RealMoney's five bloggers were all over the earnings and expiration action this week. Once again this weekend, we'd like to share the "Best of the Blogs" with TheStreet.com readers. These posts best captured the intent of these blogs, which is to provide intelligent discussion on the issues each writer sees as most pressing that day.
Now, let's take a look at
on the trouble with Microsoft and Intel,
on the pitfalls of buying and holding (which sparked
a dynamic exchange in Columnist Conversation),
on the reaction to the reaction of Ben Bernanke's speech,
on options strategies for oil and homebuilders, and
on the impact of the latest GDP report.
here for information on
where you can see all the blogs -- and readers' comments -- in real time.
Cramer's Blog: Softie and Intel Ain't What They Used to Be
Originally published 04/28/2006 10:30 AM
really doesn't deserve to be considered a great company anymore. It is chronically late with software no one really wants. It is starting its umpteenth initiative to take back the Web, but it can't. That game's pretty much over. It can't seem to get out of its own way in the media business or the cell-phone business. And whenever it succeeds, it gets sued.
I don't know what to say about this company, or about
, its twin from the old days. Both companies defy rational thought and have become highly emotional totems. They remind me of
not that long ago: companies that everyone clings to -- including yours truly -- but that no one really believes in anymore.
No one's willing to come out and say it, but both Intel and Microsoft are PC-centric in a world where the PC is too big to be convenient on the road but not fast enough or big enough to play video games on. Those are the two big drivers, and these companies simply aren't levered to either. Plus, they play no role in the great capex spending that is the telco-cable arms race.
What do you do with them? The temptation with both Intel and Microsoft is always the same: "You hold on to them, they will come back."
I have lost too much faith. While I hold on to them, it seems that every Tom, Dick and Harry sector's on fire. You need the space on your sheets to be involved in something that can make you money, if not now, then at least in the foreseeable future.
I see nothing in the foreseeable future for either company.
At the time of publication, Cramer was long Microsoft.
Rev Shark's Blog: Smoking Buy-and-Holder Out of His Hole
Originally published 04/25/2006 12:02 PM EDT
At most social gatherings I attend, the conversation usually turns to investing and the stock market at some point. As a recovering attorney, I always enjoy cross-examining folks over their investment approach. Most have been so thoroughly brainwashed by the business media and traditional Wall Street "'wisdom" that they find some of my observations to be quite surprising. Here is a typical dialogue:
So tell me about your investing. What approach do you take to the stock market?
: I am very conservative. I just buy and hold high-quality blue-chip stocks for the long run.
Whoa! You must be a real cowboy to take such a high-risk approach with your money. Do you have trouble sleeping at night?
What the heck are you talking about? I don't take big risks. What is risky about holding on to good stocks for a very long time?
What is a "good" stock? Is Coca-Cola a good stock? Is IBM a good stock? How about Microsoft?
Sure, everyone knows those are solid companies that aren't going to disappear. They will be in business forever and I can hold those stocks for years without losing sleep.
So in your approach to investing, a stock can decline over the course of seven or eight years and still be considered a good investment?
Well, those might be bad examples. There are lots of stocks that continue to go up over the course of many years.
So how do you find those? Isn't it extremely difficult to find a "good" stock at a very early point in its growth?
Sometimes you just have to be very patient.
So what happens if you make a mistake and the stock that you think is solid ends up being a loser? You have tied up capital for many years, lost money and missed out on returns in other places. Isn't that a very risky thing to do?
No, no, you are missing the point. If it's a good stock, you can just hold on while it doubles and triples, and if you don't sell, you don't even have to pay taxes. That compounding is really a powerful thing.
Yes, it sure is, but doesn't it work in reverse also? If the stock you believe is a big long-term winner turns out to be nothing special, you compound your losses by holding on to it. And do your really end up further ahead when you hold on to a stock simply to avoid taxes? Doesn't there come a time when further appreciation becomes limited and you would be better off paying the tax on the gain and moving to something else? How much in taxes did the people who didn't sell technology stocks in 2000 end up saving?
You are saying I should be a hyperactive trader, who buys and sells constantly? I don't have the time for that.
No, you don't need to be a trader, but keep in mind that long-term buy-and-hold is very risky compared with a more active approach. Even if you only consider your investments once a month and use some simple money-management rules, it's far less risky than the approach you take now. We'll talk about that next time.
Cody Willard's Blog: Weak Response to Strong Statement
Originally published 04/27/2006 10:52 AM EDT
I have to say I don't like the reaction to the reaction of Ben's speech.
