Thursday, April 30, 2009
The trajectory of the upward curve is another matter but things are certainly not getting worse.
According to this study, Google's brand value has surpassed $100 billion. #1 worldwide and therefore more than that of Microsoft. That may be a wee bit toppy but on the other hand you have to dance while the music is playing. Years later, I still can't believe I passed on that IPO.
The USA Today and others have been talking about a version of the iPhone for Verizon. More likely in my opinion is a device that aims directly at current flavor of the month, Amazon's Kindle book reader.
Jason Schwartz at Seeking Alpha makes a very good case for the device at Verizon or in general to be an Apple Media Tablet which could be a very big product indeed. It makes perfect sense to me so maybe I'm missing something.
Wednesday, April 29, 2009
Since I don't have a worst enemy, I'm switching to Ninja mode after this post and am going to battle this thing until it kills me or it.
Futures are firmer today which makes perfect sense. Morgan Stanley did a call with Institutional Clients yesterday at 11:00 to discuss the ramifications for investors of Swine Flu, which means that said ramifications are minimal. Go ahead and buy the stocks you like.
Intrade.com has the line on U.S. GDP being positive in Q3 at 35% or so, up nicely with the market since early March. I'm not sure where consensus is but that seems high to me. That would be some kind of snap-back.
Tuesday, April 28, 2009
My take? Microsoft will spend a zillion dollars trying to create something close to the iPhone then Apple will come in at the last moment or when an upgrade is ready around that time and waltz into Verizon.
I could be wrong. I don't like Microsoft's chances though.
Swine Flu continues to spread and has put a significant damper on the market. It is exactly the kind of event that I would avoid trading/investing around if I could. The most likely resolution is that the disease is contained in short order, but since there is a small risk for something much worse, people are worried. One thing I would do is buy stocks I like longer-term if they hit levels that are attractive due to the Swine-related market weakness.
The end of the Swine Flue cycle may actually be the end of the bad news cycle for this part of the economic cycle. The Regulators have spoken on the Stress Tests according to today's press and of the large banks, only Citi and BofA need more capital and it is not inconceivable that they get it.
The very strange ballet featuring GM, Chrysler and anyone with money continues but is nearing the end.
High gas prices are ancient history and I do believe that house prices are bottoming here or have bottomed already.
When we are done with the Swine Flu, it will probably be a good time to start looking at owning stocks long term again. The economy has a lot of work to do to get itself back on track and there will be enduring negatives including the deficit and the debt that we will be saddled with. Nobody said it would be easy.
Monday, April 27, 2009
This will pass, hopefully soon.
It feels to me as though oil is going lower, maybe a lot lower.
There was lots of buzz over the weekemd about Apple being in talks with Verizon to offer the iPhone. This was bound to happen at some point but will be a negative at the margin for Blackberry maker RIMM in the meantime.
Sunday, April 26, 2009
Saturday, April 25, 2009
Kentucky GRILLED Chicken is now on the menu. I thought that the only reason you would buy KFC is for the skin, which is really sophisticated salt-delivery mechanism, and so bad for you that it makes eating out a thrill similar to bungee jumping.
This can't possibly work.
If the Fed does want some banks to raise more money, and doesn't want to paint any banks with the ugly brush, it is going to be difficult to let the best banks repay the TARP money any time soon. My bet is that it happens about 5 minutes after the banks that need more money raise it.
This is yet another issue that will be eased by higher stock prices, but will be eased. We'll get there eventually.
Friday, April 24, 2009
Microsoft - missed revenues but good cost control for the quarter and going forward saved the day. No growth and no game changer here. Morgan Stanley just upgraded it based on PC units bottoming and their new product cycle - Windows 7. I can't see this one outperforming in a good tape.
Amazon - continues to defy (my) logic. Kindle is hot but the core retail business remains very strong.
Samsung - comments on semiconductor supply/demand were not as positive as I'd expected. These guys are masters of self-serving expectations management so a little more digging is in order.
"By failing to teach the principles of corporate governance, our business schools have failed our students. And by not internalizing sound principles of governance and accountability, B-school graduates have matured into executives and investment bankers who have failed American workers and retirees who have witnessed their jobs and savings vanish."
