What I'm Reading
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Sunday, July 30. 2006
I'm going to be brief about this week. So, the markets were funny this week. On Friday, we got the GDP report from the U.S. which gauges how fast the economy is growing, and the numbers were low. The headline was, U.S. economy slowing, markets rally. To translate, it means, the U.S. economy is slowing, therefore the markets went up 100 points. Economy is doing bad and the stock markets react positively to this? What on earth? This seems extremely counterintuitive, but basically, with a slowing economy, people are thinking that the federal reserve won't raise interest rates again, so they see this as a good situation.
If I had to give a subtitle for this week's market, I'd call it, "Earning Reports are Scary." We had some very good reports, and some very bad ones. One of the worst ones was from Rackable Systems (RACK). They supply servers to companies like Yahoo and Google. After they reported a bleak outlook, their stock dropped 40% in value in a few hours. My goodness! Could imagine owning that stock? That's wholesale panick. That is a house of pain.
Anyway, the markets have been improving. The bulls have finally come back for a bit. The defensive stocks are performing really well, and tech has been recovering. The banks have been doing extremely well, I've been watching Royal Bank's stock and it's up almost every day. Apple Computer's stock seems to go up every day too. Oil and natural gas is also making a comeback.
So, here are this week's results. Congratulations to Patrick for making first place. He made a bunch of money selling Apple (bought at $55, sold at $64), and he used that money to buy more shares in AMD which also has been recovering a lot this week. I have to give my hats off to Patrick because he has been using $4,000 to invest, and he's beating a lot of people who borrowed an additional $4,000 to invest. So, some people have double the money that Patrick has, yet he's able to beat them. Furthermore, he's been buying stocks in a fairly tough market. It's been easier betting against stocks, but Patrick has been able to survive this downtrend. That takes discipline.
Myron had been first place for the whole week until Friday. He made his money this week by selling off his bet against AMD, and he made a lot of money off that as well. Good thing you sold it because AMD is making a comeback. However, I think Myron might be a tad too bearish on tech right now, and it might hurt him next week.
The other big mover was my portfolio. I ditched my shares in Palm because it was a money loser, and I felt there were better places to invest my money. My sentiment about Palm hasn't changed though, it is still dirt cheap, and it's at $15/share right now and it's a great buy. I unfortunately picked some up at $18.60.
I switched into Evergreen Solar (ESLR) which is an alternate energy company which makes solar panels. They reported a good number and the stock got absolutely slaughtered for some reason. From what I've been reading, the stock may be manipulated by big hedge funds, so they're messing with the prices. So, I'm going to wait it out and hopefully this stock stabilizes because I think this stock is dirt cheap. My other defensive stock, United Health Group dropped really quick this week as well, and gave up all the gains I had made in it. So, that's why I'm down so much this week, I got hit with a double whammy. In either case, the portfolio I have now is levered towards hurricanes. Hopefully this will generate a nice return over the next month.
What will I be looking for next week? I'm going to be paying close attention to the oil sector because it might be on the verge of moving up quite a bit. In particular, I'm watching Valero Energy (VLO), they're the biggest oil refiner in the U.S. and they report their earnings on Tuesday. We'll see if oil stocks return to their 52 week highs, or maybe they'll go right past them. Most oil stocks peaked at around April. However, oil prices are even higher now than in April. Furthermore, there's more uncertainty in the world now than ever, so we'll see how that translates in the oil stocks. Go Valero! I'm expecting them to completely blow away the estimates.
The other news that comes out next week is the job numbers. It'll tell us how many new jobs were created in the U.S. A low number will reinforce the idea that the economy is slowing, and stocks might move up more. A high number will cause market jitters again and we'll be going down.
Enjoy the rollercoaster ride.
Standard disclaimer, we are not responsible for any gains or losses you may make in the stock market based on this article. This article does not constitute as financial advice, and you should seek a financial advisor for investment advice.
Thursday, July 27. 2006
I've been reading the headlines lately about the Israeli-Hezzbolah war, and one the recent developments was that a UN observation post at the Israel-Lebanon border was hit by an Israeli bomb, and four peacekeepers have died, one of which was a Canadian. Kofi Annan has condemned this action and says that Israel deliberately targeted the outpost.
In either case, CTV has an interesting report from the Canadian soldier who was stationed at UN observation post that was bombed at the Israeli-Hezzbolah border, and this is what he had to say:
What I can tell you is this: we have on a daily basis had numerous occasions where our position has come under direct or indirect fire from both artillery and aerial bombing. The closest artillery has landed within 2 meters of our position and the closest 1000 lb aerial bomb has landed 100 meters from our patrol base. This has not been deliberate targeting, but has rather been due to tactical necessity.
