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Buzz Bits

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An evening taste of the daily buzz...

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Evening Earnings - MV News -

  • Texas Instruments (TXN) guided Q4 EPS to $0.41 vs $0.40 cons and $0.39-0.43 prior and revs to $3.56-3.705 bln vs $3.62 bln cons and $3.425-3.715 bln prior.
  • Xilinx (XLNX) guided its Q3 revs growth to 4-8% vs 1-5% prior and leaves gross margin guidance unchanged at 62-63%. The company said it will repatriate $500 mln of earnings and will record a $27 mln tax charge.

Consumer Credit - Scott Reamer - 3:36 PM

As reported here a bit ago, consumer credit for October came in at ($7.2 bln), the largest decline in the data series going back to 1943. See the chart here.

I believe this is going to be a big news item in the coming days. Similar to Greenspan's use of the word "conundrum," It's going to attract a lot of attention. The reason it is important is that it may be an important stat for the end of the credit boom.

Recall the three axes of reflation: the fed & commercial banks supply credit (print money) and consumers/corporations provide demand for credit. A consumer 'repudiation' of credit means repudiation of means to pay for consumer goods since wages/salaries are so lagging, which means the linchpin of the global system may be coming unglued as the US consumer is the keystone to the demand side. This bears watching closely and fits in well with the decreasing liquidity (Money AMS) figures we have been watching decline rapidly for the last several quarters.

"When they found Carbone in the meat truck, he was frozen so stiff it took them three days to thaw him out for the autopsy." --Henry Hill - Todd Harrison - 2:21 AM

I hear ya Henry, it's deer in headlights time for alotta wiseguys out there. Yesterday's attempted jailbreak (through S&P 1270) loaded alotta boats with incremental exposure and when it failed to materialize, the (technical) catalyst was moot. I suppose that's why Jack Skiba always said never to anticipate the anticipator.

What now? S&P 1245 seems a bit "pat" but it's the beacon in the fright. With breadth 2:1 negative, the BKX eyeing 102 (support) and homies getting smoked like a Philly blunt, I'm not yet ready to slip outa my bear costume.

The risk to the fur? Some jockeying in front of Texan tonight followed by a group hug tomorrow. I don't have an edge on this particular puppy, per se, but consistent with my earlier buzz, the semis are up 16% in a hurry. Field position matters, Minyans, even in the face of performance anxiety.

Food for thought as we find our way.

R.P.

Flashback! - Bill Meehan - 1:37 PM

This day in market history...

  • Closing levels 5 years ago found:
    • DJIA: 10,617.36
    • S&P 500: 1343.55
    • Naz: 2752.66
    • Crude: 29.36
    • Gold: 273.30

This day in Minyanville history...

  • Last year, Toddo celebrated Ruby's birthday and talked tape in Ruby Tuesday, as the Johnson & Johnson (JNJ)/Guidant (GDT) rumors began flying.

In other news...

  • Today marks the 64th anniversary of the attacks on Pearl Harbor. On that day, the DJIA dropped 4.08 points to close at 112.52. The memorial at the USS Arizona is somewhere I very much would like to visit someday.

Mini-Minyan Mailbag - Todd Harrison - 12:44 PM

"Toddo, The SOX (and many of its components) have formed pennants since recently hitting their highs (ML Semicond HLDR1240 (SMH), Texas Instruments (TXN) and Xilinx (XLNX)) and this has occurred as the SOX tagged the top end of its 1 1/2 yr channel (with four key components report over the next two days), highlighting the critical juncture of the space.

In addition, the SOX have run into year end many times since 2000 only to fail thereafter. This is why the SOX are my key "tell" going into '06. Minyan TB"

MTB,

Yessir, I see it. When this group was out of favor with nosty flava (16% ago!), we discussed how the bull case was predicated on performance anxiety and participation. "Pawns in a much larger OPM game," was what we said I believe, "sorta like Russian Roulette, just a lot more stressful."

The trading community is conditioned to view this group (along with the nets) as offering the most bang for the buck. That's likely why they've found jig in the late innings of each year and why psychology is so very important in our financial fate.

R.P.

