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Playing With Fire – UltraShort S&P 500 (SDS, SH, SKF, QID, INTC, JPM)

October 14, 2009 Leave a comment

“When the facts change, I change my mind. What do you do sir?” – John Maynard Keynes

I bought SDS before the close yesterday (10/13) after looking at one of my more reliable long term technical indicators which predicted a fairly serious iminent fall in the market. Combined with the fact that Intel (INTC) and J.P. Morgan Chase (JPM) were reporting after the close and in the morning made me want to get some protection.

Their earnings not only had high expectations, but they are also bellwether of their industry and of the overall market. Had anything not gone off perfectly in their reports, the results would most likely have been bad with a run down to at least 1030 on the S&P. I also felt that Dow 10,000 could pose strong psychological resistance in the market

That being said, I heeded the wisdom of Mr. Keynes and covered the position early in the morning after anticipating a half gap fill. In the end I only lost 1.7% (including trading fees) on a trade that could have returned at least 5% easily. I also put on additional long positions which I will get into later.

-MJB

S PALM @ 17.40

September 30, 2009 2 comments

005-palm-pre_mediumI have alluded to it in previous posts, but now I think I should make it official.  I rate PALM a sell.  Palm have put all their eggs in one basket with the Pre.  They have killed their previous operating system in favor of WebOS, discontinued the Treos and Centros, and currently have no other products on sale. In short, the Pre had better work or Palm is in a lot of trouble.

So is it? Well, Palm is reporting that sales are brisk, saying that they have sold about 823,000 units, with a sell-through of 810,000.  But, according to a new report by Town Hall research analyst David Eller, they haven’t actually sold that much.  Palm reports sales when Sprint sells to customers or ships to second-tier distributers.  He says that there may be 11 weeks of inventory on hand at these distributers, which is an uncomfortably long time (RIMM typically has 30 days, AAPL far less).

Recent price action on the Pre at these distributers does seem to support the idea of an inventory glut.  Best Buy currently lists the Pre at $150, Amazon at $100, and Walmart went as low as $80, albeit temporarily.  Bear in mind that neither the iPhone 3G, 3GS or the Blackberry Tour have received any discounts so far, and they were all released at the same time.

Of the pair, Sprint releases their earnings earliest, at the end of October.  Should definitely be on the calendar of any PALM investor.

Disclosure: No position in Palm, Long AAPL and RIMM

S GRMN @ 37.63

September 29, 2009 1 comment

Garmin (NASDAQ:GRMN) introduced its new product today, a hybrid phone/gps system that will retail for $299 after rebate on AT&T, with an additional $5 monthly charge.

This device represents the company’s latest attempt to thwart those who are forsaking its stand-a-lone GPS systems for applications on their smartphones.  Recently, the rise of GPS navigation for high-profile products such as the iPhone 3G (NASDAQ:AAPL) and the Blackberry Tour (NASDAQ:RIMM) have driven customers from companies like Garmin and TomTom, who only sell independent navigation systems.  iSuppli has predicted the the market for so-called PNDs will increase by only 15% over the next 5 years, while over the same period shipments of smartphones will increase by over 400%.

It is for this reason that I am recommending a sell of GRMN.  They are being battered by an industry that is much bigger than themselves, and with this much-delayed new product, they needed to hit a home run.  From initial impressions floating around the internet, the phone isn’t actually described as bad.  In fact, some of the reviews are quite positive.  But relative to the other smartphones on the market, the price is too high, as you can get an iPhone 3Gs with a GPS application from Navigone or TomTom for much less if you include the PV of the $5 monthly fee. There simply is no compelling reason for consumers to buy this phone over an iPhone or a Blackberry, and it is for that reason that I am bullish on both those companies.

Disclosure: No holdings in GRMN, Long AAPL and RIMM.