GMT

Brownie Boy has won! Scott Brown, Republican, is now a U.S. Senator, having won the special Massachusetts election. Democrats seem mystified about how a dark-horse Republican can take the senate seat of the late Ted Kennedy, one of the greatest liberal icons of all time -- in one of the most liberal states of all time. I'll tell you why: It's the cheesecake (see below, if you don't know what I'm talking about). What does it mean for the markets? The conventional wisdom is that the market will rally whenever Republicans take over because they're for business and lower taxes. I have some news today: the market is not rallying. It's getting whacked. This is disturbing on several levels. What does it mean? I think it means the market knows that it needs the government printing presses to keep it afloat, and without further government largesse, it may just all fall apart. The fact that Brown has�won and reduces the Democrat's grip on the Senate by one vote means less chance for healthcare, less chance for more stimulus, and less chance for more debt. The market senses this, and wonders what it would be like to "fly naked" without the support of a U.S. government that looks almost certain to descend into gridlock. Scott Brown. But�not the Scott Brown that won the Massachusetts election. The Republicans appear to be elated, wagging their fingers at Democrats, saying, "I told you so," dancing on the tables with lampshades on their heads. But why, exactly, I'm not sure. Sure, they might kill healthcare, but then what? The state of the U.S. Congress is a mess. The only thing that either party knows how to do is toss angry rhetoric at the opposition and then sign a huge pork bill for their state. Let's not get carried away. It's�just one senate seat. Yes, that's enough to stop a�filibuster, but not exactly a majority.�And the market selling off on a�Brown victory warns us to be careful.� Why's that? It's because the market knows that we're in a raging recession, unemployment is at 10%, we have huge multi-trillion-dollar deficits, and Scott Brown is not going to change any of that -- even if he does look good with no clothes on. Scott Brown the new U.S. Senator.

Cree Confirms Hot LED Market

Tue, 19 Jan 2010 23:42:39 GMT

Cree (CREE) earnings were out after the market close, confirming that the LED (light emitting diode) market is white hot. The stock is up nearly 10% after hours. The semiconductor and LED company's� second-quarter profit tripled. It cited surging demand for LEDs as one of the drivers of its earnings.The companyprojected fiscal third-quarter earnings of 41 cents to 44 cents, excluding items, on revenue of $215 million to $225 million. Analysts surveyed by Thomson Reuters projected 28 cents and $190 million, respectively, according to the Wall Street Journal. The stock was trading up $5.54 to� $59.75, up 10%,� in after-hours trading. That's above the recent 52-week high, which it made last week. The advantage of LEDs, which are more akin to chips than light bulbs, is that they last much longer and consume less energy than traditional light bulbs. In November, the company said Wal-Mart Stores Inc. (WMT) would use LED lighting in 650 stores. I have just been delving into LEDs lately, but I think the demand for this technology will be huge over the next 5-10 years. Walmart is just a sign of things to come. Investors I spoke to in this market point out that commercial applications of the technology are only the beginning, as LEDs are making their way into the consumer market in the form of flashlights and house lightbulbs, which is huge. Imagine every light bulb on earth being replaced with LEDs. Cree benefits in several ways in the market. Not only is Cree a manufacturer of LED technology, but it holds key patents on the technology. The patents in LEDs are closely watched in the industry because they are held by a key group of companies and controlled by cross-licensing agreements. Read this article in LEDs magazine to learn more. This cool chart from LEDs magazine demonstrates the complexity of the LED patent world: (Disclosure: No position in Cree. Unfortunately)

Today's News Links: Politics, Markets, and Rich People

Tue, 19 Jan 2010 21:36:44 GMT

Greetings for Tuesday, January 19th. That new year goes fast eh? It's almost February. In today's news, we have Massachusetts Politics, Matt Taibbi's slam, a Krafty deal, and a rising stock market. What more can you ask for? Here's a rundown of what's going on, through the eyes of the Rayno Report:

Massachusetts politics -- what fun!� Republican Scott Brown is grabbing the headlines, with his possible come-from-behind victory over Democratic favorite Martha Coakley in a special election for a Massachusetts senate seat today (Politco). Not only would a Republican candidate taking the late senator Ted Kennedy's senate seat be a shock to the Democratic party, but it jeopardizes the Obama Adminstration's entire agenda (New York Times) Kind of a� big deal!
The market rallied today. Folks who don't study statistics say it's because of the Massachusetts senate election. Even though we don't know who won. Okay. (Bloomberg)
The disaster that is Haiti continues (CNN.com). Remember to help out, if you can.
I'm still laughing at Matt Taibbi's rant on Thomas Friedman's greenish hype (NY Press). He even tells you what it has to do with what midgets think of Austrailia. It was so inspiring, I had to flatter him with my own derivative rant below.
Interesting, Taibbi is onto something. Conflicts around "greeness" may be rising (New York Times).
Did anybody notice that China is putting together a national strategic oil reserve? (Kuwait News Agency)
Speaking of Kuwait, the Kuwait foreign minister has called Israeli Prime Minister Benjamin Netanyahu "stupid and insane." (Al-Manar TV)
I guess it's time for another Middle East conflict (Xinhua).
Avatar is now the most popular movie shown in China ever. That's enough for censors to start yanking it, apparently (Sphere).
Speaking of battles in China, Google is yanking its Nexus One from China until it can sort out that pesky negotiation with a totalitarian regime.
Microsoft wants to launch a Zune phone (All Things D). Go ahead, try to stifle your laughter.
HarperCollins Publishers is negotiating with Apple for books to appear on a new Apple tablet device (Wall Street Journal).
More men are marrying wealthier women. And women are rejecting rich men for poor men. (New York Times). No word on whether poor men can marry poor women.
Speaking of wealth, a man masquerading as a fashion model has been bilking wealthy men (L.A. Times).
The man was posing as fashion model Bree Condon. Here's what Bree Condon looks like, in case you were wondering:
The Cadbury board has accepted Kraft's improved $18.0B takeover bid (Associated Press)

Matt Taibbi Fries Friedman: He's Right, and Here's Why

Tue, 19 Jan 2010 17:33:31 GMT

Matt Taibbi, who is making a pretty nice career out of skewering the Wall Street/Beltway establishment, has a ripping piece on New York Times columnist and author Thomas Friedman, called "Flat N All That," in the New York Press (props to Aaron Task for the link). Taibbi�starts with Thomas Friedman's hypocrisy in the green movement, and then moves onto the rest of Friedman's flaws, including�his poor writing syntax and painful metaphors, bad editors at the New York Times, and pathetic use of statistical randomness�in an attempt to prove a �point. Not only is the column immensely entertaining -- Taibbi is emerging as one of the preeminent practictioners of modern Gonzo-financial journalism -- but it points out the central problem to the "green guilt" movement and why Friedman's pathetic attempt to lead us just doesn't make sense. Taibbi's central point is that Thomas Friedman is a raging hypocrite. Why is that? For starters,�Friedman apparently �considers himself as a�leader of� the environmentalist� movement, though he lives in a fuel-guzzling 12,000 sq. ft. mega-mansion and jets off to Damascus every�five days. And he's right. The "green guilt" movement is mostly led by wealthy "limosine liberals" such as Friedman and Al Gore (another jet-setting and mega-mansion-compound-living hypocrite), who really have no interest in taking the steps that true enrvironmentalism would entail: A massive scale-back in lifestyle and consumerism so as to reduce consumption of fossil fuels and greenhouse gas emissions. The fact is that it's extremely difficult and slow process to do this, because�the entire world econmomy is based on consuming stuff, and there are huge �economic challenges, psychological challenges, and political challenges to building a more green society. This is the point that Friedman ignores, as his own excessive lifestyle demonstrates. [caption id="attachment_598" align="aligncenter" width="549" caption="Thomas Friedman's "green" compound"][/caption] The main problem is that most people�want more�stuff in life. When's the last time you woke up in the morning and said, "You know, I want a smaller house, I want to give away my car, and become a Buddhist monk." It's a generous thought, but most people just don't think that way. They want to go to the office and get a promotion so that they can upgrade their kitchen. That is an economic fact that has driven humanity since the beginning of time, when we went out to�kill our dinner with large stone clubs but didn't yet have a six-burner Viking stove. How many people have the discipline to scale back the psychological need for "more"? A very small percentage of people have the ability to do so -- mostly poets and monks. But�it is not merely a measure of conscience, but also an economic choice. Most people -- especially the folks in the lower-income levels -- simply don't have the time or the money to "be green." They need to drive to work and earn a living for their family. And if you think about it, the people who consume the most energy and spew the most carbon are generally upper-middle class and and-upper-class Americans, �like Friedman and Gore, who live in gigantic houses, employ a flotilla of Suburban-driving assistants, and fly around the world stoking their egos by pontificating in front of flag-waving groupies�(air travel has the largest carbon footprint of any one action a human can take). Let's be serious. Do we really think we'll get more green by lecturing the Chinese people that they can't live in a 4-bedroom suburban house and drive cars to work like us?��That�won't hack it. The Chinese will march forward regardless. They know we are hypocrites to lecture them about how they should be different. Spend some time with the�carbon calculators. Much of our environmental excesses are consumed by recreation and travel -- not daily working�life. That is, getting on an airplane to Hawaii�or taking the family truckster to Yellowstone Park. Take a look at the chart below and you will see what I mean. Holiday flights, recreation, and leisure account for 20% of the average person's carbon footprint. If you travel for business, forget about it, it means you are a veritable carbon machine. I live in a large house. I know it's bad. But I know that other things are worse. I�once calcuated my carbon footprint based on 10 flights per year (which I used to do), and concluded that it more than tripled my carbon consumption and that air travel accounted for more than 50% of my footprint. I could ride my bicycle to work and live in a teepee, and that wouldn't offset the�eight trips to the West Coast. Now imagine Al Gore in mobilizing his globe-trotting propaganda team. Source: Carbonfootprint.com It's really hard, even for many of us who are not living in poverty in India or have decent jobs, to reduce our fuel and carbon consumption. Yet, Friedman and Gore don't get it.� Beyond the�issue that their data, science, and economic theories aren't based on fact, they don't understand that they themselves are the true carbon hogs and that the average working stiff (the person they allegedly represent) can't pay an extra $8,000 for a hybrid. Or that Ethanol subsidies eventually result in higher food prices and�a generally dysfunctional economic system.��Throwing government subsidies on the Ethanol market was one of the most stupid things we've done in the last 10 years. Maybe�people like Friedman�should spend more time on�real bread-and-butter problems of true economic change for climate, which would include the careful analysis of business cases for�alternative energy, the elimination of our Congressmen using taxpayer money to go on airplane�junkets to Cophenhagen, and examining how to promote more private investment in the alternative fuel markets. The earth does need our�help, and we as humans should reconsider how we live in order to stop the obvious destruction of major quandrants of the planet. But inevitably we're going to have to solve the problems through econmomic and technological innovation. It's the only way. Think about it: 150 years ago we were using whale blubber to fuel our homes. Now, that's progress. The innovations and economics changes will�come when�oil and gas will become more scarce, and� more expensive, and more investment is driven into new technologies. Meanwhile, solar and other alternative technologies will become cheaper�through growth of private�investment; scientists will discover new technolgies to drive down the cost of alternative energy technology; more investment will create even more economies of scale in this market. You can't force it to happen. It's going to be driven by economics. If�you're feeling guilty about that, stop lecturing us and cancel that trip to Hawaii for your next family vacation -- take the volunteer gig on the local organic hemp farm, instead. Hopefully, we'll be living greener lives in 20 years�because the economics of energy and technology guide us there, not because some arrogant jerk in a limosine with a 12,000 square foot house in suburban Maryland tells us to.

Media Obituary: Is Jeff Zucker (Big Media) Toast?

Fri, 15 Jan 2010 16:35:49 GMT

It's been a while since I posted on the media market, which I used to cover, but now I just can't keep myself out of this Jeff Zucker business. Zucker is the head of NBC-Universal, which happens to be in the middle of a huge� media�foodfight over Jay Leno and Conan O'Brien and which coveted TV sime slots they will end up in after a series of disastrous shuffling by Zucker and his team. Oh, and by the way, GE is trying to sell NBC-Universal. I guess Zucker is arrogant enough to think the buyers will ask him to stick around. The outcome is less than clear. What is clear, however, is the pathetic leadership shown by NBC-Universal's "executive management team" and the sorry mess that is late night T.V. How many late-night T.V. shows are there? How many can you watch? Even if I strap myself to my Tivo and lounge chair and take a couple shots of espresso I am lucky if I can watch 180 minutes of late-night TV per week. Wish me luck if I make it through the Letterman-Leno-O'Brien layer to penetrate into the second tier of Jimmy Kimmel/Jimmy Fallon/whomever. Who better to analyze it than David Letterman? Two nights again he went on and incredible rant on NBC management, and�it was a thinly veiled rail on�Jeff Zucker. "You can't go walking around stupid and expect to be invited to parties." Conclusion:�NBC is a mess, and Jeff Zucker's career is in jeopardy. But all of this may be symbolic of the�greater trend in Big Media and NBC: ratings are declining. Ratings on CNBC are down almost 30% on the year, the late-night shuffle continues to demonstrate their biggest problem: Demographics. The youth movement is clearly geared toward Internet media and sound-bite clips they can pass around via social-mobile means. Who watches Jay Leno, anway? Well, old people. It's clear the Big Media pie is shrinking. Jeff Zucker isn't just losing friends, he's losing viewership.

Cubist: 30% Growth in 2009, Earnings Coming Next Week

Thu, 14 Jan 2010 18:33:41 GMT

Nobody said investing, or trading, was easy. You can do all the work and the world and get the story right but still have a fatal flaw -- timing -- that screws things up. Cubist Pharmaceuticals (CBST) is a case in point for myself. Good company, making good progress, but trying to time the stock will drive you mad! The company announced on Monday that it�met Wall Street's revenue forecast with $560.3 million in revenue, up 30 percent from a year earlier. It rallied on the news and is now trading at around $19, even though in the past few monts it has sold off as low as $16. �The company's primary product is an antibiotic called CUBICIN. �Here's the catch: Although it released the revenue numbers for the full-year 2009, it has not released its earnings yet. Those are due out on January 21. Strange, yes. This company comes up on a lot of value screens because it is a growth company with a relatively low P/E (12 based on next year's earnings). I want to buy small growth stocks with 30% growth rates in a recession, especially if they have P/Es of about 12. Cubist has some other impressive numbers: It's profit margin is 34%, it's Return on Equity (ROE)�is 60%, and it has a five year growth rate of 159%. If you look at the stock chart above, you can see that the tricky part in this stock is picking your entry point! It's got a wide 52-week range of 13.81/23.40. It can sell off violently (20%) in a matter of days, or rally equally as powerfully. I must admit that I have traded this stock horribly and gotten chopped up in the past,�but I'm looking to rectify that by going from a trading position to a longer term position. To correct my past abuse of this stock, I have resolved to build a long-term position. Eventually, if the company can sustain even 20% growth in 2010, the stock will break out. It's simply too cheap. Analysts estimates for 2010 have gone from 1.22 to $1.54 in the past year, according to Capital IQ, yet the stock has done nothing but chopped around. I think this is a $20+ stock.� Even if the earnings are disappointing next week, I would probably buy more on a correction down�as low as�$16, because I think it's rare that you find companies with these kind of growth numbers this cheap. My stop is at $15.50. (Disclosure: Long CBST)

Special News Edition: Helping Haiti

Thu, 14 Jan 2010 15:30:50 GMT

This morning's news is dominated by the mounting sad information out of Haiti, where the magnitude of�destruction from the earthquake is reaching the outside world. I have spent the morning rounding up some of the news along with a list of agencies that are helping with relief efforts, if you would like to contribute. Beware of scams, as the FBI has indicated there are number of slimey con artists using Haiti as a ploy to take your money. I'm sure plenty of losers have already set up fake Web sites. First, what happened:

�If you have not seen the destruction, The Guardian has a powerful slideshow.
Here is an interactive map of the destruction�(The Guardian).
More interactive views from the The New York Times.
Relief efforts will take a while to get there (New York Times)
Some news on Twitter aid-mobilization�efforts here (CNN).

If you are looking to contribute, here is a roundup of relief efforts:

Here is some Red Cross information on relief efforts for Haiti. Here is a donation page.
If you text "HAITI" to 90999 you will donate $10 to American Red Cross relief efforts for Haiti. The amount will be added to your cell phone credit card bill.
Doctors Without Borders is a reputable outfit.�An updated status report is here.�� Here is an online donation page.
CARE has a Web site up and running with lots of earthquake relief information and methods to donate (Care.org)
The Unicef site is here (Unicef.org).
Here is a good roundup of relief organizations from CNN.com�There's another list here.

On the more commercial, "let's grab some PR" front, we have these:

Abbott is kicking in $1 million (PR Newswire).
Bank of America is good for $1 million, also (PR Newswire).
American Airlines�is taking doctors and nurses to Haiti for free.�Number is�212-697-9767.
Salesforce.com will match donations dollar-for-dollar up to $100,000.
Kellogg pledges $250,000 (BusinessWeek).
The Irene Scully Fund is mathing donations (San Jose Business Journal)
Rogers Communications Kicks in $250,000 (PR Newswire)
AT&T puts out a press release for $50,000. Hmmm, is it really worth it AT&T? Seems kind of skimpy for a multi-billion dollar multinational (PR Newswire).
Verizon Wireless� says they are are "encouraging donations" --�at least they are paying for the�text messages! (PR Newswire)

I'll update this later, especially if folks send in more�helpful stuff.

Report from JP Morgan Healthcare

Wed, 13 Jan 2010 17:34:34 GMT

Our correspondent from Raygent Associates has been sending us feeds from the JPMorgan Healthcare conference, which is packed with 6,000 people in the Westin St. Francis Hotel in San Frandisco with 6,000. The word is that��investors, company presenters and entrepreneurs have been emboldened by good biotech sector returns in 2009 of 18-28% with many stocks reaching new highs. Seasonality has been a factor with the so-called "January effect." Raygent says this is where �small cap stocks tend to spike up in the beginning of the year due to a number of factors and this year appears to be extreme:? For example:

The�IBB ETF is up about 6% from November levels.
Other movers on Monday only: AMAG up 7.9% , Array(ARRY) up 8.5%, Biocryst( BCRX )up 4%, Helicos (HLCS) up 4.6%,Ideninx(IDIX) up 9.2%,Quidel(QDEL) up 4.5%, MITI up 11%, NovaVax(NVAX) up 14% and Seracare (SRLS) up 6.7%
We should also note that no longer a small cap, Illunima (Illumina), which we were covering in detail here in the fall, has rallied strongly after its October collapse, up nearly $12 to $40 from its low near $28. Raygent analyst and Rayno Report correspondent Rod Raynovich says the Illumina presentation was quite impressive and generating chatter in the room.

Some other trends Raygent is seeing:

A��shift from small molecule drug development to biologicals and vaccines. e.g. Pfizer (PFE)
Larger companies looking for "Bolt-on" acquisitions of smaller to bolster product portfolios and emerging market positions.
More integration between�diagnostics and pharmaceuticals.
A migration of diagnostics out of the lab to the home and "point of care."
e.g. Inverness (IMA)
�Targeting cancer treatment though genomics. e.g. Genomic Health (GHDX).
�There continue to be an Increasing number of partnerships between pharma and biotech.
Pharmacogenomics -getting the right drug to the right patient-continues to get traction. e.g. CVS/Caremark (CVS)

On the healthcare refrom scene a luncheon presenter, Thomas Scully, an ex-CMS administrator, said the "reform" impact will be an expansion of insurance benefits �that will be positive for the industry in the short term due to increased demand. The downside, of course, will be federal budget problems in the long term(2013 time frame).

All in all, a very bullish message for healthcare and biotech especially, which is fueling a run in these stocks.

Baidu and Sohu Take off on Google Threats

Wed, 13 Jan 2010 15:11:36 GMT

It's Google-China Wednesday here at the Rayno Report! So exciting. Perhaps the biggest market action today comes in the stocks of Baidu Inc. (BIDU) and Sohu.com (SOHU), the leading Chinese Internet companies, which are taking off on Google's threat to "do less evil" and pull out of China because of censorship and possibly hacking by the Chinese government. Baidu was up $42, or 11%, in early morning trading, and Sohu.com was up .85, or 1.5%, in early trading. Google was down $12, or 2%. Google is operating in China with special permission as long as it continues to censor search results, as instructed by the Chinese government. With�Google's threat to pull out, the Chinese Internet companies have the opportunity to split the bulk of the Chinese market share, not giving anything to Google. The conflict doesn't merely threaten Google's business in China, though. It's also likely to become a high-level diplomatic issue between the United States and China. Google is saying that there was�an sophisticated, complex hack attempted on its servers and specifically the accounts of gmail accounts of human-rights activists. The obvious speculation is whether the Chinese government may be involved. Incidentally, other companies have weighed in, saying they were also the victims of attempted hacks. Reuters has a nice�chart here on "Google's rocky road into China."

Cisco Yahoo Board Still off the Hook....

Wed, 13 Jan 2010 14:52:08 GMT

Okay, what is the deal with the Cisco stock message board on Yahoo Finance. It is so off the scales with ludicrous threads that it is insane. Many of the other stock threads on the Yahoo Finance board seem perfectly normal. I would love to hear somebody from either Yahoo or Cisco weigh in on how the Cisco Yahoo board is being held hostage by hostile political spammers... "w"'s Iraq Invasion Ruled ILLEGAL! by lobsterman... [18 minutes ago] 2 � by lantana_le... Another Gun Nut Kills 2 in the Bable Belt by SemiReform... [13-Jan-10 12:33 am] 2 � by africanmon... Monsterous by hammerbria... [13-Jan-10 12:55 am] 2 � by connerdan8... Ahead of the Bell: Werner Enterprises upgraded by devika3443... [17 minutes ago] Not rated 0 � by devika3443... The Great Haiti Giveaway is about to begin by blackonbla... [17 minutes ago] Not rated 0 � by blackonbla... Only good Republican... by ed_409 [11-Jan-10 09:06 am] 7 � by ed_409 What Is The Difference Between Our Terrorist Cowar... by lobsterman... [29-Nov-09 12:57 am] 5 � by lobsterman... Mary Landrieu Is A Senator! Palin Is An Attention ... by attemptfut... [26-Nov-09 09:22 pm] 7 � by lobsterman... LMAO - Negros continue to be slaves to the DemocRA... by obamisacom... [13-Jan-10 06:43 am] 3 � by blackonbla... Does Harry Reid like dark-skinned black people ? by hyperactiv... [51 minutes ago] 1 � by blackonbla... Oct.7, 2001 "w" Invaded Afghanistan... by attemptfut... [25-Nov-09 10:02 am] 9 � by lobsterman... WTF Was The "w" Promise Of Tax Cuts? A Bribe!!! by attemptfut... [26-Nov-09 10:14 pm] 4 � by lobsterman... census doesn't ask citizenship or BIRTHPLACE by linda.9519... [12-Jan-10 04:34 pm] 15 � by linda.9519... "poppy" bush Should Never Have Put Boots On Saudi ... by attemptfut... [25-Nov-09 09:04 am] 10 � by lobsterman... ►Reaganomics vs Obamanomics by dearleader... [13-Jan-10 02:47 am] 2 � by lobsterman... Another Obama Lie!!!!!!!! by drstone3@b... [11-Jan-10 08:34 am] 17 � by obamanatio... The Number One Democrat Welfare Rat Tax Cheat by fasttrade1... [12-Jan-10 06:30 pm] 3 �

State Department Weighs in on Google

Wed, 13 Jan 2010 14:05:19 GMT

�The U.S. State Department has weighed in on Google.

Here's the letter from Secretary of State Hillary Rodham Clinton:

Hillary Rodham Clinton Secretary of State Washington, DC January 12, 2010
We have been briefed by Google on these allegations, which raise very serious concerns and questions. We look to the Chinese government for an explanation. The ability to operate with confidence in cyberspace is critical in a modern society and economy. I will be giving an address next week on the centrality of internet freedom in the 21st century, and we will have further comment on this matter as the facts become clear.

Hillary Rodham Clinton Secretary of State
��

What is Google's Chinese Revenue, Anyway?

Wed, 13 Jan 2010 03:53:41 GMT

The Internet is aflutter with news and interpretations of Google's China debacle, in which it's threatened to pull out of the Asian nation�because it's been hacked, perhaps by the totalitarian regime that doesn't believe in free speech. Shocking, isn't it? The bigger question is what's Google's total exposure to China. The stock is only down a few bucks after-hours, so the early market take is : "Ahh, they'll figure it out." or, "China doesn't mean much." Yeah, um, head scratcher for me, too. I just wanted to know how much business was at stake. It turns out that it's not an easy question to answer. Google doesn't break out revenue geographically. And when you look at different news sources, they all say something different.

China Tech News reported just a week ago from Chinese sources that Google had about $143M in revenue in three quarters of 2009
The Business Insider quotes JPMorgan analyst Imran Khan as saying Google's revenues were going to be in the $600M range in 2010, wihth margins of 15-20%
The Wall Street Journal printed that "Google's revenue in China is relatively small, with anlaysts estimating that only a few percentage points of Google's company's nearly $22 billin in 2008 came from the nation." Hmm, but that's 2008, Mr. WSJ.

With the stock down only about $6 after-hours (1%), you would have the think the market expected revenue in the lower range of those realms, rather than the more ambitious $600M that Mr. Khan expects. Or, the market things the problems will be solved. At any rate, it gets you thinking about global business with China, and how effective it can be, especially if you are a media company.

