Morning News: August 15, 2013
Posted by Eddy Elfenbein on August 15th, 2013 at 8:51 am

Russia Accused of Triggering Trade War with Ukraine

Confident Consumers Step Up Their Borrowing

Gold Investors Seek Alpine Haven in Swiss Army Bunkers

U.S. Stock Futures Drop on Forecasts Before Economic Data

Consumer Prices in U.S. Increase, Supporting Fed Forecast

Jobless Claims in U.S. Decline to Lowest Level Since 2007

Wal-Mart Cuts Profit Forecast as Higher Taxes Damp Sales

Cisco to Cut 4,000 Jobs, Blames Weak Economic Recovery

Soros Raises JC Penney Stake But Two Big Investors Exit in Q2

AMR-US Airways Merger Faced Antitrust Opposition From the Start

Smartphones and Tablets Outsell PCs at Lenovo

David Rosenberg Announces Big Change Of Mind On Perhaps The Most Important Economic Question Of Our Time

Jeff Bezos, Risk-Averse Rebel

Cullen Roche: Failing the Great Recession Test

Joshua Brown: Three Lessons from the Twitter Hedge Fund Ponzi

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Blast from the Past
Posted by Eddy Elfenbein on August 14th, 2013 at 4:31 pm

From the New York Times, April 30, 1997:

Head of Oracle Halts Bid to Buy Apple Computer

A quest by the chairman and chief executive of the Oracle Corporation, Lawrence J. Ellison, to acquire Apple Computer Inc. came to an abrupt — if temporary — halt late today, when he issued a statement saying that for the moment he had decided not to buy the troubled computer maker.

But in a one-paragraph statement, issued from Mr. Ellison’s Atherton, Calif., home, the billionaire software entrepreneur, raised as many questions as it answered.

While saying that Mr. Ellison had not purchased any Apple stock nor entered into negotiations with Apple executives, the statement added that he might reconsider a takeover at a later date:

”Mr. Ellison stated that he remains interested in developments at Apple and that he may well purchase stock for investment purposes or otherwise, or revisit in the future his decision regarding an acquisition or control of that firm,” the statement said. Mr. Ellison was traveling out of the country and could not be reached for comment today.

Analysts questioned whether Mr. Ellison had ever seriously intended a takeover.

”He played the media like a symphony conductor,” said Tim Bajarin, president of Creative Strategies, a San Jose, Calif., computer industry consulting firm.

Noting Mr. Ellison’s crusade for less-expensive desktop machines called network computers, Mr. Bajarin said, ”He talked about making the Macintosh into a network-computer platform, and that didn’t make any sense.”

There had been talk among industry executives in recent weeks that Mr. Ellison had succeeded in getting commitments for at least $700 million in his bid, but that he had wanted a $1.6 billion war chest.

Other people on Wall Street said that Mr. Ellison had failed to execute a cohesive hostile takeover strategy. Such hostile takeovers are rare in high technology because the assets are frequently the employees, who can leave in the event of a takeover.

Mr. Ellison’s statement was released after the stock market closed. Earlier, shares of Apple closed up 6.25 cents, at $17.6875, in Nasdaq trading.

In March, Mr. Ellison touched off a lively drama in Silicon Valley after he said he was planning to lead an effort to take over Apple and place his friend and the co-founder of Apple, Steven P. Jobs, on the board.

The next day, however, Mr. Jobs denied any knowledge of the plan. Mr. Jobs has returned to Apple as an adviser after selling his company Next Software Inc. to Apple.

The $17.6875 needs to be adjusted for two 2-for-1 stock splits, so at the time, AAPL was going for $4.42 per share.

The Surge in Small-Cap Value
Posted by Eddy Elfenbein on August 14th, 2013 at 2:48 pm

The stock market didn’t have what experts call “a good” first decade of this century. It’s kind of rough when the stock market falls in half twice within nine years.

However, below the radar, small-cap value stocks have done quite well. They were severely underpriced at the peak of the Tech Bubble in 2000.

This chart shows the total return of the Wilshire 5000 (red line) compared with the total return of the small-cap value sector (blue line). It’s not even close:

This is another reason to be cautious when people discuss “the market” as if it’s one giant entity.

Six Years of No Growth
Posted by Eddy Elfenbein on August 14th, 2013 at 11:20 am

Here’s an eye-opening chart. From the Fred database, I took the Real GDP (GDPC1) data series and divided it by the U.S. population (POP) to get GDP per capita.

After four years of recovery, we’re only now matching the high from the previous expansion in 2007.

