Monday, April 16, 2007

Show Me the Money

In astonishing news, Google has reportedly agreed to buy DoubleClick.com for $3.1 billion. The news comes as the Dow rebounds on reports of a $25 billion buyout of Sallie Mae and strength in the blue-chip sector. The news is quite wary due to the valuation of DoubleClick.com and the amount of risk Google is assuming. The report is broken down by John Shinal, a tech analyst, in an article on marketwatch.com titled "Google Founders Veer Wildly From Buffet Playbook." The title comes from the interesting standpoint that Google's founders run their company the way Warren Buffet has run Berkshire Hathaway. Buffet is known for buying companies and assets that are undervalued to create value once the true value is known. In the purchase of DoubleClick.com, the Google founders have not shown they are purchasing on the cheaper side. When looking at estimated earnings report, DoubleClick.com is predicted to earn about $150 million this year. So, Google is paying a 20x earnings to acquire this advertising firm. The only reasonable explanation would be if they expect DoubleClick.com to growth at an exponential rate. On the other hand, Google also is expected to pay entirely in cash which is close to their entire 2006 operations. If Google was to pay for the company with stock, then if investors felt Doubleclick.com wasn't going to pan out then the stock would decline therefore decreasing the value given to DoubleClick.com owners. Since it is in cash no matter what occurs the risk is entirely on Google's owners since the payment is all cash. Though we should never judge to early since Google has a proven track record and obviously did not make this bid for no reason.

American Bulls

A good investor always has put in some research before they invest in a company. An investor should never just put their money in a company without knowing historical trends, company news, earning reports and any other useful information that could provide the investor with an edge. It is only luck if a person puts their money in a company without researching and they create a return. So, if an investor should do research what is the best place to find relevant information? The truth is there is no one place to find all the information an investor needs. Every investor should look at a variety of sources and use additional tools and strategies to get the best idea of what a company has been doing and what it will do in the future. The first place to start is any general finance website such as MarketWatch or Google Finance. These sites will show all the stock information is that available to the public and often times have articles and ratings for any stock an investor may look up. There are other tools that are useful for investors that must be paid for through such brokerages as TD Ameritrade or Scottrader. In addition, there are other useful sites that help with researching. One site known as Americanbulls.com uses a system of candlestick charting to analyze buying and selling pressures that can add to an investor's research arsenal.

The system of candlestick charting has been around since the 1600s. It was developed in Japan to understand rice prices in the marketplace. It was very simple to read and understand the graphical charts. The charts gave somewhat reliable information with regard to future demand and price fluctuations. The system is used for trading and has become popular within the stock market. Steve Nison wrote a book in 1991 entitled Japanese Candlestick Charting Techniques that has helped the spread of this analysis form in today's markets.

The fundamental element of the system is the candlestick. The candlestick is composed of a body (black if the price went down for the day or white if the price went up) and an upper and lower wick. The wick shows the highest and lowest trading points of the day while the body shows the opening and closing prices of the day. Several of these candlesticks form a pattern that is interpreted by the candlestick charting system. It takes several positive or negative candlestick forms to have a reliable pattern, but they are still never that reliable. The market could have news and speculation that could be causing certain formations that do not resemble the correct pattern. So with the use of this system an investor should also look at other research information to find out if the pattern will be upheld and if the stock is a good buy or sell.

Wednesday, April 4, 2007

The Power of Oil

Besides the housing market, another major occurrence in the past week was the price of crude oil in our economy. The price of crude oil, which is used to make liquefied petroleum gas, naphtha, kerosene, gas oil, fuel oil, lubricants and asphalt, has been on the rise over the past couple of months due to tensions in Iran and forecasts of a bad storm season coming into play. The story out of Iran began with 15 British marines and sailors being captured on their boat while in the Shatt al-Arab. The capture of the marines brought high tensions between the UK and Iran. The potential for aggressive actions heightened throughout the conversations between these two nations. The United Nations Council got involved to help alleviate the tension and rescue the captives. Today, Iran released news stating they would release the prisoners which has solved the conflict for the meantime. In a news piece by Myra P Saefong entitled "Crude Falls as Iran Says It'll Release U.K. Sailors" on MarketWatch.com, it states that the positive news between these two nations helped lower the recent high crude oil prices had achieved, but the price remained relatively high due to Iranian nuclear problems still escalating along with rising gas future prices. The speculation on crude prices is not positive for the US economy. Many experts feel that issues in the Middle East will raise crude prices therefore increasing the cost of gas futures. The price of gas futures increases because the US reserve of gasoline is declining to alleviate the increase in price in crude oil. When gas prices go up it is a strain on the US economy due to our necessity for gas. Therefore, the problems that could escalate out of high crude oil prices is substantial for the US economy, much more than even the concerns within the housing sector.

Monday, April 2, 2007

Is the Bubble about to Burst?

The housing market has seen better days. In the article "New-home Sales Fall to Seven-Year Low" on MarketWatch.com, it appears the economic report has shed some light on the current housing bubble – it has still not leveled out. On March 26th 2007, the home sales for February were released and disappointment swept the economy. The number of unsold homes rose 1.5% to 546,000 which is an 8.1 month supply – the largest surplus since January of 1991, which was at the end of a recession. The news only adds to the current housing issues that are under major debate. The number of unsold homes unsold shocked the market and caused the overall stock market to end on a down note. Many economists feel that since February numbers were bad there needs to be a strong rebound in March due to the historical heavy spring buying season. If February and March are both down months than the housing sector will probably not rebound this year. Though there was a cold February as Stephen Stanley, chief economist for RBS Greenwhich Capital states "it is dangerous to overinterpret the February numbers given the weather, so it is probably best to wait until March and see what a more normal weather month brings." So, the numbers in March will most likely rebound holding off the down spiral that has been common place in the housing industry for several months now. Once the new homes sold numbers climb the economy will once again see a boost from the housing sector within the market. Furthermore, a positive effect on the economy from housing will still take some time despite the results of March due to the market being very fragile and tight right now.


 


 

Wednesday, March 28, 2007

The Recession That Never Occurred

The phenomenon of a housing bubble has been widely used, but not much news has been focused on it until recently due to the huge boom occurring in the early 2000s. The most fundamental way that a housing bubble forms is through a fairly simple process. The process starts with general economic expansion with increased employment which drives demand for homes. Initially the increase in demand causes supply to shrink and vacancies to disappear causing prices to start increasing. The increase in housing prices causes homebuyers to forecast higher prices in the future either leading to purchase of an investment property or a new home since homes in the future will be more expensive. The bubble comes about once supply reaches demand and inventories of new homes increase, prices start to decline and the bubble is fully visible. In addition, people must be aware that the prices are increasing above a fundamental level of regular economic growth. So this is the case in the mid-1980s and the current state of the housing market in 2007.

The first progression of a housing bubble is the expectations of homebuyers in at the time. Whether people believe a bubble is going to appear is often the starting point for a housing bubble. So, a study in 2003 appearing in Brookings Papers on Economic Activity mention that many buyers did not believe they were in a housing bubble because they felt there was little risk in buying a home, which Is a factor in bubble situations (Anonymous 2003). Though the study's conclusion reveals that since many people were buying "strictly for investment purposes" it is a key factor in a housing bubble forming. Furthermore, if people are buying for an investment they are buying for the short run, and in combination with low subprime mortgage rates can only pay for the house for a short period of time while the interest rate is low and if housing prices start to fall and these investors cannot sell nor pay off the raise in their non-fixed interest rates, then there are defaults on loans and many disasters can spiral out of this situation. The good thing about 2003 is that housing prices continued to soar up until 2006 when the bubble was pretty indistinguishable and many homebuyers became wary. In early 2007, several articles were published regarding the current state of the housing sector and whether economists felt the housing sector would lead to national economic problems such as a recession.

