Category Archives: Stock market

Alphabet Inc near all-time high

I remember the tech boom in the late 90`s. It was so many great tech companies and we all knew that this was the future. Investors were buying tech stocks with both hands, and we all know the results; A BIG FAT Bubble.

We can see some similar things going on today. Twitter was a hype when they went public in 2013 at a share price of $26. Investors liked the stock and it soared to about $75, but it all stopped there. Wednesday this week, Twitter traded at an all time low at $15.

bubble

Twitter is not alone in this bubble club right now. Many other tech stocks has suffered lately and I think there is different reasons for that. The main reason for the smaller tech companies is easy money because of the rock-bottom interest rates.

Together with inflated tech stock prices we can also see sky-high Silicon Valley real estate prices and rents. Just like we saw in the late 90`s tech boom.

BlackRock slashed its valuation on Snapchat by 24% last year, while Fidelity slashed its valuation on Dropbox by 31%. So things are about to change. Easy money will not be so easy now, which means it will be more difficult for many tech start-ups.

But some tech companies are still going strong.

 

GOOGL

(Click the image to enlarge)

 

One of my favorite stock since 2005, are trading higher on friday. Alphabet Inc (GOOG) is up +2,59% on friday, trading at 745,46. EPS for Alphabet Inc is 21,26 with a market cap of 493,21 Billion.

Alphabet Inc was a big Monster last year, adding nearly 47% in 2015 and traded just below $800 in late December at an all-time high!

It is revealed that Google, in 2014, had paid Apple a sum of $1 billion in order to keep their search bar on the iPhone. Google obviously understand how important it is to have their own operative system on Apple`s iPhone.

Alphabet Inc is a collection of companies like Calico, Google`s health and longevity effort; Nest its connected home business; Fiber, its gigabit internet arm; and its investment divisions such as Google Ventures and Google Capital, and incubator projects, such as Google X.

Many investors have a buy rating with a target price of $850. Others up to $900. I look forward to Apple`s quarterly earnings report next Tuesday, and Alphabet Inc will report on February 1, 2016.

Shareholders are holding their breath to see if today`s rallies will continue.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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Outrageous Predictions 2016

It`s time for some predictions for 2016, and Saxo Bank is out with their own predictions and they are outrageous. “Outrageous Predictions” are “Outrageous Predictions”. Very bold. They are outrageous, expecting next year’s El Niño to be the strongest ever. Oil making a drastic return to $100 a barrel, and EURUSD to skyrocket back to 1,23 to name a few.

Steen Jakobsen, Chief Economist at Saxo Bank, commented: “We are nearing the end of the paradigm paralysis that has dominated the policy response to the global financial crisis. Quantitative easing and other forms of intervention have failed. China is transitioning, and geopolitical tensions are as complex as ever. The marginal cost of money is rising, and so is volatility and uncertainty. It is against this backdrop we have set this year’s predictions.”

 

