Correction Day

So how is everybody's portfolio doing today? Are you feeling pain and nausea from the red paint all over your account statement? If yes, then don’t you worry, you’re not the only one out there. As of 9:09 a.m. my portfolio was down 2.2%. That’s almost my January’s entire gains wipe out in one day!

I’m not worried though, February had been stellar until now (up 5.93%), and I always brace myself for some big losses after a long winning streak.

For those who read my posting on February 1^st you can now see that I was right to be worried about Emerging Market’s valuation level. EEM is my biggest loser today, currently shaving 4.7% of its value after being down over 6% at the opening bell. By now everyone should know that China’s market had its biggest one-day lost in a decade (8.8%), and this is only the beginning. I think the decline can easily continue to -25% before it bottoms out, based on previous experience (in May of 06 EEM went down 27% from about $110 to just above $80).

To look on the bright side, this is only a correction (based on CNBC analyst’s opinion) and soon opportunities will present themselves in the form of under valued equity.

The one sector I remain bullish about is commodities, and most importantly gold. I think gold is on a strong up trend and we should see prices breaking its May of 06 highs of $732 pretty soon, probably within 6 months.

Good luck out there, and don’t let a set back hampered your enthusiasm for the equity markets.

Volcom Reports Quarterly Earnings

Volcom Inc.'s (VLCM) fourth-quarter net income rose 6.7% to $7.63 million, or 31 cents a share, from $7.15 million, or 29 cents a share, a year earlier.
The Costa Mesa, Calif., sportswear designer said revenue increased 37% to $56.6 million from $41.2 million a year ago.
On average, analysts polled by Thomson Financial predicted fourth-quarter earnings of 30 cents a share and revenue of $54.8 million.
Volcom expects first-quarter earnings of 15 cents to 16 cents and revenue of $48 million to $49 million.
Analysts predict first-quarter earnings of 19 cents a share and revenue of $51.2 million.
-Monica M. Clark; 201-938-5400; AskNewswires@dowjones.com > Dow Jones Newswires
02-22-07 1704ET
Copyright (c) 2007 Dow Jones & Company, Inc.

Volcom beat analyst's estimate for this quarter but announced lower than expected guidance for the first quarter of 07, although the guidance for the year was on the high end of the analyst's expectations. The stock is currently up a little over 8% for the day after the quarterly numbers produced mixed emotions after the closing bell yesterday (down 2%).
I still think Volcom's approach to the market is right, by sticking to their traditions and what have made them successful in the past they are securing long term growth.

The market has been good to me this earning season, long live the market!

Microsoft Vs. Google

I read an interesting article this morning on TheStreet.com. In "Vista Makes Run at Google" by Vishesh Kumar, we are told how Microsoft will (hasn't happened yet) be eating away market share from Google in the online search market.

How will they do that? Just like they did every other time a competitor came out with a technically superior product: They're going to bundle up their own inferior product with their operating system. This strategy has worked in the past (ie: Explorer vs. Netscape), but look at what is going on now in the browser business: FireFox is eating away Internet Explorer's market share, (12% to 86%).
I think what the author is missing is user awareness. After a couple of decades of Microsoft product the public is finally turning an objective eye on Microsoft's product and noticing the flaws.

I also believe he is totally underestimating the momentum Apple is currently carrying. Even if Microsoft does find a way to send more Vista users to Live, the effort will be annulled by the fact that more and more users are switching to Apple, and who sits, on Apple's board, with Al Gore? Google CEO Eric Schmidt.

All of this is understandable if you read more of this author's articles about Google. He sees every new venture Google gets in as a recipe for disaster, and always points out negatives. If I didn't know any better I would say he's being paid by Microsoft to create negative publicity about Google. He is most likely just disgusted by Google's incredible success with for only mission to organize the world's information and make it universally accessible and useful.
It must be tough, for any analyst, to be positive about a company that doesn't hold it's shareholder's interest as their only reason to do business.

Chablis Grand Cru Chistophe CAMU "Les Clos" 2004

I had the pleasure to spend last weekend in Naples where the good life is lived, and lived well. During my short vacation I was lucky enough to taste my favorite Chablis of all, Francois Raveneau. Tonight, I am just a little less lucky to have found this bottle at our dear Central Market.

I can tell, when I drink this bottle, that Christophe Camu transferred his genius to his wine. This is the first time I am impressed by a Chablis that does not carry the name Raveneau.

I have to admit the hesitation was great when I was standing in the Burgundy isle and I was staring at the $70 price tag. I'm, usually, and luckily, not the one opening bottles carrying this type of price tags. So when I uncorked the bottle and gave it my first tasting step: the cork smell, I was very anxious. I could distinctively smell the fruit pass the cork, which made me very optimistic about the rest of the exercise.

The nose was a total let down: Weak, smelled like a mix of iron and honey. But the honey gave me hope and I carried on to the tasting.

This is something I would never be afraid to serve. I would be proud to have on my hypothetical wine list and I would recommend it to any make believe customer who wanted a great chardonnay without having to feel like you are locked in a new oak barrel.

It's a perfect balance between fruit and minerals, earth and air. The savors dance on your tongue, and fill you nose with sweet sent.

