My portfolio finished down 0.85% after the markets took a nosedive at the end of the day today. The only bright side was I beat all the indexes.
But on to happier things, specifically the weekend. For this weekend’s open thread, I offer my three favorite Eurythmics songs:
1. Would I Lie to You? (1985):
2. Missionary Man (1986):
3. Sweet Dreams (Are Made of This): Now, for a twist. I actually prefer the Marilyn Manson version of this song, even though it was the song which made the Eurythmics famous back in 1983. Manson took the song to it’s most disturbing extreme, making it sound like it would easily fit into the soundtrack of a horror film.
Have a good weekend folks, and try not to think about what the markets did today.
You can ignore yesterday’s positive move on the S&P 500. It didn’t challenge resistance and only bounced off support. Until it breaks through the 10 or 20 day moving averages, I consider this a range-bound market.
The S&P 500 levels to watch today:
UPSIDE: 1655-1656 (2 data points), 1657 (10 day moving average), 1660-1661 (3 data points), 1663 (May 20th’s low), 1667 (May 17th’s high), 1672 (May 20th’s high), 1674 (2 data points), 1681 (top of the Bollinger Bands), and 1687 (May 22nd’s high and the all-time high). LAST CLOSE: 1654. DOWNSIDE: 1651-1652 (3 data points), 1648-1649 (4 data points), 1646 (May 15th’s low), 1643 (20 day moving average), 1640 (May 29th’s low), 1635-1636 (4 data points), 1632-1633 (2 data points), 1626 (2 data points), 1622-1623 (3 data points), 1618-1619 (2 data points), 1616 (May 7th’s low), 1614 (May 6th’s low), 1605 (bottom of the Bollinger Bands), 1596-1598 (5 data points, including April’s high and the 50 day moving average), 1581-1583 (2 data points), 1572 (March’s high), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high), 1501 (March’s low), and 1488 (200 day moving average).
In case you missed it, Blackberry’s Q10 is being released by T-Mobile on June 4th. From the review above, it sounds like Blackberry is still competitive, at least with the physical keyboard crowd.
Don’t get me wrong: I don’t see Blackberry becoming dominant in the smartphone market. But they are far from dead too.
Walt Disney Co. (DIS) fell the most in more than a month after Chief Financial Officer Jay Rasulo tempered expectations for the current quarter, citing film marketing costs and tough comparisons with a year earlier.
Shares of Disney, based in Burbank, California, declined 2.4 percent to $64.65 at the close in New York, the most since April 15. The stock has gained 30 percent this year.
Rasulo, speaking at a Nomura Securities investor conference, said he was reiterating and elaborating on comments made earlier this month that the company’s film studio and theme parks would be up against tough year-over-year comparisons in the current fiscal third quarter.
“When I’m looking at estimates across the Street, maybe I wasn’t clear or they weren’t properly reflected,” Rasulo said.
Disney will incur significant marketing costs for “The Lone Ranger” this quarter, while revenue from the film won’t start to flow until July 3, after the period ends, he said. “Iron Man 3,” while collecting about $1.2 billion at the worldwide box office, will fall short of “Marvel’s The Avengers” from last year, he said.
Those items will lower operating income at the film unit by about $150 million from a year earlier, Rasulo said. In addition, cable-sports channel ESPN will recognize about $75 million less in deferred revenue for the period than a year ago, he said.
Theme-park results will reflect one less week of Easter holiday traffic, compared with the same period last year, Rasulo said. The company won’t get the same earnings boost from the new cruise ship Fantasy as it did a year earlier because the ship has now been operating for more than a year.
Analysts predict Disney will earn $1.05 a share this quarter excluding items, the average of 29 estimates compiled by Bloomberg. They forecast sales of $11.8 billion.
I see this as a blip in the overall Disney picture, especially for long-term holding.
Electronic Arts (EA) and Insomniac Games announced the availability of their new game Fuse in North American stores. The game is also available for download from EA’s online distribution platform Origin. In Europe, the game is set to release on May 31.
…Although co-published with Insomniac, Fuse is EA’s only original game title for fiscal year 2014. EA is slated to release 11 games during the year, of which 10 are sequels and updates to major franchises such as FIFA, Madden NFL, NHL, NBA, Battlefield and Sims.
Major game publishers such as EA and Activision (ATVI) have been criticized by gamers for the lack of new game titles in their portfolio. Their overdependence on sequels of matured franchises has been one of the primary reasons behind gloomy retail sales in recent times.
