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| 2010-01-29 09:37 |
WHOOT, THERE IT IS... (FINAL EDITION)
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Well, all week long the action in many ways has been a set up for today and the slew of economic data set for release. Investors
are bracing good news with the real question being something akin to those Memorex commercials. Is the fourth quarter GDP report real economic growth
or just the mirage that comes along with a long overdue inventory rebuilding? One thing is for sure, there are more and more questions haunting the
market, including what's real and what's not real.
Real or Memorex?
* Higher taxes are coming.
* Intrusive
regulation will kill innovation.
* A jobless recovery, good enough?
* Economic problems around the world will hurt America.
I often talk
about the market shaking out the weak sisters, or in the case of early 2009, shaking out the entire family tree. I got the sense of that yesterday as
smart money was moving in to do a little nibbling. The rally fell short, ironically, losing steam after Ben Bernanke was confirmed to retain his role
as Chairman of the Federal Reserve. But the selloff could have been worse. There is no doubt that the market is vulnerable, but the big question is
whether this weakness is justified or simply overdue.
Spending Freeze?
The day after talking of spending freezes and fiscal responsibility, the Senate voted
to hike the nation's debt ceiling to $14.3 trillion. I understand the President said the GOP has to get involved, but none voted for the hike and I
must say this was a great "no" vote. As brilliant as President Obama is, his tactics in the State of the Union were old school...I mean real old
school as in High School. He bullied the Supreme Court, and don't let anyone tell you it's not a big deal because justices are in the job for life.
Nobody likes being painted a villain. Most of the justices were nerds in school and maybe they are accustomed to being picked on, but when the coolest
kid in school makes you the target of his ire, life can be tough. But peer pressure on this level doesn't always work, and didn't work yesterday. The
Republicans aren't angels but were smart enough to fight back against the insanity. They didn't vote for hiking the U.S. debt ceiling another $1.9
trillion bucks.
As my man Cool Hand Luke would say: "Sometimes nothing is a real cool hand."
The debt ceiling hikes are frightening to
be sure, and have climbed 12,000% since 1940, so at some point we have to ask when does it come back to haunt the nation. This is unsustainable no
matter what kind of spin is used for justification. My bigger question is where the hell is all that money going? How much of this cash has been
stolen? Just think if the debt ceiling grew at the average rate of inflation (3.99%) it would now stand at $755.8 billion. The population of the
nation is up 134% since 1940.
By the way, if you
are wondering what your share of the debt is, try $46,278 from $371.00 back in 1940. Of course, if they had to divvy this up today I guess only the
top 5% would have to fork over the dough. The sad fact is that America paid $383.0 billion in FY09 just to cover the interest payment on the national
debt.
Counter
Intuitive?
Apple (AAPL) debuts its much talked about tablet and the hottest tech stock of the week is.... (drum roll please) Amazon
(AMZN). The shares surged after the bell when the maker of the Kindle (also known as the dinosaur among the hipper than thou Apple crowd) posted
earnings of $0.85 per share on $9.52 billion, beating consensus of $0.52 per share and $9.04 billion. It was the best Christmas ever (how many people
can say that) as book and CD sales were up 29% and electronic devices 60%. Guidance for the quarter sees revenue in a range of $6.45 billion to $7.0
billion; the Street had modeled for $6.36 billion.
Microsoft (MSFT) posted earnings of $0.74 per share on $19.0 billion in revenue, huge beats
of $0.59 per share and $17.5 billion, respectively. Windows revenue climbed 70%, but the stock was only up slightly in part to some confusion over the
accounting for deferred revenue.
Economic Data
4Q GDP
We will be breaking down the GDP numbers in greater
detail in the afternoon comments. Briefly, 4Q GDP clocked in at +5.7%, the highest number since 3Q03. Inventory re-stocking was a major component of
the result, which was toward the upper-end of most forecasts we saw. Consumer spending at +2% came in a bit slower than 3Q at +2.8%. Although the
figure is robust on the headline, immediately the following thoughts arise:
1. Does this cause the Fed to move quicker on rates than some
currently believe to prevent inflation?
2. Stimulus efforts impregnated the data set; once those measures wear thin, what's left?
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Disclaimer: Securities Operations Forum is providing this research to assist investors in determining when to buy and when to sell. All investment decisions are yours and as a result you could make or lose money. Securities Operations Forum, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed, but not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Securities Operations Forum sit on the Board of Directors of any covered company. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness. The statements made herein contain general information and do not constitute an offer to buy or sell any security. |
