Category Archives: Stocks

Be Careful With The Chinese Internet Stocks

Momo is the latest Chinese tech-company you’ve probably never heard of that has plans to list its stock in the US. From what I have seen, Momo has over 180 million registered accounts, with more than 60 million being considered active monthly users and more than 2.3 million paying subscribers. In fact Momo is now estimated to be the second most popular social app in China, after “WeChat.” The company launched in 2011 as a location based instant messaging application, which basically allows users to chat with others that are in their general vicinity. Momo describes itself as a service for people to meet other users with similar interests, allowing people that are at the same party or nightclub to basically “hook up.” Whether that is just strictly a platonic match or not is highly debatable. The Chinese government earlier this year linked the app to possible prostitution in a widespread crackdown on “inappropriate” material on the internet. Some popular overseas apps like Viber and Line were actually banned by the Chinese authorities. Remember, this country’s far-reaching censorship laws are constantly evolving, with no forewarning as to what their next crackdown may be, which could prove problematic for Momo or other high-tech web based companies in the future. Of course, the recent crackdown could have just been one of many cleverly disguised protectionist moves by the Chinese government, which are really designed to eliminate foreign competition. It’s not clear how Momo was impacted by the legislation, but “WeChat” did end up having to remove 20 million accounts that had ties to obscene and/or fraudulent content. Chinese tech stocks have done well on US stock markets, but you have to wonder about the future of social networking companies to some degree. There are hundreds – possibly thousands – of them now. It’s almost impossible to keep an accurate tally. They seem to pop up as quickly as they disappear. I’m also worried about Chinese government censorship, and how quickly it can change the entire game. All I’m saying is be careful. Even though the excitement surrounding the potential in China is enticing, make certain you are considering ALL the possible risk scenarios. Always remember, “the return of your money is more important than the return on your money.”

S&P 500 Down-Cycles

S&P 500 Down-Cycles: I had the guys in the office throw together a chart showing the most recent down-cylces in the S&P 500 since 2010. As you can see they have lasted anywhere from 2-weeks to 10-weeks in duration.  This largest percentage drop came in the Spring of 2011 when the market broke by over 20%.

  • 2010 Spring – falls from high of 1216 down to 1002 – lasted 10 weeks – This was part of the Flash Crash and the meltdown in Greece. 
  • 2011 Spring – falls from high of 1373 down to 1068 – lasted 20 weeks – Following the Arab Spring, Standard & Poor’s downgraded America’s credit rating from AAA to AA+ for the first time. The US had a AAA rating since 1941. Gold increased in value up to US$1750
  • 2012 Spring – falls from high of 1419 down to 1262 – lasted 8 weeks
  • 2012 Fall – falls from a high of 1467 down to 1340 – lasted 8 weeks
  • 2013 Summer – falls from high of 1672 down to 1553 – lasted 5 weeks
  • 2014 Winter – falls from high of 1844 down to 1732 – lasted 2 weeks
  • 2014 Summer – falls from high of 1985 down to 1890 – lasted 2 weeks
  • Current S&P500 has fallen from a high of around 2015 to ??? – the break has now lasted about 4 weeks.

 

What About Possible Riots In Ferguson

The great state of Missouri might still have two teams in postseason play with dreams of reaching the World Series, but unfortunately state police and FBI agents are increasingly worried about what happens if and when the grand jury does not indict white officer (Darren Wilson) for killing a black teen (Michael Brown) back on August 9th. There seems to be some spreading fear that a major riot could break out or perhaps provoke more wide-spread riots across the US. Keep in mind civil rights groups and protestors from across the country are heavily monitoring this case. According to arrest records from the St. Louis county police, of the 227 people arrested in connection with the protests, 36 were from outside Missouri, including seven from New York, 12 from Illinois and five from California. Something else to keep in the back of your mind…there are reportedly nine white and three black jurors.  Reports from inside Ferguson are that a rally held this past week by Black Lawyers for Justice in a local church, was attended by eight members of the “New Black Panther Party,” all dressed in battle fatigues and berets. There are reports circulating that Michael Brown supporters and protestors where at the recent Cardinals playoff game and where meet with heavy headwinds from the local fans as they chanted “DAR-REN WIL-SON”… There were also some fans wearing the name Darren Wilson on the back of their Cardinals jersey’s.  If you don’t think things are going to get a little crazy check out the video posted over at Deadspin by clicking here. Now I  hear a St. Louis county judge granted a 60-day extension to the grand jury, so jurors will have until Jan. 7th to make a decision.  The problem is the protesters are already starting to gather and are coming in from all parts of the country.  In fact protesters have organized four days of activities in Ferguson and surrounding areas this weekend (over the Columbus Day holiday). Starting Friday, they say they expect thousands of people to take part in marches, rallies and a yet-to-be-detailed acts of civil disobedience.  All I can say is pay close attention to this one.  Its one thing to have riots in L.A. or an Occupy Wall Street movement in N.Y., but when you start splintering the nations midsection the consequences could be much more severe. Lets just hope this thing doesn’t spiral into major civil unrest. (Source: Reuters)

