Gundlach on Interest Rates
Posted by Eddy Elfenbein on June 4th, 2013 at 4:44 pm

Zynga Lays Off 18%
Posted by Eddy Elfenbein on June 4th, 2013 at 10:39 am

Yesterday, Zynga ($ZNGA) announced that it’s laying off 520 employees which is 18% of its workforce. I honestly feel terrible about about these types of stories; my first thoughts are with the people who are now out of work. But as an experienced investor, I’m afraid to say that I’m not surprised.

Zynga is reiterating its outlook for this year:

The company reaffirmed its revenue and earnings per share guidance for both the current quarter and the full year. But Zynga now expects a net loss of between $28.5 million and $39 million during the current quarter, worse than the $27.6 million loss analysts surveyed by Thomson Reuters had been expecting.

I get frustrated when I see so many investors taken in by companies with little operating histories. Zynga went public 18 months ago and the IPO was a flop. Still, the shares off got close to $16. That’s simply crazy. The company was never worth half that much.

A good rule for investors is to ignore all money-losing companies. A stock has to demonstrate to me that it can consistently earn a profit. Put it this way: Wall Street’s outlook for Zynga for 2014 is for earnings of $0.00. That’s right — nothing. I’m pretty sure Bed Bath & Beyond ($BBBY) will make more than nothing next year.

Just stay away from the money losers.

Morning News: June 4, 2013
Posted by Eddy Elfenbein on June 4th, 2013 at 6:47 am

IMF Tells France To Step Up Reforms And Contain Public Spending

Yen Strengthens Again, in Challenge for Abe

Oil Options Volatility Rises as Futures Gain on Stimulus Bets

Spain’s Crisis Fades as Exports Transform Country

RBA Sees Further Rate-Cut Scope as Aussie Remains High

Behind the Rise in House Prices, Wall Street Buyers

General Motors S&P 500 Inclusion Marks Another Step in Recovery

AIG, Prudential Named Systematically Important by Panel

Lenovo Group Confirms Preliminary Joint-Venture Talks

Intel to Invest $100 Million in Voice, Gesture Control

Nissan May U.S. Sales Rise 25%, Triple Industrywide Gain

Zynga Slashes Work Force By A Fifth, Shares Dive

Construction Spending in U.S. Increases on Private Building

Cullen Roche: This Time is Different for Japan, Right?

Credit Writedowns: Weak Income Growth Should Hold Back US Consumer Spending

Be sure to follow me on Twitter.

Dividend Stocks Have Been Crushed
Posted by Eddy Elfenbein on June 3rd, 2013 at 12:05 pm

Check out this chart. It shows the Utility Sector ETF ($XLU) divided by the S&P 500.

Over the last few weeks, the utes have badly lagged the rest of the stock market (though they’re ahead sharply today). It’s not just utes but it’s most stocks that pay rich dividends. Telecoms have struggled as well. The reason is that the market feels — wrongly in my opinion — that the Fed will soon raise interest rates. If that happens, then high-yielding stocks won’t be as important.

Stocks Over Bonds Since the Election
Posted by Eddy Elfenbein on June 3rd, 2013 at 10:58 am

The stock market is down just a tad this morning. The ISM report for May was pretty much a bust. In response, gold is up and bonds are down. With stocks, financials are down the most while energy is leading. As I said recently in the newsletter, don’t expect the Fed to taper any time soon.

We learned this weekend that DirecTV ($DTV) is one of three outfits that have bid more than $1 billion for Hulu. My feeling is that DTV’s management is pretty conservative when it comes to acquisitions so the odds of them buying Hulu are low. Still, it could happen. Hulu has looked to sell itself in the past but they balked at the offers they got.

Here’s a look at how badly the stock market has beaten the bond market since the election.

In January, I said that Facebook ($FB) was “horribly overpriced.” The stock is down 25% since then. I do believe that the stock market is efficent — it just takes its time.

May ISM = 49.0
Posted by Eddy Elfenbein on June 3rd, 2013 at 10:24 am

The May ISM just came in at 49.0. This was the lowest reading in nearly four years.

Today’s report suggests that the economy is weaker than people had thought. Fortunately, we’re still a long way from the danger zone. The economy has come in between 48.0 and 49.9 a total of 65 times. Only eight have been during recessions.

Ford Sales Up 14% in May
Posted by Eddy Elfenbein on June 3rd, 2013 at 10:13 am

Another good month for Ford ($F). Sales were up 14% thanks to strong truck sales.

Ford Motor Co. says its U.S. sales rose 14 percent in May as demand for the F-Series pickup hit a six-year high.

Ford sold 71,604 F-Series trucks, the most since March of 2007. F-Series sales were up 31 percent over last May as construction crews and other small businesses drove demand.

Other strong sellers included the Ford Fusion sedan, which gained 10 percent, and the Ford Escape, which was up 26 percent. Ford sold more than 29,000 Escapes, for its best sales month since the small SUV’s introduction 13 years ago.

Sales of the new luxury Lincoln MKZ sedan were up 42 percent.

Ford announced it will increase third-quarter North American production by 10 percent to 740,000 vehicles. Second-quarter production is unchanged at 800,000 cars and trucks.

The stock is currently up 22 cents to $15.90. Ford broke $16 per share on Thursday and Friday but has yet to close over it.

Morning News: June 3, 2013
Posted by Eddy Elfenbein on June 3rd, 2013 at 7:09 am

Draghi Sees Signs of Stabilization in ‘Challenging’ Economy

Emerging Market Dominoes to Fall as SocGen Sees Rout

Germany Plans One Billion Euros Aid for Spanish SMEs

Gilts Trail in Worst Global Bond Month Since 2004

China Growth Limited by Struggling Small Manufacturers

UAE Creates $15 Billion Aluminum Firm in State Merger

Trial on E-Book Price-Fixing Puts Apple in Spotlight

Bank of America $8.5 Billion Settlement Heads for Court Showdown

Hedge Fund, Under Fire, Braces for Withdrawals

In China, Concern of a Chill on Foreign Investments

Amazon’s Cloud Could Threaten A Whole New Area Of Enterprise Tech, Morgan Stanley Warns

Is This Really The End For The Great Emerging Markets Bull Run?

Bernanke at Princeton Offers Seniors Advice From Love to Money

Joshua Brown: Smart and Stupid Arguments for Active Management

Jeff Miller: Weighing The Week Ahead: Will The Interest Rate Surge Continue?

Be sure to follow me on Twitter.

Johnny Cash – I’ll Fly Away
Posted by Eddy Elfenbein on May 31st, 2013 at 8:09 pm

Personal Income Unchanged for April
Posted by Eddy Elfenbein on May 31st, 2013 at 10:08 am

The government reported this morning that personal income was unchanged in April. Economists were expecting an increase of 0.1%. So far, the market doesn’t seem terribly interested.

The stat in the personal income report that I find most interesting is real personal income after transfer payments. That’s a mouthful but it’s one of the better gauges for how the economy is performing. It rose by 0.3% in April.

Here’s a look at the data series:

The big jump at the end of last year was due to the dividend payouts. What I find interesting is that, looking past the December spike, the rising trend is continuing.