One reason I’m a news addict is that I like to game the news. What I mean is can you make money off a headline, can you get insight into a macro trend?
So here are my eye catching reads of the weekend and a way to profit from it. I’d love to hear your comments.
Number of the Week: Class of 2011 most indebted ever.
WSJ May 7th : The article states, “The Class of 2011 will graduate this spring from America’s colleges and universities with a dubious distinction: the most indebted ever.”. The reason the class of 2011 is the most indebted ever is the policy of the government has been to provide government guaranteed student loads for almost anyone that applies. This reckless indiscriminate policy is identical to the same kind of thinking that thought everyone should own a home, aka Fannie Mae and Freddie Mac. It’s nothing wrong with everyone owning a home or getting a college degree but someone besides the taxpayer has to pay for it. We know how that ended. How will the education bubble end? It’s almost certain to end badly for the profit education companies like the University of Phoenix, APOL. It’s not that I think non-profit education is better or more justified than for profit. I don’t. But when the shit hits the fan, state schools have more friends and big privates have endowments. Besides the most important reason is that for-profits have no football teams. When it comes down to it, the Arizona Sun Devils wills outlast the University of Phoenix alumni. Go ahead short APOL,DV,COCO,UTI, and STRA
Reports of ‘Suspicious Trading’ at SAC Being Sought by Senator
WSJ May 7th reports SAC Capital Advisors LLP, one of the nation’s most prominent hedge funds, is facing heightening regulatory and legislative heat. This could go a long way to explaining the squirrelly behavior of the market last week. Normally I can predict short-term price movement but many charts and indicators were trash last week. I’ve seen this before when there is wholesale liquidation. It sure felt like someone was getting out. SAC manages $12 billion and if investors decide they don’t want to risk having profits disgorged if SAC is charged there will be a stampede to the exits. My guess is this is going on now. I don’t know how to play this other than keep a cool head on your shoulders. Take advantage of price anomalies. This is when you must have a reason to own something besides it’s chart pattern or favor with analysts.
European officials to revamp Greek aid
Financial Times May 8th reports Athens seen as facing difficulty over raising money in markets. The Euro Trust (FXE) was down 1.17% on Friday, hardly a significant move considering its recent rise against the U.S. Dollar. None the less this headline bothers me because it seems inevitable to me that the Euro as a currency will go through an incredible turmoil as one by one weaker countries . I’m afraid the way you make money on this is to ride a roller coaster. FXE will come tumbling down then reverse as markets perceive a smaller but stronger Euro currency bloc made up of the Franco German trading bloc countries.
Internet boom 2.0 is here, starts to look bubbly
Reuters May 8th reports: Reuters – The tantalizing prospect of finding the next Facebook, Groupon or Twitter is driving the biggest rush of venture capital into the Internet start-up arena since dot-com mania first boomed and then fizzled more than a decade ago. I started one of the first publicly traded Internet companies, HomeCom, so I know something about Internet bubbles. What people are failing to realize is that Facebook, Linkedin, and the rest are creating silos trapping traffic not adding to the pie. This is somewhat of a zero sum game at some point everyone is wired and you are just choosing where to advertise. The time spent on Facebook is the time away from Google search. The astronomic growth rates will not continue. Short Google. GOOG. Don’t short the new arrivals unless you want your head handed to you. I wouldn’t buy them either.