Catholic High School Girls in TroubleBy Derek On February 29, 2012 Under Broker Notes
From: Derek Hillen
Sent: Wednesday, February 29, 2012 11:32 AM
“If there’s not drama and negativity in my life, all my songs will be really wack and boring or something.” - Eminem
I don’t always focus on the negative but Catholic high school girls staying out after curfew can often get into all kinds of trouble, as seen in the classic intellectual film, “Kentucky Fried Movie.” The school girl skit within the movie featured acting luminaries as Lenka Novak (whose other screen success includes “Vampire Hookers“). With the Dow closing above the lucky 13,000 level for the first time in four years yesterday could markets be facing a similar scenario of staying “up” too late? I shouldn’t ruin a good party but the last time we saw this level the Dow proceeded to plunge 42% over the next six months (spurious, I know but interesting).
The quintessential barometer stock for US equity markets has been Apple which just reached half a trillion dollars in market cap and is now exactly TWICE as big as former archenemy Microsoft and is also now fully 30% larger than the second largest listed company in the world, Exxon . Trading volume in Apple has averaged a massive $12 bn a day. The stock is up one third in the last two months and at current growth rates (the predictive method favored by analysts world over) market cap for Apple will reach US$1 trillion by July 1. Now I know February has one extra day this year but this is ridiculous. Analysts who like to play with their technicals have pointed out the charts look good. However, one other thing that worries, other than Apple’s incredible rise to global domination, is the breadth of the market is narrowing with the percentage of stocks above the 20 day MA declining in a straight line. That makes sense since everyone seems to be just buying Apple!
So a correction is in the offing which would give us a better entry point than current nosebleed levels.Asiawill not be immune either. Latest fund flow numbers from EPFR indicate emerging market equity inflows last week slowed to $350 mn vs the average weekly $2bn of inflows of the previous seven weeks.
Chinese women put up with a lot (I know, I married one). The dearth of public bathrooms for women in Chinahowever, seems to have been the last straw. Protests have erupted around the country with all women “sit-ins” of men’s restrooms led by the angry, the put upon and the bladder constrained. Ever sensitive to the “whiff” of dissent, Beijinghas slammed the stall door closed on all discussion of these protests for fear the fowl odor of discontent pollute the land. Any mention of toilet protest has been censored on Sina Weibo, China’s favorite microblog. If toilets are too sensitive a subject for internet discussion then forget about real strife and unrest, such as the riots yesterday in a small town south of Kashgar in Xinjiang where 12 people died. This all points to why I have been skeptical of Sina’s Weibo becoming “another Twitter .” The microblog’s Orwellian “freedom” to discuss approved subjects with approved conclusions is all that can now be said for it. The main attraction for many of the 300 mn users of the service was just the opposite and now that attraction is further diminished by the impending March 16th deadline of real name registration requirements for existing users. Up to half of users have refused to be registered using anything but an alias and this provides us with another reason for our downgrade of Sina (SINAUS) to Hold today.
Eric Wen believes the stock is overvalued given very weak guidance and soaring capex plans (US$160 mn this year) to expand the Weibo platform. He also says plans to monetize the service using low cost advertising will only cannibalize existing ad supported businesses. “Sina cannibalizes itself while Twitter and Facebook cannibalize others.” Eric’s top picks in the internet sector remain Baidu (BIDU US) and Qihoo (QIHU US).
Derek Hillen, CAIA