It is a Bulls eat Bears world in the stock market, for now.

It is a Bulls eat Bears world in the stock market, for now.

US stock market put on a good show in August.  The S&P 500 index that represents the US stock market failed to test 2,000 in July and slid to touch 1,900 in the first week of August.  That is a 5% correction and got the bears very excited.  The bears have been saying the US stock market was too strong for too long and the bubble has to burst.  The Tapering measure means less money is pumped to the system every month and the bears are convinced that gravitational force should apply to US stock market.  The bears had their best week in watching the market fall since January when the S&P500 corrected from 1850 level to 1750 level.

The 100 moving average, which is the average number of the past 100 trading days closing prices of the index, turned out to be a magical number.  As S&P500 touched 1,900 level at the time when it was also the 100 days moving average, magic happened and the market rebound all the way to 1,994.76 on 21 August.  Considering S&P500 was at 1,627.47 on 28 August, 2013 which is also the lowest print in the past year, US investors have done well with 22.6% return in USD in just under a year.

The technology sector in US is harder to read although there are probably more people reading their Apple iPhone screens than reading the Oxford Dictionary.  Nasdaq Composite Index which represents the high tech stocks in US has had an awesome run in the past year.  Its low point in the past year was 3,573.6 on 27 August, 2013 and the high point was 4,534.1 on 21 August, 2014.  This means a 26.9% return in USD in under a year.  This is impressive.  If we consider there are more ups and downs in Nasdaq and the tech sector is more fashionable than the boarder index like S&P500, S&P500 index fund is perhaps a more stable investment target than Nasdaq index fund.  What is more significant for the Nasdaq Composite Index is that it has captured the 4,500 level and new high in 14 years.  For those who participated in the Tech Bubble in year2000, they would remember Nasdaq Composite index shot up from 3,000 at the end of 1999 to 5,132.5 on 31 March, 2000 and dived to almost touch 3,000 again.  Then rebounded to reconquered 4,000 level before heading south all the way to 2,000.  In short, Nasdaq at 4,500 level is a very high and happy level for investors if one removed the spike in year 2000.

There are some amazing performers in the tech sector.  We all know Tesla, ran by Elon Musk the Iron Man in real life.  Tesla is up 69% year to date as of 21 August.  Sandisk (maker of memory cards) and Facebook are up 38% and 36% respectively.  Mighty Amazon.com is down 16.5% year to date.  These high tech counters could swing widely and buy and hold strategy could give you a roller coaster ride.

The European stock market has done a bungee jump in August.  Eurostoxx 50 Index, started near 3200 level in August, dropped through 3,000 level and bounced back to 3,124.6 on 22 August.  UK stock market had similar fate.  FTSE100 started at 6,800 level in August and was slammed to below 6,550 level and rebounded to 6,780 level on 22 August.  The dropped in European and UK stock markets in the first week of August was scary.  Combined with weak economic data and the tension in Ukraine, the bears really thought they could have the last laugh.  However, the market believes weak economy means potentially more money printing exercise hence asset appreciation.  The bears win again.

The British Pound dropped like a rock against the USD in August, erasing all the gain since April.  The drop started in mid-July after a high print of GBP 1 to USD 1.719 on 15 July and fell to 1.657 on 22 August.  That is a 3.6% drop in over a month.  The scary thing is that the GBP movement is like a whole month of landslide without much rebound.  GBP against the USD dropped though 50 days moving average at 1.69 level near the end of July, then the 100 days moving average at 1.68 in the first week of August and 200 days moving average at 1.67 after mid-August.  The momentum and magnitude of the movement has not been seen for a year.  GBP has broken many technical support and hopefully, 1.65 level could give Sterling a breathing space.  The EUR is falling against the USD even faster than GBP.  EUR has fallen 5% since May from EUR 1 to USD 1.399 to 1.328 on 22 August.  EUR is not far from its one year low at 1.311 on 6 September, 2013.

Cannot find the straw that broke the camel’s back?

Cannot find the straw that broke the camel’s back?