Predictions 2016
Saxo Bank’s Outrageous Predictions 2016

  1. EURUSD direction? It’s 1.23…
    Europe is running a massive current account surplus and its weaker inflation should, in macroeconomic logic, mean a stronger currency, not a weaker one. The race to the bottom has gone full circle, meaning we are back to a weaker US dollar again as the direct outcome of US interest rates policy.
  2. Russia’s rouble rises 20% by end-2016
    By the end of 2016, a surge in oil demand and the Fed raising rates at an inappropriately slow pace causes the Russian rouble to rise some 20% versus the US dollar/euro basket in 2016.
  3. Silicon Valley’s unicorns brought back down to earth
    2016 will resemble 2000 in Silicon Valley with more startups delaying monetization and tangible business models in exchange for adding users and trying to achieve critical mass.
  4. Olympics to turbo-charge EM’s Brazil-led recovery
    Stabilisation, investment spending on the Olympics, and modest reforms will see sentiment rebound in Brazil, with EM exports helped by cheaper local currencies. The result: EM equities to have a great year – outperforming bonds and other equities.
  5. Democrats retain presidency, retake Congress in 2016 landslide
    The Republican Party goes from strength to dramatic weakness as the rifts from an internal struggle on its future direction play out. This leads to a landslide victory for the Democratic Party as they successfully execute a get-out-the-vote campaign with Millennials coming out in droves having been frustrated by the political stalemate and weak job prospects of the last eight years.
  6. OPEC turmoil triggers brief return to $100/b oil
    OPEC’s crude oil basket price drops to the lowest since 2009 and unease among weaker as well as wealthier members of the cartel over the supply-and-rule strategy continues to grow. The long-awaited sign of an accelerated slowdown in non-OPEC production finally begins to flicker. Suitably buoyed, OPEC catches the market on the hop with a downward adjustment in output. The price mounts a quick recovery with investors scrambling to re-enter the market to the long side – once again bringing $100/barrel prices onto the horizon.
  7. Silver breaks golden shackles to rally 33%
    2016 will see a renewed confidence in silver. The political drive towards reducing carbon dioxide emissions by supporting renewable energy will add to increased industrial demand for the metal, given its use in solar cells. As such, silver will rally by a third, leaving other metals behind.
  8. Aggressive Fed sees meltdown in global corporate bonds
    Late 2016 will see Fed chief Janet Yellen embark down a hawkish path with a series of aggressive rate hikes, triggering a huge selloff in all major bond markets as yields start to rise. As the portions of bank and broker balance sheets allotted to bond trading and market making have almost disappeared, one of the vital parts of a functioning market is simply not there. This realisation sinks in too late and the entire buy-side flee into a panic selling one-way street, as highly advanced risk models lurch into a symmetric red alert.
  9. El Niño sparks inflation surge
    Next year’s El Niño will be the strongest on record and will cause moisture deficits in many areas of southeast Asia and droughts in Australia. Lower yields across agricultural commodities will curb supply at a time when demand is still increasing on the back of global economic expansion. The outcome will be a 40% surge in the Bloomberg Agriculture Spot Index, adding some much-needed inflationary pressure.
  10. Inequality has last laugh on luxury
    Faced with rising inequality and unemployment of over 10%, Europe is considering the introduction of a basic universal income to ensure that all citizens can afford to meet their basic needs. In a more egalitarian society where other values are promoted, demand for luxury goods decreases sharply – the sector collapses.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. UA-63539824-1.

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Will the Fed raise rates on Thursday?

Do you belive the Fed will hike on Thursday?

If so, you are among economists and strategists that belive so, but traders are betting strongly against it, and that alone is enough to wait at least one month before liftoff, according to Morgan Stanley.

CME FedWatch tool says the probability is at just 21 percent, and Morgan Stanley said its readings on trading show a 30 percent probability that «overstated the chance» of a rate rise.

Lessons learned in 1994 that reverberated into 1999 and 2004 will prelude a rate hike until the futures market prices one in. In 1999 and 2004, the central bank waited for market expectations to exceed 50 percent before moving, learning a lesson from 1994 when it tightened.

CNBC said there is one good reason the Federal Reserve won`t vote to raise interest rates, and that`s History. So, what is all this about?

percentage

Rates have been near zero since the recession, and the Fed have delayed its first-rate hike since 2006. But why is the interest rate so low? See it like this; The lower the rates, the more problems it is in the economy.

When the economy is strong and everything is okay, interest rates are hiked in order to curb inflation, but when we face tough times, the Fed will cut rates to encourage lending and inject money into the economy.

Investors can predict what the Fed (or other central banks) will do by looking at economic indicators such as;

Retail Sales: Consumer spending
The Consumer Price Index (CPI): Inflation, and
Non-farm Payrolls: Employment levels

If these indicators improve and the economy is doing well, rates will be raised, but if the improvement is small, it will be maintained. Drops in these indicators can mean a rate cut in order to encourage borrowing.

Other indicators to foreshadow changes in the economy is building permits, average weekly hours, new orders and the spread between 10-year Treasuries and the Federal Funds Rate, which is published every month by The Conference Board.

