Ed’s Daily Notes for August 14th   Leave a comment

The Hill: Why is Obama returning to Washington?

President Obama won’t make any major announcements on immigration reform during his secretive mid-vacation trip back to Washington next week, the White House said Wednesday.

The president is expected to return to the White House on Sunday, but officials won’t say why Obama is taking the unusual, and costly, trip back to Washington. He’s expected to return to Martha’s Vineyard, where he’s been vacationing, on Tuesday.

The article goes into a lot of speculation over immigration reform and other things. My guess is the president is planning some kind of classified military operation. If it goes as planned, we may never hear about it. On the other hand, if it doesn’t, it could create a situation. Maybe something involving Ukraine, Iraq, or Iran?

Regardless of the reason, it would make me reluctant to buy any stocks until next week.

Bloomberg: Recovery Halts as Germany Shrinks, France Stagnates

Yesterday, it was bad news from Asia. Today, we have Europe:

The euro area’s recovery halted in its three biggest economies in the second quarter, underlining the vulnerability of the region to weak inflation and the deepening crisis in Ukraine.

German gross domestic product shrank 0.2 percent, more than economists forecast, while stagnation in France prompted the government to scrap its 2014 deficit target after data released today. Combined with Italy’s unexpected slide into recession, the reports may add pressure on the European Central Bank to expand stimulus.

While Germany’s second-quarter weakness was largely due to a warm winter that shifted production to earlier months, the outlook for coming months is now clouded by the impact of international measures against Russia over its support of separatists in Ukraine. That imperils the euro area as a whole, where inflation is running at the slowest pace since 2009 and measures announced by the ECB will take time to have an effect.

I love the excuse for Germany: warm weather. So cold weather slows the U.S. GDP, while warm weather does it to Germany? I guess people only work in Fall and Spring?

Bloomberg: Cisco Cutting 6,000 Jobs as CEO Forecasts Stagnant Growth

Bad news for Cisco fans:

Cisco Systems Inc. (CSCO) is cutting 6,000 jobs and forecasting little to no revenue growth in the current quarter amid a slump in demand from phone and cable companies, and weakness in emerging markets.

The world’s largest networking-equipment maker, which has about 74,000 employees, said it will take a pretax charge of as much as $700 million. Including the latest round of firings, which represent about 8 percent of the workforce, Cisco has eliminated more than 18,000 people over the past three years.

John Chambers, who is nearing retirement after almost two decades as Cisco’s chief executive officer, has been grappling with slowing growth for its market-leading routers and switches. Phone carriers and other large companies are replacing legacy network hardware with software that performs many of the same tasks. Sales in emerging markets won’t recover for several more quarters, Chambers said on a conference call.

While Cisco is still in a good spot financially, they need a strategy for getting out of the death spiral in which they seem to be stuck. If they can replace Chambers with an innovation-oriented CEO, or if the stock drops to book value ($10.90/share, which isn’t likely any time soon), then I might call the stock a buy. Until then, Cisco is a solid “sell”.

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Posted August 14, 2014 by edmcgon in Economy, News, Stocks, Technology

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