Kiss of Death or Bull Case Scenario for Met Life $MET, $AIG, $PRU, $XLF

Financial Stability Oversight Council may have given Met Life an odd kiss of death. They have declared Met Life to be systemically important. Not too many details out there but size seems to be important just as it was for AIG and Prudential.

Regulation and oversight are nice but you need some transparency. The financial community should understand why. The investing public and stakeholders in Met Life should understand why and how come.

Regulators cannot expect the marketplace to respond if no one understands the why and how of it all.

George Gutowski writes from a caveat emptor perspective.

Amazon Shows Desperation and Panic Like Fear. That would be the Bear Case Scenario $AMZN, $AAPL

Amazon has dropped the price of its Fire Phone to $0.99 or basically free with a two year contract. When you need to give away your product for free that completely negates the value added proposition. Your Brand is toast.

The retail space is filled with clever price competition strategies. Cutting your price a day or two before a competitor’s product launch, smacks of desperation.

The more appropriate strategy would have been to offer the fire product at $0.99 for say two or three months before the Apple launch. It was a very safe bet that they would launch in September so announce on July 4 an Independence Day program to cut costs and allow Americans to shop shop shop.

You would have converted every available sale in advance and present Apple with a scorched earth defense. If the scorched earth defense did not work that Amazon would have determined that their product was not resonating.

George Gutowski writes from a caveat emptor perspective.

 

Amazon Scores a Bases Loaded Home Run That would be the Bullish Scenario $AMZN, $AAPL

Amazon has dropped the price of its Fire Phone to $0.99 or basically free with a two year contract. Brilliant right? I mean when you eliminate price as a transactional obstacle you will have huge volume. Gotta be! The Fire Phone of course will drive e-commerce revenue into the coffers of Amazon. So just like most shopping malls that do not charge for parking, Amazon wants you on this phone buying stuff.

Amazon has a natural advantage as they are already a dominant e-commerce player. Alibaba will soon be challenging but this clash of Titans is still some time off. Apple is coming out with some design sexy products and inching their way into the e-commerce space.

Amazon is already in the e-commerce space and vertically integrating the supply chain. Amazon and e-commerce addicts will value their relationship and probably will go Fire.

George Gutowski writes from a caveat emptor perspective.

 

Bear Case Scenario. Financials are going to Tank Soon. $XLF

Interest rates seem stuck in the muck. They may not rise fast enough to generate profits.

High unemployment rates will constrain borrowers from increasing debt and constrain the growth of deposits. Both items are critical ingredients for banking success.

Great regulatory oversight prevents nimbleness in moving in and out of opportunities and product lines.

As interest rates rise underwriting banks will find it harder  to place new business.

The index is very susceptible to headline risk. One bad story and everyone hurts a little. In an index fund that’s not good.

George Gutowski writes from a caveat emptor perspective.

 

Bull Case Scenario for Financials. Do you Believe It? $XLF

The XLF is the largest, most broadly based financial sector ETF. Also the easiest to get into. Lots of players can easily participate.

After the 2008 meltdown financials are better regulated and therefore have better governance in place.

Financials in this index are the aircraft carriers of the economic fleet. They will be protected as too large to fail. Politicians will not have clout if they want to see financial bankruptcy the thousands of voter want to know where there money is.

High interest rates are next. Rising interest rates are very good for banks. Loans will reprice upwards faster than deposits and cost of capital.

Banks are better capitalized than in the past and should be able to handle shocks better.

Banks have been cutting expenses and generally do not have much fat on the bone.

Banks are the ultimate mobile investment. They can go almost anywhere to ride out the storm.

George Gutowski writes from a caveat emptor perspective.

 

Apple’s Coming Correction. Do Apples drop in the Fall? $AAPL

Buy on rumour sell on news. Today we will have news. Consider the 30% recent ramp in share price.

Apple concentrates on a few key blockbuster products. Samsung has a plethora of offerings. Has Samsung over diversified. Does Apple have too many eggs in one basket?

Apple concentrates in the higher margin premium space and appears to have ceded cheap phones. Cheap phones may create some economies of scale that Apple may not enjoy.

Apple is highly dependent on new product offerings which are flashier and flashier. Eventually this strategy burns out.

If there will be one product stumble the whole worthiness of Steve Jobs Successor rears its useless head.

George Gutowski writes from a caveat emptor perspective.