Sunday, July 31, 2005

This and That

Sorry I didn't post this on Saturday, like I usually do. I left early to take my 1-yr old daughter to the water park for her first time. She was such a trooper, and we had a blast. We went down the water slides and played in the kiddie pools, etc. Daddy & daughter day-- nice.

Anyway, here are those links of interest:

  • 70% of S&P 500 companies have beaten earnings expectations so far

  • Retail sales look strong at Wal-Mart and Target

  • Herb takes a swipe at ISRG

  • Send Manny back to the Tribe!

Friday, July 29, 2005

Stock of the Day

My pick of the day is Optimal Group (OPMR), formally know as Optimal Robotics. This Canadian company provides technology and business services related to credit card, electronic payment, and debit payment processing. The company is small, with a market-cap of under $500 million. It has strong fundamentals, and is experiencing rapid growth in revenues and earnings.

Today, the stock is breaking out of a cup-and-handle formation on huge volume. This is a strong breakout, and looks like it should have legs. There is also growing short interest in the stock, which could result in future short covering.

long OPMR

Morning Update

"Hold fast to dreams, for if dreams die, life is a broken-winged bird that cannot fly." - Langston Hughes

Morning News of Note:
  • MWD: Morgan Stanley to Cut 10% of Its Broker Force Morgan Stanley, which has been struggling to increase the size and productivity of its brokerage force, has pulled back its horns and plans to eliminate about 10% of its brokers. In a memo from acting president Zoe Cruz to employees Thursday, Morgan Stanley said it will slash about 1,000 of its lowest-producing brokers from its force of about 10,000 over the next few months. It (Full Story) WSJ
  • MSFT: Microsoft Plans To Step Up Pace Of Acquisitions Microsoft Corp. will find growth from a broad range of new products over the next two years while increasing its pace of acquisitions, company executives told a meeting of Wall Street analysts. The company also is bullish on the growth potential of software services that are delivered over the Internet, said Microsoft Chief Executive Steve Ballmer in a presentation at Microsoft's annual meeting with financial analysts. Those services, which would include Internet search and security capabilities Microsoft gained through its recent acquisition of FrontBridge Technologies Inc., are a "job-one priority" at Microsoft, he said. (Full Story) WSJ
  • GDP Growth: U.S. Economy Grew at 3.4% Pace in 2nd Qtr The U.S. economy grew at a 3.4 percent annual pace from April through June, the ninth straight quarter in excess of 3 percent, as consumers didn't let record gasoline prices stop them from buying more cars and clothes, economists said before a government report today. The forecast for gross domestic product, the sum of all goods and services produced in the U.S., is based on the median estimate of 66 economists in a Bloomberg News survey. (Full Story) Bloomberg
  • XMSR SIRI: XM, Still One Step Ahead of Sirius Rivals Vie for Audience's Divided Attention Until recently, XM Satellite Radio Holdings Inc. and its rival Sirius Satellite Radio Inc. were engaged in a tit-for-tat, deal-for-deal face-off. Sirius landed the NFL; XM responded with baseball. XM signed an exclusive deal with General Motors Corp.; Sirius partnered with DaimlerChrysler AG. XM scored former NPR Morning Edition host Bob Edwards; Sirius lured away shock jock Howard Stern from terrestrial radio giant Infinity Broadcasting. (Full Story) Washington Post
  • OVEN SBUX: TurboChef-OVEN speed cooking becoming popular-Business Week: OVEN is a maker of high-speed, cook-to-order ovens that are already in use at 20,000 Subway restaurants. SBUX is also testing them at 100 locations. "It is very possible that SBUX and other major chains will sign up for the OVEN ovens," says Robert Stovall, managing director at Wood Asset Management. Also, OVEN will be releasing speed ovens for the home next year. The U.S. potential home market is estimated at $6B, while the commercial market is estimated at $1.5B.


Market Comments: The market is relatively flat in early trading, after another strong day yesterday. This market sure is like the Energizer bunny, isn't it?

GDP came in this morning at +3.4% (vs. 3.5% consensus), and the Chicago PMI was much stronger at 63.5 (vs. 55.0 consensus). So the economy is doing well, and manufacturing may be rebounding from the soft patch earlier this year. Slowing money supply growth, higher interest rates, and a flattening yield curve have me thinking economic growth will slow soon. But I have yet to see any real signs of it.

long MSFT, OVEN

Thursday, July 28, 2005

Wrapping Up

Another very strong day. After a brief dip this morning, the market rallied pretty much the rest of the day. Homebuilding stocks were very strong, followed by select retailing stocks and energy.

Volume was strong today with nearly 1.6 billion shares traded on the NYSE, and more than 1.7 billion on the Nazz. That qualifies as a small accumulation day for the S&P. Breadth was also very strong. The Hi/Lo index hit 367 on the NYSE, with more than 400 new highs. So, lots of stocks are breaking out and leadership is broadening. That's a bullish sign.

I'm sure you don't want to hear me say again that the market could use a pause here, but I know as soon as I stop writing it...

Mid-day Movers

Here is a partial list of today's high-volume movers:

  • High-volume advancers: SSNC, LFB, BEAV, HW, ISRG, NIHD, ACL, GENZ, TTI, BYD

  • High-Volume decliners: SSYS, SPC, UHS, ILSE, DRTK, PRX, ASVI, CAJ, BG, KWD

Market Comments: The resilient market strikes again. The market dipped into the red for about 2 minutes this morning, before reversing higher. If you've ever been short naked calls, you know the pain associated with this. And I can't help but think that as soon as I cover, Mr. Market will finally pull back.

long BYD, ILSE

Morning Update

"It is not a question how much a man knows, but what use he makes of what he knows; not a question of what he has acquired, but of what he is, and what he can do with it." - Josiah G. Holland