What We Need To Know About Apple’s New Products

With all the hype surrounding the recent Apple product release, I thought it would be nice to give everyone a short briefing on the details of the devices:

  • iPhone 6 to hit stores Sept 19th and available for preorder September 12. There will be two new phones offered, the iPhone 6 and the iPhone 6Plus. Both phones will be slimmer than the existing iPhones but the iPhone 6Plus will be a much larger 5.5-inch version. The iPhone 6 Plus will sport Apple’s new A8 chip which, according to Apple, is said to have a 25 percent faster CPU and 50 percent faster graphics. Apple is also introducing a new generation M8 motion coprocessor with the phone that can tell you when you’re cycling, walking or running and can measure distance and elevation even if you go up a flight of stairs. After upgrading the iPhones brains and brawn, all that’s left is its vision. Because Apple slimmed down their devices (.22 inches!), they’ve also had to tinker with the camera module to make it fit, and even then, it still protrudes slightly on the back. The lens remains the same with just 8 megapixels but is an iSight camera with new FocusPixels technology, true tone flash, and a f/2.2 aperture. FocusPixels helps the camera focus twice as fast and comes with next-gen tone mapping and noise reduction. The improved image signal sensor in the A8 makes advanced face detection possible, which means better focus. Apple says the battery powering all these chips and lenses will be equal or better than the iPhone 5s. The iPhone 6 boasts 11 hours of Wi-Fi browsing, 10 hours on LTE, and 14 of 3G talk time. However, the iPhone 6 Plus gives you more battery life along with that extra screen real estate.
  • Apple Watch​ was also unveiled, ​which ​ha​s a rectangular face with switchable wristbands. The round-edged watch face will be available in stainless steel, a sporty version with an aluminum casing an a high-end 18-karat gold version. All three are available in two different sizes, depending on the users wrist size. Six different watch straps will be available through Apple, but there’s no doubt outside vendors will roll out an even wider variety ofstyles. The Apple Watch starts at $349 and will be available in early 2015. One thing that may rub consumers the wrong way – it requires an iPhone 5 or newer to use it. The screen is made out of sapphire, which is designed to be resistant to cracks. The main feature is called the “Digital Crown”, a small toggle on the side that allows wearers to zoom into apps rather than trying to pinch-zoom directly on the small screens. Inside is an S1 chip, a gyroscope, and accelerometer. In order to use GPS, Apple Watch has to tether to your iPhone. And instead of plugging it in to re-juice it, you can charge the battery using inductive charging, which snaps together with your watch using magnets. You can also send messages using Siri or Emoji. There is an official “Workout” app that can monitor calories burned or miles ran, and an “Activity” app that monitors the same metrics but over the course of your day, including how often you’re sitting versus standing. It can also control your Apple TV and works with the new payment system.

Stop Waiting For “Clarity”

Just remember as we interpret the headlines and digest the political rhetoric that emotions and knee-jerk reactions rarely produce sound investment decisions. You need to be able to synthesize and distinguish what is actually the “music” and what is simply loud “noise.” In other words….

  • If your looking for “clarity” in regard to Putin…it’s not going to happen. He is in power, he is not going away, and he is going to remain highly unpredictable. 
  • If your looking for “clarity” in regard to the Middle East…it’s not going to happen. They have been fighting for over a 1,000 years and its not going to change anytime soon.
  • If your looking for “clarity” in regard to the US Fed…it’s not going to happen.  The dynamics of the game are constantly changing and they are clearly shooting at a moving target.
  • If your looking for “clarity” in regard to the Chinese economy…it’s not going to happen.  They obviously have their own agenda, so the economic numbers and data released will always be questioned.
  • If your looking for “clarity” in regard to the European Union…it’s not going to happen. There are simply too many moving parts in this machine.  In other words there are just too many countries under one roof ALL with different agendas.

Moral of the story, there is no such thing in the investment sphere as a “perfect world.” You can choose to focus on the “what if’s” and the “doom and gloom” scenarios, but will there every be time when uncertainties and problems do not exist? 

Why Does A Congressional Primary Matter To Wall Street?

The Eric Cantor loss in the Virginia primary definitely seemed to have a more negative impact than anyone saw coming, and here are a couple of reasons why. First, his top ten donors include private equity giant Blackstone Group, investment banking giant Goldman Sachs, communications giant Verizon Wireless, major hedge fund Scoggin Capital Management and Altria Group, parent company to tobacco giant Philip Morris…recognize a pattern yet? Cantor is obviously viewed as an overall “pro-business” kind of guy and he used these corporate contributions to spend $5 million on his campaign. His winning opponent spent less than $150,000! So much for big business’ influence! Maybe more importantly though, recall the headlines from recent years past – “US Government Shuts Down Over Budget Battle.” Cantor’s loss to a relatively unknown Tea Party candidate raises some fear that the US Congress could end up being stacked with enough extremes on both the left and right that they’ll once again be deadlocked on major fiscal issues. Definitely something to keep in mind as we get closer to the mid-term elections in November.