Top Ways to Spot a Crappy Company

Tue, 12 Jan 2010 21:19:00 GMT

Every wonder how to spot a crappy company? Oh, I have so many ways. I have been working up the idea for this entry for a while but haven't had the angst-ridden energy to pull it off until today. Throw in a lack of sleep and five cups of coffee, and I'm there. My research on crappy companies goes back about 16 years, as long as I have been covering the technology industry. What many people forget in the technology industry is that contrary to the Silicon Valley popular belief, most companies suck. In fact, the vast majority of venture-backed companies fail and there are really only a few public companies that rise to greatness. And when they're great, it's usually because they are�run by a�bunch of greedy, preppy�asses with no life nor�a sense of humor. If you are an investor, this is a big problem. This is why it's right to be skeptical, analytical, and do your homework. You will get burned. So, without further ado, here are my top�things to look for in order�to spot a crappy company: 1) Lead marketing guy has bad breath, a bad wardrobe, and a cold, clammy, and limp handshake. 2) The reception area has no receptionist because some arrogant VC on the board thought they shouldn't splurge for that. Bad move. Walking into an empty room with a handwritten note that says, "Call Bob at ext. 234" is about the worst first impression you can make. 3) The bathrooms are dirty. I could give you more color here, but you already get the picture... 4) They can't show you the product. Or, they show you the product and it doesn't work. 5) The CEO isn't available to meet because he's yachting in the Cayman Islands. 6) The S-1 filing contains at least four related party transactions, including a annual sales meeting that was catered by Billy Joe Jimbob, the VP of Sales's stepbrother in Tuscon, AZ. 7) The company press kit consists of a black & white photocopy of an old press release 8) The company is 80% sales people ... or 9) The company is 80% product people, with one sales person ... 10) "We don't do�a lot of�marketing." 11) VP of Business Development offers to take you to a strip club�after the first meeting. 12) There is one customer. This customer appears to be extraordinarily large. The company is very small. There is an air of mystery about how this one tiny�company got such a huge customer. Figure it out, there's a reason. And it's not good. 13) Earnings appear suspiciously predictable. The company keeps buying other companies. The CEO has the ego the size of a truck. This CEO appears to be obsessed with his company's stock price. 14) Company keeps moving into larger, shinier, more extravagent headquarters buildings. But you still have trouble getting your calls returned. Or they still don't have a receptionist. 15) Company has a generic Web 2.0 name like, "Yoono," and the lead marketing person thinks Web 2.0 is "really cool." 16) The company issues press releases using celebrities. 17) Company contact page has Web forms instead of real phone numbers. 18) "We're leveraging our core competentcies." I once thought I made this phrase up as a joke. Then I found it on the Internets. 19) Ask around. You hear stories about managers calling employees "bipolar psychotics," or there's regular sex harassment suits against the CEO, or the executives are spending all their time hanging out at a hedge fund. 20) Media�figures and "analysts" appear to bend over backwards coming up with esoteric ways to praise the company's business model. When you read it over and over, you still can't seem to make sense of it. 21) There's wayyyy too much business going on in Russia and China. 22) The company is ready to synergize, move forward, give you the 50,000-ft. view, and grab the low-hanging fruit. 23) The company hasn't been doing well and the management team is addicted to mergers. This is a sign of distress and denial. 24) Top executives are regularly dumping lots of stock.

STEC Rumors Gain Steam, Stock Gains Strength

Tue, 12 Jan 2010 15:52:05 GMT

Memory maker STEC (STEC) has been steadily rising in recent weeks, fueled by takeover rumors and rising interest in solid-state drive (SSD) technology, where it has an edge. Shares backed off earlier in the week after approaching $20, but they have rallied 50% in just the last month and are showing renewed strength this morning, rising 2% on a flurry of rumors, some of which can be tracked on StockTwits. The rumors have been floating around for a while, and they have been well covered�by�Eric Savitz over on �Barrons.com. But today's buying interest seems genuine to me, especially given the weakness in the overall market. The most obvious buyer would be a larger storage company like EMC, which is a distribution partner of STEC's. Deutsche Bank this week appears to be buying the story, reiterating a Buy rating on the stock and giving it a $36 price target. Deutsche Bank (DB) calls STEC their Top Pick for 2010. DB calls STEC the best "pure-play" in adoption of SSDs in the enterprise market. DB says that SSDs offer performance benefits in enterprise applications which will ultimate drive adoption.� Over the longer term, SSD units are expected to grow at a CAGR of 149% through 2013, with units forecast to double in 2010 and 2011, says DB. With ample room for multiple suppliers, they view STEC as well positioned to benefit from its first mover advantage and continue to grow revenue considerably, as the growth of the market will likely far outstrip ASP declines and market share losses. STEC drives, which use chips rather than moving hard drives to store memory, cost about $100 per gigabyte. Hard drives are still much cheaper, running at about as low as $10 per GB, but the pricing in chip-based memory such as STEC's DRAM solution and NAND� flash memory have been plummeting which should lead to wider adoption. STEC announced today that it will present at the 12th Annual Needham & Company Growth Stock Conference at 10:00 a.m., ET on Wednesday, January 13, 2010, which could be a market mover. The event is being held at The Palace Hotel in New York City.

Yahoo Finance Message Boards Are a Joke

Tue, 12 Jan 2010 13:54:21 GMT

I have become increasingly frustrated with the Yahoo Finance stock message board, which used to be a good place to troll for ideas and occasionally you would even come across a bitter CEO posting enlightening messages. Instead, now, the Yahoo stock message boards have become a cesspool of spam, offensive political commentary, and irrelevant� junk. Believe me not? This morning I looked to see what was happening on the Cisco (CSCO message board, and this is what I found:

Topics	Avg Rating	Replies	Latest Post (ET) �
Even the Unions say obama lied to them! by comradehus... [3 minutes ago]	Not rated	0	3 minutes ago by comradehus...
obungles sez: Tax, Tax, Tax that wealth away by comradehus... [3 minutes ago]	Not rated	0	3 minutes ago by comradehus...
Fox continues their tradition of hiring winners by bidensux [11-Jan-10 05:08 pm]		11	7 minutes ago by johnlarry9...
Reid Persecuted For Telling The Truth? by johnlarry9... [15 minutes ago]	Not rated	0	15 minutes ago by johnlarry9...
Ouch!Obama 27% Approval. by drstone3@b... [12-Jan-10 07:24 am]	Not rated	1	54 minutes ago by comradehus...
I WANT TO THANK THE REPUKES FOR MY TAX CREDIT by launiuss [11-Jan-10 04:32 pm]		30	55 minutes ago by fluteman_g...
Obama going after same banks he sued by linda.9119... [12-Jan-10 07:42 am]	Not rated	0	12-Jan-10 07:42 am by linda.9119...
Please excuse me Mr. Obama, I mean President Oba... by drstone3@b... [12-Jan-10 07:29 am]	Not rated	1	12-Jan-10 07:35 am by fluteman_g...
Beware of a big drop in stock market by pn1409 [12-Jan-10 07:33 am]	Not rated	0	12-Jan-10 07:33 am by pn1409
Is Paying Someone For A Vote Legal? by linda.9119... [12-Jan-10 07:29 am]	Not rated	0	12-Jan-10 07:29 am by linda.9119...
NAACP its OK just keep the money coming by rhonda_ede... [11-Jan-10 08:34 pm]		4	12-Jan-10 07:26 am by drstone3@b...
CBC by linda.9119... [12-Jan-10 07:20 am]		1	12-Jan-10 07:21 am by comradehus...
The heat in America is on obama, time for by comradehus... [12-Jan-10 07:21 am]	Not rated	0	12-Jan-10 07:21 am by comradehus...
Too many feral Negros and White crooks by comradehus... [12-Jan-10 06:57 am]	Not rated	0	12-Jan-10 06:57 am by comradehus...
Reid sez: Light shin= smart, dark skin = stupid by comradehus... [12-Jan-10 06:53 am]		0	12-Jan-10 06:53 am by comradehus...
Will the last democrat leaving Washington turn out... by comradehus... [12-Jan-10 06:51 am]	Not rated	0	12-Jan-10 06:51 am by comradehus...
If you doubt Obama is Muslim watch this video by rhonda_ede... [12-Jan-10 02:18 am]		1	12-Jan-10 06:38 am by linda.9119...
aol laaying off 1200 people by linda.8519... [11-Jan-10 01:09 pm]	Not rated	5	12-Jan-10 06:26 am by linda.9119...
Democrats commiting political suicide by by bidensux [11-Jan-10 05:35 pm]		8	12-Jan-10 05:43 am by jason_baby...
Maybe Its Just Me...But I Do Not Consider Obama... by westportmo... [10-Jan-10 04:31 pm]	Not rated	2	12-Jan-10 04:02 am by westportmo...

Can somebody explain to me how this happens? It's a joke. There is not one message here even remotely related to Cisco as an investment. The content is ugly. Is there a moderator in there Yahoo, anywhere? My guess is that Yahoo won't clean it up because at this point they need the traffic. Pretty sad and pathetic.

Morning Brew: China Hits the Brakes

Tue, 12 Jan 2010 13:17:36 GMT

The markets are entering a "digestive" phase today with what looks like a pullback, possibly driven by -- what else -- China? The Chinese government raised capital requirements in a move to slow the credit expansion and economy. You have to wonder if the the Chinese ministers were reading the Economist, as I was last night, which is warning of the potential for growing asset bubbles in emerging markets and especially China. Well, what do you want, you can't have it both ways. Economic depression or bubbles -- take you pick. Personally I prefer bubbles, but that's just me. Let's run through the other news, because as always there is lots happening across the globe:

Some jobs won't return, says the Wall Street Journal. Well, duh. I know mine's not coming back. Shouldn't have put that Whoopee Cushion on the boss's chair.
Alcoa disappoints, driving down shares in Europe (New York Times). I can assure you that's not the first time that's happened.
Paul Krugman: Learning From Europe�(New York Times). I thought the Krugster was going to give is tips on how to make Espresso. Alas, no. He's trying to convince us that they like to work in France.
Speaking of France. I thought I'd catch up on what Le Monde has to say. Holy cow, Sarah Palin makes the front page!
Don't you hate it when you are awash with data from drones? (New York Times)
Some reactions to the Mark McGwire steroid admission (L.A. Times).
Next time, I have to remember to hire a mermaid for my party (L.A. Times).
The Nexus One honeymoon is over (PC World)
Google's Nexus One termination fee is $350 (Engadget)
Best and Worst of CES (Scobleizer).
Shanda Games acquires Mochi Media for $80M�(TechCrunch)
New sex hormone found -- could lead to male birth control (National Geographic). I can't think of a more dangerous idea.
The birth of a massive star (MITnews).

Top Five Top Tens for 2010

Mon, 11 Jan 2010 16:22:59 GMT

In the new year, pundits, traders, and strategists sharpen their pencils (or keyboards) to issue reams of "lists" and predictions for the new year. I've done my best here to round up the top five top ten lists for 2010! These include predictions, surprises, e.t.c. Many are quite notable names. What's interesting this year is the diversity of opinions and divergent views. I think this is a measure of how much truly unconventional stuff is going on -- truly historical -- and�who hard it is to predict the outcome of "unprecedented measures," for example, of massive government money printing and multi-trillion deficits. Here are the lists: 1) Byron Wien's surprises for 2010 Notables: Treasury yield goes above 5.5%; stock market rallies to 1300 in the first half (S&P), then declines to 1000; U.S. dollar rallies. 2) Bill Gross's Investment Outlook 2010. Okay, so this isn't a traditional list. But it's one of the most successful bond investors on the planet. If you can wade through Bill's terrible writing and political ideology, there are good investment ideas. So you have to listen. Notables: Investors should be "vigilant"; all asset markets may suffer on Fed exit strategy; carry trades to be at risk; "watch out!" says Bill. 3) Doug Kass's 2010 surprises. So, this list is 20 long. Oh well. still interesting. Notables: Huge Q1; housing and jobs fail to revive; U.S. dollar rallies; gold falls; central banks tighten; Israel attacks Iran; treasury yields fall; Warren Buffett resigns; the N.Y. Yankees are sold. 4) Bob Doll's Top Ten predictions for 2010. Notables: S&P hits 1250; emerging markets outperform; possible earnings growth of 20%; inflation not a problem; merger activity picks up; GOP gains in U.S. politics but doesn't take majority. 5) Richard Bernstein's Top Ten predictions for 2010. Wow -- this was quite a shocker. The former Merrill Lynch strategists -- who had been bearish for many years -- turns bull! Maybe Merrill made a mistake in turning him loose. Notables: Stocks and bonds both have positive returns; U.S. dollar rallies; carry trades at risk; corporate profits explode;�employment improves; Democrats do better in mid-terms than people think.

Bespoke: 2010 Strategist Predictions

Mon, 11 Jan 2010 15:36:23 GMT

Bespoke Investment Group has put together a nice chart on their Web site. The numbers include Wall Street strategists as surveyed by Bloomberg.� In total, strategists are looking for a high of 1,225 for the S&P 500, which makes for a gain of about 10% over current levels. Market forecasts always crack me up. A Wall Street strategist expecting to "hit the number" of the S&P at the end of the year sounds as likely to me as hitting the lottery. But they are still fun to look at, and especially, aggregate, so that we can get a look at the overall market mood. The mood this year looks increasingly bullish, given the credit crisis and unfinished business with deficits. Check out the chart below. Source: Bespoke Investment Group (www.bespokeinvest.com)

Redpoint's Scott Raney: Things Look Up

Thu, 07 Jan 2010 18:59:07 GMT

Surely 2009 wasn't the best of years for the venture-capital industry, with Wall Street trying to sort out credit turmoil, startups struggling, and the capital simply out of whack with bloated amounts of funds looking for a place to go. But there were some victories -- some IPOs even, and 2010 is looking a lot better! Redpoint Ventures partner Scott Raney points out that the IPO market is creeping back and that M&A activity is picking up substantially. That means more exits for startup companies, which will be good for pumping new blood back into the venture capital market in 2010. Raney also says that deal flow is increasing, M&A talks are increasing, and investors feel better about things. Will it hold up? Just follow the bouncing ball of the stock market, which leads the psychology here. "The mojo is back, pricing is back, and things are full-steam ahead. It's a little surprising, actually," said Raney in an interview yesterday. "We're bullish about a lot of things especially cloud computing and on-demand software." How about some more buzzwords? Here are some other areas Raney likes: "Internet Infrastructure, virtual goods, open mobile." Some of the Redpoint investments that Raney says are doing really well right now: HomeAway.com (online vacation rentals), Solyndra (thin-film solar), and BlueKai (online marketing). I will be using some of Raney's input, as well as input from lots more people, in some research I'm doing over the next few weeks. If you'd like to talk to me on the topic of venture capital, startups, and innovation, send me an email at scott@rayno.com.

Mini Report: Nexus One vs. the Others

Thu, 07 Jan 2010 15:59:58 GMT

A big focus at CES in Las Vegas this week is on the growing smartphone wars, as a number of mobile manufacturers gear up to battle the dominance of RIMM and Apple. One of their new weapons: Android, the new open mobile OS from Google which gained attention in the last few weeks with the launch of Google's own phone, the Nexus One. Is it possible to break down the new mobile smartphone warfare in a short roundup that takes you less than 30 minutes to read? I've spent much of the week brushing up on my reading about the Nexus One, reading up on smartphones, talking to some smart mobile guys, and looking at research in this market. So let me try to wrap it up for you in 800 words and 12 links or less. Reviews First up, the Nexus One is probably one of the most important developments in the smartphone market since the launch of the iPhone. Let's look at some of the reviews of the Google's Nexus One, to set the stage of the competition: Techcrunch: Nexus One is the "best And roid phone to date". It looks more like an iPhone "than any other phone on the market. TechCrunch's Michael Arrington is also hot and bothered about the Nexus One's integration with Google voice. Good touch screen. Noise cancellation features. Possible microphone issues. Good camera. Overall, an "important milestone in the smartphone market." Walt Mossberg (Wall Street Journal): Walt also likes the Nexus One, calling it a "beautiful, sleek new" phone. He points out that the fact that it operates on the Verizon 3G network, which is superior to AT&Ts (and subject to a lot of controversy for iPhone users), this could help draw iPhone users away. "Packed with tricks." He likes the social networking features. He points out that the iPhone still has better multimedia features, appears to have more reliable battery life, and likely will have a better apps platform for a while. Engadget: This review is somewhat wordy and lukewarm (are there editors over at Engadget?) As a phone, "not dramatically different." They've "succeeded" with the sleek design. A highlight is the 1GHz Snapdragon CPU. This makes it fast, a bit faster than Motorola's Droid. Display is nice but has some "issues." Camera is good. Not sure about an Android phone without a physical keyborad. Bottom line: "it's not in any way the Earth-shattering, paradigm-skewing device.." Hmm. It took 1000s of words to say that? Breakdown of features Nexus One vs. Apple iPhone 3GS:

Feature	Google Nexus One	Apple iPhone 3GS
U.S. carrier	T-Mobile at launch, Verizon later.	AT&T
Price	$529 unlocked; $179 with T-Mobile contract	$199 or $299 with AT&T contract, depending on memory
User-accessible memory	4 gigabytes, expandable to 32 gigabytes	16 or 32 gigabytes, fixed
Minimum monthly service fee*	$79.99	$69.95
Available 3rd-party apps	Around 18,000	Over 100,000
Memory for application storage	190 megabytes	Nearly the full capacity of phone
Syncs media files with PC or Mac	No, manual copying only	Yes, iTunes
Multitasking of apps	Yes	Only Apple apps
�
Screen size	3.7 inches	3.5 inches
Screen resolution	480 x 800	480 x 320
Removable battery	Yes	No
Camera	5 megapixel, flash	3 megapixel, no flash
Length	4.68 inches	4.5 inches
Width	2.35 inches	2.4 inches
Thickness	.45 inches	.48 inches
Weight	4.58 ounces	4.8 ounces
Claimed voice-calling battery life on 3G	7 hours	5 hours
Claimed Internet battery life on Wi-Fi	6.5 hours	9 hours
Claimed music-playback battery life	20 hours	30 hours
Claimed video-playback battery life	7 hours	10 hours

Sources: Google, Apple, T-Mobile, AT&T Smartphone Trends Okay, so what does this all mean? The introduction of Android, and the fact that Google is pushing its own phone in this market, means the market is going to accelerate with this new competitive juice. It also means that Google is going to work very hard on building up the apps platform for Android, whichmeans that mobile smartphones are going to become the most powerful and fastest growing devices on the planet. And smartphones currently only have 17% share of the mobile phone market! This sucks if you are Nokia or Motorola. Let's face it, Google and Apple have the mojo, and they have key competitive advantages over the niche players who came to life primarily as "phone manufacaturers." What are those advantages? Huge, growing software platforms. And software is the key to these new phones. I think these new developments also call into question the future of Microsoft's mobile strategy, since there appears to be nary a chatter about Windows Mobile-powered devices. How will this affect market share? Below are some useful charts from an outfit called ChangeWave Research which show how the new smartphone market and mobile operating systems markets may evolve with the introduction of Nexus One and the growth of the iPhone platform: Clearly, the Nexus One has a lot of people nervous, because it is showing the viability of Android as a major-league mobile OS. The fact that is open and is likely to spawn a new generation of app developers must be leaving a lot of people tossing and turning in bed. Clearly the trend is to go "off deck," or into open, Web-based mobile platforms. Ilja CEO, the founder and CEO Getjar, a mobile phone apps supermarket, sees apps and Android "Taking off" in 2011 (Source: Go to a very interesting slideshow here.) Conclusion What does this all tell me? It reaffirms my view, which is that a massive warn is brewing between Google, Apple, and RIMM in the smartphone market! Microsoft has already lost the war.� Microsoft is a value stock, so that doesn't really affect my view of whether you can buy Microsoft -- mobile is a small pie of their pie (Disclosure: I own Microsoft shares), but I think this has more implications for Google and Apple's stock. Most to lose: RIMM, Motorola, Nokia. Static: Apple (but slowing growth could damage the stock) Most to win: Google, Getjar, mobile apps developers I do not think the market has signficantly priced in the potential gains for Google, so I think Google has the most to win in the mobile wars. RIMM has the most to lose because it is so concentrated in this market.I can't see how Motrola comes out of this doing well, because the Nexus One is likely to signficantly cannibalize Droid sales.

Morning Brew: Dodd's Done, Tablet Fever

Wed, 06 Jan 2010 14:19:56 GMT

Good morning on this fine third work day of 2010. Why is it that 2010 already seems old? Maybe it's just that I'm getting old. Senators are retiring, Microsoft is trying to front-run Apple at CES, and it's time to put away the holiday decorations and get down to work.

Powerful Senator Christopher Dodd -- yeah that's the guy whose snow-white hair looks as if it's made of wax -- is retiring (Bloomberg) Big news, given the fact the our esteemed senators are considering gigantic, 10-ton pieces of legislature including healthcare reform, financial reform, and trillions of dollars in potential fiscal deficits. Hmmm. Yes, I can see why now's the time to get out of dodge...
GOP to oppose proposed consumer financial protection agency (Huffington Post). Democrats consider countering with a new Agency Protection Agency (APA) that will manage the creation of� other protection agencies.
Microsoft and H.P. are rumored to be launching tablet-slate-like computing devices at CES (N.Y. Times). That's ahead of Apple's much vaunted iPad, the digital personal hygiene device.
Gold is up nearly $12 and other metals are rallying (Bloomberg). Looks like all the newly empowered gold bears are scurrying to cover their shorts.
The ADP report on jobs cuts shrunk (BusinessWeek) . No, I don't mean the report shrunk (bad writing), the job cuts shrunk. Good news.
VentureBeat has some photos of the "cool stuff" at CES.
Extremely speculative story about hopen source, the iPhone, and Android (I think) (CNET). Still not sure what it means. But worth reading if you are bored, and open-source gets you excited.
Okay, I got it. Only Apple and Google mean anything anymore (PC World). That is, only if you are a tech trade journalist.
Ready for 3D motion-sensor gaming? I am. (Asahi.com translated by PCWorld).
The 8-gazillion-dollar Hubble telescope has allegedly spied one of the universe's youngest galaxies (USA Today). My question: how the heck do we know?
The Big Unit is retiring (MLB.com). Very happy I never had to face his slider.
There is a new crab species that looks like a strawberry (Telegraph). Yummy!
Steve from 'Blue's Clues' teaches kids to hate Sarah Palin (Big Hollywood).� Now, that's not so bad, is it?
Microsoft has dumped upgrade pricing for Office 2010 (ComputerWorld). Bastids.
Air Force Completes Micro-done (Wired.com). Now if they can just figure out how to shrink the budget

Today's Sked

Wed, 06 Jan 2010 13:52:58 GMT

Sorry, abbreviated posting schedule today... it is a ... POWDER DAY!!!

Chat Between Mr. Bull and Mr. Bear

Tue, 05 Jan 2010 20:29:11 GMT

Like any good crazy person, I like to have conversations with myself. Raging debates. Part of it might be the journalist in me -- that there's always another side to the story (though inevitably one side is usually wrong). So I present to you today's internal conversation between Mr. Bull and Mr. Bear. Mr. Bull: Happy New Year! Dude, you check out the stock market? It's raging bro. Coal stocks, tech, blue chips... they're all on a tear. Mr. Bear: Right.�How'd you do in 2008? Mr. Bull: C'mon man, don't be such a neg. Don't you watch CNBC -- lots of bullish managers. And we're not losing jobs as fast as we were. There's lots of money on the sidelines. Mr. Bear: The money on the sidelines is a myth. It's because people have it in their mattress. They're scared. Or they need it because�many people have�unemployement benefits that are running out. Or they're paying off debts. Didn't you see that in the U.S., even though new jobless claims are down, emergency benefits recently surged to all all-time high of 4.2 million? You see, things look better because they're actually getting more desperate, and people are falling of into the black hole. Mr. Bull: Yeah, but stocks really aren't that expensive. It's not like in the bubble in 2000. You can buy�good, large�companies with low P/Es. Mr. Bear: But wait until interest rates start moving up. that will compress the P/Es. And we're still in a brutal bear market. The lows of many secular bear markets resulted in P/Es in the single digits. Mr. Bull: Cheery stuff, man. Hey, do you ever get out much, have some fun? The Chicago PMI is booming. Mr. Bear: Inventory restocking. Mr. Bull: Earnings have bottomed. They'll get better next year. Analysts are moving their numbers up. Mr. Bear: Yeah, but that means the earnings comps are easy now, because�you are comparing quarterly numbers to�4Q 2008�and 1Q of last year, when we were at�the bottom. But the comps will get harder as the year draws on to Q3 and Q4 of 2010�and then soon people will realize we're still not growing. Mr. Bull: We'll grow. We still have much of that $800M stimulus to spend. Mr. Bear: Right, and it's going into short-term, government projects and crowding out private investment. It doesn't create jobs in the long term, because you need to create real businesses, not just dole out money. The private investors are waiting for the government to get out so they can start doing real business. Mr. Bull: But the Feds have stepped up to help. They're going to pump money into the sytem. Rates are at an all-time low. The yield curve is steep. Mr. Bear: Right, because they federal goverment is subsidizing bank losses. That means more taxes for you and I down the road. That's a drag. Also, we are trying to solve the problem that caused the crash with the same thing that created it: More debt. Debt-to-GDP is going to an all-time high. This can't be good. Mr. Bull: What about the housing market? That's improving. Case-Shiller says so. Mr. Bear: That's because the government and the banks have been keeping yet another wave of foreclosures from hitting the market. They will come. And that will put new pressure on housing prices. Robert Shiller himself calls this the shadow inventory. Mr. Bull: Fine. But the market has priced all this in. We know this. Mr. Bear: Not the commercial real estate disaster. That's being hidden. They haven't recognized many of the losses. They're going to be huge. Mr. Bull: Dude, sorry, but you're a downer man. I gotta take off. This isn't fun. Mr. Bear: Fine, just have it your way. Just trying to help. It's good to be a realist.

