Euro Crisis

I think they were going to use this to short Euro in near term . The CDS. Refere to Moola blog it provide some clue on how the big boys going to short Euro.

Zero Hedge highlighted this clip: "Goldman Can Create Shorts Faster Than Europe Can Print Money"
Look at what Soros did to the Bank of England in 1992 - he went after them, they had a finite amount of dollars, he was selling sterling and taking the dollars, and they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country, you don't need money you just need synthetic euroshorts or CDS. A trillion dollar bailout: Goldman can create 10 trillion of euroshorts. So it just dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can create money."

What is CDS?
A credit default swap (CDS) is a swap contract in which the protection buyer of the CDS makes a series of payments to the protection seller and, in exchange, receives a payoff if a credit instrument (typically a bond or loan) goes into default.


In its simplest form, a credit default swap is a bilateral contract between the buyer and seller of protection. The CDS will refer to a specified bond obligation of a “reference entity”, usually a corporation or government. The reference entity is not a party to the contract. The protection buyer makes quarterly premium payments—the “spread”—to the protection seller. If the reference entity defaults, the protection seller pays the buyer the par value of the bond in exchange for physical delivery of the bond, although settlement may also be by cash or auction.[1][2] A default is referred to as a 'Credit Event' and include such events as failure to pay, restructuring and bankruptcy.[2] Most CDS’s are in the $10–$20 million range with maturities between one and 10 years.[3]

Lesson 7

Here is what i learnt from Ah Yap recent write ups. Good one!

Lesson #7. Sometimes, people sell because of fear and because they have no choice (the mutual fund manager and the poor margin player), you got to take advantage of that!

I ever ask myself if the recent votality will make me ton of money?Apparently, the opportunity has not been appealing.

Stock is not at a dirt cheap valuation. I guess it wont be so fast and rarely to have a chance to apply lesson 7. Nothing much can do , have to wait for another month or 2.


Ya. .. another things, i had asking opinion and do some read up on Citi. I guess this round i wont be investing in Citi. This is the intersting mathematics for Citi. I think if given a choice , between Wells Fargo and Citi, i would prefer a prime lending bank rather than a subprime lending bank.

C
Some EPS assumptions and price targets:
Assumptions #1. Earnings of $20.4 Billion. Share price $7.00 In the go-go days of 2006, Citi had its best yearly earnings from continuing operations of $20.4 billion. If the company ever made $20.4 billion again then this would equal EPS of $0.70 per share. Take a 10x multiple on this and you get a stock worth $7.00 per share.

Assumption #2: Earnings of $10.2 billion. Share price $3.50 Since Citigroup is half the company it was in 2006, lets give the company half of the earnings from that year or $10.2 billion in earnings. If the company ever made $10.2 billion then this would equal EPS of $0.35 per share. Take a 10x multiple of this and you get a stock worth $3.50 per share.

Assumption #3: Earnings of $2.4 billion. Share price $0.80. Earnings from continuing operations last quarter were $593 million. The quarter had a lot of moving parts, but maybe less than some others. Let assume the company is able to continue this trend and drops down this number to the bottom line. Lets extrapolate this out to the year, which would give the company $2.4 billion in earnings. If the company ever made $2.4 billion then this would equal EPS of $0.08 per share. Take a 10x multiple of this and you get a stock worth $0.80 per share.So if you look at the above assumptions, bears would argue with Bove that the stock is overvalued. Bulls would argue with Cramer that the stock is fairly valued or undervalued.

What do you think Citigroup's earnings power is? Be realistic. Remember there are 29.2 billion shares outstanding. So if you say "I think Citigroup can earn $1 per share" that would mean the company has earnings power of $29.2 billion. This would make it the most profitable company in the world. This would seem unlikely, but if you have a strong case then make it.

My analys: Citi first quater 2010 make 4.4 billion only ,this is one of the best first quater in the historical bull run. Hence, i would think that it is almost impossible to achevie 29.2 billion for next few years

Investing Note on 5/5/10

This should be the first day of the recent "Real Corrections" during the rise recently. I think i should note down the dive. Although it was a dive, but stocks valuation still not yet cheap.

Apparently, Value investing opportunity havent appear. I think have to wait at least after 15 June and see what is going to happen. I told myself have to adopt wait and see strategy. 2nd Brother ever mentioned in his blog, 20% is minor corrections, 30% is major corrections. Its not 20 or 30% it is 2 or 5% now. SP still expensive at 1173.

Afterall , so many good news ,and ,we had knew. Investing is not you think or i think , it is not puppy love. So what we should have to adopt here is the wait and see strategy untill the corrections really happen and do value investing later.

Note:C as at price before corrections around 4.36. After yesterday dive it close at 4.26

Investing Homework - GUH and TOPGlove

Justs did some homework on GUH and TopGlove

GUH
MP 1.18 S
Share Issue 203,069,963
Share Issue are too much , Market Cap now are at RTM0.239 billion ,not good

Receivable Turnover Ratio around 80days (effiecient!)
trade receivable able to net off trade payables
cash net of total debt still have around 45cents per share
NTA 1.8

Conclusion,
Earning not consisten ,Business diversify too much, Earnings not consisten, but vary in between years are too much, 100% jump in 2 years, Only monitor if huge drop. Do present some quality in stocks, However,opptunity in investing has not appeared




TOPGlove
mp 12.7
Share issue 308,190,000
Market Cap 3.8 billion
NTA 2.85
Div 22cent , 2%
Cash 0.75 per share
Inventories around 45 cent per share
Receivable not effieciten 150 days

Not my cup of tea