Monday, 17 December 2012

Jawboning ...

It's the holiday shopping season and it's sometimes interesting on the tech front to loo a little more closely at trends. E-readers have been the bridge for a lot of "tech-nervy"people. The experience of trying to read a book or magazine out in the open encouraged many aid readers to buy sn e-reader in order to allow them to mix tech with ink. The problem is that when people pick up a tech device they want to multi-task rather than uno-task, as such the sales of e-readers (in the US at least) is set to shrink. The market for these products peaked at 23million in 2011, but according to some we can expect that to shrink at least in half by the end of next year. It's worth thinking about when you head to the shops in the coming days.

Elsewhere in tech I've been trying to get a closer look at a note from investment bank ABGSC Sundal Collier, the analyst covering Apple put a $400 price target on the stock and a sell rating. Here's the basic math: Wall Street's consensus earnings is $49.39, so at 400 the P/E would be 8.09. If you use this  particular analyst's f/c then at 400 it would trade at 8.9. Here's the rub, consensus earnings grouwth next year is 11%'ish, while or man in his note grows earnings by closer to 2%. If you believe the must have cool factor has warn off Apple's products then he'll probably be right. If he's nt and you get your 11% growth then the stock will trade towards 600. For the super-bulls, with the 900+ price targets it's starting to remind me a lot of Nintendo after the Wii hit max growth and started to saturate the market. Therefore my 45 - 475'ish entry point on the balance of probabilities looks to be not a bad call for those anticipating slow to moderate earnings growth. There's also the likelihood of more dividends from the cash pile. Wait and see . . .

The FT is reporting on something that shouldn't come as a surprise to anyone in this ultra-low interest rate environment that we now live in. It seems that US banks are finally reversing the trend from over the last few years and starting to hold more mortgages on their own balance sheets. It's reasonably logical if you think about it. The inability of the banks to create "carry" has made it more attractive on a risk weighted basis to keep the quality loans in-house and capitalise on the duration of these earnings. As part of this they have stopped sending loans to the carcasses of Fannie Mae and Freddie Mac. This is a result that the government and the Fed has wanted to promote. Of course the danger here is that if rates lift then the trend will reverse and in addition more MBS will appear on the market just as the Fed starts to look to shrink its' own balance sheet. So in summary the trend is positive  for US housing and worth watching for anyone holding fixed income securities.

In Australia our friends at Fortescue is expected to announce the restart of its Kings iron ore project as early as this week. Part of me thinks this is a very good sign for the iron ore price, but I think that my be a little presumptuous. You see it looks like they'll finance it through a sell-off of some infrastructure assets. The equities market here should like that as it's always had a bias against anything too complex. Personally I'd like to see the prices they achieve before passing judgement. If nothing else some under-emplyed bankers will get a chance to do a deal and justify their existence. Good for them.

As an under-employed banker myself I managed to get out for a group ride yesterday with a mixed group from a club I belong to in town and a cycling group from the northside. Overall it was a pleasant enough morning even with my bad back and I look forward to doing it again over the holidays. I followed up today with another ride and enjoyed the fact that with the schools in Sydney starting their long summer vacation that there was less cars on the road.

I want to mention that my twitter account is up and running and I hope that I can put up some pithy insights that inform and entertain. Check it out at: @mikefagan_ibc.


No comments:

Post a Comment