Raising rates will have an impact on the markets. Raising interest rates will cause the dollar to appreciate over the Euro, which means the pair EUR/USD will decline, which is good for the U.S dollar.

If Chairwoman Janet Yellen sends out a dowish signal on Thursday, it may help to boost stocks and undermine the dollar. Investors will pay less attention to gold and allocate more of their capital into equities.

A hawkish message, including a rate increase, may help unpin the dollar and undermine stocks and gold. So, the upside will be limited for gold in both scenarios, unless we see a massive selloff in equities and the dollar.

Changes in monetary policy will ultimately cause currency exchange rates to change, and paying close attention to the news and analyzing the actions of the Fed (in this case) is vital for forex traders.

The interest rates impact currencies because the greater the rate of return, the greater the interest accrued on currency invested and the higher the profit. So how can you profit on it? The strategy is very simple, but also very risky. You can simply borrow currencies with a lower interest rate in order to buy currencies that have a higher interest rate, and this strategy is known as carry trade.

The shift in interest rate represent a monetary policy-based response as a result of economic indicators that assess the health of the economy. Most importantly; they possess the power to move the market immediately. So, how healthy is the U.S economy?

Nonfarm Payrolls is up: 215K
May, June Revisions: 14K
Unemployment Rate: 5,3%
Avg. Hourly Wages: 0,2%
Labor Force Participation: 62,6%
Consumer Price Index: -0,1%

A key measure of inflation dropped 0,1% last month for the first time since January due to sliding gasoline costs, and this is something for the FOMC (Federal Open Market Committee) on its policy meeting Wednesday and Thursday this week.

Central bank leaders have said they want to be confident inflation is heading toward their 2 percent target. Low inflation is a sign of economic weakness, and raising rates too soon risks harming the economic expansion.

IMF (International Monetary Fund) and the World Bank have asked the Fed to delay its first-rate hike since 2006.

The world`s financial watchdog is the BIS (the Bank of International Settlement) and are considered the «bank of central banks». BIS has warned that a Fed rate hike could have a huge effect on the global economy and particularly in emerging markets.

According to a BIS report, much of the global financial system remains anchored to U.S borrowing rates, and a rate hike at home tends to have an impact on higher rates in other economies. The enormous amount of debt in the emerging markets has the potential to move the markets even with a small rate hike.

Everybody knows that sooner or later, a rate hike might be necessary. No matter the results in the financial markets will be. Some belive the Fed will hold off on raising rates until December.

I really look forward to Janet Yellen`s speech on Thursday at 2 p.m. Washington time.

 

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. UA-63539824-1.

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What is cyclical stocks?

You can`t win a football match if you`re not offensive, but at the same time you can lose if you are too offensive. You also have to think defensive, which mean you must have a strategy. Just like playing chess and many other games. You can`t succeed with only one tactic.

Who haven`t been too offensive when playing chess? You just saw how you could do it forward without thinking defense.

This is just how you need to think in the stock market too, but in the stock market we are talking about cyclical and non-cyclical stocks. You know that you shouldn`t have all your eggs in one basket.

stock-labels2015

(Companies that are in the housing, airline, and steel sectors are examples of cyclical stocks)

Your portfolio need to be balanced which means you must have a mix of both offensive and defensive stocks. A mix of small caps growth stocks and value stocks, which is diversified by size and industry. In addition; mix different stocks, cash, treasurys and bonds.

You cannot control the cycles of the economy, and it is vital to know how different companies and their industry are in relationship to the economy. That`s why it is important to know the fundamental difference between cyclical and non-cyclical stocks.

If you search for the non-cyclical companies you can better identify where it`s best to put your money when the economy, growth and the stock markets starts to decline. The difference between Cyclical and non-cyclical stocks is that cyclical stocks is more volatile, and move up and down with the cycle. Non-cyclical stocks show little movement relative to the cycle.

