Archive for 2011

• Morning News: June 17, 2011
  Eddy Elfenbein, June 17th, 2011 at 7:10 am

  Merkel Agrees to Voluntary Greece Bondholder Role

  Greek PM vows to stay, lead exit from debit crisis

  Oil Heads for Biggest Weekly Decline in Six on Concern Over European Debt

  Medvedev Pledges Economic Reforms

  Spanish Banking Giant Santander Sees 2011 Profit In Line With 2010

  Gold May Fall for a Second Day in London Trading on Oil Decline, Equities

  Wall Street Braces for New Layoffs as Profits Wane

  Raters May Face SEC Civil Fraud Charges

  Utilities Turn to Mergers as Demand for Power Slows

  RIM Profit Falls Below Estimates

  Capital One to Buy ING Direct USA for $9 Billion

  Energy Transfer buying Southern Union for $4.2 Billion

  Hayward’s Vallares Raises $2.2 Billion in IPO

  Nasdaq Confirms LCH.Clearnet Bid

  Joshua Brown: HRBN: Misfortune Cookie o’ the Day

  Todd Sullivan: Vegas Tourism Still Strong

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• “It’s not a stock market. It’s a market of stocks.”
  Eddy Elfenbein, June 16th, 2011 at 1:02 pm

  My friend and I used to have an inside joke about phrases that could be used at any time to make yourself sound intelligent without really saying anything. I recall two examples: “just look at the Japanese” and “that reminds me of an article in The Economist.” Try it at your next dinner party and you’ll see what I mean.

  In that vein, Henry Blodget has a wonderful post at TBI listing 16 of Wall Street’s favorite meaningless phrases:

  “The easy money has been made.”

  “I’m cautiously optimistic.”

  “It’s a stockpicker’s market.”

  “It’s not a stock market. It’s a market of stocks.”

  “We’re constructive on the market.”

  “Profit taking”

  “Bargain hunting”

  “More buyers than sellers”

  “There’s lots of cash on the sidelines.”

  “We’re in a bottoming process.”

  “Overbought”

  “Oversold”

  “Buy on weakness”

  “Sell on strength”

  “Take a wait-and-see approach”

  “It’s a show-me stock.”

  What I love about these phrases is that they can be used anytime for almost any reason. Yet the phrases ultimately convey no information whatsoever. But they somehow sound as if something intelligent is being said.

  I suppose the human brain is wired to follow authoritative phrases before thinking. It reminds me of this article I once read in The Economist….

• Morning News: June 16, 2011
  Eddy Elfenbein, June 16th, 2011 at 8:07 am

  Europe Faces ‘Lehman Moment’ as Greece Unravels

  Societe Generale CEO: Greek Restructure Would Be Issue For Europe, Not Banks

  Ireland Opens New Front as ECB Battles Against Meltdown

  IEA Boosts 2016 Oil Demand Forecast, $100 Crude a Risk

  Consumer Prices Rise 0.2%

  Foreclosure Filings Plunge as Bank Delays Mask ‘True Face’ of U.S. Crisis

  Futures Slip as Caution Prevails

  HSBC, Citi Given Nod to Underwrite China Corporate Debt

  Terex to Acquire Demag Cranes for $1.4 Billion After Sweetening Its Offer

  Chinese Alibaba Group to Split E-Commerce Site, Talks I.P.O.

  Smithfield Foods Swings to Profit on Higher Prices

  American Retailers Try Again in Europe

  Women Are Better Investors, and Here’s Why

  Jeff Miller: How to Watch and Interpret the Greece Story

  Stone Street: Project YOKU-zuna: Failure to Execute

  Epicurean Dealmaker: The Two Beds of Procrustes

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• Inflation Hits Four-Year High
  Eddy Elfenbein, June 15th, 2011 at 8:14 pm

  Today’s CPI report showed that inflation rose by 0.2% in May which was 0.1% ahead of expectations. The core rate, which excludes food and energy prices, rose by 0.3% which was also 0.1% ahead of expectations.

  Breaking down the numbers, I took the monthly seasonally-adjusted core rates and annualized them. It turns out that May’s increase was the most in exactly four years. The seasonally adjusted core rate for May rose by 0.29%. Annualized, that comes to 3.50%. The last time it was higher was May 2006 when it rose by 3.57%.

  

• Larry Called It
  Eddy Elfenbein, June 15th, 2011 at 2:08 pm

  After $HPQ’s board fired Mark Hurd (or forced him to resign), Larry Ellison sent an e-mail to the New York Times:

  Lawrence J. Ellison, the chief executive of Oracle, denounced Hewlett-Packard’s directors on Monday for forcing the resignation of the H.P. chief executive, Mark V. Hurd, who is a friend of Mr. Ellison’s.

  Mr. Hurd stepped down Friday after a sexual harassment inquiry found that he had filed inaccurate expense reports.

  In an impassioned e-mail sent to The New York Times, Mr. Ellison chided H.P.’s board for what he said was a grave mistake.

  “The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago,” Mr. Ellison wrote. “That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them.”

  That was 10 months ago. Yep, I think Larry was right.

