IN recent Qs, it has been a mistake to buy KTCC before their earnings release. I think that changes today as I am confident that the accumulation of product ramp revenues, over the last 12+ months will be greater than the slowdown of their two largest customers IGT and SMT. Also, if the deal is closed and continues to be accretive-then sales and earnings estimates will jump for the next several Qs as will sales opportunities.
I bought some in the mid $22 area a week or so ago, but only a small position. Still waiting for much lower prices across the board before I am a buyer in size.
Euro-zone banks are finding it tough to rollover their Russian loans as:
1)US, UK and Japan banks don't want to be in syndicates and
2)Sanctions make Euro-zone bank participation questionable legally
Some of these loans may become non-performing hurting their already slim capital positions.
Also, China cam out with their trade data for July. Imports were down 1.6% y/y. This implies a very weak domestic economy. For example oil M was down 9% y/y and copper M was at a 15 month low. China banks also have a non-performing loan problem as does the shadow banking industry. Bottom line; Euro-zone is weakening, China is weakening, Japan is weakening and the US's 4% GDP was 1.7% inventory build-so the US is not strong.
Stocks should continue lower with the likely hood of an "event" financial or otherwise occurring on the increase.
Continuing on this theme, the WHO issued an international health warning. My interpretation. Other countries, in addition to the US, have requirements that their medical facilities report contagious disease outbreaks. This means, other countries, in addition to the US have suspected ebola cases in their ER's or other medical facilities.
Comments by Dr.s in western Africa say the disease is spreading beyond their control. Again, in the coming days, cases, in non west African locations are going to become public.
Stocks are up today because of "algo" reflexive buys due to lower interest rates. I expect rates to go lower (US, UK, Germany, Japan) as the save haven trade, but equities to go lower until travel bans are issued to/from western African countries.
Dr. Tom Frieden, director of the CDC said today that it is possible a "traveler" could have come to the US, from Western Africa, with the virus. If so, he offered an outbreak in the US would not be large. What is he saying in real terms? I suspect there are a few cases of suspected ebola in ER's or other emergency medical facilities that Dr.s are dealing with right now as they must report this sort of thing to the CDC. Hence the CDC's comments.
Bottom line, look for very negative "news" on this in coming days. Could be a "SARS" type of scare all over again. Raise cash.
When watching this movie, I always thought it was commentary on Is-lam as played by the Necromongers. Of course today ISIS is a perfect example of modern day Necromongers as the Taliban and El quida have been since their rise to power. The continuing problem is, BO is no Riddick. As far as all Helion Prime (western countries) there is no Riddick among any of the leaders.
As predicted by me, a couple years ago, there will be a WWIII the "world" vs the "necromongers" before the end of the decade.
I am sensing a Sudatenland type deal:
1)West acknowledges Russia owns Crimea (Alsace Loraine-Germany "annexed" from France 1936)
2)Eastern Ukraine "carved out" of Ukraine and given semi-autonomous status-which will be hugely influenced by Russia which is the Sudatenland equiv pre-WWII (1938)
3)Ukraine be left to itself to manage their own affairs with a pro-western tilt
This maybe enough to get a counter rally in Euro-zone and US markets for a couple weeks. Still, it is a land grab by Russia and a creeping "takeover" of Ukraine which does not want to be part of Russia.
To continue on the 1987 theme, the Dow was down 41% from peak to trough, the S&P 500 down 36%. After the lows in Oct, the averages almost retested them in early Dec. So, if the markets do sell off 15%-20% or so, with the last 5-8% in a very short period of time, I think the broader averages will retest those "trading lows" several weeks after they are made. So, if an investor doesn't get close to the "bottom" the first time, they will have a 2nd chance. This is assuming, that policy responses will be more easing from central banks.
A couple of other points w/r to 1987. That summer several M&A deals did not go through, for various reasons, but some of it had to do with Congressional meddling with the tax code. News, in recent days, has a few deals blowing up and threats of Congressional and or presidential meddling in tax inversions deals. When "arbs" lose alot of money on these deals that don't go through, they are highly leveraged and tend to have to sell other positions to raise liquidity to cover their loses. Unlike 1987, when interest rates were going up all year, interest rates are falling with the "active" central banks around the world. Because of the interest rate differential, I expect stocks to pull back 1/2 the amount they sold off, as a %, in 2014 vs 1987. Ultmately, 15-22%.
Waiting for NG to get closer to $3.50, ECA under $20 and did buy some UPL in the mid $22 area-but just a small position. Otherwise, same #$%$, different day-waiting for stocks to sell off further.
Back in 1987 stocks grind lower from Aug through early Oct before the big sell off. Looking for similar pattern this year.
With the RUT, DAX and CAC all down about 9% intra-day vs their recent highs. S&P 500 and Dow down less than 5%. I still think there is more to go, perhaps 2X more than what has happened so far. Europe, still has not come to grips with the:
1)Fiscal problems of most of the Euro-zone countries
2)Bank equity deficiencies
3)All the while Euro-zone sovereign bonds are way over-valued
4)Negative loan growth
I can "see" a negative self reinforcing negative loop of sovereign bonds selling off, leads to losses within bank portfolios, leads to selling of more sovereign bonds and so on until the ECB has to step in step in with QE.
If I am correct, while the above is going on, stocks will fall hard as Euro-zone and US GDP estimates will have to come down and so will S&P 500 earnings estimates. Until that happens, I'm expecting a "valley of doubt" over the next few months to keep counter rallies short.
What to look for? Watch Italy, Spain, Portugal, Greece 10 yr bonds. If they continue to sell off, like they did today, then those falling bond prices will lead to a self reinforced further selling. Those bonds all have to increase 50-100 BPSs off their recent all-time lows before the ECB will be forced to act.
Mgt did a good job on gross margins and OpX. Still, revenues down y/y and mid-point of guidance revenue will be down y/y. If folks want to bid up a "flat" business, that is OK by me. However, when one looks at hospital admissions, as an indicator of demand, hospital mgt companies are still showing declines. For example, CYH reported admissions down 4.8% y/y per hospital.
Today, 7/31, the "market" cares about what is going on-especially as it relates to Euro-zone issues. With the Spanish 5 yr yielding 1.11% vs the US's at 1.77%, Euro-zone bonds in general are way over valued. Yields need to go up 50-100 basis points, before "normalcy" returns. At this time, the ECB will have to initiate QE as increasing interest rates or falling bond prices wipe out bank equity as they takes losses on their portfolios. Also, Euro-zone banks have huge loan "assets" in Russia, so sanctions and a slowing to negative economy increase the odds some of those loans go bad-hurting Euro-zone banks.
Bottom line, I liken 2014 to 1987. Stocks turned down in Aug (1987) drip, drip, drip lower until the final blowoff selling climax in Oct. I can see the same in 2014, with stocks down 10-20% off the highs with the last 5-10% in a few days in Oct. Other that playing small ball, not a buyer of size until the "situations" are bad enough so induce easing by central banks-QE by the ECB and the FED would be the best backstops.
Revenues a little soft, guidance for the 3rd Q a little soft-I see no reason to buy more at this time. The "tell" will be how PCTI reacts if the broader averages move down. If it does, I'd be a buyer again in the $7.00 area.
Actually under another "topic" I posted that there has been some research that gold discoveries of recoverable grade, in the last 15 years, has been running about 50% of production. The implication is that in coming years, gold production will start to decline-the last several years have been around 2800 tonnes/year. Some research has projected the decline will start in 2015, other research in 2016. But, in my view, with discoveries so far below production for such a long time, it suggests that gold production, when it does start its decline, that decline will last years and perhaps be down 25-50% from the 2800 tonnes/year level. Less supply will mean higher prices, perhaps significantly so if the world financial system comes under stress in any of its various forms.
In recent months, the PBOC has blinked as they have eased in many different ways to add liquidity to help stimulate the Chinese economy.
Also, read someone else's research as it pertains to gold. In the last 15 years, gold discovery has run about 50% of production. Implication? Production has been about 2800 tonnes/year the last 3-4 years, but with replacement running at about 50% of production, then production will soon start to fall. I've read some research it will start to fall in 2015, other research says production won't fall until 2016. But, given the dynamics of production vs discovery the last 15 years, gold production will fall off in the coming years, and will continue lower for perhaps a decade as it take years to bring a mine on-line. Less supply will mean higher prices.
A trend, nationwide, in emergency rooms, will keep me from buying AHS or CCRN for the many Qs perhaps years to come future.
ERs have been putting in observation rooms, adjacent to the ERs to watch patients rather than admit them "upstairs" to the hospital. Many of these patients will be fine to go home in a few hours, rather then be admitted. As a consequence, hospitals incur lower admissions and need less floor nurses. Perhaps CCRN and AHS will be able weather this trend and be able to adjust, but I am seeing more geographical locations where nurses are having a tough time getting jobs. So, growth for these "temp" companies will be harder to come by if full-time nurses themselves are having trouble finding work.
A couple of minutes ago, I just got some at $9.36. In the CC, mgt stated that the INTC's next server chip, Grantley, coming out in the 3rd Q would be beneficial for their business as it would start a server upgrade cycle. MLNX, which had good numbers and guidance, mgt also stated that Grantley would be good for their business. QLGC, was a little soft for the Sept Q guidance, which was my concern going into the June Q's CC, but under $9.50 QLGC is cheap. Now, if the market does sell off, which is my expectation, then QLGC could back down under $9.00, then they it would become a table pounding buy.
Because QLGC used most of its NA cash to buy the Broadcom business, they don't have alot of NA cash to buy back stock currently. But, after the Sept Q, they should be in a position to start buying back stock in the 4th calender Q of this year or at the latest the 1st Q of 2015. Ultimately, if the world doesn't fall apart in 2015 or the 1stH of 2016, I'm looking for QLGC to get to the mid teens by then.