I normally rant on the futility of parsing any particular speech from the
, but Ben's comments that they would pause in the face of strong economic data (my take on what he said, obviously not verbatim) is pretty big news.
I would have thought the market would love, love, love that comment. Then again, does it really matter how the market traded in the first 53 minutes after that speech came out? Probably not.
As noted below, I've covered some short hedges but am not doing much outright buying.
Apropos my closing comments last night, add
action in the last few months and you have to notice that
old world, big-cap tech that everyone's back to thinking can never rally again is indeed in rally mode.
Finally, I'd noted a while ago that I think
is wasting advertising dollars in those contrived, silly commercials/music videos that they use the contestants on
for. I got to thinking last night, as I was thinking about how quickly advertising on television is changing in the midst of this content revolution, why doesn't Ford or some other advertiser just take a small fraction of their advertising budget and buy out the whole first half of the Superbowl this year? Bet somebody likes that and that it happens someday, though probably not this decade.
At the time of publication, the firm in which Willard is a partner had no positions in the stocks mentioned, although positions can change at any time and without notice.
Steve Smith's Blog: Oil Puts, Home Spread and ATMs
Originally published 04/27/2006 10:16 AM EDT
The oil sector will be dragged down today by
disappointing earnings. On Wednesday, the
Energy Select Spyder
saw over 156,000 of its puts trade, more than six times the average daily volume. The most active strike was the June $57 put, which traded 65,000 contracts. The group's charts now have some big gaps down.
Homebuilders are also down as the combination of lowered guidance from
and higher interest rates weighs on the group. The put spread I sold yesterday in
is back to a scratch at the moment and I will be keeping a close watch, as the group is moving toward 52-week lows.
Finally, one last comment on the deep in-the-money calls. Lenny talks a lot about buying time so he won't get shaken out etc. But in his
trade he says he is "looking to make a $1,000 because that's a nice win." So he's risking $10,000 to make $1,000 ... that doesn't strike me as an attractive proposition or "safe bet" Basically he is looking for a $1 move in the stock, not exactly a taking advantage of his bullish opinion on the stock. Maybe the safer bet, with a lower risk, is to buy 20 June at-the-money calls for about $1.20, or $2,400, and hope the stock moves about $1.50 at some point in the next month.
Tony Crescenzi's Blog: Fed Doesn't Care
Originally published on 04/28/2006 9:11 AM EDT
In and of themselves, these GDP data are bearish for the bond market.
The core deflator for personal-consumption expenditures increased at a 2.0% pace, a few tenths more than expected. This will get the
attention. That said, Ben Bernanke told us yesterday that the Fed would end its hikes even if risks were unbalanced on the inflation front. The Fed expects pressures leading to inflation today to diminish in the future.
GDP rose just 0.1% less than expected, but the gain in final sales, which measures GDP minus the inventory change, was stronger than expected. In other words, inventories fell more than expected, subtracting 0.6% from GDP. This means that spending on everything else was stronger than expected. Inventories remain extremely lean and are likely to add to GDP in the current quarter.
Spending on equipment and software increased at a 16.4% annual rate, the most since the quarter ended March 2000. This shows that recent gains in corporate profits have created plentiful liquidity to finance capital spending and that the motivation to engage in capital expenditures is seen as favorable by U.S. businesses. In other words, companies are showing confidence in the continued expansion of the U.S. economy.
Nonresidential fixed investment as a whole gained at a 14.3% annual pace, led by the gain in spending on equipment and software. This is the largest gain since the quarter ended June 2000. The advance was helped by a surge in spending on structures, which consists largely of commercial real estate and structures such as oil rigs. This component gained at an 8.6% pace, the most in three years.
Federal spending rebounded to a sharp 10.8% gain, but this was largely expected following an unusual 2.6% decline the previous quarter.
Spending on durable goods surged the most since the final quarter of 2001, increasing at a 20.6% annual rate. These data fit with the durable-goods report from earlier in the week.
Again, although these data are bearish in their own right, the Fed has told us that it expects the economy to slow and for inflation pressures to hence diminish. So, while these data increase slightly the odds of a hike in June, more powerful would be evidence that the trends seen in the first quarter are continuing in the current quarter and beyond. If they do, it's likely that we'll see more rate hikes beyond the May 10 hike. For now, however, that evidence is not yet compelling, although it is moving in that direction.
George Moriarty is managing editor of RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships.