Google takes on China

Frustrated with having to self-censor their premiere search product, Google (GOOG) announced today that it will leave the China market entirely unless the government allows for a truely open web within its borders. This move would leave the doors wide open for the current dominant search engine in China, Baidu (BIDU). It didn't hurt that revenue from China operations are currently "immaterial":

Beyond a lonely 10, all stocks are down

If you look at some of these New York Times interactive charts that show relative performance of stocks within a sector, you'll notice something remarkable: all the dots on the chart for most sectors are below 0% gain for the year. In fact, in some sectors it is so bad that +% and even 0% doesn't even show up on the axis!

This made me want to run a simple screen for YTD price gain > 0. I was fully expecting to get *nothing* back! Well, it's close. There was only one company > 30B market cap whose stock made money in the past year (WalMart). For market cap > 5 billion, only 10 companies out of all the stocks in the world made positive gains. Here is the "Lonely 10" screen. What other year does only 10 stocks make money? If you try and run similar screens, be sure to filter out bond funds and UltraShort funds. Basically long equity investors got slaughtered, and most of the downward spiral occurred in the past 2 months.

Company Name	Symbol	52w Price Change (%)	Institutional Percent Held	Market Cap
Wal-Mart Stores, Inc.	WMT	11.66	38.90	214.72B
General Mills, Inc.	GIS	3.87	77.14	20.55B
Rohm and Haas Company	ROH	32.33	80.17	13.86B
UST Inc.	UST	19.53	75.31	10.22B
Southwestern Energy Company	SWN	19.79	88.90	8.34B
Nationwide Financial Services, Inc.	NFS	14.43	21.78	7.04B
Barr Pharmaceuticals, Inc.	BRL	18.06	77.49	6.96B
AutoZone, Inc.	AZO	0.45	95.00	6.64B
People's United Financial, Inc.	PBCT	7.40	69.47	5.93B
Sociedad Quimica y Minera (ADR)	SQM	17.99	12.06	5.25B

UltraShort Bonanza

Some new ETFs have become available over the past few years that provide investors an easy way to hedge without dancing with options, and to profit handsomely off of downward moves in the market. These are the ProShares UltraShort series. These ETFs are designed to provide a return equal to -2 times an index they track. So if the S&P500 goes down 5% for example, the UltraShort S&P500 will go up 10%. On extreme down days such as today during a period of heavy volatility, these funds are getting crazy single day returns. Here is a list of some of the UltraShort funds and their corollaries:

Index	Long (% today)	UltraShort (% today)
S&P 500	SPY(-5.45%)	SDS (+11.32%)
Nasdaq 100	QQQQ (-2.76%)	QID (+5.58%)
FTSE China 25	FXI (-10.72%)	FXP (+21.34%)
Dow 30	DIA(-5.40%)	DXD (+10.31%)

In times of less volatilty, these funds can be used as a hedge. This article details some basic hedging techniques that such funds enable.

VIX volatility index tops 80

The VIX index is predicting that the S&P500 will move up or down over 20% in the next 30-days.  The only problem is no one knows which direction the move will go.

Bargain Basement

The massive lows of late mean bargain basement prices for long-term investors. The problem is that fear could drive another 20% drop, and who wants to jump into that? For the brave however -- those that feel that they can catch flying knives -- here are some picks that seem like attractive values:

High Yield

• E - Eni @ 38.5 - 9.88% div - found large deep sea oil field off of Angola - 0.5 book
  
• BCS - Barclays @ 17.3 - 9.88% div - supported by UK government; picked up scraps of Lehman - 0.7 book

Materials

• PCU - Southern Pacific Copper @ 11.5 - 20% div - commodity darling fallen victim to hedge fund unwinding - 2.5 book
• RIO - Vale @ 11.1 - 2% div - near monopoly on iron, though there is plenty of iron on earth

Others

• MCHP - Microchip @ 22.8 - 5.8% div - PIC controller maker; offer to acquire Atmel AVR and ARM chip line - 4.6 book
• NYX - NYSE Euronext @ 27.7 - 4.33% div - completed acquisition of of AMEX, 3rd largest option market - 0.7 book - Warning: Cramer's 2007 loser is down 75% and NDAQ is stealing trade share.
  

Blue Chips

• SPY @ 90 - 3%
• CVX - Chevron @ 60 - 4.33% div - 1.5 book
  
• KO - Coca Cola @ 44.2 - 3.44% div - 4.4 book
• MMM - 3M @ 54.7 - 3.66% div - 3.0 book

Concerns: global slowdown, plummeting profits, dividends slashed, general misery... Remember that Cash is King!

Fed Slams Beige Book on Market Elation

The US Federal Reserve regularly publish a "Beige Book" reporting the state of economic activity in each of its 12 regions. In the latest report, prepared last week but released today, the news was grim across the board and the markets reacted with the 2nd largest downward move ever...

2008
Jan 16 Report	Feb	Mar 5 HTML 286 KB PDF	Apr 16 HTML 182 KB PDF	May	Jun 11 HTML 144 KB PDF
Jul 23 HTML 261 KB PDF	Aug	Sep 3 HTML 164 KB PDF	Oct 15 HTML 135 KB PDF	Nov	Dec 3

Economist Cover Metric

Sometime during the market downtrend of 2000-2002, I came up with a new metric based on inputs I was seeing: "If the cover of the Economist has a really grave picture such as someone peering over a cliff, jumping without a parachute, or anything like that, it is time to stay on the sidelines of the market." Well, the last two covers have fallen into this category. The first was the whirlpool of banks sinking down, the second was an investor peering over the cliff. The third, most recent one is of the world falling through the atmosphere, ignited in flames:

Sep 20th 2008	Oct 4th 2008	Oct 11th 2008
See contents	See contents	See contents

Previous examples of when this would have been sapient advise are in late 2007:

Jul 7th 2007	Aug 18th 2007
See contents	See contents

And there was another cover series, if distant memory serves, that had a man in a parachute and one peering over a cliff that predicted the dot-com bust and the subsequent recession of 2001-2002. Can't find those exact covers that inspired the metric, but certainly this one of being chained to the bottom of the ocean would fit:

Mar 24th 2001

See contents

One could argue that selling in the midst of flames is bad timing, and that the markets will bounce back vibrantly as they did today. There is also a large amount of data that shows that the 18 months after a crash are not fun times and that the market slowly dwindles to the lows of the initial crash and beyond...

Now the question is what sorts of Economist covers trigger a buy signal?!