If you want to know the problem with the gaming industry today, look no further than this. Frankly, the only place I have seen innovation is from small gaming companies in South Korea. However, the other part of the problem is the customers, who complain about lack of innovation, yet they keep plunking down money on re-runs while ignoring the new games.
I am still watching CurrencyShares Australian Dollar Trust (FXA), as one of the few currency etf’s that pays a monthly dividend (annual yield about 2.7%, although it fluctuates each month). However, as the article above notes, FXA has taken a beating recently. Analysts are putting targets of 80 and 90 cents on the Aussie dollar, which is currently trading around 96 cents per U.S. dollar. But if you can get into FXA near the low, whatever that happens to be, then this could be a very nice and safe long-term play.
The introduction of new products and pricing changes in the U.S. Life Insurance Division implemented over the past year are expected to continue in 2013 as well. These actions led to lower sales for Genworth.
Life insurance sales slipped 68% year over year, while long-term care insurance sales decreased 17% year over year. In addition, loss ratios of long-term care insurance business have been increasing over the past several years and ranged from 65% to 71% over the last five years.
Genworth expects operating earnings to be weighed upon by continued low interest rate environment. Genworth expects consolidated operating earnings per share from after-tax spreads to be down by 7 cents per share in 2013 and 11 cents per share in 2014. It also anticipates the U.S. Life Insurance segment to be affected majorly due to its product mix, long-term care and universal life insurance in particular.
Further, to emphasize on generating capital, increasing the financial strength and flexibility of the company as well as to simplify the business model, Genworth decided to divest the wealth management business. It recognized $27 million from goodwill impairment. The company also expects to record an additional after-tax loss of up to $10 million.
Genworth generated $10 billion in revenue in the last 12 months, and Zacks is talking about problems in the millions. Admittedly, Genworth has a low profit margin (3.8%), but it also is severely undervalued, with a price/book ratio of 0.33. If Genworth’s stock was priced according to its book value, it would be trading at $32.90, not $11.02. If the company does start losing money, that can certainly bring down the book value, but to a third? That would take either extreme mismanagement, which the company hasn’t shown, or a severe economic depression, which nobody is realistically predicting.
Another irony is one of the reasons which Zachs mentions for downgrading Genworth: “earnings to be weighed upon by continued low interest rate environment”. If you buy into the Federal Reserve “tapering QE” rumors, which I don’t, then interest rates should be going up in the near future, which would be good for Genworth.
Ultimately, Genworth is a value play, and minor speed bumps in quarterly earnings will not have a significant impact on how undervalued it is.
Long-time media baron Barry Diller said Wednesday that he sees closed cable TV systems as a dying breed and that programming will eventually shift to open Internet-based platforms.
“I can’t imagine that any of you enjoy the navigation system of cable. If you do, you don’t deserve to be here,” Diller told the crowd at D11, a conference in Rancho Palos Verdes sponsored by the AllThingsD technology blog.
Diller’s IAC is backing a controversial startup called Aereo, which provides antennas for users to pick up digital video broadcasts and still time shift their viewing, like on a cable-system’s DVR. The company has been sued by a consortium of broadcasters that include CBS, Comcast, Walt Disney Co. and News Corp., who allege the service infringes on their copyrights.
Calling the controversy over the lawsuits “overblown,” Diller said he is looking to have Aereo help shift TV platforms away from closed cable systems, adding that the broadcasts offered by Aereo are available available for free over the air.
“This is a market that is ripe,” he said of the need for innovation in broadcast TV. “This has been a system that has certainly outlived itself.”
I will admit that holding both IAC and Disney seems like a conflict on the surface, but I don’t see it that way. I hold Disney more for their intellectual properties as well as their other businesses, such as theme parks. On the other hand, IAC is bringing free broadcast tv to the internet, which is overdue. If Disney wants to, they can offer their content on the internet for money, but they think they can make more money from the “old way”. At some point, Disney will be brought kicking and screaming into the 21st century, and I don’t see the process as severely impacting their bottom line due to the wide variety of income sources they have. Disney will eventually adjust their content distribution to account for the new way, and still make plenty of money. Meanwhile, IAC will lead us into a better future where we can get the content we want, when we want it, and not have to pay for content we don’t want. This is what innovative companies should do.