Morning News of Note:
  • Real Estate Financing: Heard on the Street.... Wall Street Finds a New Gusher Commercial-Mortgage Securities Are Headed Toward a Record Year As Real-Estate Financing Shifts Investors' love affair with real estate is producing a record year for commercial mortgage-backed securities, signaling a further shift in real-estate financing from banks to Wall Street. Cash is flooding into the market, where mortgages for skyscrapers, strip malls and other commercial properties are bundled together and sold off as bonds to investors varying from pension funds and insurance companies to hedge funds and wealthy investors. (Full Story) WSJ
  • Momentum Stocks: Momentum Stocks Please pass it on: The old Wall Street adage "Buy low, sell high" is patronizing to the point of absurdity -- akin to saying, "Get rich, not poor." It is also dead wrong, according to momentum investors. Buy high, sell even higher, they argue. They have a point. Studies have long shown that stocks with stellar gains tend to produce more of the same. Sadly, they tend to do so only for six to 12 months before switching direction. Researchers call this long-term reversal. In sum, buy momentum stocks if you like, but don't turn off your quote screen and forget about them for too long. (Full Story) WSJ
  • COP: ConocoPhillips Has Best of Both Worlds THANKS TO RISING oil prices, ConocoPhillips stock has been a big winner, soaring 57% in the past 12 months. That's nearly five times the rise in the Standard & Poor's 500 index and nearly double the performance of the S&P integrated oil and gas index. But ConocoPhillips continues to beat earnings estimates (it reported a 51% rise in profit Wednesday) and reinvest cash from record-high energy prices more aggressively than its competitors do. (Full Story) BARRONS
  • GOOG MSFT: Google Calls Microsoft Lawsuit 'A Charade' Google Inc. is asking a judge to reject Microsoft Corp.'s bid to keep a prized research engineer from taking a job at the Internet search company, saying the software titan filed its lawsuit to frighten other workers from defecting. Microsoft sued Kai-Fu Lee, one of its former executives, and Google last week, claiming that by taking the Google job, Lee was violating an agreement he signed in 2000 barring him from working for a direct competitor in an area that overlapped with his role at Microsoft. (Full Story) Washington Post
  • SBUX: Starbucks: Color on qtr (50.35 ) Analysts are positive on SBUX following strong results and guidance issued last night... JP Morgan notes that overall results were strong and quality was high. As comps (+7%) and revenues (+22%) were pre-reported, there were no top line surprises. They say that while they are more confident in its 3 yr. earnings outlook, the firm rates SBUX Neutral and would wait for price pullbacks to buy the stock... Goldman believes there has been a lot of investor concern regarding the lapping of October 2004 price increases (3%) and what that might mean for sales going forward. With the music initiative adding 1% to comps, expected traffic/mix gains of roughly 4%-5% this year, they believe SSS at the midpoint of mgmt's 3-7% range in reasonable for 2006. They believe that, along with unit growth of ~18% should, at a minimum, generate the 20% top line growth management is looking for.


Market Comments: The market is up again on the open. Strong earnings reports from SBUX, PHM, DRIV, XOM, COP, and PTEN (among others) have helped 2Q earnings continue to come in ahead of expectations. The steady climb by the market over the last week has been impressive, as the pause/breather I was looking for has yet to materialize.

long GOOG, MSFT, PTEN, XOM

Wednesday, July 27, 2005

Stocks of the Day

I have 2 stocks today. The first is Fisher Scientific (FSH), which is breaking out to a new high on rising volume. This company has excellent fundamentals, upward revisions to earnings, stable earnings and revenue growth, and attractive valuation.

The second stocks is Monster (MNST). The company reported in-line earnings this am and was down in early trading. But on the conference call, management commented that they have been contacted by Google about doing business together. That would be a great combination, and could compete better with Yahoo!'s Hot Jobs division.

The stock reversed its early losses, got an intraday upgrade (Ryan Beck), and is rallying on very strong volume.


On a related note, I got stopped out of a previous SOTD today: Jamdat (JMDT). The stock is breaking below its 50-day moving average on increased volume. I had a 10% stop-loss limit on this position, and it was triggered today. Managing losses is part of the game.


long FSH, GOOG, MNST

Midday Movers

Here is a partial list of today's high-volume movers:



  • High-volume advancers: ISRG, GRMN, CHRW, FCL, LOGI, ASPM, IPS, HSC, CRI, HANS

  • High-Volume decliners: PFCB, INSP, TRMB, YCC, ZBRA, FULT, WBSN, MDRX, BYD, PNE
Market Comments: The market is again acting resilient, holding strong each time it dips into negative territory. The market doesn't have to go down to work off its overbought condition. It can also just meander around, chopping and flopping, which would also have the desired effect.

But there are plenty of individual issues that have gotten slammed due to earnings (PFCB, ZBRA). So be careful, and make sure you know when your holdings are reporting.

long BYD, PNR

Morning Update

"If you have something to do that is worthwhile, don't talk about it, but do it. After you have done it, your friends and enemies will talk about it." - George W. Blount

Morning News of Note:
  • TTWO: Grand Theft Auto Game Fallout Prompts Inquiry by the FTC The fallout from hidden sex scenes in one of the most popular videogames continued yesterday as Take-Two Interactive Software Inc. said the Federal Trade Commission is conducting an inquiry into its controversial Grand Theft Auto: San Andreas game. The New York game publisher said it was notified that the FTC's division of advertising practices is examining advertising claims that Take-Two made for Grand Theft Auto: San Andreas. (Full Story) WSJ
  • Energy Bill: Congress Is Set To Approve Energy Bill After five years of trying, Congress is poised to pass an energy bill, delivering a victory for President Bush, who pushed for many of the policy goals in his presidential campaigns. The energy legislation appears to have enough bipartisan support to overcome the possibility of a filibuster or budget-related objections in the Senate, where it is scheduled to arrive for final approval by the end of the week. (Full Story) WSJ
  • CMCSA DIS: Comcast Mulls Sports Network to Rival ESPN If you can't buy 'em, clone 'em. Cable-television giant Comcast Corp. failed last year in an attempt to buy Walt Disney Co. and its ever-burgeoning ESPN sports network. Now, the Philadelphia-based company is exploring the possibility of mounting a challenge to ESPN, the undisputed leader in TV sports programming. People familiar with the company's plans say Comcast is interested in recasting its quirky and low-rated Outdoor Life Network. While best known for its coverage of Lance Armstrong's annual victory at the Tour de France, it is also the home of professional bull riding, bear hunting and competitive barbeque. (Full Story) WSJ
  • MOT RIMM: Motorola's Q Looks to Dial Into BlackBerry Success Motorola Inc. is taking aim at the success of the BlackBerry mobile phone and e-mail device with a similar product of its own, which the company unveiled at an analyst conference in Chicago this week. Dubbed the Q, Motorola's device will feature a color screen, a keyboard and a digital camera. Motorola said the "smartphone" gadget is scheduled to hit retail shelves in the first quarter of 2006 but did not announce a price for the product, which will use an operating system from Microsoft Corp. (Full Story) Washington Post
  • AMZN: Amazon conference call summary (41.70 +3.96) AMZN says guidance going forward anticipates negative impact for forex; co says it would have been able to raise revs guidance for year by $150 mln if forex hadn't changed. Many analysts wanted more details on Amazon Prime, the cos' $79 a year memberships for free 2-day shipping, and $3.99 next-day shipping. Co says customers are doing more cross shopping and buying more, but won't give many details, such as what they are buying, what revs per user is, how many customers will convert to Prime, or even if it contributed much to Q2 growth.


Market Comments: The market is slightly lower in early trading, despite a strong durable goods report (+1.4% vs. -1.0% consensus). Last night ISRG reported blowout numbers, and this morning GRMN reported much better-than-expected earnings as well. So those two stocks are up in a sea of red (on my screen). BYD reported solid results, but the stock is getting hit nonetheless.

