What is money? According to the Merriam-Webster dictionary, money is "something generally accepted as a medium of exchange, a measure of value, or a means of payment." Most importantly, money also functions as a store of value, whereby it "must be able to be saved and retrieved at a later time, and be predictably useful when retrieved."
There are many different forms of money which may fit the above definition and requirements such as commodity money, fiat money, etc... The form of money that we are most accustomed to, and which we use everyday, is actually fiat money, with minimal intrinsic value (for example the worth of paper used in the $100 USD bill is a lot less than $100), but decreed by government order (where the word fiat in Latin means "let it be done").
Since the introduction of the Euro, first as an accounting currency in January 1999 and later as a circulated currency in 2002, it has become the largest currency in circulation in the world. As of January 2013, Euros in circulation totaled â‚¬ 882.4 billion (the equivalent of about $1.196 trillion using EUR/USD exchange rate of 1.356 as of January 31, 2013), while total US Dollars in circulation stood at about $1.155 trillion.
Furthermore, the Euro has become the second largest reserve currency in the world after the U.S. Dollar. Since the introduction of the Euro, its percent composition of the world's allocated reserve currencies has risen from about 18% in 1999 to about 24% in 2012, while the U.S. Dollar has fallen from about 71% to about 62%.
In the latest NASDAQ-100 short ratio rankings (short interest/float), several technology shares witnessed an increase in short interest, with the number of shorted shares exceeding levels seen during the past twelve months. Such list includes Intel Corporation (INTC), Adobe Systems Inc. (ADBE), Seagate Technology Public Limited Company (STX) and Apple, Inc. (AAPL). Cisco Systems Inc. (CSCO) also witnessed a substantial increase of 16.5% in short interest. Although for some of these companies their short ratio remains somewhat moderate, including Apple and Cisco, is the technology sector and its bellwether companies falling out of favor, or is this a temporary phenomenon creating a potential buying opportunity?
Intel's short interest has just surpassed 200 million shares, with its short ratio ranking (short interest/float) gaining 4 spots to 36 during the past two weeks (whereby a short ratio ranking of 1 reflects the highest short ratio, and a
After reaching an intraday high of $705.07 on Sept. 21, 2012, shares of Apple (AAPL) fell as much as 21.2% to an intraday low of $555.75 on Nov. 7. Is such a drop justified by fundamental changes in the outlook for Apple? Or is the severity of such a drop unjustified, hence presenting a good buying opportunity?
From a valuation perspective, analysts' earnings estimates for Apple have been lowered during the past 30 days, from $53.45/share to $50.13/share for the year ending September 2013, and from $61.20/share to $58.70/share for the year ending September 2014. Using Apple's intraday low price of $555.75 for Nov. 7, 2012, current earnings estimates would yield P/E ratios of 11.09 and 9.47, respectively.
Meanwhile with a high price of $705.07 for Sept. 21, and using earnings estimates from 30 days ago, that would yield
It is now official, Barack Obama will serve a second four-year term as president of the United States. Despite skepticism about future economic prospects that shadowed his re-election campaign, we believe the stage is set for an upcoming U.S. economic boom driven by cash-rich companies including top ranked Berkshire Hathaway (BRK.B), Apple, Inc. (AAPL), Microsoft (MSFT), Cisco (CSCO) and Google (GOOG). An incentive to hire and invest by such companies and others will be the result of several factors.
1. Second term GDP growth effect
Since the end of World War II, there have been six U.S. presidents who have served two consecutive terms: Harry Truman - Democrat (1945 - 1953), Dwight Eisenhower - Republican (1953 - 1961), Ronald Reagan - Republican (1981 - 1989), Bill Clinton - Democrat (1993 - 2001), George W. Bush - Republican (2001 - 2009) and Barack Obama - Democrat (2009 - 2017).
There is no question that financial analysts are anxiously awaiting the result of the U.S. presidential election and its effect on the stock market. It is somewhat questionable whether the ultimate direction of the market will be influenced by the results of the election itself, or by upcoming critical events such as the fiscal cliff, European financial woes and Federal Reserve policy. As in past elections, stock market performance may vary by sector; for example, some may expect defense stocks to perform well under a Republican president, while others may expect technology stocks to do better under a Democrat president.
