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Sarah Palin and Markets
Tweet Share on Facebook August 29, 2008 Comment (8)Alaska Gov. Sarah Palin adds some heft to the McCain ticket, but what does it mean for investors if she's the next vice president?
Doug Roberts, chief investment strategist at Channel Capital Research, has this to say about Sen. John McCain's surprise pick:
• She has a reputation as a reformer with common sense and has attacked corruption as Governor of Alaska. However, she has largely attacked individuals and limited punishment to specific people. This would be good for the market since it offers an opportunity for necessary reform without excessive regulation.
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Tiffany, Zale Shine Bright
Tweet Share on Facebook August 28, 2008 Comment (2)Diamonds are an investor's best friend today as the weak economy fails, for different reasons, to dampen sales at Tiffany & Co. (TIF) and Zale Corp. (ZLC).
Tiffany beat estimates handily and doubled its second-quarter profits thanks to sales in Europe and Asia, where the economic slowdown hasn't affected its wealthy customers. The company raised its sales estimates for the year even after warnings sales in the United States and Japan will slow. It seems China, London, and foreign tourists visiting American stores are keeping sales steady. Total sales are expected to rise 13 percent this year. The company is still getting squeezed by slowing demand at the ultrahigh end (above $50,000) and among customers spending less than $500, but the middle ground seems to be holding.
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Fannie, Freddie Woes Widespread
Tweet Share on Facebook August 27, 2008 Comment (1)The next big risk for the banking sector and markets may be widespread exposure to the debt of Fannie Mae and Freddie Mac.
Société Générale points out in this note that U.S. commercial banks hold $1 trillion in agency debt from the two government-sponsored lenders. That represents a huge 9 percent of bank balance sheets and highlights the far-reaching nature of risks associated with a collapse of confidence in the government-sponsored lenders.
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Hussman Sees Trouble Ahead
Tweet Share on Facebook August 26, 2008 Comment (1)John Hussman of the Hussman Funds says we're again seeing disagreement among optimistic stock investors and the reality of ongoing troubles in credit markets. If markets finally get that we're in a significant recession, a drop in stocks could come with little warning.
From his latest commentary (Bold is mine):
The stock, bond and foreign exchange markets continue to trade essentially on the theme that the global economy is weakening, but that the U.S. has dodged a recession. This strikes me essentially as an artifact of lagging indicators such as the unemployment rate (on which the full force of the current economic downturn has yet to be felt) as well as various coincident indicators such as the ISM survey and capacity utilization, which are still hovering at tepid levels without clearly breaking down.
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Bets on Fannie Mae, Freddie Mac's Failure
Tweet Share on Facebook August 26, 2008 Comment (5)Bets are on for the future of Fannie and Freddie:
Bill Gross, chief investment officer at bond giant Pimco, tell Reuters again that a Treasury bailout of Fannie Mae and Freddie Mac isn't imminent, and said last week that, "The election season and the relatively recent passage of the (Treasury) authorization argue for delay as long as possible," though he notes both will have to keep selling notes and debt at "relatively stable spreads." (via FT Alphaville)
Meanwhile, Andrew Ross Sorkin, in his latest column at DealBook, says:
A brief forecast on Freddie Mae and Fannie Mac: Treasury Secretary Henry M. Paulson Jr. will nationalize them within the next two weeks, but he won't wipe out all the stakeholders, even if they deserve to be. The debt holders and the preferred shareholders will make out like bandits. A "moral hazard" will always exist, but the government may end up saving some of the rich to save the poor.
Sorkin's other predictions: Lehman Bros. is too important to fail.
Lastly, DealBreaker's John Carney points to an FT story over the weekend noting that regional banks and insurers hold the majority of Fannie and Freddie's $36 billion in preferred stock. If those shareholders take it on the chin, it likely means the financial sector will be in for yet another disproportionately large hit.
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LDK Solar Still Soaring
Tweet Share on Facebook August 25, 2008 CommentLDK Solar (LDK), the Chinese solar-wafer maker, is building out its production capacity more quickly than expected, making it the latest solar name to post healthy earnings and raise its sales forecasts in recent weeks.
Shares jumped earlier this month after a stellar earnings report, and the firm's new announcement that it would see revenue of $2.8 billion to $3 billion this year sent the stock up 8 percent today in late trading. The company plans to build its output to around 1.2 gigawatts this year and 3.2 gigawatts by year-end 2010.
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Weekend Reading
Tweet Share on Facebook August 22, 2008 CommentLots of good, long reads this week for a sunny weekend:
- Clusterstock gets the headline right: That Awesome Warren Buffett CNBC Interview
- A nice compilation of what we actually know about economics by Guy Sorman with help from Columbia's Pierre-André Chiappori, via City Journal.
- Obamanomics in the New York Times Magazine.
Plus: Our own Jim Pethokoukis responds.
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Apple, GameStop, Hot Topic: A Back-to-School Buy, Sell, and Hold
Tweet Share on Facebook August 21, 2008 Comment (343)Back-to-school spending might be a bit tighter this year, given consumer worries over the economy. Wall Street is busy picking winners and losers ahead of the key shopping season.
Here's a few of the latest picks and pans:
Buy: Apple (AAPL) is geared up for huge sales with promotions for the college-bound and huge buzz around the iPhone. RBC Capital Markets foresees a "Back-to-School Mac Bonanza" and says the Mac could grab 4.2 percent of the PC market. A huge 34 percent of respondents to an RBC survey said they were planning on picking up a Mac laptop in the next 90 days. Offers like a free iPod Nano or Touch with some computer purchases are helping the trend. All that, plus expectations for a huge second half for the iPhone (RBC says 5.1 million are set to ship in the fourth quarter), is keeping Steve Jobs & Co. in the money. RBC reiterates its "outperform" rating.
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Chinese Stocks Still in Trouble
Tweet Share on Facebook August 20, 2008 CommentInvestors should note the speed at which last year's hottest stock market became a pariah.
The Shanghai Composite index trades around 2500 today, almost 60 percent below a peak above 6100 reached last October before inflation became a severe worry and the U.S.-led slowdown in the global economy grew more widespread.
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Home Depot, Lowe's Hurt by Housing
Tweet Share on Facebook August 19, 2008 Comment (2)The results are grim at the big home stores now that all those improvements made by new owners and eager sellers have dried up.
Home Depots (HD) saw second-quarter net income fall by 24 percent. CEO Frank Blake blamed "pressure on the consumer." Earnings fell to 71 cents a share from 81 cents a year ago.
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