Ken Lewis at BofA, or BofA's board may become the poster children for appropriate behavior at the CEO level and above. I have been railing about boards turning down m&a offers that clearly benefit shareholders. The Ken Lewis drama over the Merrill forced acquisition might be taking us to a whole different level.
Futures are flattish today ahead of details on what went into the bank stress tests. Implying a causal relationship there sounds good on TV but is a bunch of baloney. How and on what terms the banks were tested doesn't matter for our overall market any more. No big banks will be allowed to fail from here. The worst will get more very dilutive capital so avoid those stocks obviously. Other than that, I am offically granting everyone permission to play golf this afternoon.
Thursday, April 23, 2009
The Apple quarter reported last night was a beauty. A terrible economy, an ill CEO, a resurgent RIMM - none of these could derail Apple from having a good quarter. 2-year chart for Apple above left.
Wednesday, April 22, 2009
The profile is included in addition to the search results, not instead of them, so the "search" aspect is not entirely co-opted. It's still somewhat unsettling that this will change the nature of googling. We expect Google to find what is out there according to their search algorithms, not any individual's input.
If the service does gain traction, the value to Google of the personal info that will be collected could result in dozens of add-on products and services.
The downside might be that this brings us one step closer to a Google backlash over privacy concerns. Between your search history, viewing habits, shopping tendencies and now added profile information, it may be only a matter of time until someone or everyone decides that Google has too much information.
The stock is trading up nearly 10% although short term gains may be limited by the fact that the company needs to raise some money. Up is good.
Away from semis, other growth cyclical tech data points continue to be almost universally positive. especially in flat panel news out of Asia.
Yahoo beat estimates thanks to a lower tax rate, which does not get any credit where it matters. Rightly so. Optimism over a Microsoft deal is the key, which I don't get. Moving on.
Tuesday, April 21, 2009
Bank of America yesterday pointed out that better than expected earnings can still have a dark underbelly. For me, the banks are still on a lot firmer footing than they were two months ago. I would take a flat week from this market.
Busy day. Later.
Broadcom buying Emulex? That's surprising.
Kernen is worried about a W recession/depression. Drama King? Could happen.
Monday, April 20, 2009
In previewing Samsung's March quarter, which will be reported this week, a major Wall Street firm is out saying aggressively that the semiconductor memory market has bottomed and that in the ensuing rebound, flash has the most upside potential.
SanDisk is the best pure play if you're inclined to agree. In addition to being manufacturers they have a large IP portfolio which generates a large royalty revenue stream. I think this call works at some point between now and Christmas, even without a takeover. If Samsung says something positive about flash inventories/supply/pricing, SanDisk will work sooner rather than later.
Language-learning software company Rosetta Stone (RST) went public in a rather nifty IPO on Thursday amid little fanfare. You still can't get a quote for the stock on Google Finance but I'm sure they're busy.
One of the things this market needs is some good IPOs. RST rose 40% on day one. Good, or even frothy IPOs accomplish three things. They make:
- investors both retail and institutional feel better about buying stocks
- institutional investors feel better about risky assets in general
- venture capital and private equity guys feel better about committing capital. If the IPO liquidity event is not a possibility for these private investors, money tends to flow much more slowly
I'm not sure whether RST will work from here. It might. Learning a new language is like getting in shape - it's easier to join a gym or buy some software than it is to do it.
Morgan Staney was lead underwriting and they know how to coach a company into a position to beat-and-raise for the first few quarters.
Saturday, April 18, 2009
Or kind of scary.
I am totally in favor of people becoming overnight success stories. This one, as written up by the NY Times today, is hard to believe.
The blog "I Can Has Cheezburger", has been turned into a book, published, and has sold 100,000 copies already. That people like to laugh at stupid cats who can't spell is not that surprising. That they are paying up to $15 per copy for content that is free on the internet is. Wow.
Friday, April 17, 2009
Citi and GE, both heavily shorted until recently and probably still, both reported decent quarters and had decent commentary about the future. If I were short either I'd be looking to cover.
