In what may be its largest acquisition of the year, Google announced yesterday that it bought ITA Software, an air travel service, for $700 million. According to their own report (link), the decision will not affect existing deals for ITA, though Google is "enthusiastic about adding new partners."
Google continues to expand into new and random markets, building an internet empire funded almost entirely by advertising. Since 2001, the company has acquired more than 70 companies, though ITA appears to be one of its larger investments. ITA is a relatively stable company with a high-profile list of clients including United Airlines, American Airlines, Continental Airlines, Orbitz and Hotwire. I would imagine this deal will be extremely beneficial to Google, and I look forward to healthy effects on its already-undervalued share prices.
Friday, July 2, 2010
Thursday, July 1, 2010
Immigration Reform Another Grasp for Stability from Obama
Article first published as Immigration Reform Another Grasp for Stability from Obama on Technorati.
Today, July 1, Obama brought one of the key campaign issues of 2008: immigration reform. Taking a shot at Arizona's controversial new law (which will take effect at the end of this month), he said "These laws also have the potential to violate the rights of innocent American citizens and legal residents." This change of priorities for the president comes on a day which saw a nearly 300 point swing in the Dow Jones Industrial Average, and may be an attempt to secure certainty in at least one area as the mid-term elections approach.
Certainty has been a hobgoblin for Obama. Entering into his presidency with the clear and simple goal of closing Guantanamo Bay detention camp, his administration has had trouble closing the deal, facing such problems as where to relocate prisoners. Many of the problems with an instant closure are detailed here.
Then, healthcare reform took center stage, and, though the Democrats had a majority in both houses, congress had difficulty passing what is now colloquially referred to as "Obamacare," extending the congressional debates into the Christmas recess. Though it was finally passed and signed into law, Obama gave many concessions, and its full implementation is still uncertain. Perhaps most concerning is its unknown effect on the economy.
Throughout his presidency, the economy has been in the public spotlight. Never wavering from the Keynesian ideals of lower interest rates and increased government spending on infrastructure, Obama maintains that increased government spending will pull America out of recession, into recovery and prosperity. However, the rest of the world disagrees, leaving Obama alone at the G20 summit arguing for increased spending. With conflicting actions from world governments and an optimistic government contrasting a concerned public, there is little doubt that volatility will remain king on Wall Street and around world markets.
Will immigration reform provide the stability that Democrats need to win in the fall elections? With Republicans and Democrats in little agreement, and other issues on the public mind, probably not. Obama, along with the Democrats, has spread himself too thin over a variety of domestic and foreign policy issues, and the economy is bringing his popularity down.
Today, July 1, Obama brought one of the key campaign issues of 2008: immigration reform. Taking a shot at Arizona's controversial new law (which will take effect at the end of this month), he said "These laws also have the potential to violate the rights of innocent American citizens and legal residents." This change of priorities for the president comes on a day which saw a nearly 300 point swing in the Dow Jones Industrial Average, and may be an attempt to secure certainty in at least one area as the mid-term elections approach.
Certainty has been a hobgoblin for Obama. Entering into his presidency with the clear and simple goal of closing Guantanamo Bay detention camp, his administration has had trouble closing the deal, facing such problems as where to relocate prisoners. Many of the problems with an instant closure are detailed here.
Then, healthcare reform took center stage, and, though the Democrats had a majority in both houses, congress had difficulty passing what is now colloquially referred to as "Obamacare," extending the congressional debates into the Christmas recess. Though it was finally passed and signed into law, Obama gave many concessions, and its full implementation is still uncertain. Perhaps most concerning is its unknown effect on the economy.
Throughout his presidency, the economy has been in the public spotlight. Never wavering from the Keynesian ideals of lower interest rates and increased government spending on infrastructure, Obama maintains that increased government spending will pull America out of recession, into recovery and prosperity. However, the rest of the world disagrees, leaving Obama alone at the G20 summit arguing for increased spending. With conflicting actions from world governments and an optimistic government contrasting a concerned public, there is little doubt that volatility will remain king on Wall Street and around world markets.
Will immigration reform provide the stability that Democrats need to win in the fall elections? With Republicans and Democrats in little agreement, and other issues on the public mind, probably not. Obama, along with the Democrats, has spread himself too thin over a variety of domestic and foreign policy issues, and the economy is bringing his popularity down.
In the Mirror: How to Avoid Major Losses Past the Second Quarter
Article first published as In the Mirror: How to Avoid Major Losses Past the Second Quarter on Technorati.
Wall Street's second quarter saw quite a wild ride in becoming the worst quarter since the first quarter of 2009. It witnessed the credit crisis in Greece, the BP oil spill, a change in government in the UK bringing about austerity measures, and, perhaps most notably, a true correction, with all the major indexes declining more than 10% over the period.
While the president and other members of government have forecast a quick end to the country's economic struggles, the Federal Reserve Board has advised caution, keeping interest rates low amidst fairly constant jobless claims and concerning consumer confidence levels. How can the rational investor make a profit in this climate which is at best stagnant, and at worst highly volatile?
The traditional way is to steadily invest in well-known funds that mirror the performance of the market, or some sector of it. In this manner, one can bet on the success of financials or pharmaceuticals, large companies or small companies, companies that yield high dividends or ones with high potential for growth. However, most of these funds are proud if they did not lose money over the past 5 or 10 year period.
The only way to consistently make money is to take risk. Unfortunately, that is also the best way to lose money. One can limit exposure to risk by doing these four things:
1. Diversify. Markowitz showed in the 1950s that any diversification lessens the overall risk of a portfolio.
2. Research. If even picking two random stocks provides less risk than one random stock, imagine the benefits of choosing two securities from different sectors that you know something about.
