Eurozone Fate Unknown, $RIMM's Fate All But Sealed Now
Even sell-side analysts have taken out their envelopes and started adding numbers like this blog has already done on October 18th here on this blog. Cash + enterprise/server services + patent portfolio + goodwill = terminal price. As fellow bears on $RIMM have pointed out more fluently than I: anytime a tech stock becomes a value stock, it's over. Friendly reminder: value investors buy at a discount, not a premium to net asset value.
From October 18th:
Breakup Evaluation
Again, the ltz vortex repeats its long-term view: single digits are in order as a terminal stock price. Cash is now down to $1.5/share. Patent portfolio? Again, Apple views its main competition as Samsung, as the two are in a bitter, and growing, battle in pretty much every jurisdiction on the planet. Apple and Samsung are fighting each other simply because $RIMM is not a relevant competitor. The Blackberry system outage has damaged its last remaining asset: diehards have stuck with Blackberry due to network security and exclusivity. Those features, along with RIMM's existence itself, must now be questioned. So unless a technology buyer appears to fuse the patent portfolio with one of its own, there is almost no chance of a bid. Time is running out, and management either needs to be replaced, or a further decline will be in order.
Technical Analysis "May" Help, Temporarily
Now, every chart on this stock is busted. There will be all sorts of different statistics that you can find/create. MACD, Bollinger Bands, EMA, SMA of every conceivable timeframe: you can see them all on www.freestockcharts.com for yourself. On a short term basis, it may/can work. Over the medium term? Nope.
Now that the M&A, activist shareholder rumors and hype have subsided, and the S&P has retreated, $RIMM has continued its excruciating decline to $16/share. Alexander Hamilton, soon you will be worth 1 share of $RIMM.
Sunday, November 27, 2011
"Hello. Emerging Markets?", It's Me, Ms Lagarde (Updated)
The Crowd Doth Protest Too Much, Methinks
Universal derision of the reports that the IMF is readying a 600B Euro rescue plan for Italy are all over the internet right now. The US has, historically, been the largest contributor to the IMF. Most of the protestations are related to the idea that the IMF, and the US, do not have that kind of money to help Italy. Yeah, true. But, there are others....
Possibility: Asia Would, and Should, Answer the IMF's Cash Call
Forget the past, and the fact that the IMF has helped basically every emerging market country in some shape or form over the past 30 years. The fact is that now, right now, Asia has more than enough foreign reserves, and national pension money to be on call in a revolving credit line, should the IMF require. GIC Singapore, and their counterparts in China, Korea, Taiwan, etc have more than enough money to collectively be on call for a revolver.
The key point here is that the IMF is not the ECB. The credibility of the ECB is waning by the nanosecond. However, the IMF is different, and if you believe that Asia doesn't consider that credibility, then you are being short-sighted when considering what can actually be done.
Last thing: if you know the Chinese mentality, they know this is a long game with many iterations. Even if they want to win over the long run, Eurozone depression isn't the best way to achieve that from the Chinese perspective either. While the concept of schadenfreude may exist in every culture, Confucian ethics don't focus on this in the least.
(Update) Don't Think The IMF Can "Get Away With This?" Think Again.
Oh please. TARP was &750 Billion. POMO who the hell knows how large. Bloomberg reports secret loans to banks resulted in $13B extra profits (i.e. extra handout). Now, experts are telling us that the IMF doesn't have the capacity/ability to muster up $750B?? You must have missed "current events" in Current Events class; we have just been through 4 continuous years of actions that would have been called "They cannot get away with this."
In short, the suggestion above may not occur, but to summarily dismiss the IMF would also be erroneous. The protestations to the IMF rumor are too violent. A couple of phone calls are all that are needed, and the IMF has the credibility to make those calls. For now.
Update (Nov 30): China Lowers Reserve Requirements
China lowered their reserve requirements by 50 bps in a move to head off a weakening global economy. The PBOC has joined the global PPT. This does make sense. Read the passage from the original post:
Last thing: if you know the Chinese mentality, they know this is a long game with many iterations. Even if they want to win over the long run, Eurozone depression isn't the best way to achieve that from the Chinese perspective either. While the concept of schadenfreude may exist in every culture, Confucian ethics don't focus on this in the least.