The UK stock market has some exciting moments in July.  Banco Espirito Santo SA, Portugal’s second largest bank by market value, gave the market a cold shower as some of Grupo Espirito Santo’s units missed commercial paper payments.  FTSE 100 Index first rallied to 6850 level then broke the 200 days moving average support for the first time since April and tested 6650 level.  It then bounced back to 6800 which was the supporting level in May and June.  For the past year, it has been a good strategy to buy FTSE100 when it dips below its 200 days moving average (the average price of the past 200 trading days’ closing prices) and sell a month later.  6900 level has been challenged in May, June and July and with the continuous bullish sentiment in US stock market, there is still a chance for FTSE100 to be above 6900 level in 2014.

While the FTSE100 has had an uptrend in the past year, the index has only gone up 3.5% from 25 July, 2013 to 24 July, 2014.  Buy and hold investors have done better than bank deposit and inflation.  The US stock market represented by S&P500 index has gone up 17.6% in price but only 6.1% in GBP terms in the same 12 months period.  GBP has been strong against the USD strengthening from a low of GBP 1 to USD 1.4814 on 9 July, 2013 to GBP 1 to USD 1.7192 on 15 July, 2014.  This makes the S&P500 index gain in USD much less lower in GBP terms.  It is still great to be up 6.1% in 12 months for those invested in US S&P500 Index Funds.

The Euro stock market has been as bullish as US.  It may sound illogical as US has recovery written all over it while Europe only has managed to pick up World Cup in Brazil.  Eurostoxx 50 Index is up 17.5% in the past year and was up 20% until the Banco Espirito credit issue emerged.  GBP has also gained against EUR in the past year and the 17.5% gain in Eurostoxx 50 in EUR terms would become 7.9% gain in GBP terms.  So sticking to the big index funds in US, Europe and UK have been fairy fruitful investments in the past 12 months.

Zooming into the individual stocks in FTSE100, there are a lot of dramas.  2014 top performers are Shire Plc which is up 75% year to date as of 24 July.  United Utilities and Randgold Resources are up 34% to 35%.  Weir Group, Ashtead Group, Next Plc, Fresnillo Plc, Smith & Nephew, AstraZeneca and Glencore are up 23% to 27%.  There are a lot of household names in the worst ten performers.  Tesco, Pearson, Vodafone, Kingfisher, Coca-Cola HBC, Hargreaves Lansdown, Barclays, ARM Holdings, Royal Mail are down 18% to 21%.  At the bottom of the list is WM Morrison that is down 33.5% year to date.

Shire Plc is a biopharmaceutical company with over 5,000 staff and it is bought by its US rival AbbVie Inc for about GBP 32 billion.  AbbVie can lower its tax rate as the new combined company will be a UK domiciled company.  After the AbbVie Shire merger, AstraZeneca shareholders are hoping for a better bid from Pfizer after the last bid was rejected in May.  However, its share price at 4,300-4,400p level has already priced in a merger premium.

While UK pharmaceutical companies enjoy bidding interest from US rivals, the UK supermarkets are beaten up.  WM Morrison is struggling to find breathing space between the 3 giants (Tesco, Asda and Sainsbury) and the 2 rangers (Aldi and Lidl).  Morrisons are not really big in online or in physical convenience stores.  Even Tesco is down 18% year to date which shows how tough it is in the supermarket space.

Post Office is not supposed to be a roller coaster business but Royal Mail share price have been swinging like high tech stock share price.  Royal Mail, the 500-year-old institution, came to the stock market at 330p to close at 455p on the first day of trading and peaked at 615p on 15 January which made every investor very happy.  But the share price has been heading South since March with a one month rebound in mid-April.  It closed at 441.1p on 25 July.  Amazon is withdrawing its entire business from Royal Mail.  Amazon has expanded its own delivery network and introduces a GBP10 minimum spend for free delivery.  Amazon scrapped free “super-saver” delivery on items worth less than GBP10 in January which resulted in less business for Royal Mail.  New entrants like TNT are also cannibalizing Royal Mail’s business.

