May the Fourth be With You!

Posted on May 4, 2016 by BarkerReport

First of all, Happy Star Wars Day to everybody out there, and May the Fourth be with you.

Having said that, I’ve been wondering for a while what value has the Star Wars franchise brought to Disney (NYSE: DIS) since it was purchased in 2012.  Off the bat one would argue that the purchases of Star Wars and Marvel were brilliant moves by Disney from a business strategy perspective, although many Star Wars fans doubted the “purity” of the movies to come, and were worried that the quality would decrease, and movies would be commercialized (even more than by George Lucas, if that is even remotely possible).

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After Episode VII was released last December, the stock tanked 25%.  Of course, most of that was driven by a whole market contraction during the first couple of months of 2016; however, the S&P 500 dropped 11%, and the Dow Industrials 11.5% during the same period.  So Disney under-performed the two major indices by nearly 15% on the months following the release of the seventh installment of Star Wars.  Why? Continue reading →

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Making the Most of the Earnings Season

Posted on April 26, 2016 by BarkerReport

Unlike Christmas, it comes 4 times a year, and doesn’t make all people happy.  It’s the busiest time of the year for fund managers and equity traders around the world.  It’s earnings season.

In the old days, if you beat expectations the price of your stock would shoot up, if you just meet them it would generally stay flat, and if you missed them the market would sell the stock.  Today it’s a bit harder to figure it out.  Companies may report profits, beat estimates, but stocks would drop on weak guidance, or vice-versa.

This leaves the average investor with two options, buy a stock based on solid fundamentals and keep it despite short term volatility, or take blind bets (no different to what they would do on a casino) before the reports, and hope for the best. There is however a third option… options: Continue reading →

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Are Principal Protected Notes a Good Investment?

Posted on April 19, 2016 by BarkerReport

In the current investment climate, where deposits are yielding zero (or negative), fixed income returns are negligible, and equities have been booming for the last 7 years – bringing them closer to a correction by the day, finding a safe investment that might outperform your average bond or deposit might be a bit of a nightmare.  Enter the Principal Protected Note.

A Principal Protected Note is a structured product; which, in its most basic form consists of a zero coupon bond and a call option on an equity or index, or pretty much any other asset class with variable return.

formulaeThis is how it works: Once the investment has been made, the issuer will take an
important part of the investment and purchase a zero coupon bond to match the life of the investment.  This is the part that provides the principal protection, since the zero coupon bond will mature at par.  Whatever is remaining of the investment minus the market price of the zero coupon will generate the manager fees, plus it will allow the purchase of a call option or a leap on the underlying for a notional value matching that of the initial purchase.  Some principal protected notes feature capped returns, meaning that should the returns be above a certain level, then the manager would pocket the excess returns.  Let’s look at an example: Continue reading →

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The Future of Steel in the UK

Posted on April 11, 2016 by BarkerReport

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In recent days, Tata Steel (NS: TISC) announced it would shut down its UK steel plants unless it found a suitable buyer.  Members of the UK government are running like chicken without heads trying to find a market solution, the opposition demands full nationalization (they would nationalize the whole country if it was left to them), the unions are yelling foul play, and the taxpayer looks like its about to get duped again.  So, what are the options for the steel industry in the post-1960s free market?  First let’s explore the causes, then we’ll check the potential solutions, and drawbacks. Continue reading →

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Cornering Tracks and Markets

Posted on April 4, 2016 by BarkerReport

A couple of weeks ago, a court in Stuttgart acquitted Porsche’s (Xetra:PSHG_p) former CEO Wendelin Wiedeking and ex-CFO Holger Härter on the charges of attempted market manipulation regarding the unsuccessful takeover of Volkswagn AG (Xetra:VOWG_p).

This story made me remember the remarkable short squeeze Porsche managed to pull, and what is even more amazing, is that nobody has decided to make a movie out of it.

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Let’s go back in time to relive one of the most amazing short squeezes ever.   Continue reading →

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Happy Easter

Posted on March 27, 2016 by BarkerReport


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The Barker Report will be back next week.  Have a very happy Easter.

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Brexit, Schmexit! Part 2: The Banks

Posted on March 20, 2016 by BarkerReport

As June approaches, we should find Brexit’s air time on UK news increasing (if that is even possible).  As we stand today, there are two well defined camps: those for Brexit, and those against it.  Several political figures have joined the different camps, with Prime Minister David Cameron and London mayor Boris Johnson being the most senior representatives of each side.  I won’t dwell into the politics of this, but focus on the economics.  Today we will analyze the effects of Brexit on London’s stance as a major financial hub. Continue reading →

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How Low Can You Go?

Posted on March 13, 2016 by BarkerReport

We’re not talking about the limbo dance here, but central bank rates around the world.  After (not-so-super) Mario Draghi’s bazooka last week, I decided to write a quick note about what’s going on with rates, and what are the potential pitfalls.

Why are rates important?

The interest rate is the main tool central banks have to influence the economy.  Rates are used along with banking reserves and open market operations to expand or contract the money supply.  If an economy is growing too fast central banks can increase the rate, making it more expensive to borrow and encouraging savings.   Continue reading →

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Brexit, Schmexit! Part 1: The Pound

Posted on March 6, 2016 by BarkerReport

After recent negotiations between the UK Prime Minister and heads of EU states, the in-out referendum has been scheduled for June 23rd.  So far, Brexit has been hogging air time across news outlets all over the UK.

Brexit stands for British Exit of the European Union.  Over the next 3 months I will bring you a series of blog posts analyzing Brexit and its implications to the UK economy, starting with the pound. Continue reading →

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Death Cross for Netflix

Posted on February 29, 2016 by BarkerReport

Netflix’s (NASDAQ: NFLX) 50 day simple moving average (SMA) has been slowly (even painfully some might say) creeping towards its 200 day SMA.  Last week, the 50 day SMA actually crossed the 200 day SMA downwards, this event is known by technical analysts as the “death cross”.  It denotes a long term reversal in the performance of a stock.

Last August, Apple (NASDAQ: AAPL) had its death cross moment and since then the stock has been down as much as 13%.  Apple’s stock death cross took place after coming down from its highs of nearly $135 per share.  The stock is now around 30% off  its highs.

Continue reading →

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