Month: November 2011

Groupon’s Long-Awaited IPO is Upon Us

by Justin Dove, Investment U Research
Thursday, November 3, 2011

Groupon deserves a ton of credit for revolutionizing the way Americans consume.

Over the past few years, social purchasing has offered consumers discounts they never received in the past. The business model is almost like consumers forming a union to buy in bulk – purchasing power in numbers.

But good companies and sound stock investments aren’t built on brand recognition or contributions to society.

For example, take a gander over at Eastman Kodak (NYSE: EK). Kodak revolutionized the way people captured memories. But poor leadership and lack of adaptability nearly eradicated them. All that’s left is essentially a pile of patents.

But is Groupon’s IPO a buy-low opportunity on a rising star in the social media craze? Or is it a black hole of cash that can’t survive?

The Good News

There’s a reason Groupon has reportedly called off taking IPO orders a day earlier than expected. Some investors can’t wait to get their hands on the stock. Here are a few reasons why they may be bullish:

• Rapid growth in subscribership – According to its S-1, Groupon had 1.8 million subscribers at the end of 2009. At the end of 2010 it had grown to 50.58 million subscribers. By the end of March it had grown to 83.1 million. Finally, in August, Groupon announced that it had gained 38-percent more and reached 115 million subscribers.

• Diversification – Groupon added to its offerings from its core local deals to include deals on event tickets, products and vacations. These additions have helped it grow eight percent from Q2 to Q3.

• “Smart” deals – Groupon’s eventual goal is to cater its deals to individuals by preferences and locations. This is far off, but mastering this could be something that sets Groupon apart from the numerous other deals programs.

• Contrarian factor – Groupon was such a bad word with analysts over the past month that it’s possible a herd mentality is developing and people doubt it a bit more than they should.

And the Bad News

• Increasing competition – There are now a number of deals programs that mirror Groupon’s business model. With larger companies such as Google (Nasdaq: GOOG) and CBS (NYSE: CBS) in on the action, it’s unlikely that Groupon could survive a spending war. Also, considering its core audience is people looking to save money, there’s likely little brand-loyalty. The minute a better offer comes along, customers will hop onboard, regardless of the source.

• Record low float – Bloomberg reported that “only 4.7 percent of the unprofitable company’s shares will be sold to the public, less than in any U.S. Internet company IPO of more $200 million since at least 2000.” Groupon is playing hard to get with investors. It’s trying to ramp up demand by lowering supply. This will likely artificially inflate prices until Groupon needs another injection of cash and decides to offer a secondary offering.

• Core business declining – Despite Groupon’s eight-percent growth in the last quarter, its local deals revenue fell by three percent. Taking into account the growth in subscribership… It may not be a good sign that its core local deals business is already losing market share.

The Rap on IPOs In General

Here are a few things to keep in mind about IPOs in general, which also apply to Groupon’s.

• IPOs are only available to institutional investors on the first day. That means investors like you and me couldn’t cash in on a big run, like the one in LinkedIn (NYSE: LNKD), until day two.

• IPO stocks are usually priced on the low side to generate a “pop.” This possible pop in price serves to create a momentum in hopes that the shares will run up and create value for early investors. It also generates free publicity for the company.

• Usually the glory fades on IPO pops. For instance, LinkedIn created a huge buzz with its meteoric rise on its IPO date. But a month after closing at a price of $94 on its opening day, it fell to under $65. Pandora Media (NYSE: P) is another company that’s trading under its IPO pop months after it went public.

Bottom Line for Groupon’s IPO

Groupon’s long-term prospects don’t look very positive. Most analysts don’t trust the stock, and they’re right to be cautious of the unusually small float. But the sentiment is so negative that investors may be too far down on its stock.

But the report that demand is high for its pre orders seems to spell over exuberance. Plus, history tells us that the IPO pop never lasts. And Travelzoo (Nasdaq: TZOO), which is overpriced, is probably still a better value at this point than Groupon.

It’s best to take a wait-and-see approach to Groupon’s stock. Even if investors are excessively down on Groupon on its initial offering, contrarians will have some time to act before people start believing in the stock.

How Groupon handles the next sixth months will be important. To become a truly viable investment, Groupon will need to improvement its fundamentals and curb its need to infuse more and more cash. It’ll be interesting to see if it can pull off the job.