Today's News: Apple Tablets and Tiger Tales

Tue, 05 Jan 2010 18:40:12 GMT

As somebody I spoke to on the phone this morning said, it's only the second work day of 2010 and so far things are okay... but that could change by Friday. Indeed, economic metrics are up, but why is it that folks still seem nervous? Can Apple save us? Read on, the tap into the Zeitgeist of today's economic, technological, and social movements...

BusinessWeek knows how to combine the most profligate Internet content trends of the day: Combine a list with Apple, and come up with "Five Ways Apple's Tablet May Change the World." Ah, the iPad... something not right with the name for me. Are we sure it's not a personal hygiene product?
But wait, there's more! Apparently tablets will be the trend du jour down in Vegas later this week. Pen computing, anybody?
Skype is integrating with LG and Panasonic TVs (Reuters). This is cool. I can see the future. And everybody else will see us in our bathrobes.
The Nexus One fever continues, and Engadget has a review.
The New York Times has one of its classic "catch-up" stories on Google, in which they aggregate all the possible stolen scoops that blogs had months before them. Here's some analysis: "As people increasingly rely on powerful mobile phones instead of PCs to access the Web, their surfing habits are bound to change." Thanks NYT. You mean, you can surf the Web on a phone now?
A CIA double-agent was responsible for the blast at a CIA base in Afghanistan (Wall Street Journal). Scary. I like this stuff better when it's confined to spy thriller novels.
A dark opinion piece on what the WSJ is calling the furtive end-of-year cap raise for Fannie Mae and Freddie Mac the "Christmas Eve taxpayer massacre." Yes, lifting the cap was cynical politics at its worst.
Where oh where will Ronaldo go?! (The Guardian)
Five countries that crashed and burned in the credit crunch. (The Guardian). California wasn't included. That's a mistake.
Burj Dubai: The new pinnacle of vanity (Telegraph). Hmmm. Maybe Twitter could move the HQ there. It would be a field day!
Ambrose Evans-Pritchard has a bearish piece on the coming bond crisis. Big surprise!
Apple to Buy Quattro Wireless for $275 million, says the Swisher. (All Things Digital)
Gartner Acquires Burton Group. (Gartner). 41 research analysts, 40 sales associates, but only $30 million in revenue? Hmm... I smell some layoffs.
It's official: Tiger's virtual golf career is not over. (EA Sports)
Facebook testing some sort of "crowd-sourced content moderation." (Inside Facebook). Whatever that is, it sounds scary... and I don't want any part of it.
Some Illinois Republicans Are High on Medical Marijuana. Insert stoned congressman joke here.
France to ban "psychological violence" in marriages. Doesn't that preclude marrying a Frenchman? (sorry to my French friends).
Wonder why your woman just isn't that romantic? It's guilt, says the Telegraph.
Get Smarter. Train your brain. (How Life Works). No word on whether this can help senators.
Semiconductor Mega-Trends in 2010 (Forbes). I hope the first trend is to make some money.

Forrester: 2010 the "Year of the Smartphone"

Tue, 05 Jan 2010 15:39:58 GMT

In the pre-CES warmup, I'm trying to get into the mobile groove. Forrester is out with a report on smartphones, which it defines as a "mobile phone or handheld dvice that uses a high-level operating system." Forrest says smartphones have reached 17% penetration and have grown 7% from a year earlier. For those of you who live in caves, that means an iPhone, BlackBerry, Windows Mobile, PalmOS, WebOS, Symbian or any Linux flavored device including Android. Forrester concludes that Blackberry still dominates the market, despite the fact that Apple is getting all the attention. "RIM maintained its two-to-one advantage over the iPhone," writes Forrester analyst Charles Golvin in his blog. Golvin goes on to call 2010 the "year of the smartphone." It's a good time to watch Android, and whether Microsoft and Nokia come under pressure in the mobile market, he says.

The 2010 Model Portfolio

Tue, 05 Jan 2010 08:00:48 GMT

I must confess, I struggled with the model portfolio this year. Yes, lots of attractive stocks surfaced on the screens. But it�didn't feel�as easy as, say, 2008, when I had a strong conviction that things in the market were going to be going terribly wrong, and I decided to “wait out the year” in 100% cash.�Nor was it as obvious as�in 2005, when it was clear we were in the middle of a steady bull market�in emerging markets and commodities. 2010 is a tough year to call, whether you are bullish or bearish. It will be a stock-picker’s year, in which fine companies do fine. My conclusion is that you'd do well to collect dividends, and�be careful�expensive or speculative companies that fail could fall massively. Given these dangers and mixed background, I did some long hard thinking and concluded you need an diversified portfolio that covers several distinct possiblities. I've named this approach "The Rayno Pyramid" Remember the food pyramid in school where you ate all the food groups? Well, like food, you can't overdose on one style of stock -- whether it be growth, value, or small-cap. And you don't want to be heavily invested in one part of the world, either, because the global economy has become so dynamic. There's also the risk of inflation, so you want commodities mised into your portfolio as an asset class that protects you against money-printing. This new “pyramid approach” I’m dictating dictates the following balance: 1/3 growth stocks 1/3 dividend value stocks 1/3 inflation protection (metals, commodities, and emerging markets exposure). Hence, the Rayno Pyramid. We're trying to cover a lot of bases. This framework helps us protect ourselves by balancing across a number of areas, collect dividends, and be wary of inflation by being hedged for that. A�few other features:

It’s aggressive. More aggressive than the past two years.
We wanted emerging markets exposure, especially in China and Brazil
We are still protecting ourselves on the inflation side with Silver (SLV).
We also want to protect ourselves with companies that pay dividends. We committed to having at least half of the companies in the portfolio pay dividends.

Below is the new Rayno Model Portfolio for 2010. This was done by running extensive screens on growth and further analysis of the individual companies. Over the next two weeks I will profile each of the companies and why they fit into the portfolio. Company��Symbol�� Market Cap ROE 5-yr growth P/E�Yield Microsoft�� MSFT�� 275B�� 37%�� 10%�� 15��2% Eli Lilly�� LLY�� 41B�� n/a�� 10%�� 8��5.50% Diamond Offshore DO�� 14B�� 40%�� 38%�� 10�� 2% MSCI Brazil ETF�� EWZ�� n/a�� n/a�� n/a�� n/a��2.60% Cognizant �� CTSH�� 14B�� 23%�� 50%�� 23�� n/a China Green Ag.�� CGA�� 362M�� 30%�� n/a�� 10.5�� n/a America Movil�� AMX�� 55B��47%�� 30%�� 12�� 1% Sohu.com�� SOHU�� 2.2B�� 36%�� 40%�� 14�� n/a New York Banc.�� NYB��5.17B��8%�� n/a��12�� 6.90% Silver ETF �� SLV�� n/a�� n/a��n/a�� n/a�� n/a Before I released this list, I had several other lists. The way I do this every year is I screen thousands of stocks and slowly whittle them down through a filtering process. I had quite a bundle in the end, at least 20 to 30 that I considered including (I will share some of these in the coming days). But it came down to this: I wanted the stocks with the cheapest possible valuations and the least chance of a blow-up. A good example is SOHU.com. Clearly a "mo" stock, with all the right themes: China, Internet, gaming, e.t.c. But it's got rock-solid numbers with 5-year growth of 50% and a return on equity of 36%. You would think a stock like that would be expensive, but priced at 14X next year's earnings, it does not seem outrageous at all. It recently reduced earnings guidance, and the stock appears to have digested things well. Another thing I like about this list are the dividends. 6 of the 10 stocks pay dividends, with New York Bancorp. topping out at 6.9%. Lots of dividends got cut in 2009, and I think with profits rebounding in 2010, it's possible that some companies will raise dividends. Starting out with 6 stocks paying decent dividends (an average of 3.3%) provides some support to the portfolio. What about the “market” in general?��I'm not sure, though I�expect market strength to continue at least through the 1Q. After that, it's anybody's guess. But I tried to pick things that would do well regardless. I�expect a stock-pickers market with inconsistent action. Our portfolio is rather aggressive,�and while it is probably�positioned for an "up" market, we tried to limit the risk by�focusing on companies with very solid fundamentals and not unreasonable valuations.�I think this portfolio offers good value, regardless of the market direction.

New Year's Linkbait: Twitter Quitters and Jobs-Stalkers

Mon, 04 Jan 2010 21:05:04 GMT

Greetings wunderkinds and failures! It's a new year, and a new decade, so certainly everybody is out there trying to get new stuff done with doomed resolutions in mind. Apparently those include, "hanging up Twitter." I predict this will be a trend in 2010. Maybe the people who get drunk and Twitter inappropriate things can make a double resolution: 1) quit drinking 2) quit Twitter. That could only improve your life. Elsewhere in the news:

Dubai opens gigantic office tower in the teeth of a balooning commercial real estate recession. Sounds just about perfect, doesn't it?
Reuters has a CES preview. Sorry folks, I'm sitting it out next year. Let's see, more smartphones Google Android, and flat panels. Maybe I'm just bitter about the pile of obsolete silicon and plastic in my closet. Where can I recycle it, anyway?
News Corp. Unloads Rotten Tomatoes�(Washington Post).�Not sure this means anything, but for the record, I like Rotten Tomatoes. It gets the thumbs up.
Filmcritic.com has a great feature on the Best Films in 2010. The best thing about it is that it's actually 15 lists. I like seeing variety in film reviews simply because they can be such subjective things.
Tiger Woods is shirtless on the cover of Vanity Fair�(NY Daily News).�A sign of the apocalypse?
Global factory PMI jumps to a 4-year high�(Reuters). Yay, we're making lots of junk again!!!
Bernanke Says Fed Isn't to Blame for Housing Bubble�(New York Times). In other Bernanke news, he picked the�Oakland Raiders�to win Super Bowl.
Goldman Sachs, after accumulating pretty much all of everybody else's money, announced plans for a new headquarters. No, contrary to rumors, it will not be annexed to the U.S. Treasury Dept.
The Telegraph has a nifty package of photos for 2009.
Nice graphic on speeds and costs of network access around the world. Japan pretty much rocks out. Think of all that anime flying through the pipes.
U.S. Prime Foreclosures mount (Bloomberg). Hmm. And we're supposed to believe the coast is clear?
LivingSocial grabs $5 million (VentureBeat). VCs hope they're not living large.
Europeans go grid gaga (VentureBeat).
The super-duper-mega-exciting Apple love fest that every tech journalist has been speculating about in vague terms for over a month will NOW BE HELD ON JANUARY 27TH�(All Things D).�Oh geez. give me a break. Note to self: My next scoop will consist of telling people exactly when Steve Jobs gets a haircut.
VMware likely to buy Zimbra, says All Things D.

Small Medtechs Rock Out on Baird Upgrade

Mon, 04 Jan 2010 20:25:49 GMT

Our biotech research partner Raygent Associates points out that small little medtech stocks are rocking today, including Cyberonics (CYBX), Edwards Lifescience (EW), Thoratec (THOR) and the aptly-named Volcano (VOLC). Robert W. Baird and Co. analyst Lawrence Neibor upgraded all four to Outperform from Neutral. Volcano was up 9% to 19 in late afternoon trading on 640k shares; it is about 30% from January 2008 levels, reports Raygent. Raygent reports: "Volcano is a leading provider of intravascular ultrasound(IVUS) and functional measurement (FM) products that aid in the diagnosis and treatment of vascular and structural heart disease with annual revenues in the $225M range. Over 2500 consoles have been installed. In his January 4, 2010 report, Mr. Neibor raised his price target to $23 saying that “it is one of the best- positioned stocks in devices, offering superior sales growth due to innovative IVUS and FFR technologies”. Drivers for 2010 will be clinical studies (FAME) which will demonstrate cost savings and efficacy, increased market penetration, systems integrated marketing approach, and market launches of four products in IVUS and FFR pressure wires.VOLC revenues have been running in the $54M range for the last two quarters with a loss of $4M in Q3 2009. Mr Neibor is forecasting a profit of $0.09/share for 2010 compared to an estimated loss of 37 cents a share in 2009; revenues are forecasted at $290.7M. The price target of $23 would be 4X revenue and “should be awarded a higher multiple because we think investors will look toward companies with a significant technological advantage once the details of healthcare reform are more clear.” The balance sheet looks strong with little long term debt and shareholder equity of $212M for 2009. The Company has $115M in cash. The Medtech sector has outperformed the market over the past decade because of much smaller losses in 2008 and strong gains in good years." Source: www.raygent.com

Themes of the Decade: 5 Top Asset Classes

Mon, 04 Jan 2010 17:01:44 GMT

People keep talking about "the worst investment decade," which makes me sad. It's so negative. It's also silly. Was it really the worst investment decade? Not if you bought�China and gold.�Isn't the whole challenge of investing being in the right place at the right time? I would hope the strategy does not include a Pavlovian response to buying the Dow Jones and S&P Indices. Nobody should plop a huge wad of cash�into a large-market index at one point in time and just sit on it. As I've covered on these pages, the sensible thing to do is dollar-cost average and invest slowly in diversified assets. The New York Times has a great article on this topic here. This doesn't even take into account if you were aggressive in the things that actually grew in the 2000s -- things like emerging markets, commodities, gold, Apple, and bonds. The 2000s were a great decade if you were in the right places. As investors in things that grow, let's take a look at some of the successful themes of the last 10 years. Emerging Markets: Clearly this was a the big story, with one of the greatest transfers of wealth in history from developed markets to emerging markets. If you have not read El-Erian's book, "When Markets Collide," he did a great job explaining it and he has been ahead of the curve the whole way. The Hang Seng index rose 40% in the last ten years, and at one point was up 100%. India and Brazil experienced phenomenal growth. Anybody who is ignoring the emerging market story in analyzing investments of the last ten years is not doing their homework. Mobile Technology: Google, Apple, RIMM -- the three horsemen. Even if you had bought RIMM at the top of the bubble, in 2000, you would still be up three-fold, with a 300% gain. Likewise, a share of Apple would have cost you $25 in January of 2000. It's not trading hands at about $210, a gain of 740%. Both RIMM and Apple were best-of-breed in the mobilization of the Internet, and Google certainly benefitted as well. For these three stocks, the decade was anything but bad. Treasury Bonds: Here's a shocker -- treasury bonds are one of the best investments of the last 20 years. Take a look at this chart, as t-bonds�have blown away�most Western stock indices, averaging about 8% a year for the last ten years!�This particular data point is disturbing. How can the most conservative investment asset on earth have the best return over 10 years? What do I make of this? A lot of it was driven by China's "excess liquidity" and its need to stash its cash in something save. T-bonds are�among the deepest and most liquid markets in the world. The other part was that banking�crises. But T-bond issuance is exploding to fund our deficits, and China�seems to be losing its appetite for bonds.�It seems to me that it's�extremely unlikely that treasury bonds will be a very good investment for the next 20 years. If you've been a long term bond bull, it's time to sell some. Precious Metals: I've been a precious metals bull for years and gold had a phenomenal run in the 2000s, up nearly 400%. Time to sell? Not yet. I think the precious metals market is a sympton of our dysfunctional government's compulsion to print money. Politically, there doesn't appear to be any will to stop this. Expect it to continue. Unlike bonds, there is no balooning supply of precious metals. The supply is actually shrinking while demand increases. Commodities: Commodities also had a phenomenal run during the 2000 decade, propelled by both growth in emerging markets and global money-printing and liquidity. China's vast hunger for anything to fuel its growth propelled metals, grains, and energy prices skywork. The CRB Index rose from near 230 in 2000 to a recent price of about 485. That's a 210% gain. Of course, depending on how you played commodities, which are difficult to invest in without the right experience, you could have down much better or worse. What's this all mean going forward? Decades are somewhat arbitrary time frames, but it's true that things that outperformed in the last 10 years my have less of a chance of outperforming going forward. What's important to monitor is the underlying economic conditions that drove these trends. They include growing emerging markets, extreme debt positions by the federal government, demand for raw materials, and banking crises. As of right now, I don't see many of these trends changing. Expect them to continue into 2010.

Rayno Model Portfolio in 2009: +11.5%

Fri, 01 Jan 2010 19:56:52 GMT

The numbers are in for our Model Portfolio in 2009, with a gain of 10% in 2009, or 11.5% including dividends. Not too shabby, considering. Yes, the S&P gained 24%. But how many people went "all in" with their portfolio at the bottom, in March? Also, I will remind readers that the Model Portfolio was 100% in cash in 2008, meaning it did not lose a penny. I will take losing 0% in 2008 and gaining 10% in 2009 over losing -40% in 2008 and gaining 24% in 2009. Some data: 8 of 10 of our picks made money. The largest gain was 49% (SLV), and the worst performance was Gilead (GILD), down 15%. All in all, not a bad year. We’re happy with the numbers given that our portfolio was designed to be lower risk, beefed up with oil and drug dividends. The full results are below. Biggest Upside: Silver, as measured by the Silver ETF (SLV) which rose 48.71% in 2008. Biggest comeback: At one point we were in the dumps nearly 8% on our Becton Dickinson (BDX) position. Given that it’s a solid blue chip with a 2% dividend, we never expected it to get sold off like that. But the rock-solid stock rebounded strongly in 2H and ended up 14% for the year. Biggest disappointment: We only had two losing stock picks, but Gilead was somewhat of a mystery to us. It’s a very well-run company, one of the biotech bluechips, yet it was stuck in the mud in 2009, down 15% despite a broad biotech rally. So what's up for 2010, you wonder? A much more difficult year for stock-picking, or even ideas on market direction, me thinks. The market is getting a bit sloppy and a lot of the junk has rallied. of course, we'll have our picks out the middle of next week. We'll also be releasing our "Market Outlook" for 2010. Stay tuned.

Good News Special: Stocks up, Gold Up, Blue Moon on New Year's

Thu, 31 Dec 2009 14:27:03 GMT

Hey, let's focus on the good news for a change: unemployment unexpectedly declined, there are low bond yields, stocks are up. I don't know about you but I'm tired of bad news. Let's root for a positive 2010.

U.S. Jobless Claims Drop (Bloomberg). Okay, sounds good... but we hope it's not just because that many more people have given up.
Stocks head for best year since 2003 (Bloomberg)
Chinese slapped in steel dispute (Wall Street Journal). That's it, pick a trade fight. Always a good idea during a global depression.
Cleric born in U.S. linked to bomb plot (L.A. Times). Traitor.
Elderly Wal-Mart greeter punched (KTLA.com). Ouch. Okay, back to good news....
New Year's Eve parties in L.A. (L.A. Times)
Financial Times and Fox News confirm "big Apple event" in January (Fox News). Good job. And I've confirmed that something absolutely massive will happen in 2010...
It's gonna be a tablet like a giant iPhone, says Kaifu Lee... (Cloned in China). Rumored to have dishwashing capabilities.
Ten minutes of Nexus One on video! (The Next Web). How sexy!
Nine startup dreams and industries crushed by Google in 2009 (VentureBeat).
Gold heads for ninth annual advance (Bloomberg). Does this tell you something about all dat money?
AIG said to give departing lawyer $3.8 million in severance. (BusinessWeek).
Science Review of 2009. (Telegraph.co.uk). I'm still wondering what to do with that water on the moon.
Blue moon to shine on New Year's Eve (CNN.com). Party, dude!

Sprott: U.S. Treasury a Giant Ponzi Scheme?

Thu, 31 Dec 2009 02:45:43 GMT

We like a nifty headline, which is why we had to upload the latest diatribe from Sprott� Asset Management, which is making the rounds in places like the most excellent Jim Sinclair's Mineset. "Is it all just a Ponzi scheme?" screams the headlines. The crux of the matter is U.S. Treasury debt, and who the f*ck is going to buy it all, as the printing presses run over time. But a Ponzi scheme? Sure, why not. Ponzi schemes seem to be doing well in a made-up world of overleveraged hedge funds, unlimited federal money-printing, 0% interest rates, a somnolent SEC, corrupt politicians, and somewhat naive and shellshocked general investment public. Bring it! Sprott points out that in May/June it estimated that $2 billion in new debt needed to be issued in 2009 to bring in enough money to cover the massive holes in the finances of the United States government. Many people expected that with huge amounts of new Treasury bond supply coming on, things would tank. But wait, nothing happened! yields flitted to and fro, but there wasn't the much-anticipated massive collapse in Treasury demand. Folks actually bought the stuff. Yes but... wasn't the federal government buying a lot of its own debt ... a.k.a. Quantitative Easing (QE), a clever central-banker term for money-printing? According to Sprott, there were three main groups that bought $1.885 trillion dollars in fiscal 2009. These groups included:

Foreign and International Buyers who purchased $697.5 billion worth of debt
The Federal Reserve, with an increase of $286 billion, or 69% more than it bought in 2008.
Other Investors, or random net buyers and sellers, including hedge funds,� grandma, and "households." This group purchased $90 billion in 2008 but then scaled up to $510 million in the first three quarters of fiscal 2009. Holy Benjamin Franklin!

So great question: what kind of� "Other buyers" sopped up that massive amount of treasury debt? It does seem a bit suspicious that the Fed purchased a modest amount of treasuries compared with the "Other Investors," who dove in massively, doesn't it? Here's where Sprott follows the money. After drilling down into the federal government's breakdown, Sprott discovers that a massive portion of that debt was bought by "households" -- to the tune of 35 times more government debt than they bought in 2008. Whaaaa? Sprott says "households" aren't necessarily households at all, but a catch-all category plugged in to conveniently balance the books. Who are they, and do they have black helicopters? How on earth did they soak up that much debt? And thus the conspiracy theories commence. Read on... good stuff: "Is it all just a Ponzi sheme?" (Eric Sprott & David Franklin)

2009 Greentech Fundings: Number Up, Size Down

Wed, 30 Dec 2009 23:19:19 GMT

Venture capital (VC) funding in the�greentech market is humming along, if at a smaller size, says research and analysis firm Greentech Media. VCs did 356 deals totaling $4.85 billion in 2010, according to research released by Greentech Media today.�That's down from $7.6 billion in 2008. Eric Wesoff, a senior analyst at Greentech Media, attributes the shrinking deal size as a move to capital efficiency -- and less factories. "VCs are as active as they were, they're just not spending $100M to build a factory. They're just as enthusiastic, but they don't have that pie-in-the-sky mentality." In fact, it looks as if this is a developing trend mimicking what happened in the semiconductor industry with the move to fabless. If you can design and market chips, why take on manufacturing risk? Outsource. Wesoff says other companies have reconfigured their business models altogether, avoiding capital intensive prospects like factory building. Even the big guys like SunPower are increasing outsourcing manufacturing activities. The hottest sector was solar, with biofuels coming in second place. But Wesoff points out that water investments are an emerging "dark horse" candidate, drawing $130 million in investment. The mood in the VC market is even picking up, says Wesoff, with the prospects for more IPOs in 2010. "It looks like 2010 is going to be a lot better for IPOs and M&A," he says. "There will be a lot more activity, and maybe even some successes."

