Morning News: May 28, 2014
Posted by Eddy Elfenbein on May 28th, 2014 at 6:43 am

German Jobless Rises Unexpectedly, Mild Winter Blamed

Euro Falls a Second Day Versus Yen on German Unemployment

India to Have Third-Largest Twitter Population by 2014

FTC Calls For Curbs on Consumer Data Collection

Consumer Confidence Advances to Second-Highest Since 2008

UK Fraud Office Probes GSK After Claims of Foreign Bribery

NASDAQ Nears 13-Year High as Technology Becomes Loved

Pilgrim’s Pride Makes a $6.4 Billion Proposal to Buy Hillshire Brands

Valeant Substantially Increases Merger Proposal For Allergan

Alibaba Buys Stake in Singapore’s Postal Provider

Amazon Acknowledges Contract Standoff With Hachette

Twitter Turns Higher In Bid To Break Losing Streak

Amazon Launches Collectible Coins Store

Jeff Carter: The Pension Crisis and Startups

Howard Lindzon: Stocks, Markets and Bankers Have No Memory or Shame…That’s YOUR Edge…and ‘Contain the Worrying’!

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The VIX Plunges and the S&P 500 Hits New High
Posted by Eddy Elfenbein on May 27th, 2014 at 9:51 am

We’re back! I hope everyone had a nice weekend. On Friday, the S&P 500 closed at an all-time high. We’re up again today into another all-time intra-day high. The S&P 500 is currently at 1,908. Once again, the small-caps are doing the best.

The most surprising action is in volatility. On Friday, the VIX ($VIX) closed at 11.36, and we’re not far from making a seven-year low. On our Buy List, Moog ($MOG-A) is up to $73 per share, which is a new 52-week high. Oracle ($ORCL) is also in new high territory.

This morning’s durable goods report showed an increase of 0.8% in April. Economists were expecting a decline of 0.7%. The figure for March was revised to +3.6%.

Morning News: May 27, 2014
Posted by Eddy Elfenbein on May 27th, 2014 at 7:10 am

IMF’s Lagarde Says Bank Reforms Slowed by Fierce Industry Pushback

Euro Zone’s Dijsselbloem Says Taxes on Labor Too High

Euro Zone Inflation Seen Well Below 2% in 2014, 15: Ewald Nowotny

Russian Gas Reliance in Europe Skewing Sanctions Debate

China Said to Push Banks to Remove IBM Servers

India Minister Jaitley Vows to Restore Investor Confidence

Governments Await Obama’s Move on Carbon to Gauge U.S. Climate Efforts

Big Insurance Rate Hikes in the Future?

Lloyds Banking Group Launches TSB IPO

Pfizer Abandons AstraZeneca Effort

Accor Buys Back 97 Hotels for $1.23 Billion

Foxconn to Buy Stake in Taiwanese Telecoms

Shakeout Threatens Shale Patch as Frackers Go for Broke

Joshua Brown: The First Task of the Day

Roger Nusbaum: Financial Goals Must Be Sensible

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Morning News: May 26, 2014
Posted by Eddy Elfenbein on May 26th, 2014 at 6:44 am

IMF’s Lagarde Calls for Closer Cooperation Among Central Banks

Europe Ready to Act Against Low Inflation, Says ECB’s Mario Draghi

Poroshenko Wins Ukraine Vote With Russia Ready for Talks

Five Areas Narendra Modi Should Focus on to Make India the Next China

BOJ’s Iwata Says Will Adjust Policy if Economy Overheats

Kakao Corp Agrees to Buy Daum to Spur Growth, Gain Seoul Listing

Sales of New Single-Family Homes Jump 6.4% in April

Exhibit A in G.E.’s Case for Alstom Deal

Atos Offers $844 Million to Buy Bull in Cybersecurity Push

Sony, Shanghai Oriental Pearl to set up China PlayStation JVs

Buying Insurance Against Climate Change

4 Ways To Reduce The Financial Bite Of Student Loan Interest Hikes

Everything You Need to Know About Tim Geithner’s Defense of the Wall Street Bailout — in 3 Paragraphs

Roger Nusbaum: You Are Wasting Your Time Trying to Keep Up with the Joneses

Jeff Miller: Weighing the Week Ahead: Will a Sluggish Housing Sector Derail the Economy?

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No Newsletter Today
Posted by Eddy Elfenbein on May 23rd, 2014 at 7:48 am

Just a reminder that there’s no CWS Market Review today. We’ll be back next week with another exciting episode. Enjoy the long weekend!

Morning News: May 23, 2014
Posted by Eddy Elfenbein on May 23rd, 2014 at 6:30 am

Putin’s Singapore Dream Costs Crimeans Their Banks and Burgers

No Weaning Europe Off Russian Gas Says Gazprom

Spain With Greece Win Higher Debt Ratings on Growth Outlook

Modi to Use Courtship by World Leaders to Aid India’s Growth

Unrest Spurs Honda’s Thai Unit to Cut Output, Delay New Plant

Gain in Existing U.S. Home Sales Lifts Spring Prospects

Biotech Rally Sends Market Higher

Mixed Reactions After U.S. Drastically Cuts Monterey Shale Outlook

Gap Reaffirms Outlook, Focuses on Expansion

Best Buy Beats Earnings: Turnaround Sign or Short-Term Rebound?

GameStop Is The Ultimate Bear Trap

Hewlett Packard Faces The Classic Dilemma, How Do You Thrive In A Declining Market?