Morning News: August 14, 2013
Posted by Eddy Elfenbein on August 14th, 2013 at 6:03 am

China Plans Faster Capacity Cuts Even as Growth Slows

Germany is Strong, But Not Nearly Strong Enough

Brazil Sues Samsung For More Than $100 Million Over Poor Working Conditions

Senate Pressure on Fed Pick Irks White House

Lockhart Says QE Taper Possible at Next Three Meetings

Rise in U.S. Retail Sales Points to Pickup in Spending

U.S. Moves to Ground Big Air Merger

Icahn Pushes Apple on Buyback

Pepsi Wins Battle in Cola Wars: $21 Million CUNY Deal

JCPenney Focus Turns To Holiday Prospects As Ackman Drama Ebbs

Three Top Zynga Executives Are Out

U.S. Agrees Not to Prosecute ‘London Whale’

Brocade Cost Cuts Lift 3Q Profit, Shares Jump

Credit Writedowns: Profitless Stocks and Levitating Stock Prices

Phil Pearlman: Hyperloop, Return & Ridicule

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Great Quote from Dan Loeb
Posted by Eddy Elfenbein on August 13th, 2013 at 8:46 pm

From USA Today:

Hedge fund manager Dan Loeb, whose Third Point fund has reportedly bought into Herbalife, has also appeared to weigh in on Ackman in recently. On Monday, several news organizations reported that Loeb used his Bloomberg financial terminal to post a message that read: “Never interfere with an enemy when he is in the process of destroying himself.”

When Carl Icahn Tweets, People Listen
Posted by Eddy Elfenbein on August 13th, 2013 at 2:44 pm

There was an old commercial that went, “When EF Hutton talks, people listen.” Today we learn that when Carl Icahn tweets, people listen.

Here’s Carl:

We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come.

— Carl Icahn (@Carl_C_Icahn) August 13, 2013

And the result:

My Mistake With Tupperware
Posted by Eddy Elfenbein on August 13th, 2013 at 11:23 am

Last year, I was seriously considering adding Tupperware ($TUP) to my 2013 Buy List. I even posted about it in November, but sadly, I decided against adding TUP to this year’s Buy List.

Dumb move! The stock is up 36.5% YTD.

Actually, it’s even worse than that because I had been looking at TUP when it was $54 in mid-October. The stock quickly gapped up to $62, and I thought the bargain was now gone. Dumb move!

TUP closed last year at $64.10 per share. Today it broke $88! Ugh. The stock has beaten earnings in January, April and July, plus they raised their dividend by 72%. Last November, I noted that my World’s Simplest Stock measure gave TUP a price of $77.

Last month, however, TUP lowered its full-year estimate for the second time this year. The company now expects 2013 earnings to range between $5.44 and $5.54 per share. Today, my simple stock measure says that TUP is fully priced.

180 Straight Days Above the 150-DMA
Posted by Eddy Elfenbein on August 13th, 2013 at 11:02 am

Daily volatility continues to be pretty meager this August. The stock market is currently down, but just a bit this morning. The government reported that retail sales rose by 0.2% last month, which is the fourth monthly increase in a row. Economists were expecting an increase of 0.3%. The increase for June was revised higher by 0.2% to 0.6%.

Despite the headline miss, the details were pretty good. If we look at “core” retail sales, which doesn’t include cars and gas, that rose by 0.5% in July. That’s the biggest since December. Clothing stores saw their sales rise by 0.9% last month, which bodes well for stocks like Ross Stores ($ROST).

Steven Russolillo at the WSJ highlights an interesting factoid: The S&P 500 has traded above its 150-day moving average for the last 180 days. That’s the ninth-longest streak since 1980. I think this is due to the market’s slow, steady upward crawl combined with the low volatility. The index is currently about 6% about its 15-DMA.

Morning News: August 13, 2013
Posted by Eddy Elfenbein on August 13th, 2013 at 6:44 am

German Investor Confidence Rises as Euro Area Resumes Growth

Contraction Shows Signs of Slowing for Greece

German Gov’t Dismisses Report Buba Expects More Greek Aid

Japan PM May Sweeten Sales Tax Hike With Corporate Tax Cut

There’s A Huge, $1 Trillion Hole In Chinese GDP

In Move for Economy, Mexican President Seeks Foreign Investment in Energy

Musk Shows Hyperloop Transport Design for People to Cars

BlackBerry Mulls Putting Itself up for Sale

New Bid for Steinway Is Sweet Music to Investors’ Ears

Murdock Clinches $1.6 Billion Dole Buyout

EON’s Proprietary Energy Trading Loss Narrows in First Half

U.S. Subpoenas Goldman in Inquiry of Aluminum Warehouses

Best-Paid Women in S&P 500 Settle for Less With 18% Gender Gap

John Hempton: Strange Stock Assessment From A Value Investor I Kind Of Admire: A Note On The Transition Of Apple Into A “Value Stock”

Howard Lindzon: The Bitcoin Moment – F$%^#! The Winkelvoss Twins

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