Hello traders everywhere! Adam Hewison here, President of INO.com and Co-creator of MarketClub, with your mid-day market update for Monday, the 20th of May.
Yahoo Bets A Billion
Marissa Mayer, president and CEO of Yahoo, is making a big bet today on a six year old company that is rapidly running out of money. Yahoo (NASDAQ:YHOO) is committing up to one third of its cash to buying the micro-blogging website, Tumblr, for 1.1 billion. Tumblr has approximately 108 million blogging sites and by all accounts will increase Yahoo's traffic by 20%. The key of course is whether or not Yahoo can make money from their decision to purchase Tumblr, as revenues for this stock last year only totaled $13 million. I think you will agree that spending $1.1 billion to get an income of $13 million does not make a lot of sense. We are going to let the market tell us what it thinks of this acquisition and how well Yahoo can monetize its base. Yahoo's stock has done well this year and we have been bullish on it for sometime. It remains to be seen whether the recent upward trajectory will continue and remain intact with Marissa's big bet. We will be looking at Yahoo today.
Has The Fed's Big Bet Gone Sour?
Look for doubts and finger pointing begin to creep in to the Fed's big bet policy. The QE programs have not achieved the goal of economic growth that the Fed wanted to achieve, nor has it helped create jobs. It has helped Wall Street get richer, all while leaving middle America pretty much the same as it was in 2009. In a capitalistic society like America, boom and bust periods occur on a regular basis. It is my opinion that it is much better to let them occur naturally rather than trying to alter the course of the economic cycle by spending more money. Chairman Bernanke's concept was pretty simple, he studied the great depression of the 1930s, and just did the opposite of everything. In the 1930s money was scarce and tight, so Chairman Bernanke said we will just make money more available and flood the market with credit. That policy has been good for the stock market, but that's about all. My advice to the chairman is, you can't play God with the market. While the economy has not turned out the way the Fed had hoped, one Fed member named Fisher, says the US needs a rational fiscal policy to help spur economic growth. I couldn't agree more with that statement, but I don't believe the current administration has the same ideas.
Will The IRS Scandal Torpedo The Bull Market?
It looks as though the IRS scandal is beginning to take hold of the American psyche. This could torpedo the bull market, as America has a tendency to be consumed by political scandals. This week will be a very important week for the market, as it will reflect to a large degree just how nervous the markets are about this scandal. The old adage of "sell in May and go away" may still work, given the current scandal.
The Dreamliner Flies Again
After being suspended for almost five months with battery problems, a United Airline Dreamliner is going to take to the skies today for its first flight since January. The state of the art engineering of this airplane allows it to fly using 20% less fuel. This of course could have huge cost savings for the airline industry around the world, according to Boeing (NYSE:BA), the manufacturer of the Dreamliner. We hope that Boeing has fixed all of the problems and that they're flying safely today. We will be looking at and analyzing the stock of Boeing today using our Trade Triangles.
Have a great trading day,
Adam appears frequently on the following financial news channels as a guest expert. Click on any cable logo to watch Adam's latest appearance.