Barclays Fined $44 Million for London Gold Fix Failings

Cullen Roche: Three Signs the Economy is Doing Okay

Jeff Miller: The Sound of Silence

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NSFW: The Penis Wall
Posted by Eddy Elfenbein on May 22nd, 2014 at 9:10 pm

From Death and Taxes:

One of the standouts from this year’s ITP Thesis show is this wall of 81 “erectable” penises that, in addition to reacting to the movements of those viewing it, also charts the fluctuations of the stock market.

According to creator Peiqi Su, the initial motivation was to “study one of the oldest and probably the most attractive thing that humans interact with.” But while it’s easy to poke fun at the novel idea, the wall’s construction is actually quite elaborate and impressive—each dick was 3D printed, and is made of six segments driven by motors and equipped with a sensor to respond to movement.

It can also be used to represent data, like charting the stock market.

I’m not sure how that’s better than a simple bar chart, but…to each his own. Good taste bars me from embedding this, but you can see a video here.

BusinessWeek on IBM
Posted by Eddy Elfenbein on May 22nd, 2014 at 8:29 pm

IBM is featured on the cover of this week’s BusinessWeek. Here’s Nick Summers’ feature, The Trouble With IBM. It’s harsh but not undeserved.

That was the IBM Rometty inherited in October 2011, when Palmisano named her the company’s first female CEO. It seemed like a golden moment. IBM was celebrating its centennial with record sales, record profits, and a record share price. An artificial-intelligence project called Watson hit the publicity jackpot by beating human champions on Jeopardy! And in November, IBM received the ultimate financial benediction: Warren Buffett revealed he had broken his rule of not investing in technology stocks with the purchase of a 5.5 percent stake in IBM for more than $10 billion. Buffett liked how entrenched the company had become in the world’s IT departments; he said Big Blue was like an auditor or a law firm—really difficult to break up with. He especially liked the road map Palmisano had pledged before stepping down. “They have this terrific reverence for the shareholder, which I think is very, very important,” Buffett said on CNBC.

The honeymoon proved short-lived. Rometty is by many accounts a smart, vigorous CEO—who turned out to have inherited a far more dire position than she, or much of Wall Street, may have realized. The megatrend is corporate America’s move to the cloud. It’s not just Amazon that IBM needs to worry about: In an August 2013 study of 15 cloud infrastructure providers, research firm Gartner (IT) rated IBM worst, behind Microsoft (MSFT), Rackspace (RAX), and Verizon (VZ).

Hardware sales have plummeted 24 percent in two years, turning a manageable decline into a full-on implosion. As a rule, new companies are not buying their own servers and mainframes, and larger corporations, instead of ordering new machines when they reach an upgrade point, are moving their workloads to the cloud, too. Rometty, keeping with Gerstner and Palmisano’s practice of selling businesses with shrinking profit margins, agreed in January to sell IBM’s low-end server business to Lenovo for $2.3 billion. (The deal awaits U.S. government approval.) IBM will attempt to resurrect its hardware sales with a new line of high-end servers unveiled in April called Power8, which it says can churn through massive data sets at record rates.

As I often point out, attractive investing bargains often appear to be damaged goods. That doesn’t scare me. What I want to see is if management realizes the problems and is working to correct them.

Ross Stores Earns $1.15 per Share for Q1
Posted by Eddy Elfenbein on May 22nd, 2014 at 8:09 pm

After today’s closing bell, Ross Stores ($ROST) reported Q1 earnings of $1.15 per share which matched the Street’s estimates. These are decent results and they could have been a lot worse. Earlier this week, TJX reported below expectations. For Ross, revenue was up 5.6% last quarter to $2.68 billion which was just shy of consensus. Comparable store sales, which is the key metric for retailers, were up 1% for the quarter.

For Q2, Ross sees earnings of $1.05 to $1.09 per share, and comparable stores sales growth of 1% to 2%. The Street had been expecting $1.08 per share. Bear in mind that Ross had a range of $1.11 to $1.15 per share for Q1, so they tended to be modest with their expectations.

For the entire year, Ross projects earnings of $4.09 to $4.21 per share. That’s an increase of four cents per share to the low end. The consensus on the Street is for $4.21 per share.

CEO Michael Balmuth said, “First quarter earnings per share performed at the high end of our guidance as strict inventory and expense controls offset the impact from unfavorable weather and a more challenging retail environment. Sales trends improved in April with more seasonal Spring weather that coincided with the later Easter shopping period. Operating margin for the quarter was better than forecasted, declining 25 basis points to 14.6%. A 35 basis point increase in cost of goods sold was partially offset by a 10 basis point improvement in selling, general and administrative costs.”

The VIX Closes Below 12
Posted by Eddy Elfenbein on May 22nd, 2014 at 10:28 am

The S&P 500 is up again today, and we’re over 1,890, so we’re not far from another all-time high. It was one year ago today that Ben Bernanke first warned Congress that the Fed would soon taper its bond purchases. Bernanke was careful to say that they wouldn’t move too soon. The Fed finally announced the taper on December 18 to take effect at the start of January 2014. Despite many calls of disaster, the stock market has held up well over the last year. It appears that QE will be all gone by the end of this year.

Yesterday, the VIX, which is the Volatility Index, closed below 12 for the first time in nine months. If it keeps falling, the VIX could soon hit its lowest level in more than seven years. I don’t think volatility is a good or bad thing for equity prices. Volatility was quite low before the Financial Crisis, so it may be a sign of complacency.

Ross Stores is set to report after today’s close.