Inflation Is Low, Unless You Buy Things

Wed, 30 Dec 2009 16:37:28 GMT

One of the things that drives me nuts is the regular reporting of the government's CPI inflation data and people accepting it as the gospel truth. It is well known that the government manipulates this data and is incentivized to keep it low. After all, if it looks lower than it is, then it seems as if they are being less irreponsible by printing money. I've been looking at this data on several fronts. One way to think about it is what the government is charging for postage stamps. After all, mail is run by the government, right? According to zealLLC.com, the CPI has increased at an annual average rate of 4.3% since 1960, while postage has gone up an average of 5.3%. So it's not your imagination, stamps are going up faster. But what about other stuff? We read in the paper all the time about how "cheap" stuff is. But is it? Maybe it seems cheaper than it did a year or so ago, but when you stack up average stuff over long periods of time -- a more sensible measure of inflation -- it certainly isn't that cheap. I was surprised to find this nice chart on AOL's WalletPop:

Product	1999 price	2009 price	Change
Observation deck, Empire State Building, adult	$4.00	$20.00	400.00%
Gold, one ounce	$279.11	$1,106.00	296.26%
New York Times daily edition	$0.75	$2.00	166.66%
Slurpee, largest, 7-11	$0.99	$2.12	114.14%
Superman comic book	$1.99	$3.99	100.50%
Toll (auto), Golden Gate Bridge	$3.00	$6.00	100.00%
Gallon of gasoline	$1.30	$2.56	96.92%
Apple (AAPL) stock, one share	$25.70	$198.10	92.69%
Average ticket price, Boston Red Sox	$28.33	$50.24	77.34%
Cost to raise newborn to age 18	$165,630.00	$291,570.00	76.04%
Disneyland, one day adult ticket	$41.00	$72.00	75.61%
NYC YMCA summer membership	$125	$200	60.00%
Average expanded basic cable (per month)	$31.22	$49.65	59.03%
Average ticket, NFL Denver Broncos	$49.00	$76.65	56.63%
ATM transaction cost	$2.28	$3.54	55.26%
Babysitting per hour	$7-$10	$10-$15	50.00%
Budweiser, six pack of cans	$4.01	$5.99	49.38%
Home value, average	$119,600.00	$173,100.00	44.73%
Electricity per 500 kwh	$45.38	$65.21	43.70%
Movie ticket	$5.06	$7.18	41.90%
Time magazine, newsstand	$3.50	$4.95	41.43%
Aspirin, Bayer, 100-count	$3.47	$4.81	38.62%
Sugar, 5 lb.	$2.13	$2.90	36.15%
Cheerios, one box	$3.89	$5.15	32.39%
Stamp, USPS, 1st class	$0.33	$0.43	30.30%
Cigarettes, Marlboro, per pack, Calif.	$4.65	$5.95	27.96%
Harley-Davidson 883 Sportster	$5,595.00	$6,999.00	25.09%
Average cell phone bill	$40.24	$49.57	23.19%
McDonald's Big Mac	$2.50	$2.99	19.60%
Levi's, men's, 505	$36.99	$44.00	18.95%
Coca-Cola, one liter	$1.14	$1.34	17.54%
Ty Warner penthouse, Four Seasons, NYC, per night	$30,000.00	$34,000.00	13.33%
Car, Toyota Camry,base model	$17,518.00	$19,395.00	10.71%
Wedding, average cost	$18,900.00	$20,398.00	7.93%
Nike shoes Jordon vs. LeBron James	$150.00	$160.00	6.67%
Gallon of milk	$2.88	$3.05	5.90%
Top 100 Music CD	$13.65	$13.98	2.42%
Bestseller novel, Grisham vs.Patterson	$27.95	$27.99	0.14%
Tom Cruise earnings, per movie	$20 million	$20 million	0.00%
Windows 1998 vs Windows 7	$209.00	$199.99	-4.31%
Coffee, Maxwell House, 34.5 oz.	$9.99	$9.49	-5.01%
Average domestic airfare	$329.00	$301.00	-8.51%
Credit card average APR	15.07%	13.71%	-9.02%
Batteries, AA, 4, Energizer	$3.99	$3.49	-12.53%
Wal-Mart stock	$69.12	$52.80	-23.61%
$100,000 mortgage, 30 year fixed, total cost	$265,154.54	$184,549.59	-30.40%
iMac desktop computer, Apple	$1,499.00	$999.00	-33.36%
Hummel "To Market" #49 figurine	$120.00	$79.95	-33.38%
Martini and Rossi Spumante, 375 ml	$12.99	$8.29	-36.18%
Prime rate	8.50%	3.25%	-61.76%

Source: AOL WalletPop Now, you might notice, some stuff has gone down, but most of it has gone way, way up! The elements that have gotten cheaper are driven by technology, such as cars and computers. They are benifitting from enormous innovation. The Empire State Bulding observation deck, apparently, is not. I was also somewhat shocked to see that Tom Cruise has not gotten a pay raise in 10 years. Time to call the agent.

Morning Brew: Google's Nexus One & Obama's Hair

Wed, 30 Dec 2009 14:33:39 GMT

Good morning readers. After a holiday sojourn involving many pieces of meat, potatoes, gifts, giggling children, and a few bottles of beer, it's time to get back to work in the link salt mines. Just scanning things quickly here, I can tell you that 2010 will offer up a lot of Android and Google phone headlines. Is the Google phone the new iPhone? Catching up on this story, I have seen a lot of activity so maybe it's time for a recap:

Gizmodo reports that the new Nexus One Google Android-powered phone (that's a mouthful, eh?) will cost you $530, unsubsidized. Or, you can get it subsidized by paying a contract in advance. T-Mobile will be the primary SP, but the phone will be unlocked.
But wait! Engadget says it has the full spec sheet and that the big "event" will be on January 5. Makes sense: CES.
Mashable has a roundup summarizing our roundup of other Nexus One rumors. Yes, and I'm considering making a career turn into an aggregator of aggregator of aggregators. If you're far enough removed from the orginal source, you can never be guilty.
Here's a sketchy "demo" of the interface and what it looks like. Is that enough gear porn for ya?
Tech "analyst" Michael Gartenberg goes out on a limb and says that the business model of offering an unlocked phone at full retail price is doomed for failure. "Selling unlocked devices sans carrier is a lousy business model in the States, however." Go get 'em, Michael!
Facebook and Seppukoo get lawyered up (L.A. Times). Don't� know what Seppukoo is? Read the story. It's a Facebook profile suicide enabler, if that makes any sense.
Peter Kafka is onto a good story: The best selling Kindle books are free. (All Things D)
What does it say about the print media industry when Editor and Publisher, the bible of the print media industry, is folding. (Editor and Publisher)
We were on the cutting edge with this. The "Hate AT&T" story accelerates. (CNNMoney)
"Russia Unbeatable" : Never has there been a more disturbing Bloomberg headline (Bloomberg).
Diplomatic fight escalating over drug-smuggling execution. Lovely. (Bloomberg)
GMAC said to get another $3B in government aid. Um, let's see: Let's lend more money to a money-losing lending operation. Sounds like a great ideas -- do you want to participate? (Bloomberg)
Obama Slams Security Breach (Wall Street Journal). But I'm more struck by how gray his hair has grown after only one year in office. Expect it to get more gray.
Disclaimer: I DO NOT IN ANY WAY SUPPORT THIS WEB SITE'S VIEW. But, the link is a testament to the dangers of racism and hysteria in the "fight against terrorism." Read the link about "How to strangle a terrorist" and let me know what you think. It's quite strange and disturbing.
Hundreds of al-Qaeda militants prepping terrorist attacks in Yemen (Times Online).
What is the Large Hadron Collider used for? (N.Y. Times). Great question.
4 Factors shaping the wind energy industry in 2009 (triplepundit.com). And, maybe more than 4 people will read this article.
Nokia opens new front in Apple patent battle (Reuters via Yahoo). Thanks for the update, but can you really "open up a front" in a battle against a device company, Reuters?
Star Trek is liberal propaganda. Ha! Yes. And "Teletubbies" is part of the vast right-wing conpiracy.
3 e-readers to watch in 2010 (Ars Technica). Does anybody know what Ars Technica means?

Send links, comments, and questions to scott@rayno.com.

Morning Brew: Everybody Loves the iPhone

Tue, 22 Dec 2009 11:59:59 GMT

The West is the best, says Warren Buffett, and so we agree. We didn't pick up the chuckwagon and move 2,000 miles West for anything. What else is in the news? Greece, Dubai, and the iPhone -- and brass testicles? Read on for what's happening in the morning news.

Greek Credit Rating Cut to A2 (Bloomberg). Yawn. This is getting so predictable. Rayno Report cuts the Greek credit rating to a slightly overdone souvlaki with a shot of Ouzo.
The FBI is probing a computer-security breach at Citigroup that resulted in the theft of tens of millions of dollars (Wall Street Journal).
CBS Corp. and Disney are looking at Apple's plan to offer TV subscriptions over the Internet (Wall Street Journal). Still waiting to see if Steve Jobs will guest-star on Curb Your Enthusiasm
IPhone apps:� launch point for everybody? (Los Angeles Times). Only one problem: Nobody gets any money.
Sumner Redstone unloads some theaters (Bloomberg).
Dubai prepping standstill offer for January (New York Times). Dubai or not Dubai....
Texting while driving is more dangerous than talking, observes the incisive San Francisco Chronicle. Um, yeah. That's cause YOU AREN'T LOOKING AT THE ROAD STUPID.
Visualizing the world's most profitable companies (Billshrink.com). Hint: think oil.
Researcher explains the mystery of the golden ratio (Physorg.com). No explanation of why it wasn't used at AIG, however.
MIT has found a way to squeeze data as tightly as ever (MITnews).
Avatar piles up more cash -- selling $77 million in box office (L.A. Times). The final worldwide opening tally is $242.5 million. Holy animated blockbusters.
Brooke Astor's son to the slammer (L.A. Times). My favorite lead of the day: "Anthony Marshall, 85, gets 1 to 3 years for plundering millions from his New York socialite mother, who suffered from dementia before her death." Nice guy.
Eurostar starts to bring angry passengers home (AFP). Unsuspecting tourists may have a trouble distinguishing difference between service in Parisian cafes and being locked for hours underground in a tunnel, however.
Weather continues to cause travel nightmares in Europe (Times UK). Here's a Telegraph story on the same.
David Tepper's $2.5B payday (Telegraph UK). Now, why didn't I think of that? Of course, the same story ran in the WSJ yesterday. But the Sydney Morning Herald had the best headline: "As the world crashed, the man with brass testicles on his desk made $2.8 billion."
The Google-Yelp deal is off. Who walked? (NY Times).
Livemocha bags $8M (TechCrunch).
8 products to watch in 2010 (VentureBeat). Sigh. Not FourSquare. Please, somebody make it go away ...

Some More Stock Screens

Sat, 19 Dec 2009 13:03:10 GMT

I promised some stock screens earlier this week but I'm behind! Below are some of the stock-screens I'm running in preparation for the 2010 Model Portfolio review. Technology: I've run some screens in technology based on cash flow and growth. Not as exciting as I would have thought. Here's the first one, based on Price/free cash flow. The criteria were:

Price/Free Cash Flow < 20

Price/Free Cash Flow Range_Per from 0.0 to 25.0 for Industry

Sales/Revenues ($ mil.) > 200

Debt/Total Cap. - Curr. < .5

Net Margin - Curr. (%) > 0

3-Yr. Sales Growth (%) > 12

Proj. Long-Term EPS Growth (%) > 12

Sector = Technology

Stock Ticker		Price/Free Cash Flow	Sales/Revenues ($ mil.)	Debt/Total Cap. - Curr.	Net Margin - Curr. (%)	3-Yr. Sales Growth (%)
SOHU	SOHU.COM INC	10.2	501	0	37.96	5.2
TSRA	Tessera Technologies Inc.	12.94	312	0	22.79	13.9
IDCC	InterDigital Inc.	3.96	280	0	18.67	16.82
MANT	ManTech International Corp. Cl A	10.03	1,973	0	5.42	20.06
SKIL	SKILLSOFT PLC ADR	9.94	316	0.3	23.53	12.57
SYNA	Synaptics Inc.	9.27	477	0	10.52	31.65
HIMX	HIMAX TECHNOLOGIES INC	4.84	833	0	9.17	16.28

That screen wasn't very satisfying. I went looking for more exciting things. I dialed up the a fast growth screen for technology companies with sales growth in excess of 20%.

3-Yr. Sales Growth (%) > 20

3-Yr. Earnings Growth (%) > 20

Proj. EPS Growth - This Year (%) > 20

Price Chg. - 52 Wks. (%) Range_Per from 50.0 to 100.0 for Industry

Avg. Surprise, Last 4 Qtrs (%) > 0

Sector = Technology

Stock Ticker	Company Name	3-Yr. Sales Growth (%)	3-Yr. Earnings Growth (%)	Proj. EPS Growth - This Year (%)	Price Chg. - 52 Wks. (%)
AAPL	Apple Inc.	24.79	40.04	24.01	117.14
CTSH	Cognizant Technology Solutions Corp.	30.11	27.73	21.53	146.94
BIDU	BAIDU INC ADS	86.02	92.46	39.28	216.17
SNDA	SHANDA INTERACTV ENT LTD	31.56	114.43	35.18	69.4
LFT	LONGTOP FINANCIAL TECH	38.41	52.92	28.74	127.16
PEGA	PEGASYSTEMS INC	24.66	126.28	189.66	161.6
VIT	VANCEINFO TECH INC ADR	91.03	54.81	21.95	243.02
CKSW	CLICKSOFTWARE TECHNO LTD	21.79	98.06	80.95	187.63

Okay, so let's see. basically need to buy Chinese Internet companies or Apple. I would have thought there were more surprises than that. Of course, I am oversimplifying here, there are some new names to look at above and I will do some more research. But the pickings are slimmer than I thought. What about technology as value? P/E ratios for technology companies have come way down. I decided to run a value screen in the technology market to see what I could come up with. Criteria

Trailing P/E Range_Per from 0.0 to 50.0 for Industry

Price/Sales Range_Per from 0.0 to 50.0 for Industry

Price/Cash Flow Range_Per from 0.0 to 50.0 for Industry

Debt/Total Cap. - Curr. Range_Per from 0.0 to 50.0 for Industry

Proj. Long-Term EPS Growth (%) > 12

Sales/Revenues ($ mil.) > 500

Avg. Daily Trading Volume > 100000

Average Analyst Rating > 2

Stock Ticker	Company Name	Trailing P/E	Price/Sales	Price/Cash Flow	Debt/Total Cap. - Curr.
DOX	Amdocs Ltd.	17.4	2	10.5	0
MANT	ManTech International Corp. Cl A	15.4	0.5	10.3	0
SOLR	GT SOLAR INTL INC	11.4	1.6	10.6	0
GNCMA	GENERAL COMMUNICAT CL A	160	0.6	3	0.8

Hmm, okay. Four names. None very exciting. That's okay, because I always thought value investing in technology was kind of an oxymoron anyway. I am going to look through a bunch of these names and report back later.

Today's Innovation Links

Fri, 18 Dec 2009 18:25:17 GMT

Greetings folks, it's Friday! Better yet, Friday before a holiday week... time to look forward for the new year. Here is the latest collection of news captivating exciting developments in innovation and the economy:

The top ten underreported stories (Time). I think this is the first time I've read anything from Time and years. But it was interesting.
Former Fed Chairman Paul Volcker recently said that ATMs were the only significant financial innovation of the last few decades. Here's an interesting article on the hidden cost of ATMs -- which I'm sure everybody has thought about.
The future of cars: $25,000 in communication gear?
26,031,250,000pixels in the biggest photo in the world (Gizmodo). And I thought my hard drive was full.
Fake Steve Jobs weighs in on the iPhone and AT&T's network (Secret Diary of Steve Jobs). In case you missed, we had a piece here that got a lot of attention.
This is old. But I still find it funny. Has Arianna Huffington told Rupert Murdoch to shut up? (Paidcontent.org)
The mystery of bacterial behavior gets more complicated (ScienceDaily). I tell you, I have never thought as much about bacteria as I have in the last week.
Cancer genomes reveal risks of sun and smoke (Nature). Lock yourself in a dark room with clean air. Quick.
The ten best Chrome extensions (Network World).
8 gadget screw-ups of the decade (techradar).
Three best ways to use social media (WSJ).
Google rumored to be sniffing at Yelp (TechCrunch).
Top tech acquisitions of 2009 (TechCrunch)
Unemployment dropped in 36 states in November (Bloomberg)
What are America's happiest states? (LiveScience)
Deep ocean volcano a hot topic at geophysics meeting (NPR)

Citigroup Shocker!

Thu, 17 Dec 2009 14:33:16 GMT

If you were looking for something to reinstill your confidence in the financial system, the large propped-up banks, and the federal government's ability to manage the situation, the Citigroup secondary offering was not it. Citigroup sold 5.4 billion shares at a price of $3.15, which was much worse than expected -- and below the $3.25 watermark that the federal government was looking for to unload its shares.� The�Treasury department, which was expected to dump its shares in the offering in a much heralded "exit from TARP," decided at the last minute not to sell the shares because�at such a low price it�would have represented a loss. The government is in at a price of about $3.25. As usual, financial news blog Zero Hedge had the scoop ahead of many major financial news outlets. Those annoying blogs, they keep scooping you guys! This is big news for the market. You can look very hard, but you can't find much good news in this story. It clearly sends a message that there is insufficient private investment suppport to take Citi out from under its government bailout. The poor offering has Citigroup down 10%�in pre-market hours. Keep in mind that this is the largest equity issuance in history! There are now 28.3 billion shares of Citi outstanding! Talk about printing money!

The Fed Watch is Tedious

Wed, 16 Dec 2009 18:58:51 GMT

I'm tired of "Fed Watch." I just turned on the TV and saw the financial station counting down the minutes and seconds to the Fed statement. This is part of the problem -- like we are looking to a central bank to solve all of our problems. It's not like the cost of overnight capital is going to make or break the economy right now, that's not the problem. The problem is that there is a recession and a credit contraction and it's harder for businesses to obtain capital for the longer term. So if we are looking to the low-priced overnight money for anything more than allowing a bunch of shark-like traders at hedge funds to churn money, we are mistaken. The longer-term value in this country will be made with other things: Huge innovations, building strong companies, coming up with interesting and inspiring products like the iPhone. Did the iPhone require a 0% overnight lending rate to get started? I don't think so. Give me a break.

My Stock Screen Says: Stocks Aren't Bad

Wed, 16 Dec 2009 16:59:12 GMT

In the run-up to my 2010 Model Portfolio selection, I am running a ton of stock screens. One thing I've noticed, and this is not scientific at all, is that when things are frothy and bubble-icious, the stock screens tend to run dry. For example in early 2008 it was extremely difficult to find well-priced stocks on a stock screening basis. I would run screens all the time and they came up completely empty. Conversely, the stock screens help make the market bottoms seem obvious, as in March, 2009 when my stock screens were overflowing with candidates. What do I see now? Despite the rally, individual stocks do not seem egregiously overpriced -- especially good companies. One thing that does make me nervous is that a lot of these are still in the commodity/energy sector, which would lead me to believe we are still trapped in a "slave to the Fed" mentality of growth requiring cheap money. But let's just take a look at a screen I ran a little while ago. I was looking for companies with operating margins better than 20% over the last 5 years (S&P average is 19%).� Then, I wanted only companies with better than 30% growth (total) over 5 years. The, I wanted them to have a forward P/E (2010) of less than 15. I figure, those are not overvalued stocks. Criteria

Operating Margin - 5-Yr. (%) >= 20

Forward P/E (Next Yr.) <= 15

5-Yr. Sales Growth (%) >= 30

This screen yielded 27 stocks. Here they are!

Stock Ticker	Company Name	Operating Margin - 5-Yr. (%)	Forward P/E (Next Yr.)
VALE	VALE SA ADR	48.4	7.81
RTP	RIO TINTO PLC ADR	39.52	11.34
ITUB	ITAU UNIBANCO HOLDING SA	50.64	8.36
FCX	Freeport-McMoRan Copper & Gold Inc.	45.53	10.17
SU	SUNCOR ENERGY INC	23.76	14.63
XTO	XTO Energy Inc.	72.9	13.54
CHK	Chesapeake Energy Corp.	60.04	12.37
SWN	Southwestern Energy Co.	53.61	11.33
NLY	Annaly Capital Management Inc.	91.18	7.57
AUY	YAMANA GOLD INC	25.21	6.24
VTR	Ventas Inc.	57.16	12.62
MYL	Mylan Inc.	26.23	13.97
TSU	TIM PARTICIPACOES SA	28.07	9.08
SLG	SL Green Realty Corp.	37.83	11.79
CGV	CGG VERITAS ADR	32.91	13.64
NS	NUSTAR ENERGY LP	29.96	14.63
BPL	BUCKEYE PARTNERS (L.P.)	41.27	14.43
SOHU	SOHU.COM INC	32.35	14.62
HLX	Helix Energy Solutions Group Inc.	38.3	14.94
VIP	VIMPEL COMMUNICATION ADS	49.05	10.24
LXP	LEXINGTON REALTY TRUST	39.81	10.48
GSH	GUANGSHEN RAILWAY CO	31.96	14.36
IGLD	INTERNET GOLD-GOLDEN	20.14	5.65
LSE	CAPLEASE INC	43.96	8.52
DWSN	DAWSON GEOPHYSICAL CO	21.5	14.71
GOOD	GLADSTONE COMERCIAL CORP	44.69	11.7
ABR	ARBOR REALTY TRUST	72.99	10.34

Source: Smartmoney.com Stock Screener.

Tuesday's Links We Be Lovin'

Tue, 15 Dec 2009 18:57:07 GMT

C'est Mardi. See, I bet you didn't know I knew French. It's also the Tuesday before a big Holiday break. That means, most people won't return your calls because they are "busy before the holidays." Next week, they won't return your calls because they will be "busy with the holidays." And doubtful you'll get a call the following week because those same people will be "busy after the holidays." I hate that stuff. I'm wondering, why don't we all just take three weeks off since nobody will do anything for you anyway? At any rate... here are some news items and tidbits that caught my attention today:

20 Best Gadgets of the Decade (Paste). I'm wondering where all those "Best of the decade" pieces are? Maybe there aren't as many because ... generally this decade was sub-optimal?
House considering bringing back the Glass-Steagall act (Bloomberg). Maybe they'll flip flop on this every 50 years. Bring it back during depressions, chop it when spectacular bubbles create massive banking conflicts.
Home prices end slide in Southern California (Bloomberg). Now if they can just stop them sliding down the side of hills...
Banker baiting 101 (WSJ). Of course "banker baiting" is a cynical, populist, political ploy. But it's so much fun!
Policy Wonk Makes a Career of Defense (WSJ). I just included this link because it sounded like an Onion headline.
Court will rule on privacy of text messages on employer-owned devices (LA Times). 1,000s of would-be Tiger Woods are sweating it.
Court tosses out backdating case against 2 ex-Broadcom execs (San Jose Mercury News). Henry Nicholas III now excited to get back to work in his alleged "sex lair."
Corruption at the heart of Afghan state (Guardian UK). NEWS FLASH -- LINCOLN SHOT!
Stephen Covey grants exclusive e-book rights to Amazon. Good move, or will his next book be titled "The 7 Hallmarks of Really Stupid Copyright Decisions" ?
Chinese mobile firm buys Shanghai Dacheng (gaming company) for $80 million (VentureBeat). That's a lot of coins at the arcade!
Electronic Arts gives up rights to sell id's next game (VentureBeat). Just couldn't think of anything to write after this.
3D camera breaks world record with 158 lenses (Engadget). Not available at Best Buy.
English man made millions in largest ever eBay fraud (Daily Mail). The best detail: He was selling fake golf balls that exploded.
Battery lithium could come from geothermal waste water (NewScientist). This is good, because I was having trouble sleeping as I fretted over the global lithium supply.
SpaceX to launch private shuttle in Mid-2010 (Popsci).
Boeing Dreamliner Takes Off (WSJ). Media appeared to focus on the fact that it was cloudy in Seattle. Shock!
Major airlines week to buy large amounts of alternative fuel (CNN). Also rumored to be looking to replace peanuts with dogfood.

2010 Portfolio Review Principles

Tue, 15 Dec 2009 17:40:59 GMT

I have commenced a review of the potential stocks and investments that will be in the 2010 Rayno Model Portfolio. We will release this portfolio in the first week of 2010. Let me first give you some facts and methodology behind the portfolio. The portfolio us up in each of the last five years. In 2008, we did not lose money, because our model portfolio went to "100% cash" for the entire year. Our approach is to "dumb down" investing for anybody. The principles are : 1) Buy high quality stocks and trending investments. 2) Use a screening system that screens for both good fundamentals and technicals. If we don't have both, we don't buy the stock. 3) Diversify by owning at least 10 stocks or ETFs with each being less than 10% of our portfolio. So many people buy underperforming mutual funds, ETFs, e.t.c. and then let them sit there without any management whatsoever. The reality is that this "whole market" usually results in subppar growth because of fees and the fact that 90% of mutual funds underperform the market. I believe you can outperform the "whole market" simply by buying a basket of stocks that have above-average fundamental, technical, and valuation metrics. You then rebalance or refresh this list once per year to make sure you are up to date with global trends. As we run our stock screens in the next week, here is what I look for:

High return-on-equity
Good financial management through the recession
Strong cash position and balance sheet
Either 1) a shockingly low valuation or 2) impressive growth
Playing an advantageous growth trend in global markets
Innovation and leadership

The Innovation Report: Monday, Dec. 14

Mon, 14 Dec 2009 22:15:16 GMT

Welcome to our links to a world of innovation on this fabulous Monday. In today's news, Obama's calling bankers a bunch of fat cats, Tiger's sponsorships are melting in light of his growing scandal, and Citgroup has agreed to repay $20B in TARP money. But where's innovation heading? Follow the links here:

Apple says popularity of iMacs is leading to shipment delays. (Bloomberg) Doncha love it when selling too much stuff is a problem? Especially in 2009.
Engadget's exclusive look at the Google phone.
Google to market its own Android-based phone (WSJ).� It's true, Google does want to control everything.
Tempers flare in Copenhagen (WSJ). The Chinese and Germans can't agree. Danishes fly over cups of espresso. Surprised?
Obama slams bankers (WSJ). But he was seen slipping them a $20 behind closed doors...
DOE as a VC force. (WSJ). Joe Biden likes a local car company. Government writes check for $500M.
Facebook may have it's own URL shortener. (Inside Facebook). No word on whether it can shorten your face.
ZumoDrive gets $1.5M. Online cloud storage player. (VentureBeat)
Americans consume 34 gigabytes of data per day, according to VentureBeat.
Prehistoric Pygmy Sea Cow Discovered in Madagascar. (National Geographic). No kidding!!
Single "on-off" gene can change your gender traits. (Times Online). No comment.
Earth's atmosphere came from outer space. (Science Daily). No, I have no idea what this means, either.
Researchers find hidden sensory system in our skin (Physorg.com). Whoa, dude.
Hackers Brew Self-Destruct Code to Counter Police Forensics (Wired.com). Meanwhile, Police are brewing more coffee.
Linux GNOME project poised for killer year (Network World). Yeah, I wasn't sure if I cared either.
11 open source companies to watch (Network World). Is that like watching grass grow?
Cable's got ideas for a universal retail box (Cable Digital News). It comes with it's own beer dispenser.
How to totally overhaul your phones with Google voice (Gizmodo). Google also said to be working on text-based solution to Tiger's marital woes.