The third quarter is going to be interesting for stock investors with the Russian Ukarine situation as a potential catalyst and the US unstoppable bull market could be waiting for the straw that broke the camel’s back.

Better fun to support the British Sterling

Better fun to support the British Sterling
The British fans travelled all the way to Brazil to watch the World Cup maybe slightly disappointed with their soccer team performance.  However, they certainly enjoy the strength of the British Sterling which is at a 5 years high against US Dollar.  Sterling rallied through 1.70 level, the highest since October 2008.  The Sterling has risen 14% against USD and 11% against EUR since July, 2013.  GBP 1 was USD 1.4861 on 10 July, 2013 and USD 1.7040 on 20 June, 2014.  During the same period, GBP was EUR 1.1269 and EUR 1.2510 respectively.
Just as the World Cup started, the Bank of England chief, Mr Carney, gave the first sign that there may be a rate increase as early as this year.  He said rates could rise from their historic low of 0.5pc “sooner than expected”.   He made such comments in the annual Mansion House Speech and the British pound rallied to a five-year high against USD.  The Bank of England could be the first major central bank to increase rates, ahead of the Euro zone and US.
The FTSE 100 has spent May and June testing 6900 level on the upside and it may get harder with the backdrop of increasing interest rate.  The bulls and the bears in the stock market have different interpretation on Mr Carney’s words.  The bulls would think that Mr Carney is concern about inflation and the monetary policy being too loose for too long.  The economy recovery is in good shape and it is time to tighten up the monetary policy with a bit of a rate hike.  The bulls would take these positively and hope stronger economy means good news for listed companies earning growth.  Stronger Sterling could mean more asset allocation from insurance companies, pension funds and other financial institutions.   The bulls hope for more institutional money pouring into GBP investment meaning the Gilt, corporate bonds in GBP, UK stocks and UK properties.  All these could mean more upside for the UK stock market.
The bears in the stock market think the glass is half empty as they are worried that the UK stock market is at its peak and could be running out of steam.  An increase in interest rates makes bonds more attractive and there could be money getting out of the stock market and flowing to GBP bonds.  Money outflow from stock market means selling pressure and negative for share prices.  Increase in interest rate also increases business operating cost as most business are borrowers and hence could hurt earnings of listed companies.  Weaker earnings could lead to weaker share prices.

Investors may ask if UK stocks could be at or near its peak, how about the US stock market which seems to be making new highs every other day.  Federal Reserve chair Janet Yellen continues to tighten up its monetary policy.  On 18 June, Yellen announced Federal Reserve would reduce its asset purchase program by USD 10 billion to USD 35 billion a month.  In December 2013, the Fed started cutting USD 10 billion from its USD 85 billion monthly asset purchase program.  The stock market, taking S&P500 Index as benchmark, has gone up 7% since beginning of the year (as of 20 June, 2014).  One could see the tightening in monetary policy has not marked the peak of US stock market Bull Run.

Look at a few US tech giants to get a sense of the American dreams.  Apple is paying USD 3 billion for Beats that make trendy headsets.  Apple share price has been matching strongly and it is up 57.6% in a year.  As of 20 June, it is at USD 90.91 and on an uptrend to challenge its historical high in Q4 2012 which is equivalent to USD 100.  At USD 548 billion market capitalization, paying USD 3 billion for a headsets company is not going to hurt much even if Apple has overpaid.  Google is buying Skybox for USD 500 million.  Skybox is a satellite company and Google hopes to use Skybox’s satellite to improve its digital maps quality.  Think of the street views in Google map getting significantly better.  Again, USD 500 million for Google, a USD 378 billion company is decimal point.  Google’s YouTube is also planning to launch music streaming services that offer access to millions of songs for a monthly subscription.  This is clearly taking on Spotify and iTune.  Today’s human life is very much reshaped by tech giants like Apple and Google.  They can make revenue from almost every corner of the planet and every soul in the world.  They either charge the individuals or the merchants who want to reach the individuals.