  

• Louis Navellier’s E-Letter
  Eddy Elfenbein, June 15th, 2011 at 11:56 am

  I want to give a shout-out to my good friend Louis Navellier. He has a great (and free) e-letter that you can sign up for here. I highly recommend it.

  Louis is one of Wall Street’s legends. He’s one of the original “quant guys.” Nowadays, Wall Street is full of number crunchers, but Louis was doing this kind of work long before everyone else was. Not only that, but he has an amazing track record to boot.

  His e-letter always has some interesting insight or take on the market that you can’t find anywhere else. If you want to see a sample, here’s his latest where he names beverage stocks that “bring in the bucks.”

  To sign up, just follow this link.

• Why Oracle Is a Good Value
  Eddy Elfenbein, June 15th, 2011 at 9:54 am

  Oracle‘s ($ORCL) fiscal Q4 earnings report comes out next week and I wanted to pass along this chart of the stock along with its earnings-per-share trend.

  

  As I usually do, I put the share price in blue and it follows the left scale while the EPS is in gold and it follows the right scale. The two lines are scaled at a ratio of 16 to 1 which means that the P/E Ratio is exactly 16 whenever the lines cross. The future part of the earnings line represents Wall Street’s consensus.

  The chart makes a few important points more clearly in graphic form than I could explain verbally. The first is that Oracle’s valuation is still rather subdued. The stock’s P/E Ratio is almost exactly the same as the S&P 500’s even though its earnings have fared much better than the overall market. As you can see, the earnings line was barely impacted by one of the worst recessions of the last 70 years. The rest of Corporate America, in contrast, saw its earnings plunge and we still haven’t made record earnings yet.

  The other point is that you can see how tepid Wall Street’s earnings projections are. If the future earnings projection is correct, it would be a dramatic deceleration of earnings growth (slowing of growth).

  I understand the need for conservative estimates and that’s most likely the sounder strategy, but I wanted to show you precisely what that means. If Oracle’s stock keeps tracking its earnings, I think it’s very likely that the stock will hit $36 before the end of the year. That’s about a 13% jump from yesterday’s close.

  Oracle likes to the play the “set-the-bar-low-and-guide-higher” game, and they play it very well. In March, for example, Oracle “shocked” Wall Street when it said it was expecting fiscal Q4 earnings to range between 69 cents and 73 cents per share.

  I think it’s interesting that Oracle was willing to give us this news when the quarter wasn’t even one month old. At the time, the Street was expecting 66 cents per share. Now the consensus is up to 71 cents per share.

  The company also gave us a 20% dividend increase recently. (Well…it was from five cents to six cents.) Look for a modest earnings beat, say, 73 cents per share. I’ll be interested to hear any guidance for the August quarter. Wall Street currently expects earnings of 46 cents per share.

• Morning News: June 15, 2011
  Eddy Elfenbein, June 15th, 2011 at 7:43 am

  Greek Bailout Talks Deadlock as Pressure Mounts

  Greek Unions Stage Strike Against Austerity

  European Industrial Output Unexpectedly Increased in April

  China Moves Closer to Letting Foreign Banks Underwrite Yuan Bonds

  Oil Trades Near Three-Day High on U.S. Retail Sales; Stockpiles Decline

  Asia Grain Outlook: Japan Buys Wheat; Demand Subdued Elsewhere

  Stock Futures Slip After Rebound, CPI, Factory Data Due

  Bernanke Calls Debt Limit ‘Wrong Tool’ for Forcing Budget Cuts

  Fed Officials Discuss Explicit Inflation Target

  Shuttle’s End Leaves NASA a Pension Bill

  Mortgage Applications See Biggest Gain in 3 Months: MBA

  J.C. Penney Nabbing Johnson From Apple Sets ‘Huge Expectation’

  Pandora Prices Its I.P.O. at $16 Per Share

  Chevron Bets on Volcanoes in Indonesia

  Paul Kedrosky: Global Oil Crosses Into Structural Deficit

  Phil Pearlman: Examining the Open Cloud w GigaOM Pro

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• StockTwits TV Ad
  Eddy Elfenbein, June 14th, 2011 at 10:10 pm

  This is so cool.

  Phil Pearlman asks “Can Twitter beat the stock market?“

• The Market’s P/E Is at a Nine-Month Low
  Eddy Elfenbein, June 14th, 2011 at 2:25 pm

  Here’s a look at the P/E Ratio for the S&P 500 going back to last June. The market’s P/E is the lowest it’s been in nine months (though today’s rally will change that).

  

  What’s interesting to note is that the market’s rally hasn’t been due to higher multiples but rather mostly been driven by earnings. In fact, at 14.22 times earnings, the market’s earnings multiple is still fairly modest.

  Put it this way: the S&P 500 averaged an earnings multiple of 16.94 from 2004 through 2007. Applying that multiple to the Wall Street’s earnings forecast for 2012 gives us an S&P 500 of 1,891.

  There’re a lot of ifs involved in reaching that number, but I wouldn’t say that they’re unreasonable. The market continues to be overly worried about the future.