M&A Monday – Goldman’s Golden Goose
by phil - September 27th, 2010 7:18 am
Hope springs eternal at Goldman Sachs.
This morning our favorite Banksters goosed the EU markets by upping targets on international mining operators Kazakhmys, Lonmin and BHP and that got the European markets off to a flying start out of the gate, despite the fact that UBS had just DOWNgraded the same sector on Friday. UBS said on Friday that the sector is facing difficult times concerning potential growth with government rulings on mineral leases and the proposed supertax on mining profits in Australia set to hinder metal-based stocks.
We also have a lot of M&A activity, also courtesy of GS, who are leading the resurgence this year with 225 deals to date worth $401.6Bn, accounting for about 20% of all activity going through Goldman's sticky fingers. In a sign of the times, however, GS only generated $961M in revenues as an M&A advisor as they cut a lot of discounts in order to land the top spot in dealmaking. Although outdealt by GS, MS, Rothchild, JPM and DB all made more in fees than the Uncle Lloyd show.
In a sign of the end of times, GS's London Headquarters has been taken over by lenders after the owner fell into receivership. GS's landlord, Antedon, is an offshore real estate firm that bought the building for $500M at the top of the market in 2007 and GS has locked up the building through 2026 at what seems to be not enough money to keep Antedon liquid – it would be very interesting to trace the web of deals that led to this massive default.
Meanwhile, the consortium of Irish investors that own GS's other London building are also bailing out, this action is coinciding with what Ireland's Independent says is a campaign by Wall Street Hedge Funds to short sell Irish Government Bonds. US hedge funds Groveland Capital and Corrientes Advisors are thought to have taken major positions against Irish debt. Giant €60bn asset-manager Pictet also revealed that it had earlier bet against Irish government bonds. JP Morgan is also thought to have taken a bearish position on Irish debt. The International Monetary Fund estimated that up to €3bn of Ireland's debt was being targeted by speculators through the uses of derivatives.
So,…
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October Overview – When the Goblins Come Home to Roost
by phil - November 1st, 2009 8:15 am
What a crazy month we had!
The Dow began the month of October at 9,712 and finished the month of October at EXACTLY 9,712. Now I don't want to say the market is manipulated but… No, I've got nothing, there are no buts – the market is totally manipulated! Either that or you believe that the random outcome of tens of millions of traders around the globe trading hundreds of billions of shares of stock would just so happen to begin and end the month within .50 after going as low as 9,378.77 (on the 5th) and as high as 10,157.94 (on the 21st). So that is literally a 1 out of the 779-point swing coincidence to hit that 9,712 nail on the head.
At PSW we couldn't be happier about this frankly. As I often say to members: We don't care IF the game is rigged, as long as we can figure out HOW the game is rigged so we can play along. We were bearish in our September 27th Wrap-Up when I predicted that Earnings season would bring about a "Return to Fundamentals." We targeted retrace moves of Dow 9,512, S&P 1,020, Nasdaq 2,030, NYSE 9,496 and Russell 556 – all of which we hit the following Friday.
That week I highlighted my fundamental market concerns and Monday (9/28) my topic was "6 Unemployed People Per Available Job," Tuesday I said "Consumer Confidence is Key," Wednesday we caught the turn perfectly as I predicted "End of Quarter, End of Pump," and Thursday, October 1st was the day that "REIT's Turned Rotten" – which was something we had been playing for during the September rally so we were thrilled with what is NOW the 2nd worst down day of the month. That was the day GS decided to agree with me that REITs were over-valued and gave us a signal that the Gang of 12 were no longer all on the same page. Friday, the 2nd, we were back to looking at the Jobs numbers when I asked "Is Anybody Working for the Weekend."
We could not have been more pleased with what was the worst week in the market…
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Weekend Reading – Looking for Green Shoots
by phil - October 11th, 2009 8:21 am
I've been beefing up our bullish plays on the Watch List.
If we're going to get more bullish I thought it would be a good time to look for some bullish premises so we don't feel totally silly paying 20-year high p/e's for the S&P 500. Obviously, our main hope is that the stocks we buy will grow into their earnings so the next month's worth of reports will be key. The bar for corporate earnings is still set at very easy to beat levels yet, like this limbo-playing child, when they announce their beats of very low expectations we're going to get all excited and tell them how great they are doing.
The problem is, these are not kids who we hope may grow up one day to be President or CEOs of major companies. these ARE CEOs of major companies and they are being paid top salaries for top performance and we, the stock purchasing public, are paying top dollar for what should be SPECTACULAR performance, not beating 75% off last year's earnings by a penny!
When I am being asked to buy IBM back at it's all-time high or AMZN or BIDU or AM, PALM, NFLX, PCLN, URBN, UHS, CERN, CREE, GMCR, CY, SWM, TRLG, BKE, etc – then their performance better look like this:
Nothing against those particular companies, any individual company can be exceptional and beat the market, but - Are the companies we're buying really doing exceptional things or are have we just developed such ridiculously low expectations that we have been psychologically conditioned (and Wall Street firms employ armies of behavioral psychologists for a reason) to treat these stocks and the CEOs who run them like our children? If your child was the child in the above picture and I asked you for $20 to see her limbo show – you might pay it. If it's not your child though, would you even consider making an afternoon of it? No, of course not, for good money you expect to see the cool fire guy at the top of his game and that is what you should expect from companies trading at or near all-time highs – NO LESS!
I love President Obama but he was just given a Nobel Peace Prize simply for not being President Bush – low expectations! On Sept 17th, PALM announced…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site