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In
This Edition... |
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Is
The Sky Falling Because Oil Isn't? Just how bad it is happens to be
a matter of perspective
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Is Las Vegas
a Good Bet Or Not? Our Las Vegas Sands idea took a blow...for now
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In The Flow:
Water Stocks Are Swimming Upstream Now
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Is
The Sky Falling Because Oil Isn't? |
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Remember
our biggest
fears we mentioned in our last edition?
That the U.S. dollar was poised to pull back and crude oil prices
were poised to rebound? Well, it's happened...or at least it's starting
to
happen anyway. It hasn't taken too big of a toll on stocks yet,
but Rome wasn't built in a day either.
 The
good news is this doesn't necessarily have to be devastating. If you can
put it all in perspective, any impact may just be a distant blip not too
long from now. Anyway...
The nearby chart
tells the tale. This is the same one we showed you last time, but with
current
prices. You can plainly see how things changed on Thursday. Crude oil pushed
off support at $110 to close at $120. The U.S. Dollar Index (UDX) fell
from 76.91 to 76.06. Yet, both charts could keep moving in this new
direction for quite some time before either hits a wall.
For the dollar,
that wall may well be at 74.31...a former resistance line. For oil, the
$124/$125 area is likely to be a checkpoint. That's where the 38.2% Fibonacci
retracement line is, but that area is also a consolidation zone (late July)
as well as a support area (early June).
Bear in mind
the dollar and crude oil may not get to their respective hurdles at the
exact same time, if they get there at all.
In the meantime,
the Russell 2000 Index (the most relevant index to us) looks like
it's obliging the oil/dollar dance by pulling back from a resistance level
of 764. That's where it topped in June as well. If the pattern - and
the trading range - persist, a move back to 650 may be in the cards.
That's only about an 11% dip though, from current levels.
Don't hear us
wrong - that's still a lot to lose. In the grand scheme of things
though, it's nothing unusual for this index. That's why mentioned above
that even the worst-case scenario doesn't have to be devastating. Perspective
is everything. In the meantime...
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Is
Las Vegas a Good Bet Or Not? |
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Las
Vegas Sands (LVS)?Yeah,
enough said. It wouldn't be half as irritating if there were actually a
clear and totally valid reason for the sudden pullback. (We'd even settle
for karma or Murphy's Law.)
Actually, we
know the reason....an announcement made about the potential future of the
industry. Two of them, actually.
First,
one of Macau's premier casinos is going to be replaced by an even more-premier
casino.
Stanley Ho, owner of most of Macau's casinos, has decided to take some
of gambling's market share back from Vegas and Atlantic City by building
yet another casino ....a big one. (Even though Macau lost ground relative
to its American counter-parts, it still does more business than Vegas and
Atlantic City combined.)
 The
other
x-factor? The very next day, the Chinese government said they may place
restrictions on the number of visits an individual could make to Macau.
Of course, that would cut into a big chunk of Macau's gambling revenue;
those displaced gamblers could certainly come to Las Vegas though.
So why is this
supposed
to be bad news for Western casinos? Shouldn't this be good for
companies like MGM Grand, Wynn, and of course Las Vegas Sands?
Here's why -
these
Western casinos are eyeing Macau for future revenue growth.Las Vegas
Sands and Wynn already have hotels and casinos there. That said...
See the contradiction?
If
China restricts travel from there to Macau, that's good for Las Vegas.
If China doesn't follow-through on the restriction, that's good for Macau
...which is still good for casinos with a presence in Macau (like Las Vegas
Sands).
And what
if Ho's casino really does impact the other Macau casinos? The rebuild
would be a multi-year project, and improve only one of the 29 casinos there.
It's not going to destroy all the rest.
Our overall
take - the reactions all seem to be over-reactions. We're not going
to get sucked into the volatility dance. Patience, grasshopper.
Don't look now,
but water stocks are swimming upriver again.
The water
industry has been one of MicroCapPress.com's
pet projects since last year...utilities, infrastructure, purification,
etc. Why? There's not enough of it.
Well, that's
not exactly right. There's enough water...here's just not enough
clean water. And, the means of getting it from point A to point B for
most of the world is antiquated. (Other than that, everything's fine.)
 Even
so, water-related stocks haven't done exceptionally well in 2008. Year-to-date,
the Dow Jones Water Utility Index (DJUSWU) is down 16%. That's a utility-laden
index though. The Palisades Water Index (ZWI), which focuses on water
purification and infrastructure, is down 19% for the year. On the other
hand, the ISE Water Index (HHO) is ahead by 3.4% year-to-date. The point
is, it's not been great across the board in the water arena.
However, it's
worth noting that the Dow Jones Water Utility Index is up 12% over
the last four weeks. That's actually the best performance of any industry
index for the time period, even including the other two water indices
we mentioned.
Maybe it's
something, or maybe it's nothing. Considering there's not much else
good going on right now, however, it may be worth a look to see where this
strength is coming from.
That being said,
the chart's as compelling as the recent results. The Dow Jones Water Utility
Index had been running into a resistance line for months, as well
as the 50 day moving average line (blue). It broke past both earlier
in the month though. These stocks may do much better now that there's some
room to run.
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Updated: 9:18 am PST (17:18 GMT), January 5, 2009
