Tuesday, August 28, 2007
Sun Microsystems(JAVA)is expecting double digit growth in China sales within the next fiscal year.It is providing new products to Asia as the market in the U.S. and U.K. decline,hit by slowing economic growth and the credit crunch.By the fourth quarter,Sun is expecting a 4% increase in profits,and a 10% increase within three years.Kohlberg Kravis Roberts,a private equity firm,has made a large purchase of Sun Micro corporate bonds,which amounts to a big vote of confidence.Sun is the fourth largest producer of server computers.With the aggressive development of virtualization and online telephony,Sun's products will be in growing demand.Sun's earnings rose to .09 cents a share,versus an estimate of .05 cents.Revenue in the software segment was up 6%.Revised profit was 329 million dollars.With the striving for efficiency,its Solaris operating system is especially relevant.The big search and internet companies are likely to demand Sun's products.Sun's expanded margins took the cost of doing business down.With much cash on hand,the company is on the lookout for good acquisitions.The KKR position is not CEO Johnathan Schwartz's focus;his focus is growing Sun,which posted its third consecutive quarterly profit.The firm is based in Santa Clara,California.
Tuesday, August 21, 2007
Many Wall Street thinkers continue to be troubled by financial conditions,in spite of recent attempts by the Federal Reserve to calm the markets.The credit problems are so complex and widespread,that recession seems more likely.Investors should contemplate the possibility of an extended bear market.As Brian Wesburg of First Trust Advisors sees it,the Federal Reserve actions do not resolve the long term policy issues of housing,housing finance,and the debt tied to it.Housing is 10% of the economy,yet with the leverage attached to it,it is 50-60% more significant.The credit issue will not go away overnight.We have seen early week rallies followed by sell-offs.Lyle Gramley of the Stanford Washington Research Group notes that the mortgage and mortgage securities markets have seized up,increasing the odds of a recession to 50-50.Richard Bove of Punk Ziegel sees serious systemic problems that will not go away.The bad loans are still out there and must be repaid.The deal market won't soar again,and loans won't be paid off.To Liz Ann Sonders of Charles Schwab,the credit market's seizing up calls economic growth into question.The economy is sound right now,but recessions usually start while rosy numbers are posted,as these figures are lagging indicators.The iShares Lehman Brothers treasury funds,such as SHY,TIP and TLT,are attractive to many of those who are seeking higher ground.
Tuesday, August 14, 2007
Rough seas have reached Wall Street.There seems little chance of a quick return to the bull market of July,when the Dow Jones Industrial Average crested the 14,000 mark.On Monday,the world's central banks continued to inject liquidity into the credit market.The European Central Bank gave 65 billion dollars,while Japan chipped in 5 billion and the U.S. Federal Reserve added 2 billion more.This succeeded in arresting the decline of stock prices in the short run.Just how the market will progress remains unclear.Robert Stovall of Wood Asset Management says we are in a small credit crunch.This could continue into the fall.Michael Metz of Oppenheimer predicts that institutional investors will shift from elite funds to big cap stocks.U.S. spending has exceeded income,so there will be a major tempering of spending,causing a recession by early 2008.Mark Sunshine of First Capital sees a lot of risk ahead,on account of years of over-leveraging and under-capitalized lending.Many funds were invested in the lowest form of securities.In consequence,fund redemptions will cause downward pressure on stock prices.There could be a series of big redemptions over the next 6-9 months as investors flee to quality.ING Direct offers a no-minimum savings account that is currently yielding 4.52%.Among stocks,Johnson and Johnson(JNJ) and Honeywell(HON) are also good options.
Tuesday, August 7, 2007
According to two surveys taken by the Institute for Supply Management,the U.S. economy is slowing.The ISM,a purchasing managers trade group,released its manufacturing and non-manufacturing indexes last week.The manufacturing index,a survey of factories and utilities,dropped from 56 in June to 53.8 in July.In a recession,the index could drop below 50.The non-manufacturing index showed a decline from 60.7 in June to 55.8 in July.Since the service sector represents 80% of the U.S. economy,this number is even more significant.The drop in these indexes parallels the slowing in job creation reflected in last Friday's employment report.The U.S. economy had been widely expected to cool off in the second half of 2007.This points investors to multinational firms that are not so reliant on U.S. profits,such as United Technologies(UTX) and 3M(MMM). Investors should be cautious today.The Federal Reserve issues its interest rate decision and remarks at 2:15 PM EST.If the market doesn't like them,it could take a tumble.