Buzz Bits: Markets Close Mixed
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Earnings Report - MV News
Take Two Interactive (TTWO) reported EPS of ($0.41), which may not be comparable to ($0.10) cons, on revs of $265.0 mln vs $237.52 mln cons.
Pixar (PIXR) reported Q4 EPS of $0.25 vs $0.18 cons on revs of $55.6 mln vs $44.7 mln cons.
Mini-Minyan Mailbag - Scott Reamer - 3:50 PM
Prof. Reamer -
The headlines say "US consumer borrowing rose in January by the most in four months," but on a CPI-adjusted basis (let alone on a real inflation-adjusted basis) it's the fifth straight monthly decline (using Year-over-Year comps). It's only the fourth period (not counting the blip in 1987) of CPI-adjusted decreases over the past 35 years, and the previous three lasted 24, 35, and 39 months, respectively (5/74-4/76, 1/80-11/82, 3/90-5/93). How will the U.S. handle another two years of contracting credit?
It won't 'handle' it well; saying 'no mas' to credit is the first step toward a deflationary credit contraction. And in a nation as indebted (levered) as ours, that means a high probability of a depression.
"13" - Kevin Depew - 2:51 PM
For those keeping track at home, the TD-Sequential 13 "sell" signal in the iShares Russell 2000 Index Fund (IWM) looks a bit better today. Typically if something does not "respond" to a 13 within 12 bars, it means something more complex may be going on.
The IWM began to break down just this Monday following the 13, the sixth bar following the 13. The high of the 3rd and 5th bar after the 13 came close to the risk level (denoted in the chart that follows by the light blue line) but did not exceed it.
See the chart here.
Position in RUT/SPX equivalents
Flashback! - Bill Meehan - 2:30 PM
This day in market history...
- Closing levels 1 year ago
- DJIA: 10,936.86
- Naz: 2090.21
- S&P 500: 1225.31
- Crude: 53.90
- Gold: 434.40
This day in Minyanville history...
- In '05, Prof. Goepfert answered a question on Odd Lot Short Sales
In other news...
- In 1933, Monopoly was invented and kids everywhere began learning how to leverage and flip properties.
Yes I am freeee . . .free falling!! - Fil Zucchi - 1:53 PM
Fluor (FLR) is doing a remarkable face plant today as a cool $500M of market cap has gone bye bye. I can't find any reason for it other than a downgrade by Bear and the ugly technicals. What inquiring minds want to know is whether Caterpillar (CAT) can be far behind, if the fundies are what's driving FLR.
Position in CAT
Pretty Sneaky Sis! - Todd Harrison - 1:04 PM
Keep an eye on the CRB as we edge below the 200-day and once again test the multi-year trendline. The pffft! is occuring despite relative traction in the precious metals as crude (-2%), unleaded gas (-4%), sugar (-3.3%), heating oil (-3%) and coffee (-2%) all contribute to the decline.
It's interesting to note the greenback traction as well, which fits into the "asset class deflation vs. dollar devaluation" thesis we so often discuss. With market breadth steadily negative (3:1 losers), please keep your right paw up as we dabble through Red Dye.
The bearish post of the day. Or is it? - Vitaliy Katsenelson - 12:41 PM
I have a hard time getting excited about the stock market these days: Valuation is still high, it's even higher if high corporate profit margins are taken into consideration. Consumers, two thirds of the economy, are leveraged and there are solid signs that their biggest asset (their house that they have taken to the bank many times over the last couple of years) is getting deflated little by little.
No, I am not bullish on the market. So, after reading this, should readers sell every stock holding and go to cash? Or worse, buy bonds? No. I am not bullish on bonds either. And Bennet's whispers through instant messenger confirm my bearishness. What is there left to do? Gold? Well, I have no idea what gold is worth. Really, I don't know how to value it. It has a negative cost of carry. Besides a little fact that it doesn't generate cash flows, it costs investors to hold it. Looking at history, gold has not been a good investment. It has barely kept up with inflation. I also believe that TIPS will challenge (at least in part) gold's protector against inflation status.
