Stocks and Trading Thread - Channeling your inner Mono

[MadImmortalMan]

Has any of you folks checked out VMware recently? I mean as far as financial figures and such goes.

Because I am trying to find a reason to NOT choose this as my second non-margin stock purchase. Due to my work I am in a good position to see just how virtualization will overwhelm the way IT infrastructures are handled. Yes, a lot of it has already happened but it is just a start.
And I think it is not that dependend on economic growth, I mean, whatever your company is doing, after a certain (not too big size) you will have quite a dependancy on IT and either things go well and you will need more IT infrastructure, or they will go bad in which case you need to cut costs on the existing one and virtualization is the ready-made answer for it. And it looks like VMware is by far the best choice for that.

P/E of 109, no dividends (not unusual for a tech company) and it's at its 52-wk high. However, everything you said about it is absolutely right. It has been up as high as $70 before, just not in the last year. I think the high P/E is due to the fact that their earnings dropped through the floor in the downturn. Hardly surprising with the crunch. Even the analysts who recommend sell are projecting the earnings to go back up. One thing I think is a mistake that analysts make about VMWare is that they look at it with too narrow a focus. They call it a software company. But it's a bit more than that.

IMO, the main vulnerability is exposure to M$FT's Hyper-V (which I have no personal experience with--all my stuff is running on VMWare ESX). If Hyper-V sucks, no problem. If Hyper-V is more expensive to license (likely), then VMW remains the gold standard. If M$FT does something to their server platform that introduces incompatibilities with ESX and other VMW platforms, that will be bad, but it can't happen for a few years at least. 2k8R2 and W7 work great on VMWare. I've also noticed the changes to the licensing structure for ESX 4 from 3.5 are likely to raise the revenue VMW can expect to bring in, not just from new datacenters and metal-to-virtual conversions, but also existing customers upgrading existing platforms.

So, basically I agree with you.

[Tamas]

Stocks Rally Again But "Zombie Market" Faces "Major Risks," Bleier Says
Posted Mar 17, 2010 02:11pm EDT by Aaron Task in Investing
Related: ^DJI, ^GSPC, XLF, SPY, QQQQ, FNM, FRE
Stocks were higher midday Wednesday, putting the Dow on track for a seventh-straight gain while the S&P 500 moved to its highest level in 17 months.

In what's become a familiar pattern, the rally is occurring on low volume and without any of the drama investors have become accustomed to in the past two years. That's good news but it's also a sign of what Scott Bleier, president of CreateCapital.com, calls a "zombie market," where the vast majority of trading volume is computer driven and occurs at the open and during the last 10 minutes of the session.

Bleier's theory -- which definitely has some "conspiracy" elements -- is that policymakers at the highest levels of government have come to the realization that "it's the capital market tail that wags the economy's dog."

While there's no way to prove the "plunge protection team" is in the market buying futures to make sure major averages stay above "critical" levels, what is true is the Federal Reserve has taken extraordinary measures to aid the financial markets.

By keeping rates at zero for an "extended period," the Fed has allowed the banks to repair their balance sheets by earning the spread between the fed funds rate (effectively zero) and the "risk-free" rate of return on 10-year Treasuries, which is hovering around 3%. This "free money" trade is a big reason why banks have been sitting on TARP funds, rather than lending them out.

But the Fed's comments about buying mortgage-backed securities are at least as important as the comments about rates, Bleier says. The Fed has pledged to purchase $1.25 trillion of agency mortgage-backed securities. In effect, the Fed is allowing banks and brokers to park their "toxic" assets on the Fed's balance sheet and given the investment community cash equivalents in exchange. "They then turn that into investable dollars. They leverage it up and buy stocks, bonds and commodities," Bleier says.

While one of many factors, the Fed's MBS purchase program is the single-most important reason why the financial markets have risen so dramatically in the past year, Bleier suggests.

That being the case, the critical question is what happens if, as currently planned, the Fed winds down the program at the end of the month?

Along with raised earnings expectations, this "hand-off between a government-supported market and a market that can stand on its own two feet" is the "major risk" facing the bulls, Bleier says. "We have not see any technical signs to bail from this current rally [but] we have got our finger on the trigger."

Rest assured he is not alone in that pose, another reason the recent move higher is lacking volume and conviction.

[The Minsky Moment]

It does remain to be seen whether the government can exit from the MBS market without triggering another mini-crisis, or alternative an extended period of market weakness.

[Ed Anger]

Ford is at 14.33.

[Tamas]

Ford is at 14.33.

When it was at 13.67 yesterday, I set an order to buy at 13.5 

[Ed Anger]

Ford is at 14.33.

When it was at 13.67 yesterday, I set an order to buy at 13.5 

I got it at just over 2. 

[Tamas]

Ford is at 14.33.

When it was at 13.67 yesterday, I set an order to buy at 13.5 

I got it at just over 2. 

Cool

[Ed Anger]

Economic calamity = opportunity.   

I still kick myself not exploiting the tech bubble bursting.

[Tamas]

Well, I bailed from my couple of remaining long margins before today's downturn got into swing, one on breakeven, the other (Microsoft) with profit.

At the end of the week I decided this was not a general trend-turn and climbed back in on Sclumberger(sp?) and bought Ford.

But, I am short on Starbucks (stop drinking cofee, people) and this sun energy company thingie which saw some pretty heavy insider selloff this week. The latter, I kick myself for only daring half of my usual amount because it did fell 3%, while Starbucks yielded like less than 2% in two days.

So my basic plan is that I hope to see an upward move on Monday because I am more heavily invested on that part, but I think my shorts will probably be lacking any serious upmove even in that case, so I should have my ass somewhat covered.

While I was travelling to Spain my margin trades took a huge hit, a good lesson and remainder to not be so exposed. Managed to crawl back during the last few days but I am still slightly in the red after buying these stocks soon before close.

[DGuller]

I thought people like Tamas only existed as caricatures in Burton Malkiel's book.

[Admiral Yi]

I thought people like Tamas only existed as caricatures in Burton Malkiel's book.

Were you not yet in the Free World during the dotcom bubble?

[DGuller]

I thought people like Tamas only existed as caricatures in Burton Malkiel's book.

Were you not yet in the Free World during the dotcom bubble?

I was, but I never heard the technical analysis in action in all its glory.  It was mainly "buy dotcom, buy dotcom" that I heard. 

To my credit, I even managed to talk my dad out of investing into some get-rich-quick investment that my uncle was pushing, telling him that when people like my uncle start trying to make a quick buck by investing, you know the end is near.  It was the first and last time that my dad actually followed my recommendation on any financial matters.  My uncle, of course, got burned.

[Ed Anger]

[Tamas]

I am not some believer of technical analysis telling the future or anything like that. And I would not base long term investments on it.

I think it's use -beside gathering and displaying past info like volume of buying and selling- is in the fact that many people do use it and it becomes a self-fulfilling prophecy. Like often some moving averages serving as support/resistance.

[MadImmortalMan]

So my basic plan is that I hope to see an upward move on Monday

I'm not optimistic for that. I wish I had closed out more positions before the market closed yesterday, but I got busy with other stuff and didn't get back to it until after the close.


Ed:    Cramer thinks we're all gonna die if health care passes.