Better shop in Zara or Next?

Better shop in Zara or Next?

2014 first half has been a difficult year for stock investors as the board market has been flattish and money has to be made by stock picking.  Stock picking is as hard as England getting into quarter final in the World Cup.  UK FTSE100 index has gone up by just 1.1% year to date as of 21 May, 2014.  The 5 best performing stocks have all gone up by more than 20% and they are United Utilities, AstraZeneca, Associated British Foods, Next Plc and RSA Insurance.  The worst 4 have gone down by over 20% and they are Rolls-Royce, WM Morrison, Coca-Cola Hellenic Bottling Company and ARM Holdings that designs chips for mobiles.

Europe wise, Eurostoxx 50 is up 2.5% year to date with Italian banks like Intesa Sanpaolo, Banco Santander and UniCredit in the top 10 performing stock list while BNP Paribas, Deutsche Bank and AXA in the 10 worst performing stock list.  One can say every dog has its day and the fear for Eurocrisis is fading.  Dow Jones is down 0.26%, S&P 500 is up 2.2% and Nasdaq100 is up 1.21% year to date as of 21 May, 2014.  Some big names like Yahoo!, Amazon.com, Coach, Whole Foods Market are down 15%, 24%, 26% and 35% respectively.

Let’s talk about some business we can touch and feel.  Looking at the retail sector in Europe and zooming into 2 companies, Next Plc is at GBP 10.3 billion market capitalization (how much one needs to buy every Next Plc share in the market) and Inditex, which runs Zara, is GBP 52.7 billion market capitalization.  To give the readers more reference points, GAP is GBP 10.7 billion and Esprit is GBP 1.7 billion.  (Data are as of 21 May, 2014.)

Citi Bank analyst cut Inditex 2015 estimated earnings by 5% to EUR 3.2 billion (which is still a lot of money).  He sees first quarter sales up by 5% but margin down by 1% due to negative foreign currency impact (cost in EUR and revenue in other currencies such as USD and JPY).  Inditex share underperforms Stoxx Europe 600 Retail Index by 10% (an index consists of 600 retail companies in Europe) this year.  Its share price was as high as EUR 121.8 on 30 October, 2013 and was still at similar level in January 2015. Since then, the stock has corrected 15%.

Inditex with its Zara chain has been the darling for fund managers in the past 5 years.  Since 2010, Inditex stock price has more than doubled from below EUR 50 to EUR 104.355 as of 21 May, 2014.  The stock had an amazing run in 2012 when the stock was in the EUR 50 to EUR 70 range in the first half of the year and it reached EUR 100 before yearend.  Most of the gain came from expectation of high growth which in technical jargon is called expansion in price earnings ratio (share price as a multiple of one year earnings).  Its share price was trading at 20 to 22 times earnings and expanded to 28 to 30 times earnings in 2012.  2013 was a similar story with price earnings ratio expanded to 31 times at the peak.  As of 21 May, Inditex share price is EUR 104.35 and at 27.3 times earnings.  It is important to understand the concept of price earnings ratios as investors could often choose the right company but if they pay too much for it, they may not see any profit from the investment.  Remember your friends who bought their dream holiday house in Portugal in 2007, the prices are very likely to be much lower today.

Next Plc share price has been climbing up since 2011, from GBp 2500 level to the current GBp 6600 level.  Its price earnings ratio has also improved from 8.7 times in March 2011 to 18.6 times in February 2014.  Next Plc share price enjoyed a nice jump from GBp 5500 a share to GBp 6000 in January 2014 moved up steadily to GBp 6960 on 26 March, 2014.  In April and May, the stock corrected 5% and closed at GBp 6615 on 21 May, 2014.  Between Inditex and Next Plc, it is a choice between an established global leader and a great local brand expanding cautiously overseas.  The difference in price earnings ratio also reflects the premium one has to pay for a leading global business.  China economy is slowing, India has a new Prime Minister, Brazil is busy with the World Cup and Russia has Ukraine as top agenda.  Growth in developed markets like Europe, US and Japan will need to justify most of Inditex current price earnings ratio.  Winning at home is perhaps an easier bet. 