The housing bubble is in a state of limbo. Many experts acknowledge the current decline in prices, but some expect it to end soon while others feel it will continue for some time. The market is in a state of correction. The current decline will continue for a little bit longer, but should level out within the next couple of months as the 2nd quarter is usually the hottest time of the year for real estate purchases. The only negative to this information is a recent article by Rex Nutting, a writer for MarketWatch.com, that states new-home sales fall to a seven year low and February's inventories of unsold homes is at a 16 year high. The negative out of this information is that February is suppose to be a strong month and with the numbers being worse than January it shows no signs of slowing down. Though, many experts suggest that the true indicators cannot be understood until March's numbers come out. One such expert is Stephen Stanley, chief economist for RBS Greenwich Capital, who admits that "It is dangerous to overinterpret the February numbers given the weather, so it is probably best to wait until March and see what a more normal weather month brings" (Nutting 2007). Despite the poor numbers and enormous amounts of unsold new homes, there are still positive economic conditions and relatively low mortgages rates that encourage buying. The only sure deterrent for many homebuyers is the expectation that prices will continue to drop, so they might as well hold off on buying a new home. Furthermore, if the low February numbers were so bad, why was there not a major market downturn or recession like symptoms? In response to the news Jay Suskind, head of trading at Ryan Beck, mentioned "certainly in the last day and a half it has been about housing concerns, but the flipside is that the market closed up nicely yesterday and we're seeing some of that today," in addition stating "The market bends but won't break and has been very resilient …the market is saying that it's confined to housing concerns and there is a sense that perhaps we are close to a bottom in housing" (cnbc.com 2007). So, Suskind feels that the business world understands the housing concerns, but feels the correction will end shortly. Since there was not a huge drop in the market and the small drop only lasted a day, it is noticeable that many people do not believe a recession is coming about or much more severe housing problems.

In contrast, the housing market is on a decline and cannot be entirely predictable. Many experts suggested February to be better than it was, but that was not the case. So, some experts are expecting two years for a turnaround while others expect a start up later in 2007. David Seiders, chief economist for the National Association of Home Builders, feels that 2007 will be the first nationwide decline in housing values ever. He does not feel it will be a huge stating that "It won't be a big decline, maybe 1%" (Kerch 2007). The bottom line is that it is the first predicted decline in housing values for a single year ever, which is significant. Seiders main concern is the "seriously large inventory situation (of new homes)," but he believes that there will be a gradual recovery over the next two years. Despite, the relative safe standing by Seiders he has continuously decreased his outlook for new home sales over the past month from 2% to 4% to 8% decreases in home sales this year. The negative and continuous changes in outlooks show some uneasiness in his predictions and a longer than expected turnaround. In addition, on the blog "housing Crash Blog" the writer, though may not be too credible, suggests that housing prices could be falling for "5 years or more" (Housing Blog 2007). The argument he makes is that mortgages rates have been increasing due to the "trillions of dollars" in unpaid loans that mortgages institutions will have to absorb. Therefore, this raises the mortgage rates and also does not allow partially risky homebuyers to obtain loans. Thus, home prices will continue to fall since no one will be able to afford them for awhile. This follows the suit that "cheaper money drives up housing prices… reverse the process and you get the logic of bursting bubbles" (Jubak 2005). In his defense, I feel he has a valid point, but five years is a ridiculous amount of time when mortgage rates are still near record low levels, though mortgage companies are tightening up their credit standards. In response to the blog Frank Nothaft, chief economist for Freddie Mac – one of the largest mortgage lenders, mentions "We should hit the trough (of the housing bubble) in the first half of the year. But we're a few years away from robust levels of activity we saw in 2005" (Kerch 2007). Furthermore, the housing market is unpredictable in its current state and most experts have been off in housing numbers for the first two months of 2007, which is quite disappointing. The numbers have been off and some have the economists, but I still see the housing bubble slowing down in mid- late 2007 without general economic hardships.

Despite the predicted decline in housing prices for the year and general uneasiness in the housing sector, our economy is still strong and a recession is quite unlikely. The strength of the economy while the housing sector is dropping is a significant factor in the conversation of a housing bubble. Since, approximately 5% of our GDP comes from housing construction one would think the new-homes sales number would have had a larger affect on the US economy. In 2005 Dean Baker, co-director for the Center for Economic and Policy Research, mentions that housing prices are surging well above the fundamental level which will generate a housing bubble that will cause problems due to the large amount of evenly distrusted wealth across the nation. He makes a point that "the collapse of the housing bubble will throw the economy into a recession, and quite likely a severe recession" (Baker 2005). Baker mentions that home construction has been increasing a near record pace for a few years and that once the market cools off there could be a major drop off of 40% equivalent to 2% of GDP. In addition, he adds that the decrease in demand will add about 2% of GDP and if unemployment follows suit then several millions jobs will be lost as well. Furthermore, the government could not currently boost the economy out of recession due to our large deficit. So, in effect the recession would be quite severe if it were to occur. The reason the recession will not occur is because the housing market has been in decline for a year now and the economy is still in good shape. David Seiders states "One of the good things is that the U.S. economy has been able to handle the dramatic correction in housing…GDP growth, unemployment, the overall inflation situation and interest rates have all been positive despite housing's woes" (Kerch 2007). In addition, the stock market has retained its strength despite housing issues. Since the economy is stable and many experts perceive the housing sector to continue its struggles for some time, it is a safe and very likely occurrence to believe the US economy will not enter a recession. The housing sector is under a major correction process due to the surging boom of 2004, 2005 and early 2006, but the overall economy is still strong and a recession is quite unlikely.



An In-depth look at the Housing Conversation

In researching the current state of affairs in the economy, many people would be well aware of the questions surrounding the housing sector. In response to these questions I have researched several articles and watched some interviews that put many questions to rest and ask many more. One thing about the housing market is it is currently very uncertain and many housing index numbers are inaccurate to put together a full report. Furthermore, the best knowledge and understanding available is from experts within and surrounding the industry.

The first two articles appearing in the peer reviewed journal Brookings Papers on Economic Activity are "Is There a Bubble in the Housing Market?" and "Bubble, Bubble, Where's the Housing Bubble?" These two articles discuss the current state of the housing market in 2003 and 2006, respectively. The first article compares two surveys of homeowners in 1988 and 2003. The survey asks relevant questions to access the current ideas and feeling about the housing market in four primary areas (LA, NY, Milwaukee and San Francisco). The experts use the surveys to compare the boom peak year of 1988s housing market and the current status of the possibility of a housing bubble in 2003. The second article written by Margaret Hwang Smith, Gary Smith, Christopher Mayer, and Robert J. Shiller is more relevant to us since it is from 2006 and discusses the belief that many states are in the midst of a housing bubble and buyers should be aware. Four economists put forth their understanding and knowledge about the housing market and predict future outcomes.

The rest of the articles are from big news outlets discussing the possible housing bubble since 2005. The first article written by June Kim appears on BusinessWeek Online entitled "Housing Bubble – or Bunk?" published on June 22, 2005 in the midst of the housing boom. The article discusses the possibility of a sharp decline in housing prices with four key economists in the business world today. The article has a positive stance on the housing sector. Next, is a "The Housing Bubble Fact Sheet" written by Dean Baker, one of the previous key economists a month later in July 2005. He makes several important comments on the housing sector in a published report for the Center for Economic and Policy research. The article is neutral towards the housing sector with belief that the market will have a downturn that could be negative. Another negative article appears on Housing Crash Blog entitled "US Housing Crash Continues: It's a terrible Time to Buy." The article written on March 21, 2007 compares renting and owning a home in the current market and why it is not a good market to buy in, today. The next series of articles appears on MarketWatch.com. These two articles "Housing Still on Down Slope" and "New-home Sales Fall to Seven-Year Low" discuss the surprising numbers of February housing indexes and give expert opinion on what the housing sector has in store for 2007. In addition, on Cnbc.com on March 27, 2007 there is an article "Stocks Close Lower as Housing Concerns Sideline Buyers" that reports that despite the surprising decline in housing sector numbers stocks were lower, but not to devastating. The last two articles appear on MSN Money and one written by Jim Jubak in June of 2005 is entitled "Why There Is No Housing Bubble" and discusses the boom in 2005 and why the bubble is not going to burst soon (in 2005). The second article written in April 2006 by Bill Fleckenstein titled "The Housing Bubble Has Popped" discusses the report of falling sales and a decrease in demand in the early portion of 2006. These articles give a could mixture of psotive and negative outlook on the housing market to provide a well-rounded and fair assessment of the current and recently perceived notion of the housing industry along with the not too easy question – Will the housing Bubble lead to a recession?


