Month: June 2011

Has Google Been Caught Stealing by Oracle?

by Justin Dove, Investment U Research
Wednesday, June 22, 2011

It’s hard to imagine Google (Nasdaq: GOOG) making mistakes.

They haven’t made many, but this one could hurt if Oracle (Nasdaq: ORCL) gets its way.

Oracle claims that Google infringed upon Java patents when creating its successful Android mobile device platform. And now, it’s become a major patent lawsuit.

Google could stand to lose up to $6.1 billion, plus court costs, if they lose.

But a ruling in Google’s favor may seriously hinder the future relevance of Sun Microsystems, Inc. and hurt Oracle’s stock…

Did Google Create Dalvik to Avoid Java’s Virtual Fees?

Many products such as the Amazon (NYSE: AMZN) Kindle and Apple (NYSE: AAPL) iPhone use Java’s virtual machine; however, the use of this virtual machine requires licensing fees. Oracle claims that Google created a new virtual machine called Dalvik to avoid these licensing fees in connection with the Android platform.

As far back as 2006, there were whispers that cash-rich Google might buy Sun Microsystems, Inc. Ultimately Google decided not to purchase Sun and the company was bought by Oracle for $7.4 billion in 2009.

Instead, Google decided just to develop a spin-off and save money. It was a clever move by Google, but it could now come back to bite them.

The Ruling Implications on Mobile Devices Everywhere…

The implications of the ruling on the mobile device market could be huge.

• If Oracle wins, companies will still need to pay licensing fees for the use of Java and Java-like virtual machines. This would make Sun a big deal as the smartphone technology takes off. It’s also likely that Oracle would cash-in on licensing fees on all Androids sold.

• Should Google win, it would mean that other platforms, such as the iPhone, could also create their own spin-offs to Java. This would seriously hurt the future growth of Sun, which could benefit greatly in the growing mobile market through its Java virtual machine.

It appears Oracle has the advantage. Last November the same team of lawyers won Oracle a $1.3 billion suit against competitor SAP.

There is no real consensus whether there is a technical advantage to Dalvik over Java. If Oracle can prove there is no technical advantage, it will be much easier to argue that Google created Dalvik simply to avoid fees.

Good investing,

Justin Dove

Norway’s central bank, Norges Bank, maintained its key policy rate at 2.25%, and signaled further rate increases.  The Bank said: “Overall, the Executive Board is of the view that the key policy rate should gradually be raised through the latter half of 2011, against the background of the current outlook and balance of risks.  An unexpected jump in activity or in price and cost inflation may lead to a more pronounced upward shift in the key policy rate than currently projected.  Should the turbulence in financial markets lead to considerably weaker growth or a marked krone appreciation, the increase in the interest rate may be deferred further ahead.”

The Bank of Namibia held its benchmark interest rate, the repurchase rate, at 6.00%.  The Bank said: "It is the view of the EC [Executive Committee] that the observed growth momentum at the beginning of the year that created an impression that recovery was consolidating was not firmly entrenched,"… "The EC also observed that inflation has increased, but still remains in tolerable levels, especially the underlying inflation,"

By Cedric Welsch

Forex day trading is in itself part of a foreign exchange strategy. All the literature explains tirelessly that participants must have a strategy and stick to it faithfully. However, there should be more to a strategy than deciding to buy in the morning and sell by the evening.

There are swing traders, long term investors and day traders all active in the market. The first step in a strategy is to decide which kind of player one is. If one’s preference is for being the latter kind of trader then it will be necessary to resist the temptation of suddenly become a long term investor. Day traders have to stick with the philosophy that a bird in the hand is worth two in the bush.

The term ‘day trading ‘ is something of a misnomer when it comes to the forex market. A day does not necessarily start at eight o’clock and end at five for someone in Australia who trades the Euro. There are patterns of volatility that he needs to study.

When the Far East awakes America is going to bed. London opens a few hours after Japan bit it is not until the afternoon in London that New York begins to stir. Patterns of volatility that represent profitable opportunities occur when markets are starting a fresh day, or in some cases when they are about to close.

