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Buzz Bits: Dow, Nasdaq Dip Into Red


Your daily Buzz & Banter highlights...


Editor's Note: This is a small sample of the content available on the Buzz and Banter.

Earnings Report - MV News

  • IBM reports 4Q EPS of $2.26 vs. $2.19 cons on revs of $26.26 bln vs. $25.79. Gross margin came in at 44.6% vs. 44.4% con.
  • Capital One (COF) reports 4Q EPS of $1.14 vs. $1.24 cons on revs of $3.07 bln vs. $2.7 bln cons. COF issues downside guidance for F '07, sees EPS of $7.40-7.80 vs. $8.10 cons.
  • Coldwater Creek (CWTR) guides 4Q EPS lower to $0.16-$0.17 from previous guidance of $0.26-$0.27, citing customer traffic. CWTR also says 4Q gross margin rate to be under plan.
  • Xilinx (XLNX) reports 3Q EPS of $0.24 vs. $0.23 on revs of $450.7 mln vs. $451.19 cons. XLNX sees 4Q flat to down 5% sequentially, at approx. $428 mln-$451 mln vs. $472.2 mln cons.

Name pickin' in the energy patch... - Adam Michael - 3:43 PM

I'm not sure we have seen the bottom yet in the energy patch, but now is the time I'd start putting together my buy list. Most of the names I like are in the small cap space where most of the value is derived from company specific catalysts (and where the companies have a lower correlation to the underlying price of oil or natural gas). This type of investing can be much more risky…so please do your homework when considering these ideas.

My favorite E&P name continues to be The Exploration Company (TXCO), which I have written on in the past. I expect more details on two of their unconventional resource plays in TXCO's portfolio sometime in the 1Q. Either resource could be a "company maker."

Another interesting name is BPZ Energy (BZP). Normally, I tend to shy away from companies with assets outside the USA (BZP's assets are in Peru), but in this case, the assets are so big I feel it is worth the risk. The founders are also very well connected politically. I expect to see results from a well targeting a large offshore natural gas field in the next few weeks…if successful, it should help the company prove up a very large natural gas deposit.

Positions in TXCO and BZP

Different Look at XBD - Kevin Depew - 2:32 PM

I understand Bennet's caution toward equities, but I would be very wary of viewing long-term charts in the context of the Nasdaq-100 rise in 1999, especially when the view is not on a semi-log scale.

Arithmetic charts are fine for short-term views when the percentage change in price over the short-term period is typically not great, but I prefer to look at long-term charts on a semi-log scale. Why?

A semi-log scale uses linear scaling for time and logarithmic scaling for price. This simply means that movements in price are the same in percentage terms across the scale. In a sense, on a long-term arithmetic chart it is possible to describe almost every chart as parabolic since mathematically that is exactly what it will look like when a trend that is growing at a constant percentage over time is plotted as the price increases. So any chart if viewed over a long-enough time frame of any instrument will look parabolic if plotted on a "normal" price scale.

As an example, take a look at the semi-log chart of the AMEX Brokers Index (XBD) with the NDX plotted in dark red. Here, the trend for the XBD looks far more normalized and constant, which is as it should since the percentage growth has been more constant over time than the hyper-growth shown on the NDX chart. On a PnF basis the price objective for the XBD is 330. By the way, point & figure charts can also be scaled to percentage change. Using a percentage scale, the price objective of the XBD is 306 and the recent move above 248 was a triple top breakout.

Financial bifurcation... - John Succo - 9:39 AM

Brokers are on their highs.

Large banks are performing much better than regional and smaller banks. Large banks have been making their money in riskier businesses reflecting broker activity: investment banking and trading.

Smaller and regional banks that depend on more traditional commercial and mortgage lending are suffering. Washington Mutual's (WM) sub prime business is fraying badly. Sovereign (SOV) as well.

It's pretty simple. Brokers and large banks are benefiting from the mania we know as the current bull market. Risk taking is at a very high level.

If stocks begin to go down they will meet the same fate as their smaller brothers. In a strange way people are buying brokers and large banks for a hyper-inflationary scenario. If we get a deflationary one they will be in for a nasty surprise.

Positions in WM, SOV

What you need to know... - Jon Doctor J Najarian - 8:22 AM

Apple (AAPL) Record Profit Not Enough – People are finally turning negative on AAPL, even with $1 billion ($1.14 per share) in profit and a spectacular revenue beat as well. JP Morgan downgrades Apple today and shares trade down over $2.50 in the pre.

Equity Office Properties (EOP) Gets Competing Bid – A consortium of real-estate investors launched a competing $21.5 billion offer for EOP in an attempt to upstage the Blackstone Group. Blackstone's deal is regarded as the largest leveraged buyout in history, at $36 billion, when factoring in Equity Office's $16 billion in existing debt.

Rite Aid (RAD) Vote Today – Shareholders will give the thumbs up or down today on Rite Aid's purchase of more than 1,800 Brooks and Eckerd stores. This would be the first major acquisition since Rite Aid's turnaround team arrived to save the company from bankruptcy seven years ago.

"Wal-Mart (WMT) Law" Invalidated By Appeals Court – A U.S. federal appeals court upheld a ruling invalidating a Maryland law that would have forced Wal-Mart to spend more on employee health care. Maryland had attempted to force employers with 10,000 or more workers to spend at least 8% of payroll on health care or pay the difference in taxes.

Positions in AAPL, EOP

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