Maybe today we get the pullback. I took some profits yesterday, and lowered my market exposure. But I will look to add it back on weakness, as I am anticipating another push higher.

long ISRG, BYD, CMCSK

Tuesday, July 26, 2005

Midday Movers

Here is a partial list of stocks moving on above-average volume:

  • Stocks advancing on rising volume: JCOM, MDRX, LIFC, BMHC, LCAV, IRSG, QSII, VIVO, PTC, FDG

  • Stocks declining on rising volume: MTCT, PNR, WOLF, TBL, TTWO, LXK, DD, SIE, NTRI, LM


Long ISRG, QSII, PNR, FDG

Morning Update

"New discoveries in science will continue to create a thousand new frontiers for those who still would adventure." - Herbert Hoover

Morning News of Note:
  • WMT: Wal-Mart to Nearly Double Number of Stores in China U.S. retailer Wal-Mart Stores Inc. plans to open 42 stores in China by the end of next year, nearly doubling its presence in the country, a senior company official said Monday. Lawrence Lee, Wal-Mart's operations director for eastern China, said the company plans to have 90 outlets in China by the end of 2006 -- up from the current 48, including one in Shanghai that will open Thursday. (Full Story) WSJ
  • YHOO: Yahoo Acquires Maker Of 'Widget' Applications Hoping to pave a new path to its popular Web site, Yahoo Inc. has acquired Konfabulator, a tiny software maker that provides a computer platform for monitoring the weather, stock prices and a wealth of other customized information without opening a Web browser. The acquisition, for an undisclosed price, gives Yahoo access to a toolbox of mini-applications - known as widgets - that have built a cult following since Palo Alto, Calif.-based Konfabulator first introduced them for Apple Computer Inc.'s Macintosh in 2002. (Full Story) WSJ
  • MOT: Motorola-MOT introduces the Moto Q-FT: Yesterday, MOT introduced a number of new products, including the Moto Q, a mobile communicator powered by MSFT software which is designed to rival RIMM's Blackberry device. The Moto Q device is modelled on the MOT Razr handset design. The Moto Q is expected to come out in Q1 of next year.
  • TGT: Target expects July comps to be near the upper end of the planned +4-6% range (58.72 -0.38)
  • Yuan: China Won't Revalue Yuan Further for the "Foreseeable Future": In a website statement, the People's Bank of China stated "The notion that the 2 percent revaluation is only an initial adjustment and that the central bank will further adjust the rate in the foreseeable future is wrong. The Chinese Central bank said it wouldn't revalue the yuan again in the "foreseeable future" because companies need time to adjust and the appreciation will help limit the country's trade surplus, according to Bloomberg.


Market Comments: The market opens slightly lower this morning, but has already reversed those early losses and is on the rise. Healthcare stocks look the strongest this am. Pentair (PNR) reported disappointing results, or more specifically offered weak guidance, but I still like the fundamental story there and would use the weakness to add to the stock.

long PNR, WMT

Monday, July 25, 2005

Market Wrap


I view today's decline in the market as part of a healthy consolidation. It was a bit of a nasty reversal, as the S&P 500 made a new yearly high and then reversed all of its gains. But the decline came on fairly light volume, much lighter than Friday even. So it did not add up to a distribution day.

Also, I think market breadth was constructive. The number of net decliners was not as large as the number of net advancers last week. Moreover, the number of net new highs actually rose today on both the NYSE and Nasdaq.

So I think this action could again be a 'buy the dip' opportunity. I'll have another "Stock of the Day" tomorrow, and will update how my last few picks have been fairing.

Midday Movers

Here is a partial list of stocks moving on above-average volume:

  • Stocks advancing on high volume: LIFC, FORD, LKQX, ADVS, HAL, WGR, LUFK, VIVO, FDG, HDB, CAM

  • Stocks declining on high volume: RNR, ANGO, GFIG, WRLD, TRI, FRGO, AACE, HNP, B, LEG

Market Comments: The markets are still down only slightly on the day. The SPX had an early burst and made a new high for the year (1238), but then reversed all of its gains. If the market finishes the day in the red, I think it will inidicate a much needed breather is at hand. But that is by no means a done deal.

Morning Update

"I've never known a man worth his salt who in the long run, deep down in his heart, didn't appreciate the grind, the discipline." - Vince Lombardi
  • AAPL: Apple Plants a Seed to Help Raise Podcasting What, you don't have a podcast yet? That's this year's version of, "What, you don't have a blog yet?" Podcasts -- downloadable audio clips that you can listen to on your computer or on a digital music player such as an iPod -- are riding an extraordinary wave of hype. Where blogs are supposed to make newspapers obsolete, podcasts are supposed to turn radio into a dusty fossil. (Full Story) Washington Post
  • MOT: Razor's Edge Motorola's Bold New Course MOTOROLA PRACTICALLY INVENTED the mobile phone. A picture of the first portable "radiophone" graced the cover of the company's annual report in 1973, roughly a decade before early adopters could be found hauling bulky mobile phones around in their briefcases. The Schaumburg, Ill.-based engineering icon went on to dominate the industry, controlling more than a third of the world's wireless telephone market -- only to give much of it away in the 1990s to Finnish rival Nokia and others. But now Motorola is on the comeback trail, and so are its shares (Full Story) BARRONS
  • SIRI: Sirius Business NOBODY KNOWS RADIO like Mel Karmazin. In 1981, he took over Infinity Broadcasting, built it into one of the most profitable networks in the country and, for better or worse, made Howard Stern and Don Imus national celebrities. In 1996, he sold Infinity to Westinghouse-owned CBS, which eventually was acquired by Viacom (ticker: VIA) for more than $40 billion; Karmazin became second in command to Sumner Redstone. In 2004, Karmazin suddenly quit Viacom and jumped to Sirius Satellite Radio (SIRI), the No. 2 satellite radio company after XM Satellite Radio (XMSR). (Full Story) BARRONS
  • DWA: DreamWorks Struggles as a Public Company The noise from fans was deafening at the "Mr. & Mrs. Smith" premiere last month where, in the film, Brad Pitt takes a beating from his onscreen wife, played by Angelina Jolie. Inside the theater, Jeffrey Katzenberg, the chief executive of DreamWorks Animation, was more subdued, having taken something of a beating himself in recent days. In May, Mr. Katzenberg and DreamWorks were taken to task by analysts for overestimating sales of "Shrek 2" DVD's and, later, for overselling the company's newest movie, "Madagascar." (Full Story) NY Times
  • EMC: EMC Corp.-EMC unveils new storage system-CNet.com: EMC has unveiled Symmetrix DMX-3, a new product which is capable of storing up to 288 terabytes of data on 960 disk drives, which is up from the 560-disk-drive-maximum of the company's previous powerhouse system. The company said by year's end, customers will be able to store up to 1 petabyte of data on over 2,000 disk drives on a single system. A petabyte is equal to a little more than 1,000 terabytes and is enough space to store 250 million digital music files.


