Morning Trade - Starbucks

Today, it was announced that Howard Schulz would retake the helm as CEO of Starbucks.

The stock is on a free fall for the last year.  Just take a look at the chart



See how the chart moves in almost a straight line down to the right?  This is a VERY UGLY chart.  Yes, it is Janet Reno ugly.  But I think the trend is over.  There is no technical reason that it should be, at least not yet, but I think that Schulz taking over now puts a bottom in the stock.  I hate calling bottoms, but in this case I would.  The stock should open up significantly, it is above $20 in afterhours trading.  I wouldn't get in at the bell, the stock will pull back in the morning, but I would watch the stock carefully over the next day or two.  If it can put a few good days together, than this sets up nicely for a good trade.

Short the Market

The market took a beating on Friday, with the Nasdaq losing over 3% today. Just look at the S&P 500 over the last six months and you will notice something really disturbing.



Take a look at where the market ended up on Friday. It ended up at around the same level as the previous market dip in late November which is the same as a dip we saw in August. In November, after the market bounced, people believed it would be a double bottom. When you see stocks that hit a double bottom and then continue up, you normally take this as a reversal and that the stock is on the way up. However, there is no such thing as a triple bottom. This should make you worry a lot about the direction of the market.

If the market breaks through this resistance area, it has a lot to fall. If that is the case, then it would be best to buy either the QID or SDS both of which will double for every point that the Nasdaq or S&P go down.

If not that, you need to go defensive into names like Altria or Johnson and Johnson.

And the Winner Is...

Figured I would follow up on my original post about trying to pick a winner between HD DVD and BluRay now that the industry is starting to pick sides. Warner Brothers announced that they would only distribute their movies on BluRay. Warner Brothers is the largest distributors of movies there is and this puts the momentum squarely behind the BluRay camp. This means that Sony, Disney, MGM, Fox, and LionsGate all release on only BluRay. These are the heavy hitters when it comes to movies, and

Many believe that when there finally is one format chosen, that this will move consumers away from the sidelines. However, I don't think this "confusion" on the consumers part is really what is causing the delayed adoption of the next generation DVD format. However, I think this is bogus. I think adoption has been delayed because people are indifferent. While no doubt movies look better, most Americans aren't going to waste buying a player that cost 5x more than a similar DVD player and disc that carry a 25% premium.

Most people I know think DVDs look just fine on their TVs, even their HDTVs.

So that means the winner is officially ... downloaded movies. Seriously, I wonder if anybody really cares about the next generation DVD format. I certainly don't despite Rick's urging for me to get a BluRay player and HDTV. While DVDs were a leap ahead from VHS in terms of quality and form factor, I don't see the same thing here. For god sake, the disc look exactly the same! The next leap is a form factor of nothing. I don't have to carry it around or get it, it comes to me.

So there you have it. I don't really care that BluRay seems to have brought the hammer to the HD DVD camp, because in the end, both formats are going to be irrelevant.

Knowing What you Want

Despite the fact that most humans have unlimited wants, most people can't articulate exactly what it is they want. I've been searching for an apartment the last few weeks. I've looked at a lot of apartments to try and figure out exactly what I want. Just the other day I thought I finally found a place that was good enough that I wanted to submit an application. I wasn't sure though, so I wanted to think about it and discuss it with my girlfriend.

Well right before I could submit an application, someone else did and got the apartment before me. It got me thinking about how I should have just made a decision about the apartment when I saw it. Before I spent all the time looking around, I should have really narrowed down what I would and would not accept. It's so often happens with people. People just don't know exactly what they want, and when faced with making a decision, they have decision paralysis. You would think that given my job as a decision maker, I wouldn't have a problem making decisions, but I guess I'm only human.

I think this plays out in so many ways that are even more important than finding an apartment. People have this problem when deciding what they want to do with their career. I've talked to so many people who know they don't want to be doing what they are doing now but can't tell me what they really want to do. Worse, I've seen people switch to a job just to leave their current job, without really considering what was wrong with their current job and if it would exist at their new job.

Do you ever face decision paralysis because you don't know what you want? If so in what situation?

Commuting and the Quality of Life

Slowly but surely I'm learning how taxing it is to have a really bad commute to work.  It used to be that I had a nice quick 10 minute drive to work with absolutely no traffic.  I would jump on the freeway, take it three exits, and then I was at work.

Now, that isn't anywhere near the case.  I have at least a 1.25 hour commute.  On bad days it can be two hours. I actually tend to handle traffic better than almost everybody I know, but a 2-4 hour commute is taxing on you no matter what.

It isn't even the drive that really bothers me.  It's the fact that I routinely lose about 3 hours of my day, every day, to a commute.  This used to be the three hours I would devote to this blog.  Since I have a very strict no blogging from work policy, this means I have to squeeze time in in the evening to be able to blog.  I really wanted to complete my Polycom analysis but I just don't have it in me when I get home at 11:00 and have to get to bed so I can be up by 7:00 to make the commute.  Blogging this weekend was out of the question since I spent most of it moving.  Luckily, I think I found a place much closer to work, and I hope to go and sign the papers tomorrow.

Quick thought on the market.  The whole market is down.  Like I said earlier, stay out for now.  I think if you are going to buy, buy in a few days.  Right now just does not look like a good time to go long in stocks.  Nothing is really working except for the few stocks that are coming out with good news.   I think a window might open soon, and you can get some good stocks at the bottom, but if you have to do something right now, short stocks.

Polycom

Only a quick post for now. Will elaborate later tonight. Just got back from Seattle and completed my move. Moving is hard. I don't even have that much stuff, I had the movers pack my stuff, and I still feel pretty wiped out from the whole experience.

One stock I think I may do for 2008 is Polycom, the makers of conferencing technology. I really think this is a great growth sector, and the stock looks kind of cheap now. Don't know if it is the right dime to buy right now, it's been on a downward trend as of late, but I like the growth story. Will do some research later tonight and write it up.

Wall Street is SLOW

I KNEW we had a housing bubble. On another blog, I called the top of the market in October of 2005. I was dead on in California. I was tempted to short the stocks of a few homebuilders and mortgage insurers but never did. I figured that Wall Street had to know that these businesses were in trouble and had already priced it into the stocks.

I KNEW that the Wii would take off. In fact, I told my friend Scott to buy Nintendo stock. I didn't myself because I was too lazy to call my broker and place an order since Nintendo only trades on the Japanese exchanges. I knew how hard it was to get a Wii. People were snatching them up faster than they could be shelved, and I knew Nintendo had something special. I figured Wall Street knew too so, and I was lazy, so I did nothing. Stock doubled in a year.

I KNEW that Guitar Hero 3 was the must have item of the year. I was actually going to buy it a few weeks ago, and then Vivendi announced that it would purchase them. The stock jumped over 20% that day and hasn't looked back.

There is the theory that the market always perfectly prices in all news to a stock. That's a bunch of bull. Wall Street will often over react or under react to news. It's up to you to figure out the real story and play things correctly. If you know deep down inside that the so-called-experts have it wrong, chances are, you are correct. There is a fantastic book by Peter Lynch called One Up On Wall Street where he talks about advantages that individual investors have on the street. One of the many advantages you have is that you see things at the ground level. Much easier for you to spot the trend starting than the analyst on Wall Street.

Happy New Year everybody!  I hope we have a great year going forward!