This earnings season has not been a disaster so far. Of course things could get worse, but other than unemployment, it's difficult to bet on any sector of the economy deteriorating materially from here.
Gun sales are on a tear and values for higher end firearms are surging. I hope those buyers, whoever they are, don't know something that I don't know.
The Pirate Bay is a cool site that hip people use to download/stream free online music and movies via torrents. Some people call that stealing. You be the judge.
Speaking of judges, one in Sweden today threw the four founders of the service in jail for one year and ordered them to pay over $3 million in restitution to the media companies they were harming. It has been years (if I remember correcly) since any users of these types of services have been been punished, so it doesn't appear to be a risky proposition other than the increased chance of contracting viruses, for downloaders that is.
Mike Masnick boils down the real issue at his blog over here. Pirate Bay doesn't have any content on its site, it just enables sharing, which does not sound like copyright infringement to many. I'm not sure how this will ultimately play out but it would be nice to know the rules.
Ironic that we get a different kind of Pirate action this week.
Thursday, April 16, 2009
“While we are facing difficulty in relying on external demand, we have to turn back to domestic demand, including consumer spending and investment, to sustain growth,” said statistics bureau spokesman Li Xiaochao.
Microsoft's interest in Facebook valued the company at $15 billion. Talk this week indicates that Facebook is looking to raise more money pre IPO, at a valuation of either $2 billion or $4 billion. This numbers are not close together, by the way.
Microsoft's buying less than 2% of the company for $240 million in 2007 looks kind of silly right now. That being said, if Facebook is willing to take money at a $2 billion valuation, Microsoft should take all that it can get.
Wednesday, April 15, 2009
Intel, the world's largest semiconductor manufacturer, did report better-than-expected numbers last night for the March quarter. The stock is trading down in the premarket. Wells Fargo and others' stocks traded up on better-than-expected earnings. Does the fact that Intel in trading down mean that the rally is over? No, or at least not necessarily.
Tech has outperformed off the bottom and cyclical tech has done very well. Investors have priced in a cyclical bottom (unless we need to get to a lower low, which is another story). Intel is trading down because the company gave no indication of when things will get better.
Even when you're at the bottom, yo can stay there for a long time.
Without reprinting the whole list, a couple are worth calling out as they are often overlooked.
Balance sheets are generally more important than are income or cash flow statements.
Especially in extremely bad times. Witness what happened to the financials last year. The dead ones were killed by the balance sheets. Valuing the beleaguered ones on normalized or historical earnings was impossible until the balance sheets were fixed.
Investors should be providers of scarce capital. Return on capital is typically highest where capital is scarce.
There is some irony here. Most private investors do not act as if they are providing capital - they act as though they are placing a wager. "Providing Capital" is a better mindset for protecting it.
Leverage gives the illusion of wealth. Saving is wealth.
"It isn't clear precisely what information the government might disclose. It remains possible the data won't be specific to individual banks. But some within the administration believe a certain amount of information needs to be released in order to provide assurance about the validity and rigor of the assessments."
The public deserves some detail as to what the real story is. There are plenty of people who believe that no companies should have gotten any money, that the old boys are just looking out for each other, and that there is no accounting for where the money went.
Not disclosing the true current health of the banks would raise more questions about TARP and TALF and why we are here. Answers would be nice. It might even be good news.
Tuesday, April 14, 2009
The company just announced that it will spin out Skype via IPO. I was kind of believing the NY Times and others who thought that they were going to sell it back to the founders, which would have made sense. Frankly anything would have made sense since the purchase didn't make sense in the first place and Ebay wasn't monetizing it. One could surmise that they bought it because it was cool and they could afford it.
Earlier this week, it was reported that Ebay has disposed of StumbleUpon, another nifty asset that they weren't really doing anything with. Stumble is a social web surfing site that gives users one-click web site recommendations all day long if you want them. It's a tremendous time waster but is sticky if you're bored and has a revenue model.
I am an infrequent Ebay user and use StumbleUpon from time to time. I want both to be successful and think they will be, but the reason that I like Ebay right here right now is that it is getting rid of them. Ebay's revenues have decelerated for the last 5 years and will be flat to down this year. It looks as though their core market, consumer-to-consumer auctions, has matured.
