Archive for January, 2009

Nvidia’s Warning

Today, graphics chip maker Nvidia (NVDA) warned that its fourth quarter revenue will decline sequentially by nearly 50%, much worse than 6% drop expected by analysts. To call this development horrible does not do its justice. Under normal circumstances, a high-tech company that issues a warning like this will see its stock plunge.

Today, however, Nvidia’s share actually rose a few cents. Often, when a stock fails to drop in the face of bad news indicates that such news are already priced in (indeed, Nvidia’s shares are now worth about a quarter of what they were going for a year ago), and further declines are not likely. I believe this is indicative not only of Nvidia, but of many other companies in high tech sector. Intel’s warning a few days ago also had little effect on its stock.

January 13, 2009 at 9:36 pm Leave a comment

It Is Going to Get Worse before It Gets Better

It is becoming increasingly clear that the economic situation continues to deteriorate.  A recent worse than expected job report showed that the unemployment rate shot up to 7.2%.  We had negative earnings pre-announcements from industry bellwethers, such as Intel and Time Warner.  Today, Alcoa reported fourth quarter earnings that were worse than analysts’ estimates.

This time of year marks the beginning of the earnings season, and all indications are that it is going to be quite dismal.  Investors, however, are anticipating this, and the question is whether the earnings will be even worse than already low expectations.   The current estimates are for 1% decline from a year go.  As recently as last October, analysts were expecting nearly 50% rise!

It is quite obvious that the economic situation is going to get worse before it gets better.  The market is likely to bounce around until a clearer picture emerges.  A retest of Novembers lows is possible.

January 13, 2009 at 5:00 am Leave a comment

Piles of Cash on Sidelines

According to Merrill Lynch analyst, “cash on bank balance sheet has tripled in the last two months to the level of over $800 billion.”  This is collaborated by the article from Bloomberg, which states that the total amount held in cash, bank deposit, and money-market funds now equals 74% of the total market capitalization.  This is the highest ratio in nearly 20 years.  Once confidence returns, this cash will find its way back into the market and will help to fuel a strong rally.

January 6, 2009 at 3:59 am 4 comments

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Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.


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