Fear over Financials drags Markets lower Wednesday

North American markets were broadly lower Wednesday as investor fear in the Financials and further credit crisis write-downs caused massive selling. Major indices across America were off between 2 and 3%, with the biggest loser being the S&P 500.

The US Dollar continued to weaken against other major currencies setting a new record low against the Euro. For us Canucks (Canadians, for those not from North of the border), we saw our Loonie hit $1.10 before settling back to $1.07 and change. Great if you're planning a loot shopping session in Buffalo on the weekend, not so nice if you're holding American investments.

The Financials were the biggest victims, whether they deserved it or not. Fear of further write-downs and losses spurred selling that carried throughout the entire day.

The list of victims is as follows:
Citigroup (C) - Down 4.5%
Bank Of America (BAC) - Down 5%
Wachovia (WB) - Down 6.5%
JP Morgan (JPM) - Down 4.25%
Morgan Stanley (MS) - Down 6%
Goldman Sachs (GS) - Down 4%
Lehman Brothers (LEH) - Down 5.75%
Novastar Financial (NFI) - Down 2.75%
Washington Mutual (WM) - Down 17.25%
Countrywide Financial (CFC) - Down 9.25%

Not even high flying Technology could save this session as selling was seen across the board. The amount of trader fear that exists over further credit losses, makes this a scary time as yet to go bargain hunting. If trying to buy on the cheap, do it in blocks and stagger the purchases because this pent up fear carries with it more potential downside.

Cisco Systems (CSCO) reported after the bell, a strong profit quarter, in line with forecasts but their guidance and words sparked further after hours selling. The US Bank debacle has starting to creep into the technology sector according to Cisco, as orders for networking equipment from the Financials were much weaker and comments form Cisco management only stroked further fears. Shares were off 4% in trading and another 9% in after-hours trading, leading major tech futures lower going into tomorrow's trading session.

Disclosure: Author owns and has covered calls in C, BAC, WB, GS

Google Opens Up about Mobile Strategy, new Platform called Android shows Promise

Reports trickled in over the weekend that Monday was to be the day that the long awaited "gPhone" announcement would come in some form. Google (GOOG) complied with those rumors and held a conference call announcing an Open Mobile Platform rooted in a Linux based Operating System.

This system, dubbed Android, was announced by Google and several of its partners in the Open Handset Alliance, including Qualcomm, T-Mobile, HTC, Sprint and Motorola. Over 30 partners in all for the Internet search giant, all committed to produce the technology to make a powerful, open Operating System for cell phones a reality. Google will provide the backbone programming for the Linux-based OS and will release an SDK (Software Development Kit) so that developers of all shapes and sizes will be able to create applications for a multitude of devices.

The first of these devices are expected to be available in the 2nd half of next year touting as its main feature a complete full scale Web Browser, much like Apple's Safari on the iPhone or the Opera Mini browser available for certain other smart-phones. Thus far details are scarce and not well known about Android, but next week's sneak peak at the SDK should give several more clues. This open initiative by Google comes right after the announcement of OpenSocial, an open development platform for Social Network sites, with which Google has signed up several partners including MySpace, LinkedIn, Salesforce.com and its own Orkut network.

The power of the mobile Internet is something Google has its sights squarely on, and the advertising platform that that could bring. The world has billions of cell phone users and over a billion handsets are sold each year, which represents a fantastic opportunity for localized and personalized advertising. It just so happens that Google has become a virtual expert at both of those flavors of ad-serving. Analysts and economists are throwing around estimates for growth in the mobile ad space and their particular 'Billions of $$$ by Year X' don't matter just yet, what does, is the resounding emphasis that it is the next great Internet growth sector.

The Android platform will provide Google a foundation to port its Internet software on a multitude of devices, and as CEO Eric Schmidt pointed out during the call:

"This is not an announcement for gPhone, we hope to see thousands of gPhones"

The thinking by Google of course, is that, why make the hardware when so many others already do. Create a platform that will excite partners, can cater to everyone's needs, and everyone succeeds. Google doesn't make the computers that sit at your desk do they? No! But they provide an expansive software platform and a multitude of services that arguably are simpler and better than competitive services. With powerful enough phone hardware and screens that can somewhat do justice to the "Complete Internet" Google can follow the same model with cell phones that they have used to dominate in the Internet space for Personal Computers. Not to mention innovation can foster truly and freely on an open software platform, which Android is touted as being. Google's planning to be there every step of the way and innovate as quickly as they can in this space.

Google shares have risen tremendously since August lows around $500/share, hitting a new all time high of $730 today, closing at $725. The hype built around a mobile push by Google stemmed some profit taking but the potential of this being a major platform and a revamp in mobile industry thinking is too hard to pass up for Investors. The sentiment that phone carriers lock in consumers and halt innovation, both on the hardware and software side, can die a quick and painful death if an open software platform for mobile devices in embraced. Google knows this as do its partners, and most importantly customers are starting to take notice as well.

The mobile space, especially for advertising is still wide open and Google is trying to out innovate its major competitors Yahoo (YHOO) and Microsoft (MSFT). Both companies of course missing from Google's partner list on this project. The simple fact in the mobile industry is that cell phones are turning more and more into little powerful computers capable of doing much more than phone calls and this is no different with the Internet. Consumers will see Internet on their phones much more prominently over the coming months/years and the expectation will be for a complete and encompassing experience.

The quicker that experience becomes reality the quicker Google will be able to grow into a mobile advertising conglomerate. Today's technology consumer is much more mobile than in years past and the thinking is, and I completely agree, that these mobile users will have many more opportunities to use Google products such and Search, Gmail and Maps on the go. With more usage, comes more advertising placement opportunities when it will really matter. Getting advertisements for local restaurants when you're at home is one thing but getting localized and personalized ads for local restaurants when you're hungry and on the town is something completely different. And for this to work well, Android must become the platform of choice.

