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Tonight’s Agenda

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Tonight’s Agenda

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  1. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION DISCUSSED DURING HAWKTRADE MEETINGS.  Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Investing in any financial instruments does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. There are no absolute guarantees in investing. HAWKTRADE and its members do not bear any responsibility for losses or gains made by members trading on their personal accounts based on analysis from HAWKTRADE meetings.

  2. Tonight’s Agenda • Investment Competition Update • Fracking • Bubble? • Earnings • CPI & FOMC • What’s to Come

  3. Jim Cramer as ‘DeadMau5’

  4. TNT’s NBA Future Promo • http://www.youtube.com/watch?v=00EiKvqIcTI • Derrick Rose drops 70 vs Knicks • LeBron James in dunk contest • Kobe Bryant retires • Phil Jackson to Knicks • James Harden MVP • Bulls; Clippers; Heat; Thunder; Warriors win NBA Finals

  5. Newcomer’s Information • We meet every Sunday at 7:15PM – 8:15PM at W151 in PBB • Membership Dues: $20/semester • Food/Drinks every meeting • Investment information and education • Great trading tips and strategies • Investment Competition: $15/semester • Best way to gain experience and learn • Past prizes include iPads, Apple TVs, gift cards • Fun Discussion atmosphere, member involvement

  6. Investment competition • $15 to enter competition • All money goes to prizes so more people = better prizes • Must attend 50% of meetings in order to be eligible for prizes • Top 8 get prizes (tentatively) • Won’t allow high frequency trading or anything that is unrealistic

  7. Thu 31 Oct 13 | 4:00 PM ET Pisani’s market close: ‘Terrific month’

  8. Fracking • “Fractuing of a rock by a pressurized liquid” • Millions of gallons of water with sand or aluminum is pushed into rocks • Creates small “fissures” which allow gas/oil to flow out of rocks

  9. Fracking • Started in 1947 • First commercial fracking job done in 1949 • In 2010, 60% of all new oil and gas wells were being fracked • As of 2012, 2.5 million fracking jobs have been done

  10. Fracking • 90% of all natural gas comes from fracking • Some believe it is harming the environment • The EPA said in 2004 that fracking was considered safe • The popularity of fracking continues to grow for extracting companies

  11. Tight oil estimates

  12. Fracking plays • Holding the fissures open • US Silica Holdings, Inc. – (SLCA) • CARBO Ceramics – (CRR) • Water treatment • Nuverra Environmental Solutions – (NES) • Heckmann Corporation – (HEK) • Water substitutes • GasFrac Energy Services – (GFS)

  13. Fracking plays • Equipment • USA Compression Partners – (USAC) • C&J Energy Services – (CJES) • Pipeline • Suburban Propane – (SPH) 7.8% yield • Kinder Morgan – (KMI) • Western Canadian Sedimentary Basin • Canyon Services Group – (TSE:FRC)

  14. Fracking plays • Planning, engineering and construction • KBR, Inc. – (KBR) • Liquefying natural gas • Cheniere Energy – (LNG) • Halliburton – (HAL) • Exxon Mobil – (XOM) • Market Vectors Unconventional Oil and Gas ETF Trust– (FRAK)

  15. Financial Bubble? • Market pros have been floating ideas of an impending financial bubble ready to pop: • Overvalued Equities • QE Infinity & artificially low rates • Lax credit standards Are these just symptoms of a recovering economy, or are we in the middle of a bubble?

  16. Financial Bubble? A few names “floating” the bubble idea lately: • Larry Fink (BlackRock CEO) • Bill Gross (PIMCO) • Peter Schiff (EuroPacific Capital) • Paul Singer (Elliott Management Corp.) • Al Gore A few metrics suggesting a pop: • Leveraged Buyouts • Overall Market Valuation • Loan Origination Standards

  17. Bill Gross • Co-founded Pacific Investment Management (PIMCO) • Called “the nation’s most prominent bond investor” by the New York Times • Author of several books • Funds gained over $1.7 billion after federal takeover of Fannie Mae and Freddie Mac

  18. Wed 30 Oct 13 | 02:18 PM ET All asset classes 'slightly bubbly': Bill Gross

  19. Margin Requirements • Determines amount of funds an investor needs to buy on margin • 50% of the purchase price for most securities • Gross – Raise the requirements if you don’t want to taper