Good investing,

Justin Dove

Article by Investment U

By The Sizemore Letter

The Sizemore Investment Letter’s Charles Sizemore gave his thoughts on end-of-year tax planning to Fox Business writer Sheryl Nance-Nash:

With Thanksgiving still three weeks away, taxes are probably the last thing on your mind.  Still, much as you might groan at the thought, there are some smart steps you can take between now and Dec. 31 that will make a real difference when it comes time to deal with the IRS next spring. In part one of this two-part report, we offer four moves that could benefit your bottom line on April 15.

If you have enough in cash savings set aside for emergencies and your monthly budget allows for it, consider upping your 401(k) contribution. You’re allowed to contribute up to $16,500 of your earnings tax free (in addition to any company matching), and that limit gets bumped to $22,000 if you’re over 50. If you don’t have a 401(k) at work, consider setting up an IRA or Roth IRA, recommends Charles Sizemore, editor of the Sizemore Investment Letter. If you’re self-employed and have the cash flow to allow it, you can shelter as much as $49,000 per year in a SEP-IRA.

The more money you put into these retirement funds, the less you pay in taxes now — and the more you earn for golden years. Taxes are like sandpaper that grinds down your returns over time, says Sizemore: Every dollar you pay in taxes today is a dollar that can’t be invested for growth. There are also secondary benefits, such as protection from creditors. In most cases, assets held in a 401(k) or IRA are safe from creditors’ claims.

Nov. 3 (Bloomberg) — Yannos Papantoniou, former Greek economy and finance minister, discusses Prime Minister George Papandreou’s call for a referendum on the country’s bailout and austerity measures. He talks with Francine Lacqua on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Nov. 3 (Bloomberg) — Sean Callow, a senior currency strategist at Westpac Banking Corp., talks about Europe’s debt crisis and its impact of the global currency market. He speaks with Rishaad Salamat on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

London Gold Market Report
from Ben Traynor
BullionVault
Thursday 3 November, 09:15 EDT

U.S. DOLLAR prices to buy gold jumped to a six-week high of $1757 an ounce late on Thursday morning – though only 0.7% above last Friday’s close – following reports that Greek prime minister George Papandreou was on the verge of offering his resignation.

Stocks and commodities gained, while the Euro dropped sharply following the European Central Bank’s decision to cut interest rates.

Prices to buy silver also rose, hitting $34.73 per ounce – though still 1.7% down for the week so far.

“Silver is going neither here nor there,” one Shanghai-based trader tells news agency Reuters, citing a “lack of physical demand from industrial users”.

Eurozone leaders were openly discussing a Greek exit from the Euro last night, while the Greek government was reportedly close to collapse, after another member of prime minister Papandreou’s party indicated they will not support the government in a confidence vote scheduled for tomorrow – taking Papandreou’s majority down to one.

“It seems that people prefer to buy gold [with Euros] which makes sense because of all the problems there,” says Walter de Wet, commodities strategist at Standard Bank.

Greek finance minister Evangelos Venizelos meantime caused a split in the cabinet when he indicated he is not in favor of holding a referendum on last week’s Euro Summit deal, which Papandreou says he hopes to hold on December 4.

“The referendum is dead,” reckons Nikos Salayannis, another member of Papandreou’s ruling Pasok party.

“I don’t think the government will last until tonight,” added Costas Panagopoulos, managing director of polling company ALCO, early on Thursday.

An ALCO poll conducted in May 2010, shortly after the first Greek bailout deal was agreed, found that at that time 51.4% of Greeks were in favor of austerity measures in return for international aid. Strikes and protests were favored by 28%.

Eurozone leaders and the International Monetary Fund have said they will not release the €8 billion bailout payment due for this month until the referendum is held.

“As soon as the referendum is completed, and all uncertainty removed, I will make a recommendation to the IMF Executive Board regarding the sixth tranche of our loan to support Greece’s economic program,” said IMF managing director Christine Lagarde on Wednesday.

The tranche cannot be released “until Greece endorses the package of October 27,” added French president Nicolas Sarkozy, saying that Greece would not receive “one more cent” if the Greek people were to reject the deal.

“The referendum will revolve around nothing less than the question: does Greece want to stay in the Euro, yes or no?” said German chancellor Angela Merkel, echoing words used by Papandreou earlier this week.

“We would rather achieve a stabilization of the Euro with Greece than without Greece, but this goal of stabilizing the Euro is more important.”

In September, Merkel said leaders’ “top priority” at the time was “to avoid an uncontrolled [Greek] default”.

The ECB meantime cut its key interest rate Thursday by a quarter-point to 1.25%, following its first monetary policy meeting since Mario Draghi took over as president.

