DHUnplugged #131: Zynga’s Zinger, Postal Panic and Facebook’s Faux Pas

Here is our latest conversation …. new insights for anyone who invests in anything.

The European mess is getting messier. We take a look at some of the important risk indicators that are at the highest level since the Lehman bankruptcy. Also, Zynga’s  options mess is contemplated along with some thoughts on the $5 billion lass at the U.S. Post Office.

Cisco (CSCO), Apple (AAPL), IBM (IBM), Groupon (GRPN) and other stocks are discussed.

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Euro 3M Basis Swaps – Hitting -119 is not good!


This is an important chart EU 3M Swaps – An FX swap agreement is a contract in which one party borrows one currency from, and simultaneously lends another to, the second party. Each party uses the repayment obligation to its counter-party as collateral and the amount of repayment is fixed at the FX forward rate as of the start of the contract. When the Euro/USD basis swap starts to move lower, it can be seen as a time when the risk of owning Euros over U.S. Dollars is increasing. Many believe that the -100 level is a key level that should be watched and -150 is a time when a crisis is occurring. Currently the level rests at -119, the lowest since the time of the U.S. banking crisis.

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Disclosure: Horowitz & Company clients may hold positions of securities mentioned as of the date published.

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3 Responses to “DHUnplugged #131: Zynga’s Zinger, Postal Panic and Facebook’s Faux Pas”

  1. Dennis

    I realize that since one can’t buy stock in the USPS, it’s not high on your list for depth of research, but with all due respect John has no clue about the problems of the Post Office.

    Here is a very quick and condensed look at situation:

    Andrew really nailed the entire problem in that the USPS has had very little support in Congress, especially since John McHugh left Congress to become Secretary of the Army.

    The Postal Service has seen the current problems coming for at least a decade, as the internet has grown, and mail volume has dropped, 20% since 2007. On top of that, the USPS has started each fiscal year since 2007 $5+ Billion in the hole because they are required to pre-pay their share of future retirees’ health benefits. No other government agency, and no other private company is require to do this.

    They have tried many times over the past decade to eliminate rural Post Offices that lose money, but when the proposals reach Congress they get voted down because what Congressman wants to face reelection after letting their local Post Office close up shop?

    Seeing the coming drop in mail volume, the USPS invested money in equipment to increase production, but this only helps temporarily if the volume continues to drop.

    The Post Office “seems pretty crowded” to John because of reduced hours and reduced staffing at the windows, and an overall reduced workforce due to the increases in production.

    Absolutely needed raises in postage rates create a vicious cycle of reduced volume.

    So, to sum it up quickly, the Postal Service did see these problems coming, but with no support in Congress, the continued loss of revenue due to the internet (a MAJOR problem), and these retiree pre-payments, a major bailout has to happen if the US is to continue to have the best, and most reliable, Postal Service on the planet.

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