Asset Junkie ! dot Com

By Ava E. Williams

After four consecutive declines, U.S. equity markets got a huge boost today, surging 2%+ to mark the biggest rally in three months. Upon close, the Dow stood up 200 points at 9963, the S&P up 23 points at 1066. Today’s moves come after a robust Q3 GDP print (+3.5%) and official end to the recession rekindled investor confidence and risk-seeking sentiment alike. But will this rally last?

In my humble opinion, the foundation of the recent rally will primarily depend on labor and housing. Despite many signs of economic recovery, the labor market is struggling to keep up. The unemployment rate continues to tick up (now at 9.8%, forecasted to be 9.9% next week), and while Nonfarm Payrolls are increasing they are still negative, indicating further jobless losses throughout the nation. In addition to labor, the upward momentum in US economic data has stalled; September housing growth essentially came to a standstill. As the housing industry is a huge producer of income and jobs in our economy, a freeze in its recovery will only further dampen confidence (and thus equity investment).

Not to be the pessimist (I know I’m being a pessimist), but a few other factors point towards a correction:

1) Risk Aversion: In general, speculators take less risk into year end. We can expect many to opt out of equity purchases come November and December.

2) Profit Taking: Equities have come a long way since the Bear Stearns fiasco in March. In accordance with the above, investors will want to cash out before year end, taking profits where they can.

3) Treasury Purchase Program On Halt: The Fed plans to pause buying Treasuries soon which will cause Treasury prices to fall. Lower prices (and thus higher yields) will attract investors, causing them to exit equities and pile cash into these safer assets.

By Ava E. Williams

It is official. The recession is over. This morning’s prelimiary Q3 GDP report came out and hoots and hollers filled the trading floor. Cries of “It’s over!” and “Sucks to be you, Goldman!” rang like joyful wedding bells. GDP came out a whopping +3.5%, stronger than the market consensus and most importantly positive, signalling an end to an ugly economic era.  The upturn in GDP primarily reflected increases in personal consumption, private inventory investments, imports/exports and residential fixed investments. Growing personal consumption is a huge and somewhat unexpected positive for our economy, as the waning labor market has caused many a concern that fewer employed must mean fewer purchases. As for the Goldman slander, Goldman’s reputable economists hastily lowered their Q3 GDP forecast yesterday, citing weaker shipments and durable goods of late as reasons why GDP would miss it’s >3% target.  As potent as Goldman is, we’re incredibly relieved their forecast was off.  Though this is only the first Q3 GDP reading (we still have two more readings to go), will let out a big sigh of relief in the meantime.  And perhaps…just for fun…let out one more blissful “Sucks to be you, Goldman!”

Social networking sites like Facebook and Twitter are costing UK businesses over £1.38 billion ($2.25 billion) per year in lost productivity, research from IT services company Morse stated Monday.

complete story here: http://www.cnbc.com/id/33479023

A woman was recently robbed of $27,000 after flashing her cash in a bar and bragging about her insurance settlement. This was a stupid move no matter what the state of the economy might be. Live and learn …

SPRINGFIELD, Mass. (AP) – Massachusetts police say they are searching for two men suspected of robbing a woman of $27,000 after she flashed the cash in a Springfield bar. Sgt. John Delaney said on Friday that the 22-year-old woman was robbed Monday night by two men wearing dark clothing and bandannas, one armed with what appeared to be a semiautomatic handgun.

According to police, the woman bragged in the bar of receiving the $27,000 from an insurance claim. Police say she was later robbed after she left the bar with a male friend.

Delaney said the woman should have put her cash settlement in a bank.

Oh, Raj.

You tell us you’re one of the best players of the equity long/short strategy in the market. Well, guess what. If I had the information you do when you trade, I could do it too, while eating an apple, relieving myself, and singing a song, all at once. Oh, and, I have a belly button.

Letter to Shareholders of Galleon Group, from Galleon Group founder Raj Rajaratnam (Courtesy of USA Today):

October 21, 2009

Dear Galleon Employees, Clients and Friends,

I have decided that it is now in the best interest of our investors and employees to conduct an orderly wind down of Galleon’s funds while we explore various alternatives for our business. At this important time, I want to reassure investors of the liquidity of our funds and assure Galleon employees that we are seeking the best way to keep together what I believe is the best long / short equity team in the business.

As many of you know, we have built our business on the fundamental belief in rigorous investment analysis combined with active trading around core positions. We have encouraged and invited our investors to attend our daily research morning meetings. Many of you have done so and got a first hand look at our process. This research process is the core of our investment and trading strategy.

The privilege of managing investors’ capital is a responsibility that I have always taken very seriously. I want to reiterate that I am innocent of all charges and will defend myself against these accusations with the same intensity and focus I have brought to managing our investors’ capital.

For those who have been my partners and supporters over the last 17 years, I sincerely thank you. I also want to thank you for the innumerable expressions of support I have received from you over the past few days.

Sincerely

Raj Rajaratnam

Rajaratnam, 52, and a couple of his cohorts have been accused of trading on (according to authorities) Sun Microsystems, Google and Hilton, among others, with material, non-public information. This is called insider trading and is illegal. Therefore, it is against the law. Do not try it. It is unlawful. Apparently Raj missed the last part(s) there.