 

Is

Which Side to Be On?

The decline in the housing market and decrease in almost every measure of housing conditions has been at the front of the business world for several months now. The idea of a national housing market has long been ignored and put off due to the local nature of housing prices. Though it seems apparent we could be in the midst of a national housing bubble during 2007. Economists have different positions on what to expect. Many feel that the housing market will continue to decrease to the middle of 2007 and start to level off while others feel that the market will continue to decrease until 2008 and few believe the bubble will burst causing many economic problems for investors, homebuilders and many financial institutions. In response, there has never been a year with the average national home price decreasing for the entire year, so it would be smart to assume that the market will rebound before the years end. Though with recent economic reports that February set several low records for housing the argument that a housing bubble exists is set in stone. The real question is whether the bubble will lead to economic problems or a recession. The housing bubble has, yet to cause any drastic problems outside of loan tightening and a housing slump. No other sectors have dropped considerably besides housing, though the overall market can and has had down periods when significant negative housing numbers are released. In my argument I understand that housing bubbles are important to the economy to help alleviate high prices and level out the real estate market, though a strong national housing bubble could be disastrous, it is unlikely to occur due to the local nature of real estate prices.  So, in turn housing bubbles are a natural and important occurrence in the economy and the current housing bubble will not cause huge economic problems in the United States.


 

A Glimpse at the Housing Argument

The housing market in the United States has often been a relatively safe investment. Many investors feel the housing market is not too volatile therefore is a less risky investment than stocks. In the late 1990's and early 2000s the housing market was skyrocketing due to low interest rates and a dramatic increase in home purchases. It is relevant to point out that the housing sector of the economy is very much linked to the interest rate and general economic conditions. It has only occurred recently that many economists see the huge price increase and significant supply increase of new homes through 2004, 2005 and early 2006 could bring about a housing bubble that could lead to a recession. When asking most financial institutions or economists many say that there won't be a national housing bubble since the average national home price has never been in a decline for a single year. Yet it is becoming more and more convincing through housing data and record low numbers that it could be quite possible for a national housing bubble to arise. Though the argument to consider is will the bubble lead to a recession or and other economic problems? Many experts have different opinions on the matter and may often times be skewed due to their role in the business world. Many may suggest they think all will be fine, since if they express a negative opinion their own company could suffer from many buyers being wary of the housing market. In large part, many believe everything will be fine since there was such a massive boom in the mid 2000s that it is only normal and almost obvious that a correction in housing prices must occur. Since the recent news in 2007 has not caused any major damage despite the news being negative, we can be assured that the US economy will not see a recession.

In general, the safety of the economy and housing sector lies within the interest rate as mentioned earlier. Recently, the interest rate has been on the rise due to the Fed trying to tighten up inflation worries. Though the rates have been rising, they are still close to historical lows just under 6%. The problem that lies within the housing industry is the ability for home buyers to get a mortgage. During the significant housing boom, most home buyers were able to get mortgages with any credit therefore adding to the number of capable home buyers in the economy. Now many financial institutions are tightening up their lending practices due to the number of defaults occurring on mortgages given out over the past couple of years. So, now many buyers are unable to get mortgages and cannot afford the homes that are at high prices today. A home buyer must now have excellent credit and substantial wealth in order to approve for a loan and this adds to the housing sector demand declining. In addition, the major disappointment within the housing sector right now are new homes sales not existing home sales, since supply has no far exceeded demand. Furthermore, the link between tightening loans standards and the housing sector are all linked together and can be associated with the correction that is currently occurring within the residential real estate market.

Monday, March 26, 2007

The Tumbling of the Housing Market

    The article "Housing Still on Down Slope" by Steve Kerch appearing on MarketWatch.com on Feb 8th 2007 discusses the current situation of the housing market and forecasts housing prices for the future. Three economists mention that the real estate market is still declining and will not stabilize until the middle of the year. David Seiders states that there will be a decline in housing starts, which are the number of privately owned new homes entering the market, from previous years leveling out around 2002 numbers of 1.5 million. The maximum number of starts was seen in 2005 with 2.1 million, which shows a considerably more amount of money in the US economy. Though the starts are suppose to represent wealth in the economy, GDP growth, unemployment and overall inflation and interest rates situations have all been positive. So even though it seems there has been a housing bubble, it is not as severe as many would have portrayed since it really has not harshly affected the economy. Furthermore, David Berson, chief economist for Fannie Mae, believes investors and home owners will not see real home price gains for several years. This could surmount to a problem if many investors were planning on selling their homes and cannot, but still must pay for rising mortgage rates. Many people will then default on their mortgages causing many homes to enter foreclosure. The owners who default will have many problems, but all the foreclosures on homes will allow many new home owners to enter the real estate market at a much cheaper price. If many people enter the market at a low price, then homes will eventual rise and possibly create a similar bubble in the distant future. Currently, we do not need to worry about the future markets just about the current supply and demand and housing-price declines. The housing prices in 2005 were significantly high which caused supply in the housing market to increases while many homebuilders were trying to reap the rewards of the high prices and to keep up with the demand. The demand was partially inflated due to many people investing in real estate due to the rapid increases in prices. So, now investors and homebuilders are all trying to sell homes which no one wants to buy since demand was inflated and prices were sky high. Now prices are dropping to find the market equilibrium where supply equals demand at a reasonable price level.

Monday, March 19, 2007

Wikipedia: Las Vegas Sands

Las Vegas Sands is currently in development stages of several resort areas around the world. The company is in building stages of The Palazzo which is scheduled to open in late 2007. The resort will have a luxury - Beverly Hillish - theme and be a robust 50 stories tall. The Palazzo and the Venetian will be connected providing a vast array of restaurants, gaming, shopping and poolside fun for all guests. The Palazzo will add 3,025 suites to the already 4,000+ suites offered by the Venetian. Furthermore, Las Vegas Sands has in building stages is The Venetian Macau, which will anchor their other properties under development along the Cotai Strip in Macau, China. The Venetian Macau adds to their other property in Macau - The Sands Macau - and the revenue expected to be produced by the Cotai strip has already surpassed the Las Vegas Strip, and many investors have already bought into the companies stock to reap the benefits of the potential of this gaming Mecca.

Moving on to the South of Asia, LVS is in preliminary development stages of a plot they were awarded in Singapore. Many gaming companies bid for the rights to build in this lucrative market and Las Vegas Sands came out on top and were awarded the rights to develop the land. The Resort is currently known as The Marina Bay Sands and is forecasted to open in 2009. This resort will be the first casino allowed in Singapore in the last 40 years.

Lastly, the las Vegas Sands has development plans for a resort on Hengqin Island, China, along will a gambling hall in Pennsylvania. There is also speculation that LVS has bids for places in Europe and this shows the vast array of development sites that Las Vegas Sands has proposed.

