Intel (INTC) reported earnings yesterday and profits were down (bad) and inventories were down slightly (good). But we really don't care about that because INTC and AMD are in a price war and until that stops, they'll both continue to kill each other. The winner in this war is Hewlett-Packard Co (HPQ), who's cost are driven down and profit margins rise. Couple this with the Microsoft Vista upgrade cycle (computer sales should rise as people upgrade) and HPQ should be rising over the next couple years. I know that HPQ has already run over 10 points to $43 and change, but I think the Vista upgrade cycle will be long and slow. I've heard, but not officially checked, that Microsoft has yet to release a back compatibility list for Vista, which probably means nearly all software will have to be updated. So the software makers should benefit from this cycle as well. And as much as I despise Microsoft software, this video is encouraging for Vista http://youtube.com/watch?v=N-2C2gb6ws8. If Microsoft can make Vista look nearly as good as OS X and function just over a 25% as well OS X it will be a fantastic hit. I'll add some HPQ and MSFT to portfolio to keep an eye on.
Oil has been crushed lately. Appearently, its warm in NYC and therefore, no one anywhere on the face of the earth is using any energy what so ever so we must as NYC traders bet against oil. HA! While every dollar drop in oil per day puts roughly $7 billion back in the hands of consumers (good for retail and the like) I think it represents a good long-term buying opportunity. China and India will soon overtake the US and the largest energy consumers so it won't matter at all how cold the winter is here. I still like the contract oil drillers better than the oil companies themselves because of the contract factor and the limited supply of rigs. Companies like GlobalsanteFe (GSF), Transocean (RIG), Noble Corp (NE) all have contract backlogs out a few yrs drilling at higher $/day than the current rates and these contracts can't be broken. RIG is probably the best of these with the largest fleet of drilling ships and no exposure to the US Gulf of Mexico natural gas market (not good right now). Since oil is getting crushed the entire oil services sector is getting killed indiscriminatly. Watch the OIH approaching $120, if it gets there I'm a buyer for sure, especially of companies whose earnings are largely sheltered from this drop in oil price. One last thing, the increase in supply of oil (if there is one) will take care of itself thanks to the commies in Russia and S. America. These morons don't know anything about making money but they'll steal and sell as much oil as they can right now and fail to invest in future oil development. After while they're economies will tank, oil will go back up, they won't have any to sell, and they'll be begging for us to come in and show them how to produce oil for profit again. This will be profit time for American investors.
A few quick pts
-GE is selling a plastics unit and buying aerospace and oil services companies- this is bullish for both over the longterm.
-Gold dipped early this yr due to strength in the dollar, this will fade
-A weak dollar is good for companies that do most of their businiess overseas.
-Watch for signs of housing turning around
-Fed rates are still to high, I don't expect a cut really soon, but at some point despite all the hawkish talk, they'll have to cut rates. Look for a 1/4 % cut in the summer or 2nd half of the yr. This will help homebuilders and the like.
-Some people don't think Goldman Sachs can have another really good yr this yr. BS! They said the same last jan and profits doubled even with they're hedge fund losing money (6%). FICC is where its at. Fixed Income, Currencies, and Commodies (FICC) is where they make a killing, plus if they were valued at the same P/E as Morgan Stanley they'd be at $300 which is where they're headed this yr.
Good luck,
MC
the porfolio
For those that intimately know me, I have, for the first time in my professional life actually subscribed to DVR and digital cable. No more bunny ears with a huge tv. For that matter, now I spend most free evenings, instead of renting movies, eithering watching stuff on cable or catching up on DVR'ed shows from the weekdays. Its awesome. Tonight for some reason was a rental night. Thanks to my $1 rental friends at Redbox, I picked up "The Illusionist", with Edward Norton and Jessica Biel and Paul Giamatti. Well, I had heard this movie was long and slow...but not even close. It was really good; and unbelievable ending! This movie is highly recommended. And, if you like movies about magicians...I can't wait until "The Prestige" comes out to dvd. It was worth a trip to the movie theater.
