August Shakes, Rattles, and Swirls

September 3, 2011 at 8:32 am 1 comment

Shake, Rattle, & Swirl: Category 3 hurricane Irene pounded the eastern seaboard with winds reaching 110 miles per hour, knocking out power in an estimated 8 million homes and businesses. Some analysts estimate the damage to be somewhere between $7 billion and $10 billion. If that wasn’t enough, earlier in the same week, a 5.8-magnitude earthquake rippled from its Virginia epicenter up to Maine rattling both buildings and people’s nerves.

Volatility Spikes in August: Volatility, as measured by the Volatility Index (VIX – a.k.a. “Fear Gauge”), reared its ugly head again in August, reaching a level exceeding 44 (Source: Hays Advisory). This reading has only been experienced nine times in the last 25 years. Historically, on average, these have been excellent buying points for long-term investors.

Steve Jobs Lets Go of Reins: After being Chief Executive Officer of Apple Inc. (AAPL – formerly Apple Computers) for more than 20 years, Steve Jobs passed the CEO reins over to Tim Cook, who has been with the company for 13 years (including interim CEO). Jobs will remain on board as Chairman of Apple and still provide assistance in a more limited capacity.

Buffett Puts Dry Powder to Work: Billionaire Warren Buffett is putting his money where his mouth is. Although he is one of a few wealthy individuals griping about too LOW income taxes (NYT OpEd), at least he is using some of his extra bucks to support the country’s financial system. More specifically, Buffet’s Berkshire Hathaway Inc. (BRKA) is investing $5 billion in troubled banking giant Bank of America Corp.’s (BAC) preferred stock (paying a 6% dividend), with warrants to buy additional stock in the future at a mutually prearranged price.

Google Buys Motorola Mobility: Google Inc. (GOOG) agreed to pay $12.5 billion to buy cellphone maker Motorola Mobility Holdings (MMI) in a move designed to protect the internet giant, and its partners, against patent litigation as it pertains to the Google Android mobile phone operating system. that could shake up the balance of power among among tech rivals. Time will tell whether Motorola’s assets will providing valuable resources for Google’s partners (i.e., HTC, LG Electronics and Samsung Electronics) or whether the acquisition will create competitive conflicts.

ECB Buys some Bonds:The European Central Bank (ECB), Europe’s equivalent of the U.S. Federal Reserve Bank, began buying up billions of dollars in Spanish and Italian bonds last month. The goal of the bond buying program is to stem any potential contagion effect arising from debt crises occurring in countries like Greece, Portugal, and Ireland.


Quote of the Month

On Volatility:

“Worry gives a small thing a big shadow.”

Swedish Proverb 

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: For those taking this article seriously, please look up “parody” in the dictionary. Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, GOOG, and AAPL, but at the time of publishing SCM had no direct position in BRKA, MMI, HTC,
LG Electronics and Samsung Electronics, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page

Entry filed under: Financial Markets. Tags: , , , , , , , .

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