Wednesday, November 03, 2010

3 November 2010 Table for Two


3 November 2010 Table for Two

Yeah! No more political ads on television for hopefully a couple of months. Did it seem like 4 billion dollars worth of media advertising? That’s what the estimate was to get this changing of the guard. (Remember we pimped the media ETF PBS here a couple of weeks ago when it was at $12.75. It is now up 2% in two weeks. This should have a good ride through the first quarter 2011.) At the end of the day, we ended up with huge gains in the House and a close call but no cigar in the Senate. I was surprised to see Harry Reid hang on to his seat even though we hinted here he might. Than, last night I found out that tea partier Angle made a comment this last week that all entitlement programs were fair game even social security. Mmmmm. A snow bird heavy retirement state, brilliant. It was hers to loose and she did. We pontificated last night about what the legislative changes might mean in terms of the market and we did not see anything today to indicate we were off track. However, an extension of the Bush tax cuts will not be a freebie. The spilt house and senate will have to give up something and our guess is an extension of unemployment benefits for at least through 2011 and possibly longer. Credit Suisse did not miss that point in their first alert this morning pointing out that structural unemployment grows as cyclical unemployment continues. That means, the 2005-2007 base unemployment (aka structural unemployment) rate of less than 5% has crept to and is estimated 6.7%. As we continue unemployment benefits to support those who cannot find work at the moment, (cyclical unemployment) the structural unemployment will creep closer to 7%.

Table for Two

I was going to write a nice little piece here about a cool stock that IBD, Investors Business Daily helped me find today. You see it is Wednesday and I jokingly call it date night as I regularly have dinner with one of my best buddies (and reader). We usually go to one of the best places to dine and relax near our homes. It is the famous Hanna’s, best beef, best wine (though I occasionally bring my own) and best hugs in OC. But I digress. As I read this article early this morning about OPEN OpenTable, Inc., together with its subsidiaries, provides restaurant reservation solutions in the United States, Canada, Mexico, Europe, and Asia. It offers solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. I thought I would check it out to find a decent place to try for a change. The first thing I did was to make sure Hanna’s was in their database. Not only was it in their database, they have 52 reviews, all but one exceptional. The one that was not exceptional was not all that bad but they said it was too narrow a place. This must have been a review from a portly person as even chubby I do not have a problem navigating my way through the place. After reading the article, tonight I thought I would check out the stock since it was my turn to buy and I had run into OpenTable in quite few places I had researched for another dinner I had scheduled. The website is cool, informative, interactive and has me thinking about places I did not know about. The viral social network aspect of this has a lot of legs. So let’s look at the fundamentals. Wow should have done this last night. The stock closed up today by 12%. But let’s ignore that point and still look at the numbers. Forward looking P/E is huge at 62, but that is because the company has shown phenom growth. The 5 year average earnings per share growth is a whopping (financial term for very impressive) is 36%. That is a 5 year average. Now there is no way to say that growth will continue, but from their sec filings they claim 14,000 restaurants and 160 million diners. By the way these are global stats so they have just begun to scratch the surface of this market segment. I would guess market penetration in the US at less than 2%. The social network acceptance of this is building a fairly wide competitive moat. As the economy improves and more people discover the usability of the site, I think it could be huge. With that said and the huge bump it had today. We are going to play this with a call option. We are going to look at some January $70 call for $6.00. I have a feeling that train may have already left the station, but we’ll give it tram. For every contract we buy we will control $6,800 of OPEN stock for $600. The option is selling for about 7.75 at the moment so we need a little downward adjustment to catch this option and hope we are not catching a falling knife. This is very speculative, but I like the product and except for the very expensive price, I like the stock

Talkin’ the Talk

I just saw (on late night Bloomberg z z z z z ) a sound bite from the White House press conference earlier today. If this is any result of the elections, it may be a very very promising sign. A relaxed President Obama said, “The only way to make America a success is to make American business asuccess.” I have not heard him quoted as being that pro-business since he took office. It appears from the sound bites of this press conference, that he has to be more pro-business if he is going to get business to spend the huge sums of money they are sitting on and start hiring again if he wants to keep office in two years.

QE II and then some.

We heard from the Fed Chair today and the expectation was 500 Billion or so in quantitative easing. The number was $600 Billion which is only 20% higher but the announcement did get some attention. It seemed to have turned around a drooping market to close basically even. Ironically the initial impact was to raise the 10 Year Treasury by 10 basis points to 2.6%. As you know the intent of QE is to lower the bond rates so it creates liquidity and should lower the dollar making our goods and service more affordable in a global market. That in turn enhances production, job growth, and our general economy.

From the "Who The Hell Is That?" Gallery

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