Monday, August 15, 2011

Just another merger monday

Markets rallied on Monday after Japan reported better than expected 2nd quarter GDP numbers and Google announced it was going to buy Motorola Mobility for 12.5 billion.  Google is trying to get back into the smartphone hardware business after the flop of its once promising Google Nexus 1 phone.  I think its a good move for Google.  They know the future is mobile computing and they have to find a way to make some money with it as they make no money from giving away Android.  Apple makes over 50% of the profits of the entire mobile phone industry with its business model of controlling the hardware and software and having a superior product.  Google, by purchasing Motorola Mobility, is basically admitting that it cannot compete with Apple in the smartphone arena without having some hardware it can make money on.  What remains to be seen will be how Google's former partners Samsung, HTC and LG like having a brand new competitor whose operating system they depend on!  The other companies may have to start working on their own operating systems as they may not be able to rely on Google for too much longer. 

I found today's market action to be quite constructive.  We had another 100+ up day, the third in a row.  Futures popped last night on Japan's better than expected 2nd quarter GDP report and stayed elevated into the morning hours when the Google news came out.  It seems momentum is building in this rally and there should be a continuation of this positive trajectory.  Oftentimes, when we get three big up days in a row it, the rally usually lasts awhile perhaps for the next two weeks or so!  Of course a lot depends on what happens between French president Sarkozy and German chancellor Merkel tomorrow in their meeting on the European debt crisis.  Markets need assurance that the two leaders will do whatever it takes to solve the problem.  Any dithering on their parts will likely result in another global equity rout.  I anticipate a positive outcome to these meetings however, and a continuation of the recent rally.  I will be looking to purchase more AAPL and perhaps some XLE in the next few days.  We could trade up to around 1250-1270 on the SNP going forward.  Best of luck and happy investing!

Disclosure:  Long NLY and AAPL

Warning:  All recommendations made in this article are my opinion only.  Please do your own due diligence before purchasing any stocks!

No comments:

Post a Comment