Sunday, March 11, 2007

1) The Bubble Goes…

The past year or so housing prices have been declining due to one major reason - people are unsure of the current housing market. Are we in a housing bubble or not? Should I buy a home or rent? Should I sell my home now or wait? Many analysts and economists have commented and studied the particular phenomenon of housing bubbles and the current state of real estate affairs. There are many beliefs on what will happen in the near future due to the recent decline in housing prices and surplus of homes for sell. The importance of the housing market is due to the substantial amounts of wealth invested in real estate by U.S. citizens. The real estate market is regularly used as an index for economic conditions and forecasting. Therefore, if housing prices were to substantially decrease it could cause an economic disaster. Currently, there are many economists on both sides of the argument some saying the housing bubble is in the process of bursting and either 1) will crash quickly and cause economic problems or 2) decline slowly and economic problems will be manageable; then there are other people that feel the market is just slowing down and the market will soon pick back up. No one can surely know what will happen, but it is evident that the increases in housing prices year to year have been decreasing after tremendous gains in the late 1990s and early 2000s. Furthermore, in the next couple of weeks, I will be researching and analyzing the argument over the real estate market through a variety of sources: The Housing Bubble Blog, Housing Crash News, MarketWatch's Real Estate Weekly, among many others.

Friday, March 9, 2007

The “Whole” Foods Industry

The nutritional food industry has many competitors, but two of the largest companies have just merged. On February 22nd, Whole Foods (WFMI) said it had acquired its smaller rival Wild Oats Markets (OATS) for $565 million in cash. The acquisition positions Whole Foods to compete with larger supermarket chains just as Ralphs and Vons, which have an increasing amount of healthy food for sale. The news brought increase too both companies stocks, clearly showing the merger was widely accepted. In the article on MarketWatch.com entitled "Whole Foods to acquire rival Wild Oats, shares jump" the writer Angela Moore reports increases of 13% for Whole Foods and 17.2% for Wild Oats. The article shows many perspectives on the merger by several analysts. It is mentioned that Whole Foods gained some great locations and a similar business, so the company should see increased sales, margins and continue its potential as the leading health supermarket. Many analysts upgraded their rating on Whole Foods to outperform or buy. One such analyst called this acquisition a "strategic slam dunk." The strength in the deal lays in Whole Foods current operations. They will be able to decrease the overhead costs and turn around the underperforming Wild Oats retailers. This will bring added value to Whole Foods stock and continue to establish its name as the leading retailer in this industry. The article mentions Whole Foods had been looking to acquire Wild Oats for the last six years and now was the perfect time to make the final bid. Wild Oats had slow same store sales growth therefore the company was probably undervalued. Whole Foods offered an 18% premium on their stock and now is in position to turn Wild Oats around and grow from the ever-expanding healthy consumer population. Though the food is more expensive and recent economic problems may have hindered these higher priced retail grocery stores, Whole Foods made a great merger in a downtime in this industry. Once the economy picks up and more consumers start considering organic and natural foods, then Whole Foods has positioned themselves to acquire all the potential customers. Currently, Wal-Mart is trying to compete, but Whole Foods has a better image in this industry and very popular amongst the healthy wary middle class. The news helps Whole Foods out because of their recent decline in first-quarter profits, but may struggle for the next couple of quarters due to several factors. The merger with Wild Oats will cause a lot of overhead and change within Whole Foods. Whole Foods will need to reconsider all management within Wild Oats, along with remodeling their stores to the level of quality that is known at their current stores and there are probably many stores owned by Wild Oats that are near a Whole Foods that will probably needed to be sold. All of these factors lead to strains on the company's income until these two companies mesh and run as one unit. In light of all the news, the CEO of Whole Foods John Mackey supported these findings mentioning that the benefits from the acquisition of Wild Oats would not be seen for about a year. So, in the long run the company is a good investment, but there will undoubtedly be some bumps in the road that need to be fixed and the stock price is bound to fluctuate over the next couple of quarters. In addition, as advice for investors, just sit back and wait for the hype to calm down before settling into this behemoth of a natural foods retailer.

Sunday, February 25, 2007

The Use of Online Annotated Bibliographies

The technology era has brought about many new resources for searching on the internet. The vast amount of information on the web can easily be found with the proper resources. We have all learned to use libraries, but the ease, functionality, and vast amount of knowledge that the internet provides is quickly making libraries obsolete. In the past couple of years, if not even months, new sites have become available that allow people to store the information that they read online and file the information easily. These sites allow for users to view their collection of websites virtually anywhere around the world. The site such as Diigo allows a researcher to write on the website document and save these sticky notes for later use. So, in comparison to library research, this site allows a visitor to mark up a web page and aid their reading, later providing key points they may need, which was once a major advantage for print sources. The use of this site is easy and is continuing to be developed for more sophisticated uses. The internet and online annotation programs make it much simpler for users to search a vast array of documents and academically read through them. In addition, traditional library techniques are losing their advantages since there has been much success in transcribing text to online sites, so the academic knowledge that once was only prominent in real world libraries can now be found at the click of a button from a person's personal computer. Needlessly to say, the value of books is still relevant, but in a decade or so the tools and information available to everyone wirelessly will supersede the functions of traditional library researching. Lastly, the tools that are surfacing across the internet are only valuable to the users that know they exist. So, I strongly recommend that anybody who uses the internet regularly to visit such sites as Diigo, Zotero, and del.icio.us.

Friday, February 23, 2007

The World of Diigo – A Place for Social Bookmarking

The internet has a created a much more vast array of knowledge available for all people at the touch of their fingertips. Though there is so much information out on the web, how can anyone expect to find the valuable sources and interesting websites that are available throughout all the clutter? Well, one helpful tool that has recently been created is known as Diigo. It is an online website that holds a user's bookmarked websites available for everyone to see. So, if a visitor searches the site for a certain topic and finds another user with similar interests as their own, the visitor is able to see all the sites the other person has bookmarked allowing the visitor to visit these websites, which most likely have already been filtered through all the clutter. In my experiences with Diigo, I have found a couple users that have similar investing interests and there is one user I would like to share with everyone reading this blog. The user's name is Ashishgup and the user is interested in investing, wealth, books, writing, and several other topics that pertain to my own research.

Ashisgup's bookmarks are tag with many different subject listings, but I am going to focus on his investing tag due to the content of my blog. If anyone would like to visit this user's bookmarks, they may visit the link here. This user has fifteen bookmarked sites under his investing tag, in order of appearance; "This Stock Is Cheap -- Or Is It?" [Fool.com] February 13, 2007, "The Sleepwalking Millionaire" [Fool.com] February, "Why the stock market is volatile", "Do and don'ts for stock market investments", http://www.completeinvestor.com, "The Personal Finance Weblog: Investing", "The Indian Investor's Blog: Sticky: Shenoy's Investment Fundas", "The Simple Dollar » Jim Cramer's Real Money: Building A Ten Stock Portfolio", "The Simple Dollar » Jim Cramer's Real Money: Advice to Beginning Investors", "The Simple Dollar » Jim Cramer's Real Money: General Trading Advice", "The Simple Dollar » Jim Cramer's Real Money: Overview", "The Indian Investor's Blog: Are you saving or investing?", "Equitymaster.com: Numbers jungle unfurled", "Make Your Fortune in the Market" [Fool.com] February 08, 2007, and "Stock Market India". These are a mix of sites that can be beneficial to a variety of people. Some of these sites may not help a visitor, but I am sure there is one that holds some valuable information for each and every investor.

Of these fifteen sites, the three I like the best are "This Stock Is Cheap – Or is it?", "The Simple Dollar » Jim Cramer's Real Money: Building A Ten Stock Portfolio", and "The Simple Dollar » Jim Cramer's Real Money: General Trading Advice." I enjoyed a couple of his other bookmarked sites, but felt these three would benefit anyone who has just a little bit of time to read a couple of articles. The Simple Dollar site is a very interesting site that has summarized 52 financial sources in 52 weeks. Ashisgup mainly focuses on Jim Cramer's book, but there are other fine articles that an investor may want to look at. The other article appears on The Motley Fool, which is a site that reviews many different areas, but has a surprising amount of informative financial articles that many investors already read and any new investor should look at. In addition, several of Ashisgup's bookmarked sites seem to cover the international markets, primarily India and China, which I am not too familiar with, but do give some insight maybe too much speculation into those markets.

