I own Chevron (CVX - $100.81) and have made a pretty penny holding the shares. Owning oil companies has helped make up for my losses in financial shares this year. The other nice part about holding Chevron shares is that I can do things like appoint Amazon Watch as my proxy this year to represent me at the meeting.
Is virtual real estate the next big investment craze? Will everyone start buying words online? And are financial words/URL's going for more than porn words now? I'm consulting a startup web company right now and buying a name is a real problem. I heard a rumor that Mint.com paid $200,000 for their name. At some point, high prices will drive away potential buyers and the public will become accustomed to seeing more two and three word names for websites.
Numbers like $5 million or more are starting to float around as the price for this web property. I have looked everywhere to see what it actually sold for, but it seems that information is private. I did see a transfer of the name in whois dated April 2008.
For a list of some auction prices, check out this domain auction industry site.
You can recognize a mania when items are being sold for way more than they are economically useful, in the hopes that a greater fool will make a bigger mistake. Just think about all of those empty homes in Florida bought by speculators hoping to sell them to other speculators. When you see a hedge fund set up for domain name investing, it will be time to sell all your domain names for whatever you can get.
I collaborated with David Neubert to come up with a list of the best stocks under $10, but the first thing he said was, “Most stocks under $10 are ones that have problems.” All of the stocks on his list are speculative. “Just buying stocks with low prices is not a very smart strategy. There is no disadvantage to buying one share of Google for $520 as opposed to 100 shares of stock with a price of $5.20.” It turns out most online brokers charge the same commission regardless of number of shares.
Zubin Jelveh at Portfolio.com combines research on the disadvantages of testosterone in traders. He goes as far as to suggest that traders take female hormones to become better risk managers. It looks like he's never been a trader.
I, for one, can attest to all the disadvantages of testosterone in my life. Premature baldness, extreme aggressiveness, attraction to competition and likely and early death are all things I worry about in relation to my overproduction of testosterone.
My favorite CEO on the list is John Thain for managing to negotiate Merrill Lynch (MER - $42.60) shareholders out of $83 million for doing not much more than quitting his job at the NYSE and moving into his new office. I want this guy on my team next time I buy a car. Though, unless he considered me a charity case, I couldn't afford him.
When I started on Wall Street most things were still traded this way. I was trading Emerging Market Bonds over the phone and never used these signals except across a crowded loud room, and even then I mostly got them wrong. I usually had to resort to a phone call.
However, over time, some things became part of my body language vocabulary. I've confused girlfriends and friends who never used these signals by using them instead of talking sometimes.
What does this all mean? Yahoo is willing to have a proxy fight and thinks they can win. A deal between Microsoft and Yahoo is probably further away than ever. The situation is starting to look like a lose-lose for Microsoft. Either they pay up too much for Yahoo and dilute their share price, or after a long proxy battle, Microsoft eventually acquires an engineer/key employee depleted Yahoo at the lower stock price.
This month's top 15 is full of financials and oil. I like to bottom fish, and this month it finally worked. My exposure to big bad oil is starting worry my wallet and my heart.
1. Lehman Brothers (LEH - $44.05): Now that more than three years have passed since I left Lehman Brothers I feel it is appropriate to disclose my position in the investment bank. I have to admit that this has not been a great quarter to own any investment bank, but I have a lot of confidence in Lehman management and think that they understand the risks inherent in liquidity that funding an investment bank requires. In other words, they are no Bear Stearns.
In fact, if Microsoft really wanted to play hard ball at this point they could simply give Yahoo 48 hours to accept the terms or pull the offer off of the table. With the offer off of the table Yahoo stock would immediately drop. The lawsuits would take place driving the stock down further and if Microsoft just waited 6 months or so they might be able to end up buying the stock in the end for somewhere around $8 a share.