The Chinese are now intertwined in the global economy. Add that to their own domestic issues, such as the loan losses at banks and weakening real estate prices, it makes complete sense to address stimulating its own economy, and attempting to pull the global economy with it. So while direct loans to the Eurozone are not yet in order, this is China's first step. With their foreign exchange reserves, China has plenty of bullets to spare.
Universal derision of the reports that the IMF is readying a 600B Euro rescue plan for Italy are all over the internet right now. The US has, historically, been the largest contributor to the IMF. Most of the protestations are related to the idea that the IMF, and the US, do not have that kind of money to help Italy. Yeah, true. But, there are others....
Possibility: Asia Would, and Should, Answer the IMF's Cash Call
Forget the past, and the fact that the IMF has helped basically every emerging market country in some shape or form over the past 30 years. The fact is that now, right now, Asia has more than enough foreign reserves, and national pension money to be on call in a revolving credit line, should the IMF require. GIC Singapore, and their counterparts in China, Korea, Taiwan, etc have more than enough money to collectively be on call for a revolver.
The key point here is that the IMF is not the ECB. The credibility of the ECB is waning by the nanosecond. However, the IMF is different, and if you believe that Asia doesn't consider that credibility, then you are being short-sighted when considering what can actually be done.
Last thing: if you know the Chinese mentality, they know this is a long game with many iterations. Even if they want to win over the long run, Eurozone depression isn't the best way to achieve that from the Chinese perspective either. While the concept of schadenfreude may exist in every culture, Confucian ethics don't focus on this in the least.
(Update) Don't Think The IMF Can "Get Away With This?" Think Again.
Oh please. TARP was &750 Billion. POMO who the hell knows how large. Bloomberg reports secret loans to banks resulted in $13B extra profits (i.e. extra handout). Now, experts are telling us that the IMF doesn't have the capacity/ability to muster up $750B?? You must have missed "current events" in Current Events class; we have just been through 4 continuous years of actions that would have been called "They cannot get away with this."
In short, the suggestion above may not occur, but to summarily dismiss the IMF would also be erroneous. The protestations to the IMF rumor are too violent. A couple of phone calls are all that are needed, and the IMF has the credibility to make those calls. For now.
Update (Nov 30): China Lowers Reserve Requirements
China lowered their reserve requirements by 50 bps in a move to head off a weakening global economy. The PBOC has joined the global PPT. This does make sense. Read the passage from the original post:
Last thing: if you know the Chinese mentality, they know this is a long game with many iterations. Even if they want to win over the long run, Eurozone depression isn't the best way to achieve that from the Chinese perspective either. While the concept of schadenfreude may exist in every culture, Confucian ethics don't focus on this in the least.
The Chinese are now intertwined in the global economy. Add that to their own domestic issues, such as the loan losses at banks and weakening real estate prices, it makes complete sense to address stimulating its own economy, and attempting to pull the global economy with it. So while direct loans to the Eurozone are not yet in order, this is China's first step. With their foreign exchange reserves, China has plenty of bullets to spare.
Saturday, November 26, 2011
Eurozone Rumormill in Full Swing: Expect Fireworks
Updated Nov 28
This Weekend, The Sunday Headlines Begin on Saturday
NYT: Banks Build Contingency for Breakup of Euro
Bloomberg: Europe's Single Currency May Unravel Before Action, UBS Says
Bloomberg: Euro in Longest Losing Stretch in 18 Months
The Telegraph: Prepare for riots in euro collapse, Foreign Office warns
Reuters: Greece may miss 2012 selloff target due to Euro crisis
The problem with the extreme pessimism is that it presumes that everyone is completely stupid. That in itself is a wrongly placed assumption. If someone takes Merkozy for total idiots, I am pretty sure that is wrong. I am quite confident they are not, and they are not stone deaf either. They will respond, the question is speed, force, and whether the market is convinced or not. The lack of details given so far has been stunning. That the market has bought any of the "fixes" without the details is amazing, but the crowd is getting more pessimistic with each passing announcement.
