Markets out of touch with reality

It’s been a while…in the meantime strange things have happened. I find myself scratching my head a lot especially after taking a look at the the dizzying height of S&P these days. I believe it touched a four year high last tuesday when it reached 1,426. There has not been any market shattering news as of lately. If my memory serves me right, August was marred by disappointing earnings report not just here in USA but world wide. The economic outlook of the USA has not changed drastically to cause sentiments skyrocketing. China came out with weaker than expected economic outlook and yet the S&P kept climbing. So if its not expectation of growth then what is causing market to behave this way. There is the Fed explanation i could fall back on when everything fails. Around Sep 7 Fed is expected to take actions again to do what it can. BUT with rates already so low across the board, what effect if any will Fed have even if they continue to buy. Another question is what will they buy? will it have any effect in reviving the economy. I think its more a case of jumping on the band wagon effect at work. Sean Clark, chief investment officer at Clark Capital Management Group was quoted as saying “A lot of fund managers have underperformed this year, and I think they’re feeling pressure….There may have been some panic buying over the last couple of weeks.” This is the best explanation i have came across but hardly the most logical.

MAN U playing the Stock Market

Manchester United Football club just filed to raise $100 million through IPO via NYSE. The exact details of when and offering price are not available at the moment. Its quite a bold move by one the worlds most recognizable sports team. I for one never supported the club but have to respect their annoying habit of winning all the time. The SEC filing made by the club makes for an interesting read and provides mountain of information about the cash generating Red Devils. In 2011 they had £ 331.4 million in revenues and operating profit of £ 63.2 million. The team derives its revenues from three streams

- Commercial revenue (£ 103 million) : Aon pays top dollar to have their name on the football shirts while Nike manages retail, merchandising, apparel business for the club. The club manages to make money off  its website too.

- Broadcasting revenue (£ 117 million): Broadcasting rights for Premier League, Champions League and other competition generates substantial amount of revenue. The club owns its own channel MUTV which is distributed in 54 countries.

- Matchday revenue (£ 110 million):The club averages 99% attendance in the 75,766 seating capacity stadium

In terms of investment, MAN U stock would be one of the most riskier ones out there. The clubs ability to monetize its brand, generate match day revenues and broadcasting revenues all depend on the Players ability to win matches. In a way its no different from trying your fortune at the bookies. Historically the club has won more trophies than i can count, BUT going forward this performance is not guaranteed. If they fail to make it to the champions league the team looses about 40% of its broadcasting revenues. Other teams with unlimited amount of financing coming up the ranks, there is a real danger of Man united loosing that top position.

The most alarming is the debt level of the club. The total (short/long term) debt stands at £ 458.9 million with Net financing cost of £ 51 million (in 2011 alone). This might severely affect the clubs ability to buy quality players to keep competitive with other clubs.

Anyway it will be interesting to see the clubs fortune at the stock market. The link below will take you to SEC filing just incase you want to dissect how a footy team operates. Happy reading

http://www.sec.gov/Archives/edgar/data/1549107/000104746912007026/a2210109zf-1.htm

 

Mac vs PC: ORBITZ decides

Wall street Journal reported: “Orbitz found Mac users on average spend $20 to $30 more a night on hotels than their PC counterparts, a significant margin given the site’s average nightly hotel booking is around $100, chief scientist Wai Gen Yee said. Mac users are 40% more likely to book a four- or five-star hotel than PC users, Mr. Yee said, and when Mac and PC users book the same hotel, Mac users tend to stay in more expensive rooms.”

So next time you shop around for Hotels be careful which operating system you use. Orbitz search algorithm comes out with the same list of hotels when a user searches, however what’s displayed in the first page (recommendation) differs on which system you search it from. For the same location, A Mac user can expect to see more expensive listings on the first page than the one using PC. This practice might seem unfair or even discriminatory, but like it or not this is a growing trend amongst online retailers. It’s quite clever how all that user data is incorporated in results to maximize revenue for the website. However it was not so clever for the executives at Orbitz to blog about the fact. The company might feel the effects of the spotlight on the stock price in the short term. The practice seems like the logical step for any company to tailor the products/adds to maximize sales and revenue. As long as these websites have the option of filtering the results by “cheapest” i think most people won’t have a problem with it. However for the struggling stock of Orbitz, the negative publicity will not be so forgiving. The stock has fallen from its IPO level in 2007 of  $15/share to $3.43 at close today. would not be surprising if the stock slipped further at the start of tomorrows trading.

Its official: Financial market Speculation is a sport

There has always been ways to speculate about the financial market. one can always use futures and options or just buy the underlying asset outright to take a position on their view. Now there is another way to do just that in a format that closely resembles Sports betting. Its called Spread Betting and is quite popular in UK. Like sports, you bet on an outcome amongst all that is offered by these websites. For example you can bet if the FTSE 100 will close higher or lower than the previous day’s close. The bet starts as low as 1 Pound per point. A point being the level of index in this example. You can also buy/sell points in any individual shares ( the bet size per point is up to you). This system is like speculating on steroids. It provides insane amount of leverage. The thing i found most interesting was the exposure to bonds/interest rates. It’s almost inaccessible for a retail investor/speculator to take a position on interest rate movements directly without large amount of funds. This website lets one take a position on the movement of interest rates/bonds ranging from 30 day interbank rates to Government bonds with as low as 2 pounds per point. Well its official now, speculating is a sports. Now you can bet on US Non-Farm Payroll numbers alongside Germany to win the Euro Cup.

Microsoft looking good again??

Its been eons since i got excited about anything Microsoft had to offer. Intense frustration and loathing of Windows vista drove me to the arms of Apple. Looks like Microsoft is putting some serious muscle into building something that works. The windows OS on the new Nokia phones seem to have hit it off with consumers. With the launch of Windows 8 in the horizon we are promised a unification of desktop and mobile platforms. All the preview looks good. Seems to encompass the simplicity of Apple operating system while having the configurability of Android. Then came the icing on top .. A Microsoft tablet..With both hardware and software from Microsoft we might/hope to see a slick user experience doing away with all the bloatware that usually comes from hardware-software mismatch. It does not hurt that this thing looks good too!!!

There might be good prospect for Microsoft stock in the long run if the company delivers on its teasers so far. Meanwhile in the short run, the stock is showing bullish indicators. The crossover for MACD and RSI (no divergence) both indicate a continuation of the uptrend that started at the beginning of June. The stock closed at 29.84 (June 18th). If the Stock manages to close above 29.91 in the next couple of days then it has some room to continue the uptrend.

Danish Krone as a hedge

This is a follow up on a short video on Financial times on Danish Krone. For investors with exposure to euro zone, it might be a good idea to use Danish Krone as a hedge. For speculators it could be a profitable bet in short run. Currently the Krone is pegged to the euro with a band of 2.25 percent of 746.038 per 100 euro. There has been evidence of Danish government intervening in the FX market to keep the krone trading at its mid level. Interest rate cuts beyond the ECB cuts hints at the scale of the speculative money inflow.

If the Greeks do decide to leave, things will kick off in the Euro zone. The inflow of money into Swiss, Danish and the US will intensify. In the short time the the trading band might be increased to reflect the appreciation of the krone. If the Euro crumbles then the Krone might be pegged to the German Currency giving rise to a stronger currency in the short term. It might not be such a bad idea to follow the herd this time around.