Archive for February, 2012
Update on PUDA Coal
Posted by Jody Eisenman | Filed under Uncategorized
PUDA Coal is one of several Chinese reverse mergers that came into the public markets in the last few years. I wrote about it back in April of last year.
At the time, I stated that “Puda Coal had a small problem. PUDA owns an operating subsidiary called Shanxi Coal, which comprises the vast majority of the company’s business. Unbeknownst to the shareholders, the chairman of the company secretly transferred control to a Chinese investment trust and himself back in 2009. Somehow, the auditors never figured this out”.
The SEC launched an investigation. Today, they released their findings which charged two executives with fraud. Specifically, U.S. securities regulators on Wednesday charged two China-based Puda Coal executives with fraud, saying they led investors to invest in an empty shell company instead of an actual coal business.
The Securities and Exchange Commission’s civil suit, filed in a Manhattan federal court, alleges the company’s Chairman Ming Zhao and former CEO Liping Zhu tried to “steal and sell” Puda Coal’s coal mining company Shanxi Puda Coal Group, the company’s only source of revenue.
The complaint claims that Zhao transferred a controlling interest to himself, and then sold a substantial portion to a fund.
Did Apple Just Signal a Market Top?
Posted by Jody Eisenman | Filed under Uncategorized
Pretty much every investor knows that Apple (AAPL) has been a stellar performer recently. At the end of 2011, AAPL closed at 405. Since then, the stock has exploded upward, culminating in an inter-day high today of 526. However, the stock went through what some technicians are calling a key reversal, with the stock closing today at 497.67, close to the low of the day. With many investors enjoying huge profits in this stock, it looks like profit taking has set in. Although still up about 23% for the year, this late day plunge on volume of 53MM shares (versus an average volume of 12MM) could be a sign that the stock market is ready for at least a short term pullback. The DJIA closed down almost 100 points in its’ worst day in 2012. As I mentioned last week, the strength of this market has been amazing. US stocks have shrugged off the unresolved problems in Greece, the downgrade of European banks, and the Iranian nuclear situation. However, the news of the possible unraveling of the Greek situation and the drop in bellwether AAPL could turn prices around quickly. Although investors have bought every dip thus far this year, I would certainly be cautious right now.
Incredible Strength of the 2012 Stock Market
Posted by Jody Eisenman | Filed under Uncategorized
Any equity investor would, at least by now, be cognizant of the great start the US equities market has gotten off to this year. As of yesterday’s close, the DJIA and NASDAQ composite are up around 5%. The S & P is lagging, but still up 2.3% year to date. Every attempt at a selloff has been met with another wave of buying. The banking index, which really lagged last year, is up over 13% YTD. Technology stocks are also flying, with Apple up almost 90 points thus far (+21.7%), and Netflix up 57 points (+80.1%). The tech sector index has closed higher 17 out of the last 18 days. Part of the reason for this jump are better than expected earnings, but part is due to a general market sentiment that the world as a whole is becoming more attractive for investment. Although Greece is still in deep trouble, and the Middle East is in turmoil, investors have really shrugged off all the negatives and just continue to buy stocks.
There are two telling signs. The first is the yield on the 30 year Treasury bond. Yields on treasuries were at historic lows for most of last year, but this year is another story. The 30 year currently yields 3.20%, up from 2.96% a month ago. This is an excellent indication that investors are willing to trade the safety of treasuries for the risk of stocks. The second sign is the VIX, which is a measure of volatility I have discussed here several times. A higher VIX means greater volatility and usually lower stock prices as investors flee from risky assets. Thus, it is very telling that the VIX closed at 18.63 yesterday, after spending most of the second half of last year above 30. A lower VIX means that volatility is lower, and investors do not see risk factors as significant as last year.
What’s next? As I have said previously, the trend is your friend, and until there is a breakdown, I think investors will remain bullish. However, should Greece implode, or war drums begin to louder in the Middle East, prices could change quickly. As always, stay nimble!
