Chan's Personal Blog

Time for another summary of our stock market game. I missed the last two week's worth of action because I have been quite busy on the weekends. The main impression over the last two weeks is that the markets are no longer as volatile as they were between May and July. During those months, we would have -100 or +200 point days, but now, we have +40 or -40 days. This is a lot nicer for long term investors who aren't day traders. We want a gradual up trend rather than a choppy up and down motion.

The thing that I want to focus on is the tech sector because we've been seeing a lot of action there. The main one that I want to focus on is AMD. The stock has gone from $17/share to $25/share in a very short amount of time. People were thinking that Intel could completely destroy AMD in a price war, and that thesis doesn't appear to be true. Infact, AMD has announced that they're aiming to capture 40% of the PC market from Intel in a year. That's quite a jump considering that AMD has always been the underdog in the PC market, and last year they had captured 23% of the market. Anyways, I rant on and on about AMD because this is why Patrick is #1 in our game currently. (Full disclosure, I do own shares of AMD).

The other tech stock I'd like to comment about is Microsoft. They recently announced that they'll be buying back their stock with their company's cash. A stock buy back means that the company is so confident that their stock price is going to go up in the future, that they're willing to buy their own stock with money, and make a lot of money that way. Microsoft is spending $30 billion to buy back their own stock. As a result, their stock price moves up because they're buying it up in large quantities. It also forms a cushion under the stock because as soon as the stock price falls and people are selling, Microsoft will be there buying it up which pushes the stock back up. So heads up to Myron who's betting against Microsoft, it's going to be difficult fighting Microsoft.

Two more short notes. Financial companies have been doing very well lately because we're almost done raising interest rates. The big banks in Canada have been doing very well, especially Royal Bank. Two thumbs up there. Natural gas and oil companies are also dirt cheap right now, and I'd consider picking some up for the Winter since natural gas prices tend to rise during then.

Here are this week's ranks. Patrick is #1 again, and he has a commanding lead over everyone.

Rank	Name	Net Worth	Total Return	# Transactions
1	Pirate (Patrick)	$4,821.52	+20.54%	6
2	KumaZatheef	$4,025.08	+0.63%	0
3	dpolley	$4,025.08	+0.63%	0
4	Jordan	$3,853.48	-3.66%	4
5	do da beep (Myron)	$3,502.16	-12.45%	9
6	chan_316 (me)	$3,249.74	-18.76%	7
7	cwing	$2,353.14	-41.17%	19
8	piratecakemcbearsauce (Patrick)	$1,834.90	-54.13%	6

Myron has moved down to 5th place as he has bet against tech, and tech has recovered in the last little while. Fortunately, he did pick up some shares in Apple which has been doing fairly well. So, there's hope yet.

My portfolio still hasn't done anything. As mentioned before, it's setup such that it goes up when a hurricane hits the U.S. gulf coast. Hurricane season seems to be really late this year, so until one strikes, my stocks are going to do nothing.

cwing has been buying and selling like crazy, and it is costing him a lot of money. He's done 19 transactions so far which means that he's paid 19 X $29.95/transaction = $569.05 in commission fees alone! We all started with $4,000.00 in cash! Buying and holding isn't always a bad idea.

Standard disclaimer, the opinions in this article does not constitute financial advice. We are not responsible for any gains or losses you may incur in the stock market. Please consult a professional stock advisor about investments. The opinions made by the author in this article are merely opinions and are subject to change without notice.

This week we had another slew of earnings reports from different companies. The ones that I was looking at were Starbucks (SBUX), Electronic Arts (ERTS), Alcan (AL), and Valero Energy (VLO). Starbucks reported a disappointing number, and their stock price fell from $35 to $30 fairly quickly (-16%). Interestingly enough, they blame the weather for lower sales.

So you may have heard that America is currently experiencing a heat wave. That means people are buying more frappachinos than hot lattes. When you order a coffee at Starbucks, it usually takes them 2 minutes to prepare. For a frappachino, it takes 4 minutes. You might be asking, so what? Well, if you're dealing with large number of customers, like 1,000 customers a day, and all of them are ordering cold frappachinos because it's freaking hot out, it takes you an additional 2,000 minutes to serve these customers. So, they say sales are down because a lot of the Starbucks have really long lines, and customers are turned off by this. They don't even bother going in because the lines are so long. Management at Starbucks says that they didn't anticipate this much demand for their cold drinks in the summer, but they're shipping more frappachino machines out to their stores now. A little too late for their part though because the heat wave is breaking now, and the damage has already been done to their stock. Interesting nevertheless.

