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Strategies & Market Trends : Can you beat 50% per month? -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (13625)	3/31/2008 8:09:18 PM
From: Smiling Bob	Read Replies (1) \| Respond to of 19256

Visa and Mastercard: Will You Use Common Sense, or Wait for the Analysts? posted on: March 31, 2008 \| about stocks: MA / V * Font Size: * Print * Email A few days ago, I wrote an article titled: "Visa: Good Time To Take Profits" based on the high valuation which I felt was unjustified in light of the slowing economy. The article attracted more than 145 reader comments, mostly from Visa (V) shareholders defending the stock price. Bullish comments include (with my responses in parenthesis): No credit risk (no such thing as no risk; if Visa's customers, the credit card issuers and retailers are having problems, so will Visa) Big Olympics upside (lots of turmoil in China, sponsors getting slack) Everyone uses credit/debit cards, nobody uses cash (tightening credit standards, harder to get cards) Consumers migrating to cards for non-discretionary items like groceries (what happens when they hit their credit limits?) Huge world wide growth (already accounted for in projections, a slowdown isn't) Recession proof (read the prospectus: "Our business is affected by overall economic conditions and consumer spending patterns") Basically, the expectation was that because the MasterCard (MA) IPO appreciated so significantly (400% in two years), that Visa should also. Apparently, these shareholders do not understand that the valuation of Visa has appreciated during that same period, which is how the underwriters established $37 to $42 estimated range, the $44 offering price, and the $64 current price! If the deal had been priced two years ago, like MasterCard, it would have been in the $10 per share range. The other thing they didn't pick up on is that past performance is not an indication of future results. We are in the midst of the most significant consumer-led global slowdown since the Great Depression. When MasterCard was priced, we were in "Goldilocks" mode. Very few would use this term for our present situation. Have you ever noticed that analysts (and rating agencies) tend to downgrade the day after negative news is released? When this happens, I think, "why didn't you say this yesterday, before the stock plummeted 20%?" Then I began to realize there is no need to rely on the analysts, because all the information I could ever need to make my own assessment was right in front of me, if I only took the time to digest the evidence. Below are a few recent headlines that made me decide to put my money where my mouth is and short Visa, but found that there are no shares available to short. It's hard to imagine that so many shares could have been shorted in the few weeks since the IPO, which led me to conclude that owners of restricted shares, say the consortium of bank owners, wanted to lock in a price without actually selling. Can't say I blame th