Buzz Bits: Thursday Nov. 10, 2005
What a close! Green is my favorite color!
Earnings snack pack
- Kohl's (KSS) reported Q3 EPS of $0.45 vs $0.44 cons on revs of $3.10 bln vs $3.13 bln cons. Comps were +3.5% for the quarter.
- News Corp (NWS) reported Q1 EPS of $0.18 on revs of $5.70 bln.
- Dell (DELL) reported Q3 EPS of $0.39 (in-line) on revs of $13.91 bln vs $13.96 bln cons. Gross margin was 16.9%.
The company guided Q4 to $0.40-0.42 vs $0.42 cons and revs to $14.6-15.0 bln vs $14.99 bln cons.
DELL said it repurchased $1.4 bln in stock in Q3 and plans to repurchase $1.7 bln in Q4.
Bell Buzz - Todd Harrison 3:50 PM
- Pressage in the morning and rippage in the afternoon? Oh wait, that was yesterday's vibe.
- Through clear eyes--it's better for you than Visine--the only element missing from today's ramp is internal confirmation (NYSE 9:7).
- The Rotation Station today is out of energy and into financials. Do I think it lasts? No siree, Bob.
- Speaking of reincarnation, some of my left-for-dead semi exposure is starting to stir.
- NDX 1635--former resistance--now becomes initial support for the four-letter freaks.
- Yep, both front month crude futes and spot crude are under the 200-day. I still plan to pick up the pace of my purchases near $53/brl.
- Our cable connection has been out all day. It's...refreshing.
- Please see the volatility sisters as they're devil red (-6% each).
- And just like that, we're ready for a freaky Friday. Fare ye well into the bell, Minyans, and remember that the definition of an investment should never be a trade gone awry.
Stock showcase showdown - Kevin Depew 3:49 PM
Just like that VIX, VXO, and VXN have peeled off 6-7% here as the rampers delight surges into the close. Hoofy is pointing to the NDX breakout and oil spill as his raison d'etre. Boo, meanwhile, is bruised, but still clinging to the overall high-risk context as his discipline dictates.
For what it's worth. I've increased short exposure in the SPX complex and financials here and ejected some select tech longs into today's daily affirmation of stock positivity.
A Minyan wrote in and asked me what it will "look like" when the context changes. It's a question I can't answer. Not because I won't, but because I can't see that far into the future. Remaining disciplined allows me to worry less about the absolute value of, say, the NDX, and more about the risk level and potential downside being long equities.
Mini-Minyan Mailbag - Todd Harrison 3:20 PM
Toddo--Yes, the yield curve is flattening--and it's been flattening--but what about 6-9 months from now? Maybe the Fed stops tightening and actually starts easing mid of 2006 to combat a slowing economy. Don't stocks anticipate?
Excellent point and one that warrants discussion. Equities, as a discounting mechanism, are leading indicators. The banks may be painting a friendlier '06 picture (ala the trannies and brokers) and that remains within our probability spectrum.
As a pure trade, however--and as a function of the style and substance discussed--I'm (gulp) comfy shorting this pigs, er, piggies against some ketchup canditates. I may be blinded by the light, my friend, but that's how I'm jockeying this camel.
Euro bounce? - Kevin Depew 3;15 PM
While the DX/Y moves to two-year highs against the Euro, note the EC/Y sitting right on trendline support with a move to 1.16. See the chart here, courtesy Dorsey Wright.
Anticipain - Kevin Depew 1:52 PM
NDX 1640, so close, yet so far, a spread triple top across multiple scales if triggered. And see the BKX back on a buy signal for the first time since May?
So what's a poor bear to do? As I wrote back in October, the relative strength shift to tech continues while risk is ignored. The context overall for stocks remains negative and even as the market moves higher here, there are more net new sell signals than buy signals.
I would love nothing more than to join the crowd and buy some stocks here, but with the indicators I follow saying risk is high and supply in control longer-term. I have no choice but to stay disciplined and ignore what my feelings tell me. My head may be wrong, and my gut may be right, but over time I will perform much better letting my head direct the flow.
Mini-Minyan Mailbag - John Succo 12:45 PM
Have you heard anything with respect to GM...possible bankruptcy?
Are credit spreads, etc. or any of your analyses indicating anything
"fishy" going on?
Something smells bad here...
GM's credit spreads have done little in the last week, hanging around 1000 bps over. They have widened by about 175 bps since mid-October.
We suspect they are anxious to spin off some part of GMAC (they cannot really sell it outright for it is integral to their "car" business). There is talk that any proceeds would have to go into their pension plan to shore up the problems.
Falling Rupee bodes very well for Indian IT - Sanjay Somaney 12:33 PM
My sources are telling me that the falling Indian Rupee is going to create a windfall for Indian BPO/IT firms, most of which have contracts denominated in dollars.
For every one rupee decline in the USD/INR rate, Indian BPO/IT companies will see an improvement of about 50 basis points on EBITDA margins.
The rupee is down over Rs3 versus the dollar in the last few months.
Something to chew over, no?
"Half" Foods, Inc. - Fil Zucchi 8:36 AM
For all the razzle-dazzle of stock-splits, buy-backs and special dividends, the key take away from Whole Foods' (WFMI) report is that they missed EPS and Revenues for the quarter, and they took sales and EPS growth guidance for 2006, 1-4% below current consensus, both to the 20% range. For that one gets to pay high 40's multiples.
WFMI also noted that it is indeed exposed to purse tightening by the higher income portion of the population, but no such tightening is currently factored into the scenario. Given what Toll Bros. (TOL) said about consumer confidence among the wealthy, and this recent piece by McDonald Financial on the very subject, it may be time for some contingency estimates.
(Position in WFMI, TOL)
Say what? - Kevin Depew 8:19 AM
A look at commentary, opinion and analysis from around the world:
According to reporters Dan Balz, Shailagh Murray and Peter Slevin of the Seattle Times, political disenchantment in the heartland is growing. Naturally, they turn to Newt Gingrich for answers.
Over on Asahi.com, Taiwanese President Chen Shui-bian says Japan should play a larger role in East Asia security...especially Taiwan's.
Korean Central Bankers. They're just like us. They meet in closed sessions. Sometimes they raise rates. Sometimes they freeze rates. They maintain an interest rate policy that is "supportive of the economy" and "below the neutral rate" while simultaneously promising to soon, soon move rates back to neutral, whatever neutral may be, which they will know when they see it. They are people too.
Arthur Levitt Jr. writes in the Wall Street Journal that immediate action is needed "to bring accuracy, transparency and accountability to pension accounting."
Why are Americans spending like mad at the mall, but so grumpy on those consumer sentiment tele-polls, asks Robert Samuelson in the Washington Post. One word: post boom hangover. Wait, that's three words. Must be the excessive liquidity.
Speaking of excessive liquidity, Caroline Baum writes on Bloomberg.com, that "in Greenspan's math, inflation is always zero."
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