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The Influence of Net on the Stock Market

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Heard of Erick Jackson, if no, then you are not connected! Yes Erick Jackson is one of the few Investors who has identified the power of the net and has launched a campaign to outset the underperforming heads of corporate. His credentials are quite impressive; his last campaign had resulted in the resignation of Yahoo’s former CEO Terry Semel. How did he do it, well this is exactly what Dana Cimilluca of ‘Deal Journal’-WSJ has observed in his post “ A New Thorn in Motorola’s side”, the Post is based on Li Yuan (Deal Journal) report.

According to the blog Erick Jackson has been defined as among the “new breed of investors who are savvy about grass-root power of the internet and make activism no longer a game reserved for the wealthy….”
When Erick launched the campaign against Terry Semel he had only 96 shares but his aggressive blog posts, you tube videos got him the attention he wanted and about 100 Yahoo shareholders pledged about 2 million shares for this campaign and this resulted in the outset of Semel and some of the board members!

What is new now, well Erick has already started campaigning against Ed Zander CEO of Motorola. In this case he owns about 130 shares of Motorola stocks, and has launched a campaign against Ed both in his blog and you tube. According to the ‘Deal Journal’ about 47000 shares have already been pledged by 20 fellow Motorola share holders, all this in less than 24 hours of launching the campaign! Well the pledging has only begun and is giving a hard time for Ed.

Now the underperformers better start taking cue. I guess it must have dawned on the corporate giants that it is not the wealthy few who matter but each and every stock holder! Stock Markets have a new element to take into consideration; the new breed of tech savvy, aggressive investors who think that every single shareholder has the right to demand performance from the companies! The dawn of web 2.0- social network culture has only made the corporate get into more pressure for performance!

Gyaan on ETF

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The in-word for all investors today is ETF or Exchange Trade Fund. What is this hype about ETF? The reasons are many, for one the investor can buy as less as one share and the expense involved is less. It is like holding an Index fund but you can sell it short. In other words it provides the features of a mutual fund and flexibility of a stock!

Investopedia describes ETF as follows “A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day as it is bought and sold.”

To understand it more thoroughly, it can be described in part with a Mutual Fund. Except that in case of a Mutual Fund price of the Fund is decided on the end of the day and all the purchasers gets the same price. In case of an ETF, it can take advantage of the market situation. For example an ETF reflecting that day’s top performing index can be bought and can be traded that same day, at a profit!

One popular ETF is the Fixed Income ETF which is bought due to the income generated from them through the dividends.

ETF’s to look out for are SPY, ishares and QQQQ

July

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You must have known by now, that I am running through and getting inference, possibly some cues on the market from some of the top notch financial blog sites. And the views expressed by some of the bloggers are really in tandem with my own. So here goes…

The article posted by Mark Gongloff and Dan Gallagher in Market Beat caught my attention. The duo seems to have made some very important observations in the beginning of the month and some of them might probably provide an insight into the market for the coming week.

The Observations are as follows; Dow seems to be on the right path, and as the trend shows for the past nine years, they seem to have been on the gaining front during ‘July’, especially during the first week of the month. In case of NASDAQ the story is different; the trend shows that it is not a very favorable month of the ‘tech-filled’ Index.

Another important article is on Blackberry, which has decided to provide competition to Apple’s iphone and has come up with Blackberry 8830. Verizon is the official carrier of Blackberry and AT&T for Apple. Now we need to watch the coming weeks if it is the product i.e Blackberry and Apple iphone which makes a mark in the market or the service providers, Verizon and AT&T. If you had watched last week, AT&T did carve a niche after the announcement of iphone. Guess we need to watch out for Blackberry 8830 to know the rest of the story!

The week that was

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We have so much to look forward this week, one being the Independence Day and the other the performance of Market Simplified.

Now let us have a peak at happenings of last week. According to Oliver Schwindler, in his article “Week in Review: Financials in Downtrend”, Seeking Alpha. Schwindler provides us with the gainers list as follows; Nasdaq had finished with 0.6%, followed by Dow with 0.4% and S&P with 0.03%. He analyses the week’s best performers and poor performers. The bad performers were the ‘financial’ sector (since Jan ’07) and materials; the energy sector also reflected a downtrend. The performers for the week are Healthcare, Technologies and Utilities. I feel the trend may not change much this week.

My views are as follows; the reason behind Financials downtrend might ease a little when the Fed’s tone down their language on Inflation, another factor to take into consideration is that the Economy’s growth should not aggravate the Inflation. Now as far as Energy is concerned, the only reason can be ‘geopolitical’ and as been suggested by numerous fellow bloggers and myself the time has come to stabilize on one particular alternate source!

Diversification: A necessity

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On my earlier post of ‘changing for better’ I reiterated the importance of healthy living, now I understand this is a global phenomenon, wherein the majority are trying to lead a healthy life. This change in outlook has affected two major ‘names’ in the stock market. I am talking about ‘coke’ and ‘Pepsi’. Todd Sullivan in his article “Coke vs. Pepsi: Diversification’s the Name of the Game”, in seeking alpha has traced the growth and diversification aspect of both coke and Pepsi.

In his opinion ‘coke’ seems to be doing the ‘catching up’ act and Pepsi seems to hold the roost as far as diversification is concerned in areas, like ‘tea’ and ‘water’. Now I wonder why coke has lost all its fizz and is lagging behind in diversification.