I thank you for the opportunity to provide you with some information from the front lines here in south Lebanon.
Maj Hess-von Kruedener
Read the rest of the article if you find want to find out some of the history of the peacekeepers there. The soldier offers a really good backgrounder of has happened there in the past between Israel and Hezbolah, and what the peacekeepers do there. Anyway, I think a report from a soldier from the frontlines gives a good picture of what's going on, and it cuts through the spin. I think Kofi Annan is wrong to say that Israel deliberately hit a UN outpost. Furthermore, the investigation into this matter isn't even complete yet, so I think Mr. Annan is getting ahead of himself, and he's jumping to conclusions.
When you're doing airstrikes, there's going to be accidental collateral damage. That's just a fact. For example, when NATO was bombing Serbia due to its ethnic cleansing in Kosovo, a bomb hit the Chinese embassy in Serbia. That made all the headlines, but it was accidental.
Wednesday, July 26. 2006
Okay, you might think that Chan has finally gone crazy from sleepness nights writing papers and such because he's blogging about folding shirts. That may be true, but bear with me. Patrick showed me a video of the coolest way to fold a shirt. It's like magic!
This one's dedicated to you Myron since you like to learn how to do household chores from the Internet, especially from the domestic diva, Martha Stewart. As an aside, Martha Stewart's (MSO) stock was up 13.6% today.
Monday, July 24. 2006
It has finally dawned on me that this week is the final week of classes....... ever! That's right, these will be the last lectures that I will ever attend as I conclude the course work portion of my masters degree. Of course, any momentary victory is trumpted by the thesis I still have to write and the ensuing defence. In short, all of the course work that I've done in the last 2 years will pale compare to this.
Anyway, I'm blitzing through a final project and a final term paper. If blog updates seem shallow and irregular as of late, it's because I've got a crap load of work to do.
In either case, I'm pretty excited, yet stressed that this is the last week of classes. We're playing for all the marbles now.
Saturday, July 22. 2006
This week was a fairly exciting week for our competition. People were moving up and down the ranks throughout the week. So why all this volatility? This week, a lot of tech companies announced their second quarter earnings. We had industry heavy-weights like Dell, Apple, IBM, Microsoft, AMD, Intel, EBay, Google, Yahoo, etc. So, tech largely dictated the rankings this week.
AMD, Intel, EBay, Yahoo, Dell all got slaughtered. Meanwhile Google, IBM, Apple blew away the numbers and reported great earnings. The ones that got slaughtered saw more than a 15% drop in share price, while the ones that did well got more than a 10% boost in share price.
The exception was Google though. It's a very strange stock. It completely blew away all expectations as their profits more than doubled, yet the stock did nothing. The reason is because Google doesn't reveal what they're doing in the future, and analysts like to know what's coming. Google's philosophy has always been, you either buy and hold our stock, or you sell it. They don't want people trading their shares in and out. They want people to make investments and think of the long-term. So, with no future guidance, analysts can't project growth, and they don't know what amazing projects are coming. Strategically, it makes a lot of sense for Google not to reveal what they're working on, otherwise their competitors will catch wind of it. Compare that with Yahoo who promised a new online ad system, but this week, they revaled that the system will be delayed for 6 months. This is a case where Yahoo over promised, and under delivered, and they got burned big time. The stock dropped from $32 to $26.
We had one good day this week, where the markets went up 200 points, and that moved Patrick to #1, but the stock rally was shortlived, and the bears won out at the end of the week.
Other things that have been working well this week have been the defensive stocks. Think pop, supermarkets, drug companies, healthcare. These are things that people still need when the economy slows down. Safeway jumped an amazing 10%, while other stocks such as Johnson & Johnson, Coca Cola, Pepsico, Merck, United Health Group, etc all had nice gains this week.
So what will I be looking for next week? The main stock that I will be focusing on will be Boeing (BA) as they report next week. Their primary competitor, Airbus, has been having lots of trouble with their next generation planes. Boeing's stock has been beaten up very severely, and in my case, it doesn't make sense. If Airbus is imploding, that should be good for Boeing, but the market doesn't seem to be taking that into account. To me, that doesn't make any sense. People are worried that a slowing U.S. economy will mean less orders for Boeing. However, most of Boeing's business comes from overseas, so it's unlikely to be affected by the economy at home. Furthermore, Boeing's latest aircrafts are far more fuel efficient than Airbus', and with expensive oil prices, companies are going to want to put orders in Boeing's aircrafts just to save money. A strong Boeing report will bring lots of pin action as well. Companies that supply Boeing with materials will be set to benefit or suffer. Companies that deal with airplane maintenance, aluminum, titanium, avionics, airplane seats, etc will all be affected.