The Motley Fool article "This Stock Is Cheap – Or is it?" is written by Tim Hanson and Brian Richards. The article examines some small cap and low price stocks and shares some investing tips that many normal investors normally do not realize. They showcase several low price stocks namely Microsoft and Oracle who were both price around $.55 (adjusted for splits and dividends) in 1990 and are now trading north of $60, both with gains of 5,441% and 2,718%, respectively. Though, these stocks traded very low and are now high, Hanson and Richards point out a very good investor tips.

  1. Lower-priced stocks do not go up any faster than higher-priced stocks.
  2. Lower-priced stocks are not necessarily cheaper than higher-priced stocks.
  3. Lower-priced stocks are not necessarily smaller than higher-priced stocks.

These tips are elementary, but people are often afraid of investing in high priced stocks. Furthermore, Hanson and Richard express the need for investors to invest in companies that have cheap valuations compared to their cash flow, managers that own significant shares of the company, and a growing operation in a successful industry. So, if the price is $1 or $100 it should not matter because if the company is growing and is valued low in its industry then the price will soar no matter what price an investor buys in at. Therefore, the myth that high priced stocks will not go higher is truly a myth and that there are many key factors that need to be looked at besides the price of the stock.

The article on The Simple Dollar entitled "Jim Cramer's Real Money: Advice to Beginning Investors" is written by Trent. The article is a summary of a section of Jim Cramer's book Real Money. Trent summarizes ten investment tips in Cramer's book that every investor should use when building researching and maintaining their stock portfolio. The ten investment advices are 1) do your homework, 2) be willing to speculate, 3) be conservative with your retirement, 4) diversify, 5) don't blindly follow analysts, 6) never trade at market value – use limit orders instead, 7) every company and industry has a key metric, 8) when comparing stock prices within the same sector, ignore actual price and compare the price to earnings ratio, 9) use earnings growth as a second comparison between two stocks in the same sector, and 10) You only need $2,500 to start.

In summary, these tips underline the importance of understanding and evaluating an investor's portfolio and help the beginning investor. A beginning investor should always do at least an hour of homework each week on each stock they own to relate themselves to the industry and know the recent news. Any person can and should start investing if they have $2500 and invest in a variety of industries. The investments should be in strong companies, but all people should invest a small portion of their portfolio into speculative stocks. An investor should purchase on limit orders, so they can control the purchase price. Furthermore, investors want to research these companies and not just follow analyst's opinions. In researching the market, compare like companies P/E ratio and not their trading price and look into their earnings growth to make a valid judgment. Lastly, depending on your age investors can be more risky, but always be conservative for retirement by investing in mutual funds and bonds.

The article on The Simple Dollar entitled "Jim Cramer's Real Money: Building a Ten Stock Portfolio" is written by Trent. The article is list of the ten industries Cramer would build a portfolio around written in his book Real Money. Jim Cramer is well known for his declaration of having a diversified portfolio. Cramer suggests an investor starts with a company in their own neighborhood, an oil stock, a brand name blue chip that sells at a 2.5% yield or greater, a financial institution, and something very risky. This diversifies an investor's portfolio, so a bubble within any industry would not destroy all your earnings. The company within your neighbor is usually a company where you know people work at and really know the business well. An oil company is suggested because oil companies are usually strong and always in demand. The reason for a blue-chip is Cramer feels that a company with a healthy yield will not fall out and normal have good returns. A financial is important because banking services are always increasing and have good cash flow. The last stock to finish off an investors starting portfolio is a risky stock that is speculative because this is where a tremendous amount of gains can be made and if speculation does not pay off it would not devastate an investor's portfolio.

In addition, the article further suggests five stocks that can be considered when expanding a portfolio. Jim Cramer advises a soft goods secular growth stock, a cyclical stock, a technology company, a regional retailer that is expanding nationally, and a "hope for the future" nontech stock, like a biotech company. The secular growth stock is a large company that has stable product sells and won't fall off the map, but is currently in a down time and is more than likely going to rebound. A cyclical stock is a company that has phases throughout economic changes, such as a construction stock is declining due to the failing housing market, but will increase dramatically when the housing market fortifies. The technology stock is pretty simple, just research and evaluate a technology company and buy into it. The retailer is straight forward, just look for an expanding franchise, research the company and purchase the stock if the company sounds solid. Lastly, look into a company that may have promise in the future. Many biotech companies are good starts because biotechs are always in clinical and developmental stages and when the product releases the stock jumps incredible and can provide substantial returns for years.

Wednesday, February 14, 2007

Housing: A Battle for Equity Properties

Many analysts and economic experts have speculated on the disastrous ending that could occur to the housing market, after several years of record setting prices and sales. I am here to endorse the housing market, primarily commercial developments and office space investments. The strength of the market can be seen in the recent bidding war for Equity Office Properties, between Vornado Realty Trust (VNO) and Blackstone. In the recent article "The Price is REIT" on The Wall Street Journal Online, discusses the eventual outcome between these two companies. The two companies put in several offers that include various amounts of cash; the ultimate winner was Blackstone paying an enormous $22.9 billion for one of the largest Real Estate Investment Trusts (REIT). The housing market is obviously not losing too much steam, if a company is willing to pay such a premium to acquire commercial property. Furthermore, David Gaffen discusses the impact for both of these companies, though the price of the shares of the stock reflects the investor's opinions. Over the course of the bidding war,the Vornado stock price was around $120 a share sometimes falling into the upper $110s. Many investors and analysts felt that in order for Vornado to win the war they would have to pay about $59.50 a share, while Blackstone offered $55.50. Once Vornado never made a final bid and rescinded its intent to purchase the company - the stock rose roughly 5%. Obviously, many investors felt it was a great decision to not purchase Equity Office Properties, largely due to the fact that VNO would assume a huge amount of debt. In addition, Gaffen mentions that "the valuation looks toppy by almost any measure — an impression that Vornado's withdrawal further reinforces." So, some analysts felt that Equity Office Properties is being overvalued and VNO acknowledge this by withdrawing its bid. Lastly, the housing market has been strong and though has declined in its yearly increase still is a very safe investment since real estate prices are always climbing and office space is always in demand.

Garcia, Alex. "Sears Holdings: A Baby Berkshire in the Making?" SeekingAlpha.com 2 Jan. 2007 12 Feb 2007

The recent speculation and analysis of Sears Holdings (SHLD) has opened a lot of reviews and estimations from several analysts regarding the potential this company is generating. The article by Jim Cramer "Cramer's mad Money Recap: A Yardstick for Sears" is only the beginning of an onslaught of reviews about this company. The article that sheds more light onto this once declining retailer is submitted by Alex Garcia on SeekingAlpha.com. The article is entitled "Sears Holdings: A Baby Berkshire in the Making?" that discusses the company and shows it true functions of business. Garcia is making a huge comparison when bringing Sears into a category with Berkshire Hathaway (BRK.A), which is almost in a category of its own. Garcia comments that Sears Holdings is a combination between Kmart Holding Corp. and Sears Roebuck that merged and since has changed its strategy to make up for its decline in retail sales. Alex Garcia continues to support Sears through the article due to the CEO of Sears, Edward Lampert. He profiles Lampert and his investment background by stating "At age 25, Edward Lampert started his own hedge fund, ESL Investments. Using an investment style similar to Warren Buffett's, ESL Investments has averaged returns of 29% per year. ESL Investments became Kmart's major shareholder when it built up a huge position at a time the company was going through bankruptcy and shares were depressed." So, Lampert is really an investor much to the same degree that Warren Buffet was when he created Berkshire Hathaway. Therefore, Garcia feels that this company is a strong long term investment as long as Edward Lampert continues to invest the cash flow of Sears into good investments and "improves the operation of the core business."

Monday, February 12, 2007

The Street.com Staff. "Cramer's 'Mad Money' Recap: A Yardstick for Sears" thestreet.com 8 Feb. 2007. 12 Feb. 2007.