Market Comments: The market opens flat this morning. Oil is down slightly ($58), and bond yields are in-line to up slightly (4.22%). The big news in the healthcare industry is generic drug-maker Teva buying competitor Ivax. Surprisingly, the news has both stocks trading higher.

This week's economic reports are as follow:

Monday - Existing Home Sales
Tuesday - Consumer Confidence
Wednesday - New Home Sales
Friday - Q2 Advance GDP

long TEVA

Sunday, July 24, 2005

Weekend Stock Scans

  • Here are some chart snapshots of 10 stocks that ranked highly on my weekend stock scans.

no positions

Saturday, July 23, 2005

Weekly Market Review


Anecdotally speaking, there seems to be a lot more bullishness in the market. If you watch CNBC all day, like I do, you have seen a bevy of talking heads come on and wax poetically about the market's strength here and the prospects for a 2nd half rally.

That's all fine and good, as these investment managers are mostly perma-bulls anyway. It's in their best interest to stoke optimism in the market and try to bring assets in. But as I look at the sentiment indicators, I see more of a mixed picture. To wit, here is where they stand:
  • The bull/bear survey in Investor's Intelligence fell to +30 (53% bulls, 23% bears)
  • The bull/bear survey in AAII fell much further to +13 (41% bulls, 28% bears)
  • And the bulls on Market Vane remained plentiful at 69%
  • But the Specialist Short Ratio is still very low (0.19), as is the Rydex Ursa/Nova ratio (0.22)
  • And the put/call ratios are all still only in neutral territory

In sum, there are pockets of bullishness, but nothing that I would characterize as extreme. The markets have been hitting a series of new highs lately, but I would not be suprised to see a pullback at any time. After that, I would anticipate another rally attempt that will likely suck in more investors and covert more bears to the bullish side of the camp.

This and That

Here are some links of interest that I saw over the weekend:


  • Can Armstrong be considered the best athlete ever?

  • China revalues the Yuan

Friday, July 22, 2005

Morning Update

"When I hear somebody say 'Life is hard', I am always tempted to ask, compared to what?" - Sydney J. Harris

Morning News of Note:
  • MSFT: Conference Call Summary (26.44 +0.25)L -Update- Co states they are happy with the progress made on the share buyback during the quarter... continue to see that as a significant part of cash return to shareholders... also achieved one-time dividend and regular dividend last year.... not anticipating any changes in current philosophy.... 'We continue to have very strong cash flows and very well positioned from a cash perspective... will continue the programs we've got in place'... co states they are encouraging people to look at the results after stock-based compensation... states that in general think the economy remains stable with N. America in a little better shape than Asia Pacific and Europe.... saw corporate profits improve slightly and expect some of that to carry into Y06; 'IT spending looks reasonably'... remain optimistic about the role that technology will continue to play in the global economy.
  • SNE: Sony Does More To Court Creators For PlayStation 3 Sony Corp. stepped up its efforts to woo game creators to the next generation PlayStation videogame console, unveiling measures to help developers work with the games' increasingly sophisticated graphics. Sony Computer Entertainment Inc., Sony's videogame unit, said it has tied up with three specialized makers of software to simulate realistic physical effects -- such as crashes and explosions -- and will make the software available to PlayStation 3 game creators. (Full Story) WSJ
  • NOK: Hoping to Dial Into Cell Phones' Future Nokia, Finland's Biggest Company, Betting on Music, TV, Games and Internet Nokia Corp., the world's largest producer of mobile telephones, could make good use of a time machine. For Nokia, seeing the future is a life-and-death matter. Few industries change faster than the cell phone business, as Nokia was reminded several years ago when it missed the "clamshell" wave. (Full Story) Washington Post
  • DVD Sales: Heard on the Street... Media Companies Can't Rely on DVD Sales In the past five years, DVD sales of films have been a safety net for several big media conglomerates, providing steady profit growth as other parts of the business fell off. But the net may be fraying. Last week, DreamWorks Animation SKG created a stir on Wall Street and in Hollywood when it disclosed that lower-than-expected DVD sales of "Shrek 2" meant it would likely post a second-quarter loss and report lower-than-anticipated full-year earnings. (Full Story) WSJ
  • CSCO: Co announces it will acquire privately-held KiSS Technology A/S of Horsholm, Denmark. This represents Cisco's second acquisition for its Linksys division. KiSS is a provider for networked entertainment devices and has a product portfolio that includes home video products such as networked DVD players and networked DVD recorders. Under the terms of the agreement, Cisco will pay approx $61 mln in cash and stock in exchange for all shares of KiSS Technology.


Market Comments: The market is up on the open today, after strong earnings last night from BRCM, MSFT, and GOOG. BRCM results were much better than expected, with raised guidance, and the stock is up nearly 15% this am. MSFT and GOOG also reported solid numbers, but guidance was relatively cautious, and the stocks are down in early trading.

A little consolidation here would not be a bad thing. I would like to see the market work off this overbought condition, as well as bring some more bears out of hiding. Oil stocks are also very strong today, after SLB reported great earnings.

long BRCM, MSFT

Thursday, July 21, 2005

Morning Update

"The difficulties and struggles of today are but the price we must pay for the accomplishments and victories of tomorrow." - William J. Boetcker

Morning News of Note:
  • MSFT: Microsoft to Pay Undisclosed Sum for FrontBridge Microsoft Corp. said it plans to buy closely held FrontBridge Technologies Inc., in a deal that furthers the big software maker's push into corporate computer security. Microsoft, Redmond, Wash., said yesterday that it expects the deal to close in the third quarter, following regulatory approval. Terms weren't disclosed. FrontBridge, which has developed technology for protecting and managing email, is based in Marina Del Rey, Calif., and has funding from Sierra Ventures and BA Venture Partners. The company, formerly called Big Fish Communications, was founded in late 1999 and has 160 employees. (Full Story) WSJ
  • Cell Phone Billing: Cellphone Firms Accused Of Billing for Unwanted Ads A California consumer group has filed a complaint with the state Public Utilities Commission alleging that Sprint Corp. and Cingular Wireless are improperly charging customers for cellphone messages they don't want. The Utility Consumers' Action Network, based in San Diego, told the state's Public Utilities Commission it had received complaints from consumers who said they had been billed by the companies for unwanted text messages, ringtones and advertisements. The group said it is trying to get regulators to stop the practice. (Full Story) WSJ
  • TTWO: Grand Theft Auto Videogame Is Handed Adults-Only Label In a major embarrassment for Take-Two Interactive Software Inc., the videogame industry's rating board slapped an adults-only rating on its popular Grand Theft Auto: San Andreas after the group found sexually explicit content hidden within the game. The Entertainment Software Rating Board advised retailers to pull the videogame off store shelves until Take-Two can place new adults-only ratings stickers on the game's packaging or release new discs without the objectionable material. As a result, Take-Two of New York sharply reduced its financial forecasts for its current quarter. (Full Story) WSJ
  • EBAY Conference Call: EBAY says that both U.S. and Germany generated accelerated gross merchandise volume, even though Germany total revs rose 21% vs. 24% in Q1 (co was pleased, considering G.M.V. was less than expected in Q1). Int'l revs rose 51% to $418.8 mln, with U.K. up 94% and Korea up 78%. Co adds that PayPal reported accelerated volume, net revs of $244 mln, up 51% vs. 47% in Q1. We note int'l revs rose 51% to $418.8 mln; int'l represented 52% of users. Co also notes launch of PayPal China, integration of that offering with NTES and TOMO. Analysts note transaction revs per listing that rose about 3% sequentially; co says almost all of the growth is volume-driven. Co notes increase in average selling prices, as well as "robust" conversion rates. Co also notes that its next-gen Magellan search technology will be rolled out over the next few mos, adding to conversion rates.
  • Yuan Revaluation: The timing of the announcement by China it would revalue the yuan away from just a dollar peg to a basket of currencies was a surprise. The impact makes Chinese goods into the US slightly more expensive and American goods less expensive for the Chinese. The move is in-line with market speculations but the reval itself is relatively small at about 2%. The key point is the yuan will move away from the dollar peg towards a basket of currencies, but a key question is what is the composition of this basket? The currency markets are clearly thinking the Chinese will include currencies from its trading partners which is the reasoning behind the moves in the Asian currencies and weakness in the dollar.