  20. Larry Fink • Chairman and CEO of BlackRock • Largest investment manager in the world • “BlackRock today is one of, if not the, most influential financial institutions in the world” • 2009 – hired to manage federal distressed assets

  21. Fri 01 Nov. 13 | 3:29 PM ET Fed taper will trigger recession: Schiff

  22. Financial Bubble? • Leveraged Buyouts are on the rise • Debt loads after buyouts are at 2007 levels, when debt was not safely offset by assets

  23. Financial Bubble? • Leveraged Buyouts • Higher leverage takes on greater risk to the company in the event of a downturn, as well as for companies that depend on the firm. • For this reason, risk from rising leverage becomes exponential as companies take on more and more internal and external risk. • LBO’s are not a predictor of financial bubbles, but they do speak to easing credit standards

  24. Financial Bubble? • Overall Market Valuation • Warren Buffett and Bill Gross have argued that the market is at about fair value • Historically, markets have had a PE multiple of 15 times. Today, the S&P 500 PE is approximately 19.3 times. • If there is a bubble, current PE multiples suggest a 2008 or 1999 pop are not imminent, but we may be retracing our steps from the 1991 recession.

  25. Financial Bubble? • Loan standards are falling and originations are increasing. • The Federal Reserve and Comptroller of Currency issued a warning to bankers regarding the issuance of low quality and leveraged debt earlier this week. • The Fed urged bankers to tighten lending standards and take on fewer high-risk loans

  26. Financial Bubble? • Low quality and leveraged debt is called “speculative- grade debt” (BBB- or worse) and is booming as bankers reach for higher yields in the low-interest rate environment. • Some are blaming the Federal Reserve for its current policy of negative real interest rates as the source of deteriorating balance sheet quality • Moody’s estimates a rise in speculative-grade debt defaults globally to only 3% of loans in 2013 (4.8% average since 1983), but speculative-grade loans are highly sensitive to economic fluctuations.

  27. Thu 31 Oct 13 | 01:10 PM ET Does the Fed want to end the rally?

  28. Financial Bubble? • http://finance.yahoo.com/video/liked-2013-why-2014-could-213816108.html

  29. Apple Earnings Report • Reported earnings after market close on Monday (28th) • EPS: $8.26 -- Expected: $7.92 • Sales: $37.5 billion -- Expected: $36.8 billion • Gross Margin: 37% -- Expected 36.8% • Net Income: $7.5 billion • Unit Sales: • iPad Sales: 14.1 million -- unchanged • iPhone Sales: 33.8 million – 26% increase • Mac Sales: 4.6 million – 6.2% decrease • iPod Sales: 3.5 million – 56.8% decrease • Results benefitted from recent release of iPhone 5S and 5C

  30. Apple Earnings Report • Investors were disappointed in Apple’s outlook for the next quarter, which the company predicts will come in slightly below investor expectations • Gross Margin for next Qtr missed expectations of 37.9 • Apple projects 36.5 – 37.5% • CEO Tim Cook said there will be exciting products from Apple in fall 2013 and across 2014 • Many investors are waiting for Apple to produce the “next big thing” • Could be source of some of the disappointment/mixed feelings • Shares closed at 516.68 on Tuesday (Trading day after announcement)

  31. Wednesday, 30 Oct 2013 | 4:56 PM ET Facebook posts strong earnings

  32. Facebook Highlights • Younger teens saw a decrease in daily active users • One ad per 20 stories in newsfeed – will not change • Year ago - mobile ads $150 million in revenue • This year - $880 million in revenue • Zuckerberg – average daily user is “engaging” with more than one ad per week • Meeting with Blackberry?

  33. Consumer Price Index • CPI rose .2% in September • Gasoline increased 0.8% • Airline fares rose 0.5%, while apparel is down 0.5% • Y/Y inflation slowed to 1.2% • CPI inflation was 1.5% Y/Y in August

  34. FMOC Meeting • Quantitative easing has been unchanged • $40 billion per month of mortgage-backed securities and $45 billion per month of longer-term Treasury securities • Maintaining unemployment target rate of 6.5% and a 2.5% expected inflation rate. • Fed will continue to keep interest rates low (long-term treasuries and mortgage rates) • Pressure to buy riskier assets with more returns

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