Thursday, January 21, 2010

Maybe I misjudged that regulation issue

I took a quick read of the headlines on the bank regulation proposals and thought that it was more of the same proposals -- toothless press releases that would be tap danced around by the big banks. However, when I actually read the press release and saw --

"no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit." I did a double take.

(This will actually create a nice market for some guys with huge liquidity to buy majority stakes in these operations from the banks. I'd expect to hear the name Warren Buffett at some point.)

I don't have the exact data in front of me, but I'm sure someone will put together a fancy chart soon that will show the massive percentage bank "profits" that have been generated by prop trading. When 60% of NYSE volume is accounted for by C, AIG, Fannie, Freddie and Bank of America, do you think it's mom and pop Jones trading those stocks all day long? No, I'd guess it's Goldman, Merrill, JP Morgan, Morgan Stanley, etc, and they are trading those dogs for Fidelity.

Any interruption in this cycle of banks bullying the market with their trading activities could seriously jeopardize the stock market melt up that's occurred in the past 10 mths. The technicians said support for the market would exist at 1114 for the S&P -- closed at 1116 -- with a major line in the sand at 1078. Google's results might test these support levels - see below.

Line of the day....

"Isn’t it funny when you walk into a investment firm, and you see all of the financial advisors watching CNBC — that gives me the same feeling of confidence I would have if I walked into the Mayo-clinic or Sloan Kettering and all the medical doctors were watching General Hospital…”
-Senior portfolio manager, UBS courtesy of The Big Picture

Cut the cord from CNBC and you'll lead a happier more succesful life!

Things could get interesting tomorrow with Google posting good but not great numbers and the stock getting whacked tonight - it's down about $28 or 5% after hours.

According to JP Morgan...
Pro forma EPS totaled $6.79. This was slightly below our $6.85 estimate.
Net revenue grew 13%. This was slightly below our expectation for 17% Q/Q growth.
Paid clicks grew 13% Y/Y. This was slightly lower than our estimate for 16% Y/Y growth.
US revenue was up 11% Y/Y. This was slightly ahead of our estimate calling for 9% Y/Y growth.
EBITDA margin came in at 63.1%. This was well ahead of our expectation for 61.9%

I love Google's products and services, but I still keep thinking that one day the entire advertising world is going to wake up and realize that the emperor has no clothes. I'm sure that advertisers have developed sophisticated models to determine the rate of click through to completed sale, but as a long-term google user that has never clicked on an ad, I don't get why anyone would ever pay for clicks. Then again I don't own an iphone so I'm clearly stuck in the 20th century :)



Anonymous said...

agree,the only thing is some of cnbc cheerleaders are good looking

ps howard lindzon made this call last fall.

houses Toronto said...

Really enjoying reading!
I think there are more people than 1 piece of Warren Buffet waiting with their accounts full of cash money for any suitable opportunity to invest and so heal their loss caused by our great crisis.