If you need proof that Intel is making progress in its move to mobile, here you go:
Samsung Electronics has chosen an Intel Corp processor to power a new version of one of its top-tier Android tablets, a source with knowledge of the plans told Reuters, in a major victory for the U.S. chipmaker, which is struggling to find its footing in the mobile market.
Samsung has chosen Intel’s Clover Trail+ mobile chip for at least one version of its Galaxy Tab 3 10.1, which competes with Apple Inc’s iPad, a source familiar with the matter told Reuters on Thursday, speaking on condition of anonymity because the specifications have not been announced.
This is even bigger when you consider that Samsung is capable of making their own chips. For Samsung to go with an Intel chip to compete with Apple’s iPad tells you what a significant improvement the Intel chip is.
Mind you, I don’t think Intel is a buy yet, but it could be on a pullback. At this point, I would buy it in the $21.50-22.00 area.
Good news for Netflix, but it is still hugely overpriced. A P/E of 545? A PEG ratio of 7.89? I wouldn’t even consider Netflix until it drops below $160. From it’s current price of $222.66, that’s a big drop.
As soon as I add CVR Partners (UAN) to my watchlist, then this has to happen:
CVR Partners (NYSE:UAN): Jim Cramer ranked this stock a Buy. Cramer previously ranked this stock a Sell on April 3, 2013. The stock’s 52-week high is $30.00, and its 52-week low is $19.21. “It is at the right level, and I’m saying you can buy it,” Cramer said.
There’s a “don’t buy it now” signal if ever I saw one…
“The Federal Reserve, any central bank, should not be asked to do too much to undertake responsibilities that it cannot responsibly meet with its appropriately limited powers…Credibility is an enormous asset. Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment…The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives. Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.”–former Federal Reserve Chairman Paul Volcker
The S&P 500’s 20 day moving average (1639) is still providing some solid support. But I want to see the S&P finish above the 10 day moving average at 1657 before I will say the bulls are back.
The S&P 500 levels to watch today:
UPSIDE: 1651-1652 (3 data points), 1655-1656 (2 data points), 1657 (10 day moving average), 1660-1661 (2 data points), 1663 (May 20th’s low), 1667 (May 17th’s high), 1672 (May 20th’s high), 1674 (2 data points), 1685 (top of the Bollinger Bands), and 1687 (May 22nd’s high and the all-time high). LAST CLOSE: 1648, inside the 1648-1649 (3 data points) range. DOWNSIDE: 1646 (May 15th’s low), 1640 (May 29th’s low), 1639 (20 day moving average), 1635-1636 (4 data points), 1632-1633 (2 data points), 1626 (2 data points), 1622-1623 (3 data points), 1618-1619 (2 data points), 1616 (May 7th’s low), 1614 (May 6th’s low), 1596-1598 (5 data points, including April’s high and the 50 day moving average), 1593 (bottom of the Bollinger Bands), 1581-1583 (2 data points), 1572 (March’s high), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high), 1501 (March’s low), and 1487 (200 day moving average).
If you are looking for the next Wal-Mart, Costco might be it:
Costco Wholesale Corp. (COST), the largest U.S. warehouse-club chain, said third-quarter profit rose 19 percent, beating analysts’ estimates, as revenue from membership fees increased.
Net income in the quarter ended May 12 rose to $459 million, or $1.04 a share, from $386 million, or 88 cents, a year earlier, the Issaquah, Washington-based company said today in a statement. Analysts projected profit of $447 million, the average of 11 estimates compiled by Bloomberg.
Costco has worked to lower its already-discounted prices to lure more shoppers to its annual memberships. Third-quarter sales at stores open for more than a year increased 7 percent, excluding changes in gas prices and foreign-currency exchange rates. Revenue by similar measures fell 1.4 percent at Wal-Mart Stores Inc. (WMT) in the U.S. and 0.6 percent at Target Corp. (TGT) in their most recent quarters.
Revenue from membership fees advanced 12 percent to $531 million, the company said. That was part of a 7.9 percent increase in total revenue to $24.1 billion, Costco said. That compared with the $24.2 billion average estimate of 17 analysts.
Costco isn’t cheap at the current stock price, but it is worth adding to my watchlist to look for a good entry point later.
Major advertisers including Nissan and Nationwide have suspended Facebook marketing campaigns after their ads appeared alongside offensive posts, highlighting the risks of a new form of “targeted” advertising.
The cancellations follow complaints on Twitter and from women’s rights organisations over the publication of misogynistic content, including images of abused women, on the social networking site.