If you're a growth company that is not a growth company any more, what to do? Focus on cash flow and driving your core asset if you have one. They do. The fact that they were wasting time on other "stuff" is more than a distraction. The spinoffs signal, to me, that they are willing to get back to their core competence. The stock is not expensive. I haven't liked it for years. I do now.
The stock is trading down a little, probably because it has run a lot and also announced that it is raising $5 billion to repay the TARP money.
The chart is breathtaking. $200 to $50 to $125 in under two years. This is not some second tier franchise either. At some point in the next decade, I wouldn't be surprised to see them go private again. The wave of scrutiny and increased regulation is just beginning.
Strong finish yesterday after the market spent most of the day under water. This market does not want to go down, which ironocally indicates that it is due for a correction. If earnings keep coming in better, timing it will be tough.
Monday, April 13, 2009
Up and to the right. I'm old enough to remember when lots of charts looked that way and we worried about an anachronism called "valuation".
<---That is a 1-year chart for Shanda Interactive, a Chinese online gaming company. I don't really have a point here. I don't know the company as well as I might, and it is not particularly expensive. Up is good, especially when the market is acting better as it has been.
What a Masters yesterday. Wow Bob, wow. Obscure David Lynch reference.
Anybody notice that we've had one huge health care M&A deal after another this year? "Express Scripts Inc., the third- largest manager of U.S. drug benefits, agreed to buy Wellpoint Inc.’s pharmacy-benefit management units for $4.68 billion, gaining about 25 million members." Maybe the plan is to let a handful of healthcare companies get too big to fail, make them government sponsored entities a la Fannie and Freddie and back into universal healthcare that way.
Twitter viruses are the new hott.
Pirates. Dead pirates. High seas adventure. Arrrrgh.
Microsoft and Yahoo. On again? Yawn. It looks like Eay is ready to pull the plug on Skype, which from the point of view of Ebay shareholders, must have been one of the more expensive experiments in the history of the Web. More on that later.
Lots of bank earnings this week. If they're all as good as Wells Fargo, the race is on. They won't be. Lots of alpha lying around.
Sunday, April 12, 2009
Wachovia used to sponsor a PGA tour stop in Charlotte NC. (Don't tell anybody but they still do.) Wachovia got into some trouble with some loans and Wells Fargo bought the company, a move that was cheered and maybe encouraged by the Fed. That's the same Fed that loaned Wells Fargo $25 billion under the TARP program. TARP recipients aren't allowed to have birthday parties, talk loudly in the hallways or use the elevators to travel fewer than 3 floors.
As for the golf tournament?
"(T)his is now a tournament where mentioning the title sponsor is banned. Wells Fargo? Forbidden words around Quail Hollow Club. So is Wachovia, the Charlotte-based bank whose logo, colors and name used to adorn nearly everything around the club during tournament week.
Wells Fargo is paying for the sponsorship but demanding that it get no publicity. Not exactly how most people would run a business. I don't really need to hear about taxpayers bailing out Wells Fargo either. That $25 billion amounts to a loan at 5% and given the beauty of a quarter that Wells printed this week, that money will be repaid ahead of schedule.
As an aside, let me point out that the much-maligned Fed is borrowing money at less than 2% and lending it to a company it has guaranteeed will not go busto at 5%. That's almost a better business model than Coinstar.
Saturday, April 11, 2009
It turns out that this one was an issue I feel strongly about. The suit alleges:
"that Defendants knew or should have known that the Plans’ investment in Merrill Lynch common stock was not a prudent retirement investment and that Defendants acted imprudently by not preventing further investment in Merrill Lynch common stock and not liquidating those holdings."
There are two reasons that this issue got traction this this time around. One is that Merrill had lots of subprime exposure which is currently public enemy number one, and second is the fact that BofA bought the company and is desperately trying to make all the noise go away. I actually googled the suit and it turns out that BofA already settled it. For $75 million. That's real money but at slightly more than $1000 per employee it's not at the same time.
