Existing-home sales fall 2% to 6.76 mln in April

Marketwatch.com reported that existing-home sales fall 2% to 6.76 mln in April. Now, in another blog message that I mentioned that new home sale hit higher, and inventory of existing home is hitting record high. The snow ball effect has just started. Next month, we are going to see even higher new home sale number while inventory pushing higher. This real estate market has finally turning back into buyers' market. Sooner or later, speculators will want to bail out. Price will go the way of a downward spiral.

New-home sales jump, but inventory of unsold homes rises to record

According to this USAToday article, New-home sales jump, but inventory of unsold homes rises to record. To some people this may seems like an interesting contradiction. But to me, it's a clear sign of the housing bubbles making more popping sound.

It makes perfect sense, folks. Speculators (dumb money) rushed in middle of last year buying up spec homes from builder, hoping to turn around to sell them at a much higher price when the houses are built. Houses take average 10-14 months to complete, and we are now sees those transactions being completed. Hence a jump in new home sales. When ownership of these houses are transferred to the speculators, they immediately turned around and try to unload it, adding their share to the overall housing inventory. That's how we got this pill up in inventory. Watch, the more new home sale there is, the higher the inventory is going to go up. Meanwhile, there is just not enough demand to soak up all the supply out there. You know what's next? Most of these properties are highly leveraged, and most of the loans/mortgages are interest only. With the interest rate keep going up (see my other blog), and little prospect in finding a buyer, how long can the speculators take the bleeding? Sooner or later, someone will start slashing price in a fire-sale to trigger a massive price downward pressure.

Dear oh dear...

Hunker down, the tidal wave of inflation is coming

A Reuters's article about Kodak's price power shows even a old and tire company, like Eastman Kodak is able to raise price, and pass on the energy cost to customers. Are we seeing the triggle down effect yet? Ladies and gentlmen, the Federal Reserve is not done with rate increase yet. We can officially declare the rest of year is going to be ugly.

Is Intel a value play?

I quickly scanned the list of stocks that I used to own and still interested in, one that popped up was Intel. What caught my eye was the price tag, $18/share. Last time I checked the price it was at around $30. I checked the company's info on Yahoo, and here is what I found:

• The stock is down 32% YTD
• Revenue is not going anywhere w/ a -5% YOY growth rate
• Earning is down

Now on the positive side:

• Gross margin and operating margin is still at mid to high 20's
• ROE, the indicator of the company's economic health, is at 21.77%
• Excellent balance sheet, the company is net cash at 8.5 billion
• Operating cash flow is at 13 billion, making the Enterprise Value / Operating Cash Flow ratio at at ridiculous 7.3%
• The dividend yield is at 2% at current depressed price level, and the pay out ratio is only at 34%

In summary, we are looking at a hugely profitable money making machine selling at a fire-sale price. The extreme pessimism by investors seems come from the uncertainty of the future revenue growth. Can Intel fight back AMD? Can Intel morph itself again and grow into another product category? I am willing to bet it can. But first, more reading ahead

Exotic China island gears up for British package tours

Exotic China island gears up for British package tours

I had the chance to visit the island and its beaches in 98 before the modern development. To call it an island while technically true, is kinda misleading. With the size about New Jersey, you are talking about tons and tons of beach front. I would go back to visit some time. When I visited, the beach was absolutely beautiful, with nobody arround, it was the kind of perfect setting for some peace and quiet.

HPQ order filled

Yesterday right after lunch I got a notice that my HPQ order filled at $30.50 a share. I was rather surprised. That is a very good price, and last time I checked, HPQ was at $32. Apperently, someone paniced before the earning call after the market close, and dumped their shares. They probably looked at Dell, after Dell pre-anounced they will disappoint with their earning, people started to think the same thing will happen with Hewitt Parckard. After market close, Hewitt Parckard reported 51% dump in profit compared to last year. I can officially say I am lucky. Or not. Ever since the new CEO got on board, HPQ has been on the right track, focusing on profitable innovations, less glitz, more guts. Its free cash flow to enterprise value ratio is a ridiculous 10%, far far better than a lot of value plays, and we are talking about a growth company. HPQ has years to come which they can get much better. More innovative products will be one. Another could be trimming more fat from the corporate structure, making it leaner, and meaner.

Farewell, Pier One

I was getting bearing on retails as of late. So when I started to whack positions off my portfolio a month ago, I unloaded Pier One Imports. Some might wonder why I chose this time to unload it instead of say, a year ago. The difference is fundamental, no pun intended. The fundamentals of this company has changed. It went from a solidly managed company with excellent balance sheet. When I bought this company two years ago, it looked cheap. It had a healthy cash flow and no debt, selling at a very low earnings multiple. I believed the problem was short term, something to do with product mix that didn't catch customers' fancy. Today, the cash flow is down to just a triggle, and there is no end in sight that the company is going to come out better with out a management change. If I have another 4 or 5 billion, I would buy the whole thing and try to turn it around. But I don't have that much money. The only logical thing to do is to leave and let them figure it out first.

Meanwhile, I was lucky with timing. I unloaded at $12 and change. Today it stands at $8. It doesen't matter at what price I sold it though. PIR was less than 0.5% of my portfolio, and any loss stings a lot for me.