After a year featuring tectonic shifts in the stock market and the economy, 2008 is set to go out with barely a tremor.
A quiet Monday in the technology market, with the big news that palm looks like it’s going to get its own version of a bailout. That after Elevation Partners agrees to infuse the struggling handset maker with an additional $100 million, in a move to underwrite the company's 2009 new product launch. The move spurred Palm’s stock up 50% to $3,71 in Monday trading, as investors digest the news that Palm will put the money right to work on some of its 2009 new products launches.
Elsewhere, an interesting article in CNet’s “Digital Media” web site, on whether we are seeing a huge shift in the U.S. business superpower category. For decades, the “Big Three” has meant only one thing: auto kingpins General Motors, Ford, and Chrysler. But Bernstein Associates says the current recession has realigned the corporate power structure in the U.S., with three technology behemoths supplanting the big three.
The new kings of the hill? Google, Microsoft, and Yahoo. I would counter that Apple belongs in that group, if only for creativity and consumer attraction. But the underlying argument by Bernstein analyst Jeffrey Lindsay that the past ten years has seen the ascension of Google (most notably) and the descent of the Big Three automakers is an intriguing one. Says CNet, “Lindsay notes that the downturn of 2001 to 2003 in Web advertising--AOL imploded and Yahoo fumbled--allowed Google to emerge. Instead of getting bought, the future search giant went public and owned the sector. Fast-forward a bit and MySpace, YouTube, and Facebook had no shot at going public. Facebook had its IPO shot, but blew it.”
But, and there’s always a “but”, Lindsey also reminds us that a century ago, General Motors gobbled up Buick, Oldsmobile, and Chevrolet. We are, CNet adds, already seeing some of that behavior from the new “Big Three”.
“Buick, Oldsmobile, and Chevrolet were the high-tech industry of the early 20th century. They were gobbled up to become GM. But then I pondered Yahoo, which has Flickr, Delicious, Rivals.com, Zimbra and a bunch of other properties in its collection. Are these properties really any different than the nameplates and brands that GM and Ford have?
Microsoft and Google are similar stories. Any company that may be a threat someday is gobbled up. In the last two years, Microsoft has made an acquisition every three weeks, according to a Wikipedia tally. Google has made an acquisition every five weeks over the last two years.”
Like I said, it’s an interesting argument. Read the whole thing at: http://news.cnet.com/8301-1023_3-10128131-93.html?tag=newsLatestHeadlinesArea.0
One more item for today. The Chicago Board of Trade has a computerized index that measures investors’ fear. It’s called the Volatility Index (VIX) and late in 2008. It’s off the charts. The VIX measures options trading activity and takes a 90-day view of how much fear traders have in the market. The rule of thumb among VIX-watchers is to take the index and divide it by 16 to discern the percentage swing that traders expect for the market in a particular month. Prior to the credit crisis this year, a VIX above 30 suggested a high level of volatility, and 40 was indicative of a sharp recession.
Okay, but get this. The VIX has crested 80 in recent months (meaning investors are extremely scared) but has fallen hard to 44 points. Is that a sign things are getting better?
Some people don’t think so. Todd Salamone, senior vice president at Schaeffer's Investment Research in Cincinnati, said in a research statement this week that the VIX could be heading back to the 80’s – and higher. "I point this out because important reversal points will sometimes occur at half-highs. As such, the VIX could be setting up for an advance after a sharp decline during the past month," Salamone wrote. "During the past few months, the market's darkest moments tend to occur when the VIX is trading at a steep discount to the SPX's 20-day historical volatility."
And that, my friends, is roughly where we are right now. Three weeks ago the VIX was trading in the high-50’s. We could be heading back to more volatility – and soon.