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These are the three reccomendations I got from a Swiss based bank:
(I dont have any ideas regarding stocks and companies, so please do your own research before investing)
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SEC investigates Apple Computer
On Friday 11 August, Apple Computer announced it was not in a position to publish its quarterly results due to major irregularities in its financial statements linked to the granting of stock options. Apple has therefore postponed its quarterly financial filing with the US stock market authorities and has requested a hearing from the SEC (Securities Exchange Commission) to explain the situation. US regulations do not allow any delay in financial filings. A delay can lead to the share being suspended from the Nasdaq listing. Admittedly, Apple estimates that the review and subsequent adjustment will result in a significant increase in revenues. However, the company has indicated that it is not yet in a position to estimate the full of amount of charges, which are also likely to be revised upwards. These uncertainties weighed on the share price on Friday. The share ended the week at USD 63.65, down by 6.81% relative to the previous week. A rebound in the Apple share could prove a good opportunity to sell CFDs and play a fall in the share price. If the Apple share price climbs back to USD 65, a possible strategy for an initial deposit of USD 5,000 would be as follows:
Sell 769 CFDs at USD 64.935 (estimated price of CFD for an underlying at USD 65).
The value of the deal is USD 49,935.02 but the margin requirement is one tenth of this amount.
A target price of USD 54
Under a scenario in which the uncertainties surrounding Apple Computer's financial results continue to weigh on the share price, the share could fall to USD 54:
Repurchase the 769 CFDs at USD 54.054 dollars (estimated price of CFD for an underlying at USD 54)
The value of the repurchase deal would be USD 41,567.53 and the profit on the deal would be of USD 8,367.49 (i.e. 49,935.02 – 41,567.53) for an initial deposit of USD 5,000. The profit, as a percentage of the initial deposit, is of nearly 167%.
Warning! Our scenario specifies that if, instead of falling, the Apple share price rises above USD 70.50, we recommend closing the position and bearing the loss. Note that the leverage effect is still there, whether there is a gain or a loss.
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A fall in the UBS share price?
The correction recorded by UBS since the beginning of the week is likely to continue over the next few days. With this in mind the sale of a CFD to hedge the UBS share in the portfolio, or simply to speculate on the share's fall, could be a worthwhile strategy. If you hold registered UBS shares in your portfolio, on which you are positive for the longer term, it makes more sense to sell a CFD to protect against a fall in the share price rather than to sell the shares and then repurchase them at a lower price. If you do not have any UBS shares in your portfolio, there is nothing to prevent you from playing a fall in the share price via a CFD and benefiting, in addition, from the leverage effect generated by the CFD. Here is how to do it, taking as an example an initial investment of around CHF 5,000 and a UBS share price of CHF 65.80:
Sell 760 CFDs at CHF 65.734 (estimated price of the CFD for an underlying at CHF 65.80).
The value of the sale is CHF 49,957.84 but the margin requirement for the deal is one tenth of this amount.
Target of CHF 59.45
In our preferred scenario, the UBS share price could drop to CHF 59.45 over the medium term. Assuming that this is the case after 30 days:
Repurchase the 760 CFDs at CHF 59.509 (estimated price of CFD for an underlying at CHF 59.45)
The value of the repurchase transaction is CHF 45,226.84 and the profit on the deal amounts to CHF 4,731 (i.e. 49,957.84 – 45,226.84) for an initial deposit of CHF 5,000. As a percentage of the deposit, the profit is 95%.
Warning! Our scenario specifies that if, instead of falling, the UBS share price rises to above CHF 67.50, we recommend closing the position and bearing the loss. Note that the leverage effect is still there, whether there is a gain or a loss.
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Outlook for the central banks
The major central banks recently gave their decisions regarding intervention rates. It is now an opportune time, therefore, to review the respective positions taken and to anticipate their next moves. Given the current situation, this may be a good opportunity to play a 3-month call on the euro/dollar exchange rate.
European Central Bank
The European Central Bank raised its repo rate by 25 basis points to 3%. Despite this fourth hike since last December, Lorenzo Bini Smaghi, a member of the ECB’s Executive Board, stated that the ECB’s monetary policy still remained very accommodating and that we must therefore expect the process of interest rate adjustments to continue in coming months. Most economists are expecting two further rises of 25 basis points each between now and December. The more impulsive are anticipating a further hike of 25 basis points as early as 31 August (date of the next meeting of the ECB’s Governing Council). It is interesting to note that this increase in rates is already anticipated by the market for 3-month Euribor futures, with the contract maturing in December trading at an implied rate of 3.65% compared with 3.4% for the September contract.
Federal Reserve
In the US, the last meeting of the Federal Reserve’s monetary policy committee ended with the status quo being maintained. The federal funds rate thus remains at 5.25% following 17 successive increases of 25 basis points each between June 2004 and June 2006. This situation is unlikely to change in the second half. In fact, inflation, which remains high, is already showing the first signs of easing (CPI increased by 4.1% year-on-year in July), following the slowdown in US GDP growth in the second quarter (2.5% compared with 5.6% the previous quarter).
And the others...
The Bank of Japan abandoned its zero interest rate policy by setting its overnight rate at 0.25%. However, inflation seems to be slowing, which could prompt the Japanese central bank to mark a pause in its monetary tightening policy pending clearer indications on the economic situation. The Bank of England surprised the markets by raising its base rate by 25 basis points on 3 August. This represents a discretionary move and is therefore unlikely to lead to further increases between now and the year end.
Lastly, the Swiss National Bank also raised its rates by 0.25% on 16 June, bringing the median reference rate to 1.5%. The increase in inflation and strong growth in activity mean that a further monetary tightening is virtually inevitable in coming months.
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Also Hurricane season is approaching, stocks of companies related with re-construction and re-building should fare well till October end; also Gold prices will rise in case any hurricane lands up in US. IMO.
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