Non-cyclical stocks tend to outperform the market when the economy slows down. The defensive stocks experience profit regardless of economic gyrations because they produce goods and services we always need.

Stock Labels Defensive

(Non-cyclical stocks are in the food, beverage, drug and pet food industries)

This is companies that sell food, gas, power and water, because this is something people need no matter where the economy and the stock markets go. People spend the money they have on what is necessary, and that`s not luxury cars, but water, power and food.

When the economy turns sour you need to avoid stocks cyclical industries that follow the cycle. People can`t afford to buy luxury cars. They can`t afford to take the family to a fine dining for an expensive meal. Other cyclical industries are steel, travel and construction. They produce things we can live without when money is tight.

When the economy starts to decline, the cyclical stocks will be hit the hardest, and that`s why it is important to play defensive and look for non-cyclical stocks that produce things you can`t live without.

A great example is utilities which can help you to avoid losses while the cyclical stocks will suffer. In tough times there is not so much money for building projects, but people will still buy power, food, milk and water.

Keep in mind that utility companies grow conservatively and they are not going to skyrocket when the economy is increasing again. Pick the right companies with great dividends in the right industries in relationship to the shift in the cycle. It can help keep your money safe.

 


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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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The new economy will intensify

Have a look at Radio Shack (RSH). Price: $0,24. Wow, pretty impressive eh? A very cheap stock you think, but no way. Radio Shack said to file for bankruptcy yesterday (chapter 11). I wrote about Radio Shack in an article called «retailer dead», 11th March, 2014, so this is no surprise. RadioShack have $1,2 billion in assets and $1,39 billion in debts. As widely expected: RadioShack is finish. Sorry shareholders. Everything is lost.

What`s going on? What we see now is just the start of a new era; The new economy. This is something we talked about in the late 90`s and early 2000`s. everybody was talking about the new economy at that time, and investors bid up stock prices to unprecedented highs.

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You all know the end of that history. The investors didn`t look at macroeconomic factors at that time, and it all blew up to a gigantic bubble. A tech bubble. And that bubble has long since burst. Since then many companies have remained very innovative.

Many companies in the new economy are heavily involved in the internet and biotech industries, and the ripple effects of the new technologies has spread out to all other industries as well. But obviously not to Radio Shack.

When I wrote about the retailer dead in my article last year, Radio Shack was down -38,5%. I said they were doomed, and things have changed. It`s all about time and money. Why take the bus to the shop in town and buy a product that is twice as expensive as the same product on Amazon, Ebay, Best buy or Wal-Mart?

I also wrote about it in 2013. This will affect other shops like Starbucks, and their sales was declining in the holiday season in 2013, and this is just the beginning. I think we will see this trend spread all around the world. Fast.

RadioShack`s business model failed last year and they had no reason to open the doors and throw good money after bad money. The time is over for RadioShack. Just like Mervyn`s, who had 189 stores in 10 states. Mervyn`s was the eight-third largest retailer in the U.S based on 2005 revenue. Many of the company`s stores were in shopping malls.

Mervyn`s closed the doors December 31, 2008, but the Morris family having bought back intellectual property rights to the company in 2009. They are planning to relaunch Mervyn`s as an internet-based enterprice. The new economy is here.

It is the high-tech tools like internet and powerful computers which is penetrating the consumer and business marketplace that really drives the new high growth industries. The tools are getting better and better. Add sharing economy and driverless cars to this and the new economy is here to stay.

If your shopping mall in your town is crowded today, it may change tomorrow. At one time it can be more employees than customers, and bookstores are the first to fail. Clothing chains will follow, consumer electronics stores, air-ticket booking offices and in the future; bank branches and other traditional services facilities will follow. The impact from online sales is massive.

Alibaba`s Jack Ma said they have created 14 million new jobs. McKinsey said the shift online could contribute up to 22 percent of the China`s productivity growth by 2025 and make up 7 percent to 22 percent of the total increase in GDP from 2013 to 2025.

Clashes between the old and new economies will intensify.

 


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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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