Sterling gaining strength against the mighty Dollar

Sterling gaining strength against the mighty Dollar

It may be unthinkable that Liverpool could win the Premier League this year.  It is also quite a surprise to see the Sterling is back to GBP 1 equals USDS 1.680, the strongest for 5 years.  Exceeding the peaks in 2011 April and 2009 second half.  With the backdrop of US tightening their monetary policy, printing less money, the US Dollar is expected to be relatively strong.  Also, with the sticky situation in Ukraine, one may expect financial institutions and corporates would park money in USD or US Treasury to stay away from the Euro zone.  Struggle to find an excuse from the big picture to long GBP.

The British may have been humble.  It does not feel like there has been a lot of work done by the government in growing UK economy post Financial Crisis.  For sure, the media has spent more time on the Euro crisis and geo-tension like what is happening in Ukraine right now than UK economy.  Also, the public perception is that politicians and regulators are doing everything they can to make the British banks suffer and kick the financial industry in the face when it is down on the ground.  Considering the financial service industry is about a 10^th of UK gross domestic product, which should not be helping the economy much.

Unemployment has fallen to a five-year low of 2.24 million people, 6.9% of the adult working population.  Average earnings in the 3 months to February grew 1.7% versus the same period last year.  March inflation fell to 1.6% versus last year.  It is a good sign that earnings are growing at a faster pace than inflation.  Last time we saw this was in spring 2010.

The service sector’s export sales and orders are at record levels according to the British Chambers of Commerce.  With the banking sector still crippled, the export growth came from accountancy and IT.  Manufacturing is growing consistently.  The rise is driven by a range of business.  Pharmaceuticals, transport equipment, food, beverages and tobacco saw the biggest rise since September. UK industrial output in February was 2.7% higher than last year.  The Chambers also added that UK growth lives off consumer spending which was driven by the revival in housing market and people spending their savings. 

The rosy picture of export sales and low unemployment has certainly helped the Sterling but the strength could be technical rather than fundamental.  One can look at the recent rally in GBP from USD 1.5039 to GBP 1 in the beginning of July as a 3 years journey to challenge the 1.665 high print in April 2011.  Also, the current strength should mark another peak in the chart.  There are a few big clouds hanging over the Sterling which may trigger hedge funds shorting the GBP against the USD or even the EUR.

Scotland is going to have a referendum on 18 September about independence from the rest of the United Kingdom.  Whether this is realistic or not, it is a meaningful event for the hedge fund community to take a bet on the GBP.  While Scotland is asking their people whether to stay as part of UK, David Cameron is putting Britain’s EU membership on the table if he gets re-elected in 2015.  It is no laughing matter if UK GBP 1.5 trillion economy leaves the EU.  Currently, UK’s economy is the sixth largest in the world.

While the Sterling is strong, everything in US Dollar looks cheaper.  Beside going to the States for holiday, one could also consider spending some dollars on US stocks.  Facebook reported GBP 383 million profits during the first quarter of 2014.  Main driver is the increase in mobile advertising revenue.  Revenue was 725 higher reaching USD 1.5 bn and mobile accounted for 59% of advertising revenue.  After IPO in 2012, analysts were concerned how Facebook could adopt from desktop to mobile and from concern to belief meant Facebook share price went up from below USD 20 a share after IPO in 2012 to USD 57.71 a share as of 25 April, 2014.  With 1.2 billion monthly active users, Facebook is seeing 6 billion likes a day.  eMarketer estimates that by the end of 2014, Facebook could reach GBP 2.9 billion digital display revenues versus Google GBP 2.4 billion.  The dream factor is still alive in Facebook supporting its GBP 87.4 billion market at 75 times price earnings ratio.  Facebook was over USD 72 a share in March and now it is below USD 60.  Some investors would be living in the dream for a while.