Investigators allege that the perpetrators profited in this scheme to the tune of more than $25,000,000.00.

In years past, the month of October has been an incurable disease, a degenerative virus on our portfolios. Three weeks through October this year, 2009 will likely turn out to be mild.

The flirtaciously inverse relationship between the dollar and gold this month have witnessed the Dow (^DJI) test itself. Much to participants’ surprise, we’ve watched it test the waters north of 10,000 already, just 7 months or so after the year’s lows on/around 09 March, when the Dow closed at 6,547.49. We have closed up 52.3% from this fearful day. Now only roughly 41.1% to go to to the, ironically all-time-high of 14,093 on 08 October 2007.

If you haven’t heard the ridiculous, yet hilarious story, of the ever-so-foolish, and naive, Jeffrey Chiang, you must have been hiding under a fricken rock for the last couple days.

This clown tried to fake a job offer–which he failed to proofread, evidently–in order to further the likelihood of receiving another, however, he apparently underestimated the wit and judgement of the latter interviewer, and subsequently got caught with his hand in the proverbial cookie jar, or should I say, completely screwed. Do yourself a hugely-enteraining favor and please read.

Sucks to be this guy.

For all you gossip-hungry, celebrity-worshippers out there, interested in learning about a movie more than six months prior to its release, wanted to keep you apprised as to the progress of our generation’s hollywood-finance hit: a sequel to the 1987 Academy-Award-winning hit, Wall Street.

Gekko emerges from his troublesome 20-year sentence to be welcomed by the ominous signs of what will be the worst financial crisis since the Great Depression. Unfortunately, since his reputaion has been drug through the mud, people simply write him off as a two-bit whack-job.  When the finance world turns their back on him, the movie takes strange turns towards the repair of what increasingly appears to be the now-protagonist’s life (Gekko), wherein he’s been disowned by his [now estranged] daughter (“Winnie”), whose fiancee (LeBouf/Moore) looks for help in avenging the death of a mentor. I’m confused.

The epic story began with the tale of a determined (albeit deeply-indebted graduate of NYU) young man, rising from a blue-class family to become the right-hand man of a high-flying finance king. The king being the infamous Gordon Gekko (largely resembling the character of the mid-80’s junk-bond king, Michael Milken), played appropriately by none other than the studly Michael Douglas himself. The story of the April 2010 flick apparently follows where the ‘87 film left off – trouble.

Regardless, we’re thrilled about this film, and have already set aside $12.50 in April 2010 dollars for the ticket, and you should, too.

http://dealbreaker.com/2009/10/im-at-mit-sloan-racking-up-the.php

In a recently published article by Isla Whitcroft in The Daily Telegraph in the UK, Liam Baker a 25-year-old, fixed-income trader at a British-based bank, sheds some light, to dispel the long-standing stereotypes associated with the pursuit of a career in trading, especially in a period of economic uncertainty, low-morale, and doubtful sentiment, wrought with hardship and slow growth.

Stats of recent interviews with global banks such as Morgan Stanley, RBS, and Macquarie Capital, show that banks are looking to hire again, perhaps as many as several hundred interns and graduates.

Deadlines for these positions will be open until about mid-November thru early December.

BUILD A TREE HOUSE…

… In the DOLLAR TREE!

The low cost retailer Dollar Tree Inc. (NASDAQ: DLTR) reports a greater than expected increase in earnings and has spurred a near 5 percent increase in the share price.

The retailer, Dollar Tree Inc., who sells its good for $1or less announced August 26^th, 2009 that diluted earnings per share to $0.63 up a tremendous 50 percent from the previous year.

“Our sales continue to grow across a wide range of merchandise categories,” said President and CEO Bob Sasser. “Now more than ever, customers are relying on Dollar Tree for high value basic products including Health and Beauty Care, Household Supplies and Food, in addition to discretionary items including party goods, floral, toys, books and a variety merchandise for all seasons.”

The Dollar Tree had cash at the quarter-end of $358 million which was more than three times what was held at the end of their 2008 fiscal year. Furthermore Dollar Tree repurchased 1 million shares of common stock for $42.5 million at the end of the second quarter 2009.

Any Fool should know a company’s repurchase of shares of stock is a key indicator the company feels the stock is undervalued in the market. Doing such a repurchase during economic turmoil is another gauge that internally the company feels it has strong financials and a positive outlook on the market potential.

Dollar Tree is not alone in the market of low cost goods to consumers. Retailers such as Family Dollar (NYSE: FDO) and Dollar General (privately held company) are direct competitors of Dollar Tree. Family Dollar will release earning October 7^th, 2009; however, the street is looking good for Family Dollar and a possible IPO is underway for Dollar General, as mentioned on their investor relations page on the website.

The economy sucks, stocks are down and unemployment is up. I know that does not brighten your day, but keep in mind during every economic cycle, deals can be had and money can be made. Keep your eyes open for your next fix, because a junkie needs his asset fix.