Chan's Personal Blog

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.

Rank	Name	Net Worth	Total Return	# Transactions
1	Pirate (Patrick)	$4,053.13	+1.33%	6
2	do da beep (Myron)	$4,015.32	+0.38%	8
3	KumaZatheef	$4,014.96	+0.37%	0
4	dpolley	$4,014.96	+0.37%	0
5	Jordan	$3,763.51	-5.91%	3
6	chan_316 (me)	$3,256.26	-18.59%	7
7	cwing	$2,707.02	-32.32%	11
8	piratecakemcbearsauce (Patrick)	$1,761.43	-55.96%	6

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.

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.

Rank	Name	Net Worth	Total Return	# Transactions
1	do da beep (Myron)	$4,197.54	+4.94%	6
2	KumaZatheef	$4,011.88	+0.30%	0
3	dpolley	$4,011.88	+0.30%	0
4	Pirate (Patrick)	$3,823.07	-4.42%	4
5	Jordan	$3,639.00	-9.03%	3
6	chan_316 (me)	$3,551.77	-11.21%	4
7	cwing	$3,184.63	-20.38%	7
8	piratecakemcbearsauce (Patrick)	$2,429.84	-39.25%	6

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:

Rank	Name	Net Worth	Total Return	# Transactions
1	do da beep (Myron)	$4,095.20	+2.38%	6
2	KumaZatheef	$4,008.80	+0.22%	0
3	dpolley	$4,008.80	+0.22%	0
4	Jordan	$3,834.29	-4.14%	3
5	cwing	$3,624.43	-9.39%	5
6	Pirate (Patrick)	$3,615.23	-9.62%	3
7	chan_316 (me)	$3,584.16	-10.40%	3
8	piratecakemcbearsauce (Patrick)	$2,556.49	-36.09%	4

Here's another report on our stock market challenge game. First half of the week was fairly quiet because of Independence Day in America, so the markets were closed.

The big news is that a lot of people now think that the American economy will slow down in the next 6 months. The job creation numbers came out, and they were lower than expected, so that's one of the indicators. Another indicator was that 3M warned that sales related to flat screen televisions were down, and that they have a lot of inventory now. Flat screen TVs are an interesting indicator for the economy because these are products which are discretionary, ie things that you don't absolutely need. When people spend less on discretionary items, that's a signal that the economy is slowing.

So what does this all mean? Well, that means that the Federal Reserve might pause and not raise interest rates any more because inflation will slow when the economy slows. Ironically, if this is true, the markets will move up a lot because the fear of rising rates will disappear.

On a macroscopic level, tech may be in trouble because a lot of tech items are discretionary. Defensive sectors like food, health care companies, drug companies, telephone companies, etc, may be poised to do better in the event that the economy is slowing.

Jim Cramer has an excellent article on defensive companies to consider in the event of a slowing economy. Remember, this is a stock analyst that still managed to make over 24% during the dot com crash, so these are the types of stocks he picked when the markets went down a lot.

Big news in tech as well. AMD announced that their sales have slowed this quarter because they're engaged in a price war with Intel. Every single tech stock got slaughtered on Friday because of this news. Ironically, AMD only dropped $0.50 on that negative news. It didn't really affect them too much. As an aside, AMD says it will probably slash prices as well to compete against Intel, so if you're in the market for a new computer, this is great news. When companies fight, the consumer wins!

The other news is that North Korea fired off a bunch of missiles on Independence Day, and that caused a lot of jitters in the market. Oil hit a new high of $75 a barrel, and a lot of stocks went down because of it.

Anyway, here's this week's ranks. Special welcome to Jordan who has joined our league. You can still join our game. It's never too late.

Rank	Name	Net Worth	Total Return	# Transactions
1	dpolley	$4,005.72	+0.14%	0
2	KumaZatheef	$4,005.72	+0.14%	0
3	do da beep (Myron)	$3,904.22	-2.39%	2
4	Pirate (Patrick)	$3,882.26	-2.94%	3
5	Jordan	$3,815.58	-4.61%	3
6	chan_316 (me)	$3,784.86	-5.38%	3
7	piratecakemcbearsauce (Patrick)	$3,170.26	-25.33%	4

Everyone's portfolio has remained the same as far as makeup goes, so I'm only going to talk about Jordan's portfolio. Then, I'm going to give brief commentary of the other portfolios.

So this week was the first week of the International Bank of Chan Fund challenge. Many thanks to all those who have participated, it has been really interesting so far. Lets just go over things on a macroscopic level first, then I'll cover the individual players.

On Thursday afternoon, the U.S. Federal Reserve (fed) announced that they're only going to raise interest rates by 0.25%. There was a LOT of worry that they were going up 0.50%. People were also worried that the fed would continue raising rates aggressively. More about this at Reuters. In either case, this moved the Dow Jones Industrial Index up more than 215 points. That's the biggest single day gain since 2003. In short, the bulls were on parade!

Here are the ranks for the week. Be aware that these ranks represent just one week of performance only. We're more interested in long term performance.

Rank	Name	Net Worth	Total Return	# Transactions
1	dpolley	$4,002.64	+0.07%	0
2	KumaZatheef	$4,002.64	+0.07%	0
3	Pirate (Patrick)	$3,968.58	-0.79%	3
4	do da beep (Myron)	$3,901.21	-2.47%	2
5	chan_316 (me)	$3,787.26	-5.32%	3
6	piratecakemcbearsauce (Patrick)	$3,505.85	-12.35%	4

Now onto the individual portfolios with commentary.