EM… what a headache

EM… what a headache

Ukraine has become a real chess game between Russia and US/EU.  Russian troops are in Crimea which shows Russia’s determination to take the driving seat.  Global stock markets got sold off on the back of the Ukraine situation but not for long.  The US S&P 500 Index and Eurostoxx 50 bounced back hard reflecting the institutional investors are not yet worried about a Ukraine led global crisis.  The Russian stock market is not so lucky being in the middle of US sanctions.  Moscow’s MICEX is down 14% year to date as of 21 March.  US sanctions include freezing the personal assets of about 40 officials, some from Ukraine.  Bank Rossiya, Russian’s 17^th biggest bank, has been added to the US sanctions list which raised more eyebrows.  The EU sanction list does not include companies as a trade war with Russian is like starting a food fight in your own kitchen.  The EU does not fancy hurting an already faltering Russian economy.  The credit rating companies are queuing up to downgrade Russian’s sovereign credit rating which would probably increase Russian companies borrowing cost.

Another giant Emerging Market, China, has a very different set of problem.  It has a very sad massacre in Kunming in the first weekend of March and a plane flying to Beijing went missing in the second weekend.  The smaller issue is the Renminbi dropping sharply against the USD since late February. It has depreciated by 2.8% in 2014 against USD, reversing all its gain in 2013.  The People’s Bank of China has also increased the daily movement limit from 1% to 2% to let the currency swing wider against USD.  Some said People’s Bank of China used the slide in Renminbi and the increase in volatility to drive speculators from going long the Yuan.  Many corporates and trading companies in China have been borrowing USD offshore to fund its bill in Renminbi in China.  Many could borrow USD in, say, Hong Kong at around 3% while the borrowing rate in China is 7%.  Considering the Renminbi has been strengthening against the USD every year for the past 5 years, it has become a habit for many exporters to borrow USD to fund its expenditure in Renminbi.  Well, party ends when everyone is on the same trade.

China has a debt crisis or some even worry about a Lehman moment.  There is a corporate bond that is listed in the Exchange and it missed an interest payment.  The name of the company is Shanghai Chaori Solar Energy Science and Technology Company.  Interestingly, Suntech Power Holdings Corp was the world’s biggest solar-panel maker in 2011 and it went bankrupt in 2013.  The stock is listed in the OTC Exchange in US and as of 21 March, it still has USD 67 million market capitalization.  If Suntech can go under, there should be no surprise of another solar company in China failing to make interest payment.  Well, the domestic investors were surprised that there was no white knight from local government or government friendly’s business partners.  After all, clean energy is encouraged by government policy.  This corporate bond default episode confirms the government change of gesture in shifting from protected economy to market economy.  While this is long term positive, short term jitters in the market is necessary.

Banks’ funding cost in China has been affected by mobile platforms.  Alipay which is similar to Paypal has jointed up with a Money Market Fund called YueBao.  It was launched in June 2013 and as of end of February 2014, YueBao has become the biggest fund in China and the 7^th biggest fund in the world with over USD 80 billion asset under management.  YueBao has successfully captured the long tail to beat the head.  The minimum investment about is CNY 1 which is less than 10 pence.  The interest it pays is around 5% with daily subscription and redemption.  Bank’s 7 days deposit is paying less than 3%.  YueBao has more investors than the entire China stock market.  Without saying, one can guess YueBao has drawn “spare changes” from bank accounts.  Hence it reduces banks’ deposit amount and in turn, increases what banks need to pay to attract deposit.  When banks feel tight, they have reduced lending appetite and increase borrowing rate to compensate.  The success of YueBao has induced negative pressure on the corporate funding market.

Another acid test on the sentiment in China is the Jewelry Shops in Hong Kong.  Last year when Gold touches USD 1200 per ounze, the Jewelry Shops were packed with tourists buying gold.  The Dragon and Phoenix gold bracelets were sold out in the entire Hong Kong.  Since Chinese New Year in February, the tourists have slowed and the Jewelry Shops are probably at least 50% less busy than last year.  China is slowing down, really.

