Are we in recession? Perhaps not…
February 4, 2008
Whether 2008 will be a year of recession or not is still debated by many analysts. Some claim that even if technically there will not be a recession, unemployment will rise and profits of large corporation may be dampened, leading to a feeling of recession. Others think this will not happen. It seems, though, that further increase in oil prices (at or higher than $4- $4.5 per gallon, may decrease consumer spending leading to delay in economic growth.
The US Labor Department’s report, which showed that the U.S. economy unexpectedly lost 17,000 jobs in January, dampened the mood of investors but did not stop them from pushing stocks higher. Many stocks ended a week of large gains with a sizable advance on Friday, as investors welcomed Microsoft's bid for Yahoo and a possible rescue plan for the troubled bond insurance sector.
Microsoft (MSFT), the world's biggest software company, is planning to grow even more by offering to buy search engine Yahoo! (YHOO) for $44.6 billion, in a bid aimed to rival Google and dominate a bigger slice of the online services market. Microsoft is currently offering $31 for every Yahoo! share, or an amazing 62% premium above the search engine's closing price on January 31. Shares of Yahoo! soared 47.8% (!) on Friday’s session with an extraordinarily huge volume. Completing this takeover could be a chance for Microsoft to take advantage of growing online advertising sales and dramatically increase its share in the field, reducing Google’s dominance.
Speaking of Google (GOOG), the giant online services provider reported higher quarterly sales and earnings that were still short of analysts’ forecasts, sending its shares down more than 7%. Google’s stock continued to decline throughout last month by almost 30% after hitting an all time record high of $710. Be on the lookout for more updates on Google in our future newsletters.
Last week's top stories
The gas companies Exxon Mobil (XOM) and Chevron (CVX) reported a sharp increase in their earnings, beating analysts’ consensus; this took place however, without any extraordinary reaction to their shares, possibly due to expectations for a drop in oil price.
Another interesting story from last week is Motorola Inc.'s (MOT) which signaled it may get out of its staggering cell-phone business. Analysts said the handset maker could gain between $5-10 billion for selling the troubled unit. But they cautioned that a sale, spin-off or joint venture won't alter the unit's severe challenges and said that the lack of promising products in the pipeline may be a deterrent to any interested buyer.
Despite these concerns, this restructuring, if completed, could be quite healthy for both Motorola and the mobile unit. The sell (or spin-off) could serve as a meaningful catalyst for a surge in Motorola stocks as investors will look past the drag from the underperforming handset business. In addition, history shows that, on average, spin-off businesses tend to bloom after splitting from their parent companies. This might not be the case here, but I recommend keeping an eye on the proceeding of this splitting.
Yalicoo competitions summary
TheTrader (14.91%) did it again; this master trader won the
weekly competition leaving all other players behind and beating the market weekly return (3-3.5%) by more than a factor of 4! There aren’t any special big gainers that TheTrader bought during the game; however, TheTrader's secret is probably the knowledge of what to buy, when to buy it and when to sell his position.
TheTrader is also registered to the
quarterly competition, so his “secret” moves are open for all other participants to watch and copy to your own portfolios.
The quarterly competition scoreboard is starting to get crowded, with Lindsey in the lead showing almost a 15% return. Agent (13.05%), SANMAN (11.12%) and TheTrader (10.06%) are close behind waiting for an opportunity to take the lead.
The new
monthly competition was launched last Friday, and most of the players did not have enough time to take substantial advantage of the sharp weekly increase of the market.
12345 is currently leading the game with a return of 3.38%, which should not be too hard to pass for newcomers joining this week (…this is more than a hint for you to join the
monthly competition and take the lead as the best trader…).
Stock market trivia: Was it the worst January ever?
This past January was not the worst January in Wall Street history. It was not even close to the biggest monthly percentage drop ever (-29.63% in 1931). And it was just a “blip” when compared with the losses in Black October of 1987 or the free fall of August 1998 after the Russian currency crisis.
But, obviously we did not see the common “January affect” that we were used to in the past several years.
The average return of the S&P 500 index in January during the last 80 years is 1.7%. This past January, despite the 1% rally on Thursday, the 5.62% sharp decline by the S&P 500 index was its worst January decline since 1990 and the sixth worst ever.
Did we really reach the bottom? Let’s wait for next month results and find out…
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