Recently, the focus on my blog has been gaming and leisure stocks, primarily, those concentrated in Macau. Now, I am going to discuss the housing "bubble" and other key stocks that have been entering the market. On Friday, Fortress Investment Group became the first publicly traded hedge fund. In Jim Cramer's article, "Cramer's 'Mad Money' Recap: A Yardstick for Sears" he discusses this important event in the market along with a stock that could become a great investment. Furthermore, the importance of hedge fund activity has been seen through the rapid saturation of hedge fund companies opening in the past couple of years along with the huge amounts of profits many funds have managed to make. Though, in Jim Cramer's article, he believes that Sears Holdings (SHLD) will actually be the beneficiary from Fortress going public. Since, Fortress is now public investors are now able to have a benchmark value for what the investment industry can create in profits. In addition, Cramer believes Sears Holdings is more of an investment company than a retailer, since they own Kmart and Sears, but recent acquisitions have created soaring earnings through investment activity. So, the benchmark that Fortress creates allows Sears Holdings to be properly valued and Cramer feels it could create a huge impact on the price of a share of Sears Holdings stock. In closing, Jim Cramer recommends buying this bullish stock since it is currently $180.81 and his prediction estimates Sears to be worth $327 in the near future.

Wednesday, February 7, 2007

Las Vegas Sands Fourth Quarter Earnings: Really that Great?

In response to the news articles surrounding Las Vegas Sands' Fourth Quarter Earnings Report, I would like a chance to discuss the speculation and conversations that have occurred - resulting in a decent fall in stock value over the past couple of days. The article "Investors Leave Las Vegas Sands" on BusinessWeek.com discusses the earnings report and has made some interesting speculation surrounding the company. The article mainly describes the outlook for gaming in Macau, but suggests that many stockholders sold their shares because of not a significant increase in Macau gaming revenues. LVS earnings report stated that the company had a year over year increase of 3.3% in Macau and 72.9% in Las Vegas. This is showing that the potential that many were expecting did not show up. Many people might have been expecting a much higher increase in Macau such as 10-20% maybe more. Many people are speculating that the Las Vegas earnings is a fluke and 72.9% is really high and will not happen again, so all in all the earnings really did not look good, despite the record operating income levels. Though, the earnings may not have looked good once analysts start poking around, remember that the stock has risen from speculation and Las Vegas Sands still has many more resorts here under development. These resorts could provide a substantial boost to the tourism in Macau along with the many dollars left on the gaming tables. Lastly the first quarter earnings report should look much better for LVS, since it is reporting the strongest time of year in Macau with the Chinese New Year and other Asian activities.

The Effectiveness of Communication - Online Media and Their Distractios

The display of information in a print or visual source needs to be organized in an effective way to communicate to the audience. Today’s print and media articles are often times written nicely, but the layout on the page along with advertisements distracts the viewer and usually takes away from the content the writer was trying to communicate. So in my post, on this wonderful Tuesday afternoon, would like explore a couple of my resource links and comment on their perspective choices in regard to layout and overall effective visual communication. Some sites are able to provide a simple and straightforward layout that is easy for a viewer to understand while other sites have distractions everywhere, which can cause the viewers eyes and mind to wander off into other parts of the page. In addition, people are having less and less time to read the material and by giving the audience distractions will largely take away from a writer’s conversation.

The discussion of online media and displayed information is very complex. Though, I am by no means, an expert on the delivery of content within a print or visual source, I still am able to compare sites and explore their positives and negatives of their media. Furthermore, the first site I would like to discuss is Yahoo Finance, which is a great finance site for all investors for several reasons. Yahoo Finance is well laid out with a good color scheme. The colors are simple and do not vary throughout the page, so your eyes can guide you through the several frames of content on the welcoming page. The site does have a decent size advertisement, which I would prefer not to see, but it does not flicker or play sounds like many of the advertisements on finance pages. In addition, most of the Finance sites have advertisements and so more than one a page, though I applaud Google’s finance page for not having any advertisements. Furthermore, Google Finance is very simple and just bluntly gives the information an investor is seeking. The frames on Google are all equal and the layout is the blandest, but works extraordinary well. Back to Yahoo Finance, they display more information on their welcoming page then Google, which causes some distraction, but it is just suppose to be a quick overview. Therefore, we should look at the variety of stock market charts these sites have and compare the visual elements that each of the following sites offer – CBS MarketWatch, Google Finance, and Yahoo Finance.

These three sites offer the same information in surprisingly different ways. Currently, Google Finance has the most detail oriented charts that are interactive with the user. Google’s charts allow the audience to use their cursor and pinpoint a specific spot on the stock chart giving the audience the date, price, volume and any news that came out on this day. CBS and Yahoo have detailed charts, but they are not interactive like Google’s, which is why I feel the media is delivered better by Google. Though, Yahoo does have an interactive chart under works in Beta testing that should bring the relevant stock information to the forefront better.

Lastly, I would like to consider another sight that is different than these informational/news sites. The site is Mad Money Recap and is a very useful site that is laid out in a bizarre way, which I feel demonstrates the distractions that are quite prevalent across multiple media formats, specifically the web. The site has many advertisements which distract the visitor, has multiple fonts colors and some are hard to read, and has a very interesting assortment of colors used for the lay out. Despite the fact that there are a bunch of distractions on the site, I find the archive easy to manage and the information is clearly displayed.

Wednesday, January 31, 2007

3) The End of the Rainbow -Tools To Make You A Fortune

There are thousands of sites and tools for investors to research the stock market and economy, but which ones should an investor use? I have spent countless hours and heard from hundreds of analyst and investors to find the sites that are worth an investor’s time. These sites are located on my link list under Resource List – Tools of the Trade. I will get into more detail further on, but I would first like to explain my two link lists and the differences between them. The online resources I have included on my blog’s link list were chosen for their academic content, resourceful tools, and accurate and credible news sources. I have separated the link lists into two categories for a couple reasons. First, the two lists separate the content that is found on the sites. The Resource List contains news sites and stock quoting that can benefit any investor find the information they need for any particular company that is publicly traded on an exchange. These sites probably have recognizable names because they are run by large companies that provide economic information to millions of people, therefore, are reliable sources for economic news and trading information. On the other hand, the Online Blog and News Resources section contains some blogs that I have commented on or are planning on commenting on, as well as, sites that speculate on economic conditions and public companies. As time goes on, I hope to add several more blogs on this site along with any other informational sites that can assist the average investor.

I have not found any true blogs that concentrate entirely on stock market transitions and economic news. I have found stock market blogs that are more of a one way street with basic speculation and news surrounding a given public company or industry sector. The section of my blog Online Blog and News Resources contains some valuable sites for gaining information through analyst forecast and analysis. The first site is Dan Carty’s gaming stock article that links to several other sectors he has covered. This site helped me evaluate some of the speculation I have written about regarding Macau and some of the larger gambling companies. Secondly is the site Seeking Alpha. This link is more specific to the housing industry and the latest articles concentrate on the swirl of information surrounding the decline of the real estate market. Next is Zachs Research Blog, which is a news stream of major plays they are making as a stock research company. Zachs gives suggestion on what stocks to buy, as most analysts’ do, and they provide it through this blog that is updated throughout the day. Further down the list is Jim Cramer Blog, which centers around the well-known analyst Jim Cramer, which I have gone into greater detail on January 24th, 2007. The last three blogs are all financial newsletter stocks that update daily with news surrounding the market and economic conditions. I primarily like Blogging Stocks since it is an extension of AOL Money and seems to have some great news articles everyday. Ultimately, these sites are written very similarly and have the same primary audience. They cater to the everyday investor who is looking to research a stock they own or planning on buying.