If I were to compare it with Raveneau, I would say: It lacks Raveneau's magic touch, and only him can produce that, it's also half the price.

Nuance Communications NUAN

While I am not recommending this stock, I think it is a very interesting story I should bring to your attention. Nuance Communication is a Voice Recognition Software company. This is a small cap growth story with accelerating revenue growth and a top of the line product.
I know what you think, voice recognition is one of those mirage technologies as soon as we think we have it in our grasp we end up with...software that doesn't work. (ie: this video of how Microsoft made it "work")

But Dragon Naturally Speaking 9 is the real deal, not only it would understand even my French accent, but it will also help you navigate through your windows applications. Microsoft and Ford signed contracts with Nuance this year to provide them with their voice recognition software.
This isn't the only product Nuance is the proud owner of, they also provide IP voice dialer solutions for employee to employee communications, a very useful tool in the Health Care and Education industries, also voice recognition solutions for Sprint customers enabling the full potential of their mobile devices. The usage rates doubled during the last 9 months of 06.

Why is that important? Because Nuance’s highest margins are done on maintenance fees charged to these companies.

I’ve checked out the financial and I like the equity building, the cash flow, and it seems they have their debt under control. The obvious bother in all of this is that they have yet to produce any GAAP income, also the non-GAP came in 3 cents per share higher than analyst’s estimates last quarter.

Of course after a 20% jump last week, and the way the stock handled itself the last time the company had disappointing earnings (-50% in one month), at these levels I might add, you might want to take some money off the table.

Overall the future looks bright for Nuance, if not acquired pretty soon, it looks like a winner for many years to come.

Les Clefs D'or, Chateauneuf-du-Pape

This 2001 was a delight to enjoy. It was soft, balance, with nice rasberries and strawberries hints. The finish was a little short, but what it lacked in elegance, it made up for in complexity.

Chevalier-Montrachet Notes

When I wanted to enjoy a nice chardonnay tonight, only one choice came to my mind. My father brought me this bottle from his cellar during his last visit. This 2004 Chevalier-Montrachet (burgundy, 14%) form Philippe Colin is quite exceptional. While it could have aged few more years, it is already showing the star that he is.

The wine is of light gold color. The complexity of the bouquet gives you a glimpse at the personality of the wine. Vanilla, cocoa, and honey suckle were the most dominant aromas.

This is a wine that is too young to let it warm up. This won't be a problem one day, but right now I would advise keeping this one in the ice bucket. At warmer then advised temperature, the oak would take over, and overpower some very subtle and wonderful fragrances, I don’t want you to miss out.

This fruity, elegant, and seductive Chevalier-Montrachet is a success for this cold evening. The wine’s achievement was to deliver a powerful and infinite finish with a distinctive green pear taste.

I am currently not going to give this wine a rating, and I will tell you why later, but I might change that sometime in the future.

Google's Quaterly Earnings Report

As I am writing this Google stock is having a bad day. It is down 2.76% with >x2 average volume, and it's just past the first hour of trading. After the earnings report yesterday, which came in with exceptional numbers as far as income ($3.29 EPS) was overshadowed by a slightly lower than expected profit margin. Google spending habits are growing faster than their earnings. How horrible!
Meanwhile the other concern is that Google is a one trick pony, making money only from advertising (much better than anyone else, kind of like their products).
Now I remember reading somewhere that one of the type of spending Google is doing was on developing new products to create new revenue streams.
Am I the only one seeing this? They are taking care of the "one revenue stream" problem by increasing capital spending. Shouldn't this be praised? Shouldn't this type of behavior be encouraged? Or is wall street so used to Companies ignoring a problem until the very last minute, and more than often, too late, that when one companies takes control of their future way ahead of time, they have to be negative about it? For doing something positive too early?
It's not doubt to me that Google is ahead of its time, their mission statement says it all. It must be the only one out of the thousands and thousands of traded companies, which do not contain the world "maximum profits for investors" in it. The way they treat their employees should be a model for everyone. The way they treat their customers should be a model for everyone. The Google model works, plain and simple, and if you trust it, it will reward you.

Stock Performance

The first month of the year has passed and it’s time to tally up the results. The portfolio that I managed as performed as such:

• GLD +2.56%
• COP –7.70%
• EEM –0.32%
• VLCM +9.91%
• GOOG +8.91%
• MRK +1.77%
• NUAN –0.94%

For a total weighted gain of +2.31%

My only concern for the month of February is the emerging markets. I’m afraid the long streak they are on is about to end, and I expect some below domestic return performance. As they say--most of the money comes at the end of a run, and I think this is what we are seeing right now. I have seen many TV reports praising the benefits of having emerging markets exposure, and heard enthusiasts pouring as much as 40% of their portfolio in international stocks.

It’s hard to imagine that the countries theses companies are established in will be supportive in economic hard times. A small recession could seriously impair their ability to grow, as I have seen it many times, popular and socialist governments will turn their attention to the neediest of the population instead of the fortune 500 (I don’t think the level of campaign donation by emerging markets countries could ever attain the levels seen in the U.S.).

Be wary of overexposure to one sector!