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Buzz Bits: Dow Dips, Starbucks Shows Off


Sample today's Buzz...


Earnings Report - MV News

  • Amazon (AMZN) reported Q4 EPS of $0.47 on revs of $2.98 bln vs $3.08 bln cons. Income from operations was $165 mln and gross margin was 22.4%.
  • Electronic Arts (ERTS) reported Q2 EPS of $0.86 vs $0.90 cons on revs of $1.27 bln vs $1.26 bln cons.

Some thoughts about bonds before the Unemployment Report.... - Bennet Sedacca - 3:31 PM

We have been targeting the double top in 10's at 4.63-4.64 area for a few weeks now. As the market has sold off and yields rallied, the market has become slightly short-term overbought. This makes a huge sell-off on the number a bit less likely tomorrow, but you know, bear markets tend to get oversold and STAY oversold.

Our take is that if we get a weaker number than expected (the odds of it hitting the consensus number of 250,000 jobs is doubtful if history proves correct), so there should be some surprise one way or another. Even if the market were to rally a bit, it would just invert the curve further and get people to take out their recession hats again. We still think that we can have a move towards the double top that would likely be met with stiff resistance. If that were to occur, we would expect a pullback followed by new high yields before positive seasonality begins in the Spring.

One final note, municipals still remain cheap versus Treasuries, but they have outperformed nicely during this selloff. This is typical as munis tend to lag. Good luck on the number tomorrow!

Positions in various municipal and Treasury bonds.

Flashback! - Bill Meehan - 2:33 PM

This day in market history...

  • Closing levels 6 years ago found
    o DJIA: 11,003.20
    o S&P 500: 1409.12
    o Naz: 4073.96
    o Crude: 27.52
    o Gold: 284.50

This day in Minyanville history...

In other news...

Now I will stand in the rain on the corner
I'll watch the people go shuffling downtown - Todd Harrison - 1:57 PM

The crimson tide is high and wide as Boo and his crew continue to stride. My eight screens are the definition of fugly as every sector is taking it on the chin.

You want energy and metals? Down a deuce (2%). Semis and financials? Not so hot (-1% each). Small caps? They're even smaller (-1.5%). In fact, with the exception of a smattering of retail and a few financials, today is shaping up as a clean sweep for the ursine uglies.

A few observations of note:

  • Alotta folks are focused on S&P 1260 as the next support.
  • The NDX has effectively filled the gap from the January 27 open.
  • Crude has quietly dripped 2.5% lower while Nat Gas takes another 5% hit.
  • The more I think about it, the more I like my long SunMicr-long IBM puts pair.
  • I don't think the volatility pop is a passing fancy.
  • Keep an eye on the Homies as they tickle the 200-day at HGX 160.
  • And Joel, please get off the babysitter.


position in sumw, ibm

It's a New World - John Succo - 12:21 PM

New Century Financial
(NEW), a REIT, posted top line earnings $.40 better than expected. This creates an irresistible urge to buy the stock. And it shows most don't look beneath the surface before jumping in. A few points.

Net interest margin was stable despite lower portfolio balances. This leads to questions as to the quality of the portfolio. This thought is supported by the company's refusal to give 2006 guidance. The company also built reserves (some will look at this as a positive), illustrating the company's concern going forward as to quality of their portfolio.

$.04 of earnings were due to share repurchases.

Despite loan sales exceeding forecasts, gains on sales fell short indicating thinner margins.

We are not saying the company's performance was poor, we are saying there are reasons to pause.

Position in NEW

Chin music - Fil Zucchi - 11:40 AM

Portfolio Recovery Associates (PRAA) is getting a haircut this morning on Assett Acceptance Corp.'s (AACC) report which showed major write-offs in wireless accounts. AACC is getting decapitated. Chatting with some of my contacts there's debate over whether the nexus between AACC and PRAA makes sense. PRAA is not heavy into wireless accounts. However, the risk of a write-off IS front and center on my list of concerns for PRAA.

Position in PRAA

When speculative juices run dry... - Kevin Depew - 10:51 AM

... you get the kind of downside underperformance showing up in the Russell 2000 (RUT) versus the S&P 500 (SPX) this morning. The RUT is off a full percent while the SPX is "only" off half that.

In my mind, the decision in allocation one has to make is how much upside there is this year compared to potential downside. The Point & Go Figure pieces are working the broken record circuit in terms of pointing out the high risk.

In simplest terms, the factors that are most important to me are these:

  • The SPX/RUT ratio is at an historic extreme...
  • ... while that extreme can always get more extreme, virtually all indicators across the board are in high-risk zones from which bull market runs typically conclude, not begin...
  • ...and so I have chosen a longer-term allocation that fits with my risk profile based on these factors

Position in RUT and SPX equivalents

Keep an eye out... - Sanjay Somaney - 9:54 AM

(REDF) which was profiled in our newsletter this week reported numbers overnight in India. The company reported revenues of $5.02 million, up 48% YOY and earnings of $0.123/adr. The results were ahead of my estimates and since there is no one on the Street putting out research, my estimates will have to be it!

Online revenues were up 82% YOY to $3.2 million, well ahead of what I had expected. Registered users grew to 41.2 million, up 18% YOY. U.S. publishing revenues were $1.9 million, also up 12% YOY. Operating EBITDA was $960,000 compared to a loss of $140,000 the same quarter in the prior year. General Motors (GM) increased to 75% versus 62% the prior year, same quarter. Cash and cash equivalents ended the quarter at $53 million

Were it not for a $660k FX loss when the company converted the proceeds from its recent secondary to INR, net income would have been about $0.04/share completely blowing the door off my expectations.

Good numbers which will get great if you have read my report on increasing net usage and the coming explosion in PC sales and internet users base in India.

position in redf

DeVibe from DeScribe - MV Respect - 9:22 AM

"After all the anticipation of the New Year and the onslaught of market predictions, February tends to be a quiet month. When measuring the range between monthly highs to lows, February ranks as the second least volatile for the S&P 500 dating back to 1970 (June is the lowest). February generally is a pause that generates a modest oversold condition to fuel the next rally that extends into May.

Usually, the month inches higher during the first half but tends to sell off as President's Day approaches where a trading low occurs. So far, January is managing to hold on to its positive status giving the widely followed January barometer a positive indication for the year. We should not forget that market lows tend to occur in the fall during the second year of the election cycle.

Lehman's talented technician Jeff DeGraaf

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