Now the most important of these sites are under Tools of the Trade. AOL Money, Yahoo Finance, Google Finance, and CBS Marketwatch all provide the same resources with certain aspects being different. Some people prefer one to the other, but it is mainly a personal preference. I use Google and CBS more often, but only cause I am use to these and have been using them for a while. In addition, these sites will help all investors look up quotes for any public company providing them with pages and pages of information to give an investor all the data they need to research a company they are interested in. Moving away from these sites the last three are primarily different from all the other sites I have suggested. First, American Bulls is a momentum trading site that shows the formation of certain characters that some people believe provides adequate information to invest from. For example, LVS is showing a HIGH WAVE today therefore there is indecision in the market. The site posts a BUY-IF $104.07 based off of the HIGH WAVE formation. Sometimes these signals help and other times they do not. I would suggest if using these formations to also use a secondary source to research the stock further. Next is thestreet.com and Mad Money Recap which are both sites related to Jim Cramer. TheStreet.com is an analyst/news site that was started by Jim Cramer. The site offers many analysts speculation that an investor must pay for. Furthermore, it may be worth the money since the research is backed by a strong reputation in Jim Cramer and the status of the site in the economic world. In addition, Jim Cramer has his own blog on this site, but a viewer must pay for access to that as well. Lastly, is Mad Money Recap which just posts the recap to Jim Cramer’s analyst show “Mad Money.” Cramer is well respected in a lot of circles, so it wise to look over this recap to see if he has mentioned anything about a stock within an investor’s portfolio. All of these sights can help an investor improve their research on any public company. It is knowledgeable to research any stock an investor may want to purchase in-depth using a variety of the tools previously mentioned along with other strategies and sites that may be out in the investing world.

Monday, January 29, 2007

Annotation - Melco PBL

Venturing away from some of the larger and well known gaming stocks, I would like to introduce a recent IPO to the mark – Melco PBL Entertainment. After all the discussion about the prominent potential and current success of the Chinese gaming island of Macau, can one gaming company actually have problems focusing their company on just this marvel. The company under question is Melco PBL. The company went public on December 19, 2006. In Abbi Adest article “This Week's IPOs: Dayton Superior Corp, Claymont Steel, Fuwei Film, Melco PBL Entertainment, Oculus Sciences - SeekingAlphahe highlights several IPO’s that were going to hit the market during the week of Dec 18th 2006. The following blurb underlines the company and the services it provides along with some other relevant information.

MELCO PBL ENTERTAINMENT (MPEL)
Business Overview (from prospectus)

We are a developer, owner and operator of casino gaming and entertainment resort facilities focused exclusively on the rapidly expanding Macau market. Our subsidiary Melco PBL Gaming (Macau) Limited, or MPBL Gaming, is one of six companies authorized by the Macau government to operate casinos in Macau. We have two current casino gaming and entertainment projects under development: the Crown Macau Hotel Casino targeted to open in the second quarter of 2007 and the City of Dreams integrated casino complex, phase one of which is targeted to open in late 2008. MPBL Gaming currently operates six Mocha Clubs featuring a total of approximately 1,000 gaming machines, or slot machines. We have also entered into a conditional agreement to acquire a third development site that is located on the shoreline of the Macau peninsula. We are a 50/50 joint venture between Melco International Development Limited, or Melco, and Publishing and Broadcasting Limited, or PBL. We are the exclusive vehicle of Melco and PBL to carry on casino, gaming machine and casino hotel operations in Macau.

Many investors are looking at this stock as a great investment due to the huge potential gaming outlook for the Chinese island of Macau, which I have discussed in earlier blog posts. Though there is huge potential for success in this area, one gaming analysts advises people to be careful with this gaming company for several reasons. Jeff Chen, a writer for SeekingAlpha.com, mentions there is a huge risk/reward option for this stock. In his article “Will Melco Hit the Jackpot in Macau,” he lists out his reasons for investors to be skeptical when purchasing shares of these stocks. In brief, he mentions that the company is very leveraged so if revenue does not come quickly and soon then there will be a decrease in earnings or possibly huge amounts of debt to pay off. Secondly, Melco does not have the lease for their land in Macau in their grasp, but are in negotiations for a plot. Thirdly, the transportation from areas in China to Macau is expensive and inaccessible to the mass market, compared to Vegas where people can drive. So, Chen feels that the market may get over saturated and Melco might be the loser to bigger gaming companies. Lastly, he mentions that Macau’s weather and location could be the potential for a natural disaster, which would ruin Melco. Since Melco PBL is fully dedicated in Macau, Chen states that a hurricane or disaster would be devastating for this company, therefore, crashing the stock and wiping out out all current shareholders.

For more information about Melco PBL see - An In-Depth Look at Melco PBL Entertainment's IPO

Wednesday, January 24, 2007

2) "Booyaa" Jim Cramer Blog

One of the most influential blogs concerning the option and stock market is focused on the infamous retired hedge fund manager - Jim Cramer. Jim Cramer is loved by many for his crazy antics on TV and his success with speculating on big stock gains. Jim Cramer Blog focuses on relaying Cramer’s ideas on current stock market conditions and describes itself as discussing mad money, the stock and option markets, and the economy. Jim Cramer is an analyst and the host of “Mad Money,” where he tells the viewers about the stocks he would be looking at right now and talks to callers about their current portfolio positions. He is a very popular analyst and has a proven track record. He used to run his own hedge fund after working for Goldman Sachs. He has made large claims to the hefty returns he made, while managing his fund, which brought him prestige and respect within the analyst community. He has since retired from the business to open thestreet.com which analyzes and speculates about stocks and options. Jim Cramer Blog is well laid out with archives of all of his postings along with links to various other sites that can help the average investor or any viewer searching for market news.

Jim Cramer blog is posted by someone else known as “stock administrator.” There are several postings each day and usually they review any large news stories that occurred in the economy or market, along with the stocks to watch for the day. The postings usually refer to or summarize information that is seen on thestreet.com or on Jim Cramer’s show “Mad Money.” In addition, the blog has all the information that an investor can handle showing viewers what stocks have done for the day and if there are any key speculations to play off of.

Furthermore, the content of the blog is relatively brief. Most of the posts mention several stocks in short and provide a little bit of information. There are some posts that focus on a certain topic about the economy and these posts are very insightful. I feel that the stock administrator does not put any of his own speculation on the blog he just summarizes the days account putting forth Cramer’s information for investors to easily find. The site is well organized, so any viewer could easily search the blog and find the information they were seeking. Though if a viewer of “Mad Money” wanted to see a recap of Cramer's show, I would suggest a different blog as it relays the information better. This site is located here. I feel it is easier to find the exact show a viewer may be looking for, and the show is written almost word for word on the Mad Money Recap site. So, an avid fan never has to miss a thing.

Thus, Jim Cramer Blog can benefit my blog in several ways due to the large scope of content about the economy and stock market. The blog will show the current hot stocks and cold stocks through its daily posts of hot stocks and big decliners. These stocks usually have an analyst speculating about them and that is why they are moving. So, my blog can use this information to see the validity of the speculation after a certain amount of time, and to see how much pure speculation can truly affect a stocks price. On a closing note, Jim Cramer – just by speculating and covering a stock on his show – will cause a stock to move at least a percent the following day or even in after hours. So, the power of an analyst is quite large and I will venture further into his and others analyst power at a later time.

Monday, January 22, 2007

The Market: Macau...the next gaming Mecca

The Market: Macau...the next gaming Mecca
http://www.thestreet.com/p/_tscs/rmoney/jimcramerblog/10333785.html

Macau...the next gaming Mecca

I would like to continue discussing these gaming stocks and focus this blog upon the past year of speculation surrounding the Asian gaming peninsula Macau, China. The geographic location of Macau is in a prime location 43 miles southwest of Hong Kong and 90 miles from Guangzhou. Therefore, there are hundreds of millions of people within a short distance of this developing gaming mecca. The close proximity of this peninsula to all of Asia can foreseeable draw more tourism to it than Las Vegas. This is likely due to the fact that Macau is the only place in China that allows gambling and is the home to over a billion people. In addition, these people seem to gamble much more aggressively and this is a large part of the success that Macau has to offer. One staggering report is that the casinos in Macau have tabling earnings almost 10x the per-table amount in Las Vegas. So, if the casinos have a large market to attract and large winning totals then revenue and profits should increase accordingly.

