|
|
|
Silexx Finacial Systems, LLC Newsletter
|
|
Obsidian Trading Platform
|
 |
Obsidian brings real-time risk management, complex order handling,
data analytics, trade history information and multi-ticket execution. The Power
to trade in the market, manage risk in real-time, and data analytics are now available
to everyone - from the retail trader to professional broker dealers - an All in
One Platform.
Click Here to get a Demo
|
 |
|
About The Author
|
Michael Williams
|
|
With two decades of experience as an option market
maker and institutional floor broker on the trading floor of the PCX/Arca
Exchange, Michael has been on the front lines in the trading pits. He has
lectured and consulted for exchanges, the SEC, universities, and private
investment funds. He is also the co-author of "The Fundamentals of the
Options Market" by McGraw Hill.
Michael is one of the founders of Silexx Financial
Systems, a financial software company that designed the trading/risk
management platform, Obsidian, used by traders that clear Goldman Sachs and Merrill Lynch. He
is also a partner in Kinetic Strategic Group (KSG) - a private investment
firm.
|
|
|
Traders,
We
got a great boost from open to close yesterday that kicked off the New Year. It
wasn't just equities, but commodities as well. Most of the help came from
the revisit of the short-dollar/long-equity trade we saw drive the 2nd
half of 2009, the dollar slipped sharply and it is under slight pressure again
this morning. Whether it was getting into new positions for the beginning of
2010 or that it was a driven by the risk/carry trade - it's hard to
tell at this point. There was little talk of Bernanke's tough talk on
Sunday, but it was given little weight and that is concerning - because when
he does REALLY mean it we might not be ready for it. I don't know
how many times strong dollar talk has come out of the Fed in 2009, but it is
starting to sound like the boy who cried wolf. What might force Bernanke's
hand is the yield curve, as long-term yields continue to remain high, if we see
that 10 year push through that 4% mark as the Fed Funds trade in the sub .25%
range - that could really force his hand. All eyes are on those long-term
yields.
|
 |
Gift cards give holiday sales a boost
|
|
Retail
sales in December might be better than expected as recent indications show a
climb of 2.5% in the week ending Jan 2nd, expectations were for 2%.
Gift cards at the larger retail stores saw larger redemption percentages then
last year. Maybe people buying what they need and a gift card is cash for cash
strapped consumers. The holiday sales going into X-mass showed mix to weak
signs, as foot traffic was up and sales were up, it was the average spending
per customer that was down sharply that flatten results. That clearly shows
that consumers want to spend, but just don't have the capital to spend.
It was the data coming in late and month-end that is reflecting better results,
rather than the pre-holiday sales. This may help boost earnings for some of the
retailers for quarter/year-end and with those forecasts already low and some
have even guided lower - we should see earnings in line or beat
estimates. While that may give an initial jolt to retailers, if that comes
true, remember that game of cost cutting and lower estimates to very
conservative levels eventually hits a wall after a few quarters - it will
really need to be about year-over-year revenue growth that will give the
fundamentals a solid footing.
|
| |
Berkshire votes NO
|
Berkshire
is one of the largest shareholders in Kraft and Kraft is in the current bidding
for Cadbury. Kraft wants to use its stock to purchase the company, but
Berkshire (Buffet) voted no and stated that Kraft's shares are too
valuable to use in this acquisition. Kraft is revisiting their cash portion of
their bid and reduce their use of stock - and the deal is still up in the
air. Kraft stock is seeing a slight rise in the pre-market after Berkshire's
NO vote. The game is still in play, but at this point the deal terms and price
are still unknown.
|
| |
eReaders
|
eReaders
look to be the NEW NEW thing and hot technology sector. What is an eReader -
well if you haven't been keeping up in the last year you have already
missed the start of the next big technology wave. An eReader is an electronic
book that uses a technology called eInk - that is similar to reading a
printed page. eReaders are small tablet like computers that can down load an
electronic book, magazine, newspaper, etc. They have been out for a few years,
but it was Amazon that turned it up a notch - adding a web browser,
internet access, MP3 player, etc.