Friday, April 10, 2009
APRIL 8, 2009, 10:24 P.M. ET
78%: Percentage of male golfers who would rather play Augusta National than go on a date with Sports Illustrated swimsuit model Bar Rafaeli.
Source: Callaway Golf
As you can see, to paraphrase Jerry Seinfeld, she has many of the qualities prized by superficial men.
Laser tag, go karts, arcade, bumper cars, 3D movies. Lots to do.
If you are between 36 and 50 inches, you can ride the junior bumper cars, unless you are intoxicated. If you are six years old and drunk, just stay at the bar.
In other words, less that 1/3 of the year has passed, a lot of things have happened and very little has been accomplished.
As the Fed and Treasury continue to simultaneously stimulate the economy and prevent any systemic failures and Obama tries to do everything, Goldman is contemplating selling stock in here, still 40% below its high up up 100% from its low, to pay back TARP funds to everybody's least favorite Uncle, Sam.
Credit Suisse surveyed over 400 institutional investors in the last couple of weeks and released the results on Wednesday. Of note, cash levels have been going down and 51% of respondents think that the market has bottomed. We're still at a level where stocks can work as long as results are not clearly worse than expected.
It will be a busy week for earnings coming up. Enjoy the weekend.
Thursday, April 9, 2009
The risk of being short just went through the roof.
Back to Spring Break.
Tuesday, April 7, 2009
ICANN is still taking comments on the change and apparently won't start taking applications for new suffixes until the end of the year at the earliest. Opponents are worried about, among other things, the cost of defending trademarks. From the ICANN website:
There have been a number of overarching issues raised in the comment process that require further work and so remain unchanged in this draft. Those issues are:
- Trademark protection
- Security and stability
- Malicious conduct
- Demand and economic analysis
Look for squatters to get into high gear as this approaches. I wouldn't mind owning www.dell.a or www.yankees.boo because it's pretty easy to figure out who to sell it to.
It's the kind of indicator that is only used by pros, and only used when what it may be indicating is convenient to the argument at hand. As you can see in the 1-year chart above, if you have a short-term time frame, the index is rolling over after making a big move off the November/December lows.
If you're thinking longer term what has been going on over the last two months is probably noise. The index put in a double top from October 2007 to May 2008 then declined by over 90% over the next six months.
It's actually trading a little like a bank stock, in that it is still up over 100% from its recent low. The world needs more leading indicators. It may be that this one is too volatile to be in common use.
Looks like a weak open as we wait for earnings.
Monday, April 6, 2009
If you were a shareholder on March 9 (admittedly a market low) with the stock trading at $3.84, and I told you that you could sell your stock at $9.40 per share, you would have rightly jumped for joy.
IBM was kind enough to make such an offer. Unfortunately, according to Bloomberg, founder Scott McNealy and the rest of the JAVA board elected to reject the final iteration of the deal as too cheap. What a joke. I don't know the exact details and don't need to. Boards work for the shareholders (not in this case). JAVA's stock is going to get crushed today and the current JAVA CEO will probably get the boot.
Interesting times ahead. I don't expect IBM to handle this one as poorly as MSFT handled YHOO. I still expect this deal to get done.
A lot can change in a year.
I'm surprised that the futures are up this morning given the missile shenanigans in North Korea over the weekend. I didn't watch any TV yesterday so I don't know what the experts' opinion is of whether Obama is up for this type of challenge so soon.
"In Prague on Sunday, Obama condemned the North Korean launch as a "provocative" act and used the incident as a fresh reminder of the world's dangers. He promised a broad new government effort to reduce the threat of nuclear weapons and eventually rid the world of them."
Some sort of firmer response may be required in the end.
Geithner decided to remind us yesterday that he has the right to forcibly remove execs from bailed out companies. That's news?
Sunday, April 5, 2009
“When you look at cases where compensation of senior management was out of line, or where people arguably were overpaid, it’s definitely the fault of the compensation committee of the board,” says Thomas Cooley, dean of the Stern School of Business at New York University and a director of Thornburg Mortgage. “Congress has gotten into the business of dictating executive pay now, and they shouldn’t be in that business. What they should be doing is turning the light on the committees.”
