Buzz Bits: Dow, Nasdaq Take Late Dive
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A final thought for the week... - John Succo - 3:39 PM
We study and study what is actually happening in the economy. We don't listen to the media or the government or supposed "experts" that get on TV and shop their opinions (and positions).
The government has been calling employment "good news". The reported numbers continue to come in under estimates, but it is much worse than that. Did you know that 84% of new employment adds this year are from the birth/death adjustment. These are made up numbers, folks.
From inflation to GDP statistics, the picture painted by government officials and media cheerleaders is much different from what we see. The cumulative effects of high debt and fiat currency is now dragging on the economy, which is becoming less and less stable.
Remember, only you can protect your money. The more you depend on experts to make your decisions for you, the more unexpected risk you take.
And if they stare just let them burn their eyes -
Note the BKX remaining steadily green here as the indices sell off. Although breadth has been mixed all day, and decidedly negative on the Nasdaq, the BKX continues to hold its head up so high you can hear Argent playing in the background if you put your ear to your screen.
Minyan Ken "
TOLL Patrol - Adam Warner - 12:01 PM
Interesting combo goes up in Toll Brothers (TOL) this morning. The *customer* basically bought stock and puts (half itm)">in the money, half out) vs. shorting OTM calls, all in big size, all expiring in Jan of 08. Delta-wise, it is neutral, but given the contract counts involved, they emerge net long 700 extra puts and net short 500 extra calls.
What would be the motivation behind such a trade? I couldn't tell you. Nearer term, it is probably safe to assume the extra call shorts will not embarrass you, particularly since half are on the 40 line. And you get extra puts, which seems like the more likely side to come into play. But out to '08? This stock has doubled and halved in relatively short time frames, who is to say what will happen in 18 months?
The "home runs" for the trade are 0 (any time) and $40 (as close to Jan 08 exp. as possible).
Another follow up on MMM -
3M (MMM) makes something like 25,000 products. They are truly a great gauge of the economy (remember 'it's the economy stupid?'). To me, this is a watershed event. Yes, I am sure that many, or most corporations will figure out how to 'make numbers' this quarter. But that game is ending. And there is no suport from dividends or valuations. Even MMM is 17x AFTER the miss with a whopping 2.4% yield. Cheap? Nope.
They set the bar low, buy back stock and voila, they beat by a penny. But I smell something here I don't like. I know that is a bold statement. But MMM IS THE ECONOMY.
Jobs, S&Ps Fizzle - 9:23 AM
S&Ps rallied through Thursday's last half-hour, and then again in the hours before this morning's Employment Situation report. When last-minute opinion is strong enough to influence price action, it tends to be wrong. And despite initially spiking up, S&Ps have now returned all of the gains - from both before and after the report.
Is last Thursday afternoon's rally leg the next gain to be retraced?
The spike up filled the gap back to Monday's close, leaving only a small piece of unfinished business outstanding at slightly higher highs. Otherwise, there is nothing attracting price higher or inhibiting a downleg. And now the cash session is threatening to open under Thursday's lows, which would point sharply lower.
A bounce back up to the SPX 1275.50 (ESu 1284'00) area, first, would be more likely - and possibly also a retest of the spike's high. But that would be a difficult argument to buy into if yesterday's low gives way as support.
Microsoft's iPod Killer? - Herb Greenberg - 9:14 AM
As I write in my blog today,
Biting apple: Lots of chatter about an imminent rollout by Microsoft (MSFT) of an MP3 player. The most interesting twist to the story, from the blog, engadget.com, is that to make the switch worthwhile, Microsoft supposedly will foot the bill to let you do free downloads of songs you've already bought from the Apple (AAPL) iTunes Music Store. According to Engadget, Microsoft will let you scan iTunes for purchased tracks and then automatically add those to your account. "Microsoft will still have to pay the rights-holders for the songs," Engadget says, "but they believe it'll be worth it to acquire converts to their new player." I should stress that this is unconfirmed and mentioned on a single site. Why, then, report it? Because it's interesting and without a plan like that, I don't see how Microsoft can possibly get people to go through the hassle of switching from iTunes system.
Also worth noting: CNET's Brian Cooley, who is very good, was on CNBC this morning saying that Microsoft's iTunes killer could be more important than anything it does with hardware. He says the company is rumored to be signing deals with record and movie companies. As bizarre as all this may sound, one thing Microsoft doesn't lack is the cash to invest back into the business or make something as expensive as that happen.
SBUX June comps are a little disappointing - Brian Gilmartin - 8:28 AM
With a June comp of 6%, and y/y revenue growth of 22%, Starbucks (SBUX) was inline with their June comps albeit at the low end of expectations. Briefing.com consensus was 7%.
My firm would be buying more if SBUX happened to trade into the low $30's, but I seriously doubt if it will get there.
My guess is that analysts will express some mild disappointment with tonight's number, but wait for fiscal 3rd quarter earnings on August 2nd to see what margins looked like.
According to a research report published by Thomas Weisel after the March '06 earnings report, SBUX posted its highest EBIT margin ever for the first six months of their fiscal year (ended September.)
Still, we won't sugarcoat the June numbers: I was expecting stronger.
Position in SBUX
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