A day according to the World Wide Web may be regulated by events on the web, so traders cannot afford to stick to routines that have ruled their lives since birth if they are to stay abreast of the game. For some this may constitute a problem but for others it is all part of the new and exciting world.

If a strategy involves taking many small profits and losses over a restricted time period the foreign exchange market with its high liquidity and volumes is ideal. However, the periods of maximum volatility may not be convenient. In such cases some people invest in a robot that will trade automatically for them In many cases a machine might to a better job and stick more rigidly to a system than a human being.

Alertness and quick responses are part of the fun of forex day trading. News of interest rate changes or unemployment statistics can have immediate and significant effects on prices and provide good opportunities for quick profits. Participants need to be alert to news casts and react quickly. Important announcements are often made on Friday mornings in America, resulting in radical rises or falls. For someone in Africa this means remaining stuck fast to a TV screen on Friday afternoon when others are setting out for the week-end break. However, opportunities may be too great too miss and so trading takes over normal lifestyle routines.

About the Author

Only adopt the positive claims you get out of forex daily news, and put aside negative feedbacks. Attempting to digest all the forex news you listen to may not always be good for your trading mind.

Why Investors Shouldn’t Ignore the Steel Industry

by Marc Lichtenfeld, Senior Analyst, Investment U
Wednesday, June 22, 2011: Issue #1540

While most investors are focused on precious metals, I prefer to look for investment opportunities in markets less traveled.

Sure, precious metals are still wildly popular – or not popular enough – depending on who you ask. And they’re always in the mainstream consciousness. Either the dollar is going to be worthless and gold and silver will be the only true stores of value, or precious metals are in a bubble and will correct to more reasonable levels. Again, it depends who you ask.

But there’s another type of metal that I have my eye on. It’s one that hasn’t enjoyed the kind of run-up that gold and silver had recently.

Steel, and the companies that make the industrial metal, have been sinking like a piece of iron in a swimming pool. And this decline is likely to continue, here’s why…

Steel Industry Faces Weakening Demand and Price Erosion

Last week, Steel Dynamics (Nasdaq: STLD) tanked after issuing an earnings warning. The company said second-quarter earnings per share would be $0.35 to $0.40 rather than the $0.57 Wall Street was expecting. The lower-than-expected guidance was due to a slump in orders in April and increasing costs.

Other companies within the steel industry, including Arcelor Mittal (NYSE: MT) and Nucor (NYSE: NUE), have also been weak as more investors question the economic recovery.

• The International Monetary Fund recently cut its U.S. 2011 GDP estimate to 2.5 percent from 2.8 percent as more evidence of a slowdown emerges.

• Last month, 28 states lost construction jobs versus the 22 that added them.

Should the recovery falter, it’ll be particularly painful for steel companies, as construction is a bellwether of economic activity, particularly new homes.

And the folks who are buying steel are losing their optimism. The Steel Market Update’s Steel Buyer’s Sentiment Index, while still positive, is at its lowest level of the year due to concerns about price erosion and weakening demand.

“Even those involved in segments of the steel industry which have been doing relatively well since the beginning of the year – such as automotive – were displaying signs of concern about lack of strength in the overall U.S. economy,” said John Packard, Publisher of The Steel Market Update.

Responses from the survey included:

• “Still not fully recovered and manufacturing does not exist in a lot of markets to aid in any recovery.”

• “Still no significant uptick in the backlog. Extended commitments are not happening.”

Citigroup Expecting Steel Industry to Have Negative EVA

And Citigroup is not a big fan of the sector, expecting steel companies to have negative EVA (economic value added) in 2011 through 2013. EVA is a measure of profitability over cost of capital. Citi expects aluminum and uranium companies to also have negative EVA during that period.

The weakening of the entire steel sector is analogous to the following chart of Market Vectors Steel Index ETF (NYSE: SLX)…

Allegheny Technologies: A Vulnerable Steel Company

One steel company that I think looks particularly vulnerable is Allegheny Technologies (NYSE: ATI).

• The company trades at 53 times earnings, higher than the industry average of 41.

• Yet, at the same time, its return on equity is lower than its average peer.

