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David Morrow
The Dow managed its best-ever finish in a week punctuated by economic data, including the latest Fed decision, and culminating in a quadruple-witching options expiration. But higher oil prices and still-softer housing market conditions amid dire year-ahead predictions make some investors leery of embracing holiday cheer.
Once again, RealMoney's bloggers were all over the market action, and we'd like to share the best of their commentary this week with readers of the TheStreet.com. These posts best capture the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day. Let's take a look at Jim Cramer on eBay's new vigor, Rev Shark on how overrated options expiration is, Cody Willard on tech's wild year, Tony Crescenzi on the Fed's acknowledging slower economic activity, and TheStreet Research Team on a guiding light in lasers. Click here for information on RealMoney.com, where you can see all the blogs -- and readers' comments -- in real time.Cramer's Blog: Run in eBay's Just a Matter of Time
Originally published on 12/13/2006 at 8:35 a.m. eBay's(EBAY Quote) so right, it's getting scary. Low expectations on earnings, yet listings are up. No one bothering to compete with it much anymore and a triumph over Google(GOOG Quote) on PayPal. And now, at last, eBay is charging for Skype, the acquisition that hasn't brought the company much at all. A fee put on next year is the potential for great margins, particularly given that "click to call" (click the ad, talk to the advertiser) for Google and Yahoo!(YHOO Quote) -- you're on a computer, so it's natural vs. the phone when you go to a site -- could be gigantic. eBay, like a lot of tech companies, has languished since December began. Nobody seems to care that momentum is building for this forgotten once-hot Net company. Hopefully, the news about a charge for Skype, which was beginning to look like a boneheaded buy, will get the stock going. How often to do you see a Net story with accelerating revenue growth yet a stagnant multiple?Rev Shark's Blog: Options Expiry Impact Overrated
Originally published on 12/11/2006 at 12:22 p.m. One week out of every month, a lot of time and energy is expended by some traders who feel they can game the fallout from option-expiration. There are lots of theories about how options will impact trading, from such arbitrary things as the Thursday the week before option expiration being a "misdirection" day, to an overall positive market bias due to the unwinding of out-of-the-money puts. Some traders seem to believe there is some discernible edge to be found, but it's never been apparent to me. One of the dangers of option expiration for many traders is trying to read too much into them. Options may exert some subtle biases, especially when it comes to pinning at strike prices on the actual day of expiration. But they are not the driving force in trading. There are many other factors that come into play during the week, and if you focus too much on options, you will miss the big picture. Several readers have asked me how option expiration might affect the Oil Service HOLDRs(OIH Quote) this week. At this point, I have no idea. There are strike prices at 140, 145 and 150, and one of them may become a magnet for pinning as the week progresses. But I don't think you can say at this one point that we are more likely to end up at 140 rather than 150. I'm going to defer to the technical pattern at this point and not worry about option expiration until we are much closer to the actual event.Cody Willard's Blog: A Wild Year for Tech
Originally published on 12/15/2006 at 9:05 a.m. For the third year in a row, the economy grew steadily and consistently, even taking into account the slowdown into year-end. And, for the third year in a row, the market has fought back from scary meltdowns earlier in the year and is closing out the year in strong rally mode. Let's dig down into some sectors and how they've performed in 2006. The semiconductors are down about 10%. The glut has been problematic. Semi-equipment suppliers like Applied Materials (AMAT Quote) and Lam Research (LRCX Quote), which sell to semi companies like Intel (INTC Quote) and Taiwan Semi (TSM Quote), are up about 15% on the year. That 25-percentage-point performance difference between the two will have me exploring whether there are any paired trades of long semis and short semi-equipment, if only looking for a reversion of each side toward the other to close that gap. I have to be careful that my arbitrary starting date of the beginning of this year isn't misleading me in that logic, though, in some sort of noisy manner. Software is up about 20% on the year. Microsoft (MSFT Quote) has been a big leader in the market for the past few months. Radio, despite facing secular decline and a mass exit of listeners burned out by the same playlist that some genius at CBS Radio (formerly Infinity) and Clear Channel (CCU Quote) thought everyone would want to hear endlessly in every U.S. city, is up almost 10% on the year. A lot of cash flow has steadied these stocks. I still wouldn't touch radio with a 10-foot pole. The best-performing sector in tech/media this year? Cable stocks, which were up about 60% on the year. I'll be looking to short some of those names later in 2007, when the momentum-chasers, who are thrilled that cable is winning some pointless short-term war with the even more-maligned telcos, figure out that Internet video and ultrabroadband are the actual enemies. Close behind cable is satellite, up almost 45% for 2006. Satellite isn't as poorly positioned as cable, but both models depend on making their customers pay outrageous amounts of money for time- and channel-bundled video content that never gets watched. I'd rather short cable next year, but I might also short some satellite stocks, depending on time and price, of course. Wireless is down 10% on the year, despite showing huge unit growth. That must have already been more than priced in late last year. And the market doesn't believe wireless can show double-digit growth again next year. I have my doubts, too, but I think in a strong/steady global economy, a 10% unit growth hurdle would look easy. Betting on wireless in 2007 is probably a bet on the economy. I'd rather find secular growers. Like the semi/semi-equipment setup, the fact that wireless-tower stocks (up 30% on the year) are up more than 40 percentage points over wireless stocks on the year will have me investigating possible paired trades in early 2007. Here's to the wild ride that 2006 has been. And here's looking ahead to 2007 -- betcha it'll be wild in its own right. At the time of publication, the firm in which Willard is a partner was net long Microsoft, although positions can change at any time and without notice.Tony Crescenzi's Blog: Fed Puts Exclamation Point on Weak Growth
Originally published on 12/12/2006 at 3:05 p.m. All of the changes made to Tuesday's FOMC statement are acknowledgments of recent signs of slower economic activity, and there was no downplaying the acknowledgments, which would have tempered expectations for a future interest rate cut. In other words, there is no "yes, but" feature in the statement to signal that the Fed's increased emphasis on the signs of slower economic growth is seen as temporary. Hence, there is slightly more fodder for the rate-cut camp than for those who think that the Fed will either stay on hold for an extended period or perhaps raise interest rates next. There were only two major changes to the FOMC statement. The most important one was the exclamation point that the Fed added to its assessment on the impact of the housing market on the overall economy. In today's statement, the Fed added the word "substantial" to describe the cooling in the housing market:"Economic growth has slowed over the course of the year, partly reflecting a substantial cooling of the housing market."The Fed is surely aware that the added emphasis will be seen as another step along the way to a future interest rate cut; hence, its inclusion is fairly significant. It could be said, however, that the emphasis could well reflect a more honest assessment of the situation. The other major element was the Fed's acknowledgment of other areas of slower growth in the economy.
"Although recent indicators have been mixed, the economy seems likely to expand at a moderate pace on balance over coming quarters."The beginning part of the sentence ("Although recent indicators have been mixed") is new. The Fed tempered the hawkish tone in the second part of the sentence, but there was no increase in emphasis there, no "yes, but," which will be read more dovishly by investors. The Fed kept its rate-hike bias, as evidenced by the reference to inflation risks and the possibility of "additional firming." Until today, the Fed has left no room for people to say that it has been hinting at an interest rate cut in any of its recent speeches. With the changed emphasis shown in today's statement, the next batch of Fed speeches takes on new significance.
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