3. Monitor. An easy way to shorten your lifespan is to constantly monitor the value of your portfolio. I know a story of the trader who requested a portfolio monitor in his hospital room while undergoing triple bypass surgery. However, a daily scan of the news and earning reports pertaining to your stocks and watchlist can help ensure that you buy and sell at the right time.
4. Avoid IPOs. The Tesla IPO has made headlines for several days and many amateur investors are chomping at the bit trying to get ahold of these first shares. Unfortunately, all the big players on Wall Street have access to the IPO first; therefore you will only be able to jump on the bandwagon as it has reached apogee and is falling back to earth.
By following these principles, the rational investor can find underrated securities with healthy risk while steadying himself against the tide of the economy.
Wall Street's second quarter saw quite a wild ride in becoming the worst quarter since the first quarter of 2009. It witnessed the credit crisis in Greece, the BP oil spill, a change in government in the UK bringing about austerity measures, and, perhaps most notably, a true correction, with all the major indexes declining more than 10% over the period.
While the president and other members of government have forecast a quick end to the country's economic struggles, the Federal Reserve Board has advised caution, keeping interest rates low amidst fairly constant jobless claims and concerning consumer confidence levels. How can the rational investor make a profit in this climate which is at best stagnant, and at worst highly volatile?
The traditional way is to steadily invest in well-known funds that mirror the performance of the market, or some sector of it. In this manner, one can bet on the success of financials or pharmaceuticals, large companies or small companies, companies that yield high dividends or ones with high potential for growth. However, most of these funds are proud if they did not lose money over the past 5 or 10 year period.
The only way to consistently make money is to take risk. Unfortunately, that is also the best way to lose money. One can limit exposure to risk by doing these four things:
1. Diversify. Markowitz showed in the 1950s that any diversification lessens the overall risk of a portfolio.
2. Research. If even picking two random stocks provides less risk than one random stock, imagine the benefits of choosing two securities from different sectors that you know something about.
3. Monitor. An easy way to shorten your lifespan is to constantly monitor the value of your portfolio. I know a story of the trader who requested a portfolio monitor in his hospital room while undergoing triple bypass surgery. However, a daily scan of the news and earning reports pertaining to your stocks and watchlist can help ensure that you buy and sell at the right time.
4. Avoid IPOs. The Tesla IPO has made headlines for several days and many amateur investors are chomping at the bit trying to get ahold of these first shares. Unfortunately, all the big players on Wall Street have access to the IPO first; therefore you will only be able to jump on the bandwagon as it has reached apogee and is falling back to earth.
By following these principles, the rational investor can find underrated securities with healthy risk while steadying himself against the tide of the economy.
Wednesday, June 30, 2010
Deceivingly Stable
Today marks the end of the second quarter on Wall Street, and the 0.01% change in the DJIA as we near the close implies that it has been a calm end to the quarter. A peek at graph for the DJIA today shows otherwise. The morning started with a sharp increase, most likely a correction of yesterday's tumble, dipped back down, up again, and has wavered around even for the past hour. This indecisiveness is due mainly to conflicting results from the employment situation and a strengthening industrial sector, as can be read about in this article from the Wall Street Journal: http://online.wsj.com/article/BT-CO-20100630-711458.html.
As a rational investor, I would continue to weather the storm, in the hopes that the market will start the third quarter tomorrow stronger, and make larger gains in the next two weeks. My portfolio has gained a nominal 0.42% today, and while some bargains may be available right now, it would be more prudent to see how the economic climate changes as the week draws to a close.
As a rational investor, I would continue to weather the storm, in the hopes that the market will start the third quarter tomorrow stronger, and make larger gains in the next two weeks. My portfolio has gained a nominal 0.42% today, and while some bargains may be available right now, it would be more prudent to see how the economic climate changes as the week draws to a close.
Tuesday, June 29, 2010
Gray Tuesday?
Let's not mince words. The market took a plunge today on reports of lacking consumer confidence and slowing global economic growth in China and the European Union. Though jobless claims have fallen in recent months and the markets were on a general upwards trend, there really was nothing keeping growth up, much less stable. Many of the new jobs lauded in recent reports were created by the U.S. Census; these are temporary, average-paying jobs with no future prospects. In addition, the austerity measures passed across Europe combined with the British Petroleum (BP plc NYSE: BP) oil spill in the Gulf of Mexico has worsened the job climate in the Southest region of the United States, lowering consumer confidence in that region as well.
What affect does this have on the mindset of the rational investor? Given that this setback was fairly predictable (I predicted a close of the DJIA below 10,000 to start July back in the Spring), it is not unwise to treat this as the conclusion or at least maintanence of a market correction that began when the DJIA was at 11,000. I do not predict a further decline in the DJIA past the end of this week. In fact, the market should begin a longer upwards trend towards the end of trading this week. My securities have not bucked the trend today; my portfolio has lost 2.6% two hours before the close. However, I am not selling just yet. The losses incurred today should be made up in the next week or two weeks, and then perhaps more reasonable growth will ensue. Until then, it would be unwise to speculate on short-term gains for securities, unless you are betting on extreme volatility.
What affect does this have on the mindset of the rational investor? Given that this setback was fairly predictable (I predicted a close of the DJIA below 10,000 to start July back in the Spring), it is not unwise to treat this as the conclusion or at least maintanence of a market correction that began when the DJIA was at 11,000. I do not predict a further decline in the DJIA past the end of this week. In fact, the market should begin a longer upwards trend towards the end of trading this week. My securities have not bucked the trend today; my portfolio has lost 2.6% two hours before the close. However, I am not selling just yet. The losses incurred today should be made up in the next week or two weeks, and then perhaps more reasonable growth will ensue. Until then, it would be unwise to speculate on short-term gains for securities, unless you are betting on extreme volatility.
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