Targeted advertising identifies that a person is likely to buy a particular product, and then automatically places ads for that product on whatever page he or she visits.
Adverts for Japanese carmaker Nissan, Nationwide, the UK’s largest building society, Unilever’s Dove skincare brand, were automatically placed next to the offensive images that Facebook users either sought out or stumbled upon accidentally. To the companies’ embarrassment, screenshots juxtaposing the misogynistic images with their products were then widely circulated.
This does bring up the problem with targeted ads: Advertisers have no control over what their targets are viewing, and run the risk of having their ads appear on pages with content completely unrelated to their product.
This also brings up the problem with social media websites like Facebook and Twitter: If they don’t censor their content, they run the risk of offending advertisers. On the other hand, if they do censor their content, they run the risk of going too far, and running off their users. It is a Catch-22.
My advice: Avoid companies that rely on social media for their revenue stream. They can’t win until they can move away from social media for the majority of their revenue.
From the looks of the market action over the past week, it looks like the S&P 500 may be entering a trading range period. The bottom of the range looks like it will be the 20 day moving average, while the top of the range hasn’t been defined yet, although it could be 1674. However, futures are pointing down this morning, so we may not see any top definition yet.
The S&P 500 levels to watch today:
UPSIDE: 1663 (May 20th’s low), 1667 (May 17th’s high), 1672 (May 20th’s high), 1674 (2 data points), 1686 (top of the Bollinger Bands), and 1687 (May 22nd’s high and the all-time high). LAST CLOSE: 1660, inside the 1660-1661 (2 data points) range. DOWNSIDE: 1657 (10 day moving average), 1655 (May 23rd’s high), 1651-1652 (3 data points), 1648-1649 (3 data points), 1646 (May 15th’s low), 1637 (20 day moving average), 1635-1636 (4 data points), 1632-1633 range (2 data points), 1626 (2 data points), 1622-1623 (3 data points), 1618-1619 (2 data points), 1616 (May 7th’s low), 1614 (May 6th’s low), 1596-1598 (4 data points, including April’s high), 1594 (50 day moving average), 1587 (bottom of the Bollinger Bands), 1581-1583 (2 data points), 1572 (March’s high), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high), 1501 (March’s low), and 1486 (200 day moving average).
If the U.S. and the E.U. can pull this off, it would be a huge boon to both areas:
Lobbying by companies is accelerating as the U.S. Trade Representative’s office prepares to negotiate with the 27-nation European Union to form the world’s largest free-trade region. Wal-Mart Stores Inc (WMT)., Intel Corp (INTC)., the United Steelworkers union and the Sierra Club are among 367 parties who have weighed in as the agency opens two days of hearings today.
Because the talks will cover a wide range of merchandise and services, they run the risk of being stalled by special interests. Officials plan to move quickly, beginning the talks in July and reaching an agreement by the end of 2014.
“We all have to really, you know, almost cash in on this momentum that we have,” Lucinda Creighton, Ireland’s minister for European affairs, said yesterday at a meeting with reporters and editors at Bloomberg’s New York office. “It’s going to be tricky.”
Government leaders and business groups are pursuing the pact, known as the Trans-Atlantic Trade and Investment Partnership or T-TIP, as a way jump-start their sluggish economies. Negotiators want to eliminate most tariffs and streamline the thicket of regulations in the two regions that generate $28 trillion in annual economic output, almost half the world’s total.
The amount of economic good which can come from a free trade agreement between the two regions cannot be underestimated. But it will take a huge amount of sacrifice by both sides to get there. Truth be told, I don’t have a lot of faith in the governments of either region to make this happen, and certainly not anytime soon.
California is on the verge of a new gold rush. Expanded hydraulic fracturing — or “fracking” — at the Monterey Shale formation is sparking estimates that 15 billion barrels of oil could be accessed, along with millions of jobs and huge contributions to the domestic energy supply.
Even the state’s green-friendly Democratic governor, Jerry Brown, says “the potential is extraordinary.”
But standing in the way is a flurry of anti-fracking bills. At last count, 10 were on the table, all introduced by Democrats seeking tighter controls over the controversial technology.
Some of the measures take aim at how crude is extracted from rock layers beyond the reach of conventional drilling.
Others call for full disclosure of what chemicals are used in the high-pressure process, how they’re removed, and where they’re stored.
California State Sen. Fran Pavley, a longtime environmental activist, is pushing for a fracking moratorium until more studies are done on the potential risks, particularly to the groundwater supply.
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