Energy Stocks to Watch Following Exxon/XTO Deal

Mon, 14 Dec 2009 17:18:47 GMT

Exxon announced today that it's buying XTO energy, a domestic producer of natural gas, in an all-stock deal valued at $31 billion. It includes the assumption of $10 billion in debt. This helps answer a question I've been wondering about for a while: How cheap is natural gas? Very cheap, apparently. This is good news, all around, I think because 1) The United States has large natural gas reserves, making it a viable domestic energy source 2) The low prices of natural gas will keep down winter heating costs 3) natural gas is clean-burning. Billionaire and energy invsetor T. Boone Pickens has been blathering on about the benefits of natural gas for a while. And yes, it's interesting that as oil has been rising, natural gas prices have remained low. I was waiting for a larger energy company to take advantage of this. I believe that Exxon's deal confirms the fact that natural gas is very cheap relative to oil and has room for substantial growth, especially if the U.S. can start promoting its use as a an alternative to oil. Below is the chart of Oil (Green), the S&P Index (blue), and red (natural gas) through September of this year, which shows how cheap natural gas had become relative to other assets. With natural still only trading around $5, I would expect there is plenty of room for natural gas to move up and still remain "cheap" relative to oil. The world appears to have plenty of natural gas. This deal, of course, lead to the natural auto-reflex analysis: It could spur more deal sin the energy sector, especially involving natural gas. The following stocks are some other classic natural gas-heavy plays which often come up in acquisition discussions: EOG Resources (EOG), Southwestern Energy (SWN), Anadarko Petroleum (APC), Devon Energy (DVN), and Chesapeake (CHK). I ran some quick stock screens in the energy sector. From a value position, below are some energy plays� to watch, with natural gas exposure: Noble Energy (NE). Noble is a contract driller for energy explorers. Well-run company with a operating margin of 56% and return on equity of 30%. P/E is 6. With gas and oil demand having been light, exploration companies have been under-investing in drilling. Ase the economy rebounds, it's likely that inventories will eventually tighten and reinitiate demand for drilling rigs. This stock is very cheap and it's probably a good time to accumulate. Pioneer Southwest (PSE): Energy limited partnership with oil and gas properties based in Texas. Forward P/E of 8. Like most partnerships, it pays out all of its income as a dividend. The current dividend is 9%.

Five Great Fast Growing Co. Lists

Thu, 10 Dec 2009 23:17:02 GMT

Looking for an investment? Looking for a great trend? Looking for an opportunity? I spend hours scouring many "fast growing" lists -- of which there are many. What am I looking for? Mainly, ideas. Stock picks, growth ideas, job or sales prospects. Eventually after reading enough of these lists you get a sense of good themes and trends.� Here are five of my favorite: 1) Fortune Fastest Growing Global Companies. Let's face it, the United States isn't generating growth like it used to. It pays to look global for Chinese blue chiops like China Life Insurance. 2) Forbes Fast 15 Technology Companies This list is good because it doesn't tread over obvious ground like Google and RIMM. Take Blue Coat Systems, a networking equipment manufacturer that's an interesting size. Or Ansys, a simulation software company with a 34% operating margin. 3) Fortune Fastest-growing Companies. RIMM. Yawn. but read down into the mid-twenties and you find more interesting names like, Elbit Systems (ESLT). 4) Fortune 10 fastest-growing techs. #1 is RIMM -- not surprising. #2 is Sigma Designs -- surprising. 5) Deloitte's 2009 Fast Technology 500. I've always been a little suspicious of this list, if only because I've seen some mediocre companies claim to be on it in their press release. But it's definitely an interesting read and great if you are looking for sales or job prospects.

Gold Chart Starting to Look Juicy

Wed, 09 Dec 2009 17:59:54 GMT

Gold panic! SELL SELL SELL SELL!! CNBC hates it! I love moments like this. That's because if you've been watching and trading gold for the last five years, these have often turned out to be exquisite buying moments. Make no mistake about it -- gold can be a volatile beast. That is because it is traded in a small market and big players can push it around violently. Add that to� large quantities of leveraged futures speculators, and things can get wild. My best guide has been technical charts because gold has been in such a reliable bull market. Two key triggers I've noticed during selloffs are when the RSI (relative strength) indicator gets down below 40, especially if the Stochastic is indicating oversold on the one-year chart. We have both of those conditions today. Take a look below: I was stopped out of many of my gold positions at 1190 and I am licking my chops at getting back in between 1,100 and 1030. I dipped my toe in the water today. If the decline apperas to lose steam toward the end of the week, I will be adding to my position.

Reason #1 Why the Financial Media is Awful

Wed, 09 Dec 2009 17:33:04 GMT

Journalism in the financial world is in a miserable state. I can tell you that because I've spent much time there. Take financial TV: It's filled with offhanded opinion, emotion, and politics. This is pure garbage. Why is that? Because usually the way to make money in markets is to operate counter to offhanded opinon, emotion, and politics. You need to analyze data in a cold and caclulated way, and strip out emotion. I can assure you after decades of trading and investing that my best decisions have been made when I was unemotionally involved. Of course, if they made this kind of financial TV: Cold, hard data analysis, it would be incredibly boring. And it would probably have few advertisers. Markets are just data, after all. They are prices. It's silly to assign an emotion to a price. Sure, you might get mad when you go into the grocery store and the price of eggs has gone up .15 cents. But does it necessarily mean anything? Not always. It could be just as likely you will go there a year later and the price of eggs will be .20 cents cheaper. Unless you are an expert in the local dynamics of the egg market, there's no way of knowing what is driving the egg prices or what kind of information is carried by the price shift. Financial TV -- and many mainstream media outlets -- make this mistake all the time. For some reasons, journalists always have to come up with a reason for something -- often without doing any research at all. The read into price changes, assume they are carrying information, and jump to conclusions without any context or analysis whatsoever. Turn on the TV in the morning and you will see what I mean. "S&P futures are down and the market looks bad. Sell!" This is nonsense. It's a random data point in the universe of data. Does it mean that the stock market will go down tomorrow? Nope. I have read with interest Victor Niederhoffer's books . Niederhoffer� is an interesting character who has made and lost several fortunes (I always like to get my financial information from real-life traders and investors who have lost a fortune, because of the knowledge they have gained). Niederhoffer writes at length in his book, "Practical Speculation," about this phenomenon of spurious correlation, or, as I like to call it, jumping to conclusions. Here is a classic spurious correlation: You could prove that shoe size is highly correlated with reading skills. Does that mean that buying bigger shoes will make you read better? No, that's because there is a third unmeasured factor: age. As a child gets older, their feet grow. You see this all the time in newspapers with headlines of "Stocks sell off on economic worries." Well, okay, it's logical that stocks would get sold if people are worrying about the economy. But can the reporter actually prove that's why they sold off that day? Maybe the sell-off was technically driven -- especially now when more than 60% of trades are computer driven -- and an algorithm in a data center decided to dump huge blocks of shares. Was the computer watching the economic headlines? And in fact, isn't it better to buy stocks during a recession and everybody is depressed when they are cheaper? A great time to buy stocks was March of 2009 when most investors though the world was coming to an end and investor sentiment was absolutely miserable.� If you look at a 100-year stock chart it certain seems like the best time to gather stocks for the long haul is during miserable economic times when everybody is walking around depressed. And sell them when folks are euphoric. If you aware of the concept of spurious correlations, watching financial TV or reading random headlines in the newspaper will drive you nuts, because inexperienced financial journalists love to make spurious correlations every day of the week. In fact, it's very hard to determine correlations between market elements, even if you have all the data! So now you know, when you wake up in the morning and the financial pin-heads tell you the stock market is up because the dollar is weak, you can tell them: That's absurd, there's really no way to know! And besides,� longer-term data shows that it's more common for a strong stock market to be correlated with a strong dollar. The Business Insider covered this here.

AMZN $135: WTF?

Tue, 08 Dec 2009 18:05:49 GMT

I've been having 90s bubble flashbacks all morning. Must be something somebody put in my coffee. First, there's some Red Herring alumni photos floating around Facebook. Next, my obsessive voyeurism with the Amazon.com stock price. Disclosure: I am not involved. I'm not short or long. But it's like watching some sort of bizarre, counter-intutive weather phenomenon. $135? Holy crap. And that's not even as high as its been this week -- it's been up to $145. Let me get this straight: a year ago, Amazon traded hands for about $75. That was back when the world financial meltdown was starting. Since then, we generally have: 1) lower consumer credit 2) damaged consumer balance sheets 3) more public debt 4) lower asset prices, including in homes and stocks. One of the biggest trends in the economy is the weakened purchasing power of the American consumer. Yet Amazon.com stock is nearly 80% higher than it was a year ago. WTF? I will try to be objective here. To make sure I wasn't going insane, I decided to go through all the numbers to try and figure out how you could justify a $135 stock price. So here's what I found. Earnings and fundamentals: Generally, Amazon's earnings have improved over time. From 2007 to 2008, operating income increase from $655 million to $842 million, an increase of $187 million or 28%. Not bad. This year the company looks on track to earn about $775 million or so, pending the all-important holiday-based fourth quarter. So, earnings and fundamentals are improving, but the pace of growth is slowing. Balance sheet: Looks great. $2.7 billion in cash. $6.1 billion in current assets. only $4.7 billion in liabilities, including $533 million in long-term debt. Earnings Estimates: Often, what makes a stock go up are increased expectations driven by research analysts pushng up their estimates.� The sell-side research teams that follow Amazon� have in recent months been pushing up their estimates for next year. The average EPS estimate for Amazon.com has gone from 2.16 to 2.54 in 60 days, according to Capital IQ. Valuation: Even with all of these positive factors going in Amazon's favor: rising earnings, estimates going higher, an improving economy -- it's hard to justify the $135 stock price. Let's say the analysts are right, and Amazon does $2.54 EPS In 2010. Heck, let's say the economy improves further, the estimates go even higher, and Amazon does $3.00 in EPS in 2010. Then attach a generous multiple of 30 to those earnings. That gives you a share price of $90. To me, the valuation is inflated to bubble levels. Amazon.com now trades at a P/E ratio of 75 in a market where the average P/E is 15. The price/book ratio is 16. The Enterprise value/EBITDA ratio is somewhere around 47 -- an eye-popping number in a market evironnment where acquisitions are being made when this ratio is at 6 or 7. I could see how $90 or even $100 might be justified. But $135? I just don't get it. If Amazon slips at all in the holiday quarter, it will be taken to the woodshed. There is too much risk in this stock at this point.

AT&T's Misleading Map Ads

Mon, 07 Dec 2009 20:44:38 GMT

Last week I laid out what I thought was a nice rant about AT&T's nauseating, phony "map-mercials" on my old media venue, Light Reading (www.lightreading.com), a telecom industry Website where I was the Editor In Chief for about 8 years. The story appears to have resonated with the public as at last report it had recieved 4,000 hits or so. It has also been picked up on the All Things D and True/Slant site. For those of you who want the abbreviated story: AT&T has launched a counter-attack to Verizon's aggressive map commericals, which show it having wider 3G access. The problem is that AT&T is telling you one thing in its commercials, while telling another thing to its customers (once they've sold you an iPhone contract). The fact is that much of AT&T's claimed 3G "coverage" is through partners whom it needs to pay high-priced data-access fees. If you are using an iPhone through one of these partner 3G towers, AT&T will monitor your data useage and possibly shut down your access, because they don't want you using the data access via the iPhone. AT&T confirmed this with me on the phone. It loses them money. So, if you have an iPhone with AT&T, be wary: You could get your data access shut off at any time, especially if you are in one of the coverage areas where they lean on their partners.

The Most Amazing Monday Link Roundup Ever

Mon, 07 Dec 2009 18:57:03 GMT

For those of you who follow odd news: We had a good weekend, followed by even more spectacular news weirdness on Monday morning. If you have been buried in a cave, let me get you caught up -- becasuse in fact, if you were buried in a cave, you might have won the lottery:

Cave Dwelling Browthers Inherit Billions (Telegraph)
The Gambler Who Blew $127 Million (and then sued Casino) (Wall Street Journal)
U.S. Helps Frequent Flyers Make a Mint (Wall Street Journal)
Football Coach Goes for Fake Punt on 4th-and-22. With the lead. On� his own 25 yard line. (Yale Alumni Magazine Blog)
Tennessee Man files insurance claim for $100 in cow-lick damage (Associated Press)
Police Jail man for rubbing burger in wife's face (Associated Press)
Prostitutes to offer free sex to UN climate Summit participants (Agence France Presse -- who else?)
Drunk Russian saved from fire by his cat (RIANOVOSTI)
Facebook Goes Ape Over Orangutan's Photos (Sky News)
Hotel bed jumping is the latest Internet Craze (Hotelsbycity.net)
Skin Cream Secrets Revealed (LiveScience)
87-Year Old Chairman fired by Value Line after 63 Years (Bloomberg)
Yes, Miky, There are Rabbis in Montana (New York Times)
Vinyl Records and Turntables Are Gaining Sales (New York Times
Pearl Harbor mini-submarine mystery solved? (L.A. Times)
New study reveals most children unrepentant sociopaths (The Onion)
Japan's 'space beer' sparkles among drinkers (Physorg.com)
British couple awarded over $35,000 for "loss of enjoyment on cruise" (Gadling.com)
Child molester thinks jail sentence could ruin his ice cream business (The Morning Call)
Man sits on whale, pets feeding tiger sharks (news.com.au)

The Gambling Party-Favor Mogul Lost $127M -- But How'd He Make It?

Mon, 07 Dec 2009 18:10:56 GMT

There are just so many incomprehensible things about the Wall Street Journal story of the party-favor mogul who lost $127M gambling in Las Vegas, that I just don't know where to get started. But I needed to mention something about the story because it's a parable of American capitalism. First off, the most obvious questions, how do you lose $127M gambling? That is serious mental illness. Secondly, you then sue the casino for what happened? But third, here's the thing nobody's talking about: Terrance Watanabe, the gentleman in question, earned his fortune (estimated to be slightly in excess of $127M -- by how much we don't know) by selling party favors in Nebraska, according to the story in the Wall Street Journal, which had the scoop. Now, I can see losing $127M getting drunk gambling in Las Vegas. But making $127M as a party-favor mogul in Nebraska? Writes the WSJ: "A native of Omaha, Neb., Mr. Watanabe built his fortune on plastic trinkets, the kind given away at carnivals and church fund-raisers: batons filled with tinsel, magic wands that light up, plastic spider rings that cost $1 for a bag of more than 100." The future is in plastics, apparently. More specifically, t's in plastic spider rings.

Bank Failures Indicate Inaccurate Balance Sheets

Mon, 07 Dec 2009 16:06:22 GMT

The FDIC closed six more banks over the weekend, making 130 banks that have been shuttered this year. What's disturbing is not that so many banks have closed, but that their most recent balance sheet showed no semblance of reality. For example, the largest bank to close down friday was Cleveland, OH-based AmTrust. Bank listed $12 billion in assests. Assumptions made by the FDIC in closing down the bank indicate that may be closer to $6 billion -- a 50% haircut from what the bank was listing as its asset values. This is a disturbing trend, if in a macro sense, most banks are listing their assets with values substantially higher than the fair market.� A reader named "Richard" at Jim Sinclair's Web site, Jsmineset.com, has dug up many of these inconsistencies. In addition, he points out that as more banks fail, the FDIC is having to make up larger losses as a percentage of deposits. Second, a glimpse of the failed banks' balance sheets shows they had listed assets at prices far higher than then would get at market value -- in the case of AmTrust, nearly 100% higher! The� FDIC will have to make up an estimated $2.0 billion on AmTrust, 25% of the value of its deposits. The purchasing bank, New York Community Bank, was only willing to purchase about $9.0 billion (75%) of AmTrust’s assets, and did so only on the condition that the FDIC agree to share the risk of loss. The conclusion appears to have been that the $12 billion in assets listed on AmTrust’s balance sheet were only worth about $6 billion. Take a look at another of the bank failures, and it's just as ugly. Buckhead Community Bank had stated assets of $874 million and deposits of $838 million. The FDIC’s projected cost to close this bank is $241.4 million. The FDIC's lost estimate indicates those $838 million in assets may actually only be worth $596.6 million. Read the full analysis here.

2009 Model Portfolio Update

Thu, 03 Dec 2009 16:20:02 GMT

For those of you new to The Rayno Report, each year we construct a model portfolio built around the investment themes we think will do well for the year. This year we constructed a conservative portfolio heavily weighted toward dividend stocks and precious metals. On a price basis, the portfolio is up 12.44%. With dividends, the portfolio is up� closer to 15% year-to-date (YTD). The portfolio with closing prices as of last night (Dec. 5) is below (performance does not include dividends): The S&P Index has outperformed this model, up nearly 20% YTD, but we believe that was achieved with a higher risk profile than was held in our portfolio. I've kept a conservative stance and have not played much with "single-digit midgets." The portfolio is designed to earn money with less risk. Much of the S&P performance in 2009 can be contributed to the extremely volatile financial sector, which contained many large bank stocks that made lows in the single digits in March and bounced back 100% to 200%. This has fueled much of the rally, but many of them are still 50% or more off of their all-time highs (if they're still in business). We have stayed clear of the financial sector, including in 2008. I like to follow the Warren Buffett rule of “first, don’t lose money,” which is what we did in 2008 when we did something unusual and advised readers that our model portfolio would be a 100% cash position for the entire year. This approach lost no money in 2008, when many people lost 30% to 50% sitting on your standard menu of mutual funds of stock investments. But if you went to 100% cash in 2008 lost 0% in 2008, and then made 15% in 2009, you are way ahead of most of the crowd which is still substantially underwater, trying to make up losses from 2008. The diabolic numbers of the market are such that if if you lose 50%, you need to gain 100% to make up all of you losses. This is why our investment approach stresses avoiding risk and losses first before chasing gains. What’s interesting in this year’s performance is the outperformance of the precious metals. Of our 10 picks, 8 were up. Most of them were up between 5% and 10%. But gold and silver, as measured by the ETFs (GLD and SLV), were up 40% and 68%, respectively. Clearly an overweight position in precious metals was a good move. As we have mentioned several times, precious metals are outperforming the S&P, which is not a good sign. That means that much of the rally is fueld by monetary games being played by worldwide governments, which are trying to reflate the economy with unnaturally accommodative monetary policies. This comes at a cost: weak currencies and global monetary instability are the result. This is what you see in the ailing dollar, volatile currency movements, and explosive rally in gold. Going forward, I don’t really see a change to this. Deficits are still rising, government debts are bloated, the printing presses are running overtime. Because the politicians don’t appear to have much political will to reign in the “free money” movement, I don’t see much changing for the precious metals. The currency crisis, in fact, could accelerate, putting gold into a parabolic move. Though I expect volatility in the metals to increase, I would expect to see more spectacular things from gold and silver in 2010 – possibly another doubling of their value relative to the sorry U.S. Dollar. For more details on our thoughts on gold, go here to see when and why we were buying the breakout over $1,000. We are also in good company, as John Paulson and Paul Tudor Jones are also bullish in gold, and they've both presented some powerful analysis on why this works. Also, you can read hear why you should ignore the chattering pundits who are skeptical of gold on TV. As for other holdings in our portfolio, they include dividend-paying big energy stocks such as Chevron (CVX) and British Petroleum (BP), pharmaceutical and medical supply companies Bristol-Myers (BMY) and Becton Dickinson (BDX), and blue-chip global food player McDonalds (MCD), among others. The common theme here is large global companies with solid cash flows and good dividends. The somewhat exotic call to short T-bonds work out surprisingly well (given the recent strength in treasuries), with the double inverse-treasuries (short) TBT ETF up 8% on the year. One big disappointment was DBA, the ETF tracking the grains market, which pretty much did nothing in 2009. We are satisfied with how the portfolio has performed in 2009 during these turbulent times and we won’t be making any adjustments until 2010, when we announce the new portfolio. This marks the fifth year in a row we have published the Rayno Model Portfolio, and we are proud to say it has never lost money in any one year.

Exclusive: H1N1 in the Pharma Sector

Tue, 01 Dec 2009 20:29:01 GMT

(Editor's Note: The Rayno Report, in conjunction with Raygent Associates, has been working on some exclusive research regarding the H1N1 virus and the development of vaccines. A more detailed report will be available later this month for a fee. We are publishing some early finding here, free of charge.) The potential global H1N1pandemic has generated renewed interest in vaccines. Vaccines over the last 100+ years have been one of the most important agents for controlling infectious disease, beginning with smallpox then polio in the fifties. From a commercial standpoint, vaccines have been a low growth business due to safety risks and low prices utilizing technology – i.e. you must grow a virus grown in fertilized chicken eggs. This archaic technology limits the market and also results in frequent shortgages, many of them currently being publicized in the H1N1 market. However, that doesn’t mean the renewed interest in vaccines hasn’t generated a big wave of business. It has spurred M&A deals involving and inteterest in Big Pharma in vaccine products. This is a good side business because it is more difficult to discover and get FDA approval for drugs. New technologies such as adjuvants, cell culture, and engineered antigens now provide an evolving R&D base for novel immunotherapeutic products. And longer term there is the potential of genomics for sequencing organisms and developing immune boosters. The Bill and Melinda Gates Foundation (www.gatesfondation.org)� has been funding vaccine research since 1998 and committed $2B through 2009. Major developmental programs are for malaria, TB and HIV with a goal of preventing 4 million deaths per year. More than 200 million children have been immunized since inception. The WHO (www.who.int) lists the following new vaccines that are at or near the commercial stage: Rotavirus,� Pneumococcal� disease, Human papillomavirus (HPV) and meningococcal meningitis A (Men A) so a significant rollout of new products is underway. So what does this all mean for the vaccine market going forward? Several bullish forecasts for adult and pediatric vaccines have been published over the past two years. Kalorama Information published a comprehensive report, Vaccines The World Market, in June of 2009 with profiles of companies and product forecasts. Kalorama reported global sales of $9.9B+ in 2008 for pediatric vaccines with growth forecasted at 16.3% annually through 2013 reaching $21.1B. While Kalorama believes in the growth model they reiterate the lingering concerns about product safety, supply shortages and consumers’ reluctance to immunize.(There are plenty of vaccine opponents out there). Datamonitor estimates the current market for vaccines by major players in the $19B range. The leaders in order of market share are Merck (MRK), Sanofi (SNY), GlaxoSmithKline (GSK), Wyeth (now Pfizer: PFE) and Novartis (NVS). Seasonal Flu sales for 2008/2009 are $2.8B growing to the $5B range by 2018/2019. VisionGain states in their global vaccine report,“The period of 2008-2013 will be one of the fastest growing segments of the pharmaceutical market.” Scienta Advisors of Cambridge, MA in a recent report forecasts 12% annual growth from 2008 through 2014 with growth of 8% in the viral vaccine sector and 10% growth in the pediatric bacterial vaccine sector vaccines for meningitis and MRSA. Major Players are 90% of current vaccine sales GlaxoSmithKline, Novartis and Astra Zeneca (AZN) have recently made major investments in vaccine products and technology. Leerink Swann estimated orders of $7B for swine flu from all players worldwide. The Wall Street Journal reported that GSK has invested more than $3.2B on R&D, acquisitions and manufacturing and one of the biggest bets on flu vaccines.� GSK is also the leading developer of adjuvants starting with the $300M acquisition of Corixa in 2005. GSK markets over 25 vaccines worldwide with a broad pipeline of 20 vaccines for pediatric and adult diseases including herpes and flu. AstraZeneca (AZN) bought vaccine innovator Medimmune� two years ago and now are selling the FluMist nasal spray products for seasonal flu A+B. Medimmune is a leader in pediatric health with its RSV vaccine. AZN has a number of collaborations with smaller companies for vaccine and immunotherapy development.� Novartis (NVS) has a contract to supply 90 million doses to the U.S. with a recent switch from multdose to single dose due to U.S. consumer concern about the use of trace amounts of thimerosal, a preservative that contains mercury. Conclusion Heavy R&D investment in vaccine technology over the past 10 years by government,� non-profit and commercial organizations will result in new formulations, better delivery systems and new products to control infectious disease. Advances in cell culture and bioreactors combined with recombinant technology such as DNA and VPL vaccines will make manufacturing more cost effective and speed up introduction of new products. Adjuvants� can boost the immune response and lower costs. As new vaccine products proliferate and technologies gain clinical and regulatory acceptance smaller innovative biotech companies will undoubtedly advance in the market. Please check back for more information on our comprehensive report on the vaccine market coming soon.