I am in the process of strengthening our portfolios by adding quality names, not just the stocks that I think are quality companies, but the stocks that are also perceived to be quality by the Street. If we go through some turbulent times, perception will matter a lot more than reality. Lucky for us, some quality names are showing on the bargain radar. Recently we picked up 3M (MMM), which is trading at 16 times 2006 earnings, has a strong balance sheet, great return on capital, yada, yada, yada. We are carefully eyeing Wal-Mart (WMT), Intel (INTC) and a long list of other perceived quality names.
Position in MMM
Mini-Minyan Mailbag - John Succo - 12:20 PM
It seems to me that we are now very close to an inflection point. Further evidence to me anyway is the 10 year of course, but now we are seeing the Gov't needing to raise the statutory debt limit once again and the various Fed heads' "game plan" seems to be one of "keep the market confused so they don't do anything rash and the game continues."
The U.S. dollar in my view is getting shakier by the day and could drop precipitously, seemingly "without notice." Now we also have Iran's oil being Euro denominated. Yes, maybe a smallish thing but is it possibly significant?
The Fed certainly knows what deflation will do given the unprecedented debt levels, yet they also know what can happen if the dollar tanks. It seems to me that this dangerous game they have been playing may run out of time.
As a long term Gold Bull I personally know where my bread is buttered but the "wreckage" will affect all of us.
Your points are relevant, although most "thinkers" may not want to admit the logic behind them.
The elephant in the room is that the structural imbalances resulting from our 20 year binge on credit almost have to result in a "cleansing" of the system that will not be pleasant even for the most prepared.
Tellabs (TLAB) sees unusual call activity - Phil Erlanger - 8:54 AM
We note that one of our clients pointed out to us that Tellabs was getting hit on the merger between AT&T (T) and Bellsouth (BLS). UBS weighed in with similar thoughts. Call activity was very high yesterday as 7,798 calls traded against a ten day average of 1,332. Volume was heavy in the March 12.50 calls as 1,096 calls traded there. Even heavier were the April 15 calls which traded 1,987 calls as well as June 15 calls that traded 2,180 calls. The stock closed yesterday at $13.03 down from the prior close of $15.01. We note short interest is light with a technical rank of 60%.
Bear flag update in 10's-This chart should be in a Technical Analysis textbook! - Bennet Sedacca - 8:42 AM
We have been highlighting the 'bear flag' in 10's for a while - and luckily foresaw the break coming in past commentaries. Anyway, see the chart here. That is the cleanest break of support you may ever see. YEARS of trapped buyers.
But markets don't go in straight lines, usually. So a pause that refreshes maybe? Could be today, but I doubt it lasts long. I drew arrows for potential targets, but these are just guesses really. They coincide with the end of negative seasonality. My guess (and purely a guess) - 5 to 5.25%, then a 'rally to the ice' or resistance (as Richard Wycoff would have said in the past) that fails just underneath the support that is now important resistance.
After that, I would expect a trading range to develop. That is SERIOUS RESISTANCE up there in the 107-16 area in 10's. But this move was textbook and the economic numbers just released won't help the cause. Productivity gains are gone and labor costs are accelerating faster than thought. A bounce? Sure. But I doubt it lasts long. Defense, baby, defense. At least for us and our clients. Just what we see, not advice.
Position in various Treasuries
Dark Horse - David Miller - 8:23 AM
Those familiar with our research know we tagged Myogen's (MYOG) ambrisentan as a possible target for Pfizer (PFE) given Pfizer's highly specific product acquisition comments at last month's analyst day meeting. Myogen announced yesterday they partnered with GlaxoSmithKline (GSK) to sell ambrisentan outside America. Myogen will handle its own sales here, as we said might happen in our original note. Glaxo paid $20M in cash up front and will pay an additional $80M in approval milestones. A stepped royalty averaging around 25% of net sales is also due Myogen upon commercialization.
YM Bioscience's (AMEX:YMI) tesmilifene and Dendreon's (DNDN) Provenge are the two remaining likely targets from our non-exhaustive list. YM has the inside track since they had a term sheet about to be signed with Pharmacia when Pfizer purchased them. The deal was for $75M and nice royalties, and that was before the current pivotal trial was finished and before the mechanism of action for the drug was determined. Provenge is the dark horse because management has hung a steep price tag on worldwide rights for the drug.
Position in YMI, DNDN
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