Wednesday, January 11, 2006

Bears On The Run

Morning News of Note:
  • INTC: TCL to Offer a TV-Like Computer TCL Corp., a Chinese electronics company and the world's largest manufacturer of television sets, is producing a personal computer developed with Intel Corp.'s help that looks and acts more like a flat-panel TV. The company unveiled the product at the International Consumer Electronics Show in Las Vegas last week, joining 40 other computer manufacturers by quickly adopting crossover technology concepts from Intel, maker of the main chip in most PCs (Full Story) WSJ
  • GOOG: Google-GOOG possibility of shares losing value-Internet Outsider: In a Henry Blodget article titled "Google: The Bear Case," he lays out a scenario where Google could fall to the $100 a share range from its current range. He clarifies that he is not predicting this will happen nor making a recommendation, just stating a possibility. Mr. Blodget says the problem with Google is that it is dependent on a single, high-margin revenue stream. If revenue growth slows, which it inevitably will due to market saturation and flattening price increases, Google's price multiple will fall from its current 50X-70X to an eventual 20X-30X. If this occurs quickly, due to a more disastrous scenario, such as a problem like click fraud, this would be even more detrimental to the company's economics. Mr. Blodget does not believe such a scenario would kill Google, but it would transform the company "from a symbol of the American dream to yet-another get-rich-quick hallucination."
  • GM: GM Cuts Prices On Most Vehicles Strategy May Spark Similar Moves by Rivals; Fewer Incentives, at Least for Now In an attempt to rewrite pricing rules in the highly competitive U.S. automotive market, General Motors Corp. will slash the base sticker prices for nearly 80% of its U.S. models. GM is expected to soon report that it lost more than $5 billion in 2005, weighed down by heavy costs related to health care and pension obligations as it struggles to revitalize brands such as Buick and Pontiac. The move marks the auto maker's latest attempt to settle on a pricing strategy that will help it lure customers and regain share in the U.S. market. (Full Story) WSJ
  • Bulls/Bears: Bulls 56.8 vs 55.7, Bears 22.1 vs 23.7, Correction 21.1 vs 20.6
  • Mad Money Summary: Cramer said it is time for investors to turn their heads away from financial news if they want to make money. Cramer believes it is time to buy Medicis Pharmaceutical (MRX) after Oprah Winfrey revealed the next play for the artificial youth movement, Restylane. On her show doctors demonstrated the antiwrinkle injection Restylane, Cramer believes it is superior to Botox and it is time to buy Restylane's maker, Medicis Pharmaceutical. Cramer also mentioned three $2 stocks that have big risk and big reward. Cramer mentioned Zarlink Semiconductor (ZL), as he believes the company will make a load of money if it can pull off its turnaround. He also mentioned Crystallex (KRY), which he said is a stock for "crazy people" and believes that the company will strive if Hugo Chavez does not destroy the private mining industry. Lastly Cramer mentioned Conexant (CNXT) as shares are cheap and a speculative play on low-end tech. Herb Greenberg appeared on Cramer's show last night to talk about Garmin (GRMN) and Omnivision (OVTI). Cramer said that he continues to be bullish on Garmin, but Greenberg is still taking the other side of the story as he believes that the popularity of portable GPS will ultimately hurt shares of Garmin. Cramer and Greenberg both teamed up on Omnivision, Cramer was originally bullish on the shares but believes that they are up on a short squeeze that will not hold up longer-term. Cramer ended his show by commenting on Mirant (MIR), which will come out of bankruptcy Wednesday morning. Cramer believes that investors should "own it for a week, and then get out." Cramer does not believe the company will be able to perform and is a trade, not an investment.

Market Comments: The market closed flat yesterday, after being down in the morning. I've used the term benign consolidation before, and yesterday was a perfect example. The market easily could have pulled back due to profit taking, but instead the dip was quickly bought.

Retail and chip stocks continue to bounce (see ANF, CHS, BRCM, MRVL, etc). Energy stocks are lower so far, while financials are up across the board.

Can you believe that article by Henry Blodget (see above)? What a joke.

long INTC


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