Pay USD 19 billion for a sticky application

Pay USD 19 billion for a sticky application

Facebook acquired WhatsApp for USD 19 billion.  USD 16 billion is paid upfront with USD 12 billion in Facebook shares and USD 4 billion in cash.  Additional USD 3 billion in restricted stock that will be vested over the next 4 years.  WhatsApp is a very sticky App with 450 million users and 19 billion inbound messages a day.  Dividing USD 19 billion by 450 million users, that implies Facebook paying USD 42 for each user.  WhatsApp is still growing its client base at 1 million a day.  USD 19 billion is a lot of money.  To put it in real world terms, HSBC just reported its 2013 pre-tax profit at USD 21.6 billion.  It would have taken a global banking giant HSBC 254,000 staff 11 months to make enough to buy a 55 employees startup.

Why and how could it happen?  First of all, Facebook can afford it at USD 180 billion market capitalization.  Its share price has gone up 158% in one year at USD 70 level and still a lot higher than its USD 38 IPO price in May 2012.  At USD 70, it is trading at 120 times Price to Earnings ratio (P/E ratio).  Market expects Facebook 2014 to double in 2014.  With USD 15 billion of the purchase price paid by Facebook shares, it is kind of paper money.  Google, Microsoft and Yahoo are trading at 33.3, 13.2 and 29.6 times Price to Earnings Ratio respectively.  When it comes to using shares to purchase business, Facebook has a huge advantage as it is almost using fantasy money to buy dream.  If Microsoft, with low P/E ratio, issuing new shares to buy WhatsApp, it will be like swapping Oxford Street property for a gold mine in the moon.

Secondly, Facebook should buy WhatsApp to diversify and increase its stickiness.  We have seen MySpace (or some may not have even seen it at all) disappearing from people’s PC screen without a trace.  Facebook has done well to survive the users’ behavior change from desktop to mobile platform.  However, users’ behavior in the tech world is as constant as the behavior of teenagers.  Kids in school have never heard of Ericsson as a mobile phone brand.  Blackberry is going to be known as a fruit again instead of a mobile email device.  Facebook needs to survive and compete against Google who has everything with an “e”, Microsoft Skype, LINE and WeChat from the East.  Facebook needs to stay sticky with people and attract fingerprints on its icon on people’s mobile device.  Instagram has proved to be a success and the USD 1 billion paid in 2012 looks like a bargain now.  Imagine if WhatsApp is not bought by Facebook, but Google, Microsoft or Yahoo, it will make Facebook future journey a bit darker if not wet and slippery.

Any big news on the planet is the sticky situation in Ukraine.  Not to look at the politics but the economic impact, Ukraine is likely to cost the EU and Russian billions of Euro.  Apparently, an EU official has mentioned EUR 20 billion as a conservative estimate of potential assistance.  The good news is that after Ireland, Greece, Portugal and Cyprus, the EU has become pretty experienced when it comes to bailout a country.  So money is probably not the biggest issue here but the chess game between EU and Russia.  The Ukraine episode may encourage if not force EU to be leaning towards a more generous monetary policy in 2014 or may even lead to another “whatever it takes” statement.  This could be good news for the European stock market.  The EUR has also shown some strength in February at USD 1.375 to a Euro as of 25 February.  Eurostoxx 50 Index is safely at 3,150 level, just within walking distance from its January high of 3,169.

At the other side of the world, China is letting its currency, Renminbi, to swing.  The currency of the second largest economy in the world has dropped to six-month low against the dollar.  It is dropped about 1.2% in 3 trading days from 19^th to 21^st of February.  This is the biggest correction in Renminbi strength since 2011.  With US and Europe showing sign of economics stability, the Chinese probably thinks it is their turn to ease its currency strength to boost exports.  Investors like Soros have mentioned his concern over China debt market.  The best way to resolve a debt problem is to make money from exporting goods or services (or print more debt like US).  If Renminbi could ease or at least stop appreciating against the Dollar, it helps China exports to some extent.