Market Comments: The market has opened slightly down this am, possibly due in part to the news of more bombings in London. eBay reported stellar results last night, and the stock is up big. FFIV and VRSN reported disappointing results, and their stocks are getting hit the hardest.

Companies reporting tonight include BRCM, GOOG, and MSFT. So look for more market moving news to come out of these earnings reports.

long BRCM, MSFT

Wednesday, July 20, 2005

Market Wrap

Sorry for the lack of posts today. I had some tech issues that kept me busy, in addition to dealing with this hot market. Did you see AMGN today? Wow. Talk about a strong reaction to blowout earnings.

Anyway, today was another very strong day. When I saw the market down this am, I figured it was an overdue breather. But to say the weakness was temporary would be an understatement. Despite disappointing earnings last night from INTC and YHOO, the tech market came roaring back today. My last few "Stock of the Day" picks are doing nicely (see the archives).

The Nazz moved into positive territory on the year today. Nice to see. Volume was very strong today, with over 2 billion shares traded on the Nasdaq. If I had to point out one negative divergence, it would be that the Hi/Lo index is lagging. The indexes hit new highs today, but the number of net new highs actually peaked back on July 11th. So I would like to see this indicator pick up some steam. Otherwise, I think we are closer to the market taking a breather.

long AMGN, INTC

Tuesday, July 19, 2005

Stock of the Day

My stock of the day is Jupitermedia (JUPM).

This stock broke out on huge volume in early may, and quickly ran up to $20. It has spent the last 8 weeks consolidating those gains, and now looks poised to break out.

Other internet names such as YHOO and GOOG are already breaking out, and I expect ancillary plays like JUPM to play catch-up.

The company has excellent growth, and the stock is not expensive at 20x fwd. estimates. It also has considerable short interest (13% of float), which could add fuel to the fire. If this stock can break back above that $20 level, I think it could have a nice run.

long JUPM

Stocks on the Move

Here is a partial list of a stock screen of high volume movers:

  • High Volume Advancers: SMA, WCG, FILE, LSS, CUTR, CAT, MIDD, PDX, PPDI, LFB

  • High Volume Decliners: CNC, AVP, FARO, AGP, CSL, BRO, LSCP, ICBC, PCBC, SEPR

Morning Update

"Very specific and personal misfortune awaits those who presume to believe that the future is revealed to them." - John Kenneth Galbraith

Morning News of Note:
  • SBUX: New Grind At Starbucks, a Blend of Coffee And Music Creates a Potent Mix Chain Boosts Sales and Careers As It Co-Produces, Offers Selected CDs in Its Stores Retailer Pulls Discs in Protest When Concord Records Inc. President Glen Barros was deciding whether to sign an Italian pop singer named Zucchero to a U.S. record deal this spring, his deliberations included an unusual consideration: Would Starbucks Corp. help finance and distribute the singer's next CD? More than once, Mr. Barros says, he has consulted Starbucks executives when pondering a musical act -- effectively giving them final say on whether to sign an artist. "If they'll be our partner," he says, "we'll do it." (Full Story) WSJ
  • YHOO: Turnover at Yahoo Slows Media Group's Los Angeles Move Plans to give a stiff shot of Hollywood glamour to Yahoo Inc.'s media and entertainment offerings have instead given the Internet company a case of the hiccups, as several division heads have decided either to leave Yahoo or opted against relocating to new Los Angeles-area offices. Of eight media division general managers, three heading Yahoo's finance, sports, and movies and television units have decided to leave the Sunnyvale, Calif., company, Yahoo said. Three other division heads have declined to move to Southern California from Silicon Valley and so are leaving their current posts, taking other jobs at the company. (Full Story) WSJ
  • INTC: Chip Shot Investors have long viewed Intel as a bellwether for the technology sector. Today's earnings results from the chip maker look likely to ring some bells. The company is well past last year's woes, when it misjudged demand, and now looks to be keeping inventories trim. At the same time, sales have improved. (Full Story) WSJ
  • HPQ: Hewlett-Packard Plans to Cut 14,500 Jobs Personal-computer maker Hewlett-Packard Co. on Tuesday said it will cut 14,500 jobs, about 10 percent of its full-time staff, as part of a restructuring plan designed to save $1.9 billion annually and boost business performance. The job cuts will occur over the next six quarters, the Palo Alto-based company said. (Full Story) NY Times
  • Interest Rates: Fed Seeks Clues to Stop Increases as Rates Approach `Neutral' The Federal Reserve is entering a new phase in its drive to bring interest rates back up to normal: While the central bank will continue to push rates higher, policy makers also will watch for signs that it may be time to stop. Former Fed Governor Laurence Meyer says the Fed is approaching the ``lower boundary'' of the so-called ``neutral'' zone where it hopes to leave the benchmark overnight lending rate -- a point at which monetary policy neither slows economic growth nor stimulates it, intensifying inflationary pressures. (Full Story) Bloomberg


Market Comments: The market opens up this morning after strong earnings reports last night from IBM and this morning from JNJ. Yesterday's pullback came on very light volume, so it doesn't imply any serious distribution at this point. More likely, it is just light profit taking that will help the market work off this overbought condition.

Tonight, we will hear from AMGN and INTC (and a host of others), which are bellweathers for their respective industries. Both stocks have moved up quite a bit leading up to these reports, so the action of the stocks in response to the earnings announcements should be telling.

long AMGN, INTC

Monday, July 18, 2005

Stock of the Day

My stock of the day is Jamdat (JMDT).
The company is located here in Los Angeles, though I have never visited them. It publishes wireless entertainment products such as video games, ring tones, etc. Market cap is $728 million (small cap).