Italian 10-Year bond yields hit another Euro era high Thursday morning, spiking to 6.4%. The ECB began buying Italian bonds in early August when yields hit 6.3%.

“Don’t expect the ECB to bail everyone out,” warns Marco Annunziata, former IMF official and now chief economist at GE Capital.

“It should not and it will not, unless it becomes a matter of life and death for the Eurozone.”

Over in the US meantime, the Federal Reserve is “ready if necessary to provide whatever support the financial system needs and the broader economy needs in case things [in Europe] should worsen,” Fed chairman Ben Bernanke said Wednesday, at a press conference following the Federal Open Market Committee’s decision to leave the Fed’s target interest rate on hold at between zero and 0.25%.

The FOMC also agreed to continue with ‘Operation Twist’ – the policy of buying longer-dated Treasury bonds and selling shorter-dated ones – as well as its program, begun in September, of buying mortgage-backed securities.

Richard Fisher, Narayana Kocherlakota, and Charles Plosser – the three FOMC members who opposed accommodative measures in September – voted yesterday in favor of maintaining them.

“We are not contemplating at this time any radical change in [monetary policy] framework,” Bernanke said – a statement interpreted by some as a rejection of suggestions that the Fed should target nominal GDP.

“Bernanke did not go out of his way to dampen growing expectations [of another round of asset purchases]” reckons Dana Saporta, director of US economics research at Credit Suisse.
“If anything, he stoked those expectations.”

“Reasons to buy gold seem as numerous as ever,” says a note from Mitsui Precious Metals this morning.

“Although as this week has already shown, the usual caveats about short-term volatility apply.”

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Nov. 3 (Bloomberg) — Jane King summarizes the top stories this morning on the Bloomberg Business Report. (Source: Bloomberg)

Nov. 3 (Bloomberg) — Robert Carnell, chief international economist at ING Bank NV, discusses Greece’s bailout referendum and the outlook for today’s European Central Bank interest-rate decision. He speaks with Owen Thomas on Bloomberg Television’s “Countdown.”

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By ForexYard

Today marks the end of an era as the ECB press conference will not be led by Mr. Euro, Jean-Claude Trichet. In steps the Italian Mario Draghi who begins his terms as ECB President. Draghi has a full plate of issues to sort out. While the most pressing issue may be the European debt crisis, new economic data shows a decline in euro zone growth prospects and the possibility of an EU recession.

Economic News

USD – USD Weakens as Market Sentiment Shifts

Markets have generally stabilized from the panic selling of risky assets following the announcement of a Greek referendum. A Bloomberg survey showed 69% of economists surveyed expect the Fed to enact another round of quantitative easing (QE3). With yesterday’s Fed meeting and today’s ECB meeting expectations for central bankers to support the global economy may have helped to support risky assets yesterday.

Tomorrow will bring US data releases in the US with weekly unemployment claims and the ISM Non-Manufacturing PMI survey. The risk is for the data to disappoint and show continued weakness in the US economy. This outcome would likely be USD positive.

It is difficult to ignore the price action over the recent month. The EUR/USD rallied back to 1.4250 where its previously broken trend line from May 2010 comes in and made a retracement of exactly the 61.8% Fibonacci level from the July to October move. The price action hints to the downside. The EUR/USD has support at this week’s low of 1.3607 followed by 1.3145. Resistance is found at yesterday’s high of 1.3820 and last Thursday’s high of 1.4245.

EUR – Mario Draghi Steps into Trichet’s Shoes

Today marks the end of an era as the ECB press conference will not be led by Mr. Euro, Jean-Claude Trichet. In steps the Italian Mario Draghi who begins his terms as ECB President with a full plate of issues to sort out. The sovereign debt crisis takes the headlines with the referendum in Greece threatening to derail last week’s agreement to write down 50% of Greece’s debt, a recapitalization of European banks, continued ECB bond purchases of peripheral debt, and a scheme to increase the leverage of the EFSF to EUR 1 trn.

Recent economic data hints at a continued slowdown in European growth. Germany reported an increase in unemployment during the month of October, the first rise since February 2010. The German unemployment rate climbed to 7.0% from 6.9%. Forward looking data such as the German October manufacturing PMI survey fell to 49.1 from 50.3, below the boom/bust level. With an economic slowdown occurring in Europe’s largest economy, one must wonder how long it will be before Draghi unwinds this year’s 0.50% interest rate increases?

A key level to eye for the EUR/GBP going into the ECB press conference is 0.8550 where the rising trend line from June 2010 comes in. Below this level there is a lack of significant supports until the yearly low at 0.8285.