The other companies like ERTS, AL, and VLO all reported great numbers. Their stocks are slowly moving up again, and I finally have a few stocks that are in the green (ie making me some money).

The bulls have finally come back to the market. Most markets actually made a gain overall this week. The Toronto Stock Exchange (TSE) briefly passed the 12,000 mark for the first time in months. People who bought mutual funds related to the TSE when I said the TSE was too cheap at 11,200 should be fairly happy. That's a healthy 7% return in less than 3 months. That's not bad at all.

In other news, oil moved up quite a bit this week because a hurricane was forming in the Atlantic. So, all of the energy related stocks moved up, but they gave back their gains when the hurricane never developed; it became a tropical depression, sigh . For my portfolio, because it's geared for hurricanes, which mean it moves up when there are hurricanes. (Think natural gas, oil, alternative energy, etc.)

Speaking of oil, there was a crazy news report about a hedge fund (mutual fund for extremely rich people) closing down because it lost a ton of money in oil. They were hedging against oil. So what this means is, say it's January 2006. You think in August 2006, oil will be at $40/barrel, so you sell a contract to people saying, I will sell you oil for $45/barrel in August 2006. Some companies will buy these contracts because they want to control their costs in oil, so they lock-in a rate in advance. (B.C. Transit for example buys these type of contracts in advance; this is how they can keep charging the same amount for bus fare even though gas prices go up a lot this summer). So, if August 2006 comes around, and oil prices are $40/barrel, the hedge fund buys it and sell it to people who bought the contract, and they sell it to them for $45/barrel. That's a nice $5/barrel profit.

So, some genius at a huge hedge fund thought that oil would be $40/barrel for the summer, and sold contracts for oil for $45/barrel. Unfortunately, oil prices are currently at $75/barrel. This is almost double the price of what the hedge fund thought oil prices would be at now. So, they're obligated to buy oil at $75/barrel, and sell it to their contract owners for $45/barrel. This brilliant strategy has cost the hedge fund $260 million, so they're closing down because they're bankrupt. Well played.

Anyway, for next week, all eyes will be on the U.S. Federal Reserve who meets on Tuesday to talk about interest rates. They'll either raise interest rates, or pause. If they raise rates again, the stock markets are going down big (if they raise and say they're done moving rates up, that should move markets up as well though). If they pause, then the markets are going up big. This will be an epic bulls vs bears battle. However, I think the bulls will win this coming week. The Federal Reserve chief always says that he'll decide where rates are going based on the data. Last Friday, the U.S. jobs report came out, and the report states that the U.S. created far fewer jobs than expected. This data shows that the U.S. economy is slowing down which is partially caused by these interest rate hikes. That data should convince the Federal Reserve that they have slowed the economy down enough. They might have even slowed it down too fast. So, Tuesday is the all important day. Watch the news that day.

So, here are this week's results from our stock game. Patrick retains first place, and strengthens his position a bit more. He currently owns a lot of AMD shares, and that dang stock just keeps moving up every single day. Congratulations.

Rank	Name	Net Worth	Total Return	# Transactions
1	Pirate (Patrick)	$4,198.65	+4.97%	6
2	KumaZatheef	$4,018.48	+0.46%	0
3	dpolley	$4,018.48	+0.46%	0
4	do da beep (Myron)	$3,914.56	-2.14%	8
5	Jordan	$3,735.48	-6.61%	4
6	chan_316 (me)	$3,287.12	-17.82%	7
7	cwing	$3,120.14	-22.00%	13
8	piratecakemcbearsauce (Patrick)	$1,164.98	-70.88%	6

Standard disclaimer, the opinions in this article does not constitute financial advice. We are not responsible for any gains or losses you may incur in the stock market. Please consult a professional stock advisor about investments. The opinions made by the author in this article are merely opinions and are subject to change without notice.