Las Vegas Sands has already built the largest casino in the world in Macau with regard to the number of tables within one building. There market share of the gaming tables will only increase over the next couple of years with several sites under development and the Venetian Macau set to open later this year. Wynn Resorts has also entered the market and is continuing to develop additional plots they own in this area. A couple other companies have select areas within this region, but Las Vegas Sands and Wynn own the majority of land with LVS having the original master planned Vegas-style gaming development in Macau.

Furthermore, many analysts have gradually increased their price targets and commented on the prospects of this gaming paradise deemed as the Las Vegas of Asia. One recent article through the Associated Press mentions “Analyst Hikes Target for Sands, Wynn.” One such analyst, Celeste Mellet Brown, “boosted her price target for Las Vegas Sands to $100 from $68, saying in a client note that opportunities in Macau, Singapore and China could “drive potential value.” SO, these two companies Wynn and LVS have strong growth outlooks in Macau and potentially there is a lot of money to come out of this region. On the 3rd of January 2007, both stocks reflected the recent strength of the Macau market when both stocks climbed on recent revenue results from their establishments in Macau. The AP report on these mentions that the “Macau Statistics and Census Service said that November gaming revenue increased 32 percent over the year-ago period to $598 million. Unofficial numbers for December suggest that revenue will be up 57 percent over the year-ago period.” These numbers are very high and are only going to increase with the additional gaming developments under way. J. Cogan, an analyst with Banc of America Securities feels that Macau gaming revenue could grow to $13 billion to $16 billion by 2010. That is quite a leap from the approximately $6 billion ($500 million a month) that it currently draws and only shows the potential value of the developments that these gaming giants are producing.

Earlier today, Jim Cramer wrote an article written upon the last year of speculation about Macau specifically Las Vegas Sands. He mentions that the CEO, Sheldon Adelson, sold 44 million shares of the stock 10 months ago at $49. Cramer kept a slight buy on the stock despite this, but as he mentions this was a skeptical move. He felt that if the CEO is selling such a mass amount of stock then he is getting out and so should everyone else. Though, looking back on it now everyone in their right mind should have bought since today the stock is valued at $100+, which is a substantially gain. Nobody truly knows the reason for him dumping so much of the stock at that point except that he still has millions of shares if not billions of shares left in his account and trust. The main point to notice is that there were some obvious people that speculated about Macau maybe even ventured over their and saw the current money being earned and their eyes glowed at the potential value of this place in years. These bankers bought those 44 million shares and are now sitting nicely on a 100% gain in 10 months, not to shabby in this era of the stock market.

Tuesday, January 16, 2007

Gaming Stocks

In response to Dan Carty’s article “A Closer Look at Casino Stocks,” I would like to comment that many gambling and leisure stocks have done quite well so far this past year. His pick of MGM in October was a good play with the development of Project CityCenter in Las Vegas along with strong earning outlooks for the future quarters. The MGM Mirage stock has moved from $35 in August 2006 to the upper $60s - low $70s this past week. MGM ended up having increased third-quarter profits which some analysts had predicted and very well paid off for many investors.

On the other hand his speculation on Las Vegas Sands Corp. is a little off, though he is correct that it is trading at 59x price to earnings (which is now probably higher), which is quite high compared to other gaming and leisure stocks. I question why he and other analysts want to keep backing off LVS. This stock has only gone higher over the past year though it is priced high and has only two open casinos, but people need to focus on the development of this companies holdings in Macau, which is a stronger gambling area than Vegas with less casinos. LVS is now at $108 and Dan Carty mentions that a pullback is possible if the stock hits $105. The recent news about LVS receiving its proposal to develop another plot in China is supposed to add $34 a share to this stock when adequately valued. So, if I was going to speculate I would say this stock should level out around the $120s, but as far as I know with this stock, an investor can never be certain.

These gambling stocks keep rising and many people would say that a pullback is upon us, but with the amount of money the Chinese tend to gamble, all the speculation in Macau, China has and may continue to pay off for investors who buy into the major players in China (LVS and WYNN).

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Monday, January 15, 2007

1) Introduction - Gambling on Gambling

Ever wondered how Warren Buffet made 44 billion dollars? Well, he invested his money in the stock market targeting undervalued companies and now is the second richest man in the US. The market has changed a little since he first started in the 1960s, but there are still many undervalued companies and a whole heap of wealth to made. The purpose of my blog is to research stock news and speculation and to see how it affects the price of a given stock and the trading volume. I will venture out from this topic and also inquire into several other blogs that discuss hot stocks for 2007 and see how this has affected their prices over the first couple of weeks into the New Year. I would also like to research economic news and other blogs to see how they affect the stock market in general, not just on a stock by stock basis. The majority of the investing public knows that when a stock has positive news the stock price will go higher and the number of shares traded will increase because people want to own a stock that has a higher earnings outlook, therefore, a higher current price. This can be seen everyday in the market and usually if a person visits the website CBS MarketWatch they will have a list of the biggest winners and losers of the day. The winners have good news while the losers have bad news, or either of these have at least good/bad speculation. Since we know how news affects stocks I do not need to go into any further details regarding this, but what I do want to cover is speculation and analyst recommendations.


I would like to focus this post on the speculation surrounding gaming stocks and the recent success that has followed. The stocks that I will spotlight are Las Vegas Sands Corp. (LVS), Station Casinos, Inc. (STN) and Harrah's Entertainment, Inc. (HET). These three stocks have all increased dramatically in recent weeks due to speculation by gaming analysts. Harrah’s Entertainment Inc. had news of a possible buyout offer that substantially increased the current price of the stock. The news came in October that there was a buyout offer that took the stock from $65 to $76. The price increased due to the confirmed positive news that the company was valued higher than the current stock price indicated. Though, the most interesting speculation around this news was that the offer still undervalued the price of the company. So, over the next couple of months Oct. – Dec. 2006 many analysts tried to pinpoint the value of the stock, thus finding the true value of the company. The speculation was correct and more buyout offers were made at higher prices and the stock climbed to $83. Thus, over the period from Aug. to Dec. the stock jumped from $60 to $83 a 38% increase in stock value. The people who listened to the speculation or had even speculated themselves before the company announced anything happened to make a pretty good investment.

The next stock that had buyout speculation and is still in the mist of the entire news surrounding it is Station Casinos Inc. The buyout news was a little different than Harrah’s because it was led by the management team, where as Harrah’s was offered by an outside company. The news took Station Casino’s stockholders by surprise, but it led to a jump from $68 to $83. The news brought speculation that this buyout could be similar to Harrah’s and that it would bring in more offers from other companies that might send the stock even higher. In this case, the speculation has not paid off as the stock has cooled down over the past few weeks, idling just around $80. Though, we can not entirely tell if the speculation will or will not pay off because with Harrah’s the offers came in over a several month period and for Station Casinos it has only been a month. If an investor visits this site they will notice that after the news of the buyout many brokers suggested to just hold the stock due to the new higher valuation of the stock.

Lastly, I would like to discuss the news surrounding Las Vegas Sands. LVS happens to be the richest casino company in the world, primarily due to their major plays in China and other highly sought after development sites in Asia. If an investor looks at a yearly chart of this stock they will notice a constant increase over the course of this period. The increases are mainly due to positive news about their holdings in China and the speculation by analyst that the casinos in China will be a lot more profitable then Las Vegas Casinos, which makes LVS a lot more valuable. The recent news I would like to discuss is the speculation surrounding the development of a proposal to build a resort on a small island close to Macau, China, where their other projects have been under development for some time. The recent news can be read here.
In this article, it confirms that the news was speculated before the company released it’s announce. It states that an analyst’s report caused the stock to surge and the company’s official announcement, a day later, confirmed the news. Therefore, paying off 10% for those investors who had access to the report. The news was issued on January 11th, 2007 and I am sure there will be more news to come surrounding this new development.