During the past 40 years, in the 6 months following the presidential election, the technology-heavy NASDAQ index appreciated on 3 out of 4 occasions in 1976, 1992 and 1996 (75% of the times) when the election was won by a Democrat. Average appreciation was +5.73%, while it dropped by -8.89%
Competition between Apple, Inc. (AAPL), Microsoft Corporation (MSFT) and Google (GOOG) has been intense. In an environment where consumer habits are migrating from traditional cell phones to smartphones and from laptops to tablets, the battle between the three technology giants has been predominantly focused on the associated hardware and operating systems: i.e. iPhone vs. Android phones, iPad vs. Surface, etc. ...
The next phase of such battle will move to content and unique services, including applications ("app") and beyond. Such competition has already started with Apple's launch of its own Maps to compete with Google Maps, as well as Apple's Siri which could ultimately pose a threat to Google's search dominance, as outlined in our article of October 17, 2012 "Google's search lead can become Apple's advantage in 5 years".
The traditional designation of a successful consumer technology company as a specialist in either hardware or software is
In a recent ranking of the performance of public stocks held by Warren Buffett's Berkshire Hathaway (BRK.A) (BRK.B), several of his largest holdings recorded negative gains since June 30, 2012. Coca Cola (KO) (representing 19.63% of the portfolio using June 30 positions and October 31 closing prices) has dropped by -4.25%, while American Express (AXP) (11.2%) has dropped by -3.18% and International Business Machines (IBM) (17.11%) has dropped by -0.11%. Meanwhile, another major component, Wells Fargo (WFC) (18.28%) is up a mere 1.41%.
Despite such lackluster performance by major holdings representing over 66% of Mr. Buffett's portfolio, the entire portfolio as represented by the June 30, 2012 filing of SEC form 13-F would actually by up by about 1.95% since June 30, 2012 as of October 31, 2012 (excluding effects of portfolio composition changes since June 30, as well as any holdings not reported in 13-F).
October did not turn out to be a good month for some of the largest technology shares this year. Apple, Inc. (AAPL) is down 9.5% month-to-date from end of September to October 26, while International Business Machines (IBM) is down 6.8%, Microsoft (MSFT) is down 5.2%, Google (GOOG) is down 10.5% and Intel (INTC) is down 3.5%. Will these shares continue their lackluster performance into January 2013, or is it time to buy for a year-end rally coupled with a bullish January effect?
This year's poor October performance was primarily driven by disappointing earning results. Meanwhile, during the past 10 years, the period from November 1 to January 31 has proven to be generally good for Apple, IBM and Microsoft, while in the case of Intel and Google (although Google went public August 19, 2004) this period was less generous.
Technology stocks performance from November 1 to January 31
In the latest short ratio rankings (short interest / float) for NASDAQ-100 stocks, the stocks with the three highest rankings witnessed a further increase in their short ratio from two weeks ago. It is also interesting to note that Apple, Inc.'s (AAPL) short ratio has reached a recent high of 1.72%, although such level is still rather low, with its rank standing at 69 out of 100 (where a rank of 1 reflects the highest short ratio).
Is this an indication that selling pressure will continue, driving prices lower for shares with high short ratios, or is it time to buy? Some would equate a stock being most shorted as being most hated, with possibility for further downside as investors shun it, while others may argue that such indicators may not be very conclusive due to hedges, options, ETFs and structured products.
On September 28, 2012, we published the article "4 Financial Stocks Doomed To Trade Higher", making the case for why Goldman Sachs (GS), Morgan Stanley (MS), Bank of America (BAC), and Citigroup (C), could trade higher despite the possibility of a slowing economy. As a matter of a fact, we reasoned that any economic malaise will help maintain and boost a Federal Reserve policy which would further support financial stocks.
Since the publication of the article, the Dow Jones U.S. General Financial Index (DJUSFN) has increased by 2.6% from 291.21 on September 25, 2012 to 298.71 on October 19, 2012, while the Dow Jones Industrial Average (DJI) has actually dropped by 0.9%. Although all four financial stocks have traded higher, there is a good possibility for additional gains during the next three months.
There has been substantial negative sentiment developing about Apple, Inc. (AAPL) lately, both in the news headlines, as well as in the value of its shares. Apple stock dropped by as much as 11.6% from an all time high of $705.07 on September 21, 2012, to an intraday low of $623.55 on October 9, 2012. Apple shares have since bounced back to close at $634.76 on October 15, 2012.
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Apple year-to-date chart. Source: Yahoo Finance
Despite such setbacks, Apple shares are still up 57.4% since the start of the year. Apple's recent negative sentiment has been attributed to several factors as discussed in our article published on October 8, 2012 "9 reasons Apple shares will make new highs, again." One dominant factor relates to Google's (GOOG) competitive threat to Apple arising from Google Maps (due to the initial setback experienced by Apple's Maps) as well