Diversification is the key word today and when Beverages Company like coke and Pepsi already have a brand name, it should only be easier for them to venture into related sectors! Is it the business plan that is suffering in case of coke or the failure to foresee the future?

Now Sullivan says that he would stay away from buying both coke and Pepsi! I wouldn’t comment on that. But in the long term one thing is sure; people are looking for a cleaner and healthy life so wont it be better for coke to take the cue!

Energy and Inflation

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The Rate of Inflation which has become a cause of concern in the U.S, includes a important and controversial component, the energy cost. Picerno, in his article “What do Higher Energy Cost Mean of Inflation”(Seeking Alpha) talks about the exisence of two measure of inflation and the disparity between them. The difference between the two measure could be a cause of concern for the policymaker and the economy as such.

The two measure that the blog talks is the top line measure and the core measure which again is based on two important indicators, the CPI(Consumer price Index) and PCE (Personal Consumption Expenditure Index). The disparity lies in the fact that Energy cost is included in the top line inflation measure(which is showing an upward trend). Wherase in case of core inflation this cost along with food is excluded!

Therefore monetary policy cannot be implemented on the basis of Core Inflation measure because this excludes energy prices which is an important component.

Talking of energy or oil prices, there is a transistion in this sector itself where people are looking at alternate sources of energy…so the debate remains on the change of scene and for how long oil prices will form the basis of energy cost!

Now as far as the rising oil prices are concerned it depends on the global and the political scenario and hence more stability needs to be bought about in this sphere. I think this change might happen when a cost effecient renewable source of energy is found and forms the basis of the energy cost. But there is a time factor involved in bringing about this change and until which measure of Inflation should we follow?

Since it is absolutely baseless to implement any form of monetary policy excluding the energy sector, I guess Picerno is right when he says that all the price indexs must be considered while structuring the monetary policy. Gues this dual measure his here to stay!

Shift of preference in the Congress

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June 19th will probably go down in history as one of the reason for a major change of scene and probably in coming years change of power and wealth. Well this is factor was analysed by Marquit in her blog in ‘the panelist’. The press reported that about $14 billion over ten years will be shifted in developing alternate energy sources. Looks like that free ride for Big Oil will be over, as the major subsidies granted to the Oil companies would be reduced or taken away.

Of course Exxon and American Petroleum are completely against such a shift. The Capitol Hill is only happy that this change would reduce the dependence on foreign oil and economy. It is a known fact that White House will only look at such changes favourably. It is another thing that alternate fuels like Ethanol’s share did flare and it had created an ‘Ethanol Bubble’ but now looks like the bubble has burst given that factors like ‘efficiency’ of the fuel and the ‘transport cost’ involved in transporting ethanol, cost of farm products proove to be a major hurdle. Well other types of alternate energy like hydro, solar needs to be developed and tuned in terms of ‘fuel efficiency’

Big oil in the long run would definetlly face the low. But for the short term it would do well. As far as the long shot is concerned we need to identify on alternate energy sources.

Wall Street News

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The two major news that seems to have caught the front pages of Financial Journals as well as that of online journals is that of resignation of Chief Executive Terry Semel. Yang, the co-founder was named the chief and former DFO Decker was named the President. This change came about after investors hue and cry for a new leadership. It is quite interesting to note that Semel was instrumental in many of the profitable changes in Yahoo, including the introduction of online advertising concept. The good news is that shares rose after hours of announcement of the change in leadership!

In another breakthrough event, the Supreme court in U.S dismissed an investors lawsuit that brokers syndicate had worked in consortium to drive up the prices of the IPO’s during the 90’s. The investor bankers and other brokers made a huge profit during the boom, but some of the retail investors were worst hit. Many of the brokers name such as Goldman Sachs, Credit Suisse and Morgan Stanley were involved. The company who were on the right side of the bubble were Amazon.com, eBay and Priceline.com. The court decision is that the Securities and Exchange Commission had the relevent experience to distinguish between permissable consortiums and syndicates and should be left to their descretion, well this ruling pronounces only one thing that Anti Trust laws are having the noose tightened.

American Shoppers

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An article by Tim Lacono in ‘seeking Alpha’ had made me think on the recent increase in retail sales in the U.S. This increase in retail sales did seem to put everyone into a bit of’confusion’. Confusion, because even with the increase in the gasoline prices there seems to be more left for shopping. According to the article, sale of clothing, accessories and garden equipment seems to have increased by more than 2%. Well where did the shoppers find the money to finance their shopping, obviously through their credit cards.

On the other hand what does this spending mean to the economy. I agree with Lacono when he says that this spending is vital for the economy. Any economy would require more money in the circulation and expenditures would definitely mean a boost for the economy. This increase in spending/expenditure would lead to more positive reaction and investment would increase. On the other hand when there is no saving and only expenditure, this would certainly lead to more debt…. where is the economy heading?

But then again how long will this spending spree would continue no one knows…. because the American shoppers are so unpredictable! These are some of the questions, which will definitely find answers in the next few months.

Dollar rises for a brief period

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The recent news shows that Dollar rose temporarily on Wednesday after a retail sales boom (after January 2006). Alongside with this the import prices were on the rise. But this boom subsided after the U.S. treasury yield slipped on Wednesday. The European market and the Britain market reflected this…the European market was almost flat seeing this trend. NASDAQ and S&P 500, showed a negative trend. It is yet to be seen if the Dollar rise would change the outlook of the FED.

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