Nevertheless, here are the "solutions":
Yahoo! Finance: Germany, France plan quick, new Stability Pact: report
Reuters: Euro zone integration may pave way for ECB bond action-officials
Economic Times (India): IMF readies 600-billion-euro rescue plan for Italy: Report
Within the next 24 hours, I suspect both lists are gonna get even longer.
The naysayers are out in force; you know what that usually means....
A bounce is probably in order.
Post-Mortem Monday (Update 1, Nov 28)
Rumors of IMF rescue plan were roundly denied, and the Franco-German stability pact remained sketchy at best. A euroland-within-euroland debt issue was also denied. Last, and not least, the notion of further leveraging of the EFSF was also denied. Whew, that is a heckaofalot of denials. So while the rally seemed tenuous and on low volume, the fact is that it didn't disintegrate when all of the denials arrived.
The market tell is, and will be, $DB, $CS, $ING; these three are Euro financial ADRs and yet are not within a PIIGS bloc. So, they represent the exposure to the Eurozone debt problem, and the liquidity problems all in one fell swoop. Add in some Euro exposure (due to their original denomination), and voila, you can tell whether the market move intraday is going to hold up. Today, $ING was up 12% out of the blocks, and didn't give much back. KISS, and that is as simple as it gets.
Market sent us everyone a message: the market is leaning short and punished those that stayed short. After the close today, Fitch kept the U.S. ratings but moved the outlook to Negative. Market reaction? Nada. We could be moving into a mode where bad-news fatigue is setting in again, and all bad news is good. 'Tis the season, after all.
This Weekend, The Sunday Headlines Begin on Saturday
NYT: Banks Build Contingency for Breakup of Euro
Bloomberg: Europe's Single Currency May Unravel Before Action, UBS Says
Bloomberg: Euro in Longest Losing Stretch in 18 Months
The Telegraph: Prepare for riots in euro collapse, Foreign Office warns
Reuters: Greece may miss 2012 selloff target due to Euro crisis
The problem with the extreme pessimism is that it presumes that everyone is completely stupid. That in itself is a wrongly placed assumption. If someone takes Merkozy for total idiots, I am pretty sure that is wrong. I am quite confident they are not, and they are not stone deaf either. They will respond, the question is speed, force, and whether the market is convinced or not. The lack of details given so far has been stunning. That the market has bought any of the "fixes" without the details is amazing, but the crowd is getting more pessimistic with each passing announcement.
Nevertheless, here are the "solutions":
Yahoo! Finance: Germany, France plan quick, new Stability Pact: report
Reuters: Euro zone integration may pave way for ECB bond action-officials
Economic Times (India): IMF readies 600-billion-euro rescue plan for Italy: Report
Within the next 24 hours, I suspect both lists are gonna get even longer.
The naysayers are out in force; you know what that usually means....
A bounce is probably in order.
Post-Mortem Monday (Update 1, Nov 28)
Rumors of IMF rescue plan were roundly denied, and the Franco-German stability pact remained sketchy at best. A euroland-within-euroland debt issue was also denied. Last, and not least, the notion of further leveraging of the EFSF was also denied. Whew, that is a heckaofalot of denials. So while the rally seemed tenuous and on low volume, the fact is that it didn't disintegrate when all of the denials arrived.
The market tell is, and will be, $DB, $CS, $ING; these three are Euro financial ADRs and yet are not within a PIIGS bloc. So, they represent the exposure to the Eurozone debt problem, and the liquidity problems all in one fell swoop. Add in some Euro exposure (due to their original denomination), and voila, you can tell whether the market move intraday is going to hold up. Today, $ING was up 12% out of the blocks, and didn't give much back. KISS, and that is as simple as it gets.
Market sent us everyone a message: the market is leaning short and punished those that stayed short. After the close today, Fitch kept the U.S. ratings but moved the outlook to Negative. Market reaction? Nada. We could be moving into a mode where bad-news fatigue is setting in again, and all bad news is good. 'Tis the season, after all.
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