The stock was down big this am, on news that Verizon and Sprint will offer games from competitor Electronic Arts. But the stock bounced off of its 50-day moving average, and has climbed all the way back into positive territory.

Given that short interest is more than 20% of the float, this was probably a good chance for shorts to cover. If the stock starts to climb again, I would expect further short-covering. The company has beat consensus estimates for the last 2 quarters, and estimate revisions continue to go up.

I think it could run back to new highs in the near future.

long JMDT

Morning Update

"If you would only recognize that life is hard, things would be so much easier for you." - Louis D. Brandeis

Morning News of Note:
  • AAPL: Apple Looks to Sell Videos -- and Maybe iPods to Play Them Apple helped ignite the digital music craze. The next possibility: video. The Cupertino, Calif., computer and electronics company has recently held discussions with major recording companies, seeking to license music videos to sell through Apple Computer Inc.'s iTunes Music Store, according to several people in the media industry briefed on the discussions. (Full Story) WSJ
  • SCHL: A Magical Moment for Publishing New Harry Potter Book Flies Off Shelves in U.S., Breaking One-Day Record Readers are still wild about Harry. Scholastic Corp., the U.S. publisher of J.K. Rowling's Harry Potter series, said a record 6.9 million copies of "Harry Potter and the Half-Blood Prince" were sold in the first 24 hours in the U.S. after the book went on sale at 12:01 a.m. Saturday. There was so much interest in the sixth title in the wildly popular series that the New York publisher rushed out a second printing of 2.7 million copies before the official release date, bringing the total number of books in print in the U.S. to 13.5 million. (Full Story) WSJ
  • Semi-Cap Equipment: After a Big Year, Semi-Cap-Equipment Sector Braces for a Downturn in Sales ONE THING IS CONSTANT about the semiconductor capital-equipment industry: Eventually, there will be a slowdown. You may not know when, how long or how low business will go, but you know that it will slump. That was the ax hanging over the heads of the thousands attending the world's largest semi-cap-equipment show last week in sunny San Francisco. (Full Story) BARRONS
  • Defense Contractors: Crunch Time Guns, Butter and Budget Battles THE GLOBAL WAR ON TERRORISM IS ONLY beginning, the experts say, but the party for old-line defense and aerospace stocks may be just about over. Big defense companies like General Dynamics, Lockheed Martin and Raytheon have handily beat the broad market so far this decade, the result of both rising global tensions after 9/11 and an earlier effort by the Pentagon to lift the profitability of contractors. A Dow Jones index of U.S. aerospace and defense companies is up more than 70% for the past five years, while the Dow Industrials are off 3.4%. (Full Story) BARRONS
  • ANF: Abercrombie & Fitch stock may gain more - Barron's (70.01 ): Barron's discusses Abercrombie & Fitch, saying that denim is enjoying a revival as the most versatile fashion item for stylish teens and young adults, regardless of whether they're dressing up or down. The trend has made Abercrombie & Fitch stock fashionable. The shares, recently around 70, have soared nearly 80% in the past 12 months. The catalysts: robust sales growth and solid operating margins.


Market Comments: The market opens down this am. CNBC has been citing a weak earnings reports from Citigroup and 3M as the reason, but don't discount the fact that the market has been up for 7 straight days and needs to take a breather as investors ring the register on some of the gains.

Earnings seasons picks up the pace this week, and should give us a better idea of how the market is prepared to handle this round of earnings reports. I think that current consensus estimates are reasonable, and could continue to be revised slightly higher going forward. This should help to keep a bid under the market.

long C

Sunday, July 17, 2005

This and That

Here are some links of interest that I saw over the weekend:



  • Kohl's makes turnaround with new brands

  • Another cool GPS product from Garmin

Friday, July 15, 2005

Morning Update

"Most of us have a pretty clear idea of the world we want. What we lack is an understanding of how to go about getting it." - Hugh Gibson

Morning News of Note:
  • C: Citigroup's No. 2 Will Leave, Seek A Firm to Lead Two years after losing the horse race to succeed Sanford I. Weill as chief executive, Citigroup Inc. President and Chief Operating Officer Robert B. Willumstad said he plans to leave the company to seek a job running another public company. The announcement spells the end of the partnership between Citigroup CEO Charles Prince and its No. 2 executive, Mr. Willumstad, two longtime lieutenants of Mr. Weill, the chairman. Mr. Willumstad, a 59-year-old career banker, was disappointed when Mr. Weill tapped Mr. Prince, a 55-year-old lawyer, for the top spot in July 2003. (Full Story) WSJ
  • HPQ: H-P to Unveil Major Restructuring Hewlett-Packard Co. is expected to announce a restructuring at the giant computer and printer maker on Tuesday, a person familiar with the situation said, in what would likely be the biggest action so far by new Chief Executive Officer Mark Hurd. Details of the restructuring couldn't be learned and the timing of the announcement could change. Some Wall Street analysts say thousands of layoffs could be involved. An H-P spokesman declined to comment. (Full Story) WSJ
  • Slowing Economy: Goldilocks Economy? Not This Time INVESTORS ARE FEELING better these days. They shrugged off the terror attacks in London, then backed up the truck in response to June's employment report and have kept buying. And why not? The economy is growing, consumer sentiment is strong, retail sales look good, companies are awash in cash and low interest rates are keeping the housing market hot. (Full Story) BARRONS
  • CEO UCL CVX: Cnooc Fails to Sway Unocal, Keeps Offer at $18.5 Bln Cnooc Ltd. failed to persuade Unocal Corp. directors to support a takeover because China's third- largest oil company didn't raise its $18.5 billion cash offer, people familiar with the matter said. Chief Executive Fu Chengyu has permission from Cnooc's board to raise the bid to $69 a share from $67, said the people, who asked not to be identified. Instead, he offered to set aside $2.5 billion to cover Unocal against any shareholder lawsuits should a sale to the Beijing-based company fail, they said. (Full Story) Bloomberg
  • Mad Money Names: Cramer believes that Tech is the real deal; 'stop thinking short term about tech and become an investor'... states GOOG worth $450... Companies that Jim is Bullish on include: VLO, VNO, EVVV, OSIP, JNJ, COGT, GW, ADP, INTC, OPMR, ABT, UTX, TWX... Bearish: UCL, HOC, VIAC, RHAT, PPDI, PFE, GPRO, FCEL... SONC: Cramer wants people to take profits on PFCB and CPKI and invest in SONC... for fast food chains says got to get out before saturation, notes YUM is an example of this.


Market Comments: The market opens flat this am, despite some very positive inflation reports. PPI came in +0.0% vs. +0.4% consensus. And the NY Empire Index (manufacturing) came in at 23.9 vs. 9.0 consensus. So those are both good datapoints on the economy.