• It generates a significant portion of its revenue from the aerospace and defense sectors, which up until now have been healthy. In fact, on Monday, companies announced more than $20-billion worth of airplane orders at the Paris Air Show.

However, those robust assumptions are baked into the share price. Allegheny’s stock jumped yesterday on the news. Any slowdown in orders from those customers would have a profound effect on Allegheny’s top and bottom lines.

And with the budget deficit a political football, I wouldn’t be surprised to see some defense funds cut, particularly for things like new expensive planes.

When Allegheny popped yesterday on the news, it rose above a key resistance level. If it drops back below $60, it looks like a great shorting opportunity, or a spot for longs to cut their losses.

I think Allegheny has risk to $49, which would put it more in line with its peers on a price-to-earnings basis.

• For speculators, shorting steel companies looks like an interesting short- to intermediate-term opportunity.

• Those who want to get long should wait a few months to pick shares up on the cheap.

Good investing,

Marc Lichtenfeld

The US Federal Open Market Committee held the fed funds rate unchanged at 0 to 0.25 percent, and announced that it would finish the $600 billion asset purchase program or "Quantitative Easing II".  On quantitative easing the statement noted: "The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings.  The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate."

Japan Showing Signs of Life After the Quake

by Justin Dove, Investment U Research
Wednesday, June 22, 2011

The Great East Japan Earthquake shook up Japanese electronics manufacturers like Sony (NYSE: SNE), Hitachi (NYSE: HIT) and Panasonic (NYSE: PC) in March. And things haven’t turned around yet.

Sony’s stock is still reeling as it hit a 52-week low last week – a drop of more than 25 percent from its pre-quake price. Panasonic is down more than 10 percent and Hitachi is down approximately eight percent from their respective prices on March 10, 2011 – the day before the disaster.

Days after the first quake, we suggested that investing in Japan could be a good bet for the long term. What we didn’t know at the time was how long it would take to see signs of recovery. Judging by recent outlooks at some of these companies, we now have a better idea.

Post-Recovery Outlook for Sony, Hitachi and Panasonic

Projections aren’t always a solid indicator of future performance. It is, however, a good sign when various players have similar post-recovery outlooks for themselves and their sector.

Here are some key notes from Panasonic’s outlook:

• Panasonic projects that net income will take a 59-percent nosedive for the fiscal year due to the disaster, but there will still be a profit. The projection also calls for a net loss of 70 billion yen in the first half of the fiscal year, but a profitablesecond half.

• All of the facilities damaged in the disaster are operational to some extent, but Panasonic hopes they’ll be fully operational by the end of the year.

Some similar notes from Hitachi’s outlook:

• Hitachi also projected no profit for the first half of the fiscal year, but a dip of just 16 percent for the entire year ending March 31, 2012.

• Hitachi also returned operations to all facilities that were damaged in the disaster, but not at full scale.

Finally, Sony projects the following:

• Sony reported a large loss this past year ending in March, but mainly because of an issue with reporting tax-deferred assets. Net operating profits grew to almost 200 billion yen from 31 billion in 2010, and Sony expects similar numbers in 2012.

• Sony projects a 4.4-percent increase in sales and operating revenue, and a net income of 80 billion yen by the end of March 2012.

Most Japanese companies didn’t release projections in the spring because they couldn’t measure the scope of the disaster with accuracy. These recent outlooks provide a more accurate view of the year to come in Japan. All three remain optimistic, especially for the second half of the fiscal year (October to March).

Sony, Hitachi and Panasonic… Saved by Diversification

Sony and Panasonic are both trading below book value. This could always be a sign of some unforeseen weakness. Most likely it’s the uncertainty of Japan’s future and the supply chain disruptions caused by the disaster.

Known for televisions, Panasonic and Sony both claim it will be tough to turn a profit in that area. However, all three companies are diversified.

• Hitachi recently sold off its hard drive division to Western Digital (NYSE: WDC). It essentially went “all in” on the cloud computing revolution and even teamed up with Microsoft.

• Panasonic, which recently absorbed its unprofitable subsidiary Sanyo Electric Co., is going long on green and renewable energy sources.

• Sony still holds a strong brand despite recent cyber-attacks and is scheduled to release a next-generation portable gaming console by next spring.