The other thing about next week is that it's pretty much the start of a new quarter for a lot of companies. We have back to school happening, so the market environment is changing. The Dow Jones Industrial this week was near its last bottom in early June. At this point, I think the markets are irrational, and enough is enough, they're reacting like we're going into a depression and stocks will never move back up.
Here are some things that make me believe the markets are irrational and they're panicking. Caterpillar (CAT) reported and they blow away expectations, the stock moves down. Oil refineries and oil drillers like Schlumberger (SLB) reported an amazing number, and the stock goes down. Oil is at record prices and oil stocks go down?!? Enough is enough.
Next week I intend to go bottom feeding and pick up stocks on the cheap. I think the markets are getting close to being oversold, and the bears might have seen their day. Tuesday will be the turning point since a lot of companies will be reporting that day.
Anyway, here are this week's ranks. Congratulations for the ever bearish Myron for winning another week. His cynicsm and skepticism has placed him firmly in the lead. It was quite the battle for first place this week though. Patrick briefly took first place on the +200 point day in the markets.
Continue reading "International Bank of Chan Fund - Week 4"
Thursday, July 20. 2006
Last month there was a blog article by someone in my class who was praising China for its efficiency in government. The rationale behind this argument was that a lot of time and effort is wasted by debating subjects with opposition and such. Furthermore, they argued that the media was an annoyance because it scrutinzed government affairs. Therefore, China is far more efficient because they don't have to put up with these problems that plague Western democracies. This attitude had me fairly concerned because of how little freedom of speech and freedom of press were valued here.
So, I'm going to take this time to bash the communist regime in China. When you have a government that barely recognizes human rights, really bad things happen.
I present to you this article that about the Chinese government harvesting organs from religious prisoners:
[...] a report by two prominent Canadian investigators that claims China has harvested the organs of Falun Gong prisoners.
Former Liberal MP David Kilgour and international human rights lawyer David Matas volunteered for a two-month investigation into the alleged organ harvesting of Chinese prisoners, and on Thursday presented their 45-page long report on the illegal practice.
"The allegations are true ... harvesting is indeed happening," Matas said during the press conference.
The report, which assessed 18 categories of evidence, found that organ harvesting of Falun Gong members began in 2000 and continues to this day in different parts of China.
"This is a form of evil we have yet to see on this planet," Matas said. [...]
Members of Falun Gong, a spiritual movement that is outlawed in China, claim thousands of their imprisoned practitioners have been victims of organ harvesting.
"We can't give you an estimate as to the numbers, but in our report, we will indicate that about 40,000 organ transplants are not explained," Kilgour told Canada AM Thursday.
Kilgour and Matas conclude the majority of the organs came from Falun Gong prisoners, who didn't volunteer their organs.
The report, which includes testimony from relatives of the surgeons, supports these charges.
"The wife of one of the surgeons...said that what happens is he took the cornea and then other surgeons would take the heart, the liver and the kidneys and I think the pancreases as well," Kilgour said.
According to the woman, her husband removed corneas out of approximately 2,000 Falun Gong practitioners all of whom would die as a result.
Websites have even appeared soliciting foreigners who need transplants, promising organs in a week or two. [...]
The report includes several recommendations, including the plea for Ottawa to stop training Chinese doctors in transplant technologies in Canada until there is proof that the practice has stopped.
Whether you're an agnostic, atheist, or a religious person, this qualifies as evil.
Reports like this questions why opposition and freedom of press could be bad. This is what happens when you have a government with absolute control. It's pretty scary to have a government with no morals or respect for human rights. Could you imagine having your organs harvested by the government illegally just because of the religion that you practice?
Anyway, hopefully this article will now be blacklisted by the great firewall of China because it's considered subversive propaganda. If it doesn't happen, then I have failed.
It'd be interesting to see if Canada does indeed stop training Chinese doctors in transplant technology until they prove they're not harvesting organs anymore.
In either case, very disturbing article.
Sunday, July 16. 2006
A better title for this entry will probably be "Bears Mauling The Stock Market." As the title suggests, the market has been fairly crappy this last week. The Dow Jones Industrial index dropped more than 400 points in two days. The Canadian markets faired better as they broke even for the week.
In either case, there are many factors that caused the markets to drop. Oil prices are at record highs because of the conflict in the Middle East. We've got North Korea preparing more missile launches. All of this causes stock prices to drop because of uncertainty. Companies that reported their earnings and blew away the numbers were still down! Nothing seems to make sense any more. Oil prices go up, oil stocks go down???
Anyway, here's this week's ranks:
Continue reading "International Bank of Chan Fund - Week 3"
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--Jim Cramer, Prominent Stock Market Commentater and Advisor
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