Disclosure: Author is long GOOG

Changes at the Top for Citigroup, CEO Prince steps down

Citigroup (C) Chairman and CEO Charles Prince has resigned. A move that shareholders were seemingly asking for, for more than a year, finally happened, and all it took was a disastrous housing and credit situations that nearly crippled the momentum of the United States economy.

Citigroup stock was recently beaten down heavily as the company was downgraded by analysts who were citing more write-downs due to mortgage loses and the fear that the company may need to cut its dividend in order to conserve its cash reserves. Citigroup had written down $6.5Billion worth of mortgage based investment losses. That's plenty of money to just vanish, but the kicker is that it's seemingly not gonna get better any time soon. The announcement of Prince stepping down was followed by further words of mortgage losses totalling up to $11Billion.

The company tried to reassure investors by claiming that it has no plans to cut its dividend but it'll be wait and see if that in fact is reality. Citi stock peaked earlier this summer and has fallen over 30% from that high. In the midst of these hefty losses and write-downs it was time for a change. The Chairman spot will be taken by Robert Rubin and the CEO title will be held in the interim by Sir Win Bischoff. What's next for the now struggling bank and its stock? Does anyone really know? A company having to make changes at the executive level is usually a company dealing with some kind of turmoil. However, a bank as big as Citigroup, with a reach across 100 countries has to be expected to recover in the coming years.

Holders have taken the hit now, but if the dividend in fact stays where it is, than the powerful yield of over 5% is very attractive at these stock levels. I thought Citigroup would find its floor around the $35 level but we'll have to see how traders react to Prince departure. Had this happened in the months before the credit crisis the response would have been overwhelmingly positive but with the heavy losses lingering on the minds of shareholders I expect he response to be more muted. Citigroup has a ways to go to get back near its highs, and while there are much better banks out there, with less exposure to credit problems, its a company that is so widely held that at levels under $40 it should be owned.

Disclosure: Author is long C

Las Vegas Sands posts loss as Gamblers Win and Sink the Casino Growth Sector

The Casino growth story popped severely today. The two poster child's for Macau gambling growth were sold off in bunches. Las Vegas Sands (LVS) posted a LOSS! That's right a LOSS even though its been growing its operations tremendously worldwide. Now some costs of opening new resorts factored into the loss but the bottom line was that the House was beaten this quarter. Gamblers seemed to have their day, not only at the expense of the casinos but their stockholders as well. After hours results from LVS caused shares to drop 15% after an almost 6% decline during the regular trading session. Fellow casino growth brother in arms Wynn Resorts (WYNN) posted a 4% decline in the regular session and was off 8% in after hours trading.

My take on the casino players has always been, through two major articles now, that MGM Mirage (MGM) has the potential to be the most steady and risk averse of the big 3.
From establishing highs recently the high flying momentum casino stocks WYNN and LVS have now accumulated losses of 20% and 30% respectively. Both stocks have more than doubled in the span of the last year so Investors surely must still be satisfied. Now MGM, which also more than double over the past year has only fallen 12% from its high of $100/share. On a foreword P/E basis it is also still the cheapest of the 3 casino players.

Thus MGM is still my Lion in this space and I will be buying if I see the low 80s. I do however think both WYNN and LVS are becoming a lot more attractive on a valuation and potential growth basis after this latest round of quarterly earnings fumbles, but the plan that MGM has is still unfolding in Macau and worldwide and that's the one I want to own.

Disclosure: Author currently holds no position in any of the companies mentioned

Aftermath of Fed Cut creates Market sell-off led by Financials, Citigroup Pressured

The Federal Reserve statements after their Halloween rate cut of 25 basis points, based on further economic instability due to housing issues, signaled that inflation is at the forefront of The Organization's list of concerns. This talk spooked investors Thursday and led to the Dow dropping by over 360 points. The Nasdaq and the S&P followed suit, both dropping over 2% and the Canadian TSX index fell 1.7%.

Worries over inflation signalled to Traders that the Federal Reserve will be much more cautious about further rate cuts; or as Traders read it, No December cut. This put a damper on the extended Fall rally that seemed to continue yesterday after the Fed's decision to in fact cut rates again.

The market was hurt today primarily by uncertainty in the Financial sector and Citigroup (C) was hit the hardest. Downgrades to Citigroup and Bank Of America (BAC) prompted selling in most financial securities. Looking across the Banking and Investment Banking board was not a pretty site at the close of trading as the entire sector was down by almost an average of 4%. Comments made about Citigroup focused on their ability to stabilize their balance sheet amongst the credit turmoil. This led to fears of a cut in the dividend and sellers were immediately very active. What's the point of owning a steady bank if it needs to cut its dividend just to maintain steady?

While the credit crisis poses serious issues and strains on the financial community of stocks, it is an atmosphere that seems to be closer to the bottom than not. With Citigroup falling below $40/share and probably on its way to $35, the buying support should establish itself in the months ahead. The dividend cut rumors may or may not be true but these banks will continue to operate and in the coming years this credit crisis bottom may be one of the best financial stock opportunities, to bottom feed, that has come around in quite some time.

Google (GOOG) broke a milestone yesterday as it crossed the $700/share mark, and today with all the selling still managed to hold onto a closing price of $703. But not before setting an intra-day all time high of $713. Techs are still in season right now for investors and its worthy to note that once again the Nasdaq was the smallest loser of the day amongst the major US indices.