You may want to wait and see what the summer brings, but judging by the outlooks, these Japanese companies are likely to rebound nicely by the end of the year.

Good investing,

Justin Dove

I have to issue a major correction from last Thursday’s Smart Investing Daily article. In it, I said that the PowerShares DB Agriculture ETF (DBA:NYSE) was mostly made up of coffee futures. This is not the case.

I relied on Yahoo! Finance’s information on the ETF’s holdings, which claimed to be accurate as of May 31, 2011. Here’s a screenshot.

View Larger Image

I should have looked closer. There are some futures in there with an expiration of 2010. I sincerely apologize for the mistake. Thank you Smart Investing Daily reader J.U. for correcting me.

(Sign up for Smart Investing Daily and let me and fellow editor Jared Levy simplify the market for you with our easy-to-understand articles.)

Corn Prices and Corn Consumption

So let’s go back to DBA, and the iPath Dow Jones UBS Grains ETN (JJG:NYSE) we talked about last Thursday…

But let’s talk about them in the light of a BusinessWeek.com article from Monday. Here’s an excerpt:

Corn purchases are accelerating as droughts and floods limit output gains in everything from soybeans to wheat, driving the Standard & Poor’s Agriculture Index of eight commodities 60 percent higher in 12 months. China, the world’s second-biggest consumer after the U.S., will use 47 percent more than a decade ago, adding an amount greater than the entire crop of Brazil, the third-largest producer.

You read that right… China’s corn consumption has grown more than the entire corn harvest of Brazil!

In the face of record corn harvests, the world is still “eating” more than its making.

(I put eating in quotes because this includes corn used for feed and fuel, which, as you all know, I’ll be more than happy to talk to you about at a later date…)

The USDA says the world will grow 866.2 million metric tons of corn — up 5.6%. Corn consumption, however, could be as high as 871.7 million metric tons.

This shortfall has analysts predicting corn prices at $9 a bushel by the end of the year. Any kind of hiccup in supply would send corn prices this high in a jiffy, pun intended. And we’re already seeing some major threats. There have been episodes of “extreme” weather in key states.

Things like flooding, severe storms and abnormally high temperatures have already hampered planting.

So what does this mean for investment vehicles like DBA and JJG? It could mean profits… but we’ll have to wait and see.

Here’s a time frame to keep in mind. Rabo AgriFinance says that July and August are key months for corn crops. Up until now, the group says, “More things have gone wrong than have gone right.”

We could see more short-term weakness for both DBA and JJG until we know more about the corn crops. But we don’t have long to wait.

I told you on Saturday to watch for prices to break below $51 for JJG. This point needs to provide price support for JJG in order to justify still holding it in your investment portfolio. If this level is maintained, you may want to keep holding.

Let’s keep an eye on DBA, too. There might be another point where DBA would be a good asset. I’ll certainly keep giving you updates on this ETF as we head into summer.

There’s another connection to higher corn prices, though, that I want you to know about.

Crude Oil and Corn Prices

We’ve witnessed unparalleled uprisings around the world because of sky-high food prices. Food inflation isn’t just making the Chinese government boost interest rates; it’s causing poor and hungry people to overthrow governments.

We saw this in Tunisia and Egypt. We’re still seeing conflict in Libya and Yemen, Syria and Bahrain. We even saw protests in Iran and Saudi Arabia.

These countries have something major in common. Crude oil.

Whether or not they produce crude oil, the nature of unrest in the Middle East makes oil prices jump. How else — in the face of worldwide economic troubles and a 6.2% slump in demand compared to 2007 — can oil prices be sustained above $90 a barrel?

None of these issues are going away soon. And we’ve already seen the cracks in the Middle East widen. On Monday, June 13, I told you how OPEC is having trouble maintaining its unity. By acting together, this crude oil cartel can have a strong effect on oil prices by controlling production.

But at its most recent meeting, the group came away heavily divided. Western allies like Saudi Arabia wanted to increase production, but other countries joined forces to stop the boost in quotas.

This kind of infighting spells trouble — both for stability in the Middle East and for crude oil prices.

