MorningWord 2/13/13: The path of least resistance continues to be higher, but the opportunities to make money on the long side appear to be looking less and less attractive from where I am sitting. I have repeatedly stated over the last couple weeks that 1500 in the SPX appears to be a less than optimal entry point for putting new money to work in equities, even if we get a blow off rally to 1550. As a trader who tends to be somewhat contrarian and also focused on the vol market, this is becoming an increasingly difficult market to actively trade.
On a lighter note I saw Mumford & Sons again last night at the Barclays Center in Brooklyn. Here is a clip I took of them performing The Cave during their encore.
MorningWord 2/12/13: This morning JPM downgrades their rating on QCOM from Buy to Hold, as they feel 2013 will mark the tipping point for smartphone adoption and they will ultimately see growth grates slow and margins decline. If AAPL’s year over year margin decline in Q1 (down nearly 10%) is any indication, this is a trend coming to a theater near you for the smartphone supply chain. I would add that a market share and technology leader like QCOM is likely to be far more insulated from these pressures than an OEM. BUT it makes a lot of sense for investors who have been involved in the secular trend towards smartphone to keep a close eye on saturation, and probably not wait till AAPL & Samsung have sold their last iPhone 6 or Galaxy 5 to the last human who can afford one to lighten up on their bullish thesis on the space. Widely followed Asymco.com blog had a great chart last month showing the trajectory of smartphone penetration (below).
While Smartphone bulls will agree that North America and Western Europe are not where the next leg of growth will come, it is hard to argue that margin pressure won’t become an issue in emerging markets despite what could be decade long penetration process.
MorningWord 2/11/13: I think it is fair to say that Q4 Technology earnings were a mixed bag, for instance semiconductors heavily exposed to PCs struggled (INTC), while those exposed to smartphones & tablets flourished (QCOM), smartphone manufactures still trying to hold onto every last once of margin (AAPL) felt market share pressure from those looking to undercut on price with broader offerings (Samsung & GOOG). While these trends have been emerging for the past few quarters, they are likely to continue for the foreseeable future.