I'm willing to make a speculative bet that he will be able to keep Thornburg Mortgage solvent but at a very dear costs to equity holders, but just in case I'd rather buy the preferred stock (TMA_PRC - $4.59, TMA_PRD - $4.55). I'm assuming preferred would still have some value in a liquidation. If there is no liquidation and the company is saved, it could return shooting distance ($19.00ish) of the par value of $25.
Today the Chicago Fed released notes on the economy showing a decrease in U.S. economic activity to the lowest level in five years. This indicates the recession may have already begun. Watch for more recession news to end this stock market rally as analysts look for earnings decline. I'm taking some profits on some of my financials into this rally a bit while nibbling at long term bargains like United Technologies (UTX - $69.77) and Apple (AAPL - $139.40). I think I'll have a chance to buy UTX and other industrials in the next few months at better prices as well.
Disclosure: I own UTX. I sold half my position in both FNM and FRE last Thursday. I own AAPL and added to the position today and last week. I may write some short term out of the money calls (160-170) against AAPL if it continues to rally above 140.
I do not endorse any one broker, but this eTrade commercial really got to the essense of what trading for one's own account is all about. This E*TRADE advertisement caused the following emotional and intellectual reactions in me:
1. I felt guilty about investing in Pharma companies who rely more on marketing than curing diseases.
2. I felt good about the power all self directed investors have at our fingertips.
3. I Laughed my butt off.
4. I thought about adding E*TRADE FINANCIAL (ETFC - $3.72) to the list I created today of investment banks to buy on the next pullback. I just thought about it and I wouldn't include E*TRADE in that same list, though I do think they are nice speculation on a buyout or return to grace after all the dust settles in the sub-prime mortgage debacle. After all, First Call analyst estimates have them earning $0.37 a share by 2010 that would imply a cheap 13 times earnings - not a bad deal if there are no more surprises in their mortgage portfolio.
I'm looking for Wall Street to do well no matter who wins the election this year.
Three factors will keep the cash register ringing for investment banks: 1. Demographics of baby-boomers saving for retirement. 2. The cheaper dollar, meaning that foreign firms will be on a shopping spree for U.S. companies, which will help M&A advisory. 3. Mortgage portfolios that have been marked to market. When liquidity retuns to this market, portfolios of mortgages will start to show profits.
It would seem that Wall Street also hasn't forgotten that it is the second most regulated industry in the U.S. (after nucular energy) and that it needs to keep track of where its bread is buttered. Banks are betting that the butter will be spread by a Democrat in 2009.
On the next pullback, which I think is coming once all the shorts are done covering, I'll be looking to buy the investment banks cheap again. Look out for U.S. firms like Goldman Sachs (GS - $179.63), Lehman (LEH - $48.65), Morgan Stanley (MS - $49.67) and Merill Lynch (MER - $46.71) to continue to do well. I own the investment banks directly, but rather than pick individuals, the Exchange traded fund (IAI - $39.43) works well as a proxy.
Could it be a Holy Mystery, like they told you in Catholic school, for anything that couldn't be explained? Steve Randy Waldman at Interfluidity.com has another theory on why Bear Stearns (BSC - $5.94) is trading above the $2.00. He offers up god, oh I mean Jamie Dimon, channeling J.P. Morgan. Could The House of Morgan be the one buying shares above the deal price to vote them their own way? I love the idea but I see securities law problems with that theory. I don't think JP Morgan would risk that.
I'll be watching to see what Mr Waldman comes up with next.
Disclosure: I own BSC. I own Bear Stearn Preferred shares. I am short 10 strike calls on BSC and long 15 strike calls. I own JPM. I did not go to Catholic school.
neubert (11:41:39 AM): fun day yesterday. felix (11:42:01 AM): hoo yeah felix (11:42:09 AM): do you still have your BSC @ $7? felix (11:42:19 AM): I hope you didn't take my advice to sell @ $4! neubert (11:42:31 AM): sold calls on at struck at $10 for $2.25. felix (11:43:04 AM): when? neuber (11:43:25 AM): just now felix (11:44:04 AM): expiry? neubert (11:44:12 AM): oct and april