understanding the psychology of behavior

Whether you (or content creators) like it or not, YouTube now has firmly established a very real competitive advantage against other video sites. A great article in Tech Crunch sums up the rating numbers, and those numbers are impressive. YouTube’s market share is large, and gaining especially with Google’s understanding of the web and web users.

Later on this year YouTube should be placing video ads within their ‘partner’ videos, and leveraging that huge market share and user base. After that moment the dynamic of the web will be interesting. And Google will have a second very big trick pony.

Looking at Google in the most simplistic terms you have a company with a clear competitive advantage in search (as its constant gain in market share proves) and competitive advantage in video. Add a very good valuation in that mix, and you can see the compelling potential.

(Note: Google’s PEG is about 1, with estimates of 35% 5yr growth rate, which is a bit high. Especially since the video ads are not yet established.)

I wrote about TIE about 2 weeks ago because of Boeing’s revised projection. Conincidentally Lenny Dykstra wrote positively about TIE the same day I noticed the projections. He was bullish, mentioned the position he wanted at 10.60, nothing more. Now I am looking at the head lines for TIE and noticed his e-mail article where he states he sold the calls at 11.60.

To me this is shadey. His very article could have produced the kind of move that would have given him is target price. Why not mention the target price in the article? I have short trades, so I get where he is coming from, but every time I see a short trade I mention it is a quick short trade, and where an exit should looked for.

Lenny, this just smells bad. I just lost a lot of respect.

Update: Apparently, as per Jan’s comment, his target price is always $1000. Was not aware of this. So if he does not buy the options before his articles are published, then it is not shadey.

Since all I keep hearing about are CDOs and follow GS closely, the collapse of the bond market it is obviously been on my mind (and on most of the minds on Wall Street). I keep reading articles suggesting the bond problem will get worse before it gets better because of the recent blow ups, but in the same articles and the same breath of bashing the ‘toxic waste’ investment vehicles, the mention of ample liquidity remains.

Ahhh, ample liquidity, here in lies a solution.

So because a few CDOs investment strategies went wrong we are left to assume new CDOs will not be touched despite the thirst for this liquidity to find a home. Where will this excess liquidity go? Will the managers of this liquidity force change to accomidate their need for transperancy?

Who am I, a lonely dumbass blogger, to argue with the likes of Bill Gross, Carl Icahn, John Thain and countless other media articles. These people know the markets and CDOs far better than I do. I do not argue that with the CDOs currently out there, there should be a nervousness, as Goldman’s CEO stated. But I also believe the people on Wall Street are extremely smart and will work through this problem to allow the current liquidity to find a home. How they solve it I leave up to those who know the process far better than I.  But for market sake, those buying these vehicle most take responsibility too.
Or maybe I am using to much common sense… or simply naive stupidity.

Simmons Annette, a TIE director, purchased over $1M worth of TIE on June 27 and 28. I think I am reading the Form 4 correctly, and the cost is about 32.

…interesting.  I think I may add some Dec 07 Call options tomorrow.

Japan was hit with a electronics slow down.  After observing BestBuy and Circut City’s recent earnings report, this really is not a surprise anymore.  But I guess the talking heads were correct concerning consumer electronics, and not buying related stocks until August.

Good Job Talking Heads.   

Look for a quick move to high 40 to low 41 in the short-term.

Look to play the 40 August 2007 Calls. Cover them as soon as the dotted line is achieved.

I was a little concerned about the financials the other day. The XLF looked as if it was about to break down, away from the 200 SMA support. But today a nice U-turn took place. The chart looks to want to bounce from the 200 SMA and its oversold condition, and move to the 20 SMA.

fyi - there are a number of market moving economic data coming out soon, which could alter or facilitate fundamental conditions that can derail the natural sentiment of the chart.

Because I usually short the QQQQ and SPY when the markets are overbought I pay close attention to them and how they relate to the index. Today the ETFs saw a stronger upward move then the index throughout the day. I do not have an explanation, just thought it was interesting and wanted to capture the observation.

How much GS plans on or is buyback stock this quarter and right now.  That would give a better measure of the credit problems the US market is currently fearing.

The CEO stated today they are at a high state of nervousness about the subprime borrowing and debt markets, but in the same speach stated liquidity was still ample and the markets have not peaked.

I am glad he is not arrogant about the situation, and if what he says is true about things not peaking BNI and TIE are solid plays here.  I still do not think the fear of CDOs will amount to much, out side of localized blow ups.  Maybe I put too much credit in Wall Street’s ability to understand and calculate risk.  But they are human after all, so maybe it could amount to a dooms day type of thing.

Across the board things are looking too cheap, however from a charting perspective things are looking negative too. The one positive I saw yesterday during my chart reviews was the increase in the Volatility Index in relation to the market. Fear is so high, yet the markets are relatively contained.  I hesitate in shorting this market as it is oversold and fear so high, but at the same time I understand the negativity. I wish I had the time to dig into CDOs and understand the allocation of debt between them.  For instance when I read up on these things, the term is very general.  Are they backed by mortgages, leverage, bonds…etc. Are the CDOs from Sub-Prime the only ones failing?  Or have the CDOs (used for private equity) failing?  We are told it is subprime, yet in the same breath we are told it will spread to other areas.  But we are not told how nor why. As investors we can not ignore the differences in what is failing, those differences matter.  Do not get me wrong, a domino effect can happen as people pull out because they are not willing to understand the differences. I mean, here we are questioning the very essence as to how the pros raise money, and have been raising money for years. What I see coming out of this, especially if pension funds were hurt by it, (which they should not be hurt hard as they should be allocating funds with EXTREME diversity to various hegde funds), is greater controls with in the CDO space. 

Questions I have are like: Why did the fund managers buying the CDOs not question how it originated (via debt vehicle)?  Did the manager care? If they knew it was from subprime (and even if they did not) why leverage to such a degree?  I guess I blame the manager for not conducting proper due dilligence instead of the system.  I mean would these pension fund managers or hedge fund managers invest in a company they did not know about, so why would they invest in a CDO they know so little about? I am not an insider so a lot of these questions may seem naive, but why is the system to blame? And why are we questioning every CDO out there, right down to the almost half a trillion dollars worth of them?