Today's trading will likely be influenced by options expiration. And sometimes we see a little post-expiration hangover, which could spill over into Monday. I am still moderately net long, and will look to use any pullbacks to add to my positions.

long ADP, C, INTC, PFE, OPMR, OSIP

Thursday, July 14, 2005

Morning Update

"Blessed are the young, for they shall inherit the national debt." - Herbert Hoover

Morning News of Note:
  • Housing Bubble: Safe Shelter Australia Suggests End of Home Boom Needn't Be Dire Economy, Stocks Are Strong After Central Bank Raises Rates to Stop Speculation Worries on Consumer Debt In May 2002, as talk of an international housing bubble was just beginning, Australia's central bank was already acting. Warning of "overheating in the housing market" in Australia, it raised interest rates. It kept on raising rates the next year, and officials talked loudly about the threat of housing prices getting too high. (Full Story) WSJ
  • GE: GE May Post Biggest Increase in Profit Since 2003 General Electric Co. may post its biggest profit gain in six quarters tomorrow on increased sales of new industrial equipment including wind turbines and an expansion in consumer lending in Asia and Eastern Europe. Second-quarter earnings at GE, the world's No. 2 company by market value, rose as much as 25 percent to $4.7 billion, or 45 cents a share, Chief Executive Jeffrey Immelt said during a conference call on May 6. (Full Story) Bloomberg
  • CEO UCL CVX: Cnooc May Raise Unocal Bid as U.S. Opposition Mounts Cnooc Ltd. is preparing to raise its $18.5 billion cash bid for Unocal Corp. to persuade the U.S. company's board to break a merger agreement with Chevron Corp., the Financial Times and Wall Street Journal said. The new offer would include as much as $2.5 billion in compensation from Cnooc should a takeover by the Chinese state- controlled company fail, the FT said, citing unidentified people. Chevron's cash-and-stock plan was worth $16.5 billion yesterday. (Full Story) Bloomberg
  • AAPL: IPod Sales Give Apple 75% Jump in Revenue Showing continued strong growth of its popular iPod digital music player and impressive personal computer sales in the United States, Apple Computer reported quarterly earnings on Wednesday that far outpaced the expectations of financial analysts. Apple said net income for its third quarter, ended June 30, rose to $320 million, or 37 cents a share, from $61 million a year ago, or 8 cents a share, adjusted for a stock split. (Full Story) NY Times
  • TWX: AOL Hopes for Great Mileage Out of Its Souped-Up Web Site America Online has been called the Internet on training wheels. No more. The new AOL aims to be the Internet on oversize racing wheels, a tricked-out surfing machine built for show and speed. This shiny new entry into the race for Web supremacy is live at AOL.com, a Web site that lacked pizazz and purpose for nearly a decade despite repeated redesigns. (Full Story) Washington Post


Market Comments: The market gets a big bounce at the open, pushing the S&P to new highs for the year. The early strength comes on the heels of strong earnings last night from AAPL, AMD, and YUM. This morning, we got better-than-expected reports on the CPI (+0.0% vs. +0.3% consensus) and retail sales (+1.7% vs. +0.9% consensus).

This market is short-term overbought, but it's hard to argue with a market making new highs. Recent pullbacks have been modest, which keeps investors who want to participate having to chase stocks higher. But the Nazz isn't even in positive territory for the year, so I think further upside is reasonable. But stick with the stocks that have been leading the market, not lagging.

long TWX, GE

Wednesday, July 13, 2005

Stock of the Day



My breakout of the day is a small-cap, apparel designer called True Religion Apparel. The company makes very pricey denim jeans, and sells them in a variety of upscale outlets such as Nordstrom, Bloomie's, Bergdorf, and Barney's. Unless you have a wife or girlfriend who likes to be trendy, you may not have heard of them.

But the stock has been on my radar ever since my eyes popped when I saw the sticker price of their jeans ($200+). I saw that the company was public, and bought some in my wife's IRA. The company has a market cap of only $300 million, but it's growing fast. It trades on the bulletin board for the time being.

Today, the stock is breaking out big time. TRLG is up more than 10% on surging volume, breaking out of a 4-month consolidation. I think the stock could hit $20 by year-end.

long TRLG

Morning Update

"One of the illusions is that the present hour is not the critical, decisive hour. Write it in your heart that every day is the best day of the year." - Ralph Waldo Emerson

Morning News of Note:
  • TKLC ALA: Telecom Comes Calling THE BELEAGUERED BUSINESS of building telecommunications networks is finally returning to health. Telecom equipment sales rose 5.2% in the U.S. last year, to $152 billion, after falling 17.4% in the course of the preceding three years, the Telecommunications Industry Association says. Globally, telecom spending will outpace total spending on information technology this year and next, rising 6% to 7% versus an average 5.5% for all IT, estimates Gartner Inc. (Full Story) BARRONS
  • AAPL: Apple May Say Earnings Jumped, IPod Shipments Fell in 3rd-Qtr Apple Computer Inc.'s iPod shipments probably dropped in the third quarter from the second, the first decline in more than two years and a sign the surge in demand for the music players may be waning. Apple's profit in the quarter more than quadrupled to $274.2 million, or 31 cents a share, from $61 million, or 8 cents, a year earlier, according to the average estimate of 18 analysts surveyed by Thomson Financial. (Full Story) Bloomberg
  • INTC: Intel Corp.-INTC testing using Wi-Fi as substitute for GPS-CNet.com INTC researchers is examining ways of using Wi-Fi or cellular networks to triangulate a person's location, as a substitute for GPS. The wireless method should work better by being able to show not only latitude and longitude, like GPS, but also height. Unlike GPS in cell phones, which requires an additional chip, using wireless does not require any additional hardware.
  • International Oil Demand: 1-IEA cuts global oil demand forecast as China slows - Reuters: Reuters reporting that Global oil demand in 2005 is proving slower than expected because of lower-than-forecast demand growth rates in China and the United States, the IEA said on Wednesday. The IEA, revised down its forecast for global oil demand growth this year by 200,000 barrels a day to 1.58 million bpd, 1.9 percent. The reduced demand forecast in the IEA's monthly oil market report comes with benchmark U.S. oil at record highs of more than $61 a barrel.
  • UNFI: Utd Nat Foods guides FY06 in-line; announces acquisition of Roots & Fruits Cooperative (31.64 ) Co issues in-line guidance for FY06 (Jul), sees EPS of $1.14-1.19, ex items vs. $1.17 Reuters Estimates consensus; sees FY06 (Jul) revs of $2.25-2.35 bln vs. 2.3 bln consensus. Co also announced today that its wholly-owned subsidiary, Albert's Organics has completed the acquisition of substantially all of the assets of Roots & Fruits Cooperative.


Market Comments: The market has opened flat this am. Harley Davidson reported solid earnings (stock up $2) while Abbott Labs disappointed (-$1.50). AAPL reports after the close today. I expect stocks to remain flat today, after four strong days.

long INTC, UNFI

Tuesday, July 12, 2005

Steve Job's Commencement Speech


Stanford University

I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I've ever gotten to a college graduation. Today I want to tell you three stories from my life. That's it. No big deal. Just three stories.

