Investing Adventures

Monday, March 24, 2008

JPMorgan In Talks to Purchase Bear Stearns for $10 /Share

Filed under: Equities — Jorge @ 5:58 am

It looks as if the shareholders may have a small victory on their hands as JPMorgan (JPM) was in talks with Bear Stearns (BSC) on Sunday to raise their bid from a symbolic $2 per share to a somewhat more reasonable $10 per share, valuing the merger at around $1 billion. Some will still argue that the BSC building is valued anywhere from $8 – $12 per share leaving the core of the BSC business worthless, which may or may not be the case. JPM and BSC are also discussing the purchase of approximately 35% of BSC’s shares in an attempt to fend off any battle between JPM and BSC’s shareholders.

So much for Sundays being a day of rest, eh?

Sunday, March 23, 2008

Have We Hit the Bottom?

Filed under: Market Pulse, Technical Analysis — Jorge @ 2:02 pm

“The bear market’s over!”
“We’ve just seen the bottom.”
“The VIX has retreated; therefore, we’ve hit the bottom.”

This is what I’ve seen or heard since Thursday. So have we seen the bottom, waved, and moved on on merry way?

Last week was definitely an interesting week. Bear Stearns (BSC) was purchased for $2 per share (yes, $2 and not $20 as most figured $2 was a typo). The Fed cut the discount rate not once, but twice last week. Sunday evening, the Fed cut the discount window by a quarter point. What was more important was the opening of the discount window not only to banks as usual but to investment banks as well such as Lehman (LEH) and Goldman (GS). Could this move have saved BSC? I don’t think we’ll have the chance to see that but one never knows seeing as how the sale may take longer than expected due to litigation, BSC employees and BSC stockholders.

Liquidity issues? Doesn’t seem to be an issue anymore. Credit crisis issue solved?

Not to be outdone, the Fed on Tuesday cut the discount rate by another half point to 2.5% as well as the funds rate by three-quarter points to 2.25%. After putting in a strong hammer candle on Monday, the combination of the technicals from the hammer plus the rate cut helped boost the markets Tuesday.

Wednesday’s drop could be perceived as profit taking as well as full digestion of the previous day’s rate cut. The bears also have a strong foothold on the 1330 S&P level so some resistance was expected.

Thursday was expiry day with a number of derivatives expiring including March options. Was Thursday a solid rally day or more of a short covering into a holiday weekend? I will point out if you look at Thursday’s candle, it’s very close to a bullish engulfment. Normally, a bullish (or bearish) engulfment will “engulf” the previous day’s candle. In Thursday’s case, the bullish candle closes just slightly lower than Wednesday’s open. If you notice, the top tail of Thursday’s candle does reach Wednesday’s open but backs off slightly indicating continuing strong resistance at S&P 1330.

So what does this mean for Monday? I foresee a battle between the bulls and bears at that 1330 level. If the bulls can push it past Wednesday’s high, in the short term expect the markets to move higher. The next logical level appears to be near the 1390-1400 area. It all hinges on the financials. If they can keep up their current bullish sentiment, expect S&P 1400 to be here much sooner than you think.

Weekend Reading – March 23, 2008

Filed under: Weekend Reading — Jorge @ 4:45 am

Happy Easter for those of you that celebrate! What better way to celebrate than with a weekend reading list to help digest the pounds of bunny chocolate and cadbury eggs.

  • Everyone’s talking about a bottom, especially with the financials. Anyone here long XLF?
  • While I don’t necessarily care for his trading style, I do wish Sykes would learn to ignore his critics and focus on teaching.
  • If you don’t watch the Shadowtrader weekly videos, you’re really doing yourself a disservice.
  • Europeans screwing up our recession? At a flea market?
  • If you’re renting a house, be very careful. I’ve heard of this happening quite a bit, especially since I live in a college town with overheated propery.

Have a great day today and we’ll see you back in action tomorrow. Trading withdrawal is an ugly thing.

Thursday, March 20, 2008

Faster than a Spidering Google – It’s newsflashr!

Filed under: Reviews — Jorge @ 11:18 am

Sure, Google news is nice. It’s a great news feed pulling from other sites and presenting it in a nice little package. Imagine if there was a way to grab the news even faster. Faster than Google, you say? From the looks of it, that’s exactly what Gal, founder of Instantbull, has done.
Welcome newsflashr, the latest in web news services.

Image

Now, while I don’t care for pink (and oddly enough neither does my wife), the color choice is outstanding with this Web 2.0 site. The layout’s also very interesting. Google and other news sites normally list recent news by time, and in some cases there are biases toward their own platform. newsflashr removes the bias from reporting by using Alexa, a web traffic tool, to determine the order the news is reported in. While Alexa may not be the premier method of determining internet traffic, it should be more than sufficient, especially for this application.

The FAQ on the site also helps to explain the different color choices, as well as how their tag cloud works and how quickly news feeds are updated:

How often are the news topics updated?
- newsflashr auto-generates every 15 minutes resulting in a new display of the most popular keywords (topics) in the headlines. These topics are extracted from all the latest news feeds. Each category results in a different ‘cloud’ of top topics.

Why do words in the topic cloud appear in different colors and sizes?
- Words that match fresh headlines are colored in pink. The slider above the topic cloud can be dragged to highlight topic freshness from 1 to 7 hours ago. The size of the words (at right) is proportional to headline popularity (at left).

What is the Alexa rank?
- Alexa is an Amazon owned company that independently ranks the popularity (traffic) of web sites. The closer the Alexa rank is to #1, the more popular the site e.g. Yahoo’s website & is ranked #1 because it is currently the most popular site on the Web.

How do I submit a news blog?
- Please send us an email with the: (1)blog name, (2)url, (3)news feed (4)16×16 pixel icon (5)category (e.g. business, technology blogs). Good candidates should have a significant presence on the Web and a regularly updated & well-formatted news feed (note: old atom or rss feed versions won’t be processed … time to upgrade?).

How far back can I search news topics in the headlines?
- If you type in a keyword search, results between 0 and 7 days old will be displayed. Headline search results are preceded by a convenient summary matrix. Note that search results are focused on words that appeared in news headlines only.

As the popularity of newsflashr grows, expect a larger assortment of news feeds to be compiled by them, including blogs. Currently, newsflashr compiles blog feeds from the politics and technology circles. In time, I’d expect the other major headlines such as the business section (hint, hint) to accept blog feeds. Not only will this allow you to read undiscovered blogs in different headline circles, but it may even help expand your readership.
The biggest issue newsflashr has is the competition. I won’t lie, but Google News is pretty nice and may be difficult for some so used to using it to switch over. But when you have a product that’s faster, cleaner, and potentially unbiased (as media should be), it’s only a matter of time before it catches on.

If you have a few minutes and need to catch up on what’s hot in the world before anyone else, give newsflashr a quick visit.

Tuesday, March 18, 2008

Fed Cuts Federal Funds Futures Rate by 75 Basis Points, Discount Rate by 50 Basis Points

Filed under: Alerts, FOMC — Jorge @ 11:17 am

Below is the statement released by the Federal Open Market Committee after its March 18 meeting on interest rate policy:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.

Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened.  Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.

Inflation has been elevated, and some indicators of inflation expectations have risen.  The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.  Still, uncertainty about the inflation outlook has increased.  It will be necessary to continue to monitor inflation developments carefully.

Today’s policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity.  However, downside risks to growth remain.  The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh.  Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent.  In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.

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