Thank You (Falletinme Be Mice Elf Again) - Kevin Depew - 11:25 AM

  • The AMEX Gold Bug Index (HUI) is up 3% today, breaking a new double top.
  • Meanwhile, the point and figure price count for the HUI is to 332. So far we are not seeing any potential DeMark TD-Sequential indicator flies in the ointment.
  • The Morgan Stanley Consumer Index (CMR) finally (quietly) broke through the 596 level a couple weeks ago.
  • Apple (AAPL) has a point and figure price target of 78 (basis .5x3 chart), though today it is down about 1 %. Even down 1%, it would take a move below 73 to reverse the stock down, much less generate a sell signal - which requires a move below 67. A lot can happen between here and there.
  • Dow 11,000? I remember going to my first Dow 10,000 party back in my PaineWebber days. The next thing I remember is waking up in a cardboard box under a viaduct with an empty bag of Doritos on one foot, a cone-shaped party hat taped to my left hand and $700 of cash in my breast pocket. "Thank you PaineWebber!"
  • Remember back in the good old days when Mel Gibson didn't seem so crazy?

MicroIndiaSoft? - Sanjay Somaney - 10:52 AM

Indian markets closed higher on the day with the SENSEX climbing 80 points to close at 8896. Of course, the big news in India on the day was the $1.7 billion Microsoft (MSFT) plans to invest in India over the four years. The IT/BPO sector was higher across the board.

MSFT has plans to open offices in 33 cities across India creating about 8,000 jobs over the next few years. Gates described India as a major global R&D hub. He added that Softee's investment in India is a fairly 'conservative' amount. My sources are saying that more investments will be announced by Gates within the next couple of days.

The rupee continues to weaken vis-a-vis the dollar and if the rupee stays at current levels for the month of December, IT firms could show a 7-8% upside to earnings (as a result of favorable FX impact) when they report their numbers in January-February.

ICICI Bank (IBN), one of India's largest private sector banks priced its secondary here at $26.75/share and looking at the price action thus far, it looks like demand is strong. IBN's local shares were over-subscribed 7x in India showing that investor appetite in India for quality offerings was also very strong. IBN closed higher by 2.5% in local trading.

Position in ICICI in India

Bermuda Triangle - Kevin Depew - 10:38 AM

Toddo has been flagging the Google (GOOG) action the past two days as a potential canary in the coalmine. On a point and figure basis the stock chart has formed a potential triangle. The area of the triangle is defined by 392 on the downside, a potential bearish triangle break, and 420 on the upside, a potential bullish triangle break. There's a lot of noise within that very large range. Also, keep in mind the still intact weekly DeMark TD-Sequential 13 sell signal.

Before you accuse me
Take a look at some Buzz... - Todd Harrison - 10:19 AM

  • Gurp! Keep an eye on Google (GOOG) as it starts to gurgle anew.
  • Dentyne Check? NYSE internals are flat and flatter.
  • Hugs? The drugs need 'em as the DRG continues to languish.
  • Inertia Alert? The XAU is almost three percent higher as we hike up the Hump.
  • Levels? S&P 1260ish (Monday's low) is a level to keep on ye radar.
  • Mojo? Of course, it's Ruby's birthday. Trade 'em with moxie and keep your vibe alive!

    R.P.

position in metal equities

Cash? Hey, no paper trail... - John Succo - 9:08 AM

General Motors (GM) stock price is trading roughly for cash: the company has around $24 in cash if you consider GMAC has value. They have $15 outright per share in cash.

That also assumes they will just roll their debt and not pay any off.

In other words, the market is assigning no real value to the company as an ongoing entity. It is not trading off its income statement; it is trading off of its balance sheet.

The biggest trade (perhaps that I have seen in my career) are hedge funds long the bonds and long puts. The retention value to bond holders in bankruptcy is pretty high and the puts act as a kicker for a zero stock price.

But they are still paying a high price for this bankruptcy protection because of timing. The longer GM stays afloat, the lower bondholders' retention value goes as the company burns through that cash.

Position in GM

Say what? - Kevin Depew - 8:36 AM

A look at commentary, opinion and analysis from around the world:

  • Greg Ip writes in the Wall Street Journal that a careful study of the depression taught Ben Bernanke the perils of deflation, the gold standard and the pricking of bubbles.
  • Newsweek jumps on the Google bandwagon by allowing Google co-founder Eric Schmidt and Berkeley Professor Hal Varian to outline the company's Ten Golden Rules for getting the most out of your knowledge workers. Number 5: "Eat your own dog food." Uh, Ookie dokie. Number 8: "Don't be evil." Oh, yeah, that. Number 10: "Keep workers alert with random poison dart attacks."
  • Virginia Beach is attempting to become the first locality to successfully brand a beach with its "Virginia Beach: Live the Life" campaign, part of the overall marketing turn toward "destination branding." The campaign will reportedly replace the following unsuccessful branding attempts: "Virginia Beach: Taste the Sand" and "Virginia Beach: Be the Bait."
No positions in stocks mentioned.
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