The first story is about connecting the dots.
I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?

It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: "We have an unexpected baby boy; do you want him?" They said: "Of course." My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents' savings were being spent on my college tuition. After six months, I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn't interest me, and begin dropping in on the ones that looked interesting.

It wasn't all romantic. I didn't have a dorm room, so I slept on the floor in friends' rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:

Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn't have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can't capture, and I found it fascinating.

None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, its likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.

Again, you can't connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something - your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.

I was lucky – I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation - the Macintosh - a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

I really didn't know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me – I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.

I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I retuned to Apple, and the technology we developed at NeXT is at the heart of Apple's current renaissance. And Laurene and I have a wonderful family together.

I'm pretty sure none of this would have happened if I hadn't been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did. You've got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle. As with all matters of the heart, you'll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don't settle.

My third story is about death.

When I was 17, I read a quote that went something like: "If you live each day as if it was your last, someday you'll most certainly be right." It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: "If today were the last day of my life, would I want to do what I am about to do today?" And whenever the answer has been "No" for too many days in a row, I know I need to change something.
Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn't even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor's code for prepare to die. It means to try to tell your kids everything you thought you'd have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.

I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I'm fine now.

This was the closest I've been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma - which is living with the results of other people's thinking. Don't let the noise of other's opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960's, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and Polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: "Stay Hungry. Stay Foolish." It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry. Stay Foolish.

Thank you all very much.

(I got this text from Harry Newton's website, which is worth visiting)

Morning Update

"One of the secrets of life is to keep our intellectual curiosity acute." - William Lyon Phelps

Morning News of Note:
  • DWA: In DreamWorks Earnings Woes, A Bigger Problem Sales of 'Shrek 2' DVD Suggest Format Is Peaking As Hollywood Profit Center DreamWorks Animation SKG slashed its earnings forecasts for the second time in as many months, flagging a fundamental problem for all of Hollywood: The highly profitable DVD market seems to be maturing more quickly than expected. DreamWorks yesterday significantly scaled back its earnings guidance for both the second quarter and the year because of unexpectedly high returns of "Shrek 2" DVDs by retailers. At the same time, DreamWorks called off a $500 million secondary stock offering it had planned. (Full Story) WSJ
  • DIS: Disney Explores Multistep Plan For Radio Spinoff, Cash Pullout As Walt Disney Co. explores the fate of its roughly $3 billion radio station and network group, the company is considering a multistep process to both extract cash and structure a tax-free spinoff to Disney shareholders, according to people briefed on the company's plans. Disney has debated for years the role of radio in its media conglomerate, but Chief Executive Officer Michael Eisner has resisted any dramatic change at the unit, which consists of 71 stations and a separate radio network that reaches 4,500 affiliate stations with programming including ABC News Radio and ESPN Sports Radio. (Full Story) WSJ
  • INTC: EU officials raid Intel, others U.S. chipmaker Intel Corp., computer makers and distributors were raided by European Commission and local officials on Tuesday as part of an ongoing investigation into possible antitrust violations, a spokesman for the European Union executive said. "DG Competition officials, accompanied by officials from national competition authorities are conducting inspections of several premises of Intel Corp. in Europe as well as a number of IT firms manufacturing or selling computers," spokesman Jonathan Todd said. (Full Story) Washington Post
  • TGT: Target co expects July sales to be in line with planned 4-6% increase (57.21 +0.28)
  • Mad Money Stocks: Last night on Mad Money: Jim says we need to "learn to love the bull" Cramer is bullish on AA, YHOO, ABT, UNH, and DGX... Sees OSUR and MDRX as possible takeover canidates. As part of Jim's "Buy Tech Now" thesis he recommends MOT.


Market Comments: The market opens down slightly this am. PEP reported good earnings this am, and DNA reported strong results last night. Both stocks are up so far. INFY tempered its guidance a bit, and this high-flyer is down $6.

long INTC, UNH, DNA, PEP

Monday, July 11, 2005

Market Wrap

Another great day in the market. The Nazz led the way, with another 1%+ gain on increasing volume (read: accumulation). I am glad that I added a bunch of 'beta' to my portfolio last Friday.

Breadth was also very good. And the number of new highs is surging. There were more than 500 new highs on the NYSE, and 266 on the Nazz. That means the rally is broadening out, leadership is expanding, and more stocks are participating.

This week is another expiration week, so we could see a day that tries to knock investors off of the bull, but I am going to hang on and try to ride this one a little longer than 8 seconds.

Morning Update

"Have confidence that if you have done a little thing well, you can do a bigger thing well too." - Joseph Storey

Morning News of Note:
  • AIG: co's lawyers in talks w/ SEC and NY AG to settle cahrges that AIG polished its financial results in recent years; negotiations at earl ystage but partial settlement might be reached at end of July; NY AG source indicated that eventual settlement may incl relatvely modest fine but not a lg restitution fund -- WSJ
  • COAL: India facing chronic and worsening shortage of coal; Coal India unable to keep up with rising demand; ironic considering India has 4th lgst coal reserves, 92 bln tons -- AWSJ // McCloskey Coal report est global coking coal supplies may exceed deamnd after 2007 as producers open new mines and ports increase capcity; est miners to add 84m tons of new coking coal capcity before 2010, 90m tons by 2015; est global coking coal prices to remain little changed through 2007 -- Australian Financial Review // Chinese 1H coal imports up 56% y/y to 12.1m tons
  • U.S. and U.K. governments: have drawn up plans to withdraw troops from Iraq, the Mail on Sunday said, citing a leaked memo by British Defense Secretary John Reid. The U.S. would cut force levels from 176,000 to 66,000 by early 2006 under the plans, while the U.K. would reduce its forces from 8,500 to 3,000, the newspaper said. The Ministry of Defense confirmed the authenticity of the document, according to the Mail. The memo refers to a dispute between commanders in Iraq, who are cautious about withdrawal, and U.S. commanders at the Pentagon "who favor a relatively bold reduction,'' the newspaper said.
  • WMT: reaffirms July SSS guidance up 3-5%; food sales outpaced general items for first time in 5wks (Saturday)


Market Comments: The market is strong out of the gate this am, building on Friday's gain. The Nasdaq is leading the way (see my post below from this weekend). Earnings season starts in earnest this week, so expect plenty of surprises and volatility. You should check when your stocks are reporting earnings, so that you are not suprised by anything.

While most tech stocks are higher, GOOG is conspicuously in the red. This stock has been a leader all year, so I would like to see it partcipate today. I sold my shares into the last runup, and have yet to decide if I want to repurchase them before the company reports.

Saturday, July 09, 2005

This and That

Here are some headlines of interest from this weekend:


  • Have investors learned not to panic?

  • Will the Chinese go after U.S. real estate?

  • Retirees turn to eBay for income