Why the Dysfunctional World Finance System Is like Lucent

Tue, 01 Dec 2009 20:13:03 GMT

I have writtern here about the fundamental dysfunctionality of the world financial system and what the common, hard-working person should do to protect themselves. Let me give you an example to illustrate how dysfunctional things have become. In the late 1990s, I covered Lucent Technologies. It was a glamor stock, everybody was buying it, thought it was the best. When I dug into Lucent I found substantial dishonesty and financial stresses. It all went back to debt and lack of financial transparency: Lucent, was, in fact, overleveraged and overdependent on giving its own customers financing (vendor financing). They also played fast and loose with the books. In the end, the SEC charged Lucent Technologies with fraud, and the stock collapsed before ultimately becoming a piece of Alcatel, where it's caused problems ever since. In fact there are many similarities between Lucent and the currenct massive financial morass. Lucent Technologies made a major push into "vendor financing" to lend their own customers to buy their stuff. They were creating massive artificial demand. Some of the people took the money and bought stuff, just cause they could, like subprime lending. In addition, Lucent had massive pension obligations and it made unreasonably optimistic investment assumptions about meeting these obligations. Well, then things melted down. The artificial demand that was there only because Lucent was lending money. It dried up. The scary thing is how much Lucent resembles the U.S. Government. The unfunded pension obligations are there in the form of Medicare and Social Security. The vendor financing is there in the form of Fannie Mae and the FHA, which funded trillions of dollars in consumer debt. The U.S. government, by keeping rates low, funding mortgages, and propping up automakers, enabled tons of debt to be created so that consumers and businesses could gobble up things beyond their means, just like Lucent customers. the U.S. Government was the ultimate vendor financer (and China, of course, enabled this by buying our debt). And now it's over. So, the Lucent debacle has now happend on a grand global scale, from Sacramento, Calif. to Dubai. People borrowed way to much, spent money on silly speculative projects or extravagent items, and now the money is gone and there is no more financing. The problem is this: Most of the banks still hold huge amounts of bad debt. But they are hiding it. The government hopes nobody finds out, since we now hold the bag as public shareholders of many of these banks. Debt as a percentage of GDP is still at 300%, a historical all-time high. A more reasonable historical level would be 100%. As in all corrupt systems, however, the power people want to control what's going on. The banks don't want people to know the real price of their bad assets, because it will show you they are insolvent. The governments don't want you to know, because much of the government, including the politicians, own interest in banks or real estate, and they know they'll get creamed. The average Joe? Well, he just wants a job. The world governments have decided that the answer is to take over banking assets and put them on the public balance sheet, print lots of money, hand out subsidies, and hope for the best. The thinking is that if we can artificially create some asset inflation by printing money, suddenly those bank assets will look a little better, the economy won't be complete crap, there will be some jobs left, and we'll have an "exit strategy" on� the trillions of dollars in toxic assets we've taken on the public accounts. In other words, we are still Lucent Technologies Inc. Good luck. It didn't work for Lucent. Now, I don't want things to melt down again. But I'm a realist. If debt at 300% of GDP is what got us into this mess, and it is in fact rising, that means the next problem will be even worse, and we have not eliminated the fundamental dysfunctional problem with the world economy: It's become too dependent on debt and speculation, rather than old fashioned hard work and cash.

Pre-Turkey Links

Wed, 25 Nov 2009 14:34:11 GMT

The family invasion has come, so I have to go shopping for food. Hopefully these links will keep you busy over the weekend. Happy Thanksgiving to our U.S. readers! In the news...

What Could Happen to GM's Saab? (Reuters)
Orders for Durable Goods Unexpectedly Fall (Bloomberg)
Chinese Banks' Rush for Billions Could Trip Markets (Reuters)
Major Magazine Players Coming to iPhone, Blackberry (PC World)
King of Spam Goes to Prison (CNN)
Is China Preparing for a Vampire Attack? (Financial Times)
Michelle Obama Picture in Google Images Controversy (Mashable)
Ubisoft's Assassin's Creed 2 is a Record Breaker (PC World)
FCC Chairman: Broadband Access Should Be Universal (Associated Press)
The Best Pic of Colin Powell (Dallas Observer)
The World's Most Mantastic leaders (Asylum)
Black Friday 2009: Boom or Bust? (Mint)
Five Reasons Banks Don't Get It (CNN Money)
Future Humans: Four Ways We May, or May Not, Evolve (National Geographic)
Big Payday for Driver Who Flipped Off Cop (WTAE Pittsburgh)
Man in Japan Weds Anime Character (Boing Boing)
The White House's Unprecedented Use of Unprecedented (Politico)
Donny Osmond Wins Dancing With the Stars (Associated Press)
Why Kids Ask Why (LiveScience)
Mass. Woman Seeks Funds for Turkey's Eye Surgery (Associated Press)

Five Stocks in Uptrends

Tue, 24 Nov 2009 16:10:42 GMT

This is some strictly technical stuff, here are some stocks popping up on my screens. I still need to do more research so the usual caveats apply: Do your own homework! China Green (CGA) We covered this on the raynoreport yesterday. China, “green,” fertilizer. Also flirting with 52-week highs. What more do you want? The ultimate momentum stock for 2009. Mylan Labs (MYL) At first glance, very interesting. Very cheap on a P/E (12) and PEG �(.7) basis. Gong to take a very careful look at this I have reason to believe it may be a great long-term buy. Retalix Ltd. (RTLX) Some kind of Israeli software company. Recently closed some new financing. This would take a lot of work, I’m not sure if I’m up for it, but the chart looks okay. Well, okay, so it's not fantastic. Oh well, never mind, truthfully we'll probably do nothing with this.. Lorillard Inc. (LO) Wow! This is what I call the old “straight-edge” chart. It’s a thing of beauty. This is a cigarette company. So those of you into vice investing might want to take a look. It also pays a juicy 5% dividend. DSW (DSW) This is a rust-belt-based (Columbus, Ohio) specialty footwear retailer. The Morningstar summary says that it “offers dress, casual, and athletic footwear from women and men…” Not sure what there is to get super excited about, except the chart (which sometimes is enough for me!). Kind of expensive on a P/E basis (47).

Visual Image of Work at Goldman Sachs

Tue, 24 Nov 2009 15:40:54 GMT

Tens of billions in government loans. Huge bonuses. An uncanny ability to know what's going to happen next in markets before it happens. Doesn't that sound almost like cheating? I've found a visual depiction of the Wall Street Investment Banker. This must be what it feels like to work at Goldman Sachs:

Up? Down? Conflicting Housing Signals

Tue, 24 Nov 2009 15:28:01 GMT

Mixed housing news is confusing the market this morning. The Wall Street Journal is reporting that 25% of Americans are underwater on their mortgages. This will increase pressure on foreclosures, says the Journal. That means more housing supply, which means weaker prices. Bad news, yes? But wait! Case-Shiller just came out with it's monthly housing index number which shows a rise over August levels, which represents the fourth straight month that prices have risen. These conflicting data points give both the bears and the bulls something to yell about. I think analyzing this data and drawing conclusions about the future direction of the economy is pretty much a crap shoot. Why is that? The housing numbers will likely be a "binary trade" -- that is, it's Black or White. If they reverse down, it's a disaster and we're heading for a depression.� If housing prices continue their trend of stabilizing and moving up, as is demonstrated in the Case-Shiller data, everything improves. Because of the leverage and investment attached to housing, pretting much everything in the economy is now dependent on the housing market getting fixed: Consumer equity, government loans, mortgage-bond holdings. Lots of people need the prices of these things to go up. This is why the government is so focused on stimulating housing. They know it's an "all-or-none" effect. It's the hail Mary. Because the entire economy is tied, both financially and psychologically, to the housing market, it's essential to prop it up to keep things from collapsing.

52-Week Highs to Watch: TRA, CGA, KO

Mon, 23 Nov 2009 18:16:15 GMT

I like to scan the 52-week high list to get ideas. Now, you could scoff at this as seeking “momentum” plays, but there is far more to it than that. By looking at the new highs list regularly, you can: 1) Find market leadership 2) Identify companies hitting a next leg of growth 3) Find counter-trend ideas, such as stocks succeeding even in a bear market. Over the weekend I went over some of the 52-week high list. Here are three interesting stocks that caught my eye: Coca-Cola (KO): Recognize the name? Shocking, isn’t it, that a soft-drink company is making new highs? Not really. The secret may lie in the fact that 80% of Coca-Cola’s revenue comes from outside the United States. So, it’s a weak-dollar play, for sure. Worldwide sales were definitely part of the Q3 earnings story. The company also announced a $2B investment in China. With a 2.9% dividend, KO isn't a bad place to hind, but the forward P/E of 17 makes me a bit nervous. I wouldn't chase this one. China Green (CGA): If you were to design your own custom momentum stock, wouldn’t you want “China” and “Green” both in the company name? China Green Agriculture is not for the faint of heart. This is a power trader’s stock with a 52-week range of 2.13-17.49. It recently made new highs though it’s pulling back today. The real story is that this stock makes fertilizer, which is in high demand, iand that it trades at a P/E of 18 with 27% revenue growth. So, so far, it’s a Growth at Reasonable Price (GARP) strategy. That is, if you trust a fertilizer company in China. Terra Industries (TRA): This is another popular fertilizer name. It’s cheap on a P/E basis, but the main story is that it’s in the middle of a takeover war that could entice higher bids. Terra has rejected a $4.1B takeover cash bid from CF Industries, which is itself being pursued by Agrium. Got that? It’s a fertilizer love-fest. Meanwhile, with a current market cap of $3.9B, a return on equity of 30%, and enterprise value/EBITDA of 7, Terra does seem reasonable to hold out for more money. I would expect higher bids. Can you chase these stocks higher? The fertilizer stocks will probably continue their run. None of them seems egregiously valued, nor outrageously cheap.� Because I would expect the market to rally into year-end, my strategy would be to try to get in on a disciplined entry point and set a $2 stop, banking on the fact that these are strong stocks that would lead any market rally. �After all, with a government money print fest, it’s looks like there is no shortage of liquidity to buy momentum stocks in this market.

Ron Paul's Classic Rant

Mon, 23 Nov 2009 15:39:04 GMT

I think Ron Paul's rants are eloquent in their simplicity and their use of common sense. It is funny watching the CNBC commentators run around themselves trying to be "objective" and cast aspersions on Ron Paul's ideas, by asking "penetrating questions." Ignore for a moment the baggage that comes with being Ron Paul and the "libertarian" tag. Let's break down what he says intellectually. Paul just wants to find out where the Fed money went. Where OUR MONEY went. That's it. Nothing more, nothing less, and he says so. The current HR 1207"Audit the Fed" bill is about getting more transparency in government. Isn't that what Congress is supposed to do? Work for us? Checks and balances, and stuff? Paul's bill is asking for more information from a secretive organization whose place in our Constitutional government is becoming more murky over time. That's a good thing. The fact that CNBC turns it into a huge debate on whether Congress wants to control the Fed is ridiculous. It's about the people getting more information from government! Whether your are "left" or "right" I think you need to appreciate what Paul is trying to do for the American public: He's trying to find out what extremely powerful people are doing with very large sums of money. Our money.

Wake Up! The Currency Crisis is Here

Mon, 23 Nov 2009 13:24:00 GMT

It's strange to me that many people are still perplexed as to why gold is up 30% in a year. Gee, why would that be? Massive bank insolvencies and government debt. Who would buy gold? Isn't that quirky and cute? Well, no. It's actually the most important trade of the year. The smartest people in the world such as John Paulson and Paul Tudor Jones are acquiring gold. It's indicating the growing fear of an impending currency crisis, which looks to me this morning like it's about to hit overdrive. The Currency Crisis is here. It's well reflected in the chart of gold below. So What's the problem? Where to start: * The U.S. budget deficit widened to $176.4 billion last month, compared with a deficit of $155.5 billion in the same month a year earlier. * Money supply is exploding, as the U.S. Government prints more money than at any time in history. * Due to the trade deficit, trillions of dollars are piling up in China as reserves. * According to the CIA Factbook, our current account balance ranks our nation's financial strength at #190 in the world. That's behind Poland, Pakistan, and Bulgaria. * You could make a strong argument that the U.S. government is virtually insolvent. When you include unfunded liabilities in Medicare and Social Security our budget deficits are more than $100 TRILLION dollars. Even if you take out the unfunded liabilities, the total U.S. Debt of $11T doesn't look good, at nearly 100% of GDP, according to Sprott Asset Management. The government clearly thinks the answer to the debt problem is to flood the world with money. What is going to happen to all these dollars. If you supply infinite amounts of something, what happens to the value of that thing? Well, the price of gold is telling you the answer. Whereas for many years gold was declining against the dollar in a steady, but controlled, rhythm, it is now boiling over against all currencies in what Martin Armstrong refers to as the phase shift. In uncanny fashion, Jim Sinclair has predicted this move every step of the way, down the the very week that he thought the dollar would reach it's catastrophic breaking point, Nov. 15th. He now says we can regularly expect wild, $100 intraday swings in gold as the dollar falls through the floor. Why is nobody worried? Why is nobody concerned? Why does congress and the U.S. adminstration dither on items that don't really matter when it's clear that financial markets are spooked we are about to enter the largest currency crisis in modern financial history? I'm not sure, but I'll tell you one thing: It's time to protect yourself.

Today's Compelling Links

Fri, 20 Nov 2009 22:17:24 GMT

What Are the Best Hedge Funds Buying Now (Seeking Alpha)
How to Feed the World (The Economist)
News Corp., Time Warner Said to be Interested in MGM (Bloomberg)
Poker Pros Should Run Wall Street, says Harverd Prof (Bloomberg)
Goldman Back to Economy Bashing Mode (Zero Hedge)
Ballmer: Windows 7 Flies off the Shelves (Mashable)
Vinod Khosla: Smart Grid Hard to Invest In (Greentech Media)
Financial Blog War! (Financial Times)
Ron Paul's Fed Battle (Video: The Wall Street Journal)

Paulson Report: Hedge Honcho Likes BofA, Gold

Fri, 20 Nov 2009 16:42:47 GMT

You like stock and investment tips, yeah? Well, why take them from some schmuck at a cocktail party, when you can go straight to the top: John Paulson. Part of the Rayno Report's duty is to follow what smart investors are doing, so we dug into his Q3 report. His favorite picks are Bank of America (BAC) and gold. He prefers mining stocks to the ETF, GLD. For those of you who don't know John Paulson, he's the hedge-fund manager du jour. He made a fortune betting on the housing collapse. Did fine in 2008. Manages and makes billions as #76 on the Forbes List. Year-to-date, his funds are up between 5% to 23%, depending on which one you were in (or which ones you were not in, because you were not invited, as is our case). The best of the bunch are the Credit Funds, up 23% on the year. In mergers: Their "most profitable deal" was the Pfizer $64 billion acquisition of Wyeth. The Paulson Q3 letter says he has a bright outlook for mergers in 2010.� The Merger Funds were reopened to capital because they expect a pickup in merger activity. "While merger activity in 2009 was at a cyclical trough due to the recession, we believe merger activity will pick up in 2010 providing greater opportunities." In credit markets: Paulson reports that the hedge fund bought credit of GMAC, the auto finance arm of GM that was bailed out by the government, when its bonds were yielding 55%. Nice trade! They are now yielding 11% with "very low likelihood of default). Talk about nailing the bottom. In banks: Paulson continues to hold a large position in Bank of America (BAC) -- the fund's largest financial position. "Although the stock has risen from when we purchased the stock, we believe considerable upside remains." On gold: Paulson's bullishness on gold is getting much publicity. "Due to our positive outlook for gold we wanted to have some event exposure in the sector. Our current exposure consits of five gold mining stocks, comprising 14% of our portfolio. We believe all of the stocks have upside potential in a flat gold price environment, but would rise even more in a higher price environment. Their holdings include AngloGold Ashanti (AU), which he describes as the largest holding.� Major finance publications, including the Wall Street Journal and Bloomberg were reporting on Paulson opening up a new gold fund in January. Corporate restructurings: "We are optmistic about the Recovery Funds" (their vehicles for investing in distressed securities and bankruptcy reorganizations). "We see numerous restructuring opportunities inthe financial and other sectors, both in and out of bankruptcy, which have the potential to appreciate substantially as the economy recovers. Overall, Paulson sounds bullish. He likes banks and gold. He believes the economy is recovering, and thus thinks his big bets in distressed credit, bankruptcies, and banks will pay off.

"Audit The Fed" Vote Passes, Fight Getting Ugly

Fri, 20 Nov 2009 15:32:48 GMT

The House Financial Services Committee has voted in favor, 43-26, to approve a measure sponsored by Texas Republican Ron Paul that would direct the congressional Government Accountability Office to expand its audits of the Federal Reserve Bank. The Fed, of course, opposes the measure, saying it will interfere with its ability to operate independently. Not only that, but there seems to a fair amount of anger brewing around this legislation. This is a big move. For the first time in decades, the sanctity of the Fed is really being questioned by Congress. It's clear that Congress is starting to take advantage of populist fervor against government bailouts, and there is a movement building to dive into the mysterious Fed to find out exactly what they do and how much danger lies in their bloated balance sheet . The Federal Reserve bank enjoys an independent status. As it's power has grown, this independence has grown into arrogance, as in, "Don't ask what we're doing... just trust us." The growing mistrust is not limited to the Fed. Congressmen are apparently attacking Treasury as well Taken together, it's apparent that attacks on these institutions and leaders are accelerating. It's going to ugly. According to the Wall Street Journal: At the Joint Economic Committee, a couple of House Republicans called for the resignation of Mr. Geithner, who, as president of the Federal Reserve Bank of New York, played a major role in last fall's moves to prevent the collapse of the financial system. "The public has lost all confidence in your ability to do the job," said Rep. Kevin Brady, Republican of Texas. Mr. Geithner, in an unusual public display of pique, fired back. "What I can't take responsibility is for the legacy of crises you've bequeathed this country," he told Mr. Brady. Reuters columnist John Kemp summarizes here the growth of the "Fed Fury." I would expect to see such tensions and disagreements to mount, especially as our government process devolves into a new round of finger-pointing over the crisis, all the while the budget situation devolves and the banking crisis becomes more desperate. I do believe that Obama made a huge mistake in picking Tim Geithner as Treasury Secretary. He's a milquetoast figurehead with no toughness. Geithner is part of the of the same Wall Street Club that brought the credit crisis to your door. He was a protege of Robert Rubin, a long-time defender of deregulation who let derivatives run wild in the latter days of the Clinton administration. It's also clear that during key moments of the banking crisis in 2008, Geithner was more interested in backing up his banking buddies than he was protecting taxpayer dollars. As for the Fed, their balance sheet has ballooned to unfathomable proportions -- nearly $3 trillion, much of which includes toxic assets and mysterious derivatives paper it absorbed when it took over failed institutions such as Bear Stearns and AIG. That means you and I are on the hook for all of those assets, whether they rise or fall. Is it so crazy to investigate the most powerful bank in the world, which could hold the key to our future as a nation? I don't think so. I'm surprised Paul Volcker opposes the measure.

Just Some Interesting Links

Thu, 19 Nov 2009 19:29:03 GMT

A Look at George Soros's Recent Trades (Seeking Alpha)
Facebook Common Stock Valuation Jumps 42% (Bloomberg)
The World's Most Corrupt Governments (L.A. Times)
The $2.5 Trillion Global Oil Scam (O&G)
Giant Lungless "Worm" Found Living on Land (National Geographic)

Correction Time!

Thu, 19 Nov 2009 15:46:08 GMT

This morning there has been a rapid change in tone in the market. we are back to risk-fearing mode, with stocks being sold, oil being sold, gold being sold, and the U.S. Dollar being bought. We've had quite a run in the S&P from about 1030 to 1110 in the space of only a couple weeks. Looking at the chart pattern, we've had a clear sawtooth pattern in the S&P, which it uncannily tracking in increments of 2 weeks (Two weeks of rally, followed by a two-week shallow correction). Or, as one of my neighbors remarked just the other day when we were talking about the stock market, "It seems to be selling off at the end of each month." Very astute, my neighbors. Today's action is right in line with this pattern. With the Thanksgiving week coming up in the U.S., I'm not surprised to see many investors taking the profits and running for cover. If the pattern is to contine, expect a correction into the end of the month, with the rally to resume in early December. The tricky part would be what to expect after that. I would expect we would see at least a rally off a low of, say, S&P 1050 (a level I would be buying), to take us back up toward the top. I think a typical market failure would occur after a double top. Interestingly enough, if this pattern were to continue for another month, that would also coincide with the end of the year! How neat and tidy that would be for the numerous hedge funds looking to pump their holdings into the end of 2009. Now, that's were it gets interesting. Imagine, if you will, us arriving in January of 2010 with a suspicious looking double-top and the hedge fund fat cats all feeling flush from their Q4 windfall. If I were to look for a point for the market to fail, that would be it. That's my roadmap for the next two months, anyway.

Positioning for a Year-end Biotech Rally

Wed, 18 Nov 2009 20:06:55 GMT

After a nasty October correction of 10%, biotech stocks are in a recovery mode and poised for a Q4 rally extending to early January. This has been a trend in the past few years (’05,’06, and ’07 trends) but was disrupted by the recent financial crisis of ‘08/09. A nice base has formed in the IBB tracking ETF at levels of 75-79 so a rally would take this popular ETF beyond 80, seeking the September highs of 85. Partnerships and good clinical news have given support to biotech stocks lately and the sentiment has improved especially with biotech financing. Burrill and Company (www.burrillandco.com) recently reported growing momentum in the sector (November 1, Genetic Engineering News) with total financing of $35.6B through Q3 2009. This compares to a total of $18.4B in the same period of 2008. Partnering was particularly strong with financings of $22.2B through Q3 compared to $10.4B in 2008. Venture Capital financings were $3B, about the same level as 2008. At a recent BIO Investor Conference on October 28 in San Francisco, a financial roundtable discussed a trend toward more “bio to bio” partnerships as both large and small companies in the space focus on strategic aspects of their respective technologies and Intellectual Property. In the meantime the M&A trend should continue with big pharma seeking technology and late stage products. Our Raygent Life Science Portfolio is up about 7% YTD; it could have yielded significantly more with rebalancing trades we talked about. Recently we added Cephalon (CEPH) as a new large cap position and additional weighting of Cubist (CBST), Supergen (SUPG), and Viropharma (VPHM). The Mid Cap sector has been difficult to play due to a combined affect of disappointing clinical news and high valuations/expectations. To play in biotech, we recommend a balanced portfolio with an overweight of large caps and the IBB ETF supplemented by smaller caps with good balance sheets. Additional smaller cap positions that should be added are: Alnylam (ALNY), a core play in RNA interference therapeutics for infectious disease and cancer,� Idera (IDRA) a core play in immune response therapeutics through targeted Toll Receptors for infectious and inflammatory disease and SeraCare (SRLS) a biological products and services Company in a turnaround mode with revenues growing to the $50M range and a profitable quarter. -- Rod Raynovich, Raygent Associates (www.raygent.com) Disclosure: The author of this post trades actively in biotech and is long many of the stocks mentioned in this post, including IBB, CEPH, CBST, SUPG, VPHM, ALNY, IDRA, and SRLS.

Dorfman Pegs Aetna, Ensco, and Allstate for Takeover

Tue, 17 Nov 2009 18:48:04 GMT

I'm a big fan of John Dorfman and his column on Bloomberg. With the recent percolation in M&A activity, he has some new picks: Aetna (AET) , Ensco International (ESV), and Allstate (ALL).

Dorfman is an old-school value investor who never gets carried away by bubbles or trendy trends. He just looks at the numbers. And on a P/E and cash basis, he believes that these three companies are ripe for picking with low price/earnings and debt ratios Dorfman said that last week he "screened about 2,600 U.S. companies looking for ones with alluring valuations, low debt, and at least $100 million of cash in the till." Sounds good to me. And thanks for the work, John -- saves me some time! Dorfman points out that Aetna is valued at $13 billion, which makes it the right size to be taken out when placed along side competitors such as� UnitedHealth Group Inc., at $34 billion, and Travelers Cos., at $29 billion. It sells for about nine times earnings and had $1.8 billion of cash as of Sept. 30. Dorfman also likes� Ensco International Inc., an offshore oil drilling company based in Dallas. Ensco stock sells for seven times earnings, with $1B in cash. His last pick is Allstate, the largest publicly traded U.S. home and auto insurer. It now has a market value of less than $16 billion. You can read the full analysis in Dorfman's column here.

Meredith Whitney Perplexed as to Why She Can't Always Be Right

Tue, 17 Nov 2009 14:05:53 GMT

Wall Street is a funny place, where egos often spin out of control. An ego can be death in markets and in trading. As soon as you start to think your intellect is so big that you can overcome the market, that's about where you get positively killed. Meredith Whitney, the famous banking analyst who called out banks on their many practices and predicted their implosion, should watch out. She's all over the press/blogs/Twitterville this morning for public comments about the stock market rally and why she believes it will all come crashing down. Whitney is a smart person and a great banking analyst. But now she runs her own shop and her repetitive appearances on TV with bold predictions are an ego-spiral warning sign. Plus, the reasons she gives are not enough reasons to believe the stock market rally will end. Banks are still miserable, okay. Don't we all know that? Fundamental analysis is important but even if you have your fundamental analysis right the market can run against you for years, as it did in 1998-2000 when Julian Robertson was trying to short tech stocks into a bubble. That's why, even if you are intellectually or fundamentally opposed to stock market direction, you need to take heed of the market action and technicals as well. To me, the market feels like it has an underlying bid (the hand of the Fed?), no matter what the news. Meredith Whitney asks: How can that possibly happen with the banks still a mess? That's because this is the Wizard of Oz market, anything can happen.