GBP – Events Outside the UK are Driving the GBP

Sterling continues to perform well and a weakening USD has helped. Tuesday’s release of manufacturing PMI below the 50 level was offset today with the release of a stronger construction PMI survey which came in at 53.9 vs. forecasts of 50.0. The significantly higher than expected result has helped the GBP/USD climb above 1.6000 but the pair failed to hold the gains.

Today UK services PMI will be released with expectations of a 1 point decrease from the previous month’s survey to 51.9. Stronger data may help the GBP stay afloat as it has done this week, at least more so than the EUR. Keep in mind that the GBP is trading at higher level from when BOE announced additional quantitative easing. This fact hints that external factors are driving the movements of the GBP/USD. The GBP may be caught in the crossfire of larger issues at hand such as the Greek drama and central bank policies from the Fed and ECB. The GBP/USD has support at 1.5890 where the rising support line from the October 12th low is found. Resistance is this week’s high at 1.6165.

Silver – Silver Prices Bounce at Short-Term Trend Line

Spot silver prices received a bit of support after falling as low as $32 where the commodity received a bounce at the rising trend line from the September and October lows. Support for the commodity may begin to pick up in-line with demand for gold as expectations rise for additional quantitative easing from the Fed. Resistance for spot silver will likely be found at the October high of 35.65 with support back at the rising trend from the October low which now comes in at $32.15.

Technical News

EUR/USD

An impressive run higher over the month of October took the EUR/USD as high as 1.4250, the 61% retracement from the May to October move. However, a failure of the pair to overcome this key technical mark does not bode well for the EUR in the near term. Also worth noting is the failure of the pair to move above its previously broken trend line from the June 2010 and the January 2011 lows. Falling stochastics on the daily and weekly chart also point to declines in the value EUR/USD. Support is located at 1.3915 from the October 17th high followed by 1.3650 off of the October 18th low and the October low at 1.3145. The 61% retracement level will serve as initial resistance with additional selling perhaps at 1.4450 from the trend line off of the May and July highs.

GBP/USD

Cable has failed to climb above both its 200-day moving average and stopped short of its 61% Fibonacci retracement target from the April to October move which at 1.6150 should serve as initial resistance. A move higher could go on to test the 1.6450 resistance off of the August high though daily stochastics have crossed and the weekly stochastics are beginning to roll lower as well. As such, a move lower could find support at 1.5890 from the October 26th low as well as the October 18th low of 1.5630.

USD/JPY

Another round of intervention has lifted the USD/JPY 400 pips for a 5.29% gain. However, the pair’s sharp move higher was unable to break a key falling trend line from the 2007 high which comes in this week at 79.70. With the long term downtrend still intact a move lower may once again test the all-time lows the pair will first encounter support at 77.85 from the September high as well as 77.50 from the mid-October high. Should the intervention continue the Japanese Ministry of Finance may find willing offers waiting at 80.20 which was the peak of the last round of intervention in August.

USD/CHF

The Swiss franc has once again resumed its downtrend versus the USD after moving as low as 0.8550, a level that has previously served as both support and resistance. A bounce from here could find an offer at 0.8900 from the resistance line off of the October peak. Should the downtrend from October extend into November a break of 0.8550 may have scope to 0.8240 from the August high.

The Wild Card

EUR/CHF

This currency pair has disappeared from the spotlight following the 1.20 floor the SNB put under its value but forex traders should watch more closely as the EUR/CHF drifts lower. The EUR/CHF as traded as low as 1.2140, the pair’s lowest level since early October. This is not far from the 1.20 limit the SNB has vowed to defend. It should be noted that the peak in the EUR/CHF failed to break the long term trend line that falls off of the May 2010 high and now comes in at 1.2410. Could an escalation of the European debt crisis bring the market to test the limits the SNB is willing to go to defend the floor?

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The FOMC statement did not contain any surprises and the Fed did not announce its intention to begin another round of asset purchases (QE3). What the Fed did do was downgrade its assessment of the US economy to bring the central bank in-line with market consensus. Slower growth and higher unemployment is expected to continue to weigh on the US economy.

The accompanying statement did point to stronger than expected growth in Q3 vs. the first half of the year and spending had improved though unemployment remains uncomfortably high. The highlight from the statement though was the dissent from Chicago Fed Governor Charles Evans who wanted additional stimulus. Also important to note was the absence of any hawkish vote against the Fed’s policy. Expectations for the Fed to enact QE3 will now shift to the December 13th meeting.

Read more forex trading news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.