I've been a keen observer and honestly thought this was going to go in a different direction. I thought that boards everywhere would be stepping up their game and atoning for the lax oversight and rubber stamping that had been going on.
It's bad for business to have government involved in compensation, obviously.
Saturday, April 4, 2009
Friday, April 3, 2009
<--- S&P 500 1 month chart. +23% in under a month.
RIMM tore the cover off the ball with earnings last night. Go Canada.
Semiconductor memory maker and perpetual capital destroyer Micron Technology reported in line last night and had very cheery things to say about the bottoming of its end markets pretty much across the board.
Ever notice how there are way more positive data points on days when the markets are up?
I don't know but Michael Arrington might. Google to buy Twitter? I've heard good things.
"Why would Google want Twitter? We’ve been arguing for some time that Twitter’s real value is in search. It holds the keys to the best real time database and search engine on the Internet, and Google doesn’t even have a horse in the game."
Real time search. Sweet.
Thursday, April 2, 2009
"The harder it is to estimate and analyze an uptrend (or downtrend I guess but don’t practice), the better your chances are of success. You fish where the fish are."
He was talking about Twitter specifically and social networking in general but the idea holds true for all types of upward revision ideas. Beat and raise is the sweet spot of momentum investing, especially when top line beats are leading to bigger bottom line beats. Too bad there's not much of it going on in this market.
RIMM has had its lunch money stolen by the iPhone and needs to get its act together. If you're a traditional tech investor you probably don't want RIMM to report a great quarter. Tech investors generally look for innovation to get rewarded. Apple has out-innovated RIMM, and Palm is on the way this quarter with something new and maybe better. Other than the touch screen, there's nothing all that new or different about the Blackberry.
I'm looking for a 1 - 3 quarter spurt of margin discipline and a pop in the stock followed by a resumption of the innovation-rules construct - if RIMM can't get back ahead of the pack, the stock is not going to work longer-term.
I like it ahead of tonight's earnings, though.
FASB is finally going to vote on easing mark to market, and they're doing it retroactive to last quarter. This is not yet priced in to the financials imo.
March U.S. auto sales surprised to the upside and are going to have the second derivative monkeys jumping up and down. Going from down x% y/y to down (x-1)% y/y does not make for good headlines but is a necessary condition for turning things around.
Oil just flipped back to trading like a proxy for the next 12 months' global ecomony and is up almost 5% premrket as I write this.
My wife asked me last evening if the market had bottomed. I don't remember what we were doing at the time or why she asked but it was an interesting question coming from a person who is the ultimate buy and hold and forget about it type.
Wednesday, April 1, 2009
The NY Times is reporting today that four small banks have done it already:
"Signature Bank of New York said on Tuesday that it had repaid $120 million to the Treasury Department. Old National Bancorp of Indiana returned $100 million, Iberiabank of Louisiana paid back $90 million, and Bank of Marin Bancorp of Novato, Calif., repaid $28 million. All of the banks paid 5 percent interest on the money they had received."
I sincerely hope that some members of the mainstream media choose to focus on this. The perception that money was "given" to the banks and that nobody knows where it went is baloney. That it couldn't be traced dollar for dollar to new loans is unfortunate but stuff happens and the banks' balance sheet to a step function for the worse precisely during that period. Now that there are real live banks repaying the money, after having made interest payments on it, is news. The taxpayer made money. It will not with all banks and certainly not with AIG but let's tell the whole story.
The first quarter is over. The S&P 500 was down 11% and change, which isn't the end of the world. Good thing too because it felt like the world was going to end right up until early March.
Where from here? Case Shiller data for housing prices was weak again yesterday but not a disaster. Earnings reports for the March quarter begin next week. Assuming there re no new negative macro shocks in this quarter, earnings seasons could go three ways:
- Earnings are worse than expected and stocks go down. Look for new lows ahead
- Earnings are better than expected and stocks rally. Up is good in that case
- Earnings are worse than expected and stocks rally. Do you feel lucky punk? That would be an interesting spot to make some big bets
Has anything of note come out of this G20 meeting yet? I haven't seen it if it has.