Amazon released the Kindle
and Oprah marketed the product on her show and that sent sales through the
roof. Sony had eReaders for some time, but it was really the Amazon Kindle that
put it into the hot technology sector. If we look at Amazon's last
quarter sales and revenue, shockingly the Kindle was not only the large single
product they moved, it was also their largest source of revenue. If that ain't
proof of how hot this technology is, especially during a recession - I don't
know what is. Barnes and Noble saw the writing on the wall and jumped in with
their Nook, which is the current Kindle killer. It sold out their product by
November and now are seeing delays. Nook introduced Google's Android
Operating system (and the Nook was already hacked 2 weeks after launched) -
what does that mean? It means that all those apps (like on the iphone) are now
being made for the Nook - which helps drive more sales and it turns the
Nook from just a simple eReader into something like the iPhone - it can
run applications.
We are also seeing the technology
explode, it was eInk that is the current technology they use, but there is a
great article in the Economist about new technologies that will enter into the
eReader space. Now the big guns come out - rumors that Apple will be
coming out with their own eReader is now (almost) official. The first look and
release of their "iPad" (their eReader) is expected to be announced
on Jan. 7th.
This
is probably the hottest sector in technology. There are several layers to play
this sector. There are the Amazon's and Barnes and Nobles that have a
business model more like Apple as they sell both the application and content
(eBooks). If Apple's "iPad" (for lack of the official name)
is anywhere as popular as the iPhone - expect this sector to explode
more.
There are a host of other makers as well as the companies
the build the technology. Right now it is eInk (spun out of MIT) - but it
is black-n-white and static - no video. There is several new types of
technology that could replace eInk, including new types of LCD screens. The
question is which one will eventually dominate the market and possibly topple
eInk. Whatever Apple might use could be a good bet, but I have already read
about several other amazing technologies that could move video/screen
technology into the next generation.
Here is a good article and a place to start:
Economist: http://www.economist.com/search/displaystory.cfm?story_id=15048695
Note: I received a "Nook" for my Birthday and
have already read a couple of books! It's nice and holds 1,000s of books.
Great for on the go.
|
| |
Futures Pre-market
|
The
futures are mixed this morning - expect a mix to slightly weaker opening.
|
| |
Support/Resistance
|
INDU 10,500 (We dropped over 100 points on New Year's
eve and the first day of 2010 we rallied back up. The 10,500 was broken through
and could be a support area.)
NDX 1850 / 1900 (We made a good move, but still short of the
1900 area.)
SPX 1100 / 1150 (Again nice run but we are right between
1150)
RUT 600 / 650 (Pushing towards 650).
|
| |
Conclusion
|
Berkshire
voting down on the Kraft deal for Cadbury, primarily on the use of using their
stock (which they believe is too valuable to use as mode of acquisition) is
rather interesting. Buffet is putting more and more value into equity, rather
than cash. Berkshire has borrowed a massive amount for the first time to buy a
rail-shipping company and now he doesn't seem to want to give up any
equity that could be a great inflation hedge as we all wait to see how the
monetary unfolds in the next several months. Remember it was Buffet that
expects to see inflation as high as it was in the 1970s and his capital management
and investments are heavily geared towards higher capital leverage extending
equity positions - clearly reflects that belief.
What's
hot - I think 2010 could be the year of the eReader - we had a splash
in 2009 with the Kindle and then the Nook, but it will be Apple that will bring
broader market awareness to the new technology. There are many players in this field,
some will be losers and some will be winners. It has seriously helped the
bottom line of Amazon and without it Amazon would seriously be suffering this
holiday (as sales continue to remain lack-luster), the Nook will most likely
help boost Barnes and Nobel. Who else will be a big player in this new hot
eReader sector? There are several other eReaders out there. Also - who will
Apple partner with to offer content or will they do it like iTunes and offer
iBooks? Google is already in the mix and has partnered with Barnes and Nobel
(the Nook uses the Google operating system). Google is also announcing the
release of their own smart phone (that will be unlocked) - will Google
also get further into the eReader market?
|
|
|
|
|
Disclaimer: Silexx Financial
Systems, LLC is not a registered investment adviser and does not offer
personalized advice. Nothing contained in this email constitutes a
recommendation to buy or sell any security. Our personnel and/or affiliates may
hold positions and/or trade in the securities mentioned. We are not compensated
in any way for publishing information about companies referred to in the email.
The email is for informational purposes only and the views are held by the
author and not Silexx Financial Systems, LLC or its affiliates. Any investments should be made only after consulting
with your investment adviser and only after reviewing the prospectus or
financial statements of the company.
Silexx Financial Systems, LLC, (941) 953-6800
|
|
|
|
|
|