The Wine Illusion -- and Five Bottles under $15

Mon, 16 Nov 2009 16:07:01 GMT

Now, you may think wine has nothing to do with financial markets, but for me it has everything to do with it! Wine is a dynamic global market, the prices are always changing, and there are huge inconsistencies in value. People are easily fooled. It's almost exactly like the stock market. Besides,with our national debt spiraling out of control, the U.S. Dollar collapsing,� and our political representatives clueless on how to honestly operate the financial machinery, we need to drink more wine -- for cheap. I found some interesting reading on the topic in the Wall Street Journal this weekend which confirmed suspicions I've been developing over the years. The main suspicion I've had is that trendy wines are often overrated and most wines overpriced. The excellent piece by Leonard Mlodinow, "A Hint of Hype, A Taste of Illusion," casts skepticism on how well the leading wine tasters can really perform, and whether many of their senses are a product of their imagination. Last spring, I was moving across the country, so I was forced to liquidate my wine cellar (in this case, literally liquidate, as in: down the gullet). Over the course of six months we had several nice parties and drank a lot of old wine. Some of it was worth paying for and keeping in the cellar, especially some 1999 Bordeaux and 1998 Brunellos. We drained plenty of other stuff too: High-priced California Cabernets, vintage French Champagne, even a couple magnums. However, after the 80-something odd bottles were gone in a matter of months, I was left with an empty feeling. Was it really worth it? The short answer: no. And I'm not just talking about my liver. My conclusions: many "collector" wines are overpriced and not that much better than something 1/4 of the price. I believe the most egregious offenders are the high-priced uber-California cabernets, which to me are the Bernie Madoffs of the wine market. Since I've moved, I've delayed putting together a new cellar in favor of just enjoying decent cheap bottles of wine. I left a few of my prized Bordeaux with family in New Jersey to enjoy during the holidays. Let's face it: Most wine, and wine pricing, is about marketing. And the system for tasting, evaluating, and pricing wine, as detailed by Mlodinow, is rife with human error. A while back, the New York Times did an investigation of Champagne, "Is It Champagne or a Substitute? Refined Palates Can Be Fooled?" asking leading restaurant "experts" and wine experts to identify real champagne in a blind tasting. They could not tell the difference. It turned out that one of the favorites was a cheap sparkling wine -- not even real Champagne. Which leads me to ask: If, in a blind tasting, a wine expert cannot tell the difference between a $100 bottle and a $20 bottle of Champagne, what difference is it going to make for you with hamburgers on Saturday night? The answer: absolutely none. With that, I leave you with my favorite wines under $20. These wines taste great. And they won't kill your bank account: 5) Chono Cabernet (Chile): This wine generally retails for $10-$12, although I've found it for as low as $8. You can't do any better for an everyday red quaffing wine. Great with burgers. I dare you to blind taste this wine against your run-of-the-mill bullshit $30 California Cabernet. 4) Guigal Cote Du Rhone: This wine is fine. It's $7. Unbelievable. 3) Chateau St. Michelle Columbia Valley Syrah. Available in most West Coast supermarkets (in states where they sell wine!). Classic spicy Syrah for under $10, you can't go wrong. 2) Bortolotti Prosecco. Generally around $15, so we've pushed the limits of our budget! But seriously, this is a deal. Prosecco is the one that fooled most of the Champagne snobs. 1) Villa Puccini Tuscan Red. This was one of my staples when I shopped at Wine Library in Short Hills, New Jersey. Widely available. Guess I could have easily made this list "under $10." This is a great wine for the money. You can usually find it for $10, sometimes $8.99.

U.S. Dollar on the Precipice

Mon, 16 Nov 2009 14:10:22 GMT

We awake this morning to the U.S. Dollar getting spanked again, delicately balanced on the precipice of that thin support line known as UDX 75. Plummeting through that 75 level on the dollar index will make a new yearly low and would likely accelerate the selling as momentum/technical traders pile into dollar shorts. Last week several Asian central banks tried to defend the currency but it look to me as if 75 will fail and people are starting to give up. Bloomberg is attributing this to member Asia countries maintaining stimulus plans. Seems to me though that the dollar weakness is more likely related to the lack of meaningful developments in Obama's visit to China, where apparently he's just gone over there to pat them on the back and drink some tea. U.S. Dollar December Futures

What's Next for "Chimerica" ?

Fri, 13 Nov 2009 14:27:52 GMT

President Obama is heading to China this weekend. As far as I known, Glenn Beck will not be accompanying him. This is probably the most important diplomatic venture of Obama's young presidential career. The economic relationship between the United States and China -- known in some circles as "Chimerica" -- is central to the economic recovery and a resolution of the economic crisis. Let's recap the dynamics of Chimerica: * We buy tons of cheap, crappy Chinese exports from Walmart and Home Depot (oh sorry, was I editorializing?). * Americans have been net spenders (borrowing) to buy this stuff. We sold huge amounts of our home equity to accumulate a bunch of Chinese junk in the garage. Why we did this,� I am still trying to figure out. But that's what we did. * China enables us by lending us money and buying our debt. * This creates huge "trade imbalances" : i.e. we're sending most of our cash over to China, and not selling enough to them to counterbalance this. * We resp0nd to trade imbalances with trade tariffs and by lowering the value of the dollar * China neutralizes this by pegging their currency to ours (negating import/export effects of a lower dollar). * Government officials ignore the entire problem and even try to mask it bay making disingenuous statements such as "We support a strong dollar." Doesn't this sound like a textbook case of a dysfunctional relationship? America is like the alcoholic who comes home at night to a spouse (China) that says, "Hi, honey, I bought you some more whiskey!" Where does it all lead? Well, it turns out that apparently we believe the solution so far is to borrow more money -- from China. And because there is now so much more debt to sell we are begging China to buy more of our debt! The spouse has now driven down to MegaBoozMart and loaded up with cases of whiskey., beer, wine, and vodka, and told us to party! That's not exactly a road to recovery, is it? The chart below, courtesy of the New York Times, illustrates to problems quite well: There is too much of an imbalance with China, and we are creating too much debt: There are somewhat intractable problems that prevent this dysfunctional relationship with China from being solved: 1) We keep borrowing money, spending it, and asking for more 2) China pegs their currency to ours, which prevents a "market solution" to trade imbalances. What can Obama, or any American politician, do about this? I really don't think the answer is in China, but in the halls of his own Congress. We have to stop spending money. We need to get our budget in order. We should keep the dollar strong. And we have to stop allowing our banks to run up huge amounts of debts. What's my solution? Restore interest rates to normalcy so that people can actually put dollars in a bank and collect interest,� (really support the dollar). This will break the cycle of dependence on debt. Yes, in the short term this would be extremely painful. But wouldn't we all be better off in the long run? I think if we strengthened the dollar, capital would flow back into America. A weak dollar is not the answer. A response to this might be: But this would result in a world economic depression! Possibly, but if we are suffering a crisis caused by the accumulation of debt and trade imbalances, does it really make sense to say the solution is to enable more debt and trade imbalances? If so, and the debt levels increase, what does the next crisis look like? Can't we just nip things in the bud now? Now, I think what China is doing is just as bad. They have $1.5T of our cash, and they are saying, "We're going to use your cash to build empty ghost towns that the people like! And we won't let our currency appreciate to reflect that we are collecting all this money and our economy is the strongest in the world!" This is not market economics either. Pure and simple, the problems are all political. I think Obama has to go to China has to lay this on the table. He has to say: "You and I, Mr. China, we're in a dysfunctional relationship. We've both made mistakes.� We need to come up with a solution to this right now." And they can't speak in diplomatic code. They've got to do a deal.

How to Protect Yourself in a Manipulated Market

Thu, 12 Nov 2009 18:39:12 GMT

This is the "Wizard of Oz" market. I say that because on any given day, anything can happen, based on what the wizard does behind the curtain. The wizard is the federal government, along with the powerful cabal of hedge funds that operate with inside knowledge. This is not some hair-brained conspiracy theory. This is reality. If you don't think so, look at this chart of the Federal Balance Sheet. The Fed has become the market. And with the government and big hedge funds moving the market, the� little guy can get run over pretty quick. If you do not believe this new reality of the marketplace, consider these facts: * Look at the chart below. As the Feds have expanded liquidity, bought back mortgage-backed bonds and treasuries in the market (monetization of debt), mopped up all the risk in the market, and bailed out the troubled banks, the stock market has risen. There is an incredible correlation here between the government outlays and the stock market rebound. As the federal government assumes the bad debts and prints money to bail us out, the stock market rises. * More than 60% of trades in the North American stock market are now computer-generated. I believe this estimate is probably low. High Frequency Trading (HFT) -- which is massive, second-to-second trading generated by computer algorithms -- has thrown this trend into overdrive. Look at the chart below. This chart shows you how the rise of new computer-based trading exchanges have boosted the volume in stock market transactions. If you are thinking about making a trade in your account, you've got a disadvantage against these folks. And you wonder why the "little guy" has taken a breather from the stock market. It's because he or she knows the game is rigged. But there are some things you can do. In general, I think if you are feeling "burned" by the stock market, you need to step back, take a long-term view (5+years), and start wading into the market using our basic principles. Here is my approach to trading in a Wizard of Oz market. 1) Stick with large, high-quality stocks. If you're going to buy stocks, do it slowly, over time, and buy high-quality large market-cap stocks that pay dividends. These stocks have held up relatively well even during the economic implosion. They are less susceptible to manipulation. Three stocks I own that fit this criteria are Microsoft (MSFT), Altria (MO), and Dupont (DD). They all pay dividends (2%, 5%, and 7% respectively).� Even when the world ends, people buy chemicals and cigarettes. Altria is the best-performing stock in the DJIA of the last 50 years. Including dividends, it has averaged annual rates in excess of 10% since 1950. That's better than a bond.� It pays a 7% dividend, so even if the stock goes nowhere, you collect some money.� If you don't like cigarettes, I understand. It's just an idea 2) Dollar-cost average over the long term. Cash is becoming a liability.� That's because bank accounts no longer pay any interest, and the dollar is going down. This is one main reason I think the stock market may go up even if the economy doesn't roar back -- the federal government is trying to insure it will rise via dollar devaluation. If continued, this will eventually creates asset inflation against a lower dollar. But, with big swings in the stock market, you need to be careful about your entry points. Since market timing is extremely difficult, really the only way to do this is to put money in over time� -- I would allocate money over the next four years, knowing that even if we are still in a secular bear market, it's likely to end by 2012 (especially if the world doesn't end in 2012). Let's say you have $10,000 to invest. Put in $2,500 per year. Better yet, set aside some salary to take advantage by buying more high-quality stocks in down cycles over the next few years. If you combine dollar-cost averaging with high-quality, dividend paying stocks, this will greatly reduce your risk in the long run. And you will be hedging your cash against inflation by owning an asset that's more likely to rise. I think most people make mistakes in the market by not having a methodical dollar-cost averaging strategy. They often "get in" when things are frothy or bubble like, or "sell" during panic lows such as March 2009. By sticking with a dollar-cost averaging program, you can remove the emotional component from the market. 3) Add alternative asset classes. Part of the financial crisis has been a reaction against the mountains of hard-to-value paper assets and derivatives floating around the marketplace. These include stocks. The government's response -- printing money and assuming all the liabilities -- has created a huge risk for currency devaluation, making paper money relatively worthless as well. This is hard for some people to get their head around. The easiest way to think about is that a currency as a means of exchange. Imagine a world without paper currency. After all, a Federal Reserve Note is just a "promise" from the government. It's not really backed by anything, so do you trust 'em? If paper money went away, how would you trade for goods, or measure wealth? Generally, it would be: 1) Precious metals 2) jewelry & collectibles 3) food and commodities such as fuel 4) land.� I would make sure I have some of my net worth in all of these assets. It's the only way to hedge against some sort of disastrous currency event, which is certainly possible. I allocate as much as 40% of my money to these asset classes. That's net of debt, such as mortgages. 4) The trend is your friend. Until it's not. But seriously, over the LONGEST TERM, stocks will go up, if not for anything, inflation. The government insures this by devaluing currency. Right now, the trend is up.� It appears the Fed will do everything in its power to "make sure that stocks go up." Yes, this is manipulation. It comes in the form of zero interest rates. Will it work? Who knows. Probably, in the long run, it will -- at the expense of the U.S. Dollar.� But the main thing is you do not want to "fight the fed," and generally, I believe that money-printing will make stocks go up in the long run, whether it is on a nominal basis or inflation-adjusted. 5) Own foreign assets. With historic debt levels and a government hellbent on devaluing the currency, it's as good a time as any to diversify away from the United States. You can do this by owning foreign stocks, bonds, and currencies. I currently like debt in resource-rich countries like Australia because it pays you a good interest rate and acts as a currency hedge. You can capture this yield by either buying Australian bonds directly, through the Australian dollar currency ETF (FXA), or via various mutual funds. It's also a good idea to own assets in the fastest growing parts of the world such as Brazil and Asia. I think these basic principles are a good way to preserve your wealth in these chaotic times. I really nope the worst scenarios don't happen, but you need to be prepared.

Five Questions About the Fed

Wed, 04 Nov 2009 17:20:44 GMT

Today is Fed day. Otherwise known as money-printing day. The statement will be interesting because it's starting to get to the point where the market may no longer trust the staus quo (money printing). As usual, watching how the market reacts to the statement, rather than the statement itself, will be important. Particularly, watching the bond market. Will the market start to lose trust in the Fed? Here are the big questions I have about our folks in Washington who are manning the printing presses: 1) How long can they keep printing money before the bond market rebels? 2) How on earth do they manage and "exit strategy" on�this, without destroying the equity markets: 3) Related to #2, in more detail What do they do about this? 4) Gold is becoming a problem for them. What do they do about this: 5) Do they really have a plan? Or are they just making stuff up as they go along?

Ten Takeaways on the Buffett/BNI Deal

Tue, 03 Nov 2009 21:30:46 GMT

When I launched this site I didn't think I'd be writing much about railroads. But Berkshire Hathaway's deal to buy Burlington Northern for $44B must be examined because it is Warren Buffett. When Warren Buffett reaches for the wallet on a $44 Billion deal, you have to sit, take notice, and ask yourself what it means. Buy looking at the deal we can get into Warren's mindset. Here are some of my thoughts: 1) First off: Buffett has offered $100 per share for BNI, and he said on TV today that thye would take on some debt to do the deal. This interesting because Buffett usually pays with cold hard cash. TAKEWAY: Buffett thinks debt is currently cheap. And that his stock is fairly priced. 2) The stock market did not rally on the news. TAKEAWAY: This stock market is fundamentally dysfunctional. 3)� As Zero Hedge has been astutely pointing out, rail traffic, often watched as a good barometer of the economy, has not recovered at all. Let's put it this way. The stock market is 5% higher than it was a year ago. Rail-car loadings are down 18%. TAKEWAY: Warren is taking a flyer on a long-term bet. He really thinks he's buying a bottom, but he's not sure if it will come tomorrow or in three years. 4) At today's valuation, $91 a share or 20% higher than yesterday after the deal was announced, BNI pays a 2% dividend and has an enterprise value/cash flow ratio of 6.9. The return on assets is 15%. Not bad numbers for a rail company. TAKEAWAY: Ther are deals to be had in this market, especially on a cash-flow and dividend basis. 5) Buffett is willing to split his Berkshire B shares by 50:1 to do the deal. TAKEAWAY: Warren, just like everybody else, wants folks to own his stock. 6) James Altucher, author of "Trade Like Warren Buffett," points out that this may not be a direct bet on commodities but it shows that Buffett believes that commodity prices will likely be going higher and the dollar, lower. BNI, is, after all, a play on "stuff" -- coal, oil, and commodities TAKEAWAY: This could be construed as a commodities bet 7) This is Warren Buffett's biggest deal ever! TAKEAWAY: That's bullish. 8) The deal took a total of 10 days to work out. TAKEAWAY: The man doesn't fool around. 9) Some folks are saying this is a green play. TAKEAWAY: Some journalists really like to reach. Okay, so railroads are more effecient than trucks. But are locomotives really "green"? Gimme a break. 10) Burlington Northern is not Twitter. TAKEAWAY: Thank goodness. Buffett still bets on real businesses.

Morning News: Buffett's Bigger; Eagerly awaiting 2012

Tue, 03 Nov 2009 15:31:51 GMT

G'morning, the top story today by far is Waren Buffett and Berkshire Hathaway buying Burlington Northern at $44B. Funny, I sat and watched as he bought shares of BNI at $50, $60, $70, or other various increments vastly lower than today. Thought, "Gee, maybe I should be buying some." Didn't do it. Shows you way Buffett has $50B or so more than me. But why bother with positive news from the world's greatest investor?� The Internet percolates with far more dark stuff, including material on the forthcoming 2012 apocalypse and the end of the Mayan calendar. The meme has spread. Not only is the fringe of my extended family getting increasingly involved in end-of-the world conspiracies, but I also learned that Martin Armstrong -- who is either an eccentric market genius or fraud -- has decided that 2012 marks the end of economic time. So, if the world is ending, why not go watch a movie about it? My favorite movie site Rotten Tomatoes has a nice recap, 12 Facts About 2012, which allows you to bone up on Roland Emmerich's forthcoming movie on the end of the world. With that, I send you off to even more important, eccentric, and downright strange news around the World: * Sony's Xperia phone has a face-recognition feature. Cool bro. * Part of Kate will always love Jon. Ah, isn't that sweet? Is that before or after she gets the house? * Just in case you are researching the future of LED Technology. * Phillies Pitchers fighting in the dugout. Not a good omen when you are heading back to the House that Bloomberg Built. * Mercedes driver convicted for hitting a six-foot orange bunny driving a pedicab. * Al Gore, the owner of one large carbon footprint, is apparently minting it on his green investments. Think there might be some government contracts involved?

New Microsoft Target price: $40

Mon, 02 Nov 2009 14:42:50 GMT

Let's face it, the PC market isn't what it used to be. Largely saturated, the world went into a period of many years where folks were barely replacing PCs -- let alone contributing to the market's growth. It didn't help when Microsoft laid the egg known as Vista. Recently, though, Microsoft's stock has been perking up on excitement building for Windows 7. Recently trading at a forward P/E of 13 with a dividend yield of 2%, it's not a terribly expensive stock. It's not too late to get in, if you think that Windows 7 will be a grand success. Microsoft hasn't been growing for a year. Add revenue growth to this formula, and the stock takes off. Early returns are in and Windows 7 appears to be selling well. Microsoft's recently quarterly results, which included sales of Windows 7 to OEMs, were strong. Computerworld reports a 40% bump in OS share. An unscientific poll from CNET says Windows 7 upgrades are going smoothly. Early success with Windows 7 could generate additional upgrades, including big corporate upgrades. Given that many large companies skipped Vista altogether, you could see� a huge wave of Windows 7 upgrades. And in 2010, Microsoft will also be upgrading its Office Suite. The chart below shows what happened after Vista was issued. And Vista bombed. Imagine what could happen if Windows 7 is a success. [caption id="" align="alignnone" width="682" caption="Vista was not used by the bulk of Microsoft's customers. "][/caption] Additionally, if you look at recent Windows sales,� they were down 39% year-over-year from Q1 Fiscal 2009to Q1 Fiscal 2010 Q1 (Microsoft's fiscal year runs from October-July). Part of this was the bad economy. The other part was a bad operating system. In other words, everything has been a huge disappointment. All Windows 7 has to to do is be reasonably successful to reverse this disappointment. If Windows sales can go back to fiscal 2009 levels -- or maybe even a bit higher -- that is a $2B bump in annual revenue. Now let's look at Microsoft's numbers over the past three years:

PERIOD ENDING	30-Jun-09	30-Jun-08	30-Jun-07
Total Revenue	58,437,000	60,420,000	51,122,000

Net Income	14,569,000	17,681,000	14,065,000
Preferred Stock And Other Adjustments	-	-	-

Net Income Applicable To Common Shares	$14,569,000	$17,681,000	$14,065,000

Source: Capital IQ Profits fell about $2B from 2008 to 2009. If Microsoft can get revenues back to the $60B mark, you could argue that with cost-cutting measures, they could beat 2008 profit levels, when they earned close to $2 per share.� Analyst estimates have been rising lately and now the consensus if for $2.05 EPS in 2010. If you give Microsoft a premium P/E of 20 -- a premium it has traditionally had and deserves because of its strong profitability and cash position -- that gives you a stock price of $41. There is plenty of upside for Microsoft here. Perhaps I am a leading indicator. I bought a new PC over the weekend, and I took advantage of the 50% deal on additional Windows 7 upgrades to retrofit a machine that was still running Windows XP. I think this is exactly the kind of thing that Microsoft is counting on. While I was at it, I also noticed that I needed a new copy of Office and Outlook. So, I went into the store thinking I was only spending a few hundreds bucks. I left with a bill of $1,000 -- most of it going to Microsoft. The more I think about it, the more I think this could be the trend. Disclosure: Long MSFT

Paul Tudor Jones Likes More Growth, Gold, and Money

Thu, 29 Oct 2009 19:01:52 GMT

The amazing thing about the Internet in this day and age is that you can find just about any document, especially really valuable ones.� Take for example, the recent letter to investors from Paul Tudor Jones, the legendary hedge-fund managers who manages $17B, and as far as I know, has been outperforming the market for the last 30 years or so. 10 years ago, you would not have such direct access to such a great man's thoughts. This is an outstanding resource from a leading investor. I haven't had the time to read the entire thing. Here's a neat fact: The Tudor BVI Global Portfolio L.P. has a YTD P/L of $1B. Nice work if you can get it. So what does Paul Tudor Jones like in the next year or so? He's surprisingly bullish on many things, with a focus on gold and commodities. We like this, only because it dovetails with our own thinking. And I like it when my analysis is confirmed by a global hedge-fund genius. Jones says a "wall of liquidity" unleashed by governments around the world will buoy many assets. "The forceful policy repsonse to avert depression tail risks posed by the financial crisis has likely unleased a wave of liquidity which is probably greater than that of the 2001-2003." Yes, that's right. As you recall, most people did not see the 2003-2007 bull market coming. They also did not see the housing bubble rising. That's because such a liquidity storm created by the federal government and 0% rates made things almost uncontrollable, and had unintended consequences. The current "wave of liquidity" we are now experienced is even stronger. So we can wait for even more interesting, uncontrollable, unintended consequences. Tudor Jones thinks this wave of liquidity will travel through the world economy, fueling growth through the next year. "Through 10Q2, global growth will be strong, driven by a monetary and fiscal impulse, by a reduction of inventory de-stocking rates, and by a weak dollar," he writes. In addition to liking stocks, and particularly, commodities and materials stocks, Paul Tudor Jones seems to think that will mean a lot higher prices for commodities and� gold, which despite its four-digit handle is trading at a low valuation relative to money supply figures as well as a share of global monetary reserved, which are all neatly analyzed and summarized in Jones letter here, beginning on Page 14. For example, an index of the total market capitalization of gold to M2 money supply is running at about 150 or so. The high in the 1970s of this ratio was close to 800. Similarly, Gold is relatively cheap when compared with its historical relationships with the S&P and Crude Oil, says Jones. "... we are still aways away from the highs seen 25 years ago," says Jones. "Depending on the inflation metric uses, gold's inflation-adjusted peak is between $1,600-$2,400 per ounce. Tudor Jones says his hedge fund shop runs a proprietary model of gold that shows it "undervalued by 20% over the next 12-24 months."

Illumina Post-Mortem: Ah-hah, Something Was Up!

Thu, 29 Oct 2009 00:44:50 GMT

Here at the Rayno Report we will never mince words when we�are wrong. But when we're right, we're going to celebrate like Dennis Rodman in a room full of Girls Gone Wild. Turns out our hunch on Illumina, as posted yesterday morning, couldn't have been more right! Illumina missed the quarter badly and the stocked was clocked for 20% today, dropping $8.29 to $33.37. For those of you know don't know, Illumina is a biotech stalwart that is currently the market leader in super-fast human genotyping technology, Disclosure: As I said yesterday, I was short. Well, today I covered. And currently, I'm drinking a massive cocktail. Below is a transcript of the Conference Call that was passed on by a friend. I cannot attest to its accuracy. I only caught pieces of it, but basically it reaffirmed what I've been hearing, which is that the genotyping market has softened up, at the same time that it may shortly become more competitive. I have also heard through certain channels that with genotyping pricing becoming more aggressive, it's also become harder to sell the follow-up materials and services, whereas that used to be a high-margin business for companies like Illumina. Keep in mind that once a gene-sequencing company sells the sequencing equipment, it owns the franchise to go back and sell the materials to the entity doing the genotyping. In the future, as this market becomes standardized, it's conceivable that there will be third-party "white label" genotyping supplies. My lord, is genotyping becoming commoditized like the late-1990s Ethernet market? Will you soon be able to buy a personal genotyping machine at Best Buy? It's a question that�might be answered in 2010 as a flood of new technology hits the market! See the transcript below but basically Illumina CEO Jay Flatley summed it up by saying: "Q3 was a disappointing quarter for Illumina." ------------------ CC TRANSCRIPT: THIS TRANSCRIPT HAS NOT BEEN AUDITED, EDITED, OR VETTED FOR ACCURACY. Jay T. Flatley Good afternoon everyone. And thank you for joining us today. Q3 was a disappointing quarter for Illumina. The three key factors contributing to our revenue mix. First, the concerns that I discussed last quarter regarding stimulus related delays were realized. Second, we saw a continued decline in our whole genome and genotyping market. And lastly, we had rear operation this year occurred late in the quarter.

Cheap Guinness, Expensive Gas

Wed, 28 Oct 2009 13:29:54 GMT

This is the kind of deflation I've been looking for: Irish barman Hugh McGee is cutting the price of pints of Guinness by 20 percent across his bars and hotels in Ireland. As many of you know, there is a raging inflation/deflation debate. Personally I won't complain if it results in lower beer prices. This news item led me to do a quick scan of other prices of basic things we need, to see what's really going on: * Homes -- FLAT: After years of stomach-turning drops, housing has stabilized. Temporarily? *Coffee -- UP: There is a bull market in coffee prices. I guess depression breeds the need for caffeine. * Milk -- DOWN: Milk prices have collapsed, providing challenges for dairy farmers. I guess the upside comes in the form of ice cream. * Gasoline -- UP: This must be the most perplexing one to the deflationists. If we are in a deflationary environment, why has the price of gas doubled in less than a year? The bottom line is that you may have beer getting cheaper in Ireland, but it's going to cost more to get there.

