Showing posts with label Matter. Show all posts
Showing posts with label Matter. Show all posts

Saturday, December 4, 2010

Jobs Number Is Nothing, Bullish Market Trend And Tide Of Positive Data Matter More

Toro/Bull

The bull still bucks

After a strong rally in September and October, the stock market topped out short-term four weeks ago, with the Dow then declining 4% in just seven days. In the process it broke below key short-term support levels that market technicians watch, and entered a very narrow sideways trading range, locked between 11,000 on the downside and 11,200 on the upside that it couldn’t seem to break out of in either direction.

Then came this dizzying week. Early in the week it looked like the market might be breaking out of the range to the downside. The Dow dropped below 11,000 by as much as 70 points in intraday trading on both Monday and Tuesday. Both days it recovered before the market closed, but to levels just fractionally above 11,000, leaving traders still worried.

A break out of the range to the downside would be seen as a negative development, and that possibility seemed justified given the dire reports from Europe indicating a domino effect is potentially underway in its debt crisis, and reports from China of more moves by the Chinese government to significantly slow its globally important economy (in an effort to prevent asset bubbles and ward off inflation).

However, on Wednesday the market instead reversed and surged to the upside, the Dow gaining 249 points, its biggest one day gain since September 1. On Thursday it surged up again, the Dow gaining another 106 points, breaking it clearly out of the previous narrow trading range to the upside, just two days after it had appeared to be breaking out to the downside.

The dramatic move to the upside also seemed justified, since the bad news from Europe and China had dropped out of the headlines, replaced by very positive U.S. economic reports, including gains in consumer confidence, manufacturing activity reports, retail sales, auto sales, pending home sales, and so on.

But the week’s drama was still not over.

Special Offer:? Once a month, Jim Oberweis updates his model portfolio of small cap growth stocks that often return 1,000% and more–a hit parade of monster stock tickers like HANS, BIDU, NTES, FMCN, CTRP, CHS, LULU. His readers bought Netflix in 2003 at $13 per share. What’s new for December and yearend? Click here for the December Oberweis Report.

The improving economic reports of the last couple of months had economists convinced that the big report of the week, the Labor Department’s employment report for November, would show that 155,000 new jobs were created in November. When the much anticipated report was released Friday morning it was a huge disappointment, showing that only 39,000 jobs were created in November. The economy needs roughly 150,000 new jobs a month just to keep up with the growing population, as more young people join the workforce.

Perhaps a bigger surprise and disappointment was that the already high unemployment rate ticked up to 9.8% from the previous 9.6%. The report threw a curve at economists.

The dismal employment situation, and what to do about it, has been the main focus of economic and political debates, particularly since the summer’s temporary scare that the economy might be slipping back into recession. One of the most common statements in those debates has been that the economy cannot recover until more jobs are created.? On the surface that seems to make sense, but history shows that employment is a lagging indicator, one of the last areas to begin improving in an economic recovery. That makes more sense. Employers do not begin hiring additional workers until well after the economy has recovered enough that they can no longer handle improving business by simply increasing the hours of their current employees and hiring temporary workers.

The dismal employment report should not overshadow the string of very positive economic reports of the last couple of months: gains in consumer confidence, manufacturing activity, retail sales, auto sales, pending home sales, and so on. They are the leading indicators that must improve for quite some time before employment finally begins to turn the corner.

Not that everything is wonderful in those leading areas. Investing is never worry-free.

The main leading indicators in both directions, into recessions and back out, are almost always housing and autos. That makes sense since they are the two largest purchases consumers make, usually with most of the purchase price financed, significantly multiplying the economic effect of the cash down payment, while increased home construction and auto production results in significant new business for the long stream of suppliers to those industries.

Only one of those economic engines, auto sales, seems to be functioning well so far, with the housing industry still mired in the mud. Nor have the market’s worries earlier in the week regarding Europe’s debt crisis and the intention of China to slow its economy, gone away.

So still plenty of potential bumps in the road.

But an encouraging and dramatic two-day upside reversal from the downside break that threatened the first two days of the week.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.


View the original article here

Saturday, November 20, 2010

Cisco Stares Into Traditional Set-Top Box Black Hole But It Just Doesn’t Matter

WASHINGTON - OCTOBER 19: John Chambers, Cisco...

Johnny doesn't sweat the set-top

Cisco released third quarter results recently with lowered guidance leading us to lower our forecasts and price estimate for Cisco’s stock to $24.04, which is about 23% above current market price.

Cisco competes with Juniper, Alcatel-Lucent and Tellabs in the routing and switching businesses.

We recently published an article discussing how weak public sector demand is affecting Cisco. However, Cisco is also facing dramatic declines in orders from cable providers, especially in set-top box business.

We currently forecast flat market share for Cisco in the set-top box business through the Trefis forecast period. Using our charts, if Cisco were to leave this business altogether by 2016, and market share drops from around 9% to 0%, this reduces our price estimate by 5%.

Special Offer:?Next Inning?subscribers tripled their money in Isilon Systems which EMC just bought, and they did the same in 3Par which was acquired earlier this year by Hewlett-Packard. Don’t miss out again. Click here for instant access to continuously updated analysis and stock recommendations from Paul McWilliams in?Next Inning Technology Research.

North America Set-Top Box Weakness

Traditional set-top box orders from North American accounted for about 50% [] of all set-top box orders in the recent quarter and suffered a massive decline of 40% [] in Q1 2011 vs. last year.

In addition to slowing spending, lower cost competitors are making significant inroads into this business.

A Need to Worry?

We don’t think that investors should be too much concerned about Cisco’s set-top box business. This business constitutes only about 4.3% to Cisco’s stock based on our estimates. Moreover, the company has stated that it is only witnessing declines in traditional set-top box business while its IP set-top box business is doing well.

As Cisco positions itself better for future by transitioning its business to focus more on new generation set-top boxes, the effect of a decline in the traditional set-top box will be limited.

The key for investors will be to focus on the new generation set-top boxes and the switches and routers business makes up 27% and 16% of Cisco’s value, respectively.

You can see the complete $24.04 Trefis price estimate for Cisco’s stock here.

Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.

This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.


View the original article here