Buzz Bits: Dow and Nasdaq End Higher
Your daily Buzz & Banter highlights.
Katz on Tech - Adam Katz - 3:50 p.m.
The areas of tech that have provided strength have by and large been borne from one of two themes: Either there is substantial growth/presence in emerging markets or the Street has taken down expectations so wildly that the bar was too easy to get over.
The reason international business is an important factor is two-fold: one, many have not begun to feel the slowdown of the U.S. economy to the degree that it's been felt in North America and secondly, the currency tailwind from the dollar slippage has worked out very favorably for the multinationals. IBM (IBM) for example, once again, had essentially flat new software license growth on a constant currency basis. If you want to be bored to tears with other examples, I'll gladly provide them.
VMWare (VMW) is a great example of a company where the expectations were simply too low. As recently as the beginning of April, the stock dipped into the low 40s on speculation it was going to miss their quarter. The bottom line is this: in the 4th quarter of last year, the Street was discounting how the credit crunch was going to hit tech stocks. Main Street wasn't yet seeing evidence of it. Now, the reverse is true, where the Street is starting to price in a 2nd half recovery, but we're seeing more deal deferals and hence less visibility than we were in 4Q.
My playbook is to be long despair created by earnings blow ups in names I know well while continuing to build positions in my favorite names knowing I won't get paid for it today. Further, my expectation is that the Street is setting itself up for some serious disappointment in the back half of the year. Lastly, I think that using the distributors, Arrow (ARW), Avnet (AVT), Ingram Micro (IM), etc. is a smart way to obtain a proxy for what is going on in enterprise spending.
The World at Large - Ryan Krueger - 3:19 p.m.
When one of the best risk managers you know says China might be due for a bounce, take note. Nice call Bennet. They don't get much better than that pahds.
Others are a lot better than me at looking for the most beaten up names in a universe like that to stick a chopstick in. From my table I look for just the opposite – strength. I would share with Minyans that I need less than one hand's worth of fingers to count all the Chinese ADR's that are actually up for the year – which speaks loudly to me. One of them, China Mobile (CHL) remains seated at the head of that table for many reasons.
Consumption is real and just beginning, as I shared my firm's view and one of six structural shifts we build positions around as the "Next Soap Opera."
We can wonder about where the rebate checks are going in the U.S. or paychecks in many other parts of the world. I'd avoid or short over-leveraged consumers and buy in size under-leveraged consumers.
I couldn't help but chuckle last night when hearing about the…ahem…discretionary drops in Macau. I got called crazy on a radio show a few years back when I predicted that its gaming revenues would catch the Vegas strip despite having a fraction of the tables and even less hotel rooms. They caught 'em.
And now lapped 'em. Yep, double the drop. Kung-POW.
I'm tellin ya, those firemen make out like bandits Danny! - Todd Harrison - 2:54 p.m.
Sauntering back to my turret, stuffed from the munch with some key peeps, my eyes are spying more motion (under the surface) than movement (in the mainstay averages). I'll tell ya, I could live to be 100 years old, God willing, and I'm not sure I'll ever get used to this whole "lunch outside the office" thang (gorgeous weather notwithstanding). Some thoughts, as they germinate:
- Itchy Owie Ambac (ABK)! As Bennet mused earlier, we're gonna find out real fast how interwoven this financial fabric really is. As it stands, the tape either acts fabu in the face of this news (we would have been down 300 two months ago) or this is a major siren in front of the next round of contagion.
- One Paw Paper Hanger? It's never a smart idea to catch a falling knife but after my initial nibble in Gannett (GCI) earlier, I'm adding to my (2009) calls here. I'm not going nuts (in the absence of a catalyst) but I'm being patiently proactive in my positioning.
- Let's get technical, technical. As it stands, the DJIA, TRAN, NDX and S&P remain below their respective levels of lore. Perhaps this is the respite before the rush but I would be entirely more comfortable with that if the VXO wasn't at 20 (and a redhead to boot).
- Minyanville has a long history of giving back. We've now taking that to an entirely new level with our alliance with the Children's Aid Society. Welcome aboard Yo!
- Parliament? Big Ben! Attention will soon start shifting to the FOMC meeting on April 30th. Currently, there's a 69% chance of a 25 bip snip and a 25% shot at "no change" (the remaining 6% is a 50 bp cut). We've long offered that the Fed only had so many bullets in the gun with the last one pointed inward. It'll be very interesting to see how the street reacts to this event.
- Finally, in my never-ending quest to follow in the footsteps of Television's JeffMacke®, I'll be doing my weekly snippet on FBN Happy Hour tonight at 5:30 EST. The topic of choice will be the next-gen media landscape and potential plays therein.
- Fare ye well into the bell, Minyans, fare ye well.
Position in GCI
Let the Euro Slide Begin - Lance Lewis - 11:22 a.m.
I've been one to suggest that like back in the November/December period, we would see gold "dig in" as the euro eventually undergoes an inevitable correction (which gold has clearly been fearing for several days now). That correction in the euro appears to be beginning today, and gold is trying hard to hang onto the $900 spot. Crude oil, however, is interestingly resisting the downward tug of the euro.
Note also that the gold/oil ratio is once again closing in on its all-time low. Something has to give here. If oil is going to remain stubbornly high, then gold has to rally significantly. And if one believes in "peak oil", as I do, this is precisely what will eventually occur as inflation continues to accelerate in the weeks and months ahead.
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Positions in GLD, gold shares
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