Things could get ugly… Or uglier. A lot of folks think the unrest in the Middle East and North Africa is drying up.

This couldn’t be further from the truth. And your own investment portfolio and standard of living could be in the crosshairs, unless you’re prepared.

Read this letter from Justice Litle. It’s an important step in safeguarding your financial future and well-being when things in the Middle East start spilling over into our everyday lives. To read the letter, click here.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

{jtagstpg} {authorstpg}

Other Related Sources:

By Ulli G. Niemann

In an ideal world you would start your working career with a great company in your early 20s, steadily climb the corporate ladder, retire at age 65, and draw a sufficient income from your accumulated 401k account to live happily ever after.

Unfortunately, that’s not how the real world works. If you are like most people, you will change careers, or at least companies, several times. Each time, you’ll be faced with the question of what to do with your accumulated 401k benefits.

You will likely have a few choices: keep your 401k with your old employer (sometimes possible), roll the proceeds into your new employer’s 401k plan, or put them directly into a self-directed IRA at a brokerage firm of your choice.

Since leaving your 401k with your ex-employer has no benefits whatsoever and most employers will prefer you transfer out anyway, that leaves only the last two as viable options:

1. Roll your 401k proceeds into the new employer’s 401k plan of (if allowed)

This is the most painless solution and the one that does not require much decision making. While this is certainly acceptable, there is a bigger picture.

The ultimate goal of having a 401k plan is to provide you with a comfortable retirement. To accomplish this you really need a wide variety of investment choices and the opportunity to move among them in response to market variations.

Most 401ks are limited to maybe 15 mutual fund choices which rarely change, even if market behavior dictates they should. Additionally, the canned advice provided through plan sponsors is generally not terribly useful.

The only benefit to this type of rollover is that if your plan has a loan provision, you’ll be able to borrow funds easily.

2. Roll your 401k proceeds into a self directed IRA

This is the preferable solution for most people, and with it you again have two choices: roll your 401k into a “Contributory” or a “Rollover” IRA.

1. Contributory IRA

Once you roll your proceeds into this type of IRA, you may still contribute annually if you qualify (check with your accountant). However, the 401k portion can no longer be rolled back into another 401k with a new employer, should you ever want to do that. So you eliminate the possibility of using the loan provision with those funds. While it is possible to borrow against an IRA, it’s more limited than borrowing against an employer 401k. Check with your tax preparer for details.

1. Rollover IRA

This type of IRA allows you the most flexibility. You may roll the proceeds back into a 401k plan if you want to utilize a loan provision. However, for tax reasons you should not make annual contributions to this IRA. If making annual contributions becomes important to you, simply open another contributory IRA.

Since Rollover IRAs are usually set up at a brokerage firm, you’ll have access to their entire universe of mutual funds. With this type of IRA, you can also employ an independent investment advisor to manage the account for you. (Yes there is a cost for that, but an effective advisor will more than make up for that in greater returns than you would get without him or her.)

Most of my clients have found that the investment results we’ve obtained with their personal IRAs were far superior to those yielded by their employer 401k plans or their personal investing efforts. This has been mainly due to a combination of better choices and a methodical approach to investing which has kept my clients in the market during good times and out of it altogether during severe declines.

Bottom line: Rollover IRAs offer opportunities to maximize benefits and provide flexibility not usually available with employer 401k plans.

Sterling fell sharply after the BoE meeting minutes showed the central bank is shifting its concerns to deflationary forces rather than inflationary pressures.

Yesterday’s comments by BoE member Fisher were only a prelude to today’s MPC meeting minutes which showed the BoE believes the current weakness in demand growth will continue for longer than previously thought. The central bank also noted risks the European debt crisis may weigh on future demand. However, what drove the sell-off of sterling this morning was the BoE left the door open for further asset purchases should deflationary forces emerge.

With fundamentals beginning to shift against sterling, a glance at the technicals show weekly and monthly stochastic are falling for the GBP/USD which could keep pressure on sterling in the near term. Short term resistance comes in at the May 24th low at 1.6060. A breach here might open the door to the March 28th low at 1.5935.

Read more forex trading news on our forex blog.