Illumina's Earnings Tonight: Rich Expectations

Tue, 27 Oct 2009 15:31:51 GMT

Illumina (ILMN) is a biotech stock we've been watching (and investing in) for quite a while. The company reports tonight. The phenomenal gene sequencing tools company has quickly garnered the bulk of its niche market. We made money, we sold the stock. Nothing against the company, but I've shorted a small amount going into earnings. I find the recent runup in Illumina shares perplexing. Growth has definitely slowed down in the sequencing market, as witnessed by Illumina's competitor Affymetrix's recent earnings. Yet, Illumina is nearing a 52-week high. The stock is now quite expensive. It trades at a PEG ratio of 1.67 and a forward P/E of 34. I believe Illumina has made the bulk of gains on market share, as 2010 is likely to be more competitive in this arena, with a number of startups coming up, and Affymetrix retooling (See http://www.forbes.com/fdc/welcome_mjx.shtml). I took a look at Illumina's earnings estimates, which oddly have been creeping up in the last few months:�Consensus estimates have gone from 1.19 to 1.22 in the last three months. Do the analysts know something we don't? I just don't see it. Even if Illumina comes in with more aggressive guidance for next year -- let's say, $1.25 per share -- that would give the stock a forward multiple of 33 based on today's price of $41, with growth slowing. If, on the other hand, Illumina comes in light on revenues and forward guidance, its rich muliple is ripe for a violent haircut. At this stage of the game, I'd say the risk/reward factor needs to be weighted toward a correction in the stock based on the earnings and guidance not living up to the rich expectations. I am short the stock based on this, for a trade. I still like the company. Disclosure: Short ILMN, long ILMN puts.

Who Knew? Gold’s Outperformed the DJIA since 1971

Fri, 23 Oct 2009 16:47:51 GMT

In investing it pays to be calm, scientific, and objective. Here at the Rayno Report we believe in looking at data. For years I've been perplexed by the mainstream media's skepticism of the gold rally, so I decided to look more closely at the data. There's an interesting twist that I think runs contrary to public perception: Data shows that gold has been outperforming equities for the last 40 years. The bottom line is that gold today is at $1,050. That’s 30X times the gold price of $35 in 1971, when the United States went off the gold standard. That represents a 3,000% gain!! The Dow Jones Industrial Average (DJIA) in 1971 traded around 900. It’s now 10,000. That’s a gain of about 10X, or 1,000%, over the same period of time. Gold has outperformed the DJIA by a factor of 3 since coming off the gold standard. I’ll get into the reasons of why I think that is, but let’s take a closer look at the facts first. For now, ignore the clucking of the TV commentators who fear gold is a “dead asset” that pays no interest. Not even close.�The data shows that in the post-gold-standard world, it's become a�real store of value that’s in a secular bull market. For whatever reason, the mainstream media , the government, the investment banks, and even many Americans appear to have a hard time accepting this. Let’s drive home the point. Let’s say the day the U.S.went off the gold standard, in 1971, you invested $100,000 in gold and $100,000 in the DJIA. The gold portfolio today would be worth about�$3 million. The� portfolio of DJIA-indexed stocks would only be worth $1 million. How did this happen? Let’s run through a bit of history and I’ll try to explain why it’s not that strange at all, and why we may be headed back to an International gold standard. From 1880-1935, the United States was locked on to the gold standard at a price of $21/ounce. Remember that? Okay, probably not. Those were the days of monetary stability, fiscal discipline, and sanity. Because the U.S. currency was backed by gold, it meant that the government could not randomly print money when it felt like it. It needed to acquire more gold before it printed money. If it printed more money, it had to revalue the price of gold versus the dollar, as Franklin Delano Roosevelt (FDR) later�did. The gold standard is inconvenient for the government, which loves to print money because it means that politicians can promise the world and spend more. Imagine having a money-printing machine in your basement, wouldn’t that make things a lot easier? That’s life without the gold standard. To make things more convenient, the FDR administration, under Executive Order 6102, confiscated gold by making it illegal to own in 1933. True story. Amazing thing, isn’t it? Well, it got worse. After buying gold from the public at $21 in 1933, the government swiftly revalued gold against the U.S. Currency at $35 -- 40% higher. Neat trick eh? Force folks to sell you something and then immediately mark the books for a 40% gain. Good work, if you can get it. In essence, the U.S. Government stole gold from the public. What happened after that? Well, the “new gold standard” of $35 stuck for many, many years. Coincidentally or not, this was accompanied by America’s greatest years of prosperity, from post WWII through the 1960s. Then, the Vietnam War and the awful economy of the 1970s changed things, running up huge government deficits. Does this sound familiar? As I mentioned, having a gold standard causes real problems when you are in a fiscal mess. It means you cannot print money to alleviate debts, because a gold standard means that your currency "anchored" to gold. It installs monetary discipline, which politicians absolutely despise. So, in 1971 Nixon, causing shock and awe around the world, cancelled the gold standard, essentially ending the Bretton Woods system of global currency standards that had existed since 1944. Oddly, market prices prior to the end of the gold standard had been gradually creeping up prior to the “Nixon Shock,” almost as if people “knew” what was going to happen. Since 1971, gold has been allowed to float by “market prices,” and without a gold standard has essentially allowed an entire new economic era of fiat money, famously championed by former Federal Reserve Chairman Alan Greenspan who called gold a “barbaric relic.” What’s interesting is that the barbaric relic is now having its day. It’s almost as if the gold market is flipping Alan Greenspan the bird. Since the elimination of the gold standard, it has surged massively. After a huge initial spike in the 1980s due to the inflation scare, Federal Chairman Paul Volcker brought monetary discipline back into the fold and gold collapsed back into a range of $300-$500 per ounce during the dot-com bubble, eventually bottoming, interestingly�enough, at the peak of the techology bubble. But even with these volatile spikes and collapses (make no mistake about it, short-term gold moves can be violent), the long-term trend has been a steady march up. Even when the gold price hit its bear-market low in 2000 at $260 per ounce – when tech stocks were the rage and gold was at its nadir in the public’s investing mind – it was was still 7X higher than it was on the gold standard. This make sense. Inflation was low. The tech boom was increasing productivity and the world thought we’d entered some sort of utopian “new paradigm.” Sentiment about gold was at a �low. Gold has, in fact, always served its purpose as a store of value in the face of fiat money. Yes, there was a decade in which gold did nothing – the 1990s. That’s called a bear market. Just as equities have done nothing for the last ten years. But if you look at a longer series of data – the last 40 years – it’s starting to look like gold has a better track record. With the aforementioned 3,000% gain since thend of the the gold standard in 1971, you have an immense store of value. To repeat: In that period, gold has actually outperformed equities, as measured by the DJIA, by a factor of three! Is this really so surprising? I think it makes perfect sense. Gold’s “real market” performance – in the post gold standard regime -- shows that in a fiat money system, the government will print money irresponsibly, and gold will serve as protection against this. Within that 3,000% gain a lot of inflation is embedded. (The dollar has declined approximately 90% in value since the end of the gold standard). Remember how much a Coke was in 1979? It's interesting that since 1971, gold has been a better inflation hedge than equities. Now, I still believe in equities. Investing in great companies is a good idea. But I think the track record of fiat money and gold shows that a diversified portfolio must include gold. The data shows that gold is an essential asset class for most investors because of its power to preserve value in the face of currency debasement. It’s your insurance against irresponsible government fiscal policy. The government prints money, and gold goes up. In the days of a non-gold standard, that’s almost guaranteed.

What's Behind the Biotech Selloff?

Wed, 21 Oct 2009 16:13:33 GMT

Our partners at Raygent Associates (www.raygent.com) have pointed out that Biotech has been getting creamed in the last two sessions: Yesterday, Biotech stocks were in a broad retreat for reasons that are not yet apparent. The Nasdaq and S&P were only down a modest 0.6%, but large cap biotechs that were hard hit include Amgen (AMGN), Biogen (BIIB),and Vertex (VRTX) as well as the major ETF’s. The Raygent Broad Biotech index of 35 mid cap biotechs was down 3.3% with some stocks down 4-5%. With the exception of a few tiny gains every stock in the index was in the red. The Rayno Life Science portfolio was down 3% and is now only up 9% YTD after being up 15%+. News can account for drop on specific stocks like AMGN which was buffeted by an FDA request for more information on its anticipated blockbuster denosumab. Amgen reports earnings on Wednesday. Large cap pharma stocks have been in a rally mode lately and were stable today with ABT,GSK and PFE down less than 1%. One question I have: How big a factor is the Galleon Group in the Biotech slaughter? Although Galleon is only a marginal biotech player, they do have some large holdings. The hedge fund, whose founder Raj Rajaratnam has been charged with insider trading, has announced that it will be winding down its funds, which of course could bring further liquidation of its larger holdings. As of the most recent available filing data -- June 30 -- Galleon held large positions in these biotech stocks: OSIP, BIIB, CEPH, GILD, ALXN, VRTX, ACOR, ILMN, QDEL, DNDN, BMRN, ISPH.

Life Sciences Market Update for Q3 2009

Thu, 15 Oct 2009 17:55:35 GMT

A summer Biotech rally was sparked by deals. Life sciences stocks kept pace with market sectors that offer comparable risk and performance such as small-cap growth, science and technology, and midcap growth. The broadly diversified biotech ETF -- IBB -- was up 16%, moving from 70 to 81 in the three-month period. About 50% of the IBB holdings are large cap companies such as Amgen (AMGN), Celgene (CELG), Genzyme (GENZ), Gilead (GILD) and Teva (TEVA). The IBB was flat for the year as of July 1, so all the gains came in Q3. The Fidelity Select Biotech Fund was up 9.4% YTD and underperformed due to overweighting in large caps such as Cephalon (CEPH), Genzyme (GENZ), and Gilead (GILD). The fund was underweight in tools and diagnostics, where a lot of upside performance was found. The key drivers to biotech performance have not changed over the past few years, but M&A activity has come to the forefront as several acquisitions have sparked the sector: * Abbott announced a play to buy Solvay for $6.6B. * Bristol Myers completed the acquisition of Medarex for $2.4B * JNJ bought Cougar for $1B, 18% of Crucell for $441M, and 18% of Elan for $885M. * Sanofi bought Merial for $4B The vaccine area was almost entirely abandoned by large pharmaceutical companies in the 1980s, but now that area accounts for many of the deals. New immunotherapy technologies and a greater market need for disease prevention against new infectious agents such as swine flu has brought vaccines to the forefront. Building a long-term product pipeline has always been an arduous process for large-cap pharma companies, as it requires a development process of 7-10 years with costs in the range of $1B per drug and a high risk of failure. The acquisition route has become more attractive because of good technology value. The deal-making is helped by the fact that there is a shortage of capital for smaller biotech companies in the current post-meltdown market environment. Over the past few weeks, several analysts have rushed to put out their biotech acquisition lists spurring rallies across the screen. Another factor mentioned is that biotech products may be less affected by healthcare reform than more mature drugs. A Portfolio that we track -- The Rayno Life Science portfolio -- was up 13% YTD and higher for Q3.With higher weighting of selected stocks as we recommended, it could be up as high as 15%. The big winners in the portfolio with Sep 30 prices and in order of stock appreciation YTD: Targacept (TRGT): up 700% at 21.3 Abaxis (ABAX) up 65% at 26.75 Inverness (IMA) up 58% at 38.75 Illumina (ILMN) up 55% at 42.50 United Therapeutics (UTHR) up 45.5% at 49 Among the losers in the portfolio were Array BioPharma (ARRY), Celera (CRA), Cephalon, Cubist (CBST), Gilead (GILD), and Viropharma (VPHM). Cubist, Gilead, and Viropharma are now recovering. The results from life science stock performance YTD illustrate the following principles of biotech portfolio management: 1) It is important to overweight large caps to protect losses due to events and volatility. 2) Tools and Diagnostics companies provide good returns and excellent diversification without binary clinical trial risk . Some of these include Abaxis (ABAX), Illumina (ILMN), and Inverness (IMA). Those looking for speculative plays on beaten down tools stocks should look at taking profits in Illumina (ILMN) and buying Helicos (HLCS) and Sequenom (SQNM). 3.) Stock picking can be difficult with the smaller caps due to clinical trial risk so if you are going to invest in small caps, a larger pool of stocks is necessary. If the small-cap growth market holds up and we continue to get good news on clinical trials, the M&A backdrop should support higher biotechnology valuations. Contributing Analyst Rod Raynovich is the Principal of Raygent Associates, a biotech research and business development firm. Raygent Associates may be long or short stocks in the Rayno Life Science portfolio from time to time and as of this writing we are long CBST, GILD and VPHM.

Market Recap 10.13.2009: Buyout Central

Tue, 13 Oct 2009 20:09:57 GMT

Today was a day of flopping and chopping in the equities markets. Bonds were strong again, boosted by another Treasury buyback. In the dark underbelly of currencies and precious metals, there were some strange undercurrents: The British Pound made a new low overnight, but then bounced hard. Gold made a new high in almost all currencies. The U.S. Dollar was flirting with new lows but was saved by two vicious rallies throughout the day. Coincidence? I don't think so. ZeroHedge, as usual, has some speculation on that. Big deals headlined the day as Cisco Systems bought Starent Networks, paying a 20% premium to the market. �Cisco is gobbling things up, as it just tendered $2B for Tandberg just two weeks ago. What's it all mean? I think it means that Cisco is bullish on video and mobile network data. And it has a lot of cash. So, like any good American, John Chambers is spending his piggy bank. That got me thining... hmm... who might else be a buyback candidate? I ran a quick screen (where and how -- sorry, it's a secret!). The screen says, simply, who has positive cash flow and a juicy Enterprise value/EBIDTA ratio below 8. For those of you who aren't beancounters -- that means -- CHEAP! Here are a few interesting plays for you Carl Icahn wannabes out there: * Raytheon (RTN) Enterpise/EBITDA� 5.61 *�Cardinal Health�(CAH) Enterpise/EBITDA� 4.5 * Terra Industries (TRA) Enterpise/EBITDA� 4.5 * Willbros Group (WG) Enterpise/EBITDA� 2.72 * Freightcar America (RAIL) Enterpise/EBITDA� 3.67 There are more, but these are the ones that I found more interesting upon first inspection. As usual, do your homework. I have not bought any of these lately but I am looking at them.

Check Out Our Upcoming Research

Mon, 12 Oct 2009 13:41:28 GMT

Welcome to The Rayno Report, your Web source for next-generation investment intelligence. Here we’ll present our take on what’s “happening” in exciting next-generation technology markets, including the Internet, biotech, and energy. We also plan to give you ideas on how to make money with these ideas. The Rayno Report will go behind the scenes to talk to people in the know about specific markets. Using our decades of experience in battling PR “spin,” we’ll also help screen out the B.S. inherent in any investment pitch and investigate companies on a detailed level. Because we take an investor’s perspective on markets, we’ll take a careful look at financial considerations and try to be objective and thorough in our analysis. In the next two months or so, I will be gathering and editing research on specific topics. In markets which are not my specialty, I will be working with independent analysts to bring you exciting and groundbreaking work. Most of our work will be published on our FREE Web site, Raynoreport.com. However, we will periodically be publishing detailed research as a PREMIUM REPORT, which will cost you a pretty penny (and be worth every cent). Stay tuned for report pricing and subscription information. In addition to supplying daily market updates and links to breaking news, I have planned a series of “Mini-Reports” which will be available for free on our Web site. Here’s what we have on the docket so far: October 14: Q1 Life Sciences Trading Update (via Raygent Associates) October 29: Five Undervalued Technology Stocks November 5: What’s Next for Solar Technology? Thanks for visiting and we hope to see your clicks on a regular basis. If you have any questions, comments, or critiques, feel free to send them to me: R. Scott Raynovich Editor and Publisher The Rayno Report scott@rayno.com (406) 582-5886

World Markets: Signs of Chaos

Fri, 09 Oct 2009 14:02:31 GMT

You would think with stocks up and markets rallying weekly it would instill confidence and bullishness. Not for me. I seen global monetary chaos. The �U.S. Dollar index collapsed to new contract lows for the year, fueling a continuing rally in oil,�commodities,�and gold, which�has been the theme�for a while now. Much of it was triggered by a report in the Independent about a�dark conspiracy theory in which officials on the Arabian peninsula are plotting the end to world dollar hegemoney (pun intended). It seems the dollar has been driving most of the action just about everywhere -- when the dollar falls, a wide array of commodity and equities rally. And why not? Money is free. UUP: U.S. Dollar ETF The dollar is weak because U.S. Policy is to print money, buy back debt, and maintain interest raties of zero percent. All of this is dollar negative, because it puts more greenback confetti out into the world.� It has also boosted the equity markets.�While it's true you don't want to "Fight the Fed" -- and trust me, I have no interest in shorting stocks -- the money printing strategy is dangerous and has its perils. If the dollar collapse acclerate, it risks setting off a panic among the many nations of the world which hold trillions in U.S. Dollars as a reserve currecy and start dumping dollars on the market. The world has never seen anything like that, and we really don't want to know what it looks like. Another issue is technnical. The�US Dollar made new lows this week�but the S&P Index has not been able to take out the high of 1072 which it made about a month ago. In other words, the sinking dollar appears to be losing some of its power to boost markets. This is a "divergence" bears watching over the next few days. If the S&P fails to take out it's high next week, to me that is a big red flag that the dollar-weakness jig is up. S&P 500 Index The�ferocious rallies and energy stocks and mining stocks leads me to belive we're nearing time for a pullback. Same with gold. The bludgeoning taken by the dollar means it's increasingly like that bankers in Asia and Europe will soon intervene to prop up the dollar. Now, any such actions in the end will be met with failure, but that's a trade for a later time. In the meantime, I think it's possible we'll see Japan try to plug holes in the dollar dam�in the next few weeks. In my managed accounts, I lightened up on nearly everything, including energy shares and mining shares. I also sold nearly all of my gold and silver futures (I still own the hard stuff). My experience has been that the metals futures often pull back at some point in October after the beginning of the traditional fall rally, and I am hoping to be able to buy them back at better prices. My target buy price on gold is $1030 and my buy target on silver is $15. I believe that any pullbacks will be brief, so it's going to take some surgical execution to get my metals back at a lower price.

Clearstation Scan Du Jour: Strong Tech Stocks

Wed, 07 Oct 2009 00:13:05 GMT

Symbol	Last	Change	%Change	Volume	13-week vs Ind.%	RS Rating (1)	Vol % Change	52-week High	52-week Low	% Off High
EBIX	54.60	1.58	2.98%	217,481	43.61%	91	23.20%	56.71	17.12	3.72%	Trade
NTCT	14.00	0.74	5.58%	569,431	30.42%	87	126.08%	14.99	5.69	6.60%	Trade
RDWR	11.39	0.32	2.85%	226,337	23.20%	84	116.26%	33.75	4.75	66.27%	Trade
BCSI	22.93	0.71	3.20%	461,239	17.29%	80	30.17%	44.82	6.96	48.84%	Trade
RADS	10.66	0.07	0.66%	177,637	4.50%	66	35.02%	11.51	2.19	7.38%	Trade
SYKE	22.71	2.56	12.70%	1,695,167	3.33%	64	440.51%	22.17	12.34	0.00%	Trade
CVG	10.52	0.14	1.35%	1,352,822	1.24%	59	-49.67%	14.93	4.02	29.54%	Trade
FFIV	40.00	0.75	1.91%	1,273,454	-0.41%	56	8.94%	43.06	17.75	7.11%	Trade
DRCO	12.41	0.35	2.90%	32,861	-1.28%	54	-42.29%	14.32	5.00	13.34%	Trade
JKHY	23.63	0.38	1.63%	665,112	-1.70%	53	-7.28%	24.66	14.29	4.18%	Trade
NTAP	19.55	0.72	3.82%	9,642,301	-14.46%	32	151.00%	26.78	10.39	27.00%	Trade
EZCH	12.70	0.48	3.97%	92,388	-22.38%	14	259.19%	18.12	5.63	29.91%	Trade
DASTY	39.60	0.00	0.00%	2,478	-21.34%	13	-46.66%	67.75	31.00	41.55%	Trade
ASIA	13.43	0.07	0.52%	431,702	4.84%	9	54.56%	14.93	4.22	10.05%	Trade
BBOX	26.05	1.15	4.62%	155,462	-30.49%	9	42.96%	37.67	16.24	30.85%	Trade
CERN	36.72	0.43	1.18%	1,323,700	17.58%	4	-11.22%	50.00	30.37	26.56%	Trade

Bloomberg Commodity Futures

Wed, 07 Oct 2009 00:10:55 GMT

Commodity Futures

INDEX NAME	VALUE	CHANGE	OPEN	HIGH	LOW	TIME
�UBS BLOOMBERG CMCI	1166.87	21.17	1156.76	1180.23	1156.76	10/06
�S&P GSCI	463.06	5.68	462.24	469.34	460.95	10/06
�RJ/CRB Commodity	259.47	3.24	256.19	260.44	256.19	10/06
�Rogers Intl	2942.44	48.34	2915.07	2978.08	2908.45	14:29

�

Energy

�	PRICE	CHANGE	%CHANGE	TIME
� BRENT CRUDE FUTR (USD/bbl.)	68.560	0.520	0.76	10/06
� GAS OIL FUT (ICE) (USD/MT)	576.500	24.500	4.44	10/06
� GASOLINE RBOB FUT (USd/gal.)	178.800	1.530	0.86	19:31
� HEATING OIL FUTR (USd/gal.)	183.030	1.610	0.89	19:22
� NATURAL GAS FUTR (USD/MMBtu)	4.894	0.014	0.29	19:36
� WTI CRUDE FUTURE (USD/bbl.)	71.440	0.560	0.79	19:43

�

Agriculture

�	PRICE	CHANGE	%CHANGE	TIME
� CANOLA FUTR (WCE) (CAD/MT)	373.500	2.300	0.62	10/06
� COCOA FUTURE (USD/MT)	3211.000	-29.000	-0.90	10/06
� COCOA FUTURE - LI (GBP/MT)	2120.000	-13.000	-0.61	10/06
� COFFEE 'C' FUTURE (USd/lb.)	133.600	4.150	3.21	10/06
� CORN FUTURE (USd/bu.)	359.500	1.250	0.35	19:44
� COTTON NO.2 FUTR (USd/lb.)	62.980	1.390	2.26	10/06
� FCOJ-A FUTURE (USd/lb.)	93.950	0.000	0.00	10/06
� LUMBER FUTURE ($/1,000 board ft.)	171.800	0.500	0.29	18:58
� OAT FUTURE (USd/bu.)	227.250	-1.000	-0.44	19:41
� ROUGH RICE (CBOT) (USD/cwt)	13.150	0.000	0.00	19:00
� SOYBEAN FUTURE (USd/bu.)	911.250	1.250	0.14	19:44
� SOYBEAN MEAL FUTR (USD/T.)	278.400	0.900	0.32	19:44
� SOYBEAN OIL FUTR (USd/lb.)	34.340	0.080	0.23	19:44
� SUGAR #11 (WORLD) (USd/lb.)	24.000	-0.190	-0.79	10/06
� WHEAT FUTURE(CBT) (USd/bu.)	461.500	1.250	0.27	19:43
� WHEAT FUTURE(KCB) (USd/bu.)	476.000	0.500	0.11	19:43
� WOOL FUTURE (SFE) (cents/kg)	912.000	-8.000	-0.87	10/06

�

Industrial Metals

�	PRICE	CHANGE	%CHANGE	TIME
� ALUMINUM FUTURE (USd/lb.)	NaN	NaN	NaN	�
� COPPER FUTURE (USd/lb.)	277.500	-0.950	-0.34	19:39

�

Precious Metals

�	PRICE	CHANGE	%CHANGE	TIME
� GOLD 100 OZ FUTR (USD/t oz.)	1041.900	2.200	0.21	19:44
� SILVER FUTURE (USD/t oz.)	17.350	0.055	0.32	19:43

�

Livestock

�	PRICE	CHANGE	%CHANGE	TIME
� CATTLE FEEDER FUT (USd/lb.)	93.000	0.250	0.27	19:25
� LEAN HOGS FUTURE (USd/lb.)	49.000	-0.125	-0.25	19:41
� LIVE CATTLE FUTR (USd/lb.)	83.625	0.075	0.09	19:39

�

Bloomberg Market Update

Wed, 07 Oct 2009 00:08:45 GMT

North/Latin America

INDEX	VALUE	CHANGE	%CHANGE	TIME
DOW JONES INDUS. AVG	9,731.25	131.50	1.37%	16:30
S&P 500 INDEX	1,054.72	14.26	1.37%	10/06
NASDAQ COMPOSITE INDEX	2,103.57	35.42	1.71%	10/06
S&P/TSX COMPOSITE INDEX	11,247.97	145.35	1.31%	10/06
MEXICO BOLSA INDEX	29,690.48	476.08	1.63%	16:06
BRAZIL BOVESPA STOCK IDX	62,670.59	301.